21.03.2007 20:39:00
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Radio One, Inc. Reports Preliminary Fourth Quarter Results
Radio One, Inc. (NASDAQ: ROIAK and ROIA) today reported preliminary
results for the quarter ended December 31, 2006. The financial
information included in this press release is preliminary, unaudited,
and subject to change as discussed under "Stock
Option Review” below. Net broadcast revenue
was approximately $89.2 million, a decrease of 2% from the same period
in 2005. Station operating income1 was
approximately $39.7 million, a decrease of 9% from the same period in
2005. Adjusted EBITDA2 was approximately $33.5
million, a decrease of 9% from the same period in 2005. Operating income
was approximately $29.4 million, a decrease of 2% from the same period
in 2005. Net loss applicable to common stockholders3
was approximately $22.9 million or $0.23 per diluted share.
All of the results reported in this press release are presented without
taking into account any adjustments that will be required in connection
with the anticipated restatement and should be considered preliminary
until Radio One files its Form 10-K for the year ended December 31,
2006. See "Stock Option Review”
below.
Alfred C. Liggins, III, Radio One’s CEO and
President stated, "This was another soft
quarter for the radio industry and while Radio One underperformed the
industry, our problems are truly isolated to one market - Los Angeles.
Given the significant changes we implemented at our LA station late last
year, I am confident that that market will be a growth driver for us in
the not too distant future. The early research is very positive and we
have a great team in place out there. Overall, I am optimistic that, in
the back half of 2007, we will have an opportunity to resume our
historical out-performance of the radio industry.” RESULTS OF OPERATIONS
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2006
2005
2006
2005
(unaudited) (unaudited) (in thousands) (in thousands)
STATEMENT OF OPERATIONS DATA:
NET BROADCAST REVENUE
$ 89,164
$ 90,552
$ 367,017
$ 368,658
OPERATING EXPENSES:
Programming and technical
19,553
19,606
79,490
69,547
Selling, general and administrative
29,889
27,268
117,046
115,174
Corporate selling, general and administrative
5,161
6,447
25,140
22,587
Non-cash compensation
291
307
1,238
1,758
Stock-based compensation
807
-
5,433
-
Depreciation and amortization
4,062
6,779
15,832
16,251
Total operating expenses
59,763
60,407
244,179
225,317
Operating income
29,401
30,145
122,838
143,341
INTEREST INCOME
359
522
1,393
1,428
INTEREST EXPENSE
18,853
16,911
72,932
63,010
EQUITY IN LOSS OF AFFILIATED COMPANY
772
641
2,341
1,846
IMPAIRMENT OF LONG-LIVED ASSETS
63,285
-
63,285
-
OTHER EXPENSE, NET
10
206
279
83
(Loss) income before (benefit) provision for income taxes, minority
interest in income of subsidiaries and income (loss) from
discontinued operations
(53,160)
12,909
(14,606)
79,830
(BENEFIT) PROVISION FOR INCOME TAXES
(21,303)
3,164
(3,537)
27,003
MINORITY INTEREST IN INCOME OF SUBSIDIARIES
1,083
154
3,003
1,868
Net (loss) income from continuing operations
(32,940)
9,591
(14,072)
50,959
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax
10,075
(59)
9,938
(429)
Net (loss) income
(22,865)
9,532
(4,134)
50,530
Preferred stock dividends
-
-
-
2,761
Net (loss) income applicable to common stockholders
$
(22,865)
$
9,532
$
(4,134)
$
47,769
Weighted average shares outstanding –
basic
98,711
100,387
98,709
103,750
Weighted average shares outstanding –
diluted
98,711
100,479
98,709
103,894
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2006
2005
2006
2005
(unaudited) (unaudited) (in thousands, except per share
data) (in thousands, except per share
data)
PER SHARE DATA – basic and diluted:
Net (loss) income per share
$
(0.23)
$
0.10
$
(0.04)
$
0.49
Dividends per share
-
-
-
0.03
Net (loss) income per share applicable to common stockholders
$
(0.23)
$
0.10
$
(0.04)
$
0.46
SELECTED OTHER DATA:
Station operating income
$
39,722
$
43,678
$
170,481
$
183,937
Station operating income margin (% of net revenue)
45%
48%
46%
50%
Station operating income reconciliation:
Net (loss) income
$
(22,865)
$
9,532
$
(4,134)
$
50,530
Plus: Depreciation and amortization
4,062
6,779
15,832
16,251
Plus: Corporate expenses
5,161
6,447
25,140
22,587
Plus: Non-cash compensation
291
307
1,238
1,758
Plus: Stock-based compensation
807
-
5,433
-
Plus: Equity in loss of affiliated company
772
641
2,341
1,846
Plus: (Benefit) provision for income taxes
(21,303)
3,164
(3,537)
27,003
Plus: Minority interest in income of subsidiaries
1,083
154
3,003
1,868
Plus: Interest expense
18,853
16,911
72,932
63,010
Plus: Impairment of long-lived assets
63,285
-
63,285
-
Plus: Other expense
10
206
279
83
Less: Income (loss) from discontinued operations, net of tax
10,075
(59)
9,938
(429)
Less: Interest income
359
522
1,393
1,428
Station operating income
$
39,722
$
43,678
$
170,481
$
183,937
Adjusted EBITDA
$
33,453
$
36,718
$
138,391
$
159,509
Adjusted EBITDA reconciliation:
Net (loss) income
$
(22,865)
$
9,532
$
(4,134)
$
50,530
Plus: Depreciation and amortization
4,062
6,779
15,832
16,251
Plus: (Benefit) provision for income taxes
(21,303)
3,164
(3,537)
27,003
Plus: Interest expense
18,853
16,911
72,932
63,010
Less: Interest income
359
522
1,393
1,428
EBITDA
$
(21,612)
$
35,864
$
79,700
$
155,366
Plus: Equity in loss of affiliated company
772
641
2,341
1,846
Plus: Minority interest in income of subsidiaries
1,083
154
3,003
1,868
Plus: Impairment of long-lived assets
63,285
-
63,285
-
Less: Income (loss) from discontinued operations, net of tax
10,075
(59)
9,938
(429)
Adjusted EBITDA
$
33,453
$
36,718
$
138,391
$
159,509
December 31,
December 31,
2006
2005
(unaudited)
SELECTED BALANCE SHEET DATA:
(in thousands)
Cash and cash equivalents
$
32,406
$
19,081
Intangible assets, net
1,978,261
2,004,875
Total assets
2,200,397
2,201,380
Total debt (including current portion)
937,531
952,520
Total liabilities
1,178,889
1,177,983
Total stockholders' equity
1,021,529
1,020,541
Current Amount
Outstanding
ApplicableInterest Rate (b)
(in thousands)
SELECTED LEVERAGE AND SWAP DATA:
Senior bank term debt (swap matures 6/16/2012)
$
25,000
5.97%
Senior bank term debt (swap matures 6/16/2010)
25,000
5.77%
Senior bank term debt (swap matures 6/16/2008)
25,000
5.63%
Senior bank term debt (swap matures 6/16/2007)
25,000
5.58%
Senior bank term debt (at variable rates) (a)
200,000
approximately 6.88%
Senior bank term debt (at variable rates) (a)
137,500
approximately 6.88%
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
1.50% and incorporated into the rate set forth above. This tranche is
not covered by swap agreements described in footnote (b). (b) Under its swap agreements, Radio One pays a fixed rate
plus a spread based on the Company’s
leverage, as defined in its credit agreement. As of December 31, 2006,
that spread was 1.50% and is incorporated into the applicable interest
rates set forth above.
Net broadcast revenue decreased to approximately $89.2 million for the
quarter ended December 31, 2006 from approximately $90.6 million for the
quarter ended December 31, 2005, or 2%. This decrease in net broadcast
revenue was due primarily to a significant decline in net broadcast
revenue at our Los Angeles radio station. Net broadcast revenue for
Reach Media also declined due primarily to the September 2006
discontinuation of the Tom Joyner television show, which originally
launched in October 2005. These declines were partially offset by growth
in our Baltimore, Cincinnati, Louisville and St. Louis markets, among
others, as well as from our news/talk network. Net broadcast revenue is
reported net of agency and outside sales representative commissions of
approximately $10.9 million and $11.0 million for the quarters ended
December 31, 2006 and 2005, respectively.
Operating expenses, excluding depreciation and amortization, stock-based
compensation and non-cash compensation, increased to approximately $54.6
million for the quarter ended December 31, 2006 from approximately $53.3
million for the quarter ended December 31, 2005, or 2%. The increase in
operating expenses resulted primarily from additional marketing and
promotional spending, higher talent and programming content costs and
additional music royalties expenses. The increase in operating expenses
were partially offset by decreases in costs associated with the Tom
Joyner television show which ended in September 2006, as well as
decreases in special events, contract labor, and legal and professional
spending. Operating expenses exclude expenses from discontinued
operations of approximately $125,000 and $635,000 for the quarters ended
December 31, 2006 and 2005, respectively.
Stock-based compensation expense was approximately $0.8 million for the
quarter ended December 31, 2006, compared to $0 for the quarter ended
December 31, 2005. The non-cash expense resulted from our January 1,
2006 adoption of Statement of Financial Accounting Standards ("SFAS”)
No. 123R, "Share-Based Payment.”
Depreciation and amortization expense decreased to approximately $4.1
million for the quarter ended December 31, 2006 from approximately $6.8
million for the quarter ended December 31, 2005, or 40%. This decrease
was due to less amortization of certain intangibles associated with the
February 2005 acquisition of 51% of the common stock of Reach Media.
During the fourth quarter of 2005, we completed the preliminary purchase
price allocation for the Reach Media acquisition, which included the
associated depreciation and amortization of acquired assets and
intangibles for the period since the acquisition.
Interest expense increased to approximately $18.9 million for the
quarter ended December 31, 2006 from approximately $16.9 million for the
quarter ended December 31, 2005, or 12%. This increase resulted
primarily from additional interest obligations associated with
additional borrowings throughout 2006 to fund partially the acquisitions
of radio stations WHHL-FM (formerly WRDA-FM), a radio station located in
the St. Louis metropolitan area, WMOJ-FM (formerly WIFE-FM), a radio
station located in the Cincinnati metropolitan area, and the
intellectual property of WMOJ-FM, also located in the Cincinnati
metropolitan area. Interest expense also increased due to higher market
interest rates on the variable portion of our debt.
Impairment of long-lived assets increased to approximately $63.3 million
for the quarter ended December 31, 2006 from $0 for the quarter ended
December 31, 2005. The increase in the impairment of long-lived assets
reflects a charge taken for the impairment of goodwill and radio
broadcasting licenses in our Los Angeles and Louisville markets.
The benefit for income taxes was approximately $21.3 million for the
quarter ended December 31, 2006 from an approximately $3.2 million
provision for the quarter ended December 31, 2005. As of December 31,
2006, our annual effective tax rate was a tax benefit rate of 24.2%.
Excluding the tax impact of adopting SFAS No. 123R, several state tax
law changes, the release of certain reserve contingencies, the tax
impact of the impairment of long-lived assets and the increase in
certain valuation allowances, our annual effective rate as of
December 31, 2006 was 40.3%.
Minority interest in income of subsidiaries increased to approximately
$1.1 million for the quarter ended December 31, 2006 from $154,000 for
the quarter ended December 31, 2005, or 603%. The increase in minority
interest in income of subsidiaries is due primarily to the improved net
income of Reach Media for the quarter ended December 31, 2006 compared
to the same period in 2005.
Income from discontinued operations, net of tax was approximately $10.1
million for the quarter ended December 31, 2006, compared to a loss from
discontinued operations, net of tax of $59,000 for the quarter ended
December 31, 2005. The income or loss from discontinued operations, net
of tax resulted from our December 2006 sale of the assets of WILD-FM, a
radio station located in the Boston metropolitan area to Entercom, LLC
for approximately $30.0 million in cash, for which we recognized a gain
of approximately $10.2 million.
Other pertinent financial information for the quarter ended December 31,
2006 includes capital expenditures of approximately $5.2 million,
compared to approximately $3.0 million for the quarter ended December
31, 2005. Additionally, as of December 31, 2006, we had total debt (net
of cash balances) of approximately $905.1 million.
On January 1, 2006, we adopted SFAS No. 123R, which resulted in an
increase in operating expenses of approximately $5.4 million for the
full-year of 2006.
Stock Option Review
As previously announced, we are reviewing our historical stock option
granting practices from May 5, 1999 (the date of our initial public
offering) to date, and have preliminarily concluded that the correct
measurement dates for certain stock option grants made by us differ from
the measurement dates previously used to account for such option grants.
Management is as yet unable to determine the amount of additional
non-cash compensation expense that should be recorded, the periods in
which such expense would be recorded, or the related tax impact. On
February 21, 2007, we filed a Form 8-K cautioning that the Company’s
financial statements and all earnings press releases and similar
communications issued by the Company for fiscal periods commencing on
and after January 1, 1999 should no longer be relied on.
The financial results presented in this press release will change as a
result of the completion of the review of the historical stock option
granting practices and the restatement of our historical financial
statements to record additional non-cash compensation expense.
Management does not expect that the restatement will have an impact on
current or previously reported revenues, cash flows, or total
stockholders’ equity, or a material impact on
2006 earnings.
Update on SEC Filings
At this time, we have neither completed our review of our historical
stock option granting practices nor reached final conclusions regarding
the amount of additional non-cash compensation expense we will have to
record, the periods in which such expense would be recorded or the
related tax impact of the correction of the stock option measurement
dates. Because we have not completed our review, we were unable to file
our annual report on Form 10-K for the year ended December 31, 2006 by
March 16, 2007, the date upon which the Form 10-K was due. We intend to
file our annual report on Form 10-K and restated financial statements as
soon as practicable after the completion of our review.
SEC Inquiry
We have received a letter of informal inquiry from the SEC regarding the
review of stock option accounting disclosed in our Form 8-K filed with
the SEC on February 21, 2007. The SEC’s
letter notes that the request should not be construed as any indication
by the SEC or its staff that a violation of the federal securities laws
has occurred nor should it be considered a reflection upon any person,
entity or security. We intend to cooperate with the SEC in this matter.
Radio One will hold a conference call to discuss its preliminary
unaudited results for the fourth quarter of 2006. This conference call
is scheduled for March 21, 2007 at 5:00 p.m. Eastern Time. Interested
parties should call 612-332-0637 at least five minutes prior to the
scheduled time of the call and provide the password "Radio
One.” The conference call will be recorded
and made available for replay from 8:30 p.m. Eastern Time the day of the
call, until 11:59 p.m. Eastern Time the following day. Interested
parties may listen to the replay by calling 320-365-3844; access code
867529. Access to live audio and replay of the conference call will also
be available on Radio One’s corporate website
at www.radio-one.com. The replay
will be made available on the website for the seven business days
following the call.
Radio One, Inc. (www.radio-one.com)
is the nation's seventh largest radio broadcasting company (based on
2005 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 approximately 14 million listeners every
week. Additionally, Radio One owns Magazine One, Inc. (d/b/a Giant
Magazine) (www.giantmag.com),
interests in TV One, LLC (www.tvoneonline.com),
a cable/satellite network programming primarily to African-Americans and
Reach Media, Inc. (www.blackamericaweb.com),
owner of the Tom Joyner Morning Show and other businesses associated
with Tom Joyner. Radio One also operates the only nationwide
African-American news/talk network on free radio and programs "XM 169
The POWER," an African-American news/talk channel, on XM Satellite Radio.
Notes: Forward-Looking Statements and Cautionary Note Regarding Financial
Results.
The preliminary financial results reported in this press release do not
take into account any adjustments or restatements that will be required
in connection with the ongoing review of Radio One’s
historical stock option grant practices. As previously disclosed, Radio
One’s financial statements, earnings releases
and similar communications relating to fiscal periods commencing with
the Company’s 1999 fiscal year should no
longer be relied upon and historical financial results are presented for
comparative purposes only. Until Radio One files its Annual Report on
Form 10-K for the year ended December 31, 2006, it will be required to
adjust the financial results for those periods to account for any
subsequent events that affect the preliminary estimated results included
in this press release and those results should be considered preliminary
until the Form 10-K is filed.
This press release includes other 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. Forward-looking statements
represent management’s current expectations
and are based upon information available to Radio One at the time of
this release. These forward-looking statements involve known and unknown
risks, uncertainties and other factors, some of which are beyond Radio
One’s control, that may cause the actual
results to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Important factors that could cause such differences include, but are not
limited to, the timing, results and final conclusions of the audit
committee’s review of Radio One’s
stock option grant practices; the determination of other restatement
items beyond non-cash compensation expense; tax issues or liabilities
related to adjustments to the measurement dates associated with Radio One’s
stock options; inability to accurately predict revenue and budget for
expenses for future periods; or other factors detailed in Radio One’s
filings with the Securities and Exchange Commission. Radio One does not
undertake to update any forward-looking statements.
If we become delinquent with our filings with the SEC, we may face
several adverse consequences.
As discussed above, we are reviewing our historical stock option
granting practices from May 5, 1999 to date, and have preliminarily
concluded that the correct measurement dates for certain stock option
grants made by us differ from the measurement dates previously used to
account for such option grants. Because we have not completed our
review, we have delayed filing our Annual Report on Form 10-K for the
year ended December 31, 2006 and, although we are working as quickly as
possible to complete our review and restatement, we cannot provide
assurance as to when these processes will be completed. If we are not
current with our filings with the SEC, investors in our securities may
not have the information required by SEC rules regarding our business
and financial condition with which to make decisions regarding
investment in our securities. In addition, until we are current with our
SEC filings, the SEC will not declare a registration statement covering
a public offering of securities effective under the Securities Act of
1933, and we will not be able to make offerings pursuant to existing
registration statements or pursuant to certain "private
placement” rules of the SEC under Regulation
D to any purchasers not qualifying as "accredited
investors.”
We also will not be eligible to use a "short
form” registration statement on Form S-3 to
make equity or debt offerings for a period of 12 months after the time
we become current in our filings. These restrictions could adversely
affect our ability to raise capital, as well as our business, financial
condition and results of operations. In addition, if we are not able to
make these filings, our credit rating and our ability to obtain
immediate and continued access to additional liquidity could be impaired.
The SEC has commenced an informal inquiry into our historical stock
option practices, the outcome of which could have a material adverse
effect on us.
The SEC is conducting an informal inquiry regarding the review of stock
option accounting disclosed in our Form 8-K filed with the SEC on
February 21, 2007. Other governmental agencies, such as the U.S. Attorney’s
Office, also might take action against us in response to or based on the
outcome of, or developments in, the SEC’s
informal inquiry. We cannot provide you with any assurance that we will
not be subject to adverse publicity, regulatory fines or penalties,
other contingent liabilities or other adverse reactions in connection
with this matter. Further, we cannot predict the ultimate resolution of
the inquiry or determine the ultimate effect on our financial condition
or results of operations; if the informal inquiry by the SEC escalates
into a formal civil proceeding, it could result in civil penalties,
disgorgement, and the imposition of mandatory governance guidelines or
other restrictions, all of which may have a material adverse effect on
us.
1 "Station operating
income” consists of net (loss) income before
depreciation and amortization, (benefit) provision for income taxes,
interest income, interest expense, equity in loss of affiliated company,
minority interest in income of subsidiaries, other expense, corporate
expenses, stock-based and non-cash compensation expenses, impairment of
long-lived assets and income (loss) from discontinued operations, net of
tax. 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
company’s 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
stock-based 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 (loss) income plus (1) depreciation, amortization,
(benefit) provision for income taxes, interest expense, equity in loss
of affiliated company, minority interest in income of subsidiaries and
impairment from long-lived assets and less (2) interest income and
income (loss) from discontinued operations, net of tax. Net (loss)
income before interest income, interest expense, (benefit) provision for
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 company’s
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 (benefit) provision for income tax expense, as well as our equity in
loss of our affiliated company, impairment from long-lived assets and
income (loss) from discontinued operations. 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, asset impairments or the results of
our affiliated company and minority interests in subsidiaries, as well
as the impact of discontinued operations. 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 Net loss applicable to common stockholders is
defined as net income minus dividends paid, if any.
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