Edgar Filing: WESTWOOD ONE INC /DE/

Form 10-Q

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010


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.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		95-3980449 (I.R.S. Employer Identification No.)

1166 Avenue of the Americas, 10^th Floor New York, NY (Address of principal executive offices)		10036 (Zip Code)

(212) 641-2000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web Site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-X during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer” and smaller reporting company in Rule 12b-2 of the Exchange Act (Check One):


Large Accelerated Filer o		Accelerated Filer o		Non-Accelerated Filer o		Smaller Reporting Company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of common stock, par value $.01 per share outstanding at October 31, 2010 (excluding treasury shares): 21,313,704 shares

WESTWOOD ONE, INC.

INDEX


	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Consolidated Balance Sheets		3

Consolidated Statements of Operations		4

Consolidated Statements of Cash Flows		5

Consolidated Statements of Stockholders’ Equity		6

Notes to Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24

Item 3. Quantitative and Qualitative Disclosures About Market Risk		45

Item 4. Controls and Procedures		45

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		46

Item 1A. Risk Factors		46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		46

Item 3. Reserved		46

Item 4. Removed and Reserved		46

Item 5. Other Information		46

Item 6. Exhibits		47

SIGNATURES		48

Exhibit Index		49

Exhibit 31.a
Exhibit 31.b
Exhibit 32.a
Exhibit 32.b

PART I. FINANCIAL INFORMATION

WESTWOOD ONE, INC.

CONSOLIDATED BALANCE SHEET

(In thousands, except per share amounts)


	September 30, 2010			December 31, 2009
	(unaudited)			(derived from audited)

ASSETS
Current assets:
Cash and cash equivalents	$	4,058		$	4,824
Accounts receivable, net of allowance for doubtful accounts of $840 (2010) and $2,723 (2009)		86,382			87,568
Federal income tax receivable		—			12,355
Prepaid and other assets		25,012			20,994

Total current assets		115,452			125,741

Property and equipment, net		36,925			36,265
Intangible assets, net		95,215			103,400
Goodwill		38,945			38,917
Other assets		2,652			2,995

TOTAL ASSETS	$	289,189		$	307,318


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	42,677		$	40,164
Amounts payable to related parties		775			129
Deferred revenue		3,249			3,682
Accrued expenses and other liabilities		33,323			28,864
Current maturity of long-term debt		—			13,500

Total current liabilities		80,024			86,339

Long-term debt		135,631			122,262
Deferred tax liability		39,358			50,932
Due to Gores		10,144			11,165
Other liabilities		19,203			18,636

TOTAL LIABILITIES		284,360			289,334


Commitments and Contingencies

STOCKHOLDERS’ EQUITY
Common stock, $.01 par value: authorized: 5,000,000 shares issued and outstanding: 21,314 (2010) and 20,544 (2009)		213			205
Class B stock, $.01 par value: authorized: 3,000 shares; issued and outstanding: 0		—			—
Additional paid-in capital		87,611			81,268
Net unrealized (loss) gain		(15	)		111
Accumulated deficit		(82,980	)		(63,600	)

TOTAL STOCKHOLDERS’ EQUITY		4,829			17,984


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	289,189		$	307,318

See accompanying notes to consolidated financial statements

WESTWOOD ONE, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)


	Successor Company												Predecessor Company
	Three Months Ended												For the Period
	September 30,						Nine Months Ended			For the Period April			January 1 to
	2010			2009			September 30, 2010			24 to September 30, 2009			April 23, 2009
Revenue	$	87,952		$	78,474		$	264,238		$	136,518		$	111,474

Operating costs		82,156			74,290			247,312			126,500			111,309
Depreciation and amortization		4,506			8,065			13,691			13,910			2,584
Corporate general and administrative expenses		2,346			3,562			9,174			5,875			4,519
Goodwill impairment		—			50,501			—			50,501			—
Restructuring charges		561			1,372			2,422			2,826			3,976
Special charges		1,496			820			4,295			1,188			12,819

Total expenses		91,065			138,610			276,894			200,800			135,207


Operating loss		(3,113	)		(60,136	)		(12,656	)		(64,282	)		(23,733	)

Interest expense		5,822			4,925			17,191			9,617			3,222
Other expense		1,920			70			1,918			66			(359	)


Loss before income tax		(10,855	)		(65,131	)		(31,765	)		(73,965	)		(26,596	)
Income tax benefit		(3,616	)		(11,581	)		(12,385	)		(14,231	)		(7,635	)


Net loss	$	(7,239	)	$	(53,550	)	$	(19,380	)	$	(59,734	)	$	(18,961	)


Net loss attributable to common stockholders	$	(7,239	)	$	(131,686	)	$	(19,380	)	$	(141,283	)	$	(22,037	)


Loss per share:
Common Stock
Basic	$	(0.35	)	$	(10.03	)	$	(0.94	)	$	(18.19	)	$	(43.64	)
Diluted	$	(0.35	)	$	(10.03	)	$	(0.94	)	$	(18.19	)	$	(43.64	)

Class B stock
Basic							$	—		$	—		$	—
Diluted							$	—		$	—		$	—

Weighted average shares outstanding:
Common Stock
Basic		20,921			13,135			20,671			7,769			505
Diluted		20,921			13,135			20,671			7,769			505

Class B stock
Basic											1			1
Diluted											1			1

See accompanying notes to consolidated financial statements

WESTWOOD ONE, INC.

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

(In thousands)

(unaudited)


	Successor Company						Predecessor Company
	For the Nine Months						For the Period
	Ended September 30,			For the Period April 24			January 1 to
	2010			to September 30, 2009			April 23, 2009

Cash Flows from Operating Activities:
Net loss	$	(19,380	)	$	(59,734	)	$	(18,961	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		13,691			13,910			2,584
Goodwill and intangible asset impairment		—			50,501			—
Loss on disposal of property and equipment		—			173			188
Deferred taxes		(12,167	)		(15,824	)		(6,873	)
Federal tax refund		12,940			—			—
Non-cash equity-based compensation		2,671			2,385			2,110
Paid-in-kind interest		4,348			2,922			—
Change in fair value of derivative liability (see Note 7)		1,920			—			—
Amortization of deferred financing costs		—			—			331
Net change in other assets and liabilities		3,403			(10,811	)		19,844

Net cash provided by (used in) operating activities		7,426			(16,478	)		(777	)


Cash Flows from Investing Activities:
Capital expenditures		(7,058	)		(2,355	)		(1,384	)

Net cash used in investing activities		(7,058	)		(2,355	)		(1,384	)


Cash Flows from Financing Activities:
Proceeds from Revolving Credit Facility		10,000			—			—
Repayments of Senior Notes		(15,500	)		—			—
Issuance of common stock to Gores		5,000			—			—
Payments of capital lease obligations		(634	)		(376	)		(271	)
Deferred financing costs		—			(228	)		—
Proceeds from term loan		—			20,000			—
Debt repayments		—			(25,000	)		—
Issuance of Series B Convertible Preferred Stock		—			25,000			—

Net cash (used in) provided by financing activities		(1,134	)		19,396			(271	)


Net increase in cash and cash equivalents		(766	)		563			(2,432	)
Cash and cash equivalents,beginning of period		4,824			4,005			6,437

Cash and cash equivalents, end of period	$	4,058		$	4,568		$	4,005


Supplemental Schedule of Cash Flow Information:
Non-cash financing activities
Cancellation of long-term debt		—			—			252,060
Issuance of new long-term debt		—			117,500			—
Preferred stock — conversion to common stock		—			(81,551	)		—
Class B — conversion to common stock		—			(3	)		—

See accompanying notes to consolidated financial statements

WESTWOOD ONE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands)

(unaudited)


											Unrealized			Total
					Additional						Gain (Loss) on			Stock-
	Common Stock				Paid-in			Accumulated			Available for			holders’
	Shares		Amount		Capital			Deficit			Sale Securities			Equity

Balance as of January 1, 2010		20,544	$	205	$	81,268		$	(63,600	)	$	111		$	17,984
Net loss		—		—		—			(19,380	)		—			(19,380	)
Other comprehensive income		—		—		—			—			(126	)		(126	)
Equity-based compensation		—		—		2,671			—			—			2,671
Issuance of common stock to Gores		770		8		4,992			—			—			5,000
Gores $10,000 equity commitment (see Note 7)		—		—		442			—			—			442
Loss on issuance of common stock under equity-based compensation plans		—		—		(453	)		—			—			(453	)
Cancellations of vested equity grants		—		—		(1,309	)		—			—			(1,309	)

Balance as of September 30, 2010		21,314	$	213	$	87,611		$	(82,980	)	$	(15	)	$	4,829

See accompanying notes to consolidated financial statements

WESTWOOD ONE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

NOTE 1 — Basis of Presentation:

In this report, “Westwood One,” “Company,” “registrant,” “we,” “us” and “our” refer to Westwood One, Inc. The accompanying unaudited consolidated financial statements have been prepared by us pursuant to the rules of the Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the audited financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on March 31, 2010.

In the opinion of management, all adjustments, consisting of normal and recurring adjustments necessary for a fair statement of the financial position, the results of operations and cash flows for the periods presented have been recorded.

On April 23, 2009, we completed a refinancing of substantially all of our outstanding long-term indebtedness (approximately $241,000 in principal amount) and a recapitalization of our equity (the “Refinancing”). As part of the Refinancing we entered into a Purchase Agreement (the “Purchase Agreement”) with Gores Radio Holdings, LLC (currently our ultimate parent) (together with certain related entities “Gores”). In exchange for the then outstanding shares of Series A Preferred Stock held by Gores, we issued 75 shares of 7.50% Series A-1 Convertible Preferred Stock, par value $0.01 per share (the “Series A-1 Preferred Stock”). In addition Gores purchased 25 shares of 8.0% Series B Convertible Preferred Stock (the “Series B Preferred Stock” and together with the Series A-1 Preferred Stock, the “Preferred Stock”), for an aggregate purchase price of $25,000.

Additionally and simultaneously, we entered into a Securities Purchase Agreement (“Securities Purchase Agreement”) with: (1) holders of our then outstanding senior notes, which were issued under the Note Purchase Agreement, dated as of December 3, 2002 and (2) lenders under the Credit Agreement, dated as of March 3, 2004. Gores purchased at a discount approximately $22,600 in principal amount of our then existing debt held by debt holders who did not wish to participate in the new 15.00% Senior Secured Notes due July 15, 2012 (the “Senior Notes”) being offered by us, which upon completion of the Refinancing was exchanged for $10,797 of the Senior Notes. We also entered into a senior credit facility pursuant to which we have a $15,000 revolving credit facility on a senior unsecured basis (which has since been increased to $20,000) and a $20,000 unsecured non-amortizing term loan (collectively, the “Senior Credit Facility”), which obligations are subordinated to the Senior Notes. Gores also agreed to guarantee our Senior Credit Facility and payments due to the NFL for the license and broadcast rights to certain NFL games and NFL-related programming.

As a result of the Refinancing on April 23, 2009, Gores increased its equity ownership to approximately 75.1% of our then outstanding equity (in preferred and common stock) and our then existing lenders increased their equity ownership to approximately 22.7% of our then outstanding equity (in preferred and common stock). At the time of the Refinancing, we considered the ownership held by Gores and our existing debt holders as a collaborative group in accordance with the authoritative guidance. As a result, since the closing of the Refinancing, we have followed the acquisition method of accounting, as required by the authoritative guidance, and have applied the SEC rules and guidance regarding “push down” accounting treatment. Accordingly, our consolidated financial statements and transactional records prior to the closing of the Refinancing reflect the historical accounting basis in our assets and liabilities and are labeled Predecessor Company, while such records subsequent to the Refinancing are labeled Successor Company and reflect the push down basis of accounting for the new fair values in our financial statements. This is presented in our consolidated financial statements by a vertical black line division which appears between the columns entitled Predecessor Company and Successor Company on the statements and relevant notes. The black line signifies that the amounts shown for the periods prior to and subsequent to the Refinancing are not comparable.

Based on the complex structure of the Refinancing, a valuation was performed to determine the acquisition price using the Income Approach employing a Discounted Cash Flow (“DCF”) methodology. The DCF method explicitly recognizes that the value of a business enterprise is equal to the present value of the cash flows that are expected to be available for distribution to the equity and/or debt holders of a company. In the valuation of a business enterprise, indications of value are developed by discounting future net cash flows available for distribution to their present worth at a rate that reflects both the current return requirements of the market and the risk inherent in the specific investment.

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

We used a multi-year DCF model to derive a Total Invested Capital value which was adjusted for cash, non-operating assets and any negative net working capital to calculate a Business Enterprise Value which was then used to value our equity. In connection with the Income Approach portion of this exercise, we made the following assumptions: (1) the discount rate was based on an average of a range of scenarios with rates between 15% and 16%; (2) management’s estimates of future performance of our operations; and (3) a terminal growth rate of 2%. The discount rate and market growth rate reflect the risks associated with the general economic pressure impacting both the economy in general and more specifically and substantially the advertising industry. All costs and professional fees incurred as part of the Refinancing totaling $13,895 have been expensed as special charges in 2009 ($12,699 on and prior to April 23, 2009 for the Predecessor Company and $1,196 on and after April 24, 2009 for the Successor Company).

The allocation of the Business Enterprise Value for all accounts at April 24, 2009 was as follows:


Current assets	$	104,641
Goodwill		86,414
Intangibles		116,910
Property and equipment		36,270
Other assets		21,913
Current liabilities		81,160
Deferred income taxes		77,879
Due to Gores		10,797
Other liabilities		10,458
Long-term debt		106,703

Total Business Enterprise Value	$	79,151

On March 31, 2010, we recorded an adjustment to increase goodwill related to a correction of our current liabilities as of April 24, 2009. This under accrual of liabilities of $428 was related to the purchase in cash of television advertising airtime that occurred in the Predecessor Company prior to April 24, 2009.

The following unaudited pro forma financial summary for the three and nine months ended September 30, 2009 gives effect to the Refinancing and the resultant acquisition accounting. The pro forma information does not purport to be indicative of what the financial condition or results of operations would have been had the Refinancing been completed on the applicable dates of the pro forma financial information.


	Unaudited Pro Forma
	Nine Months Ended
	September 30, 2009
Revenue	$	247,992
Net loss		(87,853	)

Financial Statement Presentation

The preparation of our financial statements in conformity with the authoritative guidance of the Financial Accounting Standards Board (“FASB”) for generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. Management continually evaluates its estimates and judgments including those related to allowances for doubtful accounts, useful lives of property, plant and equipment and intangible assets and the valuation of such, barter inventory, fair value of stock options granted, forfeiture rate of equity based compensation grants, income taxes and valuation allowances on such and other contingencies. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable in the circumstances. Actual results may differ from those estimates under different assumptions or conditions.

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

Reclassification and Revisions

Certain reclassifications to our previously reported financial information have been made to the financial information that appears in this report to conform to the current period presentation.

For the year ended December 31, 2009, we understated our income tax receivable asset due to an error in how the deductibility of certain costs for the twelve months ended December 31, 2009 was determined. This resulted in an additional income tax benefit of $590, recorded in the three months ended March 31, 2010 and the nine months ended September 30, 2010, that should have been recorded in the successor period ended December 31, 2009. We overstated accounts receivable at December 31, 2009 by $250 in connection with our failure to record a billing adjustment as a result of a renegotiated customer contract and understated accrued expenses for certain general and administrative costs incurred by $278 at December 31, 2009. We also understated accrued liabilities at December 31, 2009 by $375 in connection with our failure to record an employment claim settlement related to an employee termination that occurred prior to 2008, but which was probable and estimable as of December 31, 2009. Finally, we understated our program and operating liabilities by $428 in the predecessor period ended April 23, 2009 and have adjusted our opening balance sheet and goodwill accordingly. We have determined that the impact of these adjustments recorded in the first quarter of fiscal 2010 were immaterial to our results of operations in all applicable prior interim and annual periods. As a result, we have not restated any prior period amounts.

NOTE 2 — Earnings Per Share:

Prior to the Refinancing, we had outstanding two classes of common stock (common stock and Class B stock) and a class of preferred stock, 7.5% Series A Convertible Preferred Stock (referred to herein as the “Series A Preferred Stock”). Both the Class B stock and the Series A Preferred Stock were convertible into common stock. To the extent declared by our Board of Directors (the “Board”), the common stock was entitled to cash dividends of at least ten percent higher than those declared and paid on our Class B stock, and the Series A Preferred Stock was also entitled to receive such dividends on an as-converted basis if and when declared by the Board.

As part of the Refinancing, we issued Series A-1 Preferred Stock and Series B Preferred Stock. To the extent declared by our Board, the then outstanding Series A-1 Preferred Stock and Series B Preferred Stock were also entitled to receive such dividends on an as-converted basis if and when declared by the Board. The Series A Preferred Stock, Series A-1 Preferred Stock and Series B Preferred Stock were considered “participating securities” requiring use of the “two-class” method for the computation of basic net income (loss) per share. Losses were not allocated to the Series A Preferred Stock, Series A-1 Preferred Stock or Series B Preferred Stock in the computation of basic earnings per share (“EPS”) as the Series A Preferred Stock, Series A-1 Preferred Stock and the Series B Preferred Stock were not obligated to share in losses. Diluted earnings per share is computed using the “if-converted” method.

Basic EPS excludes the effect of common stock equivalents and is computed using the “two-class” computation method, which divides the sum of distributed earnings to common and Class B stockholders and undistributed earnings allocated to common stockholders and preferred stockholders on a pro rata basis, after Series A Preferred Stock dividends, by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could result if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share assumes the exercise of stock options using the treasury stock method and the conversion of Class B stock, Series A Preferred Stock, Series A-1 Preferred Stock and Series B Preferred Stock using the “if-converted” method.

Common equivalent shares are excluded in periods in which they are anti-dilutive. Options, restricted stock, restricted stock units (“RSUs”) (see Note 9 — Equity-Based Compensation), warrants and Series A Preferred Stock were excluded from the Predecessor Company calculations of diluted earnings per share because the conversion price, combined exercise price, unamortized fair value and excess tax benefits were greater than the average market price of our common stock for the periods presented. Options, restricted stock and RSUs were excluded from the Successor Company calculations of diluted earnings per share because combined exercise price, unamortized fair value and excess tax benefits were greater than the average market price of our common stock for the periods presented. EPS calculations for all periods reflect the effect of the 200 for 1 reverse stock split that occurred on August 3, 2009.

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

The following is a reconciliation of our common shares outstanding for calculating basic and diluted net loss per share:


													Predecessor
	Successor Company												Company
	Three Months Ended									For the Period			For the Period
	September 30,						Nine Months Ended			April 24 to			January 1 to
	2010			2009			September 30, 2010			September 30, 2009			April 23, 2009
Net loss	$	(7,239	)	$	(53,550	)	$	(19,380	)	$	(59,734	)	$	(18,961	)
Less: Accumulated Preferred Stock dividends		—			(78,136	)		—			(81,549	)		(3,076	)

Undistributed losses	$	(7,239	)	$	(131,686	)	$	(19,380	)	$	(141,283	)	$	(22,037	)

NOTE 3 — Related Party Transactions:

Gores Radio Holdings

We have a related party relationship with Gores. As a result of our Refinancing, Gores, our ultimate parent company, created a holding company which currently owns approximately 75.2% of our equity, after giving effect to Gores’ purchase of 769 shares of common stock for $5,000 on September 7, 2010. Gores also holds $10,144 (including paid-in-kind (“PIK”) interest) of our Senior Notes as a result of purchasing debt from certain of our former debt holders who did not wish to participate in the issuance of the Senior Notes on April 23, 2009 in connection with our Refinancing. Such debt is classified as Due to Gores on our balance sheet.

We recorded interest expense and fees related to consultancy and advisory services rendered by, and incurred on behalf of, Gores and Glendon Partners, an operating group affiliated with Gores as follows:


									Predecessor
	Successor Company								Company
	Three Months Ended						For the Period		For the Period
	September 30,				Nine Months Ended		April 24 to		January 1 to
	2010		2009		September 30, 2010		September 30, 2009		April 23, 2009
Gores and Glendon fees ⁽¹⁾	$	176	$	514	$	617	$	810	$	984
Reimbursement of legal fees		—		—		8		—		1,533
Reimbursement of letter-of-credit fees ⁽²⁾		62		—		188		—		—
Interest on loan		376		408		1,195		711		—

	$	614	$	922	$	2,008	$	1,521	$	2,517


(1)		These fees consist of payments for professional services rendered by various members of Gores and Glendon to us in the areas of operational improvement, tax, finance, accounting, legal and insurance/risk management.

(2)		Reimbursement of a standby letter-of-credit fee incurred and paid by Gores in connection with its guarantee of the $20,000 revolving credit facility with Wells Fargo.

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

POP Radio

We also have a related party relationship, including a sales representation agreement, with our 20% owned investee, POP Radio, L.P. We recorded fees in connection with this relationship as follows:

Predecessor

Successor Company

Company

Three Months Ended

For the Period

September 30,

Nine Months Ended

April 24

January 1 to

2010

2009

September 30, 2010

to September 30, 2009

April 23, 2009

Program commission expense

366

333

1,093

581

416

CBS Radio

As a result of the Refinancing and the August 3, 2009 conversion of all of the Preferred Stock then outstanding into common stock, CBS Radio, which previously owned approximately 15.8% of our common stock, now owns less than 1% of our common stock. Viacom is an affiliate of CBS Radio, given that National Amusements, Inc. beneficially owns a majority of the voting power of all classes of common stock of each of CBS Corporation and Viacom. As a result of CBS Radio’s change in ownership and that CBS Radio ceased to manage us in March 2008, we no longer consider CBS Radio or its affiliates to be related parties as of August 3, 2009. Accordingly, on such date we ceased recording payments to CBS and its affiliates as related party expenses or amounts due to related parties.

Through August 3, 2009, we recorded the following expenses as a result of transactions with CBS Radio and/or its affiliates:


					Predecessor
	Successor Company				Company
			For the Period		For the Period
	Three Months Ended		April 24 to		January 1 to
	September 30, 2009		September 30, 2009		April 23, 2009
Programming and affiliate arrangements	$	4,189	$	13,877	$	20,884
News agreement		1,121		3,623		4,107

	$	5,310	$	17,500	$	24,991

A summary of related party expense by expense category is as follows:


									Predecessor
	Successor Company								Company
	Three Months Ended								For the Period
	September 30,				Nine Months Ended		For the Period April 24		January 1 to
	2010		2009		September 30, 2010		to September 30, 2009		April 23, 2009
Operating costs	$	366	$	5,643	$	1,093	$	18,081	$	25,407
Special charges		176		514		625		810		2,517
Interest expense		438		408		1,383		711		—

	$	980	$	6,565	$	3,101	$	19,602	$	27,924

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

NOTE 4 — Property and Equipment:

Property and equipment is recorded at cost and is summarized as follows:


	September 30, 2010		December 31, 2009

Land, buildings and improvements	$	11,397	$	10,830
Recording, broadcasting and studio equipment		23,880		20,581
Furniture, equipment and other		14,799		11,592

		50,076		43,003
Less: Accumulated depreciation and amortization		13,151		6,738

Property and equipment, net	$	36,925	$	36,265

Depreciation expense was $2,080, $6,413, $2,791, $4,113 and $2,354 for the three and nine month periods ended September 30, 2010, the three months ended September 30, 2009, the period from April 24, 2009 to September 30, 2009 and the period from January 1, 2009 to April 23 2009, respectively. The allocation of the business enterprise value for the capital lease at April 24, 2009 was $7,355. Accumulated amortization related to the capital lease was $6,523 and $5,787 as of September 30, 2010 and December 31, 2009, respectively.

NOTE 5 — Intangible Assets

In accordance with the authoritative guidance which is applicable to the Refinancing, we revalued our intangibles using our best estimate of current fair value. The value assigned to our only indefinite lived intangible assets, our trademarks, are not amortized to expense but tested at least annually for impairment or upon a triggering event. Our identified definite lived intangible assets are: our relationships with radio and television affiliates, and other distribution partners from whom we obtain commercial airtime that we sell to advertisers; internally developed software for systems unique to our business; contracts which provide information and talent for our programming; real estate leases; and insertion order commitments from advertisers. The values assigned to definite lived assets are amortized over their estimated useful life using, where applicable, contract completion dates, lease expiration dates, historical data on affiliate relationships and software usage. On an annual basis as of October 1, or more frequently if upon the occurrence of certain events, we are required to perform impairment tests on our identified intangible assets with indefinite lives, including goodwill, which testing could impact the value of our business. Intangible assets with definite lives are tested for impairment when events and circumstances indicate that the carrying amount may not be recoverable.

While we understood there was an inherent unpredictability in the economy and our business in 2010 as described in our Form 10-Q for the first quarter ending March 31, 2010, our performance in the second half of the second quarter demonstrated a greater unpredictability than we anticipated. Based upon the results of the second quarter of 2010, we reduced our forecasted results for the second half of 2010 and 2011. We believed these new forecasts constituted a triggering event. In accordance with the authoritative guidance, we performed an impairment analysis in August 2010 for our consolidated balance sheet dated June 30, 2010 by comparing our recalculated fair value based on an income based valuation technique to our current carrying value in the second quarter. There were no indications of impairment as a result of this analysis.

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

Intangible assets by asset type and estimated life as of September 30, 2010 and December 31, 2009 are as follows:


		As of September 30, 2010							As of December 31, 2009
		Gross					Net		Gross					Net
	Estimated	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Life	Value		Amortization			Value		Value		Amortization			Value

Trademarks	Indefinite	$	20,800	$	—		$	20,800	$	20,800	$	—		$	20,800
Affiliate relationships	10 years		72,100		(10,360	)		61,740		72,100		(4,953	)		67,147
Software and technology	5 years		7,896		(2,078	)		5,818		7,896		(890	)		7,006
Client contracts	5 years		8,930		(2,848	)		6,082		8,930		(1,363	)		7,567
Leases	7 years		980		(205	)		775		980		(100	)		880
Insertion orders	9 months		—		—			—		8,400		(8,400	)		—

		$	110,706	$	(15,491	)	$	95,215	$	119,106	$	(15,706	)	$	103,400

Amortization expense of intangible assets was $2,425, $7,277, $5,413, $10,291 and $231 for the three and nine month periods ended September 30, 2010, the three months ended September 30, 2009, the period from April 24, 2009 to September 30, 2009 and the period from January 1, 2009 to April 23 2009, respectively.

NOTE 6 — Goodwill:

Goodwill represents the excess of cost over fair value of net assets of businesses acquired. In accordance with authoritative guidance, the value assigned to goodwill and indefinite lived intangible assets is not amortized to expense, but rather the estimated fair value of the reporting unit is compared to its carrying amount on at least an annual basis to determine if there is a potential impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit goodwill and intangible assets is less than their carrying value. On an annual basis as of October 1, or more frequently if upon the occurrence of certain events, we are required to perform impairment tests on our identified intangible assets with indefinite lives, including goodwill, which testing could impact the value of our business.

On March 31, 2010, we recorded a prior period adjustment of $428 to increase goodwill related to a correction of our current liabilities as of April 24, 2009 (See Note 1 — Basis of Presentation).

Based upon the results of the second quarter of 2010, we reduced our forecasted results for the second half of 2010 and 2011. We believed these new forecasts constituted a triggering event. In accordance with the authoritative guidance, we performed a Step 1 analysis in August 2010 for our consolidated balance sheet dated June 30, 2010 by comparing our recalculated fair value based on our new forecast to our current carrying value in the second quarter. There were no indications of impairment as a result of this analysis.

Changes in the carrying amount of goodwill for the nine months ended September 30, 2010 are as follows:


	Total		Metro Traffic		Network Radio

Balance January 1, 2010	$	38,917	$	13,005	$	25,912
Adjustments to opening balance		28		144		(116	)

Balance at September 30, 2010	$	38,945	$	13,149	$	25,796

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

Gross amounts of goodwill, accumulated impairment losses and carrying amount of goodwill as of September 30, 2010 are as follows:


	Total			Metro Traffic			Network Radio
Goodwill	$	89,346		$	63,550		$	25,796
Accumulated impairment losses from April 24, 2009 to September 30, 2010		(50,401	)		(50,401	)		—

Balance at September 30, 2010	$	38,945		$	13,149		$	25,796

NOTE 7 — Debt:

On April 23, 2009, we completed the Refinancing and entered into a Credit Agreement that governs our Senior Credit Facility and a Securities Purchase Agreement that govern our Senior Notes. The Senior Credit Facility included a $15,000 senior unsecured revolving credit facility, which was increased to $20,000 as part of the August 17, 2010 amendment as described below and has a $2,000 letter of credit sub-facility, and a $20,000 unsecured non-amortizing term loan. As of September 30, 2010 and December 31, 2009, we had borrowed the entire amount under the term loan and $15,000 and $5,000, respectively, under the revolving credit facility. Additionally, as of September 30, 2010 and December 31, 2009, respectively, we had used $1,219 of the term loan availability for letters of credit as security for various leased properties.

On October 14, 2009, we entered into separate agreements with the holders of our Senior Notes and Wells Fargo Capital Finance, LLC (“Wells Fargo”) to amend the terms of our Securities Purchase Agreement and Credit Agreement, respectively, to waive compliance with our debt leverage covenants which were to be measured on December 31, 2009 on a trailing four-quarter basis. On March 30, 2010, we entered into additional agreements with the holders of our Senior Notes and Wells Fargo to amend the terms of our Securities Purchase Agreement and Credit Agreement, respectively, to modify our debt leverage covenants for periods to be measured (on a trailing four-quarter basis) on March 31, 2010 and beyond.

In July 2010, as a result of our underperformance against our financial projections in late May and June of the second quarter of 2010, we reduced our forecasted results for the second half of 2010 and 2011. While these projections indicated that we would attain sufficient EBITDA to comply with the debt leverage covenants then in place for the four quarters beginning on September 30, 2010 (7.0, 6.5, 6.0 and 5.5 times, respectively). Management did not believe there was sufficient cushion in our EBITDA projections to predict with any certainty that we would satisfy such covenants given the unpredictability in the economy and our business in 2010 which as evidenced by our underperformance in late May and June 2010. Additionally, as of June 30, 2010, our available liquidity was $6,175, which was lower than our prior projections of liquidity, primarily as a result of our second quarter performance. Given our financial condition on June 30, 2010 and our revised projections, management believed it was prudent to renegotiate amendments to our debt agreements to enhance our available liquidity and to modify our debt leverage covenants. These negotiations resulted in the August 17, 2010 amendment described below. If we were to significantly underperform against our future financial projections, we may need to take additional actions designed to respond to or improve our financial condition and we cannot provide any assurance that any such actions would be successful in improving our financial position. As part of the August 17, 2010 amendments, Gores agreed to purchase an additional $15,000 of common stock, $5,000 of which was purchased on September 7, 2010 and $10,000 of which shall be purchased on February 28, 2011 or sooner depending on our needs. Notwithstanding the foregoing, if we shall have received net cash proceeds of at least $10,000 from the issuance and sale of Company qualified equity interests (as such term is defined in the Securities Purchase Agreement) to any person, other than in connection with (1) Gores’ $5,000 investment in 2010, and (2) any stock or option grant to our employees under a stock option plan or other similar incentive or compensation plan of the Company or upon the exercise thereof, Gores shall not be required to invest the aforementioned $10,000. As part of the amendment we entered into with our lenders on August 17, 2010, Gores agreed to purchase $10,000 in common stock on February 28, 2011 or earlier depending on our liquidity needs (“Gores $10,000 equity commitment”) and provided we have not received $10,000 in net cash proceeds from the sale of Company qualified equity interests (as defined in the Securities Purchase Agreement) after August 17, 2010. The purchase price of the common stock to be issued to Gores (if such commitment is funded) would be calculated using a trailing 30-day weighted average of our common stock’s closing share price for the 30 consecutive days, subject to a $4.00 per share minimum and a $9.00 per share maximum price. The Gores $10,000 equity commitment contains embedded features that have the characteristics of a derivative that is settled in our common stock. Accordingly, pursuant to authoritative guidance, we determined the fair value of the derivative by applying the Black-Scholes model using the Monte Carlo simulation to estimate the price of our common stock on the derivative’s expiration date and estimated the expected volatility of the derivative by using the aforementioned trailing 30-day weighted average. On August 17, 2010, we recorded an asset of $442 related to the aforementioned $10,000 Gores equity commitment. On September 30, 2010, the fair market value of such Gores equity commitment was a liability of $1,478 resulting in other expense of $1,920 for the quarter ended September 30, 2010. We will continue to mark-to-market the value of the derivative for each reporting period until the expiration of the derivative.

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

As part of the third amendment to the Securities Purchase Agreement entered into on August 17, 2010, our adjusted debt leverage covenants were modified to 11.25 times for the next three quarters beginning on September 30, 2010, then stepping down to 11.0, 10.0, and 9.0 times in the last three quarters of 2011 and 8.0 and 7.5 times in the first two quarters of 2012. The quarterly debt leverage covenants that appear in the Credit Agreement (governing the Senior Credit Facility) were also amended to maintain the additional 15% cushion that exists between the debt leverage covenants applicable to the Senior Credit Facility and the corresponding covenants applicable to the Senior Notes. By way of example, the remaining 2010 covenant levels of 11.25 in the Securities Purchase Agreement (applicable to the Senior Notes) are 12.95 in the Credit Agreement (governing the Senior Credit Facility). We have accrued additional interest expense for amendment fees for the nine months ended September 30, 2010 of $1,495.

Long-term debt, including current maturities of long-term debt and debt Due to Gores, is as follows:


	September 30, 2010		December 31, 2009
Senior Secured Notes due July 15, 2012 ⁽¹⁾	$	100,631	$	110,762
Due to Gores ⁽¹⁾		10,144		11,165
Term Loan ⁽²⁾		20,000		20,000
Revolving Credit Facility ⁽²⁾		15,000		5,000

	$	145,775	$	146,927


(1)		The applicable interest rate on such debt is 15.0%, which includes 5.0% PIK interest which accrues and is added to principal on a quarterly basis. For the nine months ended September 30, 2010, interest expense on the debt to Due to Gores was $1,195. The Due to Gores debt was reduced by its pro-rata share of the $15,500 payments we made to pay down the Senior Notes. PIK interest is not due until maturity.

(2)		The applicable interest rate on such debt was 7.0% as of September 30, 2010 and December 31, 2009. The interest rate is variable and is payable at the greater of (i) LIBOR plus 4.5% (with a LIBOR floor of 2.5%) or (ii) the base rate plus 4.5% (with a base rate floor equal to the greater of 3.75% or the one-month LIBOR rate), at our option.

NOTE 8 — Fair Value Measurements:

Fair Value of Financial Instruments

Our financial instruments include cash, cash equivalents, receivables, accounts payable and borrowings. The fair value of cash and cash equivalents, accounts receivable, accounts payable and borrowings under the revolving credit facility approximated carrying values because of the short-term nature of these instruments. The estimated fair value of the borrowings was based on estimated rates for long-term debt with similar debt ratings held by comparable companies. The carrying amount and estimated fair value for our borrowings are as follows:


	September 30, 2010				December 31, 2009
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Borrowings (short and long term)	$	130,775	$	131,789	$	141,927	$	148,425

The authoritative guidance establishes a common definition of fair value to be applied under GAAP, which requires the use of fair value, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

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

Fair Value Hierarchy

The authoritative guidance specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect our own assumptions of market participant valuation (unobservable inputs). In accordance with the authoritative guidance, these two types of inputs have created the following fair value hierarchy:

•

Level 1 — Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

•

Level 2 — Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;

•

Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The authoritative guidance requires the use of observable market data if such data is available without undue cost and effort.

Items Measured at Fair Value on a Recurring Basis

The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis:


	September 30, 2010						December 31, 2009
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Investments ⁽¹⁾	$	754	$	—	$	—	$	968	$	—	$	—


Liabilities
Derivative liability ⁽²⁾	$	—	$	1,478	$	—	$	—	$	—	$	—


(1)		Included in other assets

(2)		Gores $10,000 equity commitment which is included in accrued expenses and other liabilities

NOTE 9 — Equity-Based Compensation:

We have issued equity compensation to our directors, officers and key employees under three plans, the 1999 Stock Incentive Plan (the “1999 Plan”), the 2005 Equity Compensation Plan (the “2005 Plan”) and the 2010 Equity Compensation Plan (defined below as the “2010 Plan”). Although the 1999 Plan expired in early 2009 and no additional equity compensation may be issued under such plan, certain awards remain outstanding thereunder. Only stock options were issued under the 1999 Plan.

On May 25, 2005, our stockholders approved the 2005 Plan that allowed us to grant stock options, restricted stock and RSUs to our directors, officers and key employees. Effective February 12, 2010, the Board amended and restated the 2005 Plan because we had a limited number of shares available for issuance thereunder (such plan, as amended and restated, the “2010 Plan”).

Stock Options

Options granted under our equity compensation plans vest over periods ranging from 2 to 5 years, generally commencing on the anniversary date of each grant. Options expire within ten years from the date of grant. On February 12, 2010, our Board granted 1,998 options with an exercise price of $6.00 to 56 employees, which vest over 3 years. When made, these stock options were subject to approval of the 2010 Plan by our stockholders which approval was obtained on July 30, 2010 at our annual meeting of stockholders. In accordance with the authoritative guidance, the options were considered outstanding on February 12, 2010 because formal approval was essentially a formality, given that Gores owned 74.3% of our common stock at that time, which constituted enough votes to approve the 2010 Plan and options.

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

Stock option activity for the period from January 1, 2010 to September 30, 2010 is as follows:


				Weighted
				Average Exercise
	Shares			Price Per share
Outstanding January 1, 2010		28.6		$	1,345
Granted		1,998.0		$	6
Exercised		—		$	—
Cancelled, forfeited or expired		(146.9	)	$	40

Outstanding September 30, 2010		1,879.7		$	24


Options exercisable September 30, 2010		18.6		$	1,709


Aggregate estimated fair value of options vesting during the nine months ended September 30, 2010	$	1,099

At September 30, 2010, vested and exercisable options had an aggregate intrinsic value of $0 and a weighted average remaining contractual term of 5.82 years. Additionally, at September 30, 2010, 1,709.5 options were expected to vest with a weighted average exercise price of $26, a weighted average remaining term of 9.33 years and an aggregate intrinsic value of $4,049. No options were exercised during the nine months ended September 30, 2010. The aggregate intrinsic value of options represents the total pre-tax intrinsic value (the difference between our closing stock price at the end of the period and the option’s exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options at that time.

As of September 30, 2010, there was $7,260 of unearned compensation cost related to stock options granted under all of our equity compensation plans. That cost is expected to be recognized over a weighted-average period of 2.27 years.

The estimated fair value of options granted during the first nine months of 2010 was measured on the date of grant using the Black-Scholes option pricing model using the weighted average assumptions as follows:


Risk-free interest rate		2.35	%
Expected term (years)		5.0
Expected volatility		98.6	%
Expected dividend yield		0.00	%
Weighted average fair value of options granted	$	4.47

Restricted Stock

Restricted stock granted under our 2005 Plan vests over periods ranging from 2 to 4 years, generally commencing on the anniversary date of each grant. Recipients of restricted stock are entitled to the same dividends and voting rights as common stock and, once issued, such stock is considered to be currently issued and outstanding (even when unvested). The cost of restricted stock awards, calculated as the fair market value of the shares on the date of grant, net of estimated forfeitures, was expensed ratably over the vesting period. As of September 30, 2010, there was no unearned compensation cost related to restricted stock.

Restricted stock activity for the period from January 1, 2010 to September 30, 2010 is as follows:


				Weighted Average
	Shares			Grant Date Fair Value
Outstanding January 1, 2010		0.8		$	1,504
Granted		—			—
Vested		(0.8	)	$	1,504
Forfeited		—			—

Outstanding September 30, 2010		—			—

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

Restricted Stock Units

With rare exceptions, RSUs are typically awarded only to directors, not to officers or key employees. Under the 2005 Plan (the only plan under which RSU awards have been issued to date), RSUs previously awarded to our directors vest over 3 years. Directors’ RSUs vest automatically, in full, upon a change in control or upon their retirement, as defined in the 2005 Plan. RSUs are payable in newly issued shares of our common stock. Recipients of RSUs are entitled to receive dividend equivalents (subject to vesting) when and if we pay a cash dividend on our common stock. Such dividend equivalents are payable, in newly issued shares of common stock, only upon the vesting of the related restricted shares. Unlike restricted stock, RSUs do not have the same voting rights as common stock, and the shares underlying the RSUs are not considered to be issued and outstanding until they vest. In 2010, our Compensation Committee determined that the independent non-employee directors should receive annual awards of RSUs valued in an amount of $35, which awards will vest over 2 years, beginning on the anniversary of the grant date. The awards also will vest automatically upon a change in control (as defined in the 2010 Plan) and will otherwise be governed by the terms of the 2010 Plan. On July 30, 2010, the date of our 2010 annual meeting of stockholders, 15 RSUs in the aggregate with a grant date fair value of $7.00 were granted under the 2010 Plan to our independent non-employee directors. As of September 30, 2010, unearned compensation cost related to RSUs was $96.

RSU activity for the period from January 1, 2010 to September 30, 2010 is as follows:


			Weighted Average Grant
	Shares		Date Fair Value
Outstanding January 1, 2010		0.1	$	1,314
Granted		15.0		7
Converted to common stock		—		—
Forfeited		—		—

Outstanding September 30, 2010		15.1	$	22

Compensation expense related to equity-based awards was $790, $2,671, $1,533, $2,385 and $2,110 for the three and nine month periods ended September 30, 2010, the three months ended September 30, 2009, the period from April 24, 2009 to September 30, 2009 and the period from January 1, 2009 to April 23 2009, respectively.

NOTE 10 — Comprehensive Income (Loss):

Comprehensive income (loss) reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive net income (loss) represents net income or loss adjusted for unrealized gains or losses on available for sale securities. Comprehensive income (loss) is as follows:


													Predecessor
	Successor Company												Company
	Three Months Ended									For the Period			For the Period
	September 30,						Nine Months Ended			April 24 to			January 1 to
	2010			2009			September 30, 2010			September 30, 2009			April 23, 2009
Net loss	$	(7,239	)	$	(53,550	)	$	(19,380	)	$	(59,734	)	$	(18,961	)
Unrealized gain (loss) on marketable securities, net of income taxes		(225	)		57			(126	)		(38	)		219

Comprehensive loss	$	(7,464	)	$	(53,493	)	$	(19,506	)	$	(59,772	)	$	(18,742	)

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

NOTE 11 — Income Taxes

We use the asset and liability method of financial accounting and reporting for income taxes. Deferred income taxes reflect the tax impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. We classified interest expense and penalties related to unrecognized tax benefits as income tax expense.

The authoritative guidance clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the recognition and measurement of a tax position taken or expected to be taken in a tax return. The evaluation of a tax position in accordance with this interpretation is a two-step process. The first step is recognition, in which the enterprise determines whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of the liability to recognize in the financial statements.

We determined, based upon the weight of available evidence, that it is more likely than not that our deferred tax asset will be realized. We have taxable temporary differences that can be used as a source of income. As such, no valuation allowance was recorded during the nine months ended September 30, 2010 or 2009 or for the year ended December 31, 2009. We will continue to assess the need for a valuation allowance at each future reporting period.

NOTE 12 — Restructuring Charges:

In the third quarter of 2008, we announced a plan to restructure our Metro Traffic segment (the “Metro Traffic re-engineering”) and to implement other cost reductions. The Metro Traffic re-engineering entailed reducing the number of our Metro Traffic operational hubs from 60 to 13 regional centers and produced meaningful reductions in labor expense, aviation expense, station compensation, program commissions and rent.

The Metro Traffic re-engineering initiative began in the second half of 2008 and continued in 2009. In the first half of 2009, we undertook additional reductions in our workforce and terminated certain contracts. In connection with the Metro Traffic re-engineering and other cost reduction initiatives, we recorded $518, $3,976, $3,976 and $14,100, of restructuring charges in the first nine months of 2010, the year ended December 31, 2009, the period from January 1, 2009 to April 23, 2009 and the second half of 2008, respectively. We also recorded $1,021 in expense as changes in estimates as a result of revisions to estimated cash flows from our closed facilities in the first nine months of 2010. The Metro Traffic re-engineering initiative has been completed. We do not expect to incur any further material costs in connection with this initiative (other than adjustments for changes, if any, resulting from revisions to estimated facilities sublease cash flows after the cease-use date (i.e., the day we exited the facilities)) and we anticipate that the accrued expense balances will be paid over the next 8 years.

In the second quarter of 2010, we restructured certain areas of the Network Radio and Metro Traffic segments (the “2010 Program”). The 2010 Program included charges related to the consolidation of certain operations that will reduce our workforce levels during 2010, and additional actions to reduce our workforce as an extension of the Metro Traffic re-engineering. In connection with the 2010 Program, we recorded $263 and $883 of costs for the three and nine months ended September 31, 2010, respectively. We expect all costs related to the 2010 Program to be incurred by the end of 2010.

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

The restructuring charges included in the Consolidated Statement of Operations are comprised of the following:


	Balance				Changes in		Utilization					Balance
	January 1, 2010		Additions		Estimates		Cash			Non-Cash		September 30, 2010
Metro-Traffic
Severance	$	1,537	$	69	$	—	$	(1,440	)	$	—	$	166
Facilities Consolidation		3,677		352		1,021		(1,155	)		—		3,895
Contract Terminations		1,750		97		—		(1,820	)		—		27

Total		6,964		518		1,021		(4,415	)		—		4,088


2010 Program
Severance		—		883		—		(806	)		—		77

Total		—		883		—		(806	)		—		77


Total Restructuring	$	6,964	$	1,401	$	1,021	$	(5,221	)	$	—	$	4,165

NOTE 13 — Special Charges:

The special charges line item on the Consolidated Statement of Operations is comprised of the following and is described below:


									Predecessor
	Successor Company								Company
	Three Months Ended						For the Period		For the Period
	September 30,				Nine Months Ended		April 24 to		January 1 to
	2010		2009		September 30, 2010		September 30, 2009		April 23, 2009
Debt agreement costs	$	847	$	—	$	1,662	$	—	$	—
Employment claim settlements		—		—		493		—		—
Gores and Glendon fees		176		—		625		—		—
Fees related to the Refinancing		30		661		192		957		12,699
Corporate development costs		297		—		906		—		—
Regionalization costs		146		159		417		231		120

	$	1,496	$	820	$	4,295	$	1,188	$	12,819

The debt agreement costs include professional fees incurred by us in connection with negotiations with our lenders to amend the debt leverage covenants in our Securities Purchase Agreement and Credit Agreement (see Note 7 — Debt). Employment claim settlements are related to employee terminations that occurred prior to 2008. Gores and Glendon fees are related to professional services rendered by various members of Gores and Glendon to us in the areas of operational improvement, tax, finance, accounting, legal and insurance/risk management. Fees related to the Refinancing for the first nine months of 2009 include transaction fees and expenses related to negotiation of definitive documentation, including the fees of various legal and financial advisors for the constituents involved in the Refinancing (e.g., Westwood One, the banks, noteholders and Wells Fargo) and other professional fees. Fees related to the Refinancing for the first nine months of 2010 include tax consulting costs related to the finalization of the income tax treatment of the Refinancing. Corporate development costs include professional fees related to the evaluation of potential business development activity including acquisitions and dispositions. Regionalization costs are expenses we have incurred as a result of reducing the number of our Metro Traffic operational hubs from 60 to 13 regional centers, which primarily consisted of facility expenses.

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

NOTE 14 — Segment Information:

We manage and report our business in two operating segments: Metro Traffic and Network Radio. Beginning with the first quarter of 2010, we changed how we evaluate segment performance and now use segment revenue and segment operating (loss) income before depreciation and amortization (“Segment OIBDA”) as the primary measure of profit and loss for our operating segments in accordance with FASB guidance for segment reporting. We have reflected this change in all periods presented in this report. We believe the presentation of Segment OIBDA is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by our management and enhances their ability to understand our operating performance. Administrative functions such as finance, human resources, legal and information systems are centralized. However, where applicable, portions of the administrative function costs are allocated between the operating segments. The operating segments do not share programming or report distribution. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued at fair market value. Operating costs, capital expenditures and total assets are captured discretely within each segment.

We report certain administrative activities under corporate. We are domiciled in the United States with limited international operations comprising less than one percent of our revenue. No one customer represented more than 10% of our consolidated revenue.

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

Revenue, OIBDA, depreciation and amortization and capital expenditures are summarized below by segment:


													Predecessor
	Successor Company												Company
	Three Months Ended									For the Period			For the Period
	September 30,						Nine Months Ended			April 24 to			January 1 to
	2010			2009			September 30, 2010			September 30, 2009			April 23, 2009
Revenue
Metro Traffic	$	43,728		$	38,026		$	124,403		$	68,719		$	47,479
Network Radio		44,224			40,448			139,835			67,799			63,995

	$	87,952		$	78,474		$	264,238		$	136,518		$	111,474


Segment OIBDA
Metro Traffic ⁽¹⁾	$	1,646		$	212		$	2,817		$	1,946		$	(613	)
Network Radio ⁽¹⁾		3,167			2,899			11,157			6,199			(573	)
Corporate expenses		(1,363	)		(2,489	)		(6,222	)		(4,002	)		(3,168	)
Goodwill and intangible impairment		—			(50,501	)		—			(50,501	)		—
Restructuring and special charges		(2,057	)		(2,192	)		(6,717	)		(4,014	)		(16,795	)

OIBDA		1,393			(52,071	)		1,035			(50,372	)		(21,149	)
Depreciation and amortization		(4,506	)		(8,065	)		(13,691	)		(13,910	)		(2,584	)

Operating loss		(3,113	)		(60,136	)		(12,656	)		(64,282	)		(23,733	)
Interest expense		(5,822	)		(4,925	)		(17,191	)		(9,617	)		(3,222	)
Other (expense) income		(1,920	)		(70	)		(1,918	)		(66	)		359

Loss before income taxes		(10,855	)		(65,131	)		(31,765	)		(73,965	)		(26,596	)
Income tax benefit		(3,616	)		(11,581	)		(12,385	)		(14,231	)		(7,635	)

Net Loss	$	(7,239	)	$	(53,550	)	$	(19,380	)	$	(59,734	)	$	(18,961	)


Depreciation and amortization:
Metro Traffic	$	3,039		$	5,437		$	9,378		$	9,794		$	1,480
Network Radio		1,461			2,621			4,293			4,103			1,096
Corporate		6			7			20			13			8

	$	4,506		$	8,065		$	13,691		$	13,910		$	2,584


Capital expenditures:
Metro Traffic	$	818		$	100		$	3,410		$	1,093		$	878
Network Radio		1,686			709			3,606			1,262			506
Corporate		14			—			42			—			—

	$	2,518		$	809		$	7,058		$	2,355		$	1,384


(1)		Segment operating (loss) income includes allocations of certain corporate overhead expenses such as accounting and legal costs, bank charges, insurance, information technology etc.

Identifiable assets by segment at September 30, 2010 and December 31, 2009 are summarized below:


	September 30, 2010		December 31, 2009
Metro Traffic	$	144,339	$	147,387
Network Radio		125,297		131,632
Corporate		19,553		28,299

	$	289,189	$	307,318

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

NOTE 15 — Recent Accounting Pronouncements:

In February 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”). ASU 2010-09 removed the requirement that an SEC registrant disclose the date through which subsequent events are evaluated as this requirement would have potentially conflicted with SEC reporting requirements. Removal of the disclosure requirement is not expected to affect the nature or timing of our evaluations of subsequent events. This ASU became effective upon issuance. Our adoption of the new guidance did not have an impact on our consolidated financial position or results of operations.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 of the fair value hierarchy on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. Our disclosures about fair value measurements are presented in Note 8 — Fair Value Measurements. These new disclosure requirements are effective for the period ending September 30, 2010, except for the requirement concerning gross presentation of Level 3 activity, which is effective for fiscal years beginning after December 15, 2010. As such, we adopted the new guidance in the second quarter ended September 30, 2010. Our adoption of the new guidance did not have a material impact on our consolidated financial position or results of operations

In March 2009, the FASB issued new guidance intended to provide additional application guidance for the initial recognition and measurement, subsequent measurement, and disclosures of assets and liabilities arising from contingencies in a business combination and for pre-existing contingent consideration assumed as part of the business combination. It establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. The new guidance also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. We adopted the new guidance on January 1, 2009. The adoption of the new guidance impacted the accounting for our Refinancing, as described above, and for our acquisition of Jaytu Technologies, LLC, doing business as Sigalert, in the fourth quarter of 2009.

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

EXECUTIVE OVERVIEW

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this report and the annual audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009.

We produce and provide traffic, news, weather, sports, talk, music, special events and other programming content. Our content is distributed to radio and television stations and digital platforms and reaches over 190 million people. We are one of the largest domestic outsourced providers of traffic reporting services and one of the nation’s largest radio networks, delivering content to approximately 5,000 radio and 165 television stations in the U.S. We exchange our content with radio and television stations for commercial airtime, which we then sell to local, regional and national advertisers. By aggregating and packaging commercial airtime across radio and television stations nationwide, we are able to offer our advertising customers a cost effective way to reach a broad audience and target their audience on a demographic and geographic basis.

We derive substantially all of our revenue from the sale of 10 second, 15 second, 30 second and 60 second commercial airtime to advertisers. Our advertisers who target local/regional audiences generally find that an effective method is to purchase shorter duration advertisements, which are principally correlated to our traffic and information related programming and content. Our advertisers who target national audiences generally find that a cost effective method is to purchase longer 30 or 60 second advertisements, which are principally correlated to our news, talk, sports, music and entertainment related programming and content. A growing number of advertisers purchase both local/regional and national airtime. Our goal is to maximize the yield of our available commercial airtime to optimize revenue and profitability.

There are a variety of factors that influence our revenue on a periodic basis, including but not limited to: (1) economic conditions and the relative strength or weakness in the United States economy; (2) advertiser spending patterns and the timing of the broadcasting of our programming, principally the seasonal nature of sports programming; (3) changes in ratings/audience levels for our programming; (4) increases or decreases in our portfolio of program offerings and the audiences of our programs, including changes in the demographic composition of our audience base; (5) advertiser demand on a local/regional or national basis for radio related advertising products; (6) increases or decreases in the size of our advertiser sales force; and (7) competitive and alternative programs and advertising mediums.

Our commercial airtime is perishable, and accordingly, our revenue is significantly impacted by the commercial airtime available at the time we enter into an arrangement with an advertiser. Our ability to specifically isolate the relative historical aggregate impact of price and volume is not practical as commercial airtime is sold and managed on an order-by-order basis. We closely monitor advertiser commitments for the current calendar year, with particular emphasis placed on the annual upfront process. We take the following factors, among others, into account when pricing commercial airtime: (1) the dollar value, length and breadth of the order; (2) the desired reach and audience demographic; (3) the quantity of commercial airtime available for the desired demographic requested by the advertiser for sale at the time their order is negotiated; and (4) the proximity of the date of the order placement to the desired broadcast date of the commercial airtime.

For the last several years, our Network Radio revenue was trending downward due principally to reductions in national audience levels and lower clearance and audience levels of our affiliated stations. Similarly, our local/regional revenue was trending downward due principally to increased competition, reductions in our local/regional sales force and an increase in the amount of 10 second inventory being sold by radio stations. Our operating performance has also been affected by the weakness in the United States economy and advertiser demand for radio-related advertising products. In the first quarter of 2010, radio advertising spending began to improve and our radio revenue began to increase, particularly in the Network Radio business. In the nine months ended September 30, 2010, revenue in each of our Network and Metro Traffic businesses increased by 6.1% and 7.1%, respectively, reflecting improvements in radio advertising spending which has been somewhat constrained by continuing sluggishness in the economy.

The principal components of our operating expenses are programming, production and distribution costs (including affiliate compensation and broadcast rights fees), selling expenses, including commissions, promotional expenses and bad debt expenses, depreciation and amortization, and corporate general and administrative expenses. Corporate general and administrative expenses are primarily comprised of costs associated with corporate accounting, legal, personnel costs, and other administrative expenses, including those associated with corporate governance matters. Special charges include expenses associated with the 2009 and 2008 Gores investments, Refinancing costs, settlements related to employee terminations that occurred prior to 2008 and re-engineering expenses.

We consider our operating cost structure to be largely fixed in nature, and as a result, we need several months lead time to make significant modifications to our cost structure to react to what we view are more than temporary increases or decreases in advertiser demand. This becomes important in predicting our performance in periods when advertiser revenue is increasing or decreasing. In periods where advertiser revenue is increasing, the fixed nature of a substantial portion of our costs means that operating income will grow faster than the related growth in revenue. Conversely, in a period of declining revenue, operating income will decrease by a greater percentage than the decline in revenue because of the lead time needed to reduce our operating cost structure. If we perceive a decline in revenue to be temporary, we may choose not to reduce our fixed costs, or may even increase our fixed costs, so as to not limit our future growth potential when the advertising marketplace rebounds. We carefully consider matters such as credit and commercial inventory risks, among others, in assessing arrangements with our programming and distribution partners. In those circumstances where we function as the principal in the transaction, the revenue and associated operating costs are presented on a gross basis in the Consolidated Statement of Operations. In those circumstances where we function as an agent or sales representative, our effective commission is presented within revenue with no corresponding operating expenses. Although no individual relationship is significant, the relative mix of such arrangements is significant when evaluating operating margin and/or increases and decreases in operating expenses.

We engaged consultants to assist us in determining the most cost effective manner to gather and disseminate traffic information to our constituents. As a result, we announced the Metro Traffic re-engineering initiative that was implemented in the last half of 2008. The modifications to the Metro Traffic business were part of a series of re-engineering initiatives identified by us to improve our operating and financial performance in the near-term, while setting the foundation for profitable long-term growth. These changes resulted in a reduction of staff levels and the consolidation of operations centers into 13 regional hubs by the end of 2009.

The new arrangement with CBS Radio is particularly important to us, as in recent years, the radio broadcasting industry has experienced a significant amount of consolidation. As a result, certain major radio station groups, including Clear Channel Communications and CBS Radio, have emerged as powerful forces in the industry. While we provide programming to all major radio station groups, our extended affiliation agreements with most of CBS Radio’s owned and operated radio stations provide us with a significant portion of the audience that we sell to advertisers.

Prior to the new CBS arrangement which closed on March 3, 2008, many of our affiliation agreements with CBS Radio did not tie station compensation to audience levels or clearance levels. Such contributed to a significant decline in our national audience delivery to advertisers when CBS Radio stations delivered lower audience levels and broadcast fewer commercials than in earlier years. Our new arrangement with CBS mitigates both of these circumstances by adjusting affiliate compensation for changes in audience levels. In addition, the arrangement provides CBS Radio with financial incentives to broadcast substantially all our commercial inventory (referred to as “clearance”) in accordance with the terms of the contracts and significant penalties for not complying with the contractual terms of our arrangement. CBS Radio has taken and we believe will continue to take the necessary steps to stabilize and increase the audience reached by its stations. As CBS has taken steps to increase its compliance with our affiliation agreements, our operating costs have increased and we have been unable to increase prices for the larger audience we are delivering, which has been and may continue to be a contributing factor to the decline in our operating income. As part of our recent cost reduction actions to reduce station compensation expense, we and CBS Radio mutually agreed to enter into an arrangement, which became effective on February 15, 2010, to give back station inventory representing approximately 15% of the audience delivered by CBS Radio. This resulted in a commensurate reduction in cash compensation payable to them. To help deliver consistent RADAR audience levels over time, we have added incremental non-CBS inventory. We actively manage our inventory, including by purchasing additional inventory for cash. We have also added Metro Traffic inventory from CBS Radio through various stand-alone agreements.

For purposes of providing a comparison between our 2010 results and the corresponding 2009 periods, we have presented our 2009 results as the mathematical addition of the Predecessor Company and Successor Company for the nine months ended September 30, 2009. We believe that this presentation provides the most meaningful information about our results of operations. This approach is not consistent with GAAP, may yield results that are not strictly comparable on a period-to-period basis, and may not reflect the actual results we would have achieved. We have presented a reconciliation of our financial statements to the combined total, which is a non-GAAP measure.


	Successor Company			Predecessor Company			Combined Total
	For the Period April 24 to			For the Period January 1 to			Nine Months Ended
	September 30, 2009			April 23, 2009			September 30, 2009
Revenue	$	136,518		$	111,474		$	247,992

Operating costs		126,500			111,309			237,809
Depreciation and amortization		13,910			2,584			16,494
Corporate general and administrative expenses		5,875			4,519			10,394
Goodwill and intangible impairment		50,501			—			50,501
Restructuring charges		2,826			3,976			6,802
Special charges		1,188			12,819			14,007

Total expenses		200,800			135,207			336,007


Operating loss		(64,282	)		(23,733	)		(88,015	)

Interest expense		9,617			3,222			12,839
Other expense (income)		66			(359	)		(293	)


Loss before income tax		(73,965	)		(26,596	)		(100,561	)
Income tax benefit		(14,231	)		(7,635	)		(21,866	)


Net loss	$	(59,734	)	$	(18,961	)	$	(78,695	)

Results of Operations

We are organized into two business segments; Metro Traffic and Network Radio.

Our Metro Traffic business produces and distributes traffic and other local information reports (such as news, sports and weather) to approximately 2,200 radio and 165 television stations, which include stations in over 80 of the top 100 Metropolitan Statistical Area (“MSA”) markets in the U.S. Our Metro Traffic business generates revenue from the sale of commercial advertising inventory to advertisers (typically 10 and 15 second radio spots embedded within our information reports and 30 second spots in television). We provide broadcasters a cost-effective alternative to gathering and delivering their own traffic and local information reports and offer advertisers a more efficient, broad reaching alternative to purchasing advertising directly from individual radio and television stations.

Our Network Radio business nationally syndicates proprietary and licensed content to radio stations, enabling them to meet their programming needs on a cost-effective basis. The programming includes national news and sports content, such as CBS Radio News, CNN Radio News and NBC Radio News and major sporting events, including the National Football League (including the Super Bowl), NCAA football and basketball games (including the Men’s College Basketball Tournament known as “March Madness”) and the 2010 Winter Olympic Games. Our Network Radio business features popular shows that we produce with personalities including Dennis Miller, Charles Osgood, Fred Thompson and Billy Bush. We also feature special events such as live concert broadcasts, countdown shows (including MTV and Country Music Television branded programs), music and interview programs. Our Network Radio business generates revenue from the sale of 30 and 60 second commercial airtime, often embedded in our programming that we bundle and sell to national advertisers who want to reach a large audience across numerous radio stations.

Our consolidated financial statements and transactional records prior to the closing of the Refinancing reflect the historical accounting basis in our assets and liabilities and are labeled Predecessor Company, while such records subsequent to the Refinancing are labeled Successor Company and reflect the push down basis of accounting for the new fair values in our financial statements. This is presented in our consolidated financial statements by a vertical black line division which appears between the sections entitled Predecessor Company and Successor Company on the statements and relevant notes. The black line signifies that the amounts shown for the periods prior to and subsequent to the Refinancing are not comparable. For management purposes we continue to measure our performance against comparable prior periods.

Three Months Ended September 30, 2010 Compared With Three Months Ended September 30, 2009

Revenue

Revenue presented by operating segment for the three month periods ending September 30, 2010 and 2009 is as follows:


					Favorable (Unfavorable)
	2010		2009		$ Amount		%
Metro Traffic	$	43,728	$	38,026	$	5,702		15.0	%
Network Radio		44,224		40,448		3,776		9.3	%

Total (1)	$	87,952	$	78,474	$	9,478		12.1	%


(1)		As described above, we currently aggregate revenue based on the operating segment. A number of advertisers purchase both local/regional and national commercial airtime in both segments. Our objective is to optimize total revenue from those advertisers.

For the three months ended September 30, 2010, revenue increased $9,478, or 12.1%, to $87,952 compared with $78,474 for the three months ended September 30, 2009. The increase is the result of higher revenue in both segments of our business, primarily from increased advertising revenue.

Metro Traffic revenue for the three months ended September 30, 2010 increased $5,702, or 15.0%, to $43,728 from $38,026 for the same period in 2009. Metro Traffic revenue increased primarily as a result of an increase in Metro Traffic radio advertising revenue of $4,582, mainly from the financial services, auto, retail and quick service restaurant sectors, and Metro Television revenue of $1,120.

For the three months ended September 30, 2010, Network Radio revenue was $44,224 compared to $40,448 for the comparable period in 2009, an increase of 9.3%, or $3,776. The increase resulted from increased advertising revenue from our sports programs (primarily NCAA football and NFL related programs), new programming for The Weather Channel, other news programming and music programs (primarily country music programs), partially offset by decreased advertising revenue from our talk radio programming.

Operating Costs

Operating costs for the three months ended September 30, 2010 and 2009 are as follows:


					Favorable / (Unfavorable)
	2010		2009		$ Amount			%
Payroll and payroll related	$	21,425	$	19,629	$	(1,796	)		(9.1	)%
Programming and production		21,528		19,537		(1,991	)		(10.2	)%
Program and operating		9,059		6,651		(2,408	)		(36.2	)%
Station compensation		19,328		18,072		(1,256	)		(6.9	)%
Other operating expenses		10,816		10,401		(415	)		(4.0	)%

	$	82,156	$	74,290	$	(7,866	)		(10.6	)%

Operating costs increased $7,866, or 10.6%, to $82,156 in the third quarter of 2010 from $74,290 in the third quarter of 2009. The increase in operating costs is a result of higher program commission and broadcast rights costs of $3,287 (included in programming and production), increased cash buys for television and local radio inventory of $2,079 (included in program and operating), higher station compensation of $1,256 for non-affiliate inventory deals, higher sales commissions and variable compensation tied to revenue of $1,085 and higher salaries and wages of $637 (included in payroll and payroll related), reflecting additional sales force hires in the first nine months of 2010. This was partially offset by the cost savings in payroll resulting from our re-engineering and cost reduction programs in the last half of 2008 and 2009. There was also an increase in other expenses of $182 and a decrease in aviation expense of $660 (included in programming and production).

Depreciation and Amortization

Depreciation and amortization decreased $3,559, or 44.1%, to $4,506 in the third quarter of 2010 from $8,065 in the third quarter of 2009. The decrease is primarily attributable to higher amortization expense in 2009 from insertion orders that were recorded as a result of the Refinancing (and fully amortized by the end of 2009) and our application of “push down” acquisition accounting, partially offset by increased depreciation and amortization from our additional investments in systems and infrastructure in 2010.

Corporate General and Administrative Expenses

Corporate, general and administrative expenses decreased $1,216, or 34.1%, to $2,346 for the three months ended September 30, 2010 compared to $3,562 for the three months ended September 30, 2009. The decrease is principally due to the decreases in equity-based compensation expense of $743 and group health insurance costs of $543.

Restructuring Charges

During the three months ended September 30, 2010 and 2009, we recorded $561 and $1,372, respectively, for restructuring charges. For the 2010 period, restructuring charges included Metro Traffic re-engineering costs of $401 for real estate expenses as a result of revisions to estimated cash flows from our closed facilities (including estimates for subleases) and severance costs of $160, primarily related to the 2010 Program.

Special Charges

We incurred expenses aggregating $1,496 and $820 in the third quarter of 2010 and 2009, respectively. Special charges in the third quarter of 2010 included fees of $847 related to the debt agreements, including the cost to amend our Securities Purchase Agreement and Credit Agreement, Gores and Glendon fees of $206, professional fees related to the evaluation of potential business development activity of $297 (including acquisitions and dispositions), and $146 for fees primarily related to regionalization costs. Special charges in the third quarter of 2009 were expenses primarily related to consulting fees for our financial advisors and other professional fees.

Goodwill Impairment

During the third quarter of 2009, we incurred a goodwill impairment charge in our Metro Traffic segment of $50,401 as a result of a continued decline in our operating performance at that time and an impairment charge related to intangible assets in our Metro Traffic segment of $100.

OIBDA

Beginning with the first quarter of 2010, we changed how we evaluate segment performance and now use segment revenue and segment operating (loss) income before depreciation and amortization (“Segment OIBDA”) as the primary measure of profit and loss for our operating segments in accordance with FASB guidance for segment reporting. We have reflected this change in all periods presented in this report. We believe the presentation of Segment OIBDA is relevant and useful for investors because it allows investors to view segment performance in a manner similar to the primary method used by our management and enhances their ability to understand our operating performance.

OIBDA for the three months ending September 30, 2010 and 2009 is as follows:


							Favorable (Unfavorable)
	2010			2009			$ Amount		%
Metro Traffic	$	1,646		$	212		$	1,434		676.4	%
Network Radio		3,167			2,899			268		9.2	%
Corporate expenses		(1,363	)		(2,489	)		1,126		45.2	%
Goodwill and intangible impairment		—			(50,501	)		50,501		n/a
Restructuring and special charges		(2,057	)		(2,192	)		135		6.2	%

OIBDA		1,393			(52,071	)		53,464		n/a
Depreciation and amortization		(4,506	)		(8,065	)		3,559		44.1	%

Operating loss	$	(3,113	)	$	(60,136	)	$	57,023		94.8	%

OIBDA for the three months ended September 30, 2010 increased $53,464 to $1,393 from a loss of $52,071 for the same period in 2009. This increase is primarily attributable to the absence of the 2009 charge for goodwill and intangible impairment of $50,501.

Metro Traffic

OIBDA in our Metro Traffic segment increased by $1,434 to $1,646 in 2010 compared to $212 in 2009. The increase in OIBDA was due to an increase in revenue of $5,702, as described above, partially offset by increased operating costs of $4,268, primarily from increased program and operating costs of $2,528 from higher cash buys, payroll-related costs of $1,533 and station compensation of $742. These increases in operating costs were partially offset by decreases in production and programming costs of $384 and other expenses of $151.

Network Radio

OIBDA in our Network Radio segment increased by $268 to $3,167 in 2010 compared to $2,899 in 2009. The increase in OIBDA was primarily due to increases revenue of $3,776, as described above, and lower program and operating costs of $341, partially offset by increased programming and production costs of $2,595, primarily from program commissions for The Weather Channel, NCAA football, NFL related programs and music related programs, station compensation of $515, payroll-related costs of $263, and other operating costs of $476.

Operating Loss

The operating loss for the three months ended September 30, 2010 decreased to $3,113 from $60,136 for the same period in 2009. This decrease is primarily attributable to the absence of the 2009 charges for goodwill and intangible impairment of $50,501, lower depreciation and amortization of $3,559 and lower corporate expense of $1,126, as well as higher OIBDA in Metro Traffic of $1,434 and Network Radio of $268.

Interest Expense

Interest expense increased $897, or 18.2%, to $5,822 in the third quarter of 2010 from $4,925 in the third quarter of 2009, reflecting higher average levels of debt outstanding, primarily as the accrued PIK interest, partially offset by partial repayments of our Senior Loans outstanding in 2010, costs related to the amendment to the Securities Purchase Agreement entered into on March 30, 2010 and increased interest expense related to capital leases.

Other Expense

Other expense in the third quarter of 2010 was $1,920 which represents the fair market value adjustment related to the Gores $10,000 equity commitment. Such commitment constitutes an embedded derivative and was valued in our third quarter financial statements in accordance with derivative accounting. See Note 7 — Debt for additional detail.

Provision for Income Taxes

Income tax benefit in the third quarter of 2010 was $3,616 compared with a tax benefit of $11,581 in the third quarter of 2009. Our effective tax rate for the quarter ended September 30, 2010 was approximately 33.3% as compared to 17.8% for the same period in 2009. The lower effective rate in 2009 is primarily the result of the non-deductibility of the goodwill impairment charges, certain special charges and restructuring charges.

Net Loss

Our net loss for the third quarter of 2010 decreased to $7,239 from a net loss of $53,550 in the third quarter of 2009, which represented an improvement of $46,311, which is primarily attributable to the absence of the 2009 charges for goodwill and intangible impairment of $50,501. Net loss per share for basic and diluted shares was $(0.35) in the third quarter of 2010, compared with net loss per share for basic and diluted of $(10.03) in the third quarter of 2009.

Nine Months Ended September 30, 2010 Compared With Nine Months Ended September 30, 2009

Revenue

Revenue presented by operating segment for the nine month periods ending September 30, 2010 and 2009 is as follows:


					Favorable (Unfavorable)
	2010		2009		$ Amount		%

Metro Traffic	$	124,403	$	116,198	$	8,205		7.1	%
Network Radio		139,835		131,794		8,041		6.1	%

Total (1)	$	264,238	$	247,992	$	16,246		6.6	%


(1)		As described above, we currently aggregate revenue based on the operating segment. A number of advertisers purchase both local/regional and national commercial airtime in both segments. Our objective is to optimize total revenue from those advertisers.

For the nine months ended September 30, 2010, revenue increased $16,246, or 6.6%, to $264,238 compared with $247,992 for the nine months ended September 30, 2009. The increase is the result of higher revenue in both segments of our business.

Metro Traffic revenue for the nine months ended September 30, 2010 increased $8,205, or 7.1%, to $124,403 from $116,198 for the same period in 2009. The increase in Metro Traffic revenue was principally related to an increase in the revenue from Metro Traffic radio advertising of $6,520, primarily in the financial services, quick service restaurant, retail and automotive sectors, partially offset by decreases in the travel and entertainment and home services sectors. It also reflects an increase in Metro Television advertising of $1,685.

For the nine months ended September 30, 2010, Network Radio revenue was $139,835 compared to $131,794 for the comparable period in 2009, an increase of 6.1%, or $8,041. The increase resulted from increased sports advertising revenue primarily related to NFL-related programs, the NCAA Men’s College Basketball Tournament, the 2010 Winter Olympics, NCAA football and music programming, principally country music, and new programming for The Weather Channel and other news programming. These increases were partially offset by a decline in advertising revenue from our talk radio programs and the cancellation of certain talk programs.

Operating Costs

Operating costs for the nine months ended September 30, 2010 and 2009 are as follows:


					Favorable / (Unfavorable)
	2010		2009		$ Amount			%

Payroll and payroll related	$	63,317	$	60,344	$	(2,973	)		(4.9	)%
Programming and production		69,169		70,373		1,204			1.7	%
Program and operating		25,231		17,870		(7,361	)		(41.2	)%
Station compensation		56,427		56,175		(252	)		(0.4	)%
Other operating expenses		33,168		33,047		(121	)		(0.4	)%

	$	247,312	$	237,809	$	(9,503	)		(4.0	)%

Operating costs increased $9,503, or 4.0%, to $247,312 in the first nine months of 2010 from $237,809 in the first nine months of 2009. The increase is primarily from increased cash buys for television and local radio inventory of $6,868 (included in program and operating), program commissions and broadcast rights of $4,776 (included programming and production), commissions of $2,549 and salaries and wages of $403 (included in payroll and payroll related), reflecting additional sales force hires in the first nine months of 2010 and variable compensation tied to revenue. This was partially offset by the cost savings in payroll resulting from our re-engineering and cost reduction programs in the last half of 2008 and 2009. All other operating costs, including station compensation increased $305. These operating cost increases were partially offset by the decrease in talent and news agreements fees of $2,766 and aviation expense of $2,632 (included in programming and production).

Depreciation and Amortization

Depreciation and amortization decreased $2,803, or 17.0%, to $13,691 in the first nine months of 2010 from $16,494 in the first half of 2009. The decrease is primarily attributable to higher amortization expense in 2009 from insertion orders that were recorded as a result of the Refinancing and our application of “push down” acquisition accounting, partially offset by increased depreciation and amortization from our additional investments in systems and infrastructure and lower amortization of intangibles prior to the Refinancing and our application of “push down” acquisition accounting.

Corporate General and Administrative Expenses

Corporate, general and administrative expenses decreased $1,220 or 11.7%, to $9,174 for the nine months ended September 30, 2010 compared to $10,394 for the nine months ended September 30, 2009. The decrease is principally due to decreases in equity-based compensation expense of $1,824, partially offset by higher accounting and audit fees of $878.

Restructuring Charges

During the nine months ended September 30, 2010 and 2009, we recorded $2,422 and $6,802, respectively, for restructuring charges. For the nine months ended September 30, 2010, restructuring charges included Metro Traffic re-engineering costs for real estate expenses of $1,373 (including $1,021 from revisions to estimated cash flows from our closed facilities, including estimates for subleases), $97 for contract terminations and severance of $952 (including $883 for the 2010 Program).

Special Charges

We incurred expenses aggregating $4,295 and $14,007 in the first nine months of 2010 and 2009, respectively. Special charges in the first nine months of 2010 included fees of $1,662 related to the debt agreements, including the cost to amend our Securities Purchase Agreement and Credit Agreement, employment claim settlements related to employee terminations that occurred prior to 2008 of $493, Gores and Glendon fees of $625, fees related to the finalization of the income tax treatment of the Refinancing of $192, professional fees related to the evaluation of potential business development activities, including acquisitions and dispositions, of $906 and fees primarily related to regionalization costs of $417.

Goodwill Impairment

During the third quarter of 2009, we incurred a goodwill impairment charge in our Metro Traffic segment of $50,401 as a result of a continued decline in our operating performance.

OIBDA

OIBDA for the nine months ending September 30, 2010 and 2009 is as follows:


							Favorable (Unfavorable)
	2010			2009			$ Amount		%
Metro Traffic	$	2,817		$	1,333		$	1,484		111.3	%
Network Radio		11,157			5,626			5,531		98.3	%
Corporate expenses		(6,222	)		(7,170	)		948		13.2	%
Goodwill and intangible impairment		—			(50,501	)		50,501		n/a
Restructuring and special charges		(6,717	)		(20,809	)		14,092		67.7	%

OIBDA		1,035			(71,521	)		72,556		n/a
Depreciation and amortization		(13,691	)		(16,494	)		2,803		17.0	%

Operating loss	$	(12,656	)	$	(88,015	)	$	75,359		85.6	%

OIBDA was $962 for the nine months ended September 30, 2010 and increased from a loss of $71,521 for the same period in 2009. This increase is primarily attributable to the absence of the 2009 charge for goodwill and intangible impairment of $50,501, lower restructuring and special charges of $14,019 and an increased OIBDA in Network Radio of $5,531 and Metro Traffic of $1,484.

Metro Traffic

OIBDA in our Metro Traffic segment increased $1,484 to $2,817 in 2010 compared to $1,333 in 2009. The increase was primarily due to an increase in revenue of $8,205, lower programming and production costs of $2,207 and a reduction in other operating expenses of $1,463. These improvements were partially offset by increased program and operating costs of $7,003, resulting primarily from cash buys for television and local radio inventory, payroll and payroll-related expenses of $2,171 and station compensation of $1,217.

Network Radio

OIBDA in our Network Radio segment increased by $5,531 to $11,157 in 2010 compared to $5,626 in 2009. The increase in OIBDA was due to an increase in revenue of $8,041 and a decrease in station compensation of $966. These increases in OIBDA were partially offset by higher programming and operating expenses of $1,224 related to program commissions for NFL related programs, NCAA football and country music programs and broadcast rights for the 2010 Winter Olympics, other operating expenses of $1,313, payroll and payroll-related costs of $801 and program and operating costs of $138.

Operating Loss

The operating loss for the nine months ended September 30, 2010 decreased to $12,656 from $88,015 for the same period in 2009. This decrease is primarily attributable to the absence of the 2009 charge for goodwill and intangible impairment of $50,501, lower restructuring and special charges of $14,092, an increase OIBDA in Network Radio of $5,531 and Metro Traffic of $1,484, lower depreciation and amortization of $2,803, and lower corporate expenses of $948.

Interest Expense

Interest expense increased $4,352, or 33.9%, to $17,191 in the first nine months of 2010 from $12,839 in the first nine months of 2009, reflecting a higher rate of interest on a slightly lower average level of debt outstanding, primarily as a result of the Refinancing, costs related to the amendment to the Securities Purchase Agreement entered into on March 30, 2010 and increased interest expense related to capital leases.

Other Expense

Other expense in the first nine months of 2010 was $1,918 which primarily represents the fair market value adjustment related to the Gores $10,000 equity commitment. Such commitment constitutes an embedded derivative and was valued in our third quarter financial statements in accordance with derivative accounting. See Note 7 — Debt for additional detail.

Provision for Income Taxes

Income tax benefit in the first nine months of 2010 was $12,385 compared with a tax benefit of $21,866 in the first nine months of 2009. Our effective tax rate for the nine months ended September 30, 2010 was 39.0% as compared to 21.7% for the same period in 2009. The lower effective rate in 2009 is primarily the result of the non-deductibility of the goodwill impairment charges, certain special charges and restructuring charges. An additional tax benefit of $590 was recorded in the nine months ended September 30, 2010 related to an increase in our federal income tax refund arising from a change in the determination of the deductibility of certain costs for the twelve months ended December 31, 2009. These additional income tax benefits are primarily related to deductions taken in U.S. federal filings for which it is more likely than not that those deductions would be sustained on their technical merits.

Net Loss

Our net loss for the first nine months of 2010 decreased to $19,380 from a net loss of $78,695 in the first nine months of 2009, which represented an improvement of $59,315, which is primarily attributable to the absence of the 2009 charges for goodwill and intangible impairment of $50,501. Net loss per share for basic and diluted shares was $(0.94) in the first nine months of 2010, compared with net loss per share for basic and diluted of $(34.28) in the first nine months of 2009.

Cash Flows

Net cash provided by (used in) operating activities was $7,426 for the nine months ended September 30, 2010 and $(17,255) for the nine months ended September 30, 2009, an increase of $24,681 in net cash provided by operating activities. The increase was principally attributable to a lower net loss of $59,315, a federal tax refund of $12,940, a lower net decrease in our deferred taxes of $10,530, change in fair value of derivative liability of $1,920 and higher PIK interest of $1,426. These items were partially offset by the absence of the 2009 goodwill and intangible asset impairment charge of $50,501, changes in other assets and liabilities of $5,630, depreciation and amortization of $2,803, equity-based compensation of $1,824, lower loss on disposal of assets of $361 and amortization of deferred financing costs of $331.

While our business at times does not require significant cash outlays for capital expenditures, capital expenditures in the first nine months of 2010 increased to $7,058, compared to $3,739 for the first nine months of 2009, primarily as a result of payments related to investment in internal use software we installed.

Cash (used in) provided by financing activities was $(1,134) for the first nine months of 2010 compared to $19,125 in the first nine months of 2009. On June 4, 2010, as part of the Securities Purchase Agreement amendment entered into on March 30, 2010, we paid down our Senior Notes by $12,000 and, as part of the amendment entered into on October 14, 2009, we paid down our Senior Notes by $3,500 on March 31, 2010. We borrowed $10,000 under our revolving credit facility during the first nine months of 2010 and received $5,000 for the issuance of common stock to Gores. During the first nine months of 2009 we received proceeds from a term loan of $20,000 and proceeds from the issuance of preferred stock of $25,000, which was partially offset by the repayment of debt of $25,000.

Liquidity and Capital Resources

We continually project anticipated cash requirements, which may include potential acquisitions, capital expenditures, and principal and interest payments on our outstanding indebtedness, dividends and working capital requirements. To date, funding requirements have been financed through cash flows from operations, the issuance of equity and the issuance of long-term debt. Our available liquidity on September 30, 2010 was $7,839. As part of the August 17, 2010 amendments, Gores agreed to purchase an additional $15,000 of common stock, $5,000 of which was purchased on September 7, 2010 and $10,000 of which shall be purchased on February 28, 2011 or sooner depending on our needs (also referred to in this report as the Gores $10,000 equity commitment). Notwithstanding the foregoing, if we shall have received net cash proceeds of at least $10,000 from the issuance and sale of Company qualified equity interests (as such term is defined in the Securities Purchase Agreement) to any person, other than in connection with (1) Gores’ $5,000 investment in the third quarter of 2010, and (2) any stock or option grant to our employees under a stock option plan or other similar incentive or compensation plan of the Company or upon the exercise thereof, Gores shall not be required to invest the aforementioned $10,000.

While all of our businesses performed in accordance with our third quarter projections, our liquidity level was adversely affected by our second quarter performance. As a result of the foregoing, management believed it was prudent to renegotiate amendments to our debt agreements to enhance our available liquidity and to modify our debt leverage covenants. These negotiations resulted in the August 17, 2010 amendment described in Note 7 – Debt. If we were to underperform against our future financial projections, we may need to take additional actions designed to respond to or improve our financial condition and we cannot assure you that any such actions would be successful in improving our financial position.

Existing Indebtedness

On March 31, 2010 and June 4, 2010, we repaid $3,500 and $12,000, respectively, of the Senior Notes. Accordingly, as of September 30, 2010, our existing debt totaled $145,775. Such included $110,775 of Senior Notes (which includes $10,144 of debt Due to Gores) and $35,000 of debt outstanding under the Senior Credit Facility, comprised of a $20,000 unsecured, non-amortizing term loan revolver and a $20,000 revolving credit facility of which $15,000 was outstanding on September 30, 2010 (not including $1,219 used for letters of credit as security on various leased properties). As described above, on August 17, 2010, we amended our debt agreements, which resulted in our Senior Credit Facility being increased to $20,000 from $15,000. The Senior Credit Facility (including the increased revolver) matures on July 15, 2012 and is guaranteed by our subsidiaries and Gores. The Senior Notes bear interest at 15.0% per annum, payable 10% in cash and 5% PIK interest. The PIK interest accretes and is added to principal quarterly, but is not payable until maturity. As of September 30, 2010, the cumulative PIK interest was $8,777.

The Senior Notes mature on July 12, 2012 and may be prepaid at any time, in whole or in part, without premium or penalty. Payment of the Senior Notes is mandatory upon, among other things, certain asset sales and the occurrence of a “change of control” (as such term is defined in the Securities Purchase Agreement governing the Senior Notes). The Senior Notes are guaranteed by our subsidiaries and are secured by a first priority lien on substantially all of our assets.

Both the Securities Purchase Agreement (governing the Senior Notes) and Credit Agreement (governing the Senior Credit Facility) contain restrictive covenants that, among other things, limit our ability to incur debt, incur liens, make investments, make capital expenditures, consummate acquisitions, pay dividends, sell assets and enter into mergers and similar transactions beyond specified baskets and identified carve-outs. As part of the August 17, 2010 amendments, the holders of the Senior Notes and Wells Fargo agreed to amend the restrictive covenants regarding investments permitting us to make certain investments of up to $20,000 in certain twelve month periods as described in more detail in the debt amendments. Additionally, we may not exceed the maximum senior leverage ratio (the principal amount outstanding under the Senior Notes over our Adjusted EBITDA) referred to in this report as our debt leverage covenant. The Securities Purchase Agreement contains customary representations and warranties and affirmative covenants. The Credit Agreement contains substantially identical restrictive covenants (including a maximum senior leverage ratio calculated in the same manner as with the Securities Purchase Agreement), affirmative covenants and representations and warranties like those found in the Securities Purchase Agreement, modified, in the case of certain covenants, for a cushion on basket amounts and covenant levels from those contained in the Securities Purchase Agreement.

Adjusted EBITDA for the nine months ended June 30, 2010 was $12,868. Under the terms of our Senior Notes, in order to have satisfied our 11.25 to 1.00 covenant for the twelve month period ended September 30, 2010, we had to realize Adjusted EBITDA (loss) for the three months ended September 30, 2010 of no more than $(3,021). For the three months ended September 30, 2010 our Adjusted EBITDA was $4,490, which was $7,511 in excess of the required Adjusted EBITDA. As a point of reference, our Adjusted EBITDA for the three months ended September 30, 2009 was $2,154.

In order to satisfy our 11.25 to 1.00 covenant for the twelve month period ending December 31, 2010, we must realize a minimum Adjusted EBITDA (loss) for the three months ended December 31, 2010 of no more than $(1,299). This compares to our Adjusted EBITDA for the three months ended December 31, 2009 of $6,089. Adjusted EBITDA for the trailing nine months ended September 30, 2010 was $11,269.

In order to satisfy our 11.25 to 1.00 covenant for the twelve month period ending March 31, 2011, we must realize a minimum Adjusted EBITDA of $962 for the six months ended March 31, 2011. This compares to our Adjusted EBITDA for the six months ended March 31, 2010 of $8,226. Adjusted EBITDA for the six months ended September 30, 2010 was $9,132.

In order to satisfy our 11.00 to 1.00 covenant for the twelve month period ending June 30, 2011, we must realize a minimum Adjusted EBITDA of $5,963 for the nine months ended June 30, 2011. This compares to our Adjusted EBITDA for the nine months ended June 30, 2010 of $12,868. Adjusted EBITDA for the three months ended September 30, 2010 was $4,490.

In order to satisfy our 10.00 to 1.00 covenant for the twelve month period ending September 30, 2011, we must realize a minimum Adjusted EBITDA of $11,642 for the twelve months ended September 30, 2011. This compares to our Adjusted EBITDA for the twelve months ended September 30, 2010 of $17,358.

Our maximum senior leverage ratio (also referred to herein as our “debt leverage covenant”), defined as the principal amount of Senior Notes over our Adjusted EBITDA (defined below), is measured on a trailing, four-quarter basis. The covenant is the same under our Securities Purchase Agreement, governing the Senior Notes and our Senior Credit Facility, governing the Senior Credit Facility except that they have different maximum levels. We have presented the more restrictive of the two levels below.


					Required Last Twelve Months
	Maximum Senior Leverage Ratio		Principal Amount of Senior Notes		(LTM) Minimum Adjusted
Quarter Ending	Covenant		Estimated Outstanding (Includes PIK)⁽¹⁾		EBITDA⁽¹⁾
9/30/2010		11.25 to 1.0		110,775		9,847
12/31/2010		11.25 to 1.0		112,160		9,970
3/31/2011		11.25 to 1.0		113,562		10,094
6/30/2011		11.00 to 1.0		114,981		10,453
9/30/2011		10.00 to 1.0		116,418		11,642
12/31/2011		9.00 to 1.0		117,874		13,097
3/31/2012		8.00 to 1.0		119,347		14,918
6/30/2012		7.50 to 1.0		120,839		16,112


(1)		The above chart does not reflect any loan repayments from the proceeds from the sale of investments, valued at $754 at September 30, 2010, as required by the terms of the August 17, 2010 amendments.

Adjusted EBITDA has the same definition in both of our borrowing agreements and means Consolidated Net Income adjusted for the following: (1) minus any net gain or plus any loss arising from the sale or other disposition of capital assets; (2) plus any provision for taxes based on income or profits; (3) plus consolidated net interest expense; (4) plus depreciation, amortization and other non-cash losses, charges or expenses (including impairment of intangibles and goodwill); (5) minus any “extraordinary,” “unusual,” “special” or “non-recurring” earnings or gains or plus any “extraordinary,” “unusual,” “special” or “non-recurring” losses, charges or expenses; (6) plus restructuring expenses or charges; (7) plus non-cash compensation recorded from grants of stock appreciation or similar rights, stock options, restricted stock or other rights; (8) plus any Permitted Glendon/Affiliate Payments (as described below); (9) plus any Transaction Costs (as described below); (10) minus any deferred credit (or amortization of a deferred credit) arising from the acquisition of any Person; and (11) minus any other non-cash items increasing such Consolidated Net Income (including, without limitation, any write-up of assets); in each case to the extent taken into account in the determination of such Consolidated Net Income, and determined without duplication and on a consolidated basis in accordance with GAAP.

“Permitted Glendon/Affiliate Payments” means payments made at our discretion to Gores and its affiliates including Glendon Partners for consulting services provided to Westwood One and “Transaction Costs” refers to the fees, costs and expenses incurred by us in connection with the Restructuring.

Adjusted EBITDA, as we calculate it, may not be comparable to similarly titled measures employed by other companies. While Adjusted EBITDA does not necessarily represent funds available for discretionary use, and is not necessarily a measure of our ability to fund our cash needs, we use Adjusted EBITDA as defined in our lender agreements as a liquidity measure, which is different from operating cash flow, the most directly comparable financial measure calculated and presented in accordance with GAAP. We have provided below the requisite reconciliation of operating cash flow to Adjusted EBITDA.

Adjusted EBITDA for the three and nine months ended September 30, 2010 and 2009 is as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Net cash (used in) provided by operating activities	$	(5,796	)	$	(2,151	)	$	7,426		$	(17,255	)
Interest expense		5,822			4,925			17,191			12,839
Income taxes (benefit)		(3,616	)		(11,581	)		(12,385	)		(21,866	)
Restructuring		561			1,372			2,422			6,802
Special charges and other (1)		1,496			820			4,891			14,007
Sigalert earn-out (2)		250			—			250			—
Investment income		—			(98	)		—			(361	)
Other non-operating income		1,920			70			1,918			(293	)
Deferred taxes		3,545			17,986			12,167			22,697
Amortization of deferred financing costs		—			—			—			(331	)
Paid-in-kind interest		(1,366	)		(1,453	)		(4,348	)		(2,922	)
Change in fair value of derivative liability		(1,920	)		—			(1,920	)		—
Federal tax refund		—			—			(12,940	)		—
Change in assets and liabilities		3,594			(7,736	)		(3,403	)		(9,033	)

Adjusted EBITDA	$	4,490		$	2,154		$	11,269		$	4,284


(1)		“Special charges and other” includes expense of $596 classified as corporate general and administrative expenses on the Statement of Operations for the nine months ended September 30, 2010.

(2)		Sigalert earn-out refers to payments made to the members of Jaytu under the acquisition agreements in connection with the delivery and acceptance of certain traffic products in accordance with specifications mutually agreed upon by the parties.

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 of the fair value hierarchy on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. Our disclosures about fair value measurements are presented in Note 8 – Fair Value Measurements. These new disclosure requirements were applied to our financial statements for the period ending September 30, 2010, except for the requirement concerning gross presentation of Level 3 activity, which is effective for fiscal years beginning after December 15, 2010. Our adoption of the new guidance did not have a material impact on our consolidated financial position or results of operations.

In March 2009, the FASB issued new guidance intended to provide additional application guidance for the initial recognition and measurement, subsequent measurement, and disclosures of assets and liabilities arising from contingencies in a business combination and for pre-existing contingent consideration assumed as part of the business combination. It establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. The new guidance also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. We adopted the new guidance on January 1, 2009. The adoption of the new guidance impacted the accounting for our Refinancing, as described above, and for our acquisition of Jaytu Technologies, LLC (“Jaytu”), doing business as Sigalert, in the fourth quarter of 2009.

Cautionary Statement Concerning Forward-Looking Statements and Factors Affecting Forward-Looking Statements

This quarterly report on Form 10-Q, including “Item 1A-Risk Factors” and “Item 2-Management’s Discussion and Analysis of Results of Operations and Financial Condition,” contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements we make or others make on our behalf. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These statements are not based on historical fact but rather are based on management’s views and assumptions concerning future events and results at the time the statements are made. No assurances can be given that management’s expectations will come to pass. There may be additional risks, uncertainties and factors that we do not currently view as material or that are not necessarily known. Any forward-looking statements included in this document are only made as of the date of this document and we do not have any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances.

A wide range of factors could materially affect future developments and performance including the following:

Risks Related to Our Business and Industry

Our annual operating income has declined since 2005 and may continue to decline. We may not be able to reverse this trend or reduce costs sufficiently to offset declines in revenue if such trends continue and could lack sufficient funds to continue to operate our business in the ordinary course.

Since 2005, our annual operating income has declined from operating income of $143,978 to an operating loss of $97,582, which included impairment charges of approximately $50,501, for the year ended December 31, 2009. For the nine months ended September 30, 2010, our operating loss was $12,656. Since 2005, our operating income declined as a result of increased competition in our local and regional markets and an increase in the sale of short-form inventory being sold by radio stations. The decline also occurred as a result of lower commercial clearance, a decline in our sales force and reductions in national audience levels across the industry, as well as locally at our affiliated stations. We reduced our sales force beginning in mid-2006 and only recently began expanding it again in 2009. In 2008 and 2009, our operating income was affected by the weakness in the United States economy and advertising market, where the recovery in 2010 has been slower than expected. During the economic downturn, advertisers and the agencies that represent them, increased pressure on advertising rates, and in some cases, requested steep percentage discounts on ad buys, demanded increased levels of inventory and re-negotiated booked orders. Although there has been a modest improvement in the economy, advertisers’ demands and budgets for advertising have not recovered as much as we anticipated which impacted our financial results for the first nine months of 2010. If a double-dip recession were to occur or if the economic climate does not improve sufficiently for us to generate advertising revenue to meet our projections, our financial position could worsen to the point where we would lack sufficient liquidity to continue to operate our business in the ordinary course.

We have a significant amount of indebtedness and limited liquidity, which will affect our future business operations if our future operating performance does not meet our financial projections.

As of September 30, 2010, we had $110,775 in aggregate principal amount of Senior Notes outstanding (of which approximately $8,777 is PIK), which bear interest at a rate of 15.0%, and a Senior Credit Facility consisting of a $20,000 term loan and a $20,000 revolving credit facility under which $15,000 was drawn (not including $1,219 used for letters of credit as security on various leased properties). Such debt matures on July 15, 2012. Loans under our Senior Credit Facility bear interest at LIBOR plus 4.5% (with a LIBOR floor of 2.5%) or a base rate plus 4.5% (with a base rate floor equal to the greater of 3.75% or the one-month LIBOR rate). As described above, on August 17, 2010, we entered into an amendment with our lenders to modify our debt leverage covenants. As part of such amendments, Gores agreed to provide us with $20,000 in additional liquidity, in the form of: (1) a guarantee of an additional $5,000 for our revolving credit facility (which resulted in our revolving credit facility being increased to $20,000 as described below), (2) an additional $5,000 cash investment for 769 shares of our common stock on or prior to September 7, 2010 and (3) an additional $10,000 cash investment for our common stock on February 28, 2011, or sooner depending on our needs (unless we receive $10,000 in net cash proceeds from a sale of equity as described in more detail above in “Liquidity”). In connection with Gores’ agreement to increase its guarantee, Wells Fargo agreed to increase the amount of our revolving credit facility from $15,000 to $20,000 which will provide us with necessary additional liquidity for working capital purposes. Our ability to service our debt for the rest of 2010 and the next twelve months depends on our financial performance in an uncertain and unpredictable economic environment as well as on competitive pressures. Despite having successfully negotiated amendments to our credit documents in the past, if we were to significantly underperform against our financial projections in the future we might be unable to further amend our debt agreements on terms that are acceptable to us or at all. Further, our Senior Notes and Senior Credit Facility restrict our ability to incur additional indebtedness beyond certain minimum baskets. If our operating income declines or does not meet our financial projections, and we are unable to obtain a waiver to increase our indebtedness or successfully raise funds through an issuance of equity, we would lack sufficient liquidity to operate our business in the ordinary course, which would have a material adverse effect on our business, financial condition and results of operations. If we were then unable to meet our debt service and repayment obligations under the Senior Notes or the Senior Credit Facility, we would be in default under the terms of the agreements governing our debt, which if uncured, would allow our creditors at that time to declare all outstanding indebtedness to be due and payable and materially impair our financial condition and liquidity.

If our operating results continue to fall short of our financial projections, we may require additional funding to finance our working capital, debt service, capital expenditures and other capital requirements or a further amendment and/or waiver of our debt leverage covenants, which if not obtained, would have a material and adverse effect on our business continuity and our financial condition.

As discussed above, we are operating in an uncertain economic environment, where the pace of an advertising recovery is unclear. As further described in Note 5 – Intangible Assets, our financial results were lower than our projections for the first two quarters of 2010 and management deemed it advisable to negotiate an amendment with our lenders and Gores to amend our debt leverage covenants and enhance our available liquidity. These negotiations resulted in the amendment we entered into with our lenders and Gores on August 17, 2010. If our operating results fall short of our financial projections, we may need additional funds or a further amendment and/or waiver of our debt leverage covenants. If financing is limited or unavailable to us or if we are forced to fund our operations at a higher cost, these conditions could require us to curtail our business activities or increase our cost of financing, both of which could reduce our profitability or increase our losses. If we were to require additional financing or a further amendment or waiver of our debt leverage covenants, which could not then be obtained, it would have a material adverse effect on our financial condition and on our ability to meet our obligations.

Our Senior Credit Facility and Senior Notes contain various covenants which, if not complied with, could accelerate repayment under such indebtedness, thereby materially and adversely affecting our financial condition and results of operations.

Our Senior Credit Facility and Senior Notes require us to comply with certain financial and operational covenants. These covenants (as amended on August 17, 2010) include, without limitation:

	•		a maximum senior leverage ratio (expressed as the principal amount of Senior Notes over our Adjusted EBITDA (as defined in our Senior Credit Facility) measured on a trailing, four-quarter basis) which is an 11.25 to 1.0 ratio for the LTM (last twelve months) period to be measured on September 30, 2010, December 31, 2010 and March 31, 2011, and then declines on a quarterly basis thereafter, to an 11.0 to 1 ratio on June 30, 2011, a 10.0 to 1.0 ratio on September 30, 2011, a 9.0 to 1.0 ratio on December 31, 2011, an 8.0 to 1.0 ratio on March 31, 2012, and a 7.5 to 1.0 ratio on June 30, 2012.

	•		restrictions on our ability to incur debt, incur liens, make investments, make capital expenditures, consummate acquisitions, pay dividends, sell assets and enter into mergers and similar transactions.

As described above, we waived and/or amended our debt leverage covenants on October 14, 2009, March 30, 2010, and August 17, 2010. As a result of these amendments, our debt leverage covenants have been significantly eased. We believe we will generate sufficient Adjusted EBITDA to comply with our new debt leverage covenants. However, failure to comply with any of our covenants would result in a default under our Senior Credit Facility and Senior Notes that, if we were unable to obtain a waiver from the lenders or holders thereof, could accelerate repayment under the Senior Credit Facility and Senior Notes and thereby have a material adverse impact on our business.

The cost of our indebtedness has increased substantially, which further affects our liquidity and could limit our ability to implement our business plan.

As a result of our Refinancing, the interest payments on our debt (on an annualized basis — i.e., from April 23, 2009 to April 23, 2010 and subsequent annual periods thereafter) have increased from approximately $12,000 to $19,000, $6,000 of which is PIK interest. Our interest payments will be increased further if we utilize the additional amount available to us under the revolving credit facility which was increased from $15,000 to $20,000 as part of the amendments to our debt agreements entered into on August 17, 2010. If the economy does not improve more significantly and advertisers continue to maintain reduced budgets such that our financial results continue to come under pressure in 2010 and beyond, we may be required to delay the implementation or reduce the scope of our business plan and our ability to develop or enhance our services or programs could be impacted. Without additional revenue and capital, we may be unable to take advantage of business opportunities, such as acquisition opportunities or securing rights to name-brand or popular programming, or respond to competitive pressures. If any of the foregoing should occur, this could have a material and adverse effect on our business.

CBS Radio provides us with a significant portion of our commercial inventory and audience that we sell to advertisers. A material reduction in the audience delivered by CBS Radio stations or a material loss of commercial inventory from CBS Radio would have an adverse effect on our advertising sales and financial results.

While we provide programming to all major radio station groups, we have affiliation agreements with most of CBS Radio’s owned and operated radio stations which, in the aggregate, provide us with a significant portion of the audience and commercial inventory that we sell to advertisers, much of which is in the more desirable top 10 radio markets. Although the compensation we pay to CBS Radio under our March 2008 arrangement is adjustable for audience levels and commercial clearance (i.e., the percentage of commercial inventory broadcast by CBS Radio stations), any significant loss of audience or inventory delivered by CBS Radio stations, including, by way of example only, as a result of a decline in station audience, commercial clearance levels or station sales that resulted in lower audience levels, would have a material adverse impact on our advertising sales and revenue. Since implementing the new arrangement in early 2008, CBS Radio has delivered improved audience levels and broadcast more advertising inventory than it had under our previous arrangement. However, there can be no assurance that CBS Radio will be able to maintain these higher levels in particular, with the introduction of The Portable People Meter™, or PPM™, which to date has reported substantially lower audience ratings for certain of our radio station affiliates, including our CBS Radio station affiliates, in those markets in which PPM™ has been implemented as described below. As part of our recent cost reduction actions to reduce station compensation expense, we and CBS Radio mutually agreed to enter into an arrangement, which became effective on February 15, 2010, to give back approximately 15% of the audience delivered by CBS Radio. This resulted in a commensurate reduction in cash compensation payable to them. To help deliver consistent RADAR audience levels over time, we have added incremental non-CBS inventory. We actively manage our inventory, including by purchasing additional inventory for cash. We have also added Metro Traffic inventory from CBS Radio through various stand-alone agreements. While our arrangement with CBS Radio is scheduled to terminate in 2017, there can be no assurance that such arrangement will not be breached by either party. If our agreement with CBS Radio were terminated as a result of such breach, our results of operations could be materially impacted.

Our cost reduction initiatives and limited liquidity may limit our flexibility to reduce costs going forward.

In order to improve the efficiency of our operations, we have implemented certain cost reduction initiatives, including headcount and salary reductions and, in the last half of 2009, a furlough of participating full-time employees. We cannot assure you that our cost reduction activities will not adversely affect our ability to retain key employees, the significant loss of whom could adversely affect our operating results. As a result of our cost reduction activities and limited liquidity, we may not have an adequate level of resources and personnel to appropriately react to significant changes or fluctuations in the market and in the level of demand for our programming and services. If our operating losses continue, our ability to further decrease costs may be more limited as a result of our previously enacted cost reduction initiatives.

Our ability to grow our Metro Traffic business revenue may be adversely affected by the increased proliferation of free of charge traffic content to consumers.

Our Metro Traffic business produces and distributes traffic and other local information reports to approximately 2,250 radio and 165 television affiliates and we derive the substantial majority of the revenue attributed to this business from the sale of commercial advertising inventory embedded within these reports. In recent years, the US Department of Transportation and other regional and local departments of transportation have significantly increased their direct provision of real-time traffic and traveler information to the public free of charge. The ability to obtain this information free of charge may result in our radio and television affiliates electing not to utilize the traffic and local information reports produced by our Metro Traffic business, which in turn could adversely affect our revenue from the sale of advertising inventory embedded in such reports.

Our ability to increase our operating profits largely depends on the size of the audiences we deliver to our advertisers, which has been negatively impacted by the introduction of The Portable People Meter.

Arbitron Inc., the supplier of ratings data for United States radio markets, rolled out new electronic audience measurement technology to collect data for its ratings service known as The Portable People Meter™, or PPM™, in 2007. PPM™ measures the audience of radio stations remotely without requiring listeners to keep a manual diary of the stations they listen to. In 2007, 2008, 2009, 2, 9 and 19 markets, respectively, converted to PPM™. Such markets included 19 of the top 20 markets, including 3 markets whose MSAs overlap. Unlike our Metro Traffic inventory, which is fully reflected in ratings books that are released quarterly, our Network Radio inventory is reflected in ratings books on an incremental basis over time (i.e., over a rolling four-quarter period). This means we and our advertisers cannot view audience levels that give full weight to PPM™ for our Radio’s All Dimension Audience Research (“RADAR”) inventory (which comprises half of our Network Radio inventory) for over a year after a market converts to PPM™. We are only now able to review the full effect of the 14 market conversions that occurred in the first half of 2009. In the most recent RADAR ratings book released in September 2010, approximately half of the inventory (measured by the revenue generated by such inventory) published therein showed the effect of PPM™ in converted markets. In the last five published RADAR ratings books (for the five calendar quarters ending with the quarter ended September 2010) the change in audience (measured by Persons 12+ against the prior period) for our 12 RADAR networks was: (0.8)%; (5.8)%; 1.8%; (1.0)% and 1.8%, respectively. Because audience levels can change for several reasons, including changes in the radio stations included in a RADAR network, such stations’ clearance levels and general radio listening trends, it is difficult to isolate the effects of PPM™ on our audience with a high level of certainty. While annual ad revenue in our Network Radio and Metro Traffic businesses has declined to date, we are unable to determine how much is a result of the general economic environment as opposed to a decline in our audience. Given the time lag to reflect market conversions in the RADAR ratings book (described above), coupled with the fact that no markets were converted to PPM™ in the first half of 2010 but an additional 15 markets are being converted in the second half of 2010, the impact of PPM™ on our future audience levels remains unclear in the near term. In 2009, when significantly fewer market conversions were reflected in ratings books, we were able to offset the impact of audience declines by using excess inventory; however, in 2010 this option has been limited and we have offset declines in audience by purchasing additional inventory. Because such inventory must be purchased well in advance of our having definitive data on future audience levels, if we do not accurately predict how much additional inventory will be required to offset any declines in audience, or cannot purchase comparable inventory to our current inventory at efficient prices, our future operating profits could be materially and adversely affected.

If we fail to maintain an effective system of internal controls, we may not be able to continue to accurately report our financial results.

Effective internal controls are necessary for us to provide reliable financial reporting. During 2009, we identified a material weakness related to accounting for income taxes which resulted in adjustments to the 2009 annual consolidated financial statements, as described in Item 9A - Controls and Procedures of our Annual Report on Form 10-K for the year ended December 31, 2009. We also identified certain immaterial errors in our financial statements, which we have corrected in subsequent interim periods. Such items have been reported and disclosed in the financial statements for the periods ended March 31, 2010 and December 31, 2009. We do not believe these adjustments are material to our current period consolidated financial statements or to any prior period’s consolidated financial statements and no prior periods have been restated. We intend to further enhance our internal control environment and we may be required to enhance our personnel or their level of experience, among other things, in order to continue to maintain effective internal controls. No assurances can be provided that we will be able to continue to maintain effective internal controls over financial reporting, enhance our personnel or their level of experience or prevent a material weakness from occurring. Our failure to maintain effective internal controls could have a material adverse effect on us, could cause us to fail to timely meet our reporting obligations or could result in material adjustments in our financial statements.

Our business is subject to increased competition from new entrants into our business, consolidated companies and new technology/platforms, each of which has the potential to adversely affect our business.

Our business segments operate in a highly competitive environment. Our radio and television programming competes for audiences and advertising revenue directly with radio and television stations and other syndicated programming. We also compete for advertising dollars with other media such as television satellite radio, newspapers, magazines, cable television, outdoor advertising, direct mail and, more increasingly, digital media. The proliferation of new media platforms, including the Internet, video-on-demand, and portable digital devices, has increased audience fragmentation. These new media platforms have gained an increased share of advertising dollars and their introduction could lead to further decreasing revenue for traditional media. Further, as we expend resources to expand our programming and services in new digital distribution channels, our operating results could be negatively impacted until we begin to gain traction in these emerging businesses. New or existing competitors may have resources significantly greater than our own. In particular, the consolidation of the radio industry has created opportunities for large radio groups, such as Clear Channel Communications, CBS Radio and Citadel Broadcasting Corporation to gather information and produce radio and television programming on their own. Increased competition has, in part, resulted in reduced market share over the last several years, and could result in lower audience levels, advertising revenue and cash flow. There can be no assurance that we will be able to maintain or increase our market share, audience ratings or advertising revenue given this competition. To the extent we experience a further decline in audience for our programs, advertisers’ willingness to purchase our advertising could be further reduced. Additionally, audience ratings and performance-based revenue arrangements are subject to change based on the competitive environment and any adverse change in a particular geographic area could have a material and adverse effect on our ability to attract not only advertisers in that region, but national advertisers as well.

In recent years, digital media platforms and the offerings thereon have increased significantly and consumers are playing an increasingly large role in dictating the content received through such mediums. We face increasing pressure to adapt our existing programming as well as to expand the programming and services we offer to address these new and evolving digital distribution channels. Advertising buyers have the option to filter their messages through various digital platforms and as a result, many are adjusting their advertising budgets downward with respect to traditional advertising mediums such as radio and television or utilizing providers who offer “one-stop shopping” access to both traditional and alternative distribution channels. If we are unable to offer our broadcasters and advertisers an attractive full suite of traditional and new media platforms and address the industry shift to new digital mediums, our operating results may be negatively impacted.

Our failure to obtain or retain the rights in popular programming could adversely affect our revenue.

Revenue from our radio programming and television business depends in part on our continued ability to secure and retain the rights to popular programming. We obtain a significant portion of our programming from third parties. For example, some of our most widely heard broadcasts, including certain NFL and NCAA games, are made available based upon programming rights of varying duration that we have negotiated with third parties. Competition for popular programming that is licensed from third parties is intense, and due to increased costs of such programming or potential capital constraints, we may be outbid by our competitors for the rights to new, popular programming or to renew popular programming currently licensed by us. Our failure to obtain or retain rights to popular content could adversely affect our revenue.

If we are not able to integrate future acquisitions successfully, our operating results could be harmed.

We evaluate acquisitions on an ongoing basis and intend to pursue acquisitions of businesses in our industry and related industries that can assist us in achieving our growth strategy. The success of our future acquisition strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions and, if necessary, to obtain satisfactory debt or equity financing to fund those acquisitions. Mergers and acquisitions are inherently risky, and any mergers and acquisitions we do complete may not be successful.

Any mergers and acquisitions we do may involve certain risks, including, but not limited to, the following:

	•		difficulties in integrating and managing the operations, technologies and products of the companies we acquire;

	•		diversion of our management’s attention from normal daily operations of our business;

	•		our inability to maintain the key business relationships and reputations of the businesses we acquire;

	•		uncertainty of entry into markets in which we have limited or no prior experience or in which competitors have stronger market positions;

	•		our dependence on unfamiliar affiliates and partners of the companies we acquire;

	•		insufficient revenue to offset our increased expenses associated with the acquisitions;

	•		our responsibility for the liabilities of the businesses we acquire; and

	•		potential loss of key employees of the companies we acquire.

Our success is dependent upon audience acceptance of our content, particularly our radio programs, which is difficult to predict.

Revenue from our radio and television businesses is dependent on our continued ability to anticipate and adapt to changes in consumer tastes and behavior on a timely basis. Because consumer preferences are consistently evolving, the commercial success of a radio program is difficult to predict. It depends on the quality and acceptance of other competing programs, the availability of alternative forms of entertainment, general economic conditions and other tangible and intangible factors, all of which are difficult to predict. An audience’s acceptance of programming is demonstrated by rating points which are a key factor in determining the advertising rates that we receive. Poor ratings can lead to a reduction in pricing and advertising revenue. Consequently, low public acceptance of our content, particularly our radio programs, could have an adverse effect on our results of operations.

Continued consolidation in the radio broadcast industry could adversely affect our operating results.

The radio broadcasting industry has continued to experience significant change, including a significant amount of consolidation in recent years and increased business transactions by other key players in the radio industry (e.g., Clear Channel, Citadel and CBS Radio). Certain major station groups have: (1) 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, in particular the amount of 10 second inventory, which is directly competitive to us. To the extent similar initiatives are adopted by other major station groups, this could adversely impact the amount of commercial inventory made available to us 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 us or, alternatively, they could seek to obtain programming from our competitors. Any such occurrences, or merely the threat of such occurrences, could adversely affect our ability to negotiate favorable terms with our station affiliates, attract audiences and attract advertisers. If we do not succeed in these efforts, our operating results could be adversely affected.

We may be required to recognize further impairment charges.

On an annual basis and upon the occurrence of certain events, we are required to perform impairment tests on our identified intangible assets with indefinite lives, including goodwill, which testing could impact the value of our business. We have a history of recognizing impairment charges related to our goodwill. In connection with our Refinancing and our requisite adoption of the acquisition method of accounting, we recorded new values of certain assets such that as of April 24, 2009, our revalued goodwill was $86,414 (an increase of $52,426) and intangible assets were $116,910 (an increase of $114,481). In September 2009, we believe a triggering event occurred as a result of forecasted results for 2009 and 2010 and therefore we conducted a goodwill impairment analysis. Metro Traffic results indicated impairment in our Metro Traffic segment. As a result of our Metro Traffic analysis, we recorded an impairment charge of $50,501. The majority of the impairment charges related to our goodwill have not been deductible for income tax purposes.

Risks Related to Our Common Stock

Our common stock may not maintain an active trading market which could affect the liquidity and market price of our common stock.

On November 20, 2009, we listed our common stock on the NASDAQ Global Market. However, there can be no assurance that an active trading market on the NASDAQ Global Market will be maintained, that our common stock price will increase or that our common stock will continue to trade on the exchange for any specific period of time. If we are unable to maintain our listing on the NASDAQ Global Market, we may be subject to a loss of confidence by customers and investors and the market price of our shares may be affected.

Sales of additional shares of common stock by Gores or our other lenders could adversely affect the stock price.

Gores beneficially owns, in the aggregate, 16,027 shares of our common stock, or approximately 75.2% of our outstanding common stock. There can be no assurance that at some future time Gores, or our other lenders, will not, subject to the applicable volume, manner of sale, holding period and limitations of Rule 144 under the Securities Act, sell additional shares of our common stock, which could adversely affect our share price. The perception that these sales might occur could also cause the market price of our common stock to decline. Such sales could also make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

Gores will be able to exert significant influence over us and our significant corporate decisions and may act in a manner that advances its best interest and not necessarily those of other stockholders.

As a result of its beneficial ownership of 16,027 shares of our common stock, or approximately 75.2% of our voting power, Gores has voting control over our corporate actions. For so long as Gores continues to beneficially own shares of common stock representing more than 50% of the voting power of our common stock, it will be able to elect all of the members of our Board and determine the outcome of all matters submitted to a vote of our stockholders, including matters involving mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional shares of common stock or other equity securities and the payment of dividends on common stock. Gores may act in a manner that advances its best interests and not necessarily those of other stockholders by, among other things:

	•		delaying, deferring or preventing a change in control;

	•		impeding a merger, consolidation, takeover or other business combination;

	•		discouraging a potential acquirer from making a tender offer or otherwise attempting obtain control; or

	•		causing us to enter into transactions or agreements that are not in the best interests of all stockholders.

Provisions in our restated certificate of incorporation and by-laws and Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions of our restated certificate of incorporation and by-laws and Delaware law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition. In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. This provision of the Delaware General Corporation Law could delay or prevent a change of control of our company, which could adversely affect the price of our common stock.

We do not anticipate paying dividends on our common stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently anticipate that we will retain all of our available cash, if any, for use as working capital and for other general corporate purposes. Any payment of future cash dividends will be at the discretion of our Board and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our Board deems relevant. In addition, our Senior Credit Facility and the Senior Notes restrict the payment of dividends.

Any issuance of shares of preferred stock by us could delay or prevent a change of control of our company, dilute the voting power of the common stockholders and adversely affect the value of our common stock.

Our Board has the authority to cause us to issue, without any further vote or action by the stockholders, up to 10,000 shares of preferred stock, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series. To the extent we choose to issue preferred stock, any such issuance may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.

The issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of our other classes of voting stock either by diluting the voting power of our other classes of voting stock if they vote together as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote even if the action were approved by the holders of our other classes of voting stock.

The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.

The foregoing list of factors that may affect future performance and the accuracy of forward-looking statements included in the factors above are illustrative, but by no means all-inclusive or exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we may use derivative financial instruments (fixed-to-floating interest rate swap agreements) for the purpose of hedging specific exposures and hold all derivatives for purposes other than trading. All derivative financial instruments held reduce the risk of the underlying hedged item and are designated at inception as hedges with respect to the underlying hedged item. Hedges of fair value exposure are entered into in order to hedge the fair value of a recognized asset, liability or a firm commitment. Derivative contracts are entered into with major creditworthy institutions to minimize the risk of credit loss and are structured to be 100% effective. As of September 30, 2010, there are no currency or interest rate derivative financial instruments outstanding. We recognized an expense of $1,920 related to the embedded derivative that resulted in connection with the Gores’ $10,000 equity commitment as part of the amendments to our credit agreements on August 17, 2010 as described above in Note 7 — Debt.

Our receivables do not represent a significant concentration of credit risk due to the wide variety of customers and markets in which we operate.

Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our President and Chief Financial Officer and our Senior Vice President, Finance and Principal Accounting Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2010 (the “Evaluation”). Based upon the Evaluation, our President and Chief Financial Officer and our Senior Vice President, Finance and Principal Accounting Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) are effective as of September 30, 2010 in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There were no changes in our internal control over financial reporting during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There were no material developments in the third quarter of 2010 to the legal proceeding described in our Annual Report on Form 10-K for the year ended December 31, 2009.

Item 1A. Risk Factors

A description of the risk factors associated with our business is included under “Cautionary Statement Concerning Forward-Looking Statements and Factors Affecting Forward-Looking Statements “ in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contained in Item 2 of Part I of this report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended September 30, 2010, we did not purchase any of our common stock under our existing stock purchase program and we do not intend to repurchase any shares for the foreseeable future.

Issuer Purchases of Equity Securities

Total Number of

Approximate Dollar

Shares Purchased as

Value of Shares that

Total

Part of Publicly

May Yet Be

Number of Shares

Average Price Paid

Announced Plan or

Purchased Under the

Period

Purchased in Period

Per Share

Program

Plans or Programs (A)

7/1/10 – 7/31/10

—

N/A

8/1/10 – 8/31/10

—

N/A

9/1/10 – 9/30/10

—

N/A


(A)		Represents remaining authorization from the $250,000 repurchase authorization approved on February 24, 2004 and the additional $300,000 authorization approved on April 29, 2004, all of which have expired.

Item 3. Reserved

None.

Item 4. Removed and Reserved

None

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit
Number (A)				Description of Exhibit
3.1				Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware. (1)
3.1.1				Certificate of Amendment to the Restated Certificate of Incorporation of Westwood One, Inc., as filed with the Secretary of the State of Delaware on August 3, 2009. (2)
3.1.2				Certificate of Elimination, filed with the Secretary of State of the State of Delaware on November 18, 2009. (3)
3.2				Amended and Restated Bylaws of Registrant adopted on April 23, 2009 and currently in effect. (4)
4.1				Securities Purchase Agreement, dated as of April 23, 2009, by and among the Company and the other parties thereto. (4)
4.1.1				Waiver and First Amendment, dated as of October 14, 2009, to Securities Purchase Agreement, dated as of April 23, 2009, by and between the Company and the noteholders parties thereto. (5)
4.1.2				Second Amendment, dated as of March 30, 2010, to Securities Purchase Agreement, dated as of April 23, 2009, by and between the Company and the noteholders parties thereto. (6)
4.1.3				Third Amendment, dated as of August 17, 2010, to Securities Purchase Agreement, dated as of April 23, 2009, by and between the Company and the noteholders parties thereto. (7)
4.2				Shared Security Agreement, dated as of February 28, 2008, by and among the Company, the Subsidiary Guarantors parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and The Bank of New York, as Collateral Trustee (8)
4.2.1				First Amendment to Security Agreement, dated as of April 23, 2009, by and among the Company, each of the subsidiaries of the Company and The Bank of New York Mellon, as collateral trustee. (9)
31.a*				Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.b*				Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.a**				Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.b**				Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith.

**		Furnished herewith.

(A)		The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.

(1)		Filed as an exhibit to Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.

(2)		Filed as an exhibit to Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2009 and incorporated herein by reference.

(3)		Filed as an exhibit to Company’s current report on Form 8-K dated November 20, 2009 and incorporated herein by reference.

(4)		Filed as an exhibit to Company’s current report on Form 8-K dated April 23, 2009 (filed April 27, 2009) and incorporated herein by reference.

(5)		Filed as an exhibit to Company’s current report on Form 8-K dated February 28, 2008 (filed on March 5, 2008) and incorporated herein by reference.

(6)		Filed as an exhibit to Company’s current report on Form 8-K dated March 31, 2010 and incorporated herein by reference.

(7)		Filed as an exhibit Company’s current report on Form 10-Q for the quarter June 30, 2010 and incorporated herein by reference.

(8)		Filed as an exhibit to Company’s current report on Form 8-K dated February 28, 2008 (filed on March 31, 20105, 2008) and incorporated herein by reference.

(9)		Filed as an exhibit Company’s current report on Form 8-K dated April 27, 2009 and incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


WESTWOOD ONE, INC.
By:	/s/ Roderick M. Sherwood III
	Name:	Roderick M. Sherwood III
	Title:	President and CFO

Date: November 15, 2010

EXHIBIT INDEX


Exhibit
Number		Description of Exhibit
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.