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, 1998 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 8, 1998, 31,214,435 shares of Common Stock, excluding 3,433,295
treasury shares, were outstanding and 351,733 shares of Class B Stock were
outstanding.
1
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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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<TABLE>
<CAPTION>
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<S> <C> <C>
March 31, December 31,
1998 1997
--------- ------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 4,662 $ 2,763
Accounts receivable, net of allowance for doubtful accounts
of $2,765 (1998) and $2,907 (1997) 51,964 67,765
Other current assets 7,555 7,405
-------- --------
Total Current Assets 64,181 77,933
PROPERTY AND EQUIPMENT, NET 15,262 15,516
INTANGIBLE ASSETS, NET 201,864 204,339
DEFERRED TAXES 28,722 28,722
OTHER ASSETS 9,006 9,340
-------- --------
TOTAL ASSETS $319,035 $335,850
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 25,548 $ 24,412
Accrued expenses and other liabilities 36,300 41,341
-------- --------
Total Current Liabilities 61,848 65,753
LONG-TERM DEBT 107,000 115,000
DEFERRED TAXES 18,155 18,155
OTHER LIABILITIES 12,239 12,264
-------- --------
TOTAL LIABILITIES 199,242 211,172
-------- --------
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, 34,646,730 (1998) and 34,639,730 (1997) 347 347
Class B stock, $.01 par value: authorized, 3,000,000 shares:
issued and outstanding, 351,733 (1998 and 1997) 4 4
Additional paid-in capital 201,832 201,759
Accumulated deficit (11,854) (11,903)
-------- --------
190,329 190,207
Less treasury stock, at cost; 3,433,295 (1998) and 3,272,295 (1997) shares (70,536) (65,529)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 119,793 124,678
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $319,035 $335,850
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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<TABLE>
<CAPTION>
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<S> <C> <C>
Three Months Ended
March 31,
--------------------
1998 1997
GROSS REVENUES $61,059 $48,006
Less Agency Commissions 7,719 6,545
------- -------
NET REVENUES 53,340 41,461
------- -------
Operating Costs and Expenses Excluding
Depreciation and Amortization 46,833 34,520
Depreciation and Amortization 3,435 2,848
Corporate General and Administrative Expenses 1,090 1,335
------- -------
51,358 38,703
------- -------
OPERATING INCOME 1,982 2,758
Interest Expense 2,079 2,250
Other Income (178) (50)
------- -------
INCOME BEFORE INCOME TAXES 81 558
INCOME TAXES 32 54
------- -------
NET INCOME $49 $504
======= =======
NET INCOME PER SHARE:
BASIC $ .00 $ .02
======= =======
DILUTED $ .00 $ .02
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 31,664 30,185
======= =======
DILUTED 35,251 33,623
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
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<TABLE>
<CAPTION>
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31,
----------------------
<S> <C> <C>
1998 1997
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $49 $504
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,435 2,848
Other 78 85
-------- --------
3,562 3,437
Changes in assets and liabilities:
Decrease in accounts receivable 15,801 2,063
Increase in prepaid assets (150) (214)
Decrease in accounts payable and accrued liabilities (2,825) (2,255)
-------- --------
Net Cash Provided By Operating Activities 16,388 3,031
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies and other (1,316) (901)
Capital expenditures (239) (523)
-------- --------
Net Cash Used For Investing Activities (1,555) (1,424)
-------- --------
CASH PROVIDED BEFORE FINANCING ACTIVITIES 14,833 1,607
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings (repayments) under debt arrangements (8,000) -
Issuance of common stock 73 164
Repurchase of common stock (5,007) (4,238)
-------- --------
NET CASH (USED IN) FROM FINANCING ACTIVITIES (12,934) (4,074)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,899 (2,467)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,763 2,655
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,662 $188
======== ========
</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 March 31, 1998, the
consolidated statements of operations and the consolidated statements of cash
flows for the three month periods ended March 31, 1998 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 in accordance with SFAS No. 128. Basic
earnings per share excludes all dilution and is calculated using the weighted
average number of shares outstanding in the period. Diluted earnings per share
reflects the potential dilution that would occur if all financial instruments
which may be exchanged for equity securities were exercised or converted to
Common Stock.
The Company has issued options and warrants which may have a dilutive
effect on reported earnings if they were exercised or converted to Common Stock.
The following numbers of shares related to options and warrants were added to
the basic weighted average shares outstanding to arrive at the diluted weighted
average shares outstanding for each period:
March 31,
----------------------
1998 1997
---- ----
Warrants 2,719 3,008
Options 873 430
NOTE 3 - Debt:
- --------------
At March 31, 1998 the Company had outstanding borrowings of $107,000
under its bank revolving credit facility and available borrowings of $43,000.
NOTE 4 - Subsequent Event:
- --------------------------
On May 7, 1998, the Company acquired the operating assets of the Shadow
Traffic operations in Baltimore, Boston, Dallas, Detroit, Houston, Miami,
Sacramento, San Diego, San Francisco and Washington, D.C. for approximately
$20,000 plus costs and the assumption of certain obligations.
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 31, 1997 the Company entered into a Representation Agreement
with CBS, Inc. to operate the CBS Radio Networks. The Company retains all
revenue and is responsible for all expenses of the CBS Radio Networks from the
effective date of the Representation Agreement.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED
WITH THREE MONTHS ENDED MARCH 31, 1997
- ------------------------------------------
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 29% to $53,340 in the first quarter of
1998 from $41,461 in the comparable prior year quarter. The increase in net
revenue was primarily due to the CBS Representation Agreement and higher
revenues from Shadow Traffic, partially offset by lower revenues at the
Company's existing programs. The revenues in the first quarter of 1998 were
adversely affected by the addition of a new competitor in the network radio
industry.
Operating costs and expenses excluding depreciation and amortization
increased 36% to $46,833 in the first quarter of 1998 from $34,520 in the first
quarter of 1997. The increase was primarily attributable to expenses associated
with the CBS Representation Agreement.
Depreciation and amortization was $3,435 in the first quarter of 1998
as compared to $2,848 in the first quarter of 1997 due principally to higher
depreciation and amortization as a result of the CBS Representation Agreement.
Corporate administrative expenses decreased 18% to $1,090 in the first
quarter of 1998 from $1,335 in the first quarter of 1997. The decrease was
primarily attributable to lower compensation expense.
Operating income decreased 28% to $1,982 in the first quarter of 1998
from $2,758 in the first quarter of 1997, primarily due to higher depreciation
and amortization expense.
Interest expense decreased 8% to $2,079 in the first quarter of 1998
from $2,250 in 1997. The decrease is principally attributable to higher debt
levels in 1997's first quarter.
The effective income tax rate in the first quarter of 1998 was
approximately 40% as compared to the 1997 effective tax rate of 10%. The
effective tax rate was lower in prior periods as a result of the utilization of
net operating loss carryforwards.
Net income in the first quarter of 1998 was $49 as compared to $504
($.02 per share) in the first quarter of 1997.
7
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1998, the Company's cash and cash equivalents were $4,662,
an increase of $1,899 from December 31, 1997.
For the three months ended March 31, 1998 versus the comparable prior
year period, net cash from operating activities increased $13,357, principally
as a result of lower working capital requirements.
At March 31, 1998, the Company had available borrowings of $43,000 on
its revolving credit facility. The Company has used its available cash to
repurchase its Common Stock. In the first quarter of 1998, the Company
repurchased 161 shares of Common Stock at a cost of $5,007.
On May 7, 1998 the Company acquired the operating assets of the Shadow
Traffic operations in Baltimore, Boston, Dallas, Detroit, Houston, Miami,
Sacramento, San Diego, San Francisco and Washington, D.C. for $20 million plus
the assumption of certain obligations. The acquisition was financed from the
Company's available bank borrowings.
8
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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 March 31, 1998.
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: May 13, 1998
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,662
<SECURITIES> 0
<RECEIVABLES> 51,964<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 64,181
<PP&E> 15,262<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 319,035
<CURRENT-LIABILITIES> 61,848
<BONDS> 107,000
0
0
<COMMON> 347<F3>
<OTHER-SE> 119,446
<TOTAL-LIABILITY-AND-EQUITY> 319,035
<SALES> 0
<TOTAL-REVENUES> 53,340<F4>
<CGS> 0
<TOTAL-COSTS> 46,833<F5>
<OTHER-EXPENSES> 4,525<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,079
<INCOME-PRETAX> 81
<INCOME-TAX> 32
<INCOME-CONTINUING> 49
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
<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>
