e8vk
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report: November 7, 2005
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Commission File No.: 0-25969 |
(Date of earliest event reported) |
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RADIO ONE, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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52-1166660 |
(State or other jurisdiction of
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(I.R.S. Employer Identification No.) |
incorporation or organization) |
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5900 Princess Garden Parkway,
7th Floor
Lanham, Maryland 20706
(Address of principal executive offices)
(301) 306-1111
Registrants telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant
under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. Results of Operations and Financial Condition.
On November 4, 2005, Radio One, Inc. issued a press release setting forth the results for its
third quarter ended September 30, 2005. A copy of the press release is attached as Exhibit 99.1.
ITEM 9.01. Financial Statements and Exhibits.
(c) Exhibits
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Exhibit Number |
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Description |
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99.1
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Press release dated November 4, 2005: Radio One, Inc. Reports Third Quarter
Results. |
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.
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RADIO ONE, INC.
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/s/ Scott R. Royster
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November 7, 2005 |
Scott R. Royster |
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Executive Vice President and Chief Financial Officer
(Principal Accounting Officer) |
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exv99w1
Exhibit 99.1
NEWS RELEASE
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November 4, 2005
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Contact:
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Scott R. Royster, EVP and CFO |
FOR IMMEDIATE RELEASE
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(301) 429-2642 |
Washington, DC |
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RADIO ONE, INC. REPORTS THIRD QUARTER RESULTS
$5.3 million one-time, non-cash charge included in results
Washington, DC: Radio One, Inc. (NASDAQ: ROIAK and ROIA) today reported its results
for the quarter ended September 30, 2005. Net broadcast revenue was approximately $101.4 million,
an increase of 20% from the same period in 2004. Operating income was approximately $38.0 million,
a decrease of 2% compared to the same period in 2004. Station operating income 1
was approximately $47.3 million, flat compared to the same period in 2004. Both
operating income and station operating income include a non-cash, one-time charge of approximately
$5.3 million related to the termination of the Companys national sales representation agreements
with Interep National Radio Sales, Inc. (Interep). Katz Communications, Inc. (Katz) agreed to
pay the termination obligation and is now Radio Ones sole national sales representative. The
future accounting for this payment to Interep by Katz will result in a reduction to the Companys
cost of sales over the four-year life of the contract with Katz. Excluding the impact of this
one-time, non-cash charge, the Companys operating income and station operating income increased
12% and 11% respectively. Net income applicable to common stockholders was approximately $11.5
million or $0.11 per diluted share, a decrease of 2% from the same period in 2004. This decrease
was due to the approximately $5.3 million one-time, non-cash charge described above.
Alfred C. Liggins, III, Radio Ones CEO and President stated, This was another good quarter for
Radio One. Our radio stations outgrew our markets by 350 basis points and we posted solid overall
results, inclusive of Reach Media. During the quarter, we aggressively repurchased our common
stock and expect that to continue, and perhaps accelerate, through the end of the year. We are
actively engaged in developing new ways to leverage our powerful media platform and look forward to
sharing a number of new initiatives in the upcoming quarters. We are prepared to invest in our
business to maintain the growth dynamics that we have seen over the past decade although, of
course, our future growth will come from many different areas other than radio. Some of these
investments may take a while to pay off, but for patient investors, we think the rewards will be
great.
-MORE-
PAGE 2 RADIO ONE, INC. REPORTS THIRD QUARTER RESULTS
RESULTS OF OPERATIONS
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2005 |
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2004 |
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2005 |
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2004 |
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(unaudited) |
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(unaudited) |
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(in thousands, except per share data) |
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(in thousands, except per share data) |
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STATEMENT OF OPERATIONS DATA: |
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NET BROADCAST REVENUE |
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$ |
101,392 |
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$ |
84,366 |
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$ |
279,926 |
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$ |
240,238 |
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OPERATING EXPENSES: |
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Programming and technical (exclusive of non-cash compensation shown
separately below) |
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17,105 |
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13,131 |
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50,501 |
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40,151 |
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Selling, general and administrative (exclusive of non-cash compensation
shown separately below) |
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36,951 |
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23,988 |
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89,274 |
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70,691 |
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Corporate expenses (exclusive of non-cash compensation shown separately
below) |
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5,673 |
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3,734 |
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16,140 |
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10,808 |
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Non-cash compensation |
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|
541 |
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|
545 |
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1,453 |
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2,062 |
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Depreciation and amortization |
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3,114 |
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4,368 |
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9,731 |
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13,359 |
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Total operating expenses |
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63,384 |
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45,766 |
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167,099 |
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137,071 |
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Operating income |
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38,008 |
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38,600 |
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112,827 |
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103,167 |
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INTEREST INCOME |
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162 |
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630 |
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|
906 |
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1,937 |
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INTEREST EXPENSE |
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16,431 |
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9,749 |
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46,100 |
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29,472 |
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OTHER INCOME (EXPENSE) |
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(123 |
) |
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123 |
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21 |
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EQUITY IN NET LOSS OF AFFILIATED COMPANY |
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442 |
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2,144 |
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1,205 |
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5,942 |
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Income before provision for income taxes and
minority interest |
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21,297 |
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27,214 |
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66,551 |
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69,711 |
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PROVISION FOR INCOME TAXES |
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8,742 |
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10,446 |
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23,839 |
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26,693 |
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MINORITY INTEREST IN INCOME OF SUBSIDIARY |
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1,089 |
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1,714 |
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Net income |
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$ |
11,466 |
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$ |
16,768 |
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$ |
40,998 |
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$ |
43,018 |
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Preferred stock dividend |
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5,035 |
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2,761 |
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15,105 |
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Net income applicable to common stockholders4 |
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$ |
11,466 |
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$ |
11,733 |
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$ |
38,237 |
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$ |
27,913 |
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-MORE-
PAGE 3 RADIO ONE, INC. REPORTS THIRD QUARTER RESULTS
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2005 |
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2004 |
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2005 |
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2004 |
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(unaudited) |
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(unaudited) |
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(in thousands, except per share data) |
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(in thousands, except per share data) |
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PER SHARE DATA basic and diluted: |
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Net income per share |
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$ |
0.11 |
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$ |
0.16 |
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$ |
0.39 |
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$ |
0.41 |
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Preferred dividends per share |
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0.05 |
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0.03 |
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0.14 |
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Net income per share applicable to common stockholders |
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0.11 |
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0.11 |
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0.36 |
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0.26 |
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SELECTED OTHER DATA: |
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Station operating income1 |
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$ |
47,336 |
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$ |
47,247 |
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$ |
140,151 |
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$ |
129,396 |
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Station operating income margin (% of net revenue) |
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47 |
% |
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56 |
% |
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50 |
% |
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54 |
% |
Station operating income reconciliation: |
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Net income |
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$ |
11,466 |
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$ |
16,768 |
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$ |
40,998 |
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$ |
43,018 |
|
Plus: Depreciation and amortization |
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|
3,114 |
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|
|
4,368 |
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|
9,731 |
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|
13,359 |
|
Plus: Corporate expenses |
|
|
5,673 |
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|
|
3,734 |
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|
16,140 |
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|
|
10,808 |
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Plus: Non-cash compensation |
|
|
541 |
|
|
|
545 |
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|
|
1,453 |
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|
|
2,062 |
|
Plus: Equity in net loss of affiliated company |
|
|
442 |
|
|
|
2,144 |
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|
|
1,205 |
|
|
|
5,942 |
|
Plus: Income taxes |
|
|
8,742 |
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|
|
10,446 |
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|
23,839 |
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|
26,693 |
|
Plus: Minority interest in income of subsidiary |
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|
1,089 |
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|
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|
1,714 |
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Plus: Interest expense |
|
|
16,431 |
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|
|
9,749 |
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|
|
46,100 |
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|
29,472 |
|
Less: Interest income |
|
|
162 |
|
|
|
630 |
|
|
|
906 |
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|
|
1,937 |
|
Less: Other income (expense) |
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(123 |
) |
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123 |
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21 |
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Station operating income |
|
$ |
47,336 |
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$ |
47,247 |
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$ |
140,151 |
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$ |
129,396 |
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Adjusted EBITDA2 |
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$ |
41,122 |
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$ |
42,845 |
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$ |
122,681 |
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$ |
116,547 |
|
Adjusted EBITDA reconciliation: |
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Net income |
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$ |
11,466 |
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$ |
16,768 |
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$ |
40,998 |
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$ |
43,018 |
|
Plus: Depreciation and amortization |
|
|
3,114 |
|
|
|
4,368 |
|
|
|
9,731 |
|
|
|
13,359 |
|
Plus: Income taxes |
|
|
8,742 |
|
|
|
10,446 |
|
|
|
23,839 |
|
|
|
26,693 |
|
Plus: Interest expense |
|
|
16,431 |
|
|
|
9,749 |
|
|
|
46,100 |
|
|
|
29,472 |
|
Less: Interest income |
|
|
162 |
|
|
|
630 |
|
|
|
906 |
|
|
|
1,937 |
|
|
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EBITDA |
|
$ |
39,5 |
|
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|
91 $40,701 |
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|
$ |
119,7 |
|
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|
62 $110,605 |
|
Plus: Equity in net loss of affiliated company |
|
|
442 |
|
|
|
2,144 |
|
|
|
1,205 |
|
|
|
5,942 |
|
Plus: Minority interest in net income of subsidiary |
|
|
1,089 |
|
|
|
|
|
|
|
1,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Adjusted EBITDA |
|
$ |
41,122 |
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$ |
42,845 |
|
|
$ |
122,681 |
|
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$ |
116,547 |
|
|
|
|
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|
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-MORE-
PAGE 4
RADIO ONE INC., REPORTS THIRD QUARTER RESULTS
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
|
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
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|
(in thousands, except per share data) |
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|
(in thousands, except per share data) |
|
Free cash flow3 |
|
$ |
26,730 |
|
|
$ |
25,991 |
|
|
$ |
71,069 |
|
|
$ |
69,360 |
|
Free cash flow reconciliation: |
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|
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Net income |
|
$ |
11,466 |
|
|
$ |
16,768 |
|
|
$ |
40,998 |
|
|
$ |
43,018 |
|
Plus: Non-cash contract termination charge,
net of amortization |
|
|
5,091 |
|
|
|
|
|
|
|
5,091 |
|
|
|
|
|
Plus: Depreciation and amortization |
|
|
3,114 |
|
|
|
4,368 |
|
|
|
9,731 |
|
|
|
13,359 |
|
Plus: Non-cash compensation |
|
|
541 |
|
|
|
545 |
|
|
|
1,453 |
|
|
|
2,062 |
|
Plus: Non-cash interest expense |
|
|
498 |
|
|
|
425 |
|
|
|
3,660 |
|
|
|
1,273 |
|
Plus: Deferred tax provision |
|
|
8,896 |
|
|
|
10,303 |
|
|
|
22,676 |
|
|
|
26,265 |
|
Plus: Equity in net loss of affiliated company |
|
|
442 |
|
|
|
2,144 |
|
|
|
1,205 |
|
|
|
5,942 |
|
Plus: Minority interest in income of subsidiary |
|
|
1,089 |
|
|
|
|
|
|
|
1,714 |
|
|
|
|
|
Less: Capital expenditures |
|
|
4,407 |
|
|
|
3,527 |
|
|
|
12,698 |
|
|
|
7,454 |
|
Less: Preferred stock dividends |
|
|
|
|
|
|
5,035 |
|
|
|
2,761 |
|
|
|
15,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
26,730 |
|
|
$ |
25,991 |
|
|
$ |
71,069 |
|
|
$ |
69,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding basic5 |
|
|
103,709 |
|
|
|
104,987 |
|
|
|
105,536 |
|
|
|
104,935 |
|
Weighted average shares
outstanding diluted6 |
|
|
103,902 |
|
|
|
105,303 |
|
|
|
105,711 |
|
|
|
105,478 |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
(in thousands) |
|
SELECTED BALANCE SHEET DATA: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
24,627 |
|
|
$ |
10,391 |
|
Short term investments |
|
|
|
|
|
|
10,000 |
|
Intangible assets, net |
|
|
2,005,656 |
|
|
|
1,931,045 |
|
Total assets |
|
|
2,207,364 |
|
|
|
2,111,141 |
|
Total debt (including current
portion) |
|
|
952,522 |
|
|
|
620,028 |
|
Total liabilities |
|
|
1,156,085 |
|
|
|
782,696 |
|
Total stockholders equity |
|
|
1,048,642 |
|
|
|
1,328,445 |
|
Minority interest in subsidiary |
|
|
2,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Amount |
|
|
Applicable Interest |
|
|
|
Outstanding |
|
|
Rate (b) |
|
|
|
(in thousands) |
|
SELECTED LEVERAGE AND SWAP DATA: |
|
|
|
|
|
|
|
|
Senior bank term debt (swap matures 6/16/2012) |
|
$ |
25,000 |
|
|
|
5.72 |
% |
Senior bank term debt (swap matures 6/16/2010) |
|
|
25,000 |
|
|
|
5.52 |
% |
Senior bank term debt (swap matures 6/16/2008) |
|
$ |
25,000 |
|
|
|
5.38 |
% |
Senior bank term debt (swap matures 6/16/2007) |
|
|
25,000 |
|
|
|
5.33 |
% |
Senior bank term debt (at variable rates) (a) |
|
|
200,000 |
|
|
approximately 5.13 |
% |
Senior bank term debt (at variable rates) (a) |
|
|
152,500 |
|
|
approximately 5.13 |
% |
8-7/8% senior subordinated notes (fixed rate) |
|
|
300,000 |
|
|
|
8.88 |
% |
6-3/8% senior subordinated notes (fixed rate) |
|
|
200,000 |
|
|
|
6.38 |
% |
(a) |
|
Subject to rolling 90-day LIBOR plus a spread currently at 1.25% and incorporated into the rate set
forth above. This tranche is not covered by the swap agreements described in footnote (b). |
|
(b) |
|
Under its swap agreement, Radio One pays a fixed rate plus a spread based on the Companys leverage, as
defined in its credit agreement. As of September 30, 2005 that spread was 1.25% and is incorporated into
the applicable interest rates set forth above. |
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PAGE 5
RADIO ONE INC., REPORTS THIRD QUARTER RESULTS
Net broadcast revenue increased to approximately $101.4 million for the quarter ended September 30,
2005 from approximately $84.4 million for the quarter ended September 30, 2004, or 20%. This
increase resulted from the consolidation of the 2005 third quarter operating results of Reach
Media, Inc. (Reach Media), and net broadcast revenue growth in most of Radio Ones markets,
including Atlanta, Charlotte, Cleveland, Dallas, Houston, and Minneapolis. Net broadcast revenue
growth in these markets was partially offset by revenue declines in Los Angeles and Baltimore.
Excluding the 2005 third quarter operating results of Reach Media, net broadcast revenue grew 6%
for the quarter ended September 30, 2005, compared to the same period in 2004. Net broadcast
revenue is reported net of agency and sales representation commissions of approximately $13.1
million and $11.6 million for the quarters ended September 30, 2005 and 2004, respectively.
Operating expenses excluding depreciation, amortization, and non-cash compensation increased to
approximately $59.7 million for the quarter ended September 30, 2005 from approximately $40.9
million for the quarter ended September 30, 2004, or 46%. This increase resulted primarily from an
approximately $5.3 million non-cash, one-time charge associated with the termination of national
sales representation agreements with Interep and the consolidation of the 2005 third quarter
operating results of Reach Media. This increase was also attributable to increased on-air talent
expenses, higher sales commissions and national representation fees associated with additional
revenue, increased music royalties, expenses associated with our expanded presence on the Internet,
additional corporate staff compensation, and additional professional fees. Increased operating
expenses are also a result of three new stations launched late in 2004.
Depreciation and amortization expense decreased to approximately $3.1 million for the quarter ended
September 30, 2005 from approximately $4.4 million for the quarter ended September 30, 2004, a
decrease of approximately $1.3 million, or 29%. The decrease is primarily due to the completion of
amortization of Radio One trade names in late 2004, partially offset by additional depreciation for
capital expenditures made since the third quarter of 2004.
Interest expense increased to approximately $16.4 million for the quarter ended September 30, 2005
from approximately $9.7 million for the quarter ended September 30, 2004, or 69%. The increase in
interest expense during the three months ended September 30, 2005 resulted from additional interest
obligations associated with the additional borrowings to partially fund the February 2005
redemption of our 6-1/2% Convertible Preferred Remarketable Term Income Deferrable Equity
Securities (HIGH TIDES) in an amount of $309.8 million. Additional interest obligations were
also incurred from borrowings to partially fund our February 2005 acquisition of 51% of the common
stock of Reach Media. Also, in June 2005, we entered into a new $800.0 million credit agreement,
and simultaneously borrowed $437.5 million to retire our previous bank credit facilities.
Equity in net loss of affiliated company was $442,000 for the quarter ended September 30, 2005,
compared to an equity loss of approximately $2.1 million for the quarter ended September 30, 2004,
a decrease of approximately $1.7 million, or 79%. This decrease resulted primarily from the
modification of our methodology for estimating our equity in the operating results of TV One, LLC
during the fourth quarter of 2004.
Income before provision for income taxes and minority interest decreased to approximately $21.3
million for the quarter ended September 30, 2005 compared to approximately $27.2 million for the
quarter ended September 30, 2004, a decrease of $5.9 million, or 22%. This decrease was due
primarily to a decrease in operating income of $592,000, a decrease in the equity in net loss of
affiliated company of approximately $1.7 million, which was offset by increased net interest
expense of approximately $7.2 million, as described above.
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PAGE 6
RADIO ONE INC., REPORTS THIRD QUARTER RESULTS
Provision for income taxes decreased to approximately $8.7 million for the quarter ended September
30, 2005 compared to approximately $10.4 million for the quarter ended September 30, 2004, a
decrease of approximately $1.7 million, or 16%. This decrease was due primarily to lower income
before provision for income taxes and minority interest as described above. The decrease was
partially offset by the consolidation of the 2005 third quarter operating results of Reach Media,
an increase in the reserve for contingencies, and an increase to the effective tax rate resulting
from permanent differences between income subject to income tax for book versus tax purposes.
Excluding the increase to the reserve for contingencies, our effective tax rate as of September 30,
2005 was 40.6%, compared to 38.6% as of September 30, 2004.
Minority interest in income of subsidiary of approximately $1.1 million for the quarter ended
September 30, 2005 reflects the minority stockholders interest in Reach Medias 2005 third quarter
net income resulting from our February 2005 acquisition of 51% of Reach Medias common stock.
Net income decreased to approximately $11.5 million for the quarter ended September 30, 2005 from
approximately $16.8 million for the quarter ended September 30, 2004, a decrease of approximately
$5.3 million, or 32%. This decrease was due primarily to slightly lower operating income, an
increase in net interest expense and an increase in the minority interest in income of subsidiary.
Station operating income was flat at approximately $47.3 million for the quarter ended September
30, 2005 compared to approximately $47.2 million for the quarter ended September 30, 2004.
Increases to station operating income from consolidating the 2005 third quarter operating results
of Reach Media and increased net broadcast revenue in Radio One markets, were offset by higher
operating expenses, which include an approximately $5.3 million one-time, non-cash charge for the
termination of the Interep national sales representation agreements, as described above.
Other pertinent financial information for the third quarter of 2005 includes capital
expenditures of approximately $4.4 million for the quarter ended September 30, 2005, compared to
approximately $3.5 million for the quarter ended September 30, 2004. As of September 30, 2005,
Radio One had total debt (net of cash balances) of approximately $928.0 million. During the
quarter the Company repurchased approximately 1.9 million shares of its common stock for
approximately $26.4 million.
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PAGE 7
RADIO ONE INC., REPORTS THIRD QUARTER RESULTS
Radio One Information and Guidance:
Including the operating results of Reach Media, Radio One expects to report fourth quarter
2005 net broadcast revenue that will be in the mid-teens percent range higher than the
approximately $79.5 million of net broadcast revenue for the same period in 2004, and station
operating income that will be in the mid-single digit percent range lower than the approximately
$46.3 million of station operating income for the same period in 2004 which included one-time
reductions to operating expenses of approximately $4.5 million, associated with a reimbursement
from one of the Companys vendors and the radio industrys settlement with ASCAP. Excluding these
one-time reductions to operating expenses from last years fourth quarter results, the Company
expects station operating income that will be in the mid-single digit percent range higher than
station operating income for the same period in 2004.
Excluding the operating results of Reach Media, Radio One expects to report fourth quarter 2005 net
broadcast revenue that will be in the low-single digit percent range higher than the approximately
$79.5 million of net broadcast revenue generated for the same period in 2004, and station operating
income in the high-single digit percent range lower than the approximately $46.3 million of station
operating income for the same period in 2004 which included one-time reductions to operating
expenses of approximately $4.5 million, associated with a reimbursement from one of the Companys
vendors and the radio industrys settlement with ASCAP. Excluding these one-time reductions to
operating expenses from last years fourth quarter results, the Company expects station operating
income that will be in the low-single digit percent range higher than station operating income for
the same period in 2004.
Radio One will hold a conference call to discuss its results for the third quarter of 2005. This
conference call is scheduled for Friday, November 4, 2005 at 10:00 a.m. Eastern Time. Interested
parties should call 1-612-332-0630 at least five minutes prior to the scheduled time of the call.
The conference call will be recorded and made available for replay from 1:30 p.m. the day of the
call until 11:59 p.m. Eastern Time the following day. Interested parties may listen to the replay
by calling 1-320-365-3844, access code: 799060. Access to live audio and replay of the conference
call will also be available on Radio Ones corporate website at www.radio-one.com. The replay will
be made available on the website for the seven day period following the call.
Radio One, Inc. (www.radio-one.com) is the nations seventh largest radio broadcasting company
(based on 2004 net broadcast revenue) and the largest radio broadcasting company that primarily
targets African-American and urban listeners. Radio One owns and/or operates 70 radio stations
located in 22 urban markets in the United States and reaches more than 13 million listeners every
week. Radio One also owns approximately 36% of TV One, LLC (www.tvoneonline.com), a cable/satellite
network programming primarily to African-Americans, which is a joint venture with Comcast
Corporation and DIRECTV. Additionally, Radio One owns 51% of the common stock of Reach Media, Inc.
(www.blackamericaweb.com), owner of the Tom Joyner Morning Show and other businesses associated
with Tom Joyner, a leading urban media personality, and programs XM 169 The POWER on XM Satellite
Radio.
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PAGE 8
RADIO ONE INC., REPORTS THIRD QUARTER RESULTS
Notes:
This press release includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Because these
statements apply to future events, they are subject to risks and uncertainties that could cause
actual results to differ materially, including the absence of a combined operating history with an
acquired company or radio station and the potential inability to integrate acquired businesses,
need for additional financing, high degree of leverage, seasonal nature of the business, granting
of rights to acquire certain portions of the acquired companys or radio stations operations,
market ratings, variable economic conditions and consumer tastes, as well as restrictions imposed
by existing debt and future payment obligations. Important factors that could cause actual results
to differ materially are described in Radio Ones reports on Forms 10-K, 10-K/A and 10-Q and other
filings with the Securities and Exchange Commission.
1 Net income before depreciation and amortization, provision for income taxes, interest income,
interest expense, equity in net loss of affiliated company, minority interest in income of
subsidiary, other expense, corporate expenses and non-cash compensation expenses is commonly
referred to in our business 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. A reconciliation of operating income to station operating income has been provided
in this release.
2 Adjusted EBITDA consists of net income plus (1) depreciation, amortization, provision for
income taxes, interest expense, equity in net loss of affiliated company and minority interest in
income of subsidiary and less (2) interest income. Net income before interest income, interest
expense, income taxes, depreciation and amortization is commonly referred to in our business as
EBITDA. Adjusted EBITDA and EBITDA are not measures of financial performance under generally
accepted accounting principles. We believe Adjusted 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 Adjusted EBITDA excludes charges for depreciation, amortization
and interest expense that have resulted from our acquisitions and debt financings, our provision
for income tax expense, as well as our equity in net (gain) loss of our affiliated company.
Accordingly, we believe that Adjusted EBITDA provides helpful information about the operating
performance of our business, apart from the expenses associated with our physical plant, capital
structure or the results of our affiliated company. Adjusted EBITDA is frequently used as one of
the bases for comparing businesses in our industry, although our measure of Adjusted EBITDA may not
be comparable to similarly titled measures of other companies. Adjusted EBITDA and EBITDA do not
purport to represent operating income or cash flow from operating activities, as those terms are
defined under generally accepted accounting principles, and should not be considered as
alternatives to those measurements as an indicator of our performance. A reconciliation of net
income to EBITDA and Adjusted EBITDA has been provided in this release.
3 Free cash flow consists of net income plus (1) non-cash contract termination charge, net of
amortization, (2) depreciation, amortization, non-cash compensation, deferred income taxes,
non-cash interest expense, non-cash loss on retirement of assets, minority interest in income of
subsidiary and our share of the non-cash net (gain) loss of our affiliated company and less (3)
capital expenditures and dividends on our outstanding preferred stock. Free cash flow is not a
measure of financial performance under generally accepted accounting principles. We believe free
cash flow is 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 free cash flow is a
reasonable approximation of the amount of excess cash generated by the companys operations that
can be used for debt reduction, acquisitions, investments, potential common stock dividends and/or
buybacks and other strategic initiatives outside of the immediate scope of the companys
operations. Free cash flow is frequently used as one of the bases for comparing businesses in our
industry, although our measure of free cash flow may not be comparable to similarly titled measures
of other companies. Free cash flow does not purport to represent operating income or cash flow from
operating activities, as those terms are defined under generally accepted accounting principles,
and should not be considered as alternatives to those measurements as an indicator of our
performance. A reconciliation of net income to free cash flow has been provided in this release.
4 Net income applicable to common stockholders is defined as net income minus preferred stock
dividends, if any.
5 For the three months ended September 30, 2005 and 2004, Radio One had 103,709,135 and 104,986,638
shares of common stock outstanding on a weighted average basis, respectively. For the nine months
ended September 30, 2005 and 2004, Radio One had 105,535,683 and 104,935,362 shares of common stock
outstanding on a weighted average basis, respectively.
6 For the three months ended September 30, 2005 and 2004, Radio One had 103,902,356 and 105,303,330
shares of common stock outstanding on a weighted average basis, diluted for outstanding stock
options, respectively. For the nine months ended September 30, 2005 and 2004, Radio One had
105,711,453 and 105,478,109 shares of common stock outstanding on a weighted average basis, diluted
for outstanding stock options, respectively.
# # #