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04.08.2005 13:00:00
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Radio One, Inc. Reports Record Second Quarter Results
Alfred C. Liggins, III, Radio One's CEO and President stated, "Ourfirst full quarter with Reach Media turned out to be another very goodone for Radio One. We handily outgrew our markets and posted solidresults across the board. Additionally, in June, we began to executeour stock repurchase program, which we expect to continue in theupcoming months. With Reach Media and TV One now firmly in placealongside our radio platform, we think that the Company will start tobenefit greatly from the sales, programming and promotional synergiesthat can be derived from cooperation across these three very powerfulbrands. I have never felt more optimistic about the future of RadioOne than I do today."
RESULTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
--------- -------- --------- ---------
(unaudited) (unaudited)
------------------ -------------------
(in thousands, (in thousands,
except per share except per share
data) data)
------------------ -------------------
STATEMENT OF OPERATIONS DATA:
NET BROADCAST REVENUE $101,525 $86,210 $178,534 $155,872
--------- -------- --------- ---------
OPERATING EXPENSES:
Programming and technical
(exclusive of non-cash
compensation shown
separately below) 17,790 13,395 33,397 27,020
Selling, general and
administrative 28,404 24,791 52,326 46,703
Corporate expenses
(exclusive of non-cash
compensation shown
separately below) 5,552 3,716 10,468 7,074
Non-cash compensation 502 594 909 1,517
Depreciation and
amortization 3,150 4,561 6,616 8,991
--------- -------- --------- ---------
Total operating expenses 55,398 47,057 103,716 91,305
--------- -------- --------- ---------
Operating income 46,127 39,153 74,818 64,567
INTEREST INCOME 271 585 743 1,307
INTEREST EXPENSE 17,240 9,748 29,669 19,723
OTHER INCOME (EXPENSE) 33 62 123 144
EQUITY IN NET LOSS OF
AFFILIATED COMPANY 304 1,431 763 3,798
--------- -------- --------- ---------
Income before provision
for income taxes and
minority interest 28,887 28,621 45,252 42,497
PROVISION FOR INCOME TAXES 8,525 11,162 15,095 16,247
MINORITY INTEREST IN INCOME
OF SUBSIDIARY 518 - 625 -
--------- -------- --------- ---------
Net income $19,844 $17,459 $29,532 $26,250
--------- -------- --------- ---------
Preferred stock dividend - 5,035 2,761 10,070
--------- -------- --------- ---------
Net income applicable to
common stockholders(4) $19,844 $12,424 $26,771 $16,180
========= ======== ========= =========
PER SHARE DATA - basic and
diluted:
Net income per share $0.19 $0.17 $0.28 $0.25
Preferred dividends per
share - 0.05 0.03 0.10
Net income per share
applicable to common
stockholders 0.19 0.12 0.25 0.15
SELECTED OTHER DATA:
Station operating income(1) $55,331 $48,024 $92,811 $82,149
Station operating income
margin (% of net revenue) 55% 56% 52% 53%
Station operating income
reconciliation:
Net income $19,844 $17,459 $29,532 $26,250
Plus: Depreciation and
amortization 3,150 4,561 6,616 8,991
Plus: Corporate expenses 5,552 3,716 10,468 7,074
Plus: Non-cash compensation 502 594 909 1,517
Plus: Equity in net loss of
affiliated company 304 1,431 763 3,798
Plus: Income taxes 8,525 11,162 15,095 16,247
Plus: Minority interest in
income of subsidiary 518 - 625 -
Plus: Interest expense 17,240 9,748 29,669 19,723
Less: Interest income 271 585 743 1,307
Less: Other income 33 62 123 144
--------- -------- --------- ---------
Station operating income $55,331 $48,024 $92,811 $82,149
--------- -------- --------- ---------
Adjusted EBITDA(2) $49,310 $43,776 $81,557 $73,702
Adjusted EBITDA
reconciliation:
Net income $19,844 $17,459 $29,532 $26,250
Plus: Depreciation and
amortization 3,150 4,561 6,616 8,991
Plus: Income taxes 8,525 11,162 15,095 16,247
Plus: Interest expense 17,240 9,748 29,669 19,723
Less: Interest income 271 585 743 1,307
--------- -------- --------- ---------
EBITDA $48,488 $42,345 $80,169 $69,904
Plus: Equity in net loss of
affiliated company 304 1,431 763 3,798
Plus: Minority interest in
net income of subsidiary 518 - 625 -
--------- -------- --------- ---------
Adjusted EBITDA $49,310 $43,776 $81,557 $73,702
--------- -------- --------- ---------
Free cash flow(3) $29,313 $28,044 $44,335 $43,369
Free cash flow
reconciliation:
Net income $19,844 $17,459 $29,532 $26,250
Plus: Depreciation and
amortization 3,150 4,561 6,616 8,991
Plus: Non-cash compensation 502 594 909 1,517
Plus: Non-cash interest
expense 2,703 424 3,162 848
Plus: Deferred tax provision 7,517 11,021 13,780 15,962
Plus: Equity in net loss of
affiliated company 304 1,431 763 3,798
Plus: Minority interest in
income of subsidiary 518 - 625 -
Less: Capital expenditures 5,225 2,411 8,291 3,927
Less: Preferred stock
dividends - 5,035 2,761 10,070
--------- -------- --------- ---------
Free cash flow $29,313 $28,044 $44,335 $43,369
--------- -------- --------- ---------
Weighted average shares
outstanding - basic(5) 105,568 104,954 105,480 104,907
Weighted average shares
outstanding - diluted(6) 105,733 105,546 105,655 105,553
June 30, December 31,
2005 2004
------------- -------------
(unaudited)
-------------
SELECTED BALANCE SHEET DATA: (in thousands)
---------------------------
Cash and cash equivalents $16,135 $10,391
Short term investments 3,000 10,000
Intangible assets, net 2,005,188 1,931,045
Total assets 2,199,019 2,111,141
Total debt (including current portion) 937,523 620,028
Total liabilities 1,135,409 782,696
Total stockholders' equity 1,062,088 1,328,445
Minority interest in subsidiary 1,522 -
Applicable
Current Amount Interest
Outstanding Rate (b)
--------------- -------------
(in thousands)
SELECTED LEVERAGE AND SWAP DATA:
Senior bank term debt (swap matures
6/16/2012) $25,000 5.72%
Senior bank term debt (swap matures
6/16/2010) 25,000 5.52%
Senior bank term debt (swap matures
6/16/2008) $25,000 5.38%
Senior bank term debt (swap matures
6/16/2007) 25,000 5.33%
Senior bank term debt (at variable approximately
rates) (a) 200,000 4.69%
Senior bank term debt (at variable approximately
rates) (a) 137,500 4.69%
8-7/8% senior subordinated notes (fixed
rate) 300,000 8.88%
6-3/8% senior subordinated notes (fixed
rate) 200,000 6.38%
(a) Subject to rolling 90-day LIBOR plus a spread currently at
1.25% and incorporated into the rate set forth above. This
tranche is not covered by the swap agreements described in
footnote (b).
(b) Under its swap agreement, Radio One pays a fixed rate plus
a spread based on the Company's leverage, as defined in
its credit agreement. As of June 30, 2005 that spread was
1.25% and is incorporated into the applicable interest
rates set forth above.
Net broadcast revenue increased to approximately $101.5 millionfor the quarter ended June 30, 2005 from approximately $86.2 millionfor the quarter ended June 30, 2004 or 18%. This increase resultedfrom the consolidation of the 2005 second quarter operating results ofReach Media, Inc. ("Reach Media"), and net broadcast revenue growth inmany of Radio One's markets, including Atlanta, Charlotte, Cleveland,Dallas, Houston, Indianapolis, Raleigh, and Washington DC. Netbroadcast revenue growth in these markets was partially offset byrevenue declines in other markets, including Baltimore, Detroit, andLos Angeles. Excluding the 2005 second quarter operating results ofReach Media, net broadcast revenue grew 7.1% for the three monthsended June 30, 2005. Net broadcast revenue is net of agencycommissions of approximately $13.0 million and $12.1 million for thequarters ended June 30, 2005 and 2004, respectively.
Operating expenses excluding depreciation, amortization andnon-cash compensation increased to approximately $51.7 million for thequarter ended June 30, 2005 from approximately $41.9 million for thequarter ended June 30, 2004 or 23%. This increase resulted primarilyfrom the consolidation of the 2005 second quarter operating results ofReach Media. This increase was also attributable to on-air talentexpenses, sales commissions and national rep fees associated withadditional revenue, music royalties, expenses associated with ourexpanded presence on the Internet, additional corporate staffcompensation, and additional professional fees.
Depreciation and amortization expense decreased to $3.2 millionfor the quarter ended June 30, 2005 from approximately $4.6 million, adecrease of approximately $1.4 million or 31%. The decrease isprimarily due to the completion of amortization of Radio One tradenames in late 2004, partially offset by additional depreciation foradditional capital expenditures made since the second quarter of 2004.
Interest expense increased to approximately $17.2 million for thequarter ended June 30, 2005 from approximately $9.7 million for thequarter ended June 30, 2004 or 77%. This increase relates primarily tothe write-off of approximately $2.1 million of deferred financingcosts associated with the June 2005 refinancing of our bank creditfacilities. The refinancing consisted of entering into $800.0 millionof new bank credit facilities, and the simultaneous borrowing of$437.5 million to retire our previous bank credit facilities. Also, inFebruary 2005 we issued $200.0 million of 6 3/8% senior subordinatednotes and borrowed $110.0 million under our previous credit facilitiesin order to fund the total redemption of our outstanding 6 1/2%Convertible Preferred Remarketable Term Income Deferrable EquitySecurities (HIGH TIDES) in the amount of $309.8 million, and theacquisition of 51% of the common stock of Reach Media. The Reach Mediaacquisition was also partially funded with $25.0 million borrowedunder our previous revolving facility and available cash.
Equity in net loss of affiliated company was approximately$304,000 for the quarter ended June 30, 2005, compared to an equityloss of approximately $1.4 million for the quarter ended June 30,2004, a decrease of approximately $1.1 million, or 79%. This decreaseresulted primarily from the modification of our methodology forestimating our equity in the operating results of TV One, LLC duringthe fourth quarter of 2004.
Income before provision for income taxes and minority interestincreased to approximately $28.9 million for the quarter ended June30, 2005 compared to approximately $28.6 million for the quarter endedJune 30, 2004 or 1%. This increase was due primarily to higheroperating income of approximately $7.0 million, a decrease in theequity in net loss of affiliated company of approximately $1.1million, both of which were offset by an increase of net interestexpense of approximately $7.8 million, as described above.
Provision for income taxes decreased to approximately $8.5 millionfor the quarter ended June 30, 2005 compared to approximately $11.2million for the quarter ended June 30, 2004, a decrease ofapproximately $2.7 million, or 24%. The provision for income taxesdecreased primarily due to a favorable change to an Ohio state tax lawthat was enacted on June 30, 2005. This decrease was also partiallyoffset by increases for the consolidation of the 2005 second quarteroperating results of Reach Media, an increase in the reserve forcontingencies, and an increase to the effective tax rate resultingfrom permanent differences between income subject to income tax forbook versus tax purposes. Excluding the decrease to the provision forthe Ohio tax law change and the increase to the reserve forcontingencies, the Company's effective tax rate as of June 30, 2005 is40.2%, compared to 39.2% as of June 30, 2004.
Minority interest in income of subsidiary of $518,000 for thequarter ended June 30, 2005 compared to $0 for the quarter ended June30, 2004 reflects the minority stockholders' interest in Reach Media'snet income for the quarter ended June 30, 2005, resulting from theFebruary 2005 acquisition of 51% of Reach Media's common stock.
Net income increased to approximately $19.8 million for thequarter ended June 30, 2005 from approximately $17.5 million for thequarter ended June 30, 2004 or 13%. This increase was due primarily tohigher operating income of approximately $7.0 million, an increase innet interest expense of approximately $7.8 million, a decrease in theequity in net loss of affiliated company of approximately $1.1million, a decrease in the provision for income taxes of approximately$2.6 million, and an increase in the minority interest in income ofsubsidiary of approximately $518,000.
Station operating income increased to approximately $55.3 millionfor the quarter ended June 30, 2005 from approximately $48.0 millionfor the quarter ended June 30, 2004 or 15%. This increase wasattributable primarily to the consolidation of the 2005 second quarteroperating results of Reach Media, the increase in net broadcastrevenue in Radio One markets, offset by smaller increases in operatingexpenses during the second quarter of 2005 as described above.
Other pertinent financial information for the second quarter of2005 include capital expenditures of approximately $5.2 million forthe quarter June 30, 2005, compared to approximately $2.4 million forthe quarter ended June 30, 2004. As of June 30, 2005, Radio One hadtotal debt (net of cash and short term investments balances) ofapproximately $918.4 million.
Radio One Information and Guidance:
Including the operating results of Reach Media, Radio One expectsto report third quarter 2005 net broadcast revenue that will be in themid to high-teens percent range higher than the approximately $84.4million of net broadcast revenue for the same period in 2004, andstation operating income that will be in the low double digit tomid-teens percent range higher than the approximately $47.2 million ofstation operating income for the same period in 2004. Excluding theoperating results of Reach Media, Radio One expects to report thirdquarter 2005 net broadcast revenue that will be in the mid-singledigit percent range higher than the approximately $84.4 million of netbroadcast revenue generated for the same period in 2004, and stationoperating income in the mid-single digit percent range higher than theapproximately $47.2 million generated in the third quarter of 2004.
Radio One will hold a conference call to discuss its results forthe second quarter of 2005. This conference call is scheduled forThursday, August 4, 2005 at 10:00 a.m. Eastern Time. Interestedparties should call 1-612-288-0340 at least five minutes prior to thescheduled time of the call. The conference call will be recorded andmade available for replay from 1:30 p.m. the day of the call until11:59 p.m. Eastern Time the following day. Interested parties maylisten to the replay by calling 1-320-365-3844, access code: 787305.Access to live audio and replay of the conference call will also beavailable on Radio One's corporate website at www.radio-one.com. Thereplay will be made available on the website for the seven day periodfollowing the call.
Radio One, Inc. (www.radio-one.com) is the nation's seventhlargest radio broadcasting company (based on 2004 net broadcastrevenue) and the largest radio broadcasting company that primarilytargets African-American and urban listeners. Radio One owns and/oroperates 69 radio stations located in 22 urban markets in the UnitedStates and reaches more than 13 million listeners every week. RadioOne also owns approximately 36% of TV One, LLC (www.tvoneonline.com),a cable/satellite network programming primarily to African-Americans,which is a joint venture with Comcast Corporation and DIRECTV.Additionally, Radio One owns 51% of the common stock of Reach Media,Inc. (www.blackamericaweb.com), owner of the Tom Joyner Morning Showand other businesses associated with Tom Joyner, a leading urban mediapersonality, and programs "XM 169 The POWER" on XM Satellite Radio.
Notes:
This press release includes forward-looking statements within themeaning of Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934. Because these statements applyto future events, they are subject to risks and uncertainties thatcould cause actual results to differ materially, including the absenceof a combined operating history with an acquired company or radiostation and the potential inability to integrate acquired businesses,need for additional financing, high degree of leverage, seasonalnature of the business, granting of rights to acquire certain portionsof the acquired company's or radio station's operations, marketratings, variable economic conditions and consumer tastes, as well asrestrictions imposed by existing debt and future payment obligations.Important factors that could cause actual results to differ materiallyare described in Radio One's reports on Forms 10-K, 10-K/A and 10-Qand other filings with the Securities and Exchange Commission.
(1) Net income before depreciation and amortization, provision forincome taxes, interest income, interest expense, equity in net loss ofaffiliated company, minority interest in income of subsidiary, otherexpense, corporate expenses and non-cash compensation expenses iscommonly referred to in our business as station operating income.Station operating income is not a measure of financial performanceunder generally accepted accounting principles. Nevertheless webelieve station operating income is often a useful measure of abroadcasting company's operating performance and is a significantbasis used by our management to measure the operating performance ofour stations within the various markets because station operatingincome provides helpful information about our results of operationsapart from expenses associated with our physical plant, income taxesprovision, investments, debt financings, overhead and non-cashcompensation. Station operating income is frequently used as one ofthe bases for comparing businesses in our industry, although ourmeasure of station operating income may not be comparable to similarlytitled measures of other companies. Station operating income does notpurport to represent operating loss or cash flow from operatingactivities, as those terms are defined under generally acceptedaccounting principles, and should not be considered as an alternativeto those measurements as an indicator of our performance. Areconciliation of operating income to station operating income hasbeen provided in this release.
(2)"Adjusted EBITDA" consists of net income plus (1)depreciation, amortization, provision for income taxes, interestexpense, equity in net loss of affiliated company and minorityinterest in income of subsidiary and less (2) interest income. Netincome before interest income, interest expense, income taxes,depreciation and amortization is commonly referred to in our businessas "EBITDA." Adjusted EBITDA and EBITDA are not measures of financialperformance under generally accepted accounting principles. We believeAdjusted EBITDA is often a useful measure of a company's operatingperformance and is a significant basis used by our management tomeasure the operating performance of our business because AdjustedEBITDA excludes charges for depreciation, amortization and interestexpense that have resulted from our acquisitions and debt financings,our provision for income tax expense, as well as our equity in net(gain) loss of our affiliated company. Accordingly, we believe thatAdjusted EBITDA provides helpful information about the operatingperformance of our business, apart from the expenses associated withour physical plant, capital structure or the results of our affiliatedcompany. Adjusted EBITDA is frequently used as one of the bases forcomparing businesses in our industry, although our measure of AdjustedEBITDA may not be comparable to similarly titled measures of othercompanies. Adjusted EBITDA and EBITDA do not purport to representoperating income or cash flow from operating activities, as thoseterms are defined under generally accepted accounting principles, andshould not be considered as alternatives to those measurements as anindicator of our performance. A reconciliation of net income to EBITDAand Adjusted EBITDA has been provided in this release.
(3)"Free cash flow" consists of net income plus (1) depreciation,amortization, non-cash compensation, deferred income taxes, non-cashinterest expense, non-cash loss on retirement of assets, minorityinterest in income of subsidiary and our share of the non-cash net(gain) loss of our affiliated company and less (2) capitalexpenditures and dividends on our outstanding preferred stock. Freecash flow is not a measure of financial performance under generallyaccepted accounting principles. We believe free cash flow is a usefulmeasure of a company's operating performance and is a significantbasis used by our management to measure the operating performance ofour business because free cash flow is a reasonable approximation ofthe amount of excess cash generated by the company's operations thatcan be used for debt reduction, acquisitions, investments, potentialcommon stock dividends and/or buybacks and other strategic initiativesoutside of the immediate scope of the company's operations. Free cashflow is frequently used as one of the bases for comparing businessesin our industry, although our measure of free cash flow may not becomparable to similarly titled measures of other companies. Free cashflow does not purport to represent operating income or cash flow fromoperating activities, as those terms are defined under generallyaccepted accounting principles, and should not be considered asalternatives to those measurements as an indicator of our performance.A reconciliation of net income to free cash flow has been provided inthis release.
(4)Net income applicable to common stockholders is defined as netincome minus preferred stock dividends, if any.
(5)For the three months ended June 30, 2005 and 2004, Radio Onehad 105,567,725 and 104,953,961 shares of common stock outstanding ona weighted average basis, respectively. For the six months ended June30, 2005 and 2004, Radio One had 105,479,569 and 104,906,935 shares ofcommon stock outstanding on a weighted average basis, respectively.
(6)For the three months ended June 30, 2005 and 2004, Radio Onehad 105,732,976 and 105,545,683 shares of common stock outstanding ona weighted average basis, diluted for outstanding stock options,respectively. For the six months ended June 30, 2005 and 2004, RadioOne had 105,654,762 and 105,553,155 shares of common stock outstandingon a weighted average basis, diluted for outstanding stock options,respectively.
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