##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 [   ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
 For the transition period from _____ to ______
 Commission file number 0-14691
 WESTWOOD ONE, INC.
  Delaware
    
    95-3980449(State or other jurisdiction ofincorporation or organization)
    
    (I.R.S. EmployerIdentification No.)40 West 57th Street, 5th Floor, New York, NY
(Address of principal executive offices)
    
    10019(Zip Code)
 (212) 641-2000
 
 X
 X
 X




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##### Table of Contents



WESTWOOD ONE, INC.
 INDEX
 Page No.PART I.
    
    FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of
Financial Condition and Results of
Operations
    
    
    15Item 3. Qualitative and Quantitative Disclosures
About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    25PART II.
    
    OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits
    
    
    27SIGNATURES
    
    
    28Exhibit Index
    
    
    29CERTIFICATIONSEX-31.A: CERTIFICATIONEX-31.B: CERTIFICATIONEX-32.A: CERTIFICATIONEX-32.B: CERTIFICATION
 2




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WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share amounts)
 September 30,
    
    
    December 31,2006
    
    
    2005(Restated)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    12,205
    
    
    $
    10,399Accounts receivable, net of allowance for doubtful accounts
of $3,684 (2006) and $2,797 (2005)
    
    
    107,479
    
    
    
    135,184Prepaid and other assets
    
    
    25,222
    
    
    
    26,662Total Current Assets
    
    
    144,906
    
    
    
    172,245PROPERTY AND EQUIPMENT, NET
    
    
    39,173
    
    
    
    41,166GOODWILL
    
    
    982,219
    
    
    
    982,219INTANGIBLE ASSETS, NET
    
    
    4,540
    
    
    
    5,007OTHER ASSETS
    
    
    28,070
    
    
    
    39,009TOTAL ASSETS
    
    $
    1,198,908
    
    
    $
    1,239,646LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    18,756
    
    
    $
    15,044Amounts payable to related parties
    
    
    18,083
    
    
    
    21,192Deferred revenue
    
    
    8,480
    
    
    
    9,086Accrued income taxes
    
    
    1,574
    
    
    
    21,861Accrued expenses and other liabilities
    
    
    47,852
    
    
    
    32,968Total Current Liabilities
    
    
    94,745
    
    
    
    100,151LONG-TERM DEBT
    
    
    406,414
    
    
    
    427,514OTHER LIABILITIES
    
    
    7,361
    
    
    
    7,952TOTAL LIABILITIES
    
    
    508,520
    
    
    
    535,617COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITYPreferred stock: authorized 10,000,000 shares, none outstanding
    
    
    
    
    
    
    Common stock, $.01 par value: authorized, 252,751,250 shares;
issued and outstanding, 85,955,556 (2006) and 86,673,821 (2005)
    
    
    860
    
    
    
    867Class B stock, $.01 par value: authorized, 3,000,000 shares;
issued and outstanding, 291,796 (2006 and 2005)
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    289,416
    
    
    
    300,419Unrealized gain on available for sale securities
    
    
    4,152
    
    
    
    Accumulated earnings
    
    
    395,957
    
    
    
    402,740TOTAL SHAREHOLDERS EQUITY
    
    
    690,388
    
    
    
    704,029TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
    
    $
    1,198,908
    
    
    $
    1,239,646
  3




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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(Unaudited)
    
    
    (Unaudited)2006
    
    
    2005
    
    
    2006
    
    
    2005(Restated)
    
    
    
    
    
    
    (Restated)NET REVENUES
    
    $
    114,263
    
    
    $
    134,928
    
    
    $
    364,197
    
    
    $
    410,847Operating Costs (includes related party expenses of $17,117, $18,094, $58,853 and $60,103, respectively)
    
    
    82,010
    
    
    
    88,799
    
    
    
    285,329
    
    
    
    282,188Depreciation and Amortization (includes related party
warrant amortization of
$2,427,$2,427, $7,281 and
$7,281, respectively)
    
    
    5,239
    
    
    
    5,194
    
    
    
    15,424
    
    
    
    15,597Corporate General and Administrative Expenses
(includes related party
expenses of $825, $819, $2,440
and $2,367, respectively)
    
    
    3,178
    
    
    
    3,303
    
    
    
    13,031
    
    
    
    10,91890,427
    
    
    
    97,296
    
    
    
    313,784
    
    
    
    308,703OPERATING INCOME
    
    
    23,836
    
    
    
    37,632
    
    
    
    50,413
    
    
    
    102,144Interest Expense
    
    
    6,625
    
    
    
    4,840
    
    
    
    19,117
    
    
    
    12,626Other (Income) Expense
    
    
    (154
    )
    
    
    (133
    )
    
    
    (389
    )
    
    
    (319
    )INCOME BEFORE INCOME TAXES
    
    
    17,365
    
    
    
    32,925
    
    
    
    31,685
    
    
    
    89,837INCOME TAXES
    
    
    6,881
    
    
    
    12,856
    
    
    
    12,558
    
    
    
    34,460NET INCOME
    
    $
    10,484
    
    
    $
    20,069
    
    
    $
    19,127
    
    
    $
    55,377EARNINGS PER SHARE:BASIC
    
    $
    0.12
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.60DILUTED
    
    $
    0.12
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.60WEIGHTED AVERAGE SHARES OUTSTANDING:BASIC
    
    
    86,246
    
    
    
    90,338
    
    
    
    87,287
    
    
    
    91,940DILUTED
    
    
    86,248
    
    
    
    90,487
    
    
    
    87,299
    
    
    
    92,490
  4




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WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Nine Months EndedSeptember 30,(Unaudited)2006
    
    
    2005(Restated)CASH FLOW FROM OPERATING ACTIVITIES:Net income
    
    $
    19,127
    
    
    $
    55,377Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    15,424
    
    
    
    15,597Disposal of property and equipment
    
    
    
    
    
    
    88Deferred taxes
    
    
    (4,554
    )
    
    
    (3,416
    )Non-cash stock compensation
    
    
    9,596
    
    
    
    8,977Amortization of deferred financing costs
    
    
    250
    
    
    
    25039,843
    
    
    
    76,873Changes in assets and liabilities:Accounts receivable
    
    
    27,705
    
    
    
    19,620Prepaid and other assets
    
    
    1,190
    
    
    
    (5,731
    )Deferred revenue
    
    
    (606
    )
    
    
    (4,109
    )Income taxes payable and prepaid income taxes
    
    
    (20,287
    )
    
    
    11,819Accounts payable and accrued expenses
and other liabilities
    
    
    17,414
    
    
    
    11,928Amounts payable to related parties
    
    
    (3,109
    )
    
    
    (998
    )Net Cash Provided By Operating Activities
    
    
    62,150
    
    
    
    109,402CASH FLOW FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (5,258
    )
    
    
    (2,889
    )Repayment of loan receivable
    
    
    2,000
    
    
    
    Acquisition of companies and other
    
    
    75
    
    
    
    (204
    )Net Cash Used in Investing Activities
    
    
    (3,183
    )
    
    
    (3,093
    )CASH FLOW FROM FINANCING ACTIVITIES:Issuance of common stock
    
    
    302
    
    
    
    2,559Borrowings under bank and other long-term obligations
    
    
    10,000
    
    
    
    75,000Debt repayments and payments of capital lease obligations
    
    
    (30,509
    )
    
    
    (35,477
    )Dividend payments
    
    
    (25,910
    )
    
    
    (18,264
    )Repurchase of common stock
    
    
    (11,044
    )
    
    
    (120,579
    )Windfall tax benefits from stock option exercises
    
    
    
    
    
    
    682Net Cash Used in Financing Activities
    
    
    (57,161
    )
    
    
    (96,079
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    1,806
    
    
    
    10,230CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    10,399
    
    
    
    10,932CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    12,205
    
    
    $
    21,162
  5




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 NOTE 1 Basis of Presentation:
   NOTE 2 Equity-Based Compensation:
 Equity Compensation Plans
     6




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
   Adoption of SFAS 123R
   $
   Selected Balance Sheet Data:
 December 31, 2005As previouslyreported
    
    
    Adjustment
    
    
    As restatedDeferred tax (liability) /asset
    
    $
    (10,619
    )
    
    $
    19,388
    
    
    $
    8,769Paid-in capital
    
    
    211,610
    
    
    
    88,809
    
    
    
    300,419Retained earnings
    
    
    472,161
    
    
    
    (69,421
    )
    
    
    402,740
 7




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 Selected Statement of Operations Data:
 Three Months Ended September 30, 2005
    
    Nine Months Ended September 30, 2005As previously
    
    
    
    
    
    
    
    
    
    As previouslyreported
    
    Adjustment
    
    As restated
    
    reported
    
    Adjustment
    
    As restatedOperating Costs
    
    $
    87,166
    
    
    $
    1,633
    
    
    $
    88,799
    
    
    $
    276,895
    
    
    $
    5,293
    
    
    $
    282,188Corporate General and
Administrative Expenses
    
    
    2,196
    
    
    
    1,107
    
    
    
    3,303
    
    
    
    7,412
    
    
    
    3,506
    
    
    
    10,918Income Before Income
Taxes
    
    
    35,665
    
    
    
    (2,740
    )
    
    
    32,925
    
    
    
    98,636
    
    
    
    (8,799
    )
    
    
    89,837Income Taxes
    
    
    13,912
    
    
    
    (1,056
    )
    
    
    12,856
    
    
    
    37,990
    
    
    
    (3,530
    )
    
    
    34,460Net Income
    
    
    21,753
    
    
    
    (1,684
    )
    
    
    20,069
    
    
    
    60,646
    
    
    
    (5,269
    )
    
    
    55,377Basic Earnings Per Share
    
    $
    0.24
    
    
    $
    (0.02
    )
    
    $
    0.22
    
    
    $
    0.66
    
    
    $
    (0.06
    )
    
    $
    0.60Diluted Earnings Per Share
    
    $
    0.24
    
    
    $
    (0.02
    )
    
    $
    0.22
    
    
    $
    0.66
    
    
    $
    (0.06
    )
    
    $
    0.60
 Equity Compensation Activity
  Weighted AverageAggregate
    
    Grant Date2006
    
    Grant Date
    
    Fair ValueRSUs:
    
    Shares
    
    Fair Value
    
    Per ShareOutstanding at December 31, 2005
    
    
    100,683
    
    
    $
    1,819
    
    
    $
    18.07Granted during the period
    
    
    180,777
    
    
    
    2,194
    
    
    
    12.14Dividend equivalents during the period
    
    
    7,721
    
    
    
    65
    
    
    
    8.39Forfeited during the period
    
    
    (44,075
    )
    
    
    (733
    )
    
    
    16.64Converted to common stock
    
    
    (1,735
    )
    
    
    (34
    )
    
    
    19.70Outstanding at end of period
    
    
    243,371
    
    
    $
    3,311
    
    
    $
    13.60
   8




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 WeightedAverageGrant Date2006
    
    Grant Date
    
    Fair ValueRESTRICTED STOCK:
    
    Shares
    
    Fair Value
    
    Per ShareUnvested at December 31, 2005
    
    
    
    
    
    $
    
    
    
    $
    Granted during the period (1)
    
    
    341,705
    
    
    $
    4,521
    
    
    
    13.23Vested during the period
    
    
    
    
    
    
    
    
    
    
    Forfeited during the period
    
    
    (14,268
    )
    
    
    (203
    )
    
    
    14.21Unvested at September 30, 2006
    
    
    327,437
    
    
    $
    4,318
    
    
    $
    13.18
 (1)
    
    Amount includes dividend equivalents on unvested shares
 $
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Included In:
    
    2006
    
    2005*
    
    2006
    
    2005*Corporate General and
Administrative Expenses
    
    $
    35
    
    
    $
    
    
    
    $
    73
    
    
    $
    Operating Costs
    
    
    192
    
    
    
    
    
    
    
    501
    
    
    
    Total
    
    $
    227
    
    
    $
    
    
    
    $
    574
    
    
    $
    
   2006WeightedAverageExerciseSTOCK OPTIONS:
    
    Shares
    
    PriceOutstanding at December 31, 2005
    
    
    7,787,589
    
    
    $
    25.07Granted during the period
    
    
    755,560
    
    
    
    14.42Exercised during the period
    
    
    (30,000
    )
    
    
    10.09Cancelled during the period
    
    
    (1,708,068
    )
    
    
    25.08Forfeited during the period
    
    
    (579,082
    )
    
    
    22.93Expired during the Period
    
    
    (7,500
    )
    
    
    20.73Outstanding at September 30, 2006
    
    
    6,218,499
    
    
    $
    24.05
 $
 9




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Included In:
    
    2006
    
    2005
    
    2006
    
    2005Corporate General and
Administrative Expenses
    
    $
    1,067
    
    
    $
    1,107
    
    
    $
    3,503
    
    
    $
    3,506Operating Costs
    
    
    1,467
    
    
    
    1,633
    
    
    
    4,571
    
    
    
    5,293Total
    
    $
    2,534
    
    
    $
    2,740
    
    
    $
    8,074
    
    
    $
    8,799
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005*
    
    2006
    
    2005Risk-Free Interest Rate
    
    
    4.74
    %
    
    
    
    
    
    
    4.52
    %
    
    
    4.0
    %Expected Term
    
    
    6.25
    
    
    
    
    
    
    
    6.21
    
    
    
    5.0Expected Volatility
    
    
    38.2
    %
    
    
    
    
    
    
    45.3
    %
    
    
    29.1
    %Expected Dividend Yield
    
    
    6.21
    %
    
    
    
    
    
    
    2.75
    %
    
    
    1.09
    %
    10




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WESTWOOD ONE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
 RemainingWeightedWeighted
    
    AverageAverage
    
    ContractualNumber of
    
    Exercise
    
    Life (InOptions
    
    Price
    
    Years)Options Outstanding at Exercise Price Ranges of:$5.34-$9.88
    
    
    131,500
    
    
    $
    9.04
    
    
    
    2.40$10.09-$19.93
    
    
    1,524,489
    
    
    
    15.40
    
    
    
    6.24$20.25-$26.96
    
    
    2,204,160
    
    
    
    21.27
    
    
    
    6.24$30.19-$38.34
    
    
    2,339,150
    
    
    
    33.28
    
    
    
    5.81
 NOTE 3 Investments:
   NOTE 4 Comprehensive Income:
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Net Income (Loss)
    
    $
    10,484
    
    
    $
    20,069
    
    
    $
    19,127
    
    
    $
    55,377Other Comprehensive Income:Unrealized Gain (Loss)
    
    
    (752
    )
    
    
    
    
    
    
    4,152
    
    
    
    Comprehensive Income
    
    $
    9,732
    
    
    $
    20,069
    
    
    $
    23,279
    
    
    $
    55,377
 NOTE 5 Earnings Per Share:
  11




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WESTWOOD ONE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Options
    
    
    2,222
    
    
    
    550,537
    
    
    
    11,519
    
    
    
    149,849Restricted Stock
    
    
    603
    
    
    
    
    
    
    
    357
    
    
    
    Restricted Stock Units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Options
    
    
    6,363,420
    
    
    
    6,331,360
    
    
    
    7,183,212
    
    
    
    6,331,360Warrants
    
    
    3,500,000
    
    
    
    4,000,000
    
    
    
    3,500,000
    
    
    
    4,000,000
  NOTE 6 Debt:
  September 30, 2006
    
    December 31, 2005Revolving Credit Facility/Term Loan
    
    $
    210,000
    
    
    $
    230,0004.64% Senior Unsecured Notes due 2009
    
    
    50,000
    
    
    
    50,0005.26% Senior Unsecured Notes due 2012
    
    
    150,000
    
    
    
    150,000Fair market value of Swap (a)
    
    
    (3,586
    )
    
    
    (2,486
    )$
    406,414
    
    
    $
    427,514
 
 (a)
    
    write-up (write-down) to market value adjustments for debt with qualifying hedges that are
recorded as debt on the balance sheet.  12




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WESTWOOD ONE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
  NOTE 7 Related Party Transactions:
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Representation Agreement
    
    $
    6,751
    
    
    $
    6,491
    
    
    $
    20,392
    
    
    $
    19,237Programming and Affiliations
    
    
    10,366
    
    
    
    11,603
    
    
    
    38,461
    
    
    
    40,866Management Agreement
(excluding
warrant amortization)
    
    
    825
    
    
    
    819
    
    
    
    2,440
    
    
    
    2,367Warrant Amortization
    
    
    2,427
    
    
    
    2,427
    
    
    
    7,281
    
    
    
    7,281$
    20,369
    
    
    $
    21,340
    
    
    $
    68,574
    
    
    $
    69,751
   13




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##### Table of Contents



WESTWOOD ONE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
 NOTE 8 Shareholders Equity
  NOTE 9 New Accounting Standards and Interpretations Not Yet Adopted:
    NOTE 10 Subsequent Event
 ,
 14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (In thousands except for share and per share amounts)
 EXECUTIVE OVERVIEW
       15




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Results of Operations
 Three Months Ended September 30, 2006 Compared With Three Months Ended September 30, 2005
 Revenues
  Three Months Ended September 30,2006
    
    2005$
    
    % of total
    
    $
    
    % of totalLocal/Regional
    
    $
    63,911
    
    
    
    56
    
    
    $
    75,613
    
    
    
    56National
    
    
    50,352
    
    
    
    44
    
    
    
    59,315
    
    
    
    44Total (1)
    
    $
    114,263
    
    
    
    100
    %
    
    $
    134,928
    
    
    
    100
    %
 
 (1)
    
    As described above, the Company currently aggregates revenue data based on the type of
commercial airtime sold. A number of advertisers purchase both local/regional and national
commercial airtime. Accordingly, this factor should be considered in evaluating the relative
revenues generated on a local/regional versus national basis. Our objective is to optimize
total revenues from those advertisers. 16




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##### Table of Contents



Operating Costs
  Three Months Ended September 30,2006
    
    2005$
    
    % of total
    
    $
    
    % of totalProgramming, production
and distribution
expenses
    
    $
    62,203
    
    
    
    76
    
    
    $
    66,245
    
    
    
    75Selling expenses
    
    
    9,838
    
    
    
    12
    
    
    
    10,844
    
    
    
    12Stock-based compensation
    
    
    1,659
    
    
    
    2
    
    
    
    1,633
    
    
    
    2Other operating expenses
    
    
    8,310
    
    
    
    10
    
    
    
    10,077
    
    
    
    11$
    82,010
    
    
    
    100
    %
    
    $
    88,799
    
    
    
    100
    %
 ,
 Depreciation and Amortization
  Corporate General and Administrative Expenses
  17




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##### Table of Contents



Operating Income
  Interest Expense
  Provision for Income Taxes
  Net Income
  Earnings Per Share
  Nine Months Ended September 30, 2006 Compared With Nine Months Ended September 30, 2005
 Revenues
  Nine Months Ended September 30,2006
    
    2005$
    
    % of total
    
    $
    
    % of totalLocal/Regional
    
    $
    189,387
    
    
    
    52
    
    
    $
    226,254
    
    
    
    55National
    
    
    174,810
    
    
    
    48
    
    
    
    184,593
    
    
    
    45Total (1)
    
    $
    364,197
    
    
    
    100
    %
    
    $
    410,847
    
    
    
    100
    %
 (1)
    
    As described above, the Company currently aggregates revenue data based on the type of
commercial airtime sold. A number of advertisers purchase both local/regional and national
commercial airtime. Accordingly, this factor should be considered in evaluating the
relative revenues generated on a local/regional versus national basis. Our objective is to
optimize total revenues from those advertisers.
 18




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##### Table of Contents



,
   Operating Costs
  Nine Months Ended September 30,2006
    
    2005$
    
    % of total
    
    $
    
    % of totalProgramming, production
and distribution expenses
    
    $
    213,919
    
    
    
    75
    
    
    $
    205,975
    
    
    
    73Selling expenses
    
    
    36,486
    
    
    
    13
    
    
    
    39,682
    
    
    
    14Stock-based compensation
    
    
    5,072
    
    
    
    2
    
    
    
    5,293
    
    
    
    2Other operating expenses
    
    
    29,852
    
    
    
    10
    
    
    
    31,238
    
    
    
    11$
    285,329
    
    
    
    100
    %
    
    $
    282,188
    
    
    
    100
    %
  Depreciation and Amortization
  Corporate General and Administrative Expenses
  19




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##### Table of Contents



Operating Income
 ,
 Interest Expense
  Provision for Income Taxes
  Net Income
  Earnings Per Share
  Liquidity and Capital Resources
    ,
 20




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##### Table of Contents



$
  New Accounting Standards and Interpretations Not Yet Adopted
    21




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##### Table of Contents



Cautionary Statement Concerning Forward-Looking Statements and Factors Affecting Forward-Looking Statements
   
    
    The Company has a Management Agreement, a Representation Agreement and other related
agreements with CBS Radio, which expire on March 31, 2009. While the Company provides
programming to all major radio station groups, the Company has affiliation agreements with
most of CBS Radios owned and
operated radio stations, which in the aggregate, provide the Company with a significant
portion of the audience that it sells to advertisers. In addition, the Company operates the
CBS Radio Network and has purchased several other pieces of programming from CBS and its
affiliates. Accordingly, the Companys operating performance could be materially adversely
impacted by the amount of audience and inventory delivered by the CBS Radio owned and
operated radio stations, and its inability to renew, or a significant modification to, its
agreements with CBS Corporation.
    
    As a result of a recent
deterioration in the Companys operating performance, the Company recently amended
its senior loan agreement with a syndicate of banks in order to remain in compliance with
the covenants under such agreement, including the total debt ratio covenant which was
amended to 4.00 to 1 through March 31, 2008. Further changes in
the Companys operating performance
may cause the Company to seek further amendments to the covenants under the senior loan
agreement or to seek to replace the senior loan agreement, which matures on February 28,
2009. The Companys ability to obtain, if needed, additional amendments or additional
financing, or to refinance the existing senior loan agreement, may be
impacted by the Companys
ability to extend its relationship with CBS Radio beyond the March 31, 2009 expiration of
the Management Agreement and related agreements.
    
    The Company has affiliation agreements with most of CBSs owned and operated radio
stations which, in the aggregate, provide the Company with a significant portion of the
audience that it sells to advertisers. In May 2006, CBS Radio announced its intention to
explore the divestiture of its radio stations in ten of its smaller markets. CBS Radio
subsequently announced that it has entered into agreements to sell its radio stations in
eight of these ten markets and that it continues to explore the sale of its radio stations
in the remaining two markets. While CBS Radio has informed the Company that the purchasers
of such stations have agreed to assume substantially all of the affiliation agreements with
the Company, the Company may not be able to continue or renew such agreements, or its
affiliation agreements with other radio station owners, upon their expiration. If a
significant number of additional radio stations affiliated with the Company, or radio
stations in key markets that are affiliated with the Company, are sold by CBS Radio or
other owners, and the new owners of such stations do not assume and continue the
affiliation agreements with the Company, or if the Company cannot enter into new
affiliation agreements with other radio stations in such markets, the Companys operating
performance could be materially and adversely impacted.
 22




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##### Table of Contents




    
    The Company competes in a highly competitive business. Its radio programming competes
for audiences and advertising revenues directly with radio and television stations and
other syndicated programming, as well as with such other media as newspapers, magazines,
cable television, outdoor advertising and direct mail. Audience ratings and
performance-based revenue arrangements are subject to change and any adverse change in a
particular geographic area could have a material and adverse effect on the Companys
ability to attract not only advertisers in that region, but national advertisers as well.
Future operations are further subject to many factors, which could have an adverse effect
upon the Companys financial performance. These factors
include:
 -
    
    economic conditions, both generally and relative to the broadcasting industry;-
    
    advertiser spending patterns, including the notion that orders are being placed in close proximity to air, limiting visibility of demand;-
    
    the level of competition for advertising dollars;-
    
    lower than anticipated market acceptance of new or existing
products;-
    
    technological changes and innovations;-
    
    fluctuations in programming costs;-
    
    shifts in population and other demographics;-
    
    changes in labor conditions; and-
    
    changes in governmental regulations and policies and actions of federal and state regulatory bodies.
 Although the Company believes that its radio programming will be able to compete effectively
and will continue to attract audiences and advertisers, there can be no assurance that the
Company will be able to maintain or increase the current audience ratings and advertising
revenues.
    
    The radio broadcasting industry has experienced a significant amount of consolidation in
recent years. As a result, certain major station groups, including CBS Radio and Clear
Channel Communications, have emerged as powerful forces in the industry. Given the size
and financial resources of these station groups, they may be able to develop their own
programming as a substitute to that offered by the Company or, alternatively, they could
seek to obtain programming from the Companys competitors. Any such occurrences, or merely
the threat of such occurrences, could adversely affect the Companys ability to negotiate
favorable terms with its station affiliates, to attract audiences and to attract
advertisers. In addition, certain major station groups have (1) recently reduced overall
amounts of commercial inventory broadcast on their radio stations (2) experienced
significant declines in audience and (3) increased their supply of shorter duration
advertisements which is directly competitive to the Company. To the extent similar
initiatives are adopted by other major station groups, this could adversely impact the
amount of commercial inventory made available to the Company or increase the cost of such
commercial inventory at the time of renewal of existing affiliate
agreements.
    
    Changes in U.S. financial and equity markets, including market disruptions and
significant interest rate fluctuations, could impede the Companys access to, or increase
the cost of, external financing for its operations and
investments.
    
    The Company believes relations with its employees and independent contractors are
satisfactory. However, the Company may be adversely affected by future labor disputes,
which may lead to increased costs or disruption of operations in any of the Companys
business locations.
 23




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##### Table of Contents



Item 3. Qualitative and Quantitative Disclosures about Market Risk
       24




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Item 4. Controls and Procedures
   25




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Issuer Purchases of Equity Securities
 Approximate DollarTotal Number of
    
    Value of SharesShares Purchased as
    
    that May Yet BeTotal
    
    
    
    
    
    Part of Publicly
    
    Purchased Under theNumber of Shares
    
    Average Price Paid
    
    Announced Plan or
    
    Plans or ProgramsPeriod
    
    Purchased in Period
    
    Per Share
    
    Program
    
    (A)7/1/06 - 7/31/06
    
    
    
    
    
    
    
    
    
    
    21,001,424
    
    
    
    290,490,0008/1/06 - 8/31/06
    
    
    
    
    
    
    
    
    
    
    21,001,424
    
    
    
    290,490,0009/1/06 - 9/30/06
    
    
    
    
    
    
    
    
    
    
    21,001,424
    
    
    
    290,490,000
    
    
    $
    
 (A)
    
    Represents remaining authorization from the additional $250 million repurchase
authorization approved on February 24, 2004 and the additional $300 million authorization
approved on April 29, 2004.
  26




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##### Table of Contents



Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 ExhibitNumber (A)
    
    
    Description of Exhibit3.1
    
    
    Restated Certificate of Incorporation of the Company, as filed on October 25, 2002. (1)3.2
    
    
    Bylaws of Company as currently in effect. (2)4.1
    
    
    Note Purchase Agreement, dated as of December 3, 2002, between the Company and the
Purchasers parties thereto. (3)31.a*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.b*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.a**
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.b**
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 *
    
    Filed herewith.**
    
    Furnished herewith.(A)
    
    The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.(1)
    
    Filed as an exhibit to Companys quarterly report on Form 10-Q for the quarter ended September 30, 2002 and incorporated herein by reference.(2)
    
    Filed as an exhibit to Companys annual report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.(3)
    
    Filed as an exhibit to Companys current report on Form 8-K dated December 3, 2002 and incorporated herein by reference.
 27




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##### Table of Contents



SIGNATURES
  WESTWOOD ONE, INC.By:
    
    /S/ Peter KosannName: Peter KosannTitle: Chief Executive OfficerBy:
    
    /S/ Andrew ZarefName: Andrew ZarefTitle: Chief Financial OfficerDate: November 9, 2006
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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber (A)
    
    
    Description of Exhibit3.1
    
    
    Restated Certificate of Incorporation of the Company, as filed on October 25, 2002. (1)3.2
    
    
    Bylaws of Company as currently in effect. (2)4.1
    
    
    Note Purchase Agreement, dated as of December 3, 2002, between the Company and the
Purchasers parties thereto. (3)31.a*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.b*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.a**
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.b**
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 *
    
    Filed herewith.**
    
    Furnished herewith.(A)
    
    The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon
request.(1)
    
    Filed as an exhibit to Companys quarterly report on Form 10-Q for the quarter
ended September 30, 2002 and incorporated herein by reference.(2)
    
    Filed as an exhibit to Companys annual report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.(3)
    
    Filed as an exhibit to Companys current report on Form 8-K dated December 3, 2002
and incorporated herein by reference.
 29