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, 2000 Commission File Number 0-13020
WESTWOOD ONE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-3980449
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 WEST 57TH STREET, 5TH FLOOR, NEW YORK, NEW YORK
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10019 (Address of principal executive offices
and zip code)
Registrant's telephone number, including area code: (212) 641-2000
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
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As of August 1, 2000, 111,269,540 shares of Common Stock were outstanding,
excluding treasury shares, and 703,466 shares of Class B Stock were outstanding.
<PAGE>
WESTWOOD ONE, INC.
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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 11
SIGNATURES 12
2
<PAGE>
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 12,876 $ 10,626
Accounts receivable, net of allowance for doubtful accounts
of $8,443 (2000) and $7,714 (1999) 123,397 145,833
Other current assets 9,916 12,800
-------- --------
Total Current Assets 146,189 169,259
PROPERTY AND EQUIPMENT, NET 53,994 55,957
INTANGIBLE ASSETS, NET 1,056,160 1,078,587
OTHER ASSETS 20,823 31,085
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TOTAL ASSETS $1,277,166 $1,334,888
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 35,172 $ 32,121
Current maturity of long-term debt 10,000 10,000
Other accrued expenses and liabilities 91,003 85,884
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Total Current Liabilities 136,175 128,005
LONG-TERM DEBT 112,000 158,000
OTHER LIABILITIES 24,748 29,108
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TOTAL LIABILITIES 272,923 315,113
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COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock: authorized 10,000,000 shares, none outstanding - -
Common stock, $.01 par value: authorized, 300,000 shares;
issued 128,802 (2000) and 127,898 (1999) 1,288 1,280
Class B stock, $.01 par value: authorized, 3,000 shares:
issued 703 (2000 and 1999) 7 7
Additional paid-in capital 1,179,286 1,171,370
Accumulated earnings 38,987 24,387
Accumulated other comprehensive income (loss) (780) 7,862
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1,218,788 1,204,906
Less treasury stock, at cost; 17,314 (2000) and 16,421 (1999) shares (214,545) (185,131)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 1,004,243 1,019,775
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,277,166 $1,334,888
========== ==========
</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,
----------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
GROSS REVENUES $159,176 % 76,591 $302,974 $144,336
Less Agency Commissions 22,675 10,238 44,371 19,465
--------- ------- ------- -------
NET REVENUES 136,501 66,353 258,603 124,871
--------- ------- ------- -------
Operating Costs and Expenses Excluding
Depreciation and Amortization 91,311 49,148 183,655 100,268
Depreciation and Amortization 15,628 4,725 31,123 9,293
Corporate General and Administrative Expenses 2,068 1,002 4,084 2,195
--------- ------- ------- -------
109,007 54,875 218,862 111,756
--------- ------- ------- -------
OPERATING INCOME 27,494 11,478 39,741 13,115
Interest Expense 2,382 ,943 5,126 5,954
Other Income (168) (128) (372) (319)
--------- ------ ------- -------
INCOME BEFORE INCOME TAXES 25,280 8,663 34,987 7,480
INCOME TAXES 14,636 3,820 20,387 3,299
--------- ------ ------- -------
NET INCOME $10,644 $4,843 $14,600 $4,181
======= ====== ======= ======
NET INCOME PER SHARE:
BASIC $ .10 $ .09 $ .13 $ .07
======= ====== ======= ======
DILUTED $ .09 $ .07 $ .12 $ .06
======= ====== ======= ======
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 111,979 56,658 112,067 56,598
======= ====== ======= ======
DILUTED 118,058 65,580 118,192 64,710
======= ====== ======= ======
</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,
--------
2000 1999
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $14,600 $ 4,181
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization $31,123 9,293
Other 3,175 2,782
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48,898 16,256
Changes in assets and liabilities:
Decrease in accounts receivable 22,521 10,430
Decrease in other assets 2,890 98
Increase (Decrease) in accounts payable and accrued liabilities 12,475 (4,380)
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Net Cash Provided By Operating Activities 86,784 22,404
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CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies and other 10,519) (10,263)
Capital expenditures (4,866) (1,098)
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Net Cash Used For Investing Activities (15,385) (11,361)
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CASH PROVIDED BEFORE FINANCING ACTIVITIES 71,399 11,043
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CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 7,924 1,727
Debt repayments and payments of capital lease obligations (47,659) (4,534)
Repurchase of common stock (29,414) (10,528)
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NET CASH (USED IN) FINANCING ACTIVITIES (69,149) (13,335)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,250 (2,292)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,626 2,549
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $12,876 $257
======= =======
</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, 2000, the
consolidated statements of operations for the three and six month periods ended
June 30, 2000 and 1999 and the consolidated statements of cash flows for the six
months ended June 30, 2000 and 1999 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.
Total comprehensive income (loss) for the Company includes net income
and other comprehensive income items including unrealized loss on securities.
Comprehensive income is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $10,644 $ 4,843 $14,600 $ 4,181
Unrealized loss on securities, net of tax (5,027) - (8,642) -
------ ------ ------ ------
Comprehensive income $ 5,617 $ 4,843 $ 5,958 $ 4,181
======= ======= ======= =======
</TABLE>
NOTE 2 - Reclassification:
--------------------------
Certain prior period amounts have been reclassified to conform to the
current presentation.
NOTE 3 - 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:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
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2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Warrants 1,593 6,911 1,590 6,488
Options 4,486 2,011 4,535 1,624
</TABLE>
NOTE 4 - Debt:
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At June 30, 2000 the Company had outstanding borrowings of $122,000 under
its bank revolving credit facility and available borrowings of $56,000.
NOTE 5 - Acquisitions:
----------------------
On September 22, 1999 the Company acquired all the issued and
outstanding common and preferred stock of Metro Networks, Inc. ("Metro") for
approximately $953,434. The acquisition was accounted for as a purchase with the
excess of the purchase price over the fair value of the net assets acquired
being amortized over 25 years.
The unaudited pro forma combined historical results, as if Metro had
been acquired on January 1, 1999 are estimated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues $136,501 $115,692 $258,603 $216,218
Net Income 10,644 2,234 14,600 1,205
Net Income Per Share:
Basic $.10 $.02 $.13 $.01
Diluted .09 .02 .12 .01
</TABLE>
This pro forma financial information is presented for comparative
purposes only and is not necessarily indicative of the operating results that
actually would have occurred had the Metro acquisition been consummated on
January 1, 1999. In addition, these results are not intended to be a projection
of future results and do not reflect any synergies that might be achieved from
combined operations.
On June 12, 2000 the Company entered into a definitive agreement to
purchase the operating assets of SmartRoute Systems for approximately $25,000 in
cash and the assumption of certain obligations. The purchase is expected to be
completed in the third quarter of 2000.
NOTE 6 - Stock Split:
---------------------
In March 2000, the Company's shareholders approved an increase in the
number of authorized shares of common stock from 117,000 to 300,000 and the
Company subsequently effected a two-for-one stock split of its Common Stock and
Class B Stock. All references to Common Stock, Class B Stock, common shares
outstanding, weighted average shares outstanding, and per share amounts have
been restated to give retroactive effect to the stock split.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(In thousands, except per share amounts)
All references to Common Stock, Class B. Stock, common shares
outstanding, weighted average shares outstanding and per share amounts have been
restated to give retroactive effect to the two-for-one split of the Company's
Common Stock and Class B Stock which was paid to shareholders in March 2000.
On September 22, 1999 the Company completed its merger with Metro
Networks, Inc. ("Metro"). The results of operations for Metro are included in
the consolidated financial statements of the Company from the date of the
merger.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED
WITH THREE MONTHS ENDED JUNE 30, 1999
-------------------------------------
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenue increased $70,148, or 106%, to
$136,501 in the second quarter of 2000 from $66,353 in the comparable prior year
quarter. The increase in net revenue was due to record revenues at the Company's
network and traffic operations as well as the Company's acquisition of Metro. On
a pro forma basis, assuming the acquisition of Metro had occurred as of January
1 1999, net revenue for the second quarter of 2000 would have increased by
approximately 18%.
Operating costs and expenses excluding depreciation and amortization
increased $42,163, or 86%, to $91,311 in the second quarter of 2000 from $49,148
in the second quarter of 1999. The increase was principally due to the
acquisition of Metro.
Depreciation and amortization increased $10,903, or 231% to $15,628 in
the second quarter of 2000 as compared to $4,725 in the second quarter of 1999
due principally to the amortization of goodwill resulting from the Metro
acquisition.
Corporate general and administrative expenses increased $1,066, or
106%, to $2,068 in the second quarter of 2000 from $1,002 in the comparable 1999
quarter. The increase is principally attributable to higher compensation
expense.
Operating income increased $16,016, or 140%, to $27,494 in the second
quarter of 2000 from $11,478 in the second quarter of 1999 due to higher
revenues from the Company's operations partially offset by higher depreciation
and amortization.
Interest expense decreased 19% to $2,382 in the second quarter of 2000
from $2,943 in 1999. The decrease is principally attributable to lower debt
levels partially offset by higher interest rates.
<PAGE>
Income taxes increased $10,816, or 283%, to $14,636 in the second
quarter of 2000 from $3,820 in the second quarter of 1999. The Company's
effective income tax rate in the first half of 2000 is approximately 58% due
principally to non-deductible goodwill amortization from the Metro acquisition.
Net income increased $5,801, or 120%, to $10,644 ($.10 per basic share
and $.09 per diluted share) in the second quarter of 2000 from $4,843 ($.09 per
basic share and $.07 per diluted share) in the second quarter of 1999.
Weighted average shares outstanding used to compute basic and diluted
earnings per share increased to 111,979 and 118,058, respectively, in the second
quarter of 2000 as compared to 56,658 and 65,580 in the second quarter of 1999.
The increase is attributable to stock issued as part of the Metro acquisition,
partially offset by stock repurchases.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED
WITH SIX MONTHS ENDED JUNE 30, 1999
-----------------------------------
Net revenue for the first half of 2000 increased 107% to $258,603 from
$124,871 in the first half of 1999. The increase in net revenue was due to a
strong advertising environment benefiting the Company's operations as well as
the Company's acquisition of Metro. On a pro forma basis, assuming the
acquisition of Metro had occurred as of January 1, 1999, net revenue for the
first half of 2000 would have increased by approximately 20%.
Operating costs and expenses increased 83% to $183,655 in the first
half of 2000 from $100,268 in the comparable 1999 period. The increase was
primarily attributable to the acquisition of Metro.
Depreciation and amortization increased 235% to $31,123 in the first
half of 2000 as compared to $9,293 in the first half of 1999. The increase is
principally attributable to depreciation and amortization related to the Metro
acquisition.
Interest expense decreased 14% to $5,126 in the first half of 2000 from
$5,954 in the comparable 1999 period. The decrease results from lower debt
levels partially offset by the impact of higher interest rates in the Company's
second quarter.
Net income increased 249% to $14,600 ($.13 per basic share and $.12 per
diluted share) in the first half of 2000 from $4,181 ($.07 per basic share and
$.06 per diluted share) in the comparable 1999 period.
Weighted average shares outstanding used to compute basic and diluted
earnings per share increased to 112,067 and 118,192, respectively, in the first
six months of 2000 as compared to 56,598 and 64,710 in the comparable 1999
period. The increase is attributable to stock issued as part of the Metro
acquisition, partially offset by stock repurchases.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At June 30, 2000, the Company's cash and cash equivalents were $12,876,
an increase of $2,250 from December 31, 1999.
<PAGE>
For the six months ended June 30, 2000, net cash provided by operating
activities was $86,784 as compared to $22,404 for the six months ended June 30,
1999 an increase of $64,380. The cash flow from operations was principally used
to fund the Company's stock buy-back program and to reduce debt.
At June 30, 2000, the Company had available borrowings of
$56,000 on its revolving credit facility. Pursuant to the terms of the facility,
the amount of available borrowings declines by $3,000 at the end of each
quarter. In addition, the Company is required to repay its term loan by $2,500
per quarter in 2000. On June 12, 2000 the Company entered into a definitive
agreement to purchase the operating assets of SmartRoute Systems for
approximately $25,000 in cash and the assumption of certain obligations. The
purchase will be paid through the utilization of available cash and bank
borrowings.
The Company has used its available cash to repurchase its Common Stock
and repay debt. In the first six months of 2000, the Company repurchased 893
shares of Common Stock at a cost of $29,414. From July 1 through July 31, 2000,
the Company repurchased an additional 446 shares of Common Stock at a cost of
approximately $13,607.
<PAGE>
PART II OTHER INFORMATION
Items 1 through 3
-----------------
These items are not applicable.
Items 4 - Submission of Matters to a Vote of Security Holders
-------------------------------------------------------------
(a) The Annual Meeting of Shareholders of the Company was held on June 15,
2000.
(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 Class II
directors, for which holders of Common Stock voted along):
1) Election of Class II Directors:
Farid Suleman David Dennis Maria D. Hummer
------------- ------------ ---------------
FOR 117,888,690 82,716,540 82,764,183
WITHHELD 2,129,302 2,128,752 2,081,109
2) Ratification of the selection of Pricewaterhouse Coopers LLP as
the independent accountants of the Company for fiscal 2000.
FOR 119,976,564
AGAINST 6,665
ABSTAIN 34,763
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, 2000.
<PAGE>
SIGNATURES
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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 __, 2000
12
