Radio One, Inc. Reports 2006 Second Quarter Results

Radio One, Inc. (NASDAQ:ROIAK and ROIA) today reportedits results for the quarter ended June 30, 2006. Net broadcast revenuewas approximately $97.8 million, a decrease of 4% from the same periodin 2005. Station operating income(1) was approximately $46.9 million,a decrease of 15% from the same period in 2005. Operating income wasapproximately $34.9 million, a decrease of 24% from the same period in2005. Net income applicable to common stockholders(2) wasapproximately $8.1 million or $0.08 per diluted share, a decrease of59% from the same period in 2005.

Alfred C. Liggins, III, Radio One's CEO and President stated,"Last quarter, we said that the second quarter could be the bottom forthe radio industry and for Radio One, and, on its face, this quarterwas pretty disappointing. We are clearly facing some challenges incertain markets, over and above the ongoing softness in the radioindustry, and are taking active steps to address those challenges.However, when viewed in the context of our out-performance of theindustry in the second quarter of 2005, along with some discreteexpense items in this quarter that should not be recurring, as well asinvestment spending that is already beginning to pay off in positiveways, we think that this quarter may represent the perfect storm ofbad news and that better days are ahead."

Mr. Liggins continued, "In addition to ongoing managementrealignment that will greatly strengthen our management team anddeepen our bench of talent, we are excited that in the past severalmonths we have:

-- launched the Tom Joyner Morning Show and The Michael Baisden Show on KKBT-FM in Los Angeles;

-- achieved break-even results for our African-American talk radio network, launched earlier this year;

-- seen significant early DVD sales results and retail distribution commitments for "Preaching to the Choir", the independent film we are helping promote and distribute; and

-- continued to see TV One post significant revenue and subscriber gains on a year-over-year basis.

I believe that we are well positioned to benefit from thestrategic initiatives we are currently pursuing, while we continue tore-energize the performance of our radio stations through key hiresand making appropriate strategic decisions relative to our radiostation portfolio that will be in our shareholders' long-term bestinterests."

Additional Second Quarter Information

During the second quarter, the Company incurred approximately $0.7million in severance expense associated with former employees,approximately $1.2 million in expenses associated with a Tom Joynersyndicated television show that will not re-new for the upcomingtelevision season, approximately $0.6 million associated with the newAfrican-American talk radio network and approximately $1.0 million inexpenses associated with activity around the Company's independentfilm distribution initiative; additional revenue from which should beearned over the next 18 months, while incurring little additionalcost.
RESULTS OF OPERATIONS
---------------------

Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
--------- --------- --------- ---------
(unaudited) (unaudited)
----------- -----------
(in thousands) (in thousands)
-------------- --------------
STATEMENT OF OPERATIONS DATA:

NET BROADCAST REVENUE $97,834 $101,525 $179,917 $178,534

OPERATING EXPENSES:

Programming and technical 20,126 17,790 39,897 33,397

Selling, general and
administrative 30,760 28,404 57,724 52,326

Corporate expenses 6,299 5,552 12,969 10,468

Non-cash compensation 370 502 622 909

Stock-based compensation 1,507 - 3,084 -

Depreciation and amortization 3,858 3,150 8,214 6,616
--------- --------- --------- ---------
Total operating expenses 62,920 55,398 122,510 103,716
--------- --------- --------- ---------

Operating income 34,914 46,127 57,407 74,818


INTEREST INCOME 204 271 541 743

INTEREST EXPENSE 18,060 17,240 35,346 29,669

EQUITY IN LOSS OF
AFFILIATED COMPANY 453 304 934 763

OTHER INCOME (EXPENSE), NET 11 33 (265) 123
--------- --------- --------- ---------
Income before provision
for income taxes and
minority interest in
income of subsidiaries 16,616 28,887 21,403 45,252

PROVISION FOR INCOME TAXES 8,148 8,525 9,668 15,095

MINORITY INTEREST IN INCOME
OF SUBSIDIARIES 364 518 1,038 625
--------- --------- --------- ---------

Net income 8,104 19,844 10,697 29,532
--------- --------- --------- ---------


Preferred stock dividends - - - 2,761
--------- --------- --------- ---------

Net income applicable to
common stockholders $8,104 $19,844 $10,697 $26,771
========= ========= ========= =========


Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
-------- -------- -------- --------
(unaudited) (unaudited)
----------------- -----------------
(in thousands, (in thousands,
except per share except per share
data) data)
----------------- -----------------
PER SHARE DATA - basic and
diluted:
Net income per share $0.08 $0.19 $0.11 $0.28
Preferred dividends per
share - - - 0.03
----------------- -----------------
Net income per share
applicable to common
stockholders $0.08 $0.19 $0.11 $0.25
================= =================

SELECTED OTHER DATA:
Station operating income $46,948 $55,331 $82,296 $92,811
Station operating income
margin (% of net revenue) 48% 55% 46% 52%
Station operating income
reconciliation:
Net income $8,104 $19,844 $10,697 $29,532
Plus: Depreciation and
amortization 3,858 3,150 8,214 6,616
Plus: Corporate expenses 6,299 5,552 12,969 10,468
Plus: Non-cash compensation 370 502 622 909
Plus: Stock-based
compensation 1,507 - 3,084 -
Plus: Equity in loss of
affiliated company 453 304 934 763
Plus: Provision for income
taxes 8,148 8,525 9,668 15,095
Plus: Minority interest in
income of subsidiaries 364 518 1,038 625
Plus: Interest expense 18,060 17,240 35,346 29,669
Less: Interest income 204 271 541 743
Less: Other income
(expense) 11 33 (265) 123
-------- -------- -------- --------
Station operating income $46,948 $55,331 $82,296 $92,811
-------- -------- -------- --------

Adjusted EBITDA(3) $38,783 $49,310 $65,356 $81,557
Adjusted EBITDA
reconciliation:
Net income $8,104 $19,844 $10,697 $29,532
Plus: Depreciation and
amortization 3,858 3,150 8,214 6,616
Plus: Provision for income
taxes 8,148 8,525 9,668 15,095
Plus: Interest expense 18,060 17,240 35,346 29,669
Less: Interest income 204 271 541 743
-------- -------- -------- --------
EBITDA $37,966 $48,488 $63,384 $80,169
Plus: Equity in loss of
affiliated company 453 304 934 763
Plus: Minority interest in
income of subsidiaries 364 518 1,038 625
-------- -------- -------- --------
Adjusted EBITDA $38,783 $49,310 $65,356 $81,557
-------- -------- -------- --------


Free cash flow(4) $16,890 $29,313 $25,427 $44,335
Free cash flow
reconciliation:
Net income $8,104 $19,844 $10,697 $29,532
Plus: Depreciation and
amortization 3,858 3,150 8,214 6,616
Plus: Non-cash compensation 370 502 622 909
Plus: Stock-based
compensation 1,507 - 3,084 -
Plus: Non-cash interest
expense 531 2,703 1,044 3,162
Plus: Non-cash provision for
income taxes 5,998 7,517 6,568 13,780
Plus: Equity in loss of
affiliated company 453 304 934 763
Plus: Minority interest in
income of subsidiaries 364 518 1,038 625
Less: Amortization of
contract termination fee 542 - 1,084 -
Less: Capital expenditures 3,753 5,225 5,690 8,291
Less: Preferred stock
dividends - - - 2,761
-------- -------- -------- --------
Free cash flow $16,890 $29,313 $25,427 $44,335
-------- -------- -------- --------

Weighted average shares
outstanding - basic(5) 98,711 105,568 98,706 105,480
Weighted average shares
outstanding - diluted(6) 98,711 105,733 98,722 105,655


June 30, December 31,
2006 2005
------------- ------------
(unaudited)
-------------
SELECTED BALANCE SHEET DATA: (in thousands)
---------------------------
Cash and cash equivalents $18,643 $19,081
Intangible assets, net 2,034,258 2,013,480
Total assets 2,239,450 2,201,380
Total debt (including current portion) 964,500 952,520
Total liabilities 1,202,242 1,177,983
Total stockholders' equity 1,036,254 1,020,541
Minority interest in subsidiaries 954 2,856


Current Amount Applicable Interest
Outstanding Rate (b)
-------------- -------------------
(in thousands)

SELECTED LEVERAGE AND SWAP DATA:


Senior bank term debt (swap
matures 6/16/2012) $25,000 5.97%

Senior bank term debt (swap
matures 6/16/2010) 25,000 5.77%

Senior bank term debt (swap
matures 6/16/2008) 25,000 5.63%

Senior bank term debt (swap
matures 6/16/2007) 25,000 5.58%

Senior bank term debt (at
variable rates) (a) 200,000 approximately 6.88%

Senior bank term debt (at
variable rates) (a) 164,500 approximately 6.88%

8-7/8% senior subordinated notes
(fixed rate) 300,000 8.88%

6-3/8% senior subordinated notes
(fixed rate) 200,000 6.38%


(a) Subject to rolling 90-day LIBOR plus a spread currently at 1.50%
and incorporated into the rate set forth above. This tranche is
not covered by swap agreements described in footnote (b).

(b) Under its swap agreements, Radio One pays a fixed rate plus a
spread based on the Company's leverage, as defined in its credit
agreement. As of June 30, 2006, that spread was 1.50% and is
incorporated into the applicable interest rates set forth above.

Net broadcast revenue decreased to approximately $97.8 million forthe quarter ended June 30, 2006 from approximately $101.5 million forthe quarter ended June 30, 2005, or 4%. We experienced net broadcastrevenue declines in most of our markets, primarily due to overallindustry revenue declines for the markets in which we operate.Declining ratings, and/or lower pricing led to declines in many of ourmarkets, most notably Los Angeles, Washington, DC, Atlanta, Dallas,Cleveland and Cincinnati. These declines more than offset increases innet broadcast revenue experienced in our Houston, Philadelphia,Richmond and St. Louis markets, as well as increased net broadcastrevenue from Reach Media. Net broadcast revenue is reported net ofagency and outside sales representative commissions of approximately$12.0 million and $13.0 million for the quarters ended June 30, 2006and 2005, respectively.

Operating expenses, excluding depreciation and amortization,stock-based compensation, and non-cash compensation increased toapproximately $57.2 million for the quarter ended June 30, 2006 fromapproximately $51.7 million for the quarter ended June 30, 2005, or11%. This increase was primarily due to costs associated with asyndicated Tom Joyner television show that will not re-new for theupcoming television season, spending on new initiatives, such as theCompany's recently-launched African-American radio talk network andits film distribution initiative, severance expense associated withformer employees, and costs associated with two recent additions tothe Company's radio station portfolio. Excluding these expenses,operating expenses, excluding depreciation and amortization,stock-based compensation, and non-cash compensation would haveincreased 3% for the quarter ended June 30, 2006.

Stock-based compensation was approximately $1.5 million for thequarter ended June 30, 2006, compared to $0 for the same period in2005. The non-cash expense resulted from our January 1, 2006 adoptionof Statement of Financial Accounting Standards ("SFAS") No. 123R,"Share-Based Payment."

Depreciation and amortization expense increased to approximately$3.9 million for the quarter ended June 30, 2006 from approximately$3.2 million for the quarter ended June 30, 2005, an increase ofapproximately $0.7 million, or 23%. The increase was primarily due tothe amortization of certain intangibles associated with theacquisition of 51% of the common stock of Reach Media. During thefourth quarter of 2005, we completed the preliminary purchase priceallocation for the Reach Media acquisition and began the associateddepreciation and amortization of acquired fixed assets andintangibles. To a lesser extent, the increase in depreciation andamortization also resulted from depreciation associated with capitalexpenditures made since June 30, 2005, which was slightly offset bythe completion of amortization of certain trade names.

Interest expense increased to approximately $18.1 million for thequarter ended June 30, 2006 from approximately $17.2 million for thequarter ended June 30, 2005, an increase of approximately $0.9million, or 5%. The increase resulted from additional interestobligations associated with borrowings to fund partially our stockrepurchase program during the second-half of 2005, and borrowings inMay 2006 to fund partially the acquisition of WHHL-FM (formerlyWRDA-FM), a radio station located in the St. Louis metropolitan area.Interest expense also increased due to the impact of higher marketinterest rates on the variable rate portion of our debt.

Provision for income taxes decreased to approximately $8.1 millionfor the quarter ended June 30, 2006 from approximately $8.5 millionfor the quarter ended June 30, 2005, a decrease of approximately $0.4million or 4%. The decrease to the provision was due to lower pre-taxincome, offset by an unfavorable adjustment to our liabilityassociated with changes in Texas state tax law. Our effective tax rateas of June 30, 2006 was 49.0%. Excluding the tax impact of thepermanent differences associated with SFAS No. 123R and the Texasstate tax law change, our effective tax rate as of June 30, 2006 was43.3%, compared to 40.2% as of June 30, 2005. This rate increase isattributable to the lower pre-tax income and proportionately higherpermanent differences. As of June 30, 2006, our annual effective taxrate is projected at 42.9%, which is impacted by the permanentdifferences between income subject to tax for book versus taxpurposes.

Other pertinent financial information for the second quarter of2006 includes capital expenditures of approximately $3.8 million,compared to approximately $5.2 million for the second quarter of 2005.As of June 30, 2006, Radio One had total debt (net of cash balances)of approximately $945.9 million.

In May 2006, we completed the acquisition of the assets of WHHL-FM(formerly WRDA-FM), a radio station located in the St. Louismetropolitan area for approximately $20.0 million in cash.

In April 2006, we announced amendments to certain financialcovenants in our existing $800.0 million senior credit facility. Thetotal leverage ratio was increased for the second quarter of 2006,through fiscal year end 2007, while the interest coverage ratio wasdecreased from its original level for all of fiscal year 2006 throughfiscal year 2008. The other material terms and conditions of thesenior credit facility, including maturity, interest rates and otherfinancial covenants, were not affected by the amendment.

In March 2006, we announced an agreement to acquire the assets ofWIFE-FM, a radio station licensed to Connorsville, Indiana, forapproximately $18.0 million in cash. Subject to the necessaryregulatory approvals, we will move the station into the Cincinnatimetropolitan area and consolidate the station with our existingCincinnati operations. We expect to complete this acquisition duringthe second half of 2006.

On January 1, 2006, we adopted SFAS No. 123R and anticipate thatit will result in an increase in operating expenses in the range ofapproximately $6.0 to $7.0 million for the full-year of 2006. Thisincrease does not include the potential expense impact of any stockoptions or similar equity instruments that might be granted duringfiscal year 2006.

Radio One will hold a conference call to discuss its results forthe second quarter of 2006. This conference call is scheduled forMonday August 7, 2006 at 10:00 a.m. Eastern Time. Interested partiesshould call 1-612-288-0329 at least five minutes prior to thescheduled time of the call and provide the password "Radio One." Theconference call will be recorded and made available for replay from1:30 p.m. Eastern Time the day of the call, until 11:59 p.m. EasternTime the following day. Interested parties may listen to the replay bycalling 1-320-365-3844; access code 836084. Access to live audio andreplay of the conference call will also be available on Radio One'scorporate website at www.radio-one.com. The replay will be madeavailable on the website for the seven business days following thecall.

Radio One, Inc. (www.radio-one.com) is the nation's seventhlargest radio broadcasting company (based on 2005 net broadcastrevenue) and the largest radio broadcasting company that primarilytargets African-American and urban listeners. Pro forma for announcedacquisitions, Radio One owns and/or operates 71 radio stations locatedin 22 urban markets in the United States and reaches approximately 14million listeners every week. Additionally, Radio One owns interestsin TV One, LLC (www.tvoneonline.com), a cable/satellite networkprogramming primarily to African-Americans and Reach Media, Inc.(www.blackamericaweb.com), owner of the Tom Joyner Morning Show andother businesses associated with Tom Joyner. Radio One also operatesthe only nationwide African-American news/talk network on free radioand programs "XM 169 The POWER," an African-American news/talkchannel, on XM Satellite Radio.

Notes:

This press release includes forward-looking statements within themeaning of Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934. Because these statements applyto future events, they are subject to risks and uncertainties thatcould cause actual results to differ materially, including the absenceof a combined operating history with an acquired company or radiostation and the potential inability to integrate acquired businesses,need for additional financing, high degree of leverage, seasonalnature of the business, granting of rights to acquire certain portionsof the acquired company's or radio station's operations, marketratings, variable economic conditions and consumer tastes, as well asrestrictions imposed by existing debt and future payment obligations.Important factors that could cause actual results to differ materiallyare described in Radio One's reports on Forms 10-K, and 10-Q and otherfilings with the Securities and Exchange Commission.

(1) "Station operating income" consists of net income beforedepreciation and amortization, provision for income taxes, interestincome, interest expense, equity in loss of affiliated company,minority interest in income of subsidiaries, other income (expense),corporate expenses and stock-based and non-cash compensation expenses.Station operating income is not a measure of financial performanceunder generally accepted accounting principles. Nevertheless webelieve station operating income is often a useful measure of abroadcasting company's operating performance and is a significantbasis used by our management to measure the operating performance ofour stations within the various markets because station operatingincome provides helpful information about our results of operationsapart from expenses associated with our physical plant, income taxesprovision, investments, debt financings, overhead, and stock-based andnon-cash compensation. Station operating income is frequently used asone of the bases for comparing businesses in our industry, althoughour measure of station operating income may not be comparable tosimilarly titled measures of other companies. Station operating incomedoes not purport to represent operating loss or cash flow fromoperating activities, as those terms are defined under generallyaccepted accounting principles, and should not be considered as analternative to those measurements as an indicator of our performance.A reconciliation of operating income to station operating income hasbeen provided in this release.

(2) Net income applicable to common stockholders is defined as netincome minus preferred stock dividends paid, if any.

(3) "Adjusted EBITDA" consists of net income plus (1)depreciation, amortization, provision for income taxes, interestexpense, equity in loss of affiliated company and minority interest inincome of subsidiaries and less (2) interest income. Net income beforeinterest income, interest expense, provision for income taxes,depreciation and amortization is commonly referred to in our businessas "EBITDA." Adjusted EBITDA is not a measure of financial performanceunder generally accepted accounting principles. We believe AdjustedEBITDA is often a useful measure of a company's operating performanceand is a significant basis used by our management to measure theoperating performance of our business because Adjusted EBITDA excludescharges for depreciation, amortization and interest expense that haveresulted from our acquisitions and debt financings, our provision forincome tax expense, as well as our equity in loss of our affiliatedcompany. Accordingly, we believe that Adjusted EBITDA provides helpfulinformation about the operating performance of our business, apartfrom the expenses associated with our physical plant, capitalstructure or the results of our affiliated company. Adjusted EBITDA isfrequently used as one of the bases for comparing businesses in ourindustry, although our measure of Adjusted EBITDA may not becomparable to similarly titled measures of other companies. AdjustedEBITDA does not purport to represent operating income or cash flowfrom operating activities, as those terms are defined under generallyaccepted accounting principles, and should not be considered asalternatives to those measurements as an indicator of our performance.A reconciliation of net income to Adjusted EBITDA has been provided inthis release.

(4) "Free cash flow" consists of net income plus (1) depreciation,amortization, stock-based and non-cash compensation, non-cashprovision for income taxes, non-cash interest expense, non-cash losson retirement of assets, minority interest in income of subsidiariesand our share of the non-cash loss of our affiliated company and less(2) amortization of contract termination fee, capital expenditures andpreferred stock dividends paid. Free cash flow is not a measure offinancial performance under generally accepted accounting principles.We believe free cash flow is a useful measure of a company's operatingperformance and is a significant basis used by our management tomeasure the operating performance of our business because free cashflow is a reasonable approximation of the amount of excess cashgenerated by the company's operations that can be used for debtreduction, acquisitions, investments, potential common stock dividendsand/or buybacks and other strategic initiatives outside of theimmediate scope of the company's operations. Free cash flow isfrequently used as one of the bases for comparing businesses in ourindustry, although our measure of free cash flow may not be comparableto similarly titled measures of other companies. Free cash flow doesnot purport to represent operating income or cash flow from operatingactivities, as those terms are defined under generally acceptedaccounting principles, and should not be considered as alternatives tothose measurements as an indicator of our performance. Areconciliation of net income to free cash flow has been provided inthis release.

(5) For the three months ended June 30, 2006 and 2005, Radio Onehad 98,710,633 and 105,567,725 shares of common stock outstanding on aweighted average basis, respectively.

(6) For the three months ended June 30, 2006 and 2005, Radio Onehad 98,710,633 and 105,732,976 shares of common stock outstanding on aweighted average basis, diluted for outstanding stock options,respectively.