10-Q 1 d10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 Commission File No. 333-30795 RADIO ONE, INC. (Exact name of registrant as specified in its charter) Delaware 52-1166660 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5900 Princess Garden Parkway, 7th Floor Lanham, Maryland 20706 (Address of principal executive offices) (301) 306-1111 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 7, 2001 Class A Common Stock, $.001 Par Value 22,540,235 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 59,876,237 1 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- Form 10-Q For the Quarter Ended June 30, 2001 TABLE OF CONTENTS ----------------- Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements .............................................. 3 Consolidated Balance Sheets as of December 31, 2000, and June 30, 2001 (Unaudited) ................................................. 4 Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2000 and 2001(Unaudited) ................... 5 Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended June 30, 2001 (Unaudited) ....................... 6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 2001 (Unaudited) .............. 7 Notes to Consolidated Financial Statements June 30, 2000 and 2001 (Unaudited) ............................................. 9 Condensed Consolidating Balance Sheets as of December 31, 2000 .... 14 Condensed Consolidating Balance Sheets as of June 30, 2001 (Unaudited) ...................................................... 15 Condensed Consolidating Statements of Operations for the Six Months Ended June 30, 2001 (Unaudited) ........................... 16 Condensed Consolidating Statements of Operations for the Three Months Ended June 30, 2001 (Unaudited) ........................... 17 Condensed Consolidating Statements of Operations for the Six Months Ended June 30, 2000 (Unaudited) ........................... 18 Condensed Consolidating Statements of Operations for the Three Months Ended June 30, 2000 (Unaudited) ........................... 19 Consolidating Statements of Cash Flows for the Six Months Ended June 30, 2001 (Unaudited) .................................. 20 Consolidating Statements of Cash Flows for the Six Months Ended June 30, 2000 (Unaudited) .................................. 21 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................................... 22 PART II. OTHER INFORMATION Item 1. Legal Proceedings ................................................ 28 Item 2. Changes in Securities and Use of Proceeds ........................ 28 Item 3. Defaults Upon Senior Securities .................................. 28 Item 4. Submission of Matters to a Vote of Security Holders .............. 28 Item 5. Other Information ................................................ 30 Item 6. Exhibits and Reports on Form 8-K ................................. 30 SIGNATURE ................................................................. 33 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements (See pages 4-21 -- This page intentionally left blank.) 3 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- AS OF DECEMBER 31, 2000, AND JUNE 30, 2001 ------------------------------------------
December 31, June 30, 2000 2001 ---------------- ---------- ASSETS (Unaudited) ------ CURRENT ASSETS: Cash and cash equivalents $ 20,879,000 $ 9,519,000 Trade accounts receivable, net of allowance for doubtful accounts of $5,506,000 and $6,079,000, respectively 46,883,000 50,047,000 Prepaid expenses and other 6,557,000 4,915,000 Income tax receivable 2,476,000 2,000,000 Deferred tax asset 2,187,000 2,476,000 -------------- -------------- Total current assets 78,982,000 68,957,000 PROPERTY AND EQUIPMENT, net 33,376,000 27,773,000 INTANGIBLE ASSETS, net 1,637,180,000 1,594,732,000 OTHER ASSETS 15,680,000 17,260,000 -------------- -------------- Total assets $1,765,218,000 $1,708,722,000 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------- CURRENT LIABILITIES: Accounts payable $ 17,683,000 $ 7,961,000 Accrued expenses 14,127,000 17,437,000 Other current liabilities 4,696,000 2,102,000 -------------- -------------- Total current liabilities 36,506,000 27,500,000 LONG-TERM DEBT AND DEFERRED INTEREST, net of current portion 646,956,000 650,057,000 SWAP AGREEMENTS LIABILITY -- 9,733,000 DEFERRED INCOME TAX LIABILITY 24,687,000 10,059,000 -------------- -------------- Total liabilities 708,149,000 697,349,000 -------------- -------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Convertible preferred stock, $.001 par value, 1,000,000 shares authorized and 310,000 shares issued and outstanding; liquidation preference of $1,000 per share, plus cumulative dividends at 6.5% per year, which were $9,236,000 as of December 31, 2000, and $10,070,000 as of June 30, 2001 -- -- Common stock - Class A, $.001 par value, 30,000,000 shares authorized, 22,789,000 and 22,536,000 shares issued and outstanding 23,000 23,000 Common stock - Class B, $.001 par value, 150,000,000 shares authorized, 2,867,000 shares issued and outstanding 3,000 3,000 Common stock - Class C, $.001 par value, 150,000,000 shares authorized, 3,132,000 shares issued and outstanding 3,000 3,000 Common stock - Class D, $.001 par value, 150,000,000 shares authorized, 58,246,000 and 59,863,000 shares issued and outstanding 58,000 60,000 Accumulated comprehensive income adjustments -- (6,570,000) Stock subscriptions receivable (9,005,000) (30,110,000) Additional paid-in capital 1,105,681,000 1,127,515,000 Accumulated deficit (39,694,000) (79,551,000) -------------- -------------- Total stockholders' equity 1,057,069,000 1,011,373,000 -------------- -------------- Total liabilities and stockholders' equity $1,765,218,000 $1,708,722,000 ============== ============== The accompanying notes are an integral part of these consolidated balance sheets.
4 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 2001 ----------------------------------------------------------------
Three Months Ended Six Months Ended June 30, June 30, --------------------------------- ------------------------------ 2000 2001 2000 2001 ---------------- --------------- -------------- -------------- (Unaudited) (Unaudited) REVENUE: Broadcast revenue, including barter revenue of $429,000, $559,000, $1,282,000 and $1,204,000, respectively $ 37,231,000 $ 70,930,000 $ 62,355,000 $ 125,203,000 Less: agency commissions 4,588,000 8,645,000 7,560,000 14,993,000 ------------- ------------- ------------- ------------- Net broadcast revenue 32,643,000 62,285,000 54,795,000 110,210,000 ------------- ------------- ------------- ------------- OPERATING EXPENSES: Program and technical, exclusive of depreciation and amortization, shown separately below 4,697,000 9,151,000 8,937,000 18,007,000 Selling, general and administrative 11,492,000 19,090,000 19,791,000 36,206,000 Corporate expenses 1,282,000 1,683,000 2,400,000 3,523,000 Non-cash compensation -- 237,000 -- 475,000 Depreciation and amortization 7,182,000 30,851,000 12,671,000 62,375,000 ------------- ------------- ------------- ------------- Total operating expenses 24,653,000 61,012,000 43,799,000 120,586,000 ------------- ------------- ------------- ------------- Operating income (loss) 7,990,000 1,273,000 10,996,000 (10,376,000) INTEREST EXPENSE, including amortization of deferred financing costs 3,665,000 14,717,000 7,247,000 30,418,000 GAIN ON SALE OF ASSETS, net -- -- -- 4,272,000 OTHER INCOME (EXPENSE), net 5,470,000 (596,000) 9,707,000 -- ------------- ------------- ------------- ------------- Income (loss) before (provision) benefit for income taxes and extraordinary loss 9,795,000 (14,040,000) 13,456,000 (36,522,000) (PROVISION) BENEFIT FOR INCOME TAXES (4,218,000) 4,633,000 (5,818,000) 11,942,000 ------------- ------------- ------------- ------------- INCOME (LOSS) BEFORE EXTRAORDINARY LOSS 5,577,000 (9,407,000) 7,638,000 (24,580,000) ------------- ------------- ------------ ------------- EXTRAORDINARY LOSS ON DEBT RETIREMENT, net of taxes of $2,564,000 -- 5,207,000 -- 5,207,000 ------------- ------------- ------------ ------------- NET INCOME (LOSS) $ 5,577,000 $ (14,614,000) $ 7,638,000 $ (29,787,000) ============= ============= ============ ============= NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 5,577,000 $ (19,646,000) $ 7,638,000 $ (39,857,000) ============= ============= ============ ============= BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE: Income (loss) before extraordinary loss $ 0.07 $ (0.16) $ 0.09 $ (0.40) ============= ============= ============ ============= Extraordinary loss -- (0.06) -- (0.06) ============= ============= ============ ============= Net income (loss) $ 0.07 $ (0.22) $ 0.09 $ (0.46) ============= ============= ============ ============= WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 84,994,000 88,252,000 83,038,000 87,532,000 ============= ============== ============= ============== Diluted 85,256,000 88,252,000 83,316,000 87,532,000 ============= ============= ============= ============== The accompanying notes are an integral part of these consolidated statements. 5
RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ---------------------------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED) --------------------------------------------------
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, 2000 $23,000 $3,000 $3,000 $58,000 $ -- Comprehensive income: Net loss -- -- -- -- -- $(29,787,000) Cumulative effect of change in accounting principle for derivatives, net of taxes -- -- -- -- -- (2,630,000) Valuation adjustment for swap fair value, net of taxes -- -- -- -- -- (3,940,000) ------------ Comprehensive loss $(36,357,000) ============ Preferred stock dividends -- -- -- -- -- Stock sold to officer -- -- -- 2,000 -- Issuance of common stock for acquisition -- -- -- -- -- Employee exercise of options -- -- -- -- -- Preferred stock issuance costs -- -- -- -- -- ------- ------- ------- ------- ----------- BALANCE, as of June 30, 2001 (Unaudited) $23,000 $ 3,000 $ 3,000 $60,000 $ -- ======= ======= ======= ======= =========== Accumulated Comprehensive Stock Additional Total Income Subscriptions Paid-In Accumulated Stockholders' Adjustments Receivable Capital Deficit Equity ------------- -------------- ---------- ------------ -------------- BALANCE, as of December 31, 2000 $ -- $ (9,005,000) $1,105,681,000 $(39,694,000) $1,057,069,000 Comprehensive income: Net loss -- -- -- (29,787,000) (29,787,000) Cumulative effect of change in accounting principle for derivatives, net of taxes (2,630,000) -- -- -- (2,630,000) Valuation adjustment for swap fair value, net of taxes (3,940,000) -- -- -- (3,940,000) Comprehensive loss Preferred stock dividends -- -- -- (10,070,000) (10,070,000) Stock sold to officer -- (21,105,000) 21,103,000 -- -- Issuance of common stock for acquisition -- -- 500,000 -- 500,000 Employee exercise of options -- -- 240,000 -- 240,000 Preferred stock issuance costs -- -- (9,000) -- (9,000) ------------- ------------- -------------- ------------ -------------- BALANCE, as of June 30, 2001 (Unaudited) $ (6,570,000) $ (30,110,000) $1,127,515,000 $(79,551,000) $1,011,373,000 ============= ============= ============== ============ ============== The accompanying notes are an integral part of these consolidated statements. 6
RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 2001 -----------------------------------------------
Six Months Ended June 30, ---------------------------------- 2000 2001 ---------------- ---------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 7,638,000 $ (29,787,000) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation and amortization 12,671,000 62,375,000 Amortization of debt financing costs, unamortized discount and deferred interest 2,014,000 1,016,000 Deferred income taxes (244,000) (13,521,000) Non-cash compensation to officers -- 475,000 Loss on sale of investments 225,000 -- Loss on write-down of investments -- 1,206,000 Gain on sale of assets, net -- (4,272,000) Non-cash advertising revenue in exchange for equity investments (658,000) -- Extraordinary loss on debt retirement -- 7,771,000 Effect of change in operating assets and liabilities- Trade accounts receivable (5,298,000) (3,155,000) Income tax receivable -- 476,000 Prepaid expenses and other (306,000) (225,000) Other assets 221,000 (1,202,000) Accounts payable 1,110,000 (9,722,000) Accrued expenses and other 1,517,000 2,635,000 ---------------- --------------- Net cash flows from operating activities 18,890,000 14,070,000 ---------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (1,397,000) (2,840,000) Equity investments (884,000) (210,000) Proceeds from sale of available-for-sale investments, net 51,114,000 -- Proceeds from sale of assets -- 69,254,000 Deposits and payments for station purchases (262,244,000) (70,286,000) ---------------- --------------- Net cash flows from investing activities (213,411,000) (4,082,000) ---------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt (32,000) (303,648,000) Proceeds from debt issuances -- 300,000,000 Payment of preferred stock issuance costs -- (9,000) Payment of preferred stock dividends -- (10,070,000) Deferred financing costs -- (7,861,000) Proceeds from issuance of common stock, net of issuance costs 335,982,000 -- Proceeds from exercise of stock options 433,000 240,000 ---------------- --------------- Net cash flows from financing activities 336,383,000 (21,348,000) ---------------- --------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 141,862,000 (11,360,000) CASH AND CASH EQUIVALENTS, beginning of period 6,221,000 20,879,000 ---------------- --------------- CASH AND CASH EQUIVALENTS, end of period $ 148,083,000 $ 9,519,000 ================ ===============
7 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for- Interest $ 4,756,000 $ 24,788,000 =============== ================ Income taxes $ 6,068,000 $ 787,000 =============== ================ The accompanying notes are an integral part of these consolidated statements. 8
RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ JUNE 30, 2000 AND 2001 ---------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ------------------------------------------- Organization and Business ------------------------- Radio One, Inc. (a Delaware corporation referred to as Radio One) and subsidiaries (collectively referred to as the Company) were organized to acquire, operate and maintain radio broadcasting stations. The Company owns and/or operates radio stations in the Washington, D.C.; Baltimore, Maryland; Philadelphia, Pennsylvania; Detroit and Kingsley, Michigan; Atlanta and Augusta, Georgia; Cleveland, Ohio; St. Louis, Missouri; Richmond, Virginia; Boston, Massachusetts; Charlotte and Raleigh, North Carolina; Indianapolis, Indiana; Houston and Dallas, Texas; Miami, Florida; and Los Angeles, California markets. The Company has been making and may continue to make significant acquisitions of radio stations, which may require it to incur new debt. The service of this debt could require the Company to make significant debt service payments. The Company's operating results are significantly affected by its share of the audience in markets where it has stations. Basis of Presentation --------------------- The accompanying consolidated financial statements include the accounts of Radio One, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Interim Financial Statements ---------------------------- The interim consolidated financial statements included herein for Radio One, Inc. and subsidiaries have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In management's opinion, the interim financial data presented herein include all adjustments (which include only normal recurring adjustments) necessary for a fair presentation. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. Results for interim periods are not necessarily indicative of results to be expected for the full year. It is suggested that these consolidated financial statements be read in conjunction with the Company's December 31, 2000, financial statement and notes thereto included in the Company's annual report on Form 10-K/A. 9 2. ACQUISITIONS AND DIVESTITURES: ------------------------------ In June 2001, the Company entered into an agreement to acquire WPEZ-FM, licensed to Macon, Georgia, for approximately $55.0 million. The station is in the process of being moved to a location within the Atlanta, Georgia market. In April 2001, the Company acquired WTLC-AM, licensed to Indianapolis, Indiana, for approximately $1.1 million. In March 2001, the Company completed the sale of KJOI-AM (formerly KLUV-AM), licensed to Dallas, Texas, for approximately $16.0 million. In February 2001, the Company acquired the intellectual property of WTLC-FM, licensed to Indianapolis, Indiana, for approximately $7.2 million. In February 2001, the Company acquired KTXQ-FM (formerly KDGE-FM), licensed to Gainesville, Texas, for approximately $52.5 million. In February 2001, the Company completed the sale of WDYL-FM, licensed to Chester, Virginia, and radio stations WJMZ-FM and WPEK-FM, licensed to Anderson and Seneca, South Carolina, respectively, for approximately $52.5 million and WARV-FM, licensed to Petersburg, Virginia for approximately $1.0 million. In February 2001, the Company acquired Nash Communications, which owned WILD-AM, licensed to Boston, Massachusetts, for approximately $4.5 million and 63,492 shares of Class D Common Stock. 3. RECENT ACCOUNTING PRONOUNCEMENTS: --------------------------------- The Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" and SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" on January 1, 2001. This standard requires the Company to recognize all derivatives, as defined in the Statement, on the balance sheet at fair value. Derivatives, or any portion thereof, that are not effective hedges must be adjusted to fair value through income. If derivatives are effective hedges, depending on the nature of the hedges, changes in the fair value of the hedged assets, liabilities or firm commitments must be adjusted through other comprehensive income, a component of stockholders' equity. During 2000, the Company entered into swap agreements to reduce exposure to interest rate fluctuations on certain debt commitments. The Company recorded an adjustment of approximately $2.6 million, net of an income tax benefit of approximately $1.2 million on January 1, 2001, to record the liability related to the fair value of these swap agreements. This amount was recorded as a cumulative effect of change in accounting principle, which is included as a component of accumulated comprehensive income adjustments in the accompanying balance sheet. The Company then recorded a $3.9 million valuation adjustment, net of an income tax benefit of approximately $1.9 million, to record the swaps at fair market value as of June 30, 2001. This amount is also recorded as a component of accumulated comprehensive income adjustments. In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 141 (SFAS 141) "Business Combinations", which is effective for all business combinations initiated after June 30, 2001. This pronouncement requires all business combinations to be accounted for using the purchase method and broadens the criteria for recording intangible assets separate from 10 goodwill. Recorded goodwill and intangibles will be evaluated against this new criteria and may result in certain intangibles being subsumed into goodwill, or alternatively, amounts initially recorded as goodwill may be separately identified and recognized apart from goodwill. Also, in July 2001, FASB issued Statement of Financial Account Standard No. 142 (SFAS 142) "Goodwill and Other Intangible Assets". This pronouncement requires a non-amortization approach to account for purchased goodwill and certain other intangible assets. Under a non-amortization approach, goodwill and certain intangibles will not be amortized into results of operations, but instead, would be reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than their fair value. The provisions of each statement, which apply to goodwill and intangible assets acquired prior to June 30, 2001, will be adopted by the Company on January 1, 2002. The adoption of these accounting standards may result in certain of the intangibles being subsumed into goodwill and would have the impact of reducing the amortization of goodwill and intangibles commencing January 1, 2002; however, impairment reviews may result in future periodic write-downs or in write-down upon adoption. 4. DEBT: ----- In May 2001, the Company sold $300 million of 8-7/8% Senior Subordinated Notes (Notes) due July 2011, through a private placement offering, receiving net proceeds of approximately $292 million. There were approximately $7.9 million in deferred offering costs recorded in connection with the sale, which are being amortized to interest expense over the life of the Notes using the effective interest rate method. The proceeds of the Notes were primarily used to repay amounts owed on the Company's Bank Credit Facility (Credit Facility) and the entire balance of the 12% Senior Subordinated Notes due 2004 (Former Notes). The Company recognized an extraordinary loss of $5.2 million, net of income tax benefit of approximately $2.6 million, in the accompanying consolidated income statement related to the early retirement of the Former Notes. This loss encompassed the write-off of the remaining deferred offering costs, underwriter's discount, and prepayment penalties associated with the Former Notes. 5. STOCKHOLDERS' EQUITY: --------------------- In April 2001, the Company sold 1.5 million shares of its Class D Common Stock, at the then fair market value, to its Chief Executive Officer, in exchange for a full recourse promissory note for the purchase of the shares. This promissory note has been recorded in the stock subscriptions receivable caption in the equity section of the accompanying consolidated balance sheet as of June 30, 2001. Also, in April 2001, the Company granted options to purchase 1.25 million shares of its Class D Common Stock, at the then fair market value, to its Chairperson, Chief Executive Officer and Chief Operating Officer. 6. SUBSEQUENT EVENTS: ------------------ In August 2001, the Company completed the acquisition of Blue Chip Broadcasting, Inc., owner and operator of fifteen radio stations (WIZF-FM, licensed to Erlanger, Kentucky, WMJM-FM, licensed to Jeffersontown, Kentucky, WDJX-FM and WULV-FM, licensed to Louisville, Kentucky, WLRS-FM, licensed to Shepherdsville, Kentucky, WLXO-FM, licensed to Stamping Ground, Kentucky, WGZB-FM, licensed to Corydon, Indiana, KTTB-FM, licensed to Glencoe, Minnesota, WING-AM, licensed to Dayton, Ohio, WING-FM, licensed to Springfield, Ohio, WGTZ-FM, licensed to Eaton, Ohio, WKSW-FM, licensed to Urbana, Ohio, WJYD-FM, licensed to London, Ohio, WCKX-FM, licensed to Columbus, Ohio, WXMG- 11 FM, licensed to Upper Arlington, Ohio) for approximately $190.0 million in cash, stock and the retirement of outstanding debt and agreed to LMA one radio station, WDBZ-AM, licensed to Cincinnati, Ohio. The Company financed this acquisition with common stock of the Company and cash drawn from its bank credit facility. In August 2001, the Company completed the acquisition of three radio stations (WCDX-FM, licensed to Mechanicsville, Virginia, WRHH-FM (formerly WPLZ-FM) and WGCV-AM, licensed to Petersburg, Virginia) from Sinclair Telecable, Inc. and one station WJMO-FM (formerly WJRV-FM), licensed to Richmond, Virginia from Commonwealth Broadcasting, LLC for approximately $34.0 million. In August 2001, the Company announced that it had entered into an agreement to LMA radio station WAMJ-FM (formerly WAWE-FM), licensed to Mableton, Georgia from Mableton Investment Group, an entity in which one of the Company's principals has an interest. In July 2001, the Company sold the assets of WJZZ-AM, licensed to Kingsley, Michigan, for approximately $225,000. 12 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -------------------------------------------- The Company conducts a portion of its business through its subsidiaries. All of the Company's subsidiaries (the Guarantor Subsidiaries) have fully and unconditionally guaranteed the Company's Credit Facility. Set forth below are condensed consolidating financial statements for the Company and the Guarantor Subsidiaries as of December 31, 2000 and June 30, 2001, and for the three months and six month ended June 30, 2001 and 2000. The equity method of accounting has been used by the Company to report its investments in subsidiaries. Separate financial statements for the Guarantor Subsidiaries are not presented based on management's determination that they do not provide additional information that is material to investors. 13 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONDENSED CONSOLIDATING BALANCE SHEETS -------------------------------------- AS OF DECEMBER 31, 2000 ----------------------- (IN THOUSANDS) --------------
Combined Guarantor Radio One, Subsidiaries Inc. Eliminations Consolidated -------------- ---------------- -------------- ---------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 105 $ 20,774 $ -- $ 20,879 Trade accounts receivable, net of allowance for doubtful accounts 5,100 41,783 -- 46,883 Due from Combined Guarantor Subsidiaries -- 1,667,894 (1,667,894) -- Prepaid expenses and other 234 6,323 -- 6,557 Income tax receivable -- 2,476 -- 2,476 Deferred tax asset 165 2,022 -- 2,187 -------------- ------------ ----------- ------------- Total current assets 5,604 1,741,272 (1,667,894) 78,982 PROPERTY AND EQUIPMENT, net 6,033 27,343 -- 33,376 INTANGIBLE ASSETS, net 1,613,123 24,057 -- 1,637,180 OTHER ASSETS 2,634 13,046 -- 15,680 -------------- ------------ ----------- ------------- Total assets $ 1,627,394 $ 1,805,718 $ (1,667,894) $ 1,765,218 ============== ============ ============ ============= LIABILITIES AND STOCKHOLDERS' ----------------------------- EQUITY ------ CURRENT LIABILITIES: Accounts payable $ 676 $ 17,007 $ -- $ 17,683 Accrued expenses 1,589 12,538 -- 14,127 Other current liabilities 431 4,265 -- 4,696 Due to the Company 1,667,894 -- (1,667,894) -- -------------- ------------ ----------- ------------- Total current liabilities 1,670,590 33,810 (1,667,894) 36,506 INVESTMENT IN SUBSIDIARIES -- 65,569 (65,569) -- LONG-TERM DEBT AND DEFERRED INTEREST, net of current portion 28 646,928 -- 646,956 DEFERRED INCOME TAX LIABILITY 22,345 2,342 -- 24,687 -------------- ------------ ----------- ------------- Total liabilities 1,692,963 748,649 (1,733,463) 708,149 -------------- ------------ ----------- ------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock -- 87 -- 87 Stock subscriptions receivable -- (9,005) -- (9,005) Additional paid-in capital -- 1,105,681 -- 1,105,681 Accumulated deficit (65,569) (39,694) 65,569 (39,694) -------------- ------------ ----------- ------------- Total stockholders' equity (65,569) 1,057,069 65,569 1,057,069 -------------- ------------ ----------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,627,394 $ 1,805,718 $ (1,667,894) $ 1,765,218 ============== ============ ============ =============
14 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONDENSED CONSOLIDATING BALANCE SHEETS -------------------------------------- AS OF JUNE 30, 2001 ------------------- (UNAUDITED, IN THOUSANDS) -------------------------
Combined Guarantor Radio One, Subsidiaries Inc. Eliminations Consolidated -------------- -------------- -------------- -------------- ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 318 $ 9,201 -- $ 9,519 Trade accounts receivable, net of allowance for doubtful accounts 5,209 44,838 -- 50,047 Due from Combined Guarantor Subsidiaries -- 1,659,736 (1,659,736) -- Prepaid expenses and other 531 4,384 -- 4,915 Income tax receivable -- 2,000 -- 2,000 Deferred tax asset 165 2,311 -- 2,476 -------------- -------------- -------------- -------------- Total current assets 6,223 1,722,470 (1,659,736) 68,957 PROPERTY AND EQUIPMENT, net 5,692 22,081 -- 27,773 INTANGIBLE ASSETS, net 1,557,285 37,447 -- 1,594,732 OTHER ASSETS 2,574 14,686 -- 17,260 -------------- -------------- -------------- -------------- Total assets $ 1,571,774 $ 1,796,684 $ (1,659,736) $ 1,708,722 ============== ============== ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 455 $ 7,506 $ -- $ 7,961 Accrued expenses 1,777 15,660 -- 17,437 Other current liabilities 448 1,654 -- 2,102 Due to the Company 1,659,736 -- (1,659,736) -- -------------- -------------- -------------- -------------- Total current liabilities 1,662,416 24,820 (1,659,736) 27,500 INVESTMENT IN SUBSIDIARIES -- 113,934 (113,934) -- LONG-TERM DEBT AND DEFERRED INTEREST, net of current portion 7 650,050 -- 650,057 SWAP AGREEMENTS LIABILITY -- 9,733 -- 9,733 DEFERRED INCOME TAX LIABILITY 23,285 (13,226) -- 10,059 -------------- -------------- -------------- -------------- Total liabilities 1,685,708 785,311 (1,773,670) 697,349 -------------- -------------- -------------- -------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock -- 89 -- 89 Accumulated comprehensive income adjustments -- (6,570) -- (6,570) Stock subscriptions receivable -- (30,110) -- (30,110) Additional paid-in capital -- 1,127,515 -- 1,127,515 Accumulated deficit (113,934) (79,551) 113,934 (79,551) -------------- -------------- -------------- -------------- Total stockholders' equity (113,934) 1,011,373 113,934 1,011,373 -------------- -------------- -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,571,774 $ 1,796,684 $ (1,659,736) $ 1,708,722 ============== ============== ============== ==============
15 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS ------------------------------------------------ FOR THE SIX MONTHS ENDED JUNE 30, 2001 -------------------------------------- (UNAUDITED, IN THOUSANDS) -----------------------
Combined Guarantor Radio One, Subsidiaries Inc. Eliminations Consolidated -------------- -------------- --------------- --------------- REVENUE: Broadcast revenue, including barter revenue $ 16,440 $ 108,763 $ -- $ 125,203 Less: agency commissions 1,822 13,171 -- 14,993 -------------- -------------- --------------- --------------- Net broadcast revenue 14,618 95,592 -- 110,210 -------------- -------------- --------------- --------------- OPERATING EXPENSES: Program and technical 2,534 15,473 -- 18,007 Selling, general and administrative 6,639 29,567 -- 36,206 Corporate expenses -- 3,998 -- 3,998 Depreciation and amortization 53,777 8,598 -- 62,375 -------------- -------------- --------------- --------------- Total operating expenses 62,950 57,636 -- 120,586 -------------- -------------- --------------- --------------- Broadcast operating (loss) income (48,332) 37,956 -- (10,376) INTEREST EXPENSE, including amortization of deferred financing costs 40 30,378 -- 30,418 GAIN ON SALE OF ASSETS, net -- 4,272 -- 4,272 OTHER INCOME (EXPENSE), net 7 (7) -- -- -------------- -------------- --------------- --------------- (Loss) income before provision for income taxes and extraordinary loss (48,365) 11,843 -- (36,522) BENEFIT FOR INCOME TAXES -- 11,942 -- 11,942 EQUITY IN LOSSES OF SUBSIDIARY -- (48,365) 48,365 -- -------------- -------------- --------------- --------------- NET LOSS BEFORE EXTRAORDINARY LOSS (48,365) (24,580) 48,365 (24,580) -------------- -------------- --------------- --------------- EXTRAORDINARY LOSS ON DEBT RETIREMENT, net of taxes -- 5,207 -- 5,207 -------------- -------------- --------------- --------------- NET LOSS $ (48,365) $ (29,787) $ 48,365 $ (29,787) ============== ============== =============== =============== NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (48,365) $ (39,857) $ (39,857) ============== ============== ===============
16 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS ------------------------------------------------ FOR THE THREE MONTHS ENDED JUNE 30, 2001 ---------------------------------------- (UNAUDITED, IN THOUSANDS) -----------------------
Combined Guarantor Radio One, Subsidiaries Inc. Eliminations Consolidated --------------- ------------- --------------- --------------- REVENUE: Broadcast revenue, including barter revenue $ 9,572 $ 61,358 $ -- $ 70,930 Less: agency commissions 1,054 7,591 -- 8,645 --------------- ------------- --------------- --------------- Net broadcast revenue 8,518 53,767 -- 62,285 --------------- ------------- --------------- --------------- OPERATING EXPENSES: Program and technical 1,299 7,852 -- 9,151 Selling, general and administrative 3,479 15,611 -- 19,090 Corporate expenses -- 1,920 -- 1,920 Depreciation and amortization 28,015 2,836 -- 30,851 --------------- ------------- --------------- --------------- Total operating expenses 32,793 28,219 -- 61,012 --------------- ------------- --------------- --------------- Broadcast operating (loss) income (24,275) 25,548 -- 1,273 INTEREST EXPENSE, including amortization of deferred financing costs -- 14,717 -- 14,717 GAIN ON SALE OF ASSETS, net -- -- -- -- OTHER INCOME (EXPENSE), net 3 (599) -- (596) --------------- ------------- --------------- --------------- (Loss) income before provision for income taxes and extraordinary loss (24,272) 10,232 -- (14,040) BENEFIT FOR INCOME TAXES -- 4,633 -- 4,633 EQUITY IN LOSSES OF SUBSIDIARIES -- (24,272) 24,272 -- --------------- ------------- --------------- --------------- NET LOSS BEFORE EXTAORDINARY LOSS (24,272) (9,407) 24,272 (9,407) --------------- ------------- --------------- --------------- EXTRAORDINARY LOSS ON DEBT RETIREMENT, net of taxes -- 5,207 -- 5,207 --------------- ------------- --------------- --------------- NET LOSS $ (24,272) $ (14,614) $ 24,272 $ (14,614) =============== ============= =============== =============== NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (24,272) $ (19,646) $ (19,646) =============== ============= ===============
17 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS ------------------------------------------------ FOR THE SIX MONTHS ENDED JUNE 30, 2000 -------------------------------------- (UNAUDITED, IN THOUSANDS) -----------------------
Combined Guarantor Radio One, Subsidiaries Inc. Eliminations Consolidated --------------- --------------- --------------- --------------- REVENUE: Broadcast revenue, including barter revenue $ 14,190 $ 48,165 $ -- $ 62,355 Less: agency commissions 1,669 5,891 -- 7,560 --------------- --------------- --------------- --------------- Net broadcast revenue 12,521 42,274 -- 54,795 --------------- --------------- --------------- --------------- OPERATING EXPENSES: Program and technical 2,283 6,654 -- 8,937 Selling, general and administrative 4,969 14,822 -- 19,791 Corporate expenses -- 2,400 -- 2,400 Depreciation and amortization 10,328 2,343 -- 12,671 --------------- --------------- --------------- --------------- Total operating expenses 17,580 26,219 -- 43,799 --------------- --------------- --------------- --------------- Broadcast operating (loss) income (5,059) 16,055 -- 10,996 INTEREST EXPENSE, including amortization of deferred financing costs -- 7,247 -- 7,247 OTHER INCOME, net 7 9,700 -- 9,707 --------------- --------------- --------------- --------------- (Loss) income before provision for income taxes and extraordinary loss (5,052) 18,508 -- 13,456 PROVISION FOR INCOME TAXES -- (5,818) -- (5,818) EQUITY IN LOSSES OF SUBSIDIARIES -- (5,052) 5,052 -- --------------- --------------- --------------- --------------- NET (LOSS) INCOME $ (5,052) $ 7,638 $ 5,052 $ 7,638 =============== =============== =============== =============== NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDERS $ (5,052) $ 7,638 $ 7,638 =============== =============== ===============
18 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS ------------------------------------------------ FOR THE THREE MONTHS ENDED JUNE 30, 2000 ---------------------------------------- (UNAUDITED, IN THOUSANDS) -----------------------
Combined Guarantor Radio One, Subsidiaries Inc. Eliminations Consolidated --------------- --------------- --------------- --------------- REVENUE: Broadcast revenue, including barter revenue $ 8,568 $ 28,663 $ -- $ 37,231 Less: agency commissions 1,015 3,573 -- 4,588 --------------- --------------- --------------- --------------- Net broadcast revenue 7,553 25,090 -- 32,643 --------------- --------------- --------------- --------------- OPERATING EXPENSES: Program and technical 1,159 3,538 -- 4,697 Selling, general and administrative 2,992 8,500 -- 11,492 Corporate expenses -- 1,282 -- 1,282 Depreciation and amortization 5,984 1,198 -- 7,182 --------------- --------------- --------------- --------------- Total operating expenses 10,135 14,518 -- 24,653 --------------- --------------- --------------- --------------- Broadcast operating (loss) income (2,582) 10,572 -- 7,990 INTEREST EXPENSE, including amortization of deferred financing costs -- 3,665 -- 3,665 OTHER INCOME, net 4 5,466 -- 5,470 --------------- --------------- --------------- --------------- (Loss) income before provision for income taxes and extraordinary loss (2,578) 12,373 -- 9,795 PROVISION FOR INCOME TAXES -- (4,218) -- (4,218) EQUITY IN LOSSES OF SUBSIDIARIES -- (2,578) 2,578 -- --------------- --------------- --------------- --------------- NET (LOSS) INCOME $ (2,578) $ 5,577 $ 2,578 $ 5,577 =============== =============== =============== =============== NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDERS $ (2,578) $ 5,577 $ 5,577 =============== =============== ===============
19 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONSOLIDATING STATEMENTS OF CASH FLOWS -------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, 2001 -------------------------------------- (UNAUDITED, IN THOUSANDS) -----------------------
Combined Guarantor Radio One, Subsidiaries Inc. Eliminations Consolidated -------------- ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (48,365) $ (29,787) $ 48,365 $ (29,787) Adjustments to reconcile net (loss) income to net cash from operating activities: Depreciation and amortization 53,777 8,598 -- 62,375 Amortization of debt financing costs, unamortized discount and deferred interest -- 1,016 -- 1,016 Deferred income taxes 940 (14,461) -- (13,521) Non-cash compensation to officer -- 475 -- 475 Loss on write-off of investments -- 1,206 -- 1,206 Gain on sale of assets, net -- (4,272) -- (4,272) Extraordinary loss on debt retirement, net of taxes -- 7,771 -- 7,771 Effect of change in operating assets and liabilities- Trade accounts receivable (109) (3,046) -- (3,155) Due to Corporate/from Subsidiaries (5,530) 5,530 -- -- Income tax receivable -- 476 -- 476 Prepaid expenses and other (297) 72 -- (225) Other assets 60 (1,262) -- (1,202) Accounts payable (221) (9,501) -- (9,722) Accrued expenses and other 184 2,451 -- 2,635 -------------- ------------- ------------- ------------- Net cash flows from operating activities 439 (34,734) 48,365 14,070 -------------- ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (226) (2,614) -- (2,840) Investment in subsidiaries -- 48,365 (48,365) -- Equity investments -- (210) -- (210) Proceeds from sale of assets, net -- 69,254 -- 69,254 Deposits and payments for station purchases -- (70,286) -- (70,286) -------------- ------------- ------------- ------------- Net cash flows from investing activities (226) 44,509 (48,365) (4,082) -------------- ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt -- (303,648) -- (303,648) Proceeds from debt issuances -- 300,000 -- 300,000 Payment of preferred stock issuance costs -- (9) -- (9) Payment of preferred stock dividends -- (10,070) -- (10,070) Deferred financing costs -- (7,861) -- (7,861) Proceeds from exercise of stock options -- 240 -- 240 -------------- ------------- ------------- ------------- Net cash flows from financing activities -- (21,348) -- (21,348) -------------- ------------- ------------- ------------- INCREASE IN CASH AND CASH EQUIVALENTS 213 (11,573) -- (11,360) CASH AND CASH EQUIVALENTS, beginning of period 105 20,774 -- 20,879 -------------- ------------- ------------- ------------- CASH AND CASH EQUIVALENTS, end of period $ 318 $ 9,201 $ -- $ 9,519 ============== ============= ============= =============
20 RADIO ONE, INC. AND SUBSIDIARIES -------------------------------- CONSOLIDATING STATEMENTS OF CASH FLOWS -------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, 2000 -------------------------------------- (UNAUDITED, IN THOUSANDS) -----------------------
Combined Guarantor Subsidiaries Radio One, Inc. Eliminations Consolidated ------------- --------------- -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (5,052) $ 7,638 $ 5,052 $ 7,638 Adjustments to reconcile net (loss) income to net cash from operating activities: Depreciation and amortization 10,924 1,747 -- 12,671 Amortization of debt financing costs, unamortized discount and deferred interest -- 2,014 -- 2,014 Deferred income taxes and reduction in valuation reserve on deferred taxes -- (244) -- (244) Loss on sale of investments -- 225 -- 225 Non-cash advertising revenue in exchange for equity investments -- (658) -- (658) Effect of change in operating assets and liabilities- Trade accounts receivable (183) (5,115) -- (5,298) Due to corporate/from subsidiaries (5,714) 5,714 -- -- Prepaid expenses and other (50) (256) -- (306) Other assets 11 210 -- 221 Accounts payable 25 1,085 -- 1,110 Accrued expenses and other 105 1,412 -- 1,517 ------------- --------------- -------------- ------------ Net cash flows from operating activities 66 13,772 5,052 18,890 ------------- --------------- -------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment -- (1,397) -- (1,397) Investment in subsidiary -- 5,052 (5,052) -- Equity investments -- (884) -- (884) Proceeds from sale of available-for-sale investments, net -- 51,114 -- 51,114 Deposits and payments for station purchases -- (262,244) -- (262,244) ------------- --------------- -------------- ------------ Net cash flows from investing activities (208,359) (5,052) (213,411) ------------- --------------- -------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt -- (32) -- (32) Proceeds from issuance of common stock, net of issuance costs -- 335,982 -- 335,982 Proceeds from exercise of stock options -- 433 -- 433 ------------- --------------- -------------- ------------ Net cash flows from financing activities -- 336,383 -- 336,383 ------------- --------------- -------------- ------------ INCREASE IN CASH AND CASH EQUIVALENTS 66 141,796 -- 141,862 CASH AND CASH EQUIVALENTS, beginning of period 31 6,190 -- 6,221 ------------- --------------- -------------- ------------ CASH AND CASH EQUIVALENTS, end of period $ 97 $ 147,986 $ -- $ 148,083 ============= =============== ============== ============
21 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/A for the year ended December 31, 2000. RESULTS OF OPERATIONS --------------------- Comparison of periods ended June 30, 2000 to the periods ended June 30, 2001 (all periods are unaudited - all numbers in 000s except per share data).
Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2000 2001 2000 2001 ------------- ------------- --------------- -------------- STATEMENT OF OPERATIONS DATA: REVENUE: Broadcast revenue $ 37,231 $ 70,930 $ 62,355 $ 125,203 Less: Agency commissions 4,588 8,645 7,560 14,993 ------------- ------------- --------------- -------------- Net broadcast revenue 32,643 62,285 54,795 110,210 ------------- ------------- --------------- -------------- OPERATING EXPENSES: Programming and technical 4,697 9,151 8,937 18,007 Selling, G&A 11,492 19,090 19,791 36,206 Corporate expenses 1,282 1,683 2,400 3,523 Non-cash compensation - 237 - 475 Depreciation & amortization 7,182 30,851 12,671 62,375 ------------- ------------- --------------- -------------- Total operating expenses 24,653 61,012 43,799 120,586 ------------- ------------- --------------- -------------- Operating income (loss) 7,990 1,273 10,996 (10,376) INTEREST EXPENSE 3,665 14,717 7,247 30,418 GAIN ON SALE OF ASSETS, net - - - 4,272 OTHER INCOME (EXPENSE), net 5,470 (596) 9,707 - ------------- ------------- --------------- -------------- Income (loss) before provision 9,795 (14,040) 13,456 (36,522) (benefit) for income taxes PROVISION (BENEFIT) FOR INCOME TAXES 4,218 (4,633) 5,818 (11,942) ------------- ------------- --------------- -------------- Net income (loss) before 5,577 (9,407) 7,638 (24,580) extraordinary item EXTRAORDINARY LOSS ON DEBT RETIREMENT, net of taxes - 5,207 - 5,207 ------------- ------------- --------------- -------------- Net income (loss) $ 5,577 $ (14,614) $ 7,638 $ (29,787) ============= ============= =============== ============== Net income (loss) applicable to common shareholders $ 5,577 $ (19,646) $ 7,638 $ (39,857) ============= ============= =============== ==============
22
Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2000 2001 2000 2001 ------------ ------------ ---------- ---------- BASIC AND DILUTED PER SHARE DATA: Net income (loss) before extraordinary item per share $ 0.07 $ (0.11) $ 0.09 $ (0.28) Extraordinary item per share -- (0.06) -- (0.06) Net income (loss) per share 0.07 (0.17) 0.09 (0.34) Net income (loss) per share before extraordinary item applicable to common shareholders $ 0.07 $ (0.16) $ 0.09 $ (0.40) Extraordinary item per share -- (0.06) -- (0.06) Net income (loss) per share applicable to common shareholders 0.07 (0.22) 0.09 (0.46) OTHER DATA: Broadcast cash flow (a) $ 16,454 $ 34,044 $ 26,067 $ 55,997 Broadcast cash flow margin 50.4% 54.7% 47.6% 50.8% EBITDA (b) $ 15,172 $ 32,361 $ 23,667 $ 52,474 EBITDA margin 46.5% 52.0% 43.2% 47.6% After-tax cash flow (c) $ 12,277 $ 13,963 $ 19,726 $ 16,078 Capital expenditures 829 1,189 1,397 2,840 Weighted average shares outstanding - basic (d) 84,994 88,252 83,038 87,532 Weighted average shares outstanding - 85,256 88,917 83,316 88,036 diluted (e) SAME STATION RESULTS (f): Net revenue $ 32,618 $ 34,036 $ 54,770 $ 57,239 Broadcast cash flow 16,428 18,501 26,041 28,798 Broadcast cash flow margin 50.4% 54.4% 47.5% 50.3%
Net broadcast revenue increased to approximately $62.3 million for the quarter ended June 30, 2001 from approximately $32.6 million for the quarter ended June 30, 2000 or 91%. Net broadcast revenue increased to approximately $110.2 million for the six months ended June 30, 2001 from approximately $54.8 million for the six months ended June 30, 2000 or 101%. These increases in net broadcast revenue were the result of continuing broadcast revenue growth in many 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. Additional revenue gains of approximately $23.5 million and $45.0 million for the quarter and six months ended June 30, 2001, respectively, were derived from the Company's 2000 acquisition of radio stations from Clear Channel Communications and AMFM. Operating expenses excluding depreciation, amortization and non-cash compensation increased to approximately $29.9 million for the quarter ended June 30, 2001 from approximately $17.5 million for the quarter ended June 30, 2000 or 71%. Operating expenses excluding depreciation, amortization and non-cash compensation increased to approximately $57.7 million for the six months ended June 30, 2001 from approximately $31.1 million for the six months ended June 30, 2000 or 86%. These increases in expenses 23 were related to the Company's rapid expansion within all of the markets in which it operates including increased variable costs associated with increased revenue, as well as start-up and expansion expenses in its newer markets as well as higher costs associated with operating as a public company. Broadcast operating income was approximately $1.3 million for the quarter ended June 30, 2001 compared to broadcast operating income of $8.0 million for the quarter ended June 30, 2000. Broadcast operating loss was approximately $10.4 million for the six months ended June 30, 2001 compared to the broadcast operating income of $11 million for the quarter ended June 30, 2000. These decreases in net broadcast operating income were attributable to higher revenue as described above more than offset by higher depreciation and amortization expenses associated with the Company's several acquisitions made in 2000 and 2001. Interest expense increased to approximately $14.7 million for the quarter ended June 30, 2001 from approximately $3.7 million for the quarter ended June 30, 2000 or 297%. Interest expense increased to approximately $30.4 million for the six months ended June 30, 2001 from approximately $7.2 million for the six months ended June 30, 2000 or 322%. These increases relate primarily to borrowings associated with the acquisition of radio stations from Clear Channel Communications and AMFM. Other (expense) income was approximately $(0.6) million for the quarter ended June 30, 2001 compared to approximately $5.5 million for the quarter ended June 30, 2000. This change was the result of an approximately $1.2 million write-down of the Company's investment in NetNoir, Inc. partially offset by interest income. Other income decreased to zero for the six months ended June 30, 2001 from approximately $9.7 million for the six months ended June 30, 2000. This decrease was due to the Company having normalized cash balance levels during the first half of 2001 as compared to high cash and investment balances resulting from its follow-on equity offerings in November 1999 and March 2000 completed in anticipation of the acquisition of radio stations from Clear Channel Communications and AMFM, which was consummated in August 2000. (Loss) income before provision for income taxes was approximately $(14.0) million for the quarter ended June 30, 2001 compared to approximately $9.8 million for the quarter ended June 30, 2000. (Loss) income before provision for income taxes was approximately $(36.5) million for the six months ended June 30, 2001 compared to approximately $13.5 million for the six months ended June 30, 2000. These changes were due to lower operating income due to higher non-cash charges and higher interest expense due to higher levels of debt outstanding as outlined above. Net (loss) income was approximately $(14.6) million for the quarter ended June 30, 2001 compared to $5.6 million for the quarter ended June 30, 2000. Net (loss) income was approximately $(29.8) million for the six months ended June 30, 2001 compared to approximately $7.6 million for the six months ended June 30, 2000. These changes were due to the (loss) before provision for income taxes versus income before provision for income taxes in the previous year's periods as well as an extraordinary charge in conjunction with the Company's refinancing of its 12% Senior Subordinated Notes with a new offering of 8-7/8% Senior Subordinated Notes in May 2001, partially offset by a tax benefit compared to a tax provision during last year's periods. Broadcast cash flow increased to approximately $34.0 million for the quarter ended June 30, 2001 from approximately $16.5 million for the quarter ended June 30, 2000 or 106%. Broadcast cash flow increased to approximately $56.0 million for the six months ended June 30, 2001 from approximately $26.1 million for the six months ended June 30, 2000 or 115%. These increases were 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 non-cash compensation expense, increased to approximately $32.4 million for the quarter ended June 30, 2001 from 24 approximately $15.2 million for the quarter ended June 30, 2000 or 113%. Earnings before interest, taxes, depreciation, and amortization (EBITDA), and excluding non-cash compensation expense, increased to approximately $52.5 million for the six months ended June 30, 2001 from approximately $23.7 million for the six months ended June 30, 2000 or 122%. These increases were attributable to the increase in broadcast revenue partially offset by higher operating expenses and higher corporate expenses associated with the costs of operating as a public company. The table above includes information regarding broadcast cash flow, EBITDA, and after-tax cash flow. Broadcast cash flow, EBITDA, and after-tax cash flow are not measures of performance or liquidity calculated in accordance with GAAP, however we believe that these measures are useful to an investor in evaluating the Company because these measures are widely used in the broadcast industry as a measure of a radio broadcasting company's performance. Nevertheless, broadcast cash flow, EBITDA and after-tax cash flow should not be considered in isolation from or as a substitute for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity. Moreover, because broadcast cash flow, EBITDA and after-tax cash flow are not measures calculated in accordance with GAAP, these performance measures are not necessarily comparable to similarly titled measures employed by other companies. (a) "Broadcast cash flow" is defined as broadcast operating income plus corporate expenses (including non-cash compensation) and depreciation and amortization of both tangible and intangible assets. (b) "EBITDA" is defined as earnings before interest, taxes, depreciation, amortization and non-cash compensation. (c) "After-tax cash flow" is defined as income before income taxes and extraordinary items plus depreciation, amortization and non-cash compensation, non-cash interest expense and non-cash loss/(gain) on investments, less the current income tax liability/(benefit) and preferred stock dividends. (d) As of June 30, 2001 the Company had 88,252,000 shares of Common Stock outstanding on a weighted average basis for the quarter. (e) As of June 30, 2001 the Company had 88,917,000 shares of Common Stock outstanding on a weighted average basis for the quarter, diluted for outstanding stock options. (f) Same station results include results only for those stations owned and/or operated by the Company for the full one-year period in question. 25 LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company's primary source of liquidity is cash provided by operations and, to the extent necessary, commitments available under the Company's Credit Facility. The 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. The Credit 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. The Company has used, and may continue to use, a significant portion of the Company's capital resources to consummate acquisitions. These acquisitions were or will be funded from (i) the Company's Credit Facility (ii) the proceeds of the historical offerings of the Company's common stock and preferred stock, (iii) the proceeds of future common and /or preferred stock, and /or debt offerings, and (iv) internally generated cash flow. The Company's balance of cash and cash equivalents was approximately $20.9 million as of December 31, 2000. The Company's balance of cash and cash equivalents was approximately $9.5 million as of June 30, 2001. This decrease resulted primarily from preferred dividend and credit facility payments, escrow deposits on the acquisitions of Blue Chip Broadcasting, Inc. and radio station WPEZ-FM, and operating activities during the six months of 2001. The Company has entered into a bank credit facility under which the Company has borrowed $350.0 million in term loans and may borrow up to $250.0 million on a revolving basis, and which the Company has historically drawn down as capital was required, primarily for acquisitions. As of June 30, 2001, the Company had $250.0 million available to be drawn. Net cash flows from operating activities decreased to approximately $14.1 million for the six months ended June 30, 2001 from approximately $18.9 million for the six months ended June 30, 2000 or 25%. This decrease was due to lower net income, increased deferred income taxes, higher trade accounts receivable and lower accounts payable partially offset by an extraordinary loss associated with the Company's retirement of the 12% Senior Subordinated Notes and higher depreciation and amortization charges. Non-cash expenses of depreciation and amortization increased to approximately $62.4 million for the six months ended June 30, 2001 from approximately $12.7 million for the six months ended June 30, 2000 or 391% due primarily to acquisitions in 2000, particularly the acquisition of stations from Clear Channel Communications and AMFM. Net cash flows from investing activities decreased to approximately $4.1 million for the six months ended June 30, 2001 compared to an approximately $213.0 million decrease for the six months ended June 30, 2000. During the six months ended June 30, 2001 the Company acquired Nash Communications, which owned and operated WILD-AM, in the Boston, Massachusetts market, for approximately $5.0 million. The Company acquired WTLC-AM and the intellectual property of WTLC-FM, in the Indianapolis, Indiana market for approximately $8.2 million. The Company also acquired KTXQ-FM (formerly KDGE-FM), in the Dallas, Texas market for approximately $52.5 million. Also during the six months ended June 30, 2001 the Company completed the sale of KJOI-AM (formerly KLUV-AM) in Dallas, Texas, for approximately $16.0 million. The Company also completed the sale of WDYL-FM in Richmond, Virginia, and two radio stations, WJMZ-FM and WPEK-FM, in the Greenville, South Carolina market for approximately $52.5 million and WARV-FM in the Richmond, Virginia market for approximately $1.0 million. The Company also made escrow deposits of $5.0 million for the acquisition of Blue Chip Broadcasting, Inc. and $2.8 million on the anticipated acquisition of WPEZ-FM, which is in the process of being moved to the Atlanta, Georgia market. During the six months ended June 30, 2001, the Company made purchases of capital equipment totaling approximately $2.8 million. During the six months ended June 30, 2000, the Company acquired WPLY-FM in the Philadelphia, Pennsylvania market for approximately $80.0 million. The Company also acquired Davis Broadcasting, Inc., owner and operator of six radio stations in the Charlotte, North Carolina 26 and Augusta, Georgia markets for approximately $24.2 million, and three radio stations and one low power television station in the Indianapolis, Indiana market for approximately $40.0 million. The Company also made an escrow deposit of approximately $130.3 million for the August 2000 acquisition of 12 radio stations from Clear Channel Communications and AMFM. Net cash flows for financing activities decreased to approximately $21.3 million for the six months ended June 30, 2001 compared to an increase of approximately $336.4 million for the six months ended June 30, 2000. The decrease in 2001 was primarily driven by debt repayment and preferred stock dividend payments. The Company completed the sale of $300.0 million of 8-7/8% Subordinated Notes due July 2011 in May 2001. The proceeds from the notes were used to repay $200.0 million of the Company's Credit Facility and also redeem the Company's 12% Senior Subordinated Notes due 2004 (Former Notes). In addition, the Company paid approximately $10.0 million in preferred stock dividends. During the six months ended June 30, 2000, the Company had completed a public offering of common stock that raised net proceeds of approximately $336.0 million. Most of the proceeds were used to fund the Company's acquisitions in 2000. As a result of the aforementioned, cash and cash equivalents decreased by $11.4 million during the six months ended June 30, 2001 compared to an increase of approximately $141.9 million during the six months ended June 30, 2000. In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 141 (SFAS 141) "Business Combinations" and No. 142 (SFAS 142) "Goodwill and Other Intangible Assets". SFAS 141 requires all business combinations to be accounted for using the purchase method. SFAS 142 requires a non-amortization approach to account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles will not be amortized into results of operation, but instead, would be reviewed for impairment and written down and charged to results of operations only in the periods in which the carrying value of goodwill and certain intangibles is more than its fair value. The Company will adopt the provisions of these two statements on January 1, 2002. The adoption of these pronouncements may result in the reduction of amortization of goodwill and intangibles. Management has not quantified the impact of these statements on the statement of operations. This discussion may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Because these statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially, including the absence of a combined operating history with an acquired company or radio station and the potential inability to integrate acquired businesses, need for additional financing, high degree of leverage, granting of rights to acquire certain portions of the acquired company's or radio station's operations, variable economic conditions and consumer tastes, as well as restrictions imposed by existing debt and future payment obligations. Important factors that could cause actual results to differ materially are described in the Company's reports on Forms 10-K and 10-Q and other filings with the Securities and Exchange Commission. 27 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is from time to time engaged in legal proceedings incidental to its business. The Company does not believe that any legal proceedings that it is currently engaged in, either individually or in the aggregate, will have a material adverse effect on the Company. Item 2. Changes in Securities and Use of Proceeds In April 2001, the Company sold to Alfred C. Liggins, III, its Chief Executive Officer, 1.5 million unregistered shares of the Company's Class D Common Stock. These shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders On June 5, 2001, the Company held the Annual Meeting of its holders of Common Stock pursuant to a Notice of Annual Meeting of Stockholders and Proxy Statement dated April 24, 2001, a copy of which has been filed previously with the Securities and Exchange Commission. Stockholders were asked to vote upon the following proposals: 1. The election of Brian W. McNeill and Terry L. Jones as Class A directors to serve until the 2002 annual meeting of Stockholders or until their successors are duly elected and qualified. 2. The election of Catherine L. Hughes, Alfred C. Liggins, III, Larry D. Marcus, D. Geoffrey Armstrong, and L. Ross Love as directors to serve until the 2002 annual meeting of Stockholders or until their successors are duly elected and qualified. 3. The amendment of the Company's Amended and Restated Bylaws to permit the filling of vacancies on the Board of Directors by majority vote of the Stockholders or the Board of Directors. 4. The ratification of the amendment to the 1999 Option and Restricted Stock Grant Plan increasing the number of shares of class D common stock reserved for issuance under the Plan from 2,816,198 shares to 3,816,198 shares. 5. The ratification of the appointment of Arthur Andersen LLP as independent public accountants for the Company for the fiscal year ended December 31, 2001. 28 All proposals were adopted by a majority of the holders of Common Stock. The results of the vote tabulation were as follows:
NUMBER OF VOTES --------------- Class A Class B ------- ------- PROPOSAL 1 ---------- McNeill For 20,447,132 N/A Withhold Authority 130,276 N/A Jones For 20,447,132 N/A Withhold Authority 130,276 N/A PROPOSAL 2 ---------- Hughes For 17,140,430 28,618,430 Withhold Authority 3,436,978 N/A Liggins For 17,140,430 28,618,430 Withhold Authority 3,436,978 0 Marcus For 20,447,432 28,618,430 Withhold Authority 129,976 0 Armstrong For 20,447,432 28,618,430 Withhold Authority 129,976 0 Love For 20,441,782 28,618,430 Withhold Authority 135,626 0
29
Class A Class B ------- ------- PROPOSAL 3 ---------- For 17,037,235 28,618,430 Against 2,137,060 0 Abstain 3,679 0 Broker Non-Votes 1,399,434 0 PROPOSAL 4 ---------- For 11,210,688 28,618,430 Against 9,338,357 0 Abstain 28,363 0 PROPOSAL 5 ---------- For 16,447,132 28,618,430 Against 4,128,249 0 Abstain 2,026 0
Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) EXHIBITS 3.1 Amended and Restated Certificate of Incorporation of Radio One, Inc. (dated as of May 4, 2000), as filed with the State of Delaware on May 9, 2000 (incorporated by reference to Radio One's Quarterly Report on Form 10-Q for the period ended March 31, 2000 (File No. 000-25969; Film No. 631638)). 3.1.1 Certificate of Amendment (dated as of September 21, 2000) of the Amended and Restated Certificate of Incorporation of Radio One, Inc. (dated as of May 4, 2000), as filed with the State of Delaware on September 21, 2000 (incorporated by reference to Radio One's Current Report on Form 8-K filed October 6, 2000 (File No. 000-25969; Film No. 736375)). 3.2 Amended and Restated By-laws of Radio One, Inc., amended as of June 5, 2001. 3.3 Certificate Of Designations, Rights and Preferences of the 6 1/2% Convertible 30 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)). 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 Purchasers 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)). 31 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)). 4.13 Registration Rights Agreement, dated February 7, 2001, by and between Radio One, Inc. and certain stockholders of Blue Chip Broadcasting, Inc. listed therein (incorporated by reference to Exhibit 4.1 of Radio One's Current Report on Form 8-K filed February 8, 2001 (File No. 000-25969; Film No. 1528282)). 4.14 Indenture dated May 18, 2001 among Radio One, Inc., the Guarantors listed therein, and United States Trust Company of New York (incorporated by reference to Radio One's Registration Statement on Form S-4, filed July 17, 2001 (File No. 333-65278; Film No. 1683373)). 4.15 Form of 8-7/8% Senior Subordinated Notes, due 2011 governed by the Indenture dated May 18, 2001 (incorporated by reference to Radio One's Registration Statement on Form S-4, filed July 17, 2001 (File No. 333-65278; Film No. 1683373). 4.16 Registration Rights Agreement dated May 18, 2001 among Radio One, Inc., the Guarantors, Banc of America Securities LLC, Credit Suisse First Boston Corporation, Deutsche Banc Alex. Brown Inc., Blaylock & Partners, L.P., First Union Securities, Inc., Morgan Stanley & Co. Incorporated and TD Securities (USA) Inc. (incorporated by reference to Radio One's Registration Statement on Form S-4, filed July 17, 2001 (File No. 333-65278; Film No. 1683373)). 10.65 Asset Purchase Agreement dated June 21, 2001 between Radio One, Inc. and U.S. Broadcasting Limited Partnership. 10.66 Employment Agreement dated April 9, 2001 between Radio One, Inc. and Alfred C. Liggins, III. (b) REPORTS ON FORM 8-K The Company filed a Form 8-K/A dated April 9, 2001 to amend its Form 8-K filed on February 8, 2001. The Company added the Financial Statements of the Business Acquired required by Item 7(a) and the Pro Forma Financial Information required by Item 7(b). The Company filed a Form 8-K dated April 18, 2001 for the purpose of (i) disclosing its intention to sell $300 million of ten year subordinated notes, and (ii) updating its revenue and broadcast cash flow guidance for its fiscal year ending December 31, 2001. The Company filed a Form 8-K dated May 4, 2001 for the purpose of (i) releasing its results of operations for the first quarter of 2001, and (ii) disclosing its sale of $300 million in 8-7/8% senior subordinated notes due July 2011. The Company filed a Form 8-K dated May 16, 2001 disclosing its updated guidance for interest expense and shares outstanding for the second quarter of its fiscal year ending December 31, 2001. 32 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RADIO ONE, INC. /s/ Scott R. Royster ---------------------------------------------------- August 14, 2001 Scott R. Royster Executive Vice President and Chief Financial Officer (Principal Accounting Officer) 33