Radio One, Inc. Reports Record Third Quarter Results
Alfred C. Liggins, III, the Company's CEO and President stated, "This was another great quarter for us as we continued to deliver some of the highest growth rates and margins in the industry. We have weathered an uncertain economic environment and competitive entry in several of our markets and are well positioned to continue our industry outperformance in the upcoming quarters, which is remarkable given the tough comps that we are up against relative to most other industry participants. We are cautiously optimistic that the strength we have seen in radio advertising over the past several months will continue well into next year."
Scott R. Royster, the Company's Executive Vice President and CFO stated, "In addition to our strong operating performance, our balance sheet continues to improve markedly. Our leverage has fallen below five times EBITDA, and we are pleased to announce that we recently took advantage of historically low interest rates and, effective early December, 2002, fixed rates on $200 million of our bank term debt at swap rates ranging from 2.55% to 3.39% (prior to the spread above LIBOR) over an approximate four year period. These rates are down from an average fixed swap rate of 6.41% (prior to the spread above LIBOR) we have been paying for the last two years. This action should benefit net income and free cash flow and enhance our financial flexibility in 2003 and beyond."
RESULTS OF OPERATIONS
Comparison of the periods ended September 30, 2002 to the period ended
September 30, 2001
(all periods are unaudited -- all numbers in 000s except per share data).
Three Three Nine Nine
months months months months
ended ended ended ended
Sept. 30 Sept. 30 Sept. 30 Sept. 30
2002 2001 2002 2001
STATEMENT OF
OPERATIONS DATA:
REVENUE:
Broadcast revenue $91,279 $75,033 $248,251 $200,236
Less: Agency
commissions 10,810 8,827 29,306 23,820
Net broadcast
revenue 80,469 66,206 218,945 176,416
OPERATING EXPENSES:
Programming and
technical 12,699 10,531 36,805 28,538
Selling, G&A 24,665 21,238 69,787 57,444
Corporate expenses 3,245 2,353 9,002 5,876
Non-cash
compensation 352 238 994 713
Depreciation &
amortization 4,156 31,662 12,929 94,037
Total operating
expenses 45,117 66,022 129,517 186,608
Operating income
(loss) 35,352 184 89,428 (10,192)
INTEREST EXPENSE, net 14,331 15,993 46,058 46,411
(LOSS) GAIN ON
SALE OF ASSETS - (44) - 4,228
OTHER EXPENSE
(INCOME), net 52 (630) (1,013) (630)
Income (loss) before
provision (benefit)
for income taxes,
extraordinary item
and cumulative
effect of
accounting change 20,969 (15,223) 44,383 (51,745)
PROVISION (BENEFIT)
FOR INCOME TAXES 8,178 (5,134) 17,089 (17,076)
Income (loss) before
extraordinary item
and cumulative
effect of
accounting change 12,791 (10,089) 27,294 (34,669)
EXTRAORDINARY LOSS
ON DEBT RETIREMENT,
net of tax - - - 5,207
CUMULATIVE EFFECT
OF ACCOUNTING
CHANGE, net of tax - - 23,229 -
Net income (loss) $12,791 $(10,089) $4,065 $(39,876)
Net income (loss)
applicable to
common
stockholders (a) $7,756 $(15,124) $(11,040) $(54,981)
Three Three Nine Nine
months months months months
ended ended ended ended
Sept. 30 Sept. 30 Sept. 30 Sept. 30
2002 2001 2002 2001
DILUTED PER
SHARE DATA (g):
Net income (loss) per
share before
extraordinary loss
and cumulative effect
of accounting change $0.12 $(0.11) $0.27 $(0.39)
Net income (loss) per
share 0.12 (0.11) 0.04 (0.45)
Preferred dividends 0.05 0.17
per share 0.05 0.15
Net income (loss) per
share applicable to
common shareholders 0.07 (0.16) (0.11) (0.62)
After-tax cash flow
per share 0.21 0.13 0.45 0.32
OTHER DATA:
Broadcast cash
flow (b) $ 43,105 $ 34,437 $ 112,353 $ 90,434
Broadcast cash flow
margin 53.6 % 52.0 % 51.3 % 51.3 %
EBITDA (c) $ 39,860 $ 32,084 $ 103,351 $ 84,558
After-tax cash
flow (d) 21,600 12,210 45,836 28,288
Capital expenditures 2,504 1,970 7,619 4,810
Free cash flow (e) 19,096 10,240 38,217 23,478
SAME STATION RESULTS:
Net revenue $ 72,464 $ 64,150 $ 192,786 $ 173,789
Broadcast cash flow 40,140 33,550 103,083 89,225
Broadcast cash flow
margin 55.4 % 52.3 % 53.5 % 51.3 %
Weighted average
shares outstanding --
basic (f) 104,538 91,687 100,755 88,936
Weighted average
shares outstanding --
diluted (g) 104,892 91,687 101,363 88,936
AFTER-TAX CASH FLOW: Q3 -- 2002 FREE CASH FLOW: Q3 -- 2002
Pre-tax income $ 20,969 After-tax
Plus: Depreciation and cash flow $ 21,600
amortization 4,156
Plus: Loss on asset Capital
sale/investments 750 expenditures 2,504
Plus: Non-cash interest expense
& non-cash compensation 892
Less: Cash taxes (132)
Less: Preferred Dividends (5,035)
TOTAL $ 21,600 TOTAL $ 19,096
September 30, December 31,
2002 2001
(unaudited) (audited)
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents $ 65,915 $ 32,115
Current assets 139,020 97,903
Total assets 1,974,798 1,923,915
Senior debt 350,000 480,022
Subordinated debt 300,000 300,000
Preferred stock (liquidation value) 310,000 310,000
Total shareholders' equity 1,245,475 1,052,947
Current Total Total
Amount Applicable 2003 2004
Outstand- Interest Principal Principal
ing Rates(3) Payments(4) Payments(4)
SELECTED LEVERAGE DATA:
Senior bank term debt
(subject to a 46 month
fixed swap) (1) $100,000 4.39 %
Senior bank term debt
(subject to a 36 month
fixed swap) (1) 50,000 4.01 %
Senior bank term debt
(subject to a 24 month
fixed swap) (1) 50,000 3.55 %
Senior bank term debt
(subject to a 20 month
fixed swap) 25,000 4.51 %
Senior bank term debt
(variable rate) (2) 125,000 -2.80 % $ 52,500 $ 52,500
8-7/8% senior
subordinated notes
(fixed rate) 300,000 8.78 %
(1) A total of $200 million is subject to fixed rate swap agreements that
will become effective on December 2, 2002.
(2) Subject to rolling 90-day LIBOR plus a spread currently at 1.00% and
incorporated into the rate outlined above.
(3) Under its swap agreements, the Company pays a fixed rate plus a spread
based on the Company's leverage, as defined in its credit agreement.
That spread is currently 1.00% and is incorporated into the swap rates
outlined above.
(4) Principal payments are due in equal quarterly installments, commencing
on March 31, 2003.
Net broadcast revenue increased to approximately $80.5 million for the quarter
ended September 30, 2002 from approximately $66.2 million for the quarter ended
September 30, 2001 or 22%. Net broadcast revenue increased to approximately
$218.9 million for the nine months ended September 30, 2002 from approximately
$176.4 million for the nine months ended September 30, 2001 or 24%. These
increases were the result of broadcast revenue growth in most of the Company's
existing markets, as the Company benefited from historical ratings increases and
overall radio industry growth. Additional revenue gains were derived from the
Company's August 2001 acquisition of Blue Chip Broadcasting, Inc. and two new
stations launched in the Atlanta market within the past year.
Operating expenses excluding depreciation, amortization and non-cash compensation increased to approximately $40.6 million for the quarter ended September 30, 2002 from approximately $34.1 million for the quarter ended September 30, 2001 or 19%. Operating expenses excluding depreciation, amortization and stock-based compensation increased to approximately $115.6 million for the nine months ended September 30, 2002 from approximately $91.9 million for the nine months ended September 30, 2001 or 26%. These increases in expenses were related to (1) the Company's expansion within the markets in which it operates including increased variable costs associated with increased revenue, (2) start-up and expansion expenses in certain markets with new radio stations or new radio station formats, (3) expenses associated with the radio stations the Company has acquired since July 1, 2001 and (4) higher corporate expenses due to the Company's rapid expansion.
Interest expense decreased to approximately $14.3 million for the quarter ended September 30, 2002 from approximately $16.0 million for the quarter ended September 30, 2001 or 11%. Interest expense decreased to approximately $46.1 million for the nine months ended September 30, 2002 from approximately $46.4 million for the nine months ended September 30, 2001 or 1%. These decreases related primarily to the Company having reduced outstanding bank debt using proceeds from the Company's April 2002 equity offering, as well as lower interest rates on that bank debt as a result of declining leverage and lower market interest rates for most of 2002.
Income before provision for income taxes, extraordinary item and cumulative effect of an accounting change increased to approximately $21.0 million for the quarter ended September 30, 2002 compared to a loss before benefit for income taxes, extraordinary item and cumulative effect of an accounting change of approximately $15.2 million for the quarter ended September 30, 2001. Income before provision for income taxes, extraordinary item and cumulative effect of an accounting change increased to approximately $44.4 million for the nine months ended September 30, 2002 compared to a loss before benefit for income taxes, extraordinary item and cumulative effect of an accounting change of approximately $51.7 million for the nine months ended September 30, 2001. These increases were due primarily to higher operating income due to higher revenue and lower amortization expense due to the adoption of SFAS No. 142 during the first quarter of 2002. Particularly, for the nine months ended September 30, 2002, the Company incurred depreciation and amortization expense of approximately $12.9 million compared to approximately $94.0 million for the nine months ended September 30, 2001.
Net income increased to approximately $12.8 million for the quarter ended September 30, 2002 compared to a loss of approximately $10.1 million for the quarter ended September 30, 2001. This increase was due to higher income before provision for income taxes, extraordinary item and cumulative effect of an accounting change, partially offset by a provision for income taxes compared to the previous year's loss before benefit for income taxes, extraordinary item and cumulative effect of accounting change, partially offset by a benefit for income taxes. Assuming the adoption of FAS 142 "Goodwill and Other Intangibles" had occurred at the beginning of 2001, net income would have been approximately $8.7 million for the third quarter of 2001. Net income increased to approximately $4.1 million for the nine months ended September 30, 2002 compared to a loss of approximately $39.9 million for the nine months ended September 30, 2001. This increase was due to income before provision for income taxes, extraordinary item and cumulative effect of an accounting change in 2002, partially offset by a provision for income taxes compared to the previous year's loss before benefit for income taxes, extraordinary item and cumulative effect of accounting change, partially offset by a benefit for income taxes. This nine month period increase in net income was partially offset further by the effect of the adoption of SFAS No. 142 during the first quarter of 2002 which resulted in a one time charge of approximately $23.2 million.
BCF increased to approximately $43.1 million for the quarter ended September 30, 2002 from approximately $34.4 million for the quarter ended September 30, 2001 or 25%. BCF increased to approximately $112.4 million for the nine months ended September 30, 2002 from approximately $90.4 million for the nine months ended September 30, 2001 or 24%. These increases were attributable primarily to the increases in net broadcast revenue partially offset by higher operating expenses as described above.
EBITDA increased to approximately $39.9 million for the quarter ended September 30, 2002 from approximately $32.1 million for the quarter ended September 30, 2001 or 24%. EBITDA increased to approximately $103.4 million for the nine months ended September 30, 2002 from approximately $84.6 million for the nine months ended September 30, 2001 or 22%. These increases were attributable primarily to the increase in net broadcast revenue partially offset by higher operating expenses and higher corporate expenses associated with the Company's overall growth as described above.
ATCF increased to approximately $21.6 million for the quarter ended September 30, 2002 from approximately $12.2 million for the quarter ended September 30, 2001 or 77%. ATCF increased to approximately $45.8 million for the nine months ended September 30, 2002 from approximately $28.3 million for the nine months ended September 30, 2001 or 62%. These increases were attributable primarily to the increases in BCF and EBITDA partially offset by higher current taxes (versus a tax benefit in 2001) in 2002 compared to 2001.
FCF increased to approximately $19.1 million for the quarter ended September 30, 2002 from approximately $10.2 million for the quarter ended September 30, 2001 or 87%. FCF increased to approximately $38.2 million for the nine months ended September 30, 2002 from approximately $23.5 million for the nine months ended September 30, 2001 or 63%. These increases were attributable primarily to the increases in ATCF partially offset by higher capital expenditures of approximately $2.5 million and $7.6 million for the three month and nine month periods, respectively, of 2002 compared to approximately $2.0 million and $4.8 million for the three month and nine month periods, respectively, of 2001.
Company Information and Guidance:The Company adopted a portion of SFAS 142 related to the impairment of certain intangible assets during the first quarter of 2002. In accordance with SFAS 142, during the second quarter of 2002, Radio One determined that it had an impairment of goodwill (as defined in SFAS 142) in its Augusta, Georgia market. As required by SFAS 142, the Company will calculate the amount of the impairment and record it before December 31, 2002.
For the fourth quarter of 2002, the Company expects to report net broadcast revenue of approximately $76.9 million, BCF of approximately $37.4 million, EBITDA of approximately $34.2 million, ATCF per share of approximately $0.16 and net income per share (before preferred dividends of $0.05 per share and one time and/or extraordinary items, if any) of approximately $0.09-0.10. This would represent double-digit growth in same station net revenue for the quarter. The Company expects corporate expenses for all of 2002 to be approximately $12.0-12.5 million and capital expenditures to be approximately $10.5-11.0 million.
Radio One will hold a conference call to discuss its results for the fiscal third quarter of 2002. This conference call is scheduled for Wednesday, October 30, 2002 at 3:00 p.m. Eastern Standard Time. Interested parties should call 816-650-0741 at least five minutes prior to the scheduled time of the call and ask for the "Radio One Third Quarter Results Conference Call." The conference call will be recorded and made available for replay from 5:00 p.m. EST the day of the call until 11:59 p.m. EST of the day following the call. Interested parties may listen to the recording by calling 402-220-2491 and entering conference identification number 13901558. Access to live audio and replay of the conference call will also be available on Radio One's corporate website at http://www.radio-one.com . The replay will be made available on the website for the seven day period following the call.
Radio One is the nation's seventh largest radio broadcasting company (based on 2001 pro forma revenue) and the largest primarily targeting African- American and urban listeners. The Company owns and/or operates 65 radio stations located in 22 markets in the United States and programs five channels on the XM Satellite Radio Inc. system.
Notes:
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Because these statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially, including the absence of a combined operating history with an acquired company or radio station and the potential inability to integrate acquired businesses, need for additional financing, high degree of leverage, seasonal nature of the business, granting of rights to acquire certain portions of the acquired company's or radio station's operations, market ratings, variable economic conditions and consumer tastes, as well as restrictions imposed by existing debt and future payment obligations. Important factors that could cause actual results to differ materially are described in the Company's reports on Forms 10-K and 10-Q and other filings with the Securities and Exchange Commission.
(a) Net income (loss) applicable to common stockholders is defined as net
income minus preferred stock dividends.
(b) "Broadcast cash flow" is defined as operating income plus corporate
expenses, non-cash compensation and depreciation and amortization.
(c) "EBITDA" is defined as broadcast cash flow minus corporate expenses.
(d) "After-tax cash flow" is defined as income before provision/(benefit)
for income taxes, extraordinary items and cumulative effect of
accounting change plus depreciation and amortization, non-cash
compensation, non-cash interest expense and loss/(gain) on investments
and/or asset sales (if any, a component of other income (expense)),
less the current portion of the income tax provision/(benefit) and
preferred stock dividends.
(e) "Free cash flow" is defined as after-tax cash flow minus capital
expenditures.
(f) As of September 30, 2002 the Company had approximately 104,538,000
shares of common stock outstanding on a weighted average basis.
(g) As of September 30, 2002 the Company had approximately 104,892,000
shares of common stock outstanding on a weighted average basis,
diluted for outstanding stock options. Per share data were calculated
using the basic and diluted weighted average shares outstanding,
however, the per share amounts were the same because there was no
material difference between the two weighted average share amounts.
The Company has presented broadcast cash flow, EBITDA, after-tax cash flow and
free cash flow data, which the Company believes are comparable to the data
provided by other companies in the industry, because such data are commonly used
as a measure of performance for broadcast companies. However, broadcast cash
flow, EBITDA, after-tax cash flow and free cash flow do not purport to represent
cash provided by operating activities as reflected in the Company's consolidated
statements of cash flow, are not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles.
SOURCE Radio One, Inc.
CONTACT: Scott R. Royster, EVP and CFO, of Radio One, Inc., +1-301-429-2642 URL: http://www.radio-one.com