Radio One, Inc. Reports Second Quarter Results

WASHINGTON, Aug. 2, 2012 /PRNewswire/ -- Radio One, Inc. (NASDAQ: ROIAK and ROIA) today reported its results for the quarter ended June 30, 2012.  Giving effect to the consolidation of TV One, net revenue was approximately $105.9 million, an increase of 9.1% from the same period in 2011.  Also giving effect to the consolidation of TV One, station operating income1 was approximately $41.4 million, an increase of 19.0% from the same period in 2011. The Company reported operating income of approximately $21.5 million compared to operating income of approximately $15.8 million for the same period in 2011. Net income was approximately $42.7 million or $0.85 per share compared to net income of $98.6 million or $1.94 per share, for the same period in 2011.  Net income for the quarter ended June 30, 2011 included the impact of a non-cash pre-tax gain of approximately $146.9 million resulting from its increased ownership and controlling interest in TV One recorded during that period.

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Alfred C. Liggins, III, Radio One's CEO and President stated, "I was pleased with our second quarter core radio revenue growth of 6.5% year over year. While the timing of the One Love Gospel Cruise and other corporate revenues brought the headline radio revenue growth rate down to 2.7%, I believe we strongly outperformed the markets in which we operate. We expect this trend to continue into the third quarter, where we are currently pacing up high single digits, with political revenues likely to strengthen as we move closer to the Presidential election. TV One continued its growth trajectory with Quarterly EBITDA of $11.7 million, up 32.8% from the same period last year. The dividends received from TV One remain an important source of cash-flow for Radio One, and we intend to manage this aspect of the business prudently, with a view towards managing our bank covenant step-downs in 2013. Our Internet division had a somewhat weaker than expected second quarter, with a lack of tent-pole events around which to build revenue. I expect their progress towards profitability to resume in the third quarter."

 

RESULTS OF OPERATIONS


















Three Months Ended June 30,


Six Months Ended June 30, 



2012


2011


2012


2011

STATEMENT OF OPERATIONS

(unaudited)


(unaudited)



(in thousands, except share data)


(in thousands, except share data)




















NET REVENUE

$      105,916


$         97,062


$       208,958


$        162,070


OPERATING EXPENSES









Programming and technical,  excluding stock-based compensation

32,958


30,718


64,123


49,549


Selling, general and administrative, excluding
stock-based compensation

31,553


31,594


70,362


59,925


Corporate selling, general and administrative,
excluding stock-based compensation

9,824


7,523


19,390


14,772


Stock-based compensation

46


1,199


90


2,136


Depreciation and amortization 

9,742


10,238


19,427


14,321


Impairment of long-lived assets

313


-


313


-


Total operating expenses 

84,436


81,272


173,705


140,703


      Operating income 

21,480


15,790


35,253


21,367


INTEREST INCOME

25


9


47


17


INTEREST EXPENSE

22,928


22,916


46,675


42,249


GAIN ON INVESTMENT IN AFFILIATED COMPANY

-


146,879


-


146,879


LOSS ON RETIREMENT OF DEBT

-


-


-


7,743


EQUITY IN INCOME OF AFFILIATED COMPANY

-


208


-


3,287


OTHER EXPENSE, net

610


47


603


22


     (Loss) income before
     (benefit from) provision
     for income taxes,
     noncontrolling
     interest in income of

     subsidiaries and

     income (loss) from
     discontinued operations

(2,033)


139,923


(11,978)


121,536


(BENEFIT FROM) PROVISION FOR INCOME TAXES

(48,491)


38,611


16,763


84,230


     Net income (loss) from
     continuing operations

46,458


101,312


(28,741)


37,306


INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax

7


(45)


21


(81)


CONSOLIDATED NET INCOME (LOSS)

46,465


101,267


(28,720)


37,225


NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

3,797


2,717


7,854


2,920


CONSOLIDATED NET INCOME (LOSS)ATTRIBUTABLE TO COMMON STOCKHOLDERS

$        42,668


$         98,550


$       (36,574)


$          34,305











AMOUNTS ATTRIBUTABLE TO COMMON STOCKHOLDERS









NET INCOME (LOSS) FROM CONTINUING OPERATIONS

$        42,661


$         98,595


$       (36,595)


$          34,386


INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax

7


(45)


21


(81)


CONSOLIDATED NET INCOME (LOSS)ATTRIBUTABLE TO COMMON STOCKHOLDERS

$        42,668


$         98,550


$       (36,574)


$          34,305











Weighted average shares outstanding - basic2

50,006,085


50,831,560


49,997,752


51,474,556


Weighted average shares outstanding - diluted3

50,124,418


52,905,060


49,997,752


53,646,473

 

 


Three Months Ended June 30, 


Six Months Ended June 30, 


2012


2011


2012


2011


(unaudited)


(unaudited)


(in thousands, except per share data)


(in thousands, except per share data)

PER SHARE DATA - basic and diluted:
















    Net income (loss) from
    continuing operations
    (basic)

$          0.85


$          1.94


$          (0.73)


$           0.67

    Income (loss) from
    discontinued operations,
    net of tax (basic)

0.00


(0.00)


0.00


(0.00)

    Consolidated net income
    (loss) attributable to
    common stockholders
    (basic)

$           0.85


$          1.94


$          (0.73)


$           0.67









    Net income (loss) from
    continuing operations
    (diluted)

$           0.85


$          1.86


$           (0.73)


$           0.64

    Income (loss) from
    discontinued operations,
    net of tax (diluted)

0.00


(0.00)


0.00


(0.00)

    Consolidated net income
    (loss) attributable to
    common stockholders
    (diluted)

$           0.85


$         1.86


$          (0.73)


$           0.64









SELECTED OTHER DATA








    Station operating
    income1

$       41,405


$     34,750


$        74,473


$       52,596

    Station operating income
    margin (% of net
    revenue)

39.1%


35.8%


35.6%


32.5%









Station operating income reconciliation:
















    Consolidated net income
    (loss) attributable to
    common stockholders

$        42,668


$      98,550


$      (36,574)


$       34,305

   

Add back non-station operating income items included in consolidated net income (loss):








   Interest income

(25)


(9)


(47)


(17)

   Interest expense

22,928


22,916


46,675


42,249

   (Benefit from) provision
   for income taxes

(48,491)


38,611


16,763


84,230

   Corporate selling,
   general and
   administrative expenses

9,824


7,523


19,390


14,772

   Stock-based
   compensation

46


1,199


90


2,136

   Gain on investment in
   affiliated company

-


(146,879)


-


(146,879)

   Loss on retirement of

   debt

-


-


-


7,743

   Equity in income of

   affiliated company

-


(208)


-


(3,287)

   Other expense, net

610


47


603


22

   Depreciation and

   amortization

9,742


10,238


19,427


14,321

   Noncontrolling interest in

   income of subsidiaries

3,797


2,717


7,854


2,920

   Impairment of long-lived

   assets

313


-


313


-

   (Income) loss from

   discontinued operations,

   net of tax

(7)


45


(21)


81

   Station operating income

$        41,405


$      34,750


$        74,473


$       52,596









Adjusted EBITDA4

$        31,581


$      27,227


$        55,083


$       37,824









Adjusted EBITDA reconciliation:
















    Consolidated net income

    (loss) attributable to

    common stockholders

$       42,668


$      98,550


$      (36,574)


$       34,305

       Interest income

(25)


(9)


(47)


(17)

       Interest expense

22,928


22,916


46,675


42,249

       (Benefit from)

       provision for income

       taxes

(48,491)


38,611


16,763


84,230

       Depreciation and

       amortization

9,742


10,238


19,427


14,321

       EBITDA

$        26,822


$    170,306


$          46,244


$     175,088

       Stock-based

       compensation

46


1,199


90


2,136

       Gain on investment in

       affiliated company

-


(146,879)


-


(146,879)

       Loss on retirement of

       debt

-


-


-


7,743

       Equity in income of

       affiliated company

-


(208)


-


(3,287)

       Other expense, net

610


47


603


22

       Noncontrolling interest

       in income of

       subsidiaries

3,797


2,717


7,854


2,920

       Impairment of long-

       lived assets

313


-


313


-

       (Income) loss from

       discontinued

       operations, net of tax

(7)


45


(21)


81

       Adjusted EBITDA

$       31,581


$      27,227


$         55,083


$       37,824











June 30, 2012


December 31, 2011



(unaudited) 





(in thousands)

SELECTED BALANCE SHEET DATA:



Cash and cash equivalents

$                 42,760


$                  35,939


Intangible assets, net

1,223,820


1,244,861


Total assets

1,474,387


1,486,482


Total debt (including current portion)

819,930


808,904


Total liabilities

1,077,736


1,055,541


Total equity

378,651


410,598


Redeemable noncontrolling interest

18,000


20,343


Noncontrolling interest

207,704


205,063








Current Amount Outstanding


Applicable Interest Rate


(in thousands)



SELECTED LEVERAGE DATA:



Senior bank term debt, net of original issue discount of approximately $6.1 million (subject to variable rates) (a)

$              373,148


7.50%


12 1/2%/15%  senior subordinated notes (fixed rate)

327,035


12.50%


6 3/8% senior subordinated notes (fixed rate)

747


6.38%


10% Senior Secured TV One Notes due March 2016 (fixed rate)

119,000


10.00%

(a)   Subject to variable Libor plus a spread currently at 6.00% and incorporated into the applicable interest rate set forth above.

 

Cautionary Note Regarding Forward-Looking Statements
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements represent management's current expectations and are based upon information available to Radio One at the time of this release. These forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond Radio One's control, that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.  Important factors that could cause actual results to differ materially are described in Radio One's reports on Forms 10-K, 10-Q, 8-K and other filings with the Securities and Exchange Commission (the "SEC"). Radio One does not undertake any duty to update any forward-looking statements.

Net revenue increased to approximately $105.9 million for the quarter ended June 30, 2012, from approximately $97.1 million for the same period in 2011, an increase of 9.1%. We began to consolidate the results of TV One during the second quarter of 2011 and recognized approximately $32.3 million of revenue from our new cable television segment during the three months ended June 30, 2012 compared to $25.2 million for the period April 15, 2011 through June 30, 2011.  Net revenues from our radio segment for the quarter ended June 30, 2012 increased 2.7% from the same period in 2011. Excluding the timing difference for the Company's annual Gospel Cruise held in March 2012 versus April 2011, our core radio revenue, including syndicated programming, increased 6.5% for the quarter ended June 30, 2012 compared to the same period in 2011. Our Atlanta, Baltimore, Dallas, Detroit, Indianapolis, Raleigh and Washington D.C. clusters posted the most significant quarterly growth, while our Columbus, Philadelphia and St. Louis markets posted the most significant declines. Reach Media's net revenues decreased 12.6% in the second quarter 2012 compared to the same period in 2011 partially due to changes to certain of Reach Media's affiliate agreements that became effective on January 1, 2012.  Net revenues for our internet business increased 2.7% for the three months ended June 30, 2012 compared to the same period in 2011.

Operating expenses, excluding depreciation and amortization, stock-based compensation and impairment of long-lived assets, increased to approximately $74.3 million for the quarter ended June 30, 2012, up 6.4% from the approximately $69.8 million incurred for the comparable quarter in 2011. Approximately $2.3 million of the increase is a result of additional programming and technical expenses, partially related to the TV One consolidation. For our cable television segment, these operating expenses include expenses associated with the technical, programming, production, and content management. The additional increase of our programming and technical expenses is due to higher payroll and talent costs in our radio broadcasting and Reach Media segments. In addition, there were increases in corporate expenses due to higher professional fees, research and bad debt expense at our cable television segment.

Stock-based compensation decreased to $46,000 for the quarter ended June 30, 2012, compared to approximately $1.2 million for the same period in 2011. Vesting associated with the Company's long-term incentive plan whereby officers and certain key employees were granted a total of 3,250,000 shares of restricted stock in January of 2010 was fully completed as of December 31, 2011. Stock-based compensation requires measurement of compensation costs for all stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest.

Depreciation and amortization expense decreased to approximately $9.7 million compared to approximately $10.2 million for the quarters ended June 30, 2012 and 2011, respectively, a decrease of 4.9%. The decrease was due to the completion of amortization for certain intangible assets and the completion of useful lives for certain assets. 

Interest expense remained flat at approximately $22.9 million for the quarter ended June 30, 2012 compared to the same period in 2011. The Company made cash interest payments of approximately $15.5 million for the quarter ended June 30, 2012. Through May 15, 2012, interest on the Company's 12½%/15% Senior Subordinated Notes was payable at our election partially in cash and partially through the issuance of additional 12½%/15% Senior Subordinated Notes (a "PIK Election") on a quarterly basis.  The PIK Election expired on May 15, 2012 and interest accruing from and after May 15, 2012 accrues at a rate of 12½% and is payable in cash.

The gain on investment in affiliated company of approximately $146.9 million for the three months ended June 30, 2011 was due to acquiring the controlling interest in and the accounting impact of consolidating TV One results as of April 14, 2011.  The gain was computed as the difference between the book value and the fair value of our investment in TV One at the time we obtained control of TV One.

Other expense of $610,000 for the quarter ended June 30, 2012 compared to other expense of $47,000 for the quarter ended June 30, 2011. Other expense for the quarter ended June 30, 2012 was primarily due to the disposal of assets associated with the Company's corporate office move. 

There was no equity in income of affiliated company for the quarter ended June 30, 2012 compared to $208,000 for the same period in 2011. Equity in income of affiliated company reflected our estimated equity in the net income of TV One. As a result of the consolidation of TV One during the second quarter of 2011, there was no equity in income of affiliated company for the three months ended June 30, 2012. Previously, the Company's share of the net income was driven by TV One's capital structure and the Company's percentage ownership of the equity securities of TV One.

The benefit from income taxes for the quarter ended June 30, 2012 was approximately $48.5 million compared to a provision for income taxes of approximately $38.6 million for the comparable period in 2011. The decrease is primarily attributable to adjusting the year-to-date income tax provision based on the actual effective tax rate as of June 30, 2012.  The provision for income taxes of approximately $38.6 million for the same period in 2011 is attributable to the increase in the deferred tax liability for indefinite-lived intangibles. The Company paid $287,000 in taxes for the quarter ended June 30, 2012.

Income (loss) from discontinued operations, net of tax, includes the results of operations for our sold radio stations (or stations made the subject of a local marketing agreement) and Giant Magazine, which ceased publication in December 2009. Income from discontinued operations, net of tax, was $7,000 for the quarter ended June 30, 2012, compared to a loss from discontinued operations, net of tax, of $45,000 for the same period in 2011. The activity for the three months ended June 30, 2012 and 2011 resulted primarily from our remaining station in our Boston market entering into an LMA. The income (loss) from discontinued operations, net of tax, includes no tax provision for either of the three month periods ended June 30, 2012 or 2011.

The increase in noncontrolling interests in income of subsidiaries is due primarily to the impact of consolidating TV One's operating results for a full quarter during the three months ended June 30, 2012.  This amount is partially offset by a net loss generated by Reach Media for the three months ended June 30, 2012 compared to net income for the same period in 2011.

Other pertinent financial information includes capital expenditures of approximately $3.8 million and $1.9 million for the quarters ended June 30, 2012 and 2011, respectively.  Approximately $1.4 million of capital expenditures for the quarter ended June 30, 2012 relates to the Company's corporate office move to Silver Spring, MD. The Company received dividends from TV One in the amount of approximately $1.8 million for the quarter ended June 30, 2012. As of June 30, 2012, the Company had total debt (net of cash balances) of approximately $777.2 million. The Company's cash and cash equivalents by segment are as follows:  radio and internet approximately $22.0 million, Reach Media approximately $4.1 million and cable television approximately $16.7 million. In addition to cash and cash equivalents, the cable television segment also has short-term investments of $232,000 and long-term investments of approximately $2.9 million.

Other Matters
The Company has determined, and Ernst & Young LLP, the Company's independent registered public accounting firm agrees, that the Company's previously filed consolidated statement of cash flows for the year ended December 31, 2011 and interim consolidated statements of cash flows within that year and the first quarter of 2012 require restatement as a result of a classification error.  Those statements of cash flows improperly classified payments for content assets as investing activities rather than operating activities. The classification errors had no impact on the net increase in cash and cash equivalents, cash balance, the consolidated balance sheet, the consolidated statement of operations or the consolidated statement of stockholders' equity in any of the affected periods.

The adjustment to the consolidated statement of cash flows for the year ended December 31, 2011 will reclassify approximately $23.4 million of payments for content assets from investing activities to operating activities. Accordingly, net cash provided by operating activities will decrease by approximately $23.4 million and net cash provided by investing activities will increase by approximately $23.4 million. 

The authorized officers of the Company have discussed with Ernst & Young LLP the matters that will be disclosed in Current Report on Form 8-K to be filed with the SEC no later than August 3, 2012.

The Company also intends to file an amendment on Form 10-K/A to its 2011 Form 10-K to amend its financial statements therein to reflect the aforementioned reclassifications. The Company will also report reclassifications related to this matter for each interim period in 2011 in the revised notes to the 2011 consolidated financial statements when filed on Form 10-K/A, and will report the effects on the consolidated statement of cash flows for the three months ended March 31, 2012 when it files its second quarter 10-Q in the coming weeks. 

Supplemental Financial Information:
For comparative purposes, the following more detailed, unaudited statements of operations for the three and six months ended June 30, 2012 and 2011 are included.






Three Months Ended June 30, 2012






(in thousands, unaudited)
































Corporate/








Radio


Reach




Cable


Eliminations/






Consolidated

 One

Media


Internet

Television

Other







STATEMENT OF OPERATIONS:






























NET REVENUE

$

105,916

$

61,759

$

8,546

$

4,423

$

32,254

$

(1,066)


OPERATING EXPENSES:














Programming and technical 


32,958


13,076


6,004


2,026


12,879


(1,027)


Selling, general and administrative


31,553


21,990


1,226


2,872


5,719


(254)


Corporate selling, general and administrative


9,824


-


1,715


-


1,994


6,115


Stock-based compensation


46


15


-


-


-


31


Depreciation and amortization


9,742


1,623


293


823


6,762


241


Impairment of long-lived assets


313


313


-


-


-


-


Total operating expenses


84,436


37,017


9,238


5,721


27,354


5,106


           Operating income (loss)


21,480


24,742


(692)


(1,298)


4,900


(6,172)


INTEREST INCOME


25


-


2


-


8


15


INTEREST EXPENSE


22,928


250


-


-


3,039


19,639


OTHER EXPENSE (INCOME), net


610


(7)


-


-


-


617


(Loss) income before benefit from income taxes, noncontrolling interest in income of subsidiaries and income from discontinued operations


(2,033)


24,499


(690)


(1,298)


1,869


(26,413)


BENEFIT FROM INCOME TAXES


(48,491)


(48,358)


(133)


-


-


-


Net income (loss) from continuing operations


46,458


72,857


(557)


(1,298)


1,869


(26,413)


INCOME FROM DISCONTINUED OPERATIONS, net of tax


7