SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
Commission File No. 0-25969
RADIO ONE, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1166660
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5900 Princess Garden Parkway,
7th Floor
Lanham, Maryland 20706
(Address of principal executive offices)
(301) 306-1111
Registrant's telephone number, including area code
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 2, 2002
----- --------------------------
Class A Common Stock, $.001 Par Value 22,389,527
Class B Common Stock, $.001 Par Value 2,867,463
Class C Common Stock, $.001 Par Value 3,132,458
Class D Common Stock, $.001 Par Value 76,125,650
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Form 10-Q
For the Quarter Ended March 31, 2002
TABLE OF CONTENTS
-----------------
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.............................................................................. 3
Consolidated Balance Sheets as of December 31, 2001 and March 31, 2002 (Unaudited)................ 4
Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and 2002
(Unaudited).................................................................................... 5
Consolidated Statements of Changes in Stockholders' Equity for the Year Ended December 31, 2001
and for the Three Months Ended March 31, 2002 (Unaudited)...................................... 6
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2002
(Unaudited).................................................................................... 7
Notes to Consolidated Financial Statements........................................................ 8
Consolidating Financial Statements................................................................ 11
Consolidating Balance Sheet as of December 31, 2001.............................................. 12
Consolidating Balance Sheet as of March 31, 2002 (Unaudited).................................... 14
Consolidating Statement of Operations for the Three Months Ended March 31, 2001 (Unaudited)....... 16
Consolidating Statement of Operations for the Three Months Ended March 31, 2002 (Unaudited)....... 17
Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2001 (Unaudited)....... 18
Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2002 (Unaudited)....... 20
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................. 30
Item 2. Changes in Securities and Use of Proceeds......................................................... 30
Item 3. Defaults Upon Senior Securities................................................................... 30
Item 4. Submission of Matters to a Vote of Security Holders............................................... 30
Item 5. Other Information................................................................................. 30
Item 6. Exhibits and Reports on Form 8-K.................................................................. 30
SIGNATURE..................................................................................................... 32
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(See pages 4-21 -- This page intentionally left blank.)
3
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF DECEMBER 31, 2001, AND MARCH 31, 2002
-------------------------------------------
December 31, March 31,
2001 2002
-------------- --------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 32,115,000 $ 26,165,000
Trade accounts receivable, net of allowance for doubtful accounts of
$6,668,000 and $7,318,000, respectively 56,682,000 48,087,000
Prepaid expenses and other 2,441,000 2,272,000
Income tax receivable 3,200,000 3,089,000
Deferred income tax asset 3,465,000 3,465,000
-------------- --------------
Total current assets 97,903,000 83,078,000
PROPERTY AND EQUIPMENT, NET 39,446,000 39,378,000
INTANGIBLE ASSETS, NET 1,776,201,000 1,736,408,000
OTHER ASSETS 10,365,000 11,603,000
-------------- --------------
Total assets $1,923,915,000 $1,870,467,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,782,000 $ 6,463,000
Accrued expenses 38,370,000 27,312,000
Fair value of derivative instruments 13,439,000 9,678,000
Other current liabilities 2,491,000 2,431,000
-------------- --------------
Total current liabilities 62,082,000 45,884,000
LONG-TERM DEBT AND DEFERRED INTEREST 780,022,000 780,007,000
DEFERRED INCOME TAX LIABILITY 28,864,000 16,544,000
-------------- --------------
Total liabilities 870,968,000 842,435,000
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.001 par value, 1,000,000 shares authorized
and 310,000 shares issued and outstanding; liquidation preference of
$1,000 per share plus cumulative dividends at 6.5% per year, unpaid
dividends were $4,198,000 as of December 31, 2001 and March 31, 2002 -- --
Common stock - Class A, $.001 par value, 30,000,000 shares authorized,
22,389,000 and 22,388,000 shares issued and outstanding 23,000 23,000
Common stock - Class B, $.001 par value, 150,000,000 shares authorized,
2,867,000 shares issued and outstanding 3,000 3,000
Common stock - Class C, $.001 par value, 150,000,000 shares authorized,
3,132,000 shares issued and outstanding 3,000 3,000
Common stock - Class D, $.001 par value, 150,000,000 shares authorized,
65,826,000 and 65,861,000 shares issued and outstanding 66,000 66,000
Accumulated other comprehensive income (9,053,000) (6,721,000)
Stock subscriptions receivable (31,666,000) (32,130,000)
Additional paid-in capital 1,208,652,000 1,208,872,000
Accumulated deficit (115,081,000) (142,084,000)
-------------- --------------
Total stockholders' equity 1,052,947,000 1,028,032,000
-------------- --------------
Total liabilities and stockholders' equity $1,923,915,000 $1,870,467,000
============== ==============
The accompanying notes are an integral part of these consolidated balance
sheets.
4
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2002
--------------------------------------------------
Three Months Ended
March 31,
---------------------------
2001 2002
------------ ------------
(Unaudited)
REVENUE:
Broadcast revenue, including barter revenue of $645,000 and 786,000,
respectively $ 54,273,000 $ 65,937,000
Less: agency commissions 6,348,000 7,626,000
------------ ------------
Net broadcast revenue 47,925,000 58,311,000
------------ ------------
OPERATING EXPENSES:
Program and technical, exclusive of depreciation and amortization shown
separately below 8,856,000 11,502,000
Selling, general and administrative 17,116,000 20,996,000
Corporate expenses 1,840,000 2,615,000
Non-cash compensation 238,000 300,000
Depreciation and amortization 31,524,000 4,422,000
------------ ------------
Total operating expenses 59,574,000 39,835,000
------------ ------------
Operating (loss) income (11,649,000) 18,476,000
INTEREST EXPENSE, including amortization of deferred financing costs 15,701,000 16,917,000
GAIN (LOSS) ON SALE OF ASSETS, net 4,272,000 (10,000)
OTHER INCOME, net 596,000 528,000
------------ ------------
(Loss) income before benefit (provision) for income taxes and
cumulative effect of accounting change (22,482,000) 2,077,000
BENEFIT (PROVISION) FOR INCOME TAXES 7,309,000 (816,000)
------------ ------------
(Loss) income before cumulative effect of accounting change (15,173,000) 1,261,000
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, net of tax -- (23,229,000)
------------ ------------
NET LOSS $(15,173,000) $(21,968,000)
============ ============
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(20,211,000) $(27,003,000)
============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE
APPLICABLE TO COMMON STOCKHOLDERS $ (.23) $ (.29)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted 86,801,000 94,229,000
============ ============
The accompanying notes are an integral part of these consolidated
statements.
5
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2001, AND FOR THE THREE MONTHS
--------------------------------------------------------------
ENDED MARCH 31, 2002 (UNAUDITED)
--------------------------------
Accumulated
Convertible Common Common Common Common other
preferred stock stock stock stock Comprehensive comprehensive
stock Class A Class B Class C Class D income income
----------- ------- ------- ------- ------- ------------- -------------
BALANCE, as of December 31, 2000 $-- $23,000 $3,000 $3,000 $58,000 $ --
Comprehensive income:
Net loss -- -- -- -- -- $(55,247,000) --
Unrealized loss on
derivative and hedging
activities from
cumulative effect of
accounting change, net
of taxes -- -- -- -- -- (2,630,000) (2,630,000)
Change in unrealized net
loss on derivative and
hedging activities, net
of taxes -- -- -- -- -- (6,423,000) (6,423,000)
------------
Comprehensive income $(64,300,000)
============
Preferred stock dividends -- -- -- -- -- --
Issuance of stock for
acquisition -- -- -- -- 6,000 --
Stock sold to officers -- -- -- -- 2,000 --
Employee exercise of
options -- -- -- -- -- --
Preferred stock issuance
costs -- -- -- -- -- --
--- ------- ------ ------ ------- -----------
BALANCE, as of December 31, 2001 -- 23,000 3,000 3,000 66,000 (9,053,000)
Comprehensive income:
Net loss -- -- -- -- -- (21,968,000) --
Change in unrealized net
loss on derivative and
hedging activities, net
of taxes -- -- -- -- -- 2,332,000 2,332,000
------------
Comprehensive income $(19,636,000)
============
Preferred stock dividends -- -- -- -- -- --
Repurchase of stock -- -- -- -- -- --
Interest income on
subscriptions receivable -- -- -- -- -- --
Employee exercise of
options -- -- -- -- -- --
--- ------- ------ ------ ------- -----------
BALANCE, as of March 31, 2002 $-- $23,000 $3,000 $3,000 $66,000 $(6,721,000)
=== ======= ====== ====== ======= ===========
Stock Additional Total
subscriptions paid-in Accumulated stockholders'
receivable capital deficit equity
------------- -------------- ------------- --------------
BALANCE, as of December 31, 2000 $(9,005,000) $1,105,681,000 $ (39,694,000) $1,057,069,000
Comprehensive income:
Net loss -- -- (55,247,000) (55,247,000)
Unrealized loss on
derivative and hedging
activities from
cumulative effect of
accounting change, net
of taxes -- -- -- (2,630,000)
Change in unrealized net
loss on derivative and
hedging activities, net
of taxes -- -- -- (6,423,000)
Comprehensive income
Preferred stock dividends -- -- (20,140,000) (20,140,000)
Issuance of stock for
acquisition -- 81,327,000 -- 81,333,000
Stock sold to officers (22,661,000) 21,103,000 -- (1,556,000)
Employee exercise of
options -- 550,000 -- 550,000
Preferred stock issuance
costs -- (9,000) -- (9,000)
------------ -------------- ------------- --------------
BALANCE, as of December 31, 2001 (31,666,000) 1,208,652,000 (115,081,000) 1,052,947,000
Comprehensive income:
Net loss -- -- (21,968,000) (21,968,000)
Change in unrealized net
loss on derivative and
hedging activities, net
of taxes -- -- -- 2,332,000
Comprehensive income
Preferred stock dividends -- -- (5,035,000) (5,035,000)
Repurchase of stock -- (75,000) -- (75,000)
Interest income on
subscriptions receivable (464,000) -- -- (464,000)
Employee exercise of
options -- 295,000 -- 295,000
------------ -------------- ------------- --------------
BALANCE, as of March 31, 2002 $(32,130,000) $1,208,872,000 $(142,084,000) $1,028,032,000
============ ============== ============= ==============
The accompanying notes are an integral part of these
consolidated statements.
6
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2002
--------------------------------------------------
Three Months Ended
March 31,
---------------------------
2001 2002
------------ ------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,173,000) $(21,968,000)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization 31,524,000 4,422,000
Amortization of debt financing costs, unamortized discount and deferred interest 478,000 533,000
Deferred income taxes and reduction in valuation reserve on deferred income taxes (5,948,000) 793,000
Cumulative effect of accounting change -- 23,229,000
Non-cash compensation to officers 238,000 300,000
Gain on sale of assets (4,272,000) --
Effect of change in operating assets and liabilities-
Trade accounts receivable, net 10,327,000 8,595,000
Income tax receivable 726,000 111,000
Prepaid expenses and other 279,000 (231,000)
Other assets (240,000) (1,245,000)
Accounts payable (546,000) (1,319,000)
Accrued expenses and other 1,755,000 (11,794,000)
------------ ------------
Net cash flows from operating activities 19,148,000 1,426,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,651,000) (1,984,000)
Equity investments (210,000) (456,000)
Proceeds from sale of assets 69,254,000 --
Deposits and payments for station purchases (65,670,000) (5,000)
------------ ------------
Net cash flows from investing activities 1,723,000 (2,445,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (12,500,000) (15,000)
Offering costs -- (101,000)
Proceeds from exercise of stock options 42,000 295,000
Payment for retirement of stock -- (75,000)
Payment of preferred stock issuance costs (9,000) --
Payment of preferred stock dividends (5,038,000) (5,035,000)
------------ ------------
Net cash flows from financing activities (17,505,000) (4,931,000)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,366,000 (5,950,000)
CASH AND CASH EQUIVALENTS, beginning of period 20,879,000 32,115,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 24,245,000 $ 26,165,000
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 12,450,000 $ 26,404,000
============ ============
Income taxes $ 163,000 $ 88,000
============ ============
The accompanying notes are an integral part of these consolidated statements.
7
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Organization and Business
- -------------------------
Radio One, Inc. (a Delaware corporation referred to as Radio One) and
subsidiaries (collectively referred to as the Company) were organized to
acquire, operate and maintain radio broadcasting stations. The Company owns
and/or operates radio stations in the Washington, D.C.; Baltimore, Maryland;
Philadelphia, Pennsylvania; Detroit, Michigan; Atlanta and Augusta, Georgia;
Columbus, Dayton, Cincinnati and Cleveland, Ohio; St. Louis, Missouri; Richmond,
Virginia; Boston, Massachusetts; Charlotte and Raleigh, North Carolina;
Indianapolis, Indiana; Houston and Dallas, Texas; Miami, Florida; Los Angeles,
California; Minneapolis, Minnesota; and Louisville, Kentucky markets.
The Company has been making and may continue to make significant acquisitions of
radio stations, which may require it to incur new debt. The service of this debt
could require the Company to make significant debt service payments. The
Company's operating results are significantly affected by its share of the
audience in markets where it has stations.
Basis of Presentation
- ---------------------
The accompanying consolidated financial statements include the accounts of Radio
One, Inc. and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Interim Financial Statements
- ----------------------------
The interim consolidated financial statements included herein for Radio One and
subsidiaries have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. In management's
opinion, the interim financial data presented herein include all adjustments
(which include only normal recurring adjustments) necessary for a fair
presentation. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted pursuant
to such rules and regulations.
Results for interim periods are not necessarily indicative of results to be
expected for the full year. It is suggested that these consolidated financial
statements be read in conjunction with the Company's December 31, 2001 financial
statements and notes thereto included in the Company's annual report on Form
10-K.
8
2. RECENT ACCOUNTING PRONOUNCEMENTS:
---------------------------------
In June 2001, FASB issued Statement of Financial Accounting Standard No. 142
(SFAS 142) "Goodwill and Other Intangible Assets." This pronouncement requires a
non-amortization approach to account for purchased goodwill and certain other
intangible assets. Under a non-amortization approach, goodwill and certain
intangibles will not be amortized into results of operations but, instead, would
be reviewed for impairment and written down and charged to results of operations
only in the periods in which the recorded value of goodwill and certain
intangibles is more than their fair value. The provisions of this statement,
which apply to goodwill and intangible assets acquired prior to June 30, 2001,
were adopted by the Company on January 1, 2002. The provisions of this statement
that apply to goodwill and other indefinite life intangible assets acquired
after June 30, 2001, were adopted by the Company on July 1, 2001. The adoption
of these accounting standards has eliminated the amortization of goodwill and
FCC broadcast licenses commencing January 1, 2002. SFAS 142 will have a material
impact on the Company's financial statements as the amounts previously recorded
for the amortization of goodwill and FCC broadcast licenses is significant. The
Company recorded amortization expense of approximately $28.3 million for the
quarter ended March 31, 2001, but did not record a similar amortization expense
for the quarter ended March 31, 2002 as a result of the adoption of SFAS 142.
Upon adoption of SFAS 142, the Company recorded an impairment charge of
approximately $23.2 million, net of an income tax benefit of $14.6 million, as
the carrying value of certain of the Company's radio FCC licenses exceeded the
appraised fair value. Radio One has reflected this charge as a cumulative effect
of an accounting change, effective January 1, 2002, in its statement of
operations.
The Company will adopt the final provision of SFAS 142 in the second quarter of
2002 by reviewing the fair value of its goodwill. In completing the transitional
assessment of goodwill, the Company will need to (1) identify the reporting
units; (2) determine the carrying value of each reporting unit; and (3)
determine the fair value of each reporting unit. The Company has up to six
months from the date of the adoption to determine the fair value of each
reporting unit and compare it to the reporting unit's carrying amount. To the
extent a reporting unit's carrying amount exceeds its fair value, an indication
exists that the reporting unit's goodwill and non-amortizing intangible assets
may be impaired, and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of its assets and liabilities in a manner
similar to a purchase price allocation in accordance with SFAS 141, "Business
Combinations", to its carrying amount, both of which would be measured as of the
date of adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any transitional
impairment loss will be recognized as the cumulative effect of a change in
accounting principle in the Company's consolidated statement of operations. The
Company has not yet determined what the effect of the impairment tests on
goodwill will be on the Company's financial position or results of operations
but does expect to record some impairment for goodwill.
9
3. SUBSEQUENT EVENT:
-----------------
In April 2002, the Company and certain selling stockholders completed an
offering of 11,500,000 shares of Class D common stock at an offering price of
$20.25 per share. Through this offering, the Company received net proceeds of
approximately $200.0 million.
In May 2002, the Company completed the acquisition of the assets of WHTA-FM
(formerly WPEZ-FM), licensed to Macon, Georgia (subsequently changed to Hampton,
Georgia), from U.S. Broadcasting Limited Partnership for $55.0 million. The
Company has been operating the station under a local marketing agreement since
the fourth quarter of 2001.
10
CONSOLIDATING FINANCIAL STATEMENTS
----------------------------------
The Company conducts a portion of its business through its subsidiaries. All of
the Company's subsidiaries (Subsidiary Guarantors) have fully and
unconditionally guaranteed the Company's 8-7/8% Senior Subordinated Notes due
2011.
Set forth below are consolidating financial statements for the Company and the
Subsidiary Guarantors as of March 31, 2002 and 2001, and for the three month
periods then ended. The equity method of accounting has been used by the Company
to report its investments in subsidiaries. Separate financial statements for the
Subsidiary Guarantors are not presented based on management's determination that
they do not provide additional information that is material to investors.
11
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING BALANCE SHEET
---------------------------
AS OF DECEMBER 31, 2001
-----------------------
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
-------------- -------------- --------------- --------------
(Unaudited) (Unaudited) (Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ (447,000) $ 32,562,000 $ -- $ 32,115,000
Trade accounts receivable, net of allowance for
doubtful accounts 11,552,000 45,130,000 -- 56,682,000
Due from Combined Guarantor Subsidiaries -- 1,699,420,000 (1,699,420,000) --
Prepaid expenses and other 463,000 1,978,000 -- 2,441,000
Income tax receivable -- 3,200,000 -- 3,200,000
Deferred income tax asset 1,882,000 1,583,000 -- 3,465,000
-------------- -------------- --------------- --------------
Total current assets 13,450,000 1,783,873,000 (1,699,420,000) 97,903,000
PROPERTY AND EQUIPMENT, net 12,715,000 26,731,000 -- 39,446,000
INTANGIBLE ASSETS, net 1,534,807,000 241,394,000 -- 1,776,201,000
OTHER ASSETS 1,276,000 9,089,000 -- 10,365,000
-------------- -------------- --------------- --------------
Total assets $1,562,248,000 $2,061,087,000 $(1,699,420,000) $1,923,915,000
============== ============== =============== ==============
The accompanying notes are an integral part of this consolidating balance
sheet.
12
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING BALANCE SHEET
---------------------------
AS OF DECEMBER 31, 2001
-----------------------
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
-------------- --------------- ---------------- --------------
(Unaudited) (Unaudited) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 794,000 $ 6,988,000 $ -- $ 7,782,000
Accrued expenses 3,257,000 35,113,000 -- 38,370,000
Fair value of derivative investments -- 13,439,000 -- 13,439,000
Other current liabilities 316,000 2,175,000 -- 2,491,000
Due to the Company 1,699,420,000 -- (1,699,420,000) --
-------------- -------------- --------------- --------------
Total current liabilities 1,703,787,000 57,715,000 (1,699,420,000) 62,082,000
INVESTMENT IN SUBSIDIARIES -- 163,951,000 (163,951,000) --
LONG-TERM DEBT AND DEFERRED INTEREST 2,000 780,020,000 -- 780,022,000
DEFERRED INCOME TAX LIABILITY 22,410,000 6,454,000 -- 28,864,000
-------------- -------------- --------------- --------------
Total liabilities 1,726,199,000 1,008,140,000 (1,863,371,000) 870,968,000
-------------- -------------- --------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock -- 95,000 -- 95,000
Accumulated comprehensive income adjustments -- (9,053,000) -- (9,053,000)
Stock subscriptions receivable -- (31,666,000) -- (31,666,000)
Additional paid-in capital -- 1,208,652,000 -- 1,208,652,000
Accumulated deficit (163,951,000) (115,081,000) 163,951,000 (115,081,000)
-------------- -------------- --------------- --------------
Total stockholders' equity (163,951,000) 1,052,947,000 163,951,000 1,052,947,000
-------------- -------------- --------------- --------------
Total liabilities and stockholders' equity $1,562,248,000 $2,061,087,000 $(1,699,420,000) $1,923,915,000
============== ============== =============== ==============
The accompanying notes are an integral part of this consolidating balance
sheet.
13
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING BALANCE SHEET
---------------------------
AS OF MARCH 31, 2002
--------------------
(unaudited)
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
-------------- --------------- --------------- --------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 242,000 $ 25,923,000 $ -- $ 26,165,000
Trade accounts receivable, net of allowance
for doubtful accounts 19,962,000 28,125,000 -- 48,087,000
Due from Combined Guarantor Subsidiaries -- 1,105,194,000 (1,105,194,000) --
Prepaid expenses and other 695,000 1,577,000 -- 2,272,000
Income tax receivable -- 3,089,000 -- 3,089,000
Deferred tax asset 2,282,000 1,183,000 -- 3,465,000
-------------- -------------- --------------- --------------
Total current assets 23,181,000 1,165,091,000 `(1,105,194,000) 83,078,000
PROPERTY AND EQUIPMENT, net 19,390,000 19,988,000 -- 39,378,000
INTANGIBLE ASSETS, net 1,543,498,000 192,910,000 -- 1,736,408,000
OTHER ASSETS 911,000 10,692,000 -- 11,603,000
-------------- -------------- --------------- --------------
Total assets $1,586,980,000 $1,388,681,000 $(1,105,194,000) $1,870,467,000
============== ============== =============== ==============
The accompanying notes are an integral part of this consolidating
balance sheet.
14
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING BALANCE SHEET
---------------------------
AS OF MARCH 31, 2002
--------------------
(unaudited)
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
-------------- --------------- --------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 673,000 $ 5,790,000 $ -- $ 6,463,000
Accrued expenses 5,281,000 22,031,000 -- 27,312,000
Fair value of derivative instruments -- 9,678,000 -- 9,678,000
Other current liabilities 152,000 2,279,000 -- 2,431,000
Due to the Company 1,105,194,000 -- (1,105,194,000) --
-------------- --------------- --------------- ---------------
Total current liabilities 1,111,300,000 39,778,000 (1,105,194,000) 45,884,000
INVESTMENT IN SUBSIDIARIES -- -- -- --
LONG-TERM DEBT AND DEFERRED INTEREST -- 780,007,000 -- 780,007,000
DEFERRED INCOME TAX LIABILITY 10,762,000 5,782,000 -- 16,544,000
-------------- --------------- --------------- ---------------
Total liabilities 1,122,062,000 825,567,000 (1,105,194,000) 842,435,000
-------------- --------------- --------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock -- 95,000 -- 95,000
Accumulated other comprehensive income -- (6,721,000) -- (6,721,000)
Stock subscriptions receivable -- (32,130,000) -- (32,130,000)
Additional paid-in capital -- 1,208,872,000 -- 1,208,872,000
Accumulated deficit 464,918,000 (607,002,000) -- (142,084,000)
-------------- --------------- --------------- ---------------
Total stockholders' equity 464,918,000 563,114,000 -- 1,028,032,000
-------------- --------------- --------------- ---------------
Total liabilities and stockholders' equity $1,586,980,000 $ 1,388,681,000 $(1,105,194,000) $1, 870,467,000
============== =============== =============== ===============
The accompanying notes are an integral part of this consolidating
balance sheet.
15
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING STATEMENT OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2001
-----------------------------------------
(unaudited)
Combined
Guarantor Radio One,
Subsidiaries Inc. Eliminations Consolidated
------------ ------------ ------------ ------------
REVENUE:
Broadcast revenue, including barter revenue $ 6,868,000 $ 47,405,000 $ -- $ 54,273,000
Less: agency commissions 768,000 5,580,000 -- 6,348,000
------------ ------------ ----------- ------------
Net broadcast revenue 6,100,000 41,825,000 -- 47,925,000
------------ ------------ ----------- ------------
OPERATING EXPENSES:
Program and technical 1,235,000 7,621,000 -- 8,856,000
Selling, general and administrative 3,160,000 13,956,000 -- 17,116,000
Corporate expenses -- 1,840,000 -- 1,840,000
Non-cash compensation -- 238,000 -- 238,000
Depreciation and amortization 25,762,000 5,762,000 -- 31,524,000
------------ ------------ ----------- ------------
Total operating expenses 30,157,000 29,417,000 -- 59,574,000
------------ ------------ ----------- ------------
Operating (loss) income (24,057,000) 12,408,000 -- (11,649,000)
INTEREST EXPENSE, INCLUDING AMORTIZATION OF DEFERRED
FINANCING COSTS 40,000 15,661,000 -- 15,701,000
GAIN ON SALE OF ASSETS -- 4,272,000 -- 4,272,000
OTHER INCOME, net 4,000 592,000 -- 596,000
------------ ------------ ----------- ------------
(Loss) income before provision for income taxes (24,093,000) 1,611,000 -- (22,482,000)
(PROVISION) BENEFIT FOR INCOME TAXES -- 7,309,000 -- 7,309,000
EQUITY IN LOSSES OF SUBSIDIARIES -- (24,093,000) 24,093,000 --
------------ ------------ ----------- ------------
NET (LOSS) INCOME $(24,093,000) $(15,173,000) $24,093,000 $(15,173,000)
============ ============ =========== ============
NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDERS $(24,093,000) $(20,211,000) $24,093,000 $(20,211,000)
============ ============ =========== ============
The accompanying notes are an integral part of this consolidating statement.
16
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING STATEMENT OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2002
-----------------------------------------
(unaudited)
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
------------ --------------- ------------ ------------
REVENUE:
Broadcast revenue, including barter revenue $ 29,393,000 $ 36,544,000 $ -- $ 65,937,000
Less: Agency commissions 3,281,000 4,345,000 -- 7,626,000
------------ ------------ ----------- ------------
Net broadcast revenue 26,112,000 32,199,000 -- 58,311,000
------------ ------------ ----------- ------------
OPERATING EXPENSES:
Program and technical, exclusive of depreciation and
amortization shown below 5,104,000 6,398,000 -- 11,502,000
Selling, general and administrative 10,665,000 10,331,000 -- 20,996,000
Corporate expenses -- 2,615,000 -- 2,615,000
Non-cash compensation -- 300,000 -- 300,000
Depreciation and amortization 1,418,000 3,004,000 -- 4,422,000
------------ ------------ ----------- ------------
Total operating expenses 17,187,000 22,648,000 -- 39,835,000
------------ ------------ ----------- ------------
Operating income 8,925,000 9,551,000 -- 18,476,000
INTEREST EXPENSE, including amortization of deferred
financing costs 1,116,000 15,801,000 -- 16,917,000
GAIN ON SALE OF ASSETS, net -- (10,000) -- (10,000)
OTHER INCOME, net 3,000 525,000 -- 528,000
------------ ------------ ----------- ------------
Income (loss) before provision for income taxes
and cumulative effect of accounting change 7,812,000 (5,735,000) -- 2,077,000
PROVISION FOR INCOME TAXES -- (816,000) -- (816,000)
------------ ------------ ----------- ------------
Income before cumulative effect of accounting change 7,812,000 (6,551,000) -- 1,261,000
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, net of tax (23,229,000) -- -- (23,229,000)
EQUITY IN LOSSES OF SUBSIDIARIES -- (15,417,000) 15,417,000 --
------------ ------------ ----------- ------------
Net loss $(15,417,000) $(21,968,000) $15,417,000 $(21,968,000)
============ ============ =========== ============
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(15,417,000) $(27,003,000) $(27,003,000)
============ ============ ============
The accompanying notes are an integral part of this consolidating statement.
17
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING STATEMENT OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2001
-----------------------------------------
(unaudited)
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
------------ --------------- ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(24,093,000) $(15,173,000) $24,093,000 $(15,173,000)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization 25,762,000 5,762,000 -- 31,524,000
Amortization of debt financing costs, unamortized
discount and deferred interest -- 478,000 -- 478,000
Deferred income taxes and reduction in valuation reserve
on deferred income taxes 21,360,000 (27,308,000) -- (5,948,000)
Non-cash compensation to officers -- 238,000 -- 238,000
Gain on sale of assets, net -- (4,272,000) -- (4,272,000)
Effect of change in operating assets and liabilities-
Trade accounts receivable, net 1,466,000 8,861,000 -- 10,327,000
Due to Corporate/from Subsidiaries (23,761,000) 23,761,000 -- --
Income tax receivable -- 726,000 -- 726,000
Prepaid expenses and other 40,000 239,000 -- 279,000
Other assets 56,000 (296,000) -- (240,000)
Accounts payable (268,000) (278,000) -- (546,000)
Accrued expenses and other (26,000) 1,781,000 -- 1,755,000
------------ ------------ ----------- ------------
Net cash flows from operating activities 536,000 (5,481,000) 24,093,000 19,148,000
------------ ------------ ----------- ------------
The accompanying notes are an integral part of this consolidating statement.
18
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING STATEMENT OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2001
-----------------------------------------
(unaudited)
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
------------ --------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment $(56,000) $ (1,595,000) $ -- $ (1,651,000)
Investment in Subsidiaries -- 24,093,000 (24,093,000) --
Equity investments -- (210,000) -- (210,000)
Proceeds from sale of assets -- 69,254,000 -- 69,254,000
Deposits and payments for station purchases -- (65,670,000) -- (65,670,000)
-------- ------------ ------------ ------------
Net cash flows from investing activities (56,000) 25,872,000 (24,093,000) 1,723,000
-------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt -- (12,500,000) -- (12,500,000)
Proceeds from exercise of stock options -- 42,000 -- 42,000
Payment of preferred stock issuance costs -- (9,000) -- (9,000)
Payment of preferred stock dividends (5,038,000) (5,038,000)
-------- ------------ ------------ ------------
Net cash flows from financing activities -- (17,505,000) -- (17,505,000)
-------- ------------ ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 480,000 2,886,000 -- 3,366,000
CASH AND CASH EQUIVALENTS, beginning of period 105,000 20,774,000 -- 20,879,000
-------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $585,000 $ 23,660,000 $ -- $ 24,245,000
======== ============ ============ ============
The accompanying notes are an integral part of this consolidating statement.
19
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING STATEMENT OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2002
-----------------------------------------
(unaudited)
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
------------ -------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,417,000) $(21,968,000) $15,417,000 $(21,968,000)
Adjustments to reconcile loss to net cash from operating activities:
Depreciation and amortization 1,418,000 3,004,000 -- 4,422,000
Amortization of debt financing costs, unamortized
discount and deferred interest -- 533,000 -- 533,000
Deferred income taxes and reduction in valuation reserve
on deferred income taxes (502,000) 1,295,000 -- 793,000
Cumulative effect of accounting change 23,229,000 -- -- 23,229,000
Non-cash compensation to officers -- 300,000 -- 300,000
Effect of change in operating assets and liabilities-
Trade accounts receivable, net 2,071,000 6,524,000 -- 8,595,000
Due to Corporate/from Subsidiaries (24,502,000) 24,502,000 -- --
Income tax receivable -- 111,000 -- 111,000
Prepaid expenses and other 556,000 (787,000) -- (231,000)
Other assets 388,000 (1,633,000) -- (1,245,000)
Accounts payable (763,000) (556,000) -- (1,319,000)
Accrued expenses and other (140,000) (11,654,000) -- (11,794,000)
------------ ------------ ----------- ------------
Net cash flows from operating activities (13,662,000) (329,000) 15,417,000 1,426,000
------------ ------------ ----------- ------------
The accompanying notes are an integral part of this consolidating
statement.
20
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATING STATEMENT OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2002
-----------------------------------------
(unaudited)
Combined
Guarantor
Subsidiaries Radio One, Inc. Eliminations Consolidated
------------ --------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment $(1,350,000) $ (634,000) $ -- $(1,984,000)
Investment in Subsidiaries 15,417,000 -- (15,417,000) --
Equity investments -- (456,000) -- (456,000)
Deposits and payments for station purchases -- (5,000) -- (5,000)
----------- ----------- ------------ -----------
Net cash flows from investing activities 14,067,000 (1,095,000) (15,417,000) (2,445,000)
----------- ----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt -- (15,000) -- (15,000)
Offering costs -- (101,000) -- (101,000)
Proceeds from exercise of stock options -- 295,000 -- 295,000
Payment for retirement of stock -- (75,000) -- (75,000)
Payment of preferred stock dividends (5,035,000) (5,035,000)
----------- ----------- ------------ -----------
Net cash flows from financing activities -- (4,931,000) -- (4,931,000)
----------- ----------- ------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 405,000 (6,355,000) -- (5,950,000)
CASH AND CASH EQUIVALENTS, beginning of period (163,000) 32,278,000 -- 32,115,000
----------- ----------- ------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 242,000 $25,923,000 $ -- $26,165,000
=========== =========== ============ ===========
The accompanying notes are an integral part of this consolidating
statement.
21
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information should be read in conjunction with the
unaudited consolidated financial statements and notes thereto included in this
Quarterly Report and the audited financial statements and Management's
Discussion and Analysis contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001.
The table below includes information regarding (a) broadcast cash
flow, (b) EBITDA, and (c) after-tax cash flow. Broadcast cash flow, EBITDA, and
after-tax cash flow are not measures of performance or liquidity calculated in
accordance with GAAP, however we believe that these measures are useful to an
investor in evaluating the Company because these measures are widely used in the
broadcast industry as a measure of a radio broadcasting company's performance.
Nevertheless, broadcast cash flow, EBITDA and after-tax cash flow should not be
considered in isolation from nor as substitutes for operating income, net
income, cash flow, or other consolidated income or cash flow statement data
computed in accordance with GAAP, nor as a measure of the Company's
profitability or liquidity. Despite their limitations, broadcast cash flow and
EBITDA are widely used in the broadcasting industry to measure a company's
operating performance without regard to items such as depreciation and
amortization, which can vary depending upon accounting methods and the book
value of assets, particularly in the case of acquisitions. By eliminating such
effects, broadcast cash flow provides a meaningful measure of comparative radio
station performance, and EBITDA provides a meaningful measure of overall Company
performance after taking into account corporate operating expenses related to
the employment of the senior management team and other overhead costs associated
with running a large, publicly-traded broadcasting company.
22
RESULTS OF OPERATIONS
- ---------------------
Comparison of period ended March 31, 2002 to the period ended March 31, 2001
(all periods are unaudited - all numbers in 000s except per share data).
Three months ended Three months ended
March 31, March 31,
2001 2002
------------------ ------------------
STATEMENT OF OPERATIONS DATA:
REVENUE:
Broadcast revenue $ 54,273 $ 65,937
Less: Agency commissions 6,348 7,626
-------- --------
Net broadcast revenue 47,925 58,311
-------- --------
OPERATING EXPENSES:
Programming and technical 8,856 11,502
Selling, G&A 17,116 20,996
Corporate expenses 1,840 2,615
Non-cash compensation 238 300
Depreciation & amortization 31,524 4,422
-------- --------
Total operating expenses 59,574 39,835
-------- --------
Operating (loss) income (11,649) 18,476
INTEREST EXPENSE 15,701 16,917
GAIN (LOSS) ON SALE OF ASSETS, net 4,272 (10)
OTHER INCOME, net 596 528
-------- --------
(Loss) income before benefit (provision) for
income taxes and cumulative effect of
accounting change (22,482) 2,077
BENEFIT (PROVISION) FOR INCOME TAXES 7,309 (816)
-------- --------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, net of tax (15,173) 1,261
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, net of tax -- 23,229
Net loss $(15,173) $(21,968)
======== ========
Net loss applicable to common stockholders $(20,211) $(27,003)
======== ========
23
BASIC AND DILUTED PER SHARE DATA:
Net (loss) income per share before cumulative effect of
accounting change $ (0.17) $ 0.01
Net loss per share $ (0.17) $ (0.23)
Net loss per share applicable to common shareholders $ (0.23) $ (0.29)
OTHER DATA:
Broadcast cash flow (a) $21,953 $ 25,813
Broadcast cash flow margin 45.8% 44.3%
EBITDA (b) $20,113 $ 23,198
EBITDA margin 42.0% 39.8%
After-tax cash flow (c) $ 1,720 $ 2,789
Capital expenditures 1,651 1,984
Weighted average shares outstanding - basic (d) 86,801 94,229
Weighted average shares outstanding - diluted (d) 87,107 94,922
SAME STATION RESULTS (e):
Net revenue $47,355 $ 50,689
Broadcast cash flow $21,635 $ 23,792
Broadcast cash flow margin 45.7% 46.9%
Net broadcast revenue increased to approximately $58.3 million for the
quarter ended March 31, 2002 from approximately $47.9 million for the quarter
ended March 31, 2001 or 22%. This increase in net broadcast revenue was derived
from the Company's August 2001 acquisition of Blue Chip Broadcasting, Inc.
and continuing broadcast revenue growth in some of the Company's existing
markets, as the Company benefited from historical ratings increases and improved
power ratios (f) at certain of its radio stations.
Operating expenses excluding depreciation, amortization and
stock-based compensation increased to approximately $35.1 million for the
quarter ended March 31, 2002 from approximately $27.8 million for the quarter
ended March 31, 2001 or 26%. This increase in expenses was related to the
Company's expansion within the markets in which it operates including increased
variable costs associated with increased revenue, as well as start-up and
expansion expenses in its newer markets and expenses associated with the radio
stations the Company has acquired over the past year. Also, the Company had
higher corporate expenses due to its rapid expansion and the ever increasing
costs associated with operating as a publicly-traded company.
Operating income was approximately $18.5 million for the quarter ended
March 31, 2002 compared to operating loss of $11.6 million for the quarter ended
March 31, 2001. The increase in operating income was attributable to higher
revenue and lower amortization expense associated with the Company's adoption of
SFAS 142.
Interest expense increased to approximately $16.9 million for the
quarter ended March 31, 2002 from approximately $15.7 million for the quarter
ended March 31, 2001 or 8%. This increase related primarily to borrowings
associated with the acquisition of Blue Chip Broadcasting, Inc., somewhat offset
by a lower interest
24
rate on the Company's 8 7/8% notes issued in May 2001 (as compared to its 12%
notes which were redeemed in June 2001) and lower rates on the Company's bank
credit facility due to declining interest rates over the past year.
Other income (almost exclusively interest income) decreased to
approximately $0.5 million for the quarter ended March 31, 2002 compared to
approximately $0.6 million for the quarter ended March 31, 2001 or 17%. This
decrease was due to lower interest rates on the Company's cash balances.
Income before provision for income taxes and cumulative effect of
accounting change increased to approximately $2.1 million for the quarter ended
March 31, 2002 compared to a loss before benefit for income taxes of
approximately $22.5 million for the quarter ended March 31, 2001. This increase
was due to higher operating income resulting from higher net broadcast revenue
and lower amortization expense resulting from the adoption of SFAS 142, somewhat
offset by the higher interest expense (described above).
Income before cumulative effect of accounting change increased to
approximately $1.3 million for the quarter ended March 31, 2002 compared to a
loss of approximately $15.2 million for the quarter ended March 31, 2001. This
increase was due to the income before provision for income taxes and cumulative
effect of accounting change compared to the previous year's loss before benefit
for income taxes, partially offset by a provision for income taxes in this
year's quarter versus a benefit for income taxes in last year's quarter.
Cumulative effect of accounting change was $23.2 million for the
quarter ended March 31, 2002, and was due to the write down of certain of the
Company's radio station FCC licenses, net of tax in the amount of $14.6 million,
in accordance with the Company's adoption of SFAS 142, effective January 1,
2002.
Net loss increased to $22.0 million for the quarter ended March 31,
2002 compared to approximately $15.2 million for the quarter ended March 31,
2001 or 45%. This increase was due to an increase in income before cumulative
effect of accounting change, more than offset by the net write down of some of
the Company's long lived intangible assets, as described above.
Broadcast cash flow increased to approximately $25.8 million for the
quarter ended March 31, 2002 from approximately $22.0 million for the quarter
ended March 31, 2001 or 17%. This increase was attributable to the increase in
net broadcast revenue partially offset by higher operating expenses as described
above.
EBITDA increased to approximately $23.2 million for the quarter ended
March 31, 2002 from approximately $20.1 million for the quarter ended March 31,
2001 or 15%. This increase was attributable 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.
(a) "Broadcast cash flow" is defined as broadcast operating income plus
corporate expenses (including non-cash compensation) and depreciation
and amortization of both tangible and intangible assets.
(b) "EBITDA" is defined as earnings before interest, taxes, depreciation,
amortization, non-cash and stock-based compensation, other
non-operating income and cumulative effect of accounting change.
(c) "After-tax cash flow" is defined as income before income taxes and
cumulative effect of accounting change plus depreciation, amortization
and non-cash and stock-based compensation, non-cash and one time
interest expense and loss/(gain) on investments, less the current
income tax provision/(benefit) and preferred stock dividends.
(d) As of March 31, 2002, the Company had 94,229,000 shares of common
stock outstanding on a weighted average basis and 94,922,000 shares of
common stock outstanding for fully diluted purposes.
25
(e) Same station results include results only for those stations owned
and/or operated by the Company for at least one month of the
three-month period in question.
(f) A "power ratio" is defined as a station's share of the total radio
revenue in a particular market divided by its share of the listening
audience in the 12+ demographic in that market.
26
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary source of liquidity is cash provided by
operations and, to the extent necessary, commitments available under the
Company's bank credit facility. The Company has a bank credit facility under
which it has borrowed $350.0 million in term loans and may borrow up to $250.0
million on a revolving basis, and from which the Company has historically drawn
down funds as capital was required, primarily for acquisitions. As of March 31,
2002, the Company had $120.0 million available to be drawn, subject to the
restrictive covenants described below.
The credit facility contains covenants limiting the Company's ability
to incur additional debt. Such terms also place restrictions on the Company with
respect to the sale of assets, liens, investments, dividends, debt repayments,
capital expenditures, transactions with affiliates, consolidation and mergers,
and the issuance of equity interests, among other things. The credit facility
also requires compliance with financial tests based on financial position and
results of operations, including a leverage ratio, an interest coverage ratio
and a fixed charge coverage ratio, all of which could effectively limit the
Company's ability to borrow under the credit facility or to otherwise raise
funds in the debt and equity markets.
The Company has used, and may continue to use, a significant portion
of the Company's capital resources to consummate acquisitions. These
acquisitions were or will be funded from (i) the Company's credit facility (ii)
the proceeds of the historical offerings of the Company's common and preferred
stock, (iii) the proceeds of future equity or debt offerings, and (iv)
internally generated cash flow.
The Company's balance of cash and cash equivalents was approximately
$32.1 million as of December 31, 2001. The Company's balance of cash and cash
equivalents was approximately $26.2 million as of March 31, 2002. This decrease
resulted primarily from the Company's interest payment of $16.5 million on its
$300.0 million of 8 7/8% senior subordinated notes issued in May 2001.
On April 10, 2002, the Company and certain selling shareholders
completed an offering of 11,500,000 shares of Class D common stock at an
offering price of $20.25 per share. Through this offering, the Company received
proceeds of approximately $200.0 million after deducting offering costs.
Approximately $130.0 million of the proceeds were used to partially repay
amounts outstanding under the Company's credit facility. Approximately $50
million of the proceeds were used to consummate the acquisition of WHTA-FM
(formerly WPEZ-FM) in the Atlanta, Georgia market.
Net cash flows from operating activities decreased to approximately
$1.4 million for the quarter ended March 31, 2002 compared to approximately
$19.1 million for the quarter ended March 31, 2001 or 93%. This decrease was due
primarily to a reduction in accrued expenses and changes in other working
capital components, partially offset by higher operating income. Depreciation
and amortization expense decreased to approximately $4.4 million for the quarter
ended March 31, 2002 from approximately $31.5 million for the quarter ended
March 31, 2001 or 86% due primarily to the adoption of SFAS 142 on July 1, 2001
(See discussion of SFAS 142 below).
Net cash flows used in investing activities was approximately $2.4
million for the quarter ended March 31, 2002 compared to cash flows received
from investing activities of approximately $1.7 million for the quarter ended
March 31, 2001. There were no radio station acquisitions or dispositions during
the quarter ended March 31, 2002. During the quarter ended March 31, 2001, the
Company acquired (i) Nash Communications Corporation, owner and operator of
WILD-AM in the Boston, Massachusetts market for approximately $4.5 million in
cash and 63,492 shares of the Company's class A common stock, (ii) WTLC-AM and
the intellectual property of WTLC-FM in the Indianapolis, Indiana market for
approximately $8.3 million in cash and (iii) KTXQ-FM (formerly KDGE-FM) in the
Dallas, Texas market for approximately $52.6 million in cash. During the quarter
ended March 31, 2001 the Company completed the sale of (i) KJOI-AM (formerly
KLUV-AM) in the Dallas, Texas market for approximately $16.0 million in cash,
(ii) WDYL-FM in the Richmond, Virginia market, and two radio stations, WJMZ-FM
and WPEK-FM, in the Greenville, South Carolina market for approximately $52.5
million in cash and (iii) WARV-FM in the Richmond, Virginia market for
approximately $1.0 million in
27
cash. Capital expenditures were approximately $1.9 million and $1.7 million for
the quarters ended March 31, 2002 and 2001, respectively.
Net cash flows used in financing activities decreased to approximately
$4.9 million for the quarter ended March 31, 2002 compared to approximately
$17.5 million for the quarter ended March 31, 2001 or 72%. The change was
primarily a result of the repayment of $12.5 million of revolving debt during
the quarter ended March 31, 2001 and the absence of debt repayment related to
the credit facility during the quarter ended March 31, 2002.
As a result of the aforementioned, cash and cash equivalents decreased
by $5.9 million during the quarter ended March 31, 2002 compared to an increase
of approximately $3.4 million during the quarter ended March 31, 2001.
The Company believes that its current cash and cash investment
balances, as well as anticipated cash flows generated from operations, will be
sufficient to meet its working capital, capital expenditure and debt service
requirements through at least the next 12 months.
RECENT ACCOUNTING PRONOUNCEMENTS
- --------------------------------
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142 (SFAS 142) "Goodwill and
Other Intangible Assets." SFAS 142 requires a non-amortization approach to
account for purchased goodwill and certain intangibles. Under a non-amortization
approach, goodwill and certain intangibles will not be amortized into results of
operation, but instead, would be reviewed for impairment and written down and
charged to results of operations only in the periods in which the carrying value
of goodwill and certain intangibles is more than its fair value. The Company
adopted the provisions of these statements on July 1, 2001. The adoption of this
accounting standard has eliminated the amortization of goodwill and FCC
broadcast licenses commencing January 1, 2002. The Company recorded amortization
expense of approximately $28.3 million for the quarter ended March 31, 2001, but
did not record similar amortization expense for the quarter ended March 31, 2002
as a result of the adoption of SFAS 142.
FORWARD-LOOKING STATEMENTS
- --------------------------
This document contains 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. These forward-looking statements are not historical facts,
but rather reflect the Company's current expectations concerning future results
and events. You can identify these forward-looking statements by the Company's
use of words such as "anticipates," "expects," "intends," "plans," "believes,"
"seeks," "likely," "may," "estimates" and similar expressions. The Company
cannot guarantee that it will achieve these plans, intentions or expectations.
Because these statements apply to future events, they are subject to risks and
uncertainties that could cause actual results to differ materially from those
forecast or anticipated in the forward-looking statement. These risks,
uncertainties and factors include, but are not limited to:
. economic conditions, both generally and relative to the radio
broadcasting industry;
. risks associated with the Company's acquisition strategy;
. the highly competitive nature of the broadcast industry;
. the Company's high degree of leverage; and
. other factors described in the Company's reports on Form 10-K and
Form 10-Q.
28
You should not place undue reliance on these forward-looking statements, which
reflect the Company's view as of the date of this report. The Company undertakes
no obligation to publicly update or revise any forward-looking statements
because of new information, future events or otherwise.
29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In November 2001, the Company and certain of its officers and
directors were named as defendants in a class action shareholder complaint filed
in the United States District Court for the Southern District of New York.
Similar complaints were filed in the same Court against hundreds of other public
companies that conducted initial public offerings of their common stock in the
late 1990s. The complaint alleges that the Company's offering documents filed
with the SEC in May 1999 and November 1999 contained untrue statements of
material fact or omissions of material fact related to the conduct of the
underwriters conducting the offerings. The plaintiffs claim that the Company
violated Sections 11 and 12 of the Securities Act of 1933. The plaintiffs seek
unspecified monetary damages and other relief. The Company believes that these
claims are without merit and intends to vigorously defend itself. The Company
also maintains directors and officers liability insurance that it believes will
be applicable to this litigation, and the Company may also be entitled to
indemnification by the underwriters in the event of an adverse result.
The Company is from time to time engaged in legal proceedings
incidental to its business. The Company does not believe that any legal
proceedings that it is currently engaged in, either individually or in the
aggregate, will have a material adverse effect on the Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
3.1 Amended and Restated Certificate of Incorporation of
Radio One, Inc. (dated as of May 4, 2000), as filed
with the State of Delaware on May 9, 2000 (incorporated
by reference to Radio One's Quarterly Report on Form
10-Q for the period ended March 31, 2000 (File No.
0-25969; Film No. 631638)).
3.1.1 Certificate of Amendment (dated as of September 21,
2000) of the Amended and Restated Certificate of
Incorporation of Radio One, Inc. (dated as of May 4,
2000), as filed with the State of Delaware on September
21, 2000 (incorporated by reference to Radio One's
Current Report on Form 8-K filed October 6, 2000 (File
No. 0-25969; Film No. 736375)).
3.2 Amended and Restated By-laws of Radio One, Inc.,
amended as of June 5, 2001
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(incorporated by reference to Radio One's Form 10-Q
filed August 14, 2001 (File No. 0-25969; Film No.
1714323)).
3.3 Certificate Of Designations, Rights and Preferences of
the 6 1/2% Convertible Preferred Securities
Remarketable Term Income Deferrable Equity Securities
(HIGH TIDES) of Radio One, Inc., as filed with the
State of Delaware on July 13, 2000 (incorporated by
reference to Radio One's Quarterly Report on Form 10-Q
for the period ended June 30, 2000 (File No. 0-25969;
Film No. 698190)).
10.1 First Amendment to Second Amended and Restated Credit
Agreement dated March 18, 2002 among Radio One, Inc.,
Bank of America, N.A. and certain other lenders
(incorporated by reference to Radio One's current
report on Form 8-K, filed March 19, 2002 (File No.
0-25969; Film No. 2578491)).
(b) REPORTS ON FORM 8-K
The Company filed an Item 5 Form 8-K dated March 19, 2002, for the
purpose of (i) announcing the amendment of its bank credit facility, and (ii)
disclosing updated earnings guidance for the first quarter of 2002.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RADIO ONE, INC.
/s/ Scott R. Royster
----------------------------------------------------
May 9, 2002 Scott R. Royster
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
32
