SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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,
7th Floor
Lanham, Maryland 20706
(Address of principal executive offices)
(301) 306-1111
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___
----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 2001
----- -----------------------------
Class A Common Stock, $.001 Par Value 22,529,334
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 58,345,644
1
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Form 10-Q
For the Quarter Ended March 31, 2001
TABLE OF CONTENTS
-----------------
Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements 3
Consolidated Balance Sheets as of 4
December 31, 2000 (Audited) and March 31, 2001 (Unaudited)
Consolidated Statements of Operations for the Three Months 5
ended March 31, 2000 and 2001 (Unaudited)
Consolidated Statements of Changes in Stockholders' Equity for the 6
Year ended December 31, 2000 (Audited) and for the
Three Months ended March 31, 2001 (Unaudited)
Consolidated Statements of Cash Flows for the 7
Three Months ended March 31, 2000 and 2001 (Unaudited)
Notes to Consolidated Financial Statements March 31, 2000 and 2001 8
Item 2 Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities and Use of Proceeds 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
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, 2000, AND MARCH 31, 2001
-------------------------------------------
December 31, March 31,
2000 2001
-------------- --------------
ASSETS (Unaudited)
------
CURRENT ASSETS:
Cash and cash equivalents $ 20,879,000 $ 24,245,000
Trade accounts receivable, net of allowance for doubtful
accounts of $5,506,000 and $5,650,000, respectively 46,883,000 36,565,000
Prepaid expenses and other 6,557,000 5,127,000
Income tax receivable 2,476,000 1,750,000
Deferred tax asset 2,187,000 2,476,000
-------------- ---------------
Total current assets 78,982,000 70,163,000
PROPERTY AND EQUIPMENT, net 33,376,000 32,543,000
INTANGIBLE ASSETS, net 1,637,180,000 1,610,175,000
OTHER ASSETS 15,680,000 16,799,000
-------------- ---------------
Total assets $1,765,218,000 $1,729,680,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 17,683,000 $ 17,137,000
Accrued expenses 14,127,000 16,233,000
Other current liabilities 4,696,000 4,083,000
-------------- ---------------
Total current liabilities 36,506,000 37,453,000
LONG-TERM DEBT AND DEFERRED INTEREST, net of current
portion 646,956,000 634,541,000
SWAP AGREEMENTS LIABILITY -- 9,733,000
DEFERRED INCOME TAX LIABILITY 24,687,000 17,632,000
-------------- ---------------
Total liabilities 708,149,000 699,359,000
-------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.001 par value, 1,000,000 shares
authorized and 310,000 shares issued and outstanding; liquidation
preference of $1,000 per share, plus cumulative dividends at 6.5%
per year, which were $9,236,0000 as of December 31, 2000, and
$5,038,000 as of March 31, 2001 -- --
Common stock - Class A, $.001 par value, 30,000,000 shares
authorized, 22,789,000 and 22,529,000 shares issued and
outstanding 23,000 23,000
Common stock - Class B, $.001 par value, 30,000,000 shares
authorized, 2,867,000 shares issued and outstanding 3,000 3,000
Common stock - Class C, $.001 par value, 30,000,000 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, 58,246,000 and 58,345,000 shares issued and
outstanding 58,000 58,000
Accumulated comprehensive income adjustments -- (6,570,000)
Stock subscriptions receivable (9,005,000) (9,005,000)
Additional paid-in capital 1,105,681,000 1,105,714,000
Accumulated deficit (39,694,000) (59,905,000)
-------------- ---------------
Total stockholders' equity 1,057,069,000 1,030,321,000
-------------- ---------------
Total liabilities and stockholders' equity $1,765,218,000 $1,729,680,000
============== ==============
The accompanying notes are an integral part of these consolidated balance
sheets.
4
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001
--------------------------------------------------
Three Months Ended
March 31,
--------------------------------
2000 2001
------------- ------------
(Unaudited)
REVENUE:
Broadcast revenue, including barter revenue of $853,000 and $645,000,
respectively $25,124,000 $ 54,273,000
Less: agency commissions 2,972,000 6,348,000
----------- ------------
Net broadcast revenue 22,152,000 47,925,000
----------- ------------
OPERATING EXPENSES:
Program and technical 4,240,000 8,856,000
Selling, general and administrative 8,299,000 17,116,000
Corporate expenses 1,118,000 1,840,000
Deferred compensation -- 238,000
Depreciation and amortization 5,489,000 31,524,000
----------- ------------
Total operating expenses 19,146,000 59,574,000
----------- ------------
Operating income (loss) 3,006,000 (11,649,000)
INTEREST EXPENSE, including amortization of deferred financing costs 3,582,000 15,701,000
GAIN ON SALE OF ASSETS, net -- 4,272,000
OTHER INCOME, net 4,237,000 596,000
----------- ------------
Income (loss) before provision for income taxes 3,661,000 (22,482,000)
(PROVISION) BENEFIT FOR INCOME TAXES (1,600,000) 7,309,000
----------- ------------
NET INCOME (LOSS) $ 2,061,000 $(15,173,000)
=========== ============
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 2,061,000 $(20,211,000)
=========== ============
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE APPLICABLE TO COMMON
STOCKHOLDERS $ .03 $ (.23)
=========== ============
SHARES USED IN COMPUTING BASIC NET INCOME (LOSS) PER COMMON SHARE APPLICABLE TO
COMMON STOCKHOLDERS 73,608,000 86,801,000
=========== ============
SHARES USED IN COMPUTING DILULTED NET INCOME (LOSS) PER
COMMON SHARE APPLICABLE TO COMMON STOCKHOLDERS 73,908,000 86,801,000
=========== ============
The accompanying notes are an integral part of these consolidated statements.
5
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2000, AND FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------------
2001 (UNAUDITED)
----------------
Accumulated
Common Common Common Common Convertible Comprehensive
Stock Stock Stock Stock Preferred Comprehensive Income
Class A Class B Class C Class D Stock Income Adjustments
-------- ------- ------- -------- ----------- -------------- -------------
BALANCE, as of
December 31, 1999 $17,000 $3,000 $3,000 $46,000 $ -- $ 40,000
Comprehensive income:
Net loss -- -- -- -- -- $ (4,251,000) --
Unrealized loss on securities -- -- -- -- -- (40,000) (40,000)
------------
Comprehensive loss $ (4,291,000)
============
Preferred stock dividends -- -- -- -- -- --
Issuance of stock
for acquisition 1,000 -- -- 1,000 -- --
Stock sold to officers -- -- -- 1,000 -- --
Issuance of common stock 5,000 -- -- 10,000 -- --
Employee exercise of options -- -- -- -- -- --
Issuance of preferred stock -- -- -- -- -- --
-------- ------ ------ ------- ----------- -------------
BALANCE, as of
December 31, 2000 23,000 3,000 3,000 58,000 -- --
Comprehensive income:
Net loss -- -- -- -- -- $(15,173,000) --
Cumulative effect of change in
accounting principle, net of
taxes -- -- -- -- -- (2,630,000) (2,630,000)
Valuation adjustment for swap
fair value, net of taxes -- -- -- -- -- (3,940,000) (3,940,000)
------------
Comprehensive loss $(21,743,000)
============
Preferred stock dividends -- -- -- -- -- --
Employee exercise of options -- -- -- -- -- --
Preferred stock issuance costs -- -- -- -- -- --
-------- ------ ------ ------- ----------- ------------
BALANCE, as of March 31, 2001 (Unaudited)
$23,000 $3,000 $3,000 $58,000 $ -- $(6,570,000)
======== ======= ======= ======= =========== ============
Stock Additional Total
Subscriptions Paid-In Accumulated Stockholders'
Receivable Capital Deficit Equity
------------- -------------- ------------- --------------
BALANCE, as of
December 31, 1999 $ -- $ 446,354,000 $ (26,207,000) $ 420,256,000
Comprehensive income:
Net loss -- -- (4,251,000) (4,251,000)
Unrealized loss on securities -- -- -- (40,000)
Comprehensive loss
Preferred stock dividends -- -- (9,236,000) (9,236,000)
Issuance of stock
for acquisition -- 13,543,000 -- 13,545,000
Stock sold to officers (9,005,000) 9,004,000 -- --
Issuance of common stock -- 335,967,000 -- 335,982,000
Employee exercise of options -- 878,000 -- 878,000
Issuance of preferred stock -- 299,935,000 -- 299,935,000
------------- -------------- ------------- --------------
BALANCE, as of
December 31, 2000 (9,005,000) 1,105,681,000 (39,694,000) 1,057,069,000
Comprehensive income:
Net loss -- -- (15,173,000) (15,173,000)
Cumulative effect of change in
accounting principle, net of
taxes -- -- -- (2,630,000)
Valuation adjustment for swap
fair value, net of taxes -- -- -- (3,940,000)
Comprehensive loss
Preferred stock dividends -- -- (5,038,000) (5,038,000)
Employee exercise of options -- 42,000 -- 42,000
Preferred stock issuance costs -- (9,000) -- (9,000)
------------- -------------- ------------- --------------
BALANCE, as of March 31, 2001 (Unaudited) $ (9,005,000) $1,105,714,000 $ (59,905,000) $1,030,321,000
============= ============== ============= ==============
The accompanying notes are an integral part of these consolidated statements.
6
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001
--------------------------------------------------
Three Months Ended
March 31,
-----------------------------------
2000 2001
------------- --------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,061,000 $(15,173,000)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization 5,489,000 31,524,000
Amortization of debt financing costs, unamortized discount and deferred interest 1,258,000 478,000
Deferred income taxes and reduction in valuation reserve on deferred taxes (313,000) (5,948,000)
Deferred compensation to officers -- 238,000
Non-cash advertising revenue in exchange for equity investments (322,000) --
Gain on sale of assets, net -- (4,272,000)
Effect of change in operating assets and liabilities-
Trade accounts receivable 4,191,000 10,327,000
Income tax receivable -- 726,000
Prepaid expenses and other 59,000 279,000
Other assets (113,000) (240,000)
Accounts payable (168,000) (546,000)
Accrued expenses and other 211,000 1,755,000
------------- --------------
Net cash flows from operating activities 12,353,000 19,148,000
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (568,000) (1,651,000)
Equity investments (114,000) (210,000)
Purchase of available-for-sale investments, net (18,037,000) --
Proceeds from sale of assets -- 69,254,000
Deposits and payments for station purchases (210,231,000) (65,670,000)
------------- --------------
Net cash flows from investing activities (228,950,000) 1,723,000
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (18,000) (12,500,000)
Proceeds from issuance of common stock, net of issuance costs 335,982,000 --
Proceeds from exercise of stock option -- 42,000
Payment of preferred stock issuance costs -- (9,000)
Payment of preferred stock dividends -- (5,038,000)
------------- --------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 335,964,000 (17,505,000)
------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS 119,367,000 3,366,000
CASH AND CASH EQUIVALENTS, beginning of year 6,221,000 20,879,000
------------- --------------
CASH AND CASH EQUIVALENTS, end of year $ 125,588,000 $ 24,245,000
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 656,000 $ 12,450,000
============= ==============
Income taxes $ 2,051,000 $ 163,000
============= ==============
The accompanying notes are an integral part of these consolidated statements.
7
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
MARCH 31, 2000 AND 2001
-----------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Organization and Business
- -------------------------
Radio One, Inc. (a Delaware corporation referred to as Radio One) and
subsidiaries (collectively referred to as the Company) were organized to
acquire, operate and maintain radio broadcasting stations. The Company owns
and/or operates radio stations in the Washington, D.C.; Baltimore, Maryland;
Philadelphia, Pennsylvania; Detroit and Kingsley, Michigan; Atlanta and Augusta,
Georgia; Cleveland, Ohio; St. Louis, Missouri; Richmond, Virginia; Boston,
Massachusetts; Charlotte and Raleigh, North Carolina; Indianapolis, Indiana;
Houston and Dallas, Texas; Miami, Florida; and Los Angeles, California markets.
The Company has been making and may continue to make significant acquisitions of
radio stations, which may require it to incur new debt. The service of this
debt could require the Company to make significant debt service payments. The
Company's operating results are significantly affected by its share of the
audience in markets where it has stations.
Basis of Presentation
- ---------------------
The accompanying consolidated financial statements include the accounts of Radio
One, Inc. and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The accompanying
consolidated financial statements are presented on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Interim Financial Statements
- ----------------------------
The interim consolidated financial statements included herein for Radio One,
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 accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations.
8
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, 2000,
financial statement and notes thereto included in the Company's annual report on
Form 10-K.
2. ACQUISITIONS AND DIVESTITURES:
------------------------------
In March 2001, the Company completed the sale of KJOI-AM (formerly KLUV-AM),
licensed to Dallas, Texas, for approximately $16.0 million.
In February 2001, the Company acquired the intellectual property of WTLC-FM,
licensed to Indianapolis, Indiana, for approximately $7.2 million.
In February 2001, the Company acquired KTXQ-FM (formerly KDGE-FM), licensed to
Gainesville, Texas, for approximately $52.5 million.
In February 2001, the Company completed the sale of WDYL-FM licensed to Chester,
Virginia, and radio stations WJMZ-FM and WPEK-FM, licensed to Anderson and
Seneca, South Carolina, respectively, for approximately $52.5 million and WARV-
FM licensed to Petersburg, Virginia for approximately $1.0 million.
In February 2001, the Company entered into an agreement to acquire and/or
operate 16 radio stations in five markets for approximately $190.0 million in a
combination of cash, stock and the assumption of outstanding debt. The Company
expects to finance this acquisition with common stock of the Company, cash drawn
from its bank credit facility and/or free cash balances.
In February 2001, the Company acquired Nash Communications, which owned WILD-AM,
licensed to Boston, Massachusetts, for approximately $5.0 million.
In February 2001, the Company entered into an agreement to sell the assets of
WJZZ-AM, licensed to Kingsley, Michigan, for approximately $225,000.
In January 2001, the Company entered into an agreement to acquire WTLC-AM,
licensed to Indianapolis, Indiana, for approximately $1.1 million. During
February 2001, the Company started operating WTLC-AM under a time brokerage
agreement. The acquisition closed in April 2001.
3. RECENT ACCOUNTING PRONOUNCEMENTS:
---------------------------------
The Company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133),
as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133" and SFAS
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" on January 1, 2001. This standard requires the Company to recognize
all derivatives, as defined in the Statement, on the balance sheet at fair
value. Derivatives, or any portion thereof, that are not effective hedges must
be adjusted to fair value through income. If derivatives are effective hedges,
depending on the nature of the hedges, changes in the fair value of the hedged
assets, liabilities or firm commitments must be adjusted through other
comprehensive income, a component of stockholder's equity.
During 2000, the Company entered into swap agreements to reduce exposure to
interest rate fluctuations on certain debt commitments. The Company recorded an
adjustment of approximately $2.6 million, net of an income tax benefit of
approximately $1.2 million on January 1, 2001, to record the liability related
to the fair value of these swap agreements. This amount was recorded as a
cumulative effect of change in
9
accounting principle, which is included as a component of accumulated
comprehensive income adjustments in the accompanying balance sheet. The Company
then recorded a $3.9 million valuation adjustment, net of an income tax benefit
of approximately $1.9 million, to record the swaps at fair market value as of
March 31, 2001. This amount is also recorded as a component of accumulated
comprehensive income adjustments in the accompanying balance sheet.
4. SUBSEQUENT EVENTS:
------------------
Subsequent to March 31, 2001, the Company agreed to grant an aggregate of 1.25
million options to purchase Class D Common Stock, at the then fair market value,
to its Chairperson, Chief Executive Officer and Chief Operating Officer.
Also, subsequent to March 31, 2001, the Company sold 1.5 million shares of its
Class D Common Stock, at the then fair market value, to its Chief Executive
Officer, in exchange for a full recourse note for the purchase of the shares.
On May 4, 2001, the Company announced the sale of $300 million of 8 7/8% Senior
Subordinated Notes due July 2011.
10
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, 2000.
RESULTS OF OPERATIONS
- ---------------------
Comparison of periods ended March 31, 2001 to the periods ended March 31, 2000
(all periods are unaudited - all numbers in 000s except per share data).
Three months Three months
ended ended
March 31, March 31,
2000 2001
----------------------- ----------------------
STATEMENT OF OPERATIONS DATA:
REVENUE:
Broadcast revenue $ 25,124 $ 54,273
Less: Agency commissions 2,972 6,348
----------------------- ----------------------
Net broadcast revenue 22,152 47,925
----------------------- ----------------------
OPERATING EXPENSES:
Programming and technical 4,240 8,856
Selling, G&A 8,299 17,116
Corporate expenses 1,118 1,840
Deferred compensation - 238
Depreciation & amortization 5,489 31,524
----------------------- ----------------------
Total operating expenses 19,146 59,574
----------------------- ----------------------
Operating income (loss) 3,006 (11,649)
INTEREST EXPENSE 3,582 15,701
GAIN ON SALE OF ASSETS, net - 4,272
OTHER INCOME, net 4,237 596
----------------------- ----------------------
Income (loss) before
provision (benefit) for income taxes 3,661 (22,482)
PROVISION (BENEFIT) FOR INCOME TAXES 1,600 (7,309)
----------------------- ----------------------
Net income (loss) $ 2,061 $(15,173)
======================= ======================
Net income (loss) applicable
to common shareholders $ 2,061 $(20,211)
======================= ======================
11
DILUTED PER SHARE DATA:
Net income (loss) per share $ 0.03 $ (0.17)
Net income (loss) per share applicable to common shareholders
$ 0.03 $ (0.23)
BASIC PER SHARE DATA:
Net income (loss) per share $ 0.03 $ (0.17)
Net income (loss) per share applicable to common shareholders
$ 0.03 $ (0.23)
OTHER DATA:
Broadcast cash flow (a) $ 9,613 $21,953
Broadcast cash flow margin 43.4% 45.8%
EBITDA (b) $ 8,495 $20,113
EBITDA margin 38.3% 42.0%
After-tax cash flow (c) $ 7,450 $ 1,720
Capital expenditures 568 1,651
Weighted average shares outstanding - basic (d) 73,608 86,801
Weighted average shares outstanding - diluted (e) 73,917 87,107
SAME STATION RESULTS (f):
Net revenue $22,152 $23,203
Broadcast cash flow $ 9,613 $10,297
Broadcast cash flow margin 43.4% 44.4%
Net broadcast revenue increased to approximately $47.9 million for the quarter
ended March 31, 2001 from approximately $22.2 million for the quarter ended
March 31, 2000 or 116%. This increase in net broadcast revenue was the result
of continuing broadcast revenue growth in the Company's markets in which it has
operated for at least one year due to ratings increases and improved power
ratios at certain of its radio stations as well as from revenue contributed from
radio stations acquired within the last year, particularly the stations acquired
from Clear Channel Communications and AMFM.
Operating expenses excluding depreciation, amortization and stock-based
compensation increased to approximately $27.8 million for the quarter ended
March 31, 2001 from approximately $13.7 million for the quarter ended March 31,
2000 or 103%. 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.
Broadcast operating loss was approximately $11.6 million for the quarter ended
March 31, 2001 compared to broadcast operating income of $3.0 million for the
quarter ended March 31, 2000. The decrease in net broadcast operating income for
the quarter was attributable to higher revenue as described above more than
offset by higher depreciation and amortization expenses associated with the
Company's several acquisitions made in 2000.
Interest expense increased to approximately $15.7 million for the quarter
ended March 31, 2001 from approximately $3.6 million for the quarter ended March
31, 2000 or 336%. This increase relates
12
primarily to additional borrowings made in the third quarter of 2000 in
conjunction with the acquisition of radio stations from Clear Channel
Communications and AMFM.
Other income (almost exclusively interest income) decreased to approximately
$0.6 million for the quarter ended March 31, 2001 from approximately $4.2
million for the quarter ended March 31, 2000. This decrease was due to the
Company's lower cash and investment balances following its acquisition of $1.3
billion worth of radio stations in August, 2000.
Loss before provision for income taxes increased to approximately $22.5
million for the quarter ended March 31, 2001 from income before provision for
income taxes of approximately $3.7 million for the quarter ended March 31, 2000.
This decrease in income before provision for income taxes was due to higher
depreciation and amortization charges, higher interest expense and lower
interest income primarily due to the closing of the acquisition of $1.3 billion
worth of radio stations in August, 2000, partially offset by a net gain of $4.3
million on the sale of various radio stations completed during the first quarter
of 2001.
Net loss was approximately $15.2 million for the quarter ended March 31, 2001
compared to net income of approximately $2.1 million for the quarter ended March
31, 2000. This decrease in net income for the quarter was due to items
described above, partially offset by a benefit for income taxes.
Broadcast cash flow increased to approximately $22.0 million for the quarter
ended March 31, 2001 from approximately $9.6 million for the quarter ended March
31, 2000 or 129%. 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
deferred compensation expense, increased to approximately $20.1 million for the
quarter ended March 31, 2001 from approximately $8.5 million for the quarter
ended March 31, 2000 or 136%. This increase was attributable to the increase in
broadcast revenue partially offset by higher operating expenses and higher
corporate expenses associated with the growth of the company.
(a) "Broadcast cash flow" is defined as broadcast operating income plus
corporate expenses (including deferred compensation) and depreciation and
amortization of both tangible and intangible assets.
(b) "EBITDA" is defined as earnings before interest, taxes, depreciation,
amortization and deferred compensation.
(c) "After-tax cash flow" is defined as income before income taxes and
extraordinary items plus depreciation, amortization and deferred
compensation, less the current income tax liability and preferred stock
dividends.
(d) As of March 31, 2001 the Company had 86,800,813 shares of Common Stock
outstanding on a weighted average basis for the quarter.
(e) As of March 31, 2001 the Company had 87,107,145 shares of Common Stock
outstanding on a weighted average basis for the quarter, diluted for
outstanding stock options. However, the per share amounts are the same as
those based on basic shares outstanding because of the anti-dilutive effect
of these options shares, other than for after-tax cash flow. After-tax
cash flow per share data was calculated using the basic and diluted
weighted average shares outstanding, however, the per share amounts were
the same because of the relatively minor differences between the two
weighted average share amounts.
(f) Same station results include results only for those stations owned and/or
operated by the Company for the full one-year period in question.
13
LIQUIDITY AND CAPITAL RESOURCES
--------------------------------
The Company's primary source of liquidity is cash provided by operations
and, to the extent necessary, undrawn commitments available under the Company's
bank credit facility. The Company's ability to borrow in excess of the
commitments set forth in our credit agreement is limited by the terms of the
indenture governing the Company's 12% Senior Subordinated Notes due 2004.
Additionally, such terms place restrictions on Radio One with respect to the
sale of assets, liens, investments, dividends, debt repayments, capital
expenditures, transactions with affiliates, consolidation and mergers, and the
issuance of equity interests among other things.
The Company has used, and will continue to use, a significant portion of
the Company's capital resources to consummate acquisitions. These acquisitions
were or will be funded from (i) the Company's bank credit facility (ii) the
proceeds of the historical offerings of the Company's common stock and preferred
stock, (iii) the proceeds of future common and /or preferred stock, and /or debt
offerings, and (iv) internally generated cash flow.
The Company's balance of cash and cash equivalents was approximately $20.9
million as of December 31, 2000. The Company's balance of cash and cash
equivalents was approximately $24.2 million as of March 31, 2001. This increase
resulted primarily from the Company's strong cash flow from operating activities
during the three months of 2001. The Company has entered into a bank credit
facility under which the Company has borrowed $500.0 million in term loans and
may borrow up to $250.0 million on a revolving basis, and which the Company has
historically drawn down as capital was required, primarily for acquisitions. As
of March 31, 2001, the Company has drawn down $50.0 million from its revolving
bank credit facility, leaving $200.0 million in availability.
On May 4, 2001, the Company announced the sale of $300 million of 8 7/8%
Senior Subordinated Notes due July 2011. A portion of the proceeds from the sale
of the notes will be used to partially repay amounts outstanding under the
Company's senior credit facilities. In addition, the Company will use a portion
of the proceeds to redeem the Company's 12% Senior Subordinated Notes due 2004.
Net cash flows from operating activities increased to approximately $19.1
million for the three months ended March 31, 2001 from approximately $12.4
million for the three months ended March 31, 2000 or 54%. This increase was due
to lower net income more than offset by lower trade accounts receivable and
higher non-cash expenses. Non-cash expenses of depreciation and amortization
increased to approximately $31.5 million for the three months ended March 31,
2001 from approximately $5.5 million for the three months ended March 31, 2000
or 473% due primarily to acquisitions in 2000, particularly the acquisition of
stations from Clear Channel Communications and AMFM.
Net cash flows from investing activities increased to approximately $1.7
million for the three months ended March 31, 2001 compared to approximately
$229.0 million decrease for the three months ended March 31, 2000. During the
three months ended March 31, 2001 the Company acquired WILD-AM, in the Boston,
Massachusetts market for approximately $5.0 million. The Company acquired the
intellectual property of WTLC-FM, in the Indianapolis, Indiana market for
approximately $7.2 million. The Company also acquired KTXQ-FM (formerly
KDGE-FM), in the Dallas, Texas market for approximately $52.5 million. Also
during the three months ended March 31, 2001 the Company completed the sale of
KJOI-AM (formerly KLUV-AM) in Dallas, Texas, for approximately $16.0 million.
The Company also completed the sale of WDYL-FM in Richmond, Virginia, and two
radio stations, WJMZ-FM and WPEK-FM, in the Greenville, South Carolina market
for approximately $52.5 million and WARV-FM in the Richmond, Virginia market for
approximately $1.0 million. The Company made purchases of capital equipment
totaling approximately $1.7 million.
Net cash flows for financing activities decreased to approximately $17.5
million for the three
14
months ended March 31, 2001 compared to an increase of approximately $336.0
million for the three months ended March 31, 2000. The decrease was primarily
driven by a $12.5 million repayment of our credit facility and a preferred stock
dividend payment of approximately $5.0 million.
As a result of the aforementioned, cash and cash equivalents increased by
$3.4 million during the three months ended March 31, 2001 compared to an
increase of approximately $119.4 during the three months ended March 31, 2000.
This discussion may include 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,
granting of rights to acquire certain portions of the acquired company's or
radio station's operations, variable economic conditions and consumer tastes, as
well as restrictions imposed by existing debt and future payment obligations.
Important factors that could cause actual results to differ materially are
described in the Company's reports on Forms 10-K and 10-Q and other filings with
the Securities and Exchange Commission.
15
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 and Use of Proceeds
Not Applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
3.1 Amended and Restated Certificate of Incorporation of Radio One,
Inc. (dated as of May 4, 2000), as filed with the State of
Delaware on May 9, 2000 (incorporated by reference to Radio
One's Quarterly Report on Form 10-Q for the period ended March
31, 2000 (File No. 000-25969; Film No. 631638)).
3.1.1 Certificate of Amendment (dated as of September 21, 2000) of the
Amended and Restated Certificate of Incorporation of Radio One,
Inc. (dated as of May 4, 2000), as filed with the State of
Delaware on September 21, 2000 (incorporated by reference to
Radio One's Current Report on Form 8-K filed October 6, 2000
(File No. 000-25969; Film No. 736375)).
3.2 Amended and Restated By-laws of Radio One, Inc., amended as of
September 15, 2000 (incorporated by reference to Radio One's
Current Report on Form 8-K filed October 6, 2000 (File No. 000-
25969; Film No. 736375)).
3.3 Certificate Of Designations, Rights and Preferences of the
6 1/2% Convertible Preferred Securities Remarketable Term Income
Deferrable Equity Securities (HIGH TIDES) of Radio One, Inc., as
filed with the State of Delaware on July 13, 2000 (incorporated
by reference to Radio One's Quarterly Report on Form 10-Q for
the period ended June 30, 2000 (File No. 000-25969; Film No.
698190)).
16
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)
(incorporated by reference to Radio One's Quarterly Report on
Form 10-Q for the period ended June 30, 2000 (File No. 000-
25969; Film No. 698190)).
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) (incorporated by reference to Radio One's Quarterly
Report on Form 10-Q for the period ended June 30, 2000 (File No.
000-25969; Film No. 698190)).
4.12 Global Security Certificate for Radio One, Inc.'s 6 1/2%
Convertible Preferred Securities Remarketable Term Income
Deferrable Equity Securities (HIGH TIDES) (incorporated by
reference to Radio One's Quarterly Report on Form 10-Q for the
period ended June 30, 2000 (File No. 000-25969; Film No.
698190)).
17
4.13 Registration Rights Agreement, dated February 7, 2001, by and
between Radio One, Inc. and certain stockholders of Blue Chip
Broadcasting, Inc. listed therein (incorporated by reference to
Exhibit 4.1 of Radio One's Current Report on Form 8-K filed
February 8, 2001 (File No. 000-25969; Film No. 1528282)).
(b) REPORTS ON FORM 8-K
The Company filed a Form 8-K dated February 2, 2001 disclosing that it had
entered into two separate agreements to acquire a radio station and the
intellectual property rights of another radio station in the Indianapolis,
Indiana market and to divest a radio station in the Dallas, Texas market.
The Company filed a Form 8-K dated February 7, 2001 disclosing that it had
divested two radio stations in the Greenville, South Carolina market and two
radio stations in the Richmond, Virginia market and acquired one radio station
in the Dallas, Texas market.
The Company filed a Form 8-K dated February 8, 2001 disclosing that it had
executed an agreement to acquire Blue Chip Broadcasting, Inc. for approximately
$190 million in a combination of cash and stock. No financial reports were
filed at that time.
The Company filed a Form 8-K/A dated April 9, 2001 to amend its Form 8-K
filed on February 8, 2001. The Company added the Financial Statements of the
Business Acquired required by Item 7(a) and the Pro Forma Financial Information
required by Item 7(b).
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
-------------------------------------
May 14, 2001 Scott R. Royster
Executive Vice President and Chief Financial Officer
(Principal Accounting Officer)
19