e10vq
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 June 30, 2005
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
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
5900 Princess Garden Parkway,
7th Floor
Lanham, Maryland 20706
(Address of principal executive offices)
(301) 306-1111
Registrants 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 þ No o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange
Act). Yes þ No o
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date.
|
|
|
Class |
|
Outstanding as of August 5, 2005 |
|
|
|
Class A Common Stock, $.001 Par Value
|
|
16,932,280 |
Class B Common Stock, $.001 Par Value
|
|
2,867,643 |
Class C Common Stock, $.001 Par Value
|
|
3,132,458 |
Class D Common Stock, $.001 Par Value
|
|
82,851,078 |
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page | |
|
|
|
|
| |
PART I. FINANCIAL INFORMATION |
|
|
|
|
Item 1.
|
|
Financial Statements |
|
|
3 |
|
|
|
Consolidated Statements of Operations for the Three Months and
Six Months Ended June 30, 2005 and 2004 (Unaudited) |
|
|
3 |
|
|
|
Consolidated Balance Sheets as of June 30, 2005 (Unaudited)
and December 31, 2004 |
|
|
4 |
|
|
|
Consolidated Statements of Changes in Stockholders Equity
for the Year Ended December 31, 2004 and for the Six Months
Ended June 30, 2005(Unaudited) |
|
|
5 |
|
|
|
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2005 and 2004 (Unaudited) |
|
|
6 |
|
|
|
Notes to Consolidated Financial Statements (Unaudited) |
|
|
7 |
|
|
|
Consolidating Financial Statements |
|
|
16 |
|
|
|
Consolidating Statement of Operations for the Three Months Ended
June 30, 2005 (Unaudited) |
|
|
17 |
|
|
|
Consolidating Statement of Operations for the Three Months Ended
June 30, 2004 (Unaudited) |
|
|
18 |
|
|
|
Consolidating Statement of Operations for the Six Months Ended
June 30, 2005 (Unaudited) |
|
|
19 |
|
|
|
Consolidating Statement of Operations for the Six Months Ended
June 30, 2004 (Unaudited) |
|
|
20 |
|
|
|
Consolidating Balance Sheet as of June 30, 2005 (Unaudited) |
|
|
21 |
|
|
|
Consolidating Balance Sheet as of December 31, 2004 |
|
|
22 |
|
|
|
Consolidating Statement of Cash Flows for the Six Months Ended
June 30, 2005 (Unaudited) |
|
|
23 |
|
|
|
Consolidating Statement of Cash Flows for the Six Months Ended
June 30, 2004 (Unaudited) |
|
|
24 |
|
Item 2.
|
|
Managements Discussion and Analysis of Financial Condition
and Results of Operations |
|
|
25 |
|
Item 3
|
|
Quantitative and Qualitative Disclosures About Market Risk |
|
|
43 |
|
Item 4.
|
|
Controls and Procedures |
|
|
43 |
|
PART II. OTHER INFORMATION |
|
|
|
|
Item 1.
|
|
Legal Proceedings |
|
|
45 |
|
Item 2.
|
|
Unregistered Sales of Equity Securities and Use of Proceeds |
|
|
45 |
|
Item 3.
|
|
Defaults Upon Senior Securities |
|
|
46 |
|
Item 4.
|
|
Submission of Matters to a Vote of Security Holders |
|
|
46 |
|
Item 5.
|
|
Other Information |
|
|
47 |
|
Item 6.
|
|
Exhibits |
|
|
47 |
|
SIGNATURES |
|
|
48 |
|
2
PART I. FINANCIAL INFORMATION
|
|
Item 1. |
Financial Statements |
RADIO ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
(Unaudited) | |
|
|
(In thousands, except share data) | |
NET BROADCAST REVENUE
|
|
$ |
101,525 |
|
|
$ |
86,210 |
|
|
$ |
178,534 |
|
|
$ |
155,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program and technical
|
|
|
17,815 |
|
|
|
13,587 |
|
|
|
33,450 |
|
|
|
27,733 |
|
|
Selling, general and administrative
|
|
|
28,404 |
|
|
|
24,791 |
|
|
|
52,326 |
|
|
|
46,703 |
|
|
Corporate expenses
|
|
|
6,029 |
|
|
|
4,118 |
|
|
|
11,324 |
|
|
|
7,878 |
|
|
Depreciation and amortization
|
|
|
3,150 |
|
|
|
4,561 |
|
|
|
6,616 |
|
|
|
8,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
55,398 |
|
|
|
47,057 |
|
|
|
103,716 |
|
|
|
91,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
46,127 |
|
|
|
39,153 |
|
|
|
74,818 |
|
|
|
64,567 |
|
INTEREST INCOME
|
|
|
271 |
|
|
|
585 |
|
|
|
743 |
|
|
|
1,307 |
|
INTEREST EXPENSE, including amortization of deferred
financing costs
|
|
|
17,240 |
|
|
|
9,748 |
|
|
|
29,669 |
|
|
|
19,723 |
|
EQUITY IN NET LOSS OF AFFILIATED COMPANY
|
|
|
304 |
|
|
|
1,431 |
|
|
|
763 |
|
|
|
3,798 |
|
OTHER INCOME, net
|
|
|
33 |
|
|
|
62 |
|
|
|
123 |
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes and minority interest
in income of subsidiary
|
|
|
28,887 |
|
|
|
28,621 |
|
|
|
45,252 |
|
|
|
42,497 |
|
PROVISION FOR INCOME TAXES
|
|
|
8,525 |
|
|
|
11,162 |
|
|
|
15,095 |
|
|
|
16,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in income of subsidiary
|
|
|
20,362 |
|
|
|
17,459 |
|
|
|
30,157 |
|
|
|
26,250 |
|
MINORITY INTEREST IN INCOME OF SUBSIDIARY
|
|
|
518 |
|
|
|
|
|
|
|
625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
19,844 |
|
|
|
17,459 |
|
|
|
29,532 |
|
|
|
26,250 |
|
PREFERRED STOCK DIVIDENDS
|
|
|
|
|
|
|
5,035 |
|
|
|
2,761 |
|
|
|
10,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
|
|
$ |
19,844 |
|
|
$ |
12,424 |
|
|
$ |
26,771 |
|
|
$ |
16,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET INCOME PER COMMON SHARE
|
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.25 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
105,567,725 |
|
|
|
104,953,961 |
|
|
|
105,479,569 |
|
|
|
104,906,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
105,732,976 |
|
|
|
105,545,683 |
|
|
|
105,654,762 |
|
|
|
105,553,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated statements.
3
RADIO ONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, | |
|
December 31, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(Unaudited) | |
|
|
|
|
(In thousands, except | |
|
|
share data) | |
ASSETS |
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
16,135 |
|
|
$ |
10,391 |
|
|
Short term investments
|
|
|
3,000 |
|
|
|
10,000 |
|
|
Trade accounts receivable, net of allowance for doubtful
accounts of $2,912 and $4,943, respectively
|
|
|
71,950 |
|
|
|
61,830 |
|
|
Prepaid expenses and other current assets
|
|
|
4,815 |
|
|
|
2,845 |
|
|
Income tax receivable
|
|
|
3,650 |
|
|
|
3,650 |
|
|
Deferred income tax asset
|
|
|
4,311 |
|
|
|
4,036 |
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
103,861 |
|
|
|
92,752 |
|
PROPERTY AND EQUIPMENT, net
|
|
|
48,153 |
|
|
|
44,827 |
|
GOODWILL
|
|
|
132,177 |
|
|
|
116,865 |
|
RADIO BROADCASTING LICENSES
|
|
|
1,798,167 |
|
|
|
1,801,196 |
|
OTHER INTANGIBLE ASSETS, net
|
|
|
74,844 |
|
|
|
12,984 |
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
37,641 |
|
|
|
37,384 |
|
OTHER ASSETS
|
|
|
4,176 |
|
|
|
5,133 |
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
2,199,019 |
|
|
$ |
2,111,141 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
5,566 |
|
|
$ |
8,933 |
|
|
Accrued interest
|
|
|
19,427 |
|
|
|
14,221 |
|
|
Accrued compensation and related benefits
|
|
|
18,949 |
|
|
|
16,282 |
|
|
Income taxes payable
|
|
|
3,840 |
|
|
|
3,291 |
|
|
Other accrued expenses
|
|
|
4,512 |
|
|
|
4,752 |
|
|
Fair value of derivative instruments
|
|
|
944 |
|
|
|
246 |
|
|
Other current liabilities
|
|
|
4,009 |
|
|
|
621 |
|
|
Current portion of long-term debt
|
|
|
8 |
|
|
|
70,008 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
57,255 |
|
|
|
118,354 |
|
LONG-TERM DEBT, net of current portion
|
|
|
937,515 |
|
|
|
550,020 |
|
DEFERRED REVENUE, net of current portion
|
|
|
342 |
|
|
|
|
|
DEFERRED INCOME TAX LIABILITY
|
|
|
140,297 |
|
|
|
114,322 |
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$ |
1,135,409 |
|
|
$ |
782,696 |
|
|
|
|
|
|
|
|
MINORITY INTEREST IN SUBSIDIARY
|
|
|
1,522 |
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock, $.001 par value,
1,000,000 shares authorized; no shares issued at
June 30,2005. 309,820 shares issued and outstanding at
December 31, 2004. Liquidation preference of
$1,000 per share plus cumulative dividends at 6.5% per
year, unpaid dividends were $0 at June 30, 2005 and $4,198
at December 31, 2004
|
|
|
|
|
|
|
|
|
|
Common stock Class A, $.001 par value,
30,000,000 shares authorized; 18,198,244 and
22,374,547 shares issued and outstanding at June 30,
2005 and December 31, 2004, respectively
|
|
|
18 |
|
|
|
22 |
|
|
Common stock Class B, $.001 par value,
150,000,000 shares authorized; 2,867,463 shares issued
and outstanding
|
|
|
3 |
|
|
|
3 |
|
|
Common stock Class C, $.001 par value,
150,000,000 shares authorized; 3,132,458 shares issued
and outstanding at June 30, 2005 and December 31,
2004, respectively
|
|
|
3 |
|
|
|
3 |
|
|
Common stock Class D, $.001 par value,
150,000,000 shares authorized; 81,577,487 and
76,635,971 shares issued and outstanding at June 30,
2005 and December 31, 2004, respectively
|
|
|
82 |
|
|
|
77 |
|
|
Accumulated other comprehensive loss
|
|
|
(588 |
) |
|
|
(151 |
) |
|
Stock subscriptions receivable
|
|
|
(11,385 |
) |
|
|
(34,731 |
) |
|
Treasury stock, at cost, 137,100 shares of Class A and
988,800 shares of Class D common stock
|
|
|
(14,837 |
) |
|
|
|
|
|
Additional paid-in capital
|
|
|
1,115,083 |
|
|
|
1,416,284 |
|
|
Accumulated deficit
|
|
|
(26,291 |
) |
|
|
(53,062 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,062,088 |
|
|
|
1,328,445 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$ |
2,199,019 |
|
|
$ |
2,111,141 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated balance sheets.
4
RADIO ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2004 AND FOR THE SIX
MONTHS ENDED JUNE 30, 2005 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
|
|
|
|
|
|
|
|
Convertible |
|
Common | |
|
Common | |
|
Common | |
|
Common | |
|
|
|
Other | |
|
Stock | |
|
|
|
Additional | |
|
|
|
Total | |
|
|
Preferred |
|
Stock | |
|
Stock | |
|
Stock | |
|
Stock | |
|
Comprehensive | |
|
Comprehensive | |
|
Subscriptions | |
|
Treasury | |
|
Paid-In | |
|
Accumulated | |
|
Stockholders | |
|
|
Stock |
|
Class A | |
|
Class B | |
|
Class C | |
|
Class D | |
|
Income | |
|
Income | |
|
Receivable | |
|
Stock | |
|
Capital | |
|
Deficit | |
|
Equity | |
|
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except share data) | |
BALANCE, as of December 31, 2003
|
|
|
|
|
|
|
23 |
|
|
|
3 |
|
|
|
3 |
|
|
|
76 |
|
|
|
|
|
|
|
(2,605 |
) |
|
|
(35,017 |
) |
|
|
|
|
|
|
1,410,460 |
|
|
|
(94,524 |
) |
|
|
1,278,419 |
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,602 |
|
|
|
61,602 |
|
|
Change in unrealized loss on derivative and hedging activities,
net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,454 |
|
|
|
2,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
64,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of non- employee restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
803 |
|
|
|
|
|
|
|
803 |
|
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,140 |
) |
|
|
(20,140 |
) |
|
Interest on stock subscriptions receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,714 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,714 |
) |
|
Repayment of interest on officer loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
Adjustment of basis for investment in affiliated company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,840 |
|
|
|
|
|
|
|
2,840 |
|
|
Employee exercise of options for 162,953 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,721 |
|
|
|
|
|
|
|
1,721 |
|
|
Conversion of 30,000 shares of Class A common stock to
30,000 shares of Class D common stock
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effect on non- qualified option exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
460 |
|
|
|
|
|
|
|
460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, as of December 31, 2004
|
|
|
|
|
|
|
22 |
|
|
|
3 |
|
|
|
3 |
|
|
|
77 |
|
|
|
|
|
|
|
(151 |
) |
|
|
(34,731 |
) |
|
|
|
|
|
|
1,416,284 |
|
|
|
(53,062 |
) |
|
|
1,328,445 |
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,532 |
|
|
|
29,532 |
|
|
Change in unrealized gain on derivative and hedging activities,
net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(437 |
) |
|
|
(437 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(437 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
29,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment of basis for investment in affiliated company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
|
Vesting of non- employee restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53 |
|
|
|
|
|
|
|
53 |
|
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,761 |
) |
|
|
(2,761 |
) |
|
Redemption of preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(309,820 |
) |
|
|
|
|
|
|
(309,820 |
) |
|
Issuance of common stock pursuant to investment in Reach Media,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,424 |
|
|
|
|
|
|
|
25,426 |
|
|
Repayment of officer loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,962 |
|
|
Interest income on stock subscriptions receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(368 |
) |
|
Repurchase of 137,100 shares of Class A and
988,800 shares of Class D common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
17,752 |
|
|
|
(14,837 |
) |
|
|
(18,070 |
) |
|
|
|
|
|
|
(15,156 |
) |
|
Conversion of 4,189,000 shares of Class A common stock
to 4,189,000 shares of Class D common stock
|
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee exercise of options for 100,940 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
847 |
|
|
|
|
|
|
|
847 |
|
|
Tax effect on non- qualified option exercises and vesting of
restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375 |
|
|
|
|
|
|
|
375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, as of June 30, 2005
|
|
$ |
|
|
|
$ |
18 |
|
|
$ |
3 |
|
|
$ |
3 |
|
|
$ |
82 |
|
|
|
|
|
|
$ |
(588 |
) |
|
$ |
(11,385 |
) |
|
$ |
(14,837 |
) |
|
$ |
1,115,083 |
|
|
$ |
(26,291 |
) |
|
$ |
1,062,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated statements.
5
RADIO ONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(Unaudited, in thousands) | |
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
29,532 |
|
|
$ |
26,250 |
|
|
Adjustments to reconcile net income to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6,616 |
|
|
|
8,991 |
|
|
|
Amortization of debt financing costs
|
|
|
3,162 |
|
|
|
848 |
|
|
|
Deferred income taxes
|
|
|
13,173 |
|
|
|
15,963 |
|
|
|
Equity in net loss of affiliated company
|
|
|
763 |
|
|
|
3,798 |
|
|
|
Minority interest in income of subsidiary
|
|
|
625 |
|
|
|
|
|
|
|
Non-cash compensation
|
|
|
909 |
|
|
|
1,517 |
|
|
|
Effect of change in operating assets and liabilities, net of
assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(9,457 |
) |
|
|
(3,337 |
) |
|
|
|
Prepaid expenses and other current assets
|
|
|
(465 |
) |
|
|
(1,507 |
) |
|
|
|
Other assets
|
|
|
309 |
|
|
|
(241 |
) |
|
|
|
Accounts payable
|
|
|
(3,447 |
) |
|
|
(1,367 |
) |
|
|
|
Accrued interest
|
|
|
5,206 |
|
|
|
(214 |
) |
|
|
|
Accrued compensation and related benefits
|
|
|
1,967 |
|
|
|
634 |
|
|
|
|
Deferred income
|
|
|
257 |
|
|
|
|
|
|
|
|
Income taxes payable
|
|
|
322 |
|
|
|
(46 |
) |
|
|
|
Other accrued expenses
|
|
|
(4,676 |
) |
|
|
(1,582 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities
|
|
|
44,796 |
|
|
|
49,707 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(8,291 |
) |
|
|
(3,927 |
) |
|
Equity investments
|
|
|
(33 |
) |
|
|
(3,456 |
) |
|
Acquisition of 51% of common stock of Reach Media, Inc., net of
cash acquired
|
|
|
(21,320 |
) |
|
|
|
|
|
Change in short term investments
|
|
|
7,000 |
|
|
|
8,700 |
|
|
Purchase of other intangible assets
|
|
|
(285 |
) |
|
|
|
|
|
Deposits and payments for station purchases
|
|
|
|
|
|
|
(38,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(22,929 |
) |
|
|
(36,826 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Repayment of debt
|
|
|
(455,005 |
) |
|
|
(26,252 |
) |
|
Proceeds from bank credit facility
|
|
|
572,500 |
|
|
|
|
|
|
Proceeds from debt issuances, net of offering costs
|
|
|
195,472 |
|
|
|
|
|
|
Redemption of convertible preferred stock
|
|
|
(309,820 |
) |
|
|
|
|
|
Proceeds from stock subscriptions due
|
|
|
5,962 |
|
|
|
|
|
|
Payment of bank financing costs
|
|
|
(3,908 |
) |
|
|
|
|
|
Payment of preferred stock dividends
|
|
|
(6,966 |
) |
|
|
(10,070 |
) |
|
Proceeds from exercise of stock options
|
|
|
847 |
|
|
|
1,313 |
|
|
Repurchase of common stock
|
|
|
(14,837 |
) |
|
|
|
|
|
Change in interest income on stock subscriptions receivable
|
|
|
(368 |
) |
|
|
(850 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(16,123 |
) |
|
|
(35,859 |
) |
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
5,744 |
|
|
|
(22,978 |
) |
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
10,391 |
|
|
|
38,010 |
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$ |
16,135 |
|
|
$ |
15,032 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
21,301 |
|
|
$ |
19,089 |
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$ |
953 |
|
|
$ |
332 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated statements.
6
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
1. |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: |
|
|
(a) |
Organization and Business |
Radio One, Inc. (a Delaware corporation referred to as
Radio One) and subsidiaries (collectively the
Company) were organized to acquire, operate and
maintain radio broadcasting stations and other media properties.
The Company owns and/or operates 69 radio stations in 22 markets
throughout the United States. In July 2003, the Company entered
into a joint venture with an affiliate of Comcast Corporation
and other investors to create TV One, LLC (TV One),
an entity formed to operate a cable television network featuring
lifestyle, entertainment, and news-related programming targeted
primarily towards African-American viewers. In February 2005,
the Company completed the acquisition of 51% of the common stock
of Reach Media, Inc. (Reach Media) for approximately
$55.8 million in a combination of approximately
$30.4 million of cash and 1,809,648 shares of the
Companys Class D common stock.
The Companys operating results are significantly affected
by its share of the audience in markets where it owns and/or
operates stations. To increase its share, the Company has made
and may continue to make significant acquisitions of and
investments in radio stations and other media properties, which
may require it to incur additional debt. The service of this
debt will require the Company to make significant debt service
payments.
|
|
(b) |
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.
Certain reclassifications have been made to prior period amounts
to conform to the current presentation.
|
|
(c) |
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 (SEC). In
managements 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 Companys December 31, 2004 financial
statements and notes thereto included in the Companys
annual report on Form 10-K/ A.
|
|
(d) |
Financial Instruments |
Financial instruments as of June 30, 2005 and
December 31, 2004 consist of cash and cash equivalents,
short term investments, trade accounts receivable, notes
receivable (which are included in
7
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
other current assets), accounts payable, accrued expenses,
long-term debt and subscriptions receivable. The carrying
amounts approximate fair value for each of these financial
instruments as of June 30, 2005 and December 31, 2004,
except for the Companys outstanding senior subordinated
notes. The
87/8% senior
subordinated notes had a fair value of approximately
$321.8 million and $334.1 million as of June 30,
2005 and December 31, 2004, respectively. In February 2005,
the Company completed the private placement of
$200.0 million
63/8% senior
subordinated notes. The
63/8% senior
subordinated notes had a fair value of approximately
$196.5 million as of June 30, 2005. The fair value was
determined based on the fair market value of similar instruments.
The Company recognizes revenue for broadcast advertising when
the commercial is broadcast and is reported net of agency
commissions in accordance with Staff Accounting
Bulletin No. 101, Revenue Recognition in
Financial Statements as amended by Staff Accounting
Bulletin No. 104, Topic 13, Revenue
Recognition, Revised and Updated. Agency commissions,
when applicable, are calculated based on a stated percentage
applied to gross billing. Generally, clients remit the gross
billing amount to the agency and the agency remits the gross
billing, less their commission, to the Company. Agency
commissions were approximately $13.0 million and
$12.1 million during the three months ended June 30,
2005 and 2004, respectively. Agency commissions were
$23.1 million and $21.3 million during the six months
ended June 30, 2005 and 2004, respectively.
|
|
(f) |
Stock-Based Compensation |
The Company accounts for stock-based compensation arrangements
in accordance with the provisions of Accounting Principles Board
Opinion No. 25 (APB No. 25),
Accounting for Stock Issued to Employees, and
related interpretations, and complies with the disclosure
provisions of Statement of Financial Accounting Standards
No. 123 (SFAS No. 123),
Accounting for Stock-Based Compensation.
Under APB No. 25, compensation expense is based upon the
difference, if any, on the date of grant, between the fair value
of the Companys stock and the exercise price.
At June 30, 2005, the Company had one stock-based employee
compensation plan. The Company accounts for the plan under the
recognition and measurement principles of APB No. 25 and
related interpretations. The following table illustrates the
effect on net income if the Company had applied the fair value
recognition provisions of SFAS No. 123 to stock-based
employee compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months | |
|
For the Six Months | |
|
|
Ended | |
|
Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except share data) | |
Net income applicable to common stockholders, as reported:
|
|
$ |
19,844 |
|
|
$ |
12,424 |
|
|
$ |
26,771 |
|
|
$ |
16,180 |
|
Add: stock-based employee compensation expense included in net
income
|
|
|
23 |
|
|
|
|
|
|
|
43 |
|
|
|
|
|
Less: total stock-based employee compensation expense determined
under fair value-based method for all awards
|
|
|
(4,886 |
) |
|
|
(3,367 |
) |
|
|
(9,489 |
) |
|
|
(6,820 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income applicable to common stockholders
|
|
$ |
14,981 |
|
|
$ |
9,057 |
|
|
$ |
17,325 |
|
|
$ |
9,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported net income per share basic
|
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.25 |
|
|
$ |
0.15 |
|
As reported net income per share diluted
|
|
$ |
0.19 |
|
|
$ |
0.12 |
|
|
$ |
0.25 |
|
|
$ |
0.15 |
|
Pro forma net income per share basic
|
|
$ |
0.14 |
|
|
$ |
0.09 |
|
|
$ |
0.16 |
|
|
$ |
0.09 |
|
Pro forma net income per share diluted
|
|
$ |
0.14 |
|
|
$ |
0.09 |
|
|
$ |
0.16 |
|
|
$ |
0.09 |
|
8
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The per share weighted-average fair value of employee options
granted during the three months ended June 30, 2005 and
2004 was $7.01 and $9.93, respectively, on the date of grant.
The per share weighted-average fair value of employee options
granted during the six months ended June 30, 2005 and 2004
was $7.17 and $10.19, respectively, on the date of grant. These
fair values were derived using the Black-Scholes Option Pricing
Model with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months | |
|
For the Six Months | |
|
|
Ended | |
|
Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
Average risk-free interest rate
|
|
|
3.77 |
% |
|
|
3.93 |
% |
|
|
3.77 |
% |
|
|
3.93 |
% |
Expected dividend yield
|
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
Expected lives
|
|
|
5 years |
|
|
|
5 years |
|
|
|
5 years |
|
|
|
5 years |
|
Expected volatility
|
|
|
62 |
% |
|
|
67 |
% |
|
|
62 |
% |
|
|
67 |
% |
The Companys comprehensive income consists of net income
and other items recorded directly to the equity accounts. The
objective is to report a measure of all changes in equity of an
enterprise that result from transactions and other economic
events during the period, other than transactions with owners.
The Companys other comprehensive income consists
principally of gains and losses on derivative instruments that
qualify for cash flow hedge treatment.
The following table sets forth the components of comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
(In thousands) | |
|
|
Net income
|
|
$ |
19,844 |
|
|
$ |
17,459 |
|
|
$ |
29,532 |
|
|
$ |
26,250 |
|
Other comprehensive income (loss), (net of tax provision of
$260, tax benefit of $174, tax provision of $732, and tax
provision of $208, respectively):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative and hedging activities
|
|
|
(1,191 |
) |
|
|
2,547 |
|
|
|
(437 |
) |
|
|
1,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$ |
18,653 |
|
|
$ |
20,006 |
|
|
$ |
29,095 |
|
|
$ |
28,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(h) |
Net Income Applicable to Common Stockholders |
The net income applicable to common stockholders for the three
months ended June 30, 2005 and 2004 (defined as net income
less dividends on the Companys preferred stock) was
approximately $19.8 million and $12.4 million,
respectively. The net income applicable to common stockholders
for the six months ended June 30, 2005 and 2004 was
approximately $26.8 million and $16.2 million,
respectively.
Earnings per share is based on the weighted average number of
common and diluted common equivalent shares for stock options
and warrants outstanding during the period the calculation is
made, divided into the net income applicable to common
stockholders. Diluted common equivalent shares consist of shares
issuable upon the exercise of stock options and warrants, using
the treasury stock method.
9
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
2. |
RECENT ACCOUNTING
PRONOUNCEMENTS: |
In December 2004, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard
No. 123(R), (SFAS No. 123(R)),
Accounting for Stock-Based Compensation.
SFAS No. 123(R) sets accounting requirements for
share-based compensation to employees, including
employee stock purchase plans. The statement eliminates the
ability to account for share-based compensation transactions
using Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees, and generally requires instead that such
transactions be accounted for using a fair-value-based method.
Disclosure of the effect of expensing the fair value of equity
compensation is currently required under existing literature.
The statement also requires the tax benefit associated with
these share based payments be classified as financing activities
in the Statement of Cash Flows rather than operating activities
as currently permitted. The SEC delayed the required
implementation date for this statement from the third quarter of
2005 to the beginning of the 2006 fiscal year. The Company
currently uses the Black-Scholes Option Pricing Model to compute
the fair value of its stock options in connection with its
disclosure of the pro forma effects on net earnings and earnings
per share as if compensation cost had been recognized for such
options at the date of grant. However, a number of technical
implementation issues have not yet been resolved, including the
selection and use of an appropriate valuation model, and
therefore, the Company has not yet determined the ultimate
impact of the adoption of SFAS No. 123(R).
In February 2005, the Company completed the acquisition of 51%
of the common stock of Reach Media for approximately
$55.8 million in a combination of approximately
$30.4 million of cash and 1,809,648 shares of the
Companys Class D common stock. Reach Media commenced
operations in 2003 and was formed by Tom Joyner, Chairman, and
David Kantor, Chief Executive Officer, to operate the Tom Joyner
Morning Show and related businesses. Reach Media primarily
derives its revenue from the sale of advertising inventory in
connection with its syndication agreements. Mr. Joyner is a
leading nationally syndicated radio personality. The Tom Joyner
Morning Show is broadcast on over 115 affiliate stations across
the United States and is a top-rated morning show in many of the
markets in which it is broadcast. Reach Media also operates the
Tom Joyner Sky Show, the Tom Joyner Family Reunion and various
other special event-related activities. Additionally, Reach
Media operates BlackAmericaWeb.com, an African-American targeted
internet destination, and airs a television program on TV One.
The Company allocated approximately $1.2 million of the
purchase price to net working capital balances and the remaining
amount to other intangible assets on the Companys
consolidated balance sheet as of June 30, 2005, pending
completion of the purchase price allocation.
In November 2004, the Company completed the acquisition of the
assets of WABZ-FM, a radio station located in the Charlotte
metropolitan area. Upon completing the acquisition, the Company
consolidated the station with its existing Charlotte operations,
changed the call sign to WPZS-FM and reformatted the station.
The total acquisition price was approximately $11.5 million
in cash. The Company initially allocated the full value of the
purchase price to radio broadcasting licenses on the
Companys consolidated balance sheet as of
December 31, 2004. Upon completion of this purchase price
allocation in February 2005, the allocation was adjusted and
approximately $11.4 million and $76,000 was assigned to
radio broadcasting licenses and goodwill, respectively.
In October 2004, the Company acquired the outstanding stock of
New Mableton Broadcasting Corporation (NMBC), which
owned WAMJ-FM, a radio station located in the Atlanta
metropolitan area. The Company had operated WAMJ-FM under a
local marketing agreement (LMA) since August 2001.
New Mableton Broadcasting Corporations majority
shareholder was an entity controlled by the Companys Chief
Executive Officer and President. The total acquisition price was
approximately
10
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$35.0 million in cash. The Company initially allocated the
full value of the purchase price to radio broadcasting licenses
on the Companys consolidated balance sheet as of
March 31, 2005. Upon completion of this purchase price
allocation in April 2005, the allocation was adjusted and
approximately $32.0 million was assigned to radio
broadcasting licenses, approximately $2.0 million was
assigned to goodwill, and $872,000 was assigned to other assets.
In February 2004, the Company completed the acquisition of the
assets of WSNJ-FM, a radio station located in the Philadelphia
metropolitan area. Upon receiving the necessary regulatory
approvals, the Company consolidated the station with its
existing Philadelphia operations, changed the call sign to
WRNB-FM and reformatted the station. The acquisition price was
approximately $35.0 million in cash. The Company initially
allocated the full value of the purchase price to radio
broadcasting licenses on the Companys consolidated balance
sheet as of December 31, 2004. Upon completion of the
purchase price allocation in January 2005, the allocation was
adjusted and approximately $34.9 million and $54,000 was
assigned to radio broadcasting licenses and goodwill,
respectively.
|
|
4. |
INVESTMENT IN AFFILIATED COMPANY: |
In July 2003, the Company entered into a joint venture agreement
with an affiliate of Comcast Corporation and other investors to
create TV One, an entity formed to operate a cable television
network featuring lifestyle, entertainment and news-related
programming targeted primarily towards African-American viewers.
The Company has committed to make a cumulative cash investment
of $74.0 million in TV One over approximately four years,
of which the Company has already funded $37.0 million. In
December 2004, TV One entered into a distribution agreement with
DIRECTV, Inc. (DIRECTV) and certain affiliates of
DIRECTV became investors in TV One. As of June 30, 2005,
the Company owned approximately 36% of TV One on a fully
converted basis.
The Company has recorded its investment at cost and has adjusted
the carrying amount of the investment to recognize the change in
the Companys claim on the net assets of TV One resulting
from losses of TV One as well as other capital transactions of
TV One using a hypothetical liquidation at book value approach.
For the three months ended June 30, 2005 and 2004, the
Companys allocable share of TV Ones losses was
$304,000 and approximately $1.4 million, respectively. For
the six months ended June 30, 2005 and 2004, the
Companys allocable share of TV Ones losses was
$763,000 and approximately $3.8 million, respectively.
Under the hypothetical liquidation at book value approach, the
decrease in the Companys claim on the change in net assets
of TV One resulting from additional equity contributed to TV One
by investors, resulted in an insignificant decrease to
additional paid-in capital of the Company in accordance with SEC
Staff Accounting Bulletin No. 51, Accounting
for Sales of Stock by a Subsidiary.
The Company also entered into separate network services and
advertising services agreements with TV One in 2003. Under the
network services agreement, which expires in January 2009, the
Company is providing TV One with administrative and operational
support services and access to Company personalities. Under the
advertising services agreement, the Company is providing a
specified amount of advertising to TV One over a term of five
years ending in January 2009. In consideration of providing
these services, the Company has received equity in TV One, and
receives an annual fee of $500,000 in cash for providing
services under the network services agreement.
The Company is accounting for these services transactions in
accordance with Emerging Issues Task Force, Issue No. 00-8,
Accounting by a Grantee for an Equity Instrument to Be
Received in Conjunction with Providing Goods or Services.
As these services are provided to TV One, the Company is
recording revenue based on the fair value of the most reliable
unit of measurement in these transactions. For the advertising
services agreement, this has been determined to be the value of
underlying advertising time that is being provided to TV One.
For the network services agreement, this has been determined to
be the
11
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
initial value of the equity received in TV One. As a result, the
Company is re-measuring the fair value of the equity received to
complete its obligations under the network services agreement in
each subsequent reporting period as the services are provided.
The Company recognized $674,000 and $423,000 of revenue relating
to these two agreements for the three months ended June 30,
2005 and 2004, respectively. The Company recognized
approximately $1.3 million and $1.5 million of revenue
relating to these two agreements for the six months ended
June 30, 2005 and 2004, respectively.
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
June 30, | |
|
December 31, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(In thousands) | |
87/8% Senior
subordinated notes
|
|
$ |
300,000 |
|
|
$ |
300,000 |
|
63/8% Senior
subordinated notes
|
|
|
200,000 |
|
|
|
|
|
Bank credit facilities
|
|
|
437,500 |
|
|
|
320,000 |
|
Capital lease obligations
|
|
|
23 |
|
|
|
28 |
|
|
Total long-term debt
|
|
|
937,523 |
|
|
|
620,028 |
|
|
|
|
|
|
|
|
|
Less: current portion
|
|
|
(8 |
) |
|
|
(70,008 |
) |
|
|
|
|
|
|
|
|
Long term debt, net of current portion
|
|
$ |
937,515 |
|
|
$ |
550,020 |
|
|
|
|
|
|
|
|
|
|
|
Senior Subordinated Notes |
In February 2005, the Company completed the private placement of
$200.0 million
63/8% senior
subordinated notes due 2013 realizing net proceeds of
approximately $195.5 million. The Company recorded
approximately $4.5 million in deferred offering costs,
which are being amortized to interest expense over the life of
the notes using the effective interest rate method.
In May 2001, the Company completed the private placement of
$300.0 million of
87/8% senior
subordinated notes due 2011 realizing net proceeds of
approximately $291.8 million. The Company recorded
approximately $8.2 million in deferred offering costs,
which are being amortized to interest expense over the life of
the notes using the effective interest rate method. In November
2001, the
87/8% senior
subordinated notes were exchanged for an equal amount of notes
registered under the Securities Act of 1933, as amended (the
Securities Act).
In June 2005, the Company entered into a new credit agreement
(the Credit Agreement) with a syndicate of banks.
The term of the Credit Agreement is seven years and the total
amount available under the Credit Agreement is
$800.0 million, consisting of a $500.0 million
revolving facility and a $300.0 million term loan facility.
Borrowings under the bank credit facilities are subject to
compliance with provisions of the Credit Agreement, including
but not limited to financial covenants. The Company may use
proceeds from the bank credit facilities for working capital,
capital expenditures made in the ordinary course of business and
other lawful corporate purposes, for its common stock repurchase
program, and for direct and indirect investments permitted under
the Credit Agreement. The Credit Agreement contains affirmative
and negative covenants that the Company must comply with,
including (a) maintaining a ratio of consolidated adjusted
EBITDA to consolidated interest expense of no less than 2.50 to
1.00, (b) maintaining a ratio of consolidated debt for
borrowed money to consolidated adjusted EBITDA of, no greater
than 6.50 to 1.00 from June 13, 2005 to September 30,
2006, and no greater than 6.00 to 1.00
12
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
from October 1, 2006 and thereafter, (c) limitations
on liens, (d) limitations on the sale of assets,
(e) limitations on the payment of dividends, and
(f) limitations on mergers, as well as other customary
covenants. Simultaneous with entering into the Credit Agreement,
the Company borrowed $437.5 million under the Credit
Agreement to retire all outstanding obligations under its
previous credit agreement, dated as of July 17, 2000. The
previous credit agreement provided for borrowings of up to
$600.0 million, and consisted of a $350.0 million term
facility and a $250.0 million revolving facility.
The Credit Agreement, and the indentures governing the
Companys senior subordinated notes, contain covenants that
restrict, among other things, the ability of the Company to
incur additional debt, purchase capital stock, make capital
expenditures, make investments or other restricted payments,
swap or sell assets, engage in transactions with related
parties, secure non-senior debt with assets, or merge,
consolidate or sell all or substantially all of its assets.
Future minimum principal payments of long-term debt as of
June 30, 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior | |
|
|
|
|
|
|
Subordinated | |
|
Bank Credit | |
|
Capital | |
|
|
Notes | |
|
Facilities | |
|
Leases | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
July December, 2005
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2 |
|
2006
|
|
|
|
|
|
|
|
|
|
|
7 |
|
2007
|
|
|
|
|
|
|
7,500 |
|
|
|
7 |
|
2008
|
|
|
|
|
|
|
37,500 |
|
|
|
7 |
|
2009
|
|
|
|
|
|
|
67,500 |
|
|
|
|
|
2010 and thereafter
|
|
|
500,000 |
|
|
|
325,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$ |
500,000 |
|
|
$ |
437,500 |
|
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
On May 25, 2005, the Companys Board of Directors
authorized a stock repurchase program for up to
$150.0 million of the Companys Class A and
Class D common stock over a period of 18 months, with
the amount and timing of repurchases based on stock price,
general economic and market conditions, certain restrictions
contained in the Credit Agreement, the indentures governing the
Companys senior subordinated debt, and certain other
factors. The repurchase program does not obligate the Company to
repurchase any of its common stock and may be discontinued or
suspended at any time.
For the three and six months ended June 30, 2005,
137,100 shares of Class A and 988,800 shares of
Class D common stock were repurchased at an average price
of $13.15 and $13.17, respectively.
In February 2005, the Company redeemed all of its outstanding
61/2% Convertible
Preferred Remarketable Term Income Deferrable Equity Securities
(HIGH TIDES) in the aggregate sum of approximately
$309.8 million. This redemption was financed with the net
proceeds of the sale of the Companys
63/8% senior
subordinated notes due 2013, borrowings under its revolving
credit facility and available excess cash.
On June 30, 2005, the state of Ohio enacted a law that will
phase-out the Corporation Franchise Tax and phase-in a
Commercial Activity Tax. The Commercial Activity Tax is based on
gross receipts. Temporary differences reversing after the
phase-in period of the gross receipts based tax will no longer
impact the Companys income tax provision. The Company has
determined the likelihood of a reversal of the temporary
differences within the five year period of the phase-out is
unlikely, as these temporary items
13
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
have indefinite lives. Therefore, the Company reduced its
deferred tax liability and recorded an income tax benefit of
approximately $3.9 million for the three months ended
June 30, 2005.
|
|
8. |
RELATED PARTY TRANSACTIONS: |
Three officers of the Company, the Chief Executive Officer
(CEO), Chief Financial Officer (CFO) and
the Chief Administrative Officer (CAO), purchased
1,500,000 shares of the Companys Class D common
stock, 333,334 shares of the Companys Class A
common stock and 666,666 of the Companys Class D
common stock, and 250,000 shares of the Companys
Class D common stock, respectively. The stock was purchased
with the proceeds of full recourse loans from the Company in the
amounts of approximately $21.1 million, $7.0 million
and $2.0 million, respectively. The CEO made an interest
payment on his loan in the amount of $2.0 million in
December 2004. As of December 31, 2004, accrued interest on
these loans were approximately $2.5 million,
$1.7 million and $401,000, respectively. The CEO made a
further repayment of approximately $17.8 million on his
loan in February 2005 and repaid the remaining balance of the
loan of approximately $6.0 million in March 2005. The
repayment of approximately $17.8 million was effected using
1,125,000 shares of the Companys Class D common
stock owned by the CEO. All shares transferred to the Company in
satisfaction of these loans have been retired by the Company. As
of June 30, 2005, the accrued interest on these loans to
the CFO and CAO were approximately $1.9 million and
$445,000, respectively.
The Company also had loans outstanding to the Companys
CEO, CFO and Chief Operating Officer (COO) in the
amounts of $380,000, $88,000 and $262,000, respectively. The
loans are due on demand and bear interest at 5.6%. As of
December 31, 2004, accrued interest on these loans was
$163,000, $31,000 and $99,000, respectively. The CEO repaid in
full, and in cash, the balance of his loan in the amount of
$549,000 in March 2005. As of June 30, 2005, the accrued
interest on the loans to the CFO and COO was $35,000 and
$110,000 respectively.
In February 2002, the Companys CFO exercised a contractual
right to receive a non-interest-bearing loan in the amount of
$750,000. The loan was paid in full in January 2005. The
repayment was effected using a combination of cash and
20,000 shares of the Companys Class D common
stock owned by the CFO. All shares transferred to the Company in
satisfaction of these loans have been retired by the Company.
In October 2004, the Company acquired the outstanding stock of
NMBC, which owned WAMJ-FM, a radio station licensed to the
Atlanta metropolitan area. The total acquisition price was
approximately $35.0 million in cash, of which approximately
$10.0 million was paid in available cash and
$25.0 million was paid through borrowings under the
Companys bank credit facility. Prior to the acquisition,
Mableton Investment Group, LLC (MIG) was NMBCs
majority shareholder. Alfred C. Liggins, III, the
Companys CEO, was the sole member and manager of MIG.
Until February 2003, Syndicated Communications Venture Partners
II, LP was also a member of MIG. Terry L. Jones, a general
partner of Syndicated Communications Venture Partners II,
LP is a member of the Companys board of directors. The
terms of the NMBC acquisition were approved by an independent
committee of the Companys board of directors and a
fairness opinion was obtained from an independent third party.
Prior to acquiring NMBC, the Company programmed and provided
marketing services to WAMJ-FM through an LMA with MIG. Total
fees paid under the LMA were $0 and $43,000, respectively for
the three months ended June 30, 2005 and June 30,
2004. Total fees paid under the LMA were $0 and $154,000,
respectively for the six months ended June 30,2005 and
June 30, 2004.
The Company leased office space from a partnership in which the
Companys CEO and Chairperson are partners. Effective
June 28, 2004, the partnership sold the property to a third
party. On that date, the Company entered into a new lease
agreement with the third party that expired in January 2005,
after which the Company relocated to a new facility. Total rent
paid to the partnership was $60,000 during the
14
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
three months ended June 30, 2004. Total rent paid to the
partnership was $119,000 during the six months ended
June 30, 2004.
|
|
9. |
COMMITMENTS AND CONTINGENCIES: |
|
|
|
Radio Broadcasting Licenses |
Each of the Companys radio stations operates pursuant to
one or more licenses issued by the Federal Communications
Commission that have a maximum term of eight years prior to
renewal. The Companys radio broadcasting licenses expire
at various times through August 1, 2013. Although the
Company may apply to renew its radio broadcasting licenses,
third parties may challenge the Companys renewal
applications. The Company is not aware of any facts or
circumstances that would prevent the Company from having its
current licenses renewed.
Pursuant to a limited liability company agreement dated
July 18, 2003, the Company and certain other investors
formed TV One for the purpose of developing and distributing a
new television programming service. The Company has committed to
make a cumulative cash investment of $74.0 million in TV
One over approximately four years. As of June 30, 2005, the
Company has already funded $37.0 million under this
agreement.
The Company has entered into fixed fee and variable share
agreements with music performance rights organizations that
expire as late as 2009. During the three months ended
June 30, 2005 and 2004, the Company incurred expenses of
approximately $2.7 million and $2.4 million,
respectively, in connection with these agreements. During the
six months ended June 30, 2005 and 2004, the Company
incurred expenses of approximately $5.4 million and
$4.8 million, respectively, in connection with these
agreements.
The Company has been named as a defendant in several legal
actions occurring in the ordinary course of business. It is
managements opinion, after consultation with its legal
counsel, that the outcome of these claims will not have a
material adverse effect on the Companys financial position
or results of operations.
15
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING FINANCIAL STATEMENTS
The Company conducts a portion of its business through its
subsidiaries. Radio One, Inc. and its restricted subsidiaries
(Subsidiary Guarantors) have fully and
unconditionally guaranteed the Companys
87/8% senior
subordinated notes due 2011 and
63/8% senior
subordinated notes due 2013.
Set forth below are consolidating financial statements for the
Company and the Subsidiary Guarantors as of June 30, 2005
and 2004, and for the three- and six-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 managements determination that they do not provide
additional information that is material to investors.
16
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
Radio | |
|
|
|
|
|
|
Subsidiaries | |
|
One, Inc. | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
(Unaudited) | |
|
|
|
|
|
|
(In thousands) | |
|
|
NET BROADCAST REVENUE
|
|
$ |
49,864 |
|
|
$ |
51,661 |
|
|
$ |
|
|
|
$ |
101,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program and technical
|
|
|
7,156 |
|
|
|
10,659 |
|
|
|
|
|
|
|
17,815 |
|
|
Selling, general and administrative
|
|
|
15,378 |
|
|
|
13,026 |
|
|
|
|
|
|
|
28,404 |
|
|
Corporate expenses
|
|
|
|
|
|
|
6,029 |
|
|
|
|
|
|
|
6,029 |
|
|
Depreciation and amortization
|
|
|
1,935 |
|
|
|
1,215 |
|
|
|
|
|
|
|
3,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
24,469 |
|
|
|
30,929 |
|
|
|
|
|
|
|
55,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
25,395 |
|
|
|
20,732 |
|
|
|
|
|
|
|
46,127 |
|
INTEREST INCOME
|
|
|
|
|
|
|
271 |
|
|
|
|
|
|
|
271 |
|
INTEREST EXPENSE, including amortization of deferred financing
costs
|
|
|
|
|
|
|
17,240 |
|
|
|
|
|
|
|
17,240 |
|
EQUITY IN NET LOSS OF AFFILIATED COMPANY
|
|
|
|
|
|
|
304 |
|
|
|
|
|
|
|
304 |
|
OTHER INCOME (EXPENSE), net
|
|
|
(8 |
) |
|
|
41 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes and minority interest
in income of subsidiary
|
|
|
25,387 |
|
|
|
3,500 |
|
|
|
|
|
|
|
28,887 |
|
PROVISION FOR INCOME TAXES
|
|
|
|
|
|
|
8,525 |
|
|
|
|
|
|
|
8,525 |
|
MINORITY INTEREST IN INCOME OF SUBSIDIARY
|
|
|
|
|
|
|
518 |
|
|
|
|
|
|
|
518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income of subsidiaries
|
|
|
25,387 |
|
|
|
(5,543 |
) |
|
|
|
|
|
|
19,844 |
|
EQUITY IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
25,387 |
|
|
|
(25,387 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
25,387 |
|
|
$ |
19,844 |
|
|
$ |
(25,387 |
) |
|
$ |
19,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED STOCK DIVIDEND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
|
|
|
|
|
|
$ |
19,844 |
|
|
|
|
|
|
$ |
19,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this
consolidating statement.
17
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
Radio | |
|
|
|
|
|
|
Subsidiaries | |
|
One, Inc. | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
|
(In thousands) | |
NET BROADCAST REVENUE
|
|
$ |
42,844 |
|
|
$ |
43,366 |
|
|
$ |
|
|
|
$ |
86,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program and technical, exclusive of depreciation and
amortization shown below
|
|
|
6,761 |
|
|
|
6,826 |
|
|
|
|
|
|
|
13,587 |
|
|
Selling, general and administrative
|
|
|
13,710 |
|
|
|
11,081 |
|
|
|
|
|
|
|
24,791 |
|
|
Corporate expenses
|
|
|
|
|
|
|
4,118 |
|
|
|
|
|
|
|
4,118 |
|
|
Depreciation and amortization
|
|
|
2,989 |
|
|
|
1,572 |
|
|
|
|
|
|
|
4,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
23,460 |
|
|
|
23,597 |
|
|
|
|
|
|
|
47,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
19,384 |
|
|
|
19,769 |
|
|
|
|
|
|
|
39,153 |
|
INTEREST INCOME
|
|
|
10 |
|
|
|
575 |
|
|
|
|
|
|
|
585 |
|
INTEREST EXPENSE, including amortization of deferred financing
costs
|
|
|
19 |
|
|
|
9,729 |
|
|
|
|
|
|
|
9,748 |
|
EQUITY IN NET LOSS OF AFFILIATED COMPANY
|
|
|
|
|
|
|
1,431 |
|
|
|
|
|
|
|
1,431 |
|
OTHER INCOME, net
|
|
|
61 |
|
|
|
1 |
|
|
|
|
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
19,436 |
|
|
|
9,185 |
|
|
|
|
|
|
|
28,621 |
|
PROVISION FOR INCOME TAXES
|
|
|
|
|
|
|
11,162 |
|
|
|
|
|
|
|
11,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income of subsidiaries
|
|
|
19,436 |
|
|
|
(1,977 |
) |
|
|
|
|
|
|
17,459 |
|
EQUITY IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
19,436 |
|
|
|
(19,436 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
19,436 |
|
|
$ |
17,459 |
|
|
$ |
(19,436 |
) |
|
$ |
17,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED STOCK DIVIDEND
|
|
|
|
|
|
|
5,035 |
|
|
|
|
|
|
|
5,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
|
|
|
|
|
|
$ |
12,424 |
|
|
|
|
|
|
$ |
12,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this
consolidating statement.
18
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
Radio | |
|
|
|
|
|
|
Subsidiaries | |
|
One, Inc. | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
|
(In thousands) | |
NET BROADCAST REVENUE
|
|
$ |
89,310 |
|
|
$ |
89,224 |
|
|
$ |
|
|
|
$ |
178,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program and technical
|
|
|
14,720 |
|
|
|
18,730 |
|
|
|
|
|
|
|
33,450 |
|
|
Selling, general and administrative
|
|
|
28,685 |
|
|
|
23,641 |
|
|
|
|
|
|
|
52,326 |
|
|
Corporate expenses
|
|
|
|
|
|
|
11,324 |
|
|
|
|
|
|
|
11,324 |
|
|
Depreciation and amortization
|
|
|
3,882 |
|
|
|
2,734 |
|
|
|
|
|
|
|
6,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
47,287 |
|
|
|
56,429 |
|
|
|
|
|
|
|
103,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
42,023 |
|
|
|
32,795 |
|
|
|
|
|
|
|
74,818 |
|
INTEREST INCOME
|
|
|
|
|
|
|
743 |
|
|
|
|
|
|
|
743 |
|
INTEREST EXPENSE, including amortization of deferred financing
costs
|
|
|
1 |
|
|
|
29,668 |
|
|
|
|
|
|
|
29,669 |
|
EQUITY IN NET LOSS OF AFFILIATED COMPANY
|
|
|
|
|
|
|
763 |
|
|
|
|
|
|
|
763 |
|
OTHER INCOME, net
|
|
|
32 |
|
|
|
91 |
|
|
|
|
|
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes and minority interest
in income of subsidiary
|
|
|
42,054 |
|
|
|
3,198 |
|
|
|
|
|
|
|
45,252 |
|
PROVISION FOR INCOME TAXES
|
|
|
|
|
|
|
15,095 |
|
|
|
|
|
|
|
15,095 |
|
MINORITY INTEREST IN INCOME OF SUBSIDIARY
|
|
|
|
|
|
|
625 |
|
|
|
|
|
|
|
625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income of subsidiaries
|
|
|
42,054 |
|
|
|
(12,522 |
) |
|
|
|
|
|
|
29,532 |
|
EQUITY IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
42,054 |
|
|
|
(42,054 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
42,054 |
|
|
$ |
29,532 |
|
|
$ |
(42,054 |
) |
|
$ |
29,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED STOCK DIVIDEND
|
|
|
|
|
|
|
2,761 |
|
|
|
|
|
|
|
2,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
|
|
|
|
|
|
$ |
26,771 |
|
|
|
|
|
|
$ |
26,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this
consolidating statement.
19
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
Radio | |
|
|
|
|
|
|
Subsidiaries | |
|
One, Inc. | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
|
(In thousands) | |
NET BROADCAST REVENUE
|
|
$ |
77,991 |
|
|
$ |
77,881 |
|
|
$ |
|
|
|
$ |
155,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program and technical, exclusive of depreciation and
amortization shown below
|
|
|
13,759 |
|
|
|
13,974 |
|
|
|
|
|
|
|
27,733 |
|
|
Selling, general and administrative
|
|
|
26,155 |
|
|
|
20,548 |
|
|
|
|
|
|
|
46,703 |
|
|
Corporate expenses
|
|
|
|
|
|
|
7,878 |
|
|
|
|
|
|
|
7,878 |
|
|
Depreciation and amortization
|
|
|
5,954 |
|
|
|
3,037 |
|
|
|
|
|
|
|
8,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
45,868 |
|
|
|
45,437 |
|
|
|
|
|
|
|
91,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
32,123 |
|
|
|
32,444 |
|
|
|
|
|
|
|
64,567 |
|
INTEREST INCOME
|
|
|
12 |
|
|
|
1,295 |
|
|
|
|
|
|
|
1,307 |
|
INTEREST EXPENSE, including amortization of deferred financing
costs
|
|
|
64 |
|
|
|
19,659 |
|
|
|
|
|
|
|
19,723 |
|
EQUITY IN NET LOSS OF AFFILIATED COMPANY
|
|
|
|
|
|
|
3,798 |
|
|
|
|
|
|
|
3,798 |
|
OTHER INCOME, net
|
|
|
61 |
|
|
|
83 |
|
|
|
|
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
32,132 |
|
|
|
10,365 |
|
|
|
|
|
|
|
42,497 |
|
PROVISION FOR INCOME TAXES
|
|
|
|
|
|
|
16,247 |
|
|
|
|
|
|
|
16,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income of subsidiaries
|
|
|
32,132 |
|
|
|
(5,882 |
) |
|
|
|
|
|
|
26,250 |
|
EQUITY IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
32,132 |
|
|
|
(32,132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
32,132 |
|
|
$ |
26,250 |
|
|
$ |
(32,132 |
) |
|
$ |
26,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED STOCK DIVIDEND
|
|
|
|
|
|
|
10,070 |
|
|
|
|
|
|
|
10,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
|
|
|
|
|
|
$ |
16,180 |
|
|
|
|
|
|
$ |
16,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this
consolidating statement.
20
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
|
|
|
|
|
|
|
Subsidiaries | |
|
Radio One, Inc. | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
|
(In thousands) | |
ASSETS |
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
202 |
|
|
$ |
15,933 |
|
|
$ |
|
|
|
$ |
16,135 |
|
|
Short-term investments
|
|
|
|
|
|
|
3,000 |
|
|
|
|
|
|
|
3,000 |
|
|
Trade accounts receivable, net of allowance for doubtful accounts
|
|
|
36,500 |
|
|
|
35,450 |
|
|
|
|
|
|
|
71,950 |
|
|
Prepaid expenses and other current assets
|
|
|
911 |
|
|
|
3,904 |
|
|
|
|
|
|
|
4,815 |
|
|
Income tax receivable
|
|
|
|
|
|
|
3,650 |
|
|
|
|
|
|
|
3,650 |
|
|
Deferred tax asset
|
|
|
2,281 |
|
|
|
2,030 |
|
|
|
|
|
|
|
4,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
39,894 |
|
|
|
63,967 |
|
|
|
|
|
|
|
103,861 |
|
PROPERTY AND EQUIPMENT, net
|
|
|
29,174 |
|
|
|
18,979 |
|
|
|
|
|
|
|
48,153 |
|
INTANGIBLE ASSETS, net
|
|
|
1,934,992 |
|
|
|
70,196 |
|
|
|
|
|
|
|
2,005,188 |
|
INVESTMENT IN SUBSIDIARIES
|
|
|
|
|
|
|
1,960,326 |
|
|
|
(1,960,326 |
) |
|
|
|
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
|
|
|
|
37,641 |
|
|
|
|
|
|
|
37,641 |
|
OTHER ASSETS
|
|
|
683 |
|
|
|
3,493 |
|
|
|
|
|
|
|
4,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
2,004,743 |
|
|
$ |
2,154,602 |
|
|
$ |
(1,960,326 |
) |
|
$ |
2,199,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
1,368 |
|
|
$ |
4,198 |
|
|
$ |
|
|
|
$ |
5,566 |
|
|
Accrued expenses
|
|
|
6,303 |
|
|
|
40,425 |
|
|
|
|
|
|
|
46,728 |
|
|
Fair value of derivative
|
|
|
|
|
|
|
944 |
|
|
|
|
|
|
|
944 |
|
|
Other current liabilities
|
|
|
463 |
|
|
|
3,546 |
|
|
|
|
|
|
|
4,009 |
|
|
Current portion of long-term debt
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
8,142 |
|
|
|
49,113 |
|
|
|
|
|
|
|
57,255 |
|
LONG-TERM DEBT, net of current portion
|
|
|
15 |
|
|
|
937,500 |
|
|
|
|
|
|
|
937,515 |
|
DEFERRED REVENUE, net of current portion
|
|
|
|
|
|
|
342 |
|
|
|
|
|
|
|
342 |
|
DEFERRED INCOME TAX LIABILITY
|
|
|
36,260 |
|
|
|
104,037 |
|
|
|
|
|
|
|
140,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
44,417 |
|
|
|
1,090,992 |
|
|
|
|
|
|
|
1,135,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MINORITY INTEREST IN SUBSIDIARY
|
|
|
|
|
|
|
1,522 |
|
|
|
|
|
|
|
1,522 |
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
106 |
|
|
|
|
|
|
|
106 |
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
(588 |
) |
|
|
|
|
|
|
(588 |
) |
|
Stock subscriptions receivable
|
|
|
|
|
|
|
(11,385 |
) |
|
|
|
|
|
|
(11,385 |
) |
|
Treasury stock
|
|
|
|
|
|
|
(14,837 |
) |
|
|
|
|
|
|
(14,837 |
) |
|
Additional paid-in capital
|
|
|
1,240,502 |
|
|
|
1,115,083 |
|
|
|
(1,240,502 |
) |
|
|
1,115,083 |
|
|
Accumulated deficit
|
|
|
719,824 |
|
|
|
(26,291 |
) |
|
|
(719,824 |
) |
|
|
(26,291 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,960,326 |
|
|
|
1,062,088 |
|
|
|
(1,960,326 |
) |
|
|
1,062,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$ |
2,004,743 |
|
|
$ |
2,154,602 |
|
|
$ |
(1,960,326 |
) |
|
$ |
2,199,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this
consolidating balance sheet.
21
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
|
|
|
|
|
|
|
Subsidiaries | |
|
Radio One, Inc. | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
|
(In thousands) | |
ASSETS |
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
192 |
|
|
$ |
10,199 |
|
|
$ |
|
|
|
$ |
10,391 |
|
|
Short-term investments
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
Trade accounts receivable, net of allowance for doubtful accounts
|
|
|
29,773 |
|
|
|
32,057 |
|
|
|
|
|
|
|
61,830 |
|
|
Prepaid expenses and other current assets
|
|
|
1,020 |
|
|
|
1,825 |
|
|
|
|
|
|
|
2,845 |
|
|
Income tax receivable
|
|
|
|
|
|
|
3,650 |
|
|
|
|
|
|
|
3,650 |
|
|
Deferred tax asset
|
|
|
2,282 |
|
|
|
1,754 |
|
|
|
|
|
|
|
4,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
33,267 |
|
|
|
59,485 |
|
|
|
|
|
|
|
92,752 |
|
PROPERTY AND EQUIPMENT, net
|
|
|
26,349 |
|
|
|
18,478 |
|
|
|
|
|
|
|
44,827 |
|
INTANGIBLE ASSETS, net
|
|
|
1,924,945 |
|
|
|
6,100 |
|
|
|
|
|
|
|
1,931,045 |
|
INVESTMENT IN SUBSIDIARIES
|
|
|
|
|
|
|
1,954,344 |
|
|
|
(1,954,344 |
) |
|
|
|
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
|
|
|
|
37,384 |
|
|
|
|
|
|
|
37,384 |
|
OTHER ASSETS
|
|
|
807 |
|
|
|
4,326 |
|
|
|
|
|
|
|
5,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
1,985,368 |
|
|
$ |
2,080,117 |
|
|
$ |
(1,954,344 |
) |
|
$ |
2,111,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
1,274 |
|
|
$ |
7,659 |
|
|
$ |
|
|
|
$ |
8,933 |
|
|
Accrued expenses
|
|
|
5,633 |
|
|
|
32,913 |
|
|
|
|
|
|
|
38,546 |
|
|
Fair value of derivative instruments
|
|
|
|
|
|
|
246 |
|
|
|
|
|
|
|
246 |
|
|
Other current liabilities
|
|
|
356 |
|
|
|
265 |
|
|
|
|
|
|
|
621 |
|
|
Current portion of long-term debt
|
|
|
8 |
|
|
|
70,000 |
|
|
|
|
|
|
|
70,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,271 |
|
|
|
111,083 |
|
|
|
|
|
|
|
118,354 |
|
LONG-TERM DEBT, net of current portion
|
|
|
18 |
|
|
|
550,002 |
|
|
|
|
|
|
|
550,020 |
|
DEFERRED INCOME TAX LIABILITY
|
|
|
23,735 |
|
|
|
90,587 |
|
|
|
|
|
|
|
114,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
31,024 |
|
|
|
751,672 |
|
|
|
|
|
|
|
782,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
105 |
|
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(151 |
) |
|
|
|
|
|
|
(151 |
) |
|
Stock subscriptions receivable
|
|
|
|
|
|
|
(34,731 |
) |
|
|
|
|
|
|
(34,731 |
) |
|
Additional paid-in capital
|
|
|
1,276,574 |
|
|
|
1,416,284 |
|
|
|
(1,276,574 |
) |
|
|
1,416,284 |
|
|
Accumulated deficit
|
|
|
677,770 |
|
|
|
(53,062 |
) |
|
|
(677,770 |
) |
|
|
(53,062 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,954,344 |
|
|
|
1,328,445 |
|
|
|
(1,954,344 |
) |
|
|
1,328,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$ |
1,985,368 |
|
|
$ |
2,080,117 |
|
|
$ |
(1,954,344 |
) |
|
$ |
2,111,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this
consolidating balance sheet.
22
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
|
|
|
|
|
|
|
Subsidiaries | |
|
Radio One, Inc. | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
|
(In thousands) | |
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
42,054 |
|
|
$ |
29,532 |
|
|
$ |
(42,054 |
) |
|
$ |
29,532 |
|
|
Adjustments to reconcile loss to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
3,882 |
|
|
|
2,734 |
|
|
|
|
|
|
|
6,616 |
|
|
|
Amortization of debt financing costs, unamortized discount and
deferred interest
|
|
|
|
|
|
|
3,162 |
|
|
|
|
|
|
|
3,162 |
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
13,173 |
|
|
|
|
|
|
|
13,173 |
|
|
|
Minority interest in income of subsidiary
|
|
|
|
|
|
|
|
|
|
|
625 |
|
|
|
625 |
|
|
|
Equity in net losses of affiliated company
|
|
|
|
|
|
|
763 |
|
|
|
|
|
|
|
763 |
|
|
|
Non-cash compensation
|
|
|
|
|
|
|
909 |
|
|
|
|
|
|
|
909 |
|
|
|
Effect of change in operating assets and liabilities, net of
assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
6,727 |
|
|
|
(16,184 |
) |
|
|
|
|
|
|
(9,457 |
) |
|
|
|
Due to corporate/from subsidiaries
|
|
|
(60,009 |
) |
|
|
60,009 |
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other
|
|
|
(109 |
) |
|
|
(356 |
) |
|
|
|
|
|
|
(465 |
) |
|
|
|
Other assets
|
|
|
|
|
|
|
309 |
|
|
|
|
|
|
|
309 |
|
|
|
|
Accounts payable
|
|
|
94 |
|
|
|
(3,541 |
) |
|
|
|
|
|
|
(3,447 |
) |
|
|
|
Accrued expenses and other
|
|
|
13,284 |
|
|
|
(10,208 |
) |
|
|
|
|
|
|
3,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities
|
|
|
5,923 |
|
|
|
80,927 |
|
|
|
(42,054 |
) |
|
|
44,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(5,913 |
) |
|
|
(2,378 |
) |
|
|
|
|
|
|
(8,291 |
) |
|
|
Equity investments
|
|
|
|
|
|
|
(33 |
) |
|
|
|
|
|
|
(33 |
) |
|
|
Acquisition of 51% of common stock in Reach Media, Inc., net of
cash acquired
|
|
|
|
|
|
|
(21,320 |
) |
|
|
|
|
|
|
(21,320 |
) |
|
|
Change in short-term investments
|
|
|
|
|
|
|
7,000 |
|
|
|
|
|
|
|
7,000 |
|
|
|
Investment in subsidiaries
|
|
|
|
|
|
|
(42,054 |
) |
|
|
42,054 |
|
|
|
|
|
|
|
Purchase of other intangible assets
|
|
|
|
|
|
|
(285 |
) |
|
|
|
|
|
|
(285 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(5,913 |
) |
|
|
(59,070 |
) |
|
|
42,054 |
|
|
|
(22,929 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt
|
|
|
|
|
|
|
(455,005 |
) |
|
|
|
|
|
|
(455,005 |
) |
|
|
Proceeds from credit facility
|
|
|
|
|
|
|
572,500 |
|
|
|
|
|
|
|
572,500 |
|
|
|
Proceeds from debt issuances, net of offering costs
|
|
|
|
|
|
|
195,472 |
|
|
|
|
|
|
|
195,472 |
|
|
|
Redemption of convertible preferred stock
|
|
|
|
|
|
|
(309,820 |
) |
|
|
|
|
|
|
(309,820 |
) |
|
|
Proceeds from stock subscriptions due
|
|
|
|
|
|
|
5,962 |
|
|
|
|
|
|
|
5,962 |
|
|
|
Payment of bank financing costs
|
|
|
|
|
|
|
(3,908 |
) |
|
|
|
|
|
|
(3,908 |
) |
|
|
Payment of preferred stock dividends
|
|
|
|
|
|
|
(6,966 |
) |
|
|
|
|
|
|
(6,966 |
) |
|
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
847 |
|
|
|
|
|
|
|
847 |
|
|
|
Repurchase of common stock
|
|
|
|
|
|
|
(14,837 |
) |
|
|
|
|
|
|
(14,837 |
) |
|
|
Change in interest due on stock subscription receivable
|
|
|
|
|
|
|
(368 |
) |
|
|
|
|
|
|
(368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
|
|
|
|
(16,123 |
) |
|
|
|
|
|
|
(16,123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
10 |
|
|
|
5,734 |
|
|
|
|
|
|
|
5,744 |
|
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
192 |
|
|
|
10,199 |
|
|
|
|
|
|
|
10,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$ |
202 |
|
|
$ |
15,933 |
|
|
$ |
|
|
|
$ |
16,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this
consolidating statement.
23
RADIO ONE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
|
|
|
|
|
|
|
Subsidiaries | |
|
Radio One, Inc. | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Unaudited) | |
|
|
(In thousands) | |
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
32,132 |
|
|
$ |
26,250 |
|
|
$ |
(32,132 |
) |
|
$ |
26,250 |
|
|
Adjustments to reconcile loss to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5,954 |
|
|
|
3,037 |
|
|
|
|
|
|
|
8,991 |
|
|
|
Amortization of debt financing costs, unamortized discount and
deferred interest
|
|
|
|
|
|
|
848 |
|
|
|
|
|
|
|
848 |
|
|
|
Deferred income taxes
|
|
|
(1 |
) |
|
|
15,963 |
|
|
|
|
|
|
|
15,962 |
|
|
|
Equity in net loss of affiliated company
|
|
|
|
|
|
|
3,798 |
|
|
|
|
|
|
|
3,798 |
|
|
|
Non-cash compensation
|
|
|
|
|
|
|
1,517 |
|
|
|
|
|
|
|
1,517 |
|
|
|
Effect of change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(2,264 |
) |
|
|
(1,073 |
) |
|
|
|
|
|
|
(3,337 |
) |
|
|
|
Due to Corporate/from subsidiaries
|
|
|
4,317 |
|
|
|
(4,317 |
) |
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other
|
|
|
(168 |
) |
|
|
(1,338 |
) |
|
|
|
|
|
|
(1,506 |
) |
|
|
|
Other assets
|
|
|
88 |
|
|
|
(329 |
) |
|
|
|
|
|
|
(241 |
) |
|
|
|
Accounts payable
|
|
|
(230 |
) |
|
|
(1,138 |
) |
|
|
|
|
|
|
(1,368 |
) |
|
|
|
Accrued expenses and other
|
|
|
(205 |
) |
|
|
(1,002 |
) |
|
|
|
|
|
|
(1,207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities
|
|
|
39,623 |
|
|
|
42,216 |
|
|
|
(32,132 |
) |
|
|
49,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
$ |
(1,935 |
) |
|
$ |
(1,992 |
) |
|
$ |
|
|
|
$ |
(3,927 |
) |
|
Equity investments
|
|
|
(3,500 |
) |
|
|
44 |
|
|
|
|
|
|
|
(3,456 |
) |
|
Purchase of short-term investments
|
|
|
|
|
|
|
8,700 |
|
|
|
|
|
|
|
8,700 |
|
|
Investment in Subsidiaries
|
|
|
|
|
|
|
(32,132 |
) |
|
|
32,132 |
|
|
|
|
|
|
Deposits and payments for station purchases
|
|
|
(34,341 |
) |
|
|
(3,802 |
) |
|
|
|
|
|
|
(38,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(39,776 |
) |
|
|
(29,182 |
) |
|
|
32,132 |
|
|
|
(36,826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt
|
|
|
|
|
|
|
(26,252 |
) |
|
|
|
|
|
|
(26,252 |
) |
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
1,313 |
|
|
|
|
|
|
|
1,313 |
|
|
Interest on stock subscription receivable
|
|
|
|
|
|
|
(850 |
) |
|
|
|
|
|
|
(850 |
) |
|
Payment of preferred stock dividends
|
|
|
|
|
|
|
(10,070 |
) |
|
|
|
|
|
|
(10,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
|
|
|
|
(35,859 |
) |
|
|
|
|
|
|
(35,859 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(153 |
) |
|
|
(22,825 |
) |
|
|
|
|
|
|
(22,978 |
) |
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
414 |
|
|
|
37,596 |
|
|
|
|
|
|
|
38,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$ |
261 |
|
|
$ |
14,771 |
|
|
$ |
|
|
|
$ |
15,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this
consolidating statement.
24
|
|
Item 2. |
Managements Discussion and Analysis of Financial
Condition and Results of Operations |
The following information should be read in conjunction with
Selected Financial Data and the Consolidated
Financial Statements and Notes thereto included elsewhere in
this report and the audited financial statements and Management
Discussion and Analysis contained in our Annual Report on
Form 10-K/ A for the year ended December 31, 2004.
Introduction
We primarily derive revenue from the sale of advertising time
and program sponsorships to local and national advertisers.
Advertising revenue is affected primarily by the advertising
rates our radio stations are able to charge as well as the
overall demand for radio advertising time in a market. These
rates are largely based upon a radio stations audience
share in the demographic groups targeted by advertisers, the
number of radio stations in the related market, and the supply
of and demand for radio advertising time. Advertising rates are
generally highest during morning and afternoon commuting hours.
On February 28, 2005, we acquired 51% of the common stock
of Reach Media, Inc. (Reach Media). Reach Media
primarily derives revenue from the sale of advertising time on
the affiliate stations which broadcast the Tom Joyner Morning
Show. The affiliate radio stations provide Reach Media with
advertising inventory on their stations which is then sold to
the marketplace through a sales representative agreement with
ABC Radio Networks. ABC Radio Networks guarantees Reach Media an
agreed upon amount of annual revenue with the potential to earn
additional amounts if certain revenue goals are met. The
agreement with ABC Radio Networks runs through 2009. Additional
revenue is generated by Reach Media from special events,
sponsorships, its internet business and other related activities.
Approximately 65% of our net revenue was generated from local
advertising and approximately 33% was generated from national
spot advertising, including network advertising, during the
three months ended June 30, 2005. In comparison,
approximately 71% of our net revenue was generated from local
advertising and approximately 27% was generated from national
spot advertising, including network advertising, during the
three months ended June 30, 2004. Approximately 67% of our
net revenue was generated from local advertising and
approximately 30% was generated from national spot advertising,
including network advertising, during the six months ended
June 30, 2005. In comparison, approximately 70% of our net
revenue was generated from local advertising and approximately
27% was generated from national spot advertising, including
network advertising, during the six months ended June 30,
2004. The balance of revenue was generated primarily from tower
rental income, ticket sales and revenue related to our sponsored
events, management fees and other revenue.
In the broadcasting industry, radio stations often utilize trade
or barter agreements to reduce cash expenses by exchanging
advertising time for goods or services. In order to maximize
cash revenue for our spot inventory, we monitor and limit the
use of trade agreements.
Our significant broadcast expenses are (i) employee
salaries and commissions, (ii) programming expenses,
(iii) advertising and promotion expenses, (iv) rental
of premises for studios, (v) rental of transmission tower
space and (vi) music license royalty fees. We strive to
control these expenses by centralizing certain functions such as
finance, accounting, legal, human resources, management
information systems, and the overall programming management
function. We also use our multiple stations, market presence and
purchasing power to negotiate favorable rates with certain
vendors and national representative selling agencies.
We generally incur advertising and promotional expenses to
increase our audiences. However, because Arbitron reports
ratings quarterly, any changed ratings and therefore the effect
on advertising revenue, tends to lag behind the incurrence of
advertising and promotional expenditures.
25
|
|
|
Measurement of Performance |
We monitor the growth and operational results of our business
using net income and the following key metrics:
|
|
|
(a) Net broadcast revenue: The performance of an individual
radio station or group of radio stations in a particular market
is customarily measured by its ability to generate net broadcast
revenue. Net broadcast revenue consists of gross broadcast
revenue net of local and national agency commissions, consistent
with industry practice. Net broadcast revenue is recognized in
the period in which advertisements are broadcast. Net broadcast
revenue also includes advertising aired in exchange for goods
and services, which is recorded at fair value. |
|
|
(b) Station operating income: Net income before
depreciation and amortization, income taxes, interest income,
interest expense, equity in net loss of affiliated company,
minority interest in income of subsidiary, other expense,
corporate expenses, excluding non-cash compensation and non-cash
compensation expenses is commonly referred to in our industry as
station operating income. Station operating income is not a
measure of financial performance under generally accepted
accounting principles. Nevertheless we believe station operating
income is often a useful measure of a broadcasting
companys operating performance and is a significant basis
used by our management to measure the operating performance of
our stations within the various markets because station
operating income provides helpful information about our results
of operations apart from expenses associated with our physical
plant, income taxes provision, investments, debt financings,
overhead and non-cash compensation. Station operating income is
frequently used as one of the bases for comparing businesses in
our industry, although our measure of station operating income
may not be comparable to similarly titled measures of other
companies. Station operating income does not purport to
represent operating loss or cash flow from operating activities,
as those terms are defined under generally accepted accounting
principles, and should not be considered as an alternative to
those measurements as an indicator of our performance. |
|
|
(c) Station operating income margin: Station operating
income margin represents station operating income as a
percentage of net broadcast revenue. Station operating income
margin is not a measure of financial performance under generally
accepted accounting principles. Nevertheless, we believe that
station operating income margin is a useful measure of our
performance because it provides helpful information about our
profitability as a percentage of our net broadcasting revenue. |
|
|
(d) EBITDA: Net income before interest income, interest
expense, income taxes, depreciation and amortization is commonly
referred to in our industry as EBITDA. EBITDA is not
a measure of financial performance under generally accepted
accounting principles. We believe EBITDA is often a useful
measure of a companys operating performance and is a
significant basis used by our management to measure the
operating performance of our business because EBITDA excludes
charges for depreciation, amortization and interest expense that
have resulted from our acquisitions and debt financings, and our
provision for tax expense. Accordingly, we believe that EBITDA
provides helpful information about the operating performance of
our business, apart from the expenses associated with our
physical plant or capital structure. EBITDA is frequently used
as one of the bases for comparing businesses in our industry,
although our measure of EBITDA may not be comparable to
similarly titled measures of other companies. EBITDA does not
purport to represent operating loss or cash flow from operating
activities, as those terms are defined under generally accepted
accounting principles, and should not be considered as an
alternative to those measurements as an indicator of our
performance. |
26
The table below provides a summary of our performance based on
the metrics described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Net Broadcast Revenue
|
|
$ |
101,525 |
|
|
$ |
86,210 |
|
|
$ |
178,534 |
|
|
$ |
155,872 |
|
Station Operating Income(1)
|
|
$ |
55,331 |
|
|
$ |
48,024 |
|
|
$ |
92,811 |
|
|
$ |
82,149 |
|
Station Operating Income Margin
|
|
|
55 |
% |
|
|
56 |
% |
|
|
52 |
% |
|
|
53 |
% |
EBITDA(2)
|
|
$ |
48,488 |
|
|
$ |
42,345 |
|
|
$ |
80,169 |
|
|
$ |
69,904 |
|
Net Income
|
|
$ |
19,844 |
|
|
$ |
17,459 |
|
|
$ |
29,532 |
|
|
$ |
26,250 |
|
|
|
(1) |
The reconciliation of net income to station operating income is
as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Net income as reported
|
|
$ |
19,844 |
|
|
$ |
17,459 |
|
|
$ |
29,532 |
|
|
$ |
26,250 |
|
Add back non-station operating income items included in net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(271 |
) |
|
|
(585 |
) |
|
|
(743 |
) |
|
|
(1,307 |
) |
|
Interest expense
|
|
|
17,240 |
|
|
|
9,748 |
|
|
|
29,669 |
|
|
|
19,723 |
|
|
Provision for income taxes
|
|
|
8,525 |
|
|
|
11,162 |
|
|
|
15,095 |
|
|
|
16,247 |
|
|
Corporate expenses, excluding non-cash compensation
|
|
|
5,552 |
|
|
|
3,716 |
|
|
|
10,468 |
|
|
|
7,074 |
|
|
Non-cash compensation
|
|
|
502 |
|
|
|
594 |
|
|
|
909 |
|
|
|
1,517 |
|
|
Equity in net loss of affiliated company
|
|
|
304 |
|
|
|
1,431 |
|
|
|
763 |
|
|
|
3,798 |
|
|
Other income, net
|
|
|
(33 |
) |
|
|
(62 |
) |
|
|
(123 |
) |
|
|
(144 |
) |
|
Depreciation and amortization
|
|
|
3,150 |
|
|
|
4,561 |
|
|
|
6,616 |
|
|
|
8,991 |
|
|
Minority interest in income of subsidiary
|
|
|
518 |
|
|
|
|
|
|
|
625 |
|
|
|
|
|
|
|
Station operating income
|
|
$ |
55,331 |
|
|
$ |
48,024 |
|
|
$ |
92,811 |
|
|
$ |
82,149 |
|
|
|
(2) |
The reconciliation of net income to EBITDA is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Net income as reported
|
|
$ |
19,844 |
|
|
$ |
17,459 |
|
|
$ |
29,532 |
|
|
$ |
26,250 |
|
Add back non-EBITDA items included in net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(271 |
) |
|
|
(585 |
) |
|
|
(743 |
) |
|
|
(1,307 |
) |
|
Interest expense
|
|
|
17,240 |
|
|
|
9,748 |
|
|
|
29,669 |
|
|
|
19,723 |
|
|
Provision for income taxes
|
|
|
8,525 |
|
|
|
11,162 |
|
|
|
15,095 |
|
|
|
16,247 |
|
|
Depreciation and amortization
|
|
|
3,150 |
|
|
|
4,561 |
|
|
|
6,616 |
|
|
|
8,991 |
|
|
|
EBITDA
|
|
$ |
48,488 |
|
|
$ |
42,345 |
|
|
$ |
80,169 |
|
|
$ |
69,904 |
|
27
RADIO ONE, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
The following table summarizes our historical consolidated
results of operations:
Three Months Ended
June 30, 2005 Compared to Three Months Ended June 30,
2004 (In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
|
|
June 30, | |
|
|
|
|
|
|
| |
|
|
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
|
|
| |
|
| |
|
| |
Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net broadcast revenue
|
|
$ |
101,525 |
|
|
$ |
86,210 |
|
|
$ |
15,315 |
|
|
|
17.8 |
% |
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, excluding non-cash compensation
|
|
|
17,790 |
|
|
|
13,395 |
|
|
|
4,395 |
|
|
|
32.8 |
|
|
Selling, general and administrative
|
|
|
28,404 |
|
|
|
24,791 |
|
|
|
3,613 |
|
|
|
14.6 |
|
|
Corporate expenses, excluding non-cash compensation
|
|
|
5,552 |
|
|
|
3,716 |
|
|
|
1,836 |
|
|
|
49.4 |
|
|
Non-cash compensation
|
|
|
502 |
|
|
|
594 |
|
|
|
(92 |
) |
|
|
(15.5 |
) |
|
Depreciation and amortization
|
|
|
3,150 |
|
|
|
4,561 |
|
|
|
(1,411 |
) |
|
|
(30.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
55,398 |
|
|
|
47,057 |
|
|
|
8,341 |
|
|
|
17.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
46,127 |
|
|
|
39,153 |
|
|
|
6,974 |
|
|
|
17.8 |
|
Interest income
|
|
|
271 |
|
|
|
585 |
|
|
|
(314 |
) |
|
|
(53.7 |
) |
Interest expense
|
|
|
17,240 |
|
|
|
9,748 |
|
|
|
7,492 |
|
|
|
76.9 |
|
Other income, net
|
|
|
33 |
|
|
|
62 |
|
|
|
(29 |
) |
|
|
(46.8 |
) |
Equity in net loss of affiliated company
|
|
|
304 |
|
|
|
1,431 |
|
|
|
(1,127 |
) |
|
|
(78.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes and minority interest
in income of subsidiary
|
|
|
28,887 |
|
|
|
28,621 |
|
|
|
266 |
|
|
|
|
|
|
Income tax provision
|
|
|
8,525 |
|
|
|
11,162 |
|
|
|
(2,637 |
) |
|
|
(23.6 |
) |
|
Minority interest in income of subsidiary
|
|
|
518 |
|
|
|
|
|
|
|
518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
19,844 |
|
|
$ |
17,459 |
|
|
$ |
2,385 |
|
|
|
13.7 |
|
|
Preferred stock dividend
|
|
|
|
|
|
|
5,035 |
|
|
|
(5,035 |
) |
|
|
(100.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders
|
|
$ |
19,844 |
|
|
$ |
12,424 |
|
|
$ |
7,420 |
|
|
|
59.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2005 Compared to Three Months Ended June 30,
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$101,525 |
|
|
$ |
86,210 |
|
|
$ |
15,315 |
|
|
|
17.8 |
% |
During the three months ended June 30, 2005, we recognized
approximately $101.5 million in net broadcast revenue
compared to $86.2 million during the three months ended
June 30, 2004. These amounts are net of agency commissions,
which were approximately $13.0 million during the three
months ended June 30, 2005, compared to approximately
$12.1 million for the same period in 2004. The increase in
net broadcast revenue was due primarily to our consolidation of
the 2005 second quarter operating results of Reach Media,
increased pricing for advertising on our stations that resulted
from improvement in the general economy, increased listenership
and ratings, and revenue from three new stations launched in
late 2004. The revenue growth in many of our markets, including,
Atlanta, Charlotte, Cleveland, Dallas,
28
Houston, Indianapolis, Raleigh and Washington, DC, was partially
offset by revenue declines in some of our other markets,
including Philadelphia and St. Louis due to format changes,
Los Angeles due to soft ratings, and Baltimore and Detroit due
to general market conditions. Excluding the 2005 second quarter
operating results of Reach Media, our net broadcast revenue
increased 7.1% for the three months ended June 30, 2005,
compared to the same period in 2004.
|
|
|
Programming and technical |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$17,790 |
|
|
|
$13,395 |
|
|
$4,395 |
|
|
32.8 |
% |
Programming and technical expenses include expenses associated
with on-air talent and the management and maintenance of the
systems, tower facilities, and studios used in the creation,
distribution and broadcast of programming on our radio stations.
Programming and technical expenses also include expenses
associated with our research activities and music royalties. The
increase in programming and technical expenses during the three
months ended June 30, 2005 resulted primarily from our
consolidation of the 2005 second quarter operating results of
Reach Media, and to a lesser extent, an increase in programming
expenses relating to our on-air talent, music royalties,
incremental costs relating to expanding our presence on the
Internet and three new stations launched in late of 2004.
Excluding the 2005 second quarter operating results of Reach
Media, programming and technical expenses increased 3.2% for the
three months ended June 30, 2005, compared to the same
period in 2004.
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$28,404 |
|
|
|
$24,791 |
|
|
$3,613 |
|
|
14.6 |
% |
Selling, general and administrative expenses include expenses
associated with our sales departments, offices, facilities and
headcount (outside of our corporate headquarters), marketing
expenses, back office expenses, and the advertising traffic
(scheduling and insertion) functions. The increase in selling,
general and administrative expenses during the three months
ended June 30, 2005 resulted primarily from our
consolidation of the 2005 second quarter operating results of
Reach Media. The increase also resulted from higher compensation
(mainly commissions and national rep fees) and other selling
expenses driven by increased revenue, and sales expenses
associated with three new stations launched in late 2004.
Excluding the 2005 second quarter operating results of Reach
Media, selling, general and administrative expenses increased
6.5% for the three months ended June 30, 2005, compared to
the same period in 2004.
|
|
|
Corporate expenses, excluding non-cash compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$5,552 |
|
|
|
$3,716 |
|
|
$1,836 |
|
|
49.4 |
% |
Corporate expenses, excluding non-cash compensation consist of
expenses associated with maintaining Radio Ones and Reach
Medias corporate headquarters and facilities, including
headcount. The increase in corporate expenses, excluding
non-cash compensation during the three months ended
June 30, 2005, resulted primarily from our consolidation of
the 2005 second quarter operating results of Reach Media,
increased compensation, and additional professional fees.
Excluding the 2005 second quarter operating results of Reach
Media, corporate expenses, excluding non-cash compensation
increased 14.6% for the three months ended June 30, 2005,
compared to the same period in 2004.
29
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$502 |
|
|
|
$594 |
|
|
$(92) |
|
|
(15.5 |
)% |
During the three months ended June 30, 2004, we issued
restricted stock to certain on-air talent, some of which vested
immediately. As a result, the non-cash compensation expense
during the three months ended June 30, 2005 decreased from
the expense recorded in the comparable period of the prior year.
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$3,150 |
|
|
|
$4,561 |
|
|
$(1,411) |
|
|
(30.9 |
)% |
The decrease in depreciation and amortization expense for the
three months ended June 30, 2005 was due primarily to the
completion of amortization of some of our trade names in late
2004, partially offset by depreciation for our additional
capital expenditures made since the second quarter of 2004.
Excluding the 2005 second quarter operating results of Reach
Media, depreciation and amortization expense decreased 31.8% for
the three months ended June 30, 2005, compared to the same
period in 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$271 |
|
|
|
$585 |
|
|
$(314) |
|
|
(53.7 |
)% |
The decrease in interest income resulted primarily from lower
average balances of cash, cash equivalents and short-term
investments and the pay-off of certain officer loans during the
three months ended March 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$17,240 |
|
|
|
$9,748 |
|
|
$7,492 |
|
|
76.9 |
% |
The increase in interest expense during the three months ended
June 30, 2005, resulted from the write-off of approximately
$2.1 million of deferred financing costs associated with
the June 2005 refinancing of our bank credit facilities. The
refinancing consisted of entering into a $800.0 million
credit agreement, and the simultaneous borrowing of
$437.5 million to retire our previous bank credit
facilities. The increase in interest expense also resulted from
additional interest obligations incurred from borrowings to
partially fund the February 2005 redemption of our Convertible
Preferred Remarketable Term Income Deferrable Equity Securities
(HIGH TIDES) for approximately $309.8 million,
and the acquisition of 51% of the common stock of Reach Media.
The redemption of the outstanding HIGH TIDES was funded with the
issuance of $200.0 million
63/8% senior
subordinated notes and $110.0 million borrowed under our
previous revolving credit facility. The acquisition of 51% of
the common stock of Reach Media was partially funded with
$25.0 million borrowed under our previous revolving credit
facility.
30
|
|
|
Equity in net loss of affiliated company |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$304 |
|
|
|
$1,431 |
|
|
$(1,127) |
|
|
(78.8 |
)% |
In July 2003, we entered into a joint venture agreement with an
affiliate of Comcast Corporation and certain other investors to
form TV One for the purpose of distributing a new cable
television programming service. See Liquidity and Capital
Resources section below for further discussion. In
December 2004, we modified our methodology for estimating our
equity in the net loss of TV One. As a result of this
modification, we recognized a net loss of $304,000 for the three
months ended June 30, 2005, compared to a net loss of
approximately $1.4 million in for the three months ended
June 30, 2004.
|
|
|
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$8,525 |
|
|
|
$11,162 |
|
|
$(2,637) |
|
|
(23.6 |
)% |
The decrease in the provision for income taxes for the three
months ended June 30, 2005, was primarily due to a
favorable change to Ohio state tax laws enacted on June 30,
2005. The decrease was partially offset by our consolidation of
the 2005 second quarter operating results of Reach Media, an
increase in the reserve for contingencies, and an increase in
our effective tax rate due to permanent differences between
income subject to income tax for book versus tax purposes.
Excluding the increase in the reserve for contingencies, and the
decrease in the provision due to the to the Ohio tax law change,
our effective tax rate as of June 30, 2005 was 40.2%,
compared to 39.2% as of June 30, 2004. The effective tax
rate as of June 30, 2005 does not reflect the impact of
SFAS No. 123(R), given we have not yet adopted this
pronouncement. Excluding the 2005 second quarter operating
results of Reach Media, the provision for income taxes decreased
29.7% for the three months ended June 30, 2005., compared
to the same period in 2004.
|
|
|
Minority interest in income of subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$518 |
|
|
|
$ |
|
|
$518 |
|
|
|
% |
The minority interest in income of subsidiary of $518,000 for
the three months ended June 30, 2005, compared to $0 for
the same period in 2004, reflects the 49% minority
stockholders interest in Reach Medias net income for
the three months ended June 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$19,844 |
|
|
|
$17,459 |
|
|
$2,385 |
|
|
13.7 |
% |
As described above, the increase in net income for the three
months ended June 30, 2005, is primarily a result of
approximately $7.0 million in increased operating income,
and a decrease in the equity in net loss of affiliated company
of approximately $1.1 million, offset by an increase in net
interest expense of approximately $7.8 million, a decrease
in the provision for income taxes of approximately
$2.6 million, and an increase in minority interest in
income of subsidiary of $518,000.
31
|
|
|
Net income applicable to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$19,844 |
|
|
|
$12,424 |
|
|
$7,420 |
|
|
59.7 |
% |
Net income applicable to common stockholders is defined as, net
income less dividends on our outstanding HIGH TIDES. The
increase in net income applicable to common stockholders during
the three months ended June 30, 2005, was attributable to
an increase in net income of approximately $2.4 million and
the elimination of preferred stock dividends of approximately
$5.0 million during the three months ended June 30,
2005. In February 2005, we redeemed our outstanding HIGH TIDES
using proceeds from our sale of $200.0 million
63/8% senior
subordinated notes, borrowings of $110.0 million under our
revolving bank credit facility, and available excess cash.
Other Data
Station operating income. Station operating income
consists of net income before depreciation and amortization,
income taxes, interest income, interest expense, equity in net
loss of affiliated company, minority interest in income of
subsidiary, other expense, corporate expenses, excluding
non-cash compensation and non-cash compensation expenses.
Station operating income is not a measure of financial
performance under generally accepted accounting principles.
Station operating income increased to approximately
$55.3 million for the three months ended June 30,
2005, compared to approximately $48.0 million for the three
months ended June 30, 2004, an increase of approximately
$7.3 million or 15.2%. In addition to consolidating the
2005 second quarter operating results of Reach Media, this
increase was primarily attributable to an increase in net
broadcast revenue in Radio One markets, partially offset by
higher operating expenses as described above. A reconciliation
of net income to station operating income is provided on
page 27.
Station operating income margin. Station operating income
margin represents station operating income as a percentage of
net broadcast revenue. Station operating income margin is not a
measure of financial performance under generally accepted
accounting principles. Our station operating income margin was
54.5% for the three months ended June 30, 2005, compared to
55.7% for the three months ended June 30, 2004. Our station
operating income was approximately $55.3 million and
$48.0 million for the three months ended June 30, 2005
and 2004, respectively, while our net broadcast revenue was
approximately $101.5 million and $86.2 million for the
three months ended June 30, 2005 and 2004, respectively.
EBITDA. EBITDA represents net income before interest
income, interest expense, income taxes, depreciation and
amortization. EBITDA is not a measure of financial performance
under generally accepted accounting principles. EBITDA was
approximately $48.5 million for the three months ended
June 30, 2005, compared to approximately $42.3 million
for the three months ended June 30, 2004, an increase of
approximately $6.2 million or 14.7%. A reconciliation of
net income to EBITDA is provided on page 27.
32
Six Months Ended
June 30, 2005 Compared to Six Months Ended June 30,
2004 (In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
|
|
June 30, | |
|
|
|
|
|
|
| |
|
|
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
|
|
| |
|
| |
|
| |
Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net broadcast revenue
|
|
$ |
178,534 |
|
|
$ |
155,872 |
|
|
$ |
22,662 |
|
|
|
14.5 |
% |
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, excluding non-cash compensation
|
|
|
33,397 |
|
|
|
27,020 |
|
|
|
6,377 |
|
|
|
23.6 |
|
|
Selling, general and administrative
|
|
|
52,326 |
|
|
|
46,703 |
|
|
|
5,623 |
|
|
|
12.0 |
|
|
Corporate expenses, excluding non-cash compensation
|
|
|
10,468 |
|
|
|
7,074 |
|
|
|
3,394 |
|
|
|
48.0 |
|
|
Non-cash compensation
|
|
|
909 |
|
|
|
1,517 |
|
|
|
(608 |
) |
|
|
(40.1 |
) |
|
Depreciation and amortization
|
|
|
6,616 |
|
|
|
8,991 |
|
|
|
(2,375 |
) |
|
|
(26.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
103,716 |
|
|
|
91,305 |
|
|
|
12,411 |
|
|
|
13.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
74,818 |
|
|
|
64,567 |
|
|
|
10,251 |
|
|
|
15.9 |
|
Interest income
|
|
|
743 |
|
|
|
1,307 |
|
|
|
(564 |
) |
|
|
(43.2 |
) |
Interest expense
|
|
|
29,669 |
|
|
|
19,723 |
|
|
|
9,946 |
|
|
|
50.4 |
|
Other income, net
|
|
|
123 |
|
|
|
144 |
|
|
|
(21 |
) |
|
|
(14.6 |
) |
Equity in net loss of affiliated company
|
|
|
763 |
|
|
|
3,798 |
|
|
|
(3,035 |
) |
|
|
(79.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes and minority interest
in income of subsidiary
|
|
|
45,252 |
|
|
|
42,497 |
|
|
|
2,755 |
|
|
|
6.5 |
|
|
Income tax provision
|
|
|
15,095 |
|
|
|
16,247 |
|
|
|
(1,152 |
) |
|
|
(7.1 |
) |
|
Minority interest in income of subsidiary
|
|
|
625 |
|
|
|
|
|
|
|
625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
29,532 |
|
|
$ |
26,250 |
|
|
$ |
3,282 |
|
|
|
12.5 |
|
|
Preferred stock dividend
|
|
|
2,761 |
|
|
|
10,070 |
|
|
|
(7,309 |
) |
|
|
(72.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders
|
|
$ |
26,771 |
|
|
$ |
16,180 |
|
|
$ |
10,591 |
|
|
|
65.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2005 Compared to Six Months Ended June 30,
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$178,534 |
|
|
|
$155,872 |
|
|
$22,662 |
|
|
14.5 |
% |
During the six months ended June 30, 2005, we recognized
approximately $178.5 million in net broadcast revenue
compared to approximately $155.9 million during the six
months ended June 30, 2004. These amounts are net of agency
commissions, which were approximately $23.1 million during
the six months ended June 30, 2005, compared to
approximately $21.3 million for the same period in 2004.
The increase in net broadcast revenue was due primarily to our
consolidation of the March through June 2005 operating results
of Reach Media, increased pricing for advertising on our
stations that resulted from improvement in the general economy,
increased listenership and ratings, and revenue from three new
stations launched in late 2004. The revenue growth in many of
our markets, including, Atlanta, Charlotte, Cleveland, Dallas,
Houston, Indianapolis, Raleigh and Washington, DC, was partially
offset by revenue declines in some of our other markets,
including Philadelphia and St. Louis due to format changes,
Los Angeles due to soft ratings and Baltimore and Detroit
due to general market conditions. Excluding the March through
June 2005 operating results of Reach Media, our net broadcast
revenue increased 7.0% for the six months ended June 30,
2005, compared to the same period in 2004.
33
|
|
|
Programming and technical |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$33,397 |
|
|
|
$27,020 |
|
|
$6,377 |
|
|
23.6 |
% |
Programming and technical expenses include expenses associated
with on-air talent and the management and maintenance of the
systems, tower facilities, and studios used in the creation,
distribution and broadcast of programming on our radio stations.
Programming and technical expenses also include expenses
associated with our research activities and music royalties. The
increase in programming and technical expenses during the six
months ended June 30, 2005 resulted primarily from our
consolidation of the March through June 2005 operating results
of Reach Media, and to a lesser extent, an increase in
programming expenses relating to our on-air talent, music
royalties, incremental costs relating to expanding our presence
on the Internet and three new stations launched in late 2004.
Excluding the March through June 2005 operating results of Reach
Media, programming and technical expenses increased 4.3% for the
six months ended June 30, 2005, compared to the same period
in 2004.
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$52,326 |
|
|
|
$46,703 |
|
|
$5,623 |
|
|
12.0 |
% |
Selling, general and administrative expenses include expenses
associated with our sales departments, offices, facilities and
headcount (outside of our corporate headquarters), marketing
expenses, back office expenses, and the advertising traffic
(scheduling and insertion) functions. The increase in selling,
general and administrative expenses during the six months ended
June 30, 2005 resulted primarily from our consolidation of
the March through June 2005 operating results of Reach Media.
The increase also resulted from higher compensation (mainly
commissions and national rep fees) and other selling expenses
driven by increased revenue, and sales expenses associated with
three new stations launched in late 2004. Excluding the March
through June 2005 operating results of Reach Media, selling,
general and administrative expenses increased 6.7% for the six
months ended June 30, 2005, compared to the same period in
2004.
|
|
|
Corporate expenses, excluding non-cash compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$10,468 |
|
|
|
$7,074 |
|
|
$3,394 |
|
|
48.0 |
% |
Corporate expenses, excluding non-cash compensation consist of
expenses associated with maintaining Radio Ones and Reach
Medias corporate headquarters and facilities, including
headcount. The increase in corporate expenses, excluding
non-cash compensation during the six months ended June 30,
2005, resulted primarily from our consolidation of the March
through June 2005 operating results of Reach Media, increased
compensation and additional professional fees. Excluding the
March through June 2005 operating results of Reach Media,
corporate expenses, excluding non-cash compensation increased
22.5% for the six months ended June 30, 2005, compared to
the same period in 2004.
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$909 |
|
|
|
$1,517 |
|
|
$ |
(608 |
) |
|
|
(40.1 |
)% |
During the six months ended June 30, 2004, we issued
restricted stock to certain on-air talent, some of which vested
immediately. As a result, the non-cash compensation expense
during the six months ended June 30, 2005 decreased from
the expense recorded in the comparable period of the prior year.
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$6,616 |
|
|
|
$8,991 |
|
|
$(2,375) |
|
|
(26.4 |
)% |
The decrease in depreciation and amortization expense for the
six months ended June 30, 2005 was due primarily to the
completion of amortization of some of our trade names in late
2004, partially offset by depreciation for our additional
capital expenditures made since the second quarter of 2004.
Excluding the March through June 2005 operating results of Reach
Media, depreciation and amortization expense decreased 27.0% for
the six months ended June 30, 2005, compared to the same
period in 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$743 |
|
|
|
$1,307 |
|
|
$(564) |
|
|
(43.2 |
)% |
The decrease in interest income resulted primarily from lower
average balances of cash, cash equivalents and short-term
investments and the pay-off of certain officer loans during the
first quarter of 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$29,669 |
|
|
|
$19,723 |
|
|
$9,946 |
|
|
50.4 |
% |
The increase in interest expense during the six months ended
June 30, 2005, resulted from the write-off of approximately
$2.1 million of deferred financing costs associated with
the June 2005 refinancing of our bank credit facilities. The
refinancing consisted of entering into a $800.0 million
credit agreement, and the simultaneous borrowing of
$437.5 million to retire our previous bank credit
facilities. The increase in interest expense also resulted from
additional interest obligations incurred from borrowings to
partially fund the February 2005 redemption of our outstanding
HIGH TIDES for approximately $309.8 million, and the
acquisition of 51% of the common stock of Reach Media. The
redemption of the HIGH TIDES was funded with the issuance of
$200.0 million
63/8% senior
subordinated notes and $110.0 million borrowed under our
previous revolving credit facility. The acquisition of 51% of
the common stock of Reach Media was partially funded with
$25.0 million borrowed under our previous revolving credit
facility.
|
|
|
Equity in net loss of affiliated company |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$763 |
|
|
|
$3,798 |
|
|
$(3,035) |
|
|
(79.9 |
)% |
35
In July 2003, we entered into a joint venture agreement with an
affiliate of Comcast Corporation and certain other investors to
form TV One for the purpose of distributing a new cable
television programming service. See Liquidity and Capital
Resources section below for further discussion. In
December 2004, we modified our methodology for estimating our
equity in the net loss of TV One. As a result of this
modification, we recognized a net loss of $763,000 for the six
months ended June 30, 2005, compared to a net loss of
approximately $3.8 million in for the six months ended
June 30, 2004.
|
|
|
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$15,095 |
|
|
|
$16,247 |
|
|
$(1,152) |
|
|
(7.1 |
)% |
The decrease in the provision for income taxes for the six
months ended June 30, 2005, was primarily due to a
favorable change to Ohio state tax laws enacted on June 30,
2005. The decrease was partially offset by our consolidation of
the March through June 2005 operating results of Reach Media, an
increase in the reserve for contingencies, and an increase in
our effective tax rate due to permanent differences between
income subject to income tax for book versus tax purposes.
Excluding the increase in the reserve for contingencies, and the
decrease in the provision due to the Ohio tax law change, our
effective tax rate as of June 30, 2005 was 40.2%, compared
to 39.2% as of June 30, 2004. The effective tax rate as of
June 30, 2005 does not reflect the impact of
SFAS No. 123(R), given we have not yet adopted this
pronouncement. Excluding the March through June 2005 operating
results of Reach Media, the provision for income taxes decreased
12.1% for the six months ended June 30, 2005, compared to
the same period in 2004.
|
|
|
Minority interest in income of subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$625 |
|
|
|
$ |
|
|
$625 |
|
|
|
% |
The minority interest in income of subsidiary of $625,000 for
the six months ended June 30, 2005, compared to $0 for the
same period in 2004, reflects the 49% minority
stockholders interest in Reach Medias March through
June 2005 net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$29,532 |
|
|
|
$26,250 |
|
|
$3,282 |
|
|
12.5 |
% |
As described above, the increase in net income during the six
months ended June 30, 2005 is primarily a result of
approximately $10.3 million in increased operating income,
and a decrease of approximately $3.0 million in equity in
net loss of affiliated company, offset by an increase in net
interest expense of approximately $10.5 million, a decrease
in the provision for income taxes of approximately $1.2, and an
increase in minority interest in income of subsidiary of
$625,000.
36
|
|
|
Net income applicable to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
|
|
June 30, | |
|
|
|
|
| |
|
|
2005 | |
|
2004 | |
|
Increase/(Decrease) | |
| |
|
| |
|
| |
|
$26,771 |
|
|
|
$16,180 |
|
|
$10,591 |
|
|
65.5 |
% |
Net income applicable to common stockholders is defined as net
income less dividends on our outstanding HIGH TIDES. The
increase in net income applicable to common stockholders during
the six months ended June 30, 2005, was attributable to the
increase in net income of approximately $3.3 million and a
decrease in preferred stock dividends of approximately
$7.3 million. In February 2005, we redeemed our outstanding
HIGH TIDES using proceeds from our sale of $200.0 million
63/8% senior
subordinated notes, borrowings of $110.0 million under our
revolving bank credit facility, and available excess cash.
Other Data
Station operating income. Station operating income
consists of net income before depreciation and amortization,
income taxes, interest income, interest expense, equity in net
loss of affiliated company, minority interest in income of
subsidiary, other expense, corporate expenses, excluding
non-cash compensation and non-cash compensation expenses.
Station operating income is not a measure of financial
performance under generally accepted accounting principles.
Station operating income increased to approximately
$92.8 million for the six months ended June 30, 2005,
compared to approximately $82.1 million for the six months
ended June 30, 2004, an increase of approximately
$10.7 million or 13.0%. In addition to consolidating the
March through June 2005 operating results of Reach Media, this
increase was primarily attributable to an increase in net
broadcast revenue, partially offset by higher operating expenses
as described above. A reconciliation of net income to station
operating income is provided on page 27.
Station operating income margin. Station operating income
margin represents station operating income as a percentage of
net broadcast revenue. Station operating income margin is not a
measure of financial performance under generally accepted
accounting principles. Our station operating income margin was
52.0% for the six months ended June 30, 2005, compared to
52.7% for the six months ended June 30, 2004. Our station
operating income was approximately $92.8 million and
$82.1 million for the six months ended June 30, 2005
and 2004, respectively, while our net broadcast revenue was
approximately $178.5 million and $155.9 million for
the six months ended June 30, 2005 and 2004, respectively.
EBITDA. EBITDA represents net income or loss before
interest income, interest expense, income taxes, depreciation
and amortization. EBITDA is not a measure of financial
performance under generally accepted accounting principles.
EBITDA was approximately $80.2 million for the six months
ended June 30, 2005, compared to approximately
$69.9 million for the six months ended June 30, 2004,
an increase of approximately $10.3 million or 14.7%. A
reconciliation of net income to EBITDA is provided on
page 27.
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is cash provided by operations
and, to the extent necessary, commitments available under our
bank credit facilities and other debt or equity financings.
In June 2005, we entered into a new credit agreement (the
Credit Agreement) with a syndicate of banks. The
term of the Credit Agreement is seven years and the total amount
available under the Credit Agreement is $800.0 million,
consisting of a $500.0 million revolving facility and a
$300.0 million term loan facility. Borrowings under the
bank credit facilities are subject to compliance with provisions
of the Credit Agreement, including but not limited to financial
covenants. We may use proceeds from the bank
37
credit facilities for working capital, capital expenditures made
in the ordinary course of business and other lawful corporate
purposes, for our common stock repurchase program, and for
direct and indirect investments permitted under the Credit
Agreement. The Credit Agreement contains affirmative and
negative covenants that we must comply with, including
(a) maintaining a ratio of consolidated adjusted EBITDA to
consolidated interest expense of no less than 2.50 to 1.00,
(b) maintaining a ratio of consolidated debt for borrowed
money to consolidated adjusted EBITDA of, no greater than 6.50
to 1.00 from June 13, 2005 to September 30, 2006, and
no greater than 6.00 to 1.00 from October 1, 2006 and
thereafter, (c) limitations on liens, (d) limitations
on the sale of assets, (e) limitations on the payment of
dividends, and (f) limitations on mergers, as well as other
customary covenants. Simultaneous with entering into the Credit
Agreement, we borrowed $437.5 million under the Credit
Agreement to retire all outstanding obligations under our
previous credit agreement, dated as of July 17, 2000. The
previous credit agreement provided for borrowings up to
$600.0 million, and consisted of a $350.0 million term
facility and a $250.0 million revolving facility.
As of June 30, 2005, we had approximately
$362.1 million available for borrowing, of which
approximately $143.0 million is available to be drawn down,
taking into consideration the covenants under the Credit
Agreement. Both the term loan facility and the revolving
facility under the Credit Agreement bear interest, at our
option, at a rate equal to either LIBOR plus a spread that
ranges from 0.63% to 1.50%, or the prime rate plus a spread of
up to 0.50%, depending on our leverage ratio. We also pay a
commitment fee that varies depending on certain financial
covenants and the amount of unused commitment, up to a maximum
of 0.375% per annum on the average balance of the revolving
facility. We believe that we are in compliance with all
covenants under the Credit Agreement.
In connection with entering into the Credit Agreement, we
(a) recorded approximately $3.9 million of deferred
financing costs to be amortized over the life of the Credit
Agreement, and (b) wrote-off approximately
$2.1 million of the previous bank facilities
unamortized deferred financing costs as a loss on extinguishment
of debt for the three months and six months ended June 30,
2005.
Under our Credit Agreement, we may be required from time to time
to protect ourselves from interest rate fluctuations using
interest rate hedge agreements. As a result, we have entered
into various fixed rate swap agreements designed to mitigate our
exposure to higher floating interest rates. These swap
agreements require that we pay a fixed rate of interest on the
notional amount to a bank and that the bank pays to us a
variable rate equal to three-month LIBOR. As of June 30,
2005, we have swap agreements in place for a total notional
amount of $100.0 million, and the periods remaining on
these swap agreements range in duration from two to seven years.
Our credit exposure under these swap agreements is limited to
the cost of replacing an agreement in the event of
non-performance by our counter-party; however, we do not
anticipate non-performance. All of the swap agreements are tied
to the three-month LIBOR interest rate, which may fluctuate
significantly on a daily basis. The valuation of each of these
swap agreements is affected by the change in the three-month
LIBOR rates and the remaining term of the agreement. Any
increase in the three-month LIBOR rate results in a more
favorable valuation, while a decrease in the three-month LIBOR
rate results in a less favorable valuation.
38
The following table summarizes the interest rates in effect with
respect to our debt as of June 30, 2005 (excluding capital
leases):
|
|
|
|
|
|
|
|
|
|
|
Amount | |
|
Applicable | |
Type of Debt |
|
Outstanding | |
|
Interest Rate | |
|
|
| |
|
| |
|
|
(Millions) | |
|
|
Senior bank term debt (swap matures 6/16/2012)(1)(2)
|
|
$ |
25.0 |
|
|
|
5.72 |
% |
Senior bank term debt (swap matures 6/16/2010))(1)(2)
|
|
|
25.0 |
|
|
|
5.52 |
|
Senior bank term debt (swap matures 6/16/2008))(1)(2)
|
|
|
25.0 |
|
|
|
5.38 |
|
Senior bank term debt (swap matures 6/16/2007))(1)(2)
|
|
|
25.0 |
|
|
|
5.33 |
|
Senior bank term debt (subject to variable interest rates)(3)
|
|
|
200.0 |
|
|
|
4.69 |
|
Senior bank revolving debt (subject to variable interest
rates)(3)
|
|
|
137.5 |
|
|
|
4.69 |
|
87/8% Senior
subordinated notes (fixed rate)
|
|
|
300.0 |
|
|
|
8.88 |
|
63/8% Senior
subordinated notes (fixed rate)
|
|
|
200.0 |
|
|
|
6.38 |
|
|
|
(1) |
A total of $100.0 million is subject to fixed rate swap
agreements that became effective on June 16, 2005. |
|
(2) |
Under our fixed rate swap agreements, we pay a fixed rate plus a
spread based on our leverage ratio, as defined in our Credit
Agreement. That spread is currently set at 1.25% and is
incorporated into the applicable interest rates outlined above. |
|
(3) |
Subject to rolling 90-day LIBOR plus a spread currently at 1.25%
and incorporated into the applicable interest rate. |
In May 2001, we completed the private placement of
$300.0 million of
87/8% senior
subordinated notes due 2011, realizing net proceeds of
approximately $291.8 million. We recorded approximately
$8.2 million in deferred offering costs, which are being
amortized to interest expense over the life of the notes using
the effective interest rate method. The net proceeds of the
offering were primarily used to repay amounts owed on our bank
credit facilities and previously outstanding senior subordinated
notes. In November 2001, the
87/8% senior
subordinated notes were exchanged for an equal amount of notes
registered under the Securities Act of 1933, as amended
(the Securities Act).
In February 2005, we completed the private placement of
$200.0 million
63/8% senior
subordinated notes due 2013, realizing net proceeds of
approximately $195.5 million. We recorded approximately
$4.5 million in deferred offering costs, which are being
amortized to interest expense over the life of the related notes
using the effective interest rate method. The net proceeds of
the offering, in addition to borrowings of $110.0 million
under our previous revolving credit facility and available
excess cash, were primarily used to redeem our outstanding HIGH
TIDES.
Our Credit Agreement and the indentures governing our senior
subordinated notes require that we comply with certain financial
covenants limiting our ability to incur additional debt. Such
terms also place restrictions on us 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. Our Credit Agreement 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 our ability to borrow under the Credit
Agreement or to otherwise raise funds in the debt markets.
39
The following table provides a comparison of our statements of
cash flows for the six months ended June 30, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Net cash flows from operating activities
|
|
$ |
44,796 |
|
|
$ |
49,707 |
|
Net cash flows used in investing activities
|
|
|
(22,929 |
) |
|
|
(36,826 |
) |
Net cash flows used in financing activities
|
|
|
(16,123 |
) |
|
|
(35,859 |
) |
Net cash flows from operating activities were approximately
$44.8 million and $49.7 million for the six months
ended June 30, 2005 and 2004, respectively. Cash flows from
operating activities for the six months ended June 30, 2005
declined from the prior year primarily because of changes to the
components of working capital. Specifically, trade accounts
receivable increased due to sales growth and accounts payable
and other current liabilities declined due to the elimination of
the dividend accrual associated with the redemption of our
outstanding HIGH TIDES.
Net cash flows used in investing activities were approximately
$32.2 million and $36.8 million for the six months
ended June 30, 2005 and 2004, respectively. During the six
months ended June 30, 2005, we completed the acquisition of
51% of the common stock of Reach Media for approximately
$55.8 million in a combination of approximately
$30.4 million of cash and 1,809,648 shares of our
Class D common stock, and we sold short-term marketable
securities for approximately $7.0 million. Capital
expenditures were approximately $8.3 million for the six
months ended June 30, 2005. During the six months ended
June 30, 2004, we completed the acquisition of the assets
of WRNB-FM (formerly WSNJ-FM) in the Philadelphia market for
approximately $35.0 million, made a deposit of
approximately $3.6 million for the acquisition of KRTS-FM
in the Houston market, paid $3.5 million pursuant to our
agreement to purchase all of the outstanding stock of New
Mableton broadcasting Corporation (NMBC) for
approximately $35.0 million and sold short term marketable
securities for approximately $8.7 million. Capital
expenditures were approximately $3.9 million for the six
months ended June 30, 2004.
Net cash flows used in financing activities were approximately
$16.1 million for the six months ended June 30, 2005
compared to net cash flows used in financing activities of
approximately $35.9 million for the six months ended
June 30, 2004. During the six months ended June 30,
2005, we made a principal payment of $17.5 million on our
previous term loan, paid approximately $437.5 million of
amounts outstanding under our previous bank credit facilities
with proceeds from the new bank credit facilities, repurchased
shares of Class A and Class D common stock for
approximately $14.8 million, realized net proceeds of
approximately $195.5 million from the private placement of
$200.0 million
63/8% senior
subordinated notes due 2013, borrowed $135.0 million under
our previous revolving credit facility, redeemed our outstanding
HIGH TIDES, received approximately $6.0 million from our
stock subscriptions receivable and paid dividends on our HIGH
TIDES of approximately $7.0 million. During the six months
ended June 30, 2004, we made a principal payment of
approximately $26.3 million on our previous term loan
facility and also paid dividends on our HIGH TIDES of
approximately $10.1 million.
We continuously review opportunities to acquire additional radio
stations, primarily in the top 60 African-American markets, and
to make strategic investments. Other than our agreement with an
affiliate of Comcast Corporation, DIRECTV and other investors to
fund TV One (the balance of our commitment is $37.0 million
as of June 30, 2005), we have no definitive agreements to
make acquisitions of additional radio stations or to make
strategic investments. We anticipate that any future
acquisitions or strategic investments will be financed through
funds generated from operations, cash on hand, equity
financings, permitted debt financings, debt financings through
unrestricted subsidiaries or a combination of these sources.
However, there can be no assurance that financing from any of
these sources, if available, will be available on favorable
terms.
As of June 30, 2005, we had a standby letter of credit in
the amount of $417,000 in connection with our annual insurance
policy renewals. To date, there has been no activity on the
standby letter of credit.
40
Our ability to meet our debt service obligations and reduce our
total debt, our ability to refinance the
87/8% senior
subordinated notes at or prior to their scheduled maturity date
in 2011, and our ability to refinance the
63/8% senior
subordinated notes at or prior to their scheduled maturity date
in 2013 will depend upon our future performance which, in turn,
will be subject to general economic conditions and to financial,
business and other factors, including factors beyond our
control. During the remainder of 2005, our principal liquidity
requirements will be for working capital, continued business
development, strategic investment opportunities and for general
corporate purposes, including capital expenditures.
We believe that, based on current levels of operations and
anticipated internal growth, for the foreseeable future, cash
flow from operations together with other available sources of
funds will be adequate to make required payments of interest on
our indebtedness, to fulfill our commitment to fund TV One, to
fund potential acquisitions, to fund anticipated capital
expenditures and working capital requirements and to enable us
to comply with the terms of our debt agreements. However, in
order to finance future acquisitions or investments, if any, we
may require additional financing and there can be no assurance
that we will be able to obtain such financing on terms
acceptable to us.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accounting policies are described in Note 1 of the
Consolidated Financial Statements. We prepare our Consolidated
Financial Statements in conformity with accounting principles
generally accepted in the United States, which require us to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates. In
Managements Discussion and Analysis contained in our
Annual Report on Form 10-K/ A for the year ended
December 31, 2004, we summarized the policies and estimates
that we believe to be most critical in understanding the
judgments involved in preparing our financial statements and the
uncertainties that could affect our results of operations,
financial condition and cash flows. There have been no material
changes on such policies or estimates since we filed our Annual
Report on Form 10-K/ A for the year ended December 31,
2004.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard
No. 123(R), (SFAS No. 123(R)),
Accounting for Stock-Based Compensation.
SFAS No. 123(R) sets accounting requirements for
share-based compensation to employees, including
employee stock purchase plans. The statement eliminates the
ability to account for share-based compensation transactions
using Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees, and generally requires instead that such
transactions be accounted for using a fair-value-based method.
Disclosure of the effect of expensing the fair value of equity
compensation is currently required under existing literature.
The statement also requires the tax benefit associated with
these share based payments be classified as financing activities
in the Statement of Cash Flows rather than operating activities
as currently permitted. The Securities and Exchange Commission
delayed the required implementation date for this statement from
the third quarter of 2005 to the beginning of the 2006 fiscal
year. We currently use the Black-Scholes Option Pricing Model to
compute the fair value of our stock options in connection with
our disclosure of the pro forma effects on net earnings and
earnings per share as if compensation cost had been recognized
for such options at the date of grant. However, a number of
technical implementation issues have not yet been resolved,
including the selection and use of an appropriate valuation
model, and therefore, we have not yet determined the ultimate
impact of the adoption of SFAS No. 123(R).
41
CAPITAL AND COMMERCIAL COMMITMENTS
In February 2005, we completed the private placement of
$200.0 million
63/8% senior
subordinated notes due 2013 realizing net proceeds of
approximately $195.5 million. The net proceeds were
primarily used to redeem our outstanding HIGH TIDES.
In May 2001, we completed the private placement of
$300.0 million of
87/8% senior
subordinated notes due 2011 realizing net proceeds of
approximately $291.8 million. In November 2001, the
87/8% senior
subordinated notes were exchanged for an equal amount of notes
registered under the Securities Act.
We have non-cancelable operating leases for office space, studio
space, broadcast towers and transmitter facilities and
non-cancelable capital leases for equipment that expire over the
next 20 years.
|
|
|
Contractual Obligations Schedule |
The following table represents our contractual obligations as of
June 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period(1) | |
|
|
| |
|
|
July | |
|
|
|
|
December | |
|
|
|
2010 and | |
|
|
Contractual Obligations |
|
2005 | |
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
Beyond | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
87/8% Senior
subordinated notes
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
300,000 |
|
|
$ |
300,000 |
|
63/8% Senior
subordinated notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
|
|
200,000 |
|
Bank credit facilities
|
|
|
|
|
|
|
|
|
|
|
7,500 |
|
|
|
37,500 |
|
|
|
67,500 |
|
|
|
325,000 |
|
|
|
437,500 |
|
Capital lease obligations
|
|
|
2 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
23 |
|
Other operating contracts/ agreements(2)(3)(4)
|
|
|
18,739 |
|
|
|
33,907 |
|
|
|
25,723 |
|
|
|
20,026 |
|
|
|
18,095 |
|
|
|
61,000 |
|
|
|
177,490 |
|
Operating lease obligations
|
|
|
3,528 |
|
|
|
6,232 |
|
|
|
5,874 |
|
|
|
5,823 |
|
|
|
5,439 |
|
|
|
15,458 |
|
|
|
42,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
22,269 |
|
|
$ |
40,146 |
|
|
$ |
39,104 |
|
|
$ |
63,356 |
|
|
$ |
91,034 |
|
|
$ |
901,458 |
|
|
$ |
1,157,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The above amounts do not include interest, which in some cases
is variable in amount. |
|
(2) |
Includes employment contracts, severance obligations, on-air
talent contracts and other programming agreements. |
|
(3) |
Includes a retention bonus of approximately $2.0 million
pursuant to an employment agreement with the Chief
Administrative Officer (CAO) for remaining employed
with the Company through and including October 31, 2008. If
the CAOs employment ends before October 31, 2008, the
amount paid will be a pro rata portion of the retention bonus
based on the number of days of employment between
October 31, 2004 and October 31, 2008. |
|
(4) |
Includes a retention bonus of approximately $7.0 million
pursuant to an employment agreement with the Chief Financial
Officer (CFO) for remaining employed with the
Company through and including October 18, 2010. If the
CFOs employment ends before October 18, 2010, the
amount paid will be a pro rata portion of the retention bonus
based on the number of days of employment between
October 18, 2005 and October 18, 2010. |
In addition to the obligations above, as of June 30, 2005,
we had swap agreements in place for a total notional amount of
$100.0 million. The periods remaining on the swap
agreements range in duration from two to seven years. If we
terminate our interest swap agreements before they expire, we
will be required to pay early termination fees. Our credit
exposure under these agreements is limited to the cost of
replacing an agreement in the event of non-performance by our
counter-party, however, we do not anticipate non-performance.
42
We anticipate that we will fund our obligations and commitments
through one or more of the following: (1) cash on hand;
(2) cash flow from operations; (3) additional
permitted borrowings; or (4) other debt or equity
financings.
CAUTIONARY NOTE REGARDING 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 our current expectations concerning future results and
events. You can identify some of these forward-looking
statements by our use of words such as anticipates,
expects, intends, plans,
believes, seeks, likely,
may, estimates and similar expressions.
We cannot guarantee that we 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 statements. 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 our acquisition strategy; |
|
|
|
the highly competitive nature of the broadcast industry; |
|
|
|
our high degree of leverage; and |
|
|
|
other factors described in our reports on Form 10-K/ A and
Form 10-Q. |
You should not place undue reliance on these forward-looking
statements, which reflect our view as of the date of this
report. We undertake no obligation to publicly update or revise
any forward-looking statements because of new information,
future events or otherwise.
|
|
Item 3. |
Quantitative and Qualitative Disclosures About Market
Risk |
For quantitative and qualitative disclosures about market risk
affecting Radio One, see Item 7A: Quantitative and
Qualitative Disclosures about Market Risk in our Annual
Report on Form 10-K/ A, for the fiscal year ended
December 31, 2004. Our exposure related to market risk has
not changed materially since December 31, 2004.
|
|
Item 4. |
Controls and Procedures |
Evaluation of disclosure
controls and procedures
We have carried out an evaluation, under the supervision and
with the participation of our Chief Executive Officer
(CEO) and Chief Financial Officer (CFO),
of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period
covered by this report. Based on this evaluation, our CEO and
CFO concluded that as of such date, our disclosure controls and
procedures are effective in timely alerting them to material
information required to be included in our periodic SEC reports.
Disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are
controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms.
In designing and evaluating the disclosure controls and
procedures, our management recognized that any controls and
procedures, no matter how well designed and operated, can only
provide reasonable assurance of achieving the desired control
objectives and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Our disclosure controls and procedures
are designed to provide a reasonable level of assurance of
reaching our desired disclosure controls objectives. Our
management, including our CEO and CFO, has concluded that our
disclosure controls and procedures are effective in reaching
that level of reasonable assurance.
43
Changes in internal control
over financial reporting
During the second quarter of 2005, there were no changes in our
internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
44
PART II. OTHER INFORMATION
|
|
Item 1. |
Legal Proceedings |
In November 2001, Radio One 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, now captioned, In re Radio One,
Inc. Initial Public Offering Securities Litigation, Case
No. 01-CV-10160. Similar complaints were filed in the same
court against hundreds of other public companies (Issuers) that
conducted initial public offerings of their common stock in the
late 1990s (the IPO Lawsuits). In the complaint filed against
Radio One (as amended), the plaintiffs claim that Radio One,
certain of its officers and directors, and the underwriters of
certain of its public offerings violated Section 11 of the
Securities Act of 1933 as amended (the Securities
Act) based on allegations that its registration statement
and prospectus failed to disclose material facts regarding the
compensation to be received by, and the stock allocation
practices of, the underwriters. The complaint also contains a
claim for violation of Section 10(b) of the Securities
Exchange Act of 1934 based on allegations that this omission
constituted a deceit on investors. The plaintiffs seek
unspecified monetary damages and other relief.
In July 2002, Radio One joined in a global motion, filed by the
Issuers, to dismiss the IPO Lawsuits. In October 2002, the court
entered an order dismissing the Companys named officers
and directors from the IPO Lawsuits without prejudice, pursuant
to an agreement tolling the statute of limitations with respect
to Radio Ones officers and directors until
September 30, 2003. In February 2003, the court issued a
decision denying the motion to dismiss the Section 11 and
Section 10(b) claims against Radio One and most of the
Issuers.
In July 2003, a Special Litigation Committee of Radio Ones
Board of Directors approved in principle a settlement proposal
with the plaintiffs that is anticipated to include most of the
Issuers. The proposed settlement would provide for the dismissal
with prejudice of all claims against the participating Issuers
and their officers and the assignment to plaintiffs of certain
potential claims that the Issuers may have against their
underwriters. The tentative settlement also provides that, in
the event that plaintiffs ultimately recover less than a
guaranteed sum from the underwriters, plaintiffs would be
entitled to payment by each participating Issuers insurer
of a pro rata share of any shortfall in the plaintiffs
guaranteed recovery. In September 2003, in connection with the
proposed settlement, Radio Ones named officers and
directors extended the tolling agreement so that it would not
expire prior to any settlement being finalized. In June 2004,
Radio One executed a final settlement agreement with the
plaintiffs. On February 15, 2005, the Court issued a
decision certifying a class action for settlement purposes and
granting preliminary approval of the settlement subject to
modification of certain bar orders contemplated by the
settlement. In addition, the settlement is still subject to
statutory notice requirements as well as final judicial approval.
Radio One is involved from time to time in various routine legal
and administrative proceedings and threatened legal and
administrative proceedings incidental to the ordinary course of
our business. Radio One believes the resolution of such matters
will not have a material adverse effect on its business,
financial condition or results of operations.
|
|
Item 2. |
Unregistered Sales of Equity Securities and Use of
Proceeds |
During the three months and six months ending June 30,
2005, we made repurchases of our Class A and Class D
common stock pursuant to the $150.0 million stock
repurchase program adopted by our Board of Directors on
May 25, 2005.
45
The following table provides information on our repurchases
during the three months and six months ended June 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) | |
|
|
|
|
|
|
(c) | |
|
Maximum | |
|
|
|
|
|
|
Total Number of | |
|
Approximate Dollar | |
|
|
(a) | |
|
|
|
Shares Purchased | |
|
Value of Shares | |
|
|
Total Number of | |
|
(b) | |
|
as Part of Publicly | |
|
That May yet be | |
|
|
Shares | |
|
Average Price | |
|
Announced Plans | |
|
Purchased Under the | |
Period |
|
Purchased(1) | |
|
Paid per Share | |
|
or Programs | |
|
Plans or Programs | |
|
|
| |
|
| |
|
| |
|
| |
6/15/2005 6/30/2005
|
|
|
137,100 Class A |
|
|
$ |
13.17 |
|
|
|
137,100 |
|
|
|
|
|
6/15/2005 6/30/2005
|
|
|
988,800 Class D |
|
|
$ |
13.15 |
|
|
|
988,800 |
|
|
|
|
|
|
Total
|
|
|
1,125,900 |
|
|
|
|
|
|
|
1,125,900 |
|
|
$ |
135,197,246 |
|
|
|
(1) |
On May 25, 2005, the Companys Board of Directors
authorized a stock repurchase program for up to
$150.0 million of the Companys Class A and
Class D common stock over a period of 18 months, with
the amount and timing of repurchases based on stock price,
general economic and market conditions, certain restrictions
contained in the Credit Agreement governing the Companys
bank credit facilities and subordinated debt and certain other
factors. The repurchase program does not obligate the Company to
repurchase any of its common stock and may be discontinued or
suspended at any time. |
|
|
Item 3. |
Defaults Upon Senior Securities |
None.
|
|
Item 4. |
Submission of Matters to a Vote of Security Holders |
On May 25, 2005, the Company held its Annual Meeting of its
holders of common stock pursuant to a Notice of Annual Meeting
of Stockholders and Proxy Statement dated April 25, 2005, a
copy of which has been previously filed with the Securities and
Exchange Commission. Stockholders were asked to vote upon the
following proposals:
|
|
|
1) The election of Terry L. Jones and Brian W. McNeill as
Class A directors to serve until the 2006 annual meeting of
stockholders or until their successors are duly elected and
qualified. |
|
|
2) The election of Catherine L. Hughes, Alfred C.
Liggins, III, D. Geoffrey Armstrong, L. Ross Love and
Ronald E. Blaylock as directors to serve until the 2006 annual
meeting of stockholders or until their successors are duly
elected and qualified. |
|
|
3) The ratification of the appointment of Ernst &
Young, LLP as independent auditors for the Company for the year
ending December 31, 2005. |
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Votes | |
|
|
|
|
| |
|
|
|
|
Class A | |
|
Class B | |
|
|
|
|
| |
|
| |
Proposal 1
|
|
|
|
|
|
|
|
|
|
|
|
Jones
|
|
For |
|
|
16,157,877 |
|
|
|
|
|
|
|
Withhold Authority |
|
|
2,318,709 |
|
|
|
|
|
|
McNeill
|
|
For |
|
|
15,694,708 |
|
|
|
|
|
|
|
Withhold Authority |
|
|
2,781,878 |
|
|
|
|
|
Proposal 2
|
|
|
|
|
|
|
|
|
|
|
|
Hughes
|
|
For |
|
|
11,456,905 |
|
|
|
28,674,630 |
|
|
|
Withhold Authority |
|
|
7,019,681 |
|
|
|
|
|
|
Liggins
|
|
For |
|
|
11,453,939 |
|
|
|
28,674,630 |
|
|
|
Withhold Authority |
|
|
7,022,647 |
|
|
|
|
|
|
Armstrong
|
|
For |
|
|
16,157,875 |
|
|
|
28,674,630 |
|
|
|
Withhold Authority |
|
|
2,318,711 |
|
|
|
|
|
|
Love
|
|
For |
|
|
14,001,087 |
|
|
|
28,674,630 |
|
|
|
Withhold Authority |
|
|
4,475,499 |
|
|
|
|
|
|
Blaylock
|
|
For |
|
|
18,460,467 |
|
|
|
28,674,630 |
|
|
|
Withhold Authority |
|
|
16,119 |
|
|
|
|
|
Proposal 3
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
|
18,445,849 |
|
|
|
28,674,630 |
|
|
|
Against |
|
|
28,697 |
|
|
|
|
|
|
|
Abstain |
|
|
2,040 |
|
|
|
|
|
|
|
Item 5. |
Other Information |
None.
|
|
|
|
|
|
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
Ones Quarterly Report on Form 10-Q for the period
ended March 31, 2000 (File No. 000-25969)). |
|
|
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 Ones Current Report on Form 8-K
filed October 6, 2000 (File No. 000-25969)). |
|
|
3 |
.2 |
|
Amended and Restated By-laws of Radio One, Inc., amended as of
June 5, 2001 (incorporated by reference to Radio Ones
Quarterly Report on Form 10-Q filed August 14, 2001
(File No. 000-25969)). |
|
|
4 |
.1 |
|
Amended and Restated Stockholders Agreement dated as of
September 28, 2004 among Catherine L. Hughes and Alfred C.
Liggins, III. |
|
|
10 |
.1 |
|
Credit Agreement, dated June 13, 2005, by and among Radio
One Inc., Wachovia Bank and the other lenders party thereto
(incorporated by reference to Radio Ones Current Report on
Form 8-K filed June 17, 2005 (File
No. 000-25969)). |
|
|
10 |
.2 |
|
Guarantee and Collateral Agreement, dated June 13, 2005,
made by Radio One, Inc. and its Restricted Subsidiaries in favor
of Wachovia Bank (incorporated by reference to Radio Ones
Current Report on Form 8-K filed June 17, 2005 (File
No. 000-25969)). |
|
|
31 |
.1 |
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31 |
.2 |
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32 |
.1 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
§ 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
32 |
.2 |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
§ 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2 |
47
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
|
|
|
|
|
|
Scott R. Royster |
|
Executive Vice President and Chief Financial Officer |
|
(Principal Financial Officer) |
August 8, 2005
48
exv4w1
Exhibit 4.1
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
Dated as of September 28, 2004
Between
CATHERINE L. HUGHES,
And
ALFRED C. LIGGINS, III
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this AGREEMENT) is dated as of September
28, 2004 between (i) CATHERINE L. HUGHES, an individual whose business address is 5900 Princess
Garden Parkway, 8th Floor, Lanham, Maryland 20706 (HUGHES or a PRINCIPAL STOCKHOLDER), and
(ii) ALFRED C. LIGGINS, III, an individual whose business address is 5900 Princess Garden
Parkway, 8th Floor, Lanham, Maryland 20706 (LIGGINS or a PRINCIPAL STOCKHOLDER), each
being one of the PRINCIPAL STOCKHOLDERS of RADIO ONE, INC., a Delaware corporation (the COMPANY).
Further, each other person or entity who hereafter executes a counterpart of this Agreement (or
otherwise agrees to be bound by the provisions hereof) shall become an additional party to this
Agreement (the Principal Stockholders and each such other person or entity are sometimes referred
to herein individually as a STOCKHOLDER and collectively as the STOCKHOLDERS of the COMPANY).
WHEREAS, the Principal Stockholders were parties to a March 2, 1999 Stockholders Agreement
(the Original Agreement); and
WHEREAS, the Parties now desire to amend and restate the Original Agreement in its entirety.
NOW, THEREFORE, in consideration of the mutual promises, covenants, undertakings and
agreements set forth herein, the receipt and sufficiency of which are hereby acknowledged, the
parties mutually agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, the following terms have the
indicated meanings:
APPROVED SALE is defined in Section 6.
AUTHORIZATION DATE is defined in Section 4(c).
BENEFICIAL OWNERSHIP means possession of the power and authority, either singly or jointly
with another, to vote or dispose of or to direct the voting or disposition of shares of Common
Stock.
BENEFICIAL OWNER in respect of shares of Common Stock shall mean the person or persons who
possess Beneficial Ownership of such Common Stock.
BOARD means the Companys Board of Directors.
CHANGE OF CONTROL means any transaction that causes the Principal Stockholders, in the
aggregate, to own less than (i) 35.0% of the voting power of the
2
Company; or (ii) 50.0% of the voting power of the Company if any stockholder or group of
stockholders other than the Principal Stockholders controls, directly or indirectly, more than
25.0% of the voting power of the Company. A principal purpose of this Agreement is to prevent any
Change of Control without the knowledge and consent of both Principal Stockholders (or such one as
is then living and not incapacitated).
CLASS A COMMON STOCK means the Companys Class A common stock, par value $.01 per share.
CLASS B COMMON STOCK means the Companys Class B common stock, par value $.01 per share.
CLASS C COMMON STOCK means the Companys Class C common stock, par value $.01 per share.
CLASS B DIRECTORS means those members of the Board as to the election or removal of which
holders of the Class B Common Stock may exercise voting rights.
COMMON STOCK means the Class A Common Stock, the Class B Common Stock and the Class C Common
Stock.
COMPANY means Radio One, Inc., a Delaware corporation.
COMPANY SALE means a transaction with one or more independent third parties pursuant to
which such party or parties (i) acquire (whether by merger, consolidation or transfer or issuance
of capital stock) capital stock of the Company (or any surviving or resulting corporation)
possessing the voting power to elect a majority of the board of directors of the Company (or such
surviving or resulting corporation) or (ii) acquire all or substantially all of the Companys
assets determined on a consolidated basis.
DEADLOCK is defined in Section 8(a).
FAIR MARKET VALUE as of any date means (a) with respect to any Transfer of Common Stock
occurring by reason of the death of a Stockholder, the federal estate tax value of such Common
Stock as finally determined with respect to such Stockholders estate (or if there is no such
federal estate tax determination, the Fair Market Value of such Common Stock shall be determined by
applying federal estate tax valuation principles); and (b) with respect to any other Transfer of
Common Stock, the value of such Common Stock as of such date, as agreed in writing among the
Principal Stockholders and the Stockholder initiating the Transfer (the Interested Stockholders),
or if the Interested Stockholders fail to agree on the Fair Market Value within thirty (30) days of
the Transfer Notice (as required in Section 4), then the Fair Market Value of such Common Stock
shall be determined in good faith by an independent, nationally
3
recognized appraisal firm or investment banking firm, as selected by the Board, applying the
valuation principles of the federal gift tax (the cost of obtaining any such independent appraisal
of Fair Market Value shall be borne equally among the Interested Stockholders).
FINAL AUCTION PRICE is defined in Section 8(c).
FINAL PURCHASE PRICE is defined in Section 8(d).
HUGHES is defined in the preface.
INCAPACITATED means, with respect to an individual, that (1) such individual is under a
legal disability (under the laws of such individuals domicile), (2) such individual has been
certified in writing to be unable to manage his or her financial affairs by the principal physician
attending to such individuals care, and the Stockholders and the Company may rely upon written
notice of that determination without any duty to inquire into the authenticity of the
certification or any of the facts upon which it is based, or (3) such individuals whereabouts are
unknown and such individual has not been able to be located by an officer of the Company or a
member of the Board for at least ninety (90) days.
INITIAL AUCTION DATE is defined in Section 8(b).
INITIAL OFFER is defined in Section 8(c).
LAW means all applicable statutes laws ordinances, regulations, rules, guidelines, orders,
writs, injunctions, or decrees of any state, commonwealth, nation, territory, province,
possession, township, county, parish, municipality or Tribunal.
LIGGINS is defined in the preface.
OPTION PLAN means that certain Management Stock Option Plan adopted by the Board as of
March 2, 1999, as the same may be amended or supplemented from time to time.
OPTIONS means options to purchase shares of Common Stock granted by the Company pursuant to
the Option Plan.
OTHER STOCKHOLDERS is defined in Section 6.
PERMITTED TRANSFER is defined in Section 4(b).
PERMITTED TRANSFEREE shall be, if the Stockholder is an individual:
4
(A) the estate (or a revocable trust that is a substitute of an estate) of the Stockholder or
any legatee, heir or distributees thereof;
(B) the spouse or former spouse of the Stockholder;
(C) any parent or grandparent and any lineal descendant (including any adopted child) of any
parent or grandparent of the Stockholder or of the Stockholders spouse or former spouse;
(D) any guardian or custodian (including a custodian for purposes of the Uniform Gifts to
Minors Act or Uniform Transfers to Minors Act) for, or any executor, administrator, conservator
and/or other legal representative of, the Stockholder and/or any Permitted Transferee or Permitted
Transferees thereof;
(E) a trust (including a voting trust), and any savings or retirement account, such as an
individual retirement account for purposes of federal income tax laws, whether or not involving a
trust, principally for the benefit of such Stockholder and/or any Permitted Transferee or Permitted
Transferees thereof, including any trust in respect of which such Stockholder and/or any Permitted
Transferee or Permitted Transferees thereof has any general or special power of appointment or
general or special non-testamentary power or special testamentary power of appointment limited to
any Permitted Transferee or Permitted Transferees;
(F) any corporation, partnership or other business entity if Substantial Beneficial Ownership
thereof is held by such Stockholder and/or any Permitted Transferee or Permitted Transferees
thereof;
(G) any Principal Stockholder and/or any Permitted Transferee or Permitted Transferees of a
Principal Stockholder; and
(H) the Company.
A Permitted Transferee shall be, if the Stockholder is a corporation, partnership or other
business entity:
(A) any employee benefit plan, or trust thereunder or therefor, sponsored by the Stockholder;
(B) any trust (including any voting or liquidating trust) principally for the benefit of the
Stockholder and/or any Permitted Transferee or Permitted Transferees thereof;
5
(C) any corporation, partnership or other business entity if Substantial Beneficial Ownership
thereof is held by such Stockholder and/or any Permitted Transferee or Permitted Transferees
thereof;
(D) the stockholders of the corporation, partners of the partnership or other owners of equity
interests in any other business entity, who receive such shares, by way of dividend or distribution
(upon dissolution, liquidation or otherwise), provided that such transfer will not result in
Beneficial Ownership of any of such shares by any person who did not have the power to control such
corporation, partnership or business entity at the time such corporation, partnership or business
entity first acquired Beneficial Ownership of such shares of Class B Common Stock (other than by
any person who qualifies as a Permitted Transferee pursuant to any other provision of this
paragraph);
(E) the Company; and
(F) any Principal Stockholder and/or any Permitted Transferee or Permitted Transferees of a
Principal Stockholder.
PERSON means any individual, corporation, partnership, firm, joint venture, association,
limited liability company, joint-stock company, trust, unincorporated organization, governmental
or regulatory body or other legal entity.
PRINCIPAL STOCKHOLDER is defined in the preface.
SALE NOTICE is defined in Section 7.
SECURITIES ACT means the Securities Act of 1933, as amended.
SELLING PRINCIPAL STOCKHOLDER is defined in Section 7.
STOCKHOLDER is defined in the preface.
STOCKHOLDER SHARES means (i) all shares of Common Stock acquired by the Stockholders,
including all shares of Common Stock acquired pursuant to the exercise of Options, and (ii) all
shares of Common Stock or other securities issued or issuable directly or indirectly with respect
to the securities referred to in clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation or other
reorganization. Stockholder Shares shall cease to be such when they have been sold (x) pursuant to
a registered public offering under the Securities Act or (y) to the public pursuant to Rule 144
under the Securities Act, or any successor provision.
SUBSTANTIAL BENEFICIAL OWNERSHIP in respect of any corporation, partnership or other
business entity shall mean possession of the power and authority,
6
either singly or jointly with another, to vote or dispose of or to direct the voting or disposition
of at least 80% of each class of equity ownership interest in such corporation, partnership or
other business entity.
TRANSFER means, with respect to any Stockholder Shares, the gift, sale, assignment,
transfer, pledge, hypothecation or other disposition (whether for or without consideration and
whether voluntary, involuntary or by operation of law) of such Stockholder Shares or any interest
therein; provided, however, that Transfer does not include: (i) any pledge, assignment,
hypothecation, encumbrance or similar disposition of Stockholder Shares for security as collateral
security for obligations of the Company, either Stockholder, or affiliates of the Company under or
in connection with that certain Amended and Restated Credit Agreement among the Company, the
lenders from time to time party thereto (the Lenders), NationsBank, N.A., as Administrative Agent
for the Lenders, First Union National Bank, as Syndication Agent for the Lenders, and Credit
Suisse First Boston, as Documentation Agent for the Lenders, as such Credit Agreement may be
amended, modified, restated, supplemented, renewed, extended, increased, rearranged, and/or
substituted from time to time, or (ii) any sale or foreclosure of and such pledge, assignment,
hypothecation, encumbrance or similar disposition for security.
TRANSFER NOTICE is defined in Section 4(c).
TRIBUNAL means any court or governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or any state, commonwealth, nation, territory,
province, possession, township, county, parish or municipality, whether now or hereafter
constituted or existing.
VESTED OPTIONS means Options that are exercisable by the holder thereof on the date of
determination.
SECTION 2. VOTING ARRANGEMENTS.
(a) ELECTION OF DIRECTORS. Each Stockholder agrees that such Person will vote, or cause to
be voted, all voting securities of the Company over which such Person has the power to vote or
direct the voting, and will take all other necessary or desirable action within such Persons
control, to cause the authorized number of directors for the Board to be at least five persons and
no more than seven persons, and to elect or cause to be elected to the Board and cause to be
continued in such office, Hughes, Liggins and the individual or individuals designated by mutual
agreement of the Principal Stockholders to fill the remainder of Board seats to be filled by Class
B Directors, including the seat that would otherwise be filled by a Principal Stockholder if such
Principal Stockholder is unwilling or unable to serve on the Board, or has been removed from the
Board as the result of such Principal Stockholders being Incapacitated; provided, however, that if
either Principal Stockholder is Incapacitated, the
7
other Principal Stockholder shall have the sole power to exercise the designation rights granted to
the Principal Stockholders pursuant to this paragraph.
(b) REMOVAL OF DIRECTORS. If at any time the Principal Stockholders shall notify the other
Stockholders of their mutual desire to remove, with or without cause, any Class B Director from
the Board, all such Persons so notified will vote, or cause to be voted, all voting securities of
the Company over which they have the power to vote or direct the voting, and shall take all such
other actions promptly as shall be necessary or desirable to cause the removal of such Class B
Director; provided, however, that if either Principal Stockholder is Incapacitated, the other
Principal Stockholder shall have the sole power to exercise the removal rights granted to the
Principal Stockholders pursuant to this paragraph, including, without limitation, requiring the
removal of the Incapacitated Principal Stockholder.
(c) VACANCIES. If at any time any Class B Director ceases to serve on the Board (whether due
to resignation, removal or otherwise), then the Principal Stockholders shall be entitled to
designate a successor director to fill the vacancy created thereby on the terms and subject to the
conditions of Section 2(a) above. Each Stockholder agrees that he, she or it will vote, or cause
to be voted, all voting securities of the Company over which such Person has the power to vote or
direct the voting, and shall take all such other actions as shall be necessary or desirable to
cause the successor designated by the Principal Stockholders to be elected to fill such vacancy.
(d) RIGHTS UNIMPAIRED. Nothing in this Agreement shall be construed to impair any rights
that the stockholders of the Company may have to remove any director. No removal for cause of an
individual designated pursuant to this Section 2 shall affect the right of the Principal
Stockholders to designate a different individual pursuant to Section 2 to fill the directorship
from which such individual was removed.
(e) APPOINTMENT OF PROXY. IN ORDER TO SECURE THE OBLIGATIONS OF EACH AND EVERY STOCKHOLDER TO
VOTE ALL COMMON STOCK HELD BY SUCH STOCKHOLDER IN ACCORDANCE WITH ALL OF THE PROVISIONS OF THIS
AGREEMENT, EACH STOCKHOLDER HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS EACH OF CATHERINE L. HUGHES
AND ALFRED C. LIGGINS, III (ACTING TOGETHER, OR IF ONE OF THEM IS DECEASED, INCAPACITATED OR
UNAVAILABLE, THE OTHER OF THEM ACTING ALONE) AS SUCH STOCKHOLDERS TRUE AND LAWFUL ATTORNEY, AGENT
AND PROXY, WITH FULL POWER OF SUBSTITUTION, TO ATTEND MEETINGS OF STOCKHOLDERS OF THE COMPANY HELD
FROM TIME TO TIME, AND TO VOTE ON SUCH STOCKHOLDERS BEHALF AND IN SUCH STOCKHOLDERS NAME, PLACE,
AND STEAD, OR TO EXECUTE WRITTEN CONSENTS IN LIEU OF SUCH MEETINGS, THE NUMBER OF VOTES THAT SUCH
STOCKHOLDER WOULD BE ENTITLED TO CAST IF ACTUALLY PRESENT OR WITH RESPECT TO WHICH
8
SUCH STOCKHOLDER WOULD BE ENTITLED TO EXECUTE A WRITTEN CONSENT, IN CONNECTION WITH ANY ELECTION
OF DIRECTORS (IN ACCORDANCE WITH THIS SECTION 2) OR ANY COMPANY SALE (IN ACCORDANCE WITH SECTION
6). THE POWERS GRANTED HEREIN SHALL BE DEEMED TO BE COUPLED WITH AN INTEREST, SHALL BE
IRREVOCABLE AND SHALL SURVIVE THE DEATH, INCOMPETENCY, DISABILITY OR DISSOLUTION OF ANY
STOCKHOLDER.
(f) OTHER VOTING RIGHTS. In the event that a Principal Stockholder is Incapacitated, the
other Principal Stockholder shall have the right, in addition to the other rights granted pursuant
to this Section 2, to vote, or cause to be voted, all voting securities of the Company over which
such Incapacitated Principal Stockholder would otherwise have the power to vote or direct the
voting, as to all matters presented for a vote of the Companys stockholders.
(g) REGULATORY SAVINGS PROVISION. If at any time the possession by a Principal Stockholder
of the voting power represented by the voting securities held by such Principal Stockholder, or
over which such Principal Stockholder has the power to vote or direct the voting, differs from the
voting power required or permitted to be held by such Principal Stockholder, or requires a consent
or waiver that at such time has not been obtained, under any Law applicable to such Principal
Stockholder or the Company, then (i) if such voting power exceeds the amount permitted to be held
by such Principal Stockholder, or with respect to which such a consent or waiver has been
obtained, the other Principal Stockholder shall have the sole power to vote, or cause to be voted,
the number of voting securities of the Company representing such excess voting power and over
which the first Principal Stockholder would otherwise have the power to vote or direct the
voting, as to all matters presented for a vote of the Companys stockholders, and (ii) if
such voting power is less than the amount required to be held by such Principal Stockholder, such
Principal Stockholder shall have the sole power to vote, or cause to be voted, as to all
matters presented for a vote of the Companys stockholders, that number, and only that
number of voting securities of the Company representing sufficient voting power to eliminate
such shortfall and over which the other Principal Stockholder would otherwise have the power to
vote or direct the voting. In all cases, the provisions of this Section 2(g) shall be applied
only to the extent and for the period necessary to bring the Principal Stockholders and
the Company into compliance with applicable Law, and shall not operate to cause either Principal
Stockholder not to be in compliance with applicable Law. In the exercise of voting rights
provided by this Section 2(g), each Principal Stockholder shall remain subject to the other
provisions of this Agreement.
9
SECTION
3. DISPOSITION OF IN CAPACITATED PRINCIPAL STOCKHOLDERS SHARES.
In the event that a Principal Stockholder is Incapacitated, the other Principal
Stockholder shall have the right to direct the disposition of all Stockholder Shares held by
the Incapacitated Principal Stockholder, including, without limitation, the right to purchase
such Stockholder Shares; provided, however, that any Transfer of any such Stockholder Shares shall
be for a consideration equal to the Fair Market Value of such Stockholder Shares. During any
period while any Principal Stockholder is deemed to be Incapacitated, until such time as the
Stockholder Shares held by such Incapacitated Principal Stockholder are disposed of pursuant to
this Section 3, the other Principal Stockholders shall have the right to vote the Incapacitated
Principal Stockholders Stockholder Shares, as provided in Section 2(f).
SECTION 4. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIONS ON TRANSFER. No Stockholder may Transfer any Stockholder Shares, except in a
Permitted Transfer (as defined in Section 4(b)), subject to the remaining provisions of this
Section 4; provided, a Transfer may be made to any Person if both Principal Stockholders (or such
one Principal Stockholder as is not then Incapacitated, if one is Incapacitated) consent in writing
to such Transfer, subject to the provisions of Section 4(g).
(b) CERTAIN PERMITTED TRANSFERS. Permitted Transfers shall include Transfers of Stockholder
Shares (i) pursuant to Sections 3, 6, 7 or 8; or (ii) to a Permitted Transferee of a Principal
Stockholder; provided that, as a condition of any such Permitted Transfer, each such Permitted
Transferee not already a party to this Agreement executes a Joinder Agreement substantially in the
form attached hereto as Exhibit A and thereby becomes a party to this Agreement, and, provided
further that all remaining, applicable requirements of this Section 4 are satisfied.
(c) GENERAL RIGHT OF FIRST REFUSAL. No Permitted Transfer shall occur with respect to any
Class of Common Stock (other than Class B Common Stock) unless, at least ninety (90) days prior to
making any such Permitted Transfer, the transferring Stockholder delivers a written notice (the
TRANSFER NOTICE) to each Principal Stockholder that discloses in reasonable detail the identity
of the prospective transferee(s) and the terms and conditions of the proposed Permitted Transfer;
provided, in the event of a Stockholders death, no Permitted Transfer (including, without
limitation, any Transfer of any Class of Common Stock (other than Class B Common Stock) to an
executor, trustee or other fiduciary or successor in interest to the deceased Stockholder) shall
occur with respect to such Common Stock held (directly or indirectly) by such Stockholder
immediately prior to his death until (i) a legal representative of such deceased Stockholders
estate (or another duly authorized fiduciary or successor in interest to such deceased Stockholder)
delivers to the surviving Principal Stockholders
10
documentation identifying his authority to act as a fiduciary or other successor in interest with
respect to the deceased Stockholders Common Stock (and delivery of such documentation shall
constitute a Transfer Notice under this Section 4(c)); and (ii) at least ninety (90) days have
elapsed after delivery to the surviving Principal Stockholders of such Transfer Notice. No
Stockholder shall consummate any such Permitted Transfer until thirty (30) days (ninety (90) days
in the case of a Permitted Transfer upon the death of a Stockholder) after the Transfer Notice has
been delivered to each Principal Stockholder then living (the expiration of such 30 or 90-day
period being the GENERAL AUTHORIZATION DATE). Any time prior to the General Authorization Date,
each Principal Stockholder then living may elect to purchase all or a portion of such Principal
Stockholders pro rata share of Common Stock (other than Class B Common Stock) proposed to be
transferred (the GENERAL RIGHT OF FIRST REFUSAL) at a price equal to the greater of (i) the price
set forth in the Transfer Notice; or (ii) Fair Market Value of such Common Stock proposed to be
transferred; provided, in the case of a proposed Transfer by or on behalf of a Principal
Stockholder (or a Transfer that would occur as a result of a Principal Stockholders death; such
Principal Stockholder who has proposed such Transfer or died, being referred to as the Transferor
Principal Stockholder), the other Principal Stockholders General Right of First Refusal shall
extend to the entire Transfer (or any part thereof, as may be elected by such other Principal
Stockholder) proposed to be made by or on behalf of the Transferor Principal Stockholder (or as a
result of his death). Any Principal Stockholder desiring to exercise the General Right of First
Refusal shall deliver written notice of such election to the transferring Stockholder (or to the
fiduciary or other successor in interest that provided the Transfer Notice with respect to a
deceased Stockholder) within thirty (30) days after the receipt of the Transfer Notice (ninety (90)
days in the case of a Transfer upon the death of a Stockholder) by the Principal Stockholders. If
one or more of the Principal Stockholders have elected not to exercise the General Right of First
Refusal, the transferring Stockholder shall offer each Principal Stockholder electing to exercise
the General Right of First Refusal the option to purchase such Principal Stockholders pro rata
share of the Common Stock (other than Class B Common Stock) proposed to be transferred and for
which a General Right of First Refusal has not been exercised. In the event less than all of such
shares of Common Stock proposed to be transferred are acquired by the Principal Stockholders
pursuant to the General Right of First Refusal, the transferring Stockholder may Transfer such
remaining shares of Common Stock to the prospective transferee(s) as specified in the Transfer
Notice, at a price and on terms no more favorable to the transferee(s) thereof than specified in
the Transfer Notice, during the 90-day period immediately following the General Authorization Date.
Any shares of Common Stock (other than Class B Common Stock) not so transferred within such 90-day
period must be reoffered to the Principal Stockholders in accordance with the provisions of this
Section 4(c).
(d) RIGHT OF FIRST REFUSAL CLASS B STOCK. No Permitted Transfer shall occur with respect to
Class B Common Stock unless, at least ninety (90) days prior to making any such Permitted Transfer,
the transferring Stockholder delivers a written
11
notice (the CLASS B TRANSFER NOTICE) to each Principal Stockholder that discloses in reasonable
detail the identity of the prospective transferee(s) and the terms and conditions of the proposed
Permitted Transfer; provided, in the event of a Stockholders death, no Permitted Transfer
(including, without limitation, any Transfer of Class B Common Stock to an executor, trustee or
other fiduciary or successor in interest to the deceased Stockholder) shall occur with respect to
the Class B Common Stock held (directly or indirectly) by such Stockholder immediately prior to his
death until (i) a legal representative of such deceased Stockholders estate (or another duly
authorized fiduciary or successor in interest to such deceased Stockholder) delivers to the
surviving Principal Stockholders documentation identifying his authority to act as a fiduciary or
other successor in interest with respect to the deceased Stockholders Class B Common Stock (and
delivery of such documentation shall constitute a Class B Transfer Notice under this Section
4(d)); and (ii) at least ninety (90) days have elapsed after delivery to the surviving Principal
Stockholders of such Class B Transfer Notice. No Stockholder shall consummate any such Permitted
Transfer until thirty (30) days (ninety (90) days in the case of a Permitted Transfer upon the
death of a Stockholder) after the Transfer Notice has been delivered to each Principal Stockholder
then living (the expiration of such 30 or 90-day period being the CLASS B AUTHORIZATION DATE).
Any time prior to the Class B Authorization Date, each Principal Stockholder then living may elect
to purchase all or a portion of such Principal Stockholders pro rata share of Class B Common Stock
proposed to be transferred (the CLASS B RIGHT OF FIRST REFUSAL) at a price equal to the greater
of (i) the price set forth in the Class B Transfer Notice; or (ii) Fair Market Value of the Class B
Common Stock proposed to be transferred; provided, in the case of a proposed Transfer by or on
behalf of a Principal Stockholder (or a Transfer that would occur as a result of a Principal
Stockholders death; such Principal Stockholder who has proposed such Transfer or died, being
referred to as the Transferor Principal Stockholder), the other Principal Stockholders Class B
Right of First Refusal shall extend to the entire Transfer (or any part thereof, as may be elected
by such other Principal Stockholder) proposed to be made by or on behalf of the Transferor
Principal Stockholder (or as a result of his death). Any Principal Stockholder desiring to
exercise the Class B Right of First Refusal shall deliver written notice of such election to the
transferring Stockholder (or to the fiduciary or other successor in interest that provided the
Class B Transfer Notice with respect to a deceased Stockholder) within thirty (30) days after the
receipt of the Class B Transfer Notice (ninety (90) days in the case of a Transfer upon the death
of a Stockholder) by the Principal Stockholders. If one or more of the Principal Stockholders have
elected not to exercise the Class B Right of First Refusal, the transferring Stockholder shall
offer each Principal Stockholder electing to exercise the Class B Right of First Refusal the option
to purchase such Principal Stockholders pro rata share of the Class B Common stock proposed to be
transferred and for which a Class B Right of First Refusal has not been exercised. In the event
less than all of the shares of Class B Common Stock proposed to be transferred are acquired by the
Principal Stockholders pursuant to the Class B Right of First Refusal, the transferring Stockholder
may Transfer the remaining shares of Class B Common Stock to the prospective transferee(s) as
specified in the Class B Transfer Notice, during the 90-day
12
period immediately following the Class B Authorization Date, at a price and on terms no more
favorable to the transferee(s) thereof than specified in the Class B Transfer Notice. Any shares
of Class B Common Stock not so transferred within such 90-day period must be reoffered to the
Principal Stockholders in accordance with the provisions of this Section 4(d).
(e) IRREVOCABLE PROXY. In the event any Principal Stockholder elects not to exercise the
Class B Right of First Refusal and, as a result, the transferring Stockholder proposes to engage in
a Permitted Transfer of the shares of Class B Common Stock to any person other than a Principal
Stockholder, immediately prior to the time of such Permitted Transfer, the transferring Stockholder
shall irrevocably appoint and constitute the other Principal Stockholders, agents and attorneys of
the transferring Stockholder, to vote such shares of Class B Common Stock in the Principal
Stockholders sole and exclusive discretion, with full power of substitution and resubstitution, to
the full extent of such transferring Stockholders rights with respect to the shares of Class B
Common Stock proposed to be transferred. Similarly, in the event of a Stockholders death, if any
Principal Stockholder elects not to exercise the Class B Right of First Refusal and, as a result,
the deceased Stockholders Class B Common Stock would pass to any Person other than a Principal
Stockholder in a Permitted Transfer, then (as a condition precedent to any such Permitted Transfer)
the Permitted Transferees shall irrevocably appoint and constitute the Principal Stockholders then
living as the agents and attorneys of such Permitted Transferees, to vote such shares of Class B
Common Stock in such Principal Stockholders sole and exclusive discretion, with full power of
substitution and resubstitution, to the full extent of such deceased Stockholders rights with
respect to all shares of Class B Common Stock that are proposed to be transferred by reason of such
Stockholders death. Notwithstanding the foregoing, nothing contained in this Section 4(e) shall
be deemed to vest in the Principal Stockholders any direct or indirect ownership or incidence of
ownership of or with respect to any of the shares of Class B Common Stock proposed to be
transferred. All rights (other than voting rights), ownership and economic benefits of and
relating to the shares of Class B Common Stock proposed to be transferred shall remain vested in
the transferring Stockholder, and upon such Permitted Transfer shall vest in the Permitted
Transferee.
(f) LIFE INSURANCE ON PRINCIPAL STOCKHOLDERS LIVES. Each Principal Stockholder (each,
respectively, the Insured) agrees to permit the other Principal Stockholder (each, respectively,
the Owner) to apply for one or more life insurance policies (the Policies) insuring the
Insureds life, with the Owner being the owner of each such policy (controlling all incidents of
ownership of any insurance policy obtained on the Insureds life pursuant to this Section 4(f));
provided, the total face amount of the death benefits on any such Policies shall not exceed the
amounts as may be agreed to in writing (prior to application for any such life insurance) by both
Principal Stockholders. Further, each Insured agrees to consent to such life insurance
applications, medical exams and other reasonable underwriting procedures as may be required by the
insurance companies (as selected by the Owner) in connection with issuing any such
13
Policies. Each Owner may (but shall not be required to) use the death benefits from any such
Policies to facilitate a purchase of Class B Common Stock following the death of the Insured
(pursuant to any Class B Right of First Refusal that may be triggered by reason of the Insureds
death).
(g) OPINION OF COUNSEL. No holder of Stockholder Shares may Transfer any such stock
(other than pursuant to an effective registration statement under the Securities Act) without
first delivering to the Company, if the Company so requests, an opinion of counsel reasonably
acceptable in form and substance to the Company that registration under the Securities Act is
not required in connection with such transfer.
SECTION 5. LEGENDS.
(a) STOCKHOLDERS AGREEMENT LEGEND. The certificates representing Stockholder Shares shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AMENDED AND
RESTATED STOCKHOLDERS AGREEMENT DATED AS OF SEPTEMBER 28, 2004 AMONG CERTAIN
STOCKHOLDERS OF RADIO ONE, INC., A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY THE HOLDER HEREOF AT THE PRINCIPAL PLACE OF BUSINESS OF RADIO ONE, INC.
DISPOSITION OF THIS CERTIFICATE OR THE SECURITIES REPRESENTED HEREBY OR ANY RIGHTS
OR INTERESTS THEREIN IN VIOLATION OF SUCH STOCKHOLDERS AGREEMENT SHALL BE NULL AND
VOID.
SECTION 6. SALE OF THE COMPANY. If the Principal Stockholders mutually approve a Company
Sale (an APPROVED SALE), the other holders of Stockholder Shares (the OTHER
STOCKHOLDERS) shall consent to and raise no objections against such Approved Sale (and shall
waive any rights of appraisal arising in connection therewith) and shall fully cooperate with
and take all necessary and desirable actions in connection with the consummation of such
Approved Sale, including without limitation (a) executing a purchase and sale agreement and any
other agreement reasonably necessary to effectuate such Approved Sale in the form to be
entered into by the Principal Stockholders, (b) amending the Companys Certificate of
Incorporation, (c) merging, combining or consolidating the Company with any other
Person, (d) reorganizing, recapitalizing, liquidating, dissolving or winding-up the
Company, (e) exchanging or splitting stock of the Company or (f) selling, leasing or
exchanging all or substantially all of the property and assets of the Company and its
subsidiaries on a consolidated basis. If the Approved Sale is structured as a sale of stock, the
Other Stockholders shall agree to sell all of their shares of Common Stock and rights to acquire
shares of Common Stock on the terms and conditions approved by
14
the Board and the Principal Stockholders. The obligations of the Other Stockholders with
respect to any Approved Sale are subject to the conditions that (a) upon the consummation of
such Approved Sale, all of the holders of Common Stock will receive the same form and amount
of consideration per share of Common Stock, or if any holders are given an option as to the form
and amount of consideration to be received, all holders will be given the same option and (b)
no stockholder shall be required to incur indemnification obligations (whether several or
joint and several) which are in excess of the net proceeds received by such Stockholder in
connection with such Approved Sale. In the event that a Principal Stockholder is Incapacitated,
any Company Sale that is approved by the Principal Stockholder that is not Incapacitated
shall be deemed to be an Approved Sale for all purposes hereof, and all references to the
Principal Stockholders in this paragraph shall be deemed to exclude the Incapacitated Principal
Stockholder.
SECTION 7. PARTICIPATION RIGHTS. Not less than twenty (20) days prior to any proposed
Transfer of Stockholder Shares by a Principal Stockholder (the SELLING PRINCIPAL STOCKHOLDER),
the Selling Principal Stockholder shall deliver to the other Principal Stockholder (so long as
such other Principal Stockholder is not Incapacitated) a written notice (the SALE
NOTICE) specifying in reasonable detail the identity of the proposed transferee(s) and the terms
and conditions of the proposed Transfer. Provided that the other Principal Stockholder is
not Incapacitated and has not elected to exercise the Rights of First Refusal provided in Sections
4(c) and 4(d), as applicable, with respect to the Transfer specified in the Sale Notice, such
other Principal Stockholder may elect to participate in the proposed Transfer by delivering to
the Selling Principal Stockholder a written notice of such election within the 10-day period
following delivery of the Sale Notice. If the other Principal Stockholder elects to participate
in such Transfer, the Selling Principal Stockholder and such other Principal Stockholder
will be entitled to sell in such proposed Transfer, at the same price and on the same terms, a
number of shares of each class of Common Stock specified in the Sale Notice equal to the product
of (i) the quotient determined by dividing the number of shares of such class of Common
Stock then held by the Selling Principal Stockholder or such other Principal Stockholder, as
the case may be, by the aggregate number of shares of such class of Common Stock then held by the
Selling Principal Stockholder and such other Principal Stockholder, multiplied by (ii) the
number of shares of such class of Common Stock to be sold in such proposed Transfer. For
purposes of this Section 7, the amount of Common Stock held by a Principal Stockholder shall be
deemed to include all shares of Common Stock acquirable pursuant to the exercise of Vested
Options then held by such Principal Stockholder. Notwithstanding the foregoing, this Section 7
shall not apply to (i) Transfers pursuant to Rule 144 under the Securities Act (or any
successor provision), (ii) Transfers pursuant to Section 4, or (v) Transfers pursuant to
Section 6.
15
SECTION 8. DEADLOCKS.
(a) DEFINITION. For purposes hereof, a DEADLOCK shall be deemed to have occurred if
after having tried on a good-faith basis to do so for a period of at least ninety (90) days after
delivery by one Principal Stockholder to the other Principal Stockholder of a written notice
requesting the commencement of such good faith efforts, the Principal Stockholders are unable
to reach mutual agreement with respect to either (i) the individual or individuals to fill one
or more of the Board seats to be filled by Class B Directors, other than Hughes or Liggins, or
(ii) a Company Sale proposed by one of the Principal Stockholders.
(b) INITIATION OF AUCTION. Upon the occurrence of a Deadlock, either Principal Stockholder
may, by written notice delivered to the other Principal Stockholder, initiate a bidding
process to determine which Principal Stockholder shall acquire all of the other Principal
Stockholders Stockholder Shares. Such bidding process shall begin on the date (the INITIAL
AUCTION DATE) mutually agreed to by the Principal Stockholders, which date shall be not later than
thirty (30) days after delivery of the notice referred to in the preceding sentence. Such
bidding process shall in all events proceed in two stages: first, the Principal Stockholders
shall determine a market valuation for the corporation, taken as a whole, through the competitive
bidding procedures described in paragraph (c) below and second, the purchase price for the
winning bidder to purchase all of the losing bidders Stockholder Shares shall be determined
based on the formula set forth in paragraph (d) below.
(c) AUCTION PROCEDURE. On the Initial Auction Date, each Principal Stockholder shall
initiate the bidding process by delivering simultaneously to the other Principal Stockholder
a written offer (the INITIAL OFFER) which sets forth its valuation of the outstanding Common
Stock of the Company, taken as a whole. The higher of the valuations shall constitute the
initial bid. Such initial bid and each subsequent valuation must be met in turn, within forty-eight
(48) hours following delivery thereof, by either acceptance or delivery of a written
counteroffer. Each counteroffer after the initial bid must be in a minimum amount equal to the
lesser of (a) the amount that is five percent (5%) higher than the preceding bid (on a percentage
basis) and (b) the amount that is $10,000.00 higher than the preceding bid. Any failure to respond
within forty-eight (48) hours of delivery of a bid as provided above shall be deemed to constitute
an irrevocable and unconditional acceptance of that bid. This bidding process shall continue
until one Principal Stockholder accepts the other Principal Stockholders latest valuation,
either affirmatively or by failing to make a counteroffer (such final valuation, the FINAL AUCTION
PRICE).
(d) DETERMINATION OF FINAL PURCHASE PRICE. The final purchase price (the FINAL PURCHASE
PRICE) payable by the winning bidder for all of the losing bidders Stockholder Shares shall be
the amount equal to the product of (x) the
16
Final Auction Price and (y) the percentage of the outstanding Common Stock of the Company
represented by the Stockholder Shares held by the losing bidder.
(e) CONSUMMATION OF SALE AND TRANSFER. The sale and transfer of the losing bidders
Stockholder Shares to the winning bidder shall be consummated as soon as practicable after the
determination of the Final Auction Price, subject to receipt of necessary governmental, regulatory
and antitrust approvals. Each Principal Stockholder shall cooperate with the other to take all
actions necessary to conclude the sale and transfer contemplated hereunder.
SECTION 9. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any
Stockholder Shares in violation of this Agreement shall be void, and the Company shall not be
obligated to record such Transfer on its books or treat any purported transferee of such
Stockholder Shares as the owner of such shares for any purpose.
SECTION 10. AMENDMENT AND WAIVER. Except as otherwise provided herein, no amendment or
waiver of any provision of this Agreement shall be effective against the Stockholders unless such
amendment or waiver is approved in writing by the Principal Stockholders other than any
Incapacitated Principal Stockholder. The failure of any party to enforce any provision of this
Agreement shall not be construed as a waiver of such provision and shall not affect the right of
such party thereafter to enforce each provision of this Agreement in accordance with its terms.
SECTION 11. SEVERABILITY. If any provision of this Agreement is held to be invalid, illegal
or unenforceable in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained herein.
SECTION 12. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this document
embodies the complete agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
SECTION 13. SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARY. This Agreement shall bind and
inure to the benefit of and be enforceable by the Stockholders and their respective permitted
successors and assigns so long as such Stockholders and their respective permitted successors and
assigns hold Stockholder Shares. The Company is and shall be an intended third party beneficiary
of this Agreement.
17
SECTION 14. COUNTERPARTS. This Agreement may be executed in separate counterparts each of
which shall be an original and all of which taken together shall constitute one and the same
agreement.
SECTION 15. REMEDIES. The Company (as a third party beneficiary) and the Stockholders shall
be entitled to enforce their rights under this Agreement specifically to recover damages by reason
of any breach of any provision of this Agreement and to exercise all other rights existing in their
favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that the Company or any Stockholder may in
its sole discretion apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security) in order to
enforce or prevent any violation of the provisions of this Agreement.
SECTION 16. NOTICES. Any notice provided for in this Agreement shall be in writing and shall
be either personally delivered, or sent via facsimile, or mailed first class mail (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) to the Principal
Stockholders at their respective addresses set forth in the preface to this Agreement, and to any
subsequent holder of Stockholder Shares subject to this Agreement at such address as indicated by
the Companys records, or at such address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party. Notices will be
deemed to have been given hereunder when delivered personally or sent via facsimile (against
receipt therefor), three days after deposit in the U.S. mail and one day after deposit with a
reputable overnight courier service.
SECTION 17. GOVERNING LAW. The corporate law of Delaware shall govern all issues concerning
the relative rights of the Company and its stockholders. All other questions concerning the
construction, validity and interpretation of this Agreement shall be governed by the internal law,
and not the law of conflicts, of Maryland.
SECTION 18. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
SECTION 19. TERMINATION. Notwithstanding anything herein to the contrary, this Agreement
shall terminate upon a Company Sale.
18
IN WITNESS WHEREOF, the parties have executed this Amended and Restated Stockholders Agreement
as of the date first above written.
|
|
|
|
|
|
|
|
Catherine L. Hughes |
|
|
|
|
|
|
|
|
Alfred C. Liggins, III |
19
EXHIBIT A
FORM OF JOINDER
TO
STOCKHOLDERS AGREEMENT
This Joinder (this Agreement) is made as of the date written below by the undersigned (the
Joining Party) in favor of and for the parties to the Amended and Restated Stockholders
Agreement, dated as of September 28, 2004 (the Stockholders Agreement). Capitalized terms used
but not defined herein shall have the meanings given such terms in the Stockholders Agreement.
The Joining Party hereby acknowledges, agrees and confirms that, by his or her execution of
this Joinder, the Joining Party will be deemed to be a party to the Stockholders Agreement and
shall have all of the obligations of a Stockholder thereunder as if he or she had executed the
Stockholders Agreement. The Joining Party hereby ratifies, as of the date hereof, and agrees to
be bound by, all of the terms, provisions and conditions contained in the Stockholders Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Joinder as of the date written below.
20
exv31w1
Exhibit 31.1
I, Alfred C. Liggins, III, Chief Executive Officer,
President and Director of Radio One, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q
of Radio One, Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for
the registrant and have:
|
|
|
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared; |
|
|
b) designed such internal control over financial reporting,
or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; |
|
|
c) evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and |
|
|
d) disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; |
5. The registrants other certifying officer and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
|
|
|
a) all significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and |
|
|
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting. |
|
|
|
|
By: |
/s/ Alfred C.
Liggins, III
|
|
|
|
|
|
Alfred C. Liggins, III |
|
Chief Executive Officer, President and Director |
Date: August 8, 2005
exv31w2
Exhibit 31.2
I, Scott R. Royster, Executive Vice President, Chief Financial
Officer and Principal Accounting Officer of Radio One, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q
of Radio One, Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for
the registrant and have:
|
|
|
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared; |
|
|
b) designed such internal control over financial reporting,
or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; |
|
|
c) evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and |
|
|
d) disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; |
5. The registrants other certifying officers and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
|
|
|
a. all significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and |
|
|
b. any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting. |
|
|
|
|
|
Scott R. Royster |
|
Executive Vice President, Chief Financial Officer |
|
and Principal Accounting Officer |
Date: August 8, 2005
exv32w1
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. § 1350, as created by
Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned officer of Radio One, Inc. (the Company)
hereby certifies, to such officers knowledge, that:
|
|
|
(i) the accompanying Quarterly Report on Form 10-Q of
the Company for the quarter ended June 30, 2005 (the
Report) fully complies with the requirements of
Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and |
|
|
(ii) the information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company. |
|
|
|
|
By: |
/s/ Alfred C.
Liggins, III
|
|
|
|
|
|
Name: Alfred C. Liggins, III |
|
Title: Chief Executive Officer and
President |
Date: August 8, 2005
A signed original of this written statement required by
Section 906 of the Sarbanes-Oxley Act of 2002 has been
provided to Radio One, Inc. and will be retained by Radio One,
Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.
exv32w2
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. § 1350, as created by
Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned officer of Radio One, Inc. (the Company)
hereby certifies, to such officers knowledge, that:
|
|
|
(i) the accompanying Quarterly Report on Form 10-Q of
the Company for the quarter ended June 30, 2005 (the
Report) fully complies with the requirements of
Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and |
|
|
(ii) the information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company. |
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Scott R. Royster
|
|
|
|
|
|
|
|
|
|
Name: |
|
Scott R. Royster |
|
|
|
|
Title: |
|
Executive Vice President and |
|
|
|
|
|
|
Chief Financial Officer |
Date: August 8, 2005
A signed original of this written statement required by
Section 906 of the Sarbanes-Oxley Act of 200 has been
provided to Radio One, Inc. and will be retained by Radio One,
Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.