<PAGE>
AMENDMENT #1 TO FORM 8-K, DATED OCTOBER 6, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report October 6, 2000 Commission File No. 333-30795
(Date of earliest event reported)
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
This Current Report on Form 8-K/A1 amends the Current Report on Form 8-K filed
by the Company on September 7, 2000 to add the financial statements of the
business acquired by the Company required by Item 7(a) and the pro forma
financial information required by Item 7(b). In addition, Item 5 hereof reports
(a) the results tabulated at the Company's recent annual meeting of stockholders
of the votes on certain proposals put before the holders of the Company's Common
Stock, (b) a pending asset acquisition in Greenville, South Carolina, and (c) a
recently completed asset acquisition in Dallas, Texas.
Item 5. Other Events.
(a) Submission of Matters to a Vote of Security Holders.
On September 15, 2000, 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 August 16, 2000, 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 2001 annual meeting of Stockholders or
until their successors are duly elected and qualified.
2. The election of Catherine L. Hughes, Alfred C. Liggins, III, and Larry
D. Marcus as directors to serve until the 2001 annual meeting of
Stockholders or until their successors are duly elected and qualified.
3. The amendment of the Company's Amended and Restated Certificate of
Incorporation to provide holders of the Class A Common Stock the right
to convert such Class A
<PAGE>
Common Stock into Class D Non-Voting Common Stock. The Amendment to
the Company's Amended and Restated Certificate of Incorporation is
included as Exhibit 3.1.1 to this Form 8-K/A1.
4. The amendment of the Company's Amended and Restated Bylaws to permit
the election of up to eleven, but not fewer than five, members of the
Board of Directors. The Company's Amended and Restated Bylaws, as so
amended, are included as Exhibit 3.2 to this Form 8-K/A1.
5. The ratification of the adoption of the 1999 Stock Option Plan.
6. The ratification of the appointment of Arthur Andersen, LLP as
independent public accountants for the Company for the year ended
December 31, 2000.
All proposals were adopted by a majority of the holders of Common Stock.
The results of the vote tabulation were as follows:
<TABLE>
<CAPTION>
Number of Votes
---------------
Class A Class B Class C Class D
------- ------- ------- -------
<S> <C> <C> <C> <C>
PROPOSAL 1
----------
Election of McNeill
For 19,089,011 N/A N/A N/A
Withhold Authority 127,772 N/A N/A N/A
Election of Jones
For 19,089,011 N/A N/A N/A
Withhold Authority 127,772 N/A N/A N/A
PROPOSAL 2
----------
Election of Hughes
For 19,089,011 28,618,430 N/A N/A
Withhold Authority 127,772 N/A N/A 0
Election of Liggins
For 19,089,011 28,618,430 N/A N/A
Withhold Authority 127,772 0 N/A N/A
Election of Marcus
For 19,102,641 28,618,430 N/A N/A
Withhold Authority 114,142 0 N/A N/A
PROPOSAL 3
----------
For 18,037,198 28,618,430 3,121,048 37,820,936
Against 182,882 0 0 342,613
Abstain 15,465 0 0 24,085
PROPOSAL 4
----------
For 18,781,883 28,618,430 N/A N/A
Against 422,853 0 N/A N/A
Abstain 12,840 0 N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROPOSAL 5
----------
<S> <C> <C> <C> <C>
For 10,256,007 28,618,430 N/A N/A
Against 7,890,633 0 N/A N/A
Abstain 88,905 0 N/A N/A
PROPOSAL 6
----------
For 15,241,569 28,618,430 N/A N/A
Against 3,962,418 0 N/A N/A
Abstain 12,796 0 N/A N/A
</TABLE>
(b) Pending acquisition in Greenville, South Carolina.
Pursuant to an asset purchase agreement dated August 7, 2000, the
Company has agreed to acquire WPEK-FM, licensed to Seneca, South Carolina, for
approximately $7.5 million in cash. The Company expects to complete this
acquisition in the fourth quarter of 2000.
(c) Recent acquisition in Dallas, Texas.
On September 25, 2000, the Company completed its acquisition of KJOI-
AM (formerly KLUV-AM), licenced to Dallas, Texas, for approximately $16 million
in cash.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Radio One, Inc.:
We have audited the accompanying combined balance sheets of the selected
operations of AMFM, Inc., consisting of stations KKBT-FM, KBFB-FM, WZAK-FM,
WJMO-AM and WVCG-AM (the "Stations") as of December 31, 1998 and 1999, and the
related combined statements of operations and changes in station equity and cash
flows for each of the years in the three-year period ended December 31, 1999.
These financial statements are the responsibility of the Stations' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Stations and may not be indicative of the
conditions that would have existed or the results of operations had the Stations
been operated as an unaffiliated entity. As discussed in Note 2, certain
services performed by the parent corporations have not been allocated to the
accompanying financial statements.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the selected
operations of AMFM, Inc., consisting of stations KKBT-FM, KBFB-FM, WZAK-FM,
WJMO-AM and WVCG-AM as of December 31, 1998 and 1999, and the results of their
operations for each of the years in the three-year period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
/s/ Arthur Andersen LLP
Baltimore, Maryland
June 1, 2000
<PAGE>
THE SELECTED OPERATIONS OF AMFM, INC.
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1998 and 1999, AND JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1999 June 30, 2000
--------- --------- -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Assets:
Trade accounts receivable, net of allowance for doubtful accounts of
$95, $613 and $581, respectively.................................... $ 7,920 $ 11,478 $ 11,546
Prepaid expenses and other........................................... 113 120 76
-------- --------- ---------
Total current assets......................................... 8,033 11,598 11,622
Property and equipment, net............................................ 1,976 2,836 2,791
Intangible assets, net................................................. 24,572 121,339 116,925
-------- --------- ---------
Total assets $34,581 $135,773 $131,338
======== ========= =========
LIABILITIES AND STATION EQUITY
Current liabilities:
Accounts payable and accrued expenses................................. $ 855 $ 2,984 $ 1,259
Station equity.......................................................... 33,726 132,789 130,079
-------- --------- ---------
Total liabilities and station equity.......................... $34,581 $135,773 $131,338
======== ========= =========
</TABLE>
1
<PAGE>
THE SELECTED OPERATIONS OF AMFM, INC.
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN STATION EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
AND THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------- ------- ------- ------- --------
1997 1998 1999 1999 2000
------- ------- ------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Broadcast revenue, including barter revenue of
$647, $774 and $571 for the years ended
December 31, 1997, 1998 and 1999,
respectively.................................. $36,375 $42,371 $ 58,401 $ 26,528 $ 28,339
Less- Agency commissions....................... 4,910 5,361 7,409 3,373 3,535
------- ------- ------- ------- --------
Net broadcast revenue.................. 31,465 37,010 50,992 23,155 24,804
------- ------- ------- ------- --------
Operating expenses:
Program and technical.......................... 5,169 5,842 7,867 4,027 3,712
Selling, general and administrative............ 9,113 12,489 18,386 8,266 8,090
Time brokerage agreement fee................... -- 3,208 4,509 2,750 --
Depreciation and amortization.................. 1,673 1,629 8,221 3,736 4,575
------- ------- -------- -------- --------
Total operating expenses............... 15,955 23,168 38,983 18,779 16,377
------- ------- -------- -------- --------
Operating income................................. 15,510 13,842 12,009 4,376 8,427
Income tax allocation............................ 6,204 5,537 4,804 1,750 3,370
------- ------- -------- -------- --------
Net income............................. 9,306 8,305 7,205 2,626 5,057
Station equity, beginning of period.............. 34,513 35,024 33,726 33,726 132,789
Net transfer (to) from Parent.................... (8,795) (9,603) 91,858 92,803 (7,767)
------- ------- -------- -------- --------
Station equity, end of period.................... $35,024 $33,726 $132,789 $129,155 $130,079
======= ======= ======== ======== ========
</TABLE>
2
<PAGE>
THE SELECTED OPERATIONS OF AMFM, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
AND THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------- ------- ------- ------- --------
1997 1998 1999 1999 2000
------- ------- ------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Operating income............................... $ 9,306 $ 8,305 $ 7,205 $ 4,376 $ 5,057
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization............... 1,673 1,629 8,221 3,736 4,575
Effect of change in operating assets and
liabilities-
Trade accounts receivable...................... (3,146) (1,522) (3,558) (173) (68)
Prepaid expenses and other..................... (20) (32) (7) 40 44
Accounts payable and accrued expenses.......... 982 1,223 2,120 2,518 (1,725)
------- ------- ------- ------- --------
Net cash flows from operating
activities............................ 8,795 9,603 13,981 10,497 7,883
Cash flows from investing activities:
Purchase of tangible and intangible assets in
acquisitions.................................. -- -- (105,839) (103,300) --
Purchase of property, plant and equipment,
net...................................... -- -- -- -- (116)
------- ------- ------- ------- --------
Net cash flows from investing
activities............................ -- -- (105,839) (103,300) (116)
Cash flows from financing activities:
Net transfer (to) from parent.................. (8,975) (9,603) 91,858 92,803 (7,767)
------- ------- ------- ------- --------
Net decrease in cash............................. -- -- -- -- --
------- ------- ------- ------- --------
Cash and cash equivalents, beginning of period... -- -- -- -- --
------- ------- ------- ------- --------
Cash and cash equivalents, end of period......... $ -- $ -- $ -- $ -- $ --
------- ------- ------- ------- --------
</TABLE>
3
<PAGE>
THE SELECTED OPERATIONS OF AMFM, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
1. Description of the Entities:
The accompanying financial statements include the activity and financial
positions of radio stations KKBT-FM, KBFB-FM, WZAK-FM, WJMO-AM and WVCG-AM (the
"Stations"), which are owned by AMFM, Inc. (AMFM) and are being sold to Radio
One, Inc. (Radio One).
Radio station KKBT-FM is broadcast in the Los Angeles, California, area.
Radio station KBFB-FM is broadcast in the Dallas, Texas, area. Radio stations
WZAK-FM and WJMO-AM are broadcast in the Cleveland, Ohio, area, and WVCG-AM is
broadcast in the Miami, Florida, area. All interstation transactions have been
eliminated in combination.
2. Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying combined 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 revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Interim Financial Statements (Unaudited)
The interim combined financial statements for the Stations have been prepared
by management, 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. Results for
interim periods are not necessarily indicative of results to be expected for the
full year.
On August 25, 2000, Radio One acquired the assets of the Stations, along with
certain assets of stations owned by Clear Channel Communications, Inc. ("Clear
Channel"), for approximately $1.3 billion. Radio One did not acquire cash,
receivables, prepaids, or assume any liabilities.
Cash
The Stations make cash disbursements out of bank accounts controlled by AMFM
and their cash receipts are deposited into accounts controlled by AMFM. As
such, the accompanying combined financial statements do not have cash balances.
All cash transactions are recorded through the station equity account.
Revenue Recognition
In accordance with industry practice, revenue for broadcast advertising is
recognized when the commercial is broadcast.
Barter Arrangements
Certain program contracts provide for the exchange of advertising air time in
lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the lower of estimated fair value of the
advertising air
4
<PAGE>
time given in exchange for the program rights or the service or asset received.
As of year-end, the excess of services received or air time given was recorded
as deferred revenue or accounts receivable.
Corporate Expense
The accompanying statements of operations and changes in stations' equity
represent the direct revenues and expenses of the Stations. They do not include
certain corporate expenses related to management fees, income taxes, legal
expenses, corporate salaries and certain other corporate expenses. Because the
accompanying statements omit certain corporate costs that benefit the Stations
(and include allocations of certain costs among several stations in a market),
the accompanying operating results could be substantially different if the
Stations had been operated on a stand-alone basis. The accompanying statements
include certain operating revenues and expenses related to contracts for
advertisements entered into by AMFM corporate and are allocated to the Stations
based on their market revenues and airplay of the advertisements.
The two Cleveland stations (WZAK-FM and WJMO-FM) and one Dallas Station
(KBFM-FM) were operated as part of a market circle and received cost allocations
related to the market circle employees. Though management is of the opinion that
all allocations used are reasonable and appropriate, other allocations might be
used that could produce results substantially different from those reflected
herein, and those cost allocations might not be indicative of amounts which
might be paid to unrelated parties for similar services if these stations had
been operated on a stand-alone basis.
Income Tax Allocation
The Stations' pre-tax income is included in the consolidated income of AMFM.
The accompanying combined statements of operations include an income tax
allocation as if the Stations were a stand-alone entity.
Financial Instruments
Financial instruments as of December 31, 1998 and 1999, consist of trade
accounts receivables all of which the carrying amounts approximate fair value.
3. Property and Equipment
Property and equipment are recorded at cost and are being depreciated on a
straight-line basis over various periods. The components of the Stations'
property and equipment as of December 31, 1998 and 1999, were as follows:
<TABLE>
<CAPTION>
Period of
1998 1999 Depreciation
---------- ----------- --------------
(In Thousands)
<S> <C> <C> <C>
Property and equipment:
Land.................................. $ 240 $ 240
Building and leasehold improvements... 956 1,048 30 years
Furniture and fixtures................ 513 598 5 to 7 years
Equipment and other................... 4,334 5,556 5 to 7 years
---------- ----------
6,043 7,442
Less- Accumulated depreciation.......... 4,067 4,437
---------- ----------
Property and equipment, net............. $1,976 $3,005
========== ==========
</TABLE>
Depreciation expense for the fiscal years ended December 31, 1997, 1998 and
1999, were $199, $210 and $514, respectively, and $153 and $161 for the six
months ended June 30, 1999 and 2000, respectively.
5
<PAGE>
4. Intangible Assets:
Intangible assets consist primarily of broadcast licenses, goodwill and other
identifiable intangible assets resulting from applying the purchase method of
accounting to acquisitions. The intangible assets are the results of applying
the purchase price to the fair market value of the tangible assets acquired,
then to the intangible assets acquired, with the resulting excess purchase price
being allocated to goodwill. The Stations amortize such intangible assets using
the straight-line method over estimated useful lives ranging from 15 to 40
years. As of December 31, 1998 and 1999, accumulated amortization on
intangibles was $18.2 million and $25.9 million, respectively.
Long-Lived Assets
In accordance with Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," AMFM reviews its identifiable purchased intangibles
for possible impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If the expected
future cash flows is less than the carrying amount of an asset, an impairment
loss would be recognized.
5. Acquisitions:
AMFM purchased WZAK-FM and WJMO-AM in February 1999 for approximately $103
million. The acquisition was accounted for using the purchase method of
accounting and resulted in the recording of $101 million of intangible assets.
The activities of WZAK-FM and WJMO-AM prior to the acquisition by AMFM are not
included in the accompanying financial statements. The revenue for WZAK-FM and
WJMO-AM for the year ended December 31, 1998 was approximately $11 million
(unaudited). The revenue for the year ended December 31, 1997 is not readily
available as those records are maintained by the prior owners.
Beginning July 1998, AMFM entered into a time brokerage agreement to manage
and operate KBFB-FM whereby broadcast revenue and operating expenses of running
the station were included in AMFM's operating results. AMFM paid approximately
$3.2 million and $4.5 million during the years ended December 31, 1998 and 1999,
respectively in time brokerage fees.
In July 1999, AMFM purchased KBFB-FM for approximately $3.4 million. This
acquisition was accounted for under the purchase method of accounting and
resulted in the recognition of approximately $3.4 million of intangible assets.
The activity of KBFM-FM prior to entering into the time brokerage agreement in
July 1998 has not been included in the accompanying financial statements.
6. Commitments:
Future lease payments of operating leases are as follows:
Year Ending
(in thousands)
2000....................................... $315
2001....................................... 489
2002....................................... 476
2003....................................... 417
2004....................................... 420
Thereafter................................. 927
Rent expense for the years ended December 31, 1997, 1998 and 1999, was
approximately $397, $512 and $873, respectively, and $486 and $389 for the six
months ended June 30, 1999 and 2000.
6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Radio One, Inc.:
We have audited the accompanying combined balance sheets of the selected
operations of Clear Channel Communications, consisting of stations KMJQ-FM,
KBXX-FM, WQOK-FM, WFXK-FM, WNNL-FM, WFXC-FM and WJMZ-FM (the "Stations") as of
December 31, 1998 and 1999, and the related combined statements of operations
and changes in station equity and cash flows for each of the years in the three-
year period ended December 31, 1999. These financial statements are the
responsibility of the Stations' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Stations and may not be indicative of the
conditions that would have existed or the results of operations had the Stations
been operated as an unaffiliated entity. As discussed in Note 2, certain
corporate overhead and other expenses represent allocations made by the
Stations' parent, and certain services performed by the parent corporations have
not been allocated to the accompanying financial statements.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the selected
operations of Clear Channel Communications, consisting of stations KMJQ-FM,
KBXX-FM, WQOK-FM, WFXK-FM, WNNL-FM, WFXC-FM and WJMZ-FM as of December 31, 1998
and 1999, and the results of their operations for each of the years in the
three-year period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ Arthur Andersen LLP
Baltimore, Maryland
June 1, 2000
<PAGE>
THE SELECTED OPERATIONS OF CLEAR CHANNEL COMMUNICATIONS
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1999, AND JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999 June 30, 2000
------ ------ -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Trade accounts receivable, net of allowance for doubtful accounts of
$379, $402, and $548, respectively................................... $ 8,153 $ 10,194 $11,728
Property and equipment, net............................................. 5,924 5,091 4,475
Intangible assets, net.................................................. 89,041 84,678 82,638
Other assets............................................................ 269 269 268
-------- -------- ---------
Total assets.................................................. $103,387 $100,232 $99,109
======== ======== =========
LIABILITIES AND STATION EQUITY
Current liabilities:
Accounts payable and accrued expenses................................. $ 446 $ 532 $ 798
Station equity.......................................................... 102,941 99,700 98,311
-------- -------- ---------
Total liabilities and station equity.......................... $103,387 $100,232 $99,109
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
1
<PAGE>
THE SELECTED OPERATIONS OF CLEAR CHANNEL COMMUNICATIONS
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN STATION EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
AND THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
-------------------------- -----------------
1997 1998 1999 1999 2000
------ ------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Broadcast revenue, including barter revenue
of $123, $282 and $474 for the years ended
December 31, 1997, 1998 and 1999,
respectively................................. $35,355 $ 45,563 $ 53,825 $ 24,351 $29,324
Less-Agency commissions....................... 4,378 5,460 6,610 2,998 3,822
------- -------- -------- -------- -------
Net broadcast revenue................. 30,977 40,103 47,215 21,353 25,502
------- -------- -------- -------- -------
Operating expenses:
Program and technical......................... 4,260 4,850 5,641 2,497 2,906
Selling, general and administrative........... 9,757 11,584 12,719 6,107 6,431
Depreciation and amortization................. 3,593 4,929 5,324 2,692 2,683
------- -------- -------- -------- -------
Total operating expenses.............. 17,610 21,363 23,684 11,296 12,020
------- -------- -------- -------- -------
Operating income................................ 13,367 18,740 23,531 10,057 13,482
Income tax allocation........................... 5,347 7,496 9,412 4,249 5,394
------- -------- -------- -------- -------
Net income............................ 8,020 11,244 14,119 5,808 8,088
Station equity, beginning of period............. 79,098 88,917 102,941 102,941 99,700
Net transfer to Parent.......................... 1,799 2,780 (17,360) (6,487) (9,477)
------- -------- -------- -------- -------
Station equity, end of period................... $88,917 $102,941 $ 99,700 $102,262 $98,311
======= ======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
2
<PAGE>
THE SELECTED OPERATIONS OF CLEAR CHANNEL COMMUNICATIONS
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
AND THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
----------------------------- -----------------
1997 1998 1999 1999 2000
------ ------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Operating income.......................... $ 8,020 $ 11,244 $ 14,119 $ 5,808 $ 8,088
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization.......... 3,593 4,929 5,324 2,692 2,683
Effect of change in operating assets and
liabilities-
Trade accounts receivable................. 1,253 (2,653) (2,041) (1,985) (1,534)
Other assets.............................. -- -- -- -- 1
Accounts payable and accrued expenses..... 35 50 86 50 266
-------- -------- -------- -------- -------
Net cash flows from operating
activities....................... 12,901 13,570 17,488 6,565 9,504
Cash flows from investing activities:
Purchase of tangible and intangible
assets in acquisitions................... (14,700) (16,350) -- -- --
Purchase of property, plant and
equipment, net........................... -- -- (128) (78) (27)
-------- -------- -------- -------- -------
Net cash flows from investing
activities....................... (14,700) (16,350) (128) (78) (27)
Cash flows from financing activities:
Net transfer (to) from parent............. 1,799 2,780 (17,360) (6,487) (9,477)
-------- -------- -------- -------- -------
Net decrease in cash........................ -- -- -- -- --
-------- -------- -------- -------- -------
Cash and cash equivalents, beginning of
period..................................... -- -- -- -- --
-------- -------- -------- -------- -------
Cash and cash equivalents, end of period.... $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
3
<PAGE>
THE SELECTED OPERATIONS OF CLEAR CHANNEL COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1998 AND 1999
1. Description of the Entities:
The accompanying financial statements include the activity and financial
positions of radio stations KMJQ-FM, KBXX-FM, WQOK-FM WFXK-FM, WNNL-FM, WFXC-FM
and WJMZ-FM (the "Stations"), which are owned by Clear Channel Communications
(Clear Channel) and are being sold to Radio One, Inc. (Radio One).
Radio stations KMJQ-FM and KBXX-FM are broadcast in the Houston, Texas, area.
Radio stations WQOK-FM, WFXK-FM, WNNL-FM and WFXC-FM are broadcast in the
Raleigh, North Carolina, area. Radio station WJMZ-FM is broadcast in the
Greenville, South Carolina, area. All interstation transactions have been
eliminated in combination.
2. Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying combined 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 revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Interim Financial Statements (Unaudited)
The interim combined financial statements included herein for the selected
operations of Clear Channel have been prepared by management, 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. Results for interim periods are not necessarily indicative
of results to be expected for the full year.
On August 25, 2000, Radio One acquired the assets of the Stations, along with
certain assets of stations owned by AMFM, Inc. (AMFM), for approximately $1.3
billion. Radio One did not acquire cash, receivables, prepaids or assume any
liabilities.
Cash
The Stations make cash disbursements out of bank accounts controlled by Clear
Channel and their cash receipts are deposited into accounts controlled by Clear
Channel. As such, the accompanying combined financial statements do not have
cash balances. All cash transactions are recorded through the station equity
account.
Revenue Recognition
In accordance with industry practice, revenue for broadcast advertising is
recognized when the commercial is broadcast.
4
<PAGE>
Barter Arrangements
Certain program contracts provide for the exchange of advertising air time in
lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the lower of estimated fair value of the
advertising air time given in exchange for the program rights or the service or
asset received. As of year-end, the excess of services received or air time
given was recorded as deferred revenue or accounts receivable.
Corporate Expense
The accompanying statements of operations and changes in stations' equity
represent the direct revenues and expenses of the Stations. They do not include
certain corporate expenses related to management fees, income taxes, legal
expenses, corporate salaries and certain other corporate expenses. Because the
accompanying statements omit certain corporate costs that benefit the Stations
(and includes allocations of certain costs among several stations in a market),
the accompanying operating results could be substantially different if the
Stations had been operated on a stand-alone basis.
Income Tax Allocation
The Stations' pre-tax income is included in the consolidated income of Clear
Channel. The accompanying combined statements of operations include tax
allocation as if the Stations were a stand-alone equity.
Financial Instruments
Financial instruments as of December 31, 1998 and 1999, consist of trade
accounts receivables, accounts payable and accrued expenses, all of which the
carrying amounts approximate fair value.
3. Property and Equipment
Property and equipment are recorded at cost and are being depreciated on a
straight-line basis over various periods. The components of the Stations'
property and equipment as of December 31, 1998 and 1999, were as follows:
<TABLE>
<CAPTION>
Period of
1998 1999 Depreciation
------- ------- ---------------
(in thousands)
<S> <C> <C> <C>
Property and equipment:
Land........................................... $ 126 $ 126
Building and leasehold improvements............ 853 715 30 years
Furniture and fixtures......................... 674 563 5 to 7 years
Equipment...................................... 6,716 7,232 5 to 7 years
------- ------
8,369 8,636
Less- Accumulated depreciation................... 2,445 3,545
------- ------
Property and equipment, net...................... $5,924 $5,091
======= ======
</TABLE>
Depreciation expense for the fiscal years ended December 31, 1997, 1998 and
1999, was $623, $960 and $961, respectively, and $633 and $643 for the six
months ended June 30, 1999 and 2000, respectively.
4. Intangible Assets:
Intangible assets consist primarily of broadcast licenses, goodwill and other
identifiable intangible assets resulting from applying the purchase method of
accounting to acquisitions. The intangible assets are the results of applying
the purchase price to the fair market value of the tangible assets acquired,
then to the intangible assets acquired, with the resulting excess purchase price
being allocated to goodwill. The Stations amortize such intangible assets using
the straight-line method over estimated useful lives ranging from 15 to 40
years. As of December 31, 1998 and 1999, accumulated amortization on
intangibles was $12,655 and $17,018, respectively.
5
<PAGE>
Long Lived Assets
In accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of," Clear Channel reviews its identifiable purchased intangibles
for possible impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If the expected
future cash flows is less than the carrying amount of an asset, an impairment
loss would be recognized.
5. Acquisitions:
Clear Channel purchased WJMZ-FM in May 1998 for approximately $16.3 million.
The acquisition was accounted for using the purchase method of accounting and
resulted in the recording of $15.1 of intangible assets. The activities of
WJMZ-FM prior to the acquisition by Clear Channel are not included in the
accompanying financial statements. The revenue for WJMZ-FM for the period
prior to acquisition was approximately $1.6 million (unaudited).
6. Commitments:
Future lease payments of operating leases are as follows noting there are no
lease payments due after 2002:
<TABLE>
<CAPTION>
Year Ending
(in thousands)
<S> <C>
2000........................ $263
2001........................ 382
2002........................ 308
</TABLE>
Rent expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $401, $556, $431, respectively, and $270 and $275 for the six
months ended June 30, 1999 and 2000.
6
<PAGE>
(b) Pro Forma Financial Information.
Unaudited Pro Forma Consolidated Statement of Operations and Other Data
<TABLE>
<CAPTION>
Year Ended December 31, 1999
---------------------------------------------------------------------------------------------------
Pro Forma Pro Forma for
Completed for Pending Completed and
Transactions Completed Transactions Pending Offering Pro Forma as
Historical(a) Adjustments(b) Transactions Adjustments(c) Transactions Adjustment Adjusted
------------- -------------- ------------ -------------- ------------- ----------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations:
Net broadcast
revenue.............. $81,703 $119,389 $201,092 $ 2,564 $203,656 $ 203,656
Station operating
expenses............. 44,259 58,824 103,083 595 103,678 103,678
Corporate expenses.... 4,380 1,421 5,801 -- 5,801 5,801
Depreciation and
amortization......... 17,073 99,597 116,670 2,289 118,959 118,959
------- -------- -------- ------- -------- ------ ---------
Operating income...... 15,991 (40,453) (24,462) (320) (24,782) (24,782)
Interest expense...... 15,279 44,804 60,083 (1,631) 58,452 58,452
Other income
(expense), net....... 2,149 (2,001) 148 -- 148 148
Income tax (expense)
benefit.............. (2,728) -- (2,728) -- (2,728) 2,728(d) --
------- -------- -------- ------- -------- ------ ---------
Net income (loss)..... $ 133 $(87,258) $(87,125) $ 1,311 $(85,814) $2,728 $ (83,086)
======= ======== ======== ======= ======== ====== =========
Net loss applicable to
common stockholders... $(1,343) $(104,712)
======= =========
Earnings per common
share:
Basic................. $ (0.02) $ (1.23)
Diluted............... (0.02) (1.23)
Weighted average common
shares outstanding:
Basic................. 73,609(e) 85,430
Diluted............... 73,609(e)(f) 85,430(f)
Other Data:
Broadcast cash
flow(g).............. $37,444 $ 99,978
Broadcast cash flow
margin(h)............ 45.8 % 49.1 %
EBITDA (before non-
cash compensation
expense)(i).......... $33,289 $ 94,402
After-tax cash
flow(g).............. 16,303 36,098
Cash interest
expense(i)........... 10,762 53,935
Capital expenditures.. 3,252 3,974
Ratio of earnings to combined fixed charges to preferred stock dividends(j)............................... --
Ratio of EBITDA (before non-cash compensation expense) to interest expense................................ 1.6x
Ratio of EBITDA (before non-cash compensation expense) to/cash interest expense........................... 1.8x
</TABLE>
1
<PAGE>
Footnotes for the Unaudited Pro Forma Consolidated Statement of Operations and
Other Data for the Year Ended December 31, 1999.
(a) See the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the period ended December 31, 1999.
(b) The table below gives effect to the acquisitions completed during the
period from January 1, 1999 through October 5, 2000, as if they had
occurred on January 1, 1999. The operating results include the activities
of these entities during 1999 prior to the period acquired by Radio One.
The 1999 operating results after the acquisition by Radio One are included
in the Radio One historical amounts:
<TABLE>
<CAPTION>
Historical
---------------------------------------------------------------------------------------------------------------
ROA Cleveland Richmond I Richmond II WPLY Davis Shirk/IBL
Historical(/1/) Historical(/2/) Historical(/2/) Historical(/2/) Historical(/1/) Historical(/2/) Historical(/3/)
--------------- --------------- --------------- --------------- --------------- --------------- ---------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations:
Net broadcast
revenue........ $2,447 $977 $198 $1,420 $8,384 $3,176 $4,655
Station
operating
expenses....... 1,388 513 182 659 6,268 2,051 3,336
Corporate
expenses....... 96 -- 6 8 704 160 9
Time Brokerage
agreement......
Depreciation and
amortization... 202 137 8 182 110 538 425
------ ---- ---- ------ ------ ------ ------
Operating
income......... 761 327 2 571 1,302 427 885
Interest
expense........ 491 -- -- 231 -- -- 355
Other income,
net............ -- -- -- 8 77 -- 96
Income tax
benefit
(expense)...... (100) -- (6) -- -- -- --
------ ---- ---- ------ ------ ------ ------
Net income
(loss)......... $ 170 $327 $ (4) $ 348 $1,379 $ 427 $ 626
====== ==== ==== ====== ====== ====== ======
<CAPTION>
AMFM Clear Channel Pro Forma
Historical(/4/) Historical(/4/) Adjustments(/5/) Total
--------------- --------------- -------------------- ---------
<S> <C> <C> <C> <C>
Statement of
Operations:
Net broadcast
revenue........ $50,992 $47,215 $ (75)(/6/) $119,389
Station
operating
expenses....... 26,253 18,360 (186)(/7/) 58,824
Corporate
expenses....... -- 438 (/8/) 1,421
Time Brokerage
agreement...... 4,509 -- (4,509)(/9/) --
Depreciation and
amortization... 8,221 5,324 84,450 (/10/) 99,597
--------------- --------------- -------------------- ---------
Operating
income......... 12,009 23,531 (80,268) (40,453)
Interest
expense........ 43,727 (/11/) 44,804
Other income,
net............ (2,182)(/12/) (2,001)
Income tax
benefit
(expense)...... (4,804) (9,412) 14,322(/13/) --
--------------- --------------- -------------------- ---------
Net income
(loss)......... $ 7,205 $14,119 $(111,855) $(87,258)
=============== =============== ==================== =========
</TABLE>
------------------
(/1/) See the financial statements included by reference in the Form 8-K.
(/2/) The column represents the historical results of operations of the stations
acquired during the year ended December 31, 1999. As these stations
acquired did not prepare stand-alone financial statements, these financial
statements were carved out from a larger entity and include the direct
revenue and expenses charged to the stations and an allocation of those
expenses which benefited the stations but were not directly charged to the
stations. As these results of operations include allocated expenses, these
financial statements do not represent what the results from operations
would have been if the stations operated on a stand-alone basis or what
they would have been if they were owned by Radio One.
(/3/) This column represents the historical results of operations for the year
ended December 31, 1999, that were accumulated from statements of Shirk,
Inc. and IBL, Inc.
(/4/) The column represents the historical results of operations, which include
direct revenue and expense charged to the stations, excluding certain
corporate allocations, for the year ended December 31, 1999. As these
stations acquired did not prepare stand-alone financial statements, these
financial statements were carved out from a larger entity and include the
direct revenue and expenses charged to the stations. As these results of
operations include allocated expenses, these financial statements do not
represent what the results of operations would have been if the stations
operated on a stand-alone basis or what they would have been if they were
owned by Radio One. See the financial statements included elsewhere in
this Form 8-K.
(/5/) Historical financial statements and pro forma adjustments related to the
Dallas II, St. Louis and Boston acquisitions have not been included in
this pro forma income statement because Radio One has determined that
these acquisitions are purchases of assets. Income statement activity
would not be relevant because Radio One purchased the FCC license,
reformatted the stations, will not retain the employees, and for the St.
Louis and Boston acquisitions, took them off the air.
(/6/) To reflect the elimination of the management fee paid by ROA to Radio One
for administrative services provided by Radio One.
(/7/) To eliminate corporate expenses which Radio One does not expect to incur
going forward, which consist primarily of corporate management fees.
2
<PAGE>
(/8/) To eliminate corporate expenses of $962 which Radio One does not expect
to incur going forward and to record additional corporate expenses of
$1,400 which Radio One expects to incur related to the acquisitions. The
$1,400 consists of the following costs:
<TABLE>
<S> <C>
Additional corporate staff........................................... $ 900
Additional rent for corporate space.................................. 100
Additional travel costs.............................................. 100
Additional professional fees, insurance and supplies................. 300
------
Total.............................................................. $1,400
======
</TABLE>
(/9/) To eliminate the LMA fee paid by AMFM for the periods prior to being
acquired by AMFM.
(/10/) To record the additional depreciation and amortization expense that would
have been recognized if the ROA, Cleveland, Richmond I and II, WPLY,
Davis, Shirk/IBL AMFM and Clear Channel acquisitions had occurred and the
payment of the additional $4.0 million purchase price of Richmond II
based on the earn out provision, calculated as follows:
<TABLE>
<S> <C>
Excess purchase price over tangible assets acquired of ROA,
Cleveland, Richmond I, Richmond II, WPLY, Davis, Shirk/IBL, AMFM
and Clear Channel amortized over 15 years.......................... $96,667
Additional purchase price paid for Richmond II of $4.0 million
amortized over 15 years............................................ 267
Amortization of the $3.5 million in acquisition costs over 15
years.............................................................. 233
Less: Previously recorded amortization expense...................... 12,717
-------
Total............................................................. $84,450
=======
</TABLE>
(/11/) To reflect the interest expense on the new bank credit facility, to
record the amortization of deferred financing costs and to eliminate
interest expense assuming Radio One uses the proceeds from the March 3,
2000 offering, the November 11, 1999 offering, the May 5, 1999 offering
and the July 10, 2000 offering, instead of borrowings, to fund the
acquisitions.
<TABLE>
<S> <C>
Assumed $577.0 million used of the line of credit at 8.5% to fund
the acquisitions.................................................. $49,045
Amortization of the $5.7 million in financing costs using the
effective interest method......................................... 1,000
Less: Interest expense that would not have been incurred........... 6,318
-------
Total............................................................ $43,727
=======
</TABLE>
(/12/) To eliminate Radio One's historical interest income as excess cash would
have been used to partially finance the acquisitions.
(/13/) To eliminate tax expense as Radio One would have had a net loss as to
which it would have provided a 100% valuation reserve to offset the
deferred income tax benefit.
(c) The table below gives effect to the acquisition pending as of October 5,
2000.
<TABLE>
<CAPTION>
Richmond III
Historical Pro Forma
(1) Adjustments Total
------------ ----------- -------
<S> <C> <C> <C>
Statement of Operations: (in thousands)
Net broadcast revenues................... $2,564 $ -- $ 2,564
Station operating expenses............... 595 -- 595
Corporate expenses....................... 206 (206)(/2/) --
Depreciation and amortization............ 161 2,128 (/3/) 2,289
------ ------- -------
Operating income....................... 1,602 (1,922) (320)
Interest expense......................... 82 (1,713)(/4/) (1,631)
------ ------- -------
Net income (loss)...................... $1,520 $ (209) $ 1,311
====== ======= =======
</TABLE>
--------------------
(/1/) The column represents the historical results of operations for the period
ended May 31, 1999, that were obtained from carveout unaudited financial
statements, as Radio One entered into a LMA with Richmond III, effective
June 1, 1999.
(/2/) To eliminate corporate expenses of $206 which Radio One does not expect to
incur going forward.
(/3/) To record the additional depreciation and amortization expense that would
have been recorded if the acquisition had occurred, calculated as follows:
<TABLE>
<S> <C>
Excess purchase price over tangible assets acquired of Richmond III
amortized over 15 years............................................ $2,186
Less: Previously recorded amortization expense...................... 58
------
Total............................................................. $2,128
======
</TABLE>
3
<PAGE>
(/4/) To eliminate the LMA fee paid by Radio One to Richmond III and to
eliminate interest expense assuming Radio One uses the proceeds from the
March 3, 2000 offering, the November 11, 1999 offering, the May 5, 1999
offering and the July 10, 2000 offering, instead of borrowings, to fund
the acquisition.
<TABLE>
<S> <C>
Less: LMA fee paid to Richmond III................................... $1,631
Less: Interest expense that would not have been incurred............. 82
------
Total.............................................................. $1,713
======
</TABLE>
(d) To eliminate Radio One's historical tax expense as Radio One would have had
a net loss as to which it would have provided a 100% valuation reserve to
offset the deferred income tax benefit.
(e) Restated to reflect the stock dividend of May 2000.
(f) This amount has been adjusted assuming the March 3, 2000 offering, the
November 11, 1999 offering and the May 5, 1999 offering and the stock
dividend had occured as of January 1, 1999. Because the common stock
equivalents are antidilutive, they have not been added to the weighted
average shares of common stock outstanding for average diluted shares
outstanding.
(g) Broadcast cash flow consists of operating income before depreciation,
amortization, local marketing agreement fees and corporate expenses. EBITDA
(before non-cash compensation expense) consists of operating income before
depreciation, amortization, non-cash compensation expense and local
marketing agreement fees. After-tax cash flow consists of income before
income tax expense (benefit) and extraordinary items, minus net gain on
sale of assets (net of tax) and the current income tax provision, plus
depreciation and amortization expense and non-cash compensation expense.
Although broadcast cash flow, EBITDA (before non-cash compensation
expense), and after-tax cash flow are not measures of performance or
liquidity calculated in accordance with GAAP, we believe that these
measures are useful to an investor in evaluating Radio One 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 (before non-cash compensation expense) 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
(before non-cash compensation expense) 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.
(h) Broadcast cash flow margin is defined as broadcast cash flow divided by net
broadcast revenue.
(i) Cash interest expense is calculated as interest expense less non-cash
interest, including the accretion of principal, the amortization of
discounts on debt and the amortization of deferred financing costs, for the
indicated period.
(j) For purposes of this calculation, earnings consist of income (loss) before
income taxes, extraordinary items and fixed charges. Combined fixed charges
consist of interest expense, including the amortization of discounts on
debt and the amortization of deferred financing costs and the interest
component of rent expense. Earnings were insufficient to cover combined
fixed charges and preferred stock dividends on a pro forma as adjusted
basis for the year ended December 31, 1999, by approximately $104.7
million.
4
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations and Other Data
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
--------------------------------------------------------------------------------------------------
Pro Forma
Pro Forma for
Completed for Pending Completed
Transactions Completed Transaction and Pending Offering Pro Forma
Historical(a) Adjustments(b) Transactions Adjustment(c) Transactions Adjustment as Adjusted
------------- -------------- ------------ -------------- ------------ ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net broadcast
revenue............... $54,795 $ 55,434 $110,229 $ -- $110,229 $110,229
Station operating
expenses.............. 28,728 24,272 53,000 -- 53,000 53,000
Corporate expenses..... 2,400 700 3,100 -- 3,100 3,100
Depreciation and
amortization.......... 12,671 47,052 59,723 1,093 60,816 60,816
------- -------- -------- ------ -------- ------ --------
Operating income....... 10,996 (16,590) (5,594) (1,093) (6,687) (6,687)
Interest expense....... 7,247 24,930 32,177 (1,398) 30,779 30,779
Other income
(expense), net........ 9,707 (9,676) 31 -- 31 31
Income tax expense
(benefit)............. 5,818 -- 5,818 -- 5,818 (5,818)(d) --
------- -------- -------- ------ -------- ------ --------
Net income (loss).... $ 7,638 $(51,196) $(43,558) $ 305 $(43,253) $5,818 $(37,435)
======= ======== ======== ====== ======== ====== ========
Net income (loss)
applicable to common
stockholders........ $ 7,638 $(47,510)
======= ========
Earnings per common
share:
Basic.................. $ 0.09 $ (0.56)
Diluted................ 0.09 (0.55)
Weighted average common
shares outstanding:
Basic.................. 83,038(e) 85,430
Diluted................ 83,316(e)(f) 85,708 (f)
Other Data:
Broadcast cash
flow(g)............... $26,067 $ 57,229
Broadcast cash flow
margin(h)............. 47.6% 51.9%
EBITDA (before non-
cash compensation
expense)(g)........... $23,667 $ 54,129
After-tax cash
flow(g)............... 19,726 23,381
Cash interest
expense(i)............ 4,756 28,288
Capital expenditures... 1,397 1,540
Ratio of earnings to
combined fixed
charges and preferred
stock dividends(j).... --
Ratio of total debt to
EBITDA (before non-
cash compensation
expense).............. --
Ratio of EBITDA
(before non-cash
compensation expense)
to interest expense... 1.8x
Ratio of EBITDA
(before non-cash
compensation expense)
to cash interest
expense............... 1.9x
</TABLE>
-------------------
Footnotes for the Unaudited Pro Forma Consolidated Statement of Operations
and Other Data for the Six Months Ended June 30, 2000,
(a) See the consolidated financial statements included in the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 2000.
5
<PAGE>
(b) The table below gives effect to the acquisitions completed during the
period January 1, 2000 through October 5, 2000, as if they occurred on
January 1, 1999. The operating results include activities of these entities
during 2000 prior to the period acquired by Radio One. The 2000 operating
results after the acquisition by Radio One are included in the Radio One
historical amounts:
<TABLE>
<CAPTION>
Historical
-------------------------------------------------------------------------------
WPLY Davis Shirk AMFM Clear Channel Pro Forma
Historical(/1/) Historical(/2/) Historical(/3/) Historical(/4/) Historical(/4/) Adjustments Total
--------------- --------------- --------------- --------------- --------------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations:
Net broadcast
revenue.......... $1,405 $1,534 $2,189 $24,804 $25,502 $ -- $ 55,434
Station operating
expenses......... 726 961 1,539 11,802 9,337 (93)(/5/) 24,272
Corporation
expenses......... 117 49 8 -- 526(/6/) 700
Depreciation and
amortization..... 6 135 160 4,575 2,683 39,493(/7/) 47,052
------ ------ ------ ------- ------- -------- --------
Operating
income......... 556 389 482 8,427 13,482 (39,926) (16,590)
Interest
expense.......... -- 85 -- -- 24,845(/8/) 24,930
Other income
(expense), net... 9 -- 22 -- -- (9,707)(/9/) (9,676)
Income tax
allocation....... -- -- (3,370) (5,394) 8,764 (/10/) --
------ ------ ------ ------- ------- -------- --------
Net income
(loss)......... $ 565 $ 389 $ 419 $ 5,057 $ 8,088 $(65,714) $(51,196)
====== ====== ====== ======= ======= ======== ========
</TABLE>
---------------------
(/1/) The column represents the historical results of operations for the period
ended February 28, 2000, that were obtained from unaudited financial
statements.
(/2/) The column represents the historical results of operations for the period
ended June 7, 2000, the date the stations were purchased by Radio One. As
these stations acquired did not prepare stand-alone financial statements,
these financial statements were carved out from a larger entity and
include the direct revenue and expenses charged to those stations and an
allocation of those expenses which benefited the stations but were not
directly charged to the stations. As these results of operations include
allocated expenses, these financial statements do not represent what the
results from operations would have been if the stations operated on a
stand-alone basis or what they would have been if they were owned by Radio
One.
(/3/) The column represents the historical results of operations for the period
ended June 8, 2000, the date the stations were purchased by Radio One,
that were obtained from unaudited financial statements of Shirk, Inc. and
IBL, Inc.
(/4/) The column represents the historical results of operations of the stations
for the six months ended June 30, 2000. See the financial statements
included elsewhere in the Form 8-k.
(/5/) To eliminate expenses which Radio One does not expect to incur going
forward, which consist primarily of corporate officers' salaries.
(/6/) To record additional corporate expenses of $700 which Radio One expects to
incur related to the acquisitions and to eliminate $174 in corporate
expenses which Radio One does not expect to incur going forward. The $700
consists of 50% of what Radio One estimates the incremental cost to be
which is included on page 3.
(/7/) To record additional depreciation and amortization expense that would have
been recorded if the acquisitions had occurred and the payment of the
additional $4.0 million purchase price of Richmond II based on the earn
out provision calculated as follows:
<TABLE>
<S> <C>
Excess purchase price over tangible assets acquired of WPLY,
Davis, Shirk, AMFM and Clear Channel amortized over 15 years
for six months ................................................ $45,716
Additional purchase price paid for Richmond II of $4.0 million
amortized over 15 years for six months ........................ 133
Amortization of the $3.5 million in acquisition costs over 15
years for six months........................................... 117
Less: Previously recorded amortization expense.................. 6,473
-------
Total......................................................... $39,493
=======
</TABLE>
(/8/) To reflect the interest expense on the new bank credit facility, to record
the amortization of deferred finance costs and to eliminate interest
expenses that would not have been incurred.
<TABLE>
<S> <C>
Assumed $577.0 million used of the line of credit at 8.5% for six
months to fund the acquisitions................................. $24,523
Amortization of the $5.7 million in financing costs using the
effective interest method for six months ....................... 407
Less: Interest expense that would not have been incurred......... 85
-------
Total........................................................... $24,845
=======
</TABLE>
6
<PAGE>
(/9/) To eliminate Radio One's Historical interest income as excess cash would
have been used to partially finance the acquisitions.
(/10/) To eliminate interest expense of the acquisitions assuming Radio One uses
the proceeds from the March 3, 2000 offering, the November 11, 1999
offering, the May 5, 1999 offering and the July 10, 2000 offering to
fund the acquisitions.
(c) The table below gives effect to the acquisition pending as of October 5,
2000.
<TABLE>
<CAPTION>
Richmond III Pro Forma
Historical(1) Adjustments Total
------------- ----------- ------
<S> <C> <C> <C>
Statement of Operations:
Net broadcast revenues................ $-- $ -- $ --
Station operating expenses............ -- -- --
Corporate expenses.................... -- -- --
Depreciation and amortization......... -- 1,093 (/2/) 1,093
---- ------- ------
Operating income.................... -- (1,093) (1,093)
Interest expense...................... -- (1,398)(/3/) (1,398)
Other income.......................... -- -- --
Income tax allocations................ -- -- --
---- ------- ------
Net income (loss)................... $-- $ 305 $ 305
==== ======= ======
</TABLE>
---------------------
(/1/) All broadcast revenues and expenses of Richmond III for the period are
recorded in the financial statements of Radio One because Radio One has
the LMA arrangement with Richmond III during the period.
(/2/) To record additional depreciation and amortization expense that would
have been recorded if the acquisition had occurred calculated as the
excess purchase price over tangible assets acquired amortized over 15
years for six months.
(/3/) To eliminate the LMA fee paid by Radio One to Richmond III.
(d) To eliminate Radio One's historical tax expense as Radio One would have had
a net loss as to which it would have provided a 100% valuation reserve to
offset the deferred income tax benefit.
(e) Restated to reflect the stock dividend of May 2000.
(f) This amount has been adjusted assuming the March 3, 2000 offering, the
November 11, 1999 offering and the May 5, 1999 offering and the 3 for 1
stock split had occured as of January 1, 1999.
(g) Broadcast cash flow consists of operating income before depreciation,
amortization, local marketing agreement fees and corporate expenses. EBITDA
(before non-cash compensation expense) consists of operating income before
depreciation, amortization, non-cash compensation expense and local
marketing agreement fees. After-tax cash flow consists of income before
income tax expense (benefit) and extraordinary items, minus net gain on
sale of assets (net of tax) and the current income tax provision, plus
depreciation and amortization expense and non-cash compensation expense.
Although broadcast cash flow, EBITDA (before non-cash compensation
expense), and after-tax cash flow are not measures of performance or
liquidity calculated in accordance with GAAP, we believe that these
measures are useful to an investor in evaluating Radio One 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 (before non-cash compensation expense) 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
(before non-cash compensation expense) 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.
(h) Broadcast cash flow margin is defined as broadcast cash flow divided by net
broadcast revenue.
(i) Cash interest expense is calculated as interest expense less non-cash
interest, including the accretion of principal, the amortization of
discounts on debt and the amortization of deferred financing costs, for the
indicated period.
7
<PAGE>
(j) For purposes of this calculation, earnings consist of income (loss) before
income taxes, extraordinary items and fixed charges. Combined fixed charges
consist of interest expense, including the amortization of discounts on
debt and the amortization of deferred financing costs and rent expense.
Earnings were insufficient to cover combined fixed charges and preferred
stock dividends on a pro forma as adjusted basis for the six months ended
June 30, 2000, by approximately $47.5 million.
8
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As of June 30, 2000
--------------------------------------------------------------------------------------------------
Pro Forma
Completed Pro Forma Pending for Completed
Transactions for Completed Transactions and Pending Offering Pro Forma
Historical(a) Adjustments(b) Transactions Adjustments(c) Transactions Adjustments as Adjusted
------------- -------------- ------------- -------------- ------------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents........... $148,083 $(413,039) $ (264,956) $(32,682) $ (297,638) $298,500 (d) $ 862
Investments, available
for sale.............. 204,924 (204,924) -- -- -- --
Trade accounts
receivable, net....... 26,670 -- 26,670 -- 26,670 26,670
Prepaid expenses and
other................. 1,431 -- 1,431 -- 1,431 1,431
Deferred income
taxes................. 985 -- 985 -- 985 985
-------- --------- ---------- -------- ---------- --------- ----------
Total current
assets.............. 382,093 (617,963) (235,870) (32,682) (268,552) 298,500 29,948
Property and
equipment,net......... 18,199 7,266 25,465 -- 25,465 25,465
Intangible assets,
net................... 363,134 1,317,947 1,681,081 34,000 1,715,081 1,715,081
Deferred taxes......... -- -- -- -- -- --
Other assets........... 138,866 (130,250) 8,616 (1,318) 7,298 7,298
-------- --------- ---------- -------- ---------- --------- ----------
Total assets......... $902,292 $ 577,000 $1,479,292 $ -- $1,479,292 $ 298,500 $1,777,792
======== ========= ========== ======== ========== ========= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued expenses...... $ 11,931 $ -- $ 11,931 $ -- $ 11,931 $ 11,931
Other current
liabilities........... 2,248 -- 2,248 -- 2,248 2,248
Income taxes payable... 1,879 -- 1,879 -- 1,879 1,879
-------- --------- ---------- -------- ---------- --------- ----------
Total current
liabilities......... 16,058 -- 16,058 -- 16,058 -- 16,058
Bank Credit Facility... -- 577,000 577,000 -- 577,000 577,000
12% Senior
Subordinated Notes
due May 15, 2004...... 84,202 -- 84,202 -- 84,202 84,202
Other long-term debt... 155 -- 155 155 155
Deferred tax
liability............. 24,150 -- 24,150 -- 24,150 24,150
-------- --------- ---------- -------- ---------- --------- ----------
Total liabilities.... 124,565 577,000 701,565 -- 701,565 -- 701,565
-------- --------- ---------- -------- ---------- --------- ----------
Stockholders' Equity
(Deficit):
Preferred Stock........ -- -- -- -- -- 310,000 (d) 310,000
Class A Common Stock... 23 -- 23 -- 23 23
Class B Common Stock... 3 -- 3 -- 3 3
Class C Common Stock... 3 -- 3 -- 3 3
Class D Common Stock... 57 -- 57 -- 57 57
Accumulated
comprehensive income
adjustments........... (87) -- (87) -- (87) (87)
Additional paid in
capital............... 796,297 -- 796,297 -- 796,297 (11,500)(d) 784,797
Accumulated deficit.... (18,569) -- (18,569) -- (18,569) (18,569)
-------- --------- ---------- -------- ---------- --------- ----------
Total stockholders'
equity.............. 777,727 -- 777,727 -- 777,727 298,500 1,076,227
-------- --------- ---------- -------- ---------- --------- ----------
Total liabilities and
stockholders'
equity.............. $902,292 $ 577,000 $1,479,292 $ -- $1,479,292 $ 298,500 $1,777,792
======== ========= ========== ======== ========== ========= ==========
</TABLE>
9
<PAGE>
---------------------
(a) See the Consolidated Financial Statements included in the Company's
Quarterly Report on Form 10-Q as of June 30, 2000.
(b) The table below gives effect to the completed transactions between April 1,
2000 and October 5, 2000, as if they were completed on June 30, 2000.
<TABLE>
<CAPTION>
Clear Channel AMFM Dallas II Line of Acquisition
Historical(1) Historical(1) Historical(2) Credit Adjustments Total
------------- ------------- ------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents........... $ -- $ -- $ -- $ 776,211 (/3/) $(1,189,250)(/4/) $ (413,039)
Investments, available
for sale.............. -- -- -- (204,924)(/3/) (204,924)
Trade accounts
receivable, net....... 11,728 11,546 -- -- (23,274)(/5/) --
Prepaid expenses and
other................. -- 76 -- -- (76)(/5/) --
------- -------- ----- --------- ----------- ----------
Total current
assets.............. 11,728 11,622 -- 571,287 (1,212,600) (617,963)
Property and
equipment, net........ 4,475 2,791 -- -- -- 7,266
Intangible assets,
net................... 82,638 116,925 -- 5,713 (/3/) 1,112,671 (/6/) 1,317,947
Other assets........... 268 -- -- -- (130,518)(/4/)(/5/) (130,250)
------- -------- ----- --------- ----------- ----------
Total assets......... $99,109 $131,338 $ -- $ 577,000 $ (230,447) $ 577,000
======= ======== ===== ========= =========== ==========
LIABILITIES AND
STATIONS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses...... 798 1,259 -- -- (2,057)(/5/) --
------- -------- ----- --------- ----------- ----------
Total current
liabilities......... 798 1,259 -- -- (2,057) --
Long-term debt and
deferred interest..... -- -- -- 577,000 -- 577,000
------- -------- ----- --------- ----------- ----------
Total liabilities.... 798 1,259 -- 577,000 (2,057) 577,000
------- -------- ----- --------- ----------- ----------
Stations' Equity
Stations equity........ 98,311 130,079 -- -- (228,390)(/5/)
------- -------- ----- --------- ----------- ----------
Total liabilities and
stations' equity
(deficit)........... $99,109 $131,338 $ -- $ 577,000 $ (230,447) --
======= ======== ===== ========= =========== ----------
$ 577,000
==========
</TABLE>
---------------------
(/1/) This column represents the historical balance sheets as of June 30, 2000.
See the financial statements included elsewhere in the Form 8-K.
(/2/) Historical balance sheet related to the Dallas II acquisition only
includes the FCC license which Radio One acquired and is included in the
pro forma adjustment.
(/3/) To reflect borrowings of $577,000 from the new bank credit facility, the
use of investments for the acquisitions and the $5.7 million paid in
financing costs.
(/4/) To reflect the cash paid by Radio One of $1,300,000 for the AMFM and Clear
Channel acquisitions and $16,000 for the Dallas II acquisition and $3,500
paid in acquisition costs, less deposits of $130,250.
(/5/) To eliminate the account balances not being purchased or assumed by Radio
One.
(/6/) To reflect the capitalized acquisition costs of $3,500 and to record
intangible assets booked as a result of the acquisitions, calculated as
follows:
<TABLE>
<S> <C>
Purchase price................................................ $1,316,000
Less: Net tangible assets..................................... 7,266
----------
Intangibles acquired.......................................... 1,308,734
Less: Intangibles previously recorded......................... 199,563
Acquisition costs............................................. 3,500
----------
Total........................................................ $1,112,671
==========
</TABLE>
10
<PAGE>
(c) The table below gives effect to the pending transaction as of October 5,
2000, as if they had occurred on June 30, 2000:
<TABLE>
<CAPTION>
Richmond Acquisition
Historical(/1/) Adjustments Total
--------------- ----------- --------
(in thousands)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash
equivalents........... $ -- $(32,682)(/2/) $(32,682)
----- -------- --------
Total current assets... -- (32,682) (32,682)
Intangible assets,
net................... -- 34,000 (/2/) 34,000
Other assets........... -- (1,318)(/2/) (1,318)
----- -------- --------
Total assets........... $ -- $ -- $ --
===== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued expenses...... $ -- $ -- $ --
Long-term debt......... -- -- --
----- -------- --------
Total liabilities...... -- -- --
----- -------- --------
Stations' Equity:
Stations' equity....... -- -- --
----- -------- --------
Total liabilities and
stations' equity...... $ -- $ -- $ --
===== ======== ========
</TABLE>
---------------------
(/1/) All broadcast assets and liabilities as of June 30, 2000, except for the
Stations' FCC licenses of Richmond III, are recorded in the financial
statements of Radio One as Radio One has an LMA agreement with respect to
Richmond III.
(/2/) To reflect the cash paid by Radio One of $34,000 for the Richmond III
acquisition less deposits of $1,318.
(d) To reflect the net proceeds of the July 10, 2000 offering of $310,000
less underwriting discounts, commissions and offering expenses of $2,200.
11
<PAGE>
(c) 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.
3.2 Amended and Restated By-laws of Radio One, Inc., amended
as of September 15, 2000.
23.1 Consent of Arthur Andersen LLP.
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/ Linda J. Eckard
----------------------------------------
October 6, 2000 Linda J. Eckard
Assistant Secretary
