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, 2000
Commission File No. 333-30795
RADIO ONE, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1166660
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5900 Princess Garden Parkway,
8th Floor
Lanham, Maryland 20706
(Address of principal executive offices)
(301) 306-1111
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 9, 2000
----- -----------------------------
Class A Common Stock, $.001 Par Value 22,788,933
Class B Common Stock, $.001 Par Value 2,867,463
Class C Common Stock, $.001 Par Value 3,132,458
Class D Common Stock, $.001 Par Value 56,689,176
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Form 10-Q
For the Quarter Ended June 30, 2000
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements 3
Consolidated Balance Sheets as of
December 31, 1999 and June 30, 2000 (Unaudited) 4
Consolidated Statements of Operations for the Three Months and
Six Months ended June 30, 1999 and 2000 (Unaudited) 5
Consolidated Statements of Changes in Stockholders' Equity for the
Six Months ended June 30, 2000 (Unaudited) 6
Consolidated Statements of Cash Flows for the
Six Months ended June 30, 1999 and 2000 (Unaudited) 7
Notes to Consolidated Financial Statements June 30, 1999 and 2000 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Changes in Securities 15
Item 3 Defaults upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
Signature 19
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(See pages 4-9 -- This page intentionally left blank.)
3
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Consolidated Balance Sheets
---------------------------
As of December 31, 1999, and June 30, 2000
------------------------------------------
December 31, June 30,
1999 2000
------------ -----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,221,000 $148,083,000
Investments, available for sale 256,390,000 204,924,000
Trade accounts receivable, net of allowance for doubtful
accounts of $2,429,000 and $3,465,000, respectively 19,833,000 26,670,000
Prepaid expenses and other 1,035,000 1,431,000
Deferred income taxes 984,000 985,000
------------ ------------
Total current assets 284,463,000 382,093,000
PROPERTY AND EQUIPMENT, NET 15,512,000 18,199,000
INTANGIBLE ASSETS, NET 218,460,000 363,134,000
OTHER ASSETS 9,101,000 138,866,000
------------ ------------
Total assets $527,536,000 $902,292,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,663,000 $ 3,007,000
Accrued expenses 6,941,000 8,924,000
Income taxes payable 1,532,000 1,879,000
Other current liabilities -- 2,248,000
------------ ------------
Total current liabilities 10,136,000 16,058,000
LONG-TERM DEBT AND DEFERRED INTEREST, NET OF CURRENT PORTION 82,626,000 84,357,000
DEFERRED INCOME TAX LIABILITY 14,518,000 24,150,000
------------ ------------
Total liabilities 107,280,000 124,565,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - Class A, $.001 par value, 30,000,000 shares authorized,
17,221,000 and 22,789,000 shares issued and outstanding 17,000 23,000
Common stock - Class B, $.001 par value, 150,000,000 shares authorized,
2,867,000 and 2,867,000 shares issued and outstanding 3,000 3,000
Common stock - Class C, $.001 par value, 150,000,000 shares authorized,
3,132,000 and 3,132,000 shares issued and outstanding 3,000 3,000
Common stock - Class D, $.001 par value, 150,000,000 shares authorized,
0 and 56,689,000 shares issued and outstanding -- 57,000
Accumulated comprehensive income (loss) adjustments 40,000 (87,000)
Additional paid-in capital 446,400,000 796,297,000
Accumulated deficit (26,207,000) (18,569,000)
------------ ------------
Total stockholders' equity 420,256,000 777,727,000
------------ ------------
Total liabilities and stockholders' equity $527,536,000 $902,292,000
============ ============
The accompanying notes are an integral part of these consolidated statements.
4
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Consolidated Statements of Operations
-------------------------------------
For the Three Months and Six Months Ended June 30, 1999 and 2000
----------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 2000 1999 2000
-------- -------- -------- --------
(Unaudited) (Unaudited)
REVENUE:
Broadcast revenue, including barter revenue of
$274,000, $429,000, $572,000 and $1,282,000
respectively $24,083,000 $37,231,000 $37,473,000 $62,355,000
Less: agency commissions 3,046,000 4,588,000 4,619,000 7,560,000
----------- ----------- ----------- -----------
Net broadcast revenue 21,037,000 32,643,000 32,854,000 54,795,000
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Program and technical 3,405,000 4,697,000 5,877,000 8,937,000
Selling, general and administrative 8,062,000 11,492,000 13,206,000 19,791,000
Corporate expenses 1,070,000 1,282,000 1,928,000 2,400,000
Stock-based compensation -- -- 225,000 --
Depreciation and amortization 4,347,000 7,182,000 7,475,000 12,671,000
----------- ----------- ----------- -----------
Total operating expenses 16,884,000 24,653,000 28,711,000 43,799,000
----------- ----------- ----------- -----------
Broadcast operating income 4,153,000 7,990,000 4,143,000 10,996,000
INTEREST EXPENSE, including amortization of
deferred financing costs 3,752,000 3,665,000 7,489,000 7,247,000
OTHER INCOME, net 78,000 5,470,000 141,000 9,707,000
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes 479,000 9,795,000 (3,205,000) 13,456,000
PROVISION FOR INCOME TAXES 225,000 4,218,000 476,000 5,818,000
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 254,000 $ 5,577,000 $(3,681,000) $ 7,638,000
=========== =========== =========== ===========
NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDERS $ (217,000) $ 5,577,000 $(5,157,000) $ 7,638,000
=========== =========== =========== ===========
BASIC AND DILUTED NET (LOSS) INCOME PER COMMON SHARE
APPLICABLE TO COMMON STOCKHOLDERS $ -- $ .07 $ (.13) $ .09
=========== =========== =========== ===========
SHARES USED IN COMPUTING BASIC NET (LOSS) INCOME PER
COMMON SHARE APPLICABLE TO COMMON STOCKHOLDERS 48,039,000 84,994,000 38,217,000 83,038,000
=========== =========== =========== ===========
SHARES USED IN COMPUTING DILUTED NET (LOSS) INCOME
PER COMMON SHARE APPLICABLE TO COMMON STOCK HOLDERS 48,039,000 85,256,000 38,217,000 83,316,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated statements.
5
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Consolidated Statements of Changes in Stockholders' Equity
----------------------------------------------------------
For the Six Months Ended June 30, 2000
--------------------------------------
Accumulated
Common Common Common Common Comprehensive
Stock Stock Stock Stock Comprehensive Income
Class A Class B Class C Class D Income Adjustments
------- ------- ------- ------- ------------- -----------
BALANCE, as of December 31, 1998 $ - $2,000 $3,000 $10,000 $ -
Comprehensive income:
Net income - - - - $ 133,000 -
Unrealized gain on securities - - - - 40,000 40,000
-----------
Comprehensive income: - - - - $ 173,000 -
===========
Preferred stock dividends - - - - -
Issuance of stock for
acquisition 2,000 1,000 - 6,000 -
Stock issued to an officer - - - - -
Conversion of warrants 5,000 - - 10,000 -
Issuance of common stock 10,000 20,000 -
------- ------ ------ ------- ---------
BALANCE, as of December 31, 1999 17,000 3,000 3,000 46,000 40,000
Comprehensive income:
Net income - - - - $ 7,638,000 -
Unrealized loss on securities - - - - (127,000) (127,000)
-----------
Comprehensive income - - - - $75,511,000 -
===========
Issuance of common stock 5,000 - - 10,000 -
Issuance of stock for acquisitions 1,000 - - 1,000 -
Employee exercise of options - - - - -
------- ------ ------ ------- ---------
BALANCE, as of June 30, 2000
(Unaudited) $23,000 $3,000 $3,000 $57,000 $ (87,000)
======= ====== ====== ======= =========
Additional Total
Paid-in Accumulated Stockholder's
Capital Deficit Equity
---------- ----------- -------------
BALANCE, as of December 31, 1998 $ (10,000) $(24,864,000) $ (24,859,000)
Comprehensive income:
Net income - 133,000 133,000
Unrealized gain on securities - - 40,000
Comprehensive income: - - -
Preferred stock dividends - (1,476,000) (1,476,000)
Issuance of stock for
acquisition 34,185,000 - 34,194,000
Stock issued to an officer 225,000 - 225,000
Conversion of warrants (15,000) - -
Issuance of common stock 411,969,000 - 411,999,000
------------ ------------ -------------
BALANCE, as of December 31, 1999 446,354,000 (26,207,000) 420,256,000
Comprehensive income:
Net income - 7,638,000 7,638,000
Unrealized loss on securities - - (127,000)
Comprehensive income - - -
Issuance of common stock 335,967,000 - 335,982,000
Issuance of stock for acquisitions 13,543,000 - 13,545,000
Employee exercise of options 433,000 - 433,000
------------ ------------ -------------
BALANCE, as of June 30, 2000
(Unaudited) $796,297,000 $(18,569,000) $ 777,727,000
============ ============ =============
The accompanying notes are an integral part of these consolidated statements.
6
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Consolidated Statements of Cash Flows
-------------------------------------
For the Six Months Ended June 30, 1999 and 2000
-----------------------------------------------
Six Months Ended June 30,
-------------------------
1999 2000
-------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (3,681,000) 7,638,000
Adjustments to reconcile net (loss) income to net cash from
operating activities:
Depreciation and amortization 7,475,000 12,671,000
Amortization of debt financing costs, unamortized discount
and deferred interest 2,180,000 2,014,000
Deferred income taxes and reduction in valuation reserve on
deferred taxes -- (244,000)
Non-cash compensation to officer 225,000 --
Loss on sale of investments -- 225,000
Non-cash advertising revenue in exchange for equity investments -- (658,000)
Effect of change in operating assets and liabilities-
Trade accounts receivable (3,160,000) (5,298,000)
Prepaid expenses and other (159,000) (306,000)
Other assets (98,000) 221,000
Accounts payable 2,059,000 1,110,000
Accrued expenses and other 1,143,000 1,517,000
------------ -------------
Net cash flows from operating activities 5,984,000 18,890,000
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,119,000) (1,397,000)
Equity investments (1,000,000) (884,000)
Proceeds from sale of available-for-sale investments, net -- 51,114,000
Deposits and payments for station purchases (38,911,000) (262,244,000)
------------ -------------
Net cash flows from investing activities (42,030,000) (213,411,000)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (69,476,000) (32,000)
Proceeds from debt issuances 16,000,000 --
Repayment of Senior Cumulative Redeemable Preferred Stock (28,160,000) --
Deferred financing costs (282,000) --
Proceeds from issuance of common stock, net of issuance costs 118,527,000 335,982,000
Proceeds from exercise of stock options -- 433,000
------------ -------------
Net cash flows from financing activities 36,609,000 336,383,000
------------ -------------
INCREASE IN CASH AND CASH EQUIVALENTS 563,000 141,862,000
CASH AND CASH EQUIVALENTS, beginning of year 4,455,000 6,221,000
------------ -------------
ASH AND CASH EQUIVALENTS, end of year $ 5,018,000 $ 148,083,000
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 5,207,000 $ 4,756,000
============ =============
Income taxes $ 312,000 $ 6,068,000
============ =============
The accompanying notes are an integral part of these consolidated statements.
7
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
June 30, 1999 and 2000
----------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business
Radio One, Inc. (a Delaware corporation referred to as Radio One) and its
subsidiaries, Radio One Licenses, Inc., WYCB Acquisition Corporation, Radio One
of Detroit, Inc., Allur-Detroit, Inc. and Allur Licenses, Inc. (Delaware
corporations), Broadcast Holdings, Inc. (a Washington, D.C., corporation), Bell
Broadcasting Company (a Michigan corporation), Radio One of Atlanta, Inc. and
its wholly owned subsidiaries, ROA Licenses, Inc., and Dogwood Communications,
Inc. (Delaware corporations), and its wholly owned subsidiary, Dogwood Licenses,
Inc. (a Delaware corporation), Radio One of Charlotte, LLC (a Delaware entity)
and its wholly owned subsidiaries Davis Broadcasting of Charlotte, Inc., Radio
One of North Carolina, Inc., and Radio One of Augusta, Inc. (Delaware
corporations) (collectively referred to as the Company) were organized to
acquire, operate and maintain radio broadcasting stations. The Company owns and
operates radio stations in the Washington, D.C.; Baltimore, Maryland;
Philadelphia, Pennsylvania; Detroit, Michigan; Kingsley, Michigan; Atlanta,
Georgia; Cleveland, Ohio; St. Louis, Missouri; Richmond, Virginia; Boston,
Massachusetts; Augusta, Georgia; Charlotte, North Carolina; and Indianapolis,
Indiana, markets. The Company also operates radio stations in Richmond, Virginia
and Boston, Massachusetts, through time brokerage agreements. The Company's
operating results are significantly affected by its market share in the markets
where it owns or operates stations.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Radio
One, Inc. and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The
accompanying consolidated financial statements are presented on the accrual
basis of accounting in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Interim Financial Statements
The interim consolidated financial statements included herein for Radio One,
Inc. and subsidiaries have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. In
management's opinion, the interim financial data presented herein include all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations.
Results for interim periods are not necessarily indicative of results to be
expected for the full year. It is suggested that these consolidated financial
statements be read in conjunction with the Company's December 31, 1999 financial
statement and notes thereto included in the Company's annual report on Form
10-K.
8
2. ACQUISITIONS:
On June 8, 2000, the Company completed the acquisition of WHHH-FM, licensed to
Indianapolis, Indiana, WBKS-FM, licensed to Greenwood, Indiana; WYJZ-FM,
licensed to Lebanon, Indiana; and W53AV, a low-power television station licensed
to Indianapolis, Indiana, for approximately $30.0 million in cash and 441,000
shares of Class A Common Stock. The acquisition resulted in the recording of
approximately $38.9 million of intangible assets.
On June 7, 2000, the Company completed the acquisition of the stock of Davis
Broadcasting, Inc., which owns and operates radio stations WTHB(AM) and
WFXA-FM, licensed to Augusta, Georgia; WAEG-FM, licensed to Evans, Georgia;
WAKB-FM, licensed to Wrens, Georgia; WAEJ-FM, licensed to Waynesboro, Georgia;
and WCCJ-FM, licensed to Harrisburg, North Carolina, for approximately $20.0
million in cash and approximately 57,000 shares of Class A Common Stock and
115,000 shares of Class D Common Stock. The acquisition resulted in the
recording of approximately $23.9 million of intangible assets.
On February 28, 2000, the Company completed the acquisition of WPLY-FM, located
in the Philadelphia, Pennsylvania market, for approximately $80.0 million. The
acquisition of WPLY-FM resulted in the recording of approximately $78.7 million
of intangible assets.
In March 2000, the Company entered into an agreement to acquire 12 radio
stations in seven markets for approximately $1.3 billion. The Company expects to
finance these acquisitions with available cash and other third-party financings.
3. PUBLIC OFFERINGS:
In July 2000, the Company completed an offering of $310.0 million of 310,000 6
1/2% Convertible Preferred Securities, at $1,000 per security, convertible into
Class D common stock.
In March 2000, the Company completed a public offering of 5.0 million shares of
Class A common stock at $70.00 per share. The proceeds from this offering, net
of offering costs, was approximately $336.0 million.
4. STOCK SPLIT:
On May 12, 2000, the Company's Board of Directors declared a three-for-one stock
dividend of Class D Common Stock payable to shareholders of record as of May 30,
2000. All per share data in the accompanying unaudited financial statement has
been restated to reflect this stock dividend.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included in this Quarterly
Report and the audited financial statements and Management's Discussion and
Analysis contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
RESULTS OF OPERATIONS
Comparison of periods ended June 30, 2000 to the periods ended June 30, 1999
(all periods are unaudited - all numbers in 000s except per share data).
Three months Three months Six months Six months
ended ended ended ended
June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- ------------- -------------
STATEMENT OF OPERATIONS DATA:
REVENUE:
Broadcast revenue $ 24,083 $ 37,231 $ 37,473 $ 62,355
Less: Agency commissions 3,046 4,588 4,619 7,560
-------- -------- -------- --------
Net broadcast revenue 21,037 32,643 32,854 54,795
-------- -------- -------- --------
OPERATING EXPENSES:
Programming and technical 3,405 4,697 5,877 8,937
Selling, G&A 8,062 11,492 13,206 19,791
Corporate expenses 1,070 1,282 1,928 2,400
Stock-based compensation - - 225 -
Depreciation & amortization 4,347 7,182 7,475 12,671
-------- -------- -------- --------
Total operating expenses 16,884 24,653 28,711 43,799
-------- -------- -------- --------
Operating income 4,153 7,990 4,143 10,996
INTEREST EXPENSE 3,752 3,665 7,489 7,247
OTHER INCOME, net 78 5,470 141 9,707
-------- -------- -------- --------
Income (loss) before
provision for income taxes 479 9,795 (3,205) 13,456
PROVISION FOR INCOME TAXES 225 4,218 476 5,818
-------- -------- -------- --------
Net income (loss) $ 254 $ 5,577 $ (3,681) $ 7,638
======== ======== ======== ========
10
DILUTED PER SHARE DATA:
Net income (loss) per share $ - $ 0.07 $ (0.10) $ 0.09
Preferred dividends per share $ - $ - $ 0.04 $ -
Net income (loss) per share
applicable to common
shareholders $ - $ 0.07 $ (0.13) $ 0.09
After-tax cash flow per share $ 0.10 $ 0.14 $ 0.10 $ 0.24
BASIC PER SHARE DATA:
Net income (loss) per share $ - $ 0.07 $ (0.10) $ 0.09
Preferred dividends per share $ - $ - $ 0.04 $ -
Net income (loss) per share
applicable to common
shareholders $ - $ 0.07 $ (0.13) $ 0.09
After-tax cash flow per share $ 0.10 $ 0.14 $ 0.10 $ 0.24
OTHER DATA:
Broadcast cash flow (a) $ 9,570 $ 16,454 $ 13,771 $ 26,067
Broadcast cash flow margin 45.5% 50.4% 41.9% 47.6%
EBITDA (b) $ 8,500 $ 15,172 $ 11,843 $ 23,667
EBITDA margin (b) 40.4% 46.5% 36.0% 43.2%
After-tax cash flow (c) $ 4,601 $ 12,277 $ 3,794 $ 19,726
Weighted average shares outstanding
- basic (d) 48,039 84,994 38,217 83,038
Weighted average shares outstanding
- diluted (d) 48,039 85,256 38,217 83,316
Net broadcast revenue increased to approximately $32.6 million for the
quarter ended June 30, 2000 from approximately $21.0 million for the quarter
ended June 30, 1999 or 55%. Net broadcast revenue increased to approximately
$54.8 million for the six months ended June 30, 2000 from approximately $32.9
million for the six months ended June 30, 1999 or 67%. This increase in net
broadcast revenue was the result of continuing broadcast revenue growth in all
of the Company's markets in which it has operated for at least one year as the
Company benefited from historical ratings increases at certain of its radio
stations, improved power ratios at these stations as well as industry growth in
each of these markets. Additional revenue gains were derived from the Company's
mid-1999 acquisitions in Cleveland and in Richmond (where the Company also
operates stations under a time brokerage agreement), as well as the more recent
acquisitions of radio stations in Philadelphia, Charlotte, Indianapolis and
Augusta, Georgia.
Operating expenses excluding depreciation, amortization and stock-based
compensation increased to approximately $17.5 million for the quarter ended June
30, 2000 from approximately $12.5 million for the quarter ended June 30, 1999 or
40%. Operating expenses excluding depreciation, amortization and stock-based
compensation increased to approximately $31.1 million for the six months ended
June 30, 2000 from approximately $21.0 million for the six months ended June 30,
1999 or 48%. This increase in expenses was related to the Company's rapid
expansion within all of the markets in which it operates including increased
variable costs associated with increased revenue, as well as start-up and
expansion expenses in its newer markets as well as higher costs associated with
operating as a public company.
Broadcast operating income increased to approximately $8.0 million for
the quarter ended June 30, 2000 from approximately $4.2 million for the quarter
ended June 30, 1999 or 90.5%. Broadcast operating income increased to
approximately $11.0 million for the six months ended June 30, 2000 from
approximately $4.1 million for the six months ended June 30, 1999 or 168.3%.
This increase was
11
attributable to proportionately higher revenue as described above partially
offset by higher depreciation and amortization expenses associated with the
Company's several acquisitions made in 1999 and 2000.
Interest expense decreased to approximately $3.7 million for the
quarter ended June 30, 2000 from approximately $3.8 million for the quarter
ended June 30, 1999 or 3%. Interest expense decreased to approximately $7.2
million for the six months ended June 30, 2000 from approximately $7.5 million
for the six months ended June 30, 1999 or 4%. This decrease relates primarily to
the pay-down of debt under the Company's bank credit facility with proceeds
raised in follow-on equity offerings in November 1999 and March 2000.
Other income (almost exclusively interest income) increased to
approximately $5.5 million for the quarter ended June 30, 2000 from
approximately $0.1 million for the quarter ended June 30, 1999 or 5,400%. Other
income (almost exclusively interest income) increased to approximately $9.7
million for the six months ended June 30, 2000 from approximately $0.1 million
for the six months ended June 30, 1999 or 9,600%. This increase was due to the
Company's high cash and investment balances following its follow-on equity
offerings in November 1999 and March 2000 as well as cash generated from
operations.
Income before provision for income taxes increased to approximately
$9.8 million for the quarter ended June 30, 2000 from approximately $0.5 million
for the quarter ended June 30, 1999 or 1,860%. Income before provision for
income taxes increased to approximately $13.5 million for the six months ended
June 30, 2000 from a loss of approximately $3.2 million for the six months ended
June 30, 1999. This increase was due to higher operating income enhanced by
higher interest income, as described above.
Net income increased to approximately $5.6 million for the quarter
ended June 30, 2000 from $0.3 million for the quarter ended June 30, 1999 or
1,767%. Net income increased to approximately $7.6 million for the six months
ended June 30, 2000 from a loss of approximately $3.7 million for the six months
ended June 30, 1999. This increase in net income for the quarter was due to
higher income before provision for income taxes partially offset by an increased
provision for income taxes.
Broadcast cash flow increased to approximately $16.5 million for the
quarter ended June 30, 2000 from approximately $9.6 million for the quarter
ended June 30, 1999 or 72%. Broadcast cash flow increased to approximately $26.1
million for the six months ended June 30, 2000 from approximately $13.8 million
for the six months ended June 30, 1999 or 89%. This increase was attributable to
the increases in broadcast revenue partially offset by higher operating expenses
as described above.
Earnings before interest, taxes, depreciation, and amortization
(EBITDA), and excluding stock-based compensation expense, increased to
approximately $15.2 million for the quarter ended June 30, 2000 from
approximately $8.5 million for the quarter ended June 30, 1999 or 79%. Earnings
before interest, taxes, depreciation, and amortization, and excluding stock-
based compensation expense, increased to approximately $23.7 million for the six
months ended June 30, 2000 from approximately $11.8 million for the six months
ended June 30, 1999 or 101%. This increase was attributable to the increase in
broadcast revenue and interest income partially offset by higher operating
expenses and higher corporate expenses partially associated with the costs of
operating as a public company.
After-tax cash flow increased to approximately $12.3 million for the
quarter ended June, 30, 2000 from approximately $4.6 million for the quarter
ended June 30, 1999. After-tax cash flow increased to approximately $19.7
million for the six months ended June, 30, 2000 from approximately $3.8 million
for the six months ended June 30, 1999. This increase was attributable to the
increase in operating income and interest income partially offset by higher
interest charges associated with the financings of various acquisitions as well
as the provision for income taxes, as described above.
(a) "Broadcast cash flow" is defined as broadcast operating income plus
corporate expenses (including stock-based compensation) and depreciation
and amortization of both tangible and intangible assets.
(b) "EBITDA" is defined as earnings before interest, taxes, depreciation,
amortization and stock-based compensation.
12
(c) "After-tax cash flow" is defined as income before income taxes and
extraordinary items plus depreciation, amortization and stock-based
compensation, less the current income tax provision.
(d) As of June 30, 2000 the Company had 85,478,030 shares of Common Stock
outstanding.
LIQUIDITY AND CAPITAL RESOURCES
The capital structure of the Company consists of the Company's
outstanding long-term debt and stockholders' equity. The stockholders' equity
consists of common stock, additional paid-in capital and accumulated deficit.
The Company's balance of cash and cash equivalents was approximately $6.2
million as of December 31, 1999. The Company's balance of cash and cash
equivalents was approximately $148.1 million as of June 30, 2000. This increase
resulted primarily from the Company's stronger cash flow from operating
activities during the first six months of 2000 as well as the Company's
follow-on public offering on March 8, 2000 from which it raised approximately
$336.0 million, partially offset by cash paid for the acquisition of WPLY-FM on
February 28, 2000, the acquisition of Davis Broadcasting, Inc. on June 7, 2000,
the acquisition of three radio stations and one low power television station in
the Indianapolis market on June 8, 2000, and an escrow deposit on the pending
acquisition of 12 stations from Clear Channel Communications, Inc. and AMFM,
Inc. At June 30, 2000 the entire amount of $100.0 million remained available
(based on various covenant restrictions) to be drawn down from the Company's
bank credit facility. In general, the Company's primary source of liquidity is
cash provided by operations and, to the extent necessary, on undrawn commitments
available under the Company's bank credit facility.
On July 17, 2000 the Company amended and restated its credit agreement
with respect to the existing bank credit facility. Upon consummation of, and
contingent upon the Clear Channel/AMFM acquisition, the agreement provides for a
new facility under which the Company can borrow up to $750.0 million from a
group of banking institutions. The new bank credit facility contains covenants
limiting the Company's ability to incur additional debt and additional liens,
make dividends and other payments with respect to the Company's equity
securities, make new investments and sell assets. This new facility also
requires compliance with financial tests based on financial position and results
of operations, including a leverage ratio, an interest coverage ratio and a
fixed charge coverage ratio, all of which could effectively limit the Company's
ability to borrow or otherwise raise funds in the credit and capital markets.
Net cash flows from operating activities increased to approximately
$18.9 million for the six months ended June 30, 2000 from approximately $6.0
million for the six months ended June 30, 1999 or 215%. This increase was due to
a higher net income resulting from increased revenue and interest income
partially offset by higher depreciation and amortization charges associated with
the various acquisitions made by the Company in the past year and a higher
provision for income taxes as compared to the first six months of 1999. Non-cash
expenses of depreciation and amortization increased to approximately $12.7
million for the six months ended June 30, 2000 from approximately $7.5 million
for the six months ended June 30, 1999 or 69% due to various acquisitions made
by the Company within the past year.
Net cash flows used in investing activities increased to approximately
$213.4 million for the six months ended June 30, 2000 compared to approximately
$42.0 million for the six months ended June 30, 1999 or 408%. During the six
months ended June 30, 2000 the Company acquired radio station WPLY-FM in the
Philadelphia, Pennsylvania market for approximately $80.0 million. The Company
also acquired six radio stations in the Charlotte, North Carolina and Augusta,
Georgia markets through an acquisition of the stock of Davis Broadcasting, Inc.
for approximately $20.0 million in cash and approximately 57,000 shares of Class
A Common Stock and 115,000 shares of Class D Common Stock, and three radio
stations and one low power television station in the Indianapolis, Indiana
market from Shirk, Inc. and IBL, L.L.C. for approximately $30.0 million in cash
and 441,000 shares of Class A Common Stock. The Company also made an escrow
deposit of approximately $130.3 million on the anticipated acquisition of 12
radio stations in seven markets from Clear Channel/AMFM. Also during the six
months ended June 30, 2000 the Company made purchases of capital equipment
totaling approximately $1.4 million.
Net cash flows from financing activities was approximately $336.4
million for the six months
13
ended June 30, 2000 compared to approximately 36.6 million for the six months
ended June 30, 1999 or 819%. During the six months ended June 30, 2000, the
Company completed a public offering of common stock that raised net proceeds of
approximately $336.0 million. A portion of the proceeds was used to fund the
escrow deposit and acquisitions mentioned above, with the balance to be used in
part for general operating expenses and to fund future acquisitions.
As a result of the aforementioned, cash and cash equivalents increased
by $141.9 million during the six months ended June 30, 2000 compared to an
approximate $0.6 million increase during the six months ended June 30, 1999.
14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time engaged in legal proceedings
incidental to its business. The Company does not believe that any legal
proceedings that it is currently engaged in, either individually or in the
aggregate, will have a material adverse effect on the Company.
Item 2. Changes in Securities
On June 7, 2000, the Company issued approximately 57,000 shares of
Class A Common Stock and 115,000 shares of Class D Common Stock to Gregory A.
Davis. The shares of stock of the Company were issued in partial consideration
for shares of stock of Davis Broadcasting, Inc., a company controlled by Mr.
Davis, and which was the owner of six radio stations in the Augusta, Georgia and
Charlotte, North Carolina markets. The issuance was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.
On June 8, 2000, the Company issued 441,000 shares of Class A Common
Stock to Shirk, Inc. a company owned and controlled by William Shirk and William
Mays. The shares of stock of the Company were issued in partial consideration
for the assets of Shirk, Inc. which was the owner of one radio station in the
Indianapolis, Indiana market. The issuance was exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On April 28, 2000, the Company held a Special Meeting of its holders of
Common Stock pursuant to a Notice of Special Meeting of Stockholders and Proxy
Statement dated April 5, 2000, a copy of which has been filed previously with
the Securities and Exchange Commission. Stockholders were asked to vote upon the
proposal to amend the Company's Amended and Restated Certificate of
Incorporation to:
a) eliminate the Company's 15% Series A Cumulative Redeemable
Preferred Stock and 15% Series B Cumulative Redeemable
Preferred Stock;
b) authorize the issuance of Blank Check Preferred Stock;
c) authorize the issuance of Class D Non-Voting Common Stock;
d) increase the number of authorized shares of the Class A, Class
B, and Class C Common Stock;
e) provide the holders of Class A Common Stock with the right to
convert such shares to shares of Class D Common Stock; and
f) make certain other conforming changes to the Amended and
Restated Certificate of Incorporation, including
simplification of the provisions relating to amendment of the
Amended and Restated Certificate of Incorporation.
The holders of Class A Common Stock did not approve the provisions
increasing the authorized shares of Class A Common Stock and providing the right
to convert shares of Class A Common Stock to Class D Common Stock. All remaining
aspects of the proposal to amend the Amended and Restated Certificate of
Incorporation were adopted by a majority of the holders of Common Stock. The
results of the vote tabulation are as follows:
15
For Against Abstain
--- ------- -------
Class A 4,762,141 7,322,167 204
Class B 28,618,430 0 0
Class C 3,121,048 0 0
Item 5. Other Information
On February 28, 2000 the Company acquired the assets of radio station
WPLY-FM in the Philadelphia, Pennsylvania market, for approximately $80.0
million.
On March 8, 2000 the Company completed an offering of 5,000,000 shares
of Class A Common Stock at an offering price of $70.00 per share. From this
offering, the Company received net proceeds of approximately $336.0 million
after deducting offering costs.
On March 11, 2000 the Company entered into an agreement to acquire from
Clear Channel Communications, Inc. and AMFM, Inc. the assets of 12 radio
stations located in seven markets in the United States for approximately $1.3
billion.
On May 12, 2000 the Company's Board of Directors declared a
three-for-one stock split in the form of a stock dividend payable to
shareholders of record as of May 30, 2000.
On June 7, 2000 the Company completed the acquisition of Davis
Broadcasting, Inc. through which it acquired six radio stations in the
Charlotte, North Carolina and Augusta, Georgia markets, for approximately $20.0
million in cash and approximately 57,000 shares of Class A Common Stock and
115,000 shares of Class D Common Stock.
On June 8, 2000 the Company completed the acquisition of three radio
stations and one low-power television station located in the Indianapolis,
Indiana market, for approximately $30.0 million in cash and 441,000 shares of
Class A Common Stock .
On July 11, 2000 the Company completed a private placement of $310.0
million of convertible preferred securities.
On July 17, 2000 the Company entered into a $750.0 million bank credit
facility.
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS
3.1 Amended and Restated Certificate of Incorporation of
Radio One, Inc. (dated as of May 4, 2000), as filed
with the State of Delaware on May 9, 2000
(incorporated by reference to Radio One's Quarterly
Report on Form 10-Q for the period ended March 31,
2000 (File No. 000-25969; Film No. 631638)).
3.2 Amended and Restated By-laws of Radio One, Inc.,
amended as of March 17, 2000 (incorporated by
reference to Radio One's Annual Report on Form 10-K
for the period ended December 31, 1999 (File No.
000-25969; Film No. 582596)).
16
3.3 Certificate Of Designations, Rights and Preferences
of the 6 1/2% Convertible Preferred Securities
Remarketable Term Income Deferrable Equity Securities
(HIGH TIDES) of Radio One, Inc., as filed with the
State of Delaware on July 13, 2000.
4.1 Indenture dated as of May 15, 1997 among Radio One,
Inc., Radio One Licenses, Inc. and United States
Trust Company of New York (incorporated by reference
to Radio One's Annual Report on Form 10-K for the
period ended December 31, 1997 (File No. 333-30795;
Film No. 98581327)).
4.2 First Supplemental Indenture dated as of June 30,
1998, to Indenture dated as of May 15, 1997, by and
among Radio One, Inc., as Issuer and United States
Trust Company of New York, as Trustee, by and among
Radio One, Inc., Bell Broadcasting Company, Radio One
of Detroit, Inc., and United States Trust Company of
New York, as Trustee (incorporated by reference to
Radio One's Current Report on Form 8-K filed July 13,
1998 (File No. 333-30795; Film No. 98665139)).
4.3 Second Supplemental Indenture dated as of December
23, 1998, to Indenture dated as of May 15, 1997, by
and among Radio One, Inc., as Issuer and United
States Trust Company of New York, as Trustee, by and
among Radio One, Inc., Allur-Detroit, Allur Licenses,
Inc., and United States Trust Company of New York, as
Trustee (incorporated by reference to Radio One's
Current Report on Form 8-K filed January 12, 1999
(File No. 333-30795; Film No. 99504706)).
4.7 Standstill Agreement dated as of June 30, 1998 among
Radio One, Inc., the subsidiaries of Radio One, Inc.,
United States Trust Company of New York and the other
parties thereto (incorporated by reference to Radio
One's Quarterly Report on Form 10-Q for the period
ended June 30, 1998 (File No. 333-30795; Film No.
98688998)).
4.9 Stockholders Agreement dated as of March 2, 1999
among Catherine L. Hughes and Alfred C. Liggins, III
(incorporated by reference to Radio One's Quarterly
Report on Form 10-Q for the period ended June 30,
1999 (File No. 000-25969; Film No. 99686684)).
4.10 Registration Rights Agreement, dated as of July 14,
2000, by and among Radio One, Inc., and Credit Suisse
First Boston Corporation, Deutsche Bank Securities
Inc., Morgan Stanley & Co. Incorporated, Bank of
America Securities LLC, and First Union Securities,
Inc., as the Initial Purchases of Radio One, Inc.'s 6
1/2% Convertible Preferred Securities Remarketable
Term Income Deferrable Equity Securities (HIGH
TIDES).
4.11 Remarketing Agreement, dated as of July 14, 2000, by
and among Radio One, Inc., American Stock Transfer &
Trust Co., as Tender Agent and Credit Suisse First
Boston Corporation, as Remarketing Agent, for Radio
One, Inc.'s 6 1/2% Convertible Preferred Securities
Remarketable Term Income Deferrable Equity Securities
(HIGH TIDES).
4.12 Global Security Certificate for Radio One, Inc.'s
6 1/2% Convertible Preferred Securities Remarketable
Term Income Deferrable Equity Securities (HIGH
TIDES).
17
10.58 Asset Purchase Agreement dated as of March 11, 2000
relating to the acquisition of KMJQ-FM and KBXX-FM,
licensed to Houston, Texas, WVCG(AM), licensed to
Coral Gables, Florida, WZAK-FM, licensed to
Cleveland, Ohio, WJMO (AM), licensed to Cleveland
Heights, Ohio, KKBT-FM, licensed to Los Angeles,
California, KBFB-FM, licensed to Dallas, Texas,
WJMZ-FM ,licensed to Anderson, South Carolina,
WFXC-FM, licensed to Durham, North Carolina, WFXK-FM,
licensed to Tarboro, North Carolina, WNNL-FM,
licensed to Fuquay-Varina, North Carolina and
WQOK-FM, licensed to South Boston, Virginia
(incorporated by reference to Radio One's Quarterly
Report on Form 10-Q for the period ended March 31,
2000 (File No. 000-25969; Film No. 631638)).
10.59 Agreement and Plan of Merger dated as of March 11,
2000 relating to the acquisition of WCCJ-FM, licensed
to Harrisburg, North Carolina, WFXA-FM and WTHB (AM),
licensed to Augusta, Georgia, WAKB-FM, licensed to
Wrens, Georgia, WAEG-FM, licensed to Evans, Georgia
and WAEJ-FM, licensed to Waynesboro, Georgia
(incorporated by reference to Radio One's Quarterly
Report on Form 10-Q for the period ended March 31,
2000 (File No. 000-25969; Film No. 631638)).
10.60 Asset Purchase Agreement dated as of March 11, 2000
relating to the acquisition of WHHH-FM, licensed to
Indianapolis, Indiana, WBKS-FM, licensed to
Greenwood, Indiana, WYJZ-FM, licensed to Lebanon,
Indiana and W53AV, licensed to Indianapolis, Indiana
(incorporated by reference to Radio One's Quarterly
Report on Form 10-Q for the period ended March 31,
2000 (File No. 000-25969; Film No. 631638)).
10.61 Purchase Agreement, dated as of July 10, 2000, by and
among Radio One, Inc., and Credit Suisse First Boston
Corporation, Deutsche Bank Securities Inc., Morgan
Stanley & Co. Incorporated, Bank of America
Securities LLC, and First Union Securities, Inc., as
the Initial Purchases of Radio One, Inc.'s 6 1/2%
Convertible Preferred Securities Remarketable Term
Income Deferrable Equity Securities (HIGH TIDES).
27.1 Financial data schedule (EDGAR version only).
18
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
----------------------------------------------------
August 11, 2000 Scott R. Royster
Executive Vice President and Chief Financial Officer
(Principal Accounting Officer)
19