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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 2000 Commission file number 0-13020
WESTWOOD ONE, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3980449
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
40 West 57th Street, 5th Floor
New York, NY 10019
(Address of principal executive offices)
(212) 641-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class Which Registered
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates as of
March 15, 2001 was approximately $1,687,113,000.
As of March 15, 2001, 107,467,191 shares (excluding treasury shares) of
Common Stock were outstanding and 703,466 shares of Class B Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its annual
meeting of shareholders (which will be filed with the Commission within 120 days
of the registrant's last fiscal year end) are incorporated in Part III of this
Form 10-K.
PART I
Item 1. Business
General
Westwood One, Inc. (the "Company" or "Westwood One") supplies radio and
television stations with information services and programming. The Company is
the largest domestic outsource provider of traffic reporting services and the
nation's largest radio network, producing and distributing national news,
sports, talk, music and special event programs, in addition to local news,
sports, weather, video news and other information programming.
The Company's principal source of revenue is selling commercial airtime to
advertisers through one of its two operating divisions: Metro/Shadow, which is
comprised of Metro Networks, Inc. ("Metro") and "Shadow Traffic" and the Network
Division. The Company generates revenue principally by selling audience it
obtains from radio and television affiliates to local and national advertisers.
The Company provides a broad range of programming and information services which
deliver audience to advertisers and also deliver traffic, news, talk, sports,
and entertainment programs to its affiliate stations.
Metro/Shadow provides local traffic and information broadcast reports in over 80
Metro Survey Area markets (referred to herein as MSA markets) in the United
States. The Network Division offers radio stations traditional news services,
CBS Radio news, CNN Radio and Fox news in addition to seven 24-hour
satellite-delivered continuous play music formats ("24/7 Formats") and weekday
and weekend news and entertainment features and programs. These programs
include: major sporting events (principally covering the National Football
League, Notre Dame football and other college football and basketball games, the
National Hockey League, the Masters and the Olympics); live, personality
intensive talk shows; live concert broadcasts; countdown shows; music and
interview programs; and exclusive satellite simulcasts with HBO and other cable
networks.
Westwood One enables advertisers to purchase advertising time and have their
commercial messages broadcast on radio and television stations throughout the
United States, reaching demographically defined listening audiences. The
commercial inventory obtained by Westwood offers advertisers the opportunity to
reach a broad-based local, regional or national audience through a single
purchase from the Company.
Westwood One is managed by Infinity Broadcasting Corporation ("Infinity"), a
wholly-owned subsidiary of Viacom, Inc., pursuant to a Management Agreement
between the Company and Infinity which expires on March 31, 2004 (the
"Agreement"). Pursuant to the Agreement, Infinity receives a base fee of
$2,500,000 (adjusted for inflation) and an incentive bonus based on the Company
exceeding predetermined cash flow objectives. Westwood One has also issued to
Infinity warrants to acquire 4,000,000 shares of Common Stock pursuant to the
Agreement.
Industry Background
Radio Broadcasting
As of January 1, 2001, there were approximately 10,300 commercial radio stations
in the United States.
A radio station selects a style of programming ("format") to attract a target
listening audience and thereby attract commercial advertising directed at that
audience. There are many formats from which a station may select, including
news, talk, sports and various types of music and entertainment programming.
The diversity in program formats has intensified competition among stations for
local advertising revenue. A radio station has two principal ways of effectively
competing for these revenues. First, it can differentiate itself in its local
market by selecting and successfully executing a format targeted at a particular
audience thus enabling advertisers to place their commercial messages on
stations aimed at audiences with certain demographic characteristics. A station
can also broadcast special programming, syndicated shows, sporting events or
national news products, such as those supplied by Westwood One, not available to
its competitors within its format. National programming broadcast on an
exclusive geographic basis can help differentiate a station within its market,
and thereby enable a station to increase its audience and local advertising
revenue.
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Radio Advertising
Radio advertising time can be purchased on a local, regional or national basis.
Local purchases allow an advertiser to select specific radio stations in chosen
geographic markets for the broadcast of commercial messages. Local and regional
purchases are typically best suited for an advertiser whose business or ad
campaign is in a specific geographic area. Advertising purchased from a radio
network is one method by which an advertiser targets its commercial messages to
a specific demographic audience, achieving national coverage on a cost-efficient
basis. In addition, an advertiser can choose to emphasize its message in a
certain market or markets by supplementing a national purchase with local and/or
regional purchases.
To verify its network audience delivery and demographic composition, specific
measurement information is available to advertisers from independent rating
services such as Arbitron and Statistical Research, Inc.'s RADAR. These rating
services provide demographic information such as the age and gender composition
of the listening audiences. Consequently, advertisers can verify that their
advertisements are being heard by their target listening audience.
Business Strategy
Westwood One provides broad-based, local, regional or national audiences and
commercial spots to advertisers through its recognized programming and other
information products. The Company, through its various radio networks, produces
and distributes quality programming to meet listener needs for information and
to radio stations seeking to increase their listening audience and improve local
and national advertising revenue by differentiating themselves from their
competitors. The Company sells advertising time within its programs to
advertisers desiring to reach large listening audiences with specific
demographic characteristics.
In 1996, the Company expanded its product offerings to include providing local
traffic, news, sports and weather programming to radio stations and other media
outlets in selected cities across the United States. This expansion gave the
Company's advertisers the ability to easily supplement their national purchases
with local and regional purchases from the Company. It also allowed the Company
to develop relationships with local and regional advertisers. In March 1996, the
Company acquired the operating assets of New York Shadow Traffic Limited
Partnership, Chicago Shadow Traffic Limited Partnership, Los Angeles Shadow
Traffic Limited Partnership, and Philadelphia Express Traffic Limited
Partnership (collectively "Shadow Traffic"). In 1998, the Company acquired the
remaining Shadow Traffic operations, which operated in ten major metropolitan
markets, and opened operations in two additional cities. In 1999, Westwood One
significantly expanded its local and regional reach through its merger with the
country's largest traffic service provider, Metro, which broadcast information
reports in 67 of the 75 largest MSA markets in the United States. Since then,
the Company has expanded its reach to more than 80 of the largest MSA markets.
In 2000, the Company continued its expansion of products with its acquisition of
the operating assets of SmartRoute Systems, Inc. ("SmartRoute"), a company which
collects, organizes and distributes a database of advanced traveler information
through various electronic media and telecommunications.
Local Traffic and Information Programming
With respect to local content, the Company, through its Metro and Shadow Traffic
units, provides traffic reports and local news, weather and sports information
to its radio and television affiliates.
The Company gathers traffic and other data utilizing the Company's
information-gathering infrastructure, which includes aircraft (helicopters and
airplanes), broadcast-quality remote camera systems positioned at strategically
located fixed positions and on aircraft, mobile units and cellular systems, and
by accessing various government-based traffic tracking systems. The Company also
gathers information from various third-party news and information services. The
information is then processed, converted into broadcast copy and entered into
the Company's computer systems by the Company's local writers and producers.
This permits the Company to easily resell the information to other third parties
for distribution through the internet, wireless devices or personnel digital
assistants ("PDA") and various other new media systems. The Company's
professional announcers read the customized reports on the air. The Company's
information reports (including the length of report, content of report, specific
geographic coverage area, time of broadcast, number of reports aired per day,
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broadcaster's style, etc.) are customized to meet each individual affiliate's
requirements. The Company typically works closely with the program directors,
news directors and general managers of its affiliates to ensure that the
Company's services meet its affiliates' quality standards. The Company and its
affiliates jointly select the on-air talent to ensure that each on-air talent's
style is appropriate for the station's format. The Company's on-air talent often
become integral "personalities" on such affiliates' station as a result of their
significant on-air presence and interaction with the station's on-air personnel.
In order to realize operating efficiencies, the Company endeavors to utilize its
professional on-air talent on multiple affiliate stations within a particular
market.
The Company generally does not require its affiliates to identify the Company as
the supplier of its information reports. This provides the Company's affiliates
with a high degree of customization and flexibility, as each affiliate has the
right to present the information reports provided by the Company as if the
affiliate had generated such reports with its own resources. For example,
multiple affiliates in a single market may imply that the Company's
infrastructure, including its airplanes, helicopters and talent, are those of
the affiliate.
As a result of its extensive network of operations and talent, the Company
regularly reports breaking and important news stories and provides its
affiliates with live coverage of these stories. The Company is able to customize
and personalize its reports of breaking stories using its individual affiliates'
call letters from the scene of news events. For example, in 2000, the Company
was the first news organization to provide live airborne coverage of the Elian
Gonzalez situation in Miami. By using our news helicopters, the Company fed live
video to television affiliates in Miami, and around the country. Moreover, by
leveraging our infrastructure, the same reporters provided live customized
airborne reports for the Company's radio affiliates via Metro Source. The
Company believes that it is the only radio network news organization that has
local studio operations that cover in excess of 80 markets and that is able to
provide such customized reports to these markets.
Metro Source, an information service available to subscribing affiliates, is a
total information system and digital audio workstation that allows the Company's
news affiliates to receive via satellite and view, write, edit and report the
latest news, features and show preparation material. With this product, the
Company provides continuously updated and breaking news, weather, sports,
business and entertainment information to its affiliate stations which have
subscribed to the service. Information and content for Metro Source is primarily
generated from the Company's staff of news bureau chiefs, state correspondents
and professional news writers and reporters.
Local, regional and national news and information stories are fed to the
Company's national news operations center in Phoenix, Arizona where the
information is verified, edited, produced and disseminated via satellite to the
Company's internal Metro Source workstations located in each of its operations
centers and to workstations located at affiliate radio stations nationwide.
Metro Source includes proprietary software that allows for customizing reports
and editing in both audio and text formats. The benefit to stations is that
Metro Source allows them to substantially reduce time and cost from the news
gathering and editing process at the station level, while providing greater
volume and quality news and information coverage from a single source. As of
December 31, 2000, the Company had affiliated over 800 radio stations for the
Metro Source product.
Television Programming Services
The Company is supplying its Television Traffic Services to over 180 television
stations. Similar to its radio programming services, with its MetroTV Services
the Company supplies customized information reports which are generally
delivered on air by its reporters to its television station affiliates. In
addition, the Company supplies customized graphics and other visual programming
elements to its television station affiliates.
The Company utilizes live studio cameras in order to enable its traffic
reporters to provide its Video News Services on television from the Company's
local broadcast studios. In addition, the Company provides its Video News
Services from its aircraft and fixed-position based camera systems. The Video
News Services include: (i) live video coverage from strategically located
fixed-position camera systems; (ii) live video news feeds from the Company's
aircraft; and (iii) full-service, 24 hours per day/7 days per week video
coverage from the Company's camera crews using broadcast quality camera
equipment and news vehicles.
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In addition, through Ross Sports Productions, Inc. ("Ross"), the Company
produces and distributes nationally syndicated but locally produced scholastic
sports programs. Ross' main service is a weekly half-hour TV program, "The High
School Sports Show," which is marketed to local television stations in exchange
for commercial airtime inventory. Ross sells sponsorship advertising packages to
local, regional and national advertisers within the show. The show currently
airs in 22 major markets, generally on major network affiliated stations late
Saturday afternoon or late Sunday morning. The Company offers Ross' services and
products as a part of its MetroTV Services.
Information Services
The Company's Information Services ("IS") develops non-broadcast traffic
information business. IS develops innovative techniques of gathering local
traffic and transportation information, as well as new methods of distributing
such information to the public. The Company believes that in order to remain
competitive and to continue to provide an information product of the highest
quality to its affiliates, it is necessary to invest in and participate in the
development of new technology. Accordingly, in 2000 the Company acquired the
operating assets of SmartRoute. The Company is currently working with several
public and private entities across the United States to improve dissemination of
traffic and transportation information. The Company is a large supplier of
information to the wireless telephone industry, providing customized traffic
information, direction services, and other local information to wireless
subscribers via the Company's STAR JAM (TM) and STAR FIND (TM) services.
In conjunction with ETAK, a digital mapping and software company owned by Tele
Atlas, the Company has been working with a variety of private companies to
deploy commercial products and services involving traveler information. The
relationship allows for the provision of information on a personalized basis
through numerous delivery mechanisms, including the internet, paging, FM
subcarrier, traditional cellular and newly-developed and evolving wireless
systems. Information can be delivered to a wide array of devices including
pagers, computers, PDA's and in-vehicle navigation and information systems.
The Company, through its SmartRoute operations, collects, organizes and
distributes a database of advanced traveler information to automobiles, homes
and offices through various electronic media and telecommunications. The Company
delivers its information under the SmartTraveler brand name. In addition, the
Company has participated in a number of federally funded Intelligent
Transportation Systems Field Operational tests and Model Deployment Initiatives
including the AZTech Model Deployment in Phoenix, the Smart Trek Model
Deployment in Seattle, TravInfo, TransCal (for travel between the SF Bay Area
and Reno/Tahoe), the Atlanta Olympics Technology Showcase, Partners in Motion in
the Washington DC area, Advanced Regional Traffic Interactive Management and
Information System Program in Ohio, Kentucky and Indianapolis, ORION City Model
deployment with Minnesota DOT and Traffic Wise in Indianapolis, and Advanced
Traveler Information System in Massachusetts, Connecticut, Pennsylvania and New
Jersey.
The Company believes that its extensive fleet of aircraft and other
information-gathering technology and broadcast equipment have allowed the
Company to provide high quality programming, enabling it to retain and expand
its affiliate base. In the aggregate, the Company utilizes approximately: 125
helicopters and fixed-wing aircraft; 30 mobile units; 30 airborne camera
systems; 125 fixed-position camera systems; 75 broadcast studios; and 1,300
broadcasters and producers. The Company also maintains a staff of computer
programmers and graphics experts to supply customized graphics and other visual
programming elements to television station affiliates. In addition, the
Company's operations centers and broadcast studios have sophisticated computer
technology, video and broadcast equipment and cellular and wireless technology,
which enables the Company's on-air talent to deliver accurate reports to its
affiliates. The infrastructure and resources dedicated to a specific market by
the Company are determined by the size of the market, the number of affiliates
the Company serves in the market and the type of services being provided.
National Radio Programming
The Company produces and distributes 24/7 Formats, regularly scheduled and
special syndicated programs, including exclusive live concerts, music and
interview shows, national music countdowns, lifestyle short features, news
broadcasts, talk programs, sporting events, and sports features.
The Company controls most aspects of production of its programs, thereby being
able to tailor its programs to respond to current and changing listening
preferences. The Company produces regularly scheduled short-form programs
(typically five minutes or less), long-form programs (typically 60 minutes or
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or longer) and 24/7 Formats. Typically, the short-form programs are produced at
the Company's in-house facilities located in Culver City, California, and New
York, New York. The long-form programs include shows produced entirely at the
Company's in-house production facilities and recordings of live concert
performances and sports events made on location. The 24/7 Formats are produced
at the Company's facilities in Valencia, California.
Westwood One also produces and distributes special event syndicated programs. In
2000, the Company produced and distributed numerous special event programs,
including exclusive broadcasts of The Grammy Awards, Sting Live from Central
Park, and the MTV Video Music Awards.
Westwood One obtains most of the programming for its concert series by recording
live concert performances of prominent recording artists. The agreements with
these artists often provide the exclusive right to broadcast the concerts
worldwide over the radio (whether live or pre-recorded) for a specific period of
time. The Company may also obtain interviews with the recording artist and
retain a copy of the recording of the concert and the interview for use in its
radio programs and as additions to its extensive tape library. The agreements
provide the artist with master recordings of their concerts and nationwide
exposure on affiliated radio stations. In certain cases the artists may receive
compensation.
Westwood One's syndicated programs are produced at its in-house production
facilities. The Company determines the content and style of a program based on
the target audience it wishes to reach. The Company assigns a producer, writer,
narrator or host, interviewer and other personnel to record and produce the
programs. Because Westwood One controls the production process, it can refine
the programs' content to respond to the needs of its affiliated stations and
national advertisers. In addition, the Company can alter program content in
response to current and anticipated audience demand.
The Company produces and distributes seven 24/7 Formats providing music, news
and talk programming for Country, Hot Country, Adult Contemporary, Soft AC,
Oldies, Adult Standards, and the Adult Rock and Roll formats. Using its
production facilities in Valencia, California, the Company provides all the
programming for stations affiliated with each of these formats. Affiliates
compensate the Company for these formats by providing the Company with a portion
of their commercial air time and, in most cases, cash fees.
The Company believes that its tape library is a valuable asset for its future
programming and revenue generating capabilities. The library contains previously
broadcast programs, live concert performances, interviews, daily news programs,
sports and entertainment features, Capitol Hill hearings and other special
events. New programs can be created and developed at a low cost by excerpting
material from the library.
Affiliated Radio Stations
The Company's business strategy is to provide for the programming needs of radio
stations by supplying to radio stations, programs and services that individual
stations may not be able to produce on their own on a cost effective basis. The
Company offers radio stations traffic and news information as well as a wide
selection of regularly scheduled and special event syndicated programming and
24/7 Formats. The information, programs and formats are produced by the Company
and, therefore, the stations typically have virtually no production costs. With
respect to the Company's programs and formats, each program or format is offered
for broadcast by the Company exclusively to one station in its geographic
market, which assists the station in competing for audience share in its local
marketplace. In addition, except for news programming, Westwood One's programs
contain available commercial air time that the stations may sell to local
advertisers. Westwood One typically distributes promotional announcements to the
stations and places advertisements in trade and consumer publications to further
promote the upcoming broadcast of its programs.
Westwood One enters into affiliation agreements with radio stations which
requires the affiliate to provide the Company with a specific number of
commercial positions which it aggregates by similar day and time periods and
resells to its advertisers. Some affiliation agreements also require a station
to broadcast the Company's programs and to use a portion of the program's
commercial slots to air national advertisements and any related promotional
spots. With respect to 24/7 Formats, the Company may also receive a fee from the
affiliated stations for the right to broadcast the formats. Radio stations in
the top 200 national markets may also receive compensation for airing national
advertising spots.
Affiliation agreements specify the number of times and the approximate daypart
each program and advertisement may be broadcast. Westwood One requires that each
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station complete and promptly return to the Company an affidavit
(proof-of-performance) that verifies the time of each broadcast. Affiliation
agreements generally run for a period of at least one year, are automatically
renewable for subsequent periods and are cancelable by either the Company or the
station upon 90 days' notice.
The Company has a number of people responsible for station sales and marketing
its programs to radio stations. The Company's staff develops and maintains
close, professional relationships with radio station personnel to provide them
with quick programming assistance.
Advertising Sales and Marketing
The Company packages its radio commercial airtime inventory on a network basis,
covering all affiliates in relevant markets, either regionally or nationally.
This packaged inventory typically appeals to advertisers seeking a broad
demographic reach. Because the Company generally sells its commercial airtime
inventory on a network basis rather than station-by-station, the Company does
not compete for advertising dollars with its local radio station affiliates. The
Company believes that this corporate policy is a key factor in maintaining its
affiliate relationships. Currently, the Company packages its television
commercial airtime inventory on a regional and national network basis. The
Company has developed a separate sales force to sell its television commercial
airtime inventory and to optimize the efforts of the Company's national internal
structure of sales representatives. The Company's advertising sales force is
comprised of approximately 260 sales representatives.
In each of the Metro/Shadow markets in which it conducts operations, the Company
maintains an advertising sales office as part of its operations center. The
Company's advertising sales force is able to sell available commercial airtime
inventory in any and all of the Company's markets in addition to selling such
inventory in each local market, which the Company believes affords its sales
representatives an advantage over certain of their competitors. For example, an
airline advertiser can purchase sponsorship advertising packages in multiple
markets from the Company's local sales representative in the city in which the
airline is headquartered.
The Company's typical radio advertisement for traffic and information
programming consists of an opening announcement and a ten-second commercial
message presented immediately prior to, in the middle of, or immediately
following a regularly scheduled information report. Because the Company has
numerous radio station affiliates in each of its markets (averaging over 25
affiliates per market), the Company believes that its traffic and information
broadcasts reach more people, more often, in a higher impact manner than can be
achieved using any other advertising medium. The Company combines its commercial
airtime inventory into multiple "sponsorship" packages which it then sells as an
information sponsorship package to advertisers. These Company sponsorship
packages are run on a fair and equal rotation (i.e., each advertiser receives
its pro rata share of advertisements sold by the Company for broadcast on each
of the Company's affiliates in the relevant market or markets) throughout its
networks on a local, regional or national basis, primarily during morning and
afternoon drive periods. The Company generally does not allow an advertiser to
select individual stations from its networks on which to run its advertising
campaign.
The Company believes that the positioning of advertisements within or adjacent
to its information reports appeals to advertisers because the advertisers'
messages are broadcast along with regularly scheduled programming during peak
morning and afternoon drive times when a majority of the radio audience is
listening. Radio advertisements broadcast during these times typically generate
premium rates. Moreover, surveys commissioned by the Company demonstrate that
because the Company's customized information reports are related to topics of
significant interest to listeners, listeners often seek out the Company's
information reports. Since advertisers' messages are embedded in the Company's
information reports, such messages have a high degree of impact on listeners and
generally will not be "pre-empted" (i.e., moved by the radio station to another
time slot). Most of the Company's advertisements are read live by the Company's
on-air talent, providing the Company's advertisers with the added benefit of an
implied endorsement for their product.
Westwood One provides national advertisers with a cost-effective way to
communicate their commercial messages to large listening audiences nationwide
through purchases of commercial airtime in its national radio networks and
programs. An advertiser can obtain both frequency (number of exposures to the
target audience) and reach (size of listening audience) by purchasing
advertising time from the Company. By purchasing time in networks or programs
directed to different formats, advertisers can be assured of obtaining high
market penetration and visibility as their commercial messages will be broadcast
on several stations in the same market at the same time. The Company supports
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its national sponsors with promotional announcements and advertisements in trade
and consumer publications. This support promotes the upcoming broadcasts of
Company programs and is designed to increase the advertisers' target listening
audience.
Generally, the Company provides its MetroTV services to television stations in
exchange for thirty-second commercial airtime inventory that the Company
packages and sells on a regional and national basis. The amount and placement of
the commercial airtime inventory that the Company receives from television
stations varies by market and the type of service provided by the Company. As
the Company has provided enhanced MetroTV services, it has been able to acquire
more valuable commercial airtime inventory. The Company believes that it offers
advertisers significant benefits because, unlike traditional television
networks, the Company often delivers more than one station in major markets and
advertisers may select specific markets.
The Company has established a morning news network for its advertisers'
commercials to air during local news programming and local news breaks from 6:00
a.m. to 9:00 a.m. Because the Company has affiliated a large number of network
television stations in major markets, its morning news network delivers a
significant national household rating in an efficient and compelling local news
environment. As the Company continues to expand its service offerings for local
television affiliates, it plans to create additional news networks to leverage
its television news gathering infrastructure.
Competition
The Company's Metro/Shadow Division, in the MSA markets in which it operates,
competes for advertising revenue with local print and other forms of
communications media including; magazines, outdoor advertising, network radio
and network television advertising, transit advertising, direct response
advertising, yellow page directories, internet/new media and point-of-sale
advertising. Although the Company is significantly larger than the next largest
provider of traffic and local information services, there are several
multi-market operations providing local radio and television programming
services in various markets. In addition, the recent consolidation of the radio
industry has created opportunities for large radio groups to gather traffic
information on their own.
The Company's Network Division operates in a very competitive environment. In
marketing its programs to national advertisers, the Company directly competes
with other radio networks as well as with independent radio syndication
producers and distributors. More recently, as a result of consolidations in the
radio industry, companies owning large groups of stations have begun to create
competing networks that have resulted in additional competition for network
radio advertising expenditures. In addition, as with its Metro/Shadow Division,
the Network Division competes for advertising revenue with network television,
cable television, print and other forms of communications media. The Company
believes that the high quality of its programming and the strength of its
station relations and advertising sales forces enable it to compete effectively
with other forms of communication media. Westwood One markets its programs to
radio stations, including affiliates of other radio networks, that it believes
will have the largest and most desirable listening audience for each of its
programs. The Company often has different programs airing on a number of
stations in the same geographic market at the same time. The Company believes
that in comparison with any other independent radio syndication producer and
distributor or radio network it has a more diversified selection of programming
from which national advertisers and radio stations may choose. In addition, the
Company both produces and distributes programs, thereby enabling it to respond
more effectively to the demands of advertisers and radio stations.
The increase in the number of program formats has led to increased competition
among local radio stations for audience. As stations attempt to differentiate
themselves in an increasingly competitive environment, their demand for quality
programming available from outside programming sources increases. This demand
has been intensified by high operating and production costs at local radio
stations and increased competition for local advertising revenue.
Government Regulation
Radio broadcasting and station ownership are regulated by the FCC. Westwood One,
as a producer and distributor of radio programs and services, is generally not
subject to regulation by the FCC. Metro/Shadow utilizes FCC regulated two-way
radio frequencies pursuant to licenses issued by the FCC.
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Employees
On February 1, 2001, Westwood One had approximately 2,900 full-time employees,
including a domestic advertising sales force of approximately 260 people, and
620 part-time employees. In addition, the Company maintains continuing
relationships with approximately 175 independent writers, program hosts,
technical personnel and producers. Certain employees at Metro, Shadow Traffic,
the Mutual Broadcasting System, NBC Radio Networks and Unistar Radio Networks
are covered by collective bargaining agreements. The Company believes relations
with its employees and independent contractors are satisfactory.
Item 2. Properties
The Company owns a 7,600 square-foot building in Culver City, California in
which its Network Division syndicated program production facilities are located
and a 14,000 square-foot building in Culver City, California which contains
administrative, and sales and marketing offices. The Company also owns a 10,000
square-foot building adjacent to its offices which it subleases. In addition,
the Company leases operation centers/broadcast studios and marketing and
administrative offices across the United States consisting of over 275,000
square feet in the aggregate, pursuant to the terms of various lease agreements.
The Company believes that its facilities are adequate for its current level of
operations.
Item 3. Legal Proceedings
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Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of the year ended December 31, 2000.
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PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
On February 1, 2001 there were approximately 340 holders of record of the
Company's Common Stock, several of which represent "street accounts" of
securities brokers. Based upon the number of proxies requested by brokers in
conjunction with its shareholders' meeting the Company estimates that the total
number of beneficial holders of the Company's Common Stock exceeds 5,000.
Since December 15, 1998, the Company's Common Stock has been traded on the New
York Stock Exchange ("NYSE") under the symbol "WON". The following table sets
forth the range of high and low last sales prices on the NYSE for the Common
Stock for the calendar quarters indicated. These prices have been adjusted on a
retroactive basis to reflect the effect of the Company's two-for-one stock split
which was paid on March 22, 2000.
2000 High Low
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First Quarter $39 13/16 $29 1/2
Second Quarter 39 30 13/16
Third Quarter 34 3/8 19 13/16
Fourth Quarter 22 3/8 14 1/4
1999
----
First Quarter 14 13/32 11 19/32
Second Quarter 18 27/32 14 19/32
Third Quarter 25 13/16 17 7/32
Fourth Quarter 38 19 9/32
No cash dividend was paid on the Company's stock during 2000 or 1999, and the
payment of dividends is restricted by the terms of its loan agreements.
- 9 -
Item 6. SELECTED FINANCIAL DATA
(In thousands except per share data)
The per share amounts included herein have been restated to reflect on a
retroactive basis the Company's two-for-one stock split which was paid on March
22, 2000.
2000 1999 (1) 1998 (2) 1997 (3) 1996
---- ---- ---- ---- ----
OPERATING RESULTS FOR YEAR ENDED
Net Revenues $553,693 $358,305 $259,310 $240,790 $171,784
Operating and Corporate Costs, Excluding
Depreciation and Amortization 388,095 267,294 206,996 191,854 132,247
Depreciation and Amortization 62,104 30,214 18,409 13,031 12,265
Operating Income 103,494 60,797 33,354 35,905 27,272
Net Income $42,283 $23,887 $13,046 $25,496 $17,500
Income Per Basic Share $.38 $.33 $.22 $.41 $.28
Income Per Diluted Share $.36 $.30 $.20 $.37 $.25
Current Assets $153,881 $167,848 $85,663 $77,933 $48,379
Working Capital 15,679 39,843 7,111 12,180 (3,647)
Total Assets 1,285,556 1,333,153 345,279 317,695 273,046
Long-Term Debt 168,000 158,000 170,000 115,000 130,443
Total Shareholders' Equity 949,892 1,019,775 77,218 124,678 86,848
Other Financial Data For Year Ended
December 31:
OPERATING CASH FLOW (EBITDA) (4) $165,598 $91,011 $52,314 $48,936 $39,537
(1) Results for the year ended December 31, 1999 include the results of Metro
from the date of the merger on September 22, 1999.
(2) Results for the year ended December 31, 1998 include the remaining Shadow
Traffic Operations from the time they were acquired in May 1998.
(3) Results for the year ended December 31, 1997 include the CBS Radio Networks
from the effective date of the Representation Agreement in April 1997.
(4) Operating cash flow is defined as operating income plus depreciation and
amortization and non-recurring items. Operating cash flow is not determined
in accordance with generally accepted accounting principles (GAAP), is not
indicative of Cash Provided by Operating Activities and should not be
considered in isolation from, or as an alternative to, other measures
determined in accordance with GAAP.
- -- No cash dividend was paid on the Company's Common Stock during the periods
presented above.
- 10 -
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (In thousands except for per share amounts)
On January 27, 2000 the Board of Directors approved a two-for-one stock split of
the Company's Common Stock and Class B Stock effective March 22, 2000. All
references herein to share and per share amounts have been restated to give
effect to the stock split on a retroactive basis.
On September 22, 1999, the Company completed its acquisition of 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
acquisition.
On May 1, 1998, the Company purchased the operating assets of the Shadow Traffic
operations in Baltimore, Boston, Dallas, Detroit, Houston, Miami, Sacramento,
San Diego, San Francisco and Washington, D.C. The results of operations for
these additional cities are included in the consolidated financial statements of
the Company from May 1, 1998.
Results of Operations
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. Net revenues increased 55% to $553,693 in 2000
from $358,305 in 1999, and increased 38% in 1999 from $259,310 in 1998. The 2000
increase was primarily attributable to the September 22, 1999 merger with Metro,
higher advertising rates at both the Company's Network and Traffic operations
and due to the Company's exclusive live broadcast of the 2000 Summer Olympics
from Sydney, Australia. The 1999 increase was primarily attributable to the
merger with Metro and was also attributable to higher advertising rates at both
the Company's Network and Shadow Traffic operations. On a proforma basis,
assuming the acquisition of Metro had occurred as of January 1, 1999, net
revenue for 2000 would have increased by approximately 13%.
Operating costs and expenses excluding depreciation and amortization increased
45% to $380,346 in 2000 from $261,538 in 1999, and increased 29% in 1999 from
$202,138 in 1998. The 2000 increase was attributable to operating expenses
associated with the Metro acquisition and broadcast rights fees and other
related costs associated with the 2000 Summer Olympics. The 1999 increase was
primarily attributable to the 1999 Metro merger.
Depreciation and amortization increased 106% to $62,104 in 2000 from $30,214 in
1999, and increased 64% in 1999 from $18,409 in 1998. The 2000 and 1999
increases were principally related to the amortization of goodwill resulting
from the Metro acquisition.
Corporate general and administrative expenses increased 35% to $7,749 in 2000
from $5,756 in 1999, and increased 18% in 1999 from $4,858 in 1998. The
increases in 2000 and 1999 were principally attributable to an incentive bonus
payable pursuant to the terms of the Management Agreement with Infinity.
Operating income increased 70% to $103,494 in 2000 from $60,797 in 1999, and
increased 82% in 1999 from $33,354 in 1998. The 2000 increase was attributable
to higher revenues from the Company's operations partially offset by higher
depreciation and amortization. The 1999 increase was primarily related to the
Metro merger as well as the improved performance of the Company's network
division.
Interest expense was $10,785, $12,150 and $10,340 in 2000, 1999 and 1998,
respectively. The 2000 decrease was attributable to lower debt levels throughout
most of 2000 partially offset by higher interest rates. The 1999 increase was
attributable to higher average debt levels as well as higher interest rates.
The income tax provisions for 2000, 1999 and 1998 are based on annual effective
tax rates of 55%, 52% and 44%, respectively. The increase in the effective tax
rate in 2000 and 1999 are principally attributable to non-deductible goodwill
resulting from the Metro acquisition. The 1999 and 1998 provisions are
substantially all deferred taxes as the Company had tax net operating loss
deductions and deductions resulting from stock option exercises to reduce cash
taxes payable.
Net income in 2000 increased 77% to $42,283 ($.38 per basic share and $.36 per
diluted share) from $23,887 ($.33 per basic share and $.30 per diluted share) in
1999 and increased 83% in 1999 from $13,046 ($.22 per basic share and
$.20 per diluted share) in 1998.
Weighted averages shares outstanding for purposes of computing basic earnings
per share were 110,640, 72,168 and 60,196 in 2000, 1999 and 1998, respectively.
- 11 -
The increases in 2000 and 1999 were attributable to the issuance of 50,224
shares of Common Stock in conjunction with the Company's acquisition of Metro
partially offset by stock repurchases made pursuant to the Company's ongoing
stock repurchase program. Weighted average shares outstanding for purposes of
computing diluted earnings per share were 115,864, 78,930 and 66,868 in 2000,
1999 and 1998, respectively. The changes in weighted average shares are due
principally to the increase in basic shares partially offset by the effect of
stock option grants.
Liquidity and Capital Resources
At December 31, 2000, the Company's principal sources of liquidity were its cash
and cash equivalents of $6,757 and available borrowings under its loan agreement
of $164,000.
For 2000, net cash from operating activities was $156,392 an increase of
$102,055 from 1999. The increase was primarily attributable to higher cash flows
from operations. Cash flow from operations was principally used to fund the
Company's stock repurchase program.
At December 31, 2000, the Company had an unsecured $277,000 bank revolving
credit facility and an unsecured $65,000 term loan (collectively the
"Facility"). At December 31, 2000, the Company had available borrowings of
$164,000 on its Facility. The amount of the Facility is scheduled to be reduced
by $4,500 at the end of each quarter during 2001. In addition, the Company is
required to repay its term loan by $2,500 per quarter in 2001.
In November 2000, the Company completed its acquisition of the operating assets
of SmartRoute Systems, Inc. for $24,250 plus costs and the assumption of certain
obligations, including loss contracts.
In 2000, the Company purchased 5,190 shares of the Company's Common Stock for a
total cost of $123,431. In 1999, the Company purchased 3,128 shares of the
Company's Common Stock for a total cost of $54,164 and in 1998, purchased 6,750
shares of the Company's Common Stock for a total cost of $65,438. In 2001
(through February 28, 2001), the Company repurchased an additional 321 shares of
Common Stock at a cost of $6,680. The stock buybacks have been funded
principally from the Company's free cash flow.
The Company believes that its cash, other liquid assets, operating cash flows
and available bank borrowings, taken together, provide adequate resources to
fund ongoing operating requirements.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe
harbor for forward-looking statements made by or on the behalf of the Company.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Various
risks that could cause future results to differ from those expressed by
forward-looking statements include, but are not limited to: changes in economic
conditions in the US (both general and relative to the advertising industry);
fluctuations in interest rates; changes in industry conditions; changes in
operating performance; shifts in population and other demographics; changes in
the level of competition for advertising dollars; technological changes and
innovations; changes in government regulations and policies and actions of
regulatory bodies; changes in tax rates and access to capital markets. These
statements are based on management's views and assumptions at the time the
statements are made, however no assurances can be given that management's
expectations will come to pass.
- 12 -
Item 7A. Qualitative and Quantitative Disclosures about Market Risk
The Company is exposed to market risk related to changes in interest rates. The
Company does not use derivative financial instruments.
The interest rate on the Company's outstanding borrowings is based on the prime
rate plus an applicable margin of up to .25%, or LIBOR plus an applicable margin
of up to 1.25%, as chosen by the Company. Historically, the Company has
typically chosen the LIBOR option with a three month maturity.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements and the related notes and schedules of the
Company are indexed on page F-1 of this Report, and attached hereto as pages F-1
through F-17 and by this reference incorporated herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
- 13 -
PART III
Item 10. Directors and Executive Officers of the Registrant
This information is incorporated by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A not later than 120 days after
the end of the Company's fiscal year.
Item 11. Executive Compensation
This information is incorporated by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A not later than 120 days after
the end of the Company's fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is incorporated by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A not later than 120 days after
then end of the Company's fiscal year.
Item 13. Certain Relationships and Related Transactions
This information is incorporated by reference to the Company's definitive proxy
statement to be filed pursuant to Regulation 14A not later than 120 days after
the end of the Company's fiscal year.
- 14 -
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this Report on Form 10-K
1. Financial statements and schedules to be filed thereunder are indexed on
page F-1 hereof.
2. Exhibits
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)
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 Bylaws of Registrant as currently in effect. (10)
*10.1 Employment Agreement, dated April 29, 1998, between Registrant and
Norman J. Pattiz. (12)
10.2 Form of Indemnification Agreement between Registrant and its Directors
and Executive Officers. (4)
10.3 Amended and Restated Credit Agreement, dated September 30, 1996,
between Registrant and The Chase Manhattan Bank and Co-Agents. (10)
10.4 Second Amended and Restated Credit Agreement dated November 17,
2000, between Registrant and The Chase Manhattan Bank and Co-Agents.
10.5 Purchase Agreement, dated as of August 24, 1987, between Registrant
and National Broadcasting Company, Inc. (5)
10.6 Agreement and Plan of Merger among Registrant, Copter Acquisition
Corp. and Metro Networks, Inc. dated as of June 1, 1999 (13)
*10.7 Amendment 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 Management Agreement, dated as of March 30, 1999, between Registrant
and Infinity Broadcasting Corporation. (13)
10.9 Representation Agreement, dated as of March 31, 1997, between
Registrant and CBS, Inc. (11)
10.10 Westwood One Amended 1999 Stock Incentive Plan. (13)
10.11 Westwood One, Inc. 1989 Stock Incentive Plan. (6)
10.12 Amendments to the Westwood One, Inc. Amended 1989 Stock Incentive
Plan. (7) (9)
10.13 Leases, 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)
10.14 Lease, dated December 18, 1991, between Valencia Paragon
Associates, Ltd., and Unistar Communications Group, Inc. relating to
Valencia, California offices. (8)
22 List of Subsidiaries
24 Consent of Independent Accountants
27 Financial Data Schedule
**********************
* Indicates a management contract or compensatory plan.
- 15 -
(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 (File
Number 0-13020), and incorporated herein by reference.
(4) Filed as part of Registrant's September 25, 1986 proxy statement
(File Number 0-13020) and incorporated herein by reference.
(5) Filed an exhibit to Registrant's current report on Form 8-K dated
September 4, 1987 (File Number 0-13020)and incorporated herein by
reference.
(6) Filed as part of Registrant's March 27, 1992 proxy statement (File
Number 0-13020) and incorporated herein by reference.
(7) Filed as an exhibit to Registrant's July 20, 1994 proxy statement
(File Number 0-13020) and incorporated herein by reference.
(8) Filed as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 (File Number 0-13020) and
incorporated herein by reference.
(9) Filed as an exhibit to Registrant's May 17, 1996 proxy statement
(File Number 0-13020) and incorporated herein by reference.
(10) Filed as an exhibit to Registrant's Quarterly report on Form 10-Q
for the quarter ended September 30, 1996 (File Number 0-13020) and
incorporated herein by reference.
(11) Filed as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997 (File Number 0-13020) and
incorporated herein by reference.
(12) Filed as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 (File Number 0-13020) and
incorporated herein by reference.
(13) Filed as an exhibit to Registrant's August 24, 1999 proxy statement
(File Number 0-13020) and incorporated herein by reference.
(14) Filed as an exhibit to Registrant's current report on Form 8-K dated
October 1, 1999 (File Number 0-13020) and incorporated herein by
reference.
(15) Filed as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1999 (File Number 0-13020) and
incorporated herein by reference.
(b) Reports on Form 8-K
None.
- 16 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 27, 2001 By /S/ FARID SULEMAN
--------------------
Farid Suleman
Director, Secretary and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
Principal Executive Officer:
JOEL HOLLANDER Director, President and March 27, 2001
- ----------------------------------
Joel Hollander Chief Executive Officer
Principal Financial Officer and
Chief Accounting Officer:
FARID SULEMAN Director, Secretary and March 27, 2001
- ----------------------------------
Farid Suleman Chief Financial Officer
Additional Directors:
NORMAN J. PATTIZ Chairman of the Board of March 27, 2001
- ----------------------------------
Norman J. Pattiz Directors
DAVID L. DENNIS Director March 27, 2001
- ----------------------------------
David L. Dennis
GERALD GREENBERG Director March 27, 2001
- ----------------------------------
Gerald Greenberg
DENNIS HOLT Director March 27, 2001
- ----------------------------------
Dennis Holt
MARIA D. HUMMER Director March 27, 2001
- ----------------------------------
Maria D. Hummer
MEL A. KARMAZIN Director March 27, 2001
- ----------------------------------
Mel A. Karmazin
STEVEN A. LERMAN Director March 27, 2001
- ----------------------------------
Steven A. Lerman
DAVID SAPERSTEIN Director March 27, 2001
- ----------------------------------
David Saperstein
JOSEPH B. SMITH Director March 27, 2001
- ----------------------------------
Joseph B. Smith
- 17 -
WESTWOOD ONE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
1. Consolidated Financial Statements Page
----
--Report of Independent Accountants F-2
--Consolidated Balance Sheets at December 31, 2000
and 1999 F-3
--Consolidated Statements of Operations for the years
ended December 31, 2000, 1999 and 1998 F-4
--Consolidated Statements of Shareholders' Equity
for the years ended December 31, 2000, 1999 and 1998 F-5
--Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998 F-6
--Notes to Consolidated Financial Statements F-7 - F-16
2. Financial Statement Schedules:
V. -Valuation and Qualifying Accounts F-17
All other schedules have been omitted because they are not applicable, the
required information is immaterial, or the required information is included in
the consolidated financial statements or notes thereto.
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Westwood One, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Westwood One, Inc. and its subsidiaries at December 31, 2000 and
1999, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000 in conformity with generally
accepted accounting principles in the United States of America. In addition, in
our opinion, the financial statement schedule listed in the accompanying index
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
/S/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PricewaterhouseCoopers LLP
New York, New York
February 15, 2001
F-2
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
December 31,
2000 1999
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,757 $ 10,626
Accounts receivable, net of allowance for doubtful accounts
of $9,356 (2000) and $7,714 (1999) 135,550 145,833
Other current assets 11,574 11,389
---------- --------
Total Current Assets 153,881 167,848
PROPERTY AND EQUIPMENT, NET 58,052 55,957
INTANGIBLE ASSETS, NET 1,055,727 1,078,587
OTHER ASSETS 17,896 30,761
---------- ---------
TOTAL ASSETS $1,285,556 $1,333,153
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 22,103 $21,356
Amounts payable to affiliates 26,542 19,830
Other accrued expenses and liabilities 79,557 76,819
Current maturity of long-term debt 10,000 10,000
---------- ----------
Total Current Liabilities 138,202 128,005
LONG-TERM DEBT 168,000 158,000
DEFERRED INCOME TAXES 15,568 8,939
OTHER LIABILITIES 13,894 18,434
---------- ----------
TOTAL LIABILITIES 335,664 313,378
---------- ----------
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, 129,299,636 (2000) and 127,897,500 (1999) 1,293 1,279
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 1,194,118 1,171,370
Retained earnings 66,671 24,388
Accumulated other comprehensive income (loss) (3,635) 7,862
----------- ----------
1,258,454 1,204,906
Less treasury stock, at cost; 21,611,450 (2000) and 16,421,450 (1999) shares (308,562) (185,131)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 949,892 1,019,775
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,285,556 $1,333,153
========== ==========
See accompanying notes to consolidated financial statements.
F - 3
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended December 31,
2000 1999 1998
---- ---- ----
GROSS REVEBYES $644,774 $414,959 $298,888
Less Agency Commissions 91,081 56,654 39,578
-------- -------- --------
NET REVENUES 553,693 358,305 259,310
-------- -------- --------
Operating Costs and Expenses Excluding
Depreciation and Amortization 380,346 261,538 202,138
Depreciation and Amortization 62,104 30,214 18,409
Corporate General and Administrative Expenses 7,749 5,756 4,858
Nonrecurring Items, Net Expense - - 551
-------- -------- --------
450,199 297,508 225,956
-------- -------- --------
OPERATING INCOME 103,494 60,797 33,354
Interest Expense 10,785 12,150 10,340
Other Income (659) (610) (432)
--------- -------- --------
INCOME BEFORE TAXES 93,368 49,257 23,446
INCOME TAXES 51,085 25,370 10,400
-------- -------- --------
NET INCOME $ 42,283 $ 23,887 $ 13,046
======== ======== ========
INCOME PER SHARE:
Basic $ .38 $ .33 $ .22
Diluted $ .36 $ .30 $ .20
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 110,640 72,168 60,196
Diluted 115,864 78,930 66,868
See accompanying notes to consolidated financial statements.
F - 4
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Accumul'd
Other Treasury
Preferred Common Stock Class B Stock Add'l Retained Comp Stock Total
--------- ------------ ------------- Paid-in Earnings Income ----- Shareholders'
Shares Amount Shares Amount Shares Amount Capital (Deficit) (Loss) Shares Amount Equity
------ ----- ------ ------ ------ ------ ------- -------- ------ ------ ------ ------
BALANCE AT DECEMBER 31, 1997 - - 34,640 $347 352 $4 $201,759 ($11,903) - 3,272 65,529 $124,678
Net income for 1998 - - - - - - - 13,046 - - 13,046
Issuance of common stock under
stock option plans - - 322 3 - - 4,929 - - - - 4,932
Purchase of treasury stock - - - - - - - - - 3,375 65,438 (65,438)
----- ----- ------ ----- ----- --- -------- ------ ------ ------ ------- -------
BALANCE AT DECEMBER 31, 1998 - - 34,962 350 352 4 206,688 1,143 - 6,647 130,967 77,218
Components of comprehensive income:
Net income for 1999 - - - - - - - 23,887 - - - 23,887
Unrealized holding gain in equity
securities net of tax - - - - - - - - 7,862 - - 7,862
----- ----- ------ ----- ----- --- -------- ------ ------ ------ ------- -------
Total comprehensive income - - - - - - - 23,887 7,862 - - 31,749
Issuance of common stock - - 25,112 251 - - 925,304 - - - - 925,555
Issuance of common stock under warrants - - 3,000 30 - - 8,970 - - - - 9,000
Issuance of common stock under
stock option plans - - 875 9 - - 23,648 - - - - 23,657
Issuance of warrants - - - - - - 6,760 - - - - 6,760
Purchase of treasury stock - - - - - - - - - 1,564 54,164 (54,164)
Two-for-one stock split - - 63,949 639 352 3 - (642) - 8,211 - -
----- ----- ------ ----- ----- --- --------- ------- ------ ------ ------- ---------
BALANCE AT DECEMBER 31, 1999 - - 127,898 1,279 704 7 1,171,370 24,388 7,862 16,422 185,131 1,019,775
Components of comprehensive income:
Net income for 2000 - - - - - - - 42,283 - - - 42,283
Unrealized holding gain (loss) in
equity securities net of tax - - - - - - - - (11,497) - - (11,497)
----- ----- ------ ------ ----- --- --------- ------- ------ ------ -------- -------
Total comprehensive income - - - - - - - 42,283 (11,497) - - 30,786
Issuance of common stock under
stock option plans - - 1,402 14 - - 22,748 - - - - 22,762
Purchase of treasury stock - - - - - - - - - 5,190 123,431 (123,431)
----- ----- ------ ------ ----- --- --------- ------- ------- ------ -------- --------
BALANCE AT DECEMBER 31, 2000 - - 129,300 $1,293 704 $7 $1,194,118 $66,671 ($3,635)21,612 $308,562 $949,892
===== ===== ======= ===== ===== === ========= ====== ===== ====== ======= =======
See accompanying notes to consolidated financial statements
F - 5
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2000 1999 1998
---- ---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 42,283 $23,887 $13,046
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 62,104 30,214 18,409
Deferred taxes 13,144 11,451 8,496
Other 329 314 315
-------- ------- -------
117,860 65,866 40,266
Changes in assets and liabilities:
Increase (decrease) in accounts receivable 8,976 (26,271) (7,637)
Decrease (increase) in other current assets (179) (1,978) 1,104
Increase in accounts payable and accrued liabilities 29,735 16,720 8,982
-------- ------- -------
Net Cash Provided By Operating Activities 156,392 54,337 42,715
-------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of companies and other (46,280) 6,105 (30,987)
Capital expenditures (9,201) (6,084) (1,945)
-------- ------- -------
Net Cash (Used For) Provided By Investing Activities (55,481) 21 (32,932)
-------- ------- -------
CASH PROVIDED BEFORE FINANCING ACTIVITIES 100,911 54,358 9,783
-------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Debt repayments and payments of capital lease obligations (3,404) (14,973) (2,758)
Borrowings under bank and other long-term obligations 10,000 - 55,000
Issuance of common stock 13,028 22,856 3,199
Repurchase of common stock and warrants (123,431) (54,164) (65,438)
Deferred financing costs (973) - -
-------- ------- -------
Net Cash (Used For) Financing Activities (104,780) (46,281) (9,997)
-------- ------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,869) 8,077 (214)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,626 2,549 2,763
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,757 $10,626 $2,549
======== ======= =======
See accompanying notes to consolidated financial statements.
F-6
NOTE 1 - Summary of Significant Accounting Policies:
Nature of Business
Westwood One, Inc. and subsidiaries (the "Company") is in the business of
selling commercial airtime to advertisers.
Principles of Consolidation
The consolidated financial statements include the accounts of all majority and
wholly-owned subsidiaries.
Revenue Recognition
Revenue is recognized when commercial advertisements are broadcast.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and revenue and expenses during the reporting period.
Actual results may differ from those estimates.
Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of
less than three months to be cash equivalents. The carrying amount of cash
equivalents approximates fair value because of the short maturity of these
instruments.
Depreciation
Depreciation is computed using the straight line method over the estimated
useful lives of the assets, as follows:
Buildings and improvements 40 years
Recording and studio equipment 5 - 10 years
Capitalized leases Term of lease
Furniture and equipment and other 3 - 10 years
Intangible Assets
Intangible assets are amortized over periods ranging from five to forty years.
At each balance sheet date, the Company determines whether an impairment of
Intangible Assets has occurred based upon expectations of undiscounted broadcast
cash flow. Broadcast Cash Flow is based on the consolidated statement of
operations, calculated by subtracting from net revenue, operating costs and
expenses excluding depreciation and amortization. To date, the Company has not
experienced an impairment in any of its intangible assets. However, should such
an impairment exist, the impairment will be measured as the amount by which the
carrying amount of the asset exceeds its fair value, as defined by Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 ("FAS 123"), "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25
("APB 25"), "Accounting for Stock Issued to Employees," and related
Interpretations.
F-7
Income Taxes
The Company uses the asset and liability method of financial accounting and
reporting for income taxes required by Statement of Financial Accounting
Standards No. 109 ("FAS 109"), "Accounting for Income Taxes". Under FAS 109,
deferred income taxes reflect the tax impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and the amounts recognized for tax purposes.
Earnings per Share
Basic earnings per share excludes all dilution and is calculated using the
weighted average number of common shares outstanding in the period. Diluted
earnings per share amounts are based upon the weighted average number of common
and common equivalent shares outstanding during the year. Common equivalent
shares are related to warrants and stock options. The following number of common
equivalent shares were added to the basic weighted average shares outstanding
for each period:
2000 1999 1998
---- ---- ----
Warrants 1,431,000 4,578,000 5,297,000
Options 3,793,000 2,184,000 1,375,000
Common equivalent shares are excluded in periods in which they are
anti-dilutive. The following options were excluded from the calculation of
diluted earnings per share because the exercise price was greater than the
average market price of the Company's Common Stock for the years presented:
2000 1999 1998
---- ---- ----
Options 1,350,000 960,000 2,680,000
The per share exercise prices of the options were $32.25-$40.70 in 2000, $22.57
in 1999 and $13.00-$15.00 in 1998.
Reclassification
Certain amounts have been reclassified to be comparable to the 2000
presentation.
NOTE 2 - Acquisitions of Businesses:
In May 1998, the Company acquired the operating assets of the Shadow Traffic
operations in Baltimore, Boston, Dallas, Detroit, Houston, Miami, Sacramento,
San Diego, San Francisco and Washington, D.C. for approximately $20,000 plus
costs and the assumption of certain obligations, including severance obligations
and obligations to provide third parties with commercial airtime. The
acquisition was accounted for as a purchase, and accordingly, the operating
results are included with those of the Company from May 1, 1998. The purchase
price has been allocated to the assets and liabilities acquired based on their
respective fair values. The intangible assets acquired as part of the purchase
are being amortized over 20 years.
On September 22, 1999, the Company acquired all the issued and outstanding
common and preferred stock of Metro Networks, Inc. ("Metro"). Under the terms of
the merger, each outstanding share of Metro was converted into 1.5 shares of the
Company's common stock and each outstanding share of Metro Series A Convertible
Preferred Stock was converted into 1.5 shares of a corresponding series of
preferred stock of the Company. Accordingly, the Company issued approximately
50,224,000 shares of its Common Stock and 3,824,625 shares of its Series A
Convertible Preferred Stock. Based on the value of the shares issued and to be
issued and expense of the acquisition, which included investment banking fees,
professional fees, severance costs and costs of eliminating duplicative
facilities, the purchase price aggregated approximately $954,093. Goodwill and
intangible assets associated with the transaction approximated $867,160. The
F-8
acquisition was accounted for as a purchase, and accordingly, the operating
results are included with those of the Company from September 22, 1999. The
purchase price has been allocated to the assets and liabilities acquired based
on preliminary estimates of their respective fair values. The intangible assets
acquired are being amortized over 25 years. The unaudited pro forma combined
historical results for Net revenues, Net Income and Income per share, as if
Metro had been acquired at the beginning of 1999, are estimated to be $491,762,
$8,274 and $.08 per basic share and $.07 per diluted share, respectively. The
pro forma results include amortization of the intangible assets and the issuance
of the additional shares. The pro forma results are not necessarily indicative
of what actually would have occurred if the acquisition had been completed as of
the beginning of 1999, nor are they indicative of future consolidated results.
On November 17, 2000, the Company acquired the operating assets of SmartRoute
Systems, Inc. for $24,250 plus costs and the assumption of certain obligations,
including loss contracts. The acquisition was accounted for as a purchase, and
accordingly, the operating results are included with those of the Company from
November 18, 2000. The purchase price has been allocated to the assets and
liabilities acquired based on their respective fair values. The intagible assets
acquired as part of the purchase are being amortized over periods up to 10
years.
NOTE 3 - Property and Equipment:
Property and equipment is recorded at cost and is summarized as follows at:
December 31,
--------------------------
2000 1999
---- ----
Land, buildings and improvements.................. $12,097 $11,558
Recording and studio equipment.................... 45,234 35,934
Capitalized leases................................ 11,123 11,123
Furniture and equipment and other................. 21,416 16,824
------ ------
89,870 75,439
Less: Accumulated depreciation and amortization.. 31,818 19,482
------ ------
Property and equipment, net................ $58,052 $55,957
======= =======
Depreciation expense was $13,188 in 2000, $7,304 in 1999 and $5,138 in 1998.
NOTE 4 - Intangible Assets:
Intangible assets are summarized as follows at:
December 31,
----------------------
2000 1999
---- ----
Goodwill, less accumulated amortization of $97,476 (2000)
and $55,318 (1999) ................................... $1,026,502 $1,045,904
Other identifiable intangible assets, less accumulated
amortization of $25,484 (2000) and $22,025 (1999)..... 29,225 32,683
--------- ---------
Intangible assets, net............................ $1,055,727 $1,078,587
========== ==========
F-9
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
NOTE 5 - Debt:
Long-term debt consists of the following at:
December 31,
2000 1999
---- ----
Revolving Credit Facility/Term Loan............. $168,000 $158,000
======== ========
The Company's amended senior loan agreement with a syndicate of banks, led by
Chase Manhattan Bank, provides for an unsecured $277,000 revolving credit
facility and an unsecured $65,000 term loan (the "Facility"). The Facility is
available until September 30, 2004, however, the facility contains provisions
which require mandatory reductions in the amount of the facility starting in
September 1999 ($7,000 per quarter in 2001). At December 31, 2000, the Company
had available borrowings under the Facility of $164,000. Interest is payable at
the prime rate plus an applicable margin of up to .25% or LIBOR plus an
applicable margin of up to 1.25%, at the Company's option. At December 31, 2000,
the applicable margin was LIBOR plus .50% -.625%. At December 31, 2000, the
Company had borrowed $113,000 under the revolving credit facility and $65,000
under the term loan at a weighted-average interest rate of 7.1%. The Facility
contains covenants relating to dividends, liens, indebtedness, capital
expenditures and interest coverage and leverage ratios.
The aggregate maturities of debt for the next five years and thereafter,
pursuant to the Company's debt agreements as in effect at December 31, 2000, are
as follows:
Year
2001................................ $ 10,000
2002................................ 15,000
2003................................ 20,000
2004................................ 133,000
2005................................ -
-------
$178,000
========
The fair value of debt approximates its carrying value.
NOTE 6 - Shareholders' Equity:
The authorized capital stock of the Company consists of Common stock, Class B
stock and Preferred stock. Common stock is entitled to one vote per share while
Class B stock is entitled to 50 votes per share.
In conjunction with the renewal of the Company's Management Agreement with
Infinity. Infinity was granted warrants to purchase 2,000,000 shares of Common
Stock at $10.00 per share and 2,000,000 shares of Common Stock at $12.50 per
share. Vesting of the warrants was contingent upon the Company's stock price
exceeding predetermined levels for 20 out of 30 consecutive trading days.
Infinity was vested in all warrants at December 31, 2000. The warrants expire on
March 31, 2009.
The Company effected a two-for-one split of its Common Stock and Class B Stock
on March 22, 2000.
F-10
On September 22, 1999 the Company completed its merger with Metro and issued
approximately 50,224,000 shares of its Common Stock and 3,824,625 shares of its
Series A Convertible Preferred Stock. The Westwood preferred stock was issued
subject to a stock loan and pledge agreement with the preferred shareholder. In
December 1999, the Company's Series A Convertible Preferred Stock was converted
to Common Stock and the related loan of Common Stock was repaid.
NOTE 7 - Stock Options:
The Company has stock option plans established in 1989 and 1999 which provide
for the granting of options to directors, officers and key employees to purchase
stock at its market value on the date the options are granted. Under the 1989
Plan, 12,600,000 shares were reserved for grant through March 1999. This plan
expired, but certain previous grants remain outstanding at December 31, 2000. On
September 22, 1999, the stockholders ratified the Company's 1999 stock incentive
plan which authorized the grant of up to 8,000,000 shares of Common Stock.
Options granted generally become exercisable after one year in 20% increments
per year and expire within ten years from the date of grant.
The Company applies APB 25 and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for its stock
option plans. Had compensation cost been determined in accordance with the
methodology prescribed by FAS 123, the Company's net income and earnings per
share would have been reduced by approximately $5,709 ($.05 per basic and
diluted share) in 2000, $3,606 ($.05 per basic and diluted share) in 1999 and
$3,052 ($.05 per basic and diluted share) in 1998. The weighted average fair
value of the options granted in 2000, 1999 and 1998 is estimated at $15.46,
$8.84 and $4.97, respectively, on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions:
2000 1999 1998
---- ---- ----
Weighted Average Risk Free Interest Rate 7.0% 5.3% 5.4%
Expected Life (In Years)........... 5 5 5
Expected Volatility ............... 50.7% 51.3% 35.9%
Expected Dividend Yield ........... - - -
Epected Forfeitures per Year ...... 1% 1% 1%
F-11
Information concerning options outstanding under the Plan is as follows for:
Year Ended December 31,
-----------------------------------------------------------------------------
2000 1999 1998
-----------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Outstanding at beginning of
period .................... 13,242,758 $11.39 6,820,000 $ 9.89 6,021,000 $ 8.74
Granted during the period.. 1,929,000 $29.00 2,210,000 $17.28 1,600,000 $12.15
Metro options converted to
Westwood One options....... - - 6,125,458 $ 9.89 - -
Exercised during the period (1,402,136) $ 9.79 (1,748,700) $ 7.93 (491,000) $ 4.15
Forfeited during the period (247,334) $13.71 (164,000) $ 8.97 (310,000) $ 8.40
---------- ----------- ---------
Outstanding at end of period 13,522,288 $14.03 13,242,758 $11.39 6,820,000 $ 9.89
========== ========== =========
Available for new stock
options at end of period... 5,037,000 6,940,000 1,764,000
========== ========= =========
At December 31, 2000, options to purchase 6,688,288 shares of common stock were
currently exercisable at a weighted average exercise price of $9.71.
The following table contains additional information with respect to options at
December 31, 2000:
Remaining
Weighted Weighted
Average Average
Number of Exercise Contractual
Options Price Life (In Years)
Options Outstanding at Exercise Price Ranges of:
$ 1.07 - $ 3.75.................... 245,000 $ 2.28 2.4
$ 4.88 - $ 6.38.................... 1,630,564 $ 5.11 4.3
$ 7.25 - $11.55.................... 4,266,852 $ 9.42 6.8
$ 12.44 - $15.75.................... 4,420,372 $14.02 7.3
$ 17.25 - $22.57.................... 1,609,500 $21.51 9.1
$ 32.25 - $40.70.................... 1,350,000 $32.52 9.2
----------
13,522,288 $14.03 7.1
==========
F-12
NOTE 8 - Income Taxes:
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities on the Company's balance
sheet and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities follow:
December 31,
--------------------
2000 1999
---- ----
Deferred tax liabilities:
Affiliation agreements............................... $5,404 $6,149
Difference between book and tax bases of assets...... 25,348 10,730
Other................................................ 244 1,656
------ ------
Total deferred tax liabilities....................... 30,996 18,535
------ ------
Deferred tax assets:
Accrued liabilities and reserves..................... 15,428 7,855
Tax credits (AMT and ITC)............................ - 1,741
------ ------
Total deferred tax assets............................ 15,428 9,596
------ ------
Net deferred tax liabilities......................... $15,568 $8,939
======= ======
The components of the provision for income taxes follows:
Year Ended December 31,
----------------------------------
Current 2000 1999 1998
---- ---- ----
Federal..................................... $30,688 $10,345 $ 842
State....................................... 7,253 3,574 1,062
------ ------ -----
37,941 13,919 1,904
------ ------ -----
Deferred
Federal..................................... 12,167 11,854 8,562
State....................................... 977 (403) (66)
------ ------ -----
13,144 11,451 8,496
------ ------ -----
Income tax expense.............................. $51,085 $25,370 $10,400
======= ======= =======
F-13
The reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate follows:
Year Ended December 31,
----------------------------
2000 1999 1998
---- ---- ----
Federal statutory rate............. 35.0% 35.0% 35.0%
State taxes net of federal benefit 3.3 5.1 4.4
Nondeductible amortization of
intangible assets................ 16.4 11.1 5.4
Other, net......................... - .3 (.4)
---- ---- ----
Effective tax rate................. 54.7% 51.5% 44.4%
===== ===== =====
In 2000 and 1999, $9,734 and $9,800, respectively, of income tax benefits
attributable to employee stock transactions were allocated to shareholders'
equity.
NOTE 9 - Nonrecurring Items:
In 1998, the Company incurred a charge for nonrecurring items which included
amounts attributable to the consolidation of the Company's news operations and
one-time costs associated with evaluating various strategic alternatives to
enhance shareholder value partially offset by a settlement with a satellite
carrier whereby the Company received a refund for past services, resulting in a
gain of approximately $2,494. The costs associated with the consolidation of the
news operations aggregated $2,275 and were comprised of primarily of severance
costs and costs related to abandoned leases. Of the amounts accrued, $1,699 was
paid in 1998, $288 was paid in 1999 and $288 was paid in 2000.
NOTE 10 - Related Party Transactions:
The Company is managed by Infinity Broadcasting Corporation ("Infinity")
pursuant to a five year Management Agreement which expires on March 31, 2004.
Pursuant to the Management Agreement, the Company paid or accrued expenses
aggregating $5,022 in 2000 ($3,613 in 1999 and $2,226 in 1998). As part of the
Management Agreement, Infinity was given 4,000,000 warrants to acquire shares of
Common Stock after the Company's Common Stock reached certain market prices per
share. Those warrants are fully vested.
On March 31, 1997, the Company entered into a Representation Agreement with CBS.
In addition, many of Infinity's radio stations are affiliated with the Company's
radio networks and the Company purchases several programs from Infinity. During
2000 the Company incurred expenses aggregating approximately $77,578 for the
Representation Agreement and Infinity affiliations and programs ($70,241 in 1999
and $67,612 in 1998).
F-14
NOTE 11 - Commitments and Contingencies:
The Company has various non-cancelable, long-term operating leases for office
space and equipment. In addition, the Company is committed under various
contractual agreements to pay for talent, broadcast rights, research, the CBS
Representation Agreement and the Management Agreement with Infinity. The
approximate aggregate future minimum obligations under such operating leases and
contractual agreements for the five years after December 31, 2000, are set forth
below:
Year
----
2001.................................. $ 63,135
2002.................................. 57,466
2003.................................. 48,382
2004.................................. 26,555
2005.................................. 9,845
--------
$205,383
========
NOTE 12 - Supplemental Cash Flow Information:
Supplemental Information on cash flows, is summarized as follows:
Year Ended December 31,
----------------------------------
2000 1999 1998
---- ---- ----
Cash paid for:
Interest.............................. $11,017 $10,712 $10,119
Income taxes................... ...... 28,569 3,634 883
The Company had certain non-cash investing and financing activities in 2000,
1999 and 1998. During 1999, the Company merged with Metro (see Notes 2 and 6)
issuing approximately 50,224,000 shares of its Common Stock and 3,824,625 shares
of Series A Convertible Preferred Stock in exchange for all the issued and
outstanding shares of common and preferred stock of Metro. During 1998, $11,430
of lease assets and obligations were capitalized.
F-15
NOTE 13 - Quarterly Results of Operations (unaudited):
The following is a tabulation of the unaudited quarterly results of operations.
The quarterly results are presented for the years ended December 31, 2000 and
1999.
(In thousands, except per share data)
First Second Third Fourth For the
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ------
2000
----
Net revenues..................................... $122,102 $136,501 $139,014 $156,076 $553,693
Operating income................................. 12,247 27,494 24,180 39,573 103,494
Net income....................................... 3,956 10,644 9,870 17,813 42,283
Net income per share:
Basic.......................................... $0.04 $0.10 $0.09 $0.16 $0.38
Diluted........................................ 0.03 0.09 0.09 0.16 0.36
1999
----
Net revenue...................................... $ 58,518 $ 66,353 $ 78,902 $154,532 $358,305
Operating income................................. 1,637 11,478 14,380 33,302 60,797
Net income (loss)................................ (662) 4,843 5,330 14,376 23,887
Net income (loss) per share:
Basic......................................... $(0.01) $ 0.09 $0.08 $0.13 $0.33
Diluted....................................... (0.01) 0.07 0.08 0.12 0.30
F-16
WESTWOOD ONE, INC.
FINANCIAL STATEMENT SCHEDULE
(Dollars in thousands)
Schedule V - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
Balance at Additions Deductions Balance at
beginning of Charged to costs Charged to Write-offs and end of
period and expenses other accounts other adjustments period
------------ ---------------- -------------- ----------------- ----------
2000 $7,714 $12,112 - ($10,470) $9,356
1999 3,720 3,356 $1,638 (1) (1,000) 7,714
1998 2,907 1,021 - (208) 3,720
(1) Acquired reserves as a result of Metro Networks acquisition.
F-17