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, 2001 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
(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, 2001, 107,203,373 shares of Common Stock were outstanding,
excluding treasury shares, and 703,466 shares of Class B Stock were outstanding.
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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)
March 31, December 31,
2001 2000
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,406 $ 6,757
Accounts receivable, net of allowance for doubtful accounts
of $9,453 (2001) and $9,356 (2000) 106,366 135,550
Other current assets 8,154 11,574
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Total Current Assets 119,926 153,881
PROPERTY AND EQUIPMENT, NET 55,842 58,052
INTANGIBLE ASSETS, NET 1,043,452 1,055,727
OTHER ASSETS 16,243 17,896
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TOTAL ASSETS $1,235,463 $1,285,556
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 41,645 $ 41,916
Current maturity of long-term debt 6,250 10,000
Other accrued expenses and liabilities 75,683 86,286
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Total Current Liabilities 123,578 138,202
LONG-TERM DEBT 139,750 168,000
OTHER LIABILITIES 29,917 29,462
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TOTAL LIABILITIES 293,245 335,664
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COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock: authorized 10,000 shares, none outstanding - -
Common stock, $.01 par value: authorized, 300,000 shares;
issued and outstanding, 129,630 (2001) and 129,300 (2000) 1,296 1,293
Class B stock, $.01 par value: authorized, 3,000 shares:
issued and outstanding, 704 (2001 and 2000) 7 7
Additional paid-in capital 1,197,347 1,194,118
Accumulated earnings 71,271 66,671
Accumulated other comprehensive loss (4,477) (3,635)
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1,265,444 1,258,454
Less treasury stock, at cost; 22,289 (2001) and 21,612 (2000) shares (323,226) (308,562)
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TOTAL SHAREHOLDERS' EQUITY 942,218 949,892
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,235,463 $1,285,556
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See accompanying notes to consolidated financial statements.
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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
March 31,
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2001 2000
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GROSS REVENUES $140,477 $143,798
Less Agency Commissions 18,908 21,696
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NET REVENUES 121,569 122,102
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Operating Costs and Expenses Excluding
Depreciation and Amortization 90,441 92,344
Depreciation and Amortization 17,007 15,495
Corporate General and Administrative Expenses 1,811 2,016
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109,259 109,855
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OPERATING INCOME 12,310 12,247
Interest Expense 2,846 2,744
Other Income (103) (204)
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INCOME BEFORE INCOME TAXES 9,567 9,707
INCOME TAXES 4,967 5,751
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NET INCOME $4,600 $3,956
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NET INCOME PER SHARE:
BASIC $ .04 $ .04
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DILUTED $ .04 $ .03
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WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 107,865 112,155
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DILUTED 111,766 119,368
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See accompanying notes to consolidated financial statements.
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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31,
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2001 2000
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CASH FLOW FROM OPERATING ACTIVITIES:
Net income $4,600 $3,956
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 17,007 15,495
Other 658 651
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22,265 20,102
Changes in assets and liabilities:
Decrease in accounts receivable 29,184 21,894
Decrease in other assets 2,370 1,482
Increase (Decrease) in accounts payable and accrued liabilities (6,750) 5,714
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Net Cash Provided By Operating Activities 47,069 49,192
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CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies and other (2,370) (7,685)
Capital expenditures (1,723) (1,699)
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Net Cash Used For Investing Activities (4,093) (9,384)
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CASH PROVIDED BEFORE FINANCING ACTIVITIES 42,976 39,808
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CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 3,232 4,336
Debt repayments and payments of capital lease obligations (32,895) (33,324)
Repurchase of common stock (14,664) (11,601)
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NET CASH USED IN FINANCING ACTIVITIES (44,327) (40,589)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (1,351) (781)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,757 10,626
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,406 $9,845
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See accompanying notes to consolidated financial statements.
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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, 2001, the
consolidated statements of operations and the consolidated statements of cash
flows for the three month periods ended March 31, 2001 and 2000 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,
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2001 2000
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Warrants 1,154 2,688
Options 2,747 4,524
NOTE 3 - Debt:
At March 31, 2001 the Company had outstanding borrowings of $146,000 under
its bank revolving credit facility and additional available borrowings of
$184,000.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In thousands, except per share amounts)
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 COMPARED
WITH THREE MONTHS ENDED MARCH 31, 2000
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenue in the first quarter of 2001 was
$121,569 compared with $122,102 in the first quarter of 2000. The decrease in
net revenue was due to a reduction in advertising spending principally by
Internet companies partially offset by higher revenue from the Company's
traditional, as well as, new advertisers.
Operating costs and expenses excluding depreciation and amortization
decreased 2% to $90,441 in the first quarter of 2001 from $92,344 in the first
quarter of 2000. The decrease was principally due to tight cost controls, and
reductions in affiliate compensation and personnel costs.
Depreciation and amortization increased $1,512, or 10%, to $17,007 in the
first quarter of 2001 compared with $15,495 in the first quarter of 2000 due
principally to depreciation and amortization associated with the November 2000
acquisition of the operating assets of SmartRoute Systems, Inc. ("SmartRoute").
Corporate administrative expenses decreased 10% to $1,811 in the first
quarter of 2001 from $2,016 in the first quarter of 2000. The decrease was
primarily attributable to lower across-the-board expenses.
Operating income increased slightly to $12,310 in the first quarter of 2001
from $12,247 in the first quarter of 2000, primarily due to a reduction in
operating costs, partially offset by higher depreciation and amortization
expense from the SmartRoute acquisition.
Net interest expense increased in the first quarter of 2001 to $2,743 from
$2,540 in 2000. The increase was due to higher debt levels partially offset by a
reduction in expense due to lower interest rates.
Income tax expense in the first quarter of 2001 was $4,967 compared with
$5,751 in the first quarter of 2000. The Company's effective income tax rate in
2001 is approximately 52% compared with a 59% effective tax rate in the first
quarter of 2000. The decrease in the effective tax rate is a result of
nondeductible goodwill amortization being a smaller percentage of pretax income
and lower state tax expense.
Net income in the first quarter of 2001 was $4,600 ($.04 per basic and
diluted share) compared with $3,956 ($.04 per basic and $.03 diluted share) in
the first quarter of 2000, an increase of approximately $644, or 16%.
Weighted average shares outstanding used to compute basic and diluted
earnings per share decreased to 107,865 and 111,766, respectively, in the first
quarter of 2001 compared with 112,155 and 119,368, respectively, in the first
quarter of 2000. The decrease is principally attributable to the Company's stock
repurchase program.
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, the Company's cash and cash equivalents were $5,406, a
decrease of $1,351 from the December 31, 2000 balance.
For the three months ended March 31, 2001 versus the comparable prior year
period, net cash from operating activities decreased $2,123. The decrease was
primarily attributable to reducing outstanding payables.
At March 31, 2000, the Company had available borrowings of $184,000 on its
revolving credit facility. Pursuant to the terms of the facility, the amount of
available borrowings declines by $4,500 at the end of each quarter. In addition,
the Company is required to repay its term loan by $2,500 per quarter in 2001 and
$3,750 per quarter in 2002. The Company prepaid its June and September 2001 term
loan installments in the first quarter of 2001. The Company has used its
available cash to repurchase its Common Stock and repay debt. In the first
quarter of 2001, the Company repurchased 678 shares of Common Stock at a cost of
$14,664. From April 1 through April 30, 2001, the Company repurchased an
additional 321 shares of Common Stock at a cost of approximately $8,099.
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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
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
March 31, 2001
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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 11, 2001
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