FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995 Commission File Number 0-13020
WESTWOOD ONE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3980449
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9540 WASHINGTON BLVD., CULVER CITY, CALIFORNIA 90232
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (310) 204-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
As of November 1, 1995, 31,089,527 shares of Common Stock, excluding 392,500
treasury shares, were outstanding and 351,733 shares of Class B Stock were
outstanding.
1
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WESTWOOD ONE, INC.
INDEX
PART I. FINANCIAL INFORMATION: PAGE NO.
--------
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
PART II. OTHER INFORMATION 10
SIGNATURES 11
2
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WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
September 30, December 31,
1995 1994
------------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,558 $ 2,439
Accounts receivable, net of allowance for doubtful accounts 33,918 37,631
Other current assets 6,676 6,087
--------- ---------
Total Current Assets 45,152 46,157
PROPERTY AND EQUIPMENT, NET 15,705 16,748
INTANGIBLE ASSETS, NET 186,137 191,287
OTHER ASSETS 3,264 5,920
--------- ---------
TOTAL ASSETS $ 250,258 $ 260,112
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,263 $ 18,750
Accrued expenses and other liabilities 17,854 14,722
Current maturities of long-term debt 3,750 5,000
--------- ---------
Total Current Liabilities 36,867 38,472
LONG-TERM DEBT 104,193 115,443
OTHER LIABILITIES 8,827 10,743
--------- ---------
TOTAL LIABILITIES 149,887 164,658
--------- ---------
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock: authorized 10,000,000 shares, none outstanding - -
Common stock, $.01 par value: authorized, 117,000,000 shares;
issued and outstanding, 31,482,027 (1995) and 30,652,652 (1994) 315 307
Class B stock, $.01 par value: authorized, 3,000,000 shares:
issued and outstanding, 351,733 (1995 and 1994) 4 4
Additional paid-in capital 163,124 159,727
Accumulated deficit (58,742) (64,584)
--------- ---------
104,701 95,454
Less treasury stock, at cost; 301,500 shares (1995) (4,330) -
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 100,371 95,454
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 250,258 $ 260,112
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
GROSS REVENUES $ 44,547 $ 42,450 $124,898 $115,000
Less Agency Commissions 6,242 5,959 17,614 16,306
------- ------- -------- --------
NET REVENUES 38,305 36,491 107,284 98,694
------- ------- -------- --------
Operating Costs and Expenses Excluding
Depreciation and Amortization 26,959 26,787 79,669 76,532
Depreciation and Amortization 3,502 4,637 10,253 13,597
Corporate General and Administrative Expenses 1,393 1,057 4,128 3,431
Restructuring Costs -- -- -- 2,405
------- ------- ------- --------
31,854 32,481 94,050 95,965
------- ------- ------- --------
OPERATING INCOME (LOSS) 6,451 4,010 13,234 2,729
Interest Expense 2,251 2,422 7,318 6,534
Other Income (69) (70) (283) (230)
------- ------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 4,269 1,658 6,199 (3,575)
INCOME TAXES 170 -- 357 --
------- ------- ------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 4,099 1,658 5,842 (3,575)
EXTRAORDINARY ITEM - LOSS ON RETIREMENT OF DEBT -- -- -- (590)
------- ------- ------- --------
NET INCOME (LOSS) $ 4,099 $ 1,658 $ 5,842 ($ 4,165)
======= ======= ======= =========
INCOME (LOSS) PER SHARE:
Income (Loss) Before Extraordinary Item $ .12 $ .05 $ .17 ($ .12)
Extraordinary Item -- -- -- ( .02)
------- ------- ------- --------
Net Income (Loss) $ .12 $ .05 $ .17 ($ .14)
======= ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
Nine Months Ended
September 30,
-----------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 5,842 ($ 4,165)
Adjustments to reconcile net loss to net cash provided by operating
activities before cash payments related to extraordinary item:
Depreciation and amortization 10,252 13,597
Extraordinary item - loss on retirement of debt - 590
Other (156) (427)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 3,713 (13,180)
Increase in prepaid assets (1,047) (790)
Increase (decrease) in accounts payable and accrured liabilities (1,560) 4,253
------- --------
Net cash from (used by) operating activities before cash payments
related to extraordinary item 17,044 (122)
Cash payments related to extraordinary item - (250)
------- --------
Net Cash Provided By (Used For) Operating Activities 17,044 (372)
------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies (Unistar in 1994) (646) (106,976)
Capital expenditures (748) (990)
Cash payments related to disposition of discontinued operations (65) (563)
Other (principally deferred financing costs in 1994) (41) (1,405)
------- ---------
Net Cash Used For Investing Activities (1,500) (109,934)
------- ---------
CASH PROVIDED (USED) BEFORE
FINANCING ACTIVITIES 15,544 (110,306)
------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Debt repayments (12,500) (14,515)
Borrowings under debt arrangements - 110,000
Issuance of common stock 3,405 15,991
Repurchase of common stock (4,330) -
------- ---------
NET CASH FROM (USED IN) FINANCING ACTIVITIES (13,425) 111,476
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,119 1,170
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,439 114
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,558 $ 1,284
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
5
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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 - BASIS OF PRESENTATION:
The accompanying consolidated balance sheet as of September 30, 1995,
the consolidated statements of operations for the three and nine month periods
ended September 30, 1995 and 1994 and the consolidated statements of cash flows
for the nine months ended September 30, 1995 and 1994 are unaudited, but in the
opinion of management include adjustments (consisting of normal recurring
adjustments), necessary for a fair presentation of the financial position and
the results of operations for the periods presented.
These financial statements should be read in conjunction with the
Company's Annual Report of Form 10-K, filed with the Securities and Exchange
Commission.
NOTE 2 - EARNINGS PER SHARE:
Net income (loss) per share is computed based upon the weighted average
number of shares outstanding and Common Stock equivalents in periods where there
is net income. The number of shares used to compute earnings per share are
35,643 and 34,226 for the three month periods ended September 30, 1995 and 1994,
respectively and 34,036 and 28,889 for the nine month periods ended September
30, 1995 and 1994, respectively.
NOTE 3 - REVOLVING CREDIT FACILITIES AND LONG-TERM DEBIT:
In addition to its long-term debt, the Company has a $15,000 secured
revolving credit facility ("Revolver"). At September 30, 1995, the Company did
not have any borrowing outstanding under the Revolver.
NOTE 4 - REPURCHASE OF COMMON STOCK:
In the second quarter of 1995, the Company amended its senior loan
agreement with a syndicate of banks to permit the Company to repurchase up to
$15,000 of its Common Stock prior to December 31, 1996. On June 9, 1995, the
Company was authorized to repurchase shares of its Common Stock for an aggregate
purchase price not to exceed $15,000. Through September 30, 1995, the Company
repurchased 301 shares at a cost of $4,330. The Company repurchased an
additional 91 shares at a cost of $1,468 in October 1995.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands, except per share amounts)
On February 3, 1994 the Company completed the acquisition of all of the
issued and outstanding capital stock of the Unistar Radio Networks, Inc.
("Unistar"). The acquisition was accounted for as a purchase, and accordingly,
the operating results of Unistar are included with those of the Company from the
date of acquisition.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED
WITH THREE MONTHS ENDED SEPTEMBER 30, 1994
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenue increased $1,814, or 5% to $38,305
in the third quarter of 1995 from $36,491 in the comparable prior year quarter.
The increase in net revenue was primarily a result of increased program
offerings as well as higher rates offset in part by the absence of revenues from
certain unprofitable programs that were discontinued in 1994.
Operating costs and expenses excluding depreciation and amortization
increased $172 to $26,959 in the third quarter of 1995 from $26,787 in the third
quarter of 1994. The increase was primarily attributable to additional costs
related to new program offerings and higher sales costs, partially offset by
lower affiliate compensation expenses.
Depreciation and amortization decreased 24% to $3,502 in the third
quarter of 1995 from $4,637 in the third quarter of 1994. The decrease is
principally attributable to lower amortization of programming costs and rights
due to lower capitalized balances.
Corporate general and administrative expenses increased 32% to $1,393 in
1995 from $1,057 in 1994. The increase is primarily attributable to higher
compensation expense.
Interest expense decreased 7% to $2,251 in the third quarter of 1995
from $2,422 in the third quarter of 1994. The decrease is attributable to lower
debt levels resulting from the prepayment of Term Loans.
Net income in the third quarter increased 147% to $4,099, or $.12 per
share, in 1995 from $1,658, or $ .05 per share, in 1994. The weighted average
number of shares outstanding (including common stock equivalents) increased 4%
to 35,643 in the third quarter of 1995 from 34,226 in the comparable 1994
quarter.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED
WITH NINE MONTHS ENDED SEPTEMBER 30, 1994
Net revenue for the first nine months of 1995 increased 9% to $107,284
in 1995 from $98,694 in the first nine months of 1994. The increase in net
revenue was primarily a result of the purchase of Unistar in February 1994.
7
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Operating costs and expenses increased 4% to $79,669 in the first nine
months of 1995 from $76,532 in the comparable 1994 period. The increase was
primarily attributable to the purchase of Unistar, partially offset by lower
affiliate compensation expenses.
Depreciation and amortization decreased 25% to $10,253 in the first nine
months of 1995 from $13,597 in the first nine months of 1994. The decrease is
principally attributable to lower amortization of programming costs and rights
due to lower capitalized balances, partially offset by higher depreciation and
amortization resulting from the purchase of Unistar in February 1994.
Corporate general and administrative expenses increased 20%, to $4,128
in the first nine months of 1995 from $3,431 in 1994's first nine months. The
increase is attributable to higher compensation expense and the Infinity
Management Agreement, which went into effect in February 1994, partially offset
by across-the-board expense reductions.
As a result of the purchase of Unistar, the Company accrued
restructuring costs of approximately $2,405 in the first quarter of 1994
principally relating to consolidations of certain facilities and operations.
Interest expense increased 12% to $7,318 in the first nine months of
1995 as compared to $6,534 in the first nine months of 1994. The increase is
principally attributable to higher debt levels as a result of the acquisition of
Unistar and higher interest rates.
Income before extraordinary item was $5,842, or $.17 per share, in the
first nine months of 1995 as compared to a loss before extraordinary item of
$3,575, or $.12 per share, in the first nine months of 1994, an improvement of
$9,417.
In connection with the refinancing of its senior debt facility, the
Company in the first quarter of 1994 recorded an extraordinary loss of $590
($.02 per share).
Net income was $5,842 ($.17 per share) in the first nine months of 1995
as compared to a net loss of $4,165 ($.14 per share) in the comparable 1994
period. The weighted average number of shares outstanding increased 18% to
34,036 in 1995 from 28,889 in 1994. Due to net income in the first nine months
of 1995, the weighted average number of shares for 1995 includes common stock
equivalents.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company's cash and cash equivalents were
$4,558, an increase of $2,119 from December 31, 1994.
For the nine months ended September 30, 1995 net cash from operating
activities was $17,044 as compared to a net use of cash for operating activities
of $372 in 1994. The improvement is principally attributable to improved
operating results and lower working capital requirements.
On June 9, 1995, the Board of Directors authorized the Company to
repurchase up to $15,000 of its Common Stock through December 31, 1996. The
Company has used its excess cash to prepay its Term Loans and to repurchase its
Common Stock. In the first nine months of 1995, the Company repaid $12,500 of
Term Loans and repurchased 301 shares of its Common Stock at a cost of $4,330.
8
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Management believes that the Company's cash, available borrowing and
anticipated cash flow from operations will be sufficient to finance current and
forecasted operations over the next 12 months.
9
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PART II OTHER INFORMATION
ITEMS 1 THROUGH 5
These items are not applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the three months ended
September 30, 1995.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WESTWOOD ONE, INC.
BY: /s/ FARID SULEMAN
---------------------------
FARID SULEMAN
Chief Financial Officer
Dated: November 7, 1995
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,558
<SECURITIES> 0
<RECEIVABLES> 33,918<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,152
<PP&E> 15,705<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 250,258
<CURRENT-LIABILITIES> 36,867
<BONDS> 104,193
<COMMON> 315<F3>
0
0
<OTHER-SE> 100,056<F4>
<TOTAL-LIABILITY-AND-EQUITY> 250,258
<SALES> 0
<TOTAL-REVENUES> 107,284<F5>
<CGS> 0
<TOTAL-COSTS> 79,669<F6>
<OTHER-EXPENSES> 14,381<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,318
<INCOME-PRETAX> 6,199
<INCOME-TAX> 357
<INCOME-CONTINUING> 5,842
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,842
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
<FN>
<F1> REFLECTED NET OF THE ALLOWANCE FOR DOUBTFUL ACCOUNTS.
<F2> REFLECTED NET OF ACCUMULATED DEPRECIATION AND AMORTIZATION.
<F3> COMPRISED OF COMMON STOCK AND CLASS B STOCK.
<F4> REFLECTED NET OF TREASURY STOCK.
<F5> COMPRISED OF NET REVENUES.
<F6> COMPRISED OF OPERATING COSTS AND EXPENSES EXCLUDING
DEPRECIATION AND AMORTIZATION.
<F7> COMPRISED OF: (A) DEPRECIATION AND AMORTIZATION, AND (B)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES.
</FN>
</TABLE>
