Radio One, Inc. Reports First Quarter Results

Radio One, Inc. (NASDAQ:ROIAK) (NASDAQ:ROIA) todayreported its results for the quarter ended March 31, 2006. Netbroadcast revenue was approximately $82.1 million, an increase of 7%from the same period in 2005. Station operating income(1) wasapproximately $35.3 million, a decrease of 6% from the same period in2005. Operating income was approximately $22.5 million, a decrease of22% from the same period in 2005. Net income applicable to commonstockholders(2) was approximately $2.6 million or $0.03 per dilutedshare, a decrease of 63% from the same period in 2005.

Alfred C. Liggins, III, Radio One's CEO and President stated, "Weare pleased to report a quarter that, while challenging, was actuallybetter than the guidance we gave back in February of this year. We aremindful of the fact that our exceptional performance in Q1 of 2005,when we outgrew our markets by 500 basis points, would make thisyear's first quarter that much more difficult. With that said, wecontinue to focus on maximizing our radio station portfolio and arefinding opportunities for growth in places like Philadelphia and St.Louis and improvement in places such as Los Angeles and Cincinnati.Thus, we expect to continue to invest time and effort into our coreradio business to maintain our competitive advantage and feeloptimistic that in the second half of 2006 we will begin to see thefruits of our labor."
RESULTS OF OPERATIONS
Three Months Ended
March 31,
2006 2005
---------- ----------
(unaudited)
-----------------------
(in thousands)
-----------------------
STATEMENT OF OPERATIONS DATA:

NET BROADCAST REVENUE $ 82,083 $ 77,010
--------- ---------

OPERATING EXPENSES:

Programming and technical 19,771 15,606
Selling, general and administrative 26,964 23,922
Corporate expenses 6,670 4,916
Non-cash compensation 252 408
Stock-based compensation 1,577 -
Depreciation and amortization 4,356 3,467
--------- ---------
Total operating expenses 59,590 48,319
--------- ---------

Operating income 22,493 28,691

INTEREST INCOME 337 472
INTEREST EXPENSE 17,286 12,429
EQUITY IN LOSS OF AFFILIATED COMPANY 481 459
OTHER (EXPENSE) INCOME, NET (276) 90
--------- ---------
Income before provision for income taxes
and minority interest in income of
subsidiaries 4,787 16,365

PROVISION FOR INCOME TAXES 1,520 6,571
MINORITY INTEREST IN INCOME OF SUBSIDIARIES 674 107
--------- ---------

Net income $ 2,593 $ 9,687
Preferred stock dividend - 2,761
--------- ---------

Net income applicable to common
stockholders $ 2,593 $6,926
========= =========


Three Months Ended
March 31,
2006 2005
---------- ----------
(unaudited)
------------------------
(in thousands, except
per share data)
------------------------
PER SHARE DATA - basic and diluted:
Net income per share $ 0.03 $ 0.09
Preferred dividends per share - 0.02
---------- ----------
Net income per share applicable to
common stockholders $ 0.03 $ 0.07
========== ==========

SELECTED OTHER DATA:
Station operating income $ 35,348 $ 37,482
Station operating income margin (% of
net revenue) 43% 49%
Station operating income reconciliation:
Net income $ 2,593 $ 9,687
Plus: Depreciation and amortization 4,356 3,467
Plus: Corporate expenses 6,670 4,916
Plus: Non-cash compensation 252 408
Plus: Stock-based compensation 1,577 -
Plus: Equity in loss of affiliated
company 481 459
Plus: Provision for income taxes 1,520 6,571
Plus: Minority interest in income of
subsidiaries 674 107
Plus: Interest expense 17,286 12,429
Plus: Other (expense) income, net (276) 90
Less: Interest income 337 472
---------- ----------
Station operating income $ 35,348 $ 37,482
---------- ----------

Adjusted EBITDA(3) $ 26,573 $ 32,248
Adjusted EBITDA reconciliation:
Net income $ 2,593 $ 9,687
Plus: Depreciation and amortization 4,356 3,467
Plus: Provision for income taxes 1,520 6,571
Plus: Interest expense 17,286 12,429
Less: Interest income 337 472
---------- ----------
EBITDA 25,418 31,682
Plus: Equity in loss of affiliated
company 481 459
Plus: Minority interest in income of
subsidiaries 674 107
---------- ----------
Adjusted EBITDA $ 26,573 $ 32,248
---------- ----------

Free cash flow(4) $ 9,305 $ 15,051
Free cash flow reconciliation:
Net income $ 2,593 $ 9,687
Plus: Depreciation and amortization 4,356 3,467
Plus: Non-cash compensation 252 408
Plus: Stock-based compensation 1,577 -
Plus: Non-cash interest expense 513 459
Plus: Non-cash tax provision 1,338 6,262
Plus: Equity in loss of affiliated company 481 459
Plus: Minority interest in income of
subsidiaries 674 107
Less: Amortization of contract termination fee 542 -
Less: Capital expenditures 1,937 3,037
Less: Preferred stock dividends - 2,761
---------- ----------
Free cash flow $ 9,305 $ 15,051
---------- ----------

Weighted average shares outstanding -
basic(5) 98,705 105,391
Weighted average shares outstanding -
diluted(6) 98,743 105,631


March 31, December 31,
2006 2005
------------- -------------
(unaudited)
-------------
SELECTED BALANCE SHEET DATA: (in thousands)
----------------------------
Cash and cash equivalents $ 23,611 $ 19,081
Intangible assets, net 2,011,527 2,013,480
Total assets 2,197,941 2,201,380
Total debt (including current portion) 952,516 952,520
Total liabilities 1,168,671 1,177,983
Total stockholders' equity 1,025,740 1,020,541
Minority interest in subsidiaries 3,530 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 5.72%
Senior bank term debt (swap matures
6/16/2010) 25,000 5.52%
Senior bank term debt (swap matures
6/16/2008) 25,000 5.38%
Senior bank term debt (swap matures
6/16/2007) 25,000 5.33%
Senior bank term debt (at variable
rates) (a) 200,000 approximately 6.20%
Senior bank term debt (at variable
rates) (a) 152,500 approximately 6.20%
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
1.25% 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 March 31, 2006, that spread was 1.25% and is
incorporated into the applicable interest rates set forth above.

Net broadcast revenue increased to approximately $82.1 million forthe quarter ended March 31, 2006 from approximately $77.0 million forthe quarter ended March 31, 2005, or 7%. This increase resultedprimarily from the consolidation of a full quarter of operatingresults for Reach Media, Inc. ("Reach Media") during 2006, compared toone month of the quarter during 2005. We acquired 51% of the commonstock of Reach Media in February 2005. Excluding the impact ofconsolidating the 2006 first quarter operating results of Reach Media,net broadcast revenue declined 4% for the quarter ended March 31, 2006compared to the same period in 2005. We experienced net broadcastrevenue declines in most of our markets, primarily due to overallindustry revenue declines for the markets in which we operate. Thesedeclines were partially offset by growth in our Houston, Philadelphia,Richmond, and St. Louis markets, additional revenue from our internetinitiative, and revenue from our newly launched news/talk network. Netbroadcast revenue is reported net of agency and outside salesrepresentative commissions of approximately $9.8 million and $10.0million for the quarters ended March 31, 2006 and 2005, respectively.

Operating expenses, excluding depreciation and amortization,stock-based compensation, and non-cash compensation increased toapproximately $53.4 million for the quarter ended March 31, 2006 fromapproximately $44.4 million for the quarter ended March 31, 2005, or20%. This increase resulted primarily from the consolidation of a fullquarter of operating results for Reach Media during 2006, compared toone month of the quarter during 2005. Reach Media's first quarter 2006operating results include expenses associated with the Tom Joynersyndicated television variety show launched in October 2005. To alesser extent, the increase was also due to higher music royalties,tower expenses, professional fees, and expenses associated with thenewly launched news/talk network. Excluding the operating results ofReach Media, operating expenses excluding depreciation andamortization, stock-based compensation, and non-cash compensation,increased 7% for the quarter ended March 31, 2006 compared to the sameperiod in 2005.

Stock-based compensation was approximately $1.6 million for thequarter ended March 31, 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$4.4 million for the quarter ended March 31, 2006 from approximately$3.5 million for the quarter ended March 31, 2005, an increase ofapproximately $0.9 million, or 26%. The increase is primarily due tothe amortization of certain intangibles associated with theacquisition of 51% of the common stock of Reach Media.

Interest expense increased to approximately $17.3 million for thequarter ended March 31, 2006 from approximately $12.4 million for thequarter ended March 31, 2005, an increase of approximately $4.9million, or 39%. The increase resulted from higher market interestrates, as well as additional interest obligations associated withadditional borrowings to fund partially the February 2005 redemptionof our 6-1/2% Convertible Preferred Remarketable Term IncomeDeferrable Equity Securities ("HIGH TIDES") in an amount of $309.8million. Additional interest obligations also resulted from borrowingsto fund partially our February 2005 acquisition of 51% of Reach Media,and to fund partially our stock repurchase program during thesecond-half of 2005.

Income before provision for income taxes and minority interestdecreased to approximately $4.8 million for the quarter ended March31, 2006 from approximately $16.4 million for the quarter ended March31, 2005, a decrease of approximately $11.6 million, or 71%. Thisdecrease was primarily due to a decrease in operating income ofapproximately $6.2 million, an increase in interest expense ofapproximately $4.9 million, both as described above. The decrease wasalso due to an increase in other expense of approximately $0.4million, primarily due to a write-down of an investment.

Provision for income taxes decreased to approximately $1.5 millionfor the quarter ended March 31, 2006 from approximately $6.6 millionfor the quarter ended March 31, 2005, a decrease of approximately $5.1million, or 77%. This decrease was due primarily to lower incomebefore provision for income taxes and minority interest as describedabove, a reduction to our Ohio tax liability due to a favorable statetax law change, and a release of reserve contingencies. Thesedecreases were partially offset by increases to the provision for thetax impact of adopting SFAS No. 123R, and an adjustment to our 2005Kentucky tax liability due to a state tax law change. Excluding thedecrease to the provision for adopting SFAS No. 123R, the state taxlaw changes, and the contingency reserve release, our effective taxrate as of March 31, 2006 was 41.0%, compared to 40.2% as of March 31,2005.

Net income decreased to approximately $2.6 million for the quarterended March 31, 2006 from approximately $9.7 million for the quarterended March 31, 2005, a decrease of approximately $7.1 million, or73%. This decrease was due primarily to lower income before provisionfor income taxes and minority interest, increased minority interest inincome of subsidiaries, both of which were partially offset by lowerprovision for income taxes for the quarter ended March 31, 2006.

Net income applicable to common stockholders decreased toapproximately $2.6 million for the quarter ended March 31, 2006 fromapproximately $6.9 million for the quarter ended March 31, 2005, adecrease of approximately $4.3 million, or 63%. This decrease wasprimarily due to lower net income, which was partially offset bypreferred stock dividends of approximately $2.8 million paid in thequarter ended March 31, 2005 versus no preferred stock dividends paidin the quarter ended March 31, 2006. We redeemed our HIGH TIDES inFebruary 2005.

Station operating income decreased to approximately $35.3 millionfor the quarter ended March 31, 2006 from $37.5 million for thequarter ended March 31, 2005, or 6%. This decrease was due to theincrease in net broadcast revenue, which was more than offset by theincrease in operating expenses, as described above.

Other pertinent financial information for the first quarter of2006 includes capital expenditures of approximately $1.9 million,compared to approximately $3.0 million for the first quarter of 2005.As of March 31, 2006, Radio One had total debt (net of cash balances)of approximately $928.9 million.

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 ratiocovenant was decreased from its original level for all of fiscal year2006 through fiscal year 2008. The other material terms and conditionsof the senior credit facility, including maturity, interest rates andother financial 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.

In September 2005, we announced an agreement to acquire the assetsof WHHL-FM (formerly WRDA-FM), a radio station located in the St.Louis metropolitan area for approximately $20.0 million in cash. Webegan operating the station under a local marketing agreement onOctober 1, 2005, reformatted its programming, and consolidated it withour existing St. Louis operations. We expect to complete thisacquisition during the second quarter of 2006.

The Company adopted SFAS No. 123R on January 1, 2006 andanticipates that it will result in an increase in operating expensesin the range of approximately $6.0 to $7.0 million for the full-yearof 2006. This increase does not include the potential expense impactof any stock options or similar equity instruments that might begranted during fiscal year 2006.

Radio One will hold a conference call to discuss its results forthe first quarter of 2006. This conference call is scheduled forThursday, May 4, 2006 at 10:00 a.m. Eastern Time. Interested partiesshould call 1-612-288-0337 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 825772. 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.
(1) "Station operating income" consists of net income before
depreciation and amortization, provision for income taxes, interest
income, interest expense, equity in loss of affiliated company,
minority interest in income of subsidiaries, other expense, corporate
expenses and stock-based and non-cash compensation expenses. 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 provision,
investments, debt financings, overhead, and stock-based and non-cash
compensation. 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 loss 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 operating income to station operating income has
been provided in this release.
(2) Net income applicable to common stockholders is defined as net
income minus preferred stock dividends, if any.
(3) "Adjusted EBITDA" consists of net income plus (1) depreciation,
amortization, provision for income taxes, interest expense, equity in
loss of affiliated company and minority interest in income of
subsidiaries and less (2) interest income. 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 financings, our provision for income
tax expense, as well as our equity in loss of our affiliated company.
Accordingly, we believe that Adjusted EBITDA provides helpful
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 income to EBITDA and Adjusted
EBITDA has been provided in this release.
(4) "Free cash flow" consists of net income plus (1) depreciation,
amortization, stock-based and non-cash compensation, non-cash income
taxes, non-cash interest expense, non-cash loss on retirement of
assets, minority interest in income of subsidiaries and our share of
the non-cash loss of our affiliated company and less (3) amortization
of contract termination fee, capital expenditures and dividends on our
outstanding preferred stock. Free cash flow is not a measure of
financial performance under generally accepted accounting principles.
We believe free cash flow is 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 free cash
flow is a reasonable approximation of the amount of excess cash
generated by the company's operations that can be used for debt
reduction, acquisitions, investments, potential common stock dividends
and/or buybacks and other strategic initiatives outside of the
immediate scope of the company's operations. Free cash flow is
frequently used as one of the bases for comparing businesses in our
industry, although our measure of free cash flow may not be comparable
to similarly titled measures of other companies. Free cash flow 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 alternatives to
those measurements as an indicator of our performance. A
reconciliation of net income to free cash flow has been provided in
this release.
(5) For the three months ended March 31, 2006 and 2005, Radio One
had 98,704,884 and 105,390,512 shares of common stock outstanding on a
weighted average basis, respectively.
(6) For the three months ended March 31, 2006 and 2005, Radio One
had 98,743,376 and 105,630,988 shares of common stock outstanding on a
weighted average basis, diluted for outstanding stock options,
respectively.

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. Including 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. Radio One also owns approximately 36% ofTV One, LLC (www.tvoneonline.com), a cable/satellite network,programming primarily to African-Americans, which is a joint venturewith Comcast Corporation and DIRECTV. Additionally, Radio One owns 51%of Reach Media, Inc. (www.blackamericaweb.com), owner of the TomJoyner Morning Show and other businesses associated with Tom Joyner, aleading urban media personality. Radio One also syndicates the onlynational African-American news/talk network on free radio and programsXM 169 The Power, an African-American news/talk channel on XMSatellite 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.