Radio One

Radio One (Website) is the largest radio broadcasting company that primarily targets African-American and urban listeners.  Radio One owns and/or operates 53 radio stations located in 16 markets in the United States.    Radio One also has interests in Giant magazine, a Cable TV channel, and is the owner of the company that produces the Tom Joyner Morning Show.  It also owns a Social Networking service targeted at African Americans called BlackPlanet.

History

The history of Radio One is the story of its co-founder Catherine L. Hughes.  and her son Alfred Liggins III.

Born in Nebraska in 1947,  she became pregnant at the age of 16 and had a son Alfred at age 17.  She married Mr. Liggins, the father of the child, but divorced him after two years.  After attending college in Nebraska, but not completing her degree, she moved to Washington DC in 1971 to become a lecturer at Howard University (not having herself obtained a college degree).

She became sales manager of Howard University’s WHUR−FM radio station in 1973.  Her success in increasing revenue for the station caused her to be named station manager in 1975, the first woman to hold that job in the Washington DC market.

In 1980, the newly created Viacom (eventually to become CBS Radio) acquired Sonderling Broadcasting, the owner of a string of radio stations and movie theaters, include WOL-AM in Washington, DC.

Viacom was not interested in owning WOL, so looked for potential buyers.   Her husband Dewey Hughes (who worked for WOL) and she borrowed the money to buy WOL-AM in Washington DC from its prior owners for $950,000 – which at the time was a failing radio station and was in desperate shape.

The difficulty in turning the station around broke up their marriage. After losing their house and car, she literally moved into the radio station for the first 16 months, sleeping in a sleeping bag and cooking meals on a hotplate.  Mr. Hughes decided his future was in California and they were divorced, and she bought out his interest in WOL.

She converted the station from a music station into a 24 hr/day News/Talk station with her as the morning host, partly to minimize expenses.  In 1985, she hired her son as a commission only salesman.  She had been preparing her son from an early age to eventually become the heir to the Radio One operation.  With her son finding advertising revenue, the station saw its first profitable year in 1986 – the year the Fairness Doctrine was repealed by the FCC and talk radio took off as a format.

Radio One continued to acquire other radio stations with the profits of their existing stations. As the FCC began to loosen ownership rules in the early 1990s, Radio One acquired several more stations in its existing urban markets.   In 1997,  her son Alfred C. Liggins became CEO of the company.

Radio One Class A Stock “Went Public” in 1999 with an IPO that netted $172 million.

With money from the IPO in hand and more borrowed money ($750M from Bank for America), Radio One acquired 12 additional stations from Clear Channel in 2000 for $1.2 billion and several other stations from other companies, followed by more stock sales and purchases of additional stations.

Major Stations – top 25 markets

Atlanta, GA:

  • WPZE-FM (Contemporary Inspirational)
  • WJZZ-FM (Jazz)
  • WHTA-FM (Urban Contemporary Music)
  • WAMJ-FM (Urban Adult Contemporary)

Washington, DC

  • WKYS-FM  (Urban Contemporary)
  • WMMJ-FM (Urban AC)
  • WPRS-FM (Contemporary Inspirational)
  • WYCB-AM (Gospel)
  • WOL-AM  (News/Talk)

Philadelphia, PA:

  • WPPZ-FM (Contemporary Inspirational)
  • WPHI-FM (Urban Contemporary)
  • WRNB-FM (Urban A/C)

Detroit, MI

  • WHTD-FM (Urban Contemporary)
  • WDMK-FM (Urban A/C)
  • WCHB-FM (News/Talk)

Houston, TX

  • KMJQ-FM (Urban A/C)
  • KBXX-FM (Urban Contemporary)
  • KROI-FM (Contemporary Religious)

Dallas, TX

  • KBFB-FM (Urban Contemporary)
  • KSOC-FM (Urban A/C)

Baltimore, MD

  • WERQ-FM (Urban Contemporary)
  • WWIN-FM (Urban AC)
  • WOLB-AM (News/Talk)
  • WWIN-AM (Gospel)

St Louis, MO

  • WFUN-FM (Urban AC)
  • WHHL-FM (Urban Contemporary)

Urban Contemporary is music targeted at young listeners – what we list as Young Urban/Hip Hop.
Urban Adult Contemporary (AC) is targeted at older African Americans, consisting of Soul, Rhythm & Blues, and Old School music.  Contemporary Inspirational is modern religious music done by black artists.

Ownership

Radio One is a publicly traded company under the symbols ROIA and ROIAK  on NASDAQ.  The  company has been notified that its class D stock (ROIAK) will be delisted by NASDAQ for not meeting the minimum price requirements of $1/share, however NASDAQ has temporarily suspended enforcement of this requirement in their marketplace due to the poor condition of the economy.

There are 4 classes of stock outstanding (as of 2008):

Class A:  Publicly traded voting (ROAI on the NASDAQ Capital Market) – 3 M Shares outstanding
Class B:  2 owners – 2.8M shares outstanding – each share gets 10 votes
Class C: 3 owners – 3.1M shares – Non Voting
Class D: Publicly Traded non-voting (ROAIK on the NASDAQ Global Market) – 70M shares

There is also authorized (but not issued) 1M shares of Convertible Preferred stock sitting there for some future purpose.

Institutional Investors:

Because Radio One’s stock has fallen below $5/share, most institutional investors are prohibited from owning it.

Class A (Voting) Stock:  As of May 2009, there are 18 institutional investors, which own about 27% of the stock.

Class A Owner Location Approx
# Shares
Bank of New York/Mellon New York 132,000
Morgan Stanley New York 116,000
Rennaisance Technology New York 112,000
Vanguard Valley Forge, PA 109,000
PNC Financial Services Pittsburgh, PA 74,000

Class D (Non-voting stock): There are 73 institutional investors, which own 69% of the Class D Stock:

Class D Owner Location Approx
# Shares
Ariel Investments Chicago 12.7 million
Fine Capital New York 7.9 million
Citadel LP (Hedge Fund) Chicago 6.8 million
Dimensional Fund Austin, TX 3.1 million
GW Capital Management Greenwood Village, CO 2.8 million
Chicago Fundamental Investments Chicago 2.1 million
UBS OConner London 997,000
Scepter Holdings Fort Worth, TX 891,000
Pekin Singer Strauss Chicago 689,000

Management

Radio One, Inc. is led by Chairperson Catherine L. Hughes, and her son, Alfred C. Liggins, III, CEO and President.

Catherine Hughes and Alfred C Liggins control 92% of the voting rights of the common stock (those Class B shares)  [and you probably thought buying stock on NASDAQ made you an owner!]

Financial Condition as of 2008 (10-K)

Key Balance Sheet Items: (2008)

Total Assets:  $1,125 Million    ($1.1 Billion)

Value of Radio Station licenses: $763 Million
Goodwill and other intangible Assets:  $191 Million
Cash:  $22 Million
Accounts Receivable: $49 Million  (56 days of revenue)
Land, Buildings, Equipment (net) $48.6 Million

Debt:

Current Liabilities:  $81 million
Long Term Debt:  $631 Million

Stockholder Equity:  $313 Million

In 2008, Radio One borrowed $227 million from their new credit facility, and used $170 million to pay off an old credit facility, and paid off $120B in long term debt – resulting in a one time “profit” of $74 milion (buying back their own debt for $.36 on the dollar).

Credit Facility

The company has an $800M credit facility from a group of banks.  Wachovia and Bank of America arranged the transaction in 2005.  $371 million is currently borrowed against the facility.   The remainder of the long term debt is Fixed rate bonds still outstanding from earlier transactions.

Swap Transactions

Radio One owns Interest Rate Swaps with a total face value of $50 million, which partially protect the company from future interest rate rises  if the LIBOR rate used for their credit facility goes up in the next few years (assuming the international counterparty remains solvent)

SEC Issues

In 2006, Radio One was delinquent in filing its required SEC reports because it was unable to determine the value of its existing stock options and was threatened with delisting by NASDAQ for failing to file required SEC reports.  The company believes the SEC is now satisfied with their accounting and valuation of those stock options.

Profitability

Like everyone in the radio business, the value of Radio One’s radio station licenses has taken a huge paper loss as a result of Sarbane Oxley and the demands from auditors and the SEC to “write down” the value of assets to value which can be justified by comparable sales or cash flow from operations  (“Mark to Market”).    While those losses do not cost the company cash, it changes the ratios of the amount of debt being carried versus the assets being used to secure those loans, can lower the company’s credit rating (increasing their cost to borrow money) and can eventually trigger technical defaults of their credit facilities.

All numbers in $million 2008 2007 2006 2005 2004
Radio Revenue 305 320 321 308 253
License Impairment 423 211
Operating Income
(Without Impairment)
74 100
112
118 112
Long Term Debt Balance 675 815 937 952 620
Debt Service Cost 60 73 73 63 39

In 2008, company had a one time $74 million “profit” from convincing people to sell their debt back to Radio One at less than face value.

Stock Performance

ROIA Class A stock peaked at a price of $93.50 on January 10th, 2000 – but had dropped to $76.50 by the end of January. [Ah, the good old days of day traders!]

In May of 2000, the company decided to do a 3:1 stock split, giving each owner of class A stock two shares of non-Voting Class D stock.  The effect of the “dividend” was to strip away 2/3 of the voting rights of the existing stock holders.  [Story Here]

ROIAK Class D stock began trading in June 2000.  The stock closed its first day of trading at $21.75 per share.   (Equivalent to $65.25 presplit price)

In 2002, the company sold an additional 11.5 million shares of Class D stock, which raised an additional $232 million. [Press Release]

In 2002, it was disclosed at a meeting with stock analysts that the company had loaned $21 million to its CEO Mr Liggins, and additional amounts to two other officers of the company for the purpose of buying Radio One stock.

The Sarbane Oxley Act passed in 2002 made loans to executive officers to buy company stock illegal beginning in 2003.   Undisclosed transactions where proceeds of IPOs were loaned to officers who then bought more stock to bid up the price to then create additional rounds of secondary offerings at higher and higher prices – led to the collapse of many of the companies at the end of “Clinton Stock Market Bubble” era.  It was not an uncommon practice at the time.

In 2005,  those loans were partially repaid by surrendering the Radio One stock back to the company  [Press Release] [Washington Post Story]

As of May 8th, 2009:
– Class D shares closed at $0.365 per share – a 9 year loss of −98.3%.
– Class A shares with voting rights closed at $0.88 per share.

Radio One’s stock has significantly underperformed the Radio industry as a whole – which itself has seriously underperformed the NASDAQ stock market as a whole.

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