Friday’s exit of Westwood One CEO Tom Beusse was certainly sudden and unexpected. It was just this month that he bought 375,000 shares of the company’s stock for $150,000 as one of three top execs to buy a total of 1,875,000 shares. All, by the way, have already lost more than half of their investment. Beusse had been at the helm for less than 10 months and WW1 is now looking for its 4th CEO since Joel Hollander departed in 2003 to head Infinity Radio (now CBS Radio) – the 5th if you also count Hollander’s brief return as Interim President and CEO at one point.
Since the beginning of 2003 to today, Westwood One’s stock price has gone from $37.36 to Friday’s close of $0.19, a fall of 99.49%. And since Beusse took the helm on January 8th of this year the stock price has fallen from $1.63 to that 19 cent level, an 88.34% drop.
Who will be the next to try to turn around the fortunes of WW1, which was first hard-hit by a decline in national advertising for its radio networks, and more recently by a local ad fall-off affecting its Metro Networks local traffic and news business? Hollander was succeeded by Shane Coppola, who lasted less than two years, with Hollander taking the post again on an interim basis until Peter Kosann was promoted to President and CEO in Janaury 2006. It was Kosann who negotiated an end to CBS Radio’s management contract, at the same time putting in place a deal for better spot clearance on CBS O&O stations. But Kosann, who had been a CBS employee, also decided to exit once WW1 shareholders approved the restructuring. That led to the recruitment of Beusse, a magazine industry veteran who had never worked in broadcasting.
As Beusse began his effort to put WW1 back on track financially, The Gores Group came in as a new investor, agreeing in February to inject up to $100 million into the company. Gores, by the way, paid $1.75 for 25 million new WW1 shares in two blocks. Those shares have now lost 89.14% of their value. The preferred stock that Gores bought pays it 7.5% interest, but it is hard to predict if it will ever be convertible into common stock at $3.00 per share. And its 10 million warrants to buy stock at prices ranging from $5.00 to $7.00 have dropped further and further out of the money.
Westwood One ended 2002 with $550.8 million of revenues and record operating cash flow of $190.4 million. Revenues fell to $539.2 million in 2003, rose a bit to $562.2 in 2004, slipped to $557.8 million in 2005 and then began an accelerated decline of double-digit percentages – to $494.0 million in 2006 and $451.4 million in 2007. Through the first half of 2008 revenues had fallen another 9% to $206.9 million.
In an effort to boost investor enthusiasm, Beusse and other top executives embarked on a roadshow pitching the company’s three-pronged strategy “of enhancing top line growth in the Company’s core local and national radio business, implementing a multi-channel business model and increasing operational efficiencies.”
Most recently, WW1 announced a re-engineering of its Metro Networks unit and other restructuring moves that are supposed to cut cost by $25-30 million. The moves to cut Metro’s employee headcount by 15% and consolidate operations at 60 locations into 15 were to result in a one-time charge of $20-24 million in Q3. WW1 has not yet announced a date for reporting its Q3 results.
Meanwhile, the company is facing delisting by the NYSE, first for having its stock price fall below a buck and more recently for failing to meet minimum capitalization requirements. That may be a lesser worry right now for the Board of Directors than figuring out who can be recruited with the talents to at least stop the company’s revenues and cash flow from eroding in the turbulent economy and hopefully chart a course to future growth.
RBR/TVBR observation: Old hands will recall that Westwood One rebounded from a severe financial decline in the early 1990s, when an ill-timed entry into owning radio stations coincided with a tough period for the network radio business. Back then the running joke was to call the company “Westwood One and Seven-Eighths” for its depressed stock price. At that time the call went out for Mel Karmazin to rescue WW1, merging in the Unistar Radio Networks that he was already running and creating that management deal that had Infinity Broadcasting and later CBS Radio operating WW1. In truth, it was really after Mel realized that he was too busy with all of his other responsibilities that he sent Joel Hollander to run WW1 and the company enjoyed its best days. The problems are even greater today, so we wonder who will be up to the task of another rescue.