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 JuneSeptember 30, 2002 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.)
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(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 JulyOctober 31, 2002, 106,106,010105,398,318 shares of Common Stock, were outstanding, excluding treasury
shares, and 703,466 shares of Class B Stock were outstanding.
WESTWOOD ONE, INC.
------------------
INDEX
-----
PART I. FINANCIAL INFORMATION: Page No.
--------
Consolidated Balance Sheets at September 30, 2002
(Unaudited) and December 31, 2001 3
Consolidated Statements of Operations (Unaudited) for
the three and nine months ended September 30, 2002 and 2001 4
Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended September 30, 2002 and 2001 5
Notes to Consolidated Financial Statements (Unaudited) 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION 1213
SIGNATURES 15
2CERTIFICATIONS 16
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
JuneSeptember 30, December 31,
2002 2001
ASSETS ---- ----
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 12,0518,832 $ 4,509
Accounts receivable, net of allowance for doubtful accounts
of $10,320$11,629 (2002) and $9,282 (2001) 132,823122,460 123,733
Other current assets 5,1858,901 10,240
------------------ ---------
Total Current Assets 150,059140,193 138,482
PROPERTY AND EQUIPMENT, NET 55,80454,597 56,778
GOODWILL 991,043 978,011
INTANGIBLE ASSETS, NET 10,84510,246 25,326
OTHER ASSETS 8,9648,419 9,375
---------- ------------------ ---------
TOTAL ASSETS $1,216,715$1,204,498 $1,207,972
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 31,424 $33,72927,426 $ 33,729
Current maturity of long-term debt 10,000 7,500
Other accrued expenses and liabilities 67,76769,591 64,286
---------- ----------
Total Current Liabilities 109,191107,017 105,515
LONG-TERM DEBT 182,000188,000 152,000
DEFERRED INCOME TAXES 22,94124,151 21,123
OTHER LIABILITIES 12,79711,993 13,963
---------- ----------
TOTAL LIABILITIES 326,929331,161 292,601
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock: authorized 10,000 shares, none outstanding - -
Common stock, $.01 par value: authorized, 274,237 shares;
issued and outstanding, 109,061109,286 (2002) and 106,862 (2001) 1,0911,093 1,069
Class B stock, $.01 par value: authorized, 3,000 shares:
issued and outstanding, 704 (2002 and 2001) 7 7
Additional paid-in capital 816,167820,177 804,429
Accumulated earnings 157,783184,485 109,866
---------- ----------
975,0481,005,762 915,371
Less treasury stock, at cost; 2,4473,887 (2002) shares (85,262)(132,425) -
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 889,786873,337 915,371
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,216,715$1,204,498 $1,207,972
========== ==========
See accompanying notes to consolidated financial statements.
3
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In(Unaudited; In thousands, except per share amounts)
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
-------- --------------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
GROSS REVENUES $164,299 $155,298 $310,966 $295,775$155,738 $144,215 $466,704 $439,990
Less Agency Commissions 23,487 21,614 43,858 40,52221,909 20,232 65,767 60,754
-------- -------- -------- --------
NET REVENUES 140,812 133,684 267,108 255,253133,829 123,983 400,937 379,236
-------- -------- -------- --------
Operating Costs and Expenses Excluding
Depreciation and Amortization 86,146 86,715 178,547 177,15685,268 82,183 263,815 259,339
Depreciation and Amortization 2,866 17,109 5,701 34,1162,879 17,015 8,580 51,131
Corporate General and Administrative Expenses 2,064 1,853 3,801 3,6642,202 1,674 6,003 5,338
-------- -------- -------- --------
91,076 105,677 188,049 214,93690,349 100,872 278,398 315,808
-------- -------- -------- --------
OPERATING INCOME 49,736 28,007 79,059 40,31743,480 23,111 122,539 63,428
Interest Expense 1,677 2,089 3,435 4,9351,682 2,075 5,117 7,010
Other Expense (Income) (41) 1,183 (76) 1,080Income (27) (75) (103) 1,005
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 48,100 24,735 75,700 34,30241,825 21,111 117,525 55,413
INCOME TAXES 17,626 12,603 27,783 17,57015,123 10,930 42,906 28,500
-------- -------- -------- --------
NET INCOME $30,474 $12,132 $47,917 $16,732
======== ======== ======== ========$26,702 $10,181 $74,619 $26,913
======= ======= ======= =======
NET INCOMEEARNINGS PER SHARE:
BASIC $ .29 $ .11 $ .45 $ .15
======== ======== ======== ========$0.25 $0.10 $0.70 $0.25
======= ======= ======= =======
DILUTED $ .28 $ .11 $ .43 $ .15
======== ======== ======== ========$0.25 $0.09 $0.68 $0.24
======= ======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 106,751 108,377 106,690 108,121
======== ======== ======== ========105,962 106,852 106,447 107,698
======= ======= ======= =======
DILUTED 110,092 113,544 110,177 112,739
======== ======== ======== ========108,815 111,165 109,638 112,219
======= ======= ======= =======
See accompanying notes to consolidated financial statements.statements
4
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In(Unaudited; In thousands)
SixNine Months Ended
JuneSeptember 30,
---------------------
2002 2001
---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $47,917 $16,732$74,619 $26,913
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,701 34,116
Other 2,344 2,745
---------8,580 51,131
Deferred taxes and other 3,446 2,885
------- 55,962 53,593-------
86,645 80,929
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable (3,751) 20,577
(Increase)1,273 23,174
Decrease in other assets 5,055 (14)1,339 2,034
Increase in accounts payable and accrued liabilities 32,535 2,659
---------36,344 18,442
------- -------
Net Cash Provided By Operating Activities 89,801 76,815
---------125,601 124,579
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (2,660) (4,044)(3,298) (5,934)
Acquisition of companies and other (740) 103
---------(762) (6,211)
-------- -------
Net Cash Used For Investing Activities (3,400) (3,941)
--------- -------(4,060) (12,145)
-------- --------
CASH PROVIDED BEFORE FINANCING ACTIVITIES 86,401 72,874
--------- -------121,541 112,434
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 25,080 17,40828,024 18,471
Borrowings under bank and other long-term obligations 32,50038,500 -
Debt repayments and payments of capital lease obligations (107) (49,761)(247) (21,366)
Repurchase of common stock and warrants (136,332) (44,871)
--------- -------(183,495) (107,639)
-------- --------
NET CASH (USED IN) FINANCING ACTIVITIES (78,859) (77,224)
--------- -------(117,218) (110,534)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,542 (4,350)4,323 1,900
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,509 6,757
--------- --------------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $12,051 $2,407
========= =======$8,832 $8,657
======== ========
See accompanying notes to consolidated financial statements.
5
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(In(Tabular amounts in thousands, except per share data)
NOTE 1 - Basis of Presentation:
- -------------------------------
The accompanying unaudited consolidated balance sheet as of June 30, 2002,financial statements have been
prepared pursuant to the consolidated statements of operations for the three and six month periods ended
June 30, 2002 and 2001 and the consolidated statements of cash flows for the six
months ended June 30, 2002 and 2001 are unaudited, but in the opinion of
management include all adjustments necessary for a fair presentationrules of the financial positionSecurities and the results of operations for the periods presented.Exchange Commission. These
financial statements should be read in conjunction with the more detailed
financial statements in the Company's Annual Report on Form 10-K filedfor the year
ended December 31, 2001.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments necessary for a fair statement of the
financial position and results of operations and cash flows of the Company for
the periods presented. Certain previously reported amounts have been
reclassified to conform with the Securities and Exchange Commission.current presentation.
NOTE 2 - Accounting Change - Goodwill and Other Intangible Assets
- -----------------------------------------------------------------
In July 2001, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets ("SFAS 142")
(collectively, the "Statements"). SFAS 141 supercedes APB Opinion No. 16,
"Business Combinations" and requires all business combinations to be accounted
for under the purchase method. SFAS 142 primarily addresses the accounting for
goodwill and intangible assets subsequent to their initial recognition. The
provisions of SFAS 142 (1) prohibit the amortization of goodwill and
indefinite-lived intangible assets, (2) require that goodwill and indefinite -
lived intangible assets be tested annually for impairment, (3) require that
reporting units be identified for the purpose of assessing potential future
impairments of goodwill, and (4) remove the forty-year limitation on the
amortization period of intangible assets that have finite lives. The Company
adopted these Statements, as required, on January 1, 2002.
In accordance with SFAS No. 142, the Company completed its transitional
impairment testing of intangible assets during the first quarter of 2002. The
outcome of such impairment testing indicated that the fair value of the
Company's intangible assets were in excess of their carrying value.
Intangible assets subject to amortization primarily consists of network
affiliation agreements that are being amortized on an accelerated basis over
periods ranging from 4 to 20 years with a weighted-average amortization period
of approximately 8 years. At JuneSeptember 30, 2002, the Company's amortizable
intangible assets gross value was $29,337approximately $29.3 million with accumulated
amortization of $18,492.approximately $19.1 million. The Company's estimated aggregate
amortization expense for fiscal year 2002, 2003, 2004, 2005 and 2006 are $1,800, $1,450, $1,450, $1,450$1.8
million, $1.5 million, $1.5 million, $1.5 million and $900,$.9 million, respectively.
The following table provides a reconciliation of reported net income for
the three and sixnine month periods ended JuneSeptember 30, 2001 to net income that
would have been reported had SFAS No. 142 been applied as of January 1, 2001:
6
Three months ended Six monthsNine Months ended
JuneSept. 30, 2001 JuneSept. 30, 2001
------------------ ------------------------------ --------------
Reported net income $12,132 $16,732$10,181 $26,913
Add back goodwill amortization, net of tax 11,736 20,471
------- -------10,935 31,406
Adjusted net income $23,868 $37,203
======= =======
Earnings$21,116 $58,319
Net earnings per share:
Basic -
As reported $0.11 $0.15$0.10 $0.25
Goodwill amortization 0.11 0.19
----- -----0.10 0.29
As adjusted $0.22 $0.34
===== =====$0.20 $0.54
Diluted:
As reported $0.11 $0.15$0.09 $0.24
Goodwill amortization 0.10 0.18
----- -----0.28
As adjusted $0.21 $0.33
===== =====$0.19 $0.52
NOTE 3 - Reclassification:
- --------------------------
Certain prior period amounts have been reclassified to conform to the
current presentation.
NOTE 4 -Net Earnings Per Share:
- ------------------------------------------------------------
Net incomeearnings 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 that were added
to the basic weighted average shares outstanding to arrive at the diluted
weighted average shares outstanding for each period:
Three Months Ended SixNine Months Ended
JuneSeptember 30, JuneSeptember 30,
------------------ ---------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Options 2,853 3,230 2,981 3,176
Warrants 220 1,429 286 1,363
Options 3,121 3,738 3,201 3,255- 1,083 210 1,345
NOTE 4 - Debt:
- --------------
At JuneSeptember 30, 2002 the Company had outstanding borrowings of $192,000$198.0
million under its bank revolving credit facility and available borrowings of
$95,000. The
Company is in compliance with all its debt covenants.
7$78.0 million.
NOTE 5 - Related Party Transactions:
- ------------------------------------
The Company is managed by Infinity Broadcasting Corporation ("Infinity"), a
wholly-owned subsidiary of Viacom Inc. ("Viacom"), pursuant to an amended
Management Agreement which expires on March 31, 2009.
The Company amended its Representation, Registration Rights, License and
Programming Agreements with Infinity on April 15, 2002 to principally extend the
expiration dates of those agreements to March 31, 2009 from March 31, 2004.
The amendment to the Management Agreement, which was approved by
shareholders on May 29, 2002, provides for the issuance of warrants to purchase
up to 4,5004.5 million shares of the Company's Common Stock at exercise prices based
on a formula tied to the Company's future stock price.
For a more detailed description of the amendments made to the Infinity
Management Agreement and Representation, Registration Rights, License and
Programming Agreements with Infinity, refer to the Company's April 29, 2002
proxy statement.
In 2002, the Company repurchased warrants representing 2,0002 million shares of
CompanyCommon Stock for $51,070.
8$51.1 million.
NOTE 6 - Share Repurchase Program:
- ----------------------------------
For the nine months ended September 30, 2002, the Company purchased
approximately 5.9 million shares of Common Stock and warrants for approximately
$183.5 million under its stock repurchase program, of which $47.2 million was
spent in the third quarter for approximately 1.4 million shares of Common Stock.
On September 25, 2002, the Company's Board of Directors approved an additional
authorization to buy back up to $250 million of the Company's Common Stock.
NOTE 7 - Subsequent Event:
- --------------------------
The Company intends to raise $200 million in a private offering of a
combination of 7 and 10 year senior unsecured notes by the beginning of December
2002. Proceeds from the planned offering will be used to repay outstanding
borrowings under its current bank facility. The notes have not been registered
under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(In thousands, except per share amounts)
RESULTS OF OPERATIONS
Effective January 1, 2002, the Company adopted SFAS 141 and SFAS 142. The
Statements prohibit retroactive application, and accordingly several comparisons
to prior year reported amounts are not meaningful. As a result, the Company has
included pro forma disclosures to compare the current year operating results to
those that would have been reported had the Statements been applied as of
January 1, 2001.
THREE MONTHS ENDED JUNESEPTEMBER 30, 2002 COMPARED
WITH THREE MONTHS ENDED JUNESEPTEMBER 30, 2001
- -----------------------------------------------------------------------------------
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenue increased $7,128,$9,846, or 5.3%7.9%, to
$140,812$133,829 in the secondthird quarter of 2002 from $133,684$123,983 in the comparable prior year
quarter. The increase in net revenue was due principallyprimarily attributable to increasedhigher
advertising rates and better inventory management at both our network and
traffic divisions, higher revenue associated with the Company's broadcast of the
NFL as well as a result of creating new programming. The Company's third quarter
2001 revenues were also adversely affected by lost revenue from the cancellation
and rescheduling of programming and advertiser commitments due to the events of
September 11.
Operating costs and expenses excluding depreciation and amortization
decreased $569,increased $3,085 or .7%3.8%, to $86,146$85,268 in the secondthird quarter of 2002 from $86,715$82,183
in the secondthird quarter of 2001. The decreaseincrease was due principally due to tight cost
controls,costs
associated with new programming and reductions in affiliate compensation and personnel costs,
partially offset by higher bad debt expense.sports rights fees.
Depreciation and amortization expense decreased $14,243,$14,136, or 83.2%83.1%, to
$2,866$2,879 in the secondthird quarter of 2002 as compared with $17,109$17,015 in the secondthird
quarter of 2001
due2001. The decrease is principally attributable to the Company's
adoption of SFAS 142, which prohibits the Company from continuing to amortize
goodwill.
Corporate general and administrative expenses increased $211,$528, or 11.4%31.5%, to
$2,064$2,202 in the secondthird quarter of 20022001 from $1,853$1,674 in the comparable 2001 quarter.
The increase is principally attributable to higher administrative and
compensation expenses.management incentive
compensation.
Operating income increased $21,729,$20,369, or 77.6%88.1%, to $49,736$43,480 in the secondthird
quarter of 2002 from $28,007$23,111 in the secondthird quarter of 2001, primarily due to
higher net revenue as well as lower depreciation and amortization expense
resulting from the Company's adoption of SFAS 142. On a pro forma basis,
assuming the Company had adopted the provisions of SFAS 142 on January 1, 2001,
the Company's operating income increased approximately 25.6%25.5%.
Interest expense decreased 19.7%18.9% to $1,677$1,682 in the secondthird quarter of 2002
from $2,089$2,075 in the third quarter of 2001. The decrease is principally
attributable to lower interest rates.
Other income in the second quarter of 2002 was $41 compared with other
expense of $1,183 in the second quarter of 2001, an increase of $1,224. The 2001
expense is principally attributable to a 2001 non-cash charge to write-down the
carrying value of the Company's investments in internet companies, principally
Sportsline USA, to its estimated market value.
9rates, partially offset by higher debt levels.
Income taxes increased $5,023,$4,193 or 39.9%38.4%, to $17,626$15,123 in the secondthird quarter of
2002 from $12,603$10,930 in the secondthird quarter of 2001. The Company's effective income
tax rate in the first halfnine months of 2002 is approximately 36.7%36.5% compared with a
51.2%51.4% effective tax rate in the first halfnine months of 2001. Both the Company's
reported income tax expense and effective income tax rate were affected by the
Company's adoption of SFAS 142. On a pro forma basis, assuming the Company had
adopted the provisions of SFAS 142 on January 1, 2001, income tax expense would
have increased by approximately 41.4%31.2% and the Company's effective income tax
rate would have been approximately 35.3% in the first halfnine months of 2001.
Principally, all of the 2002 income tax expense is non-cash as a result of tax
deductions related to stock option exercises and warrant purchases.
Net income increased $18,342,$16,521, or 151.2%162.3%, to $30,474$26,702 ($.29 per basic share
and $.28 per diluted share) in the second quarter of 2002 from $12,132 ($.11.25 per basic and
diluted share) in the secondthird quarter of 2002 from $10,181 ($.10 per basic share
and $.09 per diluted share) in the third quarter of 2001. On a pro forma basis,
assuming the Company had adopted the provisions of SFAS 142 on January 1, 2001,
the Company's net income would have increased by approximately 27.7%28.0%, net income
per basic share would have increased by approximately 29.6%26.5% and net income per
diluted share would have increased by approximately 31.7%29.2%.
Weighted average shares outstanding used to compute basic and diluted
earnings per share decreased to 106,751 and 110,092, respectively, infor the secondthird quarter of 2002 were
105,962 basic shares and 108,815 diluted shares as compared with 108,377106,852 basic
shares and 113,544111,165 diluted shares in the secondthird quarter of 2001.2001, a decrease of
..8% for basic shares and 2.1% for diluted shares. The decrease is principallyprimarily
attributable to the Company's stock repurchase program.
SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2002 COMPARED
WITH SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2001
- --------------------------------------------------------------------------------
Net revenue for the first halfnine months of 2002 increased 4.6%5.7% to $267,108$400,937
from $255,253$379,236 in the first halfnine months of 2001. The increase in net revenue was
attributable to the Company's exclusive radio broadcast of the Winter Olympics from Salt Lake
City, higher advertising rates and better inventory management at both
our network and traffic divisions, as wellthe exclusive radio broadcast of the Winter
Olympics from Salt Lake City and as a result of launching new programming.programming, including The
Radio Factor with Bill O'Reilly.
Operating costs and expenses excluding depreciation and amortization
increased .8%1.7% to $178,547$263,815 in the first halfnine months of 2002 from $177,156$259,339 in the
comparable 2001 period. The increase was principally due to broadcast rights
fees and other related costcosts associated with the Company's exclusive radio
broadcast of the Winter Olympics, and higher bad debt expense, new program costs and
higher sports rights fees, partially offset by reductions in affiliate
compensation and personnel costs.
Depreciation and amortization expense decreased 83.3%83.2% to $5,701$8,580 in the
first halfnine months of 2002 as compared with $34,116$51,131 in the first halfnine months of
2001. The decrease is principally attributable to the Company's adoption of SFAS
142, which prohibits the Company from continuing to amortize goodwill.
Corporate general and administrative expenses increased 12.5% to $6,003 in
the first nine months of 2002 from $5,338 in the comparable 2001 period. The
increase is principally attributable to higher management incentive
compensation.
Operating income increased $38,742,$59,111, or 96.1%93.2%, to $79,059$122,539 in the first halfnine
months of 2002 from $40,317$63,428 in the comparable 2001 period primarily due to
higher net revenue as well asand lower depreciation and amortization expense resulting
from the Company's adoption of SFAS 142. On a pro forma basis, assuming the Company had
adopted the provisions of SFAS 142 on January 1, 2001, the Company's operating
income increased approximately 24.5%24.8%.
10
Interest expense decreased 30.4%27.0% to $3,435$5,117 in the first halfnine months of 2002
from $4,935$7,010 in the comparable 2001 period. The decrease resultsis principally
fromattributable to lower interest rates.
Other income in the first nine months of 2002 was $103 compared with other
expense of $1,005 in the comparable 2001 period, an increase of $1,108. The 2001
expense is principally attributable to a 2001 non-cash charge to write-down the
carrying value of the Company's investments in internet companies, principally
Sportsline USA, to its estimated market value.
Net income increased 186.4%177.3% to $47,917$74,619 ($.45.70 per basic share and $.43$.68 per
diluted share) in the first halfnine months of 2002 from $16,732$26,913 ($.15.25 per basic
share and $.24 per diluted share) in the comparable 2001 period. On a pro forma
basis, assuming the Company had adopted the provisions of SFAS 142 on January 1,
2001, the Company's net income would have increased approximately 28.8%28.0%, net
income per basic share would have increased by approximately 30.5%29.5% and net
income per diluted share would have increased by approximately 31.8%31.0%.
Weighted average shares outstanding used to computefor the first nine months of 2002 were
106,447 basic shares and 109,638 diluted earnings per share decreased to 106,690shares as compared with 107,698 basic
shares and 110,177, respectively,112,219 diluted shares in the first sixmine months of 2002 as compared with 108,121 and 112,739 in the comparable 2001
period.2001. The decrease
is principallyin shares was primarily attributable to the Company's stock repurchase program.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At JuneSeptember 30, 2002, the Company's cash and cash equivalents were $12,051,$8,832,
an increase of $7,542$4,323 from December 31, 2001.
For the sixnine months ended JuneSeptember 30, 2002, net cash provided by
operating activities was $89,801$125,601 as compared with $76,815$124,579 for the sixnine months
ended JuneSeptember 30, 2001, an increase of $12,986. Included in net cash provided by operating
activities is the income tax benefit attributable to stock option exercises and
warrant purchases ($37,750 in 2002 and $15,400 in 2001) that was charged
directly to shareholders' equity.$1,022. The cash flow from operations
combined with
bank borrowings was principally used to fund the Company's stock buy-back program.
At JuneSeptember 30, 2002, the Company had available borrowings of $95,000$78,000 on
its revolving credit facility. Pursuant to the terms of the facility, the amount
of available borrowings declines by $6,000 at the end of each quarter in 2002.
In addition, the Company is required to repay its term loan by $3,750 per
quarter in 2002. The Company has extinguishedpaid all term loan installments which were due
in 2002. In 2003,The Company intends to raise $200,000 in a private offering of a
combination of 7 and 10 year senior unsecured notes by the quarterly term loan repayments increasebeginning of December
2002. Proceeds from the planned offering will be used to $5,000 per
quarter.repay outstanding
borrowings under its current bank facility. The notes have not been registered
under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.
The Company has used its available cash and bank borrowings to either repurchase
its Common Stock and warrants and/or repay its debt.warrants. In the first six months ofnine month period ended September 30,
2002, the Company repurchased 4,447 commonapproximately 5,887 shares of Common Stock and
warrants at a cost of $136,332.
Subsequent to the quarter through July 31,approximately $183,494. In October 2002, the Company
repurchased an additional 530539 shares of Common Stock at a cost of approximately
$16,715.
11$19,217.
CONTROLS AND PROCEDURES
- -----------------------
The Company's chief executive officer and chief financial officer have
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934)
as of a date within 90 days prior to the filing date of this quarterly report
and concluded that, as of the date of their evaluation, the Company's disclosure
controls and procedures were effective and designed to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to them by others within those entities, particularly during the
period in which this quarterly report is being prepared.
There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
PART II OTHER INFORMATION
-------------------------
Items 1 through 3
- -----------------5
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 May 29, 2002.
(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 III Directors, for which holders of Common
Stock voted alone for the election of Mr. Greenberg):
1) Election of Class III Directors:
FOR WITHHELD
--- --------
Gerald Greenberg 100,926,099 267,454
Joel Hollander 135,654,129 712,124
Steven Lerman 135,358,726 1,007,527
2) Ratification of the selection of PricewaterhouseCoopers LLP as the
independent accountants of the Company for fiscal 2001.
FOR 134,630,804
AGAINST 1,730,038
ABSTAIN 5,411
3) Authorization of the Letter Agreement between the Company and Infinity
which extends the terms of, and makes other changes to, certain agreements
entered into between the Company and Infinity and provides for the issuance
of warrants to Infinity:
FOR 114,568,960
AGAINST 131,947
ABSTAIN 16,024,156
NON-VOTE 5,641,190
4) Approval of an amendment to the Company's certificate of incorporation:
FOR 130,595,712
AGAINST 101,792
ABSTAIN 27,559
NON-VOTE 5,641,190
12
Item 5
- ------
Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) EXHIBIT
NUMBER DESCRIPTION
-
------- -----------
3.1 Certificate of Incorporation of Registrant. (1)
3.2 Agreement of Merger. (1)
3.3 Certificate of Amendment of Certificate of Incorporation, as filed on October 10, 1986. (2)25, 2002.
3.4 Certificate of Amendment of Certificate of Incorporation, as filed on
October 9, 1986. (3)
3.5 Certificate of Amendment of Certificate of Incorporation, as filed on March
23, 1987. (3)
3.6 Certificate of Correction of Certificate of Amendment, as filed on March
31, 1987 at 10:00 a.m. (3)
3.7 Certificate of Correction of Certificate of Amendment, as filed on March
31, 1987 at 10:01 a.m. (3)
3.8 Certificate of Amendment of Certificate of Incorporation, as filed on July
23, 2002.
3.9 Bylaws of Registrant as currently in effect. (10)(8)
*10.1Employment Agreement, dated April 29, 1998, between Registrant and
Norman J.Pattiz. (12)J. Pattiz. (10)
10.2 Form of Indemnification Agreement between Registrant and its Directors
and Executive Officers. (4)(2)
10.3 Amended and Restated Credit Agreement, dated September 30, 1996,
between Registrant and The Chase Manhattan Bank and Co-Agents. (10)(8)
10.4 Second Amended and Restated Credit Agreement dated November 17, 2000,
between Registrant and The Chase Manhattan Bank and Co-Agents. (16)(14)
10.5 Amendment One to the Amended and Restated Credit Agreement, dated
October 24, 2002.
10.6 Purchase Agreement, dated as of August 24, 1987, between Registrant
and National Broadcasting Company, Inc. (5)
10.6(3)
10.7 Agreement and Plan of Merger among Registrant, Copter Acquisition
Corp. and Metro Networks, Inc. dated as of June 1, 1999 (13)
*10.7Amendment(11)
*10.8Amendment No. 1 to the Agreement and Plan Merger, dated as of August
20, 1999, by and among Registrant, Copter Acquisition Corp. and Metro
Networks, Inc. (14)
10.8(12)
10.9 Management Agreement, dated as of March 30, 1999, and amended on April
15, 2002 between Registrant and Infinity Broadcasting Corporation.
(13) (17)
10.9 Representation(11) (15)
10.10Representation Agreement, dated as of March 31, 1997, between
Registrant and CBS, Inc. (11)(17)
10.10(9) (15) 10.11 Westwood One Amended 1999
Stock Incentive Plan. (13)
10.11(11)
10.12 Westwood One, Inc. 1989 Stock Incentive Plan. (6)
10.12Amendments(4)
10.13Amendments to the Westwood One, Inc. Amended 1989 Stock Incentive
Plan. (5) (7)(9)
10.13Leases,
10.14Leases, dated August 9, 1999, between Lefrak SBN LP and Westwood One,
Inc. and between Infinity and Westwood One, Inc. relating to New York,
New York offices. (15)
10.14Lease,(13)
10.15Lease, dated December 18, 1991, between Valencia Paragon Associates,
Ltd., and Unistar Communications Group, Inc. relating to Valencia,
California offices. (8)
13(6)
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed for the three months ended
JuneSeptember 30, 20022002.
**********************
* Indicates a management contract or compensatory plan
(1) Filed as an exhibit to Registrant's registration statement on Form S-1
(File Number 2-98695) and incorporated herein by reference
(2) Filed as an exhibit to Registrant's registration statement on Form S-1
(Registration Number 33-9006) and incorporated herein by reference.
(3) Filed as an exhibit to Registrant's Form 8 dated March 1, 1988 and
incorporated herein by reference.
(4) Filed as part of Registrant's September 25, 1986 proxy statement and
incorporated herein by reference.
(5)(3) Filed an exhibit to Registrant's current report on Form 8-K dated September
4, 1987 and incorporated herein by reference.
(6)(4) Filed as part of Registrant's March 27, 1992 proxy statement and
incorporated herein by reference.
(7)(5) Filed as an exhibit to Registrant's July 20, 1994 proxy statement and
incorporated herein by reference.
(8)(6) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by reference.
(9)(7) Filed as an exhibit to Registrant's May 17, 1996 proxy statement and
incorporated herein by reference.
(10)(8) Filed as an exhibit to Registrant's Quarterly report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated herein by reference.
(11)(9) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference.
(12)(10) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998 and incorporated herein by reference.
(13)(11) Filed as an exhibit to Registrant's August 24, 1999 proxy statement and
incorporated herein by reference.
(14)(12) Filed as an exhibit to Registrant's current report on Form 8-K dated
October 1, 1999 and incorporated herein by reference.
(15)(13) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1999 and incorporated herein by reference.
(16)(14) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 and incorporated herein by reference.
(17)(15) Filed as an exhibit to Registrant's April 29, 2002 proxy statement and
incorporated herein by reference.
14
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/ Joel Hollander
----------------------------------s/JOEL HOLLANDER
-----------------
Joel Hollander
Chief Executive Officer
By:/S/Jacques Tortoroli
----------------------------------s/ JACQUES TORTOROLI
---------------------
Jacques Tortoroli
Chief Financial Officer
Dated: August 7,November 14, 2002
15
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joel Hollander, Chief Executive Officer of the Company, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Westwood One, Inc.
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ JOEL HOLLANDER
- ------------------
Joel Hollander
Chief Executive Officer
November 14, 2002
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jacques Tortoroli, Chief Financial Officer of the Company, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Westwood One, Inc.
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ JACQUES TORTOROLI
- ---------------------
Jacques Tortoroli
Chief Financial Officer
November 14, 2002