WESTWOOD ONE, INC. 
By "While I have said before that 2008 is an important transition year for our newly independent Company, recent revenue trends have been softer than expected due to a weak national economy and a decrease in radio advertising spending. During the second quarter, the difficult business environment negatively impacted revenue and put downward pressure on Adjusted EBITDA and these conditions are expected to continue in the near-term. Over the past few months the new management team has been actively reviewing every aspect of the business and taking actions to improve the Company's operations. Management has also identified a series of key re-engineering initiatives that are intended to create operating efficiencies, further streamline our cost structure, and drive incremental revenue. These initiatives are consistent with our existing plan but will be accelerated in order to mitigate the current softness in our revenues. These initiatives should provide stability in the near-term and position us to more effectively execute our long term strategy. I look forward to reporting on the specifics of these plans by the end of the third quarter."
Second Quarter 2008 Results
Revenue for the second quarter of 2008 was
Adjusted EBITDA for the second quarter, defined as operating income (loss)
plus depreciation and amortization, special charges, a non-cash goodwill
impairment charge (referenced in more detail below), and non-cash stock-based
compensation, was
Special charges in the second quarter were
Operating loss in the second quarter was
Interest expense for the quarter was
Income tax benefit for the quarter was
Net loss for the second quarter was
Free cash flow, defined as net income (loss) plus depreciation and
amortization, special charges, goodwill impairment, stock-based compensation,
and amortization of deferred financing costs less capital expenditures, in the
second quarter was
Goodwill Impairment Charge
In accordance with Statement of Financial Accounting Standards No. 142,
the Company has performed an interim assessment of the value of its goodwill.
This action was required given the negative impact of ongoing weakness in the
national economy and reduced advertising sales on the Company's near-term
performance. The completion of the two-part test resulted in the Company
recording a non-cash charge in the amount of
Business Update and Company Outlook
Over the past several months, management has been actively pursuing actions to improve the Company's operations, including its sales strategy and execution. However, to address near-term economic weakness and to position the Company for long-term profitable growth, management is planning several significant business re-engineering initiatives that should lend stability to the business in the near-term and are intended to drive incremental revenue and streamline the cost structure in the long-term. These initiatives will be in line with the strategy outlined to date and management will merely be accelerating certain initiatives of the overall long-term business plan.
The three key focus areas include:
-- Fundamentally re-engineer the local traffic segment to leverage leading
edge technology and right-size the business.
-- Top-grade the sales organization to be more effective and enhance our
coverage in key geographic markets while empowering the staff to better
cross-sell all of the Company's media assets.
-- Introduce significant organizational and operational discipline in
order to streamline the cost structure by improving processes and
becoming more efficient.
The new management team is still finalizing details of these initiatives. By the end of the third quarter, the Company will provide more specific information on formal plans, benefits of initiatives, and details regarding a re-engineering charge that is expected to occur in the third quarter.
2008 Outlook
Due to the ongoing planning process and the dynamic economic environment, which makes it difficult to forecast near-term operations, management believes it is prudent to withdraw the previous formal financial outlook that has been provided for 2008. Management will continue to be open about progress on the Company's operating initiatives throughout the second half of 2008.
Mr. Beusse concluded, "Although the Company has near-term challenges, Westwood One has entered a new era and we are optimistic about our long-term potential. I am proud of what this new management team has accomplished in such a short amount of time. We are analyzing every aspect of our business, taking decisive actions, and creating key partnerships. We expect that as a result of this hard work, 2009 will be a break-out year. Westwood One is rapidly becoming a more data driven, cross-platform media company delivering superior content and services. We look forward to realizing that vision and to delivering enhanced shareholder value over the long-term."
About Westwood One
Westwood One (NYSE: WON) is a platform-agnostic content company providing over 150 news, sports, music, talk, entertainment programs, features and live events to numerous media partners. Westwood One also provides local content such as traffic, weather, news, and sports to the radio, TV, and online sectors. Westwood One provides its content and services to more than 5,000 radio stations. For more information please visit www.westwoodone.com.
Certain statements in this release constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. The words or phrases "guidance," "expect," "anticipate,"
"estimates" and "forecast" and similar words or expressions are intended to
identify such forward-looking statements. In addition any statements that
refer to expectations or other characterizations of future events or
circumstances are forward-looking statements. Various risks that could cause
future results to differ from those expressed by the forward-looking
statements included in this release include, but are not limited to:
continued declines in revenue; our ability to raise additional capital or
refinance our senior credit agreement; our ability to execute our growth
strategy; trends in audience and inventory delivered by our affiliated radio
stations, and competition in the media industry; changes in economic
conditions in the U.S. and in other countries in which the Company currently
does business (both generally and relative to the broadcasting and media
industry); advertiser spending patterns; changes in the level of competition
for advertising dollars; and fluctuations in programming costs. Other key
risks are described in the Company's reports filed with the SEC, including the
Company's annual report on Form 10-K/A for the year ending
WESTWOOD ONE, INC.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
Adjusted EBITDA
The following tables set forth the Company's Adjusted EBITDA for the three
and six month periods ended
Adjusted EBITDA is used by the Company to, among other things, evaluate its operating performance, forecast and plan for future periods, value prospective acquisitions, and as one of several components of incentive compensation targets for certain management personnel. This measure is an important indicator of the Company's operational strength and performance of its business because it provides a link between profitability and operating cash flow. The Company believes the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company's management, helps improve their ability to understand the Company's operating performance and makes it easier to compare the Company's results with other companies that have different financing and capital structures or tax rates. In addition, this measure is also among the primary measures used externally by the Company's investors, analysts and peers in its industry for purposes of valuation and comparing the operating performance of the Company to other companies in its industry. Adjusted EBITDA is also used to determine compliance with its debt covenants.
Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance. Adjusted EBITDA as the Company calculates it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure does not necessarily represent funds available for discretionary use, and is not necessarily a measure of the Company's ability to fund its cash needs. As Adjusted EBITDA excludes certain financial information compared with operating income, the most directly comparable GAAP financial measure, users of this financial information should consider the types of events and transactions which are excluded. As required by the SEC, the Company provides below a reconciliation of Adjusted EBITDA to operating income, the most directly comparable amount reported under GAAP.
Three Months Ended Six Months Ended
June 30, June 30,
(In millions) 2008 2007 2008 2007
Net income (loss) ($199.7) $6.9 ($205.1) $7.6
Plus:
Income taxes (0.2) 4.0 (3.2) 4.5
Interest expense and other 4.3 5.7 9.6 11.8
Depreciation and amortization 2.4 4.9 6.4 9.9
Goodwill impairment &
special charges 207.0 2.3 214.9 2.6
Non-cash stock based
compensation 0.3 2.8 2.5 5.6
Adjusted EBITDA $14.1 $26.6 $25.1 $42.0
Free Cash Flow
Free cash flow is defined by the Company as net income (loss) plus depreciation and amortization, stock-based compensation, special charges, and non-cash goodwill impairment less capital expenditures. The Company uses free cash flow, among other measures, to evaluate its operating performance. Management believes free cash flow provides investors with an important perspective on the Company's cash available to service debt and the Company's ability to make strategic acquisitions and investments, maintain its capital assets, repurchase its common stock and fund ongoing operations. As a result, free cash flow is a significant measure of the Company's ability to generate long term value. The Company believes the presentation of free cash flow is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management. In addition, free cash flow is also a primary measure used externally by the Company's investors, analysts and peers in its industry for purposes of valuation and comparing the operating performance of the Company to other companies in its industry. Free cash flow per fully diluted weighted average Common shares outstanding is defined by the Company as free cash flow divided by the fully diluted weighted average Common shares outstanding.
As free cash flow is not a measure of performance calculated in accordance with GAAP, free cash flow should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or net cash provided by operating activities as a measure of liquidity. Free cash flow, as the Company calculates it, may not be comparable to similarly titled measures employed by other companies. In addition, free cash flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of the Company's ability to fund its cash needs. In arriving at free cash flow, the Company adjusts net cash provided by operating activities to remove the impact of cash flow timing differences to arrive at a measure which the Company believes more accurately reflects funds available for discretionary use. Specifically, the Company adjusts net cash provided by operating activities (the most directly comparable GAAP financial measure) for capital expenditures, special charges, and deferred taxes, in addition to removing the impact of sources and or uses of cash resulting from changes in operating assets and liabilities. Accordingly, users of this financial information should consider the types of events and transactions which are not reflected. The Company provides below a reconciliation of free cash flow to the most directly comparable amount reported under GAAP, net cash provided by operating activities. The following table presents a reconciliation of the Company's net cash provided by operating activities to free cash flow:
Three Months Ended Six Months Ended
June 30, June 30,
(In millions, except per share
amounts) 2008 2007 2008 2007
Net cash provided by (used in)
operating activities $6.0 ($19.2) ($4.8) ($2.6)
Plus or Minus:
Changes in assets and liabilities (4.1) 31.1 8.3 22.9
Special charges 0.9 2.3 8.9 2.6
Deferred taxes 7.6 2.8 7.1 3.1
Capital expenditures (2.4) (1.2) (6.1) (2.1)
Free cash flow $8.0 $15.8 $13.4 $23.9
Fully diluted weighted
average shares
Outstanding 100.8 86.5 95.1 86.4
Free cash flow per diluted share $0.08 $0.18 $0.14 $0.28
WESTWOOD ONE, INC
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
NET REVENUE $100,372 $111,025 $206,998 $224,984
Operating Costs (includes
related party expenses
of $18,445, $16,886, $36,320
and $35,829 respectively) 85,411 83,633 179,640 181,068
Depreciation and Amortization
(includes related party
warrant amortization of $0 ,
$2,427, $1,618 and
$4,853, respectively) 2,421 4,917 6,397 9,948
Corporate General and
Administrative Expenses
(includes related party
expenses of $0, $861, $610
and $1,690, respectively) 1,199 3,575 4,665 7,451
Goodwill Impairment 206,053 - 206,053 -
Special Charges 897 2,282 8,853 2,637
295,981 94,407 405,608 201,104
OPERATING (LOSS) INCOME (195,609) 16,618 (198,610) 23,880
Interest Expense 4,352 5,852 9,751 11,949
Other Income (43) (150) (85) (150)
(LOSS) INCOME BEFORE INCOME TAXES (199,918) 10,916 (208,276) 12,081
INCOME TAXES (BENEFIT) EXPENSE (174) 4,019 (3,194) 4,469
NET (LOSS) INCOME $(199,744) $6,897 $(205,082) $7,612
(LOSS) EARNINGS PER SHARE
COMMON STOCK
BASIC $(1.98) $0.08 $(2.16) $0.09
DILUTED $(1.98) $0.08 $(2.16) $0.09
CLASS B STOCK
BASIC $- $- $- $0.02
DILUTED $- $- $- $0.02
WEIGHTED AVERAGE SHARES OUTSTANDING:
COMMON STOCK
BASIC 100,752 86,094 95,119 86,084
DILUTED 100,752 86,540 95,119 86,408
CLASS B STOCK
BASIC 292 292 292 292
DILUTED 292 292 292 292
WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
June 30, December 31,
2008 2007
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $5,315 $6,187
Accounts receivable, net of allowance
for doubtful accounts of $3,585 (2008)
and $3,602 (2007) 95,566 108,271
Warrants, current portion - 9,706
Prepaid and other assets 8,299 13,990
Total Current Assets 109,180 138,154
Property and equipment, net 34,702 33,012
Goodwill 258,061 464,114
Intangible assets, net 3,052 3,443
Other assets 26,139 31,034
TOTAL ASSETS $431,134 $669,757
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $20,366 $17,378
Amounts payable to related parties 14,466 30,859
Deferred revenue 3,789 5,815
Income taxes payable 1,964 7,246
Accrued expenses and other liabilities 23,776 29,562
Current maturity of Long-Term Debt 60,000 -
Total Current Liabilities 124,361 90,860
Long-term debt 199,495 345,244
Other Liabilities 5,681 6,022
TOTAL LIABILITIES 329,537 442,126
Commitments and Contingencies
Redeemable preferred stock: $.01 par value,
authorized 10,000 shares, issued and
outstanding, 75 as Series A Convertible
Preferred Stock; liquidation preference
$1,000 per share 73,738 -
SHAREHOLDERS' EQUITY
Common stock, $.01 par value: authorized,
300,000 shares; issued and outstanding,
101,345 (2008) and 87,105 (2007) 1,014 872
Class B stock, $.01 par value: authorized,
3,000 shares; issued and outstanding,
292 (2008 and 2007) 3 3
Additional paid-in capital 293,363 290,786
Unrealized gain on available for sale
securities 8,551 5,955
Accumulated deficit (275,072) (69,985)
TOTAL SHAREHOLDERS' EQUITY 101,597 227,631
TOTAL LIABILITIES, REDEEMABLE
PREFERRED STOCK AND SHAREHOLDERS'
EQUITY $431,134 $669,757
WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2008 2007
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss) income $(205,082) $7,612
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 6,397 9,948
Goodwill Impairment 206,053 -
Deferred taxes (8,563) (3,079)
Non-cash stock compensation 2,455 5,572
Amortization of deferred financing costs 792 237
2,052 20,290
Changes in assets and liabilities:
Accounts receivable 12,705 (47)
Prepaid and other assets 5,531 5,264
Deferred revenue (2,026) (1,861)
Income taxes payable and prepaid
income taxes (3,915) (5,455)
Accounts payable and accrued
expenses and other liabilities (2,796) (23,269)
Amounts payable to related parties (16,393) 2,516
Net Cash Used By Operating Activities (4,842) (2,562)
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (6,078) (2,114)
Net Cash Used In Investing Activities (6,078) (2,114)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 22,750 -
Issuance of series A convertible
preferred stock and warrants 74,178 -
Debt repayments and payments of
capital lease obligations (85,343) (359)
Dividend payments - (1,663)
Deferred financing costs (1,537) -
Net Cash Provided (Used) in
Financing Activities 10,048 (2,022)
NET DECREASE IN CASH AND CASH EQUIVALENTS (872) (6,698)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 6,187 11,528
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,315 $4,830
SOURCE Westwood One, Inc.
