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 March 31, 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 May 5, 1997, 29,732,757 shares of Common Stock, excluding 2,200,395
treasury shares, were outstanding and 351,733 shares of Class B Stock were
outstanding.
1
<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 7
PART II. OTHER INFORMATION 9
SIGNATURES 10
2
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WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
ASSETS -------- --------
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 188 $ 2,655
Accounts receivable, net of allowance for doubtful accounts 39,262 41,325
Other current assets 4,613 4,399
-------- --------
Total Current Assets 44,063 48,379
PROPERTY AND EQUIPMENT, NET 15,986 16,146
INTANGIBLE ASSETS, NET 199,739 201,730
OTHER ASSETS 7,007 6,791
-------- --------
TOTAL ASSETS $266,795 $273,046
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 16,597 $ 20,233
Accrued expenses and other liabilities 32,963 31,793
-------- ---------
Total Current Liabilities 49,560 52,026
LONG-TERM DEBT 130,443 130,443
OTHER LIABILITIES 3,514 3,729
-------- ---------
TOTAL LIABILITIES 183,517 186,198
-------- ---------
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, 31,874,652 (1997) and 31,817,652 (1996) 319 318
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 152,871 152,708
Accumulated deficit (36,895) (37,399)
-------- ---------
116,299 115,631
Less treasury stock, at cost; 2,130,395 (1997) and 1,895,395 shares (1996) (33,021) (28,783)
-------- ---------
TOTAL SHAREHOLDERS' EQUITY 83,278 86,848
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $266,795 $273,046
======== ========
</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
March 31,
----------------------
1997 1996
---- ----
<S> <C> <C>
GROSS REVENUES $48,006 $39,189
Less Agency Commissions 6,545 5,341
------- -------
NET REVENUES 41,461 33,848
------- -------
Operating Costs and Expenses Excluding
Depreciation and Amortization 34,520 28,411
Depreciation and Amortization 2,848 2,844
Corporate General and Administrative Expenses 1,335 1,263
------- -------
38,703 32,518
------- -------
OPERATING INCOME 2,758 1,330
Interest Expense 2,250 2,051
Other Income (50) (82)
------- -------
INCOME (LOSS) BEFORE INCOME TAXES 558 (639)
INCOME TAXES 54 -
------- -------
NET INCOME (LOSS) $504 ($639)
======= =======
NET INCOME (LOSS) PER SHARE $.02 ($.02)
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 33,413 31,307
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $504 ($639)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 2,848 2,844
Other 85 74
Changes in assets and liabilities:
Decrease in accounts receivable 2,063 8,608
Increase in prepaid assets (214) (2,285)
Decrease in accounts payable and accrued liabilities (2,255) (3,549)
------- -------
Net Cash Provided By Operating Activities 3,031 5,053
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies and other (Shadow Traffic in 1996) (901) (20,203)
Capital expenditures (523) (322)
------- --------
Net Cash Used For Investing Activities (1,424) (20,525)
------- --------
CASH PROVIDED (USED) BEFORE
FINANCING ACTIVITIES 1,607 (15,472)
------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings under debt arrangements - 15,000
Issuance of common stock 164 621
Repurchase of common stock (4,238) -
------- --------
NET CASH (USED IN) FROM FINANCING ACTIVITIES (4,074) 15,621
------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,467) 149
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,655 256
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $188 $405
======= ========
</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 March 31, 1997, the
consolidated statements of operations and the consolidated statements of cash
flows for the three month periods ended March 31, 1997 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 (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
33,413 and 31,307 for the three month periods ended March 31, 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 March 31, 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 Networks:
- ----------------------------------------------
On March 31,1997, the Company entered into a representation and management
agreement with the CBS Radio Networks, creating the leading network and
syndicated programming service in the industry.
6
<PAGE>
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 MARCH 31, 1997 COMPARED
WITH THREE MONTHS ENDED MARCH 31, 1996
- ------------------------------------------
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenue, which is seasonally low in the
Company's first fiscal quarter, increased 22% to $41,461 in the first quarter of
1997 from $33,848 in the comparable prior year quarter. The increase in net
revenue was primarily due to higher advertising rates for the Company's programs
as well as the acquisition of Shadow Traffic.
Operating costs and expenses excluding depreciation and amortization
increased 22% to $34,520 in the first quarter of 1997 from $28,411 in the first
quarter of 1996. The increase was primarily attributable to the acquisition of
Shadow Traffic.
Depreciation and amortization was $2,848 in the first quarter of 1997
as compared to $2,844 in the first quarter of 1996. Higher depreciation and
amortization associated with the acquisition of Shadow Traffic was partially
offset by no amortization of programming costs and rights in 1997, as deferred
programming costs were fully amortized.
Operating income increased 107% to $2,758 in the first quarter of 1997
from $1,330 in the first quarter of 1996. The improvement is principally
attributable to higher revenue.
Interest expense increased 10% to $2,250 in the first quarter of 1997
from $2,051 in 1996. The increase is principally attributable to higher debt
levels as a result of the acquisition of Shadow Traffic.
Net income in the first quarter of 1997 was $504 ($.02 per share) as
compared to a net loss of $639 ($.02 per share) in the first quarter of 1996.
On March 31, 1997, the Company entered into a representation and
management agreement with the CBS Radio Networks, creating the leading network
and syndicated programming service in the industry. As a result, both net
revenues and operating costs and expenses will increase significantly in future
periods.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1997, the Company's cash and cash equivalents were $188, a
decrease of $2,467 from December 31, 1996.
For the three months ended March 31, 1997 versus the comparable prior
year period, net cash from operating activities decreased $2,022, principally as
a result of reducing accounts payable and accrued liabilities.
At March 31, 1997, the Company had available borrowings of $35,000 on
its revolving credit facility. The Company has used its available cash to
repurchase its Common Stock. In the first quarter of 1997, the Company
repurchased 235 shares of Common Stock at a cost of $4,238. In April 1997, the
Company repurchased an additional 70 shares of Common Stock at a cost of $1,452.
8
<PAGE>
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 March 31, 1997.
9
<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: May 6, 1997
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 188
<SECURITIES> 0
<RECEIVABLES> 39,262<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,063
<PP&E> 15,986<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 266,795
<CURRENT-LIABILITIES> 49,560
<BONDS> 130,443
0
0
<COMMON> 319<F3>
<OTHER-SE> 82,959
<TOTAL-LIABILITY-AND-EQUITY> 266,795
<SALES> 0
<TOTAL-REVENUES> 41,461<F4>
<CGS> 0
<TOTAL-COSTS> 34,520<F5>
<OTHER-EXPENSES> 4,183<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,250
<INCOME-PRETAX> 558
<INCOME-TAX> 54
<INCOME-CONTINUING> 504
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 504
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
<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>
