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, 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 10019
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(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 May 1, 2000, 111,567,656 shares of Common Stock were outstanding,
excluding treasury shares, and 703,466 shares of Class B Stock were outstanding.
1
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WESTWOOD ONE, INC.
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INDEX
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PART I. FINANCIAL INFORMATION: Page No.
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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
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WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
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ASSETS
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,845 $ 10,626
Accounts receivable, net of allowance for doubtful accounts
of $8,073 (2000) and $7,714 (1999) 123,939 145,833
Other current assets 11,318 12,800
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Total Current Assets 145,102 169,259
PROPERTY AND EQUIPMENT, NET 54,172 55,957
INTANGIBLE ASSETS, NET 1,067,404 1,078,587
OTHER ASSETS 26,608 31,085
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TOTAL ASSETS $1,293,286 $1,334,888
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $31,850 $32,121
Current maturity of long-term debt 10,000 10,000
Other accrued expenses and liabilities 89,667 85,884
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Total Current Liabilities 131,517 128,005
LONG-TERM DEBT 125,500 158,000
OTHER LIABILITIES 23,417 29,108
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TOTAL LIABILITIES 280,434 315,113
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COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock: authorized 10,000,000 shares, none outstanding - -
Common stock, $.01 par value: authorized, 300,000,000 shares;
issued and outstanding, 128,421,468 (2000) and 127,897,500 (1999) 1,284 1,280
Class B stock, $.01 par value: authorized, 3,000,000 shares:
issued and outstanding, 703,466 (2000 and 1999) 7 7
Additional paid-in capital 1,175,703 1,171,370
Accumulated earnings 28,343 24,387
Accumulated other comprehensive income 4,247 7,862
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1,209,584 1,204,906
Less treasury stock, at cost; 16,776,450 (2000) and 16,421,450 (1999) shares (196,732) (185,131)
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TOTAL SHAREHOLDERS' EQUITY 1,012,852 1,019,775
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,293,286 $1,334,888
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
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<S> <C> <C>
GROSS REVENUES $143,798 $67,745
Less Agency Commissions 21,696 9,227
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NET REVENUES 122,102 58,518
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Operating Costs and Expenses Excluding
Depreciation and Amortization 92,344 51,120
Depreciation and Amortization 15,495 4,568
Corporate General and Administrative Expenses 2,016 1,193
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109,855 56,881
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OPERATING INCOME 12,247 1,637
Interest Expense 2,744 3,011
Other Income (204) (191)
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INCOME (LOSS) BEFORE INCOME TAXES 9,707 (1,183)
INCOME TAXES 5,751 (521)
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NET INCOME (LOSS) $3,956 ($662)
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NET INCOME (LOSS) PER SHARE:
BASIC $ .04 $(.01)
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DILUTED $ .03 $(.01)
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WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 112,155 56,536
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DILUTED 119,368 63,184
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</TABLE>
See accompanying notes to consolidated financial statements.
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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $3,956 ($662)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 15,495 4,568
Other 651 (392)
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20,102 3,514
Changes in assets and liabilities:
Decrease in accounts receivable 21,894 20,568
Decrease in other assets 1,482 250
Decrease (Increase) in accounts payable and accrued liabilities 5,714 (8,910)
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Net Cash Provided By Operating Activities 49,192 15,422
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CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies and other (7,685) (9,919)
Capital expenditures (1,699) (544)
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Net Cash Used For Investing Activities (9,384) (10,463)
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CASH PROVIDED BEFORE FINANCING ACTIVITIES 39,808 4,959
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CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings under bank and other long-term obligations - 7,000
Issuance of common stock 4,336 92
Debt repayments and payments of capital lease obligations (33,324) (761)
Repurchase of common stock (11,601) (10,259)
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NET CASH (USED IN) FINANCING ACTIVITIES (40,589) (3,928)
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (781) 1,031
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,626 2,549
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $9,845 $3,580
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</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, 2000, the
consolidated statements of operations and the consolidated statements of cash
flows for the three month periods ended March 31, 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.
Certain amounts have been reclassified to be comparable to the 2000
presentation. 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 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,
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2000 1999
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Warrants 2,688 5,322
Options 4,524 1,326
NOTE 3 - Debt:
At March 31, 2000 the Company had outstanding borrowings of $135,500 under
its bank revolving credit facility and additional available borrowings of
$48,000.
NOTE 4 - 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.
6
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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 MARCH 31, 2000 COMPARED
WITH THREE MONTHS ENDED MARCH 31, 1999
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenue increased 109% to $122,102 in the
first quarter of 2000 from $58,518 in the first quarter 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 the beginning of the
periods presented, net revenue for the first quarter of 2000 would have
increased by approximately 21%.
Operating costs and expenses excluding depreciation and amortization
increased 81% to $92,344 in the first quarter of 2000 from $51,120 in the first
quarter of 1999. The increase was principally due to the Company's acquisition
of Metro.
Depreciation and amortization increased $10,927, or 239%, to $15,495 in
the first quarter of 2000 as compared to $4,568 in the first quarter of 1999 due
principally to the amortization of goodwill resulting from the Metro
acquisition.
Corporate administrative expenses increased 69% to $2,016 in the first
quarter of 2000 from $1,193 in the first quarter of 1999. The increase was
primarily attributable to higher compensation expense.
Operating income increased 648% to $12,247 in the first quarter of 2000
from $1,637 in the first quarter of 1999, primarily due to higher network
revenues from the Company's operations, partially offset by higher depreciation
and amortization from the Metro acquisition.
Net interest expense decreased 10% to $2,540 in the first quarter of
2000 from $2,820 in 1999. The decrease was due to lower debt levels.
7
<PAGE>
Income tax expense in the first quarter of 2000 was $5,751 as compared
to a tax benefit of $521 in the first quarter of 1999. The Company's effective
income tax rate in 2000 is approximately 59% due principally to non-deductible
goodwill amortization resulting from the Metro acquisition.
Net income in the first quarter of 2000 was $3,956 ($.04 per basic
share and $.03 per diluted share) as compared to the first quarter of 1999 net
loss of $662 ($.01 per basic and diluted share), an increase of approximately
$4,618.
Weighted average shares outstanding used to compute basic and diluted
earnings per share increased to 112,155 and 119,368, respectively, in the first
quarter of 2000 as compared to 56,536 and 63,184 in the first quarter of 1999.
The increase is attributable to stock issued as part of the Metro acquisition,
partially offset by stock repurchases.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company's cash and cash equivalents were $9,845,
a decrease of $781 from the December 31, 1999 balance.
For the three months ended March 31, 2000 versus the comparable prior
year period, net cash from operating activities increased $33,770. The increase
was primarily attributable to higher cash flow from operations and lower working
capital requirements. Capital expenditures increased to $1,699 in the first
quarter of 2000 as compared to $544 in the first quarter of 1999. The increase
is due to capital expenditures for Metro.
At March 31, 1999, the Company had available borrowings of $48,000 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. The Company has used its available cash to repurchase its Common Stock
and repay debt. In the first quarter of 2000, the Company repurchased 355 shares
of Common Stock at a cost of $11,601. From April 1 through April 28, 2000, the
Company repurchased an additional 107 shares of Common Stock at a cost of
approximately $3,574.
8
<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 consent to increase the authorized number of shares of Westwood One's
Common Stock from 117 million shares to 300 million shares was submitted to
shareholders. The shareholders consented to the increase in authorized shares on
March 8, 2000.
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 March 31, 2000
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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
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FARID SULEMAN
Chief Financial Officer
Dated: May 10, 2000
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,845
<SECURITIES> 0
<RECEIVABLES> 123,939 <F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 145,102
<PP&E> 54,172<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,293,286
<CURRENT-LIABILITIES> 131,517
<BONDS> 125,500
0
0
<COMMON> 1,291<F3>
<OTHER-SE> 1,011,561
<TOTAL-LIABILITY-AND-EQUITY> 1,293,286
<SALES> 0
<TOTAL-REVENUES> 122,102<F4>
<CGS> 0
<TOTAL-COSTS> 92,344<F5>
<OTHER-EXPENSES> 17,511<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,744
<INCOME-PRETAX> 9,707
<INCOME-TAX> 5,751
<INCOME-CONTINUING> 3,956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,956
<EPS-BASIC> .04
<EPS-DILUTED> .03
<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 DEPRECIATION AND AMORTIZATION, AND CORPORATE GENERAL AND
ADMINISTRATIVE EXPENSES.
</FN>
</TABLE>
