<PAGE>   1

================================================================================
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
                                   FORM 10-K
                             ---------------------

<TABLE>
<C>               <S>
   (MARK ONE)
      [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
      [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>

                         COMMISSION FILE NUMBER 1-12187
                             ---------------------

                             (COX RADIO INC. LOGO)
             (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                                         <C>
                         DELAWARE                                        58-1620022
     (State or other jurisdiction of incorporation or       (I.R.S. Employer Identification No.)
                      organization)
         1400 LAKE HEARN DRIVE, ATLANTA, GEORGIA                           30319
         (Address of principal executive offices)                        (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (404) 843-5000
                             ---------------------
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                Class A Common Stock, par value $1.00 per share

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      NONE

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]     No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.  [X]

     As of February 27, 1998, the aggregate market value of the Class A Common
Stock held by non-affiliates of the registrant was $360,349,503 based on the
closing price on the New York Stock Exchange on such date.

     There were 8,862,712 shares of Class A Common Stock outstanding as of
February 27, 1998.

     There were 19,577,672 shares of Class B Common Stock outstanding as of
February 27, 1998.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the 1997 Annual Report to Stockholders and the Proxy Statement
for the 1998 Annual Meeting of Stockholders are incorporated by reference into
Part II and Part III.
================================================================================
<PAGE>   2

                                COX RADIO, INC.

                          1997 FORM 10-K ANNUAL REPORT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
                                   PART I
Item 1.   Business....................................................    1
Item 2.   Properties..................................................   15
Item 3.   Legal Proceedings...........................................   16
Item 4.   Submission of Matters to a Vote of Security Holders.........   16
                                  PART II
Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................   16
Item 6.   Selected Consolidated Financial Data........................   17
Item 7.   Management's Discussion and Analysis of Financial Conditions
          and Results of Operations...................................   19
Item 7a.  Quantitative and Qualitative Disclosure about Market Risk...   26
Item 8.   Financial Statements and Supplementary Data.................   27
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure....................................   47
                                  PART III
Item 10.  Directors and Executive Officers of the Registrant..........   47
Item 11.  Executive Compensation......................................   47
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................   47
Item 13.  Certain Relationships and Related Transactions..............   47
                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
          8-K.........................................................   47
Signatures............................................................   49
</TABLE>

                                        i
<PAGE>   3

                                     PART I

ITEM 1.  BUSINESS

     Cox Radio, Inc. ("Cox Radio" or the "Company") is one of the ten largest
radio broadcasting companies in the United States, based on both net revenues
and number of stations. Cox Radio, upon completion of all pending transactions,
will own or operate, or provide sales and marketing services for 54 radio
stations (36 FM and 18 AM) clustered in 12 markets, including 18 stations
acquired from NewCity Communications, Inc. ("NewCity") during 1997 (the "NewCity
Acquisition"). On a pro forma basis, Cox Radio would have generated net revenue
of $225.2 million and broadcast cash flow (as defined in Item 6. Selected
Consolidated Financial Data) of $76.2 million during the year ending December
31, 1997.

     Cox Radio is an indirect majority-owned subsidiary of Cox Enterprises, Inc.
("CEI"). CEI indirectly owns approximately 69% of the Company's Common Stock
(defined below) and has approximately 96% of the voting power of Cox Radio. The
Company has two classes of common stock outstanding, Class A Common Stock, par
value $1.00 per share (the "Class A Common Stock") and Class B Common Stock, par
value $1.00 per share (the "Class B Common Stock"), collectively defined as the
"Common Stock." CEI's wholly-owned subsidiary, Cox Broadcasting, Inc. ("Cox
Broadcasting") is the sole stockholder of shares of the Company's Class B Common
Stock. CEI, a privately-held corporation headquartered in Atlanta, Georgia, is
one of the largest media companies in the United States, with consolidated 1997
revenues of approximately $4.9 billion. Prior to the Company's initial public
offering in September 1996, CEI transferred all of its U.S. radio operations to
Cox Radio (the "Cox Radio Consolidation"). Cox Radio, as part of CEI, was a
pioneer in radio broadcasting, building its first station in 1934, acquiring its
flagship station, WSB-AM (Atlanta), in 1939 and launching its first FM station,
WSB-FM (Atlanta), in 1948.

     Cox Radio seeks to maximize the revenues and broadcast cash flow of its
radio stations by operating and developing clusters of stations in
demographically attractive and rapidly growing markets, including major markets
such as Los Angeles and Atlanta and Sunbelt markets such as Miami, Tampa,
Orlando, San Antonio and Birmingham. During the past five years, the 12 markets
in which the Company's stations operate have demonstrated, on an aggregate
basis, greater radio advertising revenue growth than the average of 5.3%, which
was calculated using revenue projections obtained from the Radio Advertising
Bureau (the "RAB"), for the U.S. radio industry as a whole. The NewCity
Acquisition enhanced the clustering of the Company's radio stations by
increasing the total number of markets in which Cox Radio owns and/or operates
stations to 12 and by strengthening the Company's penetration in those markets.
Cox Radio operates four or more stations in 9 of its 12 markets. In addition,
the NewCity Acquisition created a platform for additional strategic acquisitions
that further clustered radio stations in the Company's markets.

     As a result of the Company's management, programming and sales efforts, the
Company's radio stations are characterized by strong ratings and above average
power ratios (defined as revenue share divided by audience share). The Company's
stations are diversified in terms of format, target audience, geographic
location and stage of development. Cox Radio has a track record of acquiring,
repositioning and improving the operating performance of previously
underperforming stations. Management believes that a number of the Company's
stations have significant growth opportunities or turnaround potential and can
therefore be characterized as start-up or developing stations. Generally, the
Company considers start-up or developing stations to include those which have
been recently acquired by the Company and offer the greatest potential for
growth. Currently, the Company considers 28 of its stations to be start-up or
developing stations. Cox Radio believes these stations can achieve significant
broadcast cash flow growth by employing the Company's operating strategy.
Management believes that its mix of stations in different stages of development
enables it to maximize the Company's growth potential.

     Cox Radio's senior operating management is comprised of six individuals
with an average of over 24 years of experience in the radio broadcasting
industry, including an average of over 15 years with Cox Radio. The Company
believes that this experienced senior management team is well positioned to
manage larger radio station clusters and take advantage of new opportunities
arising in the U.S. radio broadcasting industry.
<PAGE>   4

RECENT AND PENDING TRANSACTIONS

  Orlando Acquisition

     In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando
Acquisition resulted in a pre-tax gain of approximately $49 million. In addition
to receiving the three Orlando stations, Cox Radio also received cash proceeds
of approximately $20 million. Prior to the NewCity Acquisition, the Orlando
stations were operated by NewCity since July 1996 under a local marketing
agreement ("LMA").

  Tampa Acquisition

     In March 1997, the Company acquired WFNS-AM in Tampa for an aggregate
consideration of $1.5 million (the "Tampa Acquisition"). The Company had been
operating this station pursuant to an LMA or a joint sales agreement ("JSA")
since June 1995.

  Los Angeles Acquisition

     In April 1997, Cox Radio completed its acquisition of the license and
certain assets of KRTO-FM in Los Angeles for $19 million in cash (the "Los
Angeles Acquisition").

  NewCity Acquisition

     In April 1997, the Company, through the merger of its wholly owned
subsidiary New Cox Radio II, Inc. with and into NewCity, with NewCity surviving
as a wholly owned subsidiary of Cox Radio, acquired all of the issued and
outstanding capital stock of NewCity. Cox Radio purchased the stock of NewCity
for an aggregate consideration of approximately $253 million, including
approximately $87 million in assumption of NewCity indebtedness and
approximately $3 million in working capital adjustments. To consummate the
NewCity Acquisition, the Company utilized approximately $56 million of amounts
due from CEI and borrowed approximately $110 million pursuant to the Company's
$300 million, five-year, senior, unsecured revolving credit facility with
certain banks (the "Credit Facility"), including Texas Commerce Bank National
Association, as Administrative Agent. On April 2, 1997, NewCity was merged with
and into the Company, with the Company as the surviving corporation. NewCity's
subsidiaries were subsequently consolidated into Cox Radio. In October 1997, the
Company disposed of the assets of American Comedy Network, a former subsidiary
of NewCity, for aggregate proceeds of approximately $1.1 million including
certain non-compete agreements.

  Birmingham Transactions

     In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in
Birmingham, Alabama (the "Birmingham Acquisition I") for an aggregate
consideration of $17 million, consisting of $5 million paid for an option to
purchase and $12 million issued to the seller as a Station Investment Note
Receivable. See further discussion at Note 14 to the Company's Consolidated
Financial Statements included elsewhere herein. On August 1, 1997, the Company
began operating WBHJ-FM and WBHK-FM under an LMA. The Company expects to
consummate this acquisition during the second half of 1998.

     In May 1997, the Company agreed to acquire WENN-FM and WAGG-AM, also in
Birmingham, Alabama, for consideration of $15 million (the "Birmingham
Acquisition II"). In July 1997, the Company assigned its right to purchase
WENN-FM for consideration of $14.5 million to a third party (the "Birmingham
Disposition"). The Company consummated both the Birmingham Acquisition II and
the Birmingham Disposition during November 1997.

     In September 1997, the Company announced that it had entered into an
agreement in principle with a third party to construct, program and own WEDA-FM,
a new Class A FM radio station in Homewood, Alabama to serve the Birmingham
market (the "Birmingham Acquisition III"). Consummation of the transaction is
contingent upon FCC approval of the application for the new construction permit
and settlement of the comparative hearing between three applicants for the
construction permit. As part of the agreement in

                                        2
<PAGE>   5

principle, the third party would construct the station, the Company would enter
into an LMA for the new station and the Company would acquire an option to
purchase the station for an aggregate consideration of $5.5 million and the
assumption of debt in an amount not to exceed $200,000.

  San Antonio Transactions

     In September 1997, the Company acquired KISS-FM, KSMG-FM and KLUP-AM in San
Antonio, Texas for an aggregate consideration of $30.4 million plus certain
non-compete agreements (the "San Antonio Acquisition I").

     In December 1997, the Company acquired an option to purchase KRIO-FM
serving the San Antonio market. The Company entered into an agreement to assign
this option in January 1998 for an aggregate consideration of $250,000 (the "San
Antonio Disposition").

     In March 1998, the Company acquired KONO-FM and KONO-AM in San Antonio for
$23 million (the "San Antonio Acquisition II").

  Dayton Acquisition

     In February 1998, the Company entered into an agreement to acquire WCLR-FM,
WZLR-FM and WPTW-AM serving the Dayton, Ohio market for approximately $6 million
(the "Dayton Acquisition"). The Company has been operating these stations
pursuant to an LMA since December 1997. In addition, the Company has entered
into a Station Investment Note Receivable with the seller for $6 million. See
further discussion at Note 14 to the Company's Consolidated Financial Statements
included elsewhere herein. Pending certain regulatory approvals, the Company
anticipates closing the Dayton Acquisition in the second half of 1998.

  Orlando Exchange

     In February 1998, the Company entered into an agreement to acquire the
assets of WTLN-FM serving the Orlando, Florida market for consideration of $14.5
million. In a related transaction, the Company entered into an agreement to
dispose of the assets of WZKD-AM, also serving the Orlando, Florida market for
$.5 million (the "Orlando Exchange"). Pending certain regulatory approvals, the
Company expects to complete the Orlando Exchange in the second half of 1998.

     The Birmingham Acquisition III, the San Antonio Disposition, the Dayton
Acquisition and the Orlando Exchange are collectively referred to herein as the
"Pending Transactions".

     The following table summarizes certain information relating to radio
stations owned or operated by the Company, assuming the consummation of the
Pending Transactions:

<TABLE>
<CAPTION>
                                                                        AUDIENCE                    DEMOGRAPHIC GROUP
                                                                        SHARE IN       RANK IN       (ADULTS 25-54)
                                                         TARGET          TARGET        TARGET       -----------------
  MARKET AND STATION                                  DEMOGRAPHIC      DEMOGRAPHIC   DEMOGRAPHIC    AUDIENCE
    CALL LETTERS(1)               FORMAT                 GROUP            GROUP         GROUP         SHARE      RANK
  ------------------              ------              -----------      -----------   -----------   -----------   -----
<S>                      <C>                        <C>                <C>           <C>           <C>           <C>
LOS ANGELES
  KFI-AM                 Talk                       Adults 35-54            4.5           5            3.5         7
  KOST-FM                Adult Contemporary         Women 25-44             5.0           3            4.0         5
  KACE-FM                R&B Oldies                 African American       11.4(2)        4(2)         1.6(2)     22(2)
                                                    Adults 35-54
  KRTO-FM                R&B Oldies                 African American         --          --             --        --
                                                    Adults 35-54
ATLANTA
  WSB-AM                 News/Talk                  Adults 35-64           11.4           1            8.0         2
  WSB-FM                 Adult Contemporary         Women 25-54             7.9           4            6.1         6
  WJZF-FM                Jazz                       Men 25-54               3.6          13            3.4        13
  WCNN-AM(3)             News/Talk                  Adults 35-64            1.2          18            1.0        19
</TABLE>

                                        3
<PAGE>   6

<TABLE>
<CAPTION>
                                                                        AUDIENCE                    DEMOGRAPHIC GROUP
                                                                        SHARE IN       RANK IN       (ADULTS 25-54)
                                                         TARGET          TARGET        TARGET       -----------------
  MARKET AND STATION                                  DEMOGRAPHIC      DEMOGRAPHIC   DEMOGRAPHIC    AUDIENCE
    CALL LETTERS(1)               FORMAT                 GROUP            GROUP         GROUP         SHARE      RANK
  ------------------              ------              -----------      -----------   -----------   -----------   -----
<S>                      <C>                        <C>                <C>           <C>           <C>           <C>
MIAMI
  WFLC-FM                Hot Adult Contemporary     Adults 25-54            4.5           6            4.5         6
  WHQT-FM                Urban Adult Contemporary   Adults 25-54            6.5           1            6.5         1
TAMPA
  WWRM-FM                Soft Adult Contemporary    Women 35-54            10.9           1            6.8         3
  WCOF-FM                70's Oldies                Adults 25-44            7.5(4)        5(4)         6.7(4)      4(4)
  WFNS-AM                70's Oldies                Adults 25-44             --          --             --        --
  WSUN-AM                News                       Adults 25-54             .4          27             .4        27
ORLANDO
  WDBO-AM                News/Talk                  Adults 35-64            6.3           5            4.1        13
  WWKA-FM                Country                    Adults 25-54            8.4           1            8.4         1
  WCFB-FM                Urban Adult Contemporary   Women 25-54             5.3(5)        7(5)         4.7(5)     10(5)
  WZKD-AM(6)             Urban Adult Contemporary   Women 25-54              --          --             --        --
  WHOO-AM                Standards                  Adults 55+             14.0           2             .8        21
  WHTQ-FM                Classic Rock               Men 25-54               8.0           2            5.3         8
  WMMO-FM                Rock Adult Contemporary    Adults 25-54            6.2           5            6.2         5
  WTLN-FM(7)             Religious                                          1.1          18            1.1        18
SAN ANTONIO
  KCYY-FM                Country                    Adults 25-54            6.2           6            6.2         6
  KKYX-AM                Classic Country            Adults 35-64            2.5          15            1.2        20
  KCJZ-FM                Smooth Jazz                Adults 25-54            3.6          11            3.6        11
  KISS-FM                Adult Oriented Rock        Adults 18-49            7.1           4            4.7         9
  KSMG-FM                Hot Adult Contemporary     Adults 25-54            7.2           3            7.2         3
  KLUP-AM                Adult Standards            Adults 35-64            2.2          16             .7        26
  KONO-FM(8)             Oldies                     Adults 25-54            6.9(9)        4(9)         6.9(9)      4(9)
  KONO-AM(8)             Oldies                     Adults 25-54             --          --             --        --
LOUISVILLE
  WRKA-FM                Oldies                     Adults 35-54            8.6           4            6.3         4
  WRVI-FM                Rock Adult Contemporary    Adults 25-49            1.9          15            1.7        16
  WLSY-FM                R&B Oldies                 Adults 35-54             .5          27             .5        26
BIRMINGHAM(10)
  WZZK-FM                Country                    Adults 25-54           11.6           1           11.6         1
  WEZN-AM(11)            Stardust                   Adults 50+              7.8           4            1.7        16
  WODL-FM                Oldies                     Adults 25-54            6.7           6            6.7         6
  WBHJ-FM(3)             Contemporary Hit Urban     Adults 18-34           13.6           1            4.5         8
  WBHK-FM(3)             Urban Adult Contemporary   Adults 25-54            8.1           3            8.1         3
  WAGG-AM                Gospel                     Adults 25-54            3.7          11            3.7        11
DAYTON
  WHIO-AM                News/Talk                  Adults 35-64            5.4           4            3.9         8
  WHKO-FM                Country                    Adults 25-54           14.2           1           14.2         1
  WCLR-FM(3)(12)         Oldies                     Adults 35-54            6.4(13)       4(13)        4.7(13)     7(13)
  WZLR-FM(3)(12)         Oldies                     Adults 35-54             --          --             --        --
  WPTW-AM(3)(12)         Local Programming          Adults 35+               .3          39             --        --
TULSA
  KRMG-AM                News/Talk                  Adults 25-54            7.2           4            7.2         4
  KWEN-FM                Country                    Adults 25-54           11.1           2           11.1         2
  KJSR-FM                70's Oldies                Adults 25-54            8.1           3            8.1         3
  KRAV-FM                Adult Contemporary         Adults 25-54            5.7           7            5.7         7
  KGTO-AM                Standards                  Adults 55+             10.2           3             .7        20
BRIDGEPORT
  WEZN-FM                Adult Contemporary         Adults 25-54           14.6(14)       1(14)       14.6(14)     1(14)
SYRACUSE
  WSYR-AM                News/Talk                  Adults 35-64            8.6           4            5.4         7
  WYYY-FM                Adult Contemporary         Adults 25-54            9.8           2            9.8         2
  WBBS-FM                Country                    Adults 25-54           12.1           1           12.1         1
  WHEN-AM                Sports/Talk                Men 25-54               3.6           9            2.1        14
  WWHT-FM                Adult Hit Radio            Women 18-34            10.1           4            2.7        11
</TABLE>

Source: Arbitron 1997 Market Reports four-book average

                                        4
<PAGE>   7

---------------

 (1) Metropolitan market served; city of license may differ.
 (2) Audience share and audience rank information for KACE-FM and KRTO-FM are
     combined because the stations are simulcast.
 (3) Station operated by Cox Radio pursuant to an LMA.
 (4) Audience share and audience rank information for WCOF-FM and WFNS-AM are
     combined because the stations are simulcast.
 (5) Audience share and audience rank information for WCFB-FM and WZKD-AM are
     combined because the stations are simulcast.
 (6) Station to be sold by Cox Radio pursuant to the Orlando Exchange.
 (7) Station to be acquired by Cox Radio pursuant to the Orlando Exchange.
 (8) Station acquired by Cox Radio pursuant to the San Antonio Acquisition II.
 (9) Audience share and audience rank information for KONO-FM and KONO-AM are
     combined because the stations are simulcast.
(10) WEDA-FM is excluded from this listing because the FCC has not yet granted
     the application for the new construction permit.
(11) Audience share and rank data is based only on Arbitron Market Report for
     Fall 1997 because format was only applicable for that period.
(12) Station to be acquired by Cox Radio pursuant to the Dayton Acquisition.
(13) Audience share and audience rank information for WCLR-FM and WZLR-FM are
     combined because the stations are simulcast.
(14) Audience share and rank data is based only on Arbitron Market Reports for
     Fall 1997 and Spring 1997 because Arbitron does not produce Summer and
     Winter Arbitron Market Reports for the Bridgeport/Fairfield County market.

OPERATING STRATEGY

     The following is a description of the key elements of the Company's
operating strategy:

  Clustering of Stations

     Cox Radio operates its stations in clusters to (i) enhance net revenue
growth by increasing the appeal of the Company's stations to advertisers and
enabling such stations to compete more effectively with other forms of
advertising and (ii) achieve operating efficiencies by consolidating broadcast
facilities, eliminating duplicative positions in management and production and
reducing overhead expenses. Management believes that operating several radio
stations in each of its markets will enable its sales teams to offer advertisers
more attractive advertising packages. Furthermore, as radio groups achieve
significant audience share, they can deliver to advertisers the audience reach
that historically only television and newspapers could offer, with the added
benefit of frequent exposure to advertisers' target customers. Management
believes that the Company's clusters of stations, and their corresponding
audience share, provide opportunities to capture an increased share of total
advertising revenue in each of the Company's markets.

  Development of Underperforming Stations

     The Company's management has demonstrated its ability to acquire
underperforming radio stations and develop them into consistent ratings and
revenue leaders. The Company's historic margins reflect the acquisition and
continued development of underperforming stations, as well as the fact that
increases in net revenue are typically realized subsequent to increases in
audience share. Management believes that a number of the Company's stations have
significant growth opportunities or turnaround potential and can therefore be
characterized as developing stations.

  Implementation of the Company's Management Philosophy

     The Company's local station operations are supported by a lean corporate
staff which employs a management philosophy emphasizing (i) market research and
targeted programming; (ii) a customer-focused selling strategy; and (iii)
marketing and promotional activities.

     (i) Market Research and Targeted Programming.  Cox Radio's research,
programming and marketing strategy combines extensive research with an
assessment of competitors' vulnerabilities and market dynamics in order to
identify specific audience opportunities within each market. Cox Radio also
retains consultants and research organizations to continually evaluate listener
preferences. Using this information, Cox Radio tailors the programming,
marketing and promotions of each Cox Radio station to maximize its appeal to its
target audience. Cox Radio's disciplined application of market research enables
each of its stations to be responsive to the changing preferences of its
targeted listeners. This approach focuses on the needs of the listener and its
community and is designed to improve ratings and maximize the impact of
advertising for the Company's customers.

                                        5
<PAGE>   8

     Through its research, programming and marketing, Cox Radio also seeks to
create a distinct and marketable local identity for each of its stations in
order to enhance audience share and listener loyalty and to protect against
direct format competition. To achieve this objective, the Company employs and
promotes distinct high-profile on-air personalities and local sports programming
at many of its stations. For example, the Company broadcasts (i) "Dr. Laura" in
Los Angeles, Atlanta, Dayton, Syracuse, Tulsa and Orlando; (ii) "Rush Limbaugh"
in Los Angeles, Orlando, Syracuse and Tulsa; (iii) the Atlanta Braves in Atlanta
and Tampa; and (iv) the Orlando Magic in Orlando.

     (ii) Customer-Focused Selling Strategy.  The Company has implemented a
unique, customer-focused approach to selling advertising known as the
Consultative Selling System. The Company's sales personnel are trained to
approach each advertiser with a view towards solving the marketing needs of the
customer. In this regard, the sales staff consults with customers, attempts to
understand their business goals and offers comprehensive marketing solutions,
including the use of radio advertising. Instead of merely selling station
advertising time, the Company's sales personnel are encouraged to develop
innovative marketing strategies for the station's advertising customers.

     (iii) Marketing and Promotional Activities.  The Company's stations
regularly engage in significant local promotional activities, including
advertising on local television and in local print media, participating in
telemarketing and direct mailings and sponsoring contests, concerts and events.
Special events may include charitable athletic events, events centered around a
major local occasion or local ethnic group and special community or family
events. Cox Radio also engages in joint promotional activities with other media
in their markets to further leverage the Company's promotional spending. These
promotional efforts help the Company's stations add new listeners and increase
the amount of time spent listening to the stations.

  Strong Management Teams

     In addition to relying upon its experienced senior operating management,
the Company places great importance on the hiring and development of strong
local management teams and has been successful in retaining experienced
management teams that have strong ties to their communities and customers.

     The Company invests significant resources in identifying and training
employees to create a talented team of managers at all levels of station
operations. These resources include: (i) Gallup/SRI, which helps the Company
identify and select talented individuals for management and sales positions;
(ii) Center for Sales Strategy ("CSS"), an independent sales and management
training company which trains and develops managers and sales executives; and
(iii) a program of leadership development conducted by the Company's senior
operating management and outside consultants.

     Local managers are empowered to run the day-to-day operations of their
stations and to develop and implement policies that will improve station
performance and establish long-term relationships with listeners and
advertisers. The compensation of the senior operating management team and local
station managers is dependent upon financial performance and linked to
participation in the Company's Long-Term Incentive Plan. See Note 10 to the
Company's Consolidated Financial Statements included elsewhere herein.

ACQUISITION STRATEGY

     During the last several years, the Company has implemented its clustering
strategy through the acquisition of radio stations in several of its existing
markets. Management believes that recent changes in federal regulations will
allow Cox Radio to continue to pursue its acquisition strategy. The
Telecommunications Act of 1996 (the "1996 Act") removed the limit on the number
of radio stations an operator may own nationwide and increased the number of
radio stations an operator may own in a single market. As a result of this
legislation, the competitive landscape in the radio broadcasting industry is
changing. Management believes that larger, well-capitalized companies with
experienced management, such as Cox Radio, will be best positioned to take
advantage of this changing environment. Management considers the following
factors when making an acquisition.

                                        6
<PAGE>   9

  Market Selection Considerations

     Cox Radio's acquisition strategy has been focused on clustering stations in
its existing markets. In the future, Cox Radio will seek to make opportunistic
acquisitions in additional markets in which the Company believes that it can
cost-effectively achieve a leading position in terms of audience and revenue
share. Management also believes that Cox Radio will have the financial resources
and management expertise to continue to pursue its acquisition strategy. Certain
future acquisitions may be limited by the multiple and cross-ownership rules of
the Federal Communications Commission ("FCC"). See "-- Federal Regulation of
Broadcasting -- General Ownership Matters" and "-- Proposed Changes."

  Station Considerations

     Cox Radio expects to concentrate on acquiring radio stations that offer,
through application of Cox Radio's operating philosophy, the potential for
improvement in the station's performance, particularly its broadcast cash flow.
Such stations may be in various stages of development, presenting Cox Radio with
an opportunity to apply its management techniques and to enhance asset value. In
evaluating potential acquisitions, the Company considers the strength of a
station's broadcast signal. A powerful broadcast signal enhances delivery range
and clarity, thereby influencing listener preference and loyalty. Cox Radio also
assesses the strategic fit of an acquisition with its existing clusters of radio
stations. When entering a new market, Cox Radio expects to acquire a "platform"
upon which to expand its portfolio of stations and to build a leading cluster of
stations.

INDUSTRY OVERVIEW

     The primary source of revenues for radio stations is generated from the
sale of advertising time to local and national spot advertisers and national
network advertisers. During the past decade, local advertising revenue as a
percentage of total radio advertising revenue in a given market has ranged from
approximately 75% to 80%. The growth in total radio advertising revenue tends to
be fairly stable and has generally grown at a rate faster than the Gross
National Product ("GNP"). With the exception of 1991, when total radio
advertising revenue fell by approximately 2.8% compared to the prior year,
advertising revenue has risen in each of the 15 years through 1995 (the most
recent year for which this information is available) more rapidly than both
inflation and the GNP. Total domestic radio advertising revenue in 1995 of $11.5
billion, as reported by the RAB, was at its highest level in the industry's
history.

     According to the RAB's Radio Marketing Guide and Fact Book for Advertisers,
1997, radio reaches approximately 95% of all Americans over the age of 12 every
week. More than one-half of all radio listening is done outside the home, in
contrast to other advertising media, and three out of four adults are reached by
car radio each week. The average listener spends approximately three hours and
20 minutes per day listening to radio. Most radio listening occurs during the
morning, particularly between the time a listener wakes up and the time the
listener reaches work. Radio programming during this "morning drive time" period
reaches more than 83% of people over the age of 12 on a weekly basis, and, as a
result, radio advertising sold during this period achieves premium advertising
rates. Radio listeners have gradually shifted over the years from AM to FM
stations. FM reception, as compared to AM, is generally clearer and provides
greater tonal range and higher fidelity. In comparison to AM, FM's listener
share is now in excess of 75%, despite the fact that the number of AM and FM
commercial stations in the United States is approximately equal.

     Radio is considered an efficient, cost-effective means of reaching
specifically identified demographic groups. Stations are typically classified by
their on-air format, such as country, adult contemporary, oldies and news/talk.
A station's format and style of presentation enables it to target certain
demographics. By capturing a specific share of a market's radio listening
audience, with particular concentration in a targeted demographic, a station is
able to market its broadcasting time to advertisers seeking to reach a specific
audience. Advertisers and stations utilize data published by audience measuring
services, such as Arbitron, to estimate how many people within particular
geographical markets and demographics listen to specific stations.

     The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular station and the local competitive environment.
                                        7
<PAGE>   10

Although the number of advertisements broadcast during a given time period may
vary, the total number of advertisements broadcast on a particular station
generally does not vary significantly from year to year.

     A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station
usually will engage a firm that specializes in soliciting radio advertising
sales on a national level. National sales representatives obtain advertising
principally from advertising agencies located outside the station's market and
receive commissions based on the revenue from the advertising obtained.

COMPETITION; CHANGES IN THE BROADCASTING INDUSTRY

     The radio broadcasting industry is a highly competitive business. The
success of each of the Company's stations depends largely upon its audience
ratings and its share of the overall advertising revenue within its market. The
Company's radio stations compete for listeners directly with other radio
stations in their respective markets primarily on the basis of program content
that appeals to a target demographic group. By building a strong listener base
consisting of a specific demographic in each of its markets, Cox Radio is able
to attract advertisers seeking to reach those listeners. The Company's stations
compete for advertising revenue directly with other radio stations and with
other electronic and print media within their respective markets.

     Factors that are material to a station's competitive position include
management experience, the station's audience share rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance, and the number and characteristics of other stations in the market
area. Cox Radio attempts to improve its competitive position with promotional
campaigns aimed at the demographics targeted by its stations and by sales
efforts designed to attract advertisers. Recent changes in the law and in FCC
rules and policies have increased the number of radio stations a broadcaster may
own in a given market and permit, within limits, joint arrangements with other
stations in a market relating to programming, advertising sales, and station
operations. Management believes that radio stations that elect to take advantage
of these opportunities 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 a single entity may
own and 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 FCC's multiple ownership rules, which regulate the number of stations
that may be owned and controlled by a single entity. The FCC also recently
initiated a rulemaking proceeding to consider the use of competitive bidding
procedures (auctions) to award licenses or construction permits for new
broadcast stations to the highest bidder, and may also subject to auction all
pending and future applications by licensees to improve or otherwise modify
their existing facilities, where such applications would be mutually exclusive
with other licensees' applications.

     The Company's stations compete for advertising revenue with other radio
stations and with other electronic and print media. Potential advertisers can
substitute advertising through broadcast television, cable television systems
(which can offer concurrent exposure on a number of cable networks to enlarge
the potential audience), daily, weekly, and free-distribution newspapers, other
print media, direct mail, and on-line computer services for radio advertising.
Competing media commonly target the customers of their competitors, and
advertisers regularly shift dollars from radio to these competing media and vice
versa. Accordingly, there can be no assurance that any of the Company's stations
will be able to maintain or increase its current audience ratings and
advertising revenue share. In addition, the radio broadcasting industry is
subject to competition from new media technologies that are being developed or
introduced, such as the delivery of audio programming by cable television
systems, by satellite digital audio radio service ("satellite DARS" or "SDARS"),
and by digital audio broadcasting ("DAB"). DAB and SDARS provide for the
delivery by terrestrial or satellite means of multiple new audio programming
formats with compact disc quality sound to local and national audiences. The
delivery of information through the Internet also could create a new form of
competition. The radio broadcasting industry historically has grown despite the
introduction of new technologies for the delivery of entertainment and
information, such as broadcast television, cable

                                        8
<PAGE>   11

television, audio tapes and compact discs. A growing population and greater
availability of radios, particularly car and portable radios, have contributed
to this growth. There can be no assurance, however, that the development or
introduction in the future of any new media technology will not have an adverse
effect on the radio broadcasting industry.

     Cox Radio cannot predict what other matters might be considered in the
future by the FCC, nor can it assess in advance what impact, if any, the
implementation of any FCC proposals or changes might have on its business.

FEDERAL REGULATION OF RADIO BROADCASTING

     The ownership, operation and sale of radio stations, including those
licensed to Cox Radio, are subject to the jurisdiction of the FCC, which acts
under authority granted by the Communications Act of 1934, as amended ("the
Communications Act"). Among other things, the FCC assigns frequency bands for
broadcasting, determines the particular frequencies, locations and operating
power of stations, issues, renews and modifies station licenses, determines
whether to approve changes in ownership or control of station licenses,
regulates equipment used by stations, adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation, program
content, employment practices, and business of stations, and has the power to
impose penalties, including license revocations, for violations of its rules or
the Communications Act.

     The 1996 Act, which significantly amended the Communications Act in
numerous respects, dramatically changed the ground rules for competition and
regulation in virtually all sectors of the telecommunications industry,
including broadcasting, local and long-distance telephone services, cable
television services and telecommunications equipment manufacturing. In addition,
the 1996 Act imposed numerous requirements on the FCC to launch new inquiries
and rulemaking proceedings, perhaps 80 in all, involving a multitude of
telecommunications issues, including those described herein that will directly
affect the broadcast industry. The 1996 Act mandated that such rulemaking
proceedings be completed within certain time frames, in some cases as short as
six months. Some of these proceedings have been completed while others remain
pending.

     The following is a brief summary of certain provisions of the
Communications Act, as amended by the 1996 Act, and of specific FCC rules and
policies. Reference should be made to the Communications Act, FCC rules and
public notices and rulings of the FCC for further information concerning the
nature and extent of FCC regulation of broadcast stations.

  License Renewal

     Broadcast station licenses are subject to renewal upon application to the
FCC. Pursuant to Congress' mandate in the 1996 Act, the FCC has adopted a rule
extending radio station license terms from seven to eight years. All licenses
renewed as part of the current renewal cycle will have a term of eight years.
The FCC will renew a broadcast license if it determines that the "public
convenience, interest or necessity" will be served thereby. During a specified
period after an application for renewal of a broadcast station license has been
filed, persons objecting to the renewal may file petitions to deny the
application. Competing applications for the license, however, will not be
accepted unless the current licensee's renewal application is denied. Also,
during the period when a renewal application is pending (generally four months
prior to expiration of the license), the transferability of the applicant's
license may be restricted.

     Historically, Cox Radio's management has not experienced any material
difficulty in obtaining renewal from the FCC of any of the broadcast licenses
for stations under its control.

                                        9
<PAGE>   12

     The following table sets forth selected information concerning each of the
stations owned, or operated pursuant to a LMA by Cox Radio, including the date
on which each such station's FCC license expires (a station may continue to
operate beyond the expiration date if a timely-filed license renewal application
is pending):

<TABLE>
<CAPTION>
                                 EXPIRATION
MARKET AND STATION                 DATE OF              HEIGHT ABOVE
 CALL LETTERS(1)     FREQUENCY     LICENSE      CLASS  AVERAGE TERRAIN      POWER
------------------   ---------   ----------     -----  ---------------      -----
<S>                  <C>        <C>             <C>    <C>              <C>
LOS ANGELES
  KFI-AM             640 KHz       12/1/05        A    N.A.             50 kw
  KOST-FM            103.5 MHz     12/1/05        B    949 m            12.5 kw
  KACE-FM            103.9 MHz     12/1/05        A    119 m            1.65 kw
  KRTO-FM            98.3 MHz      12/1/05        A    296 m            .65 kw
ATLANTA
  WSB-AM             750 KHz        4/1/04        A    N.A.             50 kw
  WSB-FM             98.5 MHz       4/1/04        C    311 m            100 kw
  WJZF-FM            104.1 MHz      4/1/04       C1    371 m            60 kw
  WCNN-AM(2)         680 KHz        4/1/04        B    N.A.             50 kw day
                                                                        10 kw night
MIAMI
  WFLC-FM            97.3 MHz       2/1/04        C    307              100 kw
  WHQT-FM            105.1 MHz      2/1/04        C    307              100 kw
TAMPA
  WWRM-FM            94.9 MHz       2/1/04        C    393 m            95 kw
  WCOF-FM            107.3 MHz      2/1/04       C1    182 m            100 kw
  WSUN-AM            620 KHz        2/1/04        B    N.A.             5 kw
  WFNS-AM            910 KHz        2/1/04        B    N.A.             5 kw
ORLANDO
  WDBO-AM            580 KHz        2/1/04        B    N.A              5 kw
  WWKA-FM            92.3 MHz       2/1/04        C    408 m            98 kw
  WCFB-FM            94.5 MHz       2/1/04        C    448 m            96 kw
  WZKD-AM(3)         950 KHz        2/1/04        B    N.A.             5 kw
  WHTQ-FM            96.5 MHz       2/1/04        C    487 m            100 kw
  WMMO-FM            98.9 MHz       2/1/04       C2    134 m            38 kw
  WHOO-AM            990 KHz        2/1/04        B    N.A.             50 kw day
                                                                        5 kw night
  WTLN-FM(4)         95.3 MHz       2/1/04        A    96 m             6 kw
SAN ANTONIO
  KCYY-FM            100.3 MHz      8/1/05        C    300 m            98 kw
  KCJZ-FM            106.7 MHz      8/1/05        C    310 m            100 kw
  KKYX-AM            680 KHz        8/1/05        B    N.A.             50 kw day
                                                                        10 kw night
  KISS-FM            99.5 MHz       8/1/05        C    339 m            100 kw
  KSMG-FM            105.3 MHz      8/1/05        C    381 m            95 kw
  KLUP-AM            930 KHz        8/1/05        B    N.A.             5 kw
  KONO-AM(5)         860 KHz        8/1/05        B    N.A.             5 kw day
                                                                        0.9 kw night
  KONO-FM(5)         101.1 MHz      8/1/05       C1    302 m            97 kw
LOUISVILLE
  WRKA-FM            103.1 MHz      8/1/04        A    95 m             6 kw
  WLSY-FM(6)         94.7 MHz       8/1/04        A    118 m            2.15 kw
  WRVI-FM(7)         105.9 MHz      8/1/04        A    100 m            3 kw
BIRMINGHAM
  WZZK-FM            104.7 MHz      4/1/04        C    396 m            99 kw
  WODL-FM            106.9 MHz      4/1/04        C    351 m            99 kw
  WEZN-AM(8)         610 KHz        4/1/04        B    N.A.             5 kw day
                                                                        1 kw night
  WAGG-AM            1320 KHz       4/1/04        D    N.A.             5 kw day
                                                                        0.111 kw night
  WBHK-FM(2,9)       98.7 MHz       4/1/04       C3    200 m            6.2 kw
  WBHJ-FM(2,9)       95.7 MHz       4/1/04       C1    299 m            100 kw
</TABLE>

                                       10
<PAGE>   13

<TABLE>
<CAPTION>
                                 EXPIRATION
MARKET AND STATION                 DATE OF              HEIGHT ABOVE
 CALL LETTERS(1)     FREQUENCY     LICENSE      CLASS  AVERAGE TERRAIN      POWER
------------------   ---------   ----------     -----  ---------------      -----
<S>                  <C>        <C>             <C>    <C>              <C>
DAYTON
  WHIO-AM            1290 KHz      10/1/04        B    N.A.             5 kw
  WHKO-FM            99.1 MHz      10/1/04        B    325 m            50 kw
  WCLR-FM(2)(10)     95.7 MHz      10/1/04        B    145 m            50 kw
  WPTW-AM(2)(10)     1570 KHz      10/1/04        B    N.A.             0.25 kw
  WZLR-FM(2)(10)     95.3 MHz      10/1/04        A    98 m             6 kw
TULSA
  KWEN-FM            95.5 MHz       6/1/05        C    405 m            96 kw
  KJSR-FM            103.3 MHz      6/1/05        C    390 m            100 kw
  KRAV-FM            96.5 MHz       6/1/05        C    405 m            96 kw
  KGTO-AM            1050 KHz       6/1/05        D    N.A.             1 kw day
                                                                        0.022 kw night
  KRMG-AM            740 KHz        6/1/05        B    N.A.             50 kw day
                                                                        25 kw night
BRIDGEPORT
  WEZN-FM(11)        99.9 MHz       4/1/98        B    204 m            27.5 kw
SYRACUSE
  WSYR-AM(11)        570 KHz        6/1/98        B    N.A.             5 kw
  WHEN-AM(11)        620 KHz        6/1/98        B    N.A.             5 kw day
                                                                        1 kw night
  WYYY-FM(11)        94.5 MHz       6/1/98        B    198 m            100 kw
  WBBS-FM(11)        104.7 MHz      6/1/98        B    150 m            50 kw
  WWHT-FM(11)        107.9 MHz      6/1/98        B    152 m            50 kw
</TABLE>

---------------

 (1) Metropolitan market served; city of license may differ.
 (2) Cox Radio provides programming to this station pursuant to an LMA.
 (3) Station to be sold by Cox Radio pursuant to the Orlando Exchange.
 (4) Station to be acquired by Cox Radio pursuant to the Orlando Exchange.
 (5) Station acquired by Cox Radio pursuant to the San Antonio Acquisition II.
 (6) The prior call sign of this station was WRVI-FM.
 (7) The prior call sign of this station was WHTE-FM.
 (8) The prior call sign of this station was WZZK-AM.
 (9) Cox Radio has an option to acquire this station.
(10) Station to be acquired by Cox Radio pursuant to the Dayton Acquisition.
(11) Cox Radio has filed an application with the FCC to renew this license. The
     renewal application is pending FCC approval as of March 19, 1998.

  General Ownership Matters

     In determining whether to grant or renew a broadcast license, the FCC
considers a number of factors pertaining to the licensee, including compliance
with the Communications Act's limitations on alien (foreign) ownership,
compliance with various rules limiting common ownership of broadcast, cable and
newspaper properties, and the "character" of the licensee and those persons
holding "attributable" interests in the licensee. In the case of corporations
holding broadcast licenses, the interests of officers, directors and those who,
directly or indirectly, have the right to vote 5% or more of the corporation's
voting stock are generally deemed to be attributable, as are positions of an
officer or director of a corporate parent of a broadcast licensee. The FCC
treats all partnership interests as attributable, except for those limited
partnership interests that are "insulated" by the terms of the limited
partnership agreement from "material involvement" in the media related
activities of the partnership under FCC policies. Stock interests held by
certain "passive institutional investors" only become attributable with the
ownership of 10% or more of the stock of a corporation holding a broadcast
license.

     Cox Radio's indirect parent, CEI, has attributable ownership interests in
television stations located in Orlando, Florida; Charlotte, North Carolina;
Pittsburgh, Pennsylvania; Dayton, Ohio; Atlanta, Georgia; Oakland, California;
El Paso, Texas; Seattle, Washington; and Reno, Nevada. CEI also has attributable

                                       11
<PAGE>   14

ownership interests in daily newspapers located in Grand Junction, Colorado;
Palm Beach, Florida; Atlanta, Georgia; Greenville, Rocky Mount and Elizabeth
City, North Carolina; Dayton and Springfield, Ohio; and Austin, Longview,
Lufkin, Waco, Nacogdoches, Marshall and Jefferson, Texas. CEI has a
non-attributable ownership interest in a daily newspaper located in Daytona
Beach, Florida. Paul J. Rizzo, a director of CEI, is a director of The
McGraw-Hill Companies, Inc. which, through a wholly-owned subsidiary, owns and
operates television stations KMGH-TV, Denver, Colorado; WRTV, Indianapolis,
Indiana; KERO-TV, Bakersfield, California; and KGTV, San Diego, California. Mr.
Rizzo has no involvement in the day-to-day operations and management of any of
the McGraw-Hill television stations, only one of which, KERO-TV, is located in a
market (Los Angeles, CA) in which Cox Radio owns radio stations. None of the
other officers, directors or, to Cox Radio's knowledge, 5% or greater
shareholders of the voting stock of Cox Radio or of its subsidiaries has any
attributable interest in any broadcast stations other than through Cox Radio and
its subsidiaries.

     The Communications Act prohibits the assignment of a license or the
transfer of control of a broadcast licensee without the prior approval of the
FCC. To obtain the FCC's prior consent to assign or transfer a broadcast
license, appropriate applications must be filed with the FCC. Depending on
whether the application involves the assignment of the license or a "substantial
change" in ownership or control (e.g., the transfer of more than 50% of the
voting stock), the application may be required to go on public notice for a
period of approximately 30 days during which petitions to deny the application
may be filed by interested parties, including members of the public. 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 to any party other than the assignee or transferee specified in the
application.

     The FCC has a "cross-interest" policy that under certain circumstances
could prohibit a person or entity with an attributable interest in a broadcast
station or daily newspaper from having a "meaningful" non-attributable interest
in another broadcast station or daily newspaper in the same local market. Among
other things, "meaningful" interests could include significant equity interests
(including non-voting stock, voting stock, and limited partnership interests)
and significant employment positions. This policy may limit the permissible
acquisitions and investments Cox Radio may make and the permissible investments
a purchaser of Cox Radio's Common Stock may make or hold. If the FCC determines
that a stockholder of Cox Radio has violated this cross-interest policy, Cox
Radio may be unable to obtain from the FCC one or more authorizations needed to
conduct its radio station business and may be unable to obtain FCC consents for
certain future acquisitions. As part of its rulemaking proceedings soliciting
public comment on various proposals to modify its broadcast attribution
policies, the FCC also has requested public comment on whether to eliminate or
codify the remaining aspects of the cross-interest policy with respect to
significant employment positions, non-attributable equity interests and joint
venture arrangements.

  Local Radio Ownership Rule

     The FCC's local radio multiple ownership rule (the "Radio Contour Overlap
Rule") provides for certain limits on the number of radio stations that one
entity may own in a local geographic market. These limits are as follows:

          (a) In a radio market with 45 or more commercial radio stations, a
     party may own, operate or control up to eight commercial radio stations,
     not more than five of which are in the same broadcast service (i.e., AM or
     FM);

          (b) In a radio market with between 30 and 44 (inclusive) commercial
     radio stations, a party may own, operate or control up to seven commercial
     radio stations, not more than four of which are in the same broadcast
     service;

                                       12
<PAGE>   15

          (c) In a radio market with between 15 and 29 (inclusive) commercial
     radio stations, a party may own, operate or control up to six commercial
     radio stations, not more than four of which are in the same broadcast
     service; and

          (d) In a radio market with 14 or fewer commercial radio stations, a
     party may own, operate or control up to five commercial radio stations, not
     more than three of which are in the same broadcast service, except that a
     party may not own, operate or control more than 50 percent of the stations
     in the market.

     Notwithstanding the limits contained in the Radio Contour Overlap Rule, the
FCC has the authority to permit any person or entity to own, operate or control,
or have an attributable ownership interest in a number of radio broadcast
stations in excess of the rule's limits if the FCC determines that such
ownership, operation, control or interest will result in an increase in the
number of radio broadcast stations that are in operation. Although the 1996 Act,
which granted the FCC such authority, does not explain the intent or rationale
for this provision, Cox Radio believes that this exception may apply to
newly-constructed stations and/or stations that have been off the air but are
resuming broadcast operations.

     The FCC does not regulate the number of radio stations that may be owned or
controlled by one entity nationally.

  LMAs and JSAs

     Over the past several years, a significant number of radio broadcast
licensees, including Cox Radio, have entered into LMAs and JSAs. Under a typical
LMA, separately-owned and licensed radio stations serving a common geographic
area agree to function cooperatively in terms of programming, advertising sales,
etc., subject to the licensee of each station maintaining independent control
over the programming and station operations of its own station and subject to
compliance with other requirements of the FCC's rules and policies as well as
the antitrust laws. The LMA concept is referred to in the FCC rules as "time
brokerage" under which a licensee of a station is permitted to sell the right to
broadcast blocks of time on its station to an entity or entities which program
the blocks of time and sell their own commercial advertising announcements for
their own account during the time periods in question. Under a typical JSA, two
separately-owned radio stations serving a common service area agree to function
cooperatively in terms of advertising sales only. Under such an arrangement, the
licensee of one station sells the advertising time on the other licensee's
station for its own account but does not provide any programming to the other
licensee's station. This arrangement is also subject to ultimate control by the
latter licensee.

     LMAs between two radio stations in the same market that involve more than
15% of the brokered station's broadcast hours per week are treated as if the
brokered station were owned by the brokering station for purposes of the Radio
Contour Overlap Rule. A broadcast station, therefore, is not permitted to enter
into an LMA giving it the right to program more than 15% of the broadcast time,
on a weekly basis, of another local station which it would not be permitted to
own under the FCC's Radio Contour Overlap Rule. A JSA where no programming is
provided is not considered an attributable ownership interest under current FCC
rules. However, in connection with its broadcast attribution rulemaking
proceeding, the FCC is considering revising its attribution rules to deem
attributable, for purposes of applying the ownership rules, interests in JSAs
where the brokered and brokering stations serve substantially the same market.

  Cross-Ownership Rules

     The FCC's radio/television cross ownership rule (the "one to a market"
rule) generally prohibits a single individual or entity from having an
attributable interest in a television station and a radio station serving the
same market, although the FCC will waive this rule under certain circumstances
and is considering elimination of the rule or relaxing its policy for granting
waivers. The FCC's rules also prohibit the common ownership of a radio station
and a daily newspaper in the same market, and the FCC is considering changes to
what is currently a very limited waiver policy. Pursuant to these and certain
FCC multiple ownership rules discussed above, a purchaser of Cox Radio's Common
Stock who acquires an attributable interest in Cox Radio may violate and may
cause Cox Radio to violate the FCC's ownership rules if such purchaser also has
                                       13
<PAGE>   16

an attributable interest in other television or radio stations, or in daily
newspapers, depending on the number and location of those radio or television
stations or daily newspapers. Such a purchaser also may be restricted in the
companies in which it may invest, to the extent that those investments give rise
to an attributable interest. If a stockholder of Cox Radio who holds an
attributable interest in Cox Radio violates any of these ownership rules, Cox
Radio may be unable to obtain from the FCC one or more authorizations needed to
conduct its radio station business and may be unable to obtain FCC consent for
certain future acquisitions.

     Under the 1996 Act, the FCC is required to review all of its broadcast
ownership rules every other year to determine whether the public interest
dictates that such rules be repealed or modified.

  Programming and Operation

     The Communications Act requires broadcasters to serve the "public
interest." Since the late 1970s, the FCC gradually has relaxed or eliminated
many of the more formalized procedures it had developed to promote the broadcast
of certain types of programming responsive to the needs of a station's community
of license. However, licensees are still required to present programming that is
responsive to community problems, needs and interests and to maintain certain
records demonstrating such responsiveness. Stations also must follow various
rules promulgated under the Communications Act that regulate, among other
things, political advertising, sponsorship identification, the advertisement of
contests and lotteries, obscene and indecent broadcasts and technical
operations, including limits on radio frequency radiation. In addition,
broadcast licensees must develop and implement programs designed to promote
equal employment opportunities for minorities and women and must submit reports
to the FCC with respect to these matters annually and in connection with the
station's license renewal application.

     Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
short-term (i.e., less than the full term) renewals or, for particularly
egregious violations, the denial of a license renewal application or the
revocation of a license.

  Proposed Changes

     Congress and the FCC have under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly: (i) affect the operation,
ownership and profitability of Cox Radio and its radio broadcast stations; (ii)
result in the loss of audience share and advertising revenue of the Company's
radio broadcast stations; and (iii) affect the ability of Cox Radio to acquire
additional radio broadcast stations or to finance such acquisitions. Such
matters include, for example: changes to the license renewal process; proposals
to impose spectrum use fees or other governmentally-imposed fees upon licensees;
proposals to expand the FCC's equal employment opportunity rules and other
matters relating to minority and female involvement in broadcasting; proposals
to repeal or modify some or all of the FCC's multiple ownership rules and/or
policies; proposals to modify the attribution rules, such as increasing the
benchmarks or thresholds for attributing ownership interests in broadcast media;
proposals to change rules or policies relating to political broadcasting;
technical and frequency allocation matters, including those relative to the
implementation of DAB, SDARS, and AM stereo broadcasting; proposals to permit
expanded use of FM translator stations; proposals to restrict or prohibit the
advertising of beer, wine and other alcoholic beverages on radio; changes in the
FCC's "cross-interest" and alien ownership rules and policies; changes in the
FCC's cross-ownership rules; changes to technical requirements for broadcast
services; proposals to allow telephone companies to deliver audio and video
programming to homes through existing phone lines; and proposals to limit the
tax deductibility of advertising expenses by advertisers. In addition, the FCC
is proposing to auction to the highest bidder the right to use the radio
broadcast spectrum, instead of granting broadcast licenses and subsequent
license renewals free of charge. The FCC rulemaking proceeding initiated in
November 1997 solicits public comment on proposed broadcast auction rules to
cover not only competing applications for initial licenses and construction
permits, but also competing applications for major and possibly minor
modifications to existing broadcast facilities. Consequently, pending
applications for major modifications are presently "frozen" and will not be
acted upon by the FCC pending the outcome of the rulemaking proceeding. The
Company's pending and future applications for both major and minor modifications
may become subject to auction proceedings if they are found to be mutually
exclusive
                                       14
<PAGE>   17

with modification applications filed by other radio licensees, depending on any
final rules adopted by the FCC in its rulemaking proceeding.

     Cox Radio cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.

SEASONALITY

     Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures. Cox Radio's
revenues and broadcast cash flows are typically lowest in the first quarter and
higher in the second and fourth quarters.

EMPLOYEES

     As of December 31, 1997, Cox Radio employed 904 full-time and 443 part-time
employees. Of these employees, 50 were represented by American Federation of
Television and Radio Announcers ("AFTRA") and two were represented by National
Association of Broadcasting Employees and Technicians, AFL-CIO ("NABET"). Cox
Radio considers its employee relations to be satisfactory.

     Cox Radio employs several on-air personalities with large audiences in
their respective markets. Cox Radio enters into employment agreements with
certain on-air personalities in order to protect its interests in these employee
relationships. Cox Radio does not believe that the loss of any one of these
on-air personalities would have a material adverse effect on Cox Radio's
financial condition or results of operations.

PATENTS AND TRADEMARKS

     Cox Radio owns numerous domestic trademark registrations related to the
business of the Company's stations. Cox Radio owns no patents or patent
applications. Cox Radio does not believe that any of its trademarks are material
to its business or operations.

FORWARD-LOOKING STATEMENTS

     The matters discussed or incorporated by reference in this Form 10-K
contain forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results and events may
differ significantly from those discussed in such forward-looking statements. In
addition to other information discussed herein, factors that might cause or
contribute to such differences include the risks and uncertainties set forth
under the caption "Risk Factors" in the Prospectus, dated as of September 27,
1996, included in the Company's Registration Statement on Form S-1 (File No.
333-08737).

ITEM 2.  PROPERTIES

     Cox Radio's corporate offices are located in Atlanta, Georgia. The types of
properties required to support each of the Company's radio stations include
offices, studios, transmitter sites and antenna sites. The transmitter sites and
antenna sites generally are located so as to provide maximum market coverage.

     Cox Radio owns transmitter and antenna sites in the Atlanta, Los Angeles,
Louisville, Miami, Orlando, San Antonio, Syracuse, Tampa and Tulsa markets and
leases transmitter and antenna sites in the Atlanta, Birmingham, Bridgeport,
Dayton, Los Angeles, Louisville, Miami, Orlando, San Antonio, Syracuse, Tampa
and Tulsa markets. Cox Radio owns studio and office facilities in Birmingham,
Los Angeles, Miami and Orlando and leases facilities in Atlanta, Bridgeport,
Dayton, Louisville, Orlando, San Antonio, Syracuse, Tampa and Tulsa. Cox Radio
generally considers its facilities to be suitable and of adequate size for their
current and intended purposes. Cox Radio does not anticipate any difficulties in
renewing any facility leases or in leasing additional space, if required.

     Cox Radio owns substantially all of its other equipment, consisting
principally of transmitting antennae, transmitters, studio equipment and general
office equipment. The towers, antennae and other transmission

                                       15
<PAGE>   18

equipment used by the Company's stations are generally in good condition,
although opportunities to upgrade facilities are continuously reviewed.

ITEM 3.  LEGAL PROCEEDINGS

     Cox Radio is involved in litigation from time to time in the ordinary
course of its business. In management's opinion, the litigation in which Cox
Radio is currently involved, individually and in the aggregate, is not material
to Cox Radio's financial condition or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The information required by this Item is incorporated by reference to Cox
Radio's 1997 Annual Report to Stockholders.

                                       16
<PAGE>   19

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected financial data have been derived from the
Consolidated Financial Statements of Cox Radio. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of Cox
Radio and notes thereto included elsewhere herein. The statements of operations
data and other operating data for the years ended December 31, 1993, 1994, 1995,
1996 and 1997 and the balance sheet data as of December 31, 1994, 1995, 1996 and
1997 have been derived from audited Consolidated Financial Statements of Cox
Radio. The balance sheet data as of December 31, 1993 have been derived from
unaudited Consolidated Financial Statements of Cox Radio, which, in the opinion
of management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of financial position at such
date. The pro forma financial data for 1997 assumes all consummated
transactions, the Pending Transactions and the Company's initial public offering
occurred at the beginning of the year.

<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,                 PRO FORMA
                                    ----------------------------------------------     ---------
                                     1993       1994     1995       1996     1997        1997
                                    ------     ------   ------     ------   ------     ---------
                                                       (DOLLARS IN MILLIONS)
<S>                                 <C>        <C>      <C>        <C>      <C>        <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues(1)...................  $ 95.0     $111.5   $123.6     $132.9   $199.6      $225.2
Station operating expenses........    67.9       76.3     90.0       91.9    129.8       149.0
Corporate general and
  administrative expenses(2)......     2.5        2.7      5.9        5.3      6.9         7.4
Depreciation and amortization.....     7.3        6.9      7.2        8.1     17.5        21.5
                                    ------     ------   ------     ------   ------      ------
Operating income..................    17.3       25.6     20.5       27.6     45.4        47.3
Interest expense..................     5.6        5.2      6.0        4.6      9.4        16.2
Net income (loss)(3)..............    (1.1)(4)   11.2      8.2       14.9     49.7(5)     18.0
OTHER OPERATING DATA:
Broadcast cash flow(6)............  $ 27.1     $ 35.2   $ 33.6(7)  $ 41.0   $ 69.8      $ 76.2
Broadcast cash flow margin(6).....    28.5%      31.6%    27.2%      30.9%    35.0%       33.8%
EBITDA(6).........................  $ 24.6     $ 32.5   $ 27.7(7)  $ 35.7   $ 62.9      $ 68.8
After-tax cash flow(6)............    13.7       18.2     15.0       24.0     92.4        45.3
Net cash provided by (used in)
  operating activities............    11.4       14.1     14.0       26.9     42.2        49.1
Net cash used in investing
  activities......................     6.1       12.3     17.3       62.6    285.1       322.1
Net cash provided by (used in)
  financing activities............    (4.8)      (1.6)     3.1       44.6    238.5       275.5
BALANCE SHEET DATA (END OF
  PERIOD):
Cash and cash equivalents(8)......  $  1.7     $  1.9   $  1.7     $ 10.6   $  6.2      $  6.2
Intangible assets, net............   114.2      120.1    126.8      138.1    518.9       577.4
Total assets......................   168.3      180.0    191.8      261.7    654.6       691.6
Total debt (including amounts due
  to CEI).........................    89.7      120.3    125.1         --    232.6       269.6
</TABLE>

---------------

(1) Total revenues less advertising agency commissions.
(2) As described in Note 9 to the Consolidated Financial Statements, certain
    executives participated in CEI's Unit Appreciation Plan ("UAP"). Because CEI
    is, and Cox Radio was, a private company, the benefits under the UAP are
    generally payable in cash. This cash payment option has resulted in charges
    to compensation expense of $0.9 million, $0.8 million, $1.6 million, and
    $2.5 million for the years ended December 31, 1993, 1994, 1995 and 1996,
    respectively. This compensation expense is included in historical corporate
    general and administrative expenses. Public companies traditionally
    implement stock award plans that provide for the issuance of stock to
    participants and do not result in compensation expense under applicable
    accounting standards. The Company implemented the Cox Radio, Inc. Long-Term
    Incentive Plan in 1996 and, therefore, has not incurred this expense since
    1996. In addition, for the year ended December 31, 1995, corporate general
    and administrative expenses include a nonrecurring corporate charge.
(3) Cox Radio became publicly traded on the New York Stock Exchange effective
    September 27, 1996. Historical earnings per share information has not been
    presented because the dissimilarity of the previous capital structure of Cox
    Radio precludes a meaningful

                                       17
<PAGE>   20

    comparison. Pro forma earnings per pro forma common share is presented for
    comparative purposes at Note 4 to the Company's Consolidated Financial
    Statements included elsewhere herein.
(4) Includes a $7.6 million noncash charge for the cumulative effect of
    accounting changes.
(5) Includes an after-tax gain on the sale of WCKG-FM/WYSY-FM (Chicago) of
    approximately $29.3 million.
(6) "Broadcast cash flow" consists of operating income plus depreciation and
    amortization and corporate general and administrative expenses. "Broadcast
    cash flow margin" is broadcast cash flow as a percentage of net revenues.
    "EBITDA" is operating income plus depreciation and amortization. "After-tax
    cash flow" is income (loss) before extraordinary items plus depreciation,
    amortization and deferred tax expense. Although broadcast cash flow,
    broadcast cash flow margin, EBITDA and after-tax cash flow are not
    recognized under GAAP, they are accepted by the broadcasting industry as
    generally recognized measures of performance and are used by analysts who
    report publicly on the condition and performance of broadcast companies. For
    the foregoing reasons, the Company believes that these measures are useful
    to investors. However, investors should not consider these measures to be an
    alternative to operating income as determined in accordance with GAAP, an
    alternative to cash flows from operating activities (as a measure of
    liquidity) or an indicator of the Company's performance under GAAP.
(7) Declines in broadcast cash flow and EBITDA from the prior year are due
    mainly to the impact of the baseball strike on advertiser spending, the cost
    of sports programming rights in Atlanta, start-up costs related to
    acquisitions or LMA's consummated in late 1994 and early 1995 and a
    nonrecurring corporate charge in 1995.
(8) 1996 amount includes $9.1 million in restricted cash, representing the net
    proceeds from the Miami Disposition, net of the cash used for the Tulsa
    Acquisition.

                                       18
<PAGE>   21

UNAUDITED QUARTERLY FINANCIAL INFORMATION

     The following table sets forth selected quarterly financial information for
Cox Radio. This information is derived from unaudited financial statements of
Cox Radio and includes, in the opinion of management, all normal and recurring
adjustments that management considers necessary for a fair presentation of the
results for such periods. The operating results for any quarter are not
necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
                                                           1ST         2ND       3RD       4TH
                                                         QUARTER     QUARTER   QUARTER   QUARTER
                                                         -------     -------   -------   -------
                                                                 (THOUSANDS OF DOLLARS)
<S>                                                      <C>         <C>       <C>       <C>
1996
Net revenues...........................................  $29,568     $36,740   $33,017   $33,579
Corporate general and administrative expenses..........    1,103       1,238     1,986     1,005
Depreciation and amortization..........................    1,982       1,997     2,027     2,063
Operating income.......................................    4,700       7,991     6,578     8,369
Net income.............................................    1,812       3,401     2,370     7,362
1997
Net revenues...........................................  $29,155     $54,349   $55,188   $60,880
Corporate general and administrative expenses..........    1,422       2,028     1,709     1,726
Depreciation and amortization..........................    2,052       5,133     4,834     5,437
Operating income.......................................    6,082      11,144    14,070    14,171
Net income.............................................   34,203(1)    3,937     5,995     5,589
</TABLE>

---------------

(1) Includes an after-tax gain on the sale of WCKG-FM/WYSY-FM (Chicago) of
    approximately $29.3 million.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

GENERAL

     Cox Radio is a leading national radio broadcast company whose business is
devoted to acquiring, developing and operating radio stations located throughout
the United States. Cox Enterprises, Inc. ("CEI") indirectly owns approximately
69% of the Common Stock of Cox Radio.

     The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow and EBITDA.
Broadcast Cash Flow is defined as operating income plus depreciation and
amortization and corporate general and administrative expenses. EBITDA is
defined as operating income plus depreciation and amortization. "After-tax" cash
flow is defined as income (loss) before extraordinary items plus depreciation,
amortization and deferred tax expense. Although Broadcast Cash Flow, EBITDA and
after-tax cash flow are not recognized under generally accepted accounting
principles ("GAAP"), they are accepted by the broadcasting industry as generally
recognized measures of performance and are used by analysts who report publicly
on the condition and performance of broadcasting companies. For the foregoing
reasons, the Company believes that these measures will be useful to investors.
However, Broadcast Cash Flow, EBITDA or after-tax cash flow should not be
considered to be an alternative to operating income as determined in accordance
with GAAP, an alternative to cash flows from operating activities (as a measure
of liquidity) or an indicator of the Company's performance under GAAP.

     The primary source of the Company's revenues is the sale of local and
national advertising. Historically, approximately 73% and 25% of the Company's
gross revenues have been generated from local and national advertising,
respectively. The Company's most significant station operating expenses are
employees' salaries and benefits, commissions, programming expenses and
advertising and promotional expenditures.

     The Company's revenues vary throughout the year. As is typical in the radio
broadcasting industry, the Company's revenues and broadcast cash flows are
typically lowest in the first quarter and higher in the second and fourth
quarters. The Company's operating results in any period may be affected by the
incurrence of advertising and promotional expenses that do not necessarily
produce commensurate revenues until the impact of the advertising and promotion
is realized in future periods.

                                       19
<PAGE>   22

ACQUISITIONS AND DISPOSITIONS

     During the past several years, the Company has actively managed its
portfolio of radio stations through selected acquisitions, dispositions and
exchanges, as well as through the use of local marketing agreements ("LMAs") and
joint sales agreements ("JSAs"). Specific transactions entered into by the
Company during the past three years are discussed below.

     Under an LMA or a JSA, the company operating a station provides a
combination of programming, sales, marketing and similar services. The broadcast
revenues and operating expenses of stations operated by Cox Radio under LMAs and
JSAs have been included in the Company's operations since the respective dates
of such agreements.

     In April 1995, Cox Radio entered into an LMA to operate WCNN-AM (Atlanta).

     In August 1995, Cox Radio completed the acquisition of KACE-FM in
Inglewood, California, a suburb of Los Angeles, for $11.7 million. Cox Radio had
operated this station under an LMA since August 1994.

     In January 1996, Cox Radio completed the acquisition of Louisville stations
WRKA-FM and WRVI-FM, later renamed WLSY-FM for $8.7 million. The Company also
acquired Louisville station WXNU-FM, later renamed WRVI-FM, for $2.6 million in
August 1996.

     In June 1996, the Company acquired WHEN-AM and WWHT-FM in Syracuse for $4.5
million. These stations were operated by NewCity (as defined below) under an LMA
until the consummation of the NewCity Acquisition (as defined below).

     In October 1996, the Company completed the sale of WIOD-AM in Miami for
$13.0 million plus a working capital adjustment of $1.2 million (the "Miami
Disposition"). This transaction resulted in a pre-tax gain of approximately $2.0
million which was recognized in the fourth quarter of 1996.

     In December 1996, the Company acquired KRAV-FM and KGTO-AM (Tulsa) for $5.5
million. These stations were operated by NewCity under an LMA until the
consummation of the NewCity Acquisition.

     In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando
Acquisition resulted in a pre-tax gain of approximately $49 million. In addition
to receiving the three Orlando stations, Cox Radio also received cash proceeds
of approximately $20 million. Prior to the NewCity Acquisition (as defined
below), the Orlando stations were operated by NewCity (as defined below) since
July 1996 under an LMA.

     In March 1997, the Company acquired WFNS-AM in Tampa for an aggregate
consideration of $1.5 million (the "Tampa Acquisition"). The Company had been
operating this station pursuant to an LMA or a JSA since June 1995.

     In April 1997, Cox Radio completed its acquisition of the license and
certain assets of KRTO-FM in Los Angeles for $19 million in cash (the "Los
Angeles Acquisition").

     In April 1997, the Company, through the merger of its wholly owned
subsidiary New Cox Radio II, Inc. with and into NewCity Communications, Inc.
("NewCity"), with NewCity surviving as a wholly owned subsidiary of Cox Radio,
acquired all of the issued and outstanding capital stock of NewCity (the
"NewCity Acquisition"). Cox Radio purchased the stock of NewCity for an
aggregate consideration of approximately $253 million, including approximately
$87 million in assumption of NewCity indebtedness and approximately $3 million
in working capital adjustments. To consummate the NewCity Acquisition, the
Company utilized approximately $56 million of amounts due from CEI and borrowed
approximately $110 million pursuant to the Company's $300 million, five-year,
senior, unsecured revolving credit facility with certain banks (the "Credit
Facility"), including Texas Commerce Bank National Association, as
Administrative Agent. On April 2, 1997, NewCity was merged with and into the
Company, with the Company as the surviving corporation. NewCity's subsidiaries
were subsequently consolidated into Cox Radio. In October 1997, the Company
disposed of the assets of American Comedy Network, a former subsidiary of
NewCity for aggregate proceeds of approximately $1.1 million including certain
non-compete agreements.

                                       20
<PAGE>   23

     In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in
Birmingham, Alabama (the "Birmingham Acquisition I") for an aggregate
consideration of $17 million, consisting of $5 million paid for an option to
purchase and $12 million issued to the seller as a Station Investment Note
Receivable. See further discussion at Note 14 to the Company's Consolidated
Financial Statements included elsewhere herein. On August 1, 1997, the Company
began operating WBHJ-FM and WBHK-FM under an LMA. The Company expects to
consummate this acquisition during the second half of 1998.

     In May 1997, the Company agreed to acquire WENN-FM and WAGG-AM, also in
Birmingham, Alabama, for consideration of $15 million (the "Birmingham
Acquisition II"). In July 1997, the Company assigned its right to purchase
WENN-FM for consideration of $14.5 million to a third party (the "Birmingham
Disposition"). The Company consummated both the Birmingham Acquisition II and
the Birmingham Disposition during November 1997.

     In September 1997, the Company announced that it had entered into an
agreement in principle with a third party to construct, program and own a new
Class A FM radio station in Homewood, Alabama to serve the Birmingham market
(the "Birmingham Acquisition III"). Consummation of this transaction is
contingent upon FCC approval of the application for the new construction permit
and settlement of the comparative hearing between three applicants for the
construction permit. As part of the agreement in principle, the third party
would construct the station, the Company would enter into an LMA for the new
station and the Company would acquire an option to purchase the station for an
aggregate consideration of $5.5 million and the assumption of debt in an amount
not to exceed $200,000.

     In September 1997, the Company acquired KISS-FM, KSMG-FM and KLUP-AM in San
Antonio, Texas for an aggregate consideration of $30.4 million plus certain
non-compete agreements (the "San Antonio Acquisition I").

     In December 1997, the Company acquired an option to purchase KRIO-FM
serving the San Antonio market. The Company entered into an agreement to assign
this option in January 1998 for an aggregate consideration of $250,000 (the "San
Antonio Disposition").

     In February 1998, the Company entered into an agreement to acquire WCLR-FM,
WZLR-FM and WPTW-AM serving the Dayton, Ohio market for approximately $6 million
(the "Dayton Acquisition"). The Company has been operating these stations
pursuant to an LMA since December 1997. In addition, the Company has entered
into a Station Investment Note Receivable with the seller for $6 million. See
further discussion at Note 14 to the Company's Consolidated Financial Statements
included elsewhere herein. Pending certain regulatory approvals, the Company
anticipates closing the Dayton Acquisition in the second half of 1998.

     In February 1998, the Company entered into an agreement to acquire the
assets of WTLN-FM serving the Orlando, Florida market for consideration of $14.5
million. In a related transaction, the Company entered into an agreement to
dispose of the assets of WZKD-AM, also serving the Orlando, Florida market for
$.5 million (the "Orlando Exchange"). Pending certain regulatory approvals, the
Company expects to complete the Orlando Exchange in the second quarter of 1998.

     In March 1998, the Company acquired KONO-FM and KONO-AM in San Antonio for
$23 million (the "San Antonio Acquisition II").

     The Birmingham Acquisition III, the San Antonio Disposition, Dayton
Acquisition and the Orlando Exchange are collectively referred to herein as the
"Pending Transactions".

RESULTS OF OPERATIONS

     This discussion should be read in conjunction with the accompanying audited
Consolidated Financial Statements and Notes thereto of Cox Radio. The results of
operations for Cox Radio represent the operations of the radio stations
currently owned or operated or to which sales and marketing services were
provided in connection with CEI's U.S. radio broadcasting operations. The
historical financial statements do not necessarily reflect the results of
operations or financial position that would have been reported had Cox Radio
been an independent company.

                                       21
<PAGE>   24

     As a result of the acquisition activity discussed above, the Company's
historical financial statements are not directly comparable from period to
period.

  Pro Forma 1997 Compared with Pro Forma 1996

     The following pro forma financial information has been derived from the
unaudited pro forma summary of operations included in Note 4 to the Consolidated
Financial Statements included elsewhere herein. The unaudited pro forma summary
of operations presents the consolidated results of operations as if all
consummated transactions, the Pending Transactions and the Company's initial
public offering had occurred at the beginning of the periods presented and does
not purport to be indicative of what would have occurred had these transactions
been made as of those dates or of results which may occur in the future. No pro
forma adjustments have been made for the Louisville Acquisitions, the Tampa
Acquisition and the Los Angeles Acquisition due to immateriality.

     Net Revenues.  Pro forma net revenes increased $25.3 million to $225.2
million in 1997, a 12.6% increase over the prior year. Contributors to this
growth included the Company's radio stations in Atlanta, Los Angeles and Orlando
which experienced continued ratings performance during 1997. Additionally, a
successful station management and sales department restructuring resulted in
increased revenues at the Company's radio stations in Tampa.

     Station Operating Expenses.  Pro forma station operating expenses increased
$8.4 million to $149.0 million, an increase of 6.0% over the prior year. This
increase was primarily due to higher programming costs resulting from an
increase in talent costs (which fluctuate with ratings) and additional selling
expenses associated with the stations' local and national revenue growth.

     Broadcast Cash Flow.  Pro forma broadcast cash flow increased $16.9 million
to $76.2 million in 1997, a 28.5% increase over 1996 for the reasons noted
above. In addition, pro forma broadcast cash flow margin (defined as broadcast
cash flow as a percentage of net revenues) increased to 33.8% in 1997 from 29.7%
for the prior year.

     Corporate General and Administrative Expenses.  Pro forma corporate general
and administrative expenses increased $.3 million to $7.4 million in 1997, an
increase of 4.1%, primarily as a result of increased personnel-related costs.

     Operating Income.  Pro forma operating income increased $9.8 million to
$47.3 million, an increase of 26.0% over 1996 for the reasons noted above. In
addition, the pro forma operating margin increased to 21.0% in 1997 from 18.8%
in 1996.

     Interest Expense.  Pro forma interest expense for 1997 totaled $16.2
million as compared to $15.8 million during 1996 primarily as a result of
interest rate fluctuations during 1996 and 1997.

     Net Income.  Pro forma net income increased by $5.4 million over 1996 to
$18.0 million for the reasons noted above.

  Historical 1997 Compared with Historical 1996

     Net Revenues.  Net revenues increased $66.7 million to $199.6 million in
1997, a 50.2% increase over the prior year. This growth is primarily
attributable to the Company's 1997 acquisitions, the largest being the NewCity
Acquisition. This growth was also attributable to significant percentage
increases in net revenues at the Company's stations in Atlanta and Tampa as a
result of continued ratings growth. These increases were offset partially by the
disposition of the operations of WCKG-FM/WYSY-FM in Chicago through an LMA
commencing July 1996 and the sale of WIOD-AM in Miami in October 1996. On a
"same station" basis (reflecting results from stations operated for the entire
year ended December 31 in both 1997 and 1996), net revenues increased $18.1
million to $139.3 million, an increase of 15.0% over 1996.

     Station Operating Expenses.  Station operating expenses increased $37.9
million to $129.8 million, an increase of 41.3% over the prior year primarily as
a result of the Company's 1997 acquisitions as discussed above. Additionally,
significant contributors to this increase included higher programming costs
resulting from
                                       22
<PAGE>   25

an increase in talent costs (which fluctuate with ratings) and additional
selling expenses associated with the stations' local and national revenue
growth. These increases were offset partially by the disposition of the
operations of WCKG-FM/WYSY-FM in Chicago through an LMA commencing July 1996 and
the sale of WIOD-AM in Miami in October 1996. On a "same station" basis, station
operating expenses increased $5.1 million to $87.4 million, an increase of 6.1%
over 1996.

     Broadcast Cash Flow.  Broadcast cash flow increased $28.8 million to $69.8
million in 1997, a 70.1% increase over 1996. On a "same station" basis,
broadcast cash flow increased by $13.1 million to $51.9 million, an increase of
33.7% over the prior year. In addition, "same station" broadcast cash flow
margin (defined as broadcast cash flow as a percentage of net revenues)
increased to 37.3% in 1997 from 32.0% for the prior year for the reasons noted
above.

     Corporate General and Administrative Expenses.  Corporate general and
administrative expenses increased $1.6 million to $6.9 million in 1997 primarily
as a result of the NewCity Acquisition and as a result of costs associated with
the Company being publicly-held during 1997.

     Operating Income.  Operating income increased $17.8 million to $45.5
million, an increase of 64.5% over 1996 for the reasons noted above. In
addition, the operating margin increased to 22.8% in 1997 from 20.8% in 1996.

     Interest Expense.  Interest expense for 1997 totaled $9.4 million as
compared to $4.6 million during 1996 primarily as a result of borrowings
incurred to complete the NewCity Acquisition, the Birmingham Acquisition I, the
San Antonio Acquisition I and the Dayton Acquisition. Such expenses were
partially offset by interest income earned during the first quarter of 1997.

     Net Income.  Net income increased by $34.8 million over 1996 to $49.7
million for the reasons noted above and as a result of an after-tax gain of
approximately $29.3 million on the sale of WCKG-FM and WYSY-FM in Chicago during
March 1997.

  Historical 1996 Compared with Historical 1995

     Net Revenues.  Net revenues increased $9.3 million to $132.9 million in
1996, a 7.6% increase over the prior year. This growth is primarily attributable
to increases at the Atlanta and Los Angeles station groups and the addition of
the Louisville stations during January and August 1996. Such increases were
partially offset by the disposition of WIOD-AM (Miami) in October 1996 and an
LMA with the prospective purchaser of WCKG-FM and WYSY-FM (Chicago) in June
1996. Revenue growth in Atlanta is primarily attributable to higher ratings at
WSB-AM and revenues generated from a full season of Atlanta Braves baseball in
1996. The baseball strike in 1995 delayed the start of the season by 18 games.
In Los Angeles, higher spot advertising rates resulting from improved
utilization of customer-focused selling contributed to higher revenues. On a
"same station" basis (reflecting results from stations operated for the entire
year ended December 31 in both 1996 and 1995), net revenues increased $15.1
million to $115.8 million, an increase of 15.0% over 1995.

     Station Operating Expenses.  Station operating expenses increased $1.9
million to $91.9 million, an increase of 2.1% over the prior year. Significant
contributors to this increase include higher programming costs resulting from an
increase in talent costs which fluctuate with ratings and additional selling
expenses associated with the stations' local and national revenue growth. The
increase in station operating expenses was partially offset by the disposal of
the operations of WIOD-AM (Miami) in October 1996 and an LMA with the
prospective purchaser of WCKG-FM and WYSY-FM (Chicago) in June 1996. On a "same
station" basis, station operating expenses increased $6.8 million, to $75.4
million an increase of 9.9% over 1995.

     Broadcast Cash Flow.  Broadcast cash flow increased $7.4 million to $41.0
million in 1996, a 22.0% increase over 1995. On a "same station" basis,
broadcast cash flow increased by $8.3 million to $40.3 million, an increase of
26.0% over the prior year. In addition, "same station" broadcast cash flow
margin (defined as broadcast cash flow as a percentage of net revenues)
increased to 34.9% in 1996 from 31.8% for the prior year for the reasons noted
above.

                                       23
<PAGE>   26

     Corporate General and Administrative Expenses.  Corporate general and
administrative expenses decreased $.5 million to $5.3 million in 1996 primarily
due to a non-recurring corporate charge in 1995.

     Operating Income.  Operating income increased $7.1 million to $27.6
million, an increase of 34.8% over 1995 for the reasons noted above. In
addition, the operating margin increased to 20.8% in 1996 from 16.6% in 1995.

     Interest Expense.  Interest expense for 1996 decreased $1.4 million to $4.6
million, a 23.3% decrease from 1995 primarily due to the repayment of amounts
due to CEI funded by the Company's initial public offering.

     Net Income.  Net income increased by $6.8 million to $14.9 million, an
increase of 83.1% over 1995, for the reasons noted above as well as a $1.4
million after-tax gain on the sale of WIOD-AM (Miami).

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary source of liquidity is cash provided by operations.
Historically, cash requirements have been funded by Cox Radio's operating
activities and through borrowings under the Credit Agreement (as defined below).
In addition, cash requirements have been funded on a temporary basis through
intercompany advances from CEI under a revolving credit facility with CEI (the
"CEI Credit Facility"). Borrowings by the Company under the CEI Credit Facility
are typically repaid by the Company within 30 days. Borrowings under the CEI
Credit Facility accrue interest at CEI's commercial paper rate plus .40%. CEI
continues to perform day-to-day cash management services for Cox Radio.

     On March 7, 1997, Cox Radio entered into a $300 million, five-year, senior,
unsecured revolving credit facility (the "Credit Agreement") with certain
guarantors and banks, including Texas Commerce Bank National Association, as
Administrative Agent, Nationsbank of Texas, N.A., as Syndications Agent, and
Citibank, N.A., as Documentation Agent. The loan proceeds were used to finance
the payment of the consideration payable in the NewCity Acquisition, repay
certain secured debt of NewCity and and finance certain acquisitions. The
remaining credit availability may be used to finance additional acquisitions and
other corporate purposes. The Credit Agreement has restrictions on the payment
of dividends, certain mergers, consolidations or dispositions of assets and
establishes limitations on, among other things, additional indebtedness and
transactions with affiliates.

     Cox Radio borrowed approximately $110 million under the Credit Agreement to
consummate the NewCity Acquisition. In connection with the NewCity Acquisition,
Cox Radio assumed certain indebtedness of NewCity. NewCity was the obligor of
$75 million principal amount of 11 3/8% Senior Subordinated Notes due 2003 (the
"Notes"). On May 2, 1997, following a tender offer and consent solicitation, the
Company paid an aggregate amount of $82.1 million to holders of the Notes in
exchange for approximately $74.6 million principal amount of the Notes and
consents to the elimination of substantially all of the restrictive covenants
applicable to the Notes. As a result, the Company is the obligor of $.4 million
principal amount of the Notes. The Notes are general unsecured obligations of
Cox Radio and are subordinated to all existing and future senior indebtedness of
Cox Radio. The Company obtained the funds necessary to make such payments from
borrowings under the Credit Agreement.

     The Company has entered into interest rate swap agreements with certain
lenders providing bank financing. Pursuant to the interest rate swap agreements,
the Company has exchanged its floating rate interest obligations on an aggregate
of $100 million in principal at an average fixed rate of 6.23% per annum for an
average maturity of 6.25 years. The fixing of interest rates for this period
reduces the Company's exposure to the uncertainty of floating interest rates.
The differential paid or received on the interest rate swap agreements are
recognized as an adjustment to interest expense. The counterparties to these
interest rate swap agreements are a diverse group of major financial
institutions. The company is exposed to credit loss in the

                                       24
<PAGE>   27

event of nonperformance by these counterparties. However, the Company does not
anticipate nonperformance by the other parties, and no material loss would be
expected from their nonperformance. The fair value of the interest rate swap
agreements was not recognized in the consolidated financial statements since
they are accounted for as hedges. At December 31, 1997, the estimated fair value
of the interest rate swap agreements, based on current market rates,
approximated a net payable of $1,223,000.

     At December 31, 1997, the Company had approximately $235.8 million of
outstanding indebtedness and had approximately $65.0 million available under the
Credit Agreement. The Company had approximately $3.1 million in amounts due from
CEI at December 31, 1997.

     Future cash requirements are expected to include capital expenditures,
principal and interest payments on indebtedness and funds for acquisitions. The
Company expects its operations to generate sufficient cash to meet its capital
expenditures and debt service requirements. Additional cash requirements,
including funds for pending or other acquisitions, will be funded by various
sources, including the proceeds from bank financing and, if or when appropriate,
other issuances of Company securities.

     Net cash provided by operating activities for the year ended December 31,
1997 increased $15.3 million to $42.2 million over 1996 primarily as a result of
an increase in net income. Net cash from operating activities for 1996 increased
$12.9 million to $26.9 million over 1995 primarily as a result of an increase in
net income. Net cash from operating activities for 1995 remained substantially
the same as in 1994.

     Net cash used in investing activities for all periods presented principally
reflects the Company's acquisition activity discussed above and capital
expenditures. The increases in annual capital expenditures from 1995 to 1997
were due to the increasing number of stations owned or operated by Cox Radio.

     Net cash provided by (used in) financing activities represents the net
change in amounts due to CEI, proceeds from the Company's initial public
offering, borrowing and repayment of debt, dividends paid and net changes in
book overdrafts. Fluctuations for the periods presented generally reflect the
differences between changes in both cash flows from operating activities and
cash flows from investing activities.

     The Company has contractual commitments for sports programming and on-air
personalities of $16.2 million, $11.8 million, $1.0 million and $.3 million for
1998, 1999, 2000 and 2001, respectively, which are expected to be funded through
operations.

IMPACT OF INFLATION

     The impact of inflation on the Company's operations has not been
significant to date. However, there can be no assurance that a high rate of
inflation in the future would not have an adverse impact on the Company's
operating results.

OTHER MATTERS

     The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000 which could result in miscalculations or system failures. The Company is in
the process of assessing the potential impact of the year 2000 problem on the
Company's financial position. At this time, the Company has not determined
whether costs of addressing potential problems, if any, would have a material
adverse impact on the Company's financial position, results of operations or
cash flows in future periods or whether failure by the Company, its customers or
vendors to resolve such processing issues, if any, in a timely manner could
result in a material financial risk. The Company plans to devote the necessary
resources to assess and to resolve all significant year 2000 issues, if any, in
a timely manner.
                                       25
<PAGE>   28

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The Company has entered into interest rate swap agreements with certain
lenders providing bank financing. Pursuant to the interest rate swap agreements,
the Company has exchanged its floating rate interest obligations on an aggregate
of $100 million in principal at an average fixed rate of 6.23% per annum for an
average maturity of 6.25 years. The fixing of interest rates for this period
reduces in part the Company's exposure to the uncertainty of floating interest
rates. The differential paid or received on the interest rate swap agreements is
recognized as an adjustment to interest expense.

                                       26
<PAGE>   29

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
Cox Radio, Inc.

     We have audited the accompanying consolidated balance sheets of Cox Radio,
Inc. ("Cox Radio") as of December 31, 1996 and 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of Cox Radio's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cox Radio at
December 31, 1996 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.

                                          DELOITTE & TOUCHE LLP

Atlanta, Georgia
February 6, 1998
(March 17, 1998, as to the KONO-FM/AM
acquisition described in Note 4)

                                       27
<PAGE>   30

                                COX RADIO, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1996       1997
                                                              --------   --------
                                                                 (THOUSANDS OF
                                                                   DOLLARS)
<S>                                                           <C>        <C>
                           ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................  $  1,544   $  6,218
Restricted cash.............................................     9,051         --
Accounts receivable, less allowance for doubtful accounts of
  $834 and $1,875, respectively.............................    31,511     50,680
Prepaid expenses and other current assets...................     1,575      3,795
                                                              --------   --------
          Total current assets..............................    43,681     60,693
Plant and equipment, net....................................    27,070     46,071
Intangible assets, net......................................   138,119    518,926
Amounts due from Cox Enterprises, Inc.......................    49,667      3,113
Station investment notes receivable.........................        --     18,220
Other assets................................................     3,182      7,617
                                                              --------   --------
          Total assets......................................  $261,719   $654,640
                                                              ========   ========
            LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.......................  $ 10,296   $ 21,767
Unit appreciation plan ("UAP") liability....................       646         --
Income taxes payable........................................     3,216      3,487
Other current liabilities...................................       668      1,964
                                                              --------   --------
          Total current liabilities.........................    14,826     27,218
Notes payable...............................................        --    235,740
Deferred income taxes.......................................    11,095    104,401
                                                              --------   --------
          Total liabilities.................................    25,921    367,359
                                                              --------   --------
Commitments and contingencies (Note 13)
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value: 5,000,000 shares,
  authorized, none outstanding..............................        --         --
Class A common stock, $1.00 par value; 70,000,000 shares
  authorized; 8,736,972 and 8,831,376 shares outstanding at
  December 31, 1996 and 1997, respectively..................     8,737      8,831
Class B common stock, $1.00 par value; 45,000,000 shares
  authorized and 19,577,672 shares outstanding at December
  31, 1996 and 1997.........................................    19,578     19,578
Additional paid-in capital..................................   248,972    250,637
(Deficit in) retained earnings..............................   (41,489)     8,235
                                                              --------   --------
          Total shareholders' equity........................   235,798    287,281
                                                              --------   --------
          Total liabilities and shareholders' equity........  $261,719   $654,640
                                                              ========   ========
</TABLE>

                See notes to consolidated financial statements.

                                       28
<PAGE>   31

                                COX RADIO, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1995        1996        1997
                                                              ---------   ---------   ---------
                                                              (AMOUNTS IN THOUSANDS, EXCEPT PER
                                                                         SHARE DATA)
<S>                                                           <C>         <C>         <C>
NET REVENUES:
Local.......................................................  $ 93,465    $ 99,291    $146,326
National....................................................    29,385      31,648      50,457
Other.......................................................       722       1,965       2,789
                                                              --------    --------    --------
          Total net revenues................................   123,572     132,904     199,572
COSTS AND EXPENSES:
Operating...................................................    41,831      41,280      50,220
Selling, general and administrative.........................    48,131      50,585      79,544
Corporate general and administrative........................     5,853       5,332       6,885
Depreciation and amortization...............................     7,247       8,069      17,456
                                                              --------    --------    --------
OPERATING INCOME............................................    20,510      27,638      45,467
OTHER INCOME (EXPENSE):
Interest income (expense), net..............................        97         219     (10,122)
Intercompany interest income (expense), net.................    (6,071)     (4,799)        758
Gain on sale of radio station...............................        --       2,016      49,129
Other -- net................................................      (147)       (377)       (701)
                                                              --------    --------    --------
INCOME BEFORE INCOME TAXES..................................    14,389      24,697      84,531
Income taxes................................................     6,226       9,752      34,807
                                                              --------    --------    --------
NET INCOME..................................................  $  8,163    $ 14,945    $ 49,724
                                                              ========    ========    ========
Basic and diluted income per common share...................        --    $    .69    $   1.75
Weighted average basic common shares outstanding............        --      21,762      28,344
Weighted average diluted common shares outstanding..........        --      21,762      28,494
</TABLE>

                See notes to consolidated financial statements.

                                       29
<PAGE>   32

                                COX RADIO, INC.

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                            CLASS A           CLASS B
                                       COMMON STOCK      COMMON STOCK       COMMON STOCK     ADDITIONAL   (DEFICIT IN)
                                      ---------------   ---------------   ----------------    PAID-IN       RETAINED
                                      SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT     CAPITAL       EARNINGS      TOTAL
                                      ------   ------   ------   ------   ------   -------   ----------   ------------   --------
                                                                        (AMOUNTS IN THOUSANDS)
<S>                                   <C>      <C>      <C>      <C>      <C>      <C>       <C>          <C>            <C>
BALANCE AT DECEMBER 31, 1994........     1      $  1       --    $   --       --   $    --    $ 90,947      $(50,541)    $ 40,407
Net income..........................    --        --       --        --       --        --          --         8,163        8,163
Dividends to CEI....................    --        --       --        --       --        --          --        (1,400)      (1,400)
                                        --      ----    -----    ------   ------   -------    --------      --------     --------
BALANCE AT DECEMBER 31, 1995........     1         1       --        --       --        --      90,947       (43,778)      47,170
Net income..........................    --        --       --        --       --        --          --        14,945       14,945
Dividends to CEI....................    --        --       --        --       --        --          --       (12,656)     (12,656)
Capital contribution by CEI.........    --        --       --        --       --        --      36,744            --       36,744
Issuance of Class B common stock to
  CEI...............................    (1)       (1)      --        --   19,578    19,578     (19,577)           --           --
Issuance of Class A common stock
  related to initial public
  offering..........................    --        --    8,625     8,625       --        --     140,588            --      149,213
Issuance of restricted Class A
  common stock related to incentive
  plans.............................    --        --      112       112       --        --       1,960            --        2,072
Offering costs for common stock.....    --        --       --        --       --        --      (1,690)           --       (1,690)
                                        --      ----    -----    ------   ------   -------    --------      --------     --------
BALANCE AT DECEMBER 31, 1996........    --        --    8,737     8,737   19,578    19,578     248,972       (41,489)     235,798
                                        --      ----    -----    ------   ------   -------    --------      --------     --------
Net income..........................    --        --       --        --       --        --          --        49,724       49,724
Issuance of Class A common stock
  related to incentive plans........    --        --       94        94       --        --       1,665            --        1,759
                                        --      ----    -----    ------   ------   -------    --------      --------     --------
BALANCE AT DECEMBER 31, 1997........    --      $ --    8,831    $8,831   19,578   $19,578    $250,637      $  8,235     $287,281
                                        ==      ====    =====    ======   ======   =======    ========      ========     ========
</TABLE>

                See notes to consolidated financial statements.

                                       30
<PAGE>   33

                                COX RADIO, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                1995       1996       1997
                                                              --------   --------   ---------
                                                                  (THOUSANDS OF DOLLARS)
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................  $  8,163   $ 14,945   $  49,724
Items not requiring cash:
  Depreciation..............................................     2,382      2,533       4,286
  Amortization..............................................     4,865      5,536      13,170
  Deferred income taxes.....................................      (441)     1,001      25,187
  Settlement of UAP liability through issuance of restricted
     stock..................................................        --      2,071          --
  Gain on sale of radio station.............................        --     (2,016)    (49,129)
Changes in assets and liabilities net of effect of
  acquisitions:
Increase in accounts receivable.............................    (2,221)      (844)     (6,436)
Increase (decrease) in prepaid expenses and other current
  assets....................................................       (57)       (22)      1,789
Increase (decrease) in accounts payable and accrued
  expenses..................................................      (299)     1,111       5,240
Increase (decrease) in taxes payable........................       (37)     2,938         271
Increase (decrease) in UAP liability........................       776       (317)       (646)
Other, net..................................................       856        (25)     (1,267)
                                                              --------   --------   ---------
          Net cash provided by operating activities.........    13,987     26,911      42,189
                                                              --------   --------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................    (4,073)    (3,526)    (10,820)
Acquisitions................................................   (11,697)   (21,500)   (317,268)
Payments for station investment notes receivable............                          (18,220)
(Increase) in other long-term assets........................    (1,580)    (2,137)     (5,208)
Net proceeds from sale of radio station.....................        --     14,195      19,647
Decrease (increase) in amounts due from CEI.................        --    (49,667)     46,554
Other, net..................................................         8         --         201
                                                              --------   --------   ---------
          Net cash used in investing activities.............   (17,342)   (62,635)   (285,114)
                                                              --------   --------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in amounts due to CEI...................     4,781    (88,345)         --
Borrowings of debt..........................................        --         --     235,740
Net proceeds from initial public offering...................        --    149,213          --
Payment of stock offering costs.............................        --     (1,690)         --
Proceeds from stock options exercised.......................        --         --       1,552
Dividends paid..............................................    (1,400)   (12,656)         --
Increase (decrease) in book overdrafts......................      (232)    (1,894)      1,256
                                                              --------   --------   ---------
          Net cash provided by financing activities.........     3,149     44,628     238,548
                                                              --------   --------   ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........      (206)     8,904      (4,377)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............     1,897      1,691      10,595
                                                              --------   --------   ---------
CASH AND CASH EQUIVALENTS (INCLUDING RESTRICTED CASH OF
  $9,051 AT DECEMBER 31, 1996) AT END OF PERIOD.............  $  1,691   $ 10,595   $   6,218
                                                              ========   ========   =========
</TABLE>

                See notes to consolidated financial statements.

                                       31
<PAGE>   34

                                COX RADIO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

     Cox Radio, Inc. ("Cox Radio" or the "Company") is a leading national radio
broadcast company whose business is devoted to acquiring, developing and
operating radio stations located throughout the United States. Cox Enterprises,
Inc. ("CEI") indirectly owns approximately 69% of the Common Stock of Cox Radio.

     On September 30, 1996, pursuant to an Agreement and Plan of Merger of KFI,
Inc., WCKG, Inc., WWRM, Inc. and Cox Syracuse, Inc. with and into Cox Radio,
Inc. (the "Plan of Merger"), CEI transferred direct or indirect ownership of its
U.S. radio broadcast properties to Cox Radio (the "Cox Radio Consolidation"). In
connection with the Cox Radio Consolidation, the Company amended its Certificate
of Incorporation to change the capital structure of the Company. As a result,
the Company's capital stock consists of 70,000,000 authorized shares of Class A
Common Stock, 45,000,000 authorized shares of Class B Common Stock and 5,000,000
authorized shares of Preferred Stock, all at $1.00 par value per share. Pursuant
to the Plan of Merger, CEI, through its indirect subsidiary, Cox Broadcasting,
Inc., received 19,577,672 shares of the Company's Class B Common Stock for its
ownership interests. CEI's historical basis in the assets and liabilities of the
operations was carried over to Cox Radio.

     On October 2, 1996, the Company completed an initial public offering of
8,625,000 shares of the Company's Class A Common Stock at a price of $18.50 per
share. Proceeds to the Company from the public offering and the underwriters'
overallotment option totaled approximately $149 million net of underwriting
discounts and commissions. The Company used approximately $107.1 million of such
net proceeds to repay all amounts then outstanding under notes due to CEI. The
balance of the net proceeds was used for general corporate purposes and
acquisitions, including to partially fund the NewCity Acquisition (see note 4).

     The consolidated financial statements of Cox Radio represent the operations
of the radio broadcast stations owned by Cox Radio, CEI or its other
subsidiaries. The historical financial statements do not necessarily reflect the
results of operations or financial position that would have existed had Cox
Radio been an independent company. All significant intercompany accounts have
been eliminated in the consolidated financial statements of Cox Radio.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Cash Equivalents

     The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Fair value
approximates carrying value.

  Revenue Recognition

     Revenue is recognized as advertising air time is broadcast and is net of
advertising agency commissions.

  Corporate General and Administrative Expenses

     Corporate general and administrative expenses consist of corporate overhead
costs not specifically allocable to any of the Company's individual stations
plus expense related to the CEI Unit Appreciation Plan during 1995 and 1996. In
1995, corporate general and administrative expenses included a nonrecurring
corporate charge.

  Plant and Equipment

     Plant and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using principally the straight-line method at rates
based upon estimated useful lives of 5 to 40 years for buildings and building
improvements and 5 to 20 years for broadcast equipment.

                                       32
<PAGE>   35
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Expenditures for maintenance and repairs are charged to operating expense
as incurred. At the time of retirements, sales or other dispositions of
property, the original cost and related accumulated depreciation are written
off.

  Intangible Assets

     Intangible assets consist primarily of goodwill/FCC broadcast licenses and
non-compete agreements. Goodwill/FCC broadcast licenses recorded in business
combinations generally are amortized on a straight-line basis over 30 to 40
years. Non-compete agreements are amortized on a straight-line basis over the
contractual lives of the agreements, generally 3 to 5 years. Cox Radio assesses
on an on-going basis the recoverability of intangible assets based on estimates
of future undiscounted cash flows for the applicable business acquired compared
to net book value. If the future undiscounted cash flow estimate is less than
net book value, net book value is then reduced to the estimated fair value. Cox
Radio also evaluates the amortization periods of intangible assets to determine
whether events or circumstances warrant revised estimates of useful lives.

  Impairment of Long-Lived Assets

     SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," became effective in January 1996. This
Statement requires that long-lived assets and certain intangibles be reviewed
for impairment when events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, with any impairment losses
being reported in the period in which the recognition criteria are first applied
based on the fair value of the asset. Long-lived assets and certain intangibles
to be disposed of are required to be reported at the lower of carrying amount or
fair value less cost to sell.

  Income Taxes

     Prior to 1997, the accounts of Cox Radio were included in the consolidated
federal income tax return and certain state income tax returns of CEI. Current
federal and state income tax expenses and benefits were allocated on a separate
return basis to Cox Radio based on (i) the current year tax effects of the
inclusion of its income, expenses and credits in the consolidated income tax
returns of CEI or (ii) separate state income tax returns.

     Deferred income taxes are recognized for all temporary differences between
the tax and financial reporting bases of the Company's assets and liabilities
based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income.

  Pension, Postretirement and Postemployment Benefits

     CEI generally provides defined pension benefits to eligible employees based
on years of service and compensation during those years. CEI also provides
certain health care and life insurance benefits to eligible retirees and
employees. For certain employees and retirees of Cox Radio eligible for such
coverages, these benefits are provided through the CEI plans. Expenses related
to these plans are allocated to Cox Radio through the intercompany account. The
amount of the allocations is generally based on actuarial determinations of the
effects of Cox Radio employees' participation in the plans.

  Incentive Compensation Plans

     Cox Radio accounts for stock compensation in accordance with the
requirements of APB No. 25, "Accounting for Stock Issued to Employees." SFAS No.
123, "Accounting for Stock-Based Compensation," became effective in January
1996, and requires disclosure of the pro forma effects on net income and
earnings

                                       33
<PAGE>   36
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

per share had the fair value recognition provisions of SFAS No. 123 been elected
over the provisions of APB No. 25.

  Station Investment Notes Receivable

     Station investment notes receivable consist of amounts loaned to certain
entities which own radio stations. These notes are at varying interest rates and
are secured by substantially all of the assets of the related radio stations.

  Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles 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.

  Concentration of Risk

     A significant portion of the Company's business historically has been
conducted in certain markets. Revenues earned from radio stations located in Los
Angeles, Atlanta, and Miami represented 35%, 25% and 17%, respectively, of total
revenues for the year ended December 31, 1995 and 36%, 30% and 16%,
respectively, of total revenues for the year ended December 31, 1996. Revenues
earned from radio stations located in Los Angeles, Atlanta, Orlando and Miami
represented 27%, 24%, 9% and 8%, respectively, of total revenues for the year
ended December 31, 1997. The Company's concentration of risk in each of the
aforementioned markets has been and is expected to continue to be reduced as a
result of the NewCity Acquisition and other transactions.

  Earnings Per Common Share

     Cox Radio became publicly traded on the New York Stock Exchange effective
September 27, 1996. Earnings per common share calculation for 1995 has not been
disclosed because the dissimilarity of the previous capital structure of Cox
Radio precludes a meaningful comparison. During the fourth quarter of 1997, Cox
Radio adopted SFAS No. 128, "Earnings per Share," which replaces the
presentation of primary earnings per share ("EPS") and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common stockholders
by the weighted average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS assumes issuance of common stock for
all other potentially dilutive equivalent shares outstanding. The Company's 1996
EPS data have been restated. The adoption of this new accounting standard did
not have a material effect on the Company's reported EPS amounts.

3. CASH MANAGEMENT SYSTEM

     Cox Radio participates in CEI's cash management system, whereby the bank
sends daily notification of Cox Radio's checks presented for payment. CEI
transfers funds from other sources to cover Cox Radio's checks presented for
payment. Book overdrafts of $1.7 million and $3.0 million existed at December
31, 1996 and 1997, respectively, as a result of Cox Radio's checks outstanding.
These book overdrafts were reclassified as accounts payable on Cox Radio's
financial statements.

                                       34
<PAGE>   37
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES

     In April 1995, Cox Radio entered into a local marketing agreement ("LMA")
to operate WCNN-AM (Atlanta).

     In August 1995, Cox Radio completed the acquisition of KACE-FM in
Inglewood, California, a suburb of Los Angeles, for $11.7 million. Cox Radio had
operated this station under an LMA since August 1994.

     In January 1996, Cox Radio completed the acquisition of Louisville stations
WRKA-FM and WRVI-FM for $8.7 million. The Company also acquired Louisville
station WXNU-FM, later renamed WLSY-FM, for $2.6 million in August 1996.

     In June 1996, the Company acquired WHEN-AM and WWHT-FM in Syracuse for $4.5
million. These stations were operated by NewCity (as defined below) under an LMA
until the consummation of the NewCity Acquisition (as defined below).

     In October 1996, the Company completed the sale of WIOD-AM in Miami for
$13.0 million plus a working capital adjustment of $1.2 million (the "Miami
Disposition"). This transaction resulted in a pre-tax gain of approximately $2.0
million which was recognized in the fourth quarter of 1996.

     In December 1996, the Company acquired KRAV-FM and KGTO-AM (Tulsa) for $5.5
million. These stations were operated by NewCity under an LMA until the
consummation of the NewCity Acquisition.

     In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando
Acquisition resulted in a pre-tax gain of approximately $49 million. In addition
to receiving the three Orlando stations, Cox Radio also received cash proceeds
of approximately $20 million. Prior to the NewCity Acquisition (as defined
below), the Orlando stations were operated by NewCity (as defined below) since
July 1996 under an LMA.

     In March 1997, the Company acquired WFNS-AM in Tampa for an aggregate
consideration of $1.5 million (the "Tampa Acquisition"). The Company had been
operating this station pursuant to an LMA or a joint sales agreement ("JSA")
since June 1995.

     In April 1997, Cox Radio completed its acquisition of the license and
certain assets of KRTO-FM in Los Angeles for $19 million in cash (the "Los
Angeles Acquisition").

     In April 1997, the Company, through the merger of its wholly owned
subsidiary New Cox Radio II, Inc. with and into NewCity Communications, Inc.
("NewCity"), with NewCity surviving as a wholly owned subsidiary of Cox Radio,
acquired all of the issued and outstanding capital stock of NewCity (the
"NewCity Acquisition"). Cox Radio purchased the stock of NewCity for an
aggregate consideration of approximately $253 million, including approximately
$87 million in assumption of NewCity indebtedness and approximately $3 million
in working capital adjustments. To consummate the NewCity Acquisition, the
Company utilized approximately $56 million of amounts due from CEI and borrowed
approximately $110 million pursuant to the Company's $300 million, five-year,
senior, unsecured revolving credit facility with certain banks (the "Credit
Facility"), including Texas Commerce Bank National Association, as
Administrative Agent. On April 2, 1997, NewCity was merged with and into the
Company, with the Company as the surviving corporation. NewCity's subsidiaries
were subsequently consolidated into Cox Radio. In October 1997, the Company
disposed of the assets of American Comedy Network, a former subsidiary of
NewCity, for aggregate proceeds of approximately $1.1 million including certain
non-compete agreements.

                                       35
<PAGE>   38
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The NewCity Acquisition was recorded effective April 1, 1997, using the
purchase method of accounting, whereby the allocable share of the NewCity
purchase price was allocated to the assets acquired and liabilities assumed
based on their fair values at the date of acquisition as follows (in thousands):

<TABLE>
<S>                                                           <C>
Net working capital.........................................  $  8,342
Plant and equipment.........................................     9,310
Goodwill/FCC broadcast licenses.............................   316,634
Deferred taxes..............................................   (67,268)
                                                              --------
          Total cost of acquisition including assumed
            liabilities.....................................  $267,018
                                                              ========
</TABLE>

     In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in
Birmingham, Alabama (the "Birmingham Acquisition I") for an aggregate
consideration of $17 million, consisting of $5 million paid for an option to
purchase and $12 million issued to the seller as a Station Investment Note
Receivable. See further discussion at Note 14 to the Company's Consolidated
Financial Statements included elsewhere herein. On August 1, 1997, the Company
began operating WBHJ-FM and WBHK-FM under an LMA. The Company expects to
consummate this acquisition during the second half of 1998.

     In May 1997, the Company agreed to acquire WENN-FM and WAGG-AM, also in
Birmingham, Alabama, for consideration of $15 million (the "Birmingham
Acquisition II"). In July 1997, the Company assigned its right to purchase
WENN-FM for consideration of $14.5 million to a third party (the "Birmingham
Disposition"). The Company consummated both the Birmingham Acquisition II and
the Birmingham Disposition during November 1997.

     In September 1997, the Company announced that it had entered into an
agreement in principle with a third party to construct, program and own a new
Class A FM radio station in Homewood, Alabama to serve the Birmingham market
(the "Birmingham Acquisition III"). Consummation of the transaction is
contingent upon FCC approval of the application for the new construction permit
and settlement of the comparative hearing between three applicants for the
construction permit. As part of the agreement in principle, the third party
would construct the station, the Company would enter into an LMA for the new
station and the Company would acquire an option to purchase the station for an
aggregate consideration of $5.5 million and the assumption of debt in an amount
not to exceed $200,000.

     In September 1997, the Company acquired KISS-FM, KSMG-FM and KLUP-AM in San
Antonio, Texas for an aggregate consideration of $30.4 million plus certain
non-compete agreements (the "San Antonio Acquisition I").

     In December 1997, the Company acquired an option to purchase KRIO-FM
serving the San Antonio market. The Company entered into an agreement to assign
this option in January 1998 for an aggregate consideration of $250,000 (the "San
Antonio Disposition").

     In February 1998, the Company entered into an agreement to acquire WCLR-FM,
WZLR-FM and WPTW-AM serving the Dayton, Ohio market for approximately $6 million
(the "Dayton Acquisition"). The Company has been operating these stations
pursuant to an LMA since December 1997. In addition, the Company has entered
into a Station Investment Note Receivable with the seller for $6 million. See
further discussion at Note 14 to the Company's Consolidated Financial Statements
included elsewhere herein. Pending certain regulatory approvals, the Company
anticipates closing the Dayton Acquisition in the second half of 1998.

     In February 1998, the Company entered into an agreement to acquire the
assets of WTLN-FM serving the Orlando, Florida market for consideration of $14.5
million. In a related transaction, the Company entered into an agreement to
dispose of the assets of WZKD-AM, also serving the Orlando, Florida market for
$.5 million (the "Orlando Exchange"). Pending certain regulatory approvals, the
Company expects to complete the Orlando Exchange in the second quarter of 1998.

                                       36
<PAGE>   39
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In March 1998, the Company acquired KONO-FM and KONO-AM in San Antonio for
$23 million (the "San Antonio Acquisition II").

     The Birmingham Acquisition III, the San Antonio Disposition, the Dayton
Acquisition and the Orlando Exchange are collectively referred to herein as the
"Pending Transactions".

     The following unaudited pro forma summary of operations presents the
consolidated results of operations as if all consummated transactions, the
Pending Transactions and the Company's initial public offering had occurred at
the beginning of the periods presented and does not purport to be indicative of
what would have occurred had these transactions been made as of those dates or
of results which may occur in the future. No pro forma adjustments have been
made for the Louisville Acquisitions, the Tampa Acquisition and the Los Angeles
Acquisition due to immateriality.

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                                 1996          1997
                                                              ----------    ----------
                                                               (AMOUNTS IN THOUSANDS,
                                                               EXCEPT PER SHARE DATA)
<S>                                                           <C>           <C>
Net revenues................................................   $199,938      $225,222
Corporate general and administrative expenses...............      7,072         7,361
Depreciation and amortization...............................     14,651        21,476
Operating income............................................     37,564        47,346
Net income..................................................   $ 12,559      $ 17,954
                                                               --------      --------
Basic and diluted pro forma earnings per common share.......   $    .44      $    .63
                                                               ========      ========
Basic pro forma shares outstanding..........................     28,315        28,344
                                                               ========      ========
Diluted pro forma shares outstanding........................     28,315        28,494
                                                               ========      ========
</TABLE>

5. PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                1996         1997
                                                              ---------    ---------
                                                              (THOUSANDS OF DOLLARS)
<S>                                                           <C>          <C>
Land and land improvements..................................  $ 10,718     $ 14,240
Buildings and building improvements.........................     5,334       15,392
Broadcast equipment.........................................    31,067       51,161
Construction in progress....................................     2,454        2,875
                                                              --------     --------
Plant and equipment, at cost................................    49,573       83,668
Less accumulated depreciation...............................   (22,503)     (37,597)
                                                              --------     --------
          Net plant and equipment...........................  $ 27,070     $ 46,071
                                                              ========     ========
</TABLE>

                                       37
<PAGE>   40
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1996         1997
                                                              ----------   ----------
                                                              (THOUSANDS OF DOLLARS)
<S>                                                           <C>          <C>
Goodwill/FCC broadcast licenses.............................   $184,758     $573,069
Non-compete agreements......................................      6,707        8,351
Other.......................................................      2,131        6,036
                                                               --------     --------
          Total.............................................    193,596      587,456
Less accumulated amortization...............................    (55,477)     (68,530)
                                                               --------     --------
          Net intangible assets.............................   $138,119     $518,926
                                                               ========     ========
</TABLE>

7. INCOME TAXES

     Income tax expense (benefit) is summarized as follows:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                               1995     1996     1997
                                                              ------   ------   -------
                                                               (THOUSANDS OF DOLLARS)
<S>                                                           <C>      <C>      <C>
Current:
  Federal...................................................  $5,226   $7,788   $ 8,076
  State.....................................................   1,441      963     1,544
                                                              ------   ------   -------
          Total current.....................................   6,667    8,751     9,620
                                                              ------   ------   -------
Deferred:
  Federal...................................................    (589)   1,198    20,703
  State.....................................................     148     (197)    4,484
                                                              ------   ------   -------
          Total deferred....................................    (441)   1,001    25,187
                                                              ------   ------   -------
          Total income taxes................................  $6,226   $9,752   $34,807
                                                              ======   ======   =======
</TABLE>

     The tax effects of significant temporary differences which comprise the net
deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1996       1997
                                                              --------   ---------
                                                                 (THOUSANDS OF
                                                                    DOLLARS)
<S>                                                           <C>        <C>
Current deferred tax asset:
  Provision for doubtful accounts...........................  $    279   $     964
                                                              --------   ---------
Noncurrent deferred tax assets (liabilities):
  Plant and equipment.......................................    (3,273)    (22,773)
  Intangibles...............................................   (10,351)    (91,028)
  Net operating loss carryforwards -- states................     2,013       2,389
  Employee benefits.........................................     1,061         918
  State taxes...............................................      (955)      6,914
  Other.....................................................       410        (821)
                                                              --------   ---------
     Total net noncurrent liability.........................   (11,095)   (104,401)
                                                              --------   ---------
     Net deferred tax liability.............................  $(10,816)  $(103,437)
                                                              ========   =========
</TABLE>

                                       38
<PAGE>   41
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

\Income tax expense computed using the United States federal statutory rates is
reconciled to the reported income tax provisions as follows:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                               1995     1996     1997
                                                              ------   ------   -------
                                                               (THOUSANDS OF DOLLARS)
<S>                                                           <C>      <C>      <C>
Federal statutory income tax rate...........................      35%      35%       35%
Computed tax expense at federal statutory rates on income
  before income taxes.......................................  $5,036   $8,643   $29,586
State income taxes (net of federal tax benefit).............   1,033      498     3,918
Non-deductible amortization of intangibles..................     811    1,037     1,341
Benefit arising from low income housing credits.............    (555)    (605)     (613)
Other, net..................................................     (99)     179       575
                                                              ------   ------   -------
  Income tax provision......................................  $6,226   $9,752   $34,807
                                                              ======   ======   =======
</TABLE>

     The consolidated federal income tax returns of CEI for 1986 through 1994
and the combined California franchise tax returns of CEI for 1984 through 1990
are presently under audit. The Company will be indemnified by CEI for any
additional liabilities arising from tax-related audits of periods prior to the
Company's initial public offering. Management believes that any additional
liabilities arising from tax-related audits of periods after the Company's
initial public offering are sufficiently provided for at December 31, 1997.

8. LONG-TERM DEBT

     On March 7, 1997, Cox Radio entered into a $300 million, five-year, senior,
unsecured revolving credit facility (the "Credit Agreement"). The interest rate
is based on the London Interbank Offered Rate plus a spread determined by the
ratio of debt to EBITDA. This facility includes a commitment fee on the unused
portion of the total amount available of .1% to .25% based on the ratio of debt
to EBITDA. Cox Radio borrowed approximately $110 million under the Credit
Agreement to consummate the NewCity Acquisition.

     In connection with the NewCity Acquisition, Cox Radio assumed certain
indebtedness of NewCity. NewCity was the obligor of $75 million principal amount
of 11 3/8% Senior Subordinated Notes due 2003 (the "Notes"). The Notes were
general unsecured obligations of Cox Radio and were subordinated to all existing
and future senior indebtedness of Cox Radio. On May 2, 1997, following a tender
offer and consent solicitation, the Company paid an aggregate amount of $82.1
million to holders of the Notes in exchange for approximately $74.6 million
principal amount of the Notes and consents to the elimination of substantially
all of the restrictive covenants applicable to the Notes. As a result, the
Company is the obligor of $.4 million principal amount of Notes. The Company
obtained the funds necessary to make such payments from borrowings under the
Credit Agreement.

     At December 31, 1997, the Company had approximately $235.7 million of
outstanding indebtedness and had approximately $65.0 million available under the
Credit Agreement. During 1997, the interest rate applied to amounts due under
the Credit Agreement ranged from 6.03% to 6.37% (6.37% at December 31, 1997).
The Credit Agreement contains, among other provisions, defined requirements as
to ratio of debt to EBITDA and ratio of EBITDA to interest expense. At December
31, 1997, the Company was in compliance with these covenants.

     In accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments," the Company estimated the fair value of
its amounts outstanding under the Credit Agreement. Borrowings under the Credit
Agreement approximate fair value because the amounts because the applicable
interest rate floats at the current market rate.

                                       39
<PAGE>   42
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company has entered into interest rate swap agreements with certain
lenders providing bank financing. Pursuant to the interest rate swap agreements,
the Company has exchanged its floating rate interest obligations on an aggregate
of $100 million in principal at an average fixed rate of 6.23% per annum for an
average maturity of 6.25 years. The fixing of interest rates for this period
reduces in part the Company's exposure to the uncertainty of floating interest
rates. The differential paid or received on the interest rate swap agreements
are recognized as an adjustment to interest expense. The counterparties to these
interest rate swap agreements are a diverse group of major financial
institutions. The company is exposed to credit loss in the event of
nonperformance by these counterparties. However, the Company does not anticipate
nonperformance by the other parties, and no material loss would be expected from
their nonperformance. The fair value of the interest rate swap agreements was
not recognized in the consolidated financial statements since they are accounted
for as hedges. At December 31, 1997, the estimated fair value of the interest
rate swap agreements, based on current market rates, approximated a net payable
of $1,223,000.

9. RETIREMENT PLANS

     Certain of Cox Radio's employees are eligible to participate in the funded,
noncontributory defined benefit pension plan of CEI and certain key employees
participate in an unfunded, non-qualified supplemental pension plan. New hires
employed by Cox Radio on or after January 1, 1997, including employees
previously employed by NewCity, generally are not eligible to participate in the
plans. The plans call for benefits to be paid to eligible employees at
retirement based primarily upon years of service with Cox Radio and compensation
rates during those years. Pension expense allocated to Cox Radio by CEI was
$636,000, $801,000 and $661,000 for the years ended December 31, 1995, 1996 and
1997, respectively.

     The following table sets forth certain information attributable to the Cox
Radio employees' participation in the CEI pension plans:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,         DECEMBER 31,
                                                          1996                 1997
                                                   ------------------   ------------------
                                                   FUNDED    UNFUNDED   FUNDED    UNFUNDED
                                                    PLANS     PLANS      PLANS     PLANS
                                                   -------   --------   -------   --------
<S>                                                <C>       <C>        <C>       <C>
Actuarial present value of benefit obligations:
  Vested benefits................................  $10,464    $1,188    $11,963    $1,638
  Nonvested benefits.............................      973       172      1,237       243
                                                   -------    ------    -------    ------
Accumulated benefit obligation...................  $11,437    $1,360    $13,200    $1,881
                                                   =======    ======    =======    ======
Projected benefit obligation.....................  $14,434    $1,867    $15,961    $2,512
                                                   =======    ======    =======    ======
</TABLE>

     Assumptions used in the actuarial computations were:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                --------------------
                                                                1995    1996    1997
                                                                ----    ----    ----
<S>                                                             <C>     <C>     <C>
Discount rate...............................................    7.25%   7.75%   7.25%
Rate of increase in compensation levels.....................    5.00%   5.50%   5.00%
Expected long-term rate of return on assets.................    9.00%   9.00%   9.00%
</TABLE>

     CEI may establish a defined benefit pension plan and segregate plan assets
for Cox Radio. The amount of the assets that would be segregated would have an
estimated fair value equal to the projected benefit obligation of the CEI
defined benefit pension plan attributable to Cox Radio employees as of December
31, 1997, or $15,961,000. The assets segregated would be used to fund payments
to retirees. Any non-qualified supplemental pension plan payments due to Cox
Radio employees will be made by CEI.

     CEI provides certain health care and life insurance benefits to eligible
retirees of CEI and its subsidiaries. New hires employed by Cox Radio on or
after January 1, 1997, including employees previously employed by

                                       40
<PAGE>   43
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NewCity, generally are not eligible for such health care and life insurance
coverages. Postretirement expense allocated to Cox Radio by CEI was $218,000,
$166,000 and $158,000 for the years ended December 31, 1995, 1996 and 1997,
respectively. Cox Radio's APBO at December 31, 1997 was $3,309,000.

     The funded status of the portion of the postretirement plan covering the
employees of Cox Radio is not determinable. The APBO for the postretirement plan
of CEI substantially exceeded the fair value of assets held in the plan at
December 31, 1997.

     Actuarial assumptions used to determine the APBO include a discount rate of
7.25% (7.75% in 1996) and an expected long-term rate of return on plan assets of
9%. The assumed health care cost trend rate for retirees is 10.5% (11.5% in
1996). For participants prior to age 65, the trend rate gradually decreases to
5.5% by year 2007 and remains level thereafter. For retirees at age 65 or older,
this rate decreases to 5.0% by year 2008. Increasing the assumed health care
cost trend rate by one percentage point would have resulted in an increase in
the CEI plan's APBO of approximately 6.5% and an increase in the aggregate of
the service cost and interest cost components of the net periodic postretirement
benefit cost of approximately 5.1% for 1997.

     In addition, substantially all of Cox Radio's employees are eligible to
participate in the savings and investment plan of CEI. Under the terms of the
plan, Cox Radio matches a discretionary amount no greater than 50% of employee
contributions up to a maximum of 6% of the employee's base salary. Cox Radio's
expense under the plan was $523,000, $584,000 and $745,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.

     Cox Radio employees whose savings and investment plan contributions are at
the Internal Revenue Service ("IRS") maximum or are restricted in order to pass
the nondiscrimination test required by the IRS are eligible to participate in
CEI's non-qualified savings restoration plan, which began in 1995. Under the
terms of this plan, Cox Radio matches a discretionary amount no greater than 50%
of employee contributions to both the savings and investment and restoration
plans up to a maximum percentage of the employee's eligible compensation. Cox
Radio's expense under the non-qualified savings restoration plan was $23,000,
$23,000 and $36,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.

10. STOCK-BASED COMPENSATION PLANS

     During the three years in the period ending December 31, 1997, the Company
had three stock-based compensation plans. The Company accounts for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations. Compensation for the Cox Radio participation in the Cox
Enterprises, Inc. Unit Appreciation Plan ("UAP") was recorded annually based on
the appraised value of Cox Enterprises, Inc. stock at the end of the period.
Compensation for the Cox Radio, Inc. Long-Term Incentive Plan ("LTIP") and the
Employee Stock Purchase Plan ("ESPP") is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
exercise price. Specific information regarding each plan and required disclosure
of pro forma effect on the Company's operations if Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS
No. 123") had been adopted is presented below.

Cox Enterprises, Inc. UAP

     Prior to the Company's initial public offering during 1996, certain of the
executives and key employees of Cox Radio participated in certain Cox
Enterprises, Inc. UAPs that provided for payment of benefits in the form of
shares of CEI common stock, cash, or both, generally five years after the date
of award. Unit benefits are based on the excess, if any, over a base amount
(value of award), of the fair value of a share of CEI common stock five years
after the effective date of award. Fair values are determined by independent
appraisal. The plans provide for a maximum unit benefit of 150% of the base
amount and benefits vest over the

                                       41
<PAGE>   44
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

five year period following the date of award. The cost of awards made under the
plans was allocated to Cox Radio by CEI over the applicable vesting periods and
was charged to corporate general and administrative expense. Amounts charged to
expense for Cox Radio employees for the years ended December 31, 1995 and 1996
were $1,646,000 and, $2,464,000, respectively. In connection with the Company's
initial public offering, a portion of the 1994 plan was settled through the
issuance of 111,973 shares of restricted Class A Common Stock of Cox Radio as
discussed below. The adoption of SFAS No. 123 would have resulted in no
additional compensation expense related to the Cox Enterprises, Inc. UAP.

Cox Radio, Inc. ESPP

     During 1997, the Company adopted an ESPP, under which the Company was
authorized to issue purchase rights totaling 350,000 shares of Class A Common
Stock to substantially all employees who were employed on December 1, 1996 and
who work at least 20 hours per week. Pursuant to this plan the Company issued
purchase rights totaling 186,118 shares of Class A Common Stock. Under the terms
of the ESPP, the purchase price ($17.37 per share) was 85% of the market value
on May 1, 1997, and employees were allowed to purchase the shares via payroll
deductions through August 1, 1999, at which time the shares will be issued to
the employees. During 1997, 165 shares were issued to employees under the ESPP
due to cancellation of employees' participation in the ESPP or termination of
employment. The fair value of the employees' purchase rights granted in 1997 was
estimated using the Black-Scholes model with the following assumptions: expected
volatility of 32%, no payment of dividends, expected life of 2 years and
risk-free interest rate of 5.4%. The grant date fair value of each purchase
right granted in 1997 was $6.27.

Cox Radio, Inc. LTIP

     Pursuant to the LTIP, executive officers and certain employees of Cox Radio
who have been selected as participants are eligible to receive awards of various
forms of equity-based incentive compensation, including stock options, stock
appreciation rights, stock bonuses, restricted stock awards, performance units
and phantom stock and awards consisting of combinations of such incentives. Cox
Radio has reserved 2,400,000 shares of Class A Common Stock for issuance under
the LTIP.

     Subject to the maximum shares reserved under the LTIP, no individual may
receive a stock option covering more than 300,000 shares of Class A Common Stock
in any year nor be granted more than 100,000 shares of Class A Common Stock, in
any combination of performance awards, restricted stock or other stock-based
awards that are subject to performance criteria in any year. The maximum payout
for any individual for a performance award paid in cash is 100% of his or her
base salary as of the beginning of the year of the performance award payment.

     Upon the closing of the Company's initial public offering, certain UAP
units awarded in 1994 that would have matured in 1998, were converted into
111,973 restricted shares of Class A Common Stock issued pursuant to the LTIP
based on the calculated appreciation of the UAP units and the quoted market
price at the date of conversion. These restricted shares will remain unvested
until the end of the original five-year UAP appreciation period. Certain UAP
units awarded in 1996 were cancelled and converted to options to acquire Class A
Common Stock pursuant to the LTIP. Options granted under the LTIP vest 60% after
three years from the date of the grant, 80% after four years from the date of
the grant and 100% after five years from the date of the grant and expire ten
years after the date of the grant. An accelerated vesting schedule has been
provided such that the options become fully vested if the market value of the
shares exceeds the exercise price by 140% for ten consecutive trading days.
Vesting of certain of the options granted during 1996 and 1997 was accelerated
based upon this schedule. Because the issue price of incentive stock options
awarded during 1996 and 1997 equaled the then current market price, no
compensation cost has been recognized for these options. The fair value of the
options granted during 1996 and 1997 is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: expected
volatility of 38% and 32%, respectively,

                                       42
<PAGE>   45
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

no dividend yield, risk-free interest rate of 6.7% and 5.5%, respectively, and
expected life of three years after vesting. A summary of the status of Cox
Radio's stock options granted under the LTIP as of December 31, 1996 and 1997
and changes during the years ending on those dates is presented below:

<TABLE>
<CAPTION>
                                                       1996                       1997
                                             ------------------------   ------------------------
                                                          WEIGHTED                   WEIGHTED
                                                          AVERAGE                    AVERAGE
                                             SHARES    EXERCISE PRICE   SHARES    EXERCISE PRICE
                                             -------   --------------   -------   --------------
<S>                                          <C>       <C>              <C>       <C>
Outstanding at beginning of year...........       --                    511,673       $18.50
Granted....................................  511,673       $18.50       135,607        22.27
Exercised..................................       --                    (83,214)       18.62
Cancelled..................................       --                    (15,864)       22.53
                                             -------                    -------
Outstanding at end of year.................  511,673       $18.50       548,202       $19.29
                                             =======                    =======
Options exercisable at year-end............       --                    488,524
Weighted-average fair value of options
  granted during the year..................  $  9.39                    $  9.87
</TABLE>

     The following table summarizes information about stock options outstanding
at December 31, 1997:

<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING
                                         WEIGHTED-AVERAGE
                    NUMBER OF OPTIONS        REMAINING        NUMBER OF OPTIONS
  EXERCISE PRICES      OUTSTANDING       CONTRACTUAL LIFE        EXERCISABLE
  ---------------   -----------------   -------------------   -----------------
  <S>               <C>                 <C>                   <C>
      $17.31              32,742               9.00                 32,742
      $18.50             426,679               8.75                426,679
      $20.75              29,103               9.25                 29,103
      $25.38              59,678               9.46                     --
</TABLE>

     Had compensation cost for the LTIP and ESPP been determined based on the
fair value at the grant dates for awards in 1996 and 1997 consistent with the
provisions of SFAS No. 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1996       1997
                                                              -------    -------
                                                                (THOUSANDS OF
                                                                   DOLLARS,
                                                               EXCEPT PER SHARE
                                                                   AMOUNTS)
<S>                                                           <C>        <C>
Net income -- As reported...................................  $14,945    $49,724
                                                              =======    =======
Basic and diluted net income per share -- As reported.......  $   .69    $  1.75
                                                              =======    =======

Net income -- Pro Forma.....................................  $14,744    $46,509
                                                              =======    =======
Basic net income per share -- Pro Forma.....................  $   .68    $  1.64
                                                              =======    =======
Diluted net income per share -- Pro Forma...................  $   .68    $  1.63
                                                              =======    =======
</TABLE>

11. TRANSACTIONS WITH AFFILIATED COMPANIES

     Cox Radio borrows funds for working capital and other needs from CEI.
Certain management services are provided to Cox Radio by CEI. Such services
include rent, legal, corporate secretarial, tax, treasury, internal audit, risk
management, benefits administration, web page development and other support
services and are included in corporate general and administrative expenses in
the Consolidated Statements of Operations. Cox Radio was allocated expenses for
the years ended December 31, 1995, 1996 and 1997 of approximately $2,207,000,
$1,499,000, and $2,191,000 respectively, related to these services. Cox Radio
pays

                                       43
<PAGE>   46
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

rent and certain other occupancy costs to CEI for office facilities. Related
rent and occupancy expense was approximately $30,000, $29,000 and $46,000 for
the years ended December 31, 1995, 1996 and 1997, respectively. Corporate
general and administrative expense allocations are based on a specified
percentage of expenses related to the services provided to Cox Radio in relation
to those provided to other subsidiaries. Rent and occupancy expense is allocated
based on occupied space. Management believes that these allocations were made on
a reasonable basis. However, the allocations are not necessarily indicative of
the level of expenses that might have been incurred had Cox Radio contracted
directly with third parties. Management has not made a study or any attempt to
obtain quotes from third parties to determine what the cost of obtaining such
services from third parties would have been. The fees and expenses to be paid by
Cox Radio to CEI are subject to change.

     The amounts due to CEI are generally due on demand and represent the net of
various transactions, including those described above. The amounts due to CEI
were classified as long-term because the Company has the ability and the intent
to refinance these obligations on a long-term basis. The amounts due from CEI
are correspondingly classified as long-term assets. The amounts due to (from)
CEI are as follows:

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                           ----------------------------
                                                             1995       1996      1997
                                                           ---------   -------   ------
                                                              (THOUSANDS OF DOLLARS)
<S>                                                        <C>         <C>       <C>
Notes payable to CEI.....................................  $ (58,918)  $    --   $   --
Other intercompany amounts due from (to) CEI.............    (66,171)   49,667    3,113
                                                           ---------   -------   ------
          Total..........................................  $(125,089)  $49,667   $3,113
                                                           =========   =======   ======
</TABLE>

     Notes payable to CEI bore interest at prime plus 1.5%. The interest rates
for 1995 and 1996 were established at the beginning of each quarter and ranged
from 10.0% to 10.5% in 1995 and was 8.75% during 1996.

     Cox Radio is paid interest on the daily intercompany balance based on CEI's
commercial paper rate. The rates used during 1997 ranged from 5.6% to 6.1%.

                                       44
<PAGE>   47
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Included in the other intercompany amounts due to CEI are the following
transactions:

<TABLE>
<CAPTION>
                                                        (THOUSANDS OF DOLLARS)
                                                        ----------------------
<S>                                                     <C>
Intercompany due to CEI, December 31, 1994............        $ (61,390)
  Dividends to CEI....................................           (1,400)
  Cash transferred to CEI.............................          110,617
  Acquisitions........................................          (11,697)
  Net operating expense allocations and
     reimbursements...................................         (102,301)
                                                              ---------
Intercompany due to CEI, December 31, 1995............        $ (66,171)
  Dividends to CEI....................................          (12,656)
  Cash transferred to CEI.............................          115,002
  Acquisitions........................................          (21,500)
  Capital contributions by CEI........................           36,744
  Proceeds from initial public offering...............          149,213
  Net operating expense allocations and
     reimbursements...................................         (150,965)
                                                              ---------
Intercompany due from CEI, December 31, 1996..........        $  49,667
                                                              =========
  Cash transferred to CEI.............................          164,720
  Acquisitions........................................         (317,268)
  Borrowings on revolver..............................          235,000
  Net operating expense allocations and
     reimbursements...................................         (129,006)
                                                              ---------
Intercompany due from CEI, December 31, 1997..........        $   3,113
                                                              =========
</TABLE>

     In accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments," Cox Radio has estimated the fair value of
its intercompany advances and notes payable. Given the short-term nature of
these advances, the carrying amounts reported in the balance sheets approximate
fair value.

12. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                               1995     1996     1997
                                                              ------   ------   -------
                                                               (THOUSANDS OF DOLLARS)
<S>                                                           <C>      <C>      <C>
Additional cash flow information:
  Cash paid for interest....................................  $6,071   $5,466   $ 9,886
  Cash paid for income taxes................................   7,844    6,033    11,142
</TABLE>

13. COMMITMENTS AND CONTINGENCIES

     Cox Radio leases land, office facilities, and various items of equipment
under noncancellable operating leases. Rental expense under operating leases
amounted to $1,735,000 in 1995, $1,520,000 in 1996 and $2,995,000 in 1997.
Future minimum lease payments as of December 31, 1997 for all noncancellable
operating leases are as follows (in thousands):

<TABLE>
<S>                                                           <C>
1998........................................................  $ 2,850
1999........................................................    2,715
2000........................................................    2,177
2001........................................................    1,742
2002........................................................    1,242
Thereafter..................................................    3,219
                                                              -------
          Total.............................................  $13,945
                                                              =======
</TABLE>

                                       45
<PAGE>   48
                                COX RADIO, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Cox Radio has various contracts primarily for sports programming and on-air
personalities with future minimum payments for 1998, 1999, 2000 and 2001 of
$16.2 million, $11.8 million, $1.0 million and $0.3 million, respectively.

     At December 31, 1997, the Company had outstanding purchase commitments for
additions to plant and equipment totaling approximately $0.7 million.

     Cox Radio is a party to various legal proceedings which are ordinary and
incidental to its business. Management does not expect that any legal
proceedings currently pending will have a material adverse impact on Cox Radio's
consolidated financial position or consolidated results of operations or cash
flows.

14. STATION INVESTMENT NOTES RECEIVABLE

     In connection certain transactions discussed in Note 4, the Company has
loaned funds at varying rates of interest to certain entities which own radio
stations that the Company has agreed to purchase or is operating under an LMA.
These Station Investment Notes Receivable have interest rates ranging from 8.5%
to 10% and repayment dates ranging from June 1999 to December 2002. These notes
are collateralized by substantially all of the assets of the related radio
stations.

15. EARNINGS PER COMMON SHARE AND CAPITAL STRUCTURE

<TABLE>
<CAPTION>
                                                               1996      1997
                                                              -------   -------
                                                                 (AMOUNTS IN
                                                                 THOUSANDS)
<S>                                                           <C>       <C>
NET INCOME..................................................  $14,945   $49,724
                                                              =======   =======
BASIC EPS
Weighted-average common shares outstanding..................   21,762    28,344
                                                              =======   =======
Basic income per common share...............................      .69      1.75
                                                              =======   =======
DILUTED EPS
Weighted-average common shares outstanding..................   21,762    28,344
  Shares issuable on exercise of dilutive options...........       --       550
  Shares assumed to be purchased with proceeds of options...       --      (400)
                                                              -------   -------
Shares applicable to diluted EPS............................   21,762    28,494
                                                              =======   =======
Diluted income per common share.............................      .69      1.75
                                                              =======   =======
</TABLE>

     Historical earnings per common share for 1996 assumes (i) 19,578,000 shares
issued to CEI in connection with the Cox Radio Consolidation were issued on
January 1, 1996 and (ii) 8,625,000 shares issued in connection with the
Company's initial public offering were outstanding during the entire fourth
quarter.

     Unexercised incentive stock options to purchase 511,673 million of the
Company's common stock as of December 31, 1996 were not included in the
computations of diluted EPS because the options' exercise price was greater than
the average market price of Cox Radio common stock during the respective period.

                                       46
<PAGE>   49

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this Item is incorporated by reference to Cox
Radio's Proxy Statement for the 1998 Annual Meeting of Stockholders.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to Cox
Radio's Proxy Statement for the 1998 Annual Meeting of Stockholders.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference to Cox
Radio's Proxy Statement for the 1998 Annual Meeting of Stockholders.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to Cox
Radio's Proxy Statement for the 1998 Annual Meeting of Stockholders.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) Documents incorporated by reference or filed with this Report

     (1) No financial statement schedules are required to be filed by Items 8
and 14(d) because they are not required or are not applicable, or the required
information is set forth in the applicable financial statements or notes
thereto.

     (2) Exhibits required to be filed by Item 601 of Regulation S-K:

     Listed below are the exhibits which are filed as part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
   2.1     --  Agreement and Plan of Merger, dated as of July 1, 1996, by
               and among Cox Radio, Inc., New Cox Radio II, Inc., NewCity
               Communications, Inc. and certain stockholders of NewCity
               Communications, Inc.(1)**
   2.2     --  Guaranty by Cox Broadcasting, Inc., dated as of July 1,
               1996, in favor of NewCity Communications, Inc.(1)
   3.1     --  Amended and Restated Certificate of Incorporation of Cox
               Radio, Inc.(1)
   3.2     --  Amended and Restated Bylaws of Cox Radio, Inc.(1)
   4.1     --  Indenture between NewCity Communications, Inc. and Shawmut
               Bank Connecticut, National Association, as Trustee, dated as
               of November 2, 1993, related to the 11 3/8% Notes due 2003
               of NewCity Communications, Inc.(1)**
</TABLE>

                                       47
<PAGE>   50

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
   4.2     --  First Supplemental Indenture between NewCity Communications,
               Inc. and Shawmut Bank Connecticut, National Association, as
               Trustee, dated as of September 16, 1994, relating to the
               11 3/8% Notes due 2003 of NewCity Communications, Inc.(1)
   4.3     --  Specimen of Class A Common Stock Certificate.(1)
  10.1     --  Credit Agreement, dated as of March 7, 1997, by and among
               Cox Radio, Inc., Texas Commerce Bank National Association,
               Nationsbank of Texas, N.A. and Citibank, N.A., individually
               and as agents, and the other banks signatory thereto.(2)**
  10.2     --  CEI Credit Facility.(1)
  10.3     --  Cox Radio, Inc. Long-Term Incentive Plan.(1)
  10.4     --  Cox Radio, Inc. Employee Stock Purchase Plan.(1)
  10.5     --  Cox Radio, Inc. Restricted Stock Plan for Non-Employee
               Directors(1)
  10.6     --  Tax Allocation and Indemnification Agreement, dated as of
               September 30, 1996, by and between Cox Enterprises, Inc. and
               Cox Radio, Inc.(2)
  21       --  Subsidiaries of the Registrant(3)
  23.1     --  Consent of Deloitte & Touche LLP
  24.1     --  Power of Attorney (included on page 49)
  27.1     --  Financial Data Schedule (for SEC use only)
</TABLE>

---------------

(1) Incorporated by reference to Cox Radio's Registration Statement on Form S-1
    (Commission File No. 333-08737).
(2) Incorporated by reference to Cox Radio's Annual Report on Form 10-K for the
    period ended December 31, 1996 (Commission File No. 1-12187).
(3) Incorporated by reference to Cox Radio's Quarterly Report on Form 10-Q for
    the period ended September 30, 1997 (Commission file No. 1-12187).
 ** Schedules and Exhibits intentionally omitted.

                                       48
<PAGE>   51
Dynamic Station Clusters

                                                          [COX RADIO, INC. LOGO]
Proven Operating Strategy


Customer Focused Selling


Ratings Leadership


Solid Balance Sheet


Portfolio Diversity


Exceptional People                  1997 Annual Report
<PAGE>   52
                             SHAREHOLDER INFORMATION

                             CORPORATE HEADQUARTERS

Cox Radio, Inc.
1400 Lake Hearn Drive, N.E.
Atlanta, GA 30319
404-843-5000

                                   STOCK DATA

Cox Radio's Class A Common Stock is traded on the New York Stock Exchange.
Ticker symbol: CXR. Daily newspaper stock table listing: CoxRadio A. As of
February 27, 1998, there were 68 shareholders of record of Cox Radio's Class A
Common Stock and one shareholder of record of the Class B Common Stock, Cox
Broadcasting, Inc. There is no established trading market for Cox Radio's Class
B Common Stock. There were no sales of unregistered securities of the Company.
There have been no stock or cash dividends paid on any of Cox Radio's equity
securities. Cox Radio does not intend to pay cash dividends in the foreseeable
future.

Class A Common Stock commenced trading on September 27, 1996, following
effectiveness of the Company's initial public offering. Accordingly, history of
sales prices is limited to 1997 and the fourth quarter of 1996.

                          QUARTERLY MARKET INFORMATION

<TABLE>
<CAPTION>
Class A Common Stock
1996                     High              Low
<S>                      <C>               <C>
Fourth Quarter           $23 1/2           $16

1997
First Quarter            $21 1/8           $17 1/4
Second Quarter            27 9/16           19 5/8
Third Quarter             29 3/4            23 15/16
Fourth Quarter            42                30 5/16
</TABLE>

Cox Radio has been selected for listing on the Chicago Board Options Exchange, a
national securities exchange. Trading in options began on February 28, 1997.

                          TRANSFER AGENT AND REGISTRAR

First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, N.J. 07303-2500
(201) 324-1225
http://www.fctc.com
fctc@em.fcnbd.com

                         ANNUAL MEETING OF SHAREHOLDERS

May 13, 1998, 9:30 a.m.
Cox Radio Corporate Headquarters
1400 Lake Hearn Drive, N.E.
Atlanta, GA 30319

                                    FORM 10-K

Cox Radio's Annual Report on Form 10-K as filed with the Securities and Exchange
Commission is available free upon written request to: Finance Department, Cox
Radio, Inc., at the address above.

                               COMPANY INFORMATION

Communications regarding stock transfers, lost certificates or account changes
should be directed to the transfer agent, First Chicago Trust Company of New
York. For other information, contact one of the following:

Analysts/Institutional Investors: Maritza Pichon, Chief Financial Officer,
404-843-5159, fax: 404-843-5890.

Individual Shareholders: Tye Hanna, Assistant Controller, 404-843-5572, fax:
404-843-5890.

News media: Ellen East, Assistant Director, Communication, 404-843-5281, fax:
404-843-5109.

                              INDEPENDENT AUDITORS

Deloitte & Touche LLP
100 Peachtree St.
Suite 1700
Atlanta, GA 30303-1943
404-220-1500


COX RADIO, INC.

BOARD OF DIRECTORS

Chairman
Nicholas D. Trigony
President
Cox Broadcasting, Inc.

David E. Easterly
President and Chief
Operating Officer
Cox Enterprises, Inc.

Ernest D. Fears, Jr.
Lecturer
Howard University

Richard F. Ferguson
Vice President and
Chief Operating Officer
Cox Radio, Inc.

Paul M. Hughes
President and Chief
Operating Officer
OG Holding Ltd.

James C. Kennedy
Chairman and Chief
Executive Officer
Cox Enterprises, Inc.

Robert F. Neil
President and Chief
Executive Officer
Cox Radio, Inc.

EXECUTIVE OFFICERS

Robert F. Neil
President and Chief
Executive Officer

Richard F. Ferguson
Vice President and Chief
Operating Officer

Maritza C. Pichon
Chief Financial Officer

Marc W. Morgan
Senior Group
Vice President

James T. Morley
Senior Group
Vice President

Robert B. Green
Group Vice President

Richard A. Reis
Group Vice President
<PAGE>   53

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Cox Radio, Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          Cox Radio, Inc.

                                          By:      /s/ ROBERT F. NEIL
                                            ------------------------------------
                                                       Robert F. Neil
                                               President and Chief Executive
                                                           Officer

Date: March 27, 1998

                               POWER OF ATTORNEY

     Cox Radio, Inc., a Delaware corporation, and each person whose signature
appears below, constitutes and appoints Robert F. Neil and Maritza C. Pichon,
and either of them, with full power to act without the other, such person's true
and lawful attorneys-in-fact, with full power of substitution and
resubstitution, for him and her and in his or her name, place and stead, in any
and all capacities, to sign this Annual Report on Form 10-K and any and all
amendments to such Annual Report on Form 10-K and other documents in connection
therewith, and to file the same and all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to do and
perform each and every act and thing necessary or desirable to be done in and
about the premises, as fully to all intents and purposes as he or she might or
could do in person, thereby ratifying and confirming all that said
attorneys-in-fact, or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Cox Radio,
Inc. and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                     SIGNATURE                                   TITLE                      DATE
                     ---------                                   -----                      ----
<C>                                                  <S>                             <C>

              /s/ NICHOLAS D. TRIGONY                Chairman of the Board of            March 27, 1998
---------------------------------------------------    Directors
                Nicholas D. Trigony

                /s/ ROBERT F. NEIL                   President and Chief Executive       March 27, 1998
---------------------------------------------------    Officer; Director
                  Robert F. Neil

               /s/ MARITZA C. PICHON                 Chief Financial Officer             March 27, 1998
---------------------------------------------------    (principal accounting
                 Maritza C. Pichon                     officer and principal
                                                       financial officer)

               /s/ JAMES C. KENNEDY                  Director                            March 27, 1998
---------------------------------------------------
                 James C. Kennedy

               /s/ DAVID E. EASTERLY                 Director                            March 27, 1998
---------------------------------------------------
                 David E. Easterly
</TABLE>

                                       49
<PAGE>   54

<TABLE>
<CAPTION>
                     SIGNATURE                                   TITLE                      DATE
                     ---------                                   -----                      ----
<C>                                                  <S>                             <C>

             /s/ ERNEST D. FEARS, JR.                Director                            March 27, 1998
---------------------------------------------------
               Ernest D. Fears, Jr.

                /s/ PAUL M. HUGHES                   Director                            March 27, 1998
---------------------------------------------------
                  Paul M. Hughes
</TABLE>

                                       50