Westwood One, Inc. Reports Third Quarter 2005 Operating Results

Westwood One, Inc. Reports Third Quarter 2005 Operating Results

NEW YORK, Nov. 3 /PRNewswire-FirstCall/ -- Westwood One, Inc. (NYSE:WON) Revenues for the third quarter of 2005 were $134.9 million compared with $141.4 million for the third quarter of 2004, a decrease of approximately $6.5 million, or 4.6%. Revenues for the nine month period ended September 30, 2005 were $410.8 million compared with $410.6 million for the nine month period ended September 30, 2004. The decrease in revenues for the three month period ended September 30, 2005 as compared to 2004, is primarily attributable to the absence of revenues associated with our exclusive broadcast of the 2004 Summer Olympic games.

Operating income for the third quarter of 2005 was $40.4 million, consistent with the third quarter of 2004. Operating income for the third quarter of 2005 benefited from the absence of costs associated with our exclusive broadcast of the Summer Olympic games and reduced distribution expenses, partially offset by increased programming expenses.

Net income for the third quarter of 2005 was $21.8 million compared with $23.2 million in the third quarter of 2004, a decrease of $1.4 million, or 6.0%. Net income per diluted share was $.24 per share, consistent with the same quarter of the prior year.

Interest expense in the third quarter of 2005 was $4.8 million compared with $2.9 million in the third quarter of 2004, an increase of $1.9 million, or 66.3%. The increase in interest expense was due to an increase in outstanding borrowings and higher interest rates.

Income tax expense in the third quarter of 2005 was $13.9 million compared with $14.3 million in the third quarter of 2004, a decrease of $400,000, or 2.8%. The Company's effective income tax rate in the third quarter of 2005 was 39.0% compared with 38.1% in the third quarter of 2004. The increase in the Company's effective tax rate is attributable to recent tax developments in the states in which we operate.

Weighted average fully diluted shares outstanding in the third quarter of 2005 decreased approximately 6.3%. The decrease in weighted average fully diluted shares outstanding was primarily attributable to the Company's stock repurchase program. In the third quarter of 2005, the Company repurchased approximately 2.1 million shares of its common stock for approximately $41.7 million.

Non-GAAP(1) free cash flow for the third quarter of 2005 was $25.7 million compared with $25.6 million for the third quarter of 2004. On a non-GAAP basis free cash flow per diluted share for the third quarter of 2005 increased to $.28 from $.26 for the third quarter of 2004, or 7.7%.

The Company also announced the declaration of a cash dividend of $.10 per share for all issued and outstanding common stock, payable on November 30, 2005 to stockholders of record at the close of business on November 18, 2005. Further declarations of dividends, including the establishment of record and payment dates related to dividends, will be at the discretion of the Company's Board of Directors.

Business Outlook

Westwood One expects to deliver revenue growth of low single digits resulting in low single digit growth in operating income before depreciation and amortization for the fourth quarter of 2005.

(1) All Non-GAAP financial measures have been adjusted from comparable
GAAP measures. A description of all adjustments and reconciliations
to comparable GAAP measures for all periods presented are included
herein.

ABOUT WESTWOOD ONE

Westwood One provides over 150 news, sports, music, talk, entertainment programs, features, live events and 24/7 Formats. Through its subsidiaries, Metro Networks/Shadow Broadcast Services, Westwood One provides local content to the radio and TV industries including news, sports, weather, traffic, video news services and other information. SmartRoute Systems manages traffic information centers for state and local departments of transportation, and markets traffic and travel content to wireless, Internet, in-vehicle navigation systems and voice portal customers. Westwood One serves more than 5,000 radio stations. Westwood One is managed by Infinity Broadcasting Corporation, a wholly-owned subsidiary of Viacom Inc.

Certain statements in this release, including those relating to the Company's expected growth in revenues and operating income before depreciation and amortization and to the payment of dividends, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The words or phrases "guidance," "expect," "anticipate," "estimates" and "forecast" and similar words or expressions are intended to identify such forward-looking statements. In addition, any statements that refer to expectations or other characterizations of future events or circumstances are forward-looking statements. Various risks that could cause future results to differ from those expressed by the forward- looking statements included in this release include, but are not limited to: changes in economic conditions in the U.S. and in other countries in which Westwood One currently does business (both general and relative to the advertising and entertainment industries); fluctuations in interest rates; changes in industry conditions; changes in operating performance; shifts in population and other demographics; changes in the level of competition for advertising dollars; fluctuations in operating costs; technological changes and innovations; changes in labor conditions; changes in governmental regulations and policies and actions of regulatory bodies; changes in tax rates; changes in capital expenditure requirements and access to capital markets. Other key risks are described in the Company's reports filed with the United States Securities and Exchange Commission ("SEC"). Except as otherwise stated in this news announcement, Westwood One does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

WESTWOOD ONE, INC.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION

The following tables set forth the Company's operating income before depreciation and amortization for the three month and nine month periods ended September 30, 2005 and 2004. The Company defines "operating income before depreciation and amortization" as net income adjusted to exclude the following line items presented in its Statement of Operations: income taxes; other (income) expense; interest expense; and depreciation and amortization. While this non-GAAP measure has been relabeled to more accurately describe in the title the method of calculation of the measure, the actual method of calculating the measure now labeled operating income before depreciation and amortization is unchanged from the method previously used to calculate the measure formerly labeled EBITDA or operating cash flow in prior disclosures.

The Company uses operating income before depreciation and amortization, among other things, to evaluate the Company's operating performance, to value prospective acquisitions, to determine compliance with debt covenants and as one of several components of incentive compensation targets for certain management personnel, and this measure is among the primary measures used by management for planning and forecasting of future periods. This measure is an important indicator of the Company's operational strength and performance of its business because it provides a link between profitability and operating cash flow. The Company believes the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company's management, helps improve their ability to understand the Company's operating performance and makes it easier to compare the Company's results with other companies that have different financing and capital structures or tax rates. In addition, this measure is also among the primary measures used externally by the Company's investors, analysts and peers in its industry for purposes of valuation and comparing the operating performance of the Company to other companies in its industry.

Since operating income before depreciation and amortization is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance. Operating income before depreciation and amortization, as the Company calculates it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure does not necessarily represent funds available for discretionary use, and is not necessarily a measure of the Company's ability to fund its cash needs. As operating income before depreciation and amortization excludes certain financial information included in net income, users of this financial information should consider the types of events and transactions which are excluded. As required by the SEC, set forth below is a reconciliation of operating income before depreciation and amortization to net income, the most directly comparable amount reported under GAAP.

WESTWOOD ONE, INC.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,

2005 2004 2005 2004
Operating income before
depreciation and
amortization $45.6 $45.4 $126.5 $127.5
Depreciation and
amortization 5.2 5.0 15.6 13.0
Operating income 40.4 40.4 110.9 114.5
Interest expense, net 4.7 2.9 12.3 8.4
Income before income
taxes 35.7 37.5 98.6 106.1
Income taxes 13.9 14.3 38.0 40.2
Net income $21.8 $23.2 $60.6 $65.9

Free cash flow is defined by the Company as net income plus depreciation and amortization less capital expenditures. The Company uses free cash flow, among other measures, to evaluate its operating performance. Management believes free cash flow provides investors with an important perspective on the cash available to service debt, make strategic acquisitions and investments, maintain its capital assets, repurchase its common stock and fund ongoing operations. As a result, free cash flow is a significant measure of the Company's ability to generate long term value. The Company believes the presentation of free cash flow is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management. In addition, free cash flow is also a primary measure used externally by the Company's investors, analysts and peers in its industry for purposes of valuation and comparing the operating performance of the Company to other companies in its industry. Free cash flow per weighted average fully diluted share outstanding is defined by the Company as free cash flow divided by the weighted average fully diluted share outstanding.

As free cash flow is not a measure of performance calculated in accordance with GAAP, free cash flow should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or in isolation of, or as a substitute for, net cash flow provided by operating activities as a measure of liquidity. Free cash flow, as calculated by the Company, may not be comparable to similarly titled measures employed by other companies. In addition, free cash flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of the Company's ability to fund its cash needs. In arriving at free cash flow, the Company adjusts operating cash flow to remove the impact of cash flow timing differences to arrive at a measure which the Company believes more accurately reflects funds available for discretionary use. Specifically, the Company adjusts net cash flows provided by operating activities (the most directly comparable GAAP financial measure) for capital expenditures, deferred taxes and certain other non-cash items and removes the impact of sources and uses of cash resulting from changes in operating assets and liabilities. Accordingly, users of this financial information should consider the types of events and transactions which are not reflected. The Company has reconciled net cash flow provided by operating activities to free cash flow as follows:

WESTWOOD ONE, INC.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(In millions, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Net Cash Flow Provided
by Operating Activities $41.7 $32.3 $110.1 $108.3
Plus (Minus):
Changes in assets
and liabilities:
Accounts Receivable (13.0) (1.3) (19.6) (11.7)
Prepaid & Other Assets 1.8 1.1 5.7 (3.0)
Deferred Revenue 2.6 0.9 4.1 0.4
Income Taxes Payable (1.8) (1.3) (12.5) (8.0)
Accounts Payable and
Accrued and Other
Liabilities (7.5) 1.5 (11.9) (1.0)
Amounts Payable to
Related Parties 3.2 (3.9) 1.0 (4.1)
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Deferred Taxes 0.3 (1.0) (0.1) (1.3)
Non-cash Stock
Compensation (0.2) - (0.2) -
Amortization of Deferred
Financing Costs (0.1) (0.1) (0.3) (0.6)
Capital Expenditures (1.3) (2.6) (2.9) (5.0)
Free Cash Flow $25.7 $25.6 $73.4 $74.0

Diluted Shares
Outstanding 90.7 97.2 92.4 99.1

Free Cash Flow per
Diluted Share $0.28 $0.26 $0.79 $0.75

WESTWOOD ONE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

September 30, December 31,
2005 2004
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $21,162 $10,932
Accounts receivable, net of
allowance for doubtful accounts
of $4,075 (2005) and
$2,566 (2004) 122,394 142,014
Prepaid and other assets 25,265 21,400
----------------- -----------------
Total Current Assets 168,821 174,346
PROPERTY AND EQUIPMENT, NET 43,103 47,397
GOODWILL 982,219 981,969
INTANGIBLE ASSETS, NET 5,299 6,176
OTHER ASSETS 29,545 36,391
----------------- -----------------
TOTAL ASSETS $1,228,987 $1,246,279
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable 17,459 13,135
Amounts payable to related
parties 19,276 20,274
Deferred revenue 10,149 14,258
Income taxes payable 17,413 5,211
Accrued expenses and other
liabilities 43,091 28,463
----------------- -----------------
Total Current Liabilities 107,388 81,341
LONG-TERM DEBT 398,648 359,439
DEFERRED INCOME TAXES 11,914 12,541
OTHER LIABILITIES 7,932 8,465
----------------- -----------------
TOTAL LIABILITIES 525,882 461,786
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock: authorized
10,000,000 shares, none
outstanding - -
Common stock, $.01 par value:
authorized, 252,751,250
shares; issued and outstanding,
88,543,721 (2005) and
94,353,675 (2004) 885 944
Class B stock, $.01 par value:
authorized, 3,000,000 shares:
issued and outstanding,
291,796 (2005 and 2004) 3 3
Additional paid-in capital 227,061 369,036
Accumulated earnings 475,156 414,510
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 703,105 784,493
--------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,228,987 $1,246,279
=========== ===========

WESTWOOD ONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(Unaudited) (Unaudited)

NET REVENUES $134,928 $141,422 $410,847 $410,615
-------------- --------- --------- ---------

Operating Costs (include related
party expenses of $18,094,
$19,784, $60,103 and
$64,111, respectively) 87,166 94,162 276,895 277,419

Depreciation and Amortization
(includes related party
warrant amortization of
$2,427, $2,427, $7,281 and
$5,191, respectively) 5,194 4,964 15,597 13,074

Corporate General and
Administrative Expenses
(includes related party
expenses of $819, $759,
$2,367 and $2,221,
respectively) 2,196 1,877 7,412 5,653
-------------- --------- --------- ---------

94,556 101,003 299,904 296,146
-------------- --------- --------- ---------

OPERATING INCOME 40,372 40,419 110,943 114,469
Interest Expense 4,840 2,911 12,626 8,528
Other (Income) Expense (133) (41) (319) (114)
-------------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 35,665 37,549 98,636 106,055
INCOME TAXES 13,912 14,313 37,990 40,166
-------------- --------- --------- ---------

NET INCOME $21,753 $23,236 $60,646 $65,889
========= ========= ========= =========

EARNINGS PER SHARE:
BASIC $0.24 $0.24 $0.66 $0.67
========= ========= ========= =========
DILUTED $0.24 $0.24 $0.66 $0.66
========= ========= ========= =========

WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 90,338 96,457 91,940 97,806
========= ========= ========= =========
DILUTED 90,678 97,224 92,380 99,101
========= ========= ========= =========

Source: Westwood One, Inc.

CONTACT: Andrew Zaref for Westwood One, Inc., +1-212-373-5311

Web site: http://www.westwoodone.com/

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