Radio One, Inc. Reports Fourth Quarter Results

WASHINGTON, Feb. 20, 2013 /PRNewswire/ -- Radio One, Inc. (NASDAQ: ROIAK and ROIA) today reported its results for the quarter ended December 31, 2013. Net revenue was approximately $111.6 million, an increase of 5.4% from the same period in 2012.  Station operating income¹ was approximately $39.1 million, an increase of 9.9% from the same period in 2012. The Company reported operating income of approximately $17.4 million compared to operating income of approximately $14.6 million for the same period in 2012. Net loss was approximately $16.4 million or $0.35 per share compared to net loss of $17.2 million or $0.34 per share, for the same period in 2012. 

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Alfred C. Liggins, III, Radio One's CEO and President stated, "Our core radio business remains very robust: excluding political advertising, revenue for our combined radio and Reach Media segments increased approximately 5.0% over Q4 2012. Consolidated net revenue excluding political increased 10.6% over Q4 2012. I was pleased that once again we delivered a double digit increase in Consolidated Adjusted EBITDA², which increased 10% year over year, and that our Interactive division achieved profitability on an Adjusted EBITDA basis for both the fourth quarter and the full year."

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/A, 10-K, 10-Q/A, 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 $111.6 million for the quarter ended December 31, 2013, from approximately $105.9 million for the same period in 2012, an increase of 5.4%. Net revenue from the radio business, including Reach Media, decreased 2.2% for the quarter ended December 31, 2013, compared to the same period in 2012 due to tough political comparatives. Excluding political, revenue for our combined radio and Reach Media segments, increased 5.0% for the fourth quarter compared to the same quarter 2012 to approximately $66.4 million from approximately $63.2 million. Excluding political, consolidated net revenue increased 10.6% for the fourth quarter compared to the same quarter 2012 to approximately $111.0 million from approximately $100.4 million. We recognized approximately $38.0 million of revenue from our cable television segment during the three months ended December 31, 2013, compared to approximately $33.5 million for the same period in 2012, the increase due primarily from an increase in advertising sales. Finally, net revenues for our internet business increased 54.6% for the three months ended December 31, 2013, compared to the same period in 2012 due to growth in advertising and studio services, where Interactive One provides services to other publishers.

Operating expenses, excluding depreciation and amortization, stock-based compensation and impairment of long-lived assets, increased to approximately $84.9 million for the quarter ended December 31, 2013, up 4.0% from the approximately $81.6 million incurred for the comparable quarter in 2012. TV One incurred higher selling, general and administrative expenses related to higher marketing and promotional expenses to advertise and promote various TV One shows in addition to a higher intercompany management fee paid to Radio One. During the fourth quarter of 2012, there were no new shows to promote. This increase in expense was partially offset by a decrease in programming and technical expenses, primarily related to lower content amortization incurred by TV One for the quarter ended December 31, 2013 compared to the same period in 2012. The decrease in TV One content amortization is a result of accelerated amortization of programming content that was recorded in the prior period.

Depreciation and amortization expense decreased to approximately $9.3 million compared to approximately $9.6 million for the quarters ended December 31, 2013 and 2012, respectively, a decrease of 3.6%. The decrease was due to the completion of depreciation and amortization for certain assets. 

Interest expense increased marginally to approximately $22.4 million for the quarter ended December 31, 2013, compared to approximately $22.2 million for the same period in 2012. The Company made cash interest payments of approximately $21.0 million for the quarter ended December 31, 2013 compared to cash interest payments of approximately $21.3 million for the quarter ended December 31, 2012.

The provision for income taxes for the quarter ended December 31, 2013 was approximately $8.9 million compared to approximately $7.4 million for the comparable period in 2012, primarily attributable to the recognition of deferred tax expense associated with indefinite-lived intangible assets. Because our income tax expense does not have a correlation to our pre-tax earnings, changes in those earnings can have a significant impact on the income tax expense we recognize. As a result, we believe the actual effective tax rate best represents the estimated effective rate for the three month periods ended December 31, 2013 and 2012. The Company paid $53,000 and $187,000 in taxes for the quarters ended December 31, 2013 and 2012, respectively.

The increase in noncontrolling interests in income of subsidiaries is due primarily to greater net income generated by TV One and Reach Media during the three months ended December 31, 2013, compared to the 2012 period. 

Other pertinent financial information includes capital expenditures of approximately $2.0 million and $2.9 million for the quarters ended December 31, 2013 and 2012, respectively.  The Company received dividends in the amount of approximately $4.1 million for the quarter ended December 31, 2013, and approximately $22.6 million for the year ended December 31, 2013. The Company did not receive dividends for the quarter ended December 31, 2012, and received approximately $8.1 million in dividends for the year ended December 31, 2012. As of December 31, 2013, the Company had total debt (net of cash balances) of approximately $759.0 million. The Company's cash and cash equivalents by segment are as follows:  Radio and Internet, approximately $27.6 million; Reach Media, approximately $5.9 million; and Cable Television, approximately $23.2 million. In addition to cash and cash equivalents, the Cable Television segment also has short-term investments of approximately $2.3 million and long-term investments of $170,000. There were no stock repurchases made during the quarter ended December 31, 2013. During the year ended December 31, 2013, the Company repurchased 2,630,574 shares of Class D common stock in the amount of $5,397,734 and 32,669 shares of Class A common stock in the amount of $70,986. There were no stock repurchases made during the quarter or year ended December 31, 2012.

Other Matters

As previously announced, the Company closed a private offering of $335.0 million aggregate principal amount of 9.25% senior subordinated notes due 2020 (the "Notes") on February 10, 2014.  The Notes were offered at an original issue price of 100.00% plus accrued interest from February 10, 2014.  The Notes will mature on February 15, 2020.  Interest on the Notes accrues at the rate of 9.25% per annum and is payable semiannually in arrears on February 15 and August 15, commencing on August 15, 2014.   The Notes are guaranteed by certain of the Company's existing and future domestic subsidiaries and any other subsidiaries that guarantee the existing senior credit facility or any of the Issuer's other syndicated bank indebtedness or capital markets securities.

The Company is using the net proceeds from the offering to repurchase or otherwise redeem all of the amounts currently outstanding under its 12.5%/15.0% Senior Subordinated Notes due 2016 (the " 2016 Notes") and to pay the related accrued interest, premiums, fees and expenses associated therewith.  

The Notes and the related guarantees were offered only to "qualified institutional buyers" pursuant to Rule 144A under the Securities Act and to certain persons outside of the United States in compliance with Regulation S under the Securities Act. The Notes and the related guarantees have not been registered under the Securities Act, or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption from the Securities Act and applicable state securities or blue sky laws and foreign securities laws.

Finally, as also previously announced, on February 10, 2014 (the "Early Settlement Date"), the Company closed upon early settlement of its cash tender offer (the "Tender Offer") to purchase any and all of its outstanding 2016 Notes. The Tender Offer included a concurrent consent solicitation (the "Consent Solicitation") soliciting consents from holders of the 2016 Notes to certain amendments to the Indenture, dated as of November 24, 2010, by and among the Company, the guarantors party thereto, and Wilmington Trust Company, as trustee (the "Trustee"), pursuant to which the 2016 Notes were issued (as amended and supplemented, the "Indenture") and related provisions of the 2016 Notes, that eliminated substantially all of the restrictive covenants and certain events of default.

As reported by D.F. King & Co., Inc., the tender agent and information agent, as of February 10, 2014, tenders and corresponding consents were delivered with respect to $207,151,189 aggregate principal amount of the 2016 Notes, which 2016 Notes had been validly tendered and not validly withdrawn as of 5:00 p.m., New York City time on February 7, 2014 (the "Early Tender Time").  As a result, the requisite consents were obtained with respect to all of the Indenture amendments.

In conjunction with receiving the requisite consents, the Company, the guarantors party thereto, and the Trustee executed a third supplemental indenture with respect to the Indenture (the "Third Supplemental Indenture") effecting the amendments to eliminate substantially all of the restrictive covenants and certain events of default. The Third Supplemental Indenture became operative upon acceptance of the 2016 Notes for purchase by the Company on the Early Settlement Date pursuant to the terms and conditions described in the Offer Documents (as defined below).

As previously announced, the Tender Offer will expire at 11:59 p.m. New York City time on February 24, 2014, unless the Tender Offer is extended or earlier terminated (the "Expiration Time"). Under the terms of the Tender Offer, holders of the 2016 Notes who validly tender and do not validly withdraw their 2016 Notes and consents after the Early Tender Time but prior to the Expiration Time will receive an amount equal to $977.50 per $1,000.00 in principal amount of Notes validly tendered. Holders whose 2016 Notes are purchased in the Tender Offer will also be paid accrued and unpaid interest from the most recent interest payment date on the Notes to, but not including, the applicable settlement date. Holders may not tender their 2016 Notes in the Tender Offer without delivering their consents under the Consent Solicitation, and holders may not deliver their consents under the Consent Solicitation without tendering their 2016 Notes pursuant to the Tender Offer.

Any 2016 Notes not tendered and purchased pursuant to the Tender Offer will remain outstanding until redeemed as described below and the holders thereof will be bound by the amendments contained in the Third Supplemental Indenture eliminating substantially all restrictive covenants, certain events of default and certain related provisions contained in the Indenture even though they have not consented to the amendments.

Immediately following the Early Settlement Date, $119,883,421 aggregate principal amount of 2016 Notes remained outstanding. The Company has given the required notice under the Indenture to redeem any 2016 Notes that remain outstanding at a redemption price equal to $1,000.00 for each $1,000 principal amount of 2016 Notes in accordance with the Indenture.

Nothing in this press release constitutes a notice of redemption under the optional redemption provisions of the Indenture, nor does it constitute an offer to sell, or a solicitation of an offer to buy, any security. No offer, solicitation, or sale will be made in any jurisdiction in which such an offer, solicitation, or sale would be unlawful.

The complete terms and conditions of the Tender Offer and Consent Solicitation are set forth in an Offer to Purchase and Consent Solicitation Statement dated January 27, 2014 and the related Consent and Letter of Transmittal (the "Offer Documents") that were sent to holders of the 2016 Notes. In any jurisdiction where the laws require the Tender Offer and Consent Solicitation to be made by a licensed broker or dealer, the Tender Offer and Consent Solicitation will be deemed made on behalf of the Company by Credit Suisse Securities (USA) LLC, or one or more registered brokers or dealers under the laws of such jurisdiction.

The Company's obligation to accept for purchase and to pay for 2016 Notes validly tendered and not validly withdrawn and consents validly delivered, and not validly revoked, pursuant to the Tender Offer and Consent Solicitation, was subject to and conditioned upon the satisfaction of or, where applicable, the Company's waiver of, certain conditions, including a financing condition. As of February 10, 2014, those conditions had been satisfied and the 2016 Notes validly tendered and not validly withdrawn as of the Early Tender Time were accepted for purchase by the Company.

Credit Suisse Securities (USA) LLC acted as dealer manager and solicitation agent for the Tender Offer and Consent Solicitation. D.F. King & Co., Inc. continues to act as the tender agent and information agent for the Tender Offer and Consent Solicitation. Questions regarding the Tender Offer and Consent Solicitation may be directed to Credit Suisse Securities (USA) LLC at (800) 820-1653 (toll-free) or at (212) 325-2476 (collect). Requests for the Offer Documents may be directed to D.F. King & Co., Inc. at (212) 269-5550 (for bankers and brokers) or (888) 628-9011 (for all others).

Supplemental Financial Information:

For comparative purposes, the following more detailed, unaudited statements of operations for the three months and year ended December 31, 2013 and 2012, 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.

Effective January 1, 2013, the Radio Broadcasting segment contributed the assets and operations of its Syndication One urban programming line-up to the Reach Media segment. We consolidated our syndication operations within Reach Media to leverage that platform to create the leading syndicated radio network targeted to the African-American audience.  In connection with the consolidation, we shifted our syndicated programming sales to an internal sales force operating out of Reach Media.  Segment data for the three months and year ended December 31, 2012, has been reclassified to conform to the current period presentation.

Radio One, Inc. will hold a conference call to discuss its results for fourth quarter of 2013, as well as full year 2013. This conference call is scheduled for Thursday, February 20, 2014 at 10:00 a.m. EST. To participate on this call, U.S. callers may dial toll-free 1-800-230-1085; international callers may dial direct (+1) 612-332-0107.

A replay of the conference call will be available from 12:00 p.m. EST February 20, 2014 until 11:59 p.m. EST February 22, 2014. Callers may access the replay by calling 1-800-475-6701; international callers may dial direct (+1) 320-365-3844. The replay Access Code is 316355. Access to live audio and a replay of the conference call will also be available on Radio One's corporate website at http://www.radio-one.com/. The replay will be made available on the website for seven days after the call.

Radio One, Inc., together with its subsidiaries (http://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 and/or operating 53 broadcast stations located in 16 urban markets in the United States. Through its controlling interest in Reach Media, Inc. (http://www.blackamericaweb.com/), the Company also operates syndicated programming including the Tom Joyner Morning Show, the Russ Parr Morning Show, the Yolanda Adams Morning Show, the Rickey Smiley Morning Show, Bishop T.D. Jakes' "Empowering Moments", and the Reverend Al Sharpton Show. Beyond its core radio broadcasting franchise, Radio One owns Interactive One (http://www.interactiveone.com/), an online platform serving the African-American community through social content, news, information, and entertainment. Interactive One operates a number of branded sites, including News One, UrbanDaily, HelloBeautiful and social networking websites, including BlackPlanet and MiGente. In addition, the Company owns a controlling interest in TV One, LLC (http://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, loss (gain) on retirement of debt, (income) loss from discontinued operations, net of tax, interest income and gain on purchase of affiliated company. Station operating income is not a measure of financial performance under generally accepted accounting principles. Nevertheless station operating income 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 fixed assets and long-lived intangible assets, income taxes, investments, debt financings and retirements, overhead, stock-based compensation, impairment charges, and asset sales. Our measure of station operating income may not be comparable to similarly titled measures of other companies as our definition includes the results of all four segments (Radio Broadcasting, Reach Media, Internet and Cable Television). 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 income (loss) to station operating income has been provided in this release.

²  "Adjusted EBITDA" consists of net loss plus (1) depreciation, amortization, income taxes, interest expense, noncontrolling interest in income of subsidiaries, impairment of long-lived assets, stock-based compensation, loss on retirement of debt, loss from discontinued operations, net of tax, less (2) equity in income of affiliated company, other income, interest income, gain on retirement of debt and gain on purchase of affiliated company. 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. However, 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 fixed assets and long-lived intangible assets, 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 as our definition includes the results of all four segments (Radio Broadcasting, Reach Media, Internet and Cable Television).  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 income (loss) to EBITDA and Adjusted EBITDA has been provided in this release.

³  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."   In addition, certain reclassifications have been made associated with the transfer and consolidation of our syndication operations within Reach Media.  These reclassifications occurred between the Radio Broadcasting segment, the Reach Media segment and Corporate/Eliminations/Other.

⁴  For the three months ended December 31, 2013 and 2012, Radio One had 47,441,175 and 50,042,751 shares of common stock outstanding on a weighted average basis (basic), respectively.  For the year ended December 31, 2013 and 2012, Radio One had 48,370,195 and 50,015,252 shares of common stock outstanding on a weighted average basis (basic), respectively. 

⁵  For the three months ended December 31, 2013 and 2012, Radio One had 47,441,175 and 50,042,751 shares of common stock outstanding on a weighted average basis (fully diluted), for outstanding stock options, respectively.  For the year ended December 31, 2013 and 2012, Radio One had 48,370,195 and 50,015,252 shares of common stock outstanding on a weighted average basis (fully diluted), for outstanding stock options, respectively. 

SOURCE Radio One