##### 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 THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 [   ]
    
    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 57thStreet, 5thFloor, New York, NY
    
    10019(Address of principal executive offices)
    
    (Zip Code)
 (212) 641-2000




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##### 



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
    
    23Item 4.
    
    Controls and Procedures
    
    23PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    25Item 1A.
    
    Risk Factors
    
    25Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    25Item 3.
    
    Defaults Upon Senior Securities
    
    25Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    25Item 5.
    
    Other Information
    
    26Item 6.
    
    Exhibits
    
    27SIGNATURES
    
    28Exhibit Index
    
    29CERTIFICATIONSEX-31.A: CERTIFICATIONEX-31.B: CERTIFICATIONEX-32.A: CERTIFICATIONEX-32.B: CERTIFICATION
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 WESTWOOD ONE, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (unaudited)
 (In thousands, except share amounts)
 June 30,
    
    
    December 31,2006
    
    
    2005(Restated)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    9,342
    
    
    $
    10,399Accounts receivable, net of allowance for doubtful accounts
of $3,746 (2006) and $3,896 (2005)
    
    
    118,647
    
    
    
    135,184Prepaid taxes
    
    
    5,951
    
    
    
    Prepaid and other assets
    
    
    19,824
    
    
    
    26,662Total Current Assets
    
    
    153,764
    
    
    
    172,245PROPERTY AND EQUIPMENT, NET
    
    
    39,083
    
    
    
    41,166GOODWILL
    
    
    982,219
    
    
    
    982,219INTANGIBLE ASSETS, NET
    
    
    4,696
    
    
    
    5,007OTHER ASSETS
    
    
    31,100
    
    
    
    39,009TOTAL ASSETS
    
    $
    1,210,862
    
    
    $
    1,239,646LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    17,668
    
    
    $
    15,044Amounts payable to related parties
    
    
    22,372
    
    
    
    21,192Deferred revenue
    
    
    7,960
    
    
    
    9,086Income taxes payable
    
    
    
    
    
    
    21,861Accrued expenses and other liabilities
    
    
    48,946
    
    
    
    32,968Total Current Liabilities
    
    
    96,946
    
    
    
    100,151LONG-TERM DEBT
    
    
    413,985
    
    
    
    427,514OTHER LIABILITIES
    
    
    8,023
    
    
    
    7,952TOTAL LIABILITIES
    
    
    518,954
    
    
    
    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, 86,268,401 (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
    
    
    292,020
    
    
    
    300,419Unrealized gain on available for sale securities
    
    
    4,905
    
    
    
    Accumulated earnings
    
    
    394,120
    
    
    
    402,740TOTAL SHAREHOLDERS EQUITY
    
    
    691,908
    
    
    
    704,029TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,210,862
    
    
    $
    1,239,646
  3




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WESTWOOD ONE, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 (In thousands, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Restated)
    
    
    
    
    
    
    (Restated)NET REVENUES
    
    $
    129,162
    
    
    $
    141,837
    
    
    $
    249,934
    
    
    $
    275,919Operating Costs (includes related party expenses
of $20,348 ,$20,564, $41,737 and $42,009, respectively)
    
    
    92,509
    
    
    
    94,149
    
    
    
    203,319
    
    
    
    193,389Depreciation and Amortization (includes related party
warrant amortization of $2,427, $2,427, $4,854 and
$4,854, respectively)
    
    
    5,063
    
    
    
    5,147
    
    
    
    10,185
    
    
    
    10,403Corporate General and Administrative Expenses
(includes related party expenses of $826, $789, $1,614
and $1,548, respectively)
    
    
    4,873
    
    
    
    3,854
    
    
    
    9,853
    
    
    
    7,615102,445
    
    
    
    103,150
    
    
    
    223,357
    
    
    
    211,407OPERATING INCOME
    
    
    26,717
    
    
    
    38,687
    
    
    
    26,577
    
    
    
    64,512Interest Expense
    
    
    6,504
    
    
    
    4,075
    
    
    
    12,492
    
    
    
    7,786Other (Income) Expense
    
    
    (126
    )
    
    
    (126
    )
    
    
    (235
    )
    
    
    (186
    )INCOME BEFORE INCOME TAXES
    
    
    20,339
    
    
    
    34,738
    
    
    
    14,320
    
    
    
    56,912INCOME TAXES
    
    
    8,169
    
    
    
    13,274
    
    
    
    5,677
    
    
    
    21,604NET INCOME
    
    $
    12,170
    
    
    $
    21,464
    
    
    $
    8,643
    
    
    $
    35,308EARNINGS PER SHARE:BASIC
    
    $
    0.14
    
    
    $
    0.23
    
    
    $
    0.10
    
    
    $
    0.38DILUTED
    
    $
    0.14
    
    
    $
    0.23
    
    
    $
    0.10
    
    
    $
    0.38WEIGHTED AVERAGE SHARES OUTSTANDING:BASIC
    
    
    86,246
    
    
    
    91,829
    
    
    
    87,819
    
    
    
    92,756DILUTED
    
    
    86,256
    
    
    
    92,247
    
    
    
    87,852
    
    
    
    92,899
  4




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WESTWOOD ONE, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 (In thousands)
 Six Months EndedJune 30,2006
    
    
    2005(Restated)CASH FLOW FROM OPERATING ACTIVITIES:Net income
    
    $
    8,643
    
    
    $
    35,308Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    10,185
    
    
    
    10,403Deferred taxes
    
    
    1,819
    
    
    
    (2,086
    )Non-cash stock compensation
    
    
    6,497
    
    
    
    6,092Amortization of deferred financing costs
    
    
    167
    
    
    
    16727,311
    
    
    
    49,884Changes in assets and liabilities:Accounts receivable
    
    
    16,537
    
    
    
    6,583Prepaid and other assets
    
    
    8,736
    
    
    
    (3,913
    )Deferred revenue
    
    
    (1,126
    )
    
    
    (1,452
    )Income taxes payable and prepaid income taxes
    
    
    (27,812
    )
    
    
    10,052Accounts payable and accrued expenses
and other liabilities
    
    
    5,043
    
    
    
    4,434Amounts payable to related parties
    
    
    1,180
    
    
    
    2,239Net Cash Provided By Operating Activities
    
    
    29,869
    
    
    
    67,827CASH FLOW FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (2,660
    )
    
    
    (1,642
    )Acquisition of companies and other
    
    
    75
    
    
    
    (204
    )Net Cash Used in Investing Activities
    
    
    (2,585
    )
    
    
    (1,846
    )CASH FLOW FROM FINANCING ACTIVITIES:Issuance of common stock
    
    
    302
    
    
    
    2,275Borrowings under bank and other long-term obligations
    
    
    10,000
    
    
    
    65,000Debt repayments and payments of capital lease obligations
    
    
    (10,336
    )
    
    
    (35,316
    )Dividend payments
    
    
    (17,263
    )
    
    
    (9,171
    )Repurchase of common stock
    
    
    (11,044
    )
    
    
    (80,850
    )Windfall tax benefits from stock option exercises
    
    
    
    
    
    
    609Net Cash Used in Financing Activities
    
    
    (28,341
    )
    
    
    (57,453
    )NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,057
    )
    
    
    8,528CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    10,399
    
    
    
    10,932CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    9,342
    
    
    $
    19,460
  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 June 30, 2005
    
    Six Months Ended June 30, 2005As previously
    
    
    
    
    
    
    
    
    
    As previouslyreported
    
    Adjustment
    
    As restated
    
    reported
    
    Adjustment
    
    As restatedOperating Costs
    
    $
    92,703
    
    
    $
    1,446
    
    
    $
    94,149
    
    
    $
    189,729
    
    
    $
    3,660
    
    
    $
    193,389Corporate General and
Administrative Expenses
    
    
    2,632
    
    
    
    1,222
    
    
    
    3,854
    
    
    
    5,216
    
    
    
    2,399
    
    
    
    7,615Income Before Income
Taxes
    
    
    37,406
    
    
    
    (2,668
    )
    
    
    34,738
    
    
    
    62,971
    
    
    
    (6,059
    )
    
    
    56,912Income Taxes
    
    
    14,302
    
    
    
    (1,028
    )
    
    
    13,274
    
    
    
    24,078
    
    
    
    (2,474
    )
    
    
    21,604Net Income
    
    
    23,104
    
    
    
    (1,640
    )
    
    
    21,464
    
    
    
    38,893
    
    
    
    (3,585
    )
    
    
    35,308Basic Earnings Per Share
    
    $
    0.25
    
    
    $
    (0.02
    )
    
    $
    0.23
    
    
    $
    0.42
    
    
    $
    (0.04
    )
    
    $
    0.38Diluted Earnings Per Share
    
    $
    0.25
    
    
    $
    (0.02
    )
    
    $
    0.23
    
    
    $
    0.42
    
    
    $
    (0.04
    )
    
    $
    0.38
 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
    
    
    161,118
    
    
    
    2,044
    
    
    
    12.69Dividend equivalents during the period
    
    
    4,406
    
    
    
    41
    
    
    
    9.26Forfeited during the period
    
    
    (40,604
    )
    
    
    (665
    )
    
    
    16.37Converted to common stock
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of period
    
    
    225,603
    
    
    $
    3,239
    
    
    $
    14.36
   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)
    
    
    335,137
    
    
    
    4,313
    
    
    
    12.87Vested during the period
    
    
    
    
    
    
    
    
    
    
    Forfeited during the period
    
    
    (11,949
    )
    
    
    (170
    )
    
    
    14.21Unvested at June 30, 2006
    
    
    323,188
    
    
    
    4,143
    
    
    
    12.82
  $
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,Included In:
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Corporate General and
Administrative Expenses
    
    $
    23
    
    
    $
    
    
    
    $
    38
    
    
    $
    Operating Costs
    
    
    187
    
    
    
    
    
    
    
    309
    
    
    
    TOTAL
    
    $
    210
    
    
    $
    
    
    
    $
    347
    
    
    $
    
   2006WeightedAverageExerciseSTOCK OPTIONS:
    
    Shares
    
    
    PriceOutstanding at December 31, 2005
    
    
    7,787,589
    
    
    $
    25.07Granted during the period
    
    
    753,060
    
    
    
    14.45Exercised during the period
    
    
    (30,000
    )
    
    
    10.09Cancelled during the period
    
    
    (1,286,300
    )
    
    
    25.34Forfeited during the period
    
    
    (549,137
    )
    
    
    23.06Expired During the Period
    
    
    (7,500
    )
    
    
    20.73Outstanding at June 30, 2006
    
    
    6,667,712
    
    
    $
    24.05
  9




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##### Table of Contents



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,Included In:
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Corporate General and
Administrative Expenses
    
    $
    1,146
    
    
    $
    1,222
    
    
    $
    2,436
    
    
    $
    2,399Operating Costs
    
    
    1,463
    
    
    
    1,446
    
    
    
    3,104
    
    
    
    3,660Total
    
    $
    2,609
    
    
    $
    2,668
    
    
    $
    5,540
    
    
    $
    6,059
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Risk-Free Interest Rate
    
    
    5.05
    %
    
    
    3.91
    %
    
    
    4.52
    %
    
    
    4.00
    %Expected Term
    
    
    6.25
    
    
    
    5
    
    
    
    6.21
    
    
    
    5Expected Volatility
    
    
    47.3
    %
    
    
    28.84
    %
    
    
    45.27
    %
    
    
    29.09
    %Expected Dividend Yield
    
    
    4.02
    %
    
    
    1.90
    %
    
    
    2.73
    %
    
    
    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
    
    
    129
    
    
    $
    9.07
    
    
    
    2.50$10.09-$19.93
    
    
    1,556,342
    
    
    
    15.42
    
    
    
    6.53$20.25-$26.96
    
    
    2,507,660
    
    
    
    21.30
    
    
    
    5.96$30.19-$38.34
    
    
    2,457,050
    
    
    
    33.25
    
    
    
    6.02
 NOTE 3 Investments:
   NOTE 4 Comprehensive Income:
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net Income (Loss)
    
    $
    12,171
    
    
    $
    21,463
    
    
    $
    8,644
    
    
    $
    35,308Other Comprehensive Income:Unrealized Gain (Loss)
    
    
    (445
    )
    
    
    
    
    
    
    4,905
    
    
    
    Comprehensive Income
    
    $
    11,726
    
    
    $
    21,463
    
    
    $
    13,549
    
    
    $
    35,308
 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
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Options
    
    
    4
    
    
    
    414
    
    
    
    26
    
    
    
    143Restricted Stock
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    Restricted Stock Units
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Options
    
    
    7,495,394
    
    
    
    6,688,593
    
    
    
    7,648,968
    
    
    
    4,121,200Warrants
    
    
    3,500,000
    
    
    
    4,000,000
    
    
    
    3,500,000
    
    
    
    4,000,000
  NOTE 6- Debt:
  June 30, 2006
    
    
    December 31, 2005Revolving Credit Facility/Term Loan
    
    $
    220,000
    
    
    $
    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)
    
    
    (6,015
    )
    
    
    (2,486
    )$
    413,985
    
    
    $
    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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##### Table of Contents



WESTWOOD ONE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
 NOTE 7 Related Party Transactions:
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Representation Agreement
    
    $
    7,150
    
    
    $
    6,491
    
    
    $
    13,641
    
    
    $
    12,747Programming and Affiliations
    
    
    13,198
    
    
    
    14,073
    
    
    
    28,096
    
    
    
    29,262Management Agreement
(excluding
warrant amortization)
    
    
    826
    
    
    
    789
    
    
    
    1,614
    
    
    
    1,548Warrant Amortization
    
    
    2,427
    
    
    
    2,427
    
    
    
    4,854
    
    
    
    4,854$
    23,601
    
    
    $
    23,780
    
    
    $
    48,205
    
    
    $
    48,411
  NOTE 8 Shareholders Equity
  NOTE 9 New Accounting Standards and Interpretations Not Yet Adopted:
  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 10 Subsequent Event
 ,
 14




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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
       15




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##### Table of Contents



Results of Operations
 Three Months Ended June 30, 2006 Compared With Three Months Ended June 30, 2005
 Revenues
  Three Months Ended June 30,2006
    
    
    2005$
    
    
    % of total

    

$
    
    
    % of totalLocal/Regional
    
    
    69,624
    
    
    
    54
    
    
    
    82,262
    
    
    
    58National
    
    
    59,538
    
    
    
    46
    
    
    
    59,575
    
    
    
    42Total (1)
    
    $
    129,162
    
    
    
    100
    %
    
    
    141,837
    
    
    
    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 June 30,2006
    
    
    2005$
    
    
    % of total

    

$
    
    
    % of totalProgramming, production
and distribution
expenses
    
    
    67,972
    
    
    
    73
    
    
    
    66,963
    
    
    
    71Selling expenses
    
    
    12,076
    
    
    
    13
    
    
    
    14,787
    
    
    
    16Stock-based compensation
    
    
    1,650
    
    
    
    2
    
    
    
    1,446
    
    
    
    1Other operating expenses
    
    
    10,811
    
    
    
    12
    
    
    
    10,953
    
    
    
    12$
    92,509
    
    
    
    100
    %
    
    $
    94,149
    
    
    
    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
  Six Months Ended June 30, 2006 Compared With Six Months Ended June 30, 2005
 Revenues
  Six Months Ended June 30,2006
    
    
    2005$
    
    
    % of total
    
    $
    
    
    % of totalLocal/Regional
    
    
    125,477
    
    
    
    50
    
    
    
    150,640
    
    
    
    55National
    
    
    124,457
    
    
    
    50
    
    
    
    125,279
    
    
    
    45Total (1)
    
    $
    249,934
    
    
    
    100
    %
    
    $
    275,919
    
    
    
    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
  Six Months Ended June 30,2006
    
    
    2005$
    
    
    % of total
    
    
    $
    
    
    % of totalProgramming, production
and distribution
expenses
    
    
    151,716
    
    
    
    75
    
    
    
    139,730
    
    
    
    72Selling expenses
    
    
    26,648
    
    
    
    13
    
    
    
    28,838
    
    
    
    15Stock-based compensation
    
    
    3,413
    
    
    
    2
    
    
    
    3,660
    
    
    
    2Other operating expenses
    
    
    21,542
    
    
    
    10
    
    
    
    21,161
    
    
    
    11$
    203,319
    
    
    
    100
    %
    
    $
    193,389
    
    
    
    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
  Cautionary Statement Concerning Forward-Looking Statements and Factors Affecting Forward-Looking
Statements
  21




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##### Table of Contents



§
    
    The Company is managed by CBS Radio under a Management Agreement, which expires 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
its inability to continue to renew, or a significant modification to, its agreements with
CBS Corporation.§
    
    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;-
    
    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.
  §
    
    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, a major station group has recently announced plans to reduce
overall amounts of commercial inventory broadcast on their radio stations. 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.
 22




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##### Table of Contents



§
    
    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.
   
 Item 3. Qualitative and Quantitative Disclosures about Market Risk
       
 Item 4. Controls and Procedures
  23




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##### Table of Contents



24




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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
 Approximate DollarTotal Number of
    
    Value of Shares thatShares Purchased as
    
    May Yet Be PurchasedTotal
    
    
    
    
    
    
    
    
    
    Part of Publicly
    
    Under the Plans orNumber of Shares
    
    
    
    
    Average Price Paid
    
    Announced Plan or
    
    ProgramsPeriod
    
    Purchased in Period
    
    
    
    
    Per Share
    
    Program
    
    (A)4/1/06  4/30/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,001,424
    
    
    $
    290,490,0005/1/06  5/31/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,001,424
    
    
    
    290,490,0006/1/06  6/30/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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.  
 Items 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Annual Meeting of Shareholders of the Company was held on May 16, 2006.(b)
    
    The matters voted upon and the related voting results are as follows (holders
of common stock and Class B stock voted together on all matters except for the election
of three independent members of the Board of Directors, for which holders of common
stock voted alone for the
election of Mr. Dennis, Mr. Carnesale and Mr. Little).
 25




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##### Table of Contents



(1)
    
    Election of Class II Directors:
 FOR
    
    

    
    WITHHELDDavid L. Dennis
    
    
    77,056,475
    
    
    
    2,041,082Albert Carnesale
    
    
    39,737,424
    
    
    
    39,360,133Grant F. Little, III
    
    
    77,602,336
    
    
    
    1,495,221Walter Berger
    
    
    75,798,984
    
    
    
    3,298,573
 (2)
    
    Ratification of the selection of PricewaterhouseCoopers LLP
as the independent accountants of the Company for the fiscal year ending
December 31, 2006:
 FOR
    
    
    78,324,251AGAINST
    
    
    761,508ABSTAIN
    
    
    11,798NO VOTE
    
    
    0
 
 Item 5. Other Information
  26




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##### Table of Contents



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)10.1+
    
    
    Letter Agreement, dated April 13, 2006, between the Company and Chuck I. Bortnick relating
to Mr. Bortnicks separation from the Company (4)10.2+
    
    
    Amendment No.1 to Employment Agreement, dated June 30, 2006, between the Company and
Andrew Zaref. (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,
2006 and incorporated herein by reference.(5)
    
    Filed as an exhibit to Companys current report on Form 8-K dated June 26, 2006 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: August 9, 2006
 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+
    
    
    Letter Agreement, dated April 13, 2006, between the Company and Chuck I. Bortnick relating
to Mr. Bortnicks separation from the Company (4)10.2+
    
    
    Amendment No.1 to Employment Agreement, dated June 30, 2006, between the Company and
Andrew Zaref. (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,
2006 and incorporated herein by reference.(5)
    
    Filed as an exhibit to Companys current report on Form 8-K dated June 26, 2006 and
incorporated herein by reference. 29