1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTIONAnnual Report Pursuant to Section 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OFor 15 (d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1993
COMMISSION FILE NUMBER: 0-13020-------------
For the fiscal year ended Commission File number: 0 - 13020
December 31, 1994
WESTWOOD ONE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 95-3980449
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
9540 WASHINGTON BOULEVARD, CULVER CITY, CA 90232
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:(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.)
9540 Washington Boulevard, Culver City, CA 90232
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (310) 204-5000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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NONE NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCKSecurities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
____________________ on which registered
_____________________
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
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.
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 -
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 January 15, 1994March 1, 1995 was $142,393,663.approximately $285 million.
As of January 15, 1994, 19,742,275March 1, 1995, 30,935,152 shares of Common Stock were
outstanding and 351,733 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 to be held on May 3, 1994 (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.
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2
PART I
ITEMItem 1. BUSINESS
GENERALBusiness
General
Westwood One, Inc. (the "Company" or "Westwood One") is athe leading
producer and distributor of nationally sponsored radio programs and believes it is
the nation's second largest radio network.
The Company's principal source of revenue is selling radio time to
advertisers.advertisers through one of its two operating divisions: Westwood One
Radio Networks and Westwood One Entertainment (the "Divisions"). The
Company generates revenue principally by its radio networksDivisions entering into
radio station affiliation agreements to obtain audience and commercial
spots and then selling the audience and spots to national advertisers. The Company
is strategically positioned to provide a broad range of programming and
services which both deliver audience to advertisers and news, talk,
sports, and entertainment programs to radio stations.
The Company producesWestwood One Radio Networks offers radio stations three traditional news
services, CNN Radio, NBC Radio Network and distributes regularly scheduled news, talk,
sports, and entertainment programs through its various operating radio networks:the Mutual Broadcasting
System, NBC Radio Networks (National Radio Network,plus youth-oriented network news and entertainment programming
from The Source, in addition to eight 24-hour satellite-delivered
continuous play music formats and Talknet)weekday and weekend news and
entertainment features and programs.
Westwood One Radio. The Company'sEntertainment produces music, sports, talk and special
event programming. These programs encompass
exclusive live concerts,include: countdown shows; music and
interview shows, national music countdowns,
lifestyle short features,programs; live talk shows, and sportsconcert broadcasts; major sporting events
(principally covering the NFL, Notre Dame football and other college
football and basketball games). The Company also produces; live, personality intensive talk shows;
and distributes special event programs,
including exclusive satellite simulcasts with HBO and other cable networks.
Mutual Broadcasting System, National Radio Network and Talknet are primarily
adult-oriented networks, in the News, Sports, Talk and Country formats. Westwood
One Radio and The Source are primarily youth-oriented networks, in the
Contemporary Hit Radio ("CHR"), Album Oriented Rock ("AOR"), Country and Black
formats.1
The Company's programs are broadcast in every radio market in the United
States measured by The Arbitron Ratings Company ("Arbitron"), the
leading rating service, and are carried
by Armed Forces Radio, VOA Europe and other foreignas well as being broadcast services.internationally.
Westwood One, through its networks and programming,Divisions, enables national advertisers to
purchase advertising time and to have their commercial messages
broadcast on radio stations throughout the United States, reaching
demographically defined listening audiences. The Company delivers both
of the major demographic groups targeted by national advertisers: the
25 to 54-year old adult market and the 12 to 34-year-old youth market.
The Company currently sells advertising time to over 300 national
advertisers, including each of the 25 largest network radio advertisers.
Radio stations are able to obtain quality programming from Westwood One
to meet their objective of attracting larger listening audiences and
increasing local advertising revenue. Westwood One, through the
development of internal programming as well as through acquisitions, has
developed an extensive tape library of previously aired programs,
interviews, live concert performances, news and special events. The
Company uses its library as a major source of new programming. The tape library enhances
Westwood One'sprogramming,
enhancing the Company's future programming and revenue generating
capabilities.
1
3
INDUSTRY BACKGROUND
RADIO BROADCASTING
OnIndustry Background
Radio Broadcasting
As of January 1, 1993,1995, there were approximately 9,750 commercial radio
stations in the United States. The radio broadcast industry, however,
remains highly fragmented with no broadcaster owningpermitted to own more than
3640 radio stations. This fragmentation is due primarily to FCC
limitations on multiple station ownership.
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 number of formats has become further segmented over recent years. For example,
what once was the Rock & Roll format has now been divided into several narrower
formats, including Album Oriented Rock, Adult Contemporary Music ("AC") and
Contemporary Hit Radio, each with a more demographically specific audience.
The increasediversity in the number of 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. Second, aA station
can also broadcast special programming, sporting events or national news
product, such as supplied by Westwood One, not available to its
competitors within its format. National programming broadcast on an
2exclusive geographic basis can help differentiate a station within its
market, and thereby enable a station to increase its audience and local
advertising revenue.
RADIO ADVERTISINGRadio 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. However, this process can be expensive and time-consuming,
and may not permit the advertiser to select the specific program in
which its advertisements will be broadcast. 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. A national
advertising purchase can enable an advertiser to achieve its objective
with one purchase, at a lower cost per listener, and to select a
particular program environment in which its advertisements will be
broadcast.
In recent years the increase in the number of program formats has led to
more demographically specific listening audiences, making radio an
attractive, alternative medium for national advertisers. In addition,
nationally broadcast news, concerts and special event programming have
made radio an effective medium of reach (size of listening audiences) as
well as frequency (number of exposures to the target audience).
To verify audience delivery and demographic composition, specific
measurement information is available to national advertisers. In the top 175
markets, the number of listeners per station is
2
4
measured and publishedadvertisers by
independent rating services such as The Arbitron
Ratings Co. and Statistical Research,
Inc.'s RADAR. These rating services provide demographic information
such as the age and sex composition of the listening audiences.
Consequently, national advertisers can verify that their advertisements
are being heard by their target listening audience.
BUSINESS STRATEGYBusiness Strategy
Westwood One's principal business is providingOne provides targeted radio audiences and commercial spots to
national advertisers through its recognized programming and other
network products. The Company, through its various radio networks,
produces and distributes quality programming to radio stations seeking
to increase their listening audience and improve local and national
advertising revenue. The Company sells advertising time within its
programs to national advertisers desiring to reach large listening
audiences nationwide with specific demographic characteristics.
In fiscal 1993 the Company developed and implemented a strategy to focus on its
core radio network business and to reduce debt by divesting of all other
businesses. During the year other businesses such as radio stations (WYNY-FM and
KQLZ-FM) and Radio & Records were disposed. Consequently, the financial
results for these businesses are reported as discontinued operations in the
Company's financial statements. Additionally, in fiscal 1993 the Company
completed the sale of an unconsolidated subsidiary, WNEW-AM, (reported in
1992) and sold a parcel of real estate that had been held for sale for two
years. The net proceeds from all these transactions enabled the Company to
reduce its debt to $60,149,000 at November 30, 1993 from $178,579,000 at
November 30, 1992. Lastly, in the fourth quarter of 1993 the Company repaid
its Revolving Facility and term loan with a bank by entering into a new
senior debt agreement with a maximum borrowing capacity of $20,000,000.
In refocusing on its core network and radio syndication
3
business, the Company has concentrated on across-the-board cost
reductions in order to improve profitability. In late fiscal 1993profitability and, in February 1994, the
Company took a major step to enhance its future and ability to compete
by entering into a definitive agreement to acquireacquiring Unistar Radio Networks, Inc. ("Unistar") for $101,300,000
plus expenses along with the following additional matters in connection
with the acquisition:
(a) the sale by the Company to Infinity Network, Inc. ("INI"), a
wholly-owned subsidiary of Infinity Broadcasting Corporation
("Infinity"), of 5,000,000 shares of the Company's Common
Stock and a warrant to purchase up to an additional 3,000,000
shares of Common Stock at an exercise price of $3.00 per
share, for a total purchase price of $15,000,000;
(b) a Management Agreement between the Company and Infinity
pursuant to which (a) the Chief Executive Officer of
Infinity, currently Mel Karmazin, will becomebecame the Chief Executive
Officer of the Company, (b) the Chief Financial Officer of
Infinity, currently Farid Suleman, will
becomebecame the Chief Financial
Officer of the Company and (c) Infinity will
managebegan managing the
business and operationoperations for an annual base fee of $2,000,000
(adjusted for inflation), an annual cash bonus payable(payable in
the event of meeting certain financial targetstargets) and
additional warrants to acquire up to 1,500,000 shares of
common stock exercisable atafter the Company's common stock
reaches certain market prices per share.
(c) a Voting Agreement providing for the reconstitution of the
Board of Directors into a nine-member Board and the voting of
Norman Pattiz's shares of the Company's Common 3
5
Stock and
Class B Stock and the shares of the Common Stock held by the
Infinity subsidiary.
Unistar is a producer and distributor of radio programs and 24-hour
continuous play formats to radio stations nationwide. Unistar serves
approximately 2,000 affiliated radio stations, and similar to Westwood One,
produces and distributes regularly scheduled news, business, sports and
entertainment programs through its various operating radio networks: Unistar
Power Radio Network, CNN+Radio Network, Unistar Super Radio Network, CNBC
Business Radio Network and Unistar Programming Network.
Generally, Unistar pays the cost of producing or acquiring the broadcasting
rights for its programming and pays compensation to its affiliated stations for
broadcasting the programs and commercial announcements included therein. Like
the Company, Unistar derives substantially all of its revenue from the sale of
commercial time to national advertisers.INI.
The Company anticipates financingfinanced the acquisition ($101,300,000), repaying
its current senior debt agreement ($13,648,000 at November 30, 1993) and
improving its working capital with a new senior
loan from a syndicate of banks in the amount of $125,000,000 and the sale of $15,000,000 of Common Stock to
INI.
RADIO PROGRAMMING$125,000,000.
Radio Programming
The depth of Westwood One's programming has grown through internal
expansion and through acquisition. The Company produces and distributes
24-hour continuous play 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,
therefore being able to tailor its programs to respond to current and
4changing listening preferences. The Company produces both regularly
scheduled short-form programs (typically 5 minutes or less) and, long-form
programs (typically 60 minutes or longer). and 24-hour continuous play
formats. Typically, the short-form programs are produced at the
Company's in-house facilities located in Culver City, California, New
York, New York and Arlington, Virginia. 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-hour continuous play formats are produced at the
Company's facilities in Valencia, California.
Westwood One also produces and distributes special event syndicated
programs. In fiscal 19931994 the Company produced and distributed numerous special
event programs, including the multi-venue Country music extravaganza, Country
Takes Manhattan, worldwideexclusive broadcasts of Paul McCartneythe Rolling Stones
Voodoo Lounge concert tour, Sting Live, In The New World,
Zooropa 93: U2 Live From Dublin, Aerosmith Live From Brussels, thean HBO simulcast of Madonna: Live Down UnderBarbara
Streisand and an MTV simulcast of "The Girlie Show", and exclusive live concert
broadcasts of Tom Petty and The Heartbreakers, and Rod Stewart.Eagles: Hell Freezes Over."
Westwood One believes these broadcasts have contributed to its
reputation and are an integral part of its business strategy to increase
its share of the national radio network advertising market.
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)pre-
recorded) for a specific period of time. The Company may also obtain
interviews with the recording artist and
4
6 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 othersyndicated 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 eight 24-hour continuous play
formats providing music, news and talk programming for Country, Hot
Country, Adult Contemporary, Format 41, Oldies, AM only, Adult Rock and
Roll and the 70's formats. Using its production facilities in Valencia,
California, the Company provides all the programming for stations
5
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 and
significantly enhances 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.
For
example, in 1993 Westwood One delved into its vast archives to bring back the
sounds of the 70's and 80's for its new series The Retro Show. The Company also
utilized its extensive music and interview resources for one time only specials
and ongoing series such as Off The Record with Mary Turner, Classic Tracks and
On The Edge.
AFFILIATED RADIO STATIONSAffiliated Radio Stations
Westwood One's radio network business strategy addresses the programming
needs and financial limitations of radio stations. The Company offers
radio stations a wide selection of regularly scheduled and special event
syndicated programming.programming as well as 24-hour continuous play formats.
These programs and formats are completely produced by the Company and,
therefore, the stations have no production costs. Typically, each
program 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's networks enter into affiliation agreements with radio
stations. In the case of news and current events programming, the
agreements commit the station to broadcast only the advertisements
associated with these programs and allows the station flexibility to
have the news headlined by their newscasters. The other affiliation
agreements 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 the
24-hour formats, the Company, in most cases, also receives 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 associated with the Company's news and
current events programming.
Affiliation agreements specify the number of times and the approximate
time of day each program and advertisement may be broadcast. Westwood
One requires that each station complete and promptly return to the
Company an affidavit (proof-of-performance) that verifies the time of
each 5
7
broadcast. Affiliation agreements for Westwood One's entertainment
programming are non-cancelable for 26 weeks and are automatically
6
renewed for subsequent 26-week periods, if not canceled 30 days prior to
the end of the existing contract term. Affiliation agreements for
Westwood One's news and current events programming 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 34a number of people responsible for station relations and
marketing its programs to radio stations. Station relationships are
managed geographically to allow the marketing staff to concentrate on
specific geographical regions. This enables the Company's staff to
develop and maintain close, professional relationships with radio
station personnel and to provide them with quick programming assistance.
NATIONAL ADVERTISERSNational Advertisers
Westwood One provides national advertisers with a cost-effective way to
communicate their commercial messages to large listening audiences
nationwide that have specific demographic characteristics. An
advertiser can obtain both frequency (number of exposures to the target
audience) and reach (size of listening audience) by purchasing
advertising time in the Company'sCompany`s programs. By purchasing time in
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.
Westwood One generally guarantees an advertiser delivery of an audience of
a specified size and demographic composition, which can be verified through
independent surveys. Furthermore, advertisers receive affidavits that indicate
the number of times and the time of day the advertisers' commercial messages
were broadcast. The Company supports 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.
The Company sells its commercial time to advertisers either as "bulk" or
"flighted" purchases. Bulk purchases are long-term contracts (26 to 52
weeks) that are sold "up-front" (early advertiser commitments for
national broadcast time) at discounts below prevailing market prices.. Flighted purchases are contracts for a
specific, short-term period of time (one to six weeks) that are sold at
or above prevailing market prices. The Company's strategy for growth in
advertising revenue is to increase the amount of advertising time sold
on the usually more profitable flighted basis, to increase revenue of
the non-RADAR rated programs, and to increase audience size for news,
talk and current events programming.
COMPETITIONCompetition
The Company operates in a very competitive environment. In marketing
its programs to national advertisers, the Company directly competes with
other radio networks some of which may have greater financial resources than the Company, as well as with smaller independent radio
syndication producers and distributors. In addition, Westwood One
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
7its station relations and
6
8 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 larger and 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 has
increased.increases. This demand has been intensified by high
operating and production costs at local radio stations and increased
competition for local advertising revenue.
GOVERNMENT REGULATIONGovernment Regulation
Radio broadcasting and station ownership are regulated by the FCC.
Westwood One, as a producer and distributor of radio programs, is not
subject to regulationsregulation by the FCC.
EMPLOYEESEmployees
On JanuaryFebruary 15, 1994,1995, Westwood One had 269414 full-time employees,
including a domestic advertising sales force of 4846 people. In addition,
the Company maintains continuing relationships with approximately 50
independent writers, program hosts, technical personnel and producers.
Certain employees at the Mutual Broadcasting System, NBC Radio Networks,
and NBCUnistar Radio Networks are covered by collective bargaining
agreements. The Company believes relations with its employees and
independent contractors are good.
ITEMItem 2. PROPERTIESProperties
The Company owns a 7,600 square-foot building in Culver City, California
in which its production facilities are located; a 14,000 square-foot
building and an adjacent 10,000 square-foot building in Culver City,
California which contains administrative, sales and marketing offices,
and storage space; and a 7,700 square-foot unoccupied building in Culver
City which contained production
facilities and offices for KQLZ -FM until shortly after the station was sold.City. In addition, the Company leases offices in New York, Chicago, Detroit, Dallas,York; Chicago;
Detroit; Dallas; Arlington, Virginia and Arlington, Virginia.Valencia, California.
8
The Company believes that its facilities are more than adequate for its
current level of operations and contemplates reducing its available square
footage in the Culver City area.
ITEMoperations.
Item 3. LEGAL PROCEEDINGS
The Company submittedLegal Proceedings
- None -
Item 4. Submission of Matters to the Securities and Exchange Commission
("Commission") an offera Vote of settlement arising out of a formal investigation by
the Commission which has been pending since 1989. The settlement offer, which
was accepted by the Commission on January 7, 1994 and an order entered on
January 19, 1994, involved the Company's consent, without admitting or denying
7
9
any of the findings of the Commission, to an administrative cease and desist
order based upon findings that in 1987 and 1988 the Company violated antifraud
and accounting provisions of the federal securities laws and the rules
thereunder in its revenue recognition and accounting practices during that
period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSSecurity Holders
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year ended November 30, 1993.
8December 31, 1994.
9
10
PART II
ITEMItem 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERSMarket for Registrant's Common Stock and Related Shareholder
Matters
On January 15, 1994March 1, 1995 there were approximately 475370 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 special shareholders' meeting on January 28,August 18, 1994, the
Company estimates that the total number of beneficial holders of the
Company's Common Stock exceeds 5,000.4,500.
The Company's Common Stock has been traded in the over-the-counter market
under the NASDAQ symbol WONE since the Company's initial public offering on
April 24, 1984. The following table sets forth the range of high and low
last sales prices on the NASDAQ/National Market System, as reported by
NASDAQ, for the Common Stock for the fiscalcalendar quarters indicated.
FISCAL 1993 HIGH LOW
-----------1994 High Low
---- ---- ---
First Quarter..............................................Quarter 10 1/2 7 5/8
Second Quarter 8 7/8 7 1/8
Third Quarter 11 3/8 7 11/16
Fourth Quarter 11 1/4 7 5/8
1993
----
First Quarter 2 5/8 1 9/19/32
Second Quarter 3 1/16 Second Quarter............................................. 3 1 13/162 3/8
Third Quarter..............................................Quarter 3 1/8 2 5/3/8
Fourth Quarter.............................................Quarter 9 1/4 2 3/8
FISCAL 1992
-----------
First Quarter.............................................. 3 1/2 1 5/16
Second Quarter............................................. 3 3/8 2 1/16
Third Quarter.............................................. 3 2
Fourth Quarter............................................. 2 1/2 1 9/16
No cash dividend was paid on the Company's stock during fiscal1994 or 1993, or 1992.
9and
the payment of dividends is restricted by the terms of The Loans.
10
11
ITEM
Item 6. SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)Selected Financial Data
(In thousands except per share data)
The table below summarizes selected consolidated financial data of the
Company for each of the last five fiscal years:
OPERATING RESULTS FOR FISCAL YEAR ENDED:
NOVEMBERNovember 30,
------------------------------------------------------------December 31, ______________________________________
1994 1993 1992 1991 1990
1989
-------- -------- -------- -------- --------____ ____ ____ ____ ____
REVENUE.................................................. $ 99,579 $101,290 $108,586 $107,629 $105,420NET REVENUES $136,340 $84,014 $86,376 $93,170 $92,389
DEPRECIATION AND AMORTIZATION 18,160 16,384 19,661 22,055 22,856
OPERATING COSTS AND EXPENSES............................. 101,770 119,990 114,517 116,938 115,541
-------- -------- -------- -------- --------
OPERATINGINCOME (LOSS)......................................... 5,982 (2,191) (18,700) (5,931) (9,309)
(10,121)
-------- -------- -------- -------- --------
Interest Expense......................................... 6,551 5,562 5,610 8,031 8,155
Other Expense (Income)................................... (60) 301 1,081 (366) (612)
Equity in Net Loss of Unconsolidated Subsidiary.......... -- 789 1,901 1,608 996
Loss on Sale of Unconsolidated Subsidiary................ -- 6,536 -- -- --
Effect of Litigation Settlement.......................... -- -- -- -- 6,129
-------- -------- -------- -------- --------
6,491 13,188 8,592 9,273 14,668
-------- -------- -------- -------- --------
(LOSS) BEFORE TAXES, DISCONTINUED OPERATIONS AND
EXTRAORDINARY GAIN..................................... (8,682) (31,888) (14,523) (18,582) (24,789)
(BENEFIT) FOR INCOME TAXES............................... -- (10,491) (4,519) (5,667) (8,044)
-------- -------- -------- -------- --------
(LOSS) FROM CONTINUING OPERATIONS........................OPERATIONS (2,730) (8,682) (21,397) (10,004) (12,915)
(16,745)
(LOSS) ONFROM DISCONTINUED OPERATIONS NET OF INCOME TAX
BENEFIT................................................ (3,140)- (15,227) (2,721) (6,778) (5,260)
(5,993)
PROVISION FOR (LOSS) ON DISPOSAL OF DISCONTINUED
OPERATIONS............................................. (12,087) -- -- -- --
-------- -------- -------- -------- --------
(LOSS) BEFORE EXTRAORDINARY GAIN.........................ITEM (2,730) (23,909) (24,118) (16,782) (18,175)
(22,738)
EXTRAORDINARY GAIN....................................... -- --GAIN (LOSS) (590) - - 25,618 -- --
-------- -------- -------- -------- ---------
NET INCOME (LOSS)........................................ $(23,909) $(24,118) $ 8,836 $(18,175) $(22,738)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
EARNINGS ($3,320) ($23,909) ($24,118) $8,836 ($18,175)
INCOME (LOSS) PER SHARE:
Primary:
Continuing Operations................................ $ (.57) $ (1.44) $ (.67) $ (.89) $ (1.16)Operations ($ .09) ($ .57) ($ 1.44) ($ .67) ($ .89)
Discontinued Operations.............................. (1.01) (.18) (.46) (.36) (.42)Operations - ( 1.01) ( .18) ( .46) ( .36)
-------- -------- ----------------- -------- --------
(Loss) Before Extraordinary Gain..................... (1.58) (1.62) (1.13) (1.25) (1.58)Item ( .09) ( 1.58) ( 1.62) ( 1.13) ( 1.25)
Extraordinary Gain................................... -- --Item ( .02) - - 1.73 -- ---
-------- -------- ----------------- -------- --------
Net Income (Loss)................................ $ (1.58) $ (1.62) ($ .11) ($ 1.58) ($ 1.62) $ .60 $ (1.25) $ (1.58)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------($ 1.25)
======== ======== ========= ======== ========
Fully diluted:
Continuing Operations................................ $ (.57) $ (1.44) $ (.30) $ (.89) $ (1.16)Operations ($ .09) ($ .57) ($ 1.44) ($ .30) ($ .89)
Discontinued Operations.............................. (1.01) (.18) (.28) (.36) (.42)Operations - ( 1.01) ( .18) ( .28) ( .36)
-------- -------- ----------------- -------- --------
(Loss) Before Extraordinary Gain..................... (1.58) (1.62) (.58) (1.25) (1.58)Item ( .09) ( 1.58) ( 1.62) ( .58) ( 1.25)
Extraordinary Gain................................... -- --Item ( .02) - - 1.06 -- ---
-------- -------- ----------------- -------- --------
Net Income (Loss)................................ $ (1.58) $ (1.62) ($ .11) ($ 1.58) ($ 1.62) $ .48 $ (1.25) $ (1.58)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
BALANCE SHEET DATA AT PERIOD ENDED:
NOVEMBER($ 1.25)
======== ======== ========= ======== ========
BALANCE SHEET DATA AT:
November 30,
------------------------------------------------------------December 31, ______________________________________
1994 1993 1992 1991 1990
1989
-------- -------- -------- -------- --------
---- ---- ---- ---- ----
CURRENT ASSETS........................................... $ 32,987 $ 51,091 $ 46,126 $ 54,312 $ 54,613ASSETS $46,157 $32,987 $51,091 $46,126 $54,312
WORKING CAPITAL..........................................CAPITAL 7,685 (1,503) (11,942) 10,200 28,676
27,112
TOTAL ASSETS.............................................ASSETS 260,112 152,067 295,740 322,561 343,783
353,065
LONG-TERM DEBT...........................................DEBT 115,443 51,943 146,622 169,083 214,342
195,750
TOTAL SHAREHOLDERS' EQUITY...............................EQUITY 95,454 55,151 75,204 98,765 89,496 106,713
[FN]
- ---------------- -------------------------------------
Effective December 1, 1993, the Company changed its method of accounting for
capitalized station affiliation agreements to expense the costs as incurred.
The effect of this change in accounting method does not materially affect the
comparability of the information reflected herein.
Results for the year ended December 31, 1994 include Unistar from the time it
was acquired in February 1994.
No cash dividend was paid on the Company's common stock during the five
yearsperiods
presented above.
11
Item 7.Management's Discussion and Analysis of Financial
Condition and Results of Operations
(In thousands except for share and per share amounts)
In August 1994, the Company changed its fiscal year end from November 30 to
December 31 effective with the fiscal year ending December 31, 1994.
Accordingly, in the following discussion "1994" will refer to the calendar
year 1994, "1993" will refer to the fiscal year ended November 30, 1993.
Operating results for all prior periods have been reclassified to conform1993 and
"1992" will refer to the fiscal 1993 presentation for discontinued operations.
10
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
In June 1993,year ended November 30, 1992.
On February 3, 1994 the Company completed the salesacquisition of all of the
issued and outstanding capital stock of the Unistar Radio Networks, Inc.
("Unistar"). The acquisition was accounted for as a purchase, and
accordingly, the operating results of Unistar are included with those of the
Company from the date of acquisition.
Effective December 1, 1993, the Company changed its two owned-and-operated
radio stations, WYNY-FMmethod of accounting for
capitalized station affiliation agreements and KQLZ-FM (collectively,income taxes. In order to
conform to predominate current industry practice, capitalized station
affiliation agreements will be expensed as incurred. The cumulative effect
of the "Stations"), andchange in Novemberaccounting for station affiliation expenses in December
1993 Westinghouse Electric Corporation ("WEC") acquiredwas an expense of $4,344, or $.23 per share. SFAS No. 109 "Accounting
for Income Taxes" was adopted by the Company in December 1993. The Company
elected not to restate prior year's financial statements. Adopting SFAS No.
109 did not affect the December 1993 or current period results.
In 1993, the Company classified the results of operations from Radio &
Records and the remaining net assets of Westwood One Stations Group, Inc. ("The Group")
(a subsidiary initially set up by the Company as the owner of the Stationsits Los Angeles and Radio & Records in order to collateralize loans from WEC) in complete
satisfaction of The Group's remaining obligations for the principal amount of
loans and accrued interest thereon owed to WEC. Accordingly, the results of the
Stations and Radio & Records are classifiedNew York radio stations as discontinued
operations for all
periods presented.operations. The following table sets forth the consolidated statementsCompany disposed of operations in
dollars and as a percent of revenue for the three years ended November 30, 1993,
1992, and 1991, accompanied by dollar and percent comparisons covering 1993 vs
1992 and 1992 vs 1991:
FISCAL YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1993 1992 1991 1993 VS 1992 1992 VS 1991
--------------- --------------- --------------- ---------------- ----------------
DOLLARS % DOLLARS % DOLLARS % DOLLARS % DOLLARS %
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
REVENUE........................ $ 99,579 100% $101,290 100% $108,586 100% $ (1,711) -2% $ (7,296) -7%
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
Operating Costs and Expenses
Excluding Depreciation and
Amortization................. 80,918 81% 92,249 91% 86,287 79% (11,331) -12% 5,962 7%
Depreciation and
Amortization................. 16,384 16% 19,661 19% 22,055 20% (3,277) -17% (2,394) -11%
Corporate General and
Administrative Expenses...... 4,468 4% 6,017 6% 6,175 6% (1,549) -26% (158) -3%
Severance and Termination
Expenses..................... -- -- 2,063 -- -- -- (2,063) -100% 2,063 NM
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
101,770 102% 119,990 118% 114,517 105% (18,220) -15% 5,473 5%
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
OPERATING (LOSS)............... (2,191) -2% (18,700) -18% (5,931) -5% 16,509 88% (12,769) -215%
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
Interest Expense............... 6,551 7% 5,562 5% 5,610 5% 989 18% (48) -1%
Other Expense (Income)......... (60) -- 301 -- 1,081 1% (361) NM (780) -72%
Equity in Net Loss of
Unconsolidated Subsidiary.... -- -- 789 1% 1,901 2% (789) -100% (1,112) -58%
Loss on Sale of Unconsolidated
Subsidiary................... -- -- 6,536 6% -- -- (6,536) -100% 6,536 NM
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
6,491 7% 13,188 13% 8,592 8% (6,697) -51% 4,596 53%
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
(LOSS) BEFORE TAXES,
DISCONTINUEDthese assets during 1993.
RESULTS OF OPERATIONS AND
EXTRAORDINARY GAIN........... (8,682) -9% (31,888) -31% (14,523) -13% 23,206 73% (17,365) -120%
(BENEFIT) FOR INCOME TAXES..... -- -- (10,491) -10% (4,519) -4% 10,491 100% (5,972) -132%
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
(LOSS) FROM CONTINUING
OPERATIONS................... (8,682) -9% (21,397) -21% (10,004) -9% 12,715 59% (11,393) -114%
(LOSS) ON DISCONTINUED
OPERATIONS, NET OF INCOME TAX
BENEFIT...................... (3,140) -3% (2,721) -3% (6,778) -6% (419) -15% 4,057 60%
PROVISION FOR (LOSS) ON
DISPOSAL OF DISCONTINUED
OPERATIONS................... (12,087) -12% -- -- -- -- (12,087) NM -- --
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
(LOSS) BEFORE EXTRAORDINARY
GAIN......................... (23,909) -24% (24,118) -24% (16,782) -15% 209 1% (7,336) -44%
EXTRAORDINARY GAIN............. -- -- -- -- 25,618 24% -- -- (25,618) 100%
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
NET INCOME (LOSS).............. ($23,909) -24% ($24,118) -24% $ 8,836 8% $ 209 1% $(32,954) NM
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
-------- ---- -------- ---- -------- ---- -------- ----- -------- -----
- ---------------
NM -- not meaningful
11
13
Westwood One derives substantially all of its revenue from the sale of
advertising time to advertisers. RevenueNet revenues increased 62% to $136,340 in
1994 from $84,014 in 1993 and decreased 2% to $99,5793% in fiscal 1993 from $101,290$86,376 in fiscal 1992 and decreased 7%1992. The
increase in fiscal 1992 from $108,5861994 net revenues was primarily a result of the purchase of
Unistar in fiscal 1991.February 1994. The decrease in revenue in fiscal 1993 net revenues was attributed
to the non-recurrence of the Company's exclusive radio coverage of the 1992
Summer Olympics, partially offset by net revenue growth associated with an
overall increase in the market. The decrease in revenue in fiscal 1992 was primarily attributable
to a 13% erosion of the national network radio revenue marketplace (according to
the Radio Network Association). The decline in revenue in 1992 would have been
slightly greater had the Company not had the exclusive radio coverage for the
1992 Summer Olympics. The Company's market share, based on advertising revenue
reported to the Radio Network Association, was 24% in fiscal 1993 as compared to
approximately 25% in fiscal 1992 and 24% in 1991.
Operating costs and expenses (excluding depreciation and amortization)
primarily include affiliate compensation (to radio stations in exchange for
commercial spots, which the Company sells to advertisers), current period
production costs of syndicated radio programs (excluding the amortization of
production costs) and network administration, which typically do not vary
directly with revenue, and selling expenses (including agency commissions
related to advertising revenue) which often vary closely with revenue.marketplace.
Operating costs and expenses excluding depreciation and amortization
increased 61% to $105,389 in 1994 from $65,353 in 1993 and decreased 12% to
$80,91815% in fiscal
1993 from $92,249$77,335 in fiscal 19921992. The 1994 increase was primarily attributable to
the purchase of Unistar and increased 7% in fiscal
1992higher programming expenses resulting from $86,287 in fiscal 1991.the
production of additional programs. The 1993 decrease iswas primarily due to
cost reduction programs associated with affiliate compensation, programming,
news and related staff expenses, and the non-recurrence of the 1992 Summer
Olympics, and
lower agency commissions. The fiscal 1992 increase is primarily attributable to
costs associated with broadcasting the 1992 Summer Olympics, a provision for
contract losses and higher affiliate compensation expense, partially offset by
lower syndicated music programming expense, reduced agency commissions, lower
write-offs of doubtful accounts and lower transmission expense.Olympics.
12
Depreciation and amortization droppedincreased 11% to $18,160 in 1994 from $16,384
in 1993 and decreased 17% to $16,384 in 1993 from $19,661 in 19921992. The increase in
1994 was primarily a result of the purchase of Unistar, partially offset by
lower amortization of production costs and dropped 11%lower amortization as a result of
the Company's December 1, 1993 change in 1992 from $22,055its method of accounting for
capitalized station affiliation agreements. The reduction in 1991. The reductions are1993 was
primarily due to lower amortization of production costs and lower write-offswrite-
offs resulting from fewer terminated station affiliation agreements.
Corporate general and administrative expenses decreased 26%1% to $4,404 in 1994
from $4,468 in fiscal1993 and decreased 26% in 1993 from $6,017 in fiscal 1992 and decreased 3%1992. The
nominal decrease in fiscal 1992 from
$6,175 in fiscal 1991.1994 is a result of across-the-board expense cuts,
partially offset by fees attributable to the Infinity Management Agreement.
The decrease in 1993 was attributable to across-the-board expense cuts and
the non-recurrence of one-time charges from 1992. Ina 1992
reduced legal and consulting fees were almost offset by a one-time charge for a vested benefit related
to a newan executive officer's employment contract, an
executive search feecontract.
As a result of the purchase of Unistar, the Company accrued restructuring
costs of $2,405 in the first quarter of 1994 principally relating to the
consolidation of certain facilities and expenses associatedoperations. Approximately $2,100
of these costs were paid in 1994, with restructuring loan agreements.the balance scheduled to be paid in
1995.
Severance and termination expenses of $2,063 in 1992 were principally due to
management changes implemented to achieve future efficiencies.
Operating income increased $8,173 to $5,982 in 1994 from an operating loss
of $2,191 in 1993 and the 1993 operating loss decreased 88% to $2,191 in 1993 from $18,700 in
1992 after1992. The significant improvement in 1994 is attributable to the acquisition
of Unistar and cost savings resulting from operating synergies from the
Unistar acquisition, partially offset by higher depreciation and
amortization expense as a 215% increase in 1992 from a lossresult of $5,931 in 1991.the Unistar acquisition. The 1993 significant
improvement was primarily due to extensive cost reduction programs and the
non-recurrence of prior year severance and termination expenses, partially
offset by the non-recurrence of profit from the 1992 Summer Olympics.
Interest expense was $8,802, $6,551 and $5,562 in 1994, 1993 and 1992,
respectively. The 1994 increase inis principally attributable to higher debt
levels as a result of the 1992 operating loss occurred principally due to the profit
impactacquisition of lower revenue resulting from the overall decline in the marketplace
(somewhat offset by profit from the 1992 Olympics), increased operating costs
and expenses excluding depreciation and amortization and
12
14
significant severance and termination expenses,Unistar, partially offset by lower
depreciation and amortization.
Interestthe
elimination of interest expense was $6,551, $5,562 and $5,610 in fiscal 1993, 1992 and
1991, respectively. The 18% increase in fiscal 1993 was primarilyon the Company's 9% Senior Debentures due to
restructuring expenses accompanied by an increased interest rate associated with
amending the terms of the Company's bank revolving credit facility and term
loan.
In fiscal 1993, othertheir conversion to Common Stock.
Other income of $60 wasis principally comprised of investment income. In fiscal 1992 and 1991,The other
expense of $301 and $1,081, respectively,in 1992 was due principally to provisions in 1992 and 1991 of $250 and $1,428,
respectively,a provision to write-down a
parcel of real estate that was held for sale to its net realizable value,
partially offset by investment income.
Equity in net loss of an unconsolidated subsidiary represents the Company's
share of the operating performance of WNEW-AM, which was sold in August
1992.
13Loss on the sale of an unconsolidated subsidiary of $6,536 in 1992 represents
the provision for the sale of WNEW-AM, which closed on December 15, 1992.
Loss before taxes, discontinued operations, and extraordinary gain
decreased 73% to $8,682 in 1993 from $31,888 in 1992 and increased 120% in 1992
from $14,523 in 1991. The 1993 dramatic improvement was attributable to the
decreased operating loss and the elimination of both the equity in net loss and
loss on sale of an unconsolidated subsidiary resulting from its sale in the
third quarter of fiscal 1992. The increased loss in 1992 was principally due to
the increased operating loss, the loss on the sale of an unconsolidated
subsidiary, and the provision for the write-down to net realizable value of a
parcel of real estate.
Starting in fiscal 1993 the Company no longer has deferred tax liabilities
available to offset its loss from continuing operations resulting in a reduced
benefit for income taxes of $10,491 in 1993. The benefit for income taxes
increased 132% to $10,491 in 1992 from $4,519 in 1991, principally as a result
of the change in pre-tax loss. The Company's effective tax rates in fiscal 1992
and 1991 were 33% and 31%, respectively.
Loss from continuing operations decreased $12,71569% to $2,730 ($.09 per share) from
$8,682 ($.57 per share) in 1993 and 59% in 1993 from $21,397 ($1.44 per
share) in 1992 and increased $11,393 in 1992 from $10,004 in 1991 due to
changes in the pre-tax loss, partially offset by the benefit for income taxes.1992.
Loss on discontinued operations, net of income tax benefit, was $3,140 in
1993 and $2,721 in 1992 and $6,778 in 1991.1992. The 1993 loss represents the operating performance
of discontinued operations through March 1, 1993.
The decrease in
the loss in 1992 was due to improved operating performance of WYNY-FM and Radio
& Records, lower interest expense and the non-occurrence of costs associated
with a 1991 format change at KQLZ-FM.
The $12,087 provision for loss on disposal of discontinued operations
includesincluded estimated future costs and operating results of the discontinued
assets from March 1, 1993 until the date of disposition.
TheIn connection with the refinancing of its senior debt facility, the Company
hadrecorded an extraordinary gain on the debt exchange offer in fiscal
1991, netloss of taxes, amounting to $25,618.
13
15
In 1992, the Financial Accounting Standards Board issued FAS No. 109
"Accounting for Income Taxes"$590 ($.02 per share).
The Company will adopt the standard on
December 1,net loss decreased 86% to $3,320 ($.11 per share) in 1994 from $23,909
($1.58 per share) in 1993 and currently estimates that1% in 1993 from $24,118 ($1.62 per share) in
1992.
Weighted average shares outstanding increased 94% to 29,414 in 1994 from
15,153 in 1993 and 2% in 1993 from 14,906 in 1992. The 1994 increase in
weighted average shares is primarily attributable to the conversion of its deferred tax liability will
be increased by9%
Senior Debentures into approximately $2,000. The resulting expense will be recorded in8,864 shares of Common Stock and the
statementsale of operations5,000 shares of Common Stock to a subsidiary of Infinity.
Liquidity and reported as a cumulative effect of a change in
an accounting principle.
LIQUIDITY AND CAPITAL RESOURCESCapital Resources
At November 30, 1993,December 31, 1994, the Company's cash and cash equivalents were $3,868,$2,439, a
decrease of $2,587$1,429 from November 30, 1992. The decrease in cash1993. In addition, the Company had
available borrowings under its Loans of $2,587
combined with the cash provided before financing activities of $92,544 and the
proceeds from the issuance of common stock of $1,507 were used to reduce
outstanding borrowings by $96,638. Additionally, WEC acquired the outstanding
stock of Radio & Records and the net assets of Westwood One Stations Group in
complete satisfaction of the Group's remaining debt and a conversion to common
stock of $2,068 face value of Senior Debentures occurred. Consequently, total
debt was reduced to $60,149 at November 30, 1993, a decrease of $118,430 from
$178,579 at November 30, 1992.$15,000.
For fiscal 1993,1994, net cash from operating activities was $2,045, a decrease$2,445, an increase of
$7,207$4,739 from fiscal 1992.1993. The decreaseincrease was primarily attributable to higher prior year network collections associated with fourth quarter 1991 revenuecash
flow from operations and a
large reductionan increase in accounts payable and accrued liabilities primarily relateddue to reduced interest,the Unistar
acquisition, partially offset by improved broadcast cash flow (based onan increase in accounts receivable resulting
principally from the consolidated statement of operations, calculated by subtracting from revenue,
operating costs and expenses excluding depreciation and amortization) and
receipt of a multi-year license fee (deferred revenue).Unistar acquisition. Net cash providedused by investing
activities was $90,499, an increase of $101,841 over the prior year,$111,731 principally due to net proceeds from the salespurchase of two radio stations, an
unconsolidated subsidiary and a parcel of real estate.Unistar.
Consequently, cash providedused before financing activities increased by $94,634 from 1992.
The Company usedwas $109,286.
In the assetsfirst quarter of The Group as collateral for a revolving
credit facility and for the 16% Senior Subordinated Debentures with WEC, both
non-recourse to1994, the Company which amounted to $104,960 at November 30, 1992. In
June 1993 the Company completed the sale of both radio stations and used the net
proceeds to retire the 16% Debentures ($43,733) and reduce the outstanding
balance of the revolving credit facility. Effective November 1, 1993, WEC
acquired Radio & Records and the remaining net assets of The Group in complete
satisfaction of The Group's remaining obligations for the principal amount of
loans and accrued interest thereon owed to WEC.
On November 22, 1993 the Company repaid its Revolving Facility and term
loan by enteringentered into a new senior debtloan
agreement involving a revolving facility
and two term loans with a maximum borrowing capacity of $20,000. At November 30,
1993, the Company had outstanding borrowings under the revolving facility of
$6,648 and available borrowings of $6,352.
From December 1, 1993 through January 15, 1994, holders of the Company's
Senior Debentures converted $12,542 face amount of the Senior Debentures into
3,584,000 shares of the Company's common stock, reducing the outstanding amount
of the Senior Debentures to $18,516.
In order to finance the acquisition of Unistar (which will be accounted for
as a purchase) the Company anticipates obtaining a new senior loan with a syndicate of banks which was comprised of a $15,000
revolving facility and $110,000 in the amount of $125,000. Additionally,term loans which mature on November 30,
2001. In addition, the Company will
sell 5 millionsold 5,000 shares of Common Stock and a
warrant to purchase up to an additional 3 million3,000 shares of Common Stock at an
exercise price of $3.00 per share (subject to certain vesting conditions) to
INIa subsidiary of Infinity for $15,000. The proceeds
will beProceeds from the loans and Common
14
Stock sale were used to acquire
14
16finance the acquisition of Unistar and repay its indebtedness ($101,300), repay
the Company's currentborrowings outstanding under its previous senior debt agreement ($8,841) and
improvefor working capital. Immediately followingIn addition, from December 1993 through March 1994,
holders of approximately $31,058 of the acquisition, and as a conditionCompany's 9% Senior Debentures
converted their debentures to obtaining a new senior loan,approximately 8,864 shares of Common Stock.
In August 1994, the Company will
also redeemprepaid $5,000 on its Senior Debentures.term loans which mature on
November 30, 2001. At December 31, 1994, the outstanding balance of the
Company's term loans were $105,000. In January 1995, the Company prepaid an
additional $2,500 on its term loans. As a result, the Company's next
scheduled principal repayment of $2,500 is due in November 1995.
Management believes that the Company's cash, available borrowings and
anticipated cash flow from operations and available borrowings will be sufficient to finance current
and forecasted operations and debt obligations over the next 12 months.
Furthermore,
management believes the acquisition of Unistar will strengthen the Company's
liquidity.
ITEMItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAFinancial 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.
ITEMItem 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSUREChanges in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
15
17
PART III
ITEMItem 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTDirectors 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.
ITEMItem 11. EXECUTIVE COMPENSATIONExecutive 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.
ITEMItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSecurity 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 thethen end of the Company's fiscal year.
ITEMItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSCertain 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.
16
18
PART IV
ITEMItem 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORMExhibits, Financial Statement Schedules and Reports on Form 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT ON FORM(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.(7)
4 Form of Indenture for 6 3/4% Convertible Subordinated Debentures (including the form of
the Debenture).(2)
4.1 Warrant Agreement dated August 27, 1990 between Registrant and Security Pacific
National Bank, as Warrant Agent.(9)
4.2 Form of Indenture for 9% Convertible Senior Subordinated Debentures (including
the form of the Debenture).(10)
10.1 (7)
*10.1 Employment Agreement and Registration Rights Agreement, dated October 18, 1993,
between Registrant and Norman J. Pattiz
10.2Pattiz. (13)
*10.2 First Amendment to Employment Agreement, dated January 26, 1994 between Registrant
and Norman J. Pattiz,
dated January 26, 1994.
10.3Pattiz. (13)
*10.3 Second Amendment to Employment Agreement, dated December 5, 1991,February 2, 1994, between
Registrant and Bruce E.
Kanter.(12)
10.4Norman J. Pattiz.
*10.4 Employment Agreement, dated April 19, 1990, between Unistar Communications Group,
Inc., Unistar Radio Networks, Inc. and William J. Hogan.
*10.5 Employment Agreement, dated June 1, 1992, between Registrant and Gregory P.
Batusic.(14)
10.5 (11)
*10.6 Employment Agreement, dated August 30, 1993, between Registrant and Eric R. Weiss.
10.6(13)
10.7 Form of Indemnification Agreement Between Registrant and its Directors and Executive
Officers.(5)
10.7 Executive Stock Bonus Plan for Bruce E. Kanter (4)
10.8 Credit Agreement, dated December 16, 1992.(15)
10.8 LeaseFebruary 1, 1994, between Registrant and The Chase
Manhattan Bank (National Association) and Co-Agents.
10.9 Amendment No. 1 to the Credit Agreement, dated November 1, 1981August 12, 1994, between 1700 Broadway Co.Registrant
and The Chase Manhattan Bank (National Association) and Co-Agents.
10.10 Amendment No. 2 to the Credit Agreement, dated August 31, 1994, between Registrant
and The Chase Manhattan Bank (National Association) and Co-Agents.
10.11 Amendment No. 3 to the Credit Agreement, dated February 23, 1995, between Registrant
and The Chase Manhattan Bank (National Association) and Co-Agents.
10.12 Purchase Agreement dated as of August 24, 1987, between Registrant and National
Broadcasting Company, Inc. (5)
10.13 Stock Purchase Agreement, dated November 4, 1993, between Registrant and Unistar
Communications Group, Inc., Unistar Radio Network, Inc., and Infinity Broadcasting
Corporation. (12)
10.14 Securities Purchase Agreement, dated November 4, 1993, between Registrant and
Infinity Network, Inc. (12)
*10.15 Management Agreement, dated as of February 4, 1994, between Registrant and Infinity
Broadcasting Corporation. (12)
*10.16 Voting Agreement, dated as of February 4, 1994, among Registrant, Infinity Network, Inc.,
Infinity Broadcasting Corporation and Norman J. Pattiz. (12)
10.17 Westwood One, Inc. 1989 Stock Incentive Plan. (10)
10.18 Amendments to the Westwood One, Inc. Amended 1989 Stock Incentive Plan. (14)
10.19 Lease, dated July 19, 1989, between First Ball Associates Limited Partnership and
Westwood One, Inc., relating to Arlington, Virginia offices. (6)
10.20 Lease, dated June 18, 1990, between Broadway 52nd Associates and Unistar
Communications Group, Inc. relating to New York, New York offices.(4)
10.9
10.21 Lease, dated May 24, 1983December 18, 1991, between 1700 Broadway Co.Valencia Paragon Associates, Ltd., and
National Broadcasting
Company,Unistar Communications Group, Inc., relating to New York, New YorkValencia, California offices.(4)
10.10 Lease
10.22 Digital Audio Transmission Service Agreement, dated July 19, 1989, between First Ball Associates Limited Partnership and
Westwood
17
19
One, Inc., relating to Arlington, Virginia offices.(8)
10.11 Loan and Security AgreementJune 5, 1990, between Registrant
and Foothill Capital CorporationGE American Communications, Inc. (8)
10.23 Transmission Service Agreement, dated November 15, 1993.
10.12 Purchase Agreement Between RegistrantMay 28, 1993, between IDB Communications
Group, Inc. and National Broadcasting Company,Unistar Radio Networks, Inc.
dated as10.24 Stipulation of August 24, 1987.Settlement of Class Action Law Suit. (6)
10.13 Westwood One, Inc. 1989 Stock Incentive Plan.(13)
10.1410.25 Agreement for Cancellation of Loan Documents, Guarantees and Securities Purchase
Documents, dated as of November 19, 1993 between Registrant, Westwood One Stations
Group, Inc., Westwood One Stations-LA, Inc., Radio & Records, Inc. and Westinghouse
Electric Corporation. 10.15 Stock Purchase Agreement between Registrant and Unistar Communications Group,
Inc., Unistar Radio Network, Inc., and Infinity Broadcasting Corporation, dated
November 4, 1993.(16)
10.16 Stipulation(13)
22 List of SettlementSubsidiaries
24 Consent of Class Action Law Suit.(8)
10.17 Digital Audio Transmission Service Agreement dated June 5, 1990 between
Registrant and GE American Communications, Inc.(11)
11 Computation of Earnings (Loss) Per Share
22 List of Subsidiaries
24 Consent of Independent Accountants
27 Financial Data Schedule
- ---------------[FN]
**********************
* 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 (File
Number 0-13020), and incorporated herein by reference.
(4) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended November 30, 1987 (File Number 0-13020) and incorporated
herein by reference.
(5) Filed as part of Registrant's September 25, 1986 proxy statement (File
Number 0-13020) and incorporated herein by reference.
(6)(5) Filed as an exhibit to Registrant's current report on Form 8-K dated
September 4, 1987 (File Number 0-13020) and incorporated herein by
reference.
(7)(6) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended November 30, 19881989 (File Number 0-13020) and incorporated
herein by reference.
(7) Filed as an exhibit to Registrant's Quarterly report on Form 10-Q for the
quarter ended August 31, 1990 (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
fiscal year ended November 30, 19891990 (File Number 0-13020) and incorporated
herein by reference.
(9) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended August 31, 1990 (File Number 0-13020) and incorporated herein
by reference.
(10) Filed as an exhibit to Registrant's application for qualification of
indentures on Form T-3 which became effective and qualified on January 11,
1991 (File Number 22-20701) and incorporated herein by reference.
(11) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended November 30, 1990 (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
fiscal year ended November 30, 1991 (File Number 0-13020) and incorporated
herein by reference.
18
20
(13) (10)Filed as part of Registrant's March 27, 1992 proxy statement (File Number
0-13020) and incorporated herein by reference.
(14) (11)Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended November 30, 1992 (File Number 0-13020) and incorporated
herein by reference.
(15) Filed as an exhibit to Registrant's June 18, 1993 Registration Statement on
Form S-8.
(16) (12)Filed as part of Registrant's January 7, 1994 proxy statement (File Number
0-13020) and incorporated herein by reference.
(B) REPORTS ON FORM(13)Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended November 30, 1993 (File Number 0-13020) and incorporated
herein by reference.
(14)Filed as an exhibit to Registrant's July 20, 1994 proxy statement (File
Number 0-13020) and incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of fiscal
1993.
19
1994.
17
21
SIGNATURES
Pursuant to the requirements of Section 13Section13 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.
February 1, 1994March 31, 1995 By NORMAN J. PATTIZ
----------------------------------
Norman J. Pattiz
Chairman of the Board of DirectorsFARID SULEMAN
_______________________
Farid Suleman
Director, Secretary and
Chief ExecutiveFinancial Officer
Pursuant to the requirements of the SecuritiesSecurity 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
--------- ----- ----Signature Title Date
PRINCIPAL EXECUTIVE OFFICER:Principal Executive Officer:
MEL A. KARMAZIN
_______________ Director, President and March 31, 1995
Mel A. Karmazin Chief Executive Officer
Principal Financial Officer and
Chief Accounting Officer:
FARID SULEMAN
_______________ Director, Secretary and March 31, 1995
Farid Suleman Chief Financial Officer
Additional Directors:
NORMAN J. PATTIZ
___________________ Chairman of the Board of February 1, 1994
------------------------------ Directors and ChiefMarch 31, 1995
Norman J. Pattiz Executive Officer
PRINCIPAL FINANCIAL OFFICER AND
CHIEF ACCOUNTING OFFICER:
BRUCEDirectors
DAVID L. DENNIS
_________________ Director March 31, 1995
David L. Dennis
GERALD GREENBERG
_________________ Director March 31, 1995
Gerald Greenberg
PAUL G. KRASNOW
________________ Director March 31, 1995
Paul G. Krasnow
ARTHUR E. KANTERLEVINE
________________
Director Executive Vice February 1, 1994
------------------------------ President
BruceMarch 31, 1995
Arthur E. Kanter and Chief Financial Officer
ADDITIONAL DIRECTORS:Levine
JOSEPH B. SMITH
________________ Director February 1, 1994
------------------------------March 31, 1995
Joseph B. Smith
ARTHUR E. LEVINE Director February 1, 1994
------------------------------
Arthur E. Levine
PAUL G. KRASNOW Director February 1, 1994
------------------------------
Paul G. Krasnow
20
18
22
WESTWOOD ONE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
PAGE
--------Page
____
1. CONSOLIDATED FINANCIAL STATEMENTSConsolidated Financial Statements
--Report of Independent Accountants.....................................Accountants F-2
--Consolidated Balance Sheets at December 31, 1994
and November 30, 1993 and 1992............. F-3
--Consolidated Statements of Operations for the fiscal years
ended December 31, 1994, November 30, 1993 and
1992 and 1991......................................the month ended December 31, 1993 F-4
--Consolidated Statements of Shareholders'
Equity for the fiscal years ended December 31, 1994,
November 30, 1993 and 1992 and 1991................................the month ended
December 31, 1993 F-5
--Consolidated Statements of Cash Flows for the
fiscal years ended December 31, 1994, November 30, 1993
and 1992 and 1991......................................the month ended December 31, 1993 F-6
--Notes to Consolidated Financial Statements............................Statements F-7 - F-16F16
2. FINANCIAL STATEMENT SCHEDULES:Financial Statement Schedules:
IX. --Short-term Borrowings.............................................Borrowings 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.
F-1
23
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF WESTWOOD ONE, INC.To the Board of Directors and Shareholders
of Westwood One, Inc.
In our opinion, the consolidated financial statements listed in the index to
consolidated financial statements and financial statement schedules on page
F-1 present fairly, in all material respects, the financial position of
Westwood One, Inc. and its subsidiaries at December 31, 1994, November 30,
1993 and 1992, and the results of their operations and their cash flows for
the year ended December 31, 1994, the one month ended December 31, 1993 and
for each of the threetwo fiscal years in the period ended November 30, 1993, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards 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 the opinion expressed above.
As discussed in the Notes to Consolidated Financial Statements, effective
December 1, 1993 the Company changed its accounting policy for capitalized
station affiliation agreements and adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".
PRICE WATERHOUSE LLP
Century City, California
February 1, 199424, 1995
F-2 24
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)(In thousands, except share amounts)
NOVEMBERDecember 31, November 30,
---------------------1994 1993
1992
-------- --------------
ASSETS
------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................equivalents $ 3,8682,439 $ 6,4553,868
Accounts receivable, net of allowance for doubtful
accounts of $1,645 (1994) and $959 (1993) 37,631 19,480
Programming costs and $1,104 (1992).......................................... 19,480 22,306
Production costs.....................................................rights 3,129 6,849
9,546
Receivable from sale of unconsolidated subsidiary.................... -- 9,830
Prepaid expenses and other...........................................Other current assets 2,958 2,790
2,954
-------- ---------------
Total Current Assets.........................................Assets 46,157 32,987 51,091
PROPERTY AND EQUIPMENT, NET (Note 3)...................................16,748 15,984 23,032
DEFERRED PRODUCTION COSTS.............................................. 6,185 8,870
INTANGIBLE ASSETS, NET (Note 4)........................................191,287 90,745
205,196
OTHER.................................................................. 6,166 7,551OTHER ASSETS 5,920 12,351
-------- ---------------
TOTAL ASSETS.................................................ASSETS $260,112 $152,067
$295,740
-------- --------
-------- --------======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable.....................................................payable $ 13,44615,325 $ 15,77611,570
Accrued expenses and other liabilities...............................liabilities 12,947 12,838
15,300Amounts payable to affiliates 5,200 1,876
Current maturities of long-term debt (Note 5)........................5,000 1,558 25,157
Short-term borrowings (Note 5).......................................- 6,648 6,800
-------- --------
Total Current Liabilities....................................Liabilities 38,472 34,490 63,033
LONG-TERM DEBT (Notes 5 and 12)........................................115,443 51,943
146,622
OTHER LIABILITIES......................................................LIABILITIES 10,743 10,483 10,881
-------- --------
TOTAL LIABILITIES............................................LIABILITIES 164,658 96,916 220,536
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 12)......................... -- --- -
SHAREHOLDERS' EQUITY (Notes 6 and 12):EQUITY:
Preferred stock: authorized 10,000,000 shares, none outstanding...... -- --outstanding - -
Common stock, $.01 par value: authorized, 117,000,000 shares;
issued and outstanding, 30,652,652 (1994) and 15,978,758 (1993) and 14,621,695 (1992)..........307 160 147
Class B stock, $.01 par value: authorized, 3,000,000 shares:
issued and outstanding, 351,733 (1993(1994 and 1992)..........................1993) 4 4
Additional paid-in capital...........................................capital 159,727 110,547
106,704
Accumulated deficit..................................................deficit (64,584) (55,560) (31,651)
-------- --------
TOTAL SHAREHOLDERS' EQUITY...................................EQUITY 95,454 55,151 75,204
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................EQUITY $260,112 $152,067
$295,740
-------- --------
-------- --------======= =======
See accompanying notes to consolidated financial statements.
F-3 25
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)(In thousands, except per share amounts)
FISCAL YEAR ENDED
NOVEMBERYear Ended
Year Ended Month Ended November 30,
------------------------------December 31, December 31, ------------------
1994 1993 1993 1992
1991
-------- -------- ------------ ---- ---- ----
REVENUE........................................................
GROSS REVENUES $158,780 $ 99,5796,887 $98,357 $101,290
$108,586Less Agency Commissions 22,440 970 14,343 14,914
-------- -------- ------- --------
NET REVENUES 136,340 5,917 84,014 86,376
-------- -------- ------- --------
Operating Costs and Expenses Excluding
Depreciation and Amortization................................................. 80,918 92,249 86,287Amortization 105,389 5,411 65,353 77,335
Depreciation and Amortization..................................Amortization 18,160 1,243 16,384 19,661 22,055
Corporate General and Administrative Expenses..................Expenses 4,404 245 4,468 6,017
6,175Restructuring Costs 2,405 - - -
Severance and Termination Expenses............................. --Expenses - - - 2,063 --
-------- -------- -------- 101,770 119,990 114,517--------
130,358 6,899 86,205 105,076
-------- -------- -------- --------
OPERATING INCOME (LOSS)............................................... 5,982 (982) (2,191) (18,700)
(5,931)
-------- -------- --------
Interest Expense...............................................Expense 8,802 381 6,551 5,562
5,610
Other (Income) Expense (Income).........................................(290) (3) (60) 301 1,081
Equity in Net Loss of Unconsolidated Subsidiary................ --Subsidiary - - - 789 1,901
Loss on Sale of Unconsolidated Subsidiary...................... --Subsidiary - - - 6,536
--
-------- -------- --------
6,491 13,188 8,592
----------------- -------- --------
(LOSS) BEFORE INCOME TAXES, DISCONTINUED
OPERATIONS, EXTRAORDINARY ITEM AND
EXTRAORDINARY
GAIN.........................................................CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,530) (1,360) (8,682) (31,888)
(14,523)
(BENEFIT) FOR INCOME TAXES (Note 8)............................ --200 - - (10,491)
(4,519)-------- -------- -------- --------
(LOSS) FROM CONTINUING OPERATIONS..............................OPERATIONS (2,730) (1,360) (8,682) (21,397) (10,004)
(LOSS) ON DISCONTINUED OPERATIONS, NET
OF INCOME TAX BENEFIT (Note 2).....................................................- - (3,140) (2,721) (6,778)
PROVISION FOR (LOSS) ON DISPOSAL OF
DISCONTINUED OPERATIONS (Note 2).....................................................- - (12,087) -- ---
-------- -------- -------- --------
(LOSS) BEFORE EXTRAORDINARY GAIN...............................ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,730) (1,360) (23,909) (24,118)
(16,782)
EXTRAORDINARY GAIN............................................. -- -- 25,618ITEM - (LOSS) ON RETIREMENT OF DEBT (590) - - -
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - (4,344) - -
-------- --------- -------- -----------------
NET INCOME (LOSS).............................................. $(23,909) $(24,118) $ 8,836
-------- -------- --------
-------- -------- --------
EARNINGS ($3,320) ($ 5,704) ($23,909) ($24,118)
======== ========= ========= =========
(LOSS) PER SHARE:
Primary:
Continuing Operations..................................... $ (.57) $ (1.44) $ (.67)Operations ($ .09) ($ .07) ($ .57) ($ 1.44)
Discontinued Operations................................... (1.01) (.18) (.46)Operations - - ( 1.01) ( .18)
-------- -------- ----------------- --------- ---------
(Loss) Before Extraordinary Gain.......................... (1.58) (1.62) (1.13)Item and Cumulative
Effect of Accounting Change ( .09) ( .07) ( 1.58) ( 1.62)
Extraordinary Gain........................................ -- -- 1.73Item ( .02) - - -
-------- --------- --------- ---------
( .11) ( .07) ( 1.58) ( 1.62)
Cumulative Effect of Accounting Change - ( .23) - -
-------- ----------------- --------- ---------
Net Income (Loss).................................... $ (1.58) $ (1.62) $ .60
-------- -------- --------
-------- -------- --------
Fully diluted:
Continuing Operations..................................... $ (.57) $ (1.44) $ (.30)
Discontinued Operations................................... (1.01) (.18) (.28)
-------- -------- -------- ($ .11) ($ .30) ($ 1.58) ($ 1.62)
======== ========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING 29,414 19,051 15,153 14,906
======== ========= ========= =========
Pro Forma Amounts Assuming the New Accounting
Method is Applied Retroactively:
(Loss) Before Extraordinary Gain.......................... (1.58) (1.62) (.58)Item ($2,730) ($ 1,360) ($23,142) ($23,280)
Net (Loss) ( 3,320) ( 1,360) ( 23,142) ( 23,280)
(Loss) Per Share:
(Loss) Before Extraordinary Gain........................................ -- -- 1.06
-------- -------- --------Item ($ .09) ($ .07) ($ 1.53) ($ 1.56)
Net Income (Loss).................................... $ (1.58) $ (1.62) $ .48
-------- -------- --------
-------- -------- -------- ( .11) ( .07) ( 1.53) ( 1.56)
See accompanying notes to consolidated financial statements.
F-4 26
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)(In thousands)
COMMON STOCK CLASSCommon Stock Class B STOCK ADDITIONAL TREASURY STOCK
--------------- --------------- PAID-IN ACCUMULATED ---------------
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) SHARES AMOUNTStock Additional Treasury Stock
------------ ------------- Paid-in Accumulated --------------
Shares Amount Shares Amount Capital (Deficit) Shares Amount
------ ------ ------ ------ ---------- ------------------ ------- --------- ------ ------
BALANCE AT NOVEMBER 30, 1990............ 14,5931991 ............... 14,594 $146 352 $4 $107,321 $(16,369) 121 $1,606$106,854 ($7,533) 53 $706
Net incomeloss for 1991................... -- -- -- -- -- 8,836 -- --fiscal 1992 ................... - - - - - (24,118) - -
Amortization of deferred compensation
(Note 6)............................ -- -- -- --compensation....... - - - - 281 -- -- --- - -
Issuance of treasury stock to 401-K plan................................ -- -- -- -- (768) -- (68) (900)
Issuance of common stock.............. 1 -- -- -- 20 -- -- --
------ ------ ------ -- ---------- ----------- ------ ------
BALANCE AT NOVEMBER 30, 1991............ 14,594 146 352 4 106,854 (7,533) 53 706
Net loss for 1992..................... -- -- -- -- -- (24,118) -- --
Amortization of deferred compensation
(Note 6)............................ -- -- -- -- 281 -- -- --
Issuance of treasury stock to 401-K
plan................................ -- -- -- --plan.... - - - - (591) --- (53) (706)
Issuance of common stock under
stock option plans (Note 7)............... 3 -- -- --plans......................... 2 - - - 5 -- -- --- - -
Conversion of Senior Debentures to
common stock........................stock............................... 25 -- -- -- 89 -- -- --- - - 88 - - -
Common stock issued as compensation
to an officer (Note 6).................officer.............................. 42 1 -- --- - 67 -- -- --- - -
------- ---- ----- ----- ------- ------ ------ ------ -- ---------- ----------- ------ ---------- -----
BALANCE AT NOVEMBER 30, 1992............1992 ............... 14,663 147 352 4 106,704 (31,651) -- --- -
Net loss for 1993..................... -- -- -- -- --fiscal 1993.................... - - - - - (23,909) -- --- -
Amortization of deferred compensation
(Note 6)............................ -- -- -- --compensation....... - - - - 281 -- -- --- - -
Issuance of common stock under
stock option plans (Note 7)...............plans......................... 680 7 -- --- - 1,381 -- -- --- - -
Conversion of Senior Debentures to
common stock (Note 5)............................................. 591 6 -- --- - 2,062 -- -- --- - -
Issuance of common stock to 401-K plan................................plan...... 46 -- -- --- - - 119 -- -- --- - -
------- ---- ----- ----- ------- ------ ------ ------ -- ---------- ----------- ------ ---------- -----
BALANCE AT NOVEMBER 30, 1993............1993 ............... 15,980 $160160 352 4 110,547 (55,560) - -
Net loss for December 1993.................. - - - - - (5,704) - -
Issuance of common stock under
stock option plans......................... 179 2 - - 366 - - -
Conversion of Senior Debentures to
common stock .............................. 3,542 35 - - 12,530 - - -
------- ---- ----- ----- ------- ------ ---- -----
BALANCE AT DECEMBER 31, 1993 ............... 19,701 197 352 4 123,443 (61,264) - -
Net loss for 1994 .......................... - - - - - (3,320) - -
Issuance of common stock and
warrants................................... 5,000 50 - - 15,933 - - -
Issuance of common stock under
stock option plans......................... 629 7 - - 1,169 - - -
Conversion of Senior Debentures to
common stock .............................. 5,322 53 - - 19,170 - - -
Issuance of common stock to 401-K plan...... 1 - - - 12 - - -
------- ---- ----- ----- ------- ------ ---- -----
BALANCE AT DECEMBER 31, 1994 ............... 30,653 $307 352 $4 $110,547 $(55,560) -- --
------ ------ ------ -- ---------- ----------- ------ ------
------ ------ ------ -- ---------- ----------- ------ ------$159,727 ($64,584) - -
======= ===== ===== ===== ======= ======= ==== =====
See accompanying notes to consolidated financial statements.
F-5 27
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)(In thousands)
FISCAL YEAR ENDED NOVEMBERYear Ended
Year Ended Month Ended November 30,
------------------------------December 31, December 31, --------------
1994 1993 1993 1992
1991
-------- -------- ------------ ---- ---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)................................................. $(23,909) $(24,118) $ 8,836loss ($3,320) ($5,704) ($23,909) ($24,118)
Adjustments to reconcile net income (loss)loss to net cash provided by operating
activities before cash payments related to extraordinary gain:
Extraordinary gain on debt exchange offer, net of taxes........ -- -- (25,618)item:
Depreciation and amortization.................................. 17,372 23,606 26,026amortization:
Programming costs and rights 8,072 752 9,721 12,536
Intangible assets 6,667 253 4,079 6,489
Property and equipment 3,238 238 2,111 3,198
Capitalized station affiliation agreements - - 1,461 1,383
Other 183 - - -
Extraordinary item - loss on retirement of debt 590 - - -
Cummulative effect of accounting change - 4,344 - -
Loss on disposal of discontinued operations....................operations - - 12,087 -- ---
Equity in loss of unconsolidated subsidiary.................... --subsidiary - - - 789 1,901
Loss on sale of unconsolidated subsidiary...................... --subsidary - - - 6,536 --
Deferred income taxes.......................................... --taxes - - - (11,622) (7,707)
Write-down and provision for loss on assets.................... --assets - - - 1,000
1,428Other, including capitalized programming costs and rights (677) 11 (3,625) (4,719)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable...................receivable (19,191) 1,088 (2,239) 6,965
(672)
Decrease (increase) in prepaid assets...................................assets (377) (197) 209 1,124 1,097
Increase (decrease) in accounts payable, accrued liabilities
and accrued
liabilities.................................................amounts payable to affiliates 7,510 (95) (2,189) 4,041
3,854
Other.......................................................... 714 931 719
-------- ------- -------- --------------
Net cash fromprovided by (used for) operating activities before cash
payments related to extraordinary gain............................................. 2,045 9,252 9,864item 2,695 690 (2,294) 3,602
Cash payments related to extraordinary gain......................... -- -- (1,869)item (250) - - -
-------- ------- -------- --------------
Net Cash FromProvided By (Used For) Operating Activities........................ 2,045 9,252 7,995Activities 2,445 690 (2,294) 3,602
-------- ------- -------- --------------
CASH FLOW FROM INVESTING ACTIVITIES:
Capitalized production costs...................................... (4,339) (5,650) (8,238)
Property and equipment capital expenditures.......................Acquisition of companies (Unistar in 1994) (108,181) (72) (1,217) (1,878)
Capital expenditures (1,487) (296) (2,270) (1,192)
(4,634)
Post-acquisition obligations...................................... (1,217) (1,878) (1,969)
Capitalized station affiliation agreements........................ (694) (545) (1,766)
Proceeds (cash payments) related to sales of discontinued operations..............operations (576) (229) 88,062 -- ---
Proceeds (cash payments) related to sale of unconsolidated subsidiary.....................................................subsidary - - 10,372 (1,680)
--Capitalized station affiliation agreements - - (694) (545)
Proceeds related to sale of property and equipment................equipment - - 853 -- --
Other.............................................................-
Other (principally deferred financing costs in 1994) (1,487) (82) (268) (397)
(2,571)
-------- ------- -------- ---------------
Net Cash Provided (Used) By (Used For) Investing Activities.......... 90,499 (11,342) (19,178)Activities (111,731) (679) 94,838 (5,692)
-------- ------- -------- ---------------
CASH PROVIDED (REQUIRED)(USED) BEFORE
FINANCING ACTIVITIES......ACTIVITIES (109,286) 11 92,544 (2,090)
(11,183)
-------- ------- -------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES:
Debt repayments...................................................repayments (14,515) (4,133) (104,071) (2,306) (500)
Borrowings under debt arrangements................................arrangements 110,000 - 7,000 9,288 278
Issuance of common stock..........................................stock 16,126 368 1,507 -- ---
Issuance of subordinated debentures...............................debentures - - 433 853
6,055
-------- ------- -------- ---------------
NET CASH FROMPROVIDED BY (USED IN)FOR)
FINANCING ACTIVITIES..............ACTIVITIES 111,611 (3,765) (95,131) 7,835
5,833
-------- ------- -------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................EQUIVALENTS 2,325 (3,754) (2,587) 5,745 (5,350)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................PERIOD 114 3,868 6,455 710
6,060
-------- -------- --------------- --------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................... $ 3,868 $ 6,455 $ 710
-------- -------- --------
-------- -------- --------PERIOD $2,439 $114 $3,868 $6,455
======== ======= ========= =======
See accompanying notes to consolidated financial statements.
F-6 28
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)(Dollars in thousands, except share and per share amounts)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:- Summary of Significant Accounting Policies:
Principles of Consolidation
The consolidated financial statements include the accounts of all wholly-owned
subsidiaries. Investments in 20 to 50 percent-owned companies are
accounted for under the equity method.
Revenue Recognition
Revenue is recognized when commercial advertisements are broadcast.
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.
ProductionProgramming Costs and Rights
The Company defers a portion of its costs for recorded library material and
produced radio entertainment programs with a life of longer than a year.
Recorded library material includes previously broadcast programs, live
concert performances, interviews, news and special events. Programming costs
and rights ("Production costscosts") are amortized using the straight line method
over the period of expected benefit, not to exceed five years. Approximately 79% of current and deferred production
costs at November 30, 1993 will be amortized by November 30, 1995. The current
portion of deferred production costs represents the portion to be amortized
over the next twelve months.
Capitalized Station Affiliation Agreements
Expenditures associated with major new affiliate agreements are capitalized
and amortized starting once the affiliate's audience is included in rating
service publications for use in generating advertising revenue. Capitalized
station affiliation agreements exclude station affiliation agreements acquired
as part of a purchase of an existing network. These expenditures, which are
included in other assets, are amortized over 10 years or the period of known
benefit, whichever is less.
Measurement of Intangible Asset Impairment
The Company periodically evaluates the carrying value of Intangible Assets.
The Company considers the ability to generate positive broadcast cash flow
(based on the consolidated statement of operations, calculated by subtracting
from net revenue, operating costs and expenses excluding depreciation and
amortization) as the key factor in determining whether the assets have been
impaired. To date, the Company has not experienced an impairment in any of
its intangible assets.
Income Taxes
DeferredEffective December 1, 1993, the Company implemented Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes" which
requires the use of the asset and liability method of financial accounting
and reporting for income taxes. Under FAS 109, deferred income taxes are providedreflect
the tax impact of temporary differences between the amount of assets and
liabilities recognized for timing differences, resulting
principally from deferred production costs.
F-7
29
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)financial reporting purposes and the amounts
recognized for tax purposes.
Earnings (Loss) per Share
Net income (loss) per share is based on the weighted average number of common
shares and common equivalent shares (where inclusion of such equivalent shares
would not be anti-dilutive) outstanding during the year.
Average shares outstanding, used to
compute per share figures, were as follows:
YEAR ENDED NOVEMBER 30,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Primary.................... 15,153,000 14,906,000 14,810,000
Fully diluted.............. 15,153,000 14,906,000 24,242,000
F-7
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reclassification
Financial statements for all prior periods have been reclassified to conform
to the 1994 presentation.
NOTE 2 - Accounting Change:
Effective December 1, 1993, the Company changed its method of accounting for
capitalized station affiliation agreements to expense these costs as incurred.
The Company believes this method is preferable and conforms to the
predominant current industry practice, including Unistar. Accordingly, the
Company recognized the cumulative effect of the change as of December 1, 1993.
The non-cash charge to earnings was an expense of $4,344, or $.23 per share
and has been reflected in the financial statements for the month of December
1993.
NOTE 3 - Change in Fiscal Year:
In the third quarter of 1994, the Company changed its fiscal year end from
November 30 to December 31 effective with the fiscal year ending December 31,
1994. The accompanying financial statements include audited statements of
operations, shareholders' equity and cash flows for the one month transition
period ended December 31, 1993.
NOTE 4 - Acquisition of Unistar Radio Networks, Inc.:
On February 3, 1994, the Company completed the acquisition of all of the
issued and outstanding capital stock of Unistar Radio Networks, Inc.
("Unistar"). The acquisition was accounted for as a purchase. Accordingly,
the operating results of Unistar are included with those of the Company from
the date of acquisition. Based on management's estimates, the purchase price
has been allocated to the fair value of assets and liabilities acquired. The
excess of cost over net assets of acquired company resulting from the
transaction is being amortized over 40 years.
The pro forma unaudited combined condensed results of operations of the
Company and Unistar for the years ended December 31, 1994 and November 30,
1993 presentation.(presented as though the combination had occurred on December 1, 1992
after giving effect to certain pro forma adjustments) are as follows:
December 31, November 30,
1994 1993
---- ----
Net Revenues $140,403 $141,687
(Loss) from Continuing Operations ( 809) (4,301)
(Loss) Per Share from Continuing Operations ( $.03) ( $.15)
The principalforegoing pro forma results of operations principally reflect adjusting
historical interest expense, depreciation and amortization, the sale of 5,000
newly issued shares of common stock to a subsidiary of Infinity and
restructuring costs based on the transaction being completed at the beginning
of the periods presented. No adjustments were made to includehistorical results for
potential cost reductions due to the amortizationelimination of intangibleduplicate facilities and
costs resulting from the acquisition of Unistar. However, 1994 pro forma
results reflect the benefit of cost reductions to the extent that they have
been realized.
F-8
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 - Property and Equipment:
Property and equipment is recorded at cost and is summarized as follows at:
December 31, November 30,
1994 1993
---- ----
Land . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,378 $ 3,378
Recording and studio equipment . . . . . . . . . . . . 15,813 15,433
Buildings and leasehold improvements . . . . . . . . . 7,573 6,577
Furniture and equipment . . . . . . . . . . . . . . . 5,664 4,007
Transportation equipment . . . . . . . . . . . . . . . 690 721
Construction-in-progress . . . . . . . . . . . . . . . - 180
------- -------
33,118 30,296
Less: Accumulated depreciation and amortization . . . 16,370 14,312
------- -------
Property and equipment, net . . . . . . . . . $16,748 $15,984
======= =======
NOTE 6 - Intangible Assets:
Intangible assets are summarized as follows at:
December 31, November 30,
1994 1993
---- ----
Goodwill, less accumulated amortization of $16,334
(1994) and $12,127 (1993) . . . . . . . . . . . . . $153,205 $64,947
Acquired station affiliation agreements, less
accumulated amortization of $3,382 (1994)
and $1,851 (1993) . . . . . . . . . . . . . . . . . 21,025 8,156
Other intangible assets, less accumulated
amortization of $4,543 (1994) and $3,958
(1993) . . . . . . . . . . . . . . . . . . . . . . . 17,057 17,642
-------- -------
Intangible assets, net . . . . . . . . . . . . $191,287 $90,745
========= =======
Goodwill represents the excess of the cost of purchased businesses over the
fair value of their net assets at the date of acquisition.
Station affiliation agreements are comprised of values assigned to agreements
acquired through acquisitionas part of the purchase of radio networks and are amortized using an
accelerated method over 40 years. Intangible assets, except for acquired
station affiliation agreements, are amortized on a straight-line basis over
40 years.
F-9
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 - Debt:
Long-term debt consists of the following at:
December 31, November 30,
1994 1993
---- ----
Term Loans . . . . . . . . . . . . . . . . . . . . . . . $105,000 -
6 % Convertible Subordinated Debentures maturing 2011 . . 15,443 $15,443
Term Notes . . . . . . . . . . . . . . . . . . . . . . . - 7,000
9% Convertible Senior Subordinated Debentures maturing
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . - 31,058
------- -------
120,443 53,501
Less current maturities . . . . . . . . . . . . . . . . . 5,000 1,558
------- -------
$115,443 $51,943
======== =======
The Company's senior loan agreement with a syndicate of banks provides for
$110,000 in arrivingterm loans ("Term Loans") and a $15,000 revolving facility
("Revolver") which mature on November 30, 2001 (referred to collectively as
"The Loans"). Interest is payable at the prime rate plus an applicable
margin of up to 1.5% or LIBOR plus an applicable margin of up to 2.5%, at
the Company's option. Based on the Company's Total Debt Ratio, the applicable
margins may be reduced to as low as .5% for prime rate loans and 1.5% for
LIBOR loans. At December 31, 1994, the applicable margins were 1.0% and 2.0%,
respectively. Principal on the Term Loans is payable quarterly starting
February 28, 1995, however in 1994, the Company prepaid the quarterly
installments due on February 28, 1995 and May 31, 1995 resulting in a
December 31, 1994 balance of $105,000. The Loans are secured by substantially
all the Company's assets and contain covenants relating to dividends, liens,
indebtedness, capital expenditures and interest coverage and leverage ratios.
As a matter of policy, the Company does not engage in derivative trading,
however as part of The Loans, the Company is required to enter into interest
rate protection agreements. Accordingly, the Company has entered into two
interest rate protection agreements under which the Company's interest rate
on $50,000 of borrowings under The Loans will not exceed 8% (based on the
current margin). The agreements are effective from July and August 1995 thru
July and August 1996, with each covering $25,000 of borrowings. At
December 31, 1994, the Company did not have any borrowings outstanding under
the Revolver.
The 6 3/4% Convertible Subordinated Debentures ("Debentures") are unsecured
and subordinated in right of payment to senior indebtedness. Interest on the
Debentures is payable semiannually on April 15 and October 15. The Debentures
are convertible at any time prior to maturity, unless previously redeemed,
into shares of common stock of the Company at the conversion price of $24.58
per share, subject to adjustment upon the occurrence of certain events.
F-10
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During 1994, the Company repaid the Term Notes which were outstanding at the
beginning of the year ($7,000). In addition, the 9% Convertible Senior
Subordinated Debentures, which were outstanding on November 30, 1993, were
converted into approximately 8,864,000 shares of common stock.
The aggregate maturities of long-term debt for the next five fiscal years and
thereafter, pursuant to the Company's debt agreements as in effect at
December 31, 1994, are as follows:
Year
----
1995 . . . . . . . . $ 5,000
1996 . . . . . . . . 15,000
1997 . . . . . . . . 15,000
1998 . . . . . . . . 20,000
1999 . . . . . . . . 20,000
Thereafter . . . . . 45,443
--------
$120,443
========
With the exception of the Company's Debentures, the fair value of short and
long-term debt approximates its carrying value. The fair value of the
Debentures at December 31, 1994 was approximately $10,350, based on its quoted
market price.
NOTE 8 - 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 connection with the Company's purchase of Unistar, the Company sold 5
million shares of common stock and a warrant to purchase up to an additional
3 million shares of common stock at an exercise price of $3.00 per share
(subject to certain vesting conditions) to a wholly-owned subsidiary of
Infinity Broadcasting Corporation for $15,000.
In December 1992, the Company's Board of Directors authorized the issuance of
41,500 shares of common stock to an officer of the Company for services
performed in fiscal 1992.
As part of a settlement relating to class action lawsuits filed against the
Company, it issued warrants to purchase 3,000,000 shares of the Company's
common stock at $17.25 per share. The warrants expire on September 4, 1997.
Warrants not exercised may be redeemable under certain circumstances at $1.00
per warrant.
F-11
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 - Stock Options:
The Company has stock option plans established in 1989 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. There are 4,800,000
shares authorized under the 1989 Plan, as amended. Options granted generally
become exercisable after one year in 25% increments per year and expire within
ten years from the date of grant. The 1989 Plan will remain in existence for
10 years or until otherwise terminated by the Board of Directors.
Information concerning options outstanding under the Plans is as follows for
the year ended:
December 31, November 30,
1994 1993
---- ----
Shares authorized under option plans at end
of period . . . . . . . . . . . . . . . . . 4,800,000 2,800,000
Exercisable at end of period . . . . . . . . 608,750 734,750
-at exercise prices per share . . . . . . . $1.63-$5.38 $1.63-$9.13
Exercised during the period . . . . . . . . . 629,000 679,500
-at exercise prices per share . . . . . . . $1.63-$3.00 $2.00-$2.75
Granted during the period . . . . . . . . . . 630,000 745,000
-at exercise prices per share . . . . . . . $7.50-$9.75 $1.63-$5.38
Canceled during the period . . . . . . . . . 91,875 141,250
Expired during the period . . . . . . . . . . 50,000 171,000
Available for new stock options at end of
period . . . . . . . . . . . . . . . . . . . 1,632,125 170,250
As part of a Management Agreement between the Company and Infinity Broadcasting
Corporation ("Infinity"), a subsidiary of Infinity was given warrants to acquire
up to 1,500,000 shares of common stock at prices ranging between $3.00 and $5.00
per share, subject to adjustment, which are exercisable after the Company's
common stock reaches certain market prices per share. At December 31, 1994,
500,000 warrants were exercisable at $3.00 per share.
F-12
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On December 1, 1986, the Chairman of the Board was granted options not covered
by the Plans to acquire 525,000 shares of common stock, which vested ratably
over a seven-year term or immediately upon a change in control of the Company.
The options became exercisable at the fair market value of the common stock,
as defined, on the date of vesting. At December 31, 1994, all the options
granted are exercisable at exercise prices ranging from $1.67 to $16.31 per
share.
NOTE 10 - Income Taxes:
Effective December 1, 1993, the Company changed its method of accounting for
income taxes as required by FAS109. As permitted under the new rules, prior
year financial statements have not been restated, and adoption of FAS109 did
not affect reported earnings.
The Company has approximately $90,000 of available U.S. net operating loss
carryforwards for tax purposes. Utilization of the carryforwards is dependent
upon future taxable income and they begin to segregateexpire in 2002. As a result of
the Company's prior and pending debt and equity transactions, some of the
Federal net operating losses may be subject to certain limitations. For
financial purposes, a valuation allowance of $27,781 has been recorded to
offset the deferred tax assets related to those carryforwards.
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 at December 31,
1994 follow:
Deferred tax liabilities:
Affiliation agreements . . . . . . $ 9,143
Programming costs and rights . . . 2,186
Depreciation . . . . . . . . . . . 1,189
Other . . . . . . . . . . . . . . 351
------
Total deferred tax liabilities . 12,869
Deferred tax assets:
Net operating loss . . . . . . . . 32,650
Accrued liabilities and reserves . 6,953
Tax credits (AMT and ITC) . . . . 1,047
------
Total deferred tax assets . . . . 40,650
------
Valuation allowance . . . . . . . . 27,781
------
Total deferred income taxes $ -
=======
F-13
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the provision (benefit) for income taxes related to
continuing operations is summarized as follows:
Year Ended
---------------------------------
December 31, November 30,
Current payable: 1994 1993 1992
---- ---- ----
Federal . . . . . . . . . . . . . $ 70 $ - $ -
State . . . . . . . . . . . . . . 130 - 26
-------- ------ --------
200 - 26
-------- ------ --------
Deferred:
Federal . . . . . . . . . . . . . - - (9,520)
State . . . . . . . . . . . . . . - - (2,102)
-------- ------ --------
- - (11,622)
-------- ------ --------
Total expense (benefit) for income
taxes . . . . . . . . . . . . . 200 - (11,596)
Less amount allocated to discontinued
operations . . . . . . . . . . - - 1,105
-------- ------ --------
Expense (benefit) allocated to
continuing operations . . . . . $ 200 $ - $(10,491)
======== ======= ========
The deferred tax benefits recorded for the year ended November 30, 1992, are
attributable to the reversal of deferred taxes for timing differences, provided
for in earlier years.
Note 11 - Related Party Transactions:
In connection with the acquisition of Unistar, the Company sold 5,000,000
shares of the Company's common stock and a warrant to purchase up to an
additional 3,000,000 shares to a subsidiary of Infinity (See Note 8) and
entered into a Management Agreement with Infinity. Pursuant to the Management
Agreement, the Company paid or accrued expenses aggregating $1,849 to Infinity
in 1994.
In addition, several of Infinity's radio stations are affiliated with the
Company's radio networks and the Company purchases several programs from
Infinity. During 1994 the Company incurred expenses aggregating approximately
$12,159 for Infinity affiliations and programs.
NOTE 12 - Restructuring Costs:
As a result of the Company's February 1994 acquisition of Unistar, the Company
consolidated certain facilities and operations. Accordingly, the Company
recorded an expense of approximately $2,405 for the estimated restructuring
charges, including the costs of facility consolidations, eliminating programs,
employee separations, relocations and related costs.
F-14
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 - 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, certain
digital audio transmission services 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, 1994,
are set forth below:
Year
----
1995 . . . . . . . . . . . . . $21,389
1996 . . . . . . . . . . . . . 20,292
1997 . . . . . . . . . . . . . 14,725
1998 . . . . . . . . . . . . . 12,235
1999 . . . . . . . . . . . . . 10,258
------
$78,899
======
NOTE 14 - Supplemental Cash Flow Information:
Supplemental Information on cash flows, including amounts from discontinued
operations.operations, and non-cash transactions is summarized as follows:
Year Ended
-----------------------------------
November 30,
December 31, -----------------------
1994 1993 1992
---- ---- ----
Cash paid (received) for:
Interest . . . . . . . . . . . . . $ 7,763 $16,580 $17,083
Income taxes . . . . . . . . . . . 125 31 (176)
Non-cash investing and financing activities:
Conversion of Senior Debentures
to common stock . . . . . . . . 19,223 2,068 89
Disposition of discontinued operations:
Debt exchanged . . . . . . . . - 19,724 -
Accrued interest exchanged . . - 198 -
Accounts receivable exchanged - (448) -
For the one month ended December 31, 1993, $12,565 of Senior Debentures were
converted to common stock.
F-15
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2 -- DISCONTINUED OPERATIONS15 - Discontinued Operations:
At the end of the Company's first fiscal quarter of 1993, the Company
classified the results of operations from Radio & Records and its Los Angeles
(KQLZ-FM) and New York (WYNY-FM) radio stations as discontinued operations.
These three businesses collateralized the Company's 16% Debentures and
Revolving Credit Facility with Westinghouse Electric Corporation ("WEC"). In
June 1993 the Company completed the sales of its Los Angeles and New York
radio stations, and used the net proceeds from the sales to retire the
Company's 16% Debentures and reduce the outstanding balance of its Revolving
Credit Facility. On November 1, 1993, WEC acquired the outstanding stock of
Radio & Records and the net assets of Westwood One Stations Group for the
outstanding balance of the Revolving Credit Facility, accrued interest and
any other potential claims. Accordingly, the historical net loss of the
Company's owned-and operatedowned-and-operated radio stations and Radio & Records have been
reported separately from continuing operations, and the prior periods have
been restated (including an allocation of interest of $7,043 $12,273, and $13,058$12,273 for
fiscal 1993 1992 and 1991,1992 respectively).
The Company made a provision for the loss on the disposition of these assets
including estimated future costs and operating results from March 1, 1993
until the date of disposition, of $12,087, which includes a fourth quarter
provision of $3,587 as a result of the net proceeds from the disposal of Radio
& Records and the WEC agreement.$12,087. Revenue from discontinued
operations for fiscal 1993 1992 and 19911992 were $22,282 and $36,443, and $35,764, respectively.
NOTE 16 - Quarterly Results of Operations (unaudited):
The consolidated statements of cash flows include both continuing and
discontinued operationsfollowing is a tabulation of the Company.
F-8
unaudited quarterly results of operations.
The quarterly results are presented for the years ended December 31, 1994 and
November 30, WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 3 -- PROPERTY AND EQUIPMENT:
Property and equipment is summarized as follows at:1993.
NOVEMBER 30,
-------------------
1993 1992(In thousands, except per share data)
First Second Third Fourth For the
Quarter Quarter Quarter Quarter Year
------- -------
Land..................................................... $ 3,378 $ 4,409
Recording and studio equipment........................... 15,433 18,033
Buildings and leasehold improvements..................... 6,576 9,414
Furniture and equipment.................................. 4,007 5,214
Transportation equipment................................. 721 860
Construction-in-progress................................. 180 217
------- -------
30,296 38,147
Less: Accumulated depreciation and amortization.......... 14,312 15,115
------- -------
Property and equipment, net......................... $15,984 $23,032 ------- ------- -------
-------
NOTE 4 -- INTANGIBLE ASSETS:
Intangible assets are summarized as follows at:
NOVEMBER 30,
--------------------
1993 1992
------- --------
Goodwill, less accumulated amortization of $12,127
(1993) and $12,096 (1992)............................. $64,947 $ 77,878
Acquired station affiliation agreements, less
accumulated amortization of $1,851 (1993) and $1,727
(1992)................................................ 8,156 8,992
Other intangible assets and radio station broadcast
licenses (1992), less accumulated amortization of
$3,958 (1993) and $14,752 (1992)...................... 17,642 118,326
------- --------
Intangible assets, net........................ $90,745 $205,196
------- --------
------- --------
Station affiliation agreements are comprised of values assigned to
agreements acquired as part of the purchase of radio networks and are
amortized using an accelerated method over 40 years. The value of station
affiliation agreements, whose period of known benefit will expire in the next
twelve months, is $549 and $800 at November 30, 1993 and 1992, respectively.
Goodwill represents the excess of the cost of purchased businesses over the
fair value of their net assets at the date of acquisition.
Intangible assets, except for acquired station affiliation agreements, are
amortized on a straight-line method over 40 years.
F-9
31
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 5 -- FINANCING ARRANGEMENTS AND LONG-TERM DEBT:
Financing Arrangements
In addition to long-term debt, the Company has a secured Revolving Facility
in the maximum amount of $13,000 (based on a percentage of Eligible Accounts
Receivable). The Revolving Facility bears interest, payable monthly, at the rate
of prime plus 2.25%. At November 30, 1993, the Company owed $6,648 under this
Revolving Facility and had available borrowings of $6,352. The Loan and Security
Agreement for the Revolving Facility and the term notes (see below) contain
provisions which require the Company to maintain minimum levels of Working
Capital and Adjusted Tangible Net Worth along with a minimum current ratio. (See
Note 12 -- Subsequent Events)
Long-Term Debt
Long-term debt consists of the following at:
NOVEMBER 30,
------------------
1993 1992
------- --------
Term Notes:
Maturing December 1, 1995............................... $ 3,500 $ --
Maturing December 1, 1996............................... 3,500 --
Prime plus 1 1/2% term loan from bank..................... -- 18,250
Prime plus 1 1/4% Revolving Credit Facility............... -- 61,660
16% Senior Subordinated Debentures and contingent payment
obligations maturing 1999............................... -- 43,300
9% Convertible Senior Subordinated Debentures maturing
2002.................................................... 31,058 33,126
6 3/4% Convertible Subordinated Debentures maturing
2011.................................................... 15,443 15,443
------- --------
Total long-term debt................................. 53,501 171,779
Less current maturities................................... 1,558 25,157
------- --------
Net long-term debt................................... $51,943 $146,622
------- --------
------- --------
The Company has two Term Notes which mature on December 1, 1995 ("Note A")
and December 1, 1996 ("Note B") (collectively the "Notes"). The Notes bear
interest at the rate of prime plus 2.25%. Interest is payable monthly. Principal
is payable monthly on each note commencing on January 1, 1994 in the amounts of
$83 and $58 for Note A and Note B, respectively. (See Note 12 -- Subsequent
Events).
During fiscal 1993, the Company paid or exchanged the following debt
instruments which were outstanding at the beginning of the year: Prime plus
1 1/2% term loan from bank, Prime plus 1 1/4% Revolving Credit Facility and 16%
Senior Subordinated Debentures (See Note 2 -- Discontinued Operations).
The 9% Convertible Senior Subordinated Debentures ("Senior Debentures") are
unsecured and subordinated in right of payment to senior indebtedness of the
Company. Interest on the Senior Debentures is payable semiannually on April 15
and October 15. The Senior Debentures are
F-10
32
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
convertible at any time prior to maturity, unless previously redeemed, into
shares of Common Stock of the Company at the conversion price of $3.50 per
share, subject to adjustment upon the occurrence of certain events. The Senior
Debentures are redeemable at the option of the Company at a declining premium to
par until 1996 and at par thereafter. In fiscal 1993, $2,068 of Senior
Debentures were converted to Common Stock (See Note 12 -- Subsequent Events).
The 6 3/4% Convertible Subordinated Debentures ("Debentures") are unsecured
and subordinated in right of payment to senior indebtedness and Senior
Debentures. Interest on the Debentures is payable semiannually on April 15 and
October 15. The Debentures are convertible at any time prior to maturity, unless
previously redeemed, into shares of Common Stock of the Company at the
conversion price of $24.58 per share, subject to adjustment upon the occurrence
of certain events. On January 11, 1991, the Company accepted, and, thereafter,
retired $83,037 principal amount of the Debentures (84% of the then outstanding
bonds) tendered pursuant to its offer to exchange its Senior Debentures for any
and all of its Debentures. As a result of this transaction, the Company recorded
an extraordinary gain, net of taxes, of $25,618.
The aggregate maturities of long-term debt for the next five fiscal years
and thereafter, pursuant to the Company's debt agreements as in effect at
November 30, 1993, are as follows:
FISCAL
YEAR
-------
1994............................... $ 1,558
1995............................... 1,700
1996............................... 2,283
1997............................... 1,460
1998............................... --
Thereafter......................... 46,501
-------
$53,501
-------
-------
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 December 1992, the Company's Board of Directors authorized the issuance
of 41,500 shares of common stock to an officer of the Company for services
performed in fiscal 1992.
In October 1990 the Company issued 267,740 shares of common stock to a
company owned by the Chairman of the Board in full satisfaction of an amount
owed that company for transportation services.
F-11
33
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
As part of a settlement relating to class action lawsuits filed against the
Company, it issued warrants to purchase 3,000,000 shares of the Company's common
stock at $17.25 per share. The warrants expire on September 4, 1997. Warrants
not exercised may be redeemable under certain circumstances at $1.00 per
warrant.
As part of a seven year employment agreement which commenced December 1,
1986, 112,500 shares of Class B stock were placed in escrow for the Chairman of
the Board. As of November 30, 1993, all the shares were vested.
NOTE 7 -- STOCK OPTIONS:
The Company has stock option plans established in 1984 and 1989 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. No
additional options can be granted under the 1984 Plans. There are 2,800,000
shares authorized under the 1989 Plan, as amended. Options granted generally
become exercisable after one year in 25% increments per year and expire within
ten years from the date of grant. The 1989 Plan will remain in existence for 10
years or until otherwise terminated by the Board of Directors.
Information concerning options outstanding under the Plans is as follows:
FISCAL YEAR ENDED NOVEMBER 30,
--------------------------------
1993 1992
----------- ------------
Shares authorized under option plans at
end of period.............................. 2,800,000 2,800,000
Exercisable at end of period................. 734,750 866,250
-- at exercise prices per share............ $1.63-$9.13 $1.63-$22.75
Exercised during the period.................. 679,500 2,500
-- at exercise prices per share............ $2.00-$2.75 $2.00
Granted during the period.................... 745,000 810,000
-- at exercise prices per share............ $1.63-$5.38 $1.63-$2.75
Canceled during the period................... 141,250 234,500
Expired during the period.................... 171,000 218,000
Available for new stock options at end of
period..................................... 170,250 694,000
On December 1, 1986, the Chairman of the Board was granted options not
covered by the Plans to acquire 525,000 shares of common stock, which vested
ratably over a seven-year term or immediately upon a change in control of the
Company. The options became exercisable at the fair market value of the common
stock, as defined, on the date of vesting. At November 30, 1993, all the options
granted are exercisable at exercise prices ranging from $1.67 to $16.31 per
share.
F-12
34
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 8 -- INCOME TAXES:
Starting in fiscal 1993 the Company no longer has deferred tax liabilities
available to offset its losses.
The components of the (benefit) for income taxes related to continuing
operations is summarized as follows:
FISCAL YEAR ENDED NOVEMBER 30,
---------------------------------
1993 1992 1991
-------- -------- -------1994
----
Currently payable:
Federal...................................................
Net revenues . . . . . . . . . . . . . . . . . . . . $26,052 $36,151 $36,491 $37,646 $136,340
Operating income (loss) . . . . . . . . . . . . . . . (5,622) 4,341 4,010 3,253 5,982
Income (loss) before extraordinary item . . . . . . . (7,416) 2,183 1,658 845 (2,730)
Net income (loss) . . . . . . . . . . . . . . . . . . (8,006) 2,183 1,658 845 (3,320)
Income (loss) per share:
Before extraordinary item . . . . . . . . . . . . . (.29) 0.07 0.05 0.02 (0.09)
Net income (loss) . . . . . . . . . . . . . . . . $ --(.32) $ --0.07 $ --
State..................................................... -- 26 125
-------- -------- -------
-- 26 125
-------- -------- -------
Deferred:
Federal................................................... -- (9,520) (6,217)
State..................................................... -- (2,102) (1,490)
-------- -------- -------
-- (11,622) (7,707)
-------- -------- -------
Total (benefit) for0.05 $ 0.02 $ (0.11)
1993
----
Net revenues . . . . . . . . . . . . . . . . . . . . $17,137 $21,207 $21,732 $23,938 $84,014
Operating income taxes.......................... -- (11,596) (7,582)
Less amount allocated to discontinued operations............ -- 1,105 3,063
-------- -------- -------
(Benefit) allocated to(loss) . . . . . . . . . . . . . . . (4,291) 319 973 808 (2,191)
(Loss) from continuing operations..............operations . . . . . . . . . . (6,072) (1,303) (580) (727) (8,682)
Net (loss) . . . . . . . . . . . . . . . . . . . . . (9,212) (1,303) (9,080) (4,314) (23,909)
(Loss) per share:
From continuing operations . . . . . . . . . . . . (0.40) (0.09) (0.04) (0.04) (0.57)
Net (loss) . . . . . . . . . . . . . . . . . . . . $ -- $(10,491) $(4,519)
-------- -------- -------
-------- -------- -------(0.61) $ (0.09) $ (0.60) $ (0.28) $ (1.58)
The deferred tax benefits recorded for the two years ended November 30,
1992, are attributable to the reversal of deferred taxes for timing differences,
provided for in earlier years. Certain of these deferred taxes were reinstated
in fiscal 1991 as a result of a tax expense of $19,828 on the extraordinary
gain.
A reconciliation between the Company's effective income tax rate and the
U.S. statutory rate is as follows:
FISCAL YEAR ENDED NOVEMBER 30,
---------------------------------
1993 1992 1991
-------- -------- -------
Federal statutory income tax rate................... 34.0% 34.0% 34.0%
State taxes, net of federal benefit................. -- 3.9 3.7
Amortization of intangible assets................... -- (3.0) (7.0)
Losses for which no benefit given................... (34.0) -- --
Other items......................................... -- (2.4) .4
---- ---- ----
Effective income tax rate......................... 0.0% 32.5% 31.1%
---- ---- ----
---- ---- ----
The Company has approximately $90,000 of available U.S. net operating loss
carryforwards for tax purposes. Utilization of the carryforwards is dependent
upon future taxable income and they begin to expire in 2003. As a result of the
Company's prior and pending debt and equity transactions, some of the Federal
net operating losses may be subject to certain limitations.
In 1992, the Financial Accounting Standards Board issued FAS No. 109
"Accounting for Income Taxes". The Company will adopt the standard on
December 1, 1993, and currently estimates that its deferred tax liability will
be increased by approximately $2,000. The resulting expense will be recorded in
the statement of operations and reported as a cumulative effect of a change in
an accounting principle.
F-13
35
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 9 -- 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 and
certain digital audio transmission services. The approximate aggregate future
minimum obligations under such operating leases and contractual agreements
for the five years after November 30, 1993, are set forth below:
FISCAL
YEAR
--------
1994............................... $13,346
1995............................... 11,108
1996............................... 10,785
1997............................... 8,160
1998............................... 6,931
--------
$50,330
--------
--------
NOTE 10 -- SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental Information on cash flows, including amounts from discontinued
operations, and non-cash transactions is summarized as follows:
FISCAL YEAR ENDED NOVEMBER 30,
------------------------------
1993 1992 1991
-------- -------- ---------
Cash paid (received) for:
Interest........................................................ $16,580 $17,083 $12,306
Income taxes.................................................... 31 (176) 1,005
Non-cash investing and financing activities:
Conversion of Senior Debentures to common stock................. 2,068 89 --
Disposition of discontinued operations:
Debt exchanged............................................... 19,724 -- --
Accrued interest exchanged................................... 198 -- --
Accounts receivable exchanged................................ (448) -- --
F-14
36
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
NOTE 11 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The following is a tabulation of the unaudited quarterly results of operations
for each of the quarters for the fiscal yearsyear ended November 30, 1993
and 1992:December 31, 1993. As a
result of restating the quarterly periods, the effect of accounting change is
presented as if the change was made as of the beginning of the year.
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEARFirst Second Third Fourth For the
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- --------
1993
REVENUE................................. $20,352 $25,132 $25,782 $28,313Net revenues . . . . . . . . . . . . . . . . . . . . $18,086 $22,023 $22,611 $22,183 $84,903
Operating income (loss) . . . . . . . . . . . . . . . (3,068) 1,378 1,040 62 (588)
(Loss) from continuing operations . . . . . . . . . . (4,885) (227) (494) (1,348) (6,954)
(Loss) before cumulative effect of accounting change (7,117) (227) (8,994) (4,935) (21,273)
Income (loss) per share:
From continuing operations . . . . . . . . . . . . (0.33) (0.02) (0.03) (0.08) (0.45)
Before cumulative effect of accounting change . . . $ 99,579
OPERATING INCOME (LOSS)................. (4,291) 319 973 808 (2,191)
(LOSS) FROM CONTINUING OPERATIONS....... (6,072) (1,303) (580) (727) (8,682)
NET LOSS................................ (9,212) (1,303) (9,080) (4,314) (23,909)
(LOSS) PER SHARE:
PRIMARY AND FULLY DILUTED
CONTINUING OPERATIONS.............. (.40) (.09) (.04) (.04) (.57)
DISCONTINUED OPERATIONS............ (.21) -- (.56) (.24) (1.01)
NET (LOSS).........................(0.47) $ (.61)(0.02) $ (.09)(0.60) $ (.60)(0.29) $ (.28) $ (1.58)
1992
REVENUE................................. $23,444 $24,279 $27,810 $25,757 $101,290
OPERATING (LOSS)........................ (5,857) (5,428) (3,516) (3,899) (18,700)
(LOSS) FROM CONTINUING OPERATIONS....... (5,343) (4,544) (7,657) (3,853) (21,397)
NET (LOSS).............................. (7,240) (4,810) (7,743) (4,325) (24,118)
(LOSS) PER SHARE:
PRIMARY AND FULLY DILUTED:
CONTINUING OPERATIONS.............. (.36) (.30) (.51) (.26) (1.44)
DISCONTINUED OPERATIONS............ (.13) (.02) (.01) (.03) (.18)
NET (LOSS)......................... $ (.49) $ (.32) $ (.52) $ (.29) $ (1.62)(1.37)
NOTE 12 -- SUBSEQUENT EVENTS(UNAUDITED):
The Company submitted to the Commission an offer of settlement arising out
of a formal investigation by the Commission which has been pending since 1989.
The settlement offer, which was accepted by the Commission on January 7, 1994
and an order entered on January 19, 1994, involved the Company's consent,
without admitting or denying any of the findings of the Commission, to an
administrative cease and desist order based upon findings that in 1987 and 1988
the Company violated antifraud and accounting provisions of the federal
securities laws and the rules thereunder in its revenue recognition and
accounting practices during that period.
F-15
F-16 37
WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
From December 1, 1993 through January 15, 1994, holders of the Company's
Senior Debentures converted $12,542 face amount of the Senior Debentures into
3,584,000 shares of the Company's Common Stock.
On January 28, 1994 the shareholders of the Company approved and
authorized the acquisition by the Company of all the issued and outstanding
capital stock of Unistar Radio Networks, Inc. ("Unistar") and the assumption of
$84,711 of Unistar's indebtedness for an aggregate purchase price of $101,300.
The acquisition will be accounted for as a purchase and, accordingly,
Unistar's results of operations will be included in the consolidated statement
of operations from the date the acquisition is consummated.
In order to finance the acquisition of Unistar, the Company anticipates
obtaining a new senior loan with a syndicate of bank's in the amount of
$125,000. Additionally, the Company will sell 5 million shares of Common Stock
and a warrant to purchase up to an additional 3 million shares of Common Stock
at an exercise price of $3.00 per share (subject to certain vesting
conditions) to a wholly-owned subsidiary of Infinity Broadcasting Corporation
for $15,000. The net proceeds will be used to acquire Unistar and repay its
indebtedness ($101,300), repay the Company's current senior debt agreement,
and improve working capital. Immediately following the acquisition, and as a
condition to obtaining a new senior loan, the Company will also redeem its
Senior Debentures.
F-16
38
WESTWOOD ONE, INC.
SCHEDULE IX
CONSOLIDATED SHORT-TERM BORROWINGS
(IN THOUSANDS)(In thousands)
WEIGHTED
MAXIMUM AVERAGE AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE
CATEGORY OF WEIGHTED OUT- OUT- INTEREST
AGGREGATE BALANCE AT AVERAGE OUTSTANDING OUTSTANDINGSTANDING STANDING RATE
CATEGORY OF AGGREGATESHORT-TERM END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD PERIOD
- --------------------------------------------- ----------- ---------- -------- ----------- --------------------- ---------- ----------
YEAR ENDED NOVEMBERYear ended
December 31, 1994:
Note payable $ - - $2,657 $ 139 8.4%
Year ended
November 30, 1993:
Note payable............................. $6,648payable 6,448 8.3% $ 7,448 $ 4,404 8.2%
YEAR ENDED NOVEMBER7,248 4,399 8.2
Year ended
November 30, 1992:
Note payable ............................ 6,800 8 6,800 3,948 7.5
YEAR ENDED NOVEMBER 30, 1991:
Note payable............................. 250 9 3,000 412 9
Notes: Short-term borrowings during the years covered by this schedule consist
of loans made under various established credit lines. The average amount
outstanding during each period was computed by dividing the average outstanding
principal balance by 365 days. The weighted average interest rate during each
period was computed by dividing the actual interest expense on such borrowings
by the average amount outstanding during that period.
F-17