##### Table of Contents



United States
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-14691
 
 WESTWOOD ONE, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    95-3980449
(I.R.S. Employer
Identification No.)
 1166 Avenue of the Americas, 10thFloor New York, NY
    
    10036(Address of principal executive offices)
    
    (Zip Code)
 (212) 641-2000
 
 þ o
 o o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company þ
 o þ




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##### 



WESTWOOD ONE, INC.
 INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Consolidated Balance Sheet
    
    
    3Consolidated Statement of Operations
    
    
    4Consolidated Condensed Statement of Cash Flows
    
    
    5Consolidated Condensed Statement of Stockholders Equity
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3. Defaults Upon Senior Securities
    
    
    37Item 4. [Removed and Reserved]
    
    
    37Item 5. Other Information
    
    
    37Item 6. Exhibits
    
    
    38SIGNATURES
    
    
    39Exhibit Index
    
    
    40Exhibit 4.2Exhibit 31.aExhibit 31.bExhibit 32.aExhibit 32.b
   2




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PART I. FINANCIAL INFORMATION
 
 WESTWOOD ONE, INC.
 
 CONSOLIDATED BALANCE SHEET
 (In thousands, except per share amounts)
 March 31, 2011
    
    
    December 31, 2010(unaudited)
    
    
    (derived from audited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,396
    
    
    $
    2,938Accounts receivable, net of allowance for doubtful accounts
$1,878 (2011) and $1,424 (2010)
    
    
    93,198
    
    
    
    96,557Prepaid and other assets
    
    
    16,830
    
    
    
    18,421Total current assets
    
    
    116,424
    
    
    
    117,916Property and equipment, net
    
    
    38,044
    
    
    
    37,047Intangible assets, net
    
    
    89,759
    
    
    
    92,487Goodwill
    
    
    38,945
    
    
    
    38,945Other assets
    
    
    1,936
    
    
    
    1,879TOTAL ASSETS
    
    $
    285,108
    
    
    $
    288,274LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    49,824
    
    
    $
    45,907Amounts payable to related parties
    
    
    982
    
    
    
    859Deferred revenue
    
    
    7,266
    
    
    
    6,736Accrued expenses and other liabilities
    
    
    31,298
    
    
    
    33,819Total current liabilities
    
    
    89,370
    
    
    
    87,321Long-term debt
    
    
    137,675
    
    
    
    136,407Deferred tax liability
    
    
    29,820
    
    
    
    36,174Due to Gores
    
    
    10,350
    
    
    
    10,222Other liabilities
    
    
    22,563
    
    
    
    24,142TOTAL LIABILITIES
    
    
    289,778
    
    
    
    294,266Commitments and ContingenciesSTOCKHOLDERS DEFICITCommon stock, $.01 par value: authorized: 5,000,000 shares
issued and outstanding: 22,591 (2011) and 21,314 (2010)
    
    
    226
    
    
    
    213Class B stock, $.01 par value: authorized: 3,000 shares;
issued and outstanding: 0
    
    
    
    
    
    
    Additional paid-in capital
    
    
    99,727
    
    
    
    88,652Accumulated deficit
    
    
    (104,623
    )
    
    
    (94,857
    )TOTAL STOCKHOLDERS DEFICIT
    
    
    (4,670
    )
    
    
    (5,992
    )TOTAL LIABILITIES AND
STOCKHOLDERS DEFICIT
    
    $
    285,108
    
    
    $
    288,274
   3




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WESTWOOD ONE, INC.
 
 CONSOLIDATED STATEMENT OF OPERATIONS
 (In thousands, except per share amounts)
 (unaudited)
 Three Months Ended March 31,2011
    
    
    2010Revenue
    
    $
    90,879
    
    
    $
    92,842Operating costs
    
    
    94,080
    
    
    
    88,448Depreciation and amortization
    
    
    4,595
    
    
    
    4,496Corporate, general and administrative
expenses
    
    
    3,036
    
    
    
    3,912Restructuring charges
    
    
    835
    
    
    
    743Special charges
    
    
    1,468
    
    
    
    1,823Total expenses
    
    
    104,014
    
    
    
    99,422Operating loss
    
    
    (13,135
    )
    
    
    (6,580
    )Interest expense
    
    
    5,106
    
    
    
    5,376Other expense (income)
    
    
    (1,096
    )
    
    
    1Loss before income tax
    
    
    (17,145
    )
    
    
    (11,957
    )Income tax benefit
    
    
    (7,379
    )
    
    
    (5,234
    )Net loss
    
    $
    (9,766
    )
    
    $
    (6,723
    )Loss per share:Common StockBasic
    
    $
    (0.45
    )
    
    $
    (0.33
    )Diluted
    
    $
    (0.45
    )
    
    $
    (0.33
    )Weighted average shares outstanding:Common StockBasic
    
    
    21,749
    
    
    
    20,544Diluted
    
    
    21,749
    
    
    
    20,544
   4




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WESTWOOD ONE, INC.
 
 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
 (In thousands)
 (unaudited)
 Three Months Ended March 31,2011
    
    
    2010Cash Flows from Operating Activities:Net loss
    
    $
    (9,766
    )
    
    $
    (6,723
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    4,595
    
    
    
    4,496Deferred taxes
    
    
    (6,777
    )
    
    
    (5,107
    )Paid-in-kind interest
    
    
    1,395
    
    
    
    1,524Non-cash equity-based compensation
    
    
    965
    
    
    
    1,059Change in fair value of derivative liability
    
    
    (1,096
    )
    
    
    Amortization of deferred financing costs
    
    
    6
    
    
    
    6Net change in other assets and liabilities
    
    
    5,991
    
    
    
    9,660Net cash (used in) provided by operating activities
    
    
    (4,687
    )
    
    
    4,915Cash Flows from Investing Activities:Capital expenditures
    
    
    (1,912
    )
    
    
    (2,183
    )Net cash used in investing activities
    
    
    (1,912
    )
    
    
    (2,183
    )Cash Flows from Financing Activities:Issuance of common stock
    
    
    10,000
    
    
    
    Proceeds from exercise of stock options
    
    
    330
    
    
    
    Payments of finance and capital lease obligations
    
    
    (273
    )
    
    
    (262
    )Proceeds from Revolving Credit Facility
    
    
    
    
    
    
    3,000Repayments of Senior Notes
    
    
    
    
    
    
    (3,500
    )Net cash provided by (used in) financing activities
    
    
    10,057
    
    
    
    (762
    )Net increase in cash and cash equivalents
    
    
    3,458
    
    
    
    1,970Cash and cash equivalents, beginning of period
    
    
    2,938
    
    
    
    4,824Cash and cash equivalents, end of period
    
    $
    6,396
    
    
    $
    6,794
   5




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WESTWOOD ONE, INC.
 
 CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS DEFICIT
 (In thousands)
 (unaudited)
 Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    DeficitBalance as of January 1, 2011
    
    
    21,314
    
    
    $
    213
    
    
    $
    88,652
    
    
    $
    (94,857
    )
    
    $
    (5,992
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,766
    )
    
    
    (9,766
    )Equity based compensation
    
    
    
    
    
    
    
    
    
    
    965
    
    
    
    
    
    
    
    965Issuance of common stock to Gores
    
    
    1,186
    
    
    
    12
    
    
    
    9,988
    
    
    
    
    
    
    
    10,000Exercise of stock options, net of tax
    
    
    91
    
    
    
    1
    
    
    
    122
    
    
    
    
    
    
    
    123Balance as of March 31, 2011
    
    
    22,591
    
    
    $
    226
    
    
    $
    99,727
    
    
    $
    (104,623
    )
    
    $
    (4,670
    )
   6




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WESTWOOD ONE, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except per share data)
 Note 1  Basis of Presentation
    i.e.,
   7




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
  Financial Statement Presentation
  Earnings Per Share
   Reclassification and Revisions
     8




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
 Note 2  Related Party Transactions
 Gores Radio Holdings
   Three Months Ended March 31,2011
    
    
    2010Gores and Glendon fees (1)
    
    $
    326
    
    
    $
    312Reimbursement of legal fees
    
    
    
    
    
    
    8Reimbursement of letter-of-credit fees (2)
    
    
    63
    
    
    
    63Interest on loan
    
    
    383
    
    
    
    419$
    772
    
    
    $
    802
 (1)
    
    These fees consist of payments for professional services rendered by various members of
Gores and Glendon to us in the areas of operational improvement, tax, finance, accounting,
legal and insurance/risk management.(2)
    
    Reimbursement of a standby letter-of-credit fee incurred and paid by Gores in connection
with its guarantee of the $20,000 revolving credit facility with Wells Fargo Capital Finance,
LLC (previously Wells Fargo Foothill, LLC, Wells Fargo).
 POP Radio
  Three Months Ended March 31,2011
    
    
    2010Program commission expense
    
    $
    442
    
    
    $
    361
  9




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
  Three Months Ended March 31,2011
    
    
    2010Operating costs
    
    $
    442
    
    
    $
    361Special charges
    
    
    326
    
    
    
    320Interest expense
    
    
    446
    
    
    
    482$
    1,214
    
    
    $
    1,163
 Note 3  Property and Equipment
  March 31, 2011
    
    
    December 31, 2010Land, buildings and improvements
    
    $
    11,576
    
    
    $
    11,572Recording, broadcasting and studio equipment
    
    
    25,409
    
    
    
    24,862Furniture, computers, equipment and other
    
    
    18,124
    
    
    
    15,73855,109
    
    
    
    52,172Less: Accumulated depreciation and
amortization
    
    
    17,065
    
    
    
    15,125Property and equipment, net
    
    $
    38,044
    
    
    $
    37,047
  Note 4  Intangible Assets
   10




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
  As of March 31, 2011
    
    
    As of December 31, 2010Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetEstimated
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingLife
    
    
    Value
    
    
    Amortization
    
    
    Value
    
    
    Value
    
    
    Amortization
    
    
    ValueTrademarks
    
    Indefinite
    
    $
    20,800
    
    
    $
    
    
    
    $
    20,800
    
    
    $
    20,800
    
    
    $
    
    
    
    $
    20,800Affiliate relationships
    
    10 years
    
    
    72,100
    
    
    
    (13,965
    )
    
    
    58,135
    
    
    
    72,100
    
    
    
    (12,163
    )
    
    
    59,937Software and technology
    
    5 years
    
    
    7,896
    
    
    
    (2,868
    )
    
    
    5,028
    
    
    
    7,896
    
    
    
    (2,473
    )
    
    
    5,423Client contracts
    
    5 years
    
    
    8,930
    
    
    
    (3,839
    )
    
    
    5,091
    
    
    
    8,930
    
    
    
    (3,343
    )
    
    
    5,587Leases
    
    7 years
    
    
    980
    
    
    
    (275
    )
    
    
    705
    
    
    
    980
    
    
    
    (240
    )
    
    
    740$
    110,706
    
    
    $
    (20,947
    )
    
    $
    89,759
    
    
    $
    110,706
    
    
    $
    (18,219
    )
    
    $
    92,487
  Note 5  Goodwill
   Total
    
    
    Metro Traffic
    
    
    Network RadioGoodwill
    
    $
    89,346
    
    
    $
    63,550
    
    
    $
    25,796Accumulated impairment losses
    
    
    (50,401
    )
    
    
    (50,401
    )
    
    
    Balances at March 31, 2011
and December 31, 2010
    
    $
    38,945
    
    
    $
    13,149
    
    
    $
    25,796
 Note 6  Debt
    11




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
     12




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
  March 31, 2011
    
    
    December 31, 2010Senior NotesSenior Secured Notes due July 15, 2012
(1)
    
    $
    102,675
    
    
    $
    101,407Due to Gores (1)
    
    
    10,350
    
    
    
    10,222Senior Credit FacilityTerm Loan (2)
    
    
    20,000
    
    
    
    20,000Revolving Credit Facility (2)
    
    
    15,000
    
    
    
    15,000$
    148,025
    
    
    $
    146,629
 (1)
    
    The applicable interest rate on such debt for the periods presented above is 15.0%, which
includes 5.0% PIK interest which accrues and is added to principal on a quarterly basis. PIK
interest is not due until maturity or earlier repayment of the Senior Notes.(2)
    
    The applicable interest rate on such debt was 7.0% as of September 30, 2010 and December 31,
2009. For the periods presented above, the interest rate was variable and was payable at the
greater of (i) LIBOR plus 4.5% (with a LIBOR floor of 2.5%) or (ii) the base rate plus 4.5%
(with a base rate floor equal to the greater of 3.75% or the one-month LIBOR rate), at our
option.
 Note 7  Fair Value Measurements
 Fair Value of Financial Instruments
   March 31, 2011
    
    
    December 31, 2010Carrying Amount
    
    
    Fair Value
    
    

CarryingAmount
    
    
    Fair ValueBorrowings (short and long term)
    
    $
    133,025
    
    
    $
    135,019
    
    
    $
    131,629
    
    
    $
    146,796
   13




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
 Fair Value Hierarchy
  
    
    Level 1  Quoted prices in active markets that are unadjusted and accessible at the
measurement date for identical, unrestricted assets or liabilities;
 
    
    Level 2  Quoted prices for identical assets and liabilities in markets that are not
active, quoted prices for similar assets and liabilities in active markets or financial
instruments for which significant inputs are observable, either directly or indirectly;
 
    
    Level 3  Prices or valuations that require inputs that are both significant to the fair
value measurement and unobservable.
  Items Measured at Fair Value on a Recurring Basis
  December 31, 2010Level 1
    
    
    Level 2
    
    
    Level 3LiabilitiesDerivative liability (1)
    
    $
    
    
    
    $
    1,096
    
    
    $
    
 (1)
    
    Gores $10,000 equity commitment constituted an embedded derivative and expired on February
28, 2011, the date Gores satisfied the $10,000 Gores equity commitment. As of December 31,
2010 the embedded derivative was included in accrued expenses and other liabilities (See Note
6  Debt). There were no derivatives outstanding as of March 31, 2011.
 Note 8  Equity-Based Compensation
    14




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
 Stock Options
   WeightedAverage ExerciseShares
    
    
    Price Per shareOutstanding January 1, 2010
    
    
    1,631.3
    
    
    $
    26.25Granted
    
    
    
    
    
    $
    Exercised
    
    
    (90.8
    )
    
    $
    6.00Cancelled, forfeited or expired
    
    
    (29.0
    )
    
    $
    43.98Outstanding March 31, 2011
    
    
    1,511.5
    
    
    $
    27.13Options exercisable March 31, 2011
    
    
    469.8
    
    
    $
    72.68Aggregate estimated fair value of options vesting during
the three months ended March 31, 2011
    
    $
    2,315
    Restricted Stock Units
   Weighted Average GrantShares
    
    
    Date Fair ValueOutstanding January 1, 2011
    
    
    115.1
    
    
    $
    9.90Granted
    
    
    
    
    
    
    Converted to common stock
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding March 31, 2011
    
    
    115.1
    
    
    $
    9.90
   15




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
 Note 9  Income Taxes
    Note 10  Accrued Expenses and Other Liabilities
  March 31, 2011
    
    
    December 31, 2010Payroll and payroll related expense
    
    $
    8,369
    
    
    $
    7,968Station compensation expense
    
    
    4,430
    
    
    
    6,698Programming and operating expense
    
    
    3,248
    
    
    
    2,403Restructuring and special charges
    
    
    3,646
    
    
    
    3,250Accrued interest and capital leases
    
    
    954
    
    
    
    1,200Deferred rent
    
    
    1,174
    
    
    
    1,174Professional fees
    
    
    1,216
    
    
    
    1,138Derivative liability (See Note 7 
Fair Value Measurements)
    
    
    
    
    
    
    1,096Other operating expense
    
    
    8,261
    
    
    
    8,892$
    31,298
    
    
    $
    33,819
 Note 11  Restructuring Charges
    16




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
    Balance
    
    
    
    
    
    
    Changes in
    
    
    Utilization
    
    
    BalanceJanuary 1, 2011
    
    
    Additions
    
    
    Estimates
    
    
    Cash
    
    
    Non-Cash
    
    
    March 31, 2011Metro-TrafficSeverance
    
    $
    17
    
    
    $
    
    
    
    $
    
    
    
    $
    (17
    )
    
    $
    
    
    
    $
    Facilities
Consolidation
    
    
    3,663
    
    
    
    
    
    
    
    (23
    )
    
    
    (333
    )
    
    
    
    
    
    
    3,307Total
    
    
    3,680
    
    
    
    
    
    
    
    (23
    )
    
    
    (350
    )
    
    
    
    
    
    
    3,3072010 ProgramSeverance
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    84Total
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    842011 ProgramSeverance
    
    
    
    
    
    
    858
    
    
    
    
    
    
    
    (452
    )
    
    
    
    
    
    
    406Total
    
    
    
    
    
    
    858
    
    
    
    
    
    
    
    (452
    )
    
    
    
    
    
    
    406Total Restructuring
    
    $
    3,829
    
    
    $
    858
    
    
    $
    (23
    )
    
    $
    (867
    )
    
    $
    
    
    
    $
    3,797
  17




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
 Note 12  Special Charges
  Three Months Ended March 31,2011
    
    
    2010Debt agreement costs
    
    $
    409
    
    
    $
    579Corporate development costs
    
    
    458
    
    
    
    201Gores and Glendon fees
    
    
    326
    
    
    
    320Triangle litigation (see Note
15  Subsequent Events)
    
    
    171
    
    
    
    Regionalization costs
    
    
    104
    
    
    
    126Employment claim settlements
    
    
    
    
    
    
    483Fees related to the Refinancing
    
    
    
    
    
    
    114$
    1,468
    
    
    $
    1,823
  Note 13  Comprehensive Loss
  Three Months Ended March 31,2011
    
    
    2010Net loss
    
    $
    (9,766
    )
    
    $
    (6,723
    )Unrealized gain on marketable
securities, net effect of income
taxes
    
    
    
    
    
    
    86Comprehensive loss
    
    $
    (9,766
    )
    
    $
    (6,637
    )
 Note 14  Segment Information
   18




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
   Three Months Ended March 31,2011
    
    
    2010RevenueNetwork Radio
    
    $
    51,735
    
    
    $
    55,575Metro Traffic
    
    
    39,144
    
    
    
    37,267$
    90,879
    
    
    $
    92,842OIBDANetwork Radio  OIBDA See Notes
(1)(2)
    
    $
    (2,208
    )
    
    $
    4,976Metro Traffic  OIBDA See Note (1)
    
    
    (1,994
    )
    
    
    (1,566
    )Corporate expenses
    
    
    (2,035
    )
    
    
    (2,928
    )Restructuring and special charges
    
    
    (2,303
    )
    
    
    (2,566
    )OIBDA
    
    
    (8,540
    )
    
    
    (2,084
    )Depreciation and amortization
    
    
    4,595
    
    
    
    4,496Operating loss
    
    
    (13,135
    )
    
    
    (6,580
    )Interest expense
    
    
    5,106
    
    
    
    5,376Other (income) expense
    
    
    (1,096
    )
    
    
    1Loss before income taxes
    
    
    (17,145
    )
    
    
    (11,957
    )Income tax benefit
    
    
    (7,379
    )
    
    
    (5,234
    )Net Loss
    
    $
    (9,766
    )
    
    $
    (6,723
    )Depreciation and amortization:Network Radio
    
    $
    1,693
    
    
    $
    1,389Metro Traffic
    
    
    2,895
    
    
    $
    3,100Corporate
    
    
    7
    
    
    
    7$
    4,595
    
    
    $
    4,496Capital expenditures:Network Radio
    
    $
    783
    
    
    $
    583Metro Traffic
    
    
    1,129
    
    
    
    1,592Corporate
    
    
    
    
    
    
    8$
    1,912
    
    
    $
    2,183
 (1)
    
    Segment operating (loss) income includes allocations of certain corporate overhead expenses
such as accounting and legal costs, bank charges, insurance, information technology etc.(2)
    
    For the three months ending March 31, 2011, OIBDA includes incremental broadcast rights
expense of $3,719 related to a new sports content agreement. Of the $3,719 of incremental
broadcast rights expense, $682 was paid in the period and $3,037 was non-cash.
  19




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
  March 31, 2011
    
    
    December 31, 2010Network Radio
    
    $
    123,651
    
    
    $
    132,227Metro Traffic
    
    
    140,290
    
    
    
    142,490Corporate
    
    
    21,167
    
    
    
    13,557$
    285,108
    
    
    $
    288,274
 Note 15  Subsequent Events
 Debt Agreement Amendments
      20




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WESTWOOD ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
 Settlement of Triangle Lawsuit
   21




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
(In thousands except share and per share amounts)
 EXECUTIVE OVERVIEW
        22




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Results of Operations
      23




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Three Months Ended March 31, 2011 Compared With Three Months Ended March 31, 2010
 Revenue
  RevenueFavorable (Unfavorable)2011
    
    
    2010
    
    
    $ Amount
    
    
    %Network Radio
    
    $
    51,735
    
    
    $
    55,575
    
    
    $
    (3,840
    )
    
    
    (6.9
    %)Metro Traffic
    
    
    39,144
    
    
    
    37,267
    
    
    
    1,877
    
    
    
    5.0
    %Total (1)
    
    $
    90,879
    
    
    $
    92,842
    
    
    $
    (1,963
    )
    
    
    (2.1
    %)
 (1)
    
    As described above, we currently aggregate revenue based on the operating segment. A
number of advertisers purchase both local/regional and national commercial airtime in both
segments. Our objective is to optimize total revenue from those advertisers.
    Operating Costs
  Operating CostsFavorable / (Unfavorable)2011
    
    
    2010
    
    
    $ Amount
    
    
    %Programming and operating
    
    $
    36,559
    
    
    $
    34,963
    
    
    $
    (1,596
    )
    
    
    (4.6
    )%Station compensation
    
    
    25,832
    
    
    
    22,533
    
    
    
    (3,299
    )
    
    
    (14.6
    )%Payroll and payroll related
    
    
    21,166
    
    
    
    20,871
    
    
    
    (295
    )
    
    
    (1.4
    )%Other operating expenses
    
    
    10,523
    
    
    
    10,081
    
    
    
    (442
    )
    
    
    (4.4
    )%$
    94,080
    
    
    $
    88,448
    
    
    $
    (5,632
    )
    
    
    (6.4
    )%
 %,
  24




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Depreciation and Amortization
  Corporate General and Administrative Expenses
  Restructuring Charges
  Special Charges
  Operating Loss
  OIBDA
   25




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OIBDAFavorable (Unfavorable)2011
    
    
    2010
    
    
    $ Amount
    
    
    %Network Radio
    
    $
    (2,208
    )
    
    $
    4,976
    
    
    $
    (7,184
    )
    
    
    (144.4
    )%Metro Traffic
    
    
    (1,994
    )
    
    
    (1,566
    )
    
    
    (428
    )
    
    
    (27.3
    )%Corporate expenses
    
    
    (2,035
    )
    
    
    (2,928
    )
    
    
    893
    
    
    
    30.5
    %Restructuring and special
charges
    
    
    (2,303
    )
    
    
    (2,566
    )
    
    
    263
    
    
    
    10.2
    %Segment OIBDA
    
    
    (8,540
    )
    
    
    (2,084
    )
    
    
    (6,456
    )
    
    
    (309.8
    )%Depreciation and amortization
    
    
    4,595
    
    
    
    4,496
    
    
    
    (99
    )
    
    
    (2.2
    )%Operating loss
    
    $
    (13,135
    )
    
    $
    (6,580
    )
    
    $
    (6,555
    )
    
    
    (99.6
    )%
  Network Radio
  Metro Traffic
  Interest Expense
  Other Expense
  Provision for Income Taxes
   26




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Net Loss
  Liquidity, Cash Flow and Debt
  Cash FlowThree Months Ended March 31,2011
    
    
    2010
    
    
    ChangeNet cash (used in) provided by operating activities
    
    $
    (4,687
    )
    
    $
    4,915
    
    
    $
    (9,602
    )Net cash used in investing activities
    
    
    (1,912
    )
    
    
    (2,183
    )
    
    
    271Net cash provided by (used in) financing activities
    
    
    10,057
    
    
    
    (762
    )
    
    
    10,819Net increase in cash and cash equivalents
    
    
    3,458
    
    
    
    1,970
    
    
    $
    1,488Cash and cash equivalents, beginning of period
    
    
    2,938
    
    
    
    4,824Cash and cash equivalents, end of period
    
    $
    6,396
    
    
    $
    6,794
    Liquidity and Capital Resources
   27




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Existing Indebtedness
   28




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Cautionary Statement Concerning Forward-Looking Statements and Factors Affecting Forward-Looking
Statements
  Item 1A.
    
    Risk Factors
   29




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Risks Related to Our Business and Industry
 While our year-over-year annual operating performance increased for the first time since year end
2005, we continue to incur operating losses and there can be no assurance that our performance will
continue to improve. If it does not continue and we were to continue to incur operating losses, we
could lack sufficient funds to continue to operate our business in the ordinary course.
  If our operating results do not achieve our financial projections, we may require additional
funding, which if not obtained, would have a material and adverse effect on our business continuity
and our financial condition.
  We have a significant amount of indebtedness and limited liquidity, which could adversely affect
our operations, flexibility in running our business and our ability to service our debt if our
future operating performance does not meet our financial projections.
   30




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i.e.,
 Our Senior Credit Facility and Senior Notes mature on July 15, 2012; if we are unable to refinance
or otherwise repay such indebtedness there would be a material and adverse effect on our business
continuity and our financial condition.
   The cost of our indebtedness is substantial, which further affects our liquidity and could limit
our ability to implement our business plan.
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CBS Radio provides us with a significant portion of our commercial inventory and audience that we
sell to advertisers. A material reduction in the audience delivered by CBS Radio stations or a
material loss of commercial inventory from CBS Radio would have an adverse effect on our
advertising sales and financial results.
  Our ability to improve our operating results largely depends on the audiences we deliver to our
advertisers.
  Our business is subject to increased competition from new entrants into our business, consolidated
companies and new technologies/platforms, each of which has the potential to adversely affect our
business.
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##### Table of Contents



Our failure to obtain or retain the rights in popular programming could adversely affect our
operating results.
  If we are not able to integrate future M&A activity successfully, our operating results could be
harmed.
   
    
    diversion of our managements attention from normal daily operations of our business;
    
    responsibility for the liabilities of the businesses we sell, merge with and/or acquire;
    
    insufficient revenue to offset increased expenses associated with the M&A transactions we
consummate or inability to realize the synergies we identify;
    
    inability to maintain the key business relationships and reputations in connection with
such M&A;
    
    potential loss of key employees in connection with any M&A we undertake;
    
    difficulty in integrating and managing the operations, technologies and products of the
companies we merge with and/or acquire;
    
    uncertainty of entry into markets in which we have limited or no prior experience or in
which competitors have stronger market positions; and
    
    dependence on unfamiliar affiliates and partners of the companies we merge with and/or
acquire.
  33




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##### Table of Contents



Our success is dependent upon audience acceptance of our content which is difficult to predict.
  We may be required to recognize further impairment charges.
  Risks Related to Our Common Stock
 Our common stock may not maintain an active trading market which could affect the liquidity and
market price of our common stock.
  Sales of additional shares of common stock by Gores or our other lenders could adversely affect the
stock price.
  Gores will be able to exert significant influence over us and our significant corporate decisions
and may act in a manner that advances its best interest and not necessarily those of other
stockholders.
  
    
    delaying, deferring or preventing a change in control;
    
    impeding a merger, consolidation, takeover or other business combination;
    
    discouraging a potential acquirer from making a tender offer or otherwise attempting obtain
control; or
    
    causing us to enter into transactions or agreements that are not in the best interests of
all of our stockholders.
  34




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##### Table of Contents



Provisions in our restated certificate of incorporation and by-laws and Delaware law may
discourage, delay or prevent a change of control of our company or changes in our management and,
therefore, depress the trading price of our common stock.
  We do not anticipate paying dividends on our common stock.
  Any issuance of shares of preferred stock by us could delay or prevent a change of control of our
company, dilute the voting power of the common stockholders and adversely affect the value of our
common stock.
      35




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
 Item 4.
    
    Controls and Procedures
   36




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##### Table of Contents



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
 Total Number of
    
    
    Approximate DollarShares Purchased as
    
    
    Value of Shares thatTotal
    
    
    
    
    
    
    Part of Publicly
    
    
    May Yet BeNumber of Shares
    
    
    Average Price Paid
    
    
    Announced Plan or
    
    
    Purchased Under thePeriod
    
    Purchased in Period
    
    
    Per Share
    
    
    Program
    
    
    Plans or Programs (A)1/1/11  1/31/11
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    2/1/11  2/28/11
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    3/1/11  3/31/11
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
 (A)
    
    Represents remaining authorization from the $250,000 repurchase authorization approved on
February 24, 2004 and the additional $300,000 authorization approved on April 29, 2004, all of
which have expired.
 
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    [Removed and Reserved]
  
 Item 5.
    
    Other Information
   37




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##### Table of Contents



Item 6.
    
    Exhibits
 ExhibitNumber (A)

    
    Description of Exhibit2.1
    
    
    Stock Purchase Agreement, dated as of April 29, 2011,
by and between Clear Channel Acquisition LLC and the
Company. (1)4.1
    
    
    Fifth Amendment, made and entered into as of April 29,
2011, to Securities Purchase Agreement, dated as of
April 23, 2009, by and among the Company and the
noteholders party thereto. (2)4.2
    *
    
    Sixth Amendment, made and entered into as of May 11,
2011, to Securities Purchase Agreement, dated as of
April 23, 2009, by and among the Company and the
noteholders party thereto.10.1
    
    
    Transition Services Agreement, dated as of April 29,
2011, by and between Clear Channel Acquisition LLC and
the Company. (1)10.2
    
    
    Fifth Amendment, made and entered into as of April 28,
2011, to Credit Agreement, dated as of April 23, 2009,
by and among the Company, the lenders party thereto and
Wells Fargo Capital Finance, LLC, as administrative
agent for the lenders. (2)10.3
    
    
    Sixth Amendment, made and entered into as of April 29,
2011, to Credit Agreement, dated as of April 23, 2009,
by and among the Company, the lenders party thereto and
Wells Fargo Capital Finance, LLC, as administrative
agent for the lenders. (2)10.4
    
    
    Amendment No. 2 to Employment Agreement, effective as
of April 29, 2011, by and between the Company and
Steven Kalin, dated as of July 7, 2008. (2)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 current report
on Form 8-K dated April 29, 2011 and
incorporated herein by reference.(2)
    
    Filed as an exhibit to Companys current report on
Form 8-K dated April 28, 2011 and
incorporated herein by reference.
  38




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SIGNATURES
  WESTWOOD ONE, INC.By:

/s/ Roderick M. Sherwood IIIName:
    Roderick M. Sherwood IIITitle:
    President and CFODate: May 16, 2011  39




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber

    
    Description of Exhibit4.2
    *
    
    Sixth Amendment, made and entered into as of May 11, 2011, to Securities Purchase
Agreement, dated as of May 10, 2009, by and among the Company and the noteholders party
thereto.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.
  40