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, 1997 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 1, 1997, 30,515,089 shares of Common Stock, excluding 2,210,395
treasury shares, were outstanding and 351,733 shares of Class B Stock were
outstanding.
<PAGE>
WESTWOOD ONE, INC.
------------------
INDEX
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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 8
PART II. OTHER INFORMATION 10
SIGNATURES 11
2
<PAGE>
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,094 $ 2,655
Accounts receivable, net of allowance for doubtful accounts 60,691 41,325
Other current assets 5,287 4,399
------- --------
Total Current Assets 68,072 48,379
PROPERTY AND EQUIPMENT, NET 15,791 16,146
INTANGIBLE ASSETS, NET 203,598 201,730
OTHER ASSETS 8,353 6,791
-------- --------
TOTAL ASSETS $295,814 $273,046
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 21,031 $ 20,233
Accrued expenses and other liabilities 38,864 31,793
--------- ---------
Total Current Liabilities 59,895 52,026
LONG-TERM DEBT 130,443 130,443
OTHER LIABILITIES 13,737 3,729
--------- ---------
TOTAL LIABILITIES 204,075 186,198
--------- ---------
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, 31,991,152 (1997) and 31,817,652 (1996) 320 318
Class B stock, $.01 par value: authorized, 3,000,000 shares:
issued and outstanding, 351,733 (1997 and 1996) 4 4
Additional paid-in capital 154,102 152,708
Accumulated deficit (27,912) (37,399)
--------- ---------
126,514 115,631
Less treasury stock, at cost; 2,210,395 (1997) and 1,895,395 shares (1996) (34,775) (28,783)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 91,739 86,848
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $295,814 $273,046
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
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,
---------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
GROSS REVENUES $76,804 $52,629 $124,810 $91,818
Less Agency Commissions 10,687 7,237 17,232 12,578
-------- -------- --------- --------
NET REVENUES 66,117 45,392 107,578 79,240
-------- -------- --------- --------
Operating Costs and Expenses Excluding
Depreciation and Amortization 49,731 31,249 84,251 59,660
Depreciation and Amortization 3,090 3,094 5,938 5,938
Corporate General and Administrative Expenses 1,336 1,501 2,671 2,764
-------- -------- --------- --------
54,157 35,844 92,860 68,362
-------- -------- --------- --------
OPERATING INCOME 11,960 9,548 14,718 10,878
Interest Expense 2,251 2,172 4,501 4,223
Other Income (70) (44) (120) (126)
-------- -------- --------- --------
INCOME BEFORE INCOME TAXES 9,779 7,420 10,337 6,781
INCOME TAXES 796 429 850 429
-------- -------- --------- --------
NET INCOME $ 8,983 $ 6,991 $ 9,487 $ 6,352
======== ======== ========= ========
NET INCOME PER SHARE $0.26 $ .20 $0.28 $ .19
======== ======== ========= ========
WEIGHTED AVERAGE SHARES OUTSTANDING 35,034 35,060 34,223 33,209
======== ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 9,487 $ 6,352
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 6,071 5,938
Other 164 193
Changes in assets and liabilities:
Increase in accounts receivable (19,366) (846)
Increase in prepaid assets (888) (159)
Increase (decrease) in accounts payable and accrued liabilities 4,688 (1,292)
-------- --------
Net Cash Provided By Operating Activities 156 10,186
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies and other (Shadow Traffic in 1996) (4,182) (23,601)
Capital expenditures (951) (454)
-------- --------
Net Cash Used For Investing Activities (5,133) (24,055)
-------- --------
CASH USED BEFORE
FINANCING ACTIVITIES (4,977) (13,869)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Debt repayments - -
Borrowings under bank and other long-term obligations 9,012 13,750
Issuance of common stock 1,396 914
Repurchase of common stock (5,992) (775)
-------- --------
NET CASH FROM FINANCING ACTIVITIES 4,416 13,889
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (561) 20
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,655 256
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,094 $ 276
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
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, 1997, the
consolidated statements of operations for the three and six month periods ended
June 30, 1997 and 1996 and the consolidated statements of cash flows for the six
months ended June 30, 1997 and 1996 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 35,041 and
35,060 for the three month periods ended June 30, 1997 and 1996, respectively
and 34,227 and 33,209 for the six month periods ended June 30, 1997 and 1996,
respectively.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128 "Earnings per Share." The Statement is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
Early adoption of the Statement is prohibited, however, previously reported
earnings per share amounts will require restatement. Management does not expect
that adoption of the Statement will have a material impact on its reported
earnings per share.
NOTE 3 - Debt:
- --------------
At June 30, 1997 the Company had outstanding borrowings of $115,000
under its bank revolving credit facility and available borrowings of $35,000.
NOTE 4 - Representation of CBS Radio Network:
- ---------------------------------------------
On March 31, 1997, the Company entered into a representation and
management agreement (the "Representation Agreement") with CBS Inc. ("CBS"),
whereby the Company will operate the CBS Radio Network for an initial two-year
period ending March 31, 1999. In accordance with the Representation Agreement,
the Company pays CBS a representation fee and retains all revenues from sales of
commercial time and is responsible for all expenses of the CBS Radio Network.
Accordingly, the operating results of CBS Radio Network are included with those
6
<PAGE>
of the Company from the effective date of the Representation Agreement. Pursuant
to the Representation Agreement, CBS provided a working capital loan of $9,012,
repayable on March 31, 1999, with interest payable at 50 basis points over the
six-month LIBOR rate. The Company is required to pay a representation fee of
$10,000 and $12,000 respectively in the first and second year of the
Representation Agreement and to reimburse CBS for certain programming costs,
including news, that CBS provides to Westwood One.
NOTE 5 - Subsequent Event:
- --------------------------
On July 21, 1997, $15,293 principal amount of the Company's 6 3/4%
Convertible Subordinated Debentures were converted into approximately 622 shares
of the Company's Common Stock and the remaining balance of $150 was redeemed for
cash, thereby resulting in a complete redemption of the securities.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(In thousands, except per share amounts)
On March 31, 1997, the Company entered into a Representation Agreement
with CBS to operate the CBS Radio Network. The Company retains all revenue and
is responsible for all expenses of the CBS Radio Network from the effective date
of the Representation Agreement.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED
WITH THREE MONTHS ENDED JUNE 30, 1996
- -----------------------------------------
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenue increased $20,725, or 46%, to
$66,117 in the second quarter of 1997 from $45,392 in the comparable prior year
quarter. The increase in net revenue was primarily due to the inclusion of the
results of the CBS Radio Network and higher advertising rates for the Company's
programs.
Operating costs and expenses excluding depreciation and amortization
increased $18,482, or 59%, to $49,731 in the second quarter of 1997 from $31,249
in the second quarter of 1996. The increase was primarily attributable to the
inclusion of the CBS Radio Network, including fees payable to CBS in connection
with the Representation Agreement, partially offset by lower station
compensation expenses for the Company's network operation.
Depreciation and amortization was $3,090 in the second quarter of 1997
as compared to $3,094 in the second quarter of 1996. The nominal change is
principally attributable to no amortization of programming costs and rights in
1997, as deferred programming costs were fully amortized, partially offset by
amortization associated with the inclusion of the CBS Radio Network.
Operating income increased $2,412, or 25%, to $11,960 in the second
quarter of 1997 from $9,548 in the second quarter of 1996. The improvement is
principally attributable to higher revenue and consolidations in operations
resulting from the inclusion of the CBS Radio Network.
Interest expense increased 4% to $2,251 in the second quarter of 1997
from $2,172 in 1996. The increase is principally attributable to interest
payable to CBS as part of the Representation Agreement, partially offset by
lower interest rates.
Net income increased $1,992, or 28%, to $8,983 ($.26 per share) in the
second quarter of 1997 from $6,991 ($.20 per share) in the second quarter of
1996.
8
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED
WITH SIX MONTHS ENDED JUNE 30, 1996
- ---------------------------------------
Net revenue for the first half of 1997 increased 36% to $107,578 in
1997 from $79,240 in the first half of 1996. The increase is primarily
attributable to the inclusion of the CBS Radio Network, the acquisition of
Shadow Traffic and higher advertising rates for the Company's programs.
Operating costs and expenses increased 41% to $84,251 in the first half
of 1997 from $59,660 in the comparable 1996 period. The increase was primarily
attributable to the inclusion of the CBS Radio Network and the purchase of
Shadow Traffic.
Depreciation and amortization was $5,938 in the first half of 1997 and
1996. Higher depreciation and amortization resulting from the purchase of Shadow
Traffic and the inclusion of the CBS Radio Network was offset by no amortization
of programming costs and rights in 1997 as these costs are fully amortized.
Interest expense increased 7% to $4,501 in the first half of 1997 as
compared to $4,223 in the first half of 1996. The increase is principally
attributable to higher debt levels in the first half of 1997 and interest
payable to CBS as part of the Representation Agreement, partially offset by
lower interest rates.
Net income increased $3,135, or 49% to $9,487 ($.28 per share) in the
first half of 1997 from $6,352 ($.19 per share) in the comparable 1996 period.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 30, 1997, the Company's cash and cash equivalents were $2,094,
a decrease of $561 from December 31, 1996.
For the six months ended June 30, 1997, net cash from operating
activities increased $156. The cash flow from operations was principally used to
fund working capital requirements resulting from the inclusion of the CBS Radio
Network.
At June 30, 1997, the Company had available borrowings of $35,000 on
its revolving credit facility. In addition, as part of the Representation
Agreement with CBS, CBS provided a $9,012 working capital loan to the Company
which is payable on March 31, 1999.
On July 21, 1997, $15,293 principal amount of the Company's 6 3/4%
Convertible Subordinated Debentures were converted into approximately 622 shares
of the Company's Common Stock. The remaining outstanding balance of the issuance
was redeemed for cash.
The Company has used its available cash to repurchase its Common Stock.
In the first six months of 1997, the Company repurchased 315 shares of Common
Stock at a cost of $5,992. In addition, in July 1997, warrants covering
approximately 106 shares were exercised, resulting in a cash inflow of $1,834 to
the Company. These warrants, of which 2,368 are currently outstanding, expire on
September 4, 1997.
9
<PAGE>
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, 1997.
(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 David L.
Dennis as a Class II director, for which holders of Common
Stock voted alone):
1) Election of Class II Directors:
Farid Suleman Paul G. Krasnow David L. Dennis
------------- --------------- ---------------
FOR 45,053,683 45,042,728 27,461,283
WITHHELD 737,889 748,844 745,789
2) Approval of Amendment to Amended 1989 Stock Incentive Plan:
FOR 34,749,027
AGAINST 8,457,105
ABSTAIN 67,859
3) Ratification of the selection of Price Waterhouse as the
independent accountants of the Company for fiscal 1997.
FOR 45,734,991
AGAINST 2,224
ABSTAIN 54,357
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, 1997.
10
<PAGE>
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: FARID SULEMAN
----------------------
FARID SULEMAN
Chief Financial Officer
Dated: August 13, 1997
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,094
<SECURITIES> 0
<RECEIVABLES> 60,691<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 68,072
<PP&E> 15,791<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 295,814
<CURRENT-LIABILITIES> 59,895
<BONDS> 130,443
0
0
<COMMON> 320<F3>
<OTHER-SE> 91,419
<TOTAL-LIABILITY-AND-EQUITY> 295,814
<SALES> 0
<TOTAL-REVENUES> 107,578<F4>
<CGS> 0
<TOTAL-COSTS> 84,251<F5>
<OTHER-EXPENSES> 8,609<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,501
<INCOME-PRETAX> 10,337
<INCOME-TAX> 850
<INCOME-CONTINUING> 9,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,487
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<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> COMPRISED OF NET REVENUES.
<F5> COMPRISED OF OPERATING COSTS AND EXPENSES EXCLUDING
DEPRECIATION AND AMORTIZATION.
<F6> COMPRISED OF: (A) DEPRECIATION AND AMORTIZATION, AND (B)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES.
</FN>
</TABLE>
