##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 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 0-14691
 WESTWOOD ONE, INC.
  Delaware
    
    95-3980449(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)40 West 57th Street, 5thFloor, New York, NY
    
    10019(Address of principal executive offices)
    
    (Zip Code)
 (212) 641-2000
 
 þ o
  o þ o
 o þ




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##### 



WESTWOOD ONE, INC.
 INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Consolidated 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
    
    
    14Item 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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PART I. FINANCIAL INFORMATION
 WESTWOOD ONE, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 (unaudited)
 June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,830
    
    
    $
    11,528Accounts receivable, net of allowance for doubtful accounts
of $5,222 (2007) and $4,387 (2006)
    
    
    115,552
    
    
    
    115,505Warrants, current portion
    
    
    9,706
    
    
    
    9,706Prepaid and other assets
    
    
    8,563
    
    
    
    12,483Total Current Assets
    
    
    138,651
    
    
    
    149,222PROPERTY AND EQUIPMENT, NET
    
    
    33,462
    
    
    
    37,353GOODWILL
    
    
    464,114
    
    
    
    464,114INTANGIBLE ASSETS, NET
    
    
    3,834
    
    
    
    4,225OTHER ASSETS
    
    
    38,290
    
    
    
    41,787TOTAL ASSETS
    
    $
    678,351
    
    
    $
    696,701LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    16,728
    
    
    $
    35,425Amounts payable to related parties
    
    
    28,860
    
    
    
    26,344Deferred revenue
    
    
    6,289
    
    
    
    8,150Income taxes payable
    
    
    694
    
    
    
    6,149Accrued expenses and other liabilities
    
    
    40,538
    
    
    
    43,841Total Current Liabilities
    
    
    93,109
    
    
    
    119,909LONG-TERM DEBT
    
    
    365,615
    
    
    
    366,860OTHER LIABILITIES
    
    
    6,618
    
    
    
    7,001TOTAL LIABILITIES
    
    $
    465,342
    
    
    $
    493,770COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITYPreferred stock: authorized 10,000,000 shares, none outstanding
    
    
    
    
    
    
    Common stock, $.01 par value: authorized, 300,000,000 shares;
issued and outstanding, 86,130,896 (2007) and 85,996,019 (2006)
    
    
    861
    
    
    
    860Class B stock, $.01 par value: authorized, 3,000,000 shares;
issued and outstanding, 291,796 (2007 and 2006)
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    292,596
    
    
    
    291,851Unrealized gain on available for sale securities
    
    
    6,290
    
    
    
    4,570Accumulated deficit
    
    
    (86,741
    )
    
    
    (94,353
    )TOTAL SHAREHOLDERS EQUITY
    
    
    213,009
    
    
    
    202,931TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    678,351
    
    
    $
    696,701
  3




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##### Table of Contents



WESTWOOD ONE, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006NET REVENUES
    
    $
    111,145
    
    
    $
    134,536
    
    
    $
    225,183
    
    
    $
    259,563Operating Costs (includes related party expenses
of $17,023, $20,348, $35,967 and $41,737, respectively)
    
    
    83,752
    
    
    
    97,883
    
    
    
    181,267
    
    
    
    212,948Depreciation and Amortization (includes related party
warrant amortization of $2,427, $2,427, $4,854
and $4,854, respectively)
    
    
    4,917
    
    
    
    5,063
    
    
    
    9,948
    
    
    
    10,185Impairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    Corporate General and Administrative Expenses
(includes related party expenses of $861, $826, $1,690
and $1,614 respectively)
    
    
    3,576
    
    
    
    3,675
    
    
    
    7,451
    
    
    
    8,455Special Charges
    
    
    2,282
    
    
    
    1,198
    
    
    
    2,637
    
    
    
    1,39894,527
    
    
    
    107,819
    
    
    
    201,303
    
    
    
    232,986OPERATING INCOME
    
    
    16,618
    
    
    
    26,717
    
    
    
    23,880
    
    
    
    26,577Interest Expense
    
    
    5,852
    
    
    
    6,504
    
    
    
    11,949
    
    
    
    12,492Other Income
    
    
    (150
    )
    
    
    (126
    )
    
    
    (150
    )
    
    
    (235
    )INCOME BEFORE INCOME TAXES
    
    
    10,916
    
    
    
    20,339
    
    
    
    12,081
    
    
    
    14,320INCOME TAXES
    
    
    4,019
    
    
    
    8,169
    
    
    
    4,469
    
    
    
    5,677NET INCOME
    
    $
    6,897
    
    
    $
    12,170
    
    
    $
    7,612
    
    
    $
    8,643EARNINGS PER SHARE:COMMON STOCKBASIC
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.10DILUTED
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.10CLASS B STOCKBASIC
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.16DILUTED
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.16WEIGHTED AVERAGE SHARES OUTSTANDING:COMMON STOCKBASIC
    
    
    86,094
    
    
    
    85,954
    
    
    
    86,084
    
    
    
    87,528DILUTED
    
    
    86,540
    
    
    
    86,255
    
    
    
    86,408
    
    
    
    87,560CLASS B STOCKBASIC
    
    
    292
    
    
    
    292
    
    
    
    292
    
    
    
    292DILUTED
    
    
    292
    
    
    
    292
    
    
    
    292
    
    
    
    292DIVIDENDS DECLARED PER SHARE:COMMON STOCK
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.02
    
    
    $
    0.20CLASS B STOCK
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.16
  4




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WESTWOOD ONE, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Six Months EndedJune 30,2007
    
    
    2006CASH FLOW FROM OPERATING ACTIVITIES:Net income
    
    $
    7,612
    
    
    $
    8,643Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    9,948
    
    
    
    10,185Goodwill Impairment
    
    
    
    
    
    
    Loss on disposal of property and equipment
    
    
    
    
    
    
    Deferred taxes
    
    
    (3,079
    )
    
    
    1,819Non-cash stock compensation
    
    
    5,572
    
    
    
    6,497Gain on sale of property
    
    
    
    
    
    
    Amortization of deferred financing costs
    
    
    237
    
    
    
    16720,290
    
    
    
    27,311Changes in assets and liabilities:Accounts receivable
    
    
    (47
    )
    
    
    15,551Prepaid and other assets
    
    
    5,264
    
    
    
    9,768Deferred revenue
    
    
    (1,861
    )
    
    
    (1,126
    )Income taxes payable and prepaid income taxes
    
    
    (5,455
    )
    
    
    (27,812
    )Accounts payable and accrued expenses
and other liabilities
    
    
    (23,269
    )
    
    
    15,043Amounts payable to related parties
    
    
    2,516
    
    
    
    1,180Net Cash (Used in) Provided By Operating Activities
    
    
    (2,562
    )
    
    
    39,915CASH FLOW FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (2,114
    )
    
    
    (2,660
    )Proceeds from sale of property
    
    
    
    
    
    
    Purchase of loan receivable
    
    
    
    
    
    
    Collection of loan receivable
    
    
    
    
    
    
    Acquisition of companies and other
    
    
    
    
    
    
    75Net Cash Used In Investing Activities
    
    
    (2,114
    )
    
    
    (2,585
    )CASH FLOW FROM FINANCING ACTIVITIES:Issuance of common stock under equity based compensation plans
    
    
    
    
    
    
    302Borrowings under bank and other long-term obligations
    
    
    30,000
    
    
    
    10,000Debt repayments and payments of capital lease obligations
    
    
    (30,359
    )
    
    
    (20,336
    )Dividend payments
    
    
    (1,663
    )
    
    
    (17,263
    )Repurchase of common stock
    
    
    
    
    
    
    (11,044
    )Repurchase of warrants from related party
    
    
    Deferred financing costs
    
    
    
    
    
    
    Excess windfall tax benefits from stock option exercises
    
    
    
    
    
    
    Net Cash Used in Financing Activities
    
    
    (2,022
    )
    
    
    (38,341
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (6,698
    )
    
    
    (1,011
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    11,528
    
    
    
    10,399CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    4,830
    
    
    $
    9,388
  5




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##### Table of Contents



WESTWOOD ONE, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share data)
 NOTE 1- Basis of Presentation:
   NOTE 2 Reclassifications:
  NOTE 3 Disclosure of Out of Period Amounts:
  NOTE 4 Income Taxes:
   6




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
    NOTE 5 Equity Based Compensation:
  WeightedAverageGrant Date2007
    
    
    Grant Date
    
    
    Fair ValueRestricted Stock:
    
    Shares
    
    
    Fair Value
    
    
    Per ShareUnvested at December 31, 2006
    
    
    326,326
    
    
    $
    4,265
    
    
    $
    13.06Granted during the period
    
    
    792,736
    
    
    
    4,891
    
    
    
    6.17Vested during the period
    
    
    (72,854
    )
    
    
    (984
    )
    
    
    13.51Forfeited during the period
    
    
    (57,434
    )
    
    
    (570
    )
    
    
    9.92Unvested at June 30, 2007
    
    
    988,774
    
    
    $
    7,602
    
    
    $
    7.69
 
 (1)
    
    Amount includes dividend equivalents on unvested shares.  NOTE 6 Special Charges:
  7




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Professional fees related to new
CBS agreements
    
    $
    1,282
    
    
    $
    1,198
    
    
    $
    1,637
    
    
    $
    1,398Severance related obligations related to
executive officers
    
    
    1,000
    
    
    
    
    
    
    
    1,000
    
    
    
    $
    2,282
    
    
    $
    1,198
    
    
    $
    2,637
    
    
    $
    1,398
 NOTE 7 Investments:
  NOTE 8 Comprehensive Income:
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Net Income (Loss)
    
    $
    6,897
    
    
    $
    12,170
    
    
    $
    7,612
    
    
    $
    8,643Other Comprehensive Income:Unrealized Gain
    
    
    1,408
    
    
    
    (445
    )
    
    
    1,720
    
    
    
    4,905Comprehensive Income
    
    $
    8,305
    
    
    $
    11,725
    
    
    $
    9,332
    
    
    $
    13,548
 NOTE 9- Earnings Per Share:
   8




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net Income
    
    $
    6,897
    
    
    $
    12,170
    
    
    $
    7,612
    
    
    $
    8,643Less: distributed earnings to Common shareholders
    
    
    
    
    
    
    8,624
    
    
    
    1,658
    
    
    
    17,216Less: distributed earnings to Class B shareholders
    
    
    
    
    
    
    23
    
    
    
    5
    
    
    
    47Undistributed earnings (loss)
    
    $
    6,897
    
    
    $
    3,523
    
    
    $
    5,949
    
    
    $
    (8,620
    )Earnings  Common stockBasicDistributed earnings to Common shareholders
    
    $
    
    
    
    $
    8,624
    
    
    $
    1,658
    
    
    $
    17,216Undistributed earnings (loss) allocated to
Common shareholders
    
    
    6,897
    
    
    
    3,523
    
    
    
    5,949
    
    
    
    (8,620
    )Total Earnings  Common stock, basic
    
    $
    6,897
    
    
    $
    12,147
    
    
    $
    7,607
    
    
    $
    8,596DilutedDistributed earnings to Common shareholders
    
    $
    
    
    
    $
    8,624
    
    
    $
    1,658
    
    
    $
    17,216Distributed earnings to Class B shareholders
    
    
    
    
    
    
    23
    
    
    
    5
    
    
    
    47Undistributed earnings (loss) allocated to
Common shareholders
    
    
    6,897
    
    
    
    3,523
    
    
    
    5,949
    
    
    
    (8,620
    )Total Earnings (loss)  Common stock,
Diluted
    
    $
    6,897
    
    
    $
    12,170
    
    
    $
    7,612
    
    
    $
    8,643Weighted average Common shares outstanding, basic
    
    
    86,094,026
    
    
    
    85,953,821
    
    
    
    86,083,608
    
    
    
    87,527,627Share-based compensation shares
    
    
    153,764
    
    
    
    9,751
    
    
    
    32,711
    
    
    
    32,634Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average Class B shares
    
    
    291,796
    
    
    
    291,796
    
    
    
    291,796
    
    
    
    Weighted average Common shares outstanding, diluted
    
    
    86,539,586
    
    
    
    86,255,368
    
    
    
    86,408,115
    
    
    
    87,560,261Earnings per Common share, basicDistributed earnings, basic
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.02
    
    
    $
    0.20Undistributed earnings (loss)  basic
    
    
    0.08
    
    
    
    0.04
    
    
    
    0.07
    
    
    
    (0.10
    )Total
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.10Earnings per Common share, dilutedDistributed earnings, diluted
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.02
    
    
    $
    0.20Undistributed earnings (loss)  diluted
    
    
    0.08
    
    
    
    0.04
    
    
    
    0.07
    
    
    
    (0.10
    )Total
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.10
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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Earnings Class B stockBasicDistributed earnings to Class B
shareholders
    
    $
    
    
    
    $
    23
    
    
    $
    5
    
    
    $
    47Undistributed earnings allocated to Class
B Shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Earnings  Class B stock, basic
    
    $
    
    
    
    $
    23
    
    
    $
    5
    
    
    $
    47DilutedDistributed Earnings to Class B
shareholders
    
    $
    
    
    
    $
    23
    
    
    $
    5
    
    
    $
    47Undistributed earnings allocated to
Class B shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Earnings Class B stock, diluted
    
    $
    
    
    
    $
    23
    
    
    $
    5
    
    
    $
    47Weighted average Class B shares outstanding,
basic
    
    
    291,796
    
    
    
    291,796
    
    
    
    291,796
    
    
    
    291,796Share-based compensation
Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average Class B shares outstanding,
diluted
    
    
    291,796
    
    
    
    291,796
    
    
    
    291,796
    
    
    
    291,796Earnings per Class B share, basicDistributed earnings, basic
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.16Undistributed earnings  basic
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.16Earnings per Class B share, dilutedDistributed earnings, diluted
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.16Undistributed earnings  diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.16
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Options
    
    
    5,881,947
    
    
    
    7,495,394
    
    
    
    6,085,794
    
    
    
    7,648,968Restricted Stock
    
    
    244,088
    
    
    
    323,550
    
    
    
    1,025,963
    
    
    
    323,550Restricted Stock Units
    
    
    134,621
    
    
    
    225,603
    
    
    
    127,778
    
    
    
    225,603Warrants
    
    
    3,000,000
    
    
    
    3,500,000
    
    
    
    3,000,000
    
    
    
    3,500,000
 10




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WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
  NOTE 10- Debt:
  June 30, 2007
    
    
    December 31, 2006Revolving Credit Facility/Term Loan
    
    $
    170,000
    
    
    $
    170,0004.64% Senior Unsecured Notes due 2009
    
    
    50,000
    
    
    
    50,0005.26% Senior Unsecured Notes due 2012
    
    
    150,000
    
    
    
    150,000Fair market value of Swap (a)
    
    
    (4,385
    )
    
    
    (3,140
    )$
    365,615
    
    
    $
    366,860
 
 (a)
    
    write-up (write-down) to market value adjustments for debt with qualifying hedges that are
recorded as debt on the balance sheet.    11




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##### Table of Contents



WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 NOTE 11 Related Party Transactions:
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Representation Agreement
    
    $
    6,989
    
    
    $
    7,150
    
    
    $
    13,740
    
    
    $
    13,641Programming and Affiliations
    
    
    10,034
    
    
    
    13,198
    
    
    
    22,227
    
    
    
    28,096Management Agreement
(excluding warrant
amortization)
    
    
    861
    
    
    
    826
    
    
    
    1,690
    
    
    
    1,614Warrant Amortization
    
    
    2,427
    
    
    
    2,427
    
    
    
    4,854
    
    
    
    4,854$
    20,311
    
    
    $
    23,601
    
    
    $
    42,511
    
    
    $
    48,205
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Sales
    
    $
    1,013
    
    
    $
    829
    
    
    $
    2,164
    
    
    $
    1,314POP fees
    
    
    673
    
    
    
    542
    
    
    
    1,404
    
    
    
    862
 12




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##### Table of Contents



WESTWOOD ONE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (In thousands, except share and per share data)
 NOTE 12 Shareholders Equity
  NOTE 13 Recent Accounting Pronouncements:
  13




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##### Table of Contents



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
       14




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##### Table of Contents



Results of Operations
 Three Months Ended June 30, 2007 Compared With Three Months Ended June 30, 2006
 Revenues
  15




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##### Table of Contents



Three Months EndedJune 30,2007
    
    
    2006$
    
    
    % of total
    
    
    $
    
    
    % of totalLocal/Regional
    
    $
    63,943
    
    
    
    58
    %
    
    $
    72,566
    
    
    
    54
    %National
    
    
    47,202
    
    
    
    42
    %
    
    
    61,970
    
    
    
    46
    %Total (1)
    
    $
    111,145
    
    
    
    100
    %
    
    $
    134,536
    
    
    
    100
    %
 
 (1)
    
    As described above, the Company currently aggregates revenue data based on the type or
duration 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 revenue generated on a local/regional versus national basis. Our objective is to
optimize total revenue from those advertisers. %
   Operating Costs
  Three Months EndedJune 30,2007
    
    
    2006$
    
    
    % of total
    
    
    $
    
    
    % of totalProgramming, production
and distribution
expenses
    
    $
    64,576
    
    
    
    77
    %
    
    $
    73,346
    
    
    
    75
    %Selling expenses
    
    
    8,126
    
    
    
    10
    %
    
    
    12,076
    
    
    
    12
    %Stock-based compensation
    
    
    1,553
    
    
    
    2
    %
    
    
    1,650
    
    
    
    2
    %Other operating expenses
    
    
    9,497
    
    
    
    11
    %
    
    
    10,811
    
    
    
    11
    %$
    83,752
    
    
    
    100
    %
    
    $
    97,883
    
    
    
    100
    %
 %,
 16




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##### Table of Contents



Depreciation and Amortization
  Corporate General and Administrative Expenses
  Operating Income
  Interest Expense
  Provision for Income Taxes
  Net Income
  Earnings Per Share
  17




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##### Table of Contents



Six Months Ended June 30, 2007 Compared With Six Months Ended June 30, 2006
 Revenues
  Six Months Ended June 30,2007
    
    
    2006$
    
    
    % of total
    
    
    $
    
    
    % of totalLocal/Regional
    
    $
    117,366
    
    
    
    52
    %
    
    $
    130,505
    
    
    
    50
    %National
    
    
    107,817
    
    
    
    48
    %
    
    
    129,058
    
    
    
    50
    %Total (1)
    
    $
    225,183
    
    
    
    100
    %
    
    $
    259,563
    
    
    
    100
    %
 
 (1)
    
    As described above, the Company currently aggregates revenue data based on the type or
duration 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. %,
    Operating Costs
  Six Months Ended June 30,2007
    
    
    2006$
    
    
    % of total
    
    
    $
    
    
    % of totalProgramming, production
and distribution
expenses
    
    $
    141,454
    
    
    
    78
    %
    
    $
    161,345
    
    
    
    76
    %Selling expenses
    
    
    18,107
    
    
    
    10
    %
    
    
    26,648
    
    
    
    12
    %Stock-based compensation
    
    
    2,929
    
    
    
    2
    %
    
    
    3,413
    
    
    
    2
    %Other operating expenses
    
    
    18,777
    
    
    
    10
    %
    
    
    21,542
    
    
    
    10
    %$
    181,267
    
    
    
    100
    %
    
    $
    212,948
    
    
    
    100
    %
 %,
 18




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##### Table of Contents



Depreciation and Amortization
   Corporate General and Administrative Expenses
   Operating Income
   Interest Expense
   Provision for Income Taxes
   19




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##### Table of Contents



Net Income
  Earnings Per Share
  Liquidity and Capital Resources
      20




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Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
  Cautionary Statement Concerning Forward-Looking Statements and Factors Affecting Forward-Looking
Statements
  21




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##### Table of Contents




    
    As a result of deterioration in the Companys operating performance, the Company amended
its senior loan agreement in October 2006 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 and 3.5 to 1, thereafter. 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 and
timing to obtain, if needed, additional amendments or additional financing, or to refinance
the existing senior loan agreement, may be adversely impacted by the timing of the
Companys ability, if at all, to extend its relationship with CBS Radio beyond the March
31, 2009 expiration of the Management Agreement and related agreements. A continued
deterioration in operating results could also result in the Company violating one or more
financial covenants on its Senior Unsecured Notes, thereby resulting in all such notes
becoming immediately due and payable. If the Company defaulting on one or more of its loan
agreements, the Company might be required to unwind its current interest rate swap
agreements.
    
    The Company is party to a Management Agreement, a Representation Agreement and other
related programming agreements and arrangements 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 the radio stations owned and operated by
CBS Radio which, in the aggregate, provide the Company with a significant portion of the
audience and/or commercial inventory that it sells to advertisers. While the Company is
currently involved in discussions with CBS Radio regarding the modification and/or
extension of such agreements and arrangements, there can be no assurance the Company and
CBS Radio will be able to agree on extensions or modifications to such agreements on
similar economic terms. If the Company is unable to secure agreements with CBS Radio
beyond March 31, 2009, the Companys operations and financial condition could be materially
affected.
    
    Under the terms of the Management Agreement, CBS Radio manages the business and
operations of the Company, including by providing individuals to serve as the CEO and CFO
of the Company (CBS Radio employs the CEO and reimburses to the Company the cash
compensation of the CFO, who is employed directly by the Company). CBS Radio receives a
management fee for its management services. The Management Agreement also includes certain
non-competition provisions in favor the Company and a right of first refusal on syndication
opportunities to the Company where CBS Radio determines, in its sole discretion, to
syndicate programming. An executive of CBS Radio serves on the Companys Board of
Directors, and CBS Radio owns approximately 18.4% of the Companys Common stock. In
addition, CBS Radio competes with the Company in advertising sales and most of the radio
stations owned and operated by CBS Radio have affiliation agreements with the Company. The
foregoing could create, or appear to create, potential conflicts of interest for CBS Radio
in its decisions regarding the day-to-day operation of its business and in providing its
management services to the Company under the Management Agreement.
 22




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##### Table of Contents



The foregoing could
materially adversely impact the Companys future business, financial condition and
operating performance.
    
    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
and/or commercial inventory that it sells to advertisers. In addition, the Company
operates the CBS Radio Network and syndicates and/or distributes several other programs
from CBS and its affiliates. In 2006, the Company experienced a material decline in the
amount of audience and quantity and quality of commercial inventory delivered by the CBS
Radio owned and operated radio stations. Reasons for the decline include: (1) the
cancellation of, and loss of syndication opportunities associated with, key national
programming; (2) the sale of CBS radio stations as described in more detail below and (3)
the reduction of commercial inventory levels, including certain RADAR inventory, provided
to the Company under affiliation agreements. At the same time, other than for reductions
in compensation paid to CBS Radio to reflect reduced commercial inventory levels the
economic arrangement between the Company and CBS Radio has remained substantially fixed
pursuant to the terms of many of the existing agreements between the Company and CBS Radio.
At this time, it is unclear whether such decline is permanent. To the extent the decline
is permanent or new economic terms to its agreements with CBS Radio and its affiliates
cannot be negotiated, the Companys operating performance could be materially adversely
impacted by this decline in audience and commercial inventory.
    
    In connection with its agreements with CBS Radio dating back to 1994, the Company has
benefited from the historical practice of long-term distribution relationships for its
programming, including pursuant to affiliation agreements with most of CBSs owned and
operated radio stations, many of which operate on a month-to-month basis or contain 90-day
termination provisions which historically have not been exercised by the CBS radio
stations. During 2006, CBS Radio reached agreements to sell 39 radio stations in ten of
its smaller markets; to date, the sale of 24 of those stations have been completed. To the
extent CBS Radio continues to sell and/or restructure its portfolio of radio assets and
these existing distribution arrangements are terminated and/or not continued on a long-term
basis by the new owners of the former CBS radio stations, as was the case with certain of
the radio stations sold by CBS in 2006, there is a greater likelihood that the Company will
not be able to continue to benefit from the long-term distribution relationship it has with
CBS Radio on substantially similar economic terms and conditions or at all. If a
significant number of additional radio stations or radio stations in key markets affiliated
with the Company are sold by CBS Radio, and the new owners of such stations terminate
and/or do not continue the affiliation agreements with the Company on a long-term basis, or
if the Company cannot enter into new affiliation agreements with other radio stations in
such markets on similar terms and conditions, the Companys operating performance would be
materially and adversely impacted.
    
    The Company and CBS Radio are presently seeking to resolve a dispute as to whether the
manner of sale of certain short duration commercial inventory conducted by or on behalf of
radio stations owned by CBS Radio is permitted under the terms of existing agreements
between the parties, including the non-competition provisions of the Management Agreement.
If this dispute cannot be resolved, the Companys relationship with CBS Radio could be
adversely affected, which could, in turn, have a material and adverse impact on the
Company.
    
    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;
 23




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##### Table of Contents




    
    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, including by new entrants into
the radio advertising sales market, including Google;
    
    new competitors or existing competitors with expanded resources, including as a
result of consolidation (as described below), NAVTEQs purchase of Traffic.com or
the announced proposed merger between XM Satellite Radio and Sirius Satellite
Radio;
    
    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.There can be no assurance that the Company will be able to maintain or increase the current
audience ratings and advertising revenue.
 
    
    The radio broadcasting industry has continued to experience significant change,
including as a result of a significant amount of consolidation in recent years, and
increased business transactions in 2006 by key players in the radio industry (e.g.,Clear
Channel, Citadel, ABC, CBS Radio). In connection therewith, certain major station groups
have: (1) recently modified 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. Additionally, if the size and financial resources of certain station groups
continue to increase, the station groups 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.
    
    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.
   
 Item 3. Qualitative and Quantitative Disclosures about Market Risk
  24




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Item 4. Disclosure 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 Shares thatTotal
    
    
    
    
    
    Shares Purchased as
    
    May Yet BeNumber of Shares
    
    
    
    
    
    Part of Publicly
    
    Purchased UnderPurchased in
    
    Average Price Paid
    
    Announced Plan or
    
    the Plans orPeriod
    
    Period
    
    Per Share
    
    Program
    
    Programs (A)4/1/07  4/30/07
    
    
    
    
    
    
    N/A
    
    
    
    21,001,424
    
    
    $
    290,490,0005/1/07  5/31/07
    
    
    
    
    
    
    N/A
    
    
    
    21,001,424
    
    
    $
    290,490,0006/1/07  6/30/07
    
    
    
    
    
    
    N/A
    
    
    
    21,001,424
    
    
    $
    290,490,000
 
 (A)
    
    Represents remaining authorization from the $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



Items 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  27




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##### Table of Contents



SIGNATURES
  WESTWOOD ONE, INC.By:
Name:
    
    /S/ Peter Kosann

Peter KosannTitle:
    
    Chief Executive OfficerBy:
Name:
    
    /S/ Gary J. Yusko

Gary J. YuskoTitle:
    
    Chief Financial OfficerDate: August 9, 2007
 28




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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)10.1+
    
    Amendment No. 2 to Employment Agreement, dated May 4, 2007, between Registrant and Paul
Gregrey (4)10.2+
    
    Employment Agreement, effective as of July 16, 2007, by and between the Company and Gary
Yusko. (5)10.3+
    
    Amendment No. 2, effective July 10, 2007, to the Employment Agreement, entered into by and
between the Company and David Hillman, effective as of October 16, 2004, as amended. (5)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.+
    
    Indicates a management contract or compensatory plan.(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.(4)
    
    Filed as an exhibit to Companys quarterly report on Form 10-Q for the quarter ended March
31, 2007 and incorporated herein by reference.(5)
    
    Filed as an exhibit to Companys current report on Form 8-K dated July 10, 2007 and
incorporated herein by reference. 29