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Radio One Reports Fourth Quarter Results (details)

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Radio One, Inc. (NASDAQ:  ROIAK  and ROIA) today reported its results for the quarter ended  December 31, 2011. Giving effect to the consolidation of TV One, net revenue was approximately  $98.1 million, an increase of 37.8% from the same period in 2010.  Also giving effect to the consolidation of TV One, station operating income(1) was approximately  $35.3 million, an increase of 25.6% from the same period in 2010. The Company recorded a non-cash impairment charge against its goodwill and other intangible assets of approximately  $22.3 million, which led to a net operating loss of approximately  $9.0 million. Net loss was approximately  $19.1 million  or a loss of$0.38  per share, a decrease from the reported net loss of approximately  $27.2 million  or  $0.52  per share for the same period in 2010.

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Alfred C. Liggins, III, Radio One’s CEO and President stated, “Our fourth quarter radio revenue was impacted by a combination of tough political comps, non-recurring national accounts and certain format changes that we effected during the quarter. Normalizing for political and issue money, our underlying core radio revenue was down approximately 4.2%. While this is disappointing, I believe our radio group is poised to rebound strongly in 2012, with mid to high single digit revenue growth in both the first and second quarters. TV One continues its strong performance with fourth quarter revenue growth of 8.7% and EBITDA growth of approximately 102% compared to fourth quarter 2010. We expect TV One’s full year EBITDA to increase to approximately  $40 million  for 2012. Before intercompany management charges, our internet business generated positive adjusted EBITDA(2) for the second sequential quarter, and we expect that division to be cash-flow positive for 2012.”

RESULTS OF OPERATIONS
Three Months Ended December 31,Year Ended December 31,
2011201020112010
(as adjusted)(3)(as adjusted)(3)
STATEMENT OF OPERATIONS(unaudited)(unaudited)(audited)
(in thousands, except share data)(in thousands, except share data)
NET REVENUE$                    98,093$                    71,163$                  364,609$                  279,720
OPERATING EXPENSES
Programming and technical, excluding stock-based compensation32,89818,260115,18974,852
Selling, general and administrative, excluding stock-based compensation29,88924,848125,692102,231
Corporate  selling,  general  and  administrative,  excluding  stock-based  compensation8,4827,58033,69628,117
Stock-based compensation2,2519225,1465,799
Depreciation and amortization11,2433,22937,06917,385
Impairment of long-lived assets22,33136,06322,33136,063
Total operating expenses107,09490,902339,123264,447
            Operating (loss) income(9,001)(19,739)25,48615,273
INTEREST INCOME23432354127
INTEREST EXPENSE23,10815,77588,33046,834
GAIN ON INVESTMENT IN AFFILIATED COMPANY146,879
GAIN (LOSS) ON RETIREMENT OF DEBT6,646(7,743)6,646
EQUITY IN INCOME OF AFFILIATED COMPANY1,7263,2875,558
OTHER EXPENSE, net3211273243,061
(Loss)  income  before  (benefit  from)  provision  for  income  taxes,  noncontrolling

interest  in  income  of  subsidiaries  and  income  (loss)  from  discontinued  operations

(32,196)(27,237)79,609(22,291)
(BENEFIT FROM) PROVISION FOR INCOME TAXES(17,689)(714)64,2163,971
Net (loss) income from continuing operations(14,507)(26,523)15,393(26,262)
GAIN (LOSS) FROM DISCONTINUED OPERATIONS, net of tax50(47)(20)(363)
CONSOLIDATED NET (LOSS) INCOME(14,457)(26,570)15,373(26,625)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS4,61158110,0142,008
CONSOLIDATED NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$                  (19,068)$                  (27,151)$                      5,359$                  (28,633)
AMOUNTS ATTRIBUTABLE TO COMMON STOCKHOLDERS
NET (LOSS) INCOME FROM CONTINUING OPERATIONS$                  (19,118)$                  (27,104)$                      5,379$                  (28,270)
GAIN (LOSS) FROM DISCONTINUED OPERATIONS, net of tax50(47)(20)(363)
CONSOLIDATED NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$                  (19,068)$                  (27,151)$                      5,359$                  (28,633)
Weighted average shares outstanding – basic(4)49,782,01652,087,46050,739,44751,509,239
Weighted average shares outstanding – diluted(5)49,782,01652,087,46052,294,32251,509,239
Three Months Ended December 31,Year Ended December 31,
2011201020112010
(as adjusted)(3)(as adjusted)(3)
(unaudited)(unaudited)(audited)
(in thousands, except per share data)(in thousands, except per share data)
PER SHARE DATA – basic and diluted:
Net (loss) income from continuing operations (basic)$                      (0.38)$                  (0.52)$                      0.11$                  (0.55)
Income (loss) from discontinued operations, net of tax (basic)0.00(0.00)(0.00)(0.01)
Consolidated net (loss) income attributable to common stockholders (basic)$                      (0.38)$                  (0.52)$                      0.11$                  (0.56)
Net (loss) income from continuing operations (diluted)$                      (0.38)$                  (0.52)$                      0.10$                  (0.55)
Income (loss) from discontinued operations, net of tax (diluted)0.00(0.00)(0.00)(0.01)
Consolidated net (loss) income attributable to common stockholders (diluted)$                      (0.38)$                  (0.52)$                      0.10$                  (0.56)
SELECTED OTHER DATA
Station operating income (1)$                    35,306$                28,055$                123,728$              102,637
Station operating income margin (% of net revenue)36.0%39.4%33.9%36.7%
Station operating income reconciliation:
Consolidated  net  (loss)  income  attributable  to  common  stockholders$                  (19,068)$              (27,151)$                    5,359$              (28,633)
Add  back  non-station operating income items included in consolidated net income (loss):
Interest income(234)(32)(354)(127)
Interest expense23,10815,77588,33046,834
(Benefit from) provision for income taxes(17,689)(714)64,2163,971
Corporate selling, general and administrative expenses8,4827,58033,69628,117
Stock-based compensation2,2519225,1465,799
Gain on investment in affiliated company(146,879)
(Gain) loss on retirement of debt(6,646)7,743(6,646)
Equity in income of affiliated company(1,726)(3,287)(5,558)
Other expense, net3211273243,061
Depreciation and amortization11,2433,22937,06917,385
Noncontrolling interest in income of subsidiaries4,61158110,0142,008
Impairment of long-lived assets22,33136,06322,33136,063
(Income) loss from discontinued operations, net of tax(50)4720363
Station operating income$                    35,306$                28,055$                123,728$              102,637
Adjusted EBITDA(2)$                    26,824$                20,475$                  90,032$                74,520
Adjusted EBITDA reconciliation:
Consolidated net (loss) income attributable to common stockholders$                  (19,068)$              (27,151)$                    5,359$              (28,633)
Interest income(234)(32)(354)(127)
Interest expense23,10815,77588,33046,834
(Benefit from) provision for income taxes(17,689)(714)64,2163,971
Depreciation and amortization11,2433,22937,06917,385
EBITDA$                    (2,640)$                (8,893)$                194,620$                39,430
Stock-based compensation2,2519225,1465,799
Gain on investment in affiliated company(146,879)
(Gain) loss on retirement of debt(6,646)7,743(6,646)
Equity in income of affiliated company(1,726)(3,287)(5,558)
Other expense, net3211273243,061
Noncontrolling interest in income of subsidiaries4,61158110,0142,008
Impairment of long-lived assets22,33136,06322,33136,063
(Income) loss from discontinued operations, net of tax(50)4720363
Adjusted EBITDA$                    26,824$                20,475$                  90,032$                74,520
December 31, 2011December 31, 2010
(as adjusted)(3)
(unaudited)
(in thousands)
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents$                    35,939$                       9,192
Intangible assets, net1,244,861838,945
Total assets1,486,482999,212
Total debt (including current portion)808,904642,222
Total liabilities1,053,071774,242
Total stockholders’ equity413,068194,335
Redeemable noncontrolling interest20,34330,635
Noncontrolling interest205,063
Current Amount OutstandingApplicable Interest Rate
(in thousands)
SELECTED LEVERAGE AND SWAP DATA:
Senior bank term debt, net of original issue discount of approximately $6.7 million (subject to variable rates)  (a)$                  376,3577.50%
12-1/2%/15%   senior subordinated notes (fixed rate)312,80015.00%
6-3/8% senior subordinated notes (fixed rate)7476.38%
10%  Senior  Secured  TV  One  Notes  due  March  2016  (fixed  rate)119,00010.00%
(a)Subject to variable Libor Rate 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 and 10-K/A, and 10-Q and 10-Q/A 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  $98.1 million  for the quarter ended  December 31, 2011, from approximately  $71.2 million  for the same period in 2010, an increase of 37.8%. Net revenues from our radio segment for the quarter endedDecember 31, 2011  decreased 9.4% from the same period in 2010. We began to consolidate the results of TV One during the quarter ended  June 30, 2011  and recognized approximately  $31.3 million  of incremental revenue from our new cable television segment during the three months ended  December 31, 2011.  We experienced net revenue growth for our radio stations in ourCincinnati,  Raleigh  and  St. Louis  markets, while our  Baltimore,  Columbus,  Dallas,  Houston,  Philadelphia  and  Washington D.C.clusters experienced significant net revenue declines. Reach Media net revenue increased 13.0% for the three months endedDecember 31, 2011  compared to the same period in 2010 and net revenue from our internet business increased 30.5% for the same period.

Operating expenses, excluding depreciation and amortization, stock-based compensation and impairment of long-lived assets increased to approximately  $71.3 million  from approximately  $50.7 million  between the quarters ended  December 31, 2011  and 2010, respectively, an increase of 40.6%. Approximately  $13.6 million  of the increase is a result of the TV One consolidation specifically related to programming and technical operating expenses. For our cable television segment, these operating expenses include expenses associated with the technical, programming, production, and content management. Approximately$11.2 million  of the increase in programming and technical relates specifically to content amortization. Excluding the impact of consolidating TV One results, our operating expenses not including depreciation and amortization, stock-based compensation and impairment of long-lived assets remained flat for the quarter compared to the same period in 2010.

Stock-based compensation increased to approximately  $2.3 million  for the quarter ended  December 31, 2011, compared to$922,000  for the same period in 2010, an increase of 149.5%. Increased stock-based compensation expense was due to the accelerated vesting of approximately 1,000,000 shares of restricted stock representing the final portion of shares pursuant to a long-term incentive plan granted to officers and certain key employees in  January 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 increased to approximately  $11.2 million  compared to approximately  $3.2 million  for the quarters ended  December 31, 2011  and 2010, respectively, an increase of 250.0%. Additional depreciation and amortization expense of approximately  $7.6 million  resulted from the fixed and intangible assets recorded as part of the consolidation of TV One.

Impairment of long-lived assets for the quarter ended December  31, 2011 decreased to approximately  $22.3 million, compared to approximately  $36.1 million  for the same period in 2010, a decrease of 38.2%. Our annual 2011 impairment testing resulted in a non-cash impairment charge to goodwill in our  Columbus  market as well as a non-cash charge associated with Reach Media’s intangible assets. Our 2010 annual impairment testing resulted in a non-cash charge to radio broadcasting licenses inPhiladelphia  as well as a non-cash charge associated with Reach Media goodwill.

Interest expense increased to approximately  $23.1 million  for the quarter ended  December 31, 2011, from approximately  $15.8 million  for the same period in 2010, an increase of 46.2%. The increase in interest expense was due to higher interest rates associated with our new 2011 senior credit facility, our new senior subordinated note and notes issued by TV One.  These instruments were all in effect for the three months ended  December 31, 2011, while none of these instruments, except for our new senior subordinated note, were in place during the comparable period in 2010.    The overall effective rate of borrowing for the three months ended  December 31, 2011  increased approximately 1.5% compared to the three months ended  December 31, 2010.  Approximately  $2.4 million  of the increased interest expense relates to the debt recorded as part of the consolidation of TV One.  The Company made interest payments of approximately  $15.5 million  for the quarter ended  December 31, 2011.

As there were no early bond redemptions for the quarter ended  December 31  2011, there was no gain on retirement of debt to report for the quarter, compared to a gain of approximately  $6.6 million  for the same period in 2010. The fourth quarter 2010 net gain on retirement of debt was due to the early redemption of the Company’s outstanding 6-3/8% Senior Subordinated Notes due 2013 (the “2013 Notes”) at a discount.  This amount was offset by a write-off of approximately  $3.3 million  of debt costs associated with the Company’s previously outstanding 8-7/8% Senior Subordinated Notes due 2011 and the 2013 Notes. A principal amount of  $747,000  remained outstanding as of  December 31, 2011  for the 2013 notes.

There was no equity in income of affiliated company for the quarter ended  December 31, 2011  compared to approximately  $1.7 million  for the same period in 2010, a decrease of 100.0%. Equity in income of affiliated company primarily 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  December 31, 2011. Previously, the Company’s share of the net income was driven by TV One’s current capital structure and the Company’s percentage ownership of the equity securities of TV One.

The income tax benefit for the quarter ended  December 31, 2011  was approximately  $17.7 million  compared to a benefit of$714,000  for the same quarter in 2010.  The income tax rate for 2011 reflects the change in the deferred tax liability (“DTL”) associated with certain indefinite-lived intangibles, which increases as tax amortization on these intangibles is recognized and decreases as impairments for book purposes are recorded on these assets.  In addition to the DTL on these intangibles, a portion of the DTL for the partnership interest in TV One cannot be offset by the deferred tax assets from the net operating loss carryforward. The tax benefit for the fourth quarter 2010 relates mostly to the impairment charges for indefinite-lived intangibles recorded in that quarter, which had the impact of reducing the Company’s deferred tax liability. The Company paid approximately  $1.0 million  in taxes for the quarter ended  December 31, 2011.

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  $50,000  for the quarter ended  December 31, 2011, compared to a loss from discontinued operations, net of tax, of  $47,000  for the same period in 2010.

The increase in noncontrolling interests in income of subsidiaries is due primarily to the impact of consolidating TV One results for the three months ended  December 31, 2011.

Other pertinent financial information includes capital expenditures of approximately  $4.0 million  and  $937,000  for the quarters ended  December 31, 2011  and 2010, respectively.  For the fourth quarter 2011, approximately  $1.8 million  of capital expenditures relates to the Company’s  Washington D.C.  market and Corporate office moves to  Silver Spring, MD.  $500,000relates to expenditures associated with the  Houston  news format switch and  $600,000  relates to a tower upgrade in  Atlanta. The Company received dividends in the amount of approximately  $5.1 million  for the quarter ended  December 31, 2011  and approximately  $14.6 million  for the year ended  December 31, 2011. As of  December 31, 2011, the Company had total debt (net of cash balances) of approximately  $773.0 million. The Company’s cash and cash equivalents by segment are as follows:  Radio One and Internet approximately  $19.4 million, Reach Media approximately  $1.7 million  and Cable Television approximately  $14.9 million. In addition to cash and cash equivalents, the Cable Television segment also has short-term investments of  $761,000  and long-term investments of approximately  $7.4 million. During the quarter ended  December 31, 2011, the Company repurchased 25,250 shares of Class A common stock in the amount of  $32,000  and 752,132 shares of Class D common stock in the amount of  $926,000.  During the year ended  December 31, 2011, the Company repurchased 54,566 shares of Class A common stock in the amount of  $73,000  and 4,245,567 shares of Class D common stock in the amount of approximately  $9.4 million.

Supplemental Financial Information:

For comparative purposes, the following more detailed, unaudited statements of operations for the three months and year endedDecember 31, 2011  and 2010 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.

Three Months Ended December 31, 2011
(in thousands, unaudited)
 ConsolidatedRadio  One  Reach

Media

 Internet  Cable

Television

Corporate/

Eliminations/

Other

STATEMENT OF OPERATIONS:
NET REVENUE$98,093$54,245$10,454$4,823$31,313$(2,742)
OPERATING EXPENSES:
Programming and technical32,89814,1315,2871,87213,628(2,020)
Selling, general and administrative29,88921,1291,8763,1324,963(1,211)
Corporate selling, general and administrative8,4821,5171,9744,991
Stock-based compensation2,251384751,792
Depreciation and amortization11,2431,6159898197,582238
Impairment of long-lived assets22,33114,5097,822
Total operating expenses107,09451,76817,4915,89828,1473,790
          Operating (loss) income(9,001)2,477(7,037)(1,075)3,166(6,532)
INTEREST INCOME234319833
INTEREST EXPENSE23,108426182,42420,240
OTHER EXPENSE, net3213218(8)
(Loss) income before (benefit from) provision for income taxes, noncontrolling interest in income of subsidiaries and income from discontinued operations(32,196)1,730(7,052)(1,075)932(26,731)
(BENEFIT FROM) PROVISION FOR INCOME TAXES(17,689)(15,134)(2,555)
Net (loss) income from continuing operations(14,507)16,864(4,497)(1,075)932(26,731)
INCOME FROM DISCONTINUED OPERATIONS, net of tax50482
CONSOLIDATED NET (LOSS) INCOME(14,457)16,912(4,497)(1,073)932(26,731)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS4,6114,611
NET  (LOSS)  INCOME  ATTRIBUTABLE  TO  COMMON  STOCKHOLDERS$(19,068)$16,912$(4,497)$(1,073)$932$(31,342)
Adjusted EBITDA(2)$26,824$18,985$1,774$(181)$10,748$(4,502)

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Three Months Ended December 31, 2010
(in thousands, unaudited, as adjusted)(3)
 Consolidated  Radio  One  Reach

Media