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 June 30, 1996 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 August 9, 1996, 30,492,257 shares of Common Stock, excluding 1,325,395
treasury shares, were outstanding and 351,733 shares of Class B Stock were
outstanding.
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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 9
SIGNATURES 10
2
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<TABLE>
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
June 30, December 31,
1996 1995
---- ----
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 276 $ 256
Accounts receivable, net of allowance for doubtful accounts 41,682 36,591
Other current assets 4,475 5,038
----- -----
Total Current Assets 46,433 41,885
PROPERTY AND EQUIPMENT, NET 15,811 15,632
INTANGIBLE ASSETS, NET 203,672 184,441
OTHER ASSETS 6,138 3,637
----- -----
TOTAL ASSETS $ 272,054 $ 245,595
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 17,163 $ 20,647
Accrued expenses and other liabilities 25,482 14,675
Current maturities of long-term debt 18,750 --
------ ------
Total Current Liabilities 61,395 35,322
LONG-TERM DEBT 102,943 107,943
OTHER LIABILITIES 7,102 8,207
----- -----
TOTAL LIABILITIES 171,440 151,472
------- -------
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, 31,817,652 (1996) and 31,507,027 (1995) 318 315
Class B stock, $.01 par value: authorized, 3,000,000 shares:
issued and outstanding, 351,733 (1996 and 1995) 4 4
Additional paid-in capital 158,458 157,547
Accumulated deficit (48,547) (54,899)
------- -------
110,233 102,967
Less treasury stock, at cost; 657,395 (1996) and 607,395 (1995) (9,619) (8,844)
------ ------
TOTAL SHAREHOLDERS' EQUITY 100,614 94,123
------- ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 272,054 $ 245,595
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
GROSS REVENUES $ 52,629 $ 43,748 $ 91,818 $ 80,351
Less Agency Commissions 7,237 6,190 12,578 11,372
----- ----- ------ ------
NET REVENUES 45,392 37,558 79,240 68,979
------ ------ ------ ------
Operating Costs and Expenses Excluding
Depreciation and Amortization 31,249 25,779 59,660 52,710
Depreciation and Amortization 3,094 3,524 5,938 6,751
Corporate General and Administrative Expense 1,501 1,517 2,764 2,735
----- ----- ----- -----
35,844 30,820 68,362 62,196
------ ------ ------ ------
OPERATING INCOME 9,548 6,738 10,878 6,783
Interest Expense 2,172 2,430 4,223 5,067
Other Income (44) (114) (126) (214)
--- ---- ---- ----
INCOME BEFORE INCOME TAXES 7,420 4,422 6,781 1,930
INCOME TAXES 429 187 429 187
--- --- --- ---
NET INCOME $ 6,991 $ 4,235 $ 6,352 $ 1,743
======== ======== ======== ========
NET INCOME PER SHARE $ .20 $ .12 $ .19 $ .05
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 35,060 35,426 33,209 33,232
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1996 1995
---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 6,352 $ 1,743
Adjustments to reconcile net loss to net cash provided by operating
activities
Depreciation and amortization 5,938 6,751
Other 193 (80)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (846) 3,622
(Increase) in prepaid assets (159) (334)
(Decrease) in accounts payable and accrued liabilities (1,292) (3,088)
------ ------
Net Cash Provided By Operating Activities 10,186 8,614
------ -----
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies (Shadow Traffic in 1996) (20,701) (378)
Capital expenditures (454) (275)
Other (2,900) (27)
------ ---
Net Cash Used For Investing Activities (24,055) (680)
------- ----
CASH PROVIDED (USED) BEFORE
FINANCING ACTIVITIES (13,869) 7,934
------- -----
CASH FLOW FROM FINANCING ACTIVITIES:
Debt repayments -- (8,750)
Borrowings under debt arrangements 13,750 --
Issuance of common stock 914 1,371
Repurchase of common stock (775) (1,447)
---- ------
NET CASH FROM (USED IN) FINANCING ACTIVITIES 13,889 (8,826)
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20 (892)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 256 2,439
--- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 276 $ 1,547
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
- 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 June 30, 1996, the
consolidated statements of operations for the three and six month periods ended
June 30, 1996 and 1995 and the consolidated statements of cash flows for the six
months ended June 30, 1996 and 1995 are unaudited, but in the opinion of
management include all 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 on Form 10-K, filed with the Securities and Exchange
Commission.
NOTE 2 - EARNINGS PER SHARE:
Net income 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
35,060 and 35,426 for the three month periods ended June 30, 1996 and 1995,
respectively and 33,209 and 33,232 for the six month periods ended June 30, 1996
and 1995, respectively.
NOTE 3 - DEBT:
In March 1996, the Company borrowed an additional $15,000 under its
bank revolving credit facility (the "Facility") to complete its acquisition of
the operating assets of Shadow Traffic (see Note 4). At June 30, 1996, the
Company had outstanding borrowings under the Facility of $106,250. In July 1996,
the Company borrowed $5,000 under an unsecured loan that matures on September
30, 1996.
NOTE 4 - ACQUISITION OF SHADOW TRAFFIC:
On March 1, 1996, the Company through its wholly-owned subsidiary
Westwood One Broadcasting Services Inc. acquired the operating assets of New
York Shadow Traffic Limited Partnership, Chicago Shadow Traffic Limited
Partnership, Los Angeles Shadow Traffic Limited Partnership and Philadelphia
Express Traffic Limited Partnership (collectively "Shadow Traffic") for $20,000
plus expenses, subject to an adjustment based on the future cash flow of Shadow
Traffic. The acquisition was accounted for as a purchase, and accordingly,
Shadow Traffic's operating results are included with those of the Company from
the date of acquisition. The purchase price has been allocated to the assets and
liabilities acquired based on preliminary estimates of their respective fair
values. The intangible assets acquired as part of the purchase are being
amortized over 15 years.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands, except per share amounts)
On March 1, 1996 the Company acquired the operating assets of Shadow
Traffic. The acquisition was accounted for as a purchase and accordingly, Shadow
Traffic's operating results are included with those of the Company from the date
of acquisition.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED
WITH THREE MONTHS ENDED JUNE 30, 1995
Westwood One derives substantially all of its revenue from the sale
of advertising time to advertisers. Net revenue increased $7,834, or 21%, to
$45,392 in the second quarter of 1996 from $37,558 in the comparable prior year
quarter. The increase in net revenue was primarily due to the acquisition of
Shadow Traffic and higher advertising rates for the Company's programs.
Operating costs and expenses excluding depreciation and amortization
increased $5,470, or 21%, to $31,249 in the second quarter of 1996 from $25,779
in the second quarter of 1995. The increase was primarily attributable to the
acquisition of Shadow Traffic, partially offset by lower station compensation
expenses.
Depreciation and amortization decreased $430, or 12%, to $3,094 in
the second quarter of 1996 from $3,524 in the second quarter of 1995. 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 associated with the acquisition of Shadow Traffic.
Operating income increased $2,810, or 42%, to $9,548 in the second
quarter of 1996 from $6,738 in the second quarter of 1995. The improvement is
principally attributable to higher revenue and lower depreciation and
amortization from the Company's network radio operations.
Interest expense decreased 11% to $2,172 in the second quarter of
1996 from $2,430 in 1995. The decrease is principally attributable to lower debt
levels as well as lower interest rates in the second quarter of 1996.
Net income increased $2,756, or 65%, to $6,991 ($.20 per share) in
the second quarter of 1996 from $4,235 ($.12 per share) in the second quarter of
1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED
WITH SIX MONTHS ENDED JUNE 30, 1995
Net revenue for the first half of 1996 increased 15% to $79,240 in
1996 from $68,979 in the first half of 1995. The increase is primarily
attributable to the acquisition of Shadow Traffic and to higher advertising
rates for the Company's programs.
Operating costs and expenses increased 13% to $59,660 in the first
half of 1996 from $52,710 in the comparable 1995 period. The increase was
primarily attributable to the purchase of Shadow Traffic.
7
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Depreciation and amortization decreased 12% to $5,938 in the first
half of 1996 from $6,751 in the first half of 1995. The decrease is principally
attributable to lower amortization of programming costs and rights, partially
offset by higher depreciation and amortization resulting from the purchase of
Shadow Traffic.
Interest expense decreased 17% to $4,223 in the first half of 1996 as
compared to $5,067 in the first half of 1995. The decrease is principally
attributable to lower debt levels as well as lower interest rates in the second
half of 1996.
Net income increased 264% to $6,352 ($.19 per share) in the first
half of 1996 from $1,743 ($.05 per share) in the comparable 1995 period.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company's cash and cash equivalents were $276,
an increase of $20 from December 31, 1995.
For the six months ended June 30, 1996 net cash from operating
activities increased $1,572 to $10,186 as compared to $8,614 in 1995. The
improvement is principally attributable to improved operating results.
In March 1996, the Company borrowed $15,000 on its revolving credit
facility (the "Facility") to complete the acquisition of Shadow Traffic. The
outstanding debt on the Facility was $106,250 at June 30, 1996.
In June 1996, as part of its Common Stock Repurchase Plan, the
Company repurchased 50 shares of Common Stock at a cost of $775. Subsequent to
June 1996 (through August 9, 1996), the Company repurchased an additional 668
shares of Common Stock at a cost of $9,568.
In July 1996, the Company obtained a $5,000 unsecured loan which
matures on September 30, 1996. The proceeds of the loan were used to repurchase
the Company's Common Stock and for working capital.
Management believes that the Company's cash and anticipated cash flow
from operations will be sufficient to finance current and forecasted operations
over the next 12 months.
8
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PART II OTHER INFORMATION
ITEMS 1 THROUGH 3
These items are not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of the Company was held on
June 17, 1996.
(b) The Matters voted upon and the related voting results were as
follows (holders of Common Stock and Class B stock voted together
on all matters except for the election of Gerald Greenberg as a
Class III director, for which holders of Common Stock voted
alone):
1) Election of Class III Directors:
STEVEN A. LERMAN GERALD GREENBERG
FOR 45,634,775 28,146,475
WITHHELD 569,784 473,584
2) Approval of Amendment to Amended 1989 Stock Incentive Plan:
FOR 40,043,401
AGAINST 5,770,231
ABSTAIN 235,427
3) Ratification of the selection of Price Waterhouse as the
independent accountants of the Company for fiscal 1996.
FOR 46,179,343
AGAINST 2,916
ABSTAIN 22,300
ITEM 5
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 June 30, 1996.
9
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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: August 13, 1996
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 276
<SECURITIES> 0
<RECEIVABLES> 41,682<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,433
<PP&E> 15,811<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 272,054
<CURRENT-LIABILITIES> 61,395
<BONDS> 102,943
0
0
<COMMON> 322<F3>
<OTHER-SE> 100,292<F4>
<TOTAL-LIABILITY-AND-EQUITY> 272,054
<SALES> 0
<TOTAL-REVENUES> 79,240<F5>
<CGS> 0
<TOTAL-COSTS> 59,660<F6>
<OTHER-EXPENSES> 8,702<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,223
<INCOME-PRETAX> 6,781
<INCOME-TAX> 429
<INCOME-CONTINUING> 6,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,352
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
<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>
