<PAGE>
- --------------------------------------------------------------------------------
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, 1999
Commission File No. 000-25969
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.
<TABLE>
<CAPTION>
Class Outstanding at September 30, 1999
----- ---------------------------------
<S> <C>
Class A Common Stock, $.01 Par Value 12,034,397
Class B Common Stock, $.01 Par Value 2,873,083
Class C Common Stock, $.01 Par Value 3,195,063
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
Form 10-Q
For the Quarter Ended September 30, 1999
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
PART I FINANCIAL INFORMATION
<S> <C>
Item 1 Consolidated Financial Statements 3
Consolidated Balance Sheets as of 4
December 31, 1998 and September 30, 1999 (Unaudited)
Consolidated Statements of Operations for the 5
Three months and nine months ended September 30, 1998 and 1999 (Unaudited)
Consolidated Statements of Cash Flows for the 6
Nine months ended September 30, 1998 and 1999 (Unaudited)
Consolidated Statement of Changes in Stockholders' Equity for the 7
nine months ended September 30, 1999 (Unaudited)
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
PART II OTHER INFORMATION
<S> <C> <C>
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 17
Signature 19
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(See pages 4-10 -- This page intentionally left blank.)
3
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF DECEMBER 31, 1998, AND SEPTEMBER 30, 1999
-----------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------------- -------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,455,000 $ 4,428,000
Trade accounts receivable, net of allowance for doubtful
accounts of $1,243,000 and $2,320,000, respectively 12,026,000 19,689,000
Prepaid expenses, deferred income taxes and other current assets 1,160,000 1,604,000
------------ ------------
Total current assets 17,641,000 25,721,000
PROPERTY AND EQUIPMENT, net 6,717,000 15,536,000
INTANGIBLE ASSETS, net 127,639,000 212,363,000
OTHER ASSETS 1,859,000 4,206,000
------------ ------------
Total assets $153,856,000 $257,826,000
============ ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,190,000 $ 2,148,000
Accrued expenses 3,851,000 8,296,000
------------ ------------
Total current liabilities 5,041,000 10,444,000
DEFERRED INCOME TAX LIABILITY 15,251,000 14,943,000
LONG-TERM DEBT AND DEFERRED INTEREST:
Senior subordinated notes (net of $7,020,000 and $4,012,000
unamortized discount, respectively) 78,458,000 81,466,000
Line of credit 49,350,000 26,000,000
Note payable and deferred interest 3,841,000 -
Other long-term debt 90,000 119,000
------------ ------------
Total liabilities 152,031,000 132,972,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK:
Series A, $.01 par value, 140,000 shares authorized, 84,843 and
no shares issued and outstanding 10,816,000 -
Series B, $.01 par value, 150,000 shares authorized, 124,467 and
no shares issued and outstanding 15,868,000 -
STOCKHOLDERS' (DEFICIT) EQUITY:
Common stock - Class A, $.001 par value, 30,000,000 shares
authorized, no and 12,034,000 shares issued and
outstanding, respectively - 12,000
Common stock - Class B, $.001 par value, 30,000,000 shares
authorized, 1,572,000 and 2,873,000 shares issued and
outstanding 2,000 3,000
Common stock - Class C, $.001 par value, 30,000,000 shares
authorized, 3,146,000 shares and 3,195,000 shares issued
and outstanding, respectively 3,000 3,000
Additional paid-in capital - 152,933,000
Accumulated deficit (24,864,000) (28,097,000)
------------ ------------
Total stockholders' (deficit) equity (24,859,000) 124,854,000
------------ ------------
Total liabilities and stockholders' (deficit) equity $153,856,000 $257,826,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
balance sheets.
4
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
----------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------------- September 30,
September 30,
----------------------------------- ------------------------------------
1998 1999 1998 1999
------------------- ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
REVENUE:
Broadcast revenue including barter
revenue of $200,000, $410,000,
$494,000 and $982,000, respectively $ 15,729,000 $27,589,000 $38,057,000 $65,062,000
Less: Agency commissions 1,953,000 3,468,000 4,753,000 8,087,000
------------- ----------- ----------- -----------
Net broadcast revenue 13,776,000 24,121,000 33,304,000 56,975,000
------------- ----------- ----------- -----------
OPERATING EXPENSES:
Program and technical 2,324,000 3,864,000 5,827,000 9,741,000
Selling, general and administrative 4,716,000 8,264,000 11,723,000 21,470,000
Corporate expenses 732,000 1,148,000 2,051,000 3,076,000
Stock based compensation - - - 225,000
Depreciation and amortization 2,410,000 4,734,000 6,042,000 12,209,000
------------- ----------- ----------- -----------
Total operating expenses 10,182,000 18,010,000 25,643,000 46,721,000
------------- ----------- ----------- -----------
Broadcast operating income 3,594,000 6,111,000 7,661,000 10,254,000
INTEREST EXPENSE, including
amortization of deferred financing costs
and LMA fees 3,071,000 3,990,000 7,996,000 11,479,000
OTHER INCOME, net (19,000) 58,000 267,000 199,000
------------- ----------- ----------- -----------
Income (loss) before provision
for income taxes 504,000 2,179,000 (68,000) (1,026,000)
PROVISION FOR INCOME TAXES - 255,000 - 731,000
------------- ----------- ----------- -----------
Net income (loss) $ 504,000 $ 1,924,000 $ (68,000) $(1,757,000)
============= =========== =========== ===========
Net income (loss) applicable to common
stockholders $ (450,000) $ 1,924,000 $(2,794,000) $(3,233,000)
============== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE
APPLICABLE TO COMMON
SHAREHOLDERS:
Basic $ (0.05) $ 0.11 $ (0.30) $ (0.22)
============= =========== =========== ===========
Diluted $ (0.05) $ 0.11 $ (0.30) $ (0.22)
============= =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 9,393,000 18,103,000 9,393,000 14,547,000
============= =========== =========== ===========
Diluted 9,393,000 18,195,000 9,393,000 14,547,000
============= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
-----------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine months Ended
-----------------------------------------
September 30,
----------------------------------------
1998 1999
-------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (68,000) $ (1,757,000)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization 6,042,000 12,209,000
Amortization of deferred financing costs, unamortized
discount and deferred interest 2,733,000 3,368,000
Noncash compensation to officer - 225,000
Effect of change in operating assets and liabilities-
Trade accounts receivable (2,276,000) (5,275,000)
Prepaid expenses and other 12,000 (171,000)
Other assets (461,000) (118,000)
Accounts payable 311,000 854,000
Accrued expenses 2,758,000 3,333,000
------------ ------------
Net cash flows from operating activities 9,051,000 12,668,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,357,000) (2,580,000)
Deposits and payments for acquisitions, net of cash received (32,529,000) (55,325,000)
Purchase of investments - (1,125,000)
------------ ------------
Net cash flows from investing activities (33,886,000) (59,030,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuances 25,350,000 26,000,000
Repayment of debt (459,000) (69,483,000)
Repayment of Senior Cumulative Redeemable Preferred Stock - (28,160,000)
Proceeds from issuance of common stock, net of issuance costs - 118,527,000
Deferred financing costs (693,000) (549,000)
------------ ------------
Net cash flows from financing activities 24,198,000 46,335,000
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (637,000) (27,000)
CASH AND CASH EQUIVALENTS, beginning of period 8,500,000 4,455,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 7,863,000 $ 4,428,000
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 3,495,000 $ 6,340,000
============ ============
Income taxes $ - $ 374,000
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
6
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
--------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Common Common Common Additional Total
Stock Stock Stock Paid-In Accumulated Stockholders'
Class A Class B Class C Capital Deficit Equity
-------- ------- ------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, as of December 31, 1998 $ - $2,000 $3,000 $ - $(24,864,000) $(24,859,000)
Net loss - - - - (1,757,000) (1,757,000)
Preferred stock dividends earned - - - - (1,476,000) (1,476,000)
Issuance of stock for acquisition 2,000 1,000 - 34,191,000 - 34,194,000
Stock issued to an employee - - - 225,000 - 225,000
Conversion of warrants 5,000 - - (5,000) - -
Issuance of common stock 5,000 - - 118,522,000 - 118,527,000
------- ------ ------- ------------ ------------ ------------
BALANCE, as of September 30, 1999 $12,000 $3,000 $3,000 $152,933,000 $(28,097,000) $124,854,000
======= ====== ======= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
7
<PAGE>
RADIO ONE, INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1999
------------------
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 (Delaware
corporations), Broadcast Holdings, Inc. (a Washington, D.C., corporation), Bell
Broadcasting Company (a Michigan corporation), Radio One of Detroit, Inc.,
Allur-Detroit, Inc., Allur Licenses, Inc. (Delaware corporations), 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) (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, Georgia; Cleveland, Ohio; and Richmond, Virginia markets. The
Company owns radio stations in the St. Louis, Missouri and Boston, Massachusetts
markets. The Company's operating results are significantly affected by its
market share in the markets that it has stations. The Company also operates
radio stations in Richmond, Virginia, through a time brokerage agreement (TBA).
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.
8
<PAGE>
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, 1998,
financial statement and notes thereto included in the Company's annual report on
Form 10-K.
2. INITIAL PUBLIC OFFERING:
------------------------
The Company effected an initial public offering (IPO) of common stock during May
1999, in which it sold approximately 5.4 million shares of Class A common stock.
The Company realized approximately $119 million from the offering, after
deducting the expenses of the offering and used the proceeds to repay amounts
borrowed under its line of credit, redeem its preferred stock, repay the note
payable and deferred interest, fund planned acquisitions and for other general
corporate purposes.
3. EARNINGS PER SHARE:
-------------------
The Company had certain senior cumulative redeemable preferred stock
outstanding, which paid dividends at 15% per annum. The Company accreted the
dividends on this preferred stock, which were payable when the preferred stock
was redeemed. In May 1999, the Company redeemed the outstanding preferred stock
with proceeds from the IPO. The earnings available for common stockholders for
the three and nine months ended September 30, 1998 and 1999, is the net income
(loss) for each of the periods, less the accreted dividends of $954,000 for the
three months ended September 30, 1998, and $2,726,000 and $1,476,000 for the
nine months ended September 30, 1998 and 1999, respectively, on the preferred
stock. There were no accreted dividends during the three months ended September
30, 1999.
The Company effected a 34,061 for one stock split, effective May 6, 1999, in
conjunction with the IPO. All share data included in the accompanying
consolidated financial statements and notes thereto are as if the stock split
had occurred prior to the periods presented.
Also, effective February 25, 1999, the Company converted certain Class A Common
Stock held by the principal stockholders to Class B Common Stock which have ten
votes per share, as compared to Class A which has one vote per share, and
certain of their Class A stock to Class C Common Stock. Class C Common Stock
will have no voting rights except as required by Delaware law. All share data
included in the accompanying consolidated financial statements and notes thereto
are as if the stock conversion had occurred prior to the periods presented.
Earnings per share are based on the weighted average number of common and
diluted common equivalent shares for stock options and warrants outstanding
during the period the calculation is made, divided into the earnings available
for common stockholders. Diluted common equivalent shares consist of shares
issuable upon the exercise of stock options and warrants, using the treasury
stock method. The basic weighted average number of shares outstanding for the
three and nine months ended September 30, 1998 is 9,393,000, and for the three
and nine months ended September 30, 1999, is 18,103,000 and 14,547,000,
respectively. The diluted weighted average number of common and common
equivalent shares for the three and nine months ended September 30, 1998, is
9,393,000, and for the three and nine months ended September 30, 1999, is
18,195,000 and 14,547,000, respectively. The warrants exercised concurrent with
the closing of the IPO and the stock issued to an employee in January 1999 have
both been reflected in the calculation of earnings per share as if the stock
issued was outstanding for all periods presented. As of
9
<PAGE>
September 30, 1999, there were approximately 207,000 stock options outstanding
from options granted in May 1999; however, the common stock equivalents of these
options are not included in the diluted earnings per share for the nine months
ended September 30, 1999, as the stock options are antidilutive for the period.
4. ACQUISITIONS:
-------------
On March 30, 1999, the Company acquired all of the outstanding stock of Radio
One of Atlanta, Inc. (ROA), an affiliate of the Company, for approximately
3,277,000 shares of common stock. At the time of the ROA acquisition, ROA owned
approximately 33% of Dogwood Communications, Inc. (Dogwood). On March 30, 1999,
ROA acquired the remaining approximate 67% of Dogwood for $3.6 million. The
acquisition was accounted for using purchase accounting, with the portion of the
excess purchase price over the net book value of the assets acquired related to
the noncontrolling stockholders being stepped up and that portion of the excess
purchase price being recorded as goodwill. The remaining net book value of the
assets acquired was recorded at historical cost.
On April 30, 1999, the Company completed the acquisition of the assets of WENZ-
FM and WERE-AM in Cleveland, Ohio, for approximately $20 million.
On May 6, 1999, the Company entered into an asset purchase agreement to acquire
four stations in Richmond, Virginia, for approximately $34 million.
On June 4, 1999, the Company completed the acquisition of the assets of WFUN-FM
in St. Louis, Missouri, for approximately $13.6 million.
On July 1, 1999, the Company completed the acquisition of WKJS-FM and WARV-FM
(formerly WSOJ-FM) in Richmond, Virginia, for approximately $12 million.
On July 15, 1999, the Company completed the acquisition of WDYL-FM in Richmond,
Virginia, for approximately $4.6 million.
5. STOCK OPTION PLAN AND GRANTS:
-----------------------------
During 1999, the Company adopted a Stock Option Plan and Restricted Stock Grant
Plan (the Plan) to enable directors, executives and other key employees to
acquire interests in the Company through ownership of common stock. On May 5,
1999, the Company granted options of approximately 207,000 shares of common
stock at $24.00 per share. The options expire in 10 years and vest over a
period of three to five years.
6. SUBSEQUENT EVENTS:
------------------
On October 1, 1999, the Company completed the acquisition of the assets of WBOT-
FM (formerly WCAV-FM), located in the Boston, Massachusetts, metropolitan area
for approximately $10 million.
Subsequent to September 30, 1999, the Company completed an offering of its Class
A common stock in which the Company sold 5,170,000 shares at a gross offering
price of $59.25 per share.
10
<PAGE>
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 combined in the Company's Form 10-K filed for the year ended December
31, 1998.
RESULTS OF OPERATIONS
- ---------------------
Comparison of periods ended September 30, 1998 to the periods ended
September 30, 1999
(all periods are unaudited - all numbers in 000s except per share data).
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
1998 1999 1998 1999
---------------- ----------------- ----------------- -----------------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
REVENUE:
Broadcast revenue $ 15,729 $ 27,589 $ 38,057 $ 65,062
Less: Agency commissions 1,953 3,468 4,753 8,087
----------- ------------ ----------- -----------
Net broadcast revenue 13,776 24,121 33,304 56,975
----------- ------------ ----------- -----------
OPERATING EXPENSES:
Programming and technical 2,324 3,864 5,827 9,741
Selling, G&A 4,716 8,264 11,723 21,470
Corporate expenses 732 1,148 2,051 3,076
Stock-based compensation - - - 225
Depreciation & amortization 2,410 4,734 6,042 12,209
---------- ------------- ----------- -----------
Total operating expenses 10,182 18,010 25,643 46,721
---------- ------------- ----------- -----------
Operating income 3,594 6,111 7,661 10,254
INTEREST EXPENSE 3,071 3,990 7,996 11,479
OTHER INCOME (expense), net (19) 58 267 199
---------- ------------- ----------- -----------
Income (loss) before
provision for income taxes 504 2,179 (68) (1,026)
---------- ------------- ----------- -----------
PROVISION FOR INCOME TAXES - 255 - 731
----------- ------------- ----------- -----------
Net income (loss) $ 504 $ 1,924 $ (68) $ (1,757)
=========== ============= =========== ===========
OTHER DATA:
Broadcast cash flow (a) $ 6,736 $ 11,993 $ 15,754 $ 25,764
Broadcast cash flow margin 48.9% 49.7% 47.3% 45.2%
EBITDA (b) $ 6,004 $10,845 $13,703 $22,688
EBITDA margin (b) 43.6% 45.0% 41.1% 39.8%
After-tax cash flow (c) $ 2,914 $ 6,713 $ 5,974 $10,452
Weighted average shares outstanding
- basic (d) 9,393 18,103 9,393 14,547
Weighted average shares outstanding
- diluted (d) 9,393 18,195 9,393 14,547
</TABLE>
11
<PAGE>
Net broadcast revenue increased to approximately $24.1 million for the quarter
ended September 30, 1999 from approximately $13.8 million for the quarter ended
September 30, 1998 or 74.6%. Net broadcast revenue increased to approximately
$57.0 million for the nine months ended September 30, 1999 from approximately
$33.3 million for the nine months ended September 30, 1998 or 71.2%. This
increase in net broadcast revenue was the result of continuing broadcast revenue
growth in the Company's Washington, Baltimore and Philadelphia markets 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
recent acquisitions in Detroit and Cleveland and from the radio stations being
operated under a time brokerage agreement in Richmond, as well as the March,
1999 acquisition of the Company's former affiliate, Radio One of Atlanta, Inc.
Operating expenses excluding depreciation, amortization and stock-based
compensation increased to approximately $13.3 million for the quarter ended
September 30, 1999 from approximately $7.8 million for the quarter ended
September 30, 1998 or 70.5%. Operating expenses excluding depreciation,
amortization and stock-based compensation increased to approximately $34.3
million for the nine months ended September 30, 1999 from approximately $19.6
million for the nine months ended September 30, 1998 or 75.0%. These increases
in expenses were related to the Company's rapid expansion within all of the
markets in which it operates including higher costs in Washington associated
with improved programming on its morning shows as well as start-up and expansion
expenses in its newer markets of Detroit, Cleveland and Richmond, in particular,
as well as higher costs associated with operating as a public company.
Broadcast operating income increased to approximately $6.1 million for the
quarter ended September 30, 1999 from approximately $3.6 million for the quarter
ended September 30, 1998 or 69.4%. Broadcast operating income increased to
approximately $10.3 million for the nine months ended September 30, 1999 from
approximately $7.7 million for the nine months ended September 30, 1998 or
33.8%. Those increases for the quarter and for the nine month period were
attributable to higher depreciation and amortization expenses associated with
the Company's several acquisitions made within the last year offset by
proportionately higher revenue as described above.
Interest expense increased to approximately $4.0 million for the quarter ended
September 30, 1999 from approximately $3.1 million for the quarter ended
September 30, 1998 or 29.0%. Interest expense increased to approximately $11.5
million for the nine months ended September 30, 1999 from approximately $8.0
million for the nine months ended September 30, 1998 or 43.8%. These increases
relate primarily to interest incurred on borrowings under the Company's bank
credit facility, particularly prior to the Company's May 5, 1999 Initial Public
Offering, to help fund the several acquisitions made by the Company within the
past year.
Other income (expense) increased to $58,000 for the quarter ended September
30, 1999 from a loss of $19,000 for the quarter ended September 30, 1998. Other
income decreased to $199,000 for the nine months ended September 30, 1999 from
$267,000 for the nine months ended September 30, 1998 or 25.5%. This increase
for the quarter was due to somewhat higher interest income for the third quarter
of 1998 offset by an investment loss while the decrease for the nine month
period was primarily attributable to lower interest due to lower average cash
balances as the Company partially used its free cash balances to help fund
acquisitions made during the quarter as well as to help reduce its outstanding
senior debt, which stood at $26.0 million as of September 30, 1999 as compared
to approximately $29.2 million as of September 30, 1998.
Income before provision for income taxes increased to approximately $2.2
million for the quarter ended September 30, 1999 from approximately $0.5 million
for the quarter ended September 30, 1998 or 340.0%. Loss before provision for
income taxes increased to approximately $1.0 million for the nine months ended
September 30, 1999 from approximately $0.1 million for the nine months ended
September 30, 1998 or 900.0%. This increase in income for the quarter and
increase in the loss for the nine month period were primarily due to higher
operating income, interest and depreciation and amortization expenses as
described above, partially offset by higher revenue.
Net income increased to approximately $1.9 million for the quarter ended
September 30, 1999 from approximately $0.5 million for the quarter ended
September 30, 1998 or 280.0%. Net loss increased to
12
<PAGE>
approximately $1.8 million for the nine months ended September 30, 1999 from
approximately $0.1 million for the nine months ended September 30, 1998 or
1,700%. This increase in income for the quarter and increase in the loss for the
nine month period was due to the factors described above as well as a tax
provision for each of the second quarter and first nine month periods of 1999
associated with an estimate of the Company's effective tax rate for all of 1999.
In 1998, the Company used its remaining NOL and did not incur a tax liability
during the first nine months of 1998.
Broadcast cash flow increased to approximately $12.0 million for the quarter
ended September 30, 1999 from approximately $6.7 million for the quarter ended
September 30, 1998 or 79.1%. Broadcast cash flow increased to approximately
$25.8 million for the nine months ended September 30, 1999 from approximately
$15.8 million for the nine months ended September 30, 1998 or 63.3%. 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 stock-based compensation expense, increased to approximately $10.8
million for the quarter ended September 30, 1999 from approximately $6.0 million
for the quarter ended September 30, 1998 or 80.0%. Earnings before interest,
taxes, depreciation, and amortization (EBITDA), and excluding stock-based
compensation expense, increased to approximately $22.7 million for the nine
months ended September 30, 1999 from approximately $13.7 million for the nine
months ended September 30, 1998 or 65.7%. These increases were attributable to
the increase in broadcast revenue partially offset by higher operating expenses
and higher corporate expenses partially associated with the costs of operating
as a public company.
After-tax cash flow increased to approximately $6.7 million for the quarter
ended September 30, 1999 from approximately $2.9 million for the quarter ended
September 30, 1998 or 131.0%. After-tax cash flow increased to approximately
$10.5 million for the nine months ended September 30, 1999 from approximately
$6.0 million for the nine months ended September 30, 1998 or 75.0%. These
increases were attributable to the increase in operating income partially offset
by higher interest charges associated with the financings of various
acquisitions as well as the provision for income taxes for 1999, as described
above.
(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 provision.
(d) As of September 30, 1999 the Company had 18,103,000 shares of common stock
outstanding.
13
<PAGE>
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, additional paid-in capital and accumulated deficit. The Company's
balance of cash and cash equivalents was approximately $4.5 million as of
December 31, 1998. The Company's balance of cash and cash equivalents was
approximately $4.4 million as of September 30, 1999. This decrease resulted
primarily from the repayment of debt and preferred stock and cash paid for
various acquisitions during the year, partially offset by the Company's stronger
cash flows from operating activities during the first nine months of 1999 as
well as the Company's initial public offering on May 6, 1999 from which it
raised approximately $119.0 million. At September 30, 1999 approximately $74.0
million remained available (based on various covenant restrictions) to be drawn
down from the Company's bank credit facility which was increased to a $100.0
million facility in February 1999. 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 flow from operating activities increased to approximately $12.7
million for the nine months ended September 30, 1999 from approximately $9.1
million for the nine months ended September 30, 1998 or 39.6%. This increase
was primarily due to a higher net loss due to higher interest charges associated
with higher average levels of debt outstanding, higher depreciation and
amortization charges associated with the various acquisitions made by the
Company in the past year and a higher provision for income taxes as compared to
the first nine months of 1998. Non-cash expenses of depreciation and
amortization increased to approximately $15.6 million for the nine months ended
September 30, 1999 from approximately $8.8 million for the nine months ended
September 30, 1998 or 77.3% due to various acquisitions made by the Company
within the past year.
Net cash flow used in investing activities increased to approximately $59.0
million for the nine months ended September 30, 1999 compared to approximately
$33.9 million for the nine months ended September 30, 1998 or 74.0%. During the
nine months ended September 30, 1999 the Company, through its Radio One of
Atlanta, Inc. subsidiary (which it acquired on March 30, 1999) acquired the
remaining stock in Dogwood Communications, Inc. which it did not already own,
for approximately $3.6 million, acquired radio stations WENZ-FM and WERE-AM in
Cleveland, Ohio for approximately $20 million, acquired radio station WFUN-FM in
St. Louis, Missouri for approximately $13.6 million, acquired radio stations
WDYL-FM, WKJS-FM and WARV-FM (formerly, WSOJ-FM) in Richmond, Virginia for
approximately $16.6 million, and entered into a time brokerage agreement to
operate radio stations also located in Richmond, Virginia. The Company made a
$1.0 million investment in PNE Media, LLC and a combined cash/trade investment
of $125,000 in an internet company. The Company also made escrow deposits on
anticipated acquisitions of additional radio stations in Richmond, Virginia and
Boston, Massachusetts. Also during the nine months ended September 30, 1999 the
Company made purchases of capital equipment totaling approximately $2.6 million.
Net cash flow from financing activities was approximately $46.3 million for
the nine months ended September 30, 1999. During the nine months ended September
30, 1999, the Company completed its initial public offering of common stock and
raised net proceeds of approximately $119.0 million which was used to partially
repay outstanding balances on its bank credit facility and to repay all of the
Company's outstanding Senior Cumulative Redeemable Preferred Stock.
Additionally, the Company increased the size of its bank credit facility to
$100.0 million. During the nine months ended September 30, 1999, the Company
partially used this bank credit facility to acquire its former affiliate, Radio
One of Atlanta, Inc. which, in turn, acquired the remaining stock of Dogwood
Communications, Inc. that it did not already own. The Company also acquired
radio stations located in Cleveland, Ohio, St. Louis, Missouri and Richmond,
Virginia. Net cash flow from financing activities was approximately $24.2
million for the nine months ended September 30, 1998. During the nine months
ended September 30, 1998, the Company used its bank facility to acquire Bell
Broadcasting Company, an owner and operator of radio stations in Detroit and
Kingsley, Michigan, for approximately $34 million.
As a result of the aforementioned, cash and cash equivalents decreased by
$27,000 during the nine months ended September 30, 1999 compared to an
approximate $637,000 decrease during the nine months ended September 30, 1998.
14
<PAGE>
YEAR 2000 COMPLIANCE
- --------------------
Radio One has commenced a process to ensure Year 2000 compliance of all
hardware, software, and ancillary equipment that are date dependent. This
process involves four phases:
Phase I Inventory and Data Collection. This phase involves an
identification of all systems that are date dependent. This phase
was completed during the first quarter of 1998.
Phase II Compliance Identification. This phase involves Radio One
identifying and beginning to replace critical systems that cannot
be updated or certified as compliant. We commenced this phase in
the first quarter of 1999 and completed the substantial majority
of this phase before the end of the second quarter of 1999. To
date, we have verified that our broadcast systems, accounting,
payroll, and local wide area network hardware, and software
systems are substantially compliant. In addition, we have
determined that most of our personal computers and PC applications
are compliant. We are currently reviewing our security systems and
other miscellaneous systems.
Phase III Test, Fix, and Verify. This phase involves testing all systems
that are date dependent and upgrading all non-compliant systems.
We expect to complete this phase during the fourth quarter of
1999.
Phase IV Final Testing, New Item Compliance. This phase involves a review
of failed systems for compliance and re-testing as necessary. We
expect to complete this phase by the end of the fourth quarter of
1999.
To date, we have no knowledge that any of our major systems are not Year 2000
ready or will not be Year 2000 ready by the end of the fourth quarter of 1999.
We have not incurred significant expenditures and believe we will achieve
substantial Year 2000 readiness without the need to acquire significant new
hardware, software or systems. As part of our expansion over the past two years,
we have undertaken significant build-outs, upgrades and expansions to our radio
station studios, business offices and technology infrastructure. These
enhancement efforts are continuing in all of the markets in which we have
recently acquired radio stations and will expand into the new markets in which
we will be acquiring radio stations. We believe that most, if not all, of the
new equipment installed in conjunction with these recent build-outs is Year 2000
compliant. Based upon our experience to date, we estimate the remaining costs to
achieve Year 2000 readiness will be approximately $100,000, independent of the
costs associated with the previously-mentioned expansions which are being
undertaken in the normal course of our business development. All costs directly
related to preparing for Year 2000 readiness will be expensed as incurred. We
are not aware of any Year 2000 problems that would have a material effect on our
operations. We are also not aware of any non-compliance by our suppliers that is
likely to have material impact on our business. Nevertheless, we cannot assure
you that our critical systems, or the critical systems of our suppliers, will be
Year 2000 ready.
We do not intend to develop any contingency plans to address possible
failures by us or our vendors related to Year 2000 compliance. We do not believe
that such contingency plans are required because we believe that we and our
significant vendors will be Year 2000 compliant before January 2000.
15
<PAGE>
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
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On March 30, 1999, the Company acquired all of the outstanding stock of
Radio One of Atlanta, Inc. (ROA), an affiliate of the Company, for
approximately 3,277,000 shares of common stock. At the time of the ROA
acquisition, ROA owned approximately 33% of Dogwood Communications,
Inc. (Dogwood). On March 30, 1999, ROA acquired the remaining
approximate 67% of Dogwood for $3.6 million. The acquisition was
accounted for using purchase accounting, with the portion of the excess
purchase price over the net book value of the assets acquired related
to the noncontrolling stockholders being stepped up and that portion of
the excess purchase price being recorded as goodwill. The remaining net
book value of the assets acquired was recorded at historical cost.
On April 30, 1999, the Company completed the acquisition of the assets
of WENZ-FM and WERE-AM in Cleveland, Ohio, for approximately $20
million.
On May 6, 1999, the Company entered into an asset purchase agreement to
acquire four stations in Richmond, Virginia, for approximately $34
million.
On June 4, 1999, the Company completed the acquisition of the assets of
WFUN-FM in St. Louis, Missouri, for approximately $13.6 million.
On July 1, 1999, the Company completed the acquisition of WKJS-FM and
WARV-FM (formerly WSOJ-FM) in Richmond, Virginia, for approximately $12
million.
On July 15, 1999, the Company completed the acquisition of WDYL-FM in
Richmond, Virginia, for approximately $4.6 million.
On October 1, 1999, the Company completed the acquisition of the assets
of WBOT-FM (formerly WCAV-FM), located in the Boston, Massachusetts,
metropolitan area for approximately $10 million. The acquisition was
financed by a combination of borrowings from the Company's line of
credit and available cash.
Subsequent to September 30, 1999, the Company completed an offering of
its Class A common stock in which the Company sold 5,170,000 shares at
a gross offering price of $59.25 per share.
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS
3.1 Certificate of Incorporation of Radio One, Inc. (as of May 6,
1999)(incorporated by reference to Radio One's Amendment to its
Registration Statement on Form S-1 filed on May 4, 1999 (File No.
333-74351; Film No. 99610524)).
3.2 Amended and Restated By-laws of Radio One, Inc. (as of May 5, 1999)
(incorporated by reference to Radio One's Amendment to its
Registration Statement on Form S-1 filed on May 4, 1999 (File No.
333-74351; Film No. 99610524)).
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
16
<PAGE>
filed 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)).
27 Financial data schedule (Edgar version only)
17
<PAGE>
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 15, 1999 Scott R. Royster
Executive Vice President and Chief Financial Officer
(Principal Accounting Officer)
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements of the Company for the fiscal year ended
December 31, 1998 for the three months and the nine months ended September 30,
1998 and 1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1999 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JUL-01-1998 JUL-01-1999 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1998 SEP-30-1999 SEP-30-1998 SEP-30-1999
<CASH> 4,455,000 0 0 0 4,428,000
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 13,269,000 0 0 0 22,009,000
<ALLOWANCES> (1,243,000) 0 0 0 (2,320,000)
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 17,641,000 0 0 0 25,721,000
<PP&E> 11,306,000 0 0 0 21,821,000
<DEPRECIATION> (4,589,000) 0 0 0 (6,285,000)
<TOTAL-ASSETS> 153,856,000 0 0 0 257,826,000
<CURRENT-LIABILITIES> 5,041,000 0 0 0 10,444,000
<BONDS> 131,739,000 0 0 0 107,585,000
0 0 0 0 0
26,684,000 0 0 0 0
<COMMON> 5,000 0 0 0 18,000
<OTHER-SE> (24,864,000) 0 0 0 124,826,000
<TOTAL-LIABILITY-AND-EQUITY> 153,856,000 0 0 0 257,826,000
<SALES> 0 15,729,000 27,589,000 38,057,000 65,062,000
<TOTAL-REVENUES> 0 15,729,000 27,589,000 38,057,000 65,062,000
<CGS> 0 (1,953,000) (3,468,000) (4,753,000) (8,087,000)
<TOTAL-COSTS> 0 (1,953,000) (3,468,000) (4,753,000) (8,087,000)
<OTHER-EXPENSES> 0 10,182,000 18,010,000 25,643,000 46,721,000
<LOSS-PROVISION> 0 553,000 880,000 1,281,000 2,063,000
<INTEREST-EXPENSE> 0 3,071,000 3,990,000 7,996,000 11,479,000
<INCOME-PRETAX> 0 504,000 2,179,000 (68,000) (1,026,000)
<INCOME-TAX> 0 0 255,000 0 731,000
<INCOME-CONTINUING> 0 504,000 1,924,000 (68,000) (1,757,000)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 0 504,000 1,924,000 (68,000) (1,757,000)
<EPS-BASIC> 0 (0.05) 0.11 (0.30) (0.22)
<EPS-DILUTED> 0 (0.05) 0.11 (0.30) (0.22)
</TABLE>
