1999 ANNUAL REPORT Radioradio Oneone Stationstation Portfolioportfolio Forty-Eight Radio Stations — 47 in 18 of the Top 40 African-American Markets(1)
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1999 ANNUAL REPORT RadioRadio OneOne StationStation PortfolioPortfolio Forty-Eight Radio Stations — 47 in 18 of the Top 40 African-American Markets(1) Indianapolis Detroit Cleveland Philadelphia Boston WHHH-FM WDTJ-FM WENZ-FM WPHI-FM WBOT-FM WBKS-FM WDMK-FM WERE-AM WPLY-FM WYJZ-FM WCHB-AM WZAK-FM (2) WJZZ-AM WJMO-AM Baltimore WERQ-FM WWIN-FM WOLB-AM WWIN-AM Los Angeles Raleigh/Durham WQOK-FM KKBT-FM Washington, D.C. WFXK-FM WFXC-FM WKYS-FM WNNL-FM WMMJ-FM WOL-AM WYCB-AM St. Louis Charlotte Richmond WFUN-FM WCCJ-FM WCDX-FM WDYL-FM WJRV-FM WKJS-FM WPLZ-FM Dallas Greenville WARV-FM Houston WGCV-AM KBFB-FM Augusta WJMZ-FM KMJQ-FM KBXX-FM WAKB-FM Atlanta WAEG-FM (1) Includes pending acquisitions and stations Miami WAMJ-FM WAEJ-FM operated pursuant to time brokerage agreements WHTA-FM WFXA-FM WVCG-AM (2) Located in Kingsley, Michigan WTHB-AM 3.8.7 35991K SUPP 1 Radio One Form 10-K p03 AOGps 08 AUG 00 13:14 R. R. DONNELLEY WDC(•• ) WDC97185/44094 (703) 558-5800 To Our Stockholders: Radio One, Inc. began 1999 as a private company with a long and rich history and ended the year as a public company whose share price had appreciated approximately 280%from its initial public offering price, making it one of the top non-technology IPOs of the year. While share prices of all radio broadcasting companies have come down since the beginning of 2000, we are still very pleased with the performance of our stock and the acceptance and support we have received from investors. This is our first annual report as a public company to you, our shareholders. Thus, we wanted to share with you our successes of the past, provide an update of the present opportunities before us and give you our outlook for what, we believe, will be a very exciting future for your company, Radio One, Inc. Radio One’s 1999 Performance and Significant Events By any measure, fiscal year 1999 was a great success across all the financial aspects of our business. Net revenue increased by 77.2%to $81.7 million while broadcast cash flow (BCF) increased 73.1%to $37.4 million and EBITDA increased 77.1%to $33.3 million. Furthermore, same station net revenue and same station BCF increased 30%and 40%respectively. Same station BCF reflects the performance of stations owned and/or operated for all of 1998 and 1999 and is an important measure of how successful management is at improving the financial performance of our existing station base. Radio One’s same station growth for 1999 was among the highest in the industry among publicly-traded broadcasters. In addition to the strong organic growth which your company has been experiencing for several years, Radio One has some of the highest BCF margins in the radio industry and operates radio stations in some of the largest markets in the United States. This geographic positioning is important as the larger media markets have historically grown faster than the small and mid-sized ones. Furthermore, the company’s portfolio of radio stations has a great deal of upside potential due to the recent acquisitions of underperforming stations. In 1999 alone we acquired or began operating 13 radio stations in five new markets while setting the stage for an even more acquisitive future. In late-1999, soon after we learned of the pending acquisition of AMFM, Inc. (AMFM) by Clear Channel Communications, Inc. (CCU), we successfully tapped the public equity markets for a second time and raised over $300 million of gross proceeds in a follow-on equity offering. It was our expectation that we would be well positioned to take advantage of the requirement that CCU and AMFM divest themselves of a number of radio stations in order to receive approvals for their transaction from regulatory authorities. This turned out to be a very positive strategic maneuver. We ended the year on a high note. Revenue and cash flow growth accelerated in the fourth quarter and we began 2000 positioned to build a national niche-oriented radio company that has the potential to become a powerful multi-faceted media vehicle. All the while, we have been working to ensure that we are continually focused on the creation of shareholder value as the foundation for every strategic initiative and every action that we take in executing our strategic plans. Radio One’s Strategy Radio One is the largest radio broadcasting company targeting African-American and urban listeners. Why is this important to you as a shareholder? • First, we believe that African-Americans represent an attractive demographic group for advertisers to target because of that group’s income growth and population growth. • Second, we believe that African-Americans have historically been under-targeted by advertisers and represent a huge growth market within the dynamic and vibrant American economy. 3.8.7 35991K SUPP 2 Radio One Form 10-K p03 AOGps 07 AUG 00 11:14 R. R. DONNELLEY WDC(•• ) WDC78651/44094 (703) 558-5800 • Third, we believe that Urban radio has tremendous crossover appeal for all Americans which further enhances the value of Urban radio to an advertiser. These three factors, among others, make a great business even better. Over the last 30 years, the radio industry has been one of the bedrock industries of the American economy. You may not have thought about this while you were stuck in traffic, sitting at your desk in your office or working around the house, all the while enjoying the myriad of program choices that radio provides you. But it’s true! The radio industry has shown consistent revenue growth over this time frame. It is a business characterized by strong profitability and high barriers to entry. Since Congress further deregulated the industry in 1996, through the passage of the Telecommunications Act, there has been a great deal of consolidation among radio companies. The benefits of consolidation (economies of scale, clustering, bundled selling of multiple stations, to name just a few) are evident from the growth the industry has experienced since passage of the Act. However, we feel that this growth is only the beginning. Radio companies of scale, including your company, Radio One, are only now beginning to develop strategies for leveraging this powerful platform we have developed in the form of a national footprint of popular radio stations. The opportunities are limitless; a few are listed below: • We are able to provide a more efficient means of communication and greater reach for advertisers at, potentially, a lower cost than other forms of media. • We are able to serve a broader base of listeners across multiple formats. • We are able to realize cost and operational efficiencies associated with our scale. • We are able to utilize this huge listener and advertiser base in strategic and complementary ways that will allow us to grow beyond our core radio operations and further enhance long-term shareholder value creation. Needless to say, while the history of the radio industry is one of tremendous wealth creation for its owners, we believe the future of radio is just as bright and just as dynamic. Given the many growth opportunities before the industry today, we believe that investors will continue to be well served by having exposure to the best companies in the radio industry. Radio One, Inc. — Today and Tomorrow As I write this, I feel that we have accomplished more in the first half of 2000 than we did in all of 1999. Since the beginning of the year we raised an additional $650 million of gross proceeds in another follow-on offering of common stock and an offering of convertible preferred stock and recently entered into a $750 million bank credit facility with a group of major financial institutions. We acquired or began operating an additional 11 radio stations in five markets and have greatly expanded and deepened our already strong management team. Furthermore, earlier this year, we agreed to acquire 12 radio stations in seven markets from Clear Channel Communications, Inc. and AMFM, Inc. for approximately $1.3 billion. This acquisition, when it closes, will transform your company into one of the largest radio companies in the country and, we believe, the largest media vehicle targeting the African-American market. With all the progress we have made so far this year, I really believe that this is only the beginning of the second stage in the development of your company. My mother, Catherine Hughes, founded Radio One 20 years ago. Today, as Chairman of the Board, she is still the ‘‘soul’’ of the company. In many ways management has fulfilled her dreams of what she knew this company would become. Now it is up to that same management team, along with our new colleagues, to continue to execute on our strategies so that this company will fulfill my vision of what it will become in the next 20 years. We could not be better positioned. 3.8.7 35991K SUPP 3 Radio One Form 10-K p03 AOGps 08 AUG 00 11:46 R. R. DONNELLEY WDC(•• ) WDC78651/44094 (703) 558-5800 I want to thank each and every one of our employees for making our success possible and I know they share my enthusiasm and passion as we focus on delivering the performance you expect, the returns you deserve and making you proud to be an owner of Radio One, Inc. Thank you for your support. Sincerely, Alfred C. Liggins, III Chief Executive Officer and President 3.8.7 35991K TX 1 Radio One Form 10-K p03 AOGps 02 AUG 00 19:54 R.