UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
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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 000-29079
TOWNSQUARE MEDIA, INC.,
F/K/A REGENT COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
State or other jurisdiction of
incorporation or organization
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31-1492857
(I.R.S. Employer
Identification No.) |
2000 Fifth Third Center
511 Walnut Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (513) 651-1190
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
Common Stock, $.01 par value per share
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None |
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Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§
229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
As of June 30, 2009, the last business day of the registrants most recently completed second
fiscal quarter, the aggregate market value of common stock held by non-affiliates of the registrant
was $8,519,333 based upon the closing sale price of $0.25 on the Nasdaq Stock Markets Global
Market for that date. (For purposes hereof, directors, executive officers and 10% or greater
stockholders have been deemed affiliates.)
Indicate by check mark whether the registrant has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes þ No o
The number of new common shares of registrant outstanding as of May 14, 2010 was 1,000.
DOCUMENTS INCORPORATED BY REFERENCE
Cautionary Statement Concerning Forward-Looking Statements
This Form 10-K includes certain forward-looking statements with respect to our company and its
business that involve risks and uncertainties. These statements are influenced by our financial
position, business strategy, budgets, projected costs and the plans and objectives of management
for future operations. We use words such as anticipate, believe, plan, estimate, expect,
intend, project and other similar expressions. Although we believe our expectations reflected
in these forward-looking statements are based on reasonable assumptions, we cannot assure you that
our expectations will prove correct. Actual results and developments may differ materially from
those conveyed in the forward-looking statements. For these statements, we claim the protections
for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Important factors that could cause actual results to differ materially from the expectations
reflected in the forward-looking statements made in this Form 10-K 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, and nationally, including, in
particular: increased competition for attractive radio properties and advertising dollars;
increased competition from emerging technologies; fluctuations in the cost of operating radio
properties; our ability to manage growth; our ability to effectively integrate our acquisitions;
potential costs relating to stockholder demands; changes in the regulatory climate affecting radio
broadcast companies; cancellations, disruptions or postponements of advertising schedules in
response to national or world events; and our ability to maintain compliance with the terms of our
credit agreement. Further information on other factors that could affect the financial results of
Townsquare Media, Inc. is included in Townsquare Medias other filings with the Securities and
Exchange Commission (SEC). These documents are available free of charge at the SECs website at
http://www.sec.gov and/or from Townsquare Media, Inc. The forward-looking statements speak only as
of the date on which they are made, and we undertake no obligation to update any forward-looking
statements to reflect events or circumstances after the date of this Form 10-K. If we do update
one or more forward-looking statements, you should not conclude that we will make additional
updates with respect to those or any other forward-looking statements.
TOWNSQUARE MEDIA, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
On May 3, 2010, Regent Communications, Inc. filed a Certificate of Amendment to Certificate of
Incorporation of the Company with the Delaware Secretary of State to change its name from Regent
Communications, Inc. to Townsquare Media, Inc. Townsquare Media, Inc. is a holding company. We own
and operate our radio stations and hold our radio broadcast licenses in separate subsidiaries. In
this report, when we use the term Regent, Townsquare Media or the Company and the pronouns
we, our and us, we mean Townsquare Media, Inc. and all its subsidiaries, unless the context
otherwise requires.
PART I
ITEM 1. BUSINESS.
General Development of Business
We are a radio broadcasting company historically focused on acquiring, developing and
operating radio stations in mid-sized markets. Based on current economic conditions, our primary
focus is on the efficient and profitable operation of our current radio station markets. We
presently own 49 FM and 13 AM radio stations in 13 markets in Colorado, Illinois, Indiana,
Kentucky, Louisiana, Michigan, Minnesota, New York, and Texas. Our assembled clusters of radio
stations rank first or second in terms of revenue share in all of our markets that are ranked by
BIA Publications, Inc. in their Investing in Radio 2009 Market Report, except in Albany, New York,
Grand Rapids, Michigan and Buffalo, New York, where our clusters rank third. Our website is
www.townsquaremedia.com.
Our primary strategy is to secure and maintain a leadership position in the markets we serve
and, when possible, to expand into additional mid-sized markets where we can achieve a leadership
position. After we enter a market, we seek to acquire stations that, when integrated with our
existing operations, will allow us to reach a wider range of demographic groups that appeal to
advertisers, increase revenue and achieve substantial cost savings. Additionally, our advertising
pricing on a supply and demand basis, when combined with the added reach of our radio station
clusters, allows us to compete successfully for advertising revenue against non-radio competitors
such as print media, television, cable and outdoor advertising.
Relative to the largest radio markets in the United States, we believe that the mid-sized
markets represent attractive operating environments because they are generally characterized by the
following:
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a greater use of radio advertising compared to the national average; |
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lower overall susceptibility to fluctuations in general economic
conditions due to a lower percentage of national versus local
advertising revenues; |
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greater growth potential for advertising revenues as national and
regional retailers expand into mid-sized markets; and |
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less direct format competition due to a smaller number of owners in
any given market. |
We believe that these operating characteristics, coupled with the opportunity to establish or
expand radio station clusters within a specific market, as well as the expansion of our Interactive
initiative, create the potential for revenue growth and cost efficiencies.
Our portfolio of radio stations is diversified in terms of geographic location, target
demographics and format. We believe that this diversity helps minimize the effects of downturns in
specific markets and changes in format preferences.
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Chapter 11 Reorganization
On March 1, 2010 (the Petition Date), the Company and its wholly owned subsidiaries
(collectively, the Debtors) filed voluntary petitions for relief (the Chapter 11 Cases) under
Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 101-1532 (the Bankruptcy Code) in
the United States Bankruptcy Court for the District of Delaware, Case No. 10-10632 (KG). From the
period commencing on the Petition Date and through the Effective Date (as defined below), the
Debtors operated their businesses and managed their properties as debtors-in-possession subject to
the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code. The Chapter 11 Cases were jointly administered pursuant to an order of the
Bankruptcy Court.
On March 22, 2010 the Debtors filed a First Amended Disclosure Statement and a First Amended
Joint Plan of Reorganization with the Bankruptcy Court (the Plan). On April 12, 2010, the
Bankruptcy Court entered an order confirming the Plan as modified by the Courts order. On April
27, 2010 (the Effective Date) the Debtors satisfied all of the conditions of the Plan and emerged
from the Chapter 11 Cases.
The following is a summary of the material terms of the Plan. The Plan provided for, among
other things, a restructuring of: (i) approximately $192.6 million of senior indebtedness
(excluding post-petition interest) outstanding under the Companys Credit Agreement, dated as of
November 21, 2006, among Regent Broadcasting, LLC, the Company, the lenders party thereto, Bank of
America, N.A., as the administrative agent for the lenders, and the other agents party thereto (the
Prepetition Credit Agreement); and (ii) approximately $12.1 million of indebtedness under
interest rate swap agreements entered into in 2006 with Bank of America, N.A., Sun Trust Bank, and Bank
of Montreal (the Swap Agreements). The Plan further provided for a payment in full of cash for
general unsecured claims.
On the Effective Date, all outstanding shares of the Companys common stock (approximately
42,311,471 shares on April 27, 2010) and all other equity interests were extinguished.
Stockholders of record on the Effective Date were entitled to receive a pro rata share of
transferred cash under the Plan of $5.5 million, or $0.13 per share, paid as soon as practicable
after the Effective Date. In addition, on the Effective Date, the Company issued 100% of its new
common stock, as reorganized under the Plan, to U.S. holders of first lien debt claims under the
Prepetition Credit Agreement and the Swap Agreements, and warrants to purchase new common stock to
non-U.S. holders of such claims, each on a basis pro rata to the amount of their claims.
Further, on the Effective Date, the Company and Regent Broadcasting, LLC (Borrower) entered
into a Credit Agreement (the Credit Agreement) with General Electric Capital Corporation, as
administrative agent and collateral agent, GE Capital Markets, Inc., as sole lead arranger and book
runner, and a syndicate of certain financial institutions. The Credit Agreement provides for a
term loan in an aggregate principal amount of $95,000,000 with a maturity date of April 27, 2014.
The Credit Agreement provides for a revolving loan in an aggregate principal amount of up to
$2,000,000 with a maturity date of April 27, 2012.
The Credit Agreement is guaranteed by the Company, Regent Broadcasting Management, LLC and all
of the direct and indirect subsidiaries of Regent Broadcasting, LLC (collectively, the
Guarantors). The obligations under the Credit Agreement are secured by a first-priority lien
(subject to certain permitted liens and exceptions) on substantially all of the tangible and
intangible assets of Borrower and the Guarantors. The Credit Agreement contains customary
covenants, which, among other things require Borrower and the Guarantors to meet certain financial
tests and limit their ability to: incur indebtedness and liens; make investments; make asset sales;
pay dividends or make other restricted payments; engage in mergers or other fundamental changes;
enter into transactions with affiliates; and other covenants customary for such a credit facility.
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On the Effective Date, the Company and Borrower also entered into a Subordinated Notes
Agreement (the Subordinated Notes Agreement) with General Electric Capital Corporation, as
subordinated notes agent, and a syndicate of certain financial institutions. The Subordinated Notes
Agreement provides for 12% Senior Subordinated PIK Notes in an initial aggregate principal amount
of $25,000,000 with a maturity date of October 27, 2014. The entire unpaid principal balance of
such subordinated notes shall bear interest at 12% per annum and interest shall only be
paid-in-kind by being added to principal.
The Subordinated Notes Agreement is guaranteed by the Company, Regent Broadcasting Management,
LLC and all of the direct and indirect subsidiaries of Borrower. The Subordinated Notes Agreement
contains customary covenants, which, among other things limit the ability of Regent Communications,
Inc., Regent Broadcasting, LLC and their direct and indirect subsidiaries to incur indebtedness and
liens; make investments; make asset sales; pay dividends or make other restricted payments; engage
in mergers or other fundamental changes; enter into transactions with affiliates; and contains
other customary covenants.
On April 28, 2010, the Company filed an Amended and Restated Certificate of Incorporation with
the Delaware Secretary of State. The Amended and Restated Certificate of Incorporation reduced the
number of shares of stock which the Company is authorized to issue from 65,000,000 shares of new
common stock, par value $0.01 per share to 1,000 shares of new common stock, par value $0.01 per
share. The holders of the new common stock and warrants to purchase new common stock issued to
them on the Effective Date exchanged those securities for interests in a new entity, Regent
Holdings LLC, and Regent Holdings LLC became the sole owner of the new common stock of the Company.
On May 3, 2010, the Company further amended its Certificate of
Incorporation to change its name from Regent
Communications, Inc. to Townsquare Media, Inc.
FCC Licenses Post Reorganization
The consent of the FCC is required for the transfer of FCC licenses from the holders of those
licenses as debtors-in-possession under the U.S. Bankruptcy Code to the reorganized entity upon
emergence from bankruptcy proceedings. Such consent must be sought on a so-called long form
application, and generally must be obtained prior to the licensee entity emerging from bankruptcy.
In order to expedite the process of emergence, the Company filed so called short form
applications with the FCC to seek consent for the assignment of our FCC licenses to a trust
established to hold those licenses. A short form application is not subject to formal petitions to
deny by third parties, and can be approved by the FCC on a more expedited basis than can a long
form application.
The FCC granted our short form applications in April 2010, and on the Effective Date our FCC
licenses, together with certain related assets, were assigned to the trust. At the same time we
filed the short form applications, we also filed long form applications requesting FCC consent to
the assignment of the FCC licenses to the Company following the Effective Date. The period during
which formal petitions to deny may be filed against those applications has passed
and we are not aware that any such petitions have been filed. Assuming that those long form
applications are granted, we intend then to assign the FCC licenses from the trust to the Company.
During the interim period, while the FCC licenses are held by the trust, the Company operates its
radio stations pursuant to a time brokerage agreement with the trust. The trust is governed by a
trust agreement with the Company, and the Company is the beneficiary of the trust. The trust is
also under the continuing oversight of the U.S. Bankruptcy Court.
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At the time the FCC licenses are assigned from the trust to the Company, two stations, KARS-FM
in the Ft. Collins-Greeley, CO market, and KPEL-FM in the Lafayette, LA market, will be required to
be divested to comply with FCC ownership rules. We have filed long form applications with the FCC
to assign the licenses for those stations to a divestiture trust, which will hold and dispose of
the assets of those stations for the benefit of the Company. The period during which formal
petitions to deny may be filed with the FCC against those applications has passed and we are not
aware that any such petitions have been filed.
Delisting of our Common Stock
At the close of trading on January 7, 2010, shares of our Common Stock were delisted from
trading on The NASDAQ Global Market due to failure to maintain a closing bid price of at least
$1.00 per share over 20 continuous trading days prior to such date.
Operating Strategy
Our operating strategy focuses on maximizing our radio stations appeal to listeners and
advertisers and, consequently, increasing our revenue and station operating income. To achieve
these goals, we have implemented the following strategies:
Ownership of Strong Radio Station Clusters. We seek to secure and maintain a leadership
position in the markets we serve by owning multiple stations in those markets. By coordinating
programming, promotional and sales strategies within each local station cluster, we attempt to
capture a wider range of demographic listeners to appeal to advertisers. We believe that the
diversification of our programming formats and inventory of available advertising time strengthens
relationships with advertisers, increasing our ability to maximize the value of our inventory.
Operating multiple stations in a market enhances our ability to market the advantages of
advertising on radio versus other media, such as newspapers and television.
Our ability to utilize the existing programming and sales resources of our radio station
clusters enhances the growth potential of both new and underperforming stations while reducing the
risks associated with the implementation of station performance improvements, such as new format
launches. We believe that operating leading station clusters allows us to attract and retain
talented local personnel, who are essential to our operating success. Furthermore, we seek to
achieve cost savings within a market through the consolidation of facilities, sales and
administrative personnel, management and operating resources, such as on-air talent, programming
and music research, and the reduction of other redundant expenses.
Aggressive Sales and Marketing. We seek to maximize our share of local radio advertising
revenue in each of our markets through aggressive sales and marketing initiatives. We provide
extensive training through in-house sales and time management programs and independent consultants
who hold frequent seminars and are available for consultation with our sales personnel. We
emphasize regular, informal exchanges of ideas among our management and sales personnel across our
various markets. We seek to maximize our revenue by utilizing
sophisticated inventory management and pricing techniques to provide our sales personnel with
frequent price adjustments based on regional and local market conditions. We further strengthen our
relationship with some advertisers by offering the ability to create customer traffic through an
on-site event staged at, and broadcast from, the advertisers business location. Prior to their
acquisition, many of our acquired stations had underperformed in sales, due primarily to undersized
sales staffs, inadequate training and lack of management oversight. Accordingly, we significantly
expanded the sales forces of many of our acquired stations and instituted processes to increase
awareness of and accountability for the achievement of established goals.
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Cross-platform Sales. We believe the internet will be very beneficial to us as we continue to
develop and rapidly expand our Interactive initiatives. To take advantage of the growth in internet
advertising revenue, we are focusing on leveraging our strong radio station brands by selling
internet advertising to existing radio advertising clients. This advertising can be either audio
commercials running only on the online stream of our over-the-air broadcast, or advertising and
sponsorships on our radio station websites. Additionally, we have begun selling internet
advertising to advertisers who are not currently radio clients. Following a successful internet
advertising campaign, these advertisers have a greater chance to be converted to radio clients.
Thus, our focus on cross-platform sales not only provides additional advertising opportunities for
our clients and additional revenue channels for Regent, but also provides additional opportunities
to increase radio advertising revenue.
Targeted Programming and Promotion. To maintain or improve our position in each market, we
combine ongoing market research with an assessment of our competitors vulnerabilities in order to
identify significant and sustainable target audiences. We then tailor the programming, marketing
and promotion of each radio station to maximize its appeal to the targeted audience. We attempt to
build strong markets by:
creating distinct content and highly visible profiles for our
on-air personalities;
utilizing market research to formulate recognizable brand names for select stations; and
supporting localism through active participation in community events and charities.
Decentralized Operations. We believe that radio is primarily a local business and that much of
our success will be the result of the efforts of regional and local management and staff.
Accordingly, we decentralize much of our operations at these levels. Each of our station clusters
is managed by a team of experienced broadcasters who understand the musical tastes, demographics
and competitive opportunities of their particular market. Local managers are responsible for
preparing annual operating budgets and a portion of their compensation is linked to meeting or
surpassing their operating targets. Corporate management approves each station clusters annual
operating budget and imposes strict financial reporting requirements to track station performance.
Corporate management is responsible for long range planning, establishing corporate policies and
serving as a resource to local management.
Active Cost Management. On an ongoing basis, corporate and market-level management monitor
costs incurred in the operation of our broadcast markets. This oversight allows the Company to
respond quickly to changes in national and local economic conditions, and to evaluate potential
cost savings within each station cluster and implement appropriate cost control measures to
optimize station operating performance.
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Acquisition Strategy
Historically, our acquisition strategy has focused on expanding within our existing markets
and entering into new mid-sized markets where we believe we can effectively execute our operating
strategies. Although competition exists among potential purchasers for suitable radio station
acquisitions throughout the United States, we believe that there is currently less competition in
mid-sized markets, particularly since there is evidence that two other public mid-market
consolidators have changed their focus to major markets. We integrate acquired stations into our
existing operations in an effort to achieve operational cost savings. We have sold or will sell
stations in different markets that did not or do not fit within our existing acquisition strategy.
We may continue to evaluate opportunities to acquire suitable broadcast targets at acceptable
prices in the future.
We believe that the creation of strong station clusters in our local markets is essential to
our operating success. In evaluating an acquisition opportunity in a new market, we assess our
potential to build a leading radio station cluster in that market over time. We will not consider
entering a new market unless we can acquire multiple stations in that market. We also analyze a
number of additional factors we believe are important to success, including the number and quality
of commercial radio signals broadcasting in the market, the nature of the competition in the
market, our ability to improve the operating performance of the radio station or stations under
consideration and the general economic conditions of the market.
We believe that our acquisition strategy, properly implemented, affords a number of benefits,
including:
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greater revenue and station operating income diversity; |
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improved station operating income through the consolidation of facilities and the elimination of redundant expenses; |
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enhanced revenue by offering advertisers a broader range of advertising packages; |
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improved negotiating leverage with various key vendors; |
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enhanced appeal to top industry management talent; and |
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increased overall scale, which should facilitate our capital raising activities. |
We have developed a process for integrating newly acquired properties into our overall culture
and operating philosophy, which involves the following key elements:
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assess format quality and effectiveness so that we can refine or
change station formats in order to increase audience and revenue
share; |
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upgrade transmission, audio processing and studio facilities; |
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expand and strengthen sales staff through active recruiting and in-depth training; |
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convert acquired stations to our communications network and
centralized networked accounting system; and |
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establish revenue and expense budgets consistent with the programming
and sales strategy and corresponding cost adjustments. |
From time to time, in compliance with applicable law, we may enter into time brokerage
agreements or local marketing agreements (under which separately owned and licensed stations agree
to function cooperatively in terms of programming, advertising, sales and other matters), or
similar arrangements, with a target property prior to final Federal Communications Commission
(FCC) approval and the consummation of the acquisition, in order to gain a head start on the
integration process.
We did not acquire or divest any of our radio stations during 2009 due to the recession and
the overall decline in advertising revenues for radio stations generally and due to our default
under our credit facility as of March 31, 2009, which substantially restricted our ability to make
any acquisitions.
Station Portfolio
We currently own and operate 49 FM and 13 AM radio stations in 13 mid-sized markets. The
following table sets forth information about the stations that we owned or operated at December 31,
2009.
As you review the information in the table below, you should note the following:
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The abbreviation MSA in the table means the markets rank among the
largest metropolitan statistical areas in the United States. |
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The abbreviation REV in the table means the ranking of the market by
BIAfns estimate of 2009 market gross radio advertising revenues in
the United States. |
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In the Primary Demographic Target column, the letter A designates
adults, the letter W designates women and the letter M designates
men. The numbers following each letter designate the range of ages
included within the demographic group. |
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Station Cluster Rank by Market Revenue Share in the table is the
ranking, by radio cluster market revenue, of each of our radio
clusters in its market among all other radio clusters in that market. |
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We obtained all metropolitan statistical area rank information, market
revenue information and station cluster market rank information for
all of our markets from Investing in Radio 2009 Market Report,
published by BIA Publications, Inc. |
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We obtained all audience share information from the Fall 2009 Radio
Market Report published by The Arbitron Company, the radio broadcast
industrys principal ratings service. We derived station cluster
audience share based on persons ages 12 and over, listening Monday
through Sunday, 6:00 a.m. to 12:00 midnight. |
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N/A indicates the market has no MSA rank and is not rated by Arbitron. |
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Rank by |
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Market |
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12+ |
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Radio Market/ |
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MSA |
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REV |
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Revenue |
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Audience |
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Station Call Letters |
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Format |
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Target |
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Albany, NY |
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63 |
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58 |
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3 |
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16.0 |
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WQBJ-FM |
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Adult Oriented Rock |
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M 18-49 |
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WQBK-FM |
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Adult Oriented Rock |
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M 18-49 |
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WBZZ-FM |
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Adult Contemporary |
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W 25-54 |
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WGNA-FM |
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A 25-54 |
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WTMM-FM |
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Sports/Talk |
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M 25+ |
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Bloomington, IL |
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241 |
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185 |
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1 |
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27.8 |
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WJBC-AM |
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News/Talk |
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A 35-54 |
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WBNQ-FM |
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Hot Adult Contemporary |
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W 25-54 |
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WBWN-FM |
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Country |
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A 25-54 |
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WJBC-FM |
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News/Talk |
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A 35-54 |
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WJEZ-FM |
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Adult Contemporary |
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W 25-54 |
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Buffalo, NY |
|
52 |
|
41 |
|
|
|
|
|
3 |
|
|
24.7 |
|
WYRK-FM |
|
|
|
|
|
Country |
|
A 25-54 |
|
|
|
|
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|
WJYE-FM |
|
|
|
|
|
Adult Contemporary |
|
W 25-54 |
|
|
|
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|
WBUF-FM |
|
|
|
|
|
JACK Adult Hits |
|
A 18-34 |
|
|
|
|
|
|
WBLK-FM |
|
|
|
|
|
Urban AC |
|
A 25-54 |
|
|
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|
El Paso, TX |
|
76 |
|
74 |
|
|
|
|
|
2 |
|
|
12.6 |
|
KSII-FM |
|
|
|
|
|
Hot Adult Contemporary |
|
W 18-49 |
|
|
|
|
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|
KLAQ-FM |
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|
|
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|
Rock |
|
M 18-49 |
|
|
|
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|
KROD-AM |
|
|
|
|
|
News/Talk |
|
A 35+ |
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|
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|
Evansville, IN |
|
163 |
|
129 |
|
|
|
|
|
2 |
|
|
34.0 |
|
WKDQ-FM |
|
|
|
|
|
Country |
|
A 25-54 |
|
|
|
|
|
|
WJLT-FM |
|
|
|
|
|
Oldies |
|
A 35+ |
|
|
|
|
|
|
WDKS-FM |
|
|
|
|
|
CHR |
|
A 18-34 |
|
|
|
|
|
|
WGBF-FM |
|
|
|
|
|
Active Rock |
|
M 18-49 |
|
|
|
|
|
|
WGBF-AM |
|
|
|
|
|
News/Talk |
|
A 35+ |
|
|
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|
Flint, MI |
|
127 |
|
126 |
|
|
|
|
|
1 |
|
|
20.4 |
|
WCRZ-FM |
|
|
|
|
|
Adult Contemporary |
|
W 25-54 |
|
|
|
|
|
|
WWBN-FM |
|
|
|
|
|
Active Rock |
|
M 18-34 |
|
|
|
|
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|
WFNT-AM |
|
|
|
|
|
Adult Standards |
|
A 35+ |
|
|
|
|
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|
WRCL-FM |
|
|
|
|
|
Rhythmic CHR |
|
A 18-34 |
|
|
|
|
|
|
WQUS-FM |
|
|
|
|
|
Classic Rock |
|
A 25-54 |
|
|
|
|
|
|
WLCO-AM |
|
|
|
|
|
Classic Country |
|
A 35+ |
|
|
|
|
|
|
|
|
|
|
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|
Ft. Collins-Greeley, CO. |
|
120 |
|
158 |
|
|
|
|
|
1 |
|
|
15.6 |
|
KUAD-FM |
|
|
|
|
|
Country |
|
A 25-54 |
|
|
|
|
|
|
KTRR-FM |
|
|
|
|
|
Adult Contemporary |
|
W 25-54 |
|
|
|
|
|
|
KMAX-FM |
|
|
|
|
|
Classic Hits |
|
A 25-54 |
|
|
|
|
|
|
KKPL-FM |
|
|
|
|
|
Hot AC |
|
W 18-49 |
|
|
|
|
|
|
KARS-FM |
|
|
|
|
|
Classic Rock |
|
A 25-54 |
|
|
|
|
|
|
- 11 -
|
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|
Station |
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Cluster |
|
Station |
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|
Rank by |
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Cluster |
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Station |
|
Primary |
|
Market |
|
12+ |
|
Radio Market/ |
|
MSA |
|
REV |
|
Programming |
|
Demographic |
|
Revenue |
|
Audience |
|
Station Call Letters |
|
Rank |
|
Rank |
|
Format |
|
Target |
|
Share |
|
Share |
|
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|
Grand Rapids, MI |
|
67 |
|
66 |
|
|
|
|
|
3 |
|
|
17.0 |
|
WLHT-FM |
|
|
|
|
|
Adult Contemporary |
|
W 25-54 |
|
|
|
|
|
|
WGRD-FM |
|
|
|
|
|
New Rock |
|
M 18-49 |
|
|
|
|
|
|
WTRV-FM |
|
|
|
|
|
Soft Adult Contemporary |
|
W 35+ |
|
|
|
|
|
|
WNWZ-AM |
|
|
|
|
|
Spanish |
|
A 25-54 |
|
|
|
|
|
|
WFGR-FM |
|
|
|
|
|
Classic Hits |
|
A 35+ |
|
|
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|
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|
Lafayette, LA |
|
105 |
|
95 |
|
|
|
|
|
1 |
|
|
28.4 |
|
KPEL-FM |
|
|
|
|
|
News/Talk |
|
A 35+ |
|
|
|
|
|
|
KTDY-FM |
|
|
|
|
|
Adult Contemporary |
|
W 25-54 |
|
|
|
|
|
|
KHXT-FM |
|
|
|
|
|
Rhythmic CHR |
|
A 18-34 |
|
|
|
|
|
|
KFTE-FM |
|
|
|
|
|
Alternative |
|
M 18-34 |
|
|
|
|
|
|
KMDL-FM |
|
|
|
|
|
Country |
|
A 25-54 |
|
|
|
|
|
|
KPEL-AM |
|
|
|
|
|
Sports |
|
M 35+ |
|
|
|
|
|
|
KROF-AM |
|
|
|
|
|
Oldies |
|
A 35+ |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Owensboro, KY |
|
N/A |
|
N/A |
|
|
|
|
|
N/A |
|
|
N/A |
|
WOMI-AM |
|
|
|
|
|
News/Talk |
|
A 35+ |
|
|
|
|
|
|
WBKR-FM |
|
|
|
|
|
Country |
|
A 25-54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peoria, IL |
|
152 |
|
122 |
|
|
|
|
|
2 |
|
|
23.2 |
|
WVEL-AM |
|
|
|
|
|
Gospel |
|
A 35+ |
|
|
|
|
|
|
WGLO-FM |
|
|
|
|
|
Classic Rock |
|
M 25-54 |
|
|
|
|
|
|
WIXO-FM |
|
|
|
|
|
Active Rock |
|
A 18-34 |
|
|
|
|
|
|
WZPW-FM |
|
|
|
|
|
Rhythmic CHR |
|
A 18-34 |
|
|
|
|
|
|
WFYR-FM |
|
|
|
|
|
Country |
|
A 25-54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
St. Cloud, MN |
|
216 |
|
172 |
|
|
|
|
|
2 |
|
|
30.1 |
|
KMXK-FM |
|
|
|
|
|
Hot Adult Contemporary |
|
W 18-49 |
|
|
|
|
|
|
WWJO-FM |
|
|
|
|
|
Country |
|
A 25-54 |
|
|
|
|
|
|
WJON-AM |
|
|
|
|
|
News/Talk |
|
A 35+ |
|
|
|
|
|
|
KLZZ-FM |
|
|
|
|
|
Classic Rock |
|
M 25-54 |
|
|
|
|
|
|
KZRV-FM |
|
|
|
|
|
Active Rock |
|
M 18-34 |
|
|
|
|
|
|
KXSS-AM |
|
|
|
|
|
Sports |
|
M 35+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utica-Rome, NY |
|
164 |
|
209 |
|
|
|
|
|
1 |
|
|
37.4 |
|
WODZ-FM |
|
|
|
|
|
Oldies |
|
A 35+ |
|
|
|
|
|
|
WLZW-FM |
|
|
|
|
|
Adult Contemporary |
|
W 25-54 |
|
|
|
|
|
|
WFRG-FM |
|
|
|
|
|
Country |
|
A 25-54 |
|
|
|
|
|
|
WIBX-AM |
|
|
|
|
|
News/Talk |
|
A 35+ |
|
|
|
|
|
|
- 12 -
Advertising Sales
The majority of our revenue is generated from the sale of local, regional and national
advertising for broadcast on our radio stations. In 2009, approximately 88% of our net broadcast
revenue was generated from the sale of locally driven advertising. Additional broadcast revenue is
generated from the sale of national advertising, network compensation payments and other
miscellaneous transactions, including our Interactive initiative, which focuses on generating
advertising revenues via the internet. The major categories of our advertisers include automotive,
retail, telecommunications and entertainment.
Each stations local sales staff solicits advertising either directly from the local
advertiser or indirectly through an advertising agency. We pay a higher commission rate to our
sales staff for direct advertising sales. Through direct advertiser relationships, we can better
understand the advertisers business needs and more effectively design advertising campaigns to
sell the advertisers products. We employ personnel in each of our markets to produce commercials
for the advertiser. In-house production combined with effectively designed advertising establishes
a stronger relationship between the advertiser and the station cluster. National sales are made by
a firm specializing in radio advertising sales on the national level in exchange for a commission
based on net revenue. Regional sales, which we define as sales in regions surrounding our markets
to companies that advertise in our markets, are generally made by our local sales staff.
Depending on the programming format of a particular station, we estimate the optimum number of
advertising spots available. The number of advertisements that can be broadcast without
jeopardizing listening levels is limited in part by the format of a particular station and by the
volume of advertisements being run on competing stations in the local market. Our stations strive
to maximize revenue by managing advertising inventory. Our stations adjust pricing based on local
market conditions and the ability to provide advertisers with an effective means of reaching a
targeted demographic group. Each of our stations has a general target level of on-air inventory.
This target level of inventory may be different at different times of the day but tends to remain
stable over time. Much of our selling activity is based on demand for our radio stations on-air
inventory and, in general, we respond to this demand by varying prices rather than our target
inventory level for a particular station. Therefore, most changes in revenue can be explained by
demand-driven pricing changes.
A stations listenership is reflected in ratings surveys that estimate the number of listeners
tuned to the station and the time they spend listening. Each stations ratings are used by its
advertisers and advertising representatives to consider advertising with the station and are used
by us to chart audience levels, set advertising rates and adjust programming. The radio broadcast
industrys principal ratings service is The Arbitron Company, which publishes periodic ratings
surveys for significant domestic radio markets. These surveys are our primary source of audience
ratings data.
We believe that radio is one of the most efficient and cost-effective means for advertisers to
reach specific demographic groups. Advertising rates charged by radio stations are based primarily
on the following:
|
|
|
the supply of, and demand for, radio advertising time; |
|
|
|
|
a stations share of audiences in the demographic groups targeted by
advertisers, as measured by ratings surveys estimating the number of
listeners tuned to the station at various times; and |
|
|
|
|
the number of stations in the market competing for the same
demographic groups. |
Rates are generally highest during morning and afternoon commuting hours.
- 13 -
Competition
The radio broadcasting industry is highly competitive. The success of each station depends
largely upon audience ratings and its share of the overall advertising revenue within its market.
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. Building a strong listener base consisting
of a specific demographic group in a market enables an operator to attract advertisers seeking to
reach those listeners. Companies that operate radio stations must be alert to the possibility of
another station changing format to compete directly for listeners and advertisers. A stations
decision to convert to a format similar to that of another radio station in the same geographic
area may result in lower ratings and advertising revenue, increased promotion and other expenses
and, consequently, lower station operating income.
Factors that are material to a radio stations competitive position include management
experience, the stations local audience rank in its market, transmitter power, assigned frequency,
audience characteristics, local program acceptance and the number and characteristics of other
radio stations in the market area. Management believes that radio stations that elect to take
advantage of joint arrangements such as local marketing agreements, time brokerage agreements, or
joint sales agreements, may in certain circumstances have lower operating costs and may be able to
offer advertisers more attractive rates and services.
Although the radio broadcasting industry is highly competitive, some barriers to entry exist.
The operation of a radio broadcast station requires a license from the FCC, and the number of radio
stations that can operate in a given market is limited by the availability of FM and AM radio
frequencies allotted by the FCC to communities in that market, as well as by the FCCs rules and
policies regulating the number of stations that may be owned or controlled by a single entity. A
summary of certain of those rules and policies can be found under the heading Federal Regulation of
Radio Broadcasting below.
Our stations compete for advertising revenue with other stations and with other media,
including newspapers, broadcast television, cable television, magazines, direct mail, coupons and
outdoor advertising. The radio broadcasting industry also is subject to competition from newer
media technologies, such as the delivery of audio programming by cable or direct broadcast
satellite television systems, by satellite-delivered digital audio radio service and by in-band
digital audio broadcasting. A provider of satellite-delivered digital audio broadcasting delivers
to nationwide and regional audiences, multi-channel, multi-format, digital radio services with
sound quality equivalent to compact discs. Furthermore, terrestrial in-band digital audio
broadcasting delivers multi-channel, multi-format programming in the same bands used by AM and FM
broadcasters. The delivery of information through the internet also could become a significant form
of competition, as could the development of non-commercial low-power FM radio stations that serve
small, localized areas. We are currently focused on leveraging our strong radio brands to promote
growth in our internet-based initiatives.
- 14 -
We cannot predict what additional new services or other regulatory matters might be considered
in the future by the FCC, nor assess in advance what impact those proposals or changes might have
on our business. The radio broadcasting industry historically has grown despite the introduction of
new technologies for the delivery of entertainment and information. 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.
Employees
At
April 27, 2010, we employed approximately 829 persons. None of our employees are covered by
collective bargaining agreements. We consider our relations with our employees generally to be
good.
Federal Regulation of Radio Broadcasting
Introduction. 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. Our ownership, operation, purchase and sale of radio stations is regulated
by the FCC, which acts under authority derived from the Communications Act of 1934, as amended.
Among other things, the FCC:
|
|
|
assigns frequency bands for broadcasting; |
|
|
|
|
determines the particular frequencies, locations, operating powers and
other technical parameters of stations; |
|
|
|
|
issues, renews, revokes, conditions and modifies station licenses; |
|
|
|
|
determines whether to approve changes in ownership or control of
station licenses; |
|
|
|
|
regulates equipment used by stations; and |
|
|
|
|
adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment practices of
stations. |
The following is a brief summary of certain provisions of the Communications Act and of
specific FCC regulations and policies. Failure to observe these or other rules and policies can
result in the imposition of various sanctions, including fines, the grant of abbreviated license
renewal terms or, for particularly egregious violations, the denial of a license renewal
application, the revocation of a license or the denial of FCC consent to acquire additional radio
stations. The summary is not a comprehensive listing of all of the regulations and policies
affecting radio stations. 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.
- 15 -
License Grant and Renewal. Radio stations operate under renewable broadcasting licenses that
are ordinarily granted by the FCC for maximum terms of eight years. 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. The FCC is required
to hold hearings on a stations 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 are not currently aware of any facts that we anticipate would prevent the renewal of any of our
licenses to operate our radio stations, although we cannot assure you that all of our licenses will
be renewed.
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 and therefore the size of
the area its signal will serve 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, C0 and C. In addition, the FCC under certain circumstances subjects Class C FM
stations that do not satisfy a certain antenna height requirement to an involuntary downgrade in
class to Class C0.
The following table sets forth the market, call letters, FCC license classification, antenna
height above average terrain (HAAT), power and frequency of each of the stations that are owned or
operated by us, and the date on which each stations FCC license expires. Pursuant to FCC rules and
regulations, many AM radio stations are licensed to operate at a reduced power during the nighttime
broadcasting hours, which can result in reducing the radio stations coverage during the nighttime
hours of operation. Both daytime and nighttime power ratings are shown, where applicable. For FM
stations, the maximum effective radiated power in the main lobe is given.
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Expiration |
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Date of |
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|
Station Call |
|
FCC |
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HAAT in |
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|
Power in |
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|
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|
FCC |
Market |
|
Letters |
|
Class |
|
Meters |
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|
Kilowatts |
|
|
Frequency |
|
|
License |
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|
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|
Albany, NY |
|
WQBJ-FM |
|
B |
|
|
150 |
|
|
|
50.0 |
|
|
103.5 MHz |
|
|
06/01/14 |
|
|
WQBK-FM |
|
A |
|
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92 |
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|
|
6.0 |
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|
103.9 MHz |
|
|
06/01/14 |
|
|
WBZZ-FM |
|
B1 |
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|
187 |
|
|
|
7.1 |
|
|
105.7 MHz |
|
|
06/01/14 |
|
|
WGNA-FM |
|
B |
|
|
300 |
|
|
|
12.5 |
|
|
107.7 MHz |
|
|
06/01/14 |
|
|
WTMM-FM |
|
A |
|
|
107 |
|
|
|
5.0 |
|
|
104.5 MHz |
|
|
06/01/14 |
- 16 -
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|
Expiration |
|
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|
Date of |
|
|
Station Call |
|
FCC |
|
HAAT in |
|
|
Power in |
|
|
|
|
|
|
FCC |
Market |
|
Letters |
|
Class |
|
Meters |
|
|
Kilowatts |
|
|
Frequency |
|
|
License |
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Bloomington, IL |
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WJBC-AM |
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C |
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N/A |
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1.0 |
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1230 kHz |
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12/01/12 |
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WBNQ-FM |
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B |
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142 |
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50.0 |
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101.5 MHz |
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12/01/12 |
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WBWN-FM |
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B1 |
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100 |
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25.0 |
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104.1 MHz |
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12/01/12 |
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WJBC-FM |
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B1 |
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144 |
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12.0 |
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93.7 MHz |
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12/01/12 |
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WJEZ-FM |
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A |
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149 |
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1.3 |
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98.9 MHz |
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12/01/12 |
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Buffalo, NY |
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WYRK-FM |
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B |
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142 |
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50.0 |
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106.5 MHz |
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06/01/14 |
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WJYE-FM |
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B |
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154 |
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47.0 |
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96.1 MHz |
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06/01/14 |
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WBUF-FM |
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B |
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195 |
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76.0 |
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92.9 MHz |
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06/01/14 |
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WBLK-FM |
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B |
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154 |
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47.0 |
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93.7 MHz |
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06/01/14 |
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El Paso, TX |
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KSII-FM |
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C |
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433 |
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100.0 |
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93.1 MHz |
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08/01/13 |
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KLAQ-FM |
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C |
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424 |
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100.0 |
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95.5 MHz |
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08/01/13 |
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KROD-AM |
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B |
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N/A |
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5.0 |
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600 kHz |
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08/01/13 |
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Evansville, IN |
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WKDQ-FM |
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C |
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300 |
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100.0 |
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99.5 MHz |
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08/01/12 |
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WDKS-FM |
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A |
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100 |
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6.0 |
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106.1 MHz |
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08/01/12 |
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WJLT-FM |
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B |
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150 |
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50.0 |
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105.3 MHz |
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08/01/12 |
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WGBF-FM |
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A |
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138 |
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3.2 |
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103.1 MHz |
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08/01/12 |
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WGBF-AM |
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B |
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N/A |
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5.0 daytime 1.0 night |
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1280 kHz |
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08/01/12 |
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Flint, MI |
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WCRZ-FM |
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B |
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101 |
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50.0 |
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107.9 MHz |
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10/01/12 |
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WWBN-FM |
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A |
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149 |
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1.8 |
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101.5 MHz |
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10/01/12 |
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WFNT-AM |
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B |
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N/A |
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5.0 daytime 1.0 night |
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1470 kHz |
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10/01/12 |
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WRCL-FM |
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A |
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133 |
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3.5 |
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93.7 MHz |
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10/01/12 |
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WQUS-FM |
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A |
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91 |
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3.0 |
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103.1 MHz |
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10/01/12 |
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WLCO-AM |
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B |
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N/A |
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5.0 daytime |
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1530 kHz |
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10/01/12 |
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Ft. Collins-Greeley, CO |
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KUAD-FM |
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C1 |
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255 |
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100.0 |
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99.1 MHz |
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04/01/13 |
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KTRR-FM |
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C2 |
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234 |
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17.0 |
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102.5 MHz |
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04/01/13 |
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KMAX-FM |
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C3 |
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168 |
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8.7 |
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94.3 MHz |
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04/01/13 |
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KKPL-FM |
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C2 |
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150 |
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50.0 |
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99.9 MHz |
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10/01/13 |
|
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KARS-FM1 |
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C |
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372 |
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100.0 |
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102.9 MHz |
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|
10/01/13 |
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1 |
|
Upon consummation of the assignment of the licenses
from the trust which currently holds them to the Company, the license and
assets for this station will be divested to a divestiture trust for eventual
sale. |
- 17 -
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Expiration |
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Date of |
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Station Call |
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FCC |
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HAAT in |
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Power in |
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FCC |
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Market |
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Letters |
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Class |
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Meters |
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Kilowatts |
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Frequency |
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License |
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Grand Rapids, MI |
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WLHT-FM |
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B |
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168 |
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40.0 |
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95.7 MHz |
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10/01/12 |
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WGRD -FM |
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B |
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180 |
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13.0 |
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97.9 MHz |
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10/01/12 |
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WTRV-FM |
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A |
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92 |
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3.5 |
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100.5 MHz |
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10/01/12 |
|
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WNWZ -AM |
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D |
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N/A |
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1.0 daytime .048 night |
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1410 kHz |
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10/01/12 |
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WFGR-FM |
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A |
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150 |
|
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2.75 |
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98.7 MHz |
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10/01/12 |
|
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Lafayette, LA |
|
KMDL-FM |
|
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C2 |
|
|
|
171 |
|
|
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38.0 |
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|
97.3 MHz |
|
|
|
06/01/12 |
|
|
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KHXT-FM |
|
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C1 |
|
|
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263 |
|
|
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100.0 |
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107.9 MHz |
|
|
|
06/01/12 |
|
|
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KFTE-FM |
|
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C2 |
|
|
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163 |
|
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42.0 |
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96.5 MHz |
|
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06/01/12 |
|
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KTDY-FM |
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C |
|
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300 |
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100.0 |
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99.9 MHz |
|
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06/01/12 |
|
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KPEL-FM2 |
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C3 |
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89 |
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25.0 |
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105.1 MHz |
|
|
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06/01/12 |
|
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KPEL-AM |
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B |
|
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N/A |
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1.0 daytime |
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1420 kHz |
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06/01/12 |
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0.75 night |
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KROF-AM |
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D |
|
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N/A |
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1.0 daytime |
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960 kHz |
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06/01/12 |
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.095 night |
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Owensboro, KY |
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WOMI-AM |
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C |
|
|
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N/A |
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0.83 |
|
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1490 kHz |
|
|
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08/01/12 |
|
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WBKR-FM |
|
|
C |
|
|
|
320 |
|
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91.0 |
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92.5 MHz |
|
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08/01/12 |
|
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Peoria, IL |
|
WGLO-FM |
|
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B1 |
|
|
|
189 |
|
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7.0 |
|
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95.5 MHz |
|
|
|
12/01/12 |
|
|
|
WZPW-FM |
|
|
B1 |
|
|
|
114 |
|
|
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19.0 |
|
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92.3 MHz |
|
|
|
12/01/12 |
|
|
|
WVEL-AM |
|
|
D |
|
|
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N/A |
|
|
5.0 daytime |
|
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1140 kHz |
|
|
|
12/01/12 |
|
|
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WFYR-FM |
|
|
B1 |
|
|
|
103 |
|
|
|
23.5 |
|
|
97.3 MHz |
|
|
|
12/01/12 |
|
|
|
WIXO-FM |
|
|
B |
|
|
|
169 |
|
|
|
32.0 |
|
|
105.7 MHz |
|
|
|
12/01/12 |
|
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|
|
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St. Cloud, MN |
|
KMXK-FM |
|
|
C2 |
|
|
|
150 |
|
|
|
50.0 |
|
|
94.9 MHz |
|
|
|
04/01/13 |
|
|
|
WJON-AM |
|
|
C |
|
|
|
N/A |
|
|
|
1.0 |
|
|
1240 kHz |
|
|
|
04/01/13 |
|
|
|
WWJO-FM |
|
|
C |
|
|
|
305 |
|
|
|
100.0 |
|
|
98.1 MHz |
|
|
|
04/01/13 |
|
|
|
KZRV-FM |
|
|
C2 |
|
|
|
138 |
|
|
|
50.0 |
|
|
96.7 MHz |
|
|
|
04/01/13 |
|
|
|
KLZZ-FM |
|
|
C3 |
|
|
|
126 |
|
|
|
9.0 |
|
|
103.7 MHz |
|
|
|
04/01/13 |
|
|
|
KXSS-AM |
|
|
B |
|
|
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N/A |
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2.5 daytime |
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1390 kHz |
|
|
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04/01/13 |
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1.0 night |
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Utica-Rome, NY |
|
WODZ-FM |
|
|
B1 |
|
|
|
184 |
|
|
|
7.4 |
|
|
96.1 MHz |
|
|
|
06/01/14 |
|
|
|
WLZW-FM |
|
|
B |
|
|
|
201 |
|
|
|
25.0 |
|
|
98.7 MHz |
|
|
|
06/01/14 |
|
|
|
WFRG-FM |
|
|
B |
|
|
|
151 |
|
|
|
100.0 |
|
|
104.3 MHz |
|
|
|
06/01/14 |
|
|
|
WIBX-AM |
|
|
B |
|
|
|
N/A |
|
|
|
5.0 |
|
|
950 kHz |
|
|
|
06/01/14 |
|
|
|
|
2 |
|
Upon consummation of the assignment of the licenses
from the trust which currently holds them to the Company, the license and
assets for this station will be divested to a divestiture trust for eventual
sale. |
- 18 -
Transfers or Assignment of Licenses. The Communications Act prohibits the assignment or
transfer of a broadcast license without the prior approval of the FCC. In determining whether to
grant approval, the FCC considers a number of factors pertaining to the licensee and proposed
licensee, including:
|
|
|
compliance with the various rules limiting common ownership of media
properties in a given market; |
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|
|
the character of the licensee and those persons holding attributable
interests in the licensee; and |
|
|
|
|
compliance with the Communications Acts limitations on alien
ownership as well as compliance with other FCC regulations and
policies. |
To obtain FCC consent to assign or transfer control of a broadcast license, appropriate
applications must be filed with the FCC. If the application involves a substantial change in
ownership or control, the application must be placed on public notice for not less than 30 days
during which time petitions to deny or other objections against the application may be filed by
interested parties, including members of the public. Once the FCC grants an application, interested
parties may seek reconsideration of that grant for 30 days, after which time the FCC may for
another ten days reconsider the grant on its own motion. These types of petitions are filed from
time to time with respect to proposed acquisitions. Informal objections to assignment and transfer
of control applications may be filed at any time up until the FCC acts on the application. If the
application does not involve a substantial change in ownership or control, it is a pro forma
application. The pro forma application is nevertheless subject to having informal objections filed
against it. When passing on an assignment or transfer application, the FCC is prohibited from
considering whether the public interest might be served by an assignment or transfer of the
broadcast license to any party other than the assignee or transferee specified in the application.
Multiple Ownership Rules. The Communications Act and FCC rules impose specific limits on the
number of commercial radio stations an entity can own in a single market, as well as the
combination of radio stations, television stations and newspapers that any entity can own in a
single market. The radio multiple-ownership rules may preclude us from acquiring certain stations
we might otherwise seek to acquire. The ownership rules also effectively prevent us from selling
stations in a market to a buyer that has reached its ownership limit in the market unless that
buyer divests other stations. The local radio ownership rules are as follows:
|
|
|
in markets with 45 or more radio stations, ownership is limited to
eight commercial stations, no more than five of which can be either AM
or FM; |
|
|
|
|
in markets with 30 to 44 radio stations, ownership is limited to seven
commercial stations, no more than four of which can be either AM or
FM; |
|
|
|
|
in markets with 15 to 29 radio stations, ownership is limited to six
commercial stations, no more than four of which can be either AM or
FM; and |
|
|
|
|
in markets with 14 or fewer radio stations, ownership is limited to
five commercial stations or no more than 50.0% of the markets total,
whichever is lower, and no more than three of which can be either AM
or FM. |
- 19 -
In 2003, the FCC changed the methodology by which it defines a particular radio market and
counts stations to determine compliance with the radio multiple ownership restrictions. Those new
rules generally result in parties being able to own fewer radio stations in Arbitron-rated markets
than was the case under the previous rules. The FCCs new rules also provide that parties who own
groups of radio stations that comply with the previous multiple ownership rules, but do not comply
with the new rules, will be allowed to retain those groups on a grandfathered basis, but will not
be allowed to transfer or assign those groups intact unless such transfer or assignment is to
certain eligible small businesses, or to a buyer which commits to transfer the excess stations in
the group to a small business, either directly or through a trust, within one year after the
acquisition. As a result of these rules, the Company ultimately will be required to divest an FM
station in each of the Ft. Collins-Greeley, CO and Lafayette, LA markets. In June 2004, the United
States Court of Appeals for the Third Circuit remanded to the FCC for further justification or
modification the FCCs decision to retain the numerical limits on local radio ownership set forth
above. In July 2006, the FCC released a Further Notice of Proposed Rulemaking (the FNPRM)
seeking public comment on, among other things, how the FCC should address the Courts concerns
regarding those numerical limits. Pending action on such remand, the FCC has continued to apply
the numerical limits set forth above.
In addition to limits on the number of radio stations that a single owner may own in a
particular geographic market, the FCC also has cross-ownership rules that limit or prohibit radio
station ownership by the owner of television stations or a newspaper in the same market. The FCCs
radio/television cross-ownership rules permit a single owner to own up to two television stations,
consistent with the FCCs rules on common ownership of television stations, together with one radio
station in all markets. In addition, an owner will be permitted to own additional radio stations,
not to exceed the local radio ownership limits for the market, as follows:
|
|
|
in markets where 20 media voices will remain after the consummation of
the proposed transaction, an owner may own an additional five radio
stations, or, if the owner only has one television station, an
additional six radio stations; and |
|
|
|
|
in markets where ten media voices will remain after the consummation
of the proposed transaction, an owner may own an additional three
radio stations. |
A media voice includes each independently-owned, full power television and radio station and
each daily newspaper, plus one voice for all cable television systems operating in the market.
In addition to the limits on the number of radio stations and radio/television combinations
that a single owner may own, the FCC generally prohibits common ownership of a broadcast station
and a daily newspaper in the same geographic market. However, a party generally is permitted to own
one major newspaper and one radio station in a market which is among the 20 largest television
markets in the United States. In addition, newspaper-radio cross ownership may be permitted in
certain cases involving a failed or failing newspaper or station.
As part of its 2003 order on broadcast ownership, the FCC adopted new rules which would
eliminate television-radio cross ownership restrictions in markets with four or more television
stations. Under these new rules, cross ownership among radio and television stations would not be
permitted in markets with fewer than four television stations and would not be restricted in
markets with nine or more television stations. The Third Circuit Court of Appeals has remanded
certain aspects of these rules to the FCC for further justification or modification, and these new
rules have been stayed by the Court pending the Courts review of the FCCs action on remand. In
the July 2006 FNPRM, the FCC sought comment on how to address the issues regarding cross ownership
that were remanded by the Court. In the meantime, the FCC has continued to apply its previous
rules regarding cross ownership.
The FCC generally applies its ownership limits to attributable interests held by an
individual, corporation, partnership or other association. In the case of corporations directly or
indirectly controlling broadcast licenses, the interests of officers, directors, and those who,
directly or indirectly, have the right to vote 5.0% or more of the corporations voting stock are
generally attributable. However, certain passive investors are attributable if they hold 20.0% or
more of the corporations voting stock. In addition, the interests of minority shareholders in a
corporation generally are not attributable if a single entity or individual holds 50% or more of
that corporations voting stock.
- 20 -
The FCC also has a rule, known as the equity-debt-plus rule, which causes certain creditors or
investors to be attributable owners of a station. Under this rule, a major programming supplier or
a same-market owner will be an attributable owner of a station if the supplier or owner holds debt
or equity, or both, in the station that is greater than 33.0% of the value of the stations total
debt plus equity. A major programming supplier includes any programming supplier that provides more
than 15.0% of the stations weekly programming hours. A same-market owner includes any attributable
owner of a media company, including broadcast stations, cable television, and newspapers, located
in the same market as the station, but only if the owner is attributable under an FCC attribution
rule other than the equity-debt-plus rule. The attribution rules limit the number of radio stations
we may acquire or own in any market (and may also limit the ability of certain potential buyers of
stations owned by us from being able to purchase some or all of the stations which they might
otherwise wish to purchase from us).
Alien Ownership Rules. The Communications Act prohibits the issuance or holding of broadcast
licenses by persons who are not U.S. citizens, whom the FCC rules refer to as aliens, including
any corporation if more than 20.0% of its capital stock is owned or voted by aliens. In addition,
the FCC may prohibit any corporation from holding a broadcast license if the corporation is
controlled by any other corporation of which more than 25.0% of the capital stock is owned of
record or voted by aliens, if the FCC finds that the prohibition is in the public interest.
Time Brokerage. It is not uncommon for radio stations to enter into what are commonly
referred to as time brokerage agreements or local marketing agreements. While these agreements may
take varying forms, under a typical time brokerage agreement, separately-owned and licensed radio
stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with
the requirements of antitrust laws and with the FCCs rules and policies. Under these arrangements,
separately-owned stations could agree to function cooperatively in programming, advertising sales
and similar matters, subject to the requirement that the licensee of each station maintain
independent control over the programming and operations of its own station. One typical type of
time brokerage agreement is a programming agreement between two separately-owned radio stations
serving a common service area, whereby the licensee of one station provides substantial portions of
the broadcast programming for airing on the other licensees station, subject to ultimate editorial
and other controls being exercised by the latter licensee, and sells advertising time during those
program segments.
The FCCs rules provide that a radio station that brokers more than 15.0% of the weekly
broadcast time on another station serving the same market will be considered to have an
attributable ownership interest in the brokered station for purposes of the FCCs multiple
ownership rules. As a result, in a market where we own a radio station, we would not be permitted
to enter into a time brokerage agreement with another local radio station in the same market if we
could not own the brokered station under the multiple ownership rules, unless our programming on
the brokered station constituted 15.0% or less of the brokered stations programming time on a
weekly basis. FCC rules also prohibit a broadcast station from duplicating more than 25.0% of its
programming on another station in the same broadcast service (i.e., AM-AM or FM-FM), either through
common ownership of the two stations or through a time brokerage agreement where the brokered and
brokering stations which it owns or programs serve substantially the same area.
- 21 -
Radio stations may also enter into what are commonly known as joint sales agreements. In a
typical joint sales agreement, separately owned and licensed stations agree to enter into
cooperative arrangements involving the sale of advertising time and the collection of proceeds from
such sales, but involving none or only a limited amount of programming time. Such arrangements are
subject to compliance with the requirements of the antitrust laws and the FCCs rules and policies.
A radio station that sells more than 15.0% of the weekly advertising time of another station
serving the same market is considered to have an attributable interest in that other station.
Programming and Operation. The Communications Act requires broadcasters to serve the public
interest. Since 1981, the FCC gradually has relaxed or eliminated many of the more formalized
procedures it developed to promote the broadcast of certain types of programming responsive to the
needs of a stations community of license. However, licensees continue to be required to present
programming that is responsive to community problems, needs and interests
and to maintain records demonstrating such responsiveness. Complaints from listeners concerning a
stations programming will be considered by the FCC when it evaluates the licensees renewal
application. However, listener complaints, which are required to be maintained in the stations
public file, may be filed with and considered by the FCC at any time.
Stations also must pay regulatory and application fees and follow various FCC rules that
regulate, among other things, political advertising, sponsorship identifications, the advertisement
of contests and lotteries, employment practices, technical operations, including limits on human
exposure to radio frequency radiation, and obscene and indecent broadcasts. In June 2006, the FCC
sent two letters to us regarding allegations of indecent material having been broadcast on two
separate occasions on station KLAQ-FM in El Paso, Texas. We have responded to both letters, but
are unable to predict what, if any, action the FCC may take with respect to these matters. In
addition, a former employee of the Company has sent numerous e-mail messages to the FCC alleging
that KLAQ-FM has aired indecent programming, and to the FCC and the Department of Justice alleging
that KLAQ-FM has aired cigarette advertisements in violation of federal law. Although the Company
is not aware that any investigation or enforcement action has been undertaken by the FCC or
Department of Justice with respect to these matters, we are unable to predict what, if any actions,
these agencies may take.
The FCC has adopted rules prohibiting employment discrimination by broadcast stations on the
basis of race, religion, color, national origin, and gender; and requiring broadcasters to
implement programs to promote equal employment opportunities at their stations. The rules
generally require broadcasters to widely disseminate information about full-time job openings to
all segments of the community to ensure that all qualified applicants have sufficient opportunity
to apply for the job, to send job vacancy announcements to recruitment organizations and others in
the community indicating an interest in all or some vacancies at the station, and to implement a
number of specific longer-term recruitment outreach efforts, such as job fairs, internship
programs, and interaction with educational and community groups. Broadcasters must also file
reports with the FCC detailing outreach efforts, periodically certify their compliance with the
Equal Employment Opportunity rules, and file certain reports in their public files and with the
FCC. The applicability of these policies to part-time employment opportunities is the subject of a
pending further rule making proceeding.
- 22 -
FCC decisions hold that a broadcast station may not deny a candidate for federal political
office a request for broadcast advertising time solely on the grounds that the amount of time
requested is not the standard length of time which the station offers to its commercial
advertisers. This policy has not had a material impact on our programming and commercial
advertising operations, but the policys future impact is uncertain.
Proposed and Recent Changes. Congress and the FCC may in the future consider and adopt new
laws, regulations and policies regarding a wide variety of matters that could, directly or
indirectly, affect the operation, ownership and profitability of our radio stations, result in the
loss of audience share and advertising revenue for our radio stations, and affect our ability to
acquire additional radio stations or finance such acquisitions. Such matters could include:
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proposals to impose regulatory, spectrum use or other fees on FCC licensees; |
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proposals regarding streaming fees for radio; |
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changes to foreign ownership rules for broadcast licenses; |
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revisions to political broadcasting rules, including requirements that broadcasters provide free air time to candidates; |
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technical and frequency allocation matters; |
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proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages; |
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further changes in the FCCs attribution and multiple ownership policies; |
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changes to broadcast technical requirements; and |
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proposals to limit the tax deductibility of advertising expenses by advertisers. |
The FCC has selected In-Band On-Channel as the exclusive technology for terrestrial digital
operations by AM and FM radio stations. The FCC has authorized commencement of hybrid In-Band
On-Channel transmissions, that is, simultaneous broadcast in both digital and analog format,
including multiple digital channels. The advantages of digital audio broadcasting over traditional
analog broadcasting technology include improved sound quality and the ability to offer a greater
variety of auxiliary services. In-Band On-Channel technology permits a station to transmit radio
programming in both analog and digital formats, and eventually in digital only formats, using the
bandwidth that the radio station is currently licensed to use. We use In-Band On-Channel digital
technology to broadcast digitally on certain of our radio stations. It is unclear, however, what
future impact the introduction of digital broadcasting will have on the markets in which we
compete.
Finally, the FCC has adopted procedures for the auction of broadcast spectrum in circumstances
where two or more parties have filed for new or major change applications, which are mutually
exclusive. Such procedures may limit our efforts to modify or expand the broadcast signals of our
stations.
- 23 -
We cannot predict what other matters might be considered in the future by the FCC or Congress,
nor can we judge in advance what impact, if any, the implementation of any of these proposals or
changes might have on our business.
Federal Antitrust Considerations. The Federal Trade Commission and the United States
Department of Justice, which evaluate transactions to determine whether those transactions should
be challenged under the federal antitrust laws, may investigate certain radio station acquisitions.
We cannot predict the outcome of any specific Federal Trade Commission or Department of Justice
investigation. Any decision by the Federal Trade Commission or Department of Justice to challenge
a proposed acquisition could affect our ability to consummate the acquisition or to consummate it
on the proposed terms.
For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder, require the parties to
file Notification and Report Forms with the Federal Trade Commission and the Department of Justice
and to observe specified waiting period requirements before consummating the acquisition. During
the initial 30-day period after the filing, the investigating agency may determine that the
transaction does not raise significant antitrust issues, in which case it will either terminate the
waiting period or allow it to expire after the initial 30 days. On the other hand, if the agency
determines that the transaction requires a more detailed investigation, then, at
the conclusion of the initial 30-day period, it will issue a formal request for additional
information. The issuance of a formal request extends the waiting period until the 20th calendar
day after the date of substantial compliance by all parties to the acquisition. Thereafter, the
waiting period may only be extended by court order or with the consent of the parties. In practice,
complying with a formal request can take a significant amount of time. In addition, if the
investigating agency raises substantive issues in connection with a proposed transaction, then the
parties frequently engage in lengthy discussions or negotiations with the investigating agency
concerning possible means of addressing those issues, including persuading the agency that the
proposed acquisition would not violate the antitrust laws, restructuring the proposed acquisition,
divestiture of other assets of one or more parties, or abandonment of the transaction. These
discussions and negotiations can be time consuming, and the parties may agree to delay completion
of the acquisition during their pendency.
At any time before or after the completion of a proposed acquisition, the Federal Trade
Commission or the Department of Justice could take such action under the antitrust laws as it
considers necessary or desirable in the public interest, including seeking to enjoin the
acquisition or seeking divestiture of the business or other assets acquired. Acquisitions that are
not required to be reported under the Hart-Scott-Rodino Act may be investigated by the Federal
Trade Commission or the Department of Justice under the antitrust laws before or after completion.
In addition, private parties may under certain circumstances bring legal action to challenge an
acquisition under the antitrust laws.
- 24 -
The Department of Justice has stated publicly that it believes that commencement of operations
under time brokerage agreements, local marketing agreements, joint sales agreements and other
similar agreements customarily entered into in connection with radio station transfers prior to the
expiration of the waiting period under the Hart-Scott-Rodino Act could violate the
Hart-Scott-Rodino Act. In connection with acquisitions subject to the waiting period under the
Hart-Scott-Rodino Act, so long as the Department of Justice policy on the issue remains unchanged,
we would not expect to commence operation of any affected station to be acquired under time
brokerage agreement, local marketing agreement or similar agreement until the waiting period has
expired or been terminated.
Access to Information
Until April 30, 2010, our internet site (www.regentcomm.com) made available free of charge to
interested parties our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current
reports on Form 8-K, and all amendments to those reports, as well as all other reports and
schedules we file electronically with the Securities and Exchange Commission (the Commission), as
soon as reasonably practicable after such material is electronically filed with or furnished to the
Commission. Interested parties may also find reports, proxy and information statements and other
information on issuers that file electronically with the Commission at the Commissions internet
site (http://www.sec.gov).
- 25 -
ITEM 1A. RISK FACTORS.
We Were in Default Under Our Prepetition Credit Agreement Which Led to Our Reorganization Under
Chapter 11 and the Cancellation of Our Common Stock. Our Common Stock No Longer Trades.
The Report of Independent Registered Public Accounting Firm issued by our auditors relating to
our financial statements for the period ended December 31, 2008 contained an explanatory paragraph
regarding uncertainty in our ability to continue as a going concern. Under the terms of our
Prepetition Credit Agreement, any audit report containing such going concern language constituted a
default. On April 1, 2009, our lenders notified us that a default had occurred, that no further
borrowings could be made under the credit agreement until the default was remedied, and that we had
thirty days to cure such default. We did not cure such default nor have we sought or obtained any
forbearance agreement that would limit our lenders rights and/or remedies with respect to our
default. Accordingly, our lenders imposed a default rate of interest and could at any time have
accelerated the maturity of our outstanding debt to become immediately payable, and/or exercise
other rights and remedies available to the lenders under the terms of the credit agreement
including, without limitation, the right to foreclose on the collateral securing our indebtedness.
Our indebtedness under the Prepetition Credit Agreement was secured by a lien on substantially all
of our assets and of our subsidiaries and by a pledge of our operating and license subsidiaries
stock, and was further supported by guarantees from our subsidiaries.
On March 1, 2010, we along with our subsidiaries, filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code, along with a proposed Plan of Reorganization that
would extinguish all of our common stock and provide for a distribution to our stockholders of
$0.13 per share. On April 12, 2010, the Bankruptcy Court hearing our case issued an order
confirming our Plan, as amended, and on April 27, 2010 our Plan went effective and all of our
common stock and other equity interests were cancelled. Stockholders of record on April 26, 2010
are entitled to receive $0.13 per share, and distribution of that amount is expected to occur in
early to mid May 2010 through our transfer agent. All trading in our common stock ceased as of the
close of business on April 26, 2010 and our symbol RGCIQ.PK was retired.
RISKS RELATED TO OUR OPERATIONS
We Face Many Unpredictable Business Risks That Could Have a Material Adverse Effect on Our Future
Operations.
Our operations are subject to many business risks, including certain risks that specifically
influence the radio broadcasting industry, which could have a material adverse effect on our
business. These include:
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changing economic conditions, both generally and relative to
the radio broadcasting industry; |
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shifts in population, listenership, demographics, or audience
tastes; |
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the level of competition for advertising revenues with other
radio stations, satellite radio, television stations, newspapers,
internet-based media, and other communications media; |
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technological changes and innovations; |
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the potential future imposition of fees or charges specific
to the broadcasting industry; and |
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changes in governmental regulations and policies and actions
of federal regulatory bodies, including the U.S. Department of Justice, the
Federal Trade Commission, and the Federal Communications Commission (FCC). |
- 26 -
Given the inherent unpredictability of these variables, we cannot with any degree of certainty
predict what effect, if any, these risks will have on our future operations.
Adverse Economic Conditions Have Caused a Decline in Client Spending Which Has Adversely Affected
Our Business and Financial Performance.
Our operating results continue to be impacted by the health of the national economy and the
local economies in which we operate. Our business and financial performance, including the
collection of our accounts receivable, have been and may continue to be adversely affected by
current and future economic conditions (including a reduction in the availability of credit, the
potential for higher energy costs, and financial market volatility) which have caused a decline in
client spending. Additionally, declines in the financial health of specific industries that
routinely advertise on our stations, such as the automotive sector, have negatively impacted our
business, and could continue to do so in the future.
We May Lose Key Personnel.
Our business depends upon the continued efforts, abilities and expertise of our employees.
These adverse effects could include the impairment of our ability to execute our operating and
acquisition strategies and a decline in our standing in the radio broadcast industry.
We also employ several on-air personalities with large loyal audiences in their individual
markets. The loss of one or more of these personalities could result in a loss of audience share in
that particular market.
An Economic Downturn in Any of Our Significant Markets Could Adversely Affect Our Revenue and Cash
Flow.
Our stations are located in 13 markets. A significant decline in net broadcasting revenue from
our stations in any of our significant markets could have a material adverse effect on our
operations and financial condition.
Our Results of Operations Have Been and May Continue to Be Adversely Affected by a General
Deterioration in Economic Conditions.
We derive substantially all of our revenue from the sale of advertising time on our radio
stations. Generally, advertising tends to decline during economic recessions or downturns.
Furthermore, because a substantial portion of our revenue is derived from local advertisers, our
ability to generate advertising revenue in specific markets is directly affected by local or
regional economic conditions. The current downturn in the U.S. economy has had a negative effect on
our financial condition and results of operations, and could continue to negatively affect us for
the foreseeable future.
- 27 -
Our Acquisition Strategy May Not Be Successful.
Historically we have looked to acquisitions to enhance our growth. Our growth strategy
includes acquiring new stations in mid-sized markets. This strategy is subject to a variety of
risks, including the:
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potential inability to obtain financing for acquisitions; |
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reduction in the number of suitable acquisition targets
resulting from continued industry consolidation; |
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state of general broadcast industry valuations; |
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inability to negotiate definitive purchase agreements on
satisfactory terms; |
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current adverse credit conditions; |
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inability to sell any under-performing station; and |
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failure or unanticipated delays in completing acquisitions
due to difficulties in obtaining required regulatory approvals. |
If we are unable to grow as planned, we may not be able to compete successfully with larger
broadcasting companies and other media. Additionally, in the event that the operations of a newly
acquired business do not meet our expectations, we may be required to write-off the value of some
or all of the assets of the new business. The success of our completed acquisitions will depend on
our ability to effectively integrate the acquired stations into our existing portfolio. Integration
of acquisitions involves numerous risks, including difficulties in integration of operations,
systems and management of a large and geographically diverse group of stations, the potential loss
of key personnel at acquired stations, and the diversion of managements attention from other
business concerns during periods of integration.
We May Lose Audience Share and Advertising Revenue Due to Competition.
Our radio stations compete with other radio stations in each market for audience share and
advertising revenue. Our advertising revenue primarily depends upon our stations audience share in
the demographic groups targeted by our advertisers. 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 a competing station converts to a format
similar to that of one of our stations, or if one of our competitors strengthens its operations,
our stations could suffer a reduction in ratings and/or advertising revenue, and could incur
increased promotional and other expenses. Other radio companies which are larger and have more
financial resources may also enter our markets. Although we believe our stations are
well-positioned to compete, we cannot assure that our stations will maintain or increase their
current ratings or advertising revenue.
We also compete with other media, such as satellite-delivered digital audio radio, television,
newspapers, direct mail, outdoor advertising, and internet-based media for advertising revenue. A
loss of audience share to these media, or the introduction of new media competitors, could result
in the inability to grow our advertising revenue, or decreased advertising revenue for us.
- 28 -
We Are Subject to Competition From New Technologies That May Affect Our Broadcasting Operations.
Our radio stations are subject to rapid technological change, evolving industry standards, and
the emergence of competition from new media technologies and services. Various new media
technologies and services have been introduced, or are being developed, including:
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satellite-delivered digital audio radio service, which has
resulted in the introduction of new subscriber-based satellite radio services
with numerous niche formats; |
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audio programming by cable systems, direct-broadcast
satellite systems, personal communications systems, internet content providers
and other digital audio broadcast formats; |
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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; |
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low-powered FM radio, which could result in additional FM
radio broadcast outlets; and |
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MP3 players and other personal audio systems that create new
ways for individuals to listen to music and other content of their own
choosing. |
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 our financial condition and results of
operations. We continue to monitor technological changes and advances that could potentially have
an impact on our business.
RISKS RELATED TO REGULATION
We Are Subject to Extensive and Changing Federal Regulation.
Our business is dependent upon maintaining our broadcasting licenses issued by the FCC, which
are issued currently for a maximum term of eight years. Our broadcasting licenses will expire
between 2012 and 2014. Although the vast majority of FCC radio station licenses are routinely
renewed, we cannot assure you that our pending or future renewal applications will be approved, or
that such renewals will not include conditions or qualifications that could adversely affect our
operations. 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 also comply with the 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 complete future transactions and in
certain circumstances could require us to divest some radio stations. The FCCs rules also limit
our ability to transfer our radio stations in certain markets as a group to a single buyer.
Additionally, these FCC regulations could change over time and we cannot assure you that those
changes would not have a material adverse affect on us.
- 29 -
Enforcement by the FCC of its Indecency Rules Could Adversely Impact Our Business.
FCC rules prohibit the broadcast of obscene material at any time, and of indecent material
between the hours of 6:00 a.m. and 10:00 p.m. Over the past several years, the FCC has increased
its enforcement efforts with respect to these rules. In addition, recent legislation has
substantially increased the penalties for broadcasting indecent material (up to $325,000 per
incident). Broadcasters may also be subject to other penalties for the broadcast of obscene or
indecent material, including revocation or non-renewal of their licenses. We may become subject to
inquiries or proceedings regarding our stations broadcast of allegedly obscene or indecent
material. To the extent any such proceeding results in the imposition of fines, a settlement with
the FCC, or revocation or non-renewal of any of our licenses, our business could be adversely
impacted.
We Could Experience Delays in Expanding Our Business Due to Antitrust Laws and Other Regulatory
Considerations.
Although part of our growth strategy is the acquisition of additional radio stations, we may
not be able to complete all the acquisitions that we agree to make. The Federal Trade Commission,
the United States Department of Justice and the FCC carefully review proposed transactions under
their respective regulatory authority, focusing, among other things, on the effects on competition,
the number of radio stations and other media outlets owned in a market, and compliance with federal
antitrust and communications laws and regulations. Any delay, prohibition or modification required
by these regulatory authorities could adversely affect the terms of a proposed transaction or could
require us to abandon an otherwise attractive opportunity. We have experienced delays from time to
time in connection with some of our acquisitions. Additionally, we may be unable to maximize our
profit when selling properties that no longer fit in our strategy, due to the same such regulations
imposed upon our competitors.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM
2. PROPERTIES.
The types of properties required to support each of our radio stations include offices,
studios, transmitter sites and antenna sites. A stations studios are generally housed with its
offices in business districts. The transmitter sites and antenna sites are generally located so as
to provide maximum market coverage.
We currently own studio facilities in Burton (Flint), Michigan; Lafayette, Louisiana; Peoria,
Illinois; St. Cloud, Minnesota; Marcy (Utica-Rome), New York; Colonie (Albany), New York;
Owensboro, Kentucky; Windsor (Ft. Collins-Greeley), Colorado; Evansville, Indiana; and Bloomington
and Pontiac (Bloomington), Illinois. We own transmitter and antenna sites in Burton, Otisville,
Millington and Lapeer (Flint), Michigan; Rice, Stearns County and Graham Township (St. Cloud),
Minnesota; Whitesboro, Deerfield and Kirkland (Utica-Rome), New York; El Paso, Texas; Tazewell and
Peoria Counties (Peoria), Illinois; Lafayette and Abbeville (Lafayette), Louisiana; Bethlehem and
Palatine (Albany), New York; Grand Rapids and Comstock Park (Grand Rapids), Michigan; Utica and
Henderson (Owensboro), Kentucky; Windsor (Ft. Collins-Greeley), Colorado; and Evansville, Indiana.
We lease our remaining studio and office facilities, including corporate office space in
Cincinnati, Ohio and Covington, Kentucky, and our remaining transmitter and antenna sites. We do
not anticipate any difficulties
in renewing any facility leases or in leasing alternative or additional space, if required. We own
substantially all of our other equipment, consisting principally of transmitting antennae, towers,
transmitters, studio equipment and general office equipment. Our buildings and equipment are
suitable for our operations and generally in good condition, although opportunities to upgrade
facilities are periodically reviewed.
- 30 -
Substantially all of our personal property and equipment served as collateral for our
obligations under our Prepetition Credit Agreement, and serves as collateral under our new Credit
Agreement entered into on April 27, 2010.
ITEM 3. LEGAL PROCEEDINGS.
We currently and from time to time are involved in litigation incidental to the conduct of our
business. In August 2008, Regent, Terry S. Jacobs (our former chief executive officer), and
approximately twenty other parties (not associated with Regent) were named as defendants in a
lawsuit brought by Alan Brill and various of his related entities, in connection with Regents 2003
purchase of twelve radio stations from Brill Media Company LLC and related entities. The plaintiffs
alleged numerous claims against Regent, Mr. Jacobs and the other defendants, including without
limitation, claims for breach of contract, intentional interference with contracts, breach of
implied covenants and good faith, and fraud and misrepresentation. The plaintiffs sought
compensatory and punitive damages in excess of $20 million from all parties. The complaint has now
been amended to assert claims only against Regent based on alleged violations of a confidentiality
agreement executed in connection with the purchase of the radio stations by Regent. We believe the
suit has no merit and we intend to vigorously defend our position. In the opinion of our
management, we are not a party to any other lawsuit or proceeding that is likely to have a material
adverse effect on us.
The Company is not aware of any probable or levied penalties against the Company relating to
the American Jobs Creation Act.
ITEM 4. (Removed and Reserved).
- 31 -
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
Stock Prices
Shares of our common stock were quoted on The Nasdaq Stock Market under the symbol RGCI until
January 8, 2010. The following table sets forth, for each of the calendar quarters indicated, the
reported high and low sales prices of our common stock as reported currently in the Nasdaq Global
Market.
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High |
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Low |
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2009 |
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First quarter |
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$ |
0.22 |
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$ |
0.08 |
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Second quarter |
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$ |
0.30 |
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$ |
0.10 |
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Third quarter |
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$ |
0.54 |
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$ |
0.16 |
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Fourth quarter |
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$ |
0.82 |
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$ |
0.18 |
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2008 |
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First quarter |
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$ |
1.60 |
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$ |
0.85 |
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Second quarter |
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$ |
1.34 |
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$ |
0.82 |
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Third quarter |
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$ |
1.08 |
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$ |
0.46 |
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Fourth quarter |
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$ |
0.89 |
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$ |
0.07 |
|
As of April 1, 2010, there were approximately 333 holders of record of our common stock. The
number of record holders was determined from the records of our transfer agent and does not include
beneficial owners of common stock whose shares are held in the names of securities brokers, dealers
and registered clearing agencies.
We have never declared nor paid cash dividends on our common stock, and we have no plans in
the foreseeable future to do so. Additionally, our ability to pay dividends is subject to the terms
and conditions of our credit agreements.
- 32 -
Share Repurchases
During the three months ended December 31, 2009, we repurchased the following shares:
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Approximate |
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Total Number of |
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Dollar Value of |
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Total Number |
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Shares Purchased |
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Shares that May |
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of Shares |
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Average Price Paid |
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as Part of Publicly |
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Yet be Purchased |
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Period |
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Purchased |
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per Share |
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Announced Plan(1) |
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Under the Plan (1) |
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(in thousands) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2009
October 31, 2009 |
|
|
2,080 |
(2) |
|
$ |
0.65 |
|
|
|
0 |
|
|
$ |
1,593 |
|
November 1, 2009
November 30, 2009 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$ |
1,593 |
|
December 1, 2009
December 31, 2009 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$ |
1,593 |
|
Total |
|
|
2,080 |
|
|
$ |
0.65 |
|
|
|
0 |
|
|
$ |
1,593 |
|
|
|
|
(1) |
|
On June 1, 2000, Regents Board of Directors approved a stock buyback program
which authorized the Company to repurchase shares of its common stock at certain market price
levels. Through December 31, 2009, the Board has authorized the Company to repurchase approximately
$56.7 million of Regent common stock, of which amount the Company has utilized approximately $55.1
million, leaving available repurchases of approximately $1.6 million, subject to the terms and
conditions of the Companys credit agreement. There were no repurchases of common stock under the
program during 2009. |
|
(2) |
|
Represents shares of common stock surrendered for the payment of employee
withholding taxes related to the vesting of shares granted under The Regent Communications, Inc.
2005 Incentive Compensation Plan. |
- 33 -
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data below should be read in conjunction with our consolidated
financial statements and related notes and Managements Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
YEAR ENDED DECEMBER 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
OPERATING RESULTS (1) (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net broadcast revenues |
|
$ |
84,141 |
|
|
$ |
96,340 |
|
|
$ |
97,912 |
|
|
$ |
82,706 |
|
|
$ |
76,439 |
|
Operating loss |
|
|
(30,686 |
) |
|
|
(43,333 |
) |
|
|
(141,681 |
) |
|
|
(31,465 |
) |
|
|
(8,020 |
) |
Loss from continuing operations
before income taxes |
|
|
(43,770 |
) |
|
|
(65,013 |
) |
|
|
(163,431 |
) |
|
|
(36,956 |
) |
|
|
(11,380 |
) |
Loss from continuing
operations |
|
|
(43,982 |
) |
|
|
(119,402 |
) |
|
|
(102,870 |
) |
|
|
(22,522 |
) |
|
|
(7,558 |
) |
Net income (loss) from discontinued
operations |
|
|
|
|
|
|
411 |
|
|
|
296 |
|
|
|
(4,074 |
) |
|
|
919 |
|
Net loss |
|
$ |
(43,982 |
) |
|
$ |
(118,991 |
) |
|
$ |
(102,574 |
) |
|
$ |
(26,596 |
) |
|
$ |
(6,639 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(1.08 |
) |
|
$ |
(3.07 |
) |
|
$ |
(2.69 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations |
|
|
|
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
(0.10 |
) |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1.08 |
) |
|
$ |
(3.06 |
) |
|
$ |
(2.68 |
) |
|
$ |
(0.67 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares used in basic calculation |
|
|
40,588 |
|
|
|
38,872 |
|
|
|
38,308 |
|
|
|
39,807 |
|
|
|
43,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(1.08 |
) |
|
$ |
(3.07 |
) |
|
$ |
(2.69 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.17 |
) |
Income (loss) from discontinued
operations |
|
|
|
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
(0.10 |
) |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1.08 |
) |
|
$ |
(3.06 |
) |
|
$ |
(2.68 |
) |
|
$ |
(0.67 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares used in fully diluted
calculation: (2) |
|
|
40,588 |
|
|
|
38,872 |
|
|
|
38,308 |
|
|
|
39,807 |
|
|
|
43,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
BALANCE SHEET DATA (1) (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
25,756 |
|
|
$ |
16,880 |
|
|
$ |
25,813 |
|
|
$ |
22,721 |
|
|
$ |
16,053 |
|
Total assets |
|
|
165,887 |
|
|
|
205,284 |
|
|
|
339,250 |
|
|
|
451,645 |
|
|
|
374,481 |
|
Current liabilities |
|
|
206,769 |
|
|
|
191,866 |
|
|
|
12,175 |
|
|
|
9,311 |
|
|
|
12,441 |
|
Long-term debt and capital leases,
less current portion |
|
|
128 |
|
|
|
126 |
|
|
|
202,866 |
|
|
|
213,923 |
|
|
|
78,349 |
|
Total stockholders (deficit) equity |
|
|
(43,318 |
) |
|
|
(126 |
) |
|
|
117,614 |
|
|
|
219,160 |
|
|
|
262,056 |
|
|
|
|
(1) |
|
Acquisitions and dispositions affect comparability among years (see Note 3 in Notes
to Consolidated Financial Statements, as well as our prior Annual Reports on Form 10-K). |
|
(2) |
|
Shares for fully diluted are the same as basic in years 2009, 2008, 2007,
2006 and 2005, as the effect of outstanding common stock options and warrants was
antidilutive in those years. In 2009, we implemented accounting guidance related to
participating securities. There was no impact to our computation of earnings per share
for any period shown in the table above, as we recorded a net loss in each period
presented. |
|
(3) |
|
Impairment of indefinite-lived intangible assets recorded in 2009, 2008,
2007, 2006 and 2005 will affect comparability among years (see Note 8 in Notes to
Consolidated Financial Statements, as well as our prior Annual Reports on Form 10-K). |
- 34 -
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the financial statements, related notes
and other financial information appearing elsewhere in this report. In addition, see Cautionary
Statement Concerning Forward-Looking Statements and Risk Factors.
OVERVIEW
Executive Overview
|
|
|
Over the past year, Regent, like many radio, television and newspaper companies, has
experienced declining profitability as a result of the cyclical economic downturn and
secular changes in the industry. Like its competitors, Regent derives substantially all
of its revenue from advertising. The financial crisis, with its particular impact on
consumer driven segments, has had a significant negative impact on advertising.
Significant sources of Regents advertising revenues relate to several beleaguered
consumer driven sectors, such as auto, financial services and entertainment. In addition,
advertising has decreased due to other factors such as the shift in advertising
expenditures to online media. |
|
|
|
We performed our annual impairment analysis on our indefinite-lived intangible assets
and goodwill during the fourth quarter of 2009. Based primarily on decreases in the long
term market revenue growth rates, we determined that the fair value of goodwill and FCC
licenses for certain markets were less than the carrying values recorded in our financial
statements. Consequently, we recorded a pre-tax impairment charge of $11.8 million for FCC
licenses and approximately $1.0 million for goodwill. |
|
|
|
As a result of lower long-term interest rates at the end of 2009, we recorded an
unrealized loss of approximately $3.2 million related to the interest rate swap agreements
we had in place on the term loan portions of our credit agreement. In addition, we
recorded a realized loss of approximately $6.1 million in 2009 related to lower short-term
interest rates compared to our fixed interest rates. At December 31, 2009 the value of the
swaps was approximately $7.8 million. |
|
|
|
In the second half of 2009, we and our advisors, Bank of America, N.A., in its capacity
as Administrative Agent, BMO Capital Markets, General Electric Capital Corporation,
various affiliates of Oaktree Capital Management, L.P., SunTrust Robinson Humphrey and
Wells Fargo Foothill, among others, engaged in ongoing negotiations and analyses
concerning a restructuring of our business. In late February 2010, we and holders of at
least 76.3% of the principal amount of the loans outstanding under the credit agreement
and counter parties to our interest rate swap agreements agreed on detailed terms
regarding the parameters of a global financial restructuring in the form of a Chapter 11
plan of reorganization, which would result in the elimination of approximately $86.7
million in indebtedness in 2010. |
- 35 -
|
|
|
On March 1, 2010, the Company and its wholly owned subsidiaries filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code, in the United
States Bankruptcy Court for the District of Delaware. From the period commencing from
March 1, 2010 and through the Effective Date (as defined below), we operated our
businesses and managed our properties as debtors-in-possession, subject to the jurisdiction
of the bankruptcy court and in accordance with the applicable provisions of the Bankruptcy
Code. On March 22, 2010 we filed a First Amended Disclosure Statement and a First Amended
Joint Plan of Reorganization with the bankruptcy court. On April 12, 2010, the Bankruptcy
Court entered an order confirming the Plan as modified by the Courts order. On April 27,
2010 (the Effective Date) we satisfied all of the conditions of the Plan and emerged from
the Chapter 11 Cases. On the Effective Date, the Company issued 100% of its new common
stock, as reorganized under the Plan, to U.S. holders of first lien debt claims under the
old credit agreement and the swap agreements, and warrants to purchase new common stock to
non-U.S. holders of such claims, each on a basis pro rata to the amount of their claims. |
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make judgments and estimates that
affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures
of contingent assets and liabilities. We continually evaluate our accounting estimates, the most
significant of which include establishing allowances for doubtful accounts, evaluating the
realizability of our deferred tax assets, determining the recoverability of our long-lived assets,
evaluating our goodwill and indefinite-lived intangible assets for impairment, and determining the
fair value of our derivative financial instruments. The basis for our estimates are historical
experience and various assumptions that are believed to be reasonable under the circumstances,
given the available information at the time of the estimate, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily
available from other sources. Actual results may differ from these estimates under different
assumptions and conditions.
We believe the following critical accounting policies affect our more significant judgments
and estimates used in the preparation of our consolidated financial statements.
Revenue recognition We recognize revenue from the sale of commercial broadcast time to
advertisers when the commercials are broadcast, subject to meeting certain conditions such
as pervasive evidence that an arrangement exists, the price is fixed and determinable, and
collection is reasonably assured. These criteria are generally met at the time an
advertisement is broadcast, and the revenue is recorded net of advertising agency
commissions.
Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts for
estimated losses resulting from the inability of our customers to make required payments.
We routinely review customer account activity in order to assess the adequacy of the
allowances provided for potential losses. Based on historical information, we believe that
our allowance is adequate. However, changes in general economic, business and market
conditions could affect the ability of our customers to make their required payments;
therefore, the allowance for doubtful accounts is reviewed monthly and changes to the
allowance are updated as new information is received. A 1% change to our allowance as a
percent of our outstanding accounts receivable balance at December 31, 2009 would cause a
change in net income of approximately $0.1 million, net of tax.
- 36 -
Goodwill and Indefinite-Lived Intangible Assets Our FCC licenses qualify as
indefinite-lived intangible assets, and represent a significant portion of the assets on
our balance
sheet. We utilize the greenfield methodology for valuation of our FCC licenses, which
allocates a start-up value to each station and employs a discounted cash flow methodology
and accepted appraisal techniques. To test goodwill, we utilize a market multiple approach
at the reporting unit level. Local economic conditions in each of our markets could impact
whether an FCC license or goodwill is impaired, as a decrease or increase in market revenue
could negatively or positively impact discounted cash flows. Other factors such as interest
rates, the performance of the S&P 500, cash flow multiples, as well as capital
expenditures, can affect the discounted cash flow analysis. In the event that there are no
representative asset purchases or sale transactions to substantiate the fair value analysis
utilized in the application of Accounting Standards Codification (ASC) Topic 350, we may
defer to the fair value implied by Regents market capitalization to establish the fair
value. To the extent that the carrying value exceeds the fair value of the assets, an
impairment loss will be recorded in operating income or loss. A 1% to 5% decrease in
expected cumulative cash flows with no further changes in assumptions would have resulted
in approximately $1.1 million to $5.6 million of additional pre-tax impairment expense in
the fourth quarter of 2009. A 1% increase in our weighted average cost of capital with no
further changes in assumptions would have resulted in approximately $7.4 million of
additional pre-tax impairment expense in the fourth quarter of 2009.
Determining the Recoverability of Long-Lived Assets Our long-lived assets to be held and
used (fixed assets and definite-lived intangible assets) are reviewed for impairment
whenever events or circumstances indicate that the carrying amount may not be recoverable.
The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the
undiscounted cash flows expected to result from the use and eventual disposal of the asset.
If we were to determine that the carrying amount of an asset was not recoverable, we would
record an impairment loss for the difference between the carrying amount and the fair value
of the asset. We determine the fair value of our long-lived assets based upon the market
value of similar assets, if available, or independent appraisals, if necessary. Long-lived
assets to be disposed of and/or held for sale are reported at the lower of carrying amount
or fair value, less cost to sell. We determine the fair value of these assets in the same
manner as described for assets held and used.
Deferred Tax Assets At December 31, 2009, we had current and non-current net deferred tax
assets of approximately $96.5 million before valuation allowance, the primary components of
which are our intangible assets and net operating loss carryforwards. As a result of our
failure to meet the required financial covenants in our credit agreement, the potential
acceleration of the maturity of our debt created uncertainty in our ability to continue as
a going concern. Consequently, during the fourth quarter of 2008, we recorded a valuation
allowance against substantially all of our net deferred tax assets due to our inability to
conclude that it was more likely than not that the deferred tax assets would be realized.
The valuation allowance remained in place at December 31, 2009 as a result of our continued
inability to meet the financial covenants. If it were determined that we would be able to
utilize a portion of the net operating loss carryforwards that are currently reduced by a
valuation allowance, an adjustment to the valuation allowance would be recorded as a
reduction to income tax expense.
- 37 -
Derivative Financial Instruments At December 31, 2009 we were a party to five interest
rate swap agreements, which effectively converted approximately $147.2 million of our
borrowings from a variable interest rate to a fixed rate of interest. Hedge accounting was
not applied to these interest rate swap agreements. Consequently, revaluation gains and
losses associated with changes in the fair value measurement of the
swaps are recorded as a component of operating loss in the Consolidated Statements of
Operations. Fair value for derivative interest rate swap agreements is obtained from
counterparties to the agreements and corroborated through estimates using internal
discounted cash flow calculations based upon forward interest-rate yield curves, and
considering the risk of non-performance by the parties to the contract. At December 31,
2009 and 2008, the Company had liabilities of approximately $7.8 million and $11.0 million,
respectively, related to the swap agreements.
RESULTS OF OPERATIONS
The key factors that have affected our business over the last three years are discussed and
analyzed in the following paragraphs. This commentary should be read in conjunction with our
consolidated financial statements and the related footnotes included herein.
Our financial results are seasonal. As is typical in the radio broadcasting industry, we
expect our first calendar quarter to produce the lowest revenues for the year, and the fourth
calendar quarter to produce the highest revenues for the year. Our operating results in any period
may be affected by advertising and promotion expenses that do not necessarily produce commensurate
revenues until the impact of the advertising and promotion is realized in future periods.
Year ended December 31, 2009 as compared to year ended December 31, 2008
Results of continuing operations for the year ended December 31, 2009 compared to December 31,
2008 were impacted by several factors. Of primary significance was a continued deterioration of
spending by advertisers due to recessionary economic conditions throughout the United States
during the entire 2009 year. Additionally, comparisons to 2009 were negatively impacted as a result
of strong political revenues in 2008 in certain of our markets.
Net Broadcast Revenues
The radio industry overall experienced an 18% decrease in revenues in 2009 compared to 2008,
according to the Radio Advertising Bureau (RAB). The RAB further indicated that in 2009, local
revenues decreased 20% and national revenues decreased 19%. In 2009, our net broadcast revenue was
derived from approximately 88% local revenue and 12% national revenue.
- 38 -
Net broadcast revenues for Regent decreased 12.7%, to approximately $84.1 million in 2009 from
approximately $96.3 million in 2008. The table below provides a summary of the net broadcast
revenue variance for the comparable twelve-month periods (in thousands):
Net broadcast revenue variance:
|
|
|
|
|
|
|
|
|
|
|
(Decrease) |
|
|
|
|
|
|
increase in net |
|
|
|
|
|
|
broadcast |
|
|
% |
|
|
|
revenue |
|
|
Change |
|
Local revenue |
|
$ |
(8,662 |
) |
|
|
(10.9 |
)% |
National revenue |
|
|
(2,038 |
) |
|
|
(20.6 |
)% |
Political revenue |
|
|
(1,557 |
) |
|
|
(81.6 |
)% |
Barter revenue |
|
|
127 |
|
|
|
3.6 |
% |
Other |
|
|
(68 |
) |
|
|
(4.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net broadcast revenue variance |
|
$ |
(12,198 |
) |
|
|
(12.7 |
)% |
|
|
|
|
|
|
|
|
Local revenue The decrease of 10.9% in local revenue in 2009 compared to 2008 was due
primarily to the effects on advertising spending of depressed economic conditions throughout the
United States during the entire year. The economic conditions affected all of the local economies
in which we operated, as none of our markets experienced increases in local direct and agency
advertising revenues. The overall declines in local direct and agency revenues were partially
offset by increases in Interactive revenue and non-traditional event revenue. Interactive revenue
increased by approximately $0.8 million or 42.4% in 2009, as we continued to develop our
Interactive initiative during the year. Non-traditional revenues in 2009 increased 4.5% compared to
2008 due to strong attendance at our Taste of Country event in our Buffalo, New York market. Our
St. Cloud, Minnesota market experienced higher non-traditional revenue in 2009 due to the addition
of a new non-traditional revenue event during the year.
National revenue National revenue decreased approximately $2.0 million in 2009, or 20.6%,
compared to 2008. The decline in national revenue was seen across all of our broadcast markets, and
was due primarily to the difficult economic conditions present during 2009.
Political revenue Political revenue of approximately $350,000 in 2009 decreased
approximately $1.6 million compared to 2008. Our Lafayette, Louisiana and Utica, New York markets
accounted for over half of the political revenue in 2009 as a result of local and state issue
advertising. The largest decreases were seen in our Ft. Collins-Greeley, Colorado, Buffalo, New
York, and St. Cloud, Minnesota markets. In 2008 Ft. Collins-Greeley saw an influx of political
advertising revenue for state ballot propositions and initiatives, as well as for federal senate
and congressional races, while Buffalo benefited from local and state governmental races and ballot
initiatives. In 2008 St. Cloud saw increased political advertising due to a strongly-contested U.S.
Senate race, in addition to local government races and ballot initiatives.
- 39 -
Station Operating Expenses
Station operating expenses decreased 6.7%, to approximately $57.3 million in 2009 from
approximately $61.4 million in 2008. The table below provides a summary of the station operating
expense variance for the comparable twelve-month periods (in thousands):
Station operating expense variance:
|
|
|
|
|
|
|
|
|
|
|
Decrease |
|
|
|
|
|
|
(increase) in |
|
|
|
|
|
|
station operating |
|
|
% |
|
|
|
expense |
|
|
Change |
|
Technical expense |
|
$ |
217 |
|
|
|
6.4 |
% |
Programming expense |
|
|
694 |
|
|
|
4.0 |
% |
Promotion expense |
|
|
687 |
|
|
|
32.4 |
% |
Interactive expense |
|
|
(62 |
) |
|
|
(4.9 |
)% |
Sales expense |
|
|
1,710 |
|
|
|
8.9 |
% |
Administrative expense |
|
|
952 |
|
|
|
6.4 |
% |
Barter expense |
|
|
(112 |
) |
|
|
(3.2 |
%) |
|
|
|
|
|
|
|
|
Station operating expense variance |
|
$ |
4,086 |
|
|
|
6.7 |
% |
|
|
|
|
|
|
|
|
Technical expense Technical expenses decreased approximately 6.4% in 2009, due primarily to
lower utility expenses in our New York markets. These savings may be temporary due to energy rate
volatility. Additionally, we had fewer equipment repair costs and associated outside consulting
fees. These savings were partially offset by approximately $30,000 of contractual increased tower
rent expenses related to our St. Cloud, Minnesota market.
Programming expense Programming expense decreased by approximately 4.0% during 2009. The
decrease was due to a combination of salary savings, primarily in our Evansville, Indiana, Grand
Rapids, Michigan and Flint, Michigan markets, and savings in broadcast program rights, outside
consulting and talent fees. The salary savings were due primarily to staff reductions. These
savings were partially offset by increased music license fees in the majority of our broadcast
markets.
Promotion expense Promotion expense decreased 32.4% in 2009 compared to the 2008 year,
primarily due to lower levels of promotional spending for television advertising, billboards,
contests, and promotional products, as we continued to manage our discretionary costs in response
to challenging economic conditions.
Interactive expense Interactive expense increased 4.9% during 2009, as our Interactive
initiative continued its growth trend. The largest increases in 2009 were in commissions and music
license fees due to increased revenues. These increases were partially offset by salary savings in
various markets as we directed resources out of the field into the corporate office.
Sales expense During 2009, sales expense decreased 8.9% compared to 2008. The decrease was
due primarily to lower salaries, commissions, bonuses and national representation fees associated
with lower revenue levels in 2009. These savings were partially offset by increased rating service
fees.
Administrative expense During 2008, administrative expense decreased 6.4%. The decrease was
due primarily to lower bonuses, payroll taxes and 401(K) contributions, as we discontinued the
Company march in early 2009. Additionally, savings in legal fees and franchise taxes were offset by
increased medical insurance expense.
- 40 -
Depreciation and Amortization
Depreciation and amortization expense of approximately $3.8 million in 2009 decreased by 8.5%
from approximately $4.2 million for the 2008 year. The decrease is due primarily to a combination
of decreased depreciation expense during 2009, as many assets acquired are now fully depreciated,
and lower capital expenditures in 2009.
Corporate General and Administrative Expenses
Corporate general and administrative expense of approximately $9.1 million in 2009 increased
approximately 32.1% or approximately $2.2 million from approximately $6.9 million in 2008. The
increase was caused primarily by $1.9 million of professional fees related primarily to the
restructuring of the Company and $0.5 million of non-cash deferred compensation expense related to
the mark-to-market of phantom stock units in our Deferred Compensation Plan.
Impairment of Indefinite-Lived Intangible Assets and Goodwill
Based on deteriorating global economic conditions, volatility in the equity markets, and
operating results, we performed an analysis for potential impairment of our indefinite-lived
intangibles and goodwill during the first quarter of 2009. Based primarily upon material reductions
in future revenue and cash flow projections, we determined that the fair value of goodwill and FCC
licenses for certain markets were less than the carrying values recorded in our financial
statements. Accordingly, we recorded a pre-tax impairment charges of $25.6 million for FCC licenses
and approximately $6.2 million for goodwill during the first quarter of 2009.
We performed our annual impairment testing of our indefinite-lived intangible assets and
goodwill during the fourth quarter of 2009. Based primarily upon lower long term market revenue
projections, we determined that the fair value of goodwill and FCC licenses for certain of our
broadcast markets was less than the carrying values recorded in our financial statements.
Consequently, we recorded estimated pre-tax impairment charges of approximately $11.8 million
against FCC licenses and $1.0 million against goodwill during the fourth quarter of 2009.
Gain on Sale of Radio Stations
During the first quarter of 2008, we disposed of WTMM-AM in Albany, New York and WECK-AM in
Buffalo, New York. The sale of the stations did not qualify for discontinued operations treatment
under current accounting guidance. We recorded a gain of approximately $0.5 million on the sale of
these stations.
Interest Expense
Interest expense decreased to approximately $10.3 million in 2009 from approximately $11.8
million in 2008. The $1.5 million decrease was due primarily to a decrease in average interest
rates during 2009 compared to 2008. Substantially all of the $1.5 million decrease was due to lower
average interest rates during the first nine months of 2009 compared to 2008. The average interest
rate for the first nine months of 2009 was 4.61%, compared to 5.59% for the first nine months of
2008. Commencing in May 2009, we began paying a 2.0% default premium on our outstanding borrowings
under the credit agreement, and in June 2009, we were precluded from further utilizing LIBOR-based
interest rates on our outstanding borrowings; however, despite these factors, average interest
rates for the first nine months of 2009 were still lower than those in the previous year due to the
steep decline in LIBOR-based interest rates during the period in which we could utilize them. To a
lesser degree, lower average debt levels contributed to the
decline in interest expense. Our average debt level in 2009 was approximately $188.3 million,
compared to approximately $193.3 million in 2008.
- 41 -
Realized and Unrealized (Loss) Gain on Derivatives
In order to mitigate the impact of potential interest rate fluctuations, during the fourth
quarter of 2006, we swapped the interest rates on both the Term A Loan and Term B Loan portions of
our credit agreement, from floating to fixed. The Term A Loan pricing is fixed at approximately
4.83% for five years and the Term B Loan pricing is fixed at approximately 4.72% for five years, in
both cases plus the Applicable Margin. Since hedge accounting was not applied to these interest
rate swap agreements, revaluation gains and losses associated with changes in the fair value
measurement of the swaps are recorded within realized and unrealized (loss) gain on derivatives in
the Consolidated Statements of Operations. We recorded approximately $3.2 million of
unrealized gain related to the change in the fair value of the swaps during the 2009
year, compared to approximately $6.5 million of unrealized loss for the 2008 year. Additionally, we
recorded approximately $6.1 million of realized loss during 2009 related to the unfavorable swap
fixed rates compared to market rates during the period. For the 2008 year, we recorded
approximately $2.2 million of realized loss due to the unfavorable swap fixed rates compared to
market rates during the period.
Impairment of Notes Receivable
During the third quarter of 2008, we recorded an other-than-temporary impairment loss of
approximately $1.0 million on an investment in notes receivable and associated interest receivable
due to changing market conditions potentially affecting the collectibility of the investment.
Income Taxes
During 2009, we recorded income tax expense at an effective rate of 0.5%. This rate includes a
tax benefit at a (34.0)% federal rate, a state tax benefit, net of federal benefit, of (4.0)% and
miscellaneous adjustments of 2.9%. Consistent with our conclusions at December 31, 2008, the tax
benefits recorded were offset by a charge to the valuation allowance against our deferred tax
assets of 35.6%, as we are unable to conclude that it is more likely than not that the assets will
be realized.
We recorded income tax expense of approximately $54.4 million in 2008, which represented a
negative 83.7% effective rate. The rate includes a tax benefit at a 34.0% federal rate and a state
tax benefit of approximately 4.4%, offset by an increase in the valuation allowance of 120.0% and
2.1% of other permanent item adjustments.
During the third quarter of 2008, we recorded $5.8 million of valuation allowance against our
federal and state net operating loss carryforwards expiring in years 2017 through 2021, based on
insufficient future taxable income during those years. As a result of our anticipated failure to
meet the required financial covenants in our credit agreement at March 31, 2009, the potential
acceleration of the maturity of our debt creates uncertainty in our ability to continue as a going
concern. Consequently, during the fourth quarter of 2008, we recorded an additional valuation
allowance of approximately $73.3 million, as were unable to conclude that it is more likely than
not that our deferred tax assets will be realized, given this uncertainty. The additional valuation
allowance recorded included approximately $26.0 million for net operating loss carryforwards
expiring in years 2022 through 2028.
- 42 -
We have cumulative gross federal and state tax loss carryforwards of approximately $205.7
million at December 31, 2009, which expire in the years 2010 through 2029. The utilization of a
portion of these net operating loss carryforwards for federal income tax purposes is limited,
pursuant to the annual utilization limitations provided under the provisions of Internal Revenue
Code Section 382.
Discontinued Operations
We applied current accounting guidance to the sale of our Watertown, New York market in 2008,
which requires that in a period in which a component of an entity has been disposed of or is
classified as held for sale, the income statement of a business enterprise for current and prior
periods shall report the results of operations of the component, including any gain or loss
recognized, in discontinued operations. The table below summarizes the effect of the
reclassification on the years ended December 31, 2009 and December 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Net broadcast revenue |
|
|
|
|
|
$ |
182 |
|
Station operating expense |
|
|
|
|
|
|
156 |
|
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
Allocated interest expense |
|
|
|
|
|
|
15 |
|
Gain on sale of radio stations |
|
|
|
|
|
|
(638 |
) |
|
|
|
|
|
|
|
|
Gain before income taxes |
|
|
|
|
|
|
649 |
|
Income tax expense |
|
|
|
|
|
|
(238 |
) |
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
$ |
411 |
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008 as compared to year ended December 31, 2007
Results of continuing operations for the year ended December 31, 2008 compared to December 31,
2007 were impacted by several factors. Of primary significance was a general deterioration in
spending by advertisers due to recessionary economic conditions throughout the United States,
especially during the fourth quarter of 2008, but for certain advertiser categories, throughout the
entire 2008 year. The impact of these poor economic conditions was offset partially by strong
political revenues in 2008 compared to 2007 in certain of our markets.
Net Broadcast Revenues
The radio industry overall experienced a 9% decrease in revenues in 2008 compared to 2007,
according to the Radio Advertising Bureau (RAB). The RAB further indicated that in 2008, local
revenues decreased 10% and national revenues decreased 12%. In 2008, our net broadcast revenue was
derived from approximately 86% local revenue and 14% national revenue.
- 43 -
Net broadcast revenues for Regent decreased 1.6%, to approximately $96.3 million in 2008 from
approximately $97.9 million in 2007. The table below provides a summary of the net broadcast
revenue variance for the comparable twelve-month periods (in thousands):
Net broadcast revenue variance:
|
|
|
|
|
|
|
|
|
|
|
(Decrease) |
|
|
|
|
|
|
increase in net |
|
|
|
|
|
|
broadcast |
|
|
% |
|
|
|
revenue |
|
|
Change |
|
Local revenue |
|
$ |
(1,248 |
) |
|
|
(1.6 |
)% |
National revenue |
|
|
(1,588 |
) |
|
|
(13.8 |
)% |
Political revenue |
|
|
1,320 |
|
|
|
224.1 |
% |
Barter revenue |
|
|
(33 |
) |
|
|
(0.9 |
)% |
Other |
|
|
(23 |
) |
|
|
(1.0 |
)% |
|
|
|
|
|
|
|
|
Net broadcast revenue variance |
|
$ |
(1,572 |
) |
|
|
(1.6 |
)% |
|
|
|
|
|
|
|
|
Local revenue The decrease of 1.6% in local revenue in 2008 compared to 2007 was due
primarily to the effects on advertising spending of deteriorating economic conditions throughout
the United States, which primarily affected us during the fourth quarter of 2008. Despite an
economic downturn in most of the local economies in which we operated, certain of our markets
experienced increases in local direct and agency advertising revenues, primarily our Bloomington,
Illinois and Utica, New York markets. Bloomington benefited from strong agricultural advertising
spending, while Utica benefited from strong sales initiatives for local direct and agency business.
The overall declines in local direct and agency revenues were partially offset by increases in
Interactive revenue and non-traditional event revenue. Interactive revenue increased by
approximately $1.2 million in 2008, as we continued to develop our Interactive initiative during
the year. Non-traditional revenues increased due to strong attendance at our Taste of Country event
in our Buffalo, New York market and our Countryfest event in our Albany, New York market. Our
Utica, New York market experienced higher non-traditional revenue in 2008 due to stronger
attendance at several non-traditional revenue events over the prior year, in addition to rolling
out a new non-traditional revenue event during the year.
National revenue National revenue decreased approximately $1.6 million in 2008, or 13.8%,
compared to 2007. The decline in national revenue was seen across the majority of our broadcast
markets, and was due primarily to the difficult economic conditions present during 2008,
particularly during the fourth quarter. Three of our broadcast markets, Lafayette, Louisiana, Ft.
Collins, Colorado, and Bloomington, Illinois, saw increases in their national revenue in the 2008
year. Ft. Collins and Lafayette benefited from stronger station ratings, which led to more national
advertising for their stations. Bloomington reclaimed several large national accounts that had not
advertised on the stations during the 2007 year.
Political revenue Political revenue increased approximately $1.3 million in 2008 compared to
2007. The largest increases were seen in our Ft. Collins, Colorado, Buffalo, New York, and St.
Cloud, Minnesota markets. Ft. Collins saw an influx of political advertising revenue for state
ballot propositions and initiatives, as well as for federal senate and congressional races, while
Buffalo benefited from local and state governmental races and ballot initiatives. St. Cloud saw
increased political advertising due to a strongly-contested U.S. Senate race, in addition to local
government races and ballot initiatives.
- 44 -
Station Operating Expenses
Station operating expenses decreased 2.7%, to approximately $61.4 million in 2008 from
approximately $63.1 million in 2007. The table below provides a summary of the station operating
expense variance for the comparable twelve-month periods (in thousands):
Station operating expense variance:
|
|
|
|
|
|
|
|
|
|
|
Decrease |
|
|
|
|
|
|
(increase) in |
|
|
|
|
|
|
station operating |
|
|
% |
|
|
|
expense |
|
|
Change |
|
Technical expense |
|
$ |
155 |
|
|
|
4.4 |
% |
Programming expense |
|
|
383 |
|
|
|
2.2 |
% |
Promotion expense |
|
|
1,136 |
|
|
|
34.9 |
% |
Interactive expense |
|
|
(522 |
) |
|
|
(71.0 |
)% |
Sales expense |
|
|
549 |
|
|
|
2.8 |
% |
Administrative expense |
|
|
(3 |
) |
|
|
(0.0 |
)% |
Barter expense |
|
|
8 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
Station operating expense variance |
|
$ |
1,706 |
|
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
Technical expense Technical expenses decreased approximately 4.4%, due primarily to fewer
equipment repair costs and associated outside consulting fees, as well as fewer software fees.
These decreases were partially offset by higher utility expenses during the period.
Programming expense Programming expense decreased by approximately 2.2% during 2008. The
decrease was due to a combination of salary savings, primarily in our Evansville, Indiana market,
where we began broadcasting a syndicated program for the morning drive on one of our stations, and
reduced outside consulting and research projects during the year. These savings were partially
offset by increased music license fees in the majority of our broadcast markets.
Promotion expense Promotion expense decreased 34.9% compared to the 2007 year, primarily due
to lower levels of promotional spending for television time, billboards, contests, direct mail
promotions and promotional products, as we continued to manage our discretionary costs in response
to challenging economic conditions.
Interactive expense Interactive expense increased 71.0% during 2008, as our Interactive
initiative continued its growth trend. The largest increases in 2008 were in salaries and
commissions, as the majority of our markets employed Interactive sales managers and program
directors for the full 2008 year, and incurred more commission expense due to increased revenues.
Sales expense During 2008, sales expense decreased 2.8%. The decrease was due primarily to
lower commissions, bonuses and national representation fees associated with lower revenue levels in
2008. These savings were partially offset by increased event costs for several of our
non-traditional events in 2008 and increased rating service fees.
- 45 -
Depreciation and Amortization
Depreciation and amortization expense of approximately $4.2 million in 2008 decreased by 16.6%
from approximately $5.0 million for the 2007 year. The decrease is due primarily to $0.8 million
of amortization expense for acquired advertising contracts during the first quarter of 2007 related
to the acquisition of the Buffalo, New York stations in 2006. The advertising contracts were fully
amortized as of March 31, 2007. The remaining change in expense was due to decreased depreciation
expense of approximately $0.1 million during 2008, as many assets acquired through our purchases of
the Grand Rapids, Michigan and Albany, New York broadcast markets are now fully depreciated. The
decreases in Grand Rapids and Albany were partially offset by increased depreciation expense for
our newly-remodeled broadcast facility in our Evansville, Indiana market.
Corporate General and Administrative Expenses
Corporate general and administrative expense of approximately $6.9 million in 2008 decreased
approximately 5.8% or $0.4 million from approximately $7.3 million in 2007. The reduction was
caused primarily by: decreased non-cash expense related to the Companys deferred compensation
match, caused by a decline in the value of the plans assets; savings in business travel expenses;
savings in connectivity charges; and reduced bonus expense based upon the Companys operating
results compared to its established goals. These savings were offset partially by increased
salaries and non-cash stock compensation expense related to the issuance of nonvested shares of our
common stock.
Activist Defense Costs
In the third quarter of 2007, we incurred approximately $0.6 million in legal and other costs
related to the settlement of a stockholder activist lawsuit. Further information pertaining to this
matter was filed on the Companys Form 8-K dated September 14, 2007. No activist defense costs were
incurred in 2008.
Impairment of Indefinite-Lived Intangible Assets and Goodwill
Based on deteriorating national economic conditions and volatility in the equity markets, we
performed an analysis for potential impairment of our indefinite-lived intangible assets and
goodwill during the third quarter of 2008. Based primarily upon declining radio station transaction
multiples, decreases in our common stock price, and changes in the cost of capital, we determined
that the fair value of goodwill and FCC licenses for certain of our broadcast markets was less than
the carrying values recorded in our financial statements. Consequently, we recorded estimated
pre-tax impairment charges of approximately $67.5 million against FCC licenses and goodwill during
the third quarter of 2008. During the fourth quarter of 2008, we finalized our analysis, with no
significant changes to the amount of impairment recorded. Also, no further impairment charges were
recorded during our annual testing of indefinite-lived intangible assets and goodwill during the
fourth quarter of 2008. In 2007, we recorded impairment of FCC licenses and goodwill of
approximately $163.6 million.
Gain on Sale of Radio Stations
During the first quarter of 2008, we disposed of WTMM-AM in Albany, New York and WECK-AM in
Buffalo, New York. The sale of the stations did not qualify for discontinued operations treatment
under current accounting guidance. We recorded a gain of approximately $0.5 million on the sale of
these stations.
- 46 -
Interest Expense
Interest expense decreased to approximately $11.8 million in 2008 from approximately $16.8
million in 2007. The $5.0 million decrease was due primarily to a decrease in average interest
rates during 2008 compared to 2007. A reduction in average outstanding borrowings under our credit
agreement also contributed to the decrease in interest expense, as we repaid outstanding debt under
the agreement with proceeds from the sale of several radio properties during the first quarter of
2008, and with cash provided by our operations. Our average debt level in 2008 was approximately
$193.3 million, compared to approximately $212.5 million in 2007.
Realized and Unrealized (Loss) Gain on Derivatives
In order to mitigate the impact of potential interest rate fluctuations, during the fourth
quarter of 2006, we swapped the interest rates on both the Term A Loan and Term B Loan portions of
our credit agreement, from floating to fixed. The Term A Loan pricing is fixed at approximately
4.83% for five years and the Term B Loan pricing is fixed at approximately 4.72% for five years, in
both cases plus the Applicable Margin. Since hedge accounting was not applied to these interest
rate swap agreements, revaluation gains and losses associated with changes in the fair value
measurement of the swaps are recorded within realized and unrealized (loss) gain on derivatives in
the Consolidated Statements of Operations. We recorded approximately $6.5
million of unrealized loss related to the change in the fair value of the swaps during the 2008
year, compared to approximately $6.2 million of unrealized loss for the 2007 year. Additionally, we
recorded approximately $2.2 million of realized loss during 2008 related to the unfavorable swap
fixed rates compared to market rates during the period. For the 2007 year, we recorded
approximately $1.0 million of realized gain due to the favorable swap fixed rates compared to
market rates during the period.
Impairment of Notes Receivable
During the third quarter of 2008, we recorded an other-than-temporary impairment loss of
approximately $1.0 million on an investment in notes receivable and associated interest receivable
due to changing market conditions potentially affecting the collectibility of the investment.
Income Taxes
We recorded income tax expense of approximately $54.4 million in 2008, which represented a
negative 83.7% effective rate. The rate includes a tax benefit at a 34% federal rate and a state
tax benefit of approximately 4.4%, offset by an increase in the valuation allowance of 120.0% and
2.1% of other permanent item adjustments. We recorded an income tax benefit on the loss from
continuing operations of approximately $60.6 million in 2007, which represented a 37.1% effective
rate. The rate included a tax benefit at a 34% federal rate and a state tax benefit of
approximately 3.9%, offset by other permanent item adjustments, primarily related to the write-off
of non tax-deductible goodwill, of 0.8%.
- 47 -
During the third quarter of 2008, we recorded $5.8 million of valuation allowance against our
federal and state net operating loss carryforwards expiring in years 2017 through 2021, based on
insufficient future taxable income during those years. As a result of our anticipated failure to
meet the required financial covenants in our credit agreement at March 31, 2009, the potential
acceleration of the maturity of our debt creates uncertainty in our ability to continue as a going
concern. Consequently, during the fourth quarter of 2008, we recorded an additional valuation
allowance of approximately $73.3 million, as were unable to conclude that it is more likely than
not that our deferred tax assets will be realized, given this uncertainty. The additional valuation
allowance recorded included approximately $26.0 million for net operating loss carryforwards
expiring in years 2022 through 2028.
We have cumulative gross federal and state tax loss carryforwards of approximately $149.5
million at December 31, 2008, which expire in the years 2009 through 2028. The utilization of a
portion of these net operating loss carryforwards for federal income tax purposes is limited,
pursuant to the annual utilization limitations provided under the provisions of Internal Revenue
Code Section 382.
Discontinued Operations
We applied the provisions of current accounting guidance to the sale of our Watertown, New
York market in 2008, which requires that in a period in which a component of an entity has been
disposed of or is classified as held for sale, the income statement of a business enterprise for
current and prior periods shall report the results of operations of the component, including any
gain or loss recognized, in discontinued operations. The table below summarizes the effect of the
reclassification on the years ended December 31, 2008 and December 31, 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Net broadcast revenue |
|
$ |
182 |
|
|
$ |
2,410 |
|
Station operating expense |
|
|
156 |
|
|
|
1,739 |
|
Depreciation and amortization expense |
|
|
|
|
|
|
91 |
|
Allocated interest expense |
|
|
15 |
|
|
|
145 |
|
Gain on sale of radio stations |
|
|
(638 |
) |
|
|
(49 |
) |
|
|
|
|
|
|
|
Gain before income taxes |
|
|
649 |
|
|
|
484 |
|
Income tax expense |
|
|
(238 |
) |
|
|
(188 |
) |
|
|
|
|
|
|
|
Net income |
|
$ |
411 |
|
|
$ |
296 |
|
|
|
|
|
|
|
|
LIQUIDITY AND CAPITAL RESOURCES
Executive Overview
Our cash and cash equivalents balance at December 31, 2009 was approximately $9.9 million
compared to approximately $1.1 million at December 31, 2008. Cash balances between years fluctuate
due to the timing of when monies are received and expenditures are made. We typically maintain a
target cash balance of approximately one million dollars, as our excess cash generated by operating
activities after investing activities is typically utilized to reduce outstanding debt. However, due
to the likelihood that available borrowings under our credit agreement could be suspended, we
borrowed $13.5 million of our available revolver balance, to enable us to make scheduled repayments
of debt and interest through the remainder of 2009.
- 48 -
At December 31, 2009, all outstanding balances from our old credit agreement of $187.7 million
were classified as current liabilities on our balance sheet as a result of our continuing events of
default. Also at December 31, 2009, we had three LIBOR-based interest rate swap agreements on our
Term B Loan, which effectively converted approximately $105.8 million of our current outstanding
loan balance from variable-rate to fixed-rate debt and two LIBOR-based interest rate swap
agreements on our Term A Loan, which effectively converted $41.4 million
from variable-rate to fixed-rate debt. During 2009, we realized a loss of approximately $6.1
million related to these agreements as a result of lower market interest rates compared to our
fixed rates.
The swap agreements were terminated in letters received from our banks in January 2010 which
calculated termination amounts totaling approximately $12.1 million as of January 12, 2010. The
Termination Amounts from each party included accrued interest payable at the applicable rate in
their respective Master Agreements. The swap agreements were settled at the same percent as the
first lien debt holders in the reorganization plan.
Upon our emergence from Chapter 11 Bankruptcy on April 27, 2010, we entered into a new Credit
Agreement with General Electric Capital Corporation, as administrative agent and collateral agent,
GE Capital Markets, Inc., as sole lead arranger and book runner, and a syndicate of certain
financial institutions. Also on the Effective Date, we entered into a Subordinated Notes Agreement
with General Electric Capital Corporation, as subordinated notes agent, and a syndicate of certain
financial institutions. Currently there are no interest swap agreements in place related to the new
credit facility.
Our tax position may be impacted as a result of our emergence from Chapter 11 Bankruptcy.
Under IRC Section 382, if a corporation or a consolidated group of corporations with net operating
losses (NOLs) undergoes an ownership change, the loss corporations use of its pre-change NOLs
(and certain other tax attributes) generally will be subject to an annual limitation in the
post-change period. In general, an ownership change occurs if the percentage of the value of the
loss corporations stock owned by one or more direct or indirect five percent shareholders
increases by more than fifty percentage points over the lowest percentage of value owned by the
five percent shareholders at any time during the applicable testing period . The testing period
generally is the shorter of (i) the three-year period preceding the testing date or (ii) the period
of time since the most recent ownership change of the corporation. We are currently evaluating the
impact of the ownership change and its impacts upon our cash and liquidity.
2009 Sources and Uses of Funds
Sources of Funds
In 2009, our sources of cash, derived primarily from a combination of cash provided by
operating activities and borrowings under our credit agreement, were used to fund various investing
and financing transactions totaling approximately $12.0 million.
Net cash provided by operating activities decreased 54.4% in 2009 to approximately
$7.0 million, compared to $15.4 million in 2008. The $8.4 million decrease was due to a combination
of lower station operating income and increased realized cash losses on our interest rate swap
agreements.
Cash flows provided by financing activities were approximately $2.5 million in 2009 compared
to cash flows used in financing activities of approximately $21.3 million in 2008. The change in
financing activities primarily reflects the pay down of debt in 2008 with proceeds from the sale of
radio stations and cash from operations.
- 49 -
At December 31, 2009, we had borrowings under our credit facility of approximately $187.7
million, comprised of approximately $105.8 million under our Term B Loan, a $41.4
million Term A Loan, and $40.5 million of revolver borrowings. As we were in credit default at
December 31, 2009 we were unable to borrow on the revolving credit facility. Borrowings under the
credit agreement bore interest at an average rate of 6.11% and 3.44% at December 31, 2009 and
December 31, 2008, respectively. Our weighted-average interest rate for the year ended December
31, 2009 and December 31, 2008 was 5.00% and 5.62%, respectively.
Upon our emergence from Chapter 11 Bankruptcy, we entered into a new Credit Agreement with
General Electric Capital Corporation, as administrative agent and collateral agent, GE Capital
Markets, Inc., as sole lead arranger and book runner, and a syndicate of certain financial
institutions. The Credit Agreement provides for a term loan in an aggregate principal amount of
$95,000,000 with a maturity date of April 27, 2014. The Credit Agreement provides for a revolving
loan in an aggregate principal amount of up to $2,000,000 with a maturity date of April 27, 2012.
The terms of the term loan under the credit agreement sets the interest rate to one-month
Eurodollar Rate plus 4.0% and, upon an event of default, increased to one-month Eurodollar Rate plus 6.0%, provided
that in each case there is a Eurodollar Rate floor of 1.25%.
The new Credit Agreement is guaranteed by the Company, Regent Broadcasting Management, LLC and
all of the direct and indirect subsidiaries of Regent Broadcasting, LLC. The obligations under the
Credit Agreement are secured by a first-priority lien (subject to certain permitted liens and
exceptions) on substantially all of the tangible and intangible assets of Borrower and the
Guarantors. The Credit Agreement contains customary covenants, which, among other things require
Borrower and the Guarantors to meet certain financial tests and limit their ability to: incur
indebtedness and liens; make investments; make asset sales; pay dividends or make other restricted
payments; engage in mergers or other fundamental changes; enter into transactions with affiliates;
and other covenants customary for such a credit facility.
Additionally, we entered into a new Subordinated Notes Agreement (the Subordinated Notes
Agreement) with General Electric Capital Corporation, as subordinated notes agent, and a syndicate
of certain financial institutions. The Subordinated Notes Agreement provides for 12% Senior
Subordinated PIK Notes in an initial aggregate principal amount of $25,000,000 with a maturity date
of October 27, 2014. The entire unpaid principal balance of such subordinated notes shall bear
interest at 12% per annum and interest shall only be paid-in-kind by being added to principal.
The new Subordinated Notes Agreement is guaranteed by the Company, Regent Broadcasting
Management, LLC and all of the direct and indirect subsidiaries of the Company. The Subordinated
Notes Agreement contains customary covenants, which, among other things limit the ability of Regent
Communications, Inc., Regent Broadcasting, LLC and their direct and indirect subsidiaries to incur
indebtedness and liens; make investments; make asset sales; pay dividends or make other restricted
payments; engage in mergers or other fundamental changes; enter into transactions with affiliates;
and contains other customary covenants.
Under the terms of the term loan in the new credit agreement, we are subject to a Maximum
Consolidated Leverage Ratio and a Minimum Consolidated Fixed Charge Coverage Ratio, as well as to
negative covenants customary for facilities of this type. The Maximum Consolidated Leverage Ratio
is 6.40:1.00 at December 31, 2010. The ratio will decrease to 5.90:1.00 at March 31, 2011 and will
be 4.80:1.00 at December 31, 2011. Over the remaining period, the Maximum Consolidated Leverage
Ratio will decrease to 4.50:1.00. The Minimum Consolidated fixed charge Coverage Ratio is 1.75:1.00
at December 31, 2010 and increases to
1.85:1.00 at March 31, 2011, at which point such leverage remains throughout the remaining
life of the credit agreement.
- 50 -
Uses of Funds
In 2009, we utilized our sources of cash primarily to repay borrowings under our credit
agreement and fund capital expenditures.
Net cash used in investing activities was approximately $700,000 in 2009, compared to
approximately $5.6 million provided by investing activities in 2008. The cash used by investing
activities in 2009 was primarily capital expenditures. During the first quarter of 2008, the sale
of our four Watertown stations and one station in each of our Albany and Buffalo, New York markets
provided approximately $7.9 million of net cash proceeds.
We funded capital expenditures of approximately $0.7 million in 2009 compared to $2.4 million
in 2008. The decrease was due primarily to approximately $1.2 million of expenditures in 2008
related to our Evansville, Indiana consolidation project, where we built an operating facility
with sufficient space to accommodate all of our Evansville radio stations, which were originally
purchased from two separate sellers. We expect 2010 capital expenditures to be approximately $2.0
million in total for maintenance capital expenditures.
We are required to repay the New Term Loan in an amount equal to $237,500 on each March 31,
June 30, September 30 and December 31 of each year beginning June 30, 2010. We are required to
repay the Term Loans in full on the Term Loan Maturity Date. Amounts of Term Loans repaid may not
be reborrowed. Also, we are required to repay Revolving Loans, if any, in an amount equal to
$125,000 on each March 31, June 30, September 30 and December 31 of each year. We are required to
repay the Revolving Loans in full on the Scheduled Revolving Credit Termination Date of April 27,
2012. Amounts of Revolving Loans repaid may be reborrowed. We currently project that the revolver
will not be utilized in the foreseeable future.
In addition to regularly scheduled debt repayments, we may also be subject to prepayments of
borrowings under our credit agreement for excess cash flow generated by the Company. Excess cash
flow, as defined in the credit agreement, is substantially calculated as follows:
Consolidated EBITDA minus: any cash principal payment on the loans during such period
other than any mandatory prepayment required; any scheduled or other mandatory cash principal
payment on any Capitalized Lease Obligation or other Indebtedness; any Capital Expenditure;
Consolidated Cash Interest Expense; any cash losses from extraordinary items; any cash payment made
during such period to satisfy obligations for United States federal income taxes or other taxes
measured by net income; any increase in Working Capital plus: any provision for United
States federal income taxes or other taxes measured by net income; any decrease in Working Capital.
We are required to pay to the Administrative Agent, within 5 Business Days after (i) the last
date the Financial Statements for the second Fiscal Quarter can be delivered as required by the
credit facility for any Fiscal Year, 50% of the Excess Cash Flow for the first and second Fiscal
Quarters of such Fiscal Year, and (ii) the last date Financial Statements can be delivered as
required by the Credit Facility for any Fiscal Year, an amount equal to 50% of the Excess Cash Flow
for such Fiscal Year; provided that for the Fiscal Year ended December 31, 2010, such amount shall
be equal to 50% of the Excess Cash Flow for the third and fourth Fiscal Quarters of such Fiscal
Year.
- 51 -
We are required to pay certain fees to the agent and the lenders for the underwriting
commitment and the administration and use of the credit agreement.
The unused commitment for
the new revolving facility is 0.5%.
Cash Requirements
The Term loan commitment will begin scheduled payment reductions on June 30, 2010. Repayments
under the credit agreement are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Term Loan |
|
|
Revolver |
|
|
Paydowns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
$ |
712,500 |
|
|
$ |
0 |
|
|
$ |
712,500 |
|
We believe that the cash generated from operations and available cash on hand will be
sufficient to meet our requirements for corporate expenses, capital expenditures and scheduled debt
repayments under the new credit agreement over the next 12 months.
2008 Sources and Uses of Funds
Sources of Funds
In 2008, our sources of cash, derived primarily from a combination of cash provided by
operating activities, cash received from the sale of stations and borrowings under our credit
agreement, were used to fund various investing and financing transactions totaling approximately
$33.8 million.
Net cash provided by operating activities increased approximately 13.0% in 2008 to
approximately $15.4 million, compared to $13.6 million in 2007. The $1.8 million increase was due
primarily to lower interest expense costs as a result of lower interest rates and outstanding debt
balances, offset partially by realized cash losses on our interest rate swap agreements.
Net cash provided by investing activities was approximately $5.6 million in 2008, compared to
approximately $7.6 million used in investing activities in 2007. During the first quarter of 2008,
the sale of our four Watertown stations and one station in each of our Albany and Buffalo, New York
markets provided approximately $7.9 million of net cash proceeds. During 2007, we expended
approximately $4.6 million for the purchase of WBZZ-FM (formerly WNYQ-FM) in Albany, New York.
At December 31, 2008, we reclassified all outstanding balances under our credit agreement to
currently payable, as our lenders may, at their discretion, accelerate the payments of the
outstanding amounts to current, due to our failure to comply with certain covenants of the credit
agreement. However, it is not certain that our lenders will require such amounts to be accelerated.
Accordingly, we are providing the information below with regard to certain terms and conditions
contained within our credit agreement in the event the debt is not required to be repaid currently.
- 52 -
Any required prepayments are applied to the principal of the outstanding borrowings on a pro
rata basis, with a resulting permanent reduction of available commitment for both the Term A and
Term B portions of the credit agreement. Available commitment under the revolving agreement is not
affected by any required excess cash flow prepayments. In April 2008, we were required to
permanently repay borrowings under the Term A Loan and Term B Loan portions of
our credit agreement based upon the calculation of excess cash flow generated by our
operations. Based on this calculation, we repaid approximately $3.6 million of borrowings under our
Term B Loan and approximately $1.5 million of borrowings under our Term A Loan. We used borrowings
from our revolving facility to fund the required repayments.
Borrowings under the Term A Loan and the revolving facility bear interest at a rate equal to,
at the Companys option, either (a) the higher of the rate announced or published publicly from
time to time by the agent as its corporate base rate of interest or the Federal Funds Rate plus
0.5%, in either case plus the applicable margin determined under the credit agreement, which varies
between 0.0% and 1.0% depending upon the Companys Consolidated Leverage Ratio, or (b) the
Eurodollar Rate plus the applicable margin, which varies between 0.75% and 2.5%, depending upon our
Consolidated Leverage Ratio. Borrowings under the Term B Loan bear interest at a rate equal to, at
our option, either (a) the higher of the rate announced or published publicly from time to time by
the agent as its corporate base rate of interest or the Federal Funds Rate plus 0.5%, in either
case plus an applicable margin of 2.5%, or (b) the Eurodollar Rate plus an applicable margin of
2.5%. Effective February 23, 2007, we entered into an amendment to our credit agreement. The material
terms of the amendment were a reduction of the Applicable Margin on Base Rate and Eurodollar Loans
under the credit agreement to 2.25% for Eurodollar Loans and 0.75% for Base Rate Loans under the
Term B Loan of the facility.
We have three LIBOR-based interest rate swap agreements on our Term B Loan, which effectively
convert approximately $109.2 million from variable-rate to fixed-rate debt. The swap agreements
became effective on December 6, 2006 and expire December 31, 2011. Under the agreements, payments
are made based on a fixed rate of approximately 4.72%, plus applicable margin. In addition, we also
have two LIBOR-based interest rate swap agreements on our Term A Loan, which effectively convert
approximately $46.0 million from variable-rate to fixed-rate debt. The swap agreements became
effective on December 15, 2006 and expire December 15, 2011. Under the agreements, payments are
made based on a fixed rate of approximately 4.83%, plus applicable margin.
At December 31, 2008, we had borrowings under the credit agreement of approximately $185.1
million, comprised of approximately $109.2 million under our Term B Loan, a $46.0 million Term A
Loan, $29.9 million of revolver borrowings, and available borrowings of approximately $45.0
million, subject to the terms and conditions of the facility. Subsequent to December 31, 2008, we
borrowed approximately $9.5 million under the revolving portion of our credit agreement, leaving
available borrowings of approximately $35.5 million. Borrowings under the credit agreement bore
interest at an average rate of 3.44% and 7.01% at December 31, 2008 and December 31, 2007,
respectively. Our weighted-average interest rate for the year ended December 31, 2008 and December
31, 2007 was 5.62% and 7.49%, respectively. We are required to pay certain fees to the agent and
the lenders for the underwriting commitment and the administration and use of the credit agreement.
The underwriting commitment varies between 0.25% and 0.50% depending upon the amount of the credit
agreement utilized.
- 53 -
Uses of Funds
In 2008, we utilized our sources of cash primarily to repay borrowings under our credit
agreement and fund capital expenditures.
Cash flows used in financing activities were approximately $21.3 million in 2008 compared to
approximately $8.8 million in 2007. The change in financing activities primarily reflects the pay
down of debt in 2008 with proceeds from the sale of radio stations.
We funded capital expenditures of approximately $2.4 million in 2008 compared to approximately
$3.1 million in 2007. Maintenance capital expenditures, excluding HD technology expenditures, were
approximately $1.1 million in 2008 compared to $2.1 million in 2007. We incurred expenditures of
approximately $0.1 million related to the conversion of one AM radio station to HD technology in
early 2009, compared to $1.0 million related to the conversion of nine of our FM radio stations to
HD technology in 2007. We also incurred approximately $1.2 million in 2008 related to our
Evansville, Indiana consolidation project, where we built an operating facility with sufficient
space to accommodate all of our Evansville radio stations, which were originally purchased from two
separate sellers.
Off-Balance Sheet Financing Arrangements
We do not have off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii)
of Regulation S-K) that have or are reasonably likely to have a current or future effect on our
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources.
We have no other off-balance sheet financing arrangements with related or unrelated parties
and no unconsolidated subsidiaries.
Effect of Recently Issued Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Account Principles a replacement of FASB Statement No. 162
(SFAS 168). SFAS 168 is the new source of authoritative GAAP recognized by the FASB to be
applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of
federal securities laws are also sources of authoritative GAAP for SEC registrants. This statement
was incorporated into Accounting Standards Codification (ASC) 105, Generally Accepted Accounting
Principles under the new FASB codification (Codification) which became effective on July 1,
2009. The new Codification supersedes all then-existing non-SEC accounting and reporting standards.
All other non-grandfathered non-SEC accounting literature not included in the Codification will
become non-authoritative. We adopted this standard during the third quarter of 2009. We have
included the references to the Codification, as appropriate, in these consolidated financial
statements. Adoption of this statement did not have an impact on our consolidated results of
operations, cash flows or financial condition.
In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated
Financial Statements an amendment of ARB No. 51 (SFAS 160). SFAS 160 is effective for fiscal
years beginning after December 15, 2008 and early adoption is prohibited. SFAS 160 was incorporated
into ASC 810, Consolidation (ASC 810) and requires companies to present minority interest
separately within the equity section of the balance sheet. We adopted this statement as of January
1, 2009 and it had no impact on our consolidated results of operations, cash flows or financial
condition.
- 54 -
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS 161). SFAS 161was incorporated into ASC 815, Derivatives and Hedging
(ASC 815). ASC 815 requires entities to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related hedged items are
accounted for, and (c) how derivative instruments and related hedged items affect an entitys
financial position, financial performance, and cash flows. This statement became effective for
financial statements issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. We adopted this statement on January 1, 2009 and the adoption
had no impact on our results of operations, cash flows or financial condition. (See Note 13 Fair
Value of Financial Instruments.)
In May 2009, the FAB issued SFAS No. 165, Subsequent Events (SFAS 165). The statement
establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but prior to the issuance of financial statements. This statement was
incorporated into ASC 855, Subsequent Events (ASC 855). This statement was effective for
interim or annual reporting periods after June 15, 2009. ASC 855 sets forth the period after the
balance sheet date during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the financial statements as
well as the circumstances under which the entity would recognize them and the related disclosures
an entity should make. This statement became effective for our financial statements as of June 30,
2009.
In April 2008, the FASB issued FASB Staff Position No. 142-3, Determination of the Useful
Lives of Intangible Assets (FSP 142-3. FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of an intangible
asset. Under the new codification this interpretation was incorporated into two different ASCs, ASC
275, Risks and Uncertainties (ASC 275) and ASC 350, Intangibles Goodwill and Other (ASC
350). This interpretation was effective for financial statements issued for fiscal years beginning
after December 15, 2008 and interim periods within those years. We adopted the staff position on
January 1, 2009, and it did not have a material impact on our consolidated results of operations,
cash flows or financial condition.
In June 2009, the FASB issued SFAS No 167, Amendments to FASB Interpretation No. 46(R)
(SFAS 167), which amended the consolidation guidance for variable-interest entities in ASC 810,
Consolidations. The amendments include: (1) the elimination of the exemption for qualifying
special purpose entities (2) a new approach for determining who should consolidate a
variable-interest entity, and (3) changes to when it is necessary to reassess who should
consolidate a variable-interest entity. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2009. We will adopt the provisions of SFAS 167 on
January 1, 2010 and are currently the impact this statement will have on our consolidated results
of operations, cash flows and financial position.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R),
Business Combinations (SFAS 141R), which was incorporated into ASC 805, Business Combinations
(ASC 805). ASC 805 requires an acquirer to recognize all of the fair values of acquired assets,
including goodwill, and assumed liabilities, with limited exceptions, even in instances where the
acquirer has not acquired 100% of its target. ASC 805 also requires that contingent consideration
be measured at fair value at that acquisition date and included on that basis in the purchase price
consideration. Under ASC 805, transaction costs would be expensed as incurred. ASC 805 amends ASC
740-10 Income Taxes (ASC 740) to require the acquiring entity to recognize changes in the
amount of its deferred tax benefits that are
recognizable due to a business combination either in income from continuing operations in the
period of the combination or directly in contributed capital, based upon the circumstances. ASC
805 is effective for fiscal years beginning after December 15, 2008. We adopted this statement on
January 1, 2009, with no effect on our consolidated results of operations, cash flows or financial
position.
- 55 -
In February 2009, the FASB issued SFAS No. 141R-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies, which allows an
exception to the recognition and fair value measurement principles of ASC 805. This exception
requires that acquired contingencies be recognized at fair value on the acquisition date if fair
value can be reasonably estimated during the allocation period. This statement update was effective
for us as of January 1, 2009 for all business combinations that closed on or after January 1, 2009,
and it did not have an impact on our consolidated results of operations, cash flows or financial
position.
In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities (FSP 03-6-1). Under the new FASB
Codification, this FSSP was incorporated into ASC 260, Earnings Per Share (ASC 260). ASC 260
addresses whether instruments granted in share-based payment transactions are participating
securities prior to vesting, and, therefore, need to be included in the earnings allocation in
computing earnings per share under the two-class method as described in current accounting
guidance. Under the guidance in ASC 260, unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings per share pursuant to
the two-class method. ASC 260 was effective on January 1, 2009 and prior-period earnings per share
data were adjusted retrospectively. (See Note 7, Earnings Per Share.)
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
A smaller reporting company, as defined by Rule 229.10(f)(1), is not required to provide the
information required by this Item.
- 56 -
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Regent
Communications, Inc.
Index to Financial Statements
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Page |
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Financial Statements: |
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|
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|
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58 |
|
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59 |
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60 |
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61 |
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62 |
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63 |
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64 |
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Financial Statement Schedule: |
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|
For each of the three years in the period ended December 31, 2009: |
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97 |
|
All other schedules are omitted because they are not applicable or the required information is
shown in the consolidated financial statements and notes thereto.
- 57 -
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Townsquare Medias management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule 13a-15(f) or Rule
15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial
reporting is a process designed by, or under the supervision of, Townsquare Medias Chief Executive
Officer and Chief Financial Officer, and effected by our management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation and fair
presentation of financial statements for external purposes in accordance with generally accepted
accounting principles, and includes those policies and procedures that:
|
|
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; |
|
|
|
Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorization of management and directors of the Company; and |
|
|
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements. |
Internal control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent limitations. Internal control over
financial reporting is a process that involves human diligence and compliance is subject to lapses
in judgment and breakdowns resulting from human failures. Internal control over financial
reporting also can be circumvented by collusion or improper management override. Because of such
limitations, there is a risk that material misstatements may not be prevented or detected on a
timely basis by internal control over financial reporting. However, these inherent limitations are
known features of the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
Under the supervision and with the participation of the Companys management, including its
Chief Executive Officer and Chief Financial Officer, Townsquare Media has assessed as of December
31, 2009, the effectiveness of its internal control over financial reporting. This assessment was
based on criteria established in the framework in Internal Control Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
management has concluded that the Companys internal control over financial reporting was effective
as of December 31, 2009, the end of our fiscal year.
This Annual Report on Form 10-K does not include an attestation report of the Companys
registered public accounting firm regarding internal control over financial reporting. Managements
report regarding internal control over financial reporting was not subject to attestation by the
Companys registered public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only managements report in this Annual
Report on Form 10-K. In addition, this report by management regarding internal control over
financial reporting is specifically not incorporated by reference into this Annual Report on Form
10-K or into any other filing by the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.
May 14, 2010
|
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/s/ Steven Price
Steven Price, Chief Executive Officer
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/s/ Stuart Rosenstein
Stuart Rosenstein, Chief Financial Officer
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- 58 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Townsquare Media, Inc.:
We have audited the accompanying consolidated balance sheets of Townsquare Media, Inc. and
subsidiaries (formerly known as Regent Communications, Inc.) (the Company) as of December 31,
2009 and 2008, and the related consolidated statements of operations, stockholders
(deficit) equity, and cash flows for each of the three years in the period ended December 31, 2009.
Our audits also included the financial statement schedule listed in the accompanying index at
Item 8. These financial statements and financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2009,
in conformity with accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 1 to the consolidated financial statements, on March 1, 2010, the Company
filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware. On April 27, 2010 (the Effective
Date), the Company consummated the reorganization contemplated by the joint plan of reorganization
and emerged from Chapter 11 bankruptcy proceedings. On the Effective Date, the Company entered into
a number of related transactions and agreements pursuant to the joint plan of reorganization.
As discussed in Note 9 to the consolidated financial statements, the Company adopted the provisions
of ASC 740, Income Taxes (formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes an Interpretation of FASB Statement No. 109), effective January 1, 2007.
|
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/s/ Deloitte & Touche LLP
Cincinnati, Ohio
|
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|
May 14, 2010 |
|
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- 59 -
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
|
|
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|
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|
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|
|
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|
|
|
YEAR ENDED DECEMBER 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Broadcast revenues, net of agency commissions of
$8,339, $10,044 and $10,291 for the years ended
December 31, 2009, 2008 and 2007, respectively |
|
$ |
84,141 |
|
|
$ |
96,340 |
|
|
$ |
97,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Station operating expenses |
|
|
57,272 |
|
|
|
61,358 |
|
|
|
63,064 |
|
Depreciation and amortization |
|
|
3,804 |
|
|
|
4,157 |
|
|
|
4,982 |
|
Corporate general and administrative expenses |
|
|
9,085 |
|
|
|
6,876 |
|
|
|
7,296 |
|
Activist defense costs |
|
|
|
|
|
|
|
|
|
|
599 |
|
Impairment of indefinite-lived intangible assets and goodwill |
|
|
44,620 |
|
|
|
67,522 |
|
|
|
163,600 |
|
Gain on sale of radio stations |
|
|
|
|
|
|
(507 |
) |
|
|
|
|
Loss on sale of long-lived assets and other |
|
|
46 |
|
|
|
267 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(30,686 |
) |
|
|
(43,333 |
) |
|
|
(141,681 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(10,283 |
) |
|
|
(11,818 |
) |
|
|
(16,757 |
) |
Realized and unrealized (loss) gain on derivatives |
|
|
(2,936 |
) |
|
|
(8,717 |
) |
|
|
(5,155 |
) |
Impairment of note receivable and other, net |
|
|
135 |
|
|
|
(1,145 |
) |
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes |
|
|
(43,770 |
) |
|
|
(65,013 |
) |
|
|
(163,431 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit |
|
|
(212 |
) |
|
|
(54,389 |
) |
|
|
60,561 |
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(43,982 |
) |
|
|
(119,402 |
) |
|
|
(102,870 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Results from operations of discontinued operations, net
of income taxes |
|
|
|
|
|
|
7 |
|
|
|
266 |
|
Gain on sale of discontinued operations, net of
income taxes |
|
|
|
|
|
|
404 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
Gain on discontinued operations, net of income
taxes |
|
|
|
|
|
|
411 |
|
|
|
296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(43,982 |
) |
|
$ |
(118,991 |
) |
|
$ |
(102,574 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER COMMON SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(1.08 |
) |
|
$ |
(3.07 |
) |
|
$ |
(2.69 |
) |
Discontinued operations |
|
|
|
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1.08 |
) |
|
$ |
(3.06 |
) |
|
$ |
(2.68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
used in basic and diluted calculation |
|
|
40,588 |
|
|
|
38,872 |
|
|
|
38,308 |
|
The accompanying notes are an integral part of these consolidated financial statements.
- 60 -
REGENT COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 31, |
|
|
|
2009 |
|
|
2008 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
9,888 |
|
|
$ |
1,094 |
|
Restricted cash |
|
|
300 |
|
|
|
|
|
Accounts receivable, net of allowance of $512 and
$527 at December 31, 2009 and 2008, respectively |
|
|
12,794 |
|
|
|
13,914 |
|
Assets held for sale |
|
|
156 |
|
|
|
156 |
|
Other current assets |
|
|
2,618 |
|
|
|
1,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
25,756 |
|
|
|
16,880 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
29,538 |
|
|
|
32,651 |
|
Intangible assets, net |
|
|
97,729 |
|
|
|
135,252 |
|
Goodwill |
|
|
11,172 |
|
|
|
18,392 |
|
Deferred tax assets |
|
|
|
|
|
|
|
|
Other assets |
|
|
1,692 |
|
|
|
2,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
165,887 |
|
|
$ |
205,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
187,730 |
|
|
$ |
185,128 |
|
Accounts payable |
|
|
1,386 |
|
|
|
1,329 |
|
Accrued compensation |
|
|
967 |
|
|
|
1,399 |
|
Other current liabilities |
|
|
16,686 |
|
|
|
4,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
206,769 |
|
|
|
191,866 |
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion |
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
2,436 |
|
|
|
13,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
209,205 |
|
|
|
205,410 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders deficit: |
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 100,000,000 shares authorized;
50,082,342 and 49,151,642 shares issued at
December 31, 2009 and 2008, respectively |
|
|
501 |
|
|
|
492 |
|
Treasury stock, 7,774,163 and 9,169,465 shares, at cost at
December 31, 2009 and 2008, respectively |
|
|
(40,780 |
) |
|
|
(49,203 |
) |
Additional paid-in capital |
|
|
339,331 |
|
|
|
346,973 |
|
Accumulated deficit |
|
|
(342,370 |
) |
|
|
(298,388 |
) |
|
|
|
|
|
|
|
Total stockholders deficit |
|
|
(43,318 |
) |
|
|
(126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit |
|
$ |
165,887 |
|
|
$ |
205,284 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
- 61 -
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED DECEMBER 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(43,982 |
) |
|
$ |
(118,991 |
) |
|
$ |
(102,574 |
) |
Adjustments to reconcile net loss to net cash provided
by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of indefinite-lived intangible assets and goodwill |
|
|
44,620 |
|
|
|
67,522 |
|
|
|
163,600 |
|
Depreciation and amortization |
|
|
3,804 |
|
|
|
4,157 |
|
|
|
5,073 |
|
Provision for doubtful accounts |
|
|
694 |
|
|
|
446 |
|
|
|
286 |
|
Deferred income tax expense (benefit) |
|
|
|
|
|
|
54,326 |
|
|
|
(60,590 |
) |
Non-cash interest expense |
|
|
465 |
|
|
|
582 |
|
|
|
556 |
|
Non-cash charge for compensation |
|
|
690 |
|
|
|
1,155 |
|
|
|
1,124 |
|
Unrealized (gain) loss on derivatives |
|
|
(3,190 |
) |
|
|
6,540 |
|
|
|
6,150 |
|
Gain on sale of radio stations, net |
|
|
|
|
|
|
(1,155 |
) |
|
|
(49 |
) |
(Gain) loss on sale of long-lived assets |
|
|
(87 |
) |
|
|
179 |
|
|
|
52 |
|
Impairment of note receivable and other, net |
|
|
39 |
|
|
|
996 |
|
|
|
(105 |
) |
Changes in operating assets and liabilities, net of acquisitions and
dispositions: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
448 |
|
|
|
1,380 |
|
|
|
458 |
|
Other assets |
|
|
(1,001 |
) |
|
|
21 |
|
|
|
(309 |
) |
Current and long-term liabilities |
|
|
4,512 |
|
|
|
(1,772 |
) |
|
|
(60 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
7,012 |
|
|
|
15,386 |
|
|
|
13,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of radio stations, acquisition-related costs, and escrow
deposits on pending acquisitions, net of cash acquired |
|
|
|
|
|
|
|
|
|
|
(4,630 |
) |
Capital expenditures |
|
|
(645 |
) |
|
|
(2,375 |
) |
|
|
(3,064 |
) |
Proceeds from the sale of radio stations |
|
|
|
|
|
|
7,888 |
|
|
|
|
|
Investment in restricted cash |
|
|
(300 |
) |
|
|
|
|
|
|
|
|
Proceeds from sale of long-lived assets and other |
|
|
245 |
|
|
|
136 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(700 |
) |
|
|
5,649 |
|
|
|
(7,627 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
10 |
|
|
|
71 |
|
|
|
165 |
|
Proceeds from borrowings of long-term debt |
|
|
13,500 |
|
|
|
10,000 |
|
|
|
5,500 |
|
Principal payments on long-term debt |
|
|
(10,898 |
) |
|
|
(31,222 |
) |
|
|
(14,150 |
) |
Payment of financing costs |
|
|
|
|
|
|
|
|
|
|
(175 |
) |
Treasury stock purchases |
|
|
(16 |
) |
|
|
(68 |
) |
|
|
(84 |
) |
Repayment of capital lease obligations |
|
|
(114 |
) |
|
|
(113 |
) |
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
2,482 |
|
|
|
(21,332 |
) |
|
|
(8,844 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
8,794 |
|
|
|
(297 |
) |
|
|
(2,859 |
) |
Cash and cash equivalents at beginning of year |
|
|
1,094 |
|
|
|
1,391 |
|
|
|
4,250 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
9,888 |
|
|
$ |
1,094 |
|
|
$ |
1,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations for property and equipment |
|
$ |
129 |
|
|
$ |
61 |
|
|
$ |
221 |
|
|
|
|
|
|
|
|
|
|
|
Accrued capital expenditures |
|
$ |
0 |
|
|
$ |
37 |
|
|
$ |
108 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
6,892 |
|
|
$ |
11,542 |
|
|
$ |
16,646 |
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
238 |
|
|
$ |
124 |
|
|
$ |
184 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
- 62 -
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS (DEFICIT) EQUITY
(In thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Stockholders |
|
|
|
Common |
|
|
Treasury |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
(Deficit) |
|
|
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
Balance, December 31, 2006 |
|
$ |
483 |
|
|
$ |
(53,099 |
) |
|
$ |
348,518 |
|
|
$ |
(76,742 |
) |
|
$ |
|
|
|
$ |
219,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of FIN 48 adoption |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(81 |
) |
|
|
|
|
|
|
(81 |
) |
Issuance of 270,900 nonvested shares, net of forfeitures |
|
|
3 |
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of nonvested shares |
|
|
|
|
|
|
|
|
|
|
508 |
|
|
|
|
|
|
|
|
|
|
|
508 |
|
Issuance of 160,449 shares of treasury stock
for 401(k) match |
|
|
|
|
|
|
826 |
|
|
|
(336 |
) |
|
|
|
|
|
|
|
|
|
|
490 |
|
Issuance of 76,443 shares of treasury stock
for employee stock purchase plan |
|
|
|
|
|
|
387 |
|
|
|
(222 |
) |
|
|
|
|
|
|
|
|
|
|
165 |
|
Purchase of 28,771 shares of treasury stock |
|
|
|
|
|
|
(84 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84 |
) |
Stock-based compensation expense related to
employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
30 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102,574 |
) |
|
|
|
|
|
|
(102,574 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007 |
|
|
486 |
|
|
|
(51,970 |
) |
|
|
348,495 |
|
|
|
(179,397 |
) |
|
|
|
|
|
|
117,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of 536,450 nonvested shares, net of forfeitures |
|
|
6 |
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Stock bonus award (54,923 shares) |
|
|
|
|
|
|
258 |
|
|
|
(183 |
) |
|
|
|
|
|
|
|
|
|
|
75 |
|
Amortization of nonvested shares |
|
|
|
|
|
|
|
|
|
|
641 |
|
|
|
|
|
|
|
|
|
|
|
641 |
|
Issuance of 491,827 shares of treasury stock
for 401(k) match |
|
|
|
|
|
|
2,218 |
|
|
|
(1,707 |
) |
|
|
|
|
|
|
|
|
|
|
511 |
|
Issuance of 78,506 shares of treasury stock
for employee stock purchase plan |
|
|
|
|
|
|
359 |
|
|
|
(288 |
) |
|
|
|
|
|
|
|
|
|
|
71 |
|
Purchase of 49,626 shares of treasury stock |
|
|
|
|
|
|
(68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68 |
) |
Stock-based compensation expense related to
employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
21 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(118,991 |
) |
|
|
|
|
|
|
(118,991 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008 |
|
|
492 |
|
|
|
(49,203 |
) |
|
|
346,973 |
|
|
|
(298,388 |
) |
|
|
|
|
|
|
(126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of 930,700 nonvested shares, net of forfeitures |
|
|
9 |
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of nonvested shares |
|
|
|
|
|
|
|
|
|
|
667 |
|
|
|
|
|
|
|
|
|
|
|
667 |
|
Issuance of 1,361,013 shares of treasury stock
for 401(k) match |
|
|
|
|
|
|
7,739 |
|
|
|
(7,610 |
) |
|
|
|
|
|
|
|
|
|
|
129 |
|
Issuance of 126,213 shares of treasury stock
for employee stock purchase plan |
|
|
|
|
|
|
700 |
|
|
|
(690 |
) |
|
|
|
|
|
|
|
|
|
|
10 |
|
Purchase of 91,924 shares of treasury stock |
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,982 |
) |
|
|
|
|
|
|
(43,982 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009 |
|
$ |
501 |
|
|
$ |
(40,780 |
) |
|
$ |
339,331 |
|
|
$ |
(342,370 |
) |
|
$ |
|
|
|
$ |
(43,318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
- 63 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. |
|
SUBSEQUENT EVENT CHAPTER 11 REORGANIZATION |
On March 1, 2010 (the Petition Date), Regent Communications, Inc.
(Regent or the Company) and its wholly owned subsidiaries
(collectively, the Debtors) filed voluntary petitions for relief (the Chapter 11 Cases)
under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 101-1532 (the
Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware, Case
No. 10-10632 (KG). From the period commencing on the Petition Date and through the
Effective Date (as defined below), the Debtors operated their businesses and managed their
properties as debtors-in-possession subject to the jurisdiction of the Bankruptcy Court and
in accordance with the applicable provisions of the Bankruptcy Code. The Chapter 11 Cases
were jointly administered pursuant to an order of the Bankruptcy Court.
On March 22, 2010 the Debtors filed a First Amended Disclosure Statement and a First
Amended Joint Plan of Reorganization with the Bankruptcy Court (the Plan). On
April 12, 2010, the Bankruptcy Court entered an order confirming the Plan as modified by the
Courts order. On April 27, 2010 (the Effective Date) the Debtors satisfied all of the
conditions of the Plan and emerged from the Chapter 11 Cases.
The following is a summary of the material terms of the Plan. The Plan provided for,
among other things, a restructuring of: (i) approximately $192.6 million of senior
indebtedness (excluding post-petition interest) outstanding under the Companys Credit
Agreement, dated as of November 21, 2006, among Regent Broadcasting, LLC, the Company, the
lenders party thereto, Bank of America, N.A., as the administrative agent for the lenders,
and the other agents party thereto (the Prepetition Credit Agreement); and (ii)
approximately $12.1 million of indebtedness under interest rate swap agreements entered into in
2006 with Bank of America, N.A., Sun Trust Bank, and Bank of Montreal (the Swap
Agreements). The Plan further provided for a payment in full of cash for general unsecured
claims.
On the Effective Date, all outstanding shares of the Companys common stock
(approximately 42,311,471 shares on April 26, 2010) and all other equity interests were
extinguished. Stockholders of record on the Effective Date were entitled to receive a pro
rata share of transferred cash under the Plan of $5.5 million, or $0.13 per share, paid as
soon as practicable after the Effective Date.
In addition, on the Effective Date, the Company issued 100% of its new common stock, as
reorganized under the Plan, to U.S. holders of first lien debt claims under the Prepetition
Credit Agreement and the Swap Agreements, and warrants to purchase new common stock to
non-U.S. holders of such claims, each on a basis pro rata to the amount of their claims.
Further, on the Effective Date, the Company and Regent Broadcasting, LLC (Borrower)
entered into a Credit Agreement (the Credit Agreement) with General Electric Capital
Corporation, as administrative agent and collateral agent, GE Capital Markets, Inc., as sole
lead arranger and book runner, and a syndicate of certain financial institutions. The
Credit Agreement provides for a term loan in an aggregate principal amount of $95,000,000
with a maturity date of April 27, 2014. The Credit Agreement provides for a revolving loan
in an aggregate principal amount of up to $2,000,000 with a maturity date of April 27, 2012.
- 64 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Credit Agreement is guaranteed by the Company, Regent Broadcasting Management, LLC
and all of the direct and indirect subsidiaries of Regent Broadcasting, LLC (collectively,
the Guarantors). The obligations under the Credit Agreement are secured by a
first-priority lien (subject to certain permitted liens and exceptions) on substantially all
of the tangible and intangible assets of Borrower and the Guarantors. The Credit Agreement
contains customary covenants, which, among other things require Borrower and the Guarantors
to meet certain financial tests and limit their ability to: incur indebtedness and liens;
make investments; make asset sales; pay dividends or make other restricted payments; engage
in mergers or other fundamental changes; enter into transactions with affiliates; and other
covenants customary for such a credit facility.
On the Effective Date, the Company and Borrower also entered into a Subordinated Notes
Agreement (the Subordinated Notes Agreement) with General Electric Capital Corporation, as
subordinated notes agent, and a syndicate of certain financial institutions. The
Subordinated Notes Agreement provides for 12% Senior Subordinated PIK Notes in an initial
aggregate principal amount of $25,000,000 with a maturity date of October 27, 2014. The
entire unpaid principal balance of such subordinated notes shall bear interest at 12% per
annum and interest shall only be paid-in-kind by being added to principal.
The Subordinated Notes Agreement is guaranteed by the Company, Regent Broadcasting
Management, LLC and all of the direct and indirect subsidiaries of Borrower. The
Subordinated Notes Agreement contains customary covenants, which, among other things limit
the ability of Regent Communications, Inc., Regent Broadcasting, LLC and their direct and
indirect subsidiaries to incur indebtedness and liens; make investments; make asset sales;
pay dividends or make other restricted payments; engage in mergers or other fundamental
changes; enter into transactions with affiliates; and contains other customary covenants.
On April 28, 2010, the Company filed an Amended and Restated Certificate of
Incorporation with the Delaware Secretary of State. The Amended and Restated Certificate of
Incorporation reduced the number of shares of stock which the Company is authorized to issue
from 65,000,000 shares of new common stock, par value $0.01 per share to 1,000 shares of new
common stock, par value $0.01 per share. The holders of the new common stock and warrants
to purchase new common stock issued to them on the Effective Date exchanged those securities
for interests in a new entity, Regent Holdings LLC, and Regent Holdings LLC became the sole
owner of the new common stock of the Company.
In conjunction with the change in ownership, the Company is required to divest two
stations, KARS-FM in the Ft. Collins-Greeley, CO market, and KPEL-FM in the Lafayette, LA
market, in order to comply with FCC ownership rules. We have filed applications with the
FCC to assign the licenses for those stations to a divestiture trust, which will hold and
dispose of the assets of those stations for the benefit of the Company.
- 65 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. |
|
BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES |
The consolidated financial statements include the accounts of Regent Communications,
Inc. and its subsidiaries, all of which are wholly owned,
and entities for which Regent is the primary beneficiary. All intercompany transactions
and balances have been eliminated in consolidation.
|
b. |
|
DESCRIPTION OF BUSINESS: |
Regent is a radio broadcasting company whose primary business is to
acquire, develop, and operate radio stations in mid-sized markets throughout the United
States. The Company owns radio stations in the following markets: Ft. Collins-Greeley,
Colorado; Bloomington and Peoria, Illinois; Evansville, Indiana; Owensboro, Kentucky;
Lafayette, Louisiana; Flint and Grand Rapids, Michigan; St. Cloud, Minnesota; Albany,
Buffalo and Utica, New York; and El Paso, Texas.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
|
d. |
|
CASH AND CASH EQUIVALENTS: |
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
|
e. |
|
PROPERTY AND EQUIPMENT: |
Property and equipment are stated at cost. Major additions or improvements are
capitalized, while repairs and maintenance are charged to expense. Property and
equipment are depreciated on a straight-line basis over the estimated useful life of
the assets. Buildings are depreciated over thirty-nine years, broadcasting equipment
over a three-to-twenty-year life, computer equipment and software over a three-to-five
year life, and furniture and fixtures generally over a ten-year life. Leasehold
improvements are amortized over the shorter of their useful lives or the terms of the
related leases. Upon sale or disposition of an asset, the cost and related accumulated
depreciation are removed from the accounts and any gain or loss is recognized as a
component of operating loss in the Consolidated Statements of Operations.
- 66 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
f. |
|
GOODWILL AND OTHER INTANGIBLE ASSETS: |
Intangible assets consist principally of the value of Federal Communication Commission
(FCC) licenses and other definite-lived intangible assets. Goodwill represents the
excess of the purchase price over the fair value of net assets of acquired radio
stations. The Company follows current accounting guidance (See Note 8), which requires
that a company perform impairment testing annually, or more frequently if events or
circumstances indicate that the asset may be impaired, using a direct valuation
methodology for those assets determined to have an indefinite life. To test goodwill
for potential impairment, the Company compares the fair value of the reporting unit
with its carrying amount. Consistent with prior years, in 2009, the Company determined
the reporting unit as a radio market. If the fair value of any reporting unit is less
than its carrying amount, an indication exists that the amount of goodwill attributed
to the reporting unit may be impaired and the Company is required to perform a second
step of the impairment test. In the second step, the Company compares the implied fair
value of each reporting units goodwill, determined by allocating the reporting units
fair value to all of its assets and liabilities, to the carrying amount of the
reporting unit. If the fair value is less than the carrying value, the Company will
record an impairment charge to operating expense up to the carrying value of the
recorded goodwill.
The Company is also required to test its FCC licenses and other indefinite-lived
intangible assets for impairment by comparing their estimated fair values to their
carrying values. If the carrying amount of an intangible asset exceeds its fair value,
an impairment charge is recorded to operating expense for the amount equal to the
excess. The Company utilizes the greenfield methodology, a widely-used direct
valuation methodology, to value its FCC licenses. This method assumes an inception
value for FCC licenses and employs a discounted cash flow methodology and accepted
appraisal techniques to estimate the fair value of each license.
Acquired advertising contracts are amortized on a straight-line basis over a
six-month period. Intangible assets related to non-competition agreements, sports
rights agreements, favorable leasehold interests and employment agreements are
amortized on a straight-line basis over the life of the respective agreement or
contract, while advertiser lists and advertiser relationships are amortized over a
three-year period.
|
g. |
|
IMPAIRMENT OF LONG-LIVED ASSETS: |
Long-lived assets (including property, equipment, and intangible assets subject to
amortization) to be held and used are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds
the sum of the undiscounted cash flows expected to result from the use and eventual
disposal of the asset. If it were determined that the carrying amount of an asset was
not recoverable, an impairment loss would be recorded for the difference between the
carrying amount and the fair value of the asset. The Company determines the fair value
of its long-lived assets based upon the market value of similar assets, if available,
or independent appraisals, if necessary. Long-lived assets to be disposed of and/or
held for sale are reported at the lower of carrying amount or fair value, less cost to
sell. The fair value of assets held for sale is determined in the same manner as
described for assets held and used.
- 67 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
h. |
|
DEFERRED FINANCING COSTS: |
Deferred financing costs are amortized to interest expense using the effective interest
method over the term of the related debt.
|
i. |
|
CONCENTRATIONS OF CREDIT RISK: |
Financial instruments which potentially subject the Company to concentrations of credit
risk consist primarily of accounts receivable. The credit risk is limited due to the
large number of customers comprising the Companys customer base and their dispersion
across several different geographic areas of the country. The Company also maintains
cash in bank accounts at financial institutions where the balance, at times, exceeds
federally insured limits.
Broadcast Revenue
Broadcast revenue for commercial broadcasting advertisements is recognized when the
commercial is broadcast. Revenue is reported net of agency commissions. Agency
commissions are calculated based on a stated percentage applied to gross billing
revenue for advertisers that use agencies.
Barter Transactions
Barter transactions (advertising provided in exchange for goods and services) are
reported at the estimated fair value of the products or services received. Revenue from
barter transactions is recognized when advertisements are broadcast, and merchandise or
services received are charged to expense when received or used. If merchandise or
services are received prior to the broadcast of the advertising, a liability (deferred
barter revenue) is recorded. If advertising is broadcast before the receipt of the
goods or services, a receivable is recorded. Barter revenue was approximately $3.7
million, $3.6 million, and $3.6 million and barter expense was approximately $3.6
million, $3.5 million, and $3.5 million for the years ended December 31, 2009, 2008 and
2007 respectively.
Time Brokerage Agreements
At times, the Company enters into time brokerage agreements or local marketing
agreements (together TBAs) in connection with the purchase or sale of radio stations.
In most cases, a TBA is in effect from the signing of the acquisition agreement, or
shortly thereafter, through the closing date of the purchase or sale. Generally, under
the contractual terms of a TBA, the buyer agrees to furnish the programming content for
and provide other services to the stations, and in return, receives the right to sell
and broadcast advertising on the station and collect receipts for such advertising.
During the period the Company operates stations under TBAs for the purchase of a
station, Regent recognizes revenue and expense for such stations in the same manner as
for owned stations, and includes such revenues and expenses related to such stations in
operations since the effective dates of the TBAs. At December 31, 2009 and 2008, Regent
had no ongoing TBAs.
- 68 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
k. |
|
FAIR VALUE OF FINANCIAL INSTRUMENTS: |
Short-Term Instruments
Due to their short-term maturity, the carrying amount of accounts receivable, accounts
payable and accrued expenses approximated their fair value at December 31, 2009 and
2008.
Investments in Debt Securities
In connection with Regents 2006 sale of three radio stations in Peoria, Illinois, the
Company received a note receivable for $925,000 of the $2.8 million purchase price. In
accordance with current accounting guidance, and based on the Companys intent and
ability to hold the investment to maturity, Regent has classified the debt security as
held-to-maturity and accounts for the investment at cost. Additionally, the Company
routinely assesses whether an other-than-temporary impairment loss on an investment has
occurred due to declines in fair value or other market conditions. Declines in fair
value that are considered other than temporary are recorded as a component of expense
in the Consolidated Statements of Operations. During 2008, the Company determined that
an other-than-temporary impairment loss on the investment had occurred due to changing
market conditions potentially affecting the collectibility of the note. Accordingly,
the Company recorded an impairment loss for approximately $1.0 million, which amount
included interest accrued through September 30, 2008. No interest has been accrued
subsequent to September 30, 2008.
Investments in Equity Securities
The Company has classified its investments in marketable equity securities, primarily
mutual funds, as trading securities, which are reported at fair value, with changes in
fair value recorded in consolidated net loss. The fair value of marketable securities
is based on quoted market prices for those securities. The marketable securities are
included in other current assets.
Long-Term Debt
The fair value of the Companys long-term debt is estimated based on the current rates
offered to the Company for debt of the same remaining maturities. Based on borrowing
rates currently available, the fair value of long-term debt approximated 78% of its
carrying value at December 31, 2009. At December 31, 2008, fair value of the long-term
debt approximated its carrying value.
Interest Rate Swaps
At times, the Company enters into interest rate swap agreements to manage its exposure
to interest rate movements by effectively converting a portion of its debt from
variable to fixed rates. The Company follows current accounting guidance, which
requires that all derivative financial instruments, such as interest rate swap
agreements, be recognized in the financial statements as assets or liabilities and be
measured at fair value. Because the Company has not designated the interest rate swap
agreements as hedging instruments in 2009 or 2008,
revaluation gains and losses associated with changes in the fair value measurement of
the swaps are recorded within realized and unrealized (loss) gain on derivatives in the
Consolidated Statements of Operations.
- 69 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts based on enacted tax laws and statutory tax rates. Valuation
allowances are established when necessary to reduce deferred tax assets to the amount
more likely than not to be realized.
|
m. |
|
ADVERTISING AND PROMOTION COSTS: |
Costs of media advertising and associated production costs are expensed to station
operating expenses the first time the advertising takes place. The Company recorded
advertising expenses of approximately $1.1 million, $1.3 million, and $2.2 million for
the years ended December 31, 2009, 2008, and 2007, respectively.
|
n. |
|
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: |
The Companys trade accounts receivable are generally non-interest bearing. The Company
maintains an allowance for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. The allowance is calculated
based on a percentage of cash revenue, and includes a provision for known issues.
Customer account activity is routinely reviewed to assess the adequacy of the allowance
provided for potential losses. Account balances are charged off against the allowance
when it is probable the receivable will not be recovered.
|
o. |
|
VARIABLE INTEREST ENTITIES: |
Under current accounting guidance, the Company is required to consolidate the
operations of entities for which it is the primary beneficiary, and deconsolidate those
entities for which it is no longer the primary beneficiary. The Company may be
required to consolidate the operations of stations it operates as a lessee under time
brokerage or local marketing agreements, or deconsolidate those stations it leases to
other broadcasting entities under time brokerage or local marketing agreements. At
December 31, 2009 and 2008, the Company was involved in no transactions that would
constitute variable interest entity transactions.
|
p. |
|
STOCK-BASED COMPENSATION PLANS: |
Under current accounting guidance, companies are required to record compensation
expense for share-based payment transactions. At December 31, 2009, the Company had
four stock-based employee compensation plans, which are more fully described in Note 6.
- 70 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
q. |
|
DISCONTINUED OPERATIONS:
Disposal of Markets |
On February 1, 2008, the Company completed the disposition of its Watertown, New York
radio stations. Regent applied current accounting guidance to the transaction, which
requires that in a period in which a component of an entity has been disposed of or is
classified as held for sale, the income statement of a business enterprise for current
and prior periods shall report the results of operations of the component, including
any gain or loss recognized, in discontinued operations. The Companys policy is to
allocate a portion of interest expense to discontinued operations, based upon current
accounting guidance. As there was no debt required to be repaid as a result of the
disposal, nor was there any debt assumed by the buyers, interest expense was allocated
to discontinued operations in proportion to the net assets disposed of to total net
assets of the Company.
Selected financial information related to all discontinued operations for the years
ended December 31, 2008 and 2007 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
182 |
|
|
$ |
2,410 |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
91 |
|
|
|
|
|
|
|
|
Allocated interest expense |
|
|
15 |
|
|
|
145 |
|
|
|
|
|
|
|
|
Gain before income taxes |
|
|
649 |
|
|
|
484 |
|
At December 31, 2007, the pending disposals of one station each of the Albany and
Buffalo, New York markets did not meet the criteria for the reclassification of
operating results to discontinued operations, due to the migration of cash flows from
the disposed stations to other Regent-owned stations. Therefore the results for these
radio stations remained classified in income from continuing operations in 2007.
- 71 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets held for sale
Long-lived assets to be sold are classified as held for sale in the period in which
they meet all the criteria of current accounting guidance. Regent measures assets held
for sale at the lower of their carrying amount or fair value less cost to sell. Assets
held for sale at December 31, 2009 and 2008 were comprised of Regents former studio
location in Evansville, Indiana. The assets held for sale include approximately
$43,000 of land and land improvements and approximately $153,000 of building and
building improvements, offset by accumulated depreciation of approximately $20,000.
Based upon its assessment of the fair market value of the assets at December 31, 2008,
Regent reduced the carrying value of the assets by $20,000. The reduction was
allocated among the assets on a pro rata basis. major categories of these assets were
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
Land and improvements |
|
$ |
39 |
|
|
$ |
39 |
|
Building and improvements |
|
|
137 |
|
|
|
137 |
|
Equipment |
|
|
|
|
|
|
|
|
FCC licenses |
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176 |
|
|
|
176 |
|
Accumulated depreciation |
|
|
(20 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
$ |
156 |
|
|
$ |
156 |
|
|
|
|
|
|
|
|
The Company has 13 distinct operating segments. These segments meet the criteria for
aggregation under current accounting guidance, and therefore the Company has
aggregated these operating segments to create one reportable segment.
|
s. |
|
ASSET RETIREMENT OBLIGATIONS: |
Under the provisions of current accounting guidance, a company is required to
recognize a liability for the fair value of a conditional asset retirement obligation
when incurred if fair value can be reasonably estimated. The liability is accreted to
its present value each period, and the capitalized cost is depreciated over the useful
life of the related asset. Upon settlement of the liability, an entity settles the
obligation for its recorded amount or incurs a gain or loss upon settlement. The
amount of accretion recorded by the Company during all years presented is immaterial.
|
t. |
|
INTERNAL USE SOFTWARE: |
Included in computer equipment is the capitalized cost of website development costs.
The Company follows current accounting guidance, which provides that costs incurred
during the application development stage related to the development of internal-use
software are capitalized and amortized over the estimated useful life. Costs incurred
related to the conceptual design and maintenance of internal-use software are expensed
as incurred. Regent amortizes the costs of capitalized internal-use software over a
three-year period.
3. |
|
ACQUISITIONS AND DISPOSITIONS |
The Company seeks to acquire radio stations that enable it to expand within its
existing markets and enter into new mid-sized markets that fit into Regents operating
strategy. Regent applies various common valuation methods to determine the fair values of
significant assets acquired, including identifiable tangible and intangible assets. Any
remaining purchase price is allocated to goodwill. The results of operations of the acquired
businesses are included in the Companys consolidated financial statements since their
respective dates of acquisition or operation under TBAs.
2008 Dispositions
On February 1, 2008, the Company completed the disposition of four radio stations
(WCIZ-FM, WFRY-FM, WTNY-AM and WNER-AM) serving the Watertown, New York market to Stephens
Media Group Watertown, LLC for $6.25 million in cash. Regent recorded a pre-tax gain of
approximately $0.6 million on the sale, which amount is included in gain (loss) on
discontinued operations in the Companys Consolidated Statements of Operations. The results
of
operations for the stations have been reclassified to discontinued operations for the 2007
and 2008 years.
- 72 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On February 5, 2008, Regent completed the disposition of WTMM-AM serving the Albany,
New York market to Capital Broadcasting, Inc. for $850,000 in cash. Capital Broadcasting,
Inc. commenced operations of the station under a time brokerage agreement on November 1,
2007. The Company treated the disposal of WTMM-AM as the disposal of long-lived assets,
rather than a business or a component of a business, due to the fact that the station had no
independent revenue stream from its operations. The Company recorded a gain on sale of
approximately $0.5 million for the transaction, which amount is included in Loss from
continuing operations in Regents Consolidated Statements of Operations.
On March 11, 2008, the Company completed the disposition of WECK-AM serving the
Buffalo, New York market to Culver Communications II, Inc. and related entities for $1.3
million in cash. The Company treated the disposal of WECK-AM as the disposal of long-lived
assets, rather than a business or a component of a business. The Company recorded an
immaterial loss on the transaction, which amount is included in Loss from continuing
operations in Regents Consolidated Statements of Operations.
2007 Acquisitions
On January 4, 2007, the Company completed the acquisition of substantially all of the
broadcasting and intangible assets of WBZZ-FM (formerly WNYQ-FM), serving the Albany, New
York market, from Vox New York, LLC and related entities for $4.9 million in cash, plus
repayment of approximately $212,000 of transmitter site build-out expenditures.
Long-term debt consisted of the following as of December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Senior secured Term A Loan |
|
$ |
41,386 |
|
|
$ |
46,013 |
|
|
|
|
|
|
|
|
|
|
Senior secured Term B Loan |
|
|
105,844 |
|
|
|
109,165 |
|
|
|
|
|
|
|
|
|
|
Senior secured revolving credit facility |
|
|
40,500 |
|
|
|
29,950 |
|
|
|
|
|
|
|
|
|
|
|
187,730 |
|
|
|
185,128 |
|
|
|
|
|
|
|
|
|
|
Less: current portion of long-term debt |
|
|
(187,730 |
) |
|
|
(185,128 |
) |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
In April 2010, the Company entered into a new credit agreement (see New Credit
Agreement, below). Information regarding the Companys credit agreement in effect at
December 31, 2009, is contained in the paragraphs below under the caption Previous Credit
Agreement.
- 73 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Previous Credit Agreement
On November 21, 2006, the Company entered into a senior secured reducing credit
agreement with a group of lenders that provided for an initial maximum aggregate principal
amount of $240.0 million, consisting of a senior secured term A loan (Term A Loan) in the
initial aggregate principal amount of $50.0 million, a senior secured term B loan (Term B
Loan) in the initial aggregate amount of $115.0 million and a senior secured revolving
credit facility (revolving facility) in the aggregate amount of $75.0 million (collectively,
the previous credit agreement). The previous credit agreement included a commitment to
issue letters of credit of up to $35.0 million in aggregate face amount, subject to the
maximum revolving commitment available. The previous credit agreement also provided for an
additional $100.0 million incremental loan facility, subject to the terms of the facility,
whose weighted-average life shall not be shorter than that of the Term B Loan, the Term A
Loan, and the revolving commitment, taken as whole. At December 31, 2009, the Company had
one letter of credit outstanding for approximately $0.1 million. The previous credit
agreement was scheduled to expire on November 21, 2013.
At December 31, 2009, all outstanding balances under the Companys previous credit
agreement were classified as currently payable, as the Companys lenders had the authority,
at their discretion, to accelerate the payments of the outstanding amounts to current, due
to the Companys failure to comply with certain covenants of the previous credit agreement.
Regent incurred approximately $2.9 million in financing costs related to the previous
credit agreement. The previous credit agreement was available for working capital, permitted
acquisitions, including related acquisition costs, and general corporate purposes.
At December 31, 2009, the Company had available borrowings of approximately $34.4
million, subject to the terms and conditions of the facility. At December 31, 2008, the
Company had available borrowings of approximately $45.0 million. However, due to its default
status under the facility, Regent was precluded from utilizing any of the available
borrowings.
In addition to regularly scheduled debt repayments, Regent could also be subject to
prepayments of borrowings under the previous credit agreement for excess cash flow generated
by the Company. Excess cash flow is calculated as the excess of the sum of consolidated
EBITDA plus or minus the annual change in working capital (excluding cash and cash
equivalent amounts included in current assets and any debt owed under the previous credit
agreement and included in current liabilities), less the sum of consolidated fixed charges,
voluntary permanent repayments of outstanding balances and $1,000,000. The necessity and
amounts of calculated prepayments are based upon the Companys consolidated leverage ratio
at the end of each calendar year preceding the calculation date, and commenced April 30,
2008 and continues for each April 30 thereafter that the Company had borrowings under the
previous credit agreement. The percentage of excess cash flow required to be repaid was as
follows:
|
|
|
|
|
|
|
Excess cash |
|
|
|
flow |
|
Consolidated leverage ratio |
|
percentage |
|
Greater than 6.75:1.00 |
|
|
75 |
% |
5.00:1.00 to 6.74:1.00 |
|
|
50 |
% |
Less than 5.00:1.00 |
|
|
0 |
% |
- 74 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Any required prepayments are applied to the principal of the outstanding borrowings on a pro
rata basis, with a resulting permanent reduction of available commitment for both the Term A
and
Term B portions of the previous credit agreement. Available commitment under the revolving
agreement was not affected by any required excess cash flow prepayments.
Under the previous credit agreement, the Company was subject to a maximum consolidated
leverage ratio, a minimum consolidated interest coverage ratio, and a minimum fixed charge
coverage ratio, as well as to negative covenants customary for facilities of this type. The
Maximum Consolidated Leverage Ratio was 6.00:1.00 at December 31, 2009. Over the remaining
four-year period, the Maximum Consolidated Leverage Ratio was scheduled to decrease to
4.50:1.00. The Minimum Consolidated Interest Coverage Ratio was 2.00:1.00 at December 31,
2009, at which point such
leverage would remain throughout the remaining life of the previous credit agreement. The
Company was required to maintain a Minimum Consolidated Fixed Charge Coverage Ratio of
1.10:1.00 throughout the entire term of the previous credit agreement.
Borrowings under the Term A Loan and the revolving facility bear interest at a rate
equal to, at the Companys option, either (a) the higher of the rate announced or published
publicly from time to time by the agent as its corporate base rate of interest or the
Federal Funds Rate plus 0.5%, in either case plus the applicable margin determined under the
credit agreement, which varies between 0.0% and 1.0% depending upon the Companys
consolidated leverage ratio, or (b) the Eurodollar Rate plus the applicable margin, which
varies between 0.75% and 2.5%, depending upon the Companys consolidated leverage ratio.
Effective February 23, 2007, the Company and its lenders entered into an amendment of the
credit agreement. The material terms of the amendment included a reduction of the applicable
margin on Base Rate and Eurodollar loans under the Term B Loan from 2.5% for both types of
loans, to 0.75% for Base Rate loans and 2.25% for Eurodollar loans. Borrowings under the
Term B Loan bear interest at a rate equal to, at the Companys option, either (a) the higher
of the rate announced or published publicly from time to time by the agent as its corporate
base rate of interest or the Federal Funds Rate plus 0.5%, in either case plus an applicable
margin of 0.75%, or (b) the Eurodollar Rate plus an applicable margin of 2.25%. Commencing
in May 2009, the Company began paying a 2.0% default premium on our outstanding borrowings
under the former credit agreement, and in June 2009, the Company was precluded from further
utilizing LIBOR-based interest rates on its outstanding borrowings. Borrowings under the
previous credit agreement bore interest at an average rate of 6.11% and 3.44% at December
31, 2009 and 2008, respectively.
The Company is required to pay certain fees to the agent and the lenders for the
underwriting commitment and the administration and use of the previous credit agreement. The
underwriting commitment for the Term A Loan was 0.5% during the period of time between the
commencement of the credit agreement and December 15, 2006, the date the Term A Loan was
utilized. There are no further underwriting commitment fees applicable to the Term A Loan.
The underwriting commitment for the revolving facility varies between 0.25% and 0.5% based
upon the Companys consolidated leverage ratio. The Companys indebtedness under the
previous credit agreement 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 those
subsidiaries.
- 75 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the event the parties to the Companys previous credit agreement would not have
accelerated the repayments of borrowings under the agreement to currently payable, Regent
would have been required to continue scheduled repayments of the Term A Loan, Term B Loan
and revolving facility. Commencing March 31, 2007, the Company began making quarterly
repayments of the amounts borrowed under the Term B Loan, which amount is currently set at
approximately $278,000 per quarter, until November 21, 2013, at which date any
remaining amounts outstanding under the loan were due and payable. Borrowings under the
Term A Loan must be repaid in 24 quarterly installments, which repayments commenced March
31, 2008. Repayments began at 1.25% of the outstanding principal amount, which percentage
increases to a maximum of approximately 6.05% of the original principal amount, until the
final payment date of November 21, 2013. No repayments are required under the revolving
facility until the termination of the credit agreement on November 21, 2013.
New Credit Agreement
Upon our emergence from Chapter 11 Bankruptcy, we entered into a new Credit Agreement
with General Electric Capital Corporation, as administrative agent and collateral agent, GE
Capital Markets, Inc., as sole lead arranger and book runner, and a syndicate of certain
financial institutions. The Credit Agreement provides for a term loan in an aggregate
principal amount of $95,000,000 with a maturity date of April 27, 2014. The Credit
Agreement provides for a revolving loan in an aggregate principal amount of up to $2,000,000
with a maturity date of April 27, 2012.
The terms of the term loan under the credit agreement sets the interest rate to
one-month Eurodollar Rate plus 4.0% and, upon an event of default, increased to one-month Eurodollar Rate plus
6.0%, provided that in each case there is a Eurodollar Rate floor of 1.25%.
The new Credit Agreement is guaranteed by the Company, Regent Broadcasting Management,
LLC and all of the direct and indirect subsidiaries of Regent Broadcasting, LLC. The
obligations under the Credit Agreement are secured by a first-priority lien (subject to
certain permitted liens and exceptions) on substantially all of the tangible and intangible
assets of Borrower and the Guarantors. The Credit Agreement contains customary covenants,
which, among other things require Borrower and the Guarantors to meet certain financial
tests and limit their ability to: incur indebtedness and liens; make investments; make asset
sales; pay dividends or make other restricted payments; engage in mergers or other
fundamental changes; enter into transactions with affiliates; and other covenants customary
for such a credit facility.
Additionally, we entered into a new Subordinated Notes Agreement (the Subordinated
Notes Agreement) with General Electric Capital Corporation, as subordinated notes agent,
and a syndicate of certain financial institutions. The Subordinated Notes Agreement provides
for 12% Senior Subordinated PIK Notes in an initial aggregate principal amount of
$25,000,000 with a maturity date of October 27, 2014. The entire unpaid principal balance of
such subordinated notes shall bear interest at 12% per annum and interest shall only be
paid-in-kind by being added to principal.
The new Subordinated Notes Agreement is guaranteed by the Company, Regent Broadcasting
Management, LLC and all of the direct and indirect subsidiaries of the Company. The
Subordinated Notes Agreement contains customary covenants, which, among other things limit
the ability of Regent Communications, Inc., Regent Broadcasting, LLC and their direct and
indirect subsidiaries to incur indebtedness and liens; make investments; make asset sales;
pay dividends or make other restricted payments; engage in mergers or other fundamental
changes; enter into transactions with affiliates; and contains other customary covenants.
- 76 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the terms of the term loan in the new credit agreement, we are subject to a
Maximum Consolidated Leverage Ratio and a Minimum Consolidated Fixed Charge Coverage
Ratio, as well as to negative covenants customary for facilities of this type. The
Maximum Consolidated Leverage Ratio is 6.40:1.00 at December 31, 2010. The ratio will
decrease to 5.90:1.00 at March 31, 2011 and will be 4.80:1.00 at December 31, 2011. Over
the remaining period, the Maximum Consolidated Leverage Ratio will decrease to 4.50:1.00.
The Minimum Consolidated fixed charge Coverage Ratio is 1.75:1.00 at December 31, 2010 and
increases to 1.85:1.00 at March 31, 2011, at which point such leverage remains throughout
the remaining life of the credit agreement.
As of December 31, 2009, the Companys authorized capital stock consists of 100,000,000
shares of common stock and 40,000,000 shares of preferred stock. No shares of preferred
stock were issued or outstanding at December 31, 2009 or 2008. The Company has in the past
designated shares of preferred stock in several different series. Of the available shares
of preferred stock, 6,768,862 remain designated in several of those series and 33,231,138
shares are currently undesignated.
In January 2006, the Company began issuing grants of nonvested stock to employees under
the Regent Communications, Inc. 2005 Incentive Compensation Plan. Grants of nonvested
common stock vest ratably over the life of the award, which is typically four years. During
2009 and 2008, the Company granted 896,600 and 493,600 shares of nonvested common stock,
respectively. At December 31, 2009 and 2008, there were
1,407,875 and 756,000 nonvested shares outstanding under the plan, respectively.
In May 2006, the Company began issuing grants of nonvested stock to directors under the
Regent Communications, Inc. 2006 Directors Equity Compensation Plan, which plan was approved
by the Companys stockholders at the 2006 Annual Meeting of Stockholders. Grants of
nonvested common stock vest ratably over the life of the award, which is typically four
years. During 2009 and 2008, the Company granted 50,000 and 60,000 shares of nonvested
common stock, respectively. At December 31, 2009 and 2008, 100,000 and 86,875 shares of
nonvested common stock were outstanding under the plan, respectively.
On January 30, 2008, the Company issued 54,923 shares of Regent common stock from
treasury shares to two executive officers at an issue price of $1.35 per share as a payment
of a portion of 2007 bonuses awarded and expensed under the Companys Senior Management
Bonus Plan.
Regent has a stock buyback program, approved by its Board of Directors, which currently
allows the Company to repurchase up to $1.6 million worth of shares of its common stock at
certain market price levels. There were no repurchases of common stock under the program
during 2009 and 2008 other than treasury shares exchanged for payment of employee
withholding taxes related to the vesting of nonvested stock grants.
During 2009, 2008 and 2007, Regent reissued 1,487,226, 570,333 and 236,892 shares,
respectively, of treasury stock previously acquired, net of forfeited shares, as an employer
match to employee contributions under the Companys 401(k) Profit Sharing Plan and to
employees enrolled in the Companys Employee Stock Purchase Plan.
- 77 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On June 15, 2008, 140,000 warrants entitling holders to purchase shares of Regents
common stock at a price of $5.00 per share, expired unexercised. These warrants were
previously issued in 1998 in connection with the Series A, B, and F convertible preferred
stock.
See Note 1 to the Consolidated Financial Statements for information on the impact of
the reorganization on the Companys capital structure.
6. |
|
STOCK-BASED COMPENSATION PLANS |
Share-based Plans
1998 Management Stock Option Plan
The Regent Communications, Inc. 1998 Management Stock Option Plan, as amended (the
1998 Stock Option Plan) provides for the issuance of up to an aggregate of 4,500,000
common shares in connection with the issuance of incentive stock options (ISOs) and
non-qualified stock options (NQSOs). The Compensation Committee of the Companys Board of
Directors determines eligibility. The exercise price of the options is to be not less than
the fair market value of the underlying common stock at the grant date and in the case of
ISOs granted to a 10% owner (as defined), the exercise price must be at least 110% of the
fair market value of the underlying common stock at the grant date. Under the terms of the
1998 Stock Option Plan, the options expire no later than ten years from the date of grant in
the case of ISOs (five years in the case of ISOs granted to a 10% owner), no later than ten
years and one day in the case of NQSOs, or earlier in either case in the event a participant
ceases to be an employee of the Company. The ISOs vest ratably over a five-year period and
the NQSOs vest ratably over periods ranging from three to ten years. In 2008, the provision
to issue common stock under the 1998 Stock Option Plan expired.
2001 Directors Stock Option Plan
The Regent Communications, Inc. 2001 Directors Stock Option Plan (the 2001 Directors
Option Plan) provides for the issuance of up to an aggregate of 500,000 common shares in
connection with the issuance of NQSOs. The exercise price of the options is to be equal to
the fair market value of the underlying common stock at the date of grant. Under the terms
of the 2001 Directors Option Plan, the options are exercisable six months from the date of
grant and expire ten years from the date of grant.
2005 Incentive Compensation Plan
The Regent Communications, Inc. 2005 Incentive Compensation Plan, as amended (the 2005
Incentive Plan) provides for the issuance of up to an aggregate of 3,500,000 shares in
connection with the issuance of stock appreciation rights (SARs), restricted stock, and
ISOs and NQSOs. The maximum number of shares of restricted stock that can be awarded under
the 2005 Incentive Plan is 75% of the total shares available to be awarded. The exercise
price of the options is to be not less than the fair market value of the underlying common
stock at the grant date and in the case of ISOs granted to a 10% owner (as defined), the
exercise price must be at least 110% of the fair market value of the underlying common stock
at the grant date. Under the terms of the 2005 Incentive Plan, the stock appreciation
rights and stock options expire no later than ten years from the date of grant (five years
in the case of ISOs granted to a 10% owner), or
earlier in the event a participant ceases to be an employee of the Company. The Compensation
Committee of the Companys Board of Directors determines eligibility and terms and
restrictions related to all awards under the 2005 Incentive Plan.
- 78 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2006 Directors Equity Compensation Plan
The Regent Communications, Inc. 2006 Directors Equity Compensation Plan (2006
Directors Plan) provides for the issuance of up to an aggregate of 250,000 shares in
connection with the issuance of SARs, restricted stock, and NQSOs. The exercise price of the
options is to be not less than the fair market value of the underlying common stock at the
grant date. Under the terms of the 2006 Directors Plan, the stock appreciation rights and
stock options expire no later than ten years from the date of grant, or earlier in the event
a participant ceases to be a director of the Company. The Compensation Committee of the
Companys Board of Directors determines eligibility and terms and restrictions related to
all awards under the 2006 Directors Plan.
Employee Stock Purchase Plan
In December 2001, the Company adopted the Regent Communications, Inc. Employee Stock
Purchase Plan (the Stock Purchase Plan) and reserved 500,000 shares of common stock for
issuance thereunder. Under the Stock Purchase Plan, participating
employees could purchase
shares of the Companys common stock at a price per share that is 90% of the lesser of the
fair market value as of the beginning or the end of the quarterly offering period. Under
the terms of the Stock Purchase Plan, eligible employees could elect each offering period to
have between 1% and 10% of their compensation withheld through payroll deductions. For the
first nine months of 2008, approximately 79,000 shares of Regent common stock were issued
under the plan. In addition, approximately 126,000 shares of Regent common stock were issued
for the fourth quarter of 2008 and were distributed to the participants in February 2009.
Effective with the distribution of shares for the quarter ended December 31, 2008, there
were no further shares available for purchase by employees under the Stock Purchase Plan.
Consequently, the Company terminated the Stock Purchase Plan effective with the fourth
quarter distribution of shares. A total of approximately 76,000 shares of common stock were
issued under the Stock Purchase Plan for the 2007 offering period.
Stock Compensation
Under the provisions of current accounting guidance, companies are required to record
compensation expense for share-based payment transactions. No stock options were granted
under any of Regents share-based plans during 2009, 2008 or 2007. During 2009, 353,678
stock options with a weighted-average exercise price of $5.38 were terminated due to
expiration or forfeiture. During 2008, 1,504,988 stock options with a weighted-average
exercise price of $5.23 were terminated due to expiration or forfeiture. During 2007, 86,000
stock options with a weighted-average exercise price of $6.28 were terminated due to
expiration or forfeiture. The intrinsic value of all outstanding stock options was zero at
December 31, 2009 and 2008.
- 79 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Presented below is a summary of the status of outstanding Company stock options issued
to employees and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED |
|
|
|
|
|
|
|
AVERAGE |
|
|
|
SHARES |
|
|
EXERCISE PRICE |
|
|
|
|
|
|
|
|
|
|
Company options held by employees and Directors: |
|
|
|
|
|
|
|
|
At December 31, 2006 |
|
|
4,169,039 |
|
|
$ |
5.92 |
|
Granted |
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
Forfeited/expired |
|
|
(86,000 |
) |
|
$ |
6.28 |
|
|
|
|
|
|
|
|
|
Company options held by employees and Directors: |
|
|
|
|
|
|
|
|
At December 31, 2007 |
|
|
4,083,039 |
|
|
$ |
5.91 |
|
Granted |
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
Forfeited/expired |
|
|
(1,504,988 |
) |
|
$ |
5.23 |
|
|
|
|
|
|
|
|
|
Company options held by employees and Directors: |
|
|
|
|
|
|
|
|
At December 31, 2008 |
|
|
2,578,051 |
|
|
$ |
6.31 |
|
Granted |
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
Forfeited/expired |
|
|
(353,678 |
) |
|
$ |
5.38 |
|
|
|
|
|
|
|
|
|
Company options held by employees and Directors: |
|
|
|
|
|
|
|
|
At December 31, 2009 |
|
|
2,224,373 |
|
|
$ |
6.46 |
|
|
|
|
|
|
|
|
|
The following table summarizes the status of Company options outstanding and exercisable at December 31, 2009 under the 1998 Stock Option Plan and the
2001 Directors
Option Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTIONS OUTSTANDING |
|
|
OPTIONS EXERCISABLE |
|
|
|
|
|
|
|
WEIGHTED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE |
|
|
WEIGHTED |
|
|
|
|
|
|
WEIGHTED |
|
|
|
|
|
|
|
REMAINING |
|
|
AVERAGE |
|
|
|
|
|
|
AVERAGE |
|
EXERCISE |
|
|
|
|
|
CONTRACTUAL |
|
|
EXERCISE |
|
|
|
|
|
|
EXERCISE |
|
PRICE |
|
SHARES |
|
|
LIFE (YEARS) |
|
|
PRICE |
|
|
SHARES |
|
|
PRICE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$5.90 $7.83 |
|
|
1,331,623 |
|
|
|
2.4 |
|
|
$ |
7.04 |
|
|
|
1,331,623 |
|
|
$ |
7.04 |
|
$5.01 $5.89 |
|
|
892,750 |
|
|
|
4.1 |
|
|
$ |
5.58 |
|
|
|
892,750 |
|
|
$ |
5.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,224,373 |
|
|
|
|
|
|
|
|
|
|
|
2,224,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, the stock options granted under the 1998 Stock Option Plan
entitle the holders to purchase 2,149,373 shares of the Companys common stock. Stock
options granted under the 2001 Directors Option Plan entitle the holders to purchase 75,000
shares of the Companys common stock.
During 2009 and 2008, the Company issued 896,600 and 493,600 nonvested shares,
respectively, under the 2005 Incentive Plan as a component of compensation to employees.
The value of each nonvested share was determined by the fair value of a share of Regent
common stock on the date of grant. The nonvested shares typically vest ratably over a
four-year period and the Company records expense related to the nonvested shares on a
straight-line basis over the vesting period. For the year ended December 31, 2009, the
Company recorded approximately $591,000 of expense related to the nonvested shares awards.
For the year ended December 31, 2008, Regent recorded approximately $599,000 of expense
related to the nonvested share awards, which amount included approximately $18,000 related
to the acceleration of 9,750 nonvested shares for an employee in a broadcast market the Company disposed of in 2008. At December
31, 2009, deferred compensation expense related to the nonvested shares was approximately
$575,000, which will be recognized over the remaining weighted-average 2.6 years of
the vesting period. During 2009 and 2008, 15,900 and 14,650 nonvested shares granted under
the plan were forfeited, respectively. All material outstanding awards are expected to vest.
- 80 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 2009 and 2008, the Company issued 50,000 and 60,000 nonvested shares,
respectively, of Regent common stock to its non-management directors under the 2006
Directors Plan. The value of each nonvested share was determined by the fair market value of
a share of Regent common stock on the date of grant. The nonvested shares vest ratably over
a four-year period and the Company records expense related to the nonvested shares on a
straight-line basis over the vesting period. The Company recorded approximately $77,000 and
$42,000 of expense related to the nonvested awards during 2009 and 2008, respectively.
Included in the 2009 expense was approximately $28,000 of expense related to acceleration of
nonvested shares for the Companys former Chairman of the Board, who terminated service in
March 2009. At December 31, 2009, deferred compensation
expense related to the nonvested shares was approximately $65,000, which will be recognized over the remaining
weighted-average 2.8 years of the vesting period. During the year ended December 31, 2009,
no nonvested shares granted under the plan were forfeited. During the year ended December
31, 2008, 2,500 nonvested shares granted under the plan were forfeited. All material
outstanding awards are expected to vest.
The following table summarizes the status of Company nonvested shares under the 2005
Incentive Plan and the 2006 Directors Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE |
|
|
|
|
|
|
|
GRANT-DATE FAIR |
|
|
|
SHARES |
|
|
VALUE |
|
|
|
|
|
|
|
|
|
|
Company nonvested shares held by employees and Directors: |
|
|
|
|
|
|
|
|
At December 31, 2006 |
|
|
250,500 |
|
|
$ |
4.65 |
|
Granted |
|
|
282,900 |
|
|
$ |
2.85 |
|
Vested |
|
|
(80,125 |
) |
|
$ |
4.43 |
|
Forfeited/expired |
|
|
(12,000 |
) |
|
$ |
3.53 |
|
|
|
|
|
|
|
|
|
Company nonvested shares held by employees and Directors: |
|
|
|
|
|
|
|
|
At December 31, 2007 |
|
|
441,275 |
|
|
$ |
3.57 |
|
Granted |
|
|
553,600 |
|
|
$ |
1.37 |
|
Vested |
|
|
(134,850 |
) |
|
$ |
3.60 |
|
Forfeited/expired |
|
|
(17,150 |
) |
|
$ |
2.24 |
|
|
|
|
|
|
|
|
|
Company nonvested shares held by employees and Directors: |
|
|
|
|
|
|
|
|
At December 31, 2008 |
|
|
842,875 |
|
|
$ |
2.15 |
|
Granted |
|
|
946,600 |
|
|
$ |
0.09 |
|
Vested |
|
|
(265,700 |
) |
|
$ |
2.45 |
|
Forfeited/expired |
|
|
(15,900 |
) |
|
$ |
0.48 |
|
|
|
|
|
|
|
|
|
Company nonvested shares held by employees and Directors: |
|
|
|
|
|
|
|
|
At December 31, 2009 |
|
|
1,507,875 |
|
|
$ |
0.83 |
|
|
|
|
|
|
|
|
|
- 81 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting guidance calls for the dual presentation of basic and diluted earnings
(loss) per share (EPS). Basic EPS is calculated by dividing net income (loss) by the
weighted average number of common shares outstanding during the reporting period, and
excluding shares issued under the Regent Communications, Inc. 2005 Incentive Compensation
Plan and the
Regent Communications, Inc. 2006 Directors Equity Compensation Plan that were not vested as
of the reporting period. The calculation of diluted earnings per share is similar to basic
except that the weighted average number of shares outstanding includes the additional
dilution that would occur if potential common stock, such as stock options and warrants
were exercised, except when the effect would be antidilutive. The
number of additional shares is calculated by assuming that outstanding stock options and warrants with an
exercise price less than the Companys average stock price for the period were exercised,
and that the proceeds from such exercises were used to acquire shares of common stock at
the average market price during the reporting period. At December 31, 2009, none of the
Companys 2,224,373 stock options had exercise prices that were less than the Companys
average stock price for the 2009 year. At December 31, 2008, none of the Companys
2,578,051 outstanding stock options had exercise prices that were less than the Companys
average stock price for the 2008 year. At December 31, 2007, none of the Companys
4,083,039 outstanding stock options and 140,000 outstanding warrants had exercise prices
that were less than the Companys average stock price for the 2007 year. The Company
adopted new accounting guidance effective January 1, 2009 related to participating
securities. Regents nonvested stock contains rights to receive non-forfeitable dividends,
and thus, are participating securities requiring the two-class method of computing earnings
per share. Under the provisions of the guidance, in periods in which the Company records
net income, the calculation of earnings per share for common shares will exclude the income
attributed to the Companys nonvested stock from the numerator and will exclude the
dilutive impact for those nonvested shares from the denominator. The accounting guidance
also requires the Company to retroactively adjust all prior period earnings per share
computations for the two-class method of computing earnings per share. The retroactive
application of this guidance had no impact on our earnings (loss) per share calculation for
the years ended December 31, 2008 and 2007, as the Company recorded a net loss in each of
those years. There were 1,507,875, 842,875, and 441,275 nonvested
shares outstanding at December 31, 2009,
2008, and 2007, respectively.
- 82 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the computation of basic and diluted net loss per share
for the periods indicated (in thousands except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(43,982 |
) |
|
$ |
(119,402 |
) |
|
$ |
(102,870 |
) |
Gain on discontinued operations,
net of taxes |
|
|
|
|
|
|
411 |
|
|
|
296 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(43,982 |
) |
|
$ |
(118,991 |
) |
|
$ |
(102,574 |
) |
Less: dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed earnings |
|
$ |
(43,982 |
) |
|
$ |
(118,991 |
) |
|
$ |
(102,574 |
) |
Percentage allocated to common
shares (1) |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Undistributed earnings
common shares |
|
$ |
(43,982 |
) |
|
$ |
(118,991 |
) |
|
$ |
(102,574 |
) |
Add: dividends declared
common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic and diluted
loss per share |
|
$ |
(43,982 |
) |
|
$ |
(118,991 |
) |
|
$ |
(102,574 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average basic common
shares |
|
|
40,588 |
|
|
|
38,872 |
|
|
|
38,308 |
|
Dilutive effect of stock options
and warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average diluted
common shares |
|
|
40,588 |
|
|
|
38,872 |
|
|
|
38,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net basic and diluted loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from
continuing operations |
|
$ |
(1.08 |
) |
|
$ |
(3.07 |
) |
|
$ |
(2.69 |
) |
Discontinued operations |
|
|
|
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1.08 |
) |
|
$ |
(3.06 |
) |
|
$ |
(2.68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Weighted-average common
shares outstanding: |
|
|
40,588 |
|
|
|
38,872 |
|
|
|
38,308 |
|
Weighted-average nonvested
shares (participating securities) |
|
|
|
(2) |
|
|
|
(2) |
|
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
40,588 |
|
|
|
38,872 |
|
|
|
38,308 |
|
Percentage allocated to common
shares |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
(2) |
|
As the Company was in a net loss position for the indicated period, nonvested shares
are not included in the allocation of loss for the numerator in the calculation of earnings per
share. |
- 83 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. |
|
GOODWILL AND OTHER INTANGIBLE ASSETS |
The Company performs its annual review of goodwill and indefinite-lived intangible
assets for impairment during the fourth quarter, or at an earlier date if conditions exist
that would indicate that it is more likely than not an impairment exists. Based on
deteriorating economic conditions, volatility in the equity market and operating results for
the quarter, the Company performed an analysis for potential impairment of indefinite-lived
intangibles and goodwill during the first quarter of 2009. Based primarily upon material
changes in future revenue and cash flow projections, the Company determined that the fair
value of goodwill and FCC licenses for certain markets were less than the carrying value
recorded in the financial statements. Accordingly, during the first quarter of 2009 the
Company recognized pre-tax impairment charges of $25.6 million for FCC licenses and $6.2
million for goodwill. As permitted by accounting guidance, the Company completed step two of
its impairment analysis in the second quarter of 2009 and recorded no adjustments to its
initial estimates. During the fourth quarter of 2009, the Company performed its annual
review for impairment of indefinite-lived intangible assets and goodwill. Based primarily
upon additional declines in future revenue and cash flow projections, the Company recognized
pre-tax impairment charges of $11.8 million for FCC licenses and $1.0 million for goodwill
as a component of loss from continuing operations. Based on deteriorating economic
conditions, volatility in the equity market and operating results for the quarter, the
Company performed an analysis for potential impairment of indefinite-lived intangibles and
goodwill during the third quarter of 2008. Based primarily upon material changes in future
revenue and cash flow projections, the Company determined that the fair value of goodwill
and FCC licenses for certain markets were less than the carrying values recorded in the
financial statements. Consequently, during the third quarter of 2008, the Company recorded a
preliminary pre-tax impairment charge of approximately $66.6 million for FCC licenses and
approximately $0.9 million for goodwill, which amounts were recorded as a component of
operating loss. The Company recorded impairment of FCC licenses in eleven of its broadcast
markets and goodwill impairment in one broadcast market. During the fourth quarter of 2008,
the Company finalized its impairment testing with no significant changes to its preliminary
valuation. Also during the fourth quarter of 2008, the Company performed its annual review
for impairment of indefinite-lived intangible assets and goodwill and recorded no further
impairment charges.
- 84 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Definite-lived Intangible Assets
The Company has definite-lived intangible assets that continue to be amortized in
accordance with current accounting guidance, consisting primarily of non-competition
agreements, employment and sports rights agreements, favorable leasehold interest and
advertiser relationships and lists. Non-compete, employment and sports right agreements, and
favorable leasehold interests are amortized over the life of the agreement or contract.
Advertiser lists and relationships are amortized over a three-year period. The following
table presents the gross carrying amount and accumulated amortization for the Companys
definite-lived intangibles at December 31, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
Accumulated |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amortization |
|
Non-compete agreements |
|
$ |
|
|
|
$ |
|
|
|
$ |
219 |
|
|
$ |
171 |
|
Sports rights, employment
agreements, favorable
leasehold interests and
advertiser lists and
relationships |
|
|
17 |
|
|
|
3 |
|
|
|
779 |
|
|
|
690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
17 |
|
|
$ |
3 |
|
|
$ |
998 |
|
|
$ |
861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate amortization expense related to the Companys definite-lived intangible
assets for the years ended December 31, 2009, 2008, and 2007, was approximately $123,000,
$235,000, and $997,000, respectively. The estimated annual amortization expense for the
years ending December 31, 2010, 2011, 2012, 2013 and 2014 is approximately $1,000 per year.
Indefinite-lived Intangible Assets
The Companys indefinite-lived intangible assets consist primarily of FCC licenses for
radio stations. The following table presents the changes in the carrying amount of the
Companys indefinite-lived intangible assets at December 31, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
FCC Licenses |
|
|
|
|
|
|
Balance as of December 31, 2007 |
|
$ |
201,685 |
|
Miscellaneous adjustments |
|
|
20 |
|
Impairment of FCC licenses |
|
|
(66,600 |
) |
|
|
|
|
Balance as of December 31, 2008 |
|
|
135,105 |
|
Impairment of FCC licenses |
|
|
(37,400 |
) |
|
|
|
|
Balance as of December 31, 2009 |
|
$ |
97,705 |
|
|
|
|
|
The 2008 miscellaneous adjustments consist of final adjustments to stations disposed of
during the first quarter of 2008.
Other indefinite-lived intangible assets, consisting primarily of trademarks and
website domain names, were approximately $10,000 at December 31, 2009 and 2008.
Goodwill
The following table presents the changes in the carrying amount of goodwill for the
years ended December 31, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
Balance as of December 31, 2007 |
|
$ |
19,272 |
|
Impairment of goodwill |
|
|
(922 |
) |
Acquisition-related adjustment |
|
|
42 |
|
|
|
|
|
Balance as of December 31, 2008 |
|
|
18,392 |
|
Impairment of goodwill |
|
|
(7,220 |
) |
|
|
|
|
Balance as of December 31, 2009 |
|
$ |
11,172 |
|
|
|
|
|
- 85 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 2008 miscellaneous adjustments consist of final adjustments to stations disposed of
during the first quarter of 2008.
The changes in the gross amounts of Goodwill and the accumulated asset impairment and
disposal charges for the years ended December 31, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Balance as of January 1: |
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
57,036 |
|
|
$ |
57,036 |
|
Accumulated asset impairment and disposal charges |
|
|
(38,644 |
) |
|
|
(37,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill net of impairment at January 1 |
|
|
18,392 |
|
|
|
19,439 |
|
|
|
|
|
|
|
|
|
|
Asset impairment and disposal charges |
|
|
(7,220 |
) |
|
|
(1,047 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31: |
|
|
|
|
|
|
|
|
Goodwill |
|
|
57,036 |
|
|
|
57,036 |
|
Accumulated asset impairment and disposal charges |
|
|
(45,864 |
) |
|
|
(38,644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill net of impairment at December 31 |
|
$ |
11,172 |
|
|
$ |
18,392 |
|
Approximately $2.2 million of the Companys recorded goodwill amount is not deductible
for income tax purposes.
The Companys income tax expense (benefit) for continuing operations consists of the
following for the years ended December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current federal |
|
$ |
|
|
|
$ |
|
|
|
$ |
49 |
|
Current state |
|
|
212 |
|
|
|
301 |
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current |
|
|
212 |
|
|
|
301 |
|
|
|
217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred federal |
|
|
(13,704 |
) |
|
|
(20,913 |
) |
|
|
(54,165 |
) |
Deferred state |
|
|
(1,882 |
) |
|
|
(2,992 |
) |
|
|
(6,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred |
|
|
(15,586 |
) |
|
|
(23,905 |
) |
|
|
(60,565 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
|
15,586 |
|
|
|
77,993 |
|
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income tax
expense (benefit) |
|
$ |
212 |
|
|
$ |
54,389 |
|
|
$ |
(60,561 |
) |
|
|
|
|
|
|
|
|
|
|
- 86 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has allocated income tax expense of approximately $0, $238,000 and $188,000
to discontinued operations for the years ended December 31, 2009, 2008 and 2007,
respectively.
The components of the Companys deferred tax assets and liabilities are as follows as
of December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
43,637 |
|
|
$ |
33,609 |
|
Miscellaneous accruals and credits |
|
|
1,031 |
|
|
|
827 |
|
Derivative financial instruments |
|
|
2,999 |
|
|
|
4,236 |
|
Intangible and long-lived assets |
|
|
50,443 |
|
|
|
43,416 |
|
Accounts receivable reserve |
|
|
197 |
|
|
|
203 |
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
98,307 |
|
|
|
82,291 |
|
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
|
(96,486 |
) |
|
|
(80,899 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
|
1,821 |
|
|
|
1,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Property and equipment |
|
|
(1,821 |
) |
|
|
(1,392 |
) |
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
(1,821 |
) |
|
|
(1,392 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Realization of the Companys deferred tax assets is dependent upon the generation of
future taxable income, the timing and amounts of which, if any, are uncertain. Based upon
uncertainty regarding the Companys ability to continue as a going concern as of December
31, 2008, the Company was unable to conclude that it is more likely than not that the
deferred tax assets will be realized. Accordingly, Regent recorded a valuation allowance for
substantially all of its deferred tax assets at December 31, 2008. No event occurred during
the year ended December 31, 2009 that changed the conclusion reached in 2008 with respect to
the realization of the deferred tax assets. As a result, Regent has maintained a valuation
allowance for substantially all of its deferred tax assets.
The Company has cumulative federal and state tax loss carryforwards of approximately
$205.7 million at December 31, 2009. These loss carryforwards will expire in years 2010
through 2029. The utilization of a portion of these net operating loss carryforwards for
federal income tax purposes is limited pursuant to the annual utilization limitations
provided under the provisions of Internal Revenue Code Section 382.
- 87 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The difference between the Companys effective tax rate on loss from continuing
operations before income taxes and the federal statutory tax rate arise from the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
Federal tax expense at statutory rate |
|
|
(34.0 |
)% |
|
|
(34.0 |
)% |
|
|
(34.0 |
)% |
|
|
|
|
|
|
|
|
|
|
Other non-deductible expenses |
|
|
1.7 |
|
|
|
0.3 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in valuation allowance |
|
|
35.6 |
|
|
|
120.0 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
Expiration of net operating losses |
|
|
1.1 |
|
|
|
1.8 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
State tax, net of federal tax benefit |
|
|
(4.0 |
) |
|
|
(4.4 |
) |
|
|
(3.9 |
) |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
0.1 |
|
|
|
0.0 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
0.5 |
% |
|
|
83.7 |
% |
|
|
(37.1 |
)% |
|
|
|
|
|
|
|
|
|
|
Current accounting guidance calls for a single model to address uncertainty in income
tax positions, and clarifies the accounting for income taxes by prescribing the minimum
recognition threshold a tax position is required to meet before being recognized in the
financial statements. It also provides guidance on de-recognition, measurement,
classification, interest and penalties, accounting in interim periods, disclosures and
transition. As a result of the implementation of the new accounting guidance, the Company
recorded approximately $81,000 in additional liabilities for unrecognized tax benefits,
which amount was recorded as an adjustment to beginning retained earnings at January 1,
2007.
A reconciliation of the beginning and ending balances of the total amounts of gross
unrecognized tax benefits, excluding interest and penalties, is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits Beginning of year |
|
$ |
430,701 |
|
|
$ |
388,077 |
|
Decrease based on tax positions settled |
|
|
(42,624 |
) |
|
|
|
|
Increase based on tax positions related to current year |
|
|
|
|
|
|
42,624 |
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits End of year |
|
$ |
388,077 |
|
|
$ |
430,701 |
|
|
|
|
|
|
|
|
The Companys policy is to recognize interest and penalties accrued on unrecognized tax
benefits as part of income tax expense. During the years ended 2009 and 2008, the Company
recognized $38,420 and $59,083 of interest expense. At December 31, 2009, the total amount
of net unrecognized tax benefits that, if recognized, would affect income tax expense is
approximately $542,000, which includes interest of approximately $154,000. At December 31,
2008, the total amount of net unrecognized tax benefits, if recognized, would have affected
income tax expense was approximately $567,000, which included accrued interest and penalties
of approximately $136,000. The Company does not currently anticipate that the total amount
of unrecognized tax benefits will materially increase or decrease within 12 months of the
reporting date.
The Company files income tax returns in the United States federal jurisdiction and
various state jurisdictions. The Company is no longer subject to United States federal
examinations by tax authorities for years prior to 2006 and for state and local income tax
examinations by tax authorities for years prior to 2005.
- 88 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. |
|
DERIVATIVE FINANCIAL INSTRUMENTS |
Under the terms of its credit agreement, the Company was required to enter into
interest rate protection agreements for borrowings under its Term A Loan and Term B Loan.
Effective December 6, 2006, the Company entered into three LIBOR-based interest rate swap
agreements, which effectively converted $115.0 million of Regents then-outstanding
variable-rate debt under the Term B Loan to a fixed rate. The swaps expire on December 11,
2011. Under the agreements, payments are made based on a fixed rate of approximately 4.72%,
plus applicable margin. Additionally, effective December 15, 2006, the Company entered into
two LIBOR-based interest rate swap agreements, which effectively converted $50.0 million of
Regents then-outstanding variable-rate debt under the Term A Loan to a fixed rate. The
swaps expire on December 15, 2011. Under the agreements, payments are made based on a fixed
rate of approximately 4.83%, plus applicable margin. All outstanding interest rate swaps are
considered free-standing derivatives. As such, the fair value of each swap is recorded as
an asset or a liability on the Companys Consolidated Balance Sheets (included in Other
long-term liabilities or Other current liabilities), with any resulting change in value
recorded as a component of net loss. At December 31, 2009 and 2008, the unrealized loss
related to the swap transactions, inclusive of non-performance risk, was approximately $7.8
million and $11.0 million, respectively.
The Company is exposed to a variety of market risks, including the effects of changes in
interest rates. The Companys risk management strategy includes the use of derivative instruments
to convert a portion of its debt from variable to fixed rates in order to reduce the effect of
fluctuating interest rates. The Company follows current accounting guidance, which requires that
all derivative financial instruments, such as interest rate swap agreements, be recognized in the
financial statements as assets or liabilities and be measured at fair value. The Company has not
designated its interest rate swap agreements as hedging instruments in 2009, 2008 or 2007. The
Company recorded a loss on its interest rate swap agreements of approximately $2.9 million, $8.7
million, and $5.2 million for the years ended December 31, 2009, 2008, and 2007, respectively,
which amounts are included in the Companys Consolidated Statements of Operations in the category
Realized and unrealized (loss) gain on derivatives.
Regent Communications, Inc. 401(k) Profit Sharing Plan
The Company sponsors a defined contribution plan covering substantially all employees.
Both the employee and the Company can make voluntary contributions to the plan. Prior to the
January 14, 2009 suspension of the Company matching contribution to the 401(k) Profit
Sharing Plan, the Company matched participant contributions in the form of employer stock at
a rate of 50 cents for every dollar contributed up to the first 6% of compensation.
Company-matched contributions vest to the employees over a three-year period after one year
of service. Contribution expense was approximately $22,000, $492,000, and $496,000 in 2009,
2008 and 2007, respectively.
Regent Communications, Inc. Deferred Compensation Plan
The Company sponsors a deferred compensation plan as a vehicle for highly-compensated
employees to defer compensation that they could not otherwise defer due to the limitations
applicable to the Regent Communications, Inc. 401(k) Profit Sharing Plan and to provide an
opportunity to share in matching contributions on a portion of such deferrals. The Board of
Directors determines the Companys matching cash contribution, if any, within 60 days after
the end of the calendar year for which deferrals were made. For the 2009, 2008 and 2007
plan years, the matching contribution was 100% of the first 1% of deferrals contributed by
participants, and contribution expense was approximately $15,000, $26,000 and $29,000,
respectively. The Company funds participant contributions to the Plan into a Rabbi Trust
Investment account as they are withheld from employees compensation. Participants are
immediately vested in all of their deferral contributions. Matching contributions vest
after attainment of age 65, termination of employment due to disability, a change in control
of the Company, or if sooner, based on a vesting schedule of 33.3% after one year of
service, 66.6% after two years of service, and 100% after three years of service. The
Company categorizes the
plan assets as trading securities which are reported at fair value, with changes in
fair value recorded in consolidated net loss. The marketable securities are included in
other current assets, with an offsetting liability to employees in current liabilities. At
December 31, 2009, the plan assets were approximately $826,000 and plan liabilities were
approximately $805,000. At December 31, 2008, the plan assets were approximately $572,000
and plan liabilities were approximately $558,000.
- 89 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. |
|
OTHER FINANCIAL INFORMATION |
Property and Equipment:
Property and equipment consists of the following as of December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Equipment |
|
$ |
40,978 |
|
|
$ |
40,743 |
|
Furniture and fixtures |
|
|
2,651 |
|
|
|
2,696 |
|
Building and improvements |
|
|
14,208 |
|
|
|
14,210 |
|
Land and improvements |
|
|
4,140 |
|
|
|
4,140 |
|
|
|
|
|
|
|
|
|
|
|
61,977 |
|
|
|
61,789 |
|
Less accumulated depreciation |
|
|
(32,439 |
) |
|
|
(29,138 |
) |
|
|
|
|
|
|
|
Net property and equipment |
|
$ |
29,538 |
|
|
$ |
32,651 |
|
|
|
|
|
|
|
|
Depreciation expense was approximately $3.7 million, $3.9 million, and $4.0 million for
the years ended December 31, 2009, 2008 and 2007.
Other Current Liabilities:
Other current liabilities consist of the following as of December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Accrued interest |
|
$ |
2,967 |
|
|
$ |
50 |
|
Accrued professional fees |
|
|
640 |
|
|
|
137 |
|
Deferred revenue |
|
|
870 |
|
|
|
511 |
|
Accrued medical and dental costs |
|
|
653 |
|
|
|
732 |
|
Accrued state, local, franchise
and property taxes |
|
|
246 |
|
|
|
373 |
|
Deferred compensation plan obligation |
|
|
805 |
|
|
|
558 |
|
Accrued national representation fees |
|
|
228 |
|
|
|
318 |
|
Derivative mark-to-market and interest payable |
|
|
9,146 |
|
|
|
|
|
Accrued other |
|
|
1,131 |
|
|
|
1,331 |
|
|
|
|
|
|
|
|
|
|
$ |
16,686 |
|
|
$ |
4,010 |
|
|
|
|
|
|
|
|
- 90 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. |
|
FAIR VALUE OF FINANCIAL INSTRUMENTS |
The Companys financial assets and liabilities reflected in the consolidated financial
statements at fair value include short-term investments, marketable securities and
derivative financial instruments. Fair value for short-term investments and marketable
securities are determined utilizing quoted market prices at each period. Fair value for
derivative interest rate swap agreements is obtained from counterparties to the agreements
and corroborated through estimates using internal discounted cash flow calculations based
upon forward interest-rate yield
curves and considering the risk of non-performance by the parties to the contract. The
Companys non-financial assets and liabilities include goodwill and FCC licenses. As
described in Note 8, the Company was required to test intangible assets for impairment
during the fourth quarter of 2009. Regent uses the greenfield methodology for valuation of
its FCC licenses, which allocates a start-up value to each station and employs a discounted
cash flow methodology. The Company uses a market-multiple approach to value goodwill. The
following table summarizes the valuation of the Companys financial assets and liabilities
at December 31, 2009 and December 31, 2008 and non-financial assets and liabilities that
were required to be measured at fair value at December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Market |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Prices for |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
Financial and Non-Financial Asset |
|
December 31, |
|
|
Assets - |
|
|
Inputs - |
|
|
Inputs - |
|
(Liability) |
|
2009 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Recurring Valuations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
$ |
826 |
|
|
$ |
826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative interest rate swap
agreements |
|
$ |
(7,890 |
) |
|
|
|
|
|
$ |
(7,890 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring Valuations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
1,020 |
|
|
|
|
|
|
|
|
|
|
$ |
1,020 |
|
FCC Licenses |
|
$ |
71,700 |
|
|
|
|
|
|
|
|
|
|
$ |
71,700 |
|
The following table summarizes the valuation of the Companys financial assets and
liabilities at December 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Market |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Prices for |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
December 31, |
|
|
Assets - |
|
|
Inputs - |
|
|
Inputs - |
|
Financial Asset (Liability) |
|
2008 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
5 |
|
|
$ |
5 |
|
|
|
|
|
|
|
|
|
Marketable securities |
|
$ |
572 |
|
|
$ |
572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative interest rate swap
agreements |
|
$ |
(10,980 |
) |
|
|
|
|
|
$ |
(10,980 |
) |
|
|
|
|
The Company has not elected any eligible items for fair value measurement.
- 91 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. |
|
COMMITMENTS AND CONTINGENCIES |
In the normal course of business, the Company is subject to various regulatory
proceedings, lawsuits, claims and other matters. Such matters are subject to many
uncertainties and outcomes are not predictable with assurance. In August 2008, Regent, Terry
S. Jacobs (our former chief executive officer), and approximately twenty other parties (not
associated with Regent) were named as defendants in a lawsuit brought by Alan Brill and
various of his related entities, in connection with Regents 2003 purchase of twelve radio
stations from Brill Media Company LLC and related entities. The plaintiffs alleged numerous
claims against Regent, Mr. Jacobs and the other defendants, including without limitation,
claims for breach of contract, intentional interference with contracts, breach of implied
covenants and good faith, and fraud and misrepresentation. The plaintiffs sought
compensatory and punitive damages in excess of $20 million from all parties. The complaint
has been amended to assert claims only against Regent based on alleged violations of a
confidentiality agreement executed in connection with the purchase of the radio stations by
Regent. We believe the suit has no merit and we intend to vigorously defend our position.
In the opinion of the Companys management, the eventual resolution of such matters for
amounts above those reflected in the consolidated financial statements would not likely have
a materially adverse effect on the financial condition of the Company.
The Company has contracted with Ibiquity Digital Corporation for the right to convert
60 radio stations to digital or high definition radio over a six-year period, which contract
began in 2005.
The Company leases certain facilities and equipment used in its operations. Certain of
the Companys operating leases contain renewal options, escalating rent provisions, and/or
cost of living adjustments. Total rental expenses were approximately $2.4 million, $2.5
million and $2.1 million, in 2009, 2008 and 2007, respectively.
At December 31, 2009, the total minimum annual rental commitments under non-cancelable
leases are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
Capital |
|
|
|
Leases |
|
|
Leases |
|
|
|
|
|
|
|
|
|
|
2010 |
|
$ |
1,549 |
|
|
$ |
112 |
|
2011 |
|
|
1,269 |
|
|
|
83 |
|
2012 |
|
|
1,203 |
|
|
|
36 |
|
2013 |
|
|
1,122 |
|
|
|
11 |
|
2014 |
|
|
1,067 |
|
|
|
3 |
|
Thereafter |
|
|
3,269 |
|
|
|
2 |
|
|
|
|
|
|
|
|
Total minimum payments |
|
$ |
9,479 |
|
|
|
247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount representing interest |
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of net minimum lease payments |
|
|
|
|
|
$ |
229 |
|
|
|
|
|
|
|
|
|
- 92 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company classifies the current portion of capital leases in other current
liabilities and the long-term portion in other long-term liabilities. The cost and
accumulated depreciation associated with assets under capital leases is considered
insignificant.
15. |
|
QUARTERLY FINANCIAL INFORMATION (UNAUDITED): |
All adjustments necessary for a fair statement of (loss) income for each period have
been included (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Quarter |
|
|
2nd Quarter |
|
|
3rd Quarter |
|
|
4th Quarter |
|
|
|
|
|
|
ended |
|
|
ended |
|
|
ended |
|
|
ended |
|
|
Total |
|
|
|
March 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
|
Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net broadcast revenues |
|
$ |
18,263 |
|
|
$ |
22,766 |
|
|
$ |
21,811 |
|
|
$ |
21,301 |
|
|
$ |
84,141 |
|
Operating (loss) income |
|
|
(30,355 |
) |
|
|
5,026 |
|
|
|
3,648 |
|
|
|
(9,005 |
) |
|
|
(30,686 |
) |
(Loss) income from continuing
operations |
|
|
(32,507 |
) |
|
|
3,171 |
|
|
|
(442 |
) |
|
|
(14,204 |
) |
|
|
(43,982 |
) |
NET (LOSS) INCOME: |
|
$ |
(32,507 |
) |
|
|
3,171 |
|
|
|
(442 |
) |
|
|
(14,204 |
) |
|
|
(43,982 |
) |
BASIC AND DILUTED NET
(LOSS) INCOME PER COMMON
SHARE(1)(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
common share |
|
$ |
(0.81 |
) |
|
$ |
0.08 |
|
|
$ |
(0.01 |
) |
|
$ |
(0.35 |
) |
|
$ |
(1.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net broadcast revenues |
|
$ |
20,833 |
|
|
$ |
26,482 |
|
|
$ |
25,328 |
|
|
$ |
23,697 |
|
|
$ |
96,340 |
|
Operating income (loss) |
|
|
3,610 |
|
|
|
7,091 |
|
|
|
(60,165 |
) |
|
|
6,131 |
|
|
|
(43,333 |
) |
(Loss) income from continuing
operations |
|
|
(3,369 |
) |
|
|
5,609 |
|
|
|
(46,265 |
) |
|
|
(75,377 |
) |
|
|
(119,402 |
) |
NET (LOSS) INCOME: |
|
$ |
(3,010 |
) |
|
|
5,679 |
|
|
|
(46,292 |
) |
|
|
(75,368 |
) |
|
|
(118,991 |
) |
BASIC AND DILUTED NET
(LOSS) INCOME PER COMMON
SHARE(1)(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
common share |
|
$ |
(0.08 |
) |
|
$ |
0.15 |
|
|
$ |
(1.19 |
) |
|
$ |
(1.93 |
) |
|
$ |
(3.06 |
) |
|
|
|
(1) |
|
The sum of the quarterly net (loss) income per share amounts may not equal
the annual amount reported, as per share amounts are computed independently for each
quarter. |
|
(2) |
|
Despite net income for each of the second quarters of 2009 and 2008, net income
per common share was the same for both the basic and diluted calculation. |
- 93 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. |
|
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS |
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Account Principles a replacement of FASB Statement
No. 162 (SFAS 168). SFAS 168 is the new source of authoritative GAAP recognized by the
FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative GAAP for SEC
registrants. This statement was incorporated into Accounting Standards Codification (ASC)
105, Generally Accepted Accounting Principles under the new FASB codification
(Codification) which became effective on July 1, 2009. The new Codification supersedes all
then-existing non-SEC accounting and reporting standards. All other non-grandfathered
non-SEC accounting literature not included in the Codification will become
non-authoritative. The Company adopted this standard during the third quarter of 2009. The
Company has included the references to the Codification, as appropriate, in these
consolidated financial statements. Adoption of this statement did not have an impact on the
Companys consolidated results of operations, cash flows or financial condition.
In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements an amendment of ARB No. 51 (SFAS 160). SFAS 160 is
effective for fiscal years beginning after December 15, 2008 and early adoption is
prohibited. SFAS 160 was incorporated into ASC 810, Consolidation (ASC 810) and requires
companies to present minority interest separately within the equity section of the balance
sheet. The Company adopted this statement as of January 1, 2009 and it had no impact on the
Companys consolidated results of operations, cash flows or financial condition.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities (SFAS 161). SFAS 161was incorporated into ASC 815, Derivatives
and Hedging (ASC 815). ASC 815 requires entities to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how derivative instruments and
related hedged items are accounted for, and (c) how derivative instruments and related
hedged items affect an entitys financial position, financial performance, and cash flows.
This statement became effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early application encouraged. The Company
adopted this statement on January 1, 2009 and the adoption had no impact on the Companys
results of operations, cash flows or financial condition. (See Note 13 Fair Value of
Financial Instruments.)
In May 2009, the FAB issued SFAS No. 165, Subsequent Events (SFAS 165). The
statement establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but prior to the issuance of financial statements. This
statement was incorporated into ASC 855, Subsequent Events (ASC 855). This statement was
effective for interim or annual reporting periods after June 15, 2009. ASC 855 sets forth
the period after the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or disclosure in
the financial statements as well as the circumstances under which the entity would recognize
them and the related disclosures an entity should make. This statement became effective for
the Companys financial statements as of June 30, 2009.
- 94 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 2008, the FASB issued FASB Staff Position No. 142-3, Determination of the
Useful Lives of Intangible Assets (FSP 142-3. FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful life
of an intangible asset. Under the new codification this interpretation was incorporated into
two different ASCs, ASC 275, Risks and Uncertainties (ASC 275) and ASC 350, Intangibles
Goodwill and Other (ASC 350). This interpretation was effective for financial
statements issued for fiscal years beginning after December 15, 2008 and interim periods
within those years. The Company adopted the staff position on January 1, 2009, and it did
not have a material impact on the Companys consolidated results of operations, cash flows
or financial condition.
In June 2009, the FASB issued SFAS No 167, Amendments to FASB Interpretation No.
46(R) (SFAS 167), which amended the consolidation guidance for variable-interest entities
in ASC 810, Consolidations. The amendments include: (1) the elimination of the exemption
for qualifying special purpose entities (2) a new approach for determining who should
consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess
who should consolidate a variable-interest entity. This statement is effective for financial
statements issued for fiscal years beginning after November 15, 2009. The Company will adopt
the provisions of SFAS 167 on January 1, 2010 and is currently the impact this statement
will have on the Companys consolidated results of operations, cash flows and financial
position.
In December 2007, the FASB issued Statement of Financial Accounting Standards No.
141(R), Business Combinations (SFAS 141R), which was incorporated into ASC 805,
Business Combinations (ASC 805). ASC 805 requires an acquirer to recognize all of the
fair values of acquired assets, including goodwill, and assumed liabilities, with limited
exceptions, even in instances where the acquirer has not acquired 100% of its target. ASC
805 also requires that contingent consideration be measured at fair value at that
acquisition date and included on that basis in the purchase price consideration. Under ASC
805, transaction costs would be expensed as incurred. ASC 805 amends ASC 740-10 Income
Taxes (ASC 740) to require the acquiring entity to recognize changes in the amount of its
deferred tax benefits that are recognizable due to a business combination either in income
from continuing operations in the period of the combination or directly in contributed
capital, based upon the circumstances. ASC 805 is effective for fiscal years beginning
after December 15, 2008. Regent adopted this statement on January 1, 2009, with no effect on
the Companys consolidated results of operations, cash flows or financial position.
- 95 -
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 2009, the FASB issued SFAS No. 141R-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies, which allows
an exception to the recognition and fair value measurement principles of ASC 805. This
exception requires that acquired contingencies be recognized at fair value on the
acquisition date if fair value can be reasonably estimated during the allocation period.
This statement update was effective for the Company as of January 1, 2009 for all business
combinations that closed on or after January 1, 2009, and it did not have an impact on the
Companys consolidated results of operations, cash flows or financial position.
In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities (FSP 03-6-1). Under the
new FASB Codification, this FSSP was incorporated into ASC 260, Earnings Per Share (ASC
260). ASC 260 addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting, and, therefore, need to be included in the
earnings allocation in computing earnings per share under the two-class method as
described in current accounting guidance. Under the guidance in ASC 260, unvested
share-based payment awards that contain non-forfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and shall be included in
the computation of earnings per share pursuant to the two-class method. ASC 260 was
effective on January 1, 2009 and prior-period earnings per share data were adjusted
retrospectively. (See Note 7, Earnings Per Share.)
- 96 -
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONS |
|
|
|
|
|
|
|
|
|
|
BALANCE |
|
|
CHARGED |
|
|
CHARGED |
|
|
|
|
|
|
|
BALANCE |
|
|
|
AT |
|
|
TO |
|
|
TO |
|
|
|
|
|
|
AT |
|
|
|
BEGINNING |
|
|
COSTS AND |
|
|
OTHER |
|
|
|
|
|
|
THE END |
|
|
|
OF PERIOD |
|
|
EXPENSES |
|
|
ACCOUNTS |
|
|
DEDUCTIONS(1) |
|
|
OF PERIOD |
|
Allowance for doubtful
accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
$ |
527 |
|
|
|
694 |
|
|
|
|
|
|
|
709 |
|
|
$ |
512 |
|
2008 |
|
$ |
651 |
|
|
|
446 |
|
|
|
|
|
|
|
570 |
|
|
$ |
527 |
|
2007 |
|
$ |
898 |
|
|
|
286 |
|
|
|
|
|
|
|
533 |
|
|
$ |
651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset valuation
allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
$ |
80,899 |
|
|
|
16,081 |
(2) |
|
|
|
|
|
|
495 |
(3) |
|
$ |
96,485 |
|
2008 |
|
$ |
2,906 |
|
|
|
79,127 |
(4) |
|
|
|
|
|
|
1,134 |
(5) |
|
$ |
80,899 |
|
2007 |
|
$ |
3,119 |
|
|
|
64 |
(6) |
|
|
|
|
|
|
277 |
(7) |
|
$ |
2,906 |
|
|
|
|
(1) |
|
Represents accounts written off to the reserve. |
|
(2) |
|
Represents a valuation allowance recorded for change in net deferred tax assets,
principally related to the impairment of indefinite-lived intangible assets. |
|
(3) |
|
Represents the release of valuation allowance for federal and state net operating
loss carryforwards that expired or were utilized in 2009. |
|
(4) |
|
Represents a valuation allowance recorded for net deferred tax assets. |
|
(5) |
|
Represents the release of valuation allowance for federal and state net operating
loss carryforwards that expired or were utilized in 2008. |
|
(6) |
|
Represents a valuation allowance recorded for state net operating loss
carryforwards generated in 2007 and scheduled to expire prior to 2017. |
|
(7) |
|
Represents the release of valuation allowance for federal and state net operating
loss carryforwards that expired or were utilized in 2007. |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM
9A(T). CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Companys Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to the Companys management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure based on the definition of disclosure controls and procedures in Rule
13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)). In designing and evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. The Companys disclosure controls
and procedures are designed to provide a reasonable level of assurance of reaching the desired
control objectives, and the Companys certifying officers have concluded that the Companys
disclosure controls and procedures are effective in reaching that level of reasonable assurance.
- 97 -
The Company has carried out an evaluation, under the supervision and with the participation of
the Companys Disclosure Committee and management, including the Companys Chief Executive Officer
and the Companys Chief Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as of the end of the period covered by this report,
pursuant to Exchange Act Rules 13a-15(e) or Rule 15d-15(e). Based on the foregoing, the Companys
Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and
procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of
1934, as amended (the Exchange Act)), are effective.
Internal Control Over Financial Reporting
There have been no changes in the Companys internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule
15d-15 under the Exchange Act that occurred during our fourth fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Managements Annual Report on Internal Control Over Financial Reporting
Refer to Item 8 for information pertaining to Managements annual report on internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
- 98 -
PART III
|
|
|
ITEM 10. |
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
Size of the Board of Directors
On March 17, 2009, and in conjunction with an agreement between the Company and certain
parties, described below, the Companys Board of Directors met and voted to reduce the size of the
Board from seven members to six members.
Procedures for Nomination of Director Candidates
Director candidates are nominated by the Companys Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committees charter directs the Committee to
investigate and assess the background and skills of potential candidates. The Committee is
empowered to engage a third party director search firm to assist, but the Committee to date has not
engaged or paid any fees to any such firm. The Committee believes that the existing directors and
executive officers of the Company have significant networks of business contacts from which
suitable candidates will be identified when necessary.
Generally, once a candidate is identified for serious consideration, one or more members of
the Nominating and Corporate Governance Committee will initially interview such candidate to
evaluate the candidates qualifications and level of potential interest in serving on the Companys
Board of Directors. If the candidate merits further consideration, meetings then will be arranged
to the fullest extent feasible and practical, individually or collectively, with other members of
the Nominating and Corporate Governance Committee, other directors and the Companys Chief
Executive Officer and other executive officers. The Nominating and Corporate Governance Committee
next would obtain feedback from all persons who participated in those meetings and then determine
whether or not to nominate the candidate.
In addition, the Companys Corporate Governance Guidelines provide that stockholders of the
Company may propose nominees for election at Regents Annual Meeting of Stockholders for
consideration by the Nominating and Corporate Governance Committee upon submitting the names and
qualifications of such persons to the Committee no later than December 31 of any year. Submissions
must be made to the Committee c/o Regent Communications, Inc., Secretary, 2000 Fifth Third Center,
511 Walnut Street, Cincinnati, Ohio 45202, which submissions will then be forwarded to the
Nominating and Corporate Governance Committee. The Committee would then evaluate the possible
nominee and would consider such person in comparison to all other candidates. No such stockholder
nominations have been received by the Company since January 1, 2009.
- 99 -
In September 2007, the Company entered into an agreement with Riley Investment Management LLC
(RIM), John J. Ahn, Joseph P. Hannan and other parties, providing RIM the right to propose two
nominees for election to Regents Board of Directors. RIM initially proposed Messrs. Ahn and
Hannan, each of whom was subsequently elected to the Board. In April 2008, Mr. Hannan resigned
from Regents Board of Directors. RIM nominated Mr. DeLorenzo to replace Mr. Hannan, and Mr.
DeLorenzo was subsequently elected to the Regent Board of Directors. In March 2009, Regent entered
into a new agreement with RIM and Riley
Investment Partners Master Fund, L.P. (together Riley), the material terms of which
are as follows:
|
|
|
Regents Board of Directors accepted the recommendations of the Nominating and
Corporate Committee to reduce the size of the Board to six directors and continuing
thereafter until such time as the Board may take further action to either increase or
decrease the size of the Board; |
|
|
|
The Board accepted the recommendations of the Nominating and Corporate Governance
Committee that all of Regents incumbent directors, other than Mr. Sutter, be nominated
for re-election to Regents Board of Directors at the 2009 Annual Meeting, and that John
H. Wyant be appointed Chairman of the Board effective immediately; |
|
|
|
Riley will not nominate any person for election to Regents Board in connection with
Regents 2009 Annual Meeting of Stockholders, will not call for any special meeting of
Regents stockholders, and will not nominate any person for election to Regents Board at
any special or annual meeting of Regents stockholders or form or join a group or act in
concert with any person or entity to change the composition of Regents Board through
December 31, 2009; |
|
|
|
Unless approved by a majority of Regents Board, including the approval of either Mr.
Ahn or Mr. DeLorenzo, Regents bylaws will not be amended with respect to calling a
special meeting of stockholders until at least two months after no designees of Riley
serve on Regents Board; and |
|
|
|
Except as otherwise specifically provided in the agreement, unless Regents Board fails
to take the actions specified above, all covenants and restrictions set forth in the
agreement will lapse and be of no further effect as of 11:59 p.m. on December 31, 2009. |
In conjunction with this agreement, William P. Sutter, Jr. submitted his resignation as a
member of the Board of Directors and from the Boards Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee. Mr. Sutter also resigned as the Chairman of the
Board and as Chairman of the Nominating and Corporate Governance Committee. A copy of the
agreement was filed as Exhibit 10.1 to Regents Form 8-K filed March 19, 2009.
Considerations in Evaluating Candidates for Directors
The Companys Corporate Governance Guidelines set forth the following guidelines for the
qualifications desired for directors: highest personal and professional ethics and integrity;
willingness and ability to devote sufficient time to carrying out the duties of a director
effectively; and the diversity of experience, age, skills and other factors possessed by the
candidate that will best serve the needs of the Company and its stockholders in combination with
the other directors. In addition, a director of the Company generally should not serve on more
than three other public company boards of directors.
- 100 -
Information Regarding Directors
The following individuals were elected to serve as Directors at our Annual Meeting of
Stockholders on June 3, 2009, and served until our emergence from Chapter 11 on April 27, 2010.
JOHN J. AHN (Age 45)
Mr. Ahn served as a director of Regent from September 2007 to April 27, 2010. Since October
2005, Mr. Ahn has served as a principal of Riley Investment Management LLC, an
investment firm specializing in investing in public equities. From January 2004 through December
2005, Mr. Ahn served as general partner for ISA Capital Management, an investment company that
focused on investing in public equities and distressed debt. From March 2003 through January 2004,
Mr. Ahn was managing director of Maxcor Financial, a company that specialized in the trading of
high-yield and distressed debt. From April 1995 through May 2003, Mr. Ahn was a partner with
Standard Capital Group. Mr. Ahn also serves as a director for MAIR Holdings Inc., a publicly
traded company. Mr. Ahns qualifications to serve on the Board include his experience in working
with companies in financial distress to resolve liquidity requirements and reach restructuring
arrangements with lenders.
JOHN F. DELORENZO (Age 51)
Mr. DeLorenzo served as a director of Regent from April 2008 to April 27, 2010. Since May
2008, Mr. DeLorenzo has served as the manager of Trenwest Development LLC, an investment company
which he founded in 1996 and operated through 1999. From 2002 through 2008, Mr. DeLorenzo served
as the executive vice president, treasurer and chief financial officer of Entravision
Communications Corporation, a Spanish-language media company. From 1999 to 2002, Mr. DeLorenzo
served as a media investment banking consultant. In 1999, Mr. DeLorenzo served as executive vice
president and chief financial officer of Paxson Communications, a television broadcaster. From
1988 to 1996, he was executive vice president and chief financial officer of Act III
Communications, a broadcasting, publishing and movie theater exhibition holding company. Prior to
1988, Mr. DeLorenzo worked at Renaissance Communications and Fox Television, both broadcasting
companies.
ANDREW L. LEWIS, IV (Age 53)
Mr. Lewis served as a director of Regent from May 2005 to April 27, 2010. Since 1989, Mr.
Lewis has been an independent business consultant and entrepreneur, providing a range of consulting
services to start-up and other businesses in the areas of strategic planning, financing and
marketing. Mr. Lewis also serves as a board member and advisor since January 1986 to Brynwood
Partners, a privately-held investment partnership. From 1986 to 2000, Mr. Lewis served as a
director of Air Express International Corporation, a transportation logistics provider, and from
1987 to 2000, he served as a director of Hurco Companies, Inc., an automation company in the metal
cutting and forming industry: both of which companies were publicly traded and investments of
Brynwood Partners I, L.P. From July 1993 to December 1995, he also served as managing partner of
KRR Partners, L.P., an investment partnership. Mr. Lewis currently serves as a member of the
Delaware County Council in Media, Pennsylvania. Mr. Lewis qualifications to serve on the Board
include his experience in advising companies on attracting investment capital, and in strategies to
improve marketing efforts to increase revenue from customers and potential customers.
TIMOTHY M. MOONEY (Age 62)
Mr. Mooney served as a director of Regent from July 2003 to April 27, 2010. Since August
2004, he has been the vice president of operations of St. Xavier High School in Cincinnati, Ohio,
one of the nations largest Jesuit high schools. From May 1996 through December 2002, Mr. Mooney
served as executive vice president and chief financial officer of Kendle International Inc., a
publicly traded company that provides clinical research services to pharmaceutical and
biotechnology companies. He also served as a director of Kendle beginning in January 1997 until
his retirement from the company in December 2002. Prior to joining Kendle, Mr. Mooney served as
the chief financial officer of two other publicly traded companies, The Future Now, Inc., a
computer reseller, and Hook-SupeRx, Inc., a retail drugstore chain. Prior
to May 1988, he was a partner with Coopers & Lybrand, a predecessor to PricewaterhouseCoopers LLP.
Since November 2008, Mr. Mooney has served as a director of Kendle International Inc. Mr. Mooneys
qualifications to serve on the Board of Directors include his chief financial officer experience
and as a partner of a Big 4 accounting firm, thus helping to guide the Company and management
during a period of financial distress and default on its credit facility to maintain operating
liquidity.
- 101 -
WILLIAM L. STAKELIN (Age 67)
Mr. Stakelin has been President, Chief Executive Officer and a director of Regent since
September 2005 and served in those capacities to April 30, 2010. Prior to that time, Mr. Stakelin
served as President, Chief Operating Officer, Secretary and a director of Regent since its
incorporation in November 1996. He served as executive vice president and chief operating officer
of a privately-held radio broadcast company under the name Regent Communications, Inc. (Regent
I), which acquired and operated 23 radio stations from 1995 until its merger into Jacor
Communications, Inc. in February 1997. Mr. Stakelin served as president and chief executive
officer of Apollo Radio, Ltd., a privately-held radio broadcast company, which he co-founded in
1988 and which acquired and operated nine radio stations prior to its sale to Regent I in 1995. He
currently serves as a director of the Radio Advertising Bureau and the Bayliss Foundation, both of
which are industry trade associations. Mr. Stakelins qualifications to serve on the Board of
Directors include his forty-plus years of experience in the radio industry and in managing
broadcast properties.
JOHN H. WYANT (Age 63)
Mr. Wyant has served as a director of Regent from June 1998 to April 27, 2010. Mr. Wyant has
served as president of Blue Chip Venture Company, a venture capital investment firm, since its
formation in 1990. Blue Chip Venture Company, together with its affiliates, manages an aggregate
of approximately $550 million of committed capital for investment in privately-held high-growth
companies. Mr. Wyant is also a director of a number of privately-held companies. Mr. Wyants
qualifications to serve on the Board of Directors include his experience in advising companies on
attracting investment capital, and in understanding what outside investors may require of a company
undergoing financial stress.
On April 27, 2010 the following individuals were elected by the holders of our new common
stock, issued to our lenders in fulfillment of our Plan of Reorganization, on April 27, 2010.
STEPHEN KAPLAN (Age 51)
Stephen Kaplan is the head of the Principal Group at Oaktree Capital Management L.P.
(Oaktree). He joined Oaktree in 1995, having previously served as a Managing Director of TCW and
portfolio manager of TCW Special Credits Fund V The Principal Fund. Prior to joining TCW in
1993, Mr. Kaplan was a partner with the law firm of Gibson, Dunn & Crutcher and responsible for
that firms East Coast bankruptcy and workout practice. During his career as an attorney, Mr.
Kaplan specialized in transactions involving the purchase and sale of companies undergoing
financial restructurings. Mr. Kaplan graduated with a B.S. degree in Political Science summa cum
laude from the State University of New York at Stony Brook and a J.D. from the New York University
School of Law.
- 102 -
B. JAMES FORD (Age 41)
B. James Ford currently serves as a Managing Director at Oaktree. Mr. Ford joined Oaktree in
1996 following graduation from the Stanford Graduate School of Business. Prior thereto, Mr. Ford
served as a consultant at McKinsey & Co. and a financial analyst in the Investment Banking
Department of PaineWebber Incorporated. Previously, he was an acquisitions analyst for National
Partnership Investments Corp., a real estate investment firm. In addition to an M.B.A. from
Stanford, Mr. Ford received a B.A. degree in Economics from the University of California at Los
Angeles.
ANDREW SALTER (Age 33)
Andrew Salter currently serves as Senior Vice President of Oaktree. Prior to joining Oaktree
in 2001, Mr. Salter was Director of Business Development at RiverOne Inc., a software company,
where he worked primarily on acquisition strategy, fundraising and product development. Prior
thereto, he was an Investment Banking Analyst at Donaldson, Lufkin and Jenrette. Mr. Salter
received a B.A. degree in Economics from Stanford University.
DAVID QUICK (Age 30)
David Quick currently serves as Vice President of Oaktree. Prior to joining Oaktree in 2004,
Mr. Quick spent two years as an Analyst at UBS Investment Bank in Los Angeles, gaining experience
in mergers and acquisitions, leveraged buyouts, initial public offerings and debt financings.
Prior experience includes internships at Johnson Control, Inc. and Paine Webber, Inc. Mr. Quick
received a B.B.A. degree with distinction with an emphasis in Finance and Accounting from the
School of Business Administration at the University of Michigan.
STEVEN PRICE (Age 48)
On May 2, 2010, Steven Price, 48 years old, was appointed as chairman, president and chief
executive officer of the Company. Mr. Price was also appointed to the Board of Directors of the
Company.
Mr. Price co-founded media investment firm FiveWire Ventures, LLC in 2009. Prior to
co-founding FiveWire, from 2006 until 2009, Mr. Price was a Senior Managing Director at New
York-based private equity firm Centerbridge Partners, L.P. and, from 2004-2006, he held a similar
position at Spectrum Equity Investors, L.P. From 2001-2004, Mr. Price served in the Pentagon as
Deputy Assistant Secretary of Defense (Spectrum, Space, and Communications). Prior to joining the
Pentagon, he served as President and CEO of LiveWire Ventures, LLC from 1998 until 2001, a software
and services company he co-founded with Stuart Rosenstein. Mr. Price was also formerly an
executive of PriCellular Corporation from 1993 until 1998, most recently serving as the President
and Chief Executive Officer. PriCellular, a publicly traded cellular phone operator focused on
small to mid-sized markets, was acquired by an AT&T predecessor entity in 1998. Mr. Price
currently serves on the board of directors of SmartBrief, Inc. Mr. Price previously served on the
board of directors of Classic Media, Inc., from 2005 until 2006, and QTC Management, Inc. from 2005
until 2006.
None of the above named directors or former directors have any family relationships with any
other nominee or with any executive officers of the Company.
- 103 -
Director Compensation
In accordance with our Plan of Reorganization, immediately following the effectiveness of the
Plan and issuance of the new common stock of the reorganized Company, each holder of such new
common stock was deemed to automatically contribute such new common stock to Regent Holdings LLC
(Holdings) in exchange for the issuance by Holdings to each such holders pro rata share of the
common units of Holdings. As a result of this transaction Holdings became the sole stockholder of
the Company.
Until such time as the new directors establish a new director compensation plan, Holdings will
pay all reimbursable out-of-pocket costs and expenses incurred by each member of the new Board
incurred in the course of their service, including in connection with attending regular and special
meetings of the new Board, any board of managers or board of directors of Holdings or any of the
Companys subsidiaries and/or any of their respective committees. It is anticipated that the
directors will not receive any compensation for serving in such capacity, except for any additional
directors appointed to the new Board, the compensation of which will be subject to the approval of
the holder(s) in accordance with the terms of the limited liability company agreement of Holdings.
Transactions with Directors
Messrs. Kaplan, Ford, Salter and Quick, each a newly-appointed director, is related to Oaktree
described above. Pursuant to the Plan and on the Effective Date, Oaktree and funds controlled by
it were issued new common stock in exchange for their first lien debt claims, which were
automatically converted into common units of Holdings. The Company did not engage in transactions
with any of the Directors who served on the Board during 2009 and through April 27, 2010, other
than Mr. Stakelin who served as the Companys President and CEO who at all times had an employment
agreement with the Company.
Meetings of the Board of Directors and Attendance
During the year ended December 31, 2009, the Board held four regularly scheduled meetings and
14 special meetings. Each director attended or participated in at least 90% of the meetings of the
Board of Directors and of all committees on which he served in 2009.
The Board also regularly holds executive sessions of those members of the Board who meet the
then current standards of independence. Such meetings have occurred during scheduled meetings of
the full Board of Directors, at which time all members of the companys management team and
non-independent directors are excused. The independent directors also could convene an executive
session separately from any scheduled Board meeting if deemed appropriate. In 2009, the
independent directors held six executive sessions in conjunction with regularly scheduled Board
meetings. Executive sessions of the Board of Directors are chaired by the independent director as
determined by the independent directors collectively to have the requisite experience and knowledge
regarding the matters being discussed in a particular executive session. The Board of Directors
believes that this practice, coupled with the fact that the Board has elected an independent
Chairman of the Board, provides for effective leadership of all executive sessions.
The Company does not maintain a policy regarding director attendance at the companys Annual
Meetings of Stockholders. Three of the six directors elected at the June 3, 2009 Annual Meeting of
Stockholders were in attendance at the meeting.
- 104 -
Determination of Independence
The Board of Directors determined that Messrs. Ahn, DeLorenzo, Lewis, Mooney and Wyant are
independent directors in accordance with the standards of Rule 4200(a)(15) of the National
Association of Securities Dealers listing standards for issuers whose securities are listed on The
Nasdaq Stock Market (Nasdaq). Mr. Stakelin was not an independent director based on his
employment by the Company within the past three years. Accordingly, approximately 83% of the
Companys Board of Directors was comprised of independent directors during 2009.
Committees of the Board of Directors
The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating
and Corporate Governance Committee as described below.
Audit Committee. The Audit Committee consisted of four directors during 2009, and to April 27,
2010, Messrs. Mooney (Chairman), Ahn, DeLorenzo and Lewis, all of whom are independent directors as
discussed above and satisfy the audit committee qualification standards contained in Rule
4350(d)(2) of the National Association of Securities Dealers listing standards. The Board of
Directors also determined that Mr. Mooney was an audit committee financial expert until April 27,
2010.
Since April 27, 2010, Messrs Quick and Salter have served on the Audit Committee, and the
Board of Directors has determined that Mr. Quick is an audit committee financial expert.
The Audit Committees functions include the engagement of the companys independent registered
public accounting firm, review of the results of the audit engagement and the Companys financial
results, review of the auditors independence, review of the effectiveness of the Companys
internal controls and similar functions, and the approval of all auditing and non-auditing services
performed by the independent auditors of the company. The Audit Committees charter was available
on the Companys website at www.regentcomm.com through April 30, 2010 by selecting the
Investor Information tab and then selecting Corporate Governance. The Audit Committee held
seven meetings during 2009.
Compensation Committee. The Compensation Committee consisted of five directors during 2009 and to
April 27, 2010. Messrs. Wyant (Chairman), Ahn, DeLorenzo, Lewis and Mooney, all of whom are
independent directors as discussed above. The basic function of the Compensation Committee is to
review and establish salaries, bonuses and other elements of compensation for the Companys chief
executive officer and other executive officers, as well as to determine equity incentive awards for
such officers and other key employees. The Compensation Committee has adopted a charter, which was
available on the Companys website at www.regentcomm.com by selecting the Investor
information tab and then selecting Corporate Governance. The Compensation Committee held four
meetings during 2009.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance
Committee consisted of five directors during 2009 and to April 27, 2010. Messrs. Lewis (Chairman),
Ahn, DeLorenzo, Mooney and Wyant, all of whom are independent as discussed above. The primary
purpose of the Nominating and Corporate Governance Committee is to develop and recommend to the
Board corporate governance policies and guidelines for the Company, and to nominate directors for
election to the Board and appointment to committee memberships. The Nominating and corporate
Governance Committee has adopted a charter, which was available on the companys website through
April 30, 2010 at www.regentcomm.com by selecting the Investor Information tab and then
selecting Corporate Governance. The Nominating and Corporate Governance Committee held three
meetings during 2009.
- 105 -
Risk Oversight
Our Board of Directors oversees an enterprise-wide approach to risk management, designed to
support the achievement of organizational objectives, including strategic objectives, to improve
long-term organizational performance and enhance stockholder value. A fundamental part of risk
management is not only understanding the risks a company faces and what steps management is taking
to manage those risks, but also understanding what level of risk is appropriate for the company.
Management is responsible for the establishing our business strategy, identifying and assessing the
related risks and establishing appropriate risk management practices. Our Board of Directors
reviews our business strategy and managements assessment of the related risk, and discusses with
management the appropriate level of risk for the Company.
Our Board of Directors administers its risk oversight function with respect to our operating
risk as a whole, and meets with management at least quarterly to receive updates with respect to
our operations, business strategies and the monitoring of related risks. The Board also delegates
oversight to Board committees to oversee selected elements of risk:
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Our Audit Committee oversees financial risk exposures, including monitoring the
integrity of the financial statements, internal controls over financial reporting, and the
independence of the independent auditor of the Company. The Audit Committee also assists
the Board of Directors in fulfilling its oversight responsibility with respect to
compliance with legal and regulatory matters related to the Companys financial statements
and meets quarterly with our financial management, independent auditors and legal advisors
for updates on risks related to our financial reporting function. The Audit Committee
also monitors our whistleblower hot line with respect to financial reporting matters. Our
Audit Committee oversees financial, credit and liquidity risk by working with our treasury
function to evaluate elements of financial and credit risk and advise on our financial
strategy, capital structure and long-term liquidity needs, and the implementation of risk
mitigating strategies. Our chief financial officer and treasurer meet periodically with
our Audit Committee to discuss and advise on elements of risks related to our credit risk
and function. Our Audit Committee oversees risk by working with management to adopt codes
of conduct and business ethics designed to encourage the highest standards of business
ethics Our employees receive regular, annual guidance from senior management on our Code
of Conduct, and we believe that adherence to our Code of Conduct has been exemplary. |
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Our Nominating and Governance committee oversees governance related risks by working
with management to establish corporate governance guidelines applicable to the Company,
including recommendations regarding director nominees, the determination of director
independence, Board leadership structure and membership on Board Committees. |
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Our Compensation Committee oversees risk management by participating in the creation of
compensation structures that create incentives that encourage a level of risk-taking
behavior consistent with the Companys business strategy. While in the past we have
included equity grants as a means to incentive management over the long term, most
compensation paid to management consists of salary and annual cash bonuses, and we do not
view equity grants as creating any material risk to the Companys continued operating
performance or financial condition. |
- 106 -
Compensation Committee Interlocks and Insider Participation
For the year ended December 31, 2009, the Compensation Committee consisted of five members,
Messrs. Wyant, DeLorenzo, Lewis, Ahn and Mooney. No executive officer of the Company serves on any
board of directors or compensation committee of any entity that compensates Messrs. Wyant,
DeLorenzo, Lewis, Ahn and Mooney. The Company is a party to the following agreements, which are
described further below: an agreement to provide registration rights to entities affiliated with
Mr. Wyant, and which the Company has registered shares held by such entities; and an agreement with
Riley as discussed below.
The Company is a party to a registration rights agreement dated as of June 15, 1998, as
amended, with Blue Chip Capital Fund II Limited Partnership, Blue Chip Capital Fund III Limited
Partnership, Miami Valley Venture Fund L.P., and other entities. Under this agreement, upon a
demand made by parties to the agreement that held at least 10% of the Companys outstanding common
stock, Regent was required to register under the Securities Act of 1933 the shares of the Companys
common stock owned by these holders. In addition, the parties to the agreement have the right to
join in certain registrations of Regents equity securities. None of the parties to the
registration rights agreement currently hold 10% of the Companys outstanding common stock,
although the Company has filed an effective registration statement with the Securities and Exchange
Commission (SEC), allowing for the public resale of 3,246,356 shares of Regent common stock held
by Blue Chip and its current and former affiliates.
On March 17, 2009, William P. Sutter, Jr. submitted his resignation as a member of the Board of
Directors and from the Boards Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee. Mr. Sutter also resigned as the Chairman of the Board and as Chairman of the
Nominating and Corporate Governance Committee. Mr. Sutters resignation from these positions was
predicated on an agreement between the Company and Riley dated March 17, 2009. Under the terms of
the agreement, and based on the recommendation of the Nominating and Corporate Governance
Committee, Regents Board reduced the size of the Board to six directors until such time as the
Board may take further action to either increase or decrease the size of the Board, and agreed to
nominate the incumbent six directors for reelection at the 2009 Annual Meeting of Stockholders.
Communications with Directors
The Companys stockholders may communicate directly in writing with the Companys Board of
Directors by sending a letter to the Board at Regent Communications, Inc., Board of Directors, 2000
Fifth Third Center, 511 Walnut Street, Cincinnati, Ohio 45202. Your letter should state that you
are a stockholder of Regent Communications, Inc. and provide evidence of your stock ownership if
your shares are not registered in your own name. All such letters will be reviewed by a senior
member of the Companys accounting and finance department. Depending on the subject matter of your
letter, management will: forward the communication to the full Board or the director to whom the
letter is addressed; attempt to handle the inquiry directly, for example, where it is a request for
information about the Company or it is related to your stock holdings; or not forward the
communication if it relates to a clearly irrelevant, improper or frivolous topic. At each Board
meeting, a member of management will summarize for the full Board of Directors all non-forwarded
letters and make those letters available to any director who indicates a desire to see the actual
communication.
- 107 -
Code of Business Conduct and Ethics
The Board of Directors has adopted the Regent Communications, Inc. Code of Business Conduct
and Ethics applicable to all directors and Company employees, including the chief
executive officer and all senior financial officers and employees. The Code was available on the
Companys website at www.regentcomm.com through April 30, 2010 by selecting the Investor
Information tab and then selecting Corporate Governance.
EXECUTIVE OFFICERS
The executive officers of the Company, their ages and the positions they held with the Company
through April 30, 2010 were as follows:
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Name |
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Age |
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Position |
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William L. Stakelin
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67 |
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President and Chief Executive Officer |
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Anthony A. Vasconcellos
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45 |
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Executive Vice President
and Chief Financial Officer |
Executive officers are elected annually by the Board of Directors and serve at the discretion
of the Board. Information with respect to the business experience, principal occupations during
the past five years and affiliations of the executive officers of Regent who are not also directors
is set forth below. Information regarding Mr. Stakelin is set forth above.
Anthony A. Vasconcellos joined Regent in September 1998 as Vice President and Chief Financial
Officer. From December 2000 until August 2005, he served as Senior Vice President and Chief
Financial Officer for Regent. In September 2005, he became Executive Vice President and Chief
Financial Officer for the Company. From October 1991 until joining Regent in 1998, he was employed
by LensCrafters, Inc., a highly acquisitive optical retail company, which by 1998 had 800 retail
stores and $1.2 billion in revenues. From February 1992 to March 1994, Mr. Vasconcellos served as
controller of LensCrafters Canadian subsidiary. In 1994, he was repatriated and assumed oversight
of financial reporting and financial systems for LensCrafters until leaving to join Regent in 1998.
From July 1987 to September 1991, Mr. Vasconcellos served as an auditor for the international
accounting firm of Coopers & Lybrand, a predecessor to PricewaterhouseCoopers LLP.
The executive officers of the Company, their ages and the positions they have held with the
Company commencing May 2, 2010, are as follows:
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Name |
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Age |
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Position |
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Steven Price
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48 |
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Chairman, President
and Chief Executive Officer |
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Stuart Rosenstein
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49 |
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Executive Vice President
and Chief Financial Officer |
Stuart Rosenstein co-founded FiveWire with Mr. Price in 2009. Since 2006, Mr. Rosenstein has
served as the managing principal of AMG Financial Co. LLC, a private lending firm that extended
financing and provided collateralized loans and other services principally to the real estate
industry. Prior to AMG Financial, Mr. Rosenstein co-founded LiveWire with Mr. Price and served as
the companys Executive Vice President and Chief Financial Officer from 1998 until 2004. Prior to
that, he was an executive with PriCellular from 1990 until 1998, most recently serving as the
Executive Vice President and Chief Financial Officer. Mr. Rosenstein started his career at Ernst &
Young. Mr. Rosenstein currently serves on the board of managers of AMG Financial.
- 108 -
ITEM 11. EXECUTIVE COMPENSATION.
The following table is a summary of certain information concerning the compensation awarded or
paid to, or earned by, the Companys Chief Executive Officer, William L. Stakelin, and Chief
Financial Officer, Anthony A. Vasconcellos, (the Named Executives) during the last three
completed fiscal years.
2009 Summary Compensation Table
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Change in |
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Pension Value |
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and |
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Name |
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Non-Equity |
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Nonqualified |
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and |
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Stock |
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Option |
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Incentive Plan |
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Deferred |
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All Other |
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Principal |
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Salary |
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Bonus |
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Awards(2) |
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Awards |
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Compensation |
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Compensation |
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Compensation(1) |
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Total |
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Position |
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Year |
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|
($) |
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($) |
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($) |
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($) |
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($) |
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($) |
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($) |
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|
($) |
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William L. Stakelin,
President and Chief Executive |
|
|
2009 |
|
|
$ |
366,057 |
|
|
$ |
146,423 |
|
|
$ |
18,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
20,567 |
|
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$ |
551,047 |
|
Officer |
|
|
2008 |
|
|
$ |
366,057 |
|
|
$ |
52,712 |
|
|
$ |
213,000 |
|
|
$ |
0 |
|
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$ |
105,424 |
|
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$ |
0 |
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$ |
25,033 |
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$ |
762,226 |
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Anthony A. Vasconcellos,
Executive Vice President and Chief Financial |
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2009 |
|
|
$ |
277,172 |
|
|
$ |
110,869 |
|
|
$ |
15,750 |
|
|
$ |
0 |
|
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$ |
0 |
|
|
$ |
0 |
|
|
$ |
14,428 |
|
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$ |
418,219 |
|
Officer |
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|
2008 |
|
|
$ |
277,172 |
|
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$ |
39,913 |
|
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$ |
142,000 |
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$ |
0 |
|
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$ |
79,826 |
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$ |
0 |
|
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$ |
19,224 |
|
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$ |
558,135 |
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(1) |
|
All Other Compensation consists of auto allowances and insurance, employer match
under the Companys 401(k) Profit Sharing and Deferred Compensation Plans, and employer-paid
premiums for medical, dental and short-term disability insurance. |
|
(2) |
|
Amounts shown represent the aggregate grant date fair value of stock awards granted
to the Named Executives in 2008 and 2009, calculated in accordance with FASB ASC Topic 718. The
value of each share subject to stock awards was based upon the closing price of the Companys
common stock on the OTC Bulletin Board or Nasdaq Global Market (or its predecessor, the Nasdaq
National Market) on the date of grant. For Mr. Stakelin, the amounts include a January 4, 2008
grant of 150,000 shares at a grant date fair value of $1.42 per share; and a January 2, 2009 grant
of 200,000 shares at a grant date fair value of $0.09 per share. For Mr. Vasconcellos, the amounts
include a January 4, 2008 grant of 100,000 shares at a grant date fair value of $1.42 per share; and a
January 2, 2009 grant of 175,000 shares at a grant date fair value of $0.09 per share. |
- 109 -
Narrative Disclosure to 2009 Summary Compensation Table
During 2009, our Named Executives were each employed pursuant to an employment agreement that
set forth their base salaries, target bonus amounts and other terms and conditions of their
employment. Effective as of December 31, 2009, our Named Executives entered into new employment
agreements that provided for similar base salary and target bonus amounts, but contained revised
severance pay provisions in the event the Named Executives employment was terminated in certain
circumstances. The new employment agreements provided that in the event the Named Executive was
terminated without cause or resigned for good reason (as such terms were defined in the employment
agreements), the Named Executive would receive severance pay in an amount equal to one times his
annual base salary, a pro-rated bonus for the year of termination and reimbursement for or
continued participation in health and life insurance plans
for up to 12 months. If such a termination was in anticipation of or within two years following a
change in control, the Named Executive would receive an amount equal to two times his annual base
salary, plus two times his average annual bonus, a pro-rated bonus for the year of
termination and benefit continuation for a period of 18 months. In connection with our Chapter
11 reorganization, we incurred a change in control within the meaning of these employment
agreements, and the Named Executives resigned their employment with us effective as of April 30,
2010.
2009 Outstanding Equity Awards at Fiscal Year End
The following table sets forth each of the outstanding option awards and unvested stock awards
held by the Named Executives as of December 31, 2009. Effective April 27, 2010, all stock awards
and option awards were cancelled in connection with our Reorganization Plan, as described more
fully above under Business Chapter 11 Reorganization. All unvested awards were accelerated and
became fully vested in conjunction with our April 27, 2010 reorganization.
- 110 -
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Option Awards |
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Stock Awards |
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Equity |
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Incentive |
|
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|
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Plan |
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Equity |
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Awards: |
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Incentive |
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Market |
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Plan |
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or Payout |
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Equity |
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Awards: |
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Value of |
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Incentive |
|
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Market |
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|
Number of |
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|
Unearned |
|
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Plan |
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Value of |
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|
Unearned |
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|
Shares, |
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|
|
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|
Awards: |
|
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|
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|
|
|
|
Number of |
|
|
Shares or |
|
|
Shares, |
|
|
Units or |
|
|
|
Number of |
|
|
Number of |
|
|
Number of |
|
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|
|
|
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|
|
|
|
Shares or |
|
|
Units of |
|
|
Unit or |
|
|
Other |
|
|
|
Securities |
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
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|
|
|
Units of |
|
|
Stock |
|
|
Other |
|
|
Rights |
|
|
|
Underlying |
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Stock That |
|
|
That |
|
|
Rights |
|
|
That |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
|
Have Not |
|
|
Have Not |
|
|
That Have |
|
|
Have Not |
|
|
|
Options # |
|
|
Options # |
|
|
Unearned |
|
|
Exercise |
|
|
Expiration |
|
|
Vested |
|
|
Vested |
|
|
Not Vested |
|
|
Vested |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
Options (#) |
|
|
Price ($) |
|
|
Date |
|
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William L. Stakelin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
7.76 |
|
|
|
5/17/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
6.93 |
|
|
|
1/4/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
5.86 |
|
|
|
1/3/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
6.46 |
|
|
|
1/2/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
5.33 |
|
|
|
1/7/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750 |
(1) |
|
|
4,875 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500 |
(3) |
|
|
9,750 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,500 |
(4) |
|
|
29,250 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
(5) |
|
|
52,000 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony A. Vasconcellos |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
7.76 |
|
|
|
5/17/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
6.93 |
|
|
|
1/4/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
5.86 |
|
|
|
1/3/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
6.46 |
|
|
|
1/2/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
5.33 |
|
|
|
1/7/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500 |
(6) |
|
|
3,250 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
(7) |
|
|
6,500 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
(8) |
|
|
19,500 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,000 |
(9) |
|
|
45,500 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On January 3, 2006, the above Named Executive was awarded 75,000 nonvested
shares, of which, 18,750 shares vested on January 3, 2007, 18,750 vested on January 3, 2008,
and 18,750 vested on January 3, 2009. The remaining 18,750 nonvested shares would have vested
on January 3, 2010. |
|
(2) |
|
The value of nonvested shares awarded to the above Named Executive was
calculated using a price of $0.26, the closing price of a share of Regent Communications, Inc.
common stock on the last business day of the 2009 calendar year. |
|
(3) |
|
On January 3, 2007, the above Named Executive was awarded 75,000 nonvested
shares, of which, 18,750 shares vested on January 3, 2008 and 18,750 vested on January 3, 2009.
The remaining nonvested shares would have vested in two equal annual installments of 18,750
shares through 2011. |
- 111 -
|
|
|
(4) |
|
On January 4, 2008, the Named Executive was awarded 150,000 nonvested shares, of
which, 37,500 shares vested on January 4, 2009. The remaining nonvested shares would have
vested in three equal annual installments of 37,500 shares through 2012. |
|
(5) |
|
The nonvested shares awarded to the above Named Executive on January 2, 2009,
would have vested in four equal annual installments of 50,000 shares through 2013. |
|
(6) |
|
On January 3, 2006, the above Named Executive was awarded 50,000 nonvested
shares, of which, 12,500 shares vested on January 3, 2007, 12,500 shares vested January 3,
2008, and 12,500 shares vested January 3, 2009. The remaining 12,500 nonvested shares would
have vested on January 3, 2010. |
|
(7) |
|
On January 3, 2007, the above Named Executive was awarded 50,000 nonvested
shares, of which, 12,500 shares vested on January 3, 2008 and 12,500 shares vested on January
3, 2009. The remaining nonvested shares would have vested in two equal annual installments of
12,500 shares through 2011. |
|
(8) |
|
On January 4, 2008, the Named Executive was awarded 100,000 nonvested shares, of
which, 25,000 shares vested on January 4, 2009. The remaining nonvested shares would have
vested in three equal annual installments of 25,000 shares through 2012. |
|
(9) |
|
The nonvested shares awarded to the above Named Executive on January 4, 2008,
would have vested in four equal annual installments of 43,750 shares through 2013. |
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Compensation of Directors
Only non-employee directors of the Company are eligible to receive directors fees. During
2009, non-employee directors received the following compensation:
|
|
|
A $1,000 monthly retainer; |
|
|
|
A Board Committee meeting fee of $2,000 for each on-site Board Committee meeting
attended ($1,000 for attendance by telephone); |
|
|
|
A Board Committee meeting fee of $1,000 for each telephonic Board Committee meeting
attended; |
|
|
|
The Chairman of the Board and Chair of each Board Committee receives the following
fees: |
|
|
|
Chairman of the Board annual fee of $15,000 |
|
|
|
Audit Committee Chair annual fee of $10,000 |
|
|
|
Nominating and Corporate Governance Committee Chair annual fee of $5,000 |
|
|
|
Compensation Committee Chair annual fee of $5,000 |
Each non-employee director of the Company was eligible to receive awards of stock appreciation
rights, nonvested stock, or non-qualified stock options under the Regent Communications, Inc. 2006
Directors Equity Compensation Plan. The terms, conditions, form and amount of such awards, if any,
were determined by the Compensation Committee of the Companys Board of Directors. Each director
serving on the Companys Board of Directors on June 3, 2009, was awarded 10,000 nonvested shares of
Regent common stock.
- 112 -
The following table presents the compensation provided by the Company to the non-employee
directors for the year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity |
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
Fees Earned or |
|
|
Stock |
|
|
Incentive Plan |
|
|
Deferred |
|
|
All Other |
|
|
|
|
|
|
Paid in Cash |
|
|
Awards |
|
|
Compensation |
|
|
Compensation |
|
|
Compensation |
|
|
Total |
|
Name |
|
($) |
|
|
($) (1) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
John J. Ahn |
|
$ |
24,000 |
|
|
$ |
1,400 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
25,400 |
|
John F. DeLorenzo |
|
$ |
29,000 |
|
|
$ |
1,400 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
30,400 |
|
Andrew L. Lewis, IV |
|
$ |
32,944 |
|
|
$ |
1,400 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
34,344 |
|
Timothy M. Mooney |
|
$ |
43,000 |
|
|
$ |
1,400 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
44,400 |
|
William P. Sutter, Jr. (2) |
|
$ |
19,771 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
19,771 |
|
John H. Wyant |
|
$ |
40,833 |
|
|
$ |
1,400 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
42,233 |
|
|
|
|
(1) |
|
Amounts shown represent the aggregate grant date fair value of stock awards granted
to the Director in 2009, calculated in accordance with FASB ASC Topic 718. The value of each share
subject to stock awards was based upon the closing price of the Companys common stock on the
Nasdaq Global Market (or its predecessor, the Nasdaq National Market) on the date of grant. |
|
(2) |
|
Effective March 17, 2009, Mr. Sutter resigned from the Board of Directors and from
the Boards Audit Committee, Compensation Committee and Nominating and Corporate Governance
Committee. Mr. Sutter also resigned as Chairman of the Board and as Chairman of the Nominating and
Corporate Governance Committee. Effective upon his resignation, the Board of Directors approved the
payment to Mr. Sutter of all director fees earned through the date of his resignation, the
additional sum of $8,000 (which represents the director, Board Chairman and Nominating and
Corporate Governance Committee Chairman retainer fees as would have been payable to him if he had
remained on the Board through the date of the 2009 Annual Meeting) and the acceleration of vesting
for 16,250 shares of nonvested common stock that were previously granted to Mr. Sutter as part of
his compensation for serving on the Board of Directors. |
When traveling from out-of-town, the members of the Board of Directors are also eligible for
reimbursement for their travel expenses incurred in connection with attendance at Board meetings
and Board Committee meetings. These amounts are not included in the table above. Employee directors
do not receive any compensation for their participation in Board meetings or Board Committee
meetings.
Potential Payments Upon Termination or Change in Control
The Company had employment agreements with William L. Stakelin and Anthony A. Vasconcellos.
Mr. Stakelin was employed as Regents President and Chief Executive Officer and Mr. Vasconcellos
was employed as Regents Executive Vice President and Chief Financial Officer. The employment
agreement for Mr. Stakelin also requires the company to seek to cause him to be nominated to serve
on the companys Board of Directors. Each employment agreement is for a term effective December
31, 2009 and ending December 31, 2011.
Under their employment agreements, for the 2009 year, Mr. Stakelin was entitled to a base
salary of no less than $366,057 and Mr. Vasconcellos was entitled to a base salary of no less than
$277,172. Under the terms of their employment agreements, the 2010 base salaries for each of Mr.
Stakelin and Mr. Vasconcellos would equal their respective 2008 salaries, plus an amount equal to
the percentage increase in the Consumer Price Index-All Items during the period January 1, 2009
through December 31, 2009. The employment agreements also provided for Messrs. Stakelin and
Vasconcellos to receive discretionary annual bonuses in accordance with the Companys Senior
Management Bonus Plan. These bonuses, if any, would be determined by the Compensation Committee of
the Board of Directors of Regent and are based on performance of the executive and Regent and the
achievement of certain goals established for each year. In
addition, the employment agreements entitled Messrs. Stakelin and Vasconcellos each to receive, at
the discretion of the Compensation Committee of the Board of Directors, annual grants of nonvested
stock, stock options or other equity-based incentives, and/or incentive and non-qualified options
to purchase common stock of the Company and other equity-based incentives pursuant to any incentive
compensation plus as may be adopted by the Company from time to time. Pursuant to the employment
agreements, Messrs. Stakelin and Vasconcellos also received automobile allowance, parking and
automobile insurance coverage at Regents expense and other benefits available to key management
employees, including the employee portion of health and disability insurance premiums.
- 113 -
Messrs. Stakelin and Vasconcellos may terminate their respective employment agreements for any
reason upon 90 days notice and the Company may terminate the agreements at any time. In the event
of a termination by the Company without cause or upon disability, then (a) the executive is
entitled to receive his base salary through the termination date and, in the event of disability,
for up to one year after termination during the continuation of disability, and (b) all vested
stock options, shares of nonvested stock and other equity awards held by the executive will
accelerate and vest in full. If employment is terminated by the Company without cause, the
employment agreements entitle Messrs. Stakelin or Vasconcellos, as the case may be, to receive, in
addition to base salary and bonus prorated through the date of termination, the greater of his
current base salary for an additional 12-month period or his current base salary throughout the
remaining portion of the current term of the employment agreement. In the event of the death of
either of Mr. Stakelin or Mr. Vasconcellos, per the provisions of the Regent Communications, Inc.
2005 Incentive Compensation Plan, all unvested shares of nonvested stock awarded to the participant
will vest immediately.
In the event of a termination for any reason of either of Messrs. Stakelin and Vasconcellos in
the 24-month period prior to or subsequent to a change in control of the Company, as defined in the
respective agreements, or in the event of the death or disability of either of Messrs. Stakelin or
Vasconcellos in the 12-month period prior to or subsequent to a change in control of the Company,
Messrs. Stakelin or Vasconcellos will be entitled to receive (i) all compensation accrued and
unpaid prior to the date of termination, (ii) an amount equal to 2.0 times the employees base
salary as in effect at the date of termination, (iii) an amount equal to 2.0 times the average of
the Senior Management Bonuses calculated for 2009 and each successive full calendar year prior to
the date of termination for the employee, and (iv) the vesting of all stock options, shares of
nonvested stock and other equity awards held by the employee shall accelerate and vest in full.
The employment agreements for each of Messrs. Stakelin and Vasconcellos further provided that if
such payments would result in an excess parachute payment within the meaning of Section 280G of
the Internal Revenue Code, then the amount payable shall be capped at the maximum amount payable to
the employee before such excess parachute payment would apply. In the event that any tax would
be imposed on either of Messrs. Stakelin or Vasconcellos under Section 280G or Section 409A of the
Internal Revenue Code with respect to any payment made by the Company to either individual pursuant
to compensation paid after the employees termination, the Company will be responsible for the
payment of such tax, penalty, interest and any related audit costs incurred by the individual,
including any payments necessary to place the employee in the same taxable position as if no such
tax had been imposed on the employee. The employee will be required to return to the Company any
excess amounts received over the limitations of Section 280G or 409A, as applicable.
- 114 -
The term change of control means the purchase or other acquisition by any person, entity or
group of persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of
1934 (Exchange Act), or any comparable successor provisions, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50 percent or
more of either the outstanding shares of common stock or the combined voting power of Regent
Communications, Inc.s then outstanding voting securities entitled to vote generally, or the
approval by the stockholders of Regent Communications, Inc. of a reorganization, merger, or
consolidation, in each case, with respect to which persons who were stockholders of Regent
Communications, Inc. immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50 percent of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or consolidated Regent
Communications, Inc.s then outstanding securities, or a liquidation or dissolution of Regent
Communications, Inc. or of the sale of all or substantially all of Regent Communications, Inc.s
assets, it being understood and agreed that a sale of all or substantially all of the Companys
assets shall be deemed to have occurred if at any time through the 24-month anniversary of the date
of termination of the employees employment with the Company, one or more transactions occur in
which assets of the Company are sold, transferred or otherwise disposed of to one or more persons
and such sold, transferred or disposed assets in the aggregate provided more than 50% of the
station operating income generated by the Company for the year ended December 31, 2008. It is not
considered a change of control if the sale or transfer of assets is to: (i) a stockholder of the
Company (immediately before the asset transfer) in exchange for or with respect to its stock; (ii)
an entity, 50 percent or more of the total value or voting power of which is owned, directly or
indirectly, by the Company; (iii) a person, or a group of people, that owns, directly or
indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of
the Company; or (iv) an entity, at least 50 percent of the total value or voting power of which is
owned, directly or indirectly, by a person described in (iii) above. In addition, the term change
of control includes changes in the Regent Communications, Inc. Board of Directors during any
twelve (12) month period, such that individuals who, as of the beginning of such period, constitute
the Board (the Incumbent Directors) cease for any reason to constitute at least a majority of the
Board, provided that any person becoming a director subsequent to the beginning of such period
whose election or nomination for election was approved by a vote of at least a majority of the
Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for director, without written
objection to such nomination) shall be deemed to be an Incumbent Director.
Messrs. Stakelin and Vasconcellos are subject to customary non-competition and
non-solicitation covenants during their period of employment with Regent and for a 24-month period
thereafter as well as customary confidentiality covenants. The employment agreements further
provide that, for a period of two years following termination, the employee will not induce any
Company employee to leave the Company and the employee must maintain confidentiality of all
confidential information relating to the Company.
- 115 -
The following table describes the potential payments upon termination or a change in control
of the Company for William L. Stakelin, the Companys President and Chief Executive Officer. The
amounts included in the table below are calculated as if Mr. Stakelin were terminated on December
31, 2009, and such amounts are in addition to what Mr. Stakelin earned for the 2009 year, as shown
in the Summary Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and |
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
Payments Upon |
|
Voluntary |
|
|
For Cause |
|
|
Not for Cause |
|
|
|
|
|
|
|
|
|
|
Change in |
|
Termination |
|
Termination |
|
|
Termination |
|
|
Termination(1) |
|
|
Disability |
|
|
Death |
|
|
Control |
|
Base salary (2) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
732,114 |
|
|
$ |
366,057 |
|
|
$ |
0 |
|
|
$ |
732,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Management Bonus
Plan |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
292,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life and disability
insurance, medical,
dental and
hospitalizations |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested stock, unvested
and accelerated
(3) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
95,875 |
|
|
$ |
95,875 |
|
|
$ |
95,875 |
|
|
$ |
95,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
827,989 |
|
|
$ |
461,932 |
|
|
$ |
95,875 |
|
|
$ |
1,120,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assumes the named Executives benefit under an involuntary not for cause termination
is equal to the remaining amount of base salary through December 31, 2011, the expiration of the
Named Executives employment agreement, and the full vesting of any nonvested shares of Regent
common stock assuming a price of $0.26, based upon the price of a share of the Companys common
stock on the last business day in 2009. |
|
(2) |
|
For analysis purposes, the named Executives base salary was equal to the salary in
place for the 2009 fiscal year. |
|
(3) |
|
Under the terms of the Regent Communications, Inc. 2005 Incentive Compensation Plan,
any unvested shares of nonvested stock will automatically accelerate to 100% vested in the
instances of an employees death, permanent disability, or a change in control of the Company. |
The following table describes the potential payments upon termination or a change in control
of the Company for Anthony A. Vasconcellos, the Companys Executive Vice President and Chief
Financial Officer. The amounts included in the table below are calculated as if Mr. Vasconcellos
were terminated on December 31, 2009, and such amounts are in addition to what Mr. Vasconcellos
earned for the 2009 year, as shown in the Summary Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and |
|
|
|
|
|
|
|
|
|
Involuntary |
|
|
|
|
|
|
|
|
|
|
|
|
Payments Upon |
|
Voluntary |
|
|
For Cause |
|
|
Not for Cause |
|
|
|
|
|
|
|
|
|
|
Change in |
|
Termination |
|
Termination |
|
|
Termination |
|
|
Termination(1) |
|
|
Disability |
|
|
Death |
|
|
Control |
|
Base salary (2) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
554,344 |
|
|
$ |
277,172 |
|
|
$ |
0 |
|
|
$ |
554,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Management Bonus Plan |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
221,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life and disability insurance,
medical, dental and
hospitalization(3) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
16,144 |
|
|
$ |
16,144 |
|
|
$ |
0 |
|
|
$ |
16,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested stock, unvested and
accelerated (4) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
68,250 |
|
|
$ |
68,250 |
|
|
$ |
68,250 |
|
|
$ |
68,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
638,738 |
|
|
$ |
361,566 |
|
|
$ |
68,250 |
|
|
$ |
860,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assumes the named Executives benefit under an involuntary not for cause termination
is equal to the remaining amount of base salary through December 31, 2011, the expiration of the
Named Executives employment agreement, and the full vesting of any nonvested shares of Regent
common stock assuming a
price of $0.26, based upon the price of a share of the Companys common stock on the last business
day in 2009. |
- 116 -
|
|
|
(2) |
|
For analysis purposes, the named Executives base salary was equal to the salary in
place for the 2009 fiscal year. |
|
(3) |
|
The Named Executive is entitled to Company-paid life, and disability insurance,
medical, dental and hospitalization premiums for the lesser of 12 months or the number of months
until the executive attains the age of 65. For purposes of the calculation, the Company used the
total cost of premiums paid for such plans as of December 31, 2009. |
|
(4) |
|
Under the terms of the Regent Communications, Inc. 2005 Incentive Compensation Plan,
any unvested shares of nonvested stock will automatically accelerate to 100% vested in the
instances of an employees death, permanent disability, or a change in control of the Company. |
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a)
of the Securities Exchange Act of 1934 requires the Company's officers and directors, and
persons who own more than ten percent of a registered class of the Companys stock,
to file reports of ownership and changes in ownership with the SEC. Officers, directors
and greater than ten percent stockholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely
on its review of the copies of such reports received by it, and upon written
representations from certain reporting persons, the Company believes that, for the year
ended December 31, 2009, all Section 16(a) filing requirements applicable to the
Companys executive officers, directors and greater than ten percent stockholders
were complied with on a timely basis.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
Number of |
|
|
|
|
|
|
securities |
|
|
|
securities to be |
|
|
|
|
|
|
remaining available |
|
|
|
issued upon |
|
|
Weighted average |
|
|
for issuance under |
|
|
|
exercise of |
|
|
exercise price of |
|
|
equity compensation |
|
|
|
outstanding |
|
|
outstanding |
|
|
plans (excluding |
|
|
|
options, warrants |
|
|
options, warrants |
|
|
securities |
|
|
|
and rights |
|
|
and rights |
|
|
reflected in column (a)) |
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
Equity compensation
plans approved by
security holders |
|
|
2,224,373 |
|
|
$ |
6.46 |
|
|
|
3,972,526 |
|
Equity compensation
plans not approved
by security holders |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,224,373 |
|
|
$ |
6.46 |
|
|
|
3,972,526 |
|
Effective April 27, 2010, all equity awards were cancelled in connection with our Reorganization
Plan, as described more fully above under Business Chapter 11 Reorganization.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of May 14, 2010, the number and percentage of the Companys
common stock held by (i) persons known to the Company to be beneficial owners of more than 5% of a
class of the Companys securities, (ii) the Companys directors and nominees for directors, (iii)
executive officers of the Company and (iv) all executive officers and directors of the Company, as
a group.
|
|
|
|
|
|
|
|
|
|
|
Amount and |
|
|
|
|
|
|
Nature of |
|
|
|
|
|
|
Beneficial |
|
|
Percent of |
|
Name and Address of Beneficial Owner(2) |
|
Ownership |
|
|
Class |
|
Regent Holdings LLC |
|
1,000 Shares |
|
|
100 |
% |
Oaktree Capital Management, L.P. |
|
|
549 |
|
|
|
54.9 |
%(1) |
Stephen Kaplan |
|
|
549 |
|
|
|
54.9 |
%(1) |
B. James Ford |
|
|
549 |
|
|
|
54.9 |
%(1) |
Andrew Salter |
|
|
549 |
|
|
|
54.9 |
%(1) |
David Quick |
|
|
549 |
|
|
|
54.9 |
%(1) |
Steven Price |
|
|
0 |
|
|
|
* |
|
Stuart Rosenstein |
|
|
0 |
|
|
|
* |
|
All Executives Officers and Directors as a group |
|
|
549 |
|
|
|
54.9 |
%(1) |
(1) 54.9% refers to shares and warrants held in Regent Holdings LLC, the sole
stockholder of Townsquare Media, Inc. Messrs. Kaplan, Ford, Salter and Quick disclaim beneficial
ownership of such indirect ownership held by Oaktree Capital Management, L.P.
(2) The business address of Regent Holdings LLC and Messrs. Price and Rosenstein is 2000
Fifth Third Center, 511 Walnut Street, Cincinnati OH 45202. The business address of Oaktree
Capital Management, L.P. and Messrs Kaplan, Ford, Salter and Quick is 333 S. Grand Avenue, Los
Angeles, CA 90071
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The Audit Committee of the Board of Directors is charged with the responsibility to review and
pre-approve all related party or affiliate transactions between the Company and its directors,
executive officers, employees and/or their affiliates or in which any such persons directly or
indirectly is interested or may benefit. The Company currently has no agreements, arrangements,
transactions or similar relationship with any of its directors or executive officers. See also
Transactions with Directors and Determination of Independence provided herein.
- 117 -
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Principal Accounting Firm Fees
The following table sets forth the aggregate fees billed to Regent Communications, Inc. for
the fiscal years ended December 31, 2009 and 2008 by the Companys principal accounting firm,
Deloitte & Touche LLP.
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Audit Fees |
|
$ |
379,500 |
(a) |
|
$ |
395,000 |
(a) |
Audit-Related Fees |
|
|
15,000 |
(b) |
|
|
15,000 |
(b) |
Tax Fees |
|
|
|
|
|
|
|
|
All Other Fees |
|
|
1,500 |
(c) |
|
|
1,500 |
(c) |
|
|
|
|
|
|
|
Total |
|
$ |
396,000 |
|
|
$ |
411,500 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes fees for professional services rendered for the audit of the consolidated
financial statements of the Company, the audit of managements assessment of internal control
over financial reporting, the audit of stand-alone financial statements for significant
acquisitions, issuance of consents and assistance with review of documents filed with the
Securities and Exchange Commission. |
|
(b) |
|
Represents fees for services related to research and application of various
accounting requirements. |
|
(c) |
|
Represents the annual charge for online access to an accounting, auditing and
reporting library. |
The aggregate amount of all services other than audit and audit-related services provided by
the auditors to the Company constituted 0.38% and 0.36% of the total amount of revenues paid by the
Company to the auditors during 2009 and 2008, respectively.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) 1. FINANCIAL STATEMENTS.
The consolidated financial statements of Regent, Inc. and subsidiaries filed as part of this
Annual Report on Form 10-K are set forth under Item 8.
2. FINANCIAL STATEMENT SCHEDULES.
The financial statement schedule filed as part of this Annual Report on Form 10-K is set forth
under Item 8.
3. EXHIBITS.
A list of the exhibits filed or incorporated by reference as part of this Annual Report on
Form 10-K is set forth in the Index to Exhibits which immediately precedes such exhibits and is
incorporated herein by this reference.
- 118 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
TOWNSQUARE MEDIA, INC.
|
|
Date: May 14, 2010 |
By: |
/s/ Steven Price
|
|
|
|
Steven Price, President and |
|
|
|
Chief Executive Officer |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Steven Price
Steven Price
|
|
President, Chief Executive
Officer,
and Director
(Principal Executive Officer)
|
|
May 14, 2010 |
|
|
|
|
|
/s/ Stuart Rosenstein
Stuart Rosenstein
|
|
Executive Vice President and
Chief
Financial Officer
(Principal
Financial and Principal Accounting
Officer)
|
|
May 14, 2010 |
|
|
|
|
|
/s/
Stephen Kaplan
Stephen Kaplan
|
|
Director
|
|
May 14, 2010 |
|
|
|
|
|
/s/
B. James Ford
B. James Ford
|
|
Director
|
|
May 14, 2010 |
|
|
|
|
|
/s/ Andrew Salter
Andrew Salter
|
|
Director
|
|
May 14, 2010 |
|
|
|
|
|
/s/ David Quick
David Quick
|
|
Director
|
|
May 14, 2010 |
S-1
EXHIBIT INDEX
The following exhibits are filed, or incorporated by reference where indicated, as part of
Part IV of this Annual Report on Form 10-K:
|
|
|
|
|
EXHIBIT |
|
|
NUMBER |
|
EXHIBIT DESCRIPTION |
|
|
|
|
|
|
2(a) |
* |
|
First Amended Joint Plan of Reorganization of Regent Communications, Inc. dated March 22,
2010 (previously filed as Exhibit 99.2 to the Registrants Form 8-K filed March 25, 2010 and
incorporated herein by this reference) |
|
|
|
|
|
|
2(b) |
* |
|
First Amended Disclosure Statement for the First Amended Joint Plan of Reorganization of
Regent Communications, Inc. dated March 22, 2010 (previously filed as Exhibit 99.1 to the
Registrants Form 8-K filed March 25, 2010 and incorporated herein by this reference) |
|
|
|
|
|
|
2(c) |
* |
|
Findings of Fact, Conclusions of Law and Order Confirming First Amended Joint Plan of
Reorganization dated April 12, 2010 (previously filed as Exhibit 2.2 to the Registrants Form
8-K filed April 13, 2010 and incorporated herein by reference) |
|
|
|
|
|
|
3(a) |
* |
|
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Regent
Communications, Inc. filed with the Delaware Secretary of State on March 13, 2002 (previously
filed as Exhibit 3(h) to the Registrants Form 10-K for the year ended December 31, 2001 and
incorporated herein by this reference) |
|
|
|
|
|
|
3(b) |
* |
|
Amended and Restated Certificate of Incorporation dated April 27, 2010 (previously filed as
Exhibit No. 3.1 to the Registrants Form 8-K filed April 27, 2010 and incorporated herein by
this reference) |
|
|
|
|
|
|
3(c) |
* |
|
Amended and Restated Certificate of Incorporation dated April 27, 2010 (previously filed as
Exhibit No. 3.1 to the Registrants Form 8-K filed April 30, 2010 and incorporated herein by
this reference) |
|
|
|
|
|
|
3(d) |
* |
|
Certificate of Amendment to Certificate of Incorporation of Regent Communications, Inc.
dated April 30, 2010 (previously filed as Exhibit 3.1 to the Registrants Form 8-K filed May
6, 2010 and incorporated herein by this reference) |
|
|
|
|
|
|
3(e) |
* |
|
Amended and Restated By-Laws of Regent Communications, Inc. adopted October 24, 2007
(previously filed as Exhibit 3(i) to the Registrants Form 10-Q for the quarter ended
September 30, 2007 and incorporated herein by this reference) |
|
|
|
|
|
|
3(f) |
* |
|
Amended and Restated By-Laws of Regent Communications, Inc. dated April 27, 2010 (previously
filed as Exhibit No. 3.2 to the Registrants Form 8-K filed April 27, 2010 and incorporated
herein by this reference) |
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4(a) |
* |
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Credit Agreement dated as of November 21, 2006 among Regent Broadcasting, LLC, Regent
Communications, Inc. and the lenders identified therein (without
schedules and exhibits, which Regent has determined are not material) (previously
filed as Exhibit 4 to the Registrants Form 8-K filed November 28, 2006 and
incorporated herein by this reference) |
E-1
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EXHIBIT |
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NUMBER |
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EXHIBIT DESCRIPTION |
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4(b) |
* |
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Amendment No. 1 to the Credit Agreement, dated as of February 23, 2007 among Regent
Broadcasting, LLC, Regent Communications, Inc. and the lenders identified therein (without
schedules and exhibits, which Regent has determined are not material) (previously filed as
Exhibit 4(a) to the Registrants Form 8-K filed March 1, 2007 and incorporated herein by this
reference) |
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4(c) |
* |
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Amendment No. 2 to the Credit Agreement, dated as of November 15, 2007 by and among Regent
Broadcasting, LLC, Regent Communications, Inc. and the lenders identified therewith (without
schedules and exhibits, which Regent has determined are not material) (previously filed as
Exhibit 4(a) to the Registrants Form 8-K filed November 21, 2007 and incorporated herein by
this reference) |
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4(d) |
* |
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Rights Agreement dated as of May 19, 2003 between Regent Communications, Inc. and Fifth
Third Bank (previously filed as Exhibit 4.1 to the Registrants Form 8-K filed May 20, 2003
and incorporated herein by this reference) |
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4(e) |
* |
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First Amendment to Rights Agreement dated and effective as of February 27, 2004 between
Regent Communications, Inc., Fifth Third Bank, and Computershare Services, LLC (previously
filed as Exhibit 4(c) to the Registrants Form 10-Q for the quarter ended September 30, 2004
and incorporated herein by this reference) |
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4(f) |
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Credit Agreement dated as of April 27, 2010 among Regent Broadcasting, LLC as Borrower,
Regent Communications, Inc., as one of the Guarantors, and the lenders identified therein
(without schedules and exhibits, which Regent has determined are not material) |
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4(g) |
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Subordinated Notes Agreement dated as of April 27, 2010 among Regent Broadcasting, LLC, as
Company, Regent Communications, Inc., as One of the Guarantors, and The Subordinated
Noteholders identified therein (without schedules and exhibits, which Regent has determined
are not material) |
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10(a) |
*# |
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Regent Communications, Inc. 1998 Management Stock Option Plan, as amended through May 17,
2001 and restated as of October 24, 2002 (previously filed as Exhibit 10(b) to the
Registrants Form 10-Q for the quarter ended September 30, 2002 and incorporated herein by
this reference) |
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10(b) |
*# |
|
Regent Communications, Inc. Employee Stock Purchase Plan, as amended on October 24, 2002
and effective January 1, 2003 (previously filed as Exhibit 10(a) to the Registrants Form 10-Q
for the quarter ended September 30, 2002 and incorporated herein by this reference) |
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10(c) |
*# |
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Regent Communications, Inc. Deferred Compensation Plan dated July 25, 2002 and effective
October 1, 2002 (previously filed as Exhibit 10(e) to the Registrants Form 10-K for the year
ended December 31, 2002 and incorporated herein by this reference) |
E-2
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EXHIBIT |
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NUMBER |
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EXHIBIT DESCRIPTION |
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10(d) |
*# |
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Employment Agreement between Regent Communications, Inc. and William L. Stakelin
(previously filed as Exhibit 10.1 to the Registrants Form 8-K filed January 4, 2008 and
incorporated herein by this reference) |
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10(e) |
*# |
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Amendment No. 1 to Employment Agreement between Regent Communications, Inc. and William L.
Stakelin dated January 22, 2009 (previously filed as Exhibit 10(o) to the Registrants Form
10-K for the year ended December 31, 2008 and incorporated herein by this reference) |
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10(f) |
*# |
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Employment Agreement between Regent Communications, Inc. and Anthony A. Vasconcellos
(previously filed as Exhibit 10.2 to the Registrants Form 8-K filed January 4, 2008 and
incorporated herein by this reference) |
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10(g) |
*# |
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Amendment No. 1 to Employment Agreement between Regent Communications, Inc. and Anthony A.
Vasconcellos dated January 22, 2009 (previously filed as Exhibit 10(q) to the Registrants
Form 10-K for the year ended December 31, 2008 and incorporated herein by this reference) |
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10(h) |
*# |
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Employment Agreement between Regent Communications, Inc. and William L. Stakelin
(previously filed as Exhibit 10.1 to the Registrants Form 8-K filed January 7, 2010 and
incorporated herein by this reference) |
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10(i) |
*# |
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Employment Agreement between Regent Communications, Inc. and Anthony A. Vasconcellos
(previously filed as Exhibit 10.2 to the Registrants Form 8-K filed January 7, 2010 and
incorporated herein by this reference) |
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10(j) |
* |
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Settlement Agreement dated September 14, 2007, among Regent Communications, Inc., Riley
Investment Management LLC, Riley Investment Partners Master Fund, L.P., SMH Capital Inc. and
other parties to the agreement, including Release as Exhibit A thereto (previously filed as
Exhibit 10.1 to the Registrants Form 8-K filed September 17, 2007 and incorporated herein by
this reference) |
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10(k) |
* |
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Standstill Agreement dated March 17, 2009, among Regent Communications, Inc., Riley
Investment Management LLC and Riley Investment Partners Master Fund, L.P. (previously filed as
Exhibit 10.1 to the Registrants Form 8-K filed March 19, 2009 and incorporated herein by this
reference) |
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10(l) |
(#) |
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Amendment No. 1 to Executive Employment Agreement between Regent Communications, Inc. and
Anthony A. Vasconcellos dated February 28, 2010 |
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10(m) |
(#) |
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Amendment No. 1 to Executive Employment Agreement between Regent Communications, Inc. and
William L. Stakelin dated February 28, 2010 |
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21 |
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Subsidiaries of Registrant |
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31 |
(a) |
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Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification |
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31 |
(b) |
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Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification |
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32 |
(a) |
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Chief Executive Officer Section 1350 Certification |
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32 |
(b) |
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Chief Financial Officer Section 1350 Certification |
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* |
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Incorporated by reference. |
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# |
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Constitutes a management contract or compensatory plan or arrangement. |
E-3