10-Q 1 0001.txt QUARTERLY REPORT 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 September 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 September 30, 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 56,695,484
1 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- Form 10-Q For the Quarter Ended September 30, 2000 TABLE OF CONTENTS -----------------
Page ---- PART I FINANCIAL INFORMATION Item 1 Financial Statements 3 Consolidated Balance Sheets as of 4 December 31, 1999 (Audited) and September 30, 2000 (Unaudited) Consolidated Statements of Operations for the Three Months and 5 Nine Months ended September 30, 1999 and 2000 (Unaudited) Consolidated Statements of Changes in Stockholders' Equity for the 6 Nine Months ended September 30, 2000 (Unaudited) Consolidated Statements of Cash Flows for the 7 Nine Months ended September 30, 1999 and 2000 (Unaudited) Notes to Consolidated Financial Statements September 30, 1999 and 2000 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 Acquisition or Disposition of Assets 16 Item 3 Defaults upon Senior Securities 16 Item 4 Submission of Matters to a Vote of Security Holders 16 Item 5 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 September 30, 2000 -----------------------------------------------
December 31, September 30, 1999 2000 ------------ -------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,221,000 $ 35,151,000 Investments, available for sale 256,390,000 10,373,000 Trade accounts receivable, net of allowance for doubtful accounts of $3,465,000 and $4,529,000, respectively 19,833,000 34,657,000 Prepaid expenses and other 1,035,000 9,015,000 Deferred income taxes 984,000 984,000 ------------ -------------- Total current assets 284,463,000 90,180,000 PROPERTY AND EQUIPMENT, NET 15,512,000 117,216,000 INTANGIBLE ASSETS, NET 218,460,000 1,571,701,000 OTHER ASSETS 9,101,000 11,977,000 ------------ -------------- Total assets $527,536,000 $1,791,074,000 ============ ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,663,000 $ 8,790,000 Accrued expenses 6,941,000 15,498,000 Income taxes payable 1,532,000 2,248,000 Other current liabilities -- 4,723,000 ------------ -------------- Total current liabilities 10,136,000 31,259,000 LONG-TERM DEBT AND DEFERRED INTEREST, NET OF CURRENT PORTION 82,626,000 654,407,000 DEFERRED INCOME TAX LIABILITY 14,518,000 31,208,000 ------------ -------------- Total liabilities 107,280,000 716,874,000 ------------ -------------- 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, 3,184,000 and 3,132,000 shares issued and outstanding 3,000 3,000 Common stock - Class D, $.001 par value, 150,000,000 shares authorized, 46,546,000 and 56,695,000 shares issued and outstanding 46,000 57,000 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 6-1/2% per year or $4,198,000 as of September 30, 2000 -- -- Accumulated comprehensive income adjustments 40,000 -- Additional paid-in capital 446,354,000 1,096,704,000 Accumulated deficit (26,207,000) (22,590,000) ------------ -------------- Total stockholders' equity 420,256,000 1,074,200,000 ------------ -------------- Total liabilities and stockholders' equity $527,536,000 $1,791,074,000 ============ ==============
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 Nine Months Ended September 30, 1999 and 2000 ----------------------------------------------------------------------
Three Months Ended September 30, Nine months Ended September 30, -------------------------------- ------------------------------- 1999 2000 1999 2000 ----------- ----------- ----------- ------------ (Unaudited) (Unaudited) REVENUE: Broadcast revenue, including barter revenue of $410,000, $670,000, $982,000 and $1,952,000, respectively $27,589,000 $48,914,000 $65,062,000 $111,269,000 Less: agency commissions 3,468,000 6,028,000 8,087,000 13,588,000 ----------- ----------- ----------- ------------ Net broadcast revenue 24,121,000 42,886,000 56,975,000 97,681,000 ----------- ----------- ----------- ------------ OPERATING EXPENSES: Program and technical 3,864,000 6,404,000 9,741,000 15,341,000 Selling, general and administrative 8,264,000 14,167,000 21,470,000 33,958,000 Corporate expenses 1,148,000 1,825,000 3,076,000 4,225,000 Stock-based compensation -- -- 225,000 -- Depreciation and amortization 4,734,000 17,726,000 12,209,000 30,397,000 ----------- ----------- ----------- ------------ Total operating expenses 18,010,000 40,122,000 46,721,000 83,921,000 ----------- ----------- ----------- ------------ Broadcast operating income 6,111,000 2,764,000 10,254,000 13,760,000 INTEREST EXPENSE, including amortization of deferred financing costs 3,990,000 8,970,000 11,479,000 16,217,000 OTHER INCOME, net 58,000 9,735,000 199,000 19,442,000 ----------- ----------- ----------- ------------ Income (loss) before provision for income taxes 2,179,000 3,529,000 (1,026,000) 16,985,000 PROVISION FOR INCOME TAXES 255,000 7,550,000 731,000 13,368,000 ----------- ----------- ----------- ------------ NET INCOME (LOSS) $ 1,924,000 $(4,021,000) $(1,757,000) $ 3,617,000 =========== =========== =========== ============ NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 1,924,000 $(8,219,000) $(3,233,000) $ (581,000) =========== =========== =========== ============ BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE APPLICABLE TO COMMON STOCKHOLDERS $ .04 $ (.10) $ (.07) $ (.01) =========== =========== =========== ============ SHARES USED IN COMPUTING BASIC NET INCOME (LOSS) PER COMMON SHARE APPLICABLE TO COMMON STOCKHOLDERS 54,309,000 85,494,000 43,641,000 83,862,000 =========== =========== =========== ============ SHARES USED IN COMPUTING DILUTED NET INCOME (LOSS) PER COMMON SHARE APPLICABLE TO COMMON STOCKHOLDERS 54,585,000 85,494,000 43,641,000 83,862,000 =========== =========== =========== ============
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 Nine Months Ended September 30, 2000 --------------------------------------------
Common Common Common Common Convertible Stock Stock Stock Stock Preferred Comprehensive Class A Class B Class C Class D Stock Income ------- ------- ------- ------- ----------- ------------- BALANCE, as of December 31, 1998 $ -- $2,000 $3,000 $10,000 $ Comprehensive income: Net income -- -- -- -- $ 133,000 Unrealized gain on securities -- -- -- -- 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 Comprehensive income: Net income -- -- -- -- $3,617,000 Unrealized loss on securities -- -- -- -- (40,000) ---------- Comprehensive income -- -- -- -- $3,577,000 ========== Issuance of common stock 5,000 -- -- 10,000 Issuance of stock for acquisitions 1,000 -- -- 1,000 Employee exercise of options -- -- -- -- Issuance of preferred stock -- -- -- -- ------- ------ ------ ------- ----- BALANCE, as of September 30, 2000 (Unaudited) $23,000 $3,000 $3,000 $57,000 $ ======= ====== ====== ======= ===== Accumulated Comprehensive Additional Total Income Paid-in Accumulated Stockholders' Adjustments 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 -- 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 40,000 446,354,000 (26,207,000) 420,256,000 Comprehensive income: Net income -- 3,617,000 3,617,000 Unrealized loss on securities (40,000) -- (40,000) 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 -- 905,000 -- 905,000 Issuance of preferred stock -- 299,935,000 -- 299,935,000 -------- -------------- ------------ -------------- BALANCE, as of September 30, 2000 (Unaudited) $ -- $1,096,704,000 $(22,590,000) $1,074,200,000 ======== ============== ============ ==============
The accompanying notes are an integral part of these consolidated statements 6 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- Consolidated Statements of Cash Flows ------------------------------------- For the Nine Months Ended September 30, 1999 and 2000 -----------------------------------------------------
1999 2000 ------------- --------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (1,757,000) $ 3,617,000 Adjustments to reconcile net (loss) income to net cash from operating activities: Depreciation and amortization 12,209,000 30,397,000 Amortization of debt financing costs, unamortized discount and deferred interest 3,368,000 2,361,000 Deferred income taxes and reduction in valuation reserve on deferred taxes -- 7,550,000 Non-cash compensation to officer 225,000 -- Loss on sale of investments -- 254,000 Non-cash advertising revenue in exchange for equity investments -- (683,000) Effect of change in operating assets and liabilities- Trade accounts receivable (5,275,000) (13,285,000) Prepaid expenses and other (171,000) 118,000 Other assets (118,000) 180,000 Accounts payable 854,000 6,893,000 Accrued expenses and other 3,333,000 6,808,000 ------------ --------------- Net cash flows from operating activities 12,668,000 44,210,000 ------------ --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,580,000) (2,316,000) Equity investments (1,125,000) (934,000) Proceeds from sale of investments, net -- 245,803,000 Deposits and payments for station purchases (55,325,000) (1,458,516,000) ------------ --------------- Net cash flows from investing activities (59,030,000) (1,215,963,000) ------------ --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt (69,483,000) (65,000) Proceeds from debt issuances 26,000,000 570,000,000 Repayment of Senior Cumulative Redeemable Preferred Stock (28,160,000) -- Deferred financing costs (549,000) (6,069,000) Proceeds from issuance of common stock, net of issuance costs 118,527,000 335,982,000 Proceeds from exercise of stock options -- 900,000 Proceeds from issuance of preferred stock, net of issuance costs -- 299,935,000 ------------ --------------- Net cash flows from financing activities 46,335,000 1,200,683,000 ------------ --------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (27,000) 28,930,000 CASH AND CASH EQUIVALENTS, beginning of period 4,455,000 6,221,000 ------------ --------------- CASH AND CASH EQUIVALENTS, end of period $ 4,428,000 $ 35,151,000 ============ =============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for- Interest $ 6,340,000 $ 5,602,000 ============ =============== Income taxes $ 374,000 $ 6,192,000 ============ ===============
The accompanying notes are an integral part of these consolidated statements 7 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- Notes to Consolidated Financial Statements ------------------------------------------ September 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 and Augusta, Georgia; Cleveland, Ohio; St. Louis, Missouri; Richmond, Virginia; Boston, Massachusetts; Charlotte and Raleigh, North Carolina; Greenville, South Carolina; Indianapolis, Indiana; Houston and Dallas, Texas; Miami, Florida; and Los Angeles, California, 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 that it has 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 September 25, 2000, the Company completed the acquisition of KJOI-AM (formerly KLUV-AM) licensed to Dallas, Texas, for approximately $16.0 million. The acquisition resulted in recording approximately $15.3 million of intangible assets. On August 25, 2000, the Company completed the acquisition of twelve radio stations (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, WFXK-FM, licensed to Tarboro, North Carolina, WFXC-FM, licensed to Durham, North Carolina, WNNL-FM, licensed to Fuquay-Varina, North Carolina and WQOK-FM, licensed to South Boston, Virginia) from Clear Channel Communications, Inc. and AMFM, Inc. for approximately $1.3 billion in cash. The acquisition resulted in the recording of approximately $1.2 billion of intangible assets. In connection with this acquisition, the Company is obtaining an appraisal of all tangible assets acquired. Thus, the Company estimated the value of the tangible assets until the appraisals are complete. On June 8, 2000, the Company completed the acquisitions of WHHH-FM, licensed to Indianapolis, Indiana; WBKS-FM, licensed to Greenwood, Indiana; WYJZ-FM, licensed to Lebanon, Indiana; and W53AV, a low-powered television station licensed to Indianapolis, Indiana, for approximately $30.0 million in cash and 441,000 shares of Class A common stock. The acquisitions 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, 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. 3. PRIVATE PLACEMENT AND PUBLIC OFFERING: In July 2000, the Company completed a private placement of $310.0 million of 6-1/2% Convertible Preferred Securities, at $1,000 per security, with a par value of $.001 per share. Each of these preferred securities is convertible to 53.3832 shares of Class D common stock. Issuance costs were approximately $10.1 million, including underwriting commissions. 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, were approximately $336.0 million. 4. STOCK SPLIT: On May 22, 2000, the Company's Board of Directors declared a three-for-one stock split of Class A Common Stock in the form of a 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. 5. INCOME TAX PROVISION: The Company records its income tax provision for the interim periods based on its estimate of the effective tax rate for the year. The Company recorded a tax provision for the quarter ended September 30, 2000, of 9 $7.6 million or a 214% effective tax rate, compared to a tax provision for the six months ended June 30, 2000, at a 43% effective tax rate. The increase in the effective tax rate for the quarter was to increase the cumulative effective tax rate for the nine-month period ended September 30, 2000, to a 79% effective tax rate. The increase in the cumulative effective tax rate relates to the acquisitions completed during the quarter ended September 30, 2000, which effected the year-end estimated pre-tax income causing the annual estimated effective tax rate to increase to 79%. The actual effective tax rate for the year may be significantly different from the estimated effective tax rate used for the nine months ended September 30, 2000. 6. SUBSEQUENT EVENTS: Subsequent to September 30, 2000, an officer of the Company purchased one million shares of the Company's newly-issued stock. The stock was purchased with the proceeds of a loan from the Company. In October 2000, the Company's Board of Directors declared and the Company paid a $5.0 million dividend to the holders of the convertible preferred securities. In November 2000, the Company entered into an asset purchase agreement to acquire a radio station formerly known as KDGE-FM licensed to Gainesville, Texas for approximately $52.4 million. Additionally, the Company will divest two radio stations in Richmond, Virginia and two radio stations in Greenville, South Carolina for approximately $53.5 million. 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, 1999. RESULTS OF OPERATIONS --------------------- Comparison of periods ended September 30, 2000 to the periods ended September 30, 1999 (all periods are unaudited - all numbers in 000s except per share data).
Three months Three months Nine months Nine months ended ended ended ended September 30, September 30, September 30, September 30, 1999 2000 1999 2000 --------------- ------------- --------------- --------------- STATEMENT OF OPERATIONS DATA: REVENUE: Broadcast revenue $27,589 $48,914 $65,062 $111,269 Less: Agency commissions 3,468 6,028 8,087 13,588 --------------- ------------- --------------- --------------- Net broadcast revenue 24,121 42,886 56,975 97,681 --------------- ------------- --------------- --------------- OPERATING EXPENSES: Programming and technical 3,864 6,404 9,741 15,341 Selling, G&A 8,264 14,167 21,470 33,958 Corporate expenses 1,148 1,825 3,076 4,225 Stock-based compensation - - 225 - Depreciation & amortization 4,734 17,726 12,209 30,397 --------------- ------------- --------------- --------------- Total operating expenses 18,010 40,122 46,721 83,921 --------------- ------------- --------------- --------------- Operating income 6,111 2,764 10,254 13,760 INTEREST EXPENSE 3,990 8,970 11,479 16,217 OTHER INCOME, net 58 9,735 199 19,442 --------------- ------------- --------------- --------------- Income (loss) before provision for income taxes 2,179 3,529 (1,026) 16,985 PROVISION FOR INCOME TAXES 255 7,550 731 13,368 --------------- ------------- --------------- --------------- Net income (loss) $ 1,924 $(4,021) $(1,757) $ 3,617 =============== ============= =============== =============== Net income (loss) applicable to common stockholders $ 1,924 $(8,219) $(3,233) $ (581) =============== ============= =============== =============== BASIC PER SHARE DATA: Net income (loss) per share $ 0.04 $ (0.05) $ (0.04) $ 0.04 Preferred dividends per share $ - $ 0.05 $ 0.03 $ 0.05 Net income (loss) per share applicable to common shareholders $ 0.04 $ (0.10) $ (0.07) $ (0.01) After-tax cash flow per share $ 0.12 $ 0.20 $ 0.24 $ 0.44 DILUTED PER SHARE DATA: Net income (loss) per share $ 0.04 $ (0.05) $ (0.04) $ 0.04 Preferred dividends per share $ - $ 0.05 $ 0.03 $ 0.05 Net income (loss) per share applicable to common shareholders $ 0.04 $ (0.10) $ (0.07) $ (0.01) After-tax cash flow per share $ 0.12 $ 0.20 $ 0.24 $ 0.44 OTHER DATA: Broadcast cash flow (a) $11,993 $22,315 $25,764 $48,382 Broadcast cash flow margin 49.7% 52.0% 45.2% 49.5% EBITDA (b) $10,845 $20,490 $22,688 $44,157 EBITDA margin (b) 45.0% 47.8% 39.8% 45.2% After-tax cash flow (c) $ 6,713 $17,057 $10,452 $36,784 SAME STATION RESULTS(d) Net revenue $24,120 $27,170 $58,754 $70,998 Broadcast cash flow 11,993 14,376 26,552 36,391 Broadcast cash flow margin 49.7% 52.9% 45.1% 51.3% Weighted average shares outstanding - basic (e) 54,309 85,494 43,641 83,862 Weighted average shares outstanding - diluted (f) 54,585 85,684 43,641 84,061 Capital expenditures $ 461 $ 919 $ 2,580 $ 2,316
Net broadcast revenue increased to approximately $42.9 million for the quarter ended September 30, 2000 from approximately $24.1 million for the quarter ended September 30, 1999 or 78%. Net broadcast revenue increased to approximately $97.7 million for the nine months ended September 30, 2000 from approximately $57.0 million for the nine months ended September 30, 1999 or 71%. 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 Boston and in Richmond (where the Company also operates stations under time brokerage agreements), as well as the more recent acquisitions of radio stations in Augusta, Charlotte, Dallas, Greenville, Houston, Indianapolis, Los Angeles, Miami, Philadelphia, and Raleigh. 11 Operating expenses excluding depreciation, amortization and stock-based compensation increased to approximately $22.4 million for the quarter ended September 30, 2000 from approximately $13.3 million for the quarter ended September 30, 1999 or 68%. Operating expenses excluding depreciation, amortization and stock-based compensation increased to approximately $53.5 million for the nine months ended September 30, 2000 from approximately $34.3 million for the nine months ended September 30, 1999 or 56%. 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 and higher costs associated with operating as a public company. Broadcast operating income was approximately $2.8 million for the quarter ended September 30, 2000 compared to $6.1 million for the quarter ended September 30, 1999 or a decrease of 54%. Broadcast operating income increased to approximately $13.8 million for the nine months ended September 30, 2000 from approximately $10.3 million for the nine months ended September 30, 1999 or 34%. 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 1999 and 2000. The increase in net broadcast operating income for the nine month period was due to higher revenue as described above partially offset by increased depreciation and amortization expenses. Interest expense increased to approximately $9.0 million for the quarter ended September 30, 2000 from approximately $4.0 million for the quarter ended September 30, 1999 or 125%. Interest expense increased to approximately $16.2 million for the nine months ended September 30, 2000 from approximately $11.5 million for the nine months ended September 30, 1999 or 41%. This increase relates primarily to additional borrowings made in the third quarter of 2000 in conjunction with the acquisition of radio stations from Clear Channel Communications, Inc. and AMFM, Inc. Other income (almost exclusively interest income) increased to approximately $9.7 million for the quarter ended September 30, 2000 from approximately $0.1 million for the quarter ended September 30, 1999 or 9,600%. Other income (almost exclusively interest income) increased to approximately $19.4 million for the nine months ended September 30, 2000 from approximately $0.2 million for the nine months ended September 30, 1999 or 9,600%. This increase was due to the Company's high cash and investment balances following its equity offerings in November 1999, March 2000 and July 2000 as well as cash generated from operations. Income before provision for income taxes increased to approximately $3.5 million for the quarter ended September 30, 2000 from approximately $2.2 million for the quarter ended September 30, 1999 or 59%. Income before provision for income taxes increased to approximately $17.0 million for the nine months ended September 30, 2000 from a loss of approximately $1.0 million for the nine months ended September 30, 1999. This increase was due to higher operating income enhanced by higher interest income, partially offset by higher interest expense in the quarter, as described above. Net loss was approximately $4.0 million for the quarter ended September 30, 2000 compared to net income of approximately $1.9 million for the quarter ended September 30, 1999. Net income increased to approximately $3.6 million for the nine months ended September 30, 2000 from a loss of approximately $1.8 million for the nine months ended September 30, 1999. This decrease in net income for the quarter was due to higher income before provision for income taxes more than offset by a higher income tax provision associated with the change in the estimated pre-tax income for the year as a result of the acquisition of 12 radio stations from Clear Channel Communications, Inc. and AMFM, Inc. The increase in net income for the nine month period 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 $22.3 million for the quarter ended September 30, 2000 from approximately $12.0 million for the quarter ended September 30, 1999 or 86%. Broadcast cash flow increased to approximately $48.4 million for the nine months ended September 30, 2000 from approximately $25.8 million for the nine months ended September 30, 1999 or 88%. This increase was 12 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 $20.5 million for the quarter ended September 30, 2000 from approximately $10.8 million for the quarter ended September 30, 1999 or 90%. Earnings before interest, taxes, depreciation, and amortization, and excluding stock-based compensation expense, increased to approximately $44.2 million for the nine months ended September 30, 2000 from approximately $22.7 million for the nine months ended September 30, 1999 or 95%. 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. (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. (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 liability and preferred stock dividends. (d) Same station results include results only for those stations owned and/or operated by the Company for the full one-year period in question. For 1999, same station results include results of an affiliate of the Company's, Radio One of Atlanta, which was operated by the Company from its inception and acquired by the Company on March 30, 1999. (e) As of September 30, 2000 the Company had 85,494,000 shares of Common Stock outstanding on a weighted average basis for the quarter. As of September 30, 2000, the Company had 85,684,000 shares of Common Stock outstanding on a weighted average basis for the quarter, diluted for outstanding stock options. (f) As of September 30, 2000 the Company had 85,684,000 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. 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, convertible preferred 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 $35.2 million as of September 30, 2000. This increase resulted primarily from the Company's stronger cash flow from operating activities during the first nine 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 and the Company's convertible preferred offering from which it raised approximately $299.9 million, partially offset by cash paid for the acquisition of WPLY-FM on February 28, 2000 from Greater Media Radio Company, the acquisition of Davis Broadcasting, Inc. on June 7, 2000 which included WCCJ-FM in the Charlotte, North Carolina market and five radio stations in the Augusta, Georgia market, the acquisition of three radio stations and one low power television station in the Indianapolis market on June 8, 2000 from Shirk, Inc. and IBL, L.L.C., the acquisition of 12 radio stations from Clear Channel Communications, Inc. and AMFM, Inc. for $1.3 billion on August 25, 2000, and the acquisition of KJOI-AM (formerly KLUV-AM) in the Dallas market from Infinity Broadcasting Corporation on September 25, 2000. The balance of the purchase price and related expenses for the Clear Channel acquisition was funded with approximately $570.0 million drawn on a $750.0 million credit facility which the Company entered into on July 17, 2000 and became effective concurrent with the closing of the Asset Purchase Agreement with Clear Channel Communications, Inc. and AMFM, Inc. The Amended and Restated Credit Agreement dated July 17, 2000 provides for a new bank facility 13 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. At September 30, 2000, $180.0 million remained available (based on various covenant restrictions) to be drawn down from the Company's $750.0 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. Net cash flows from operating activities increased to approximately $44.2 million for the nine months ended September 30, 2000 from approximately $12.7 million for the nine months ended September 30, 1999 or 248%. This increase was due to higher net income resulting from increased revenue and interest income in addition to higher non-cash expenses. Non-cash expenses of depreciation and amortization increased to approximately $30.4 million for the nine months ended September 30, 2000 from approximately $12.2 million for the nine months ended September 30, 1999 or 149% due to various acquisitions made by the Company within the past year. Other significant increases in non-cash expenses for the nine months ended September 30, 2000 included deferred income taxes of $7.6 million compared to zero for the nine months ended September 30, 1999. Net cash flows used in investing activities increased to approximately $1,216.0 million for the nine months ended September 30, 2000 compared to approximately $59.0 million for the nine months ended September 30, 1999 or 1,961%. During the nine months ended September 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 acquired 12 radio stations in seven markets from Clear Channel Communications, Inc. and AMFM, Inc. for approximately $1.3 billion and radio station KJOI-AM (formerly KLUV-AM) in the Dallas, Texas market for approximately $16.0 million. Also during the nine months ended September 30, 2000 the Company made purchases of capital equipment totaling approximately $2.3 million. Net cash flows from financing activities increased to approximately $1,200.7 million for the nine months ended September 30, 2000 compared to approximately $46.3 million for the nine months ended September 30, 1999 or 2,493%. In March 2000, the Company completed a public offering of common stock that raised net proceeds of approximately $336.0 million. In July 2000, the Company completed an offering of 6-1/2% Convertible Preferred Securities that raised net proceeds of approximately $299.9 million. Most of the proceeds were used to fund the 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 $28.9 million during the nine months ended September 30, 2000 compared to a decrease of approximately $27,000 during the nine months ended September 30, 1999. 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 14 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. Acquisition or Disposition of Assets Information is incorporated by reference to Radio One's Current Report on Form 8-K dated September 7, 2000, File No. 000-25969; Film No. 717885 Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders Information is incorporated by reference to Radio One's Current Report on Form 8-K/A1 dated October 6, 2000, File No. 000-25969; Film No. 736375. Item 5. 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)). 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)). 16 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)). 10.62 Second Amended and Restated Credit Agreement, dated as of July 17, 2000, by and among Radio One, Inc., Bank of America, N.A., Credit Suisse First Boston, First Union National Bank, Toronto Dominion (Texas), Inc., Bankers Trust Company, and the Several Lenders From Time to Time Parties Hereto. 17 27.1 Financial data schedule (EDGAR version only). (b) REPORTS ON FORM 8-K The Company filed a Form 8-K dated September 7, 2000 disclosing that it had consummated the acquisition of twelve radio stations from Clear Channel Communications, Inc. and AMFM, Inc. for approximately $1.3 billion in cash. No financial reports were filed at that time. The Company filed a Form 8-K/A dated October 6, 2000 to amend its Form 8-K filed on September 7, 2000. 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). In addition, the Company disclosed (i) the results of its Annual Meeting of Stockholders, (ii) a pending asset acquisition in Greenville, South Carolina, and (iii) a completed acquisition in Dallas, Texas. 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 ---------------------------------------------------- November 10, 2000 Scott R. Royster Executive Vice President and Chief Financial Officer (Principal Accounting Officer) 19