Radio One, Inc. Reports First Quarter Results

WASHINGTON, May 17 /PRNewswire-FirstCall/ -- Radio One, Inc. (Nasdaq: ROIAK; ROIA) today reported its results for the quarter ended March 31, 2010.  Net revenue was approximately $59.0 million, a decrease of 2.1% from the same period in 2009.  Station operating income(1) was approximately $17.8 million, an increase of 5.0% from the same period in 2009. The Company reported operating income of approximately $3.8 million compared to an operating loss of approximately $42.8 million for the same period in 2009. Net loss was approximately $4.6 million or $0.09 per share, an improvement from the net loss of approximately $59.4 million or $0.84 per share for the same period in 2009.    

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Alfred C. Liggins, III, Radio One's CEO and President stated, "The first quarter brought some much needed revenue growth to our core radio business, driven predominantly by national business, which was up 17.7% year-to-year and some uptick in local business, up 3.6%. Our core radio business also saw its second consecutive quarter with over $1.0 million in internet revenue, which had growth of 72.0% year-to-year. We continue to see healthy pacings in second quarter, with national pacing up 27.0% and local up 1.0%, although national has cooled somewhat over the past two to three weeks. I anticipate our second quarter core radio business finishing up with high single-digit growth.

The sales transition at Reach Media, away from a guaranteed revenue to a commissioned based sales representation agreement with Citadel, has gone as well as could be expected. The new internal sales team has settled in, and we believe that the new structure, coupled with increased demand will allow us to strengthen rates over the long-term."

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 Form 10-K and other filings with the Securities and Exchange Commission.  Radio One does not undertake any duty to update any forward-looking statements.

Net revenue decreased to approximately $59.0 million for the quarter ended March 31, 2010, from approximately $60.3 million for the same period in 2009, a decrease of 2.1%. The decline was driven predominantly by Reach Media. Reach Media net revenue declined significantly for the quarter and was impacted by the transition starting January 2010 from a guaranteed revenue sales representation agreement with Citadel Broadcasting Corporation ("Citadel") to sell all advertising inventory for the Tom Joyner Morning Show, to a commissioned based agreement with Citadel selling out-of-show inventory.  As part of that transition, Reach Media began selling in-show inventory. Net revenue for our online businesses, which includes Community Connect Inc. ("CCI"), was essentially flat for the three months ended March 31, 2010 compared to the same period in 2009.

With a surge in national revenues, there was recovery in the radio marketplaces in which we operate, with all but two markets experiencing growth, for a total growth of 6.9% for the quarter. At 7.9% growth, our radio stations delivered over performance by 100 basis points, thus slightly improving market share. Our total radio stations' net revenues experienced growth in all revenue types, with national, local and internet up 17.7%, 3.6% and 72.0%, respectively. Our total core radio growth (radio stations and syndication, excluding Reach Media) was 3.8% due to a change in dates of the Company's annual Gospel Cruise event (this event was held in April 2010 versus in March 2009). Three of our four largest markets posted growth during the quarter, with Atlanta up 16.0%, Houston up 11.4% and Baltimore up 1.7%. While sequentially better than the 13.1% decline experienced in the fourth quarter of 2009, our Washington, DC cluster was down 3.5% for the quarter. The DC cluster performance was driven by continuing ratings challenges on its adult station since the implementation of The Portable People Meter^™, and the impact that has had on pricing, especially local rates. Recent leadership and pending programming changes are expected to yield more positive results going forward for the DC cluster. Dallas, one of our mid-sized markets, posted an impressive 30.7% net revenue growth for the quarter. Our top four advertising categories for our core radio business generated 53.5% of the quarter's business, with entertainment, retail, telecommunications and food & beverage comprising 15.5%, 14.7%, 12.9% and 10.4%, respectively, of radio's total revenue. Growth performance during the quarter for the entertainment, retail, and telecommunications categories were 2.6%, 15.2% and 21.4%, respectively, while the food & beverage category declined 12.0% caused by less fast food and food product spending. Our automotive category, driven mostly by dealer activity, was 7.3% of total core radio revenue and grew 4.3% for the current quarter. Census, and political advertising helped our public category garner 9.3% of total core radio revenue, with a growth of 26.7% over last first quarter.

Operating expenses, excluding depreciation and amortization, stock-based compensation and impairment of long-lived assets remained flat at approximately $48.5 million for the quarters ended March 31, 2010 and 2009, respectively. We experienced reduced spending for payroll related expenses from salary cuts and vacation plan changes, contract labor, music royalties, facilities, bad debt, events and promotions. This reduced spending was offset by additional commissions expense and representative fees for increased radio revenue and for the recording of corporate bonuses during the quarter compared to recording bonus reductions in the comparable quarter of 2009.

Stock-based compensation increased to approximately $2.0 million for the quarter ended March 31, 2010, compared to $483,000 for the same period in 2009. Increased stock-based compensation expense is due to a 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. 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 $4.7 million compared to approximately $5.2 million for the quarters ended March 31, 2010 and 2009, respectively, a decrease of 9.8%. The decrease is attributable to the completion of amortization for certain CCI intangible assets.

There was no impairment of long-lived assets for the quarter ended March 31, 2010, compared to approximately $49.0 million for the comparable quarter in 2009. During the first quarter of 2009, we recorded non-cash impairment charges to reduce the carrying value of radio broadcasting licenses to their estimated fair values for most of our markets, namely Charlotte, Cincinnati, Cleveland, Columbus, Dallas, Houston, Indianapolis, Philadelphia, Raleigh-Durham, Richmond and St. Louis. The recent economic and advertising industry recovery has contributed to stable valuations for certain long-lived assets and to the non-recurrence of impairments for such assets.

Interest expense decreased to approximately $9.2 million for the quarter ended March 31, 2010, from approximately $10.8 million for the same period in 2009, a decline of 14.3%. The decrease in interest expense was due primarily to shifting outstanding principal debt from the term to the revolver portion of the credit facility, which favorably impacted interest rates. Cash payments for interest obligations were approximately $14.2 million for the first quarter of 2010, which was less than the approximately $16.0 million paid during the comparable period in 2009.  

Other expense was $477,000 for the quarter ended March 31, 2010 compared to $50,000 in other income for the comparable quarter in 2009. Increased other expense was principally due to the write off of a pro-rata portion of debt financing and modification costs in connection with the lowering of the revolver commitment under the Company's bank facilities from $500.0 million to $400 million. The $100.0 million reduction to the revolver commitment resulted from entering into a third amendment to our Credit Agreement which waived a non-monetary technical default to the Credit Agreement associated with the non-filing of certain subsidiaries as guarantors as part of our indentures governing the 6 3/8% and 8 7/8% Senior Subordinated Notes. The write off of the debt financing and modification costs are partially offset by the recording of the value of translator equipment awarded to the Company as a result of a legal settlement.

Equity in income of affiliated company decreased to $909,000 for the quarter ended March 31, 2010, compared to approximately $1.2 million for the same period in 2009, a decrease of 20.9%. The amounts are attributable to our share of the net income generated by TV One, LLC ("TV One") for the quarters ended March 31, 2010 and 2009, respectively, and inception to date dividend distributions made by TV One. The Company's share of TV One's income is driven by TV One's current capital structure and the Company's ownership levels in the equity securities of TV One.

Income taxes for the quarter ended March 31, 2010 was a benefit of $309,000, compared to a provision for taxes of approximately $7.1 million for the comparable period in 2009. Approximately $1.0 million of the decrease is due to reduced pre-tax book income for Reach Media, and the remaining approximately $6.4 million decrease is related to the change in the deferred tax liability ("DTL") for indefinite-lived intangibles. The Company continues to maintain a full valuation allowance for entities other than Reach Media for its deferred tax assets ("DTAs"), including the DTA associated with its net operating loss carryforward. The consolidated effective tax rate for the three months ended March 31, 2010 and 2009 was 6.2% and (13.8%), respectively.

Gain or loss from discontinued operations, net of tax, includes the results of operations for our sold radio stations and Giant Magazine, which ceased publication in December 2009. The gain from discontinued operations, net of tax, for the quarter ended March 31, 2010 resulted from the assumption of Giant Magazine's subscriber liability by another publisher, which was partially offset by legal and litigation expenses incurred as a result of certain previous station sales. The loss from continued operations, net of tax, for the three months ended March 31, 2009 resulted primarily from operational losses incurred by Giant Magazine. The gain or loss from discontinued operations, net of tax, also includes a tax provision of zero and $89,000 for the three months ended March 31, 2010 and 2009, respectively.

Other pertinent financial information includes capital expenditures of approximately $1.2 million and $1.1 million for the quarters ended March 31, 2010 and 2009, respectively. In addition, as of March 31, 2010, Radio One had total debt (net of cash balances) of approximately $639.1 million.

A new stock option and restricted stock plan ("the 2009 Stock Plan") was approved by the stockholders at the Company's annual meeting in December of 2009. The terms of the 2009 Stock Plan are substantially similar to the prior Plan. The compensation committee and the non-executive members of the Board of Directors subsequently approved a long-term incentive plan (the "2009 LTIP") for certain "key" employees of the Company. The 2009 LTIP is comprised of 3,250,000 shares (the "LTIP Shares") of the 2009 Stock Plan's 8,250,000 shares of Class D common stock. Awards of the LTIP Shares have been granted in the form of restricted stock and allocated among 31 employees of the Company, including the named executive officers. The named executive officers were allocated LTIP Shares as follows: (i) Chief Executive Officer ("CEO") (1.0 million shares); (ii) the Chairperson (300,000 shares); (iii) the Chief Financial Officer ("CFO") (225,000 shares); (iv) the Chief Administrative Officer ("CAO") (225,000 shares); and (v) the President of the Radio Division ("PRD") (130,000 shares). The remaining 1,370,000 shares were allocated among 26 other "key" employees. All awards will vest in three installments. The awards were granted effective January 5, 2010 and the first installment of 33% will vest on June 5, 2010. The remaining two installments will vest equally on June 5, 2011 and 2012.

During the quarter ended March 31, 2010, we noted that certain of our subsidiaries identified as guarantors in our financial statements did not have requisite guarantees filed with the trustee as required under the terms of the indentures governing the 6³/₈% and 8⁷/₈% Senior Subordinated Notes (the "Non-Joinder of Certain Subsidiaries").  The Non-Joinder of Certain Subsidiaries caused a non-monetary, technical default under the terms of the relevant indentures at December 31, 2009, causing a non-monetary, technical cross-default at December 31, 2009 under the terms of our Credit Agreement dated June 2005.  We have since joined the relevant subsidiaries as guarantors under the relevant indentures (the "Joinder").  Further, on March 30, 2010, we entered into a third amendment (the "Third Amendment") to the Credit Agreement.  The Third Amendment provides for, among other things: (i) a $100.0 million revolver commitment reduction (from $500.0 million to $400.0 million) under the bank facilities; (ii) a 1.0% floor with respect to any loan bearing interest at a rate determined by reference to the adjusted LIBOR (iii) certain additional collateral requirements; (iv) certain limitations on the use of proceeds from the revolving loan commitments; (v) the addition of Interactive One, LLC as a guarantor of the loans under the Credit Agreement and under the notes governed by the Company's 2001 and 2005 senior subordinated debt documents; (vi) the waiver of the technical cross-defaults that existed as of December 31, 2009 and through the date of the amendment arising due to the Non-Joinder of Certain Subsidiaries; and (vii) the payment of certain fees and expenses of the lenders in connection with their diligence work on the amendment. 

Supplemental Financial Information:

For comparative purposes, the following more detailed and unaudited statements of operations for the three months ended March 31, 2010 and 2009 are included. These detailed, unaudited and adjusted statements of operations include certain reclassifications associated with accounting for discontinued operations.  These reclassifications had no effect on previously reported net income or loss, or any other previously reported statements of operations, balance sheet or cash flow amounts.

The Company announced during its 2009 fourth quarter conference call that it would continue to hold only an annual conference call as opposed to quarterly conference calls for the fiscal year 2010.  Thus no conference call is scheduled for discussion of the first quarter results.

Radio One, Inc. (www.radio-one.com) is a diversified media company that primarily targets African-American and urban consumers. The Company is one of the nation's largest radio broadcasting companies, currently owning 53 broadcast stations located in 16 urban markets in the United States. As a part of its core broadcasting business, Radio One operates syndicated programming including the Russ Parr Morning Show, the Yolanda Adams Morning Show, the Rickey Smiley Morning Show, CoCo Brother Live, CoCo Brother's "Spirit" program, Bishop T.D. Jakes' "Empowering Moments", the Reverend Al Sharpton Show, and the Warren Ballentine Show. The Company also owns a controlling interest in Reach Media, Inc. (www.blackamericaweb.com), owner of the Tom Joyner Morning Show and other businesses associated with Tom Joyner. Beyond its core radio broadcasting business, Radio One owns Interactive One (www.interactiveone.com), an online platform serving the African-American community through social content, news, information, and entertainment, which operates a number of branded sites, including News One, UrbanDaily, HelloBeautiful, Community Connect Inc. (www.communityconnect.com), an online social networking company, which operates a number of branded websites, including BlackPlanet, MiGente, and Asian Avenue and an interest in TV One, LLC (www.tvoneonline.com), a cable/satellite network programming primarily to African-Americans.

Notes:

1 "Station operating income" consists of net loss before depreciation and amortization, corporate expenses, stock-based compensation, equity in income of affiliated company, income taxes, noncontrolling interest in income (loss) of subsidiaries, interest expense, impairment of long-lived assets, other (income) expense,  gain on retirement of debt, (income) loss  from discontinued operations, net of tax, and interest income. Station operating income is not a measure of financial performance under generally accepted accounting principles. Nevertheless we believe station operating income is often a useful measure of a broadcasting company's operating performance and is a significant basis used by our management to measure the operating performance of our stations within the various markets because station operating income provides helpful information about our results of operations apart from expenses associated with our physical plant, income taxes, investments, debt financings and retirements, overhead, stock-based compensation, impairment charges, and asset sales. Station operating income is frequently used as one of the bases for comparing businesses in our industry, although our measure of station operating income may not be comparable to similarly titled measures of other companies. Station operating income does not purport to represent operating income or cash flow from operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to those measurements as an indicator of our performance. A reconciliation of net loss to station operating income has been provided in this release.

2 Certain reclassifications associated with accounting for discontinued operations have been made to prior period balances to conform to the current presentation. These reclassifications had no effect on any other previously reported or consolidated net income or loss or any other statement of operations, balance sheet or cash flow amounts. Where applicable, these financial statements have been identified as "as adjusted."  

3 For the quarter ended March 31, 2010 and 2009, Radio One had 50,844,148 and 70,719,332 shares of common stock outstanding on a weighted average basis, diluted for outstanding stock options, respectively.

4 "Adjusted EBITDA" consists of net loss plus (1) depreciation, amortization, income taxes, interest expense,  equity in income of affiliated company, noncontrolling interest in income (loss) of subsidiaries, impairment of long-lived assets, stock-based compensation, other (income) expense, (income) loss from discontinued operations, net of tax, less (2) interest income and gain on retirement of debt. Net income before interest income, interest expense, income taxes, depreciation and amortization is commonly referred to in our business as "EBITDA." Adjusted EBITDA and EBITDA are not measures of financial performance under generally accepted accounting principles. We believe Adjusted EBITDA is often a useful measure of a company's operating performance and is a significant basis used by our management to measure the operating performance of our business because Adjusted EBITDA excludes charges for depreciation, amortization and interest expense that have resulted from our acquisitions and debt financing, our taxes, impairment charges, as well as our equity in (income) loss of our affiliated company, gain on retirements of debt, and any discontinued operations. Accordingly, we believe that Adjusted EBITDA provides useful information about the operating performance of our business, apart from the expenses associated with our physical plant, capital structure or the results of our affiliated company. Adjusted EBITDA is frequently used as one of the bases for comparing businesses in our industry, although our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA and EBITDA do not purport to represent operating income or cash flow from operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as alternatives to those measurements as an indicator of our performance. A reconciliation of net loss to EBITDA and Adjusted EBITDA has been provided in this release.

SOURCE Radio One, Inc.