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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
[ ] 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 00-24525
CUMULUS MEDIA INC.
(Exact Name of Registrant as Specified in Its Charter)
ILLINOIS 36-4159663
(State of Incorporation) (I.R.S. Employer Identification No.)
3535 PIEDMONT ROAD
BUILDING 14, FLOOR 14
ATLANTA, GA 30305
(404) 949-0700
(Address, including zip code, and telephone number, including area code, of
registrant's principal offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK; PAR VALUE $.01 PER SHARE
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 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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's outstanding common stock
held by non-affiliates of the registrant as of March 16, 2001 was approximately
$190.4 million. As of March 16, 2001, the registrant had outstanding 35,214,349
shares of common stock consisting of (i) 28,427,729 shares of Class A Common
Stock; (ii) 4,479,343 shares of Class B Common Stock; and (iii) 2,307,277 shares
of Class C Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's Proxy Statement for the Annual Meeting of
Shareholders, to be held on May 4, 2001, have been incorporated by reference in
Items 10, 11, 12 and 13 of Part III of this Annual Report on Form 10-K.
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CUMULUS MEDIA INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
ITEM PAGE
NUMBER NUMBER
- ------ ------
Index....................................................... 2
PART I
1. Business.................................................... 3
2. Properties.................................................. 21
3. Legal Proceedings........................................... 21
4. Submission of Matters to a Vote of Security Holders......... 22
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 22
6. Selected Consolidated Financial Data........................ 22
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
7A. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 35
8. Financial Statements and Supplementary Data................. 36
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 36
PART III
10. Directors and Executive Officers of the Company............. 36
11. Executive Compensation...................................... 36
12. Security Ownership of Certain Beneficial Owners &
Management................................................ 36
13. Certain Relationships and Related Transactions.............. 36
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 37
Signatures.................................................. 49
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PART 1
ITEM 1. BUSINESS
CERTAIN DEFINITIONS
We use the term "local marketing agreement" ("LMA") in various places in
this report. A typical LMA is an agreement under which a Federal Communications
Commission ("FCC") licensee of a radio station makes available, for a fee, air
time on its station to a party. Such party provides programming to be broadcast
during such airtime and collects revenues from advertising it sells for
broadcast during such programming. In addition to entering into LMAs, we will
from time to time enter into management or consulting agreements that provide us
with the ability, as contractually specified, to assist current owners in the
management of radio station assets that we have contracted to purchase, subject
to FCC approval. In such arrangements, we receive a contractually specified
management fee or consulting fee in exchange for the services provided.
In this Form 10-K the terms "Company", "Cumulus", "we", "us", and "our"
refer to Cumulus Media Inc. and its consolidated subsidiaries.
"MSA" is defined as Metro Survey Area, as listed in the Arbitron Radio
Metro and Television Market Population Estimates 1999-2000. For example, "MSA
100-283" would mean the 100th largest market through the 283rd largest market,
as listed in the Arbitron Radio Metro and Television Market Population Estimate.
Unless otherwise indicated:
- we obtained market ranking by radio advertising revenue, radio market
advertising revenue and radio market advertising data from BIA's
MasterAccess ("BIA") compiled by BIA Research, Inc.;
- we obtained total industry listener and revenue levels from the Radio
Advertising Bureau ("RAB");
- we derived all audience share data and audience rankings, including
ranking by population, except where otherwise stated to the contrary,
from surveys of people ages 12 and over ("Adults 12+"), listening Monday
through Sunday, 6 a.m. to 12 midnight, and based on the Fall 2000
Arbitron Market Report pertaining to each market, as reported by BIA; and
- we obtained revenue share data in each market presented from BIA as
adjusted for market information available to and known by the Company.
- All dollar amounts are rounded to the nearest thousand.
The terms "Broadcast Cash Flow" and "EBITDA" are used in various places in
this document.
Broadcast Cash Flow consists of:
- operating income (loss) before
-- depreciation,
-- amortization,
-- LMA fees,
-- non-cash stock compensation expense,
-- corporate general and administrative expense, and
-- restructuring and other charges.
EBITDA, consists of:
- operating income (loss) before
-- depreciation,
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-- amortization,
-- LMA fees,
-- non-cash stock compensation expense, and
-- restructuring and other charges.
EBITDA, as defined by the Company, may not be comparable to similarly
titled measures used by other companies. Although Broadcast Cash Flow and EBITDA
are not measures of performance calculated in accordance with generally accepted
accounting principles ("GAAP"), we believe that they are useful to an investor
in evaluating the Company because they are measures widely used in the broadcast
industry to evaluate a radio company's operating performance. However, Broadcast
Cash Flow and EBITDA should not be considered in isolation or as substitutes for
net income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as measures of liquidity or
profitability.
COMPANY OVERVIEW
We are a radio broadcasting company focused on acquiring, operating and
developing radio stations in mid-size radio markets in the U.S. and own and
operate 186 stations in 42 U.S. markets. We also provide sales and marketing
services under local marketing, management and consulting agreements (pending
FCC approval of acquisition) to 41 stations in 16 U.S. markets. We are the
second largest radio broadcasting company in the U.S. based on number of
stations. We believe we are the tenth largest radio broadcasting company in the
U.S. based on 2000 pro forma net revenues. We will own and operate a total of
225 radio stations (164 FM and 61 AM) in 46 U.S. markets upon consummation of
our pending acquisitions and dispositions. According to BIA and the Radio
Advertising Bureau, we have assembled market-leading groups or clusters of radio
stations which rank first or second in terms of revenue share and/or audience
share in substantially all of our markets. On a historical basis, for the year
ended December 31, 2000, we had net revenues of $225.9 million and Broadcast
cash Flow of $34.6 million.
Relative to the 100 largest markets in the U.S., we believe that the
mid-size markets represent attractive operating environments and generally are
characterized by:
- a greater use of radio advertising as evidenced by the greater percentage
of total media revenues captured by radio than the national average;
- rising advertising revenues as the larger national and regional retailers
expand into these markets;
- small independent operators, many of whom lack the capital to produce
high quality locally-originated programming and/or to employ more
sophisticated research, marketing, management and sales techniques; and
- lower overall susceptibility to economic downturns.
We believe that the attractive operating characteristics of mid-size
markets, together with the relaxation of radio station ownership limits under
the Telecommunications Act of 1996 ("the Telecom Act") and FCC rules, create
significant opportunities for growth from the formation of groups of radio
stations within these markets. We believe that mid-size radio markets provide an
excellent opportunity to acquire attractive properties at favorable purchase
prices due to the size and fragmented nature of ownership in these markets and
to the greater attention historically given to the larger markets by radio
station acquirers. According to BIA, there are approximately 1,656 FM and 1,035
AM stations in the 177 US radio markets ranked MSA 100-283. These 2,691 stations
are owned by approximately 990 different operators. In addition, there are
nearly 4,700 stations in unranked markets owned by approximately 2,500
operators.
To maximize the advertising revenues and Broadcast Cash Flow of our
stations, we seek to enhance the quality of radio programs for listeners and the
attractiveness of the radio station in a given market. We also increase the
amount of locally originated programming. Within each market, our stations are
diversified in terms of format, target audience and geographic location,
enabling us to attract larger and broader listener
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audiences and thereby a wider range of advertisers. This diversification,
coupled with our favorable advertising pricing, also has provided us with the
ability to compete successfully for advertising revenue against non-traditional
competitors such as print media and television.
We believe that we are in a position to generate revenue growth in excess
of historical market rates, increase audience and revenue shares within these
markets and, by capitalizing on economies of scale and by competing against
other media for incremental advertising revenue, increase our Broadcast Cash
Flow growth rates and margins to those levels found in large markets. As we have
assembled our portfolio of stations over the past four years, many of our
markets are still in the development stage with the potential for substantial
growth as we implement our operating strategy.
OPERATING STRATEGY
Our operating strategy has the following principal components:
- ASSEMBLE AND DEVELOP LEADING STATION GROUPS. In each market, we acquire
leading stations in terms of revenue or audience share as well as
under-performing stations which we believe create an opportunity for
growth. Each station within a market generally has a different format and
an FCC license that provides for full signal coverage in the market area.
- DEVELOP EACH STATION AS A UNIQUE ENTERPRISE. While stations within a
market share common infrastructure in terms of office and/or studio
space, support personnel and certain senior management, each station is
developed and marketed as an individual brand with its own identity,
programming, programming personnel, inventory of time slots and sales
force. We believe that this strategy maximizes the revenues per station
and of the group as a whole.
- USE RESEARCH TO GUIDE PROGRAMMING. We use audience research and music
testing to refine each station's programming content to match the
preferences of the station's target demographic audience. We also seek to
enrich our listeners' experiences by increasing both the quality and
quantity of local programming. We believe this strategy maximizes the
number of listeners for each station.
- POSITION STATION GROUPS TO COMPETE WITH PRINT AND TELEVISION. While
advertising for each station is typically sold independently of other
stations, the diverse station formats within each market have enabled us
to attract a larger and broader listener audience which in turn has
attracted a wider range of advertisers. We believe this diversification,
coupled with our favorable advertising pricing, has provided us with the
ability to compete successfully against not only traditional radio
competitors, but also against non-traditional competitors such as print
media and television.
- ORGANIZE MARKETS IN ADVERTISER REGIONS. Our markets are located primarily
in five regional concentrations: the Southeast, Midwest, Southwest,
Northeast and the Far West. By assembling market clusters with a regional
concentration, we believe that we will be able to increase revenues by
offering regional coverage of key demographic groups that were previously
unavailable to national and regional advertisers.
- EMPLOY INTERNET-BASED MANAGEMENT INFORMATION SYSTEMS. We have implemented
an Internet-based proprietary software application which enables us to
monitor daily sales performance by station and by market compared to
their respective budgets. It also enables us to identify any
under-performing stations, determine the explanation for the
under-performance and take corrective action quickly. In addition, our
Internet-based system provides all of our stations with a cost-efficient
and rapid medium to exchange ideas and views regarding station operations
and ways to increase advertising revenues. We also use this system to
electronically deliver to our stations ads and program elements which are
produced at our central production facility.
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ACQUISITION AND DIVESTITURES HISTORY
We completed the acquisitions of 76 radio stations for cash during the year
ended December 31, 2000. The aggregate purchase price of $430.3 million for
these transactions includes certain acquisition-related costs paid in 2000 and
1999.
On March 5, 2000 Cumulus Media Inc. entered into an Asset Purchase
Agreement (the "Phase 1 Purchase Agreement") with Capstar Radio Operating
Company ("Capstar ROC") and Capstar TX Limited Partnership ("Capstar TX"),
entities controlled by Clear Channel Communications Inc. ("Clear Channel") to
facilitate the acquisition and disposition of certain radio station assets. Also
on March 5, 2000 Cumulus Media Inc. entered into an Asset Exchange Agreement
(the "Phase 1 Exchange Agreement") with Capstar ROC and Capstar TX pursuant to
which the parties agreed to exchange the Clear Channel Station Assets (defined
therein) and the Exchange Party Station Assets (defined therein). The parties
intended the transaction contemplated by this Exchange Agreement to be a
like-kind exchange in accordance with the provisions of Section 1031 of the
Internal Revenue Code of 1986, as amended (the "Code"). On June 5, 2000 the
parties to the Phase 1 Purchase Agreement and the Phase 1 Exchange Agreement
entered into an Amendment (the "First Amendment") in which the Exchange
Agreement and the Phase 1 Purchase Agreement were amended to, among other
things, 1) modify the radio station assets to be included in the Phase 1
Exchange Agreement; and 2) modify the purchase price under the Phase 1 Purchase
Agreement and the cash amount under the Phase 1 Exchange Agreement.
On July 17, 2000 the parties to the Phase 1 Purchase Agreement and the
Phase 1 Exchange Agreement entered into a Second Amendment (the "Second
Amendment") whereby the Phase 1 Exchange Agreement and the Phase 1 Purchase
Agreement were amended to, among other things, 1) further modify the radio
station assets to be included in the Phase 1 Exchange Agreement; and 2) further
modify the purchase price under the Phase 1 Purchase Agreement and the cash
amount under the Phase 1 Exchange Agreement. The Phase 1 Purchase Agreement and
the Phase 1 Exchange Agreement, as amended, will hereafter be referred to as the
"Phase 1 Clear Channel Agreements".
The transactions contemplated by the Phase 1 Clear Channel Agreements were
consummated on August 25, 2000, whereby the Company transferred 25 stations in 5
markets to Clear Channel in exchange for 8 stations in 3 markets plus $91.5
million of cash proceeds.
On September 6, 2000, Cumulus Media Inc. entered into an Asset Purchase
Agreement (the "Phase 2 Asset Purchase Agreement") with Clear Channel
Broadcasting, Inc. and Clear Channel Broadcasting Licenses, Inc., entities
controlled by Clear Channel. On September 30, 2000, Cumulus Media Inc. entered
into an amendment to the Phase 2 Asset Purchase Agreement (the "Phase 2
Amendment") with Clear Channel. Among other things, the Phase 2 Amendment i)
specified the transfer of the Station Assets were as part of a like-kind
exchange under Section 1031 of the Internal Revenue Code, and ii) set the
closing date for October 2, 2000.
The transactions contemplated by the Phase 2 Asset Purchase Agreement were
consummated on October 2, 2000, whereby the Company sold 28 stations in 5
markets for $68.9 million of initial cash proceeds. Upon receipt of regulatory
approval for 6 of the stations being sold, the Company will receive an
additional $6.0 million of cash proceeds.
On October 2, 2000, Cumulus Media Inc. entered into a Tangible Property
Purchase Agreement (the "Phase 3 Tangible Property Purchase Agreement") with
Capstar ROC. The transactions contemplated by the Phase 3 Tangible Property
Purchase Agreement were consummated on October 2, 2000, whereby the Company sold
the tangible assets associated with 44 stations in 8 markets to Clear Channel in
exchange for cash proceeds of $15.0 million. On October 2, 2000, Cumulus Media
Inc. entered into an Asset Exchange Agreement (the "Phase 3 Asset Exchange
Agreement") with Capstar ROC and Capstar TX.
On January 18, 2001, the Company completed substantially all of the asset
exchanges and sales contemplated by the Phase 3 Asset Exchange Agreement with
Capstar ROC and Capstar TX. Upon the closing, the Company transferred 44
stations in 8 markets in exchange for 4 stations in 1 market and
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approximately $36.2 million in cash. As of the close date, the Company also
received approximately $2.7 million in proceeds previously withheld from the
second phase of the Clear Channel transactions.
The statement of operations for the year ended December 31, 2000 includes
the revenue and broadcast operating expenses, or in the case of local marketing,
management or consulting agreements, the respective contractual income, of these
radio stations and any related fees associated with the LMA from the effective
date of the LMA through the earlier of (i) the date of acquisition of such
station by the Company; (ii) December 31, 2000; or (iii) in the case of WJZE-FM,
the termination date of the LMA.
As of December 31, 2000 the Company was a party to various agreements to
acquire stations across 16 markets for an aggregate purchase price of
approximately $186.6 million. Between January 1, 2001 and March 16, 2001 the
Company closed the acquisitions of 7 of those stations across 2 markets,
representing $106.2 million in purchase price.
INDUSTRY OVERVIEW
The primary source of revenues for radio stations is the sale of
advertising time to local, regional and national spot advertisers and national
network advertisers. National spot advertisers assist advertisers in placing
their advertisements in a specific market. National network advertisers place
advertisements on a national network show and such advertisements will air in
each market where the network has an affiliate. During the past decade, local
advertising revenue as a percentage of total radio advertising revenue in a
given market has ranged from approximately 72% to 87%. The growth in total radio
advertising revenue tends to be fairly stable. With the exception of 1991, when
total radio advertising revenue fell by approximately 3.1% compared to the prior
year, advertising revenue has generally risen in each of the past 16 years
faster than both inflation and the gross national product.
According to the Radio Advertising Bureau's Radio Marketing Guide and Fact
Book for Advertisers, Fall '99 to Spring '00, each week radio reaches
approximately 95% of all Americans over the age of 12. More than 66% of all
radio listening is done outside the home and car radio reaches four out of five
adults each week. The average listener spends approximately three hours and six
minutes per day listening to radio. The highest portion of radio listenership
occurs during the morning, particularly between the time a listener wakes up and
the time the listener reaches work. This "morning drive time" period reaches
more than 84% of people over 12 years of age, and as a result, radio advertising
sold during this period achieves premium advertising rates.
Radio is considered an efficient, cost-effective means of reaching
specifically identified demographic groups. Stations are typically classified by
their on-air format, such as country, adult contemporary, oldies and news/talk.
A station's format and style of presentation enables it to target specific
segments of listeners sharing certain demographic features. By capturing a
specific share of a market's radio listening audience, with particular
concentration in a targeted demographic, a station is able to market its
broadcasting time to advertisers seeking to reach a specific audience.
Advertisers and stations use data published by audience measuring services, such
as Arbitron, to estimate how many people within particular geographical markets
and demographics listen to specific stations.
The number of advertisements that can be broadcast without jeopardizing
listening levels and the resulting ratings are limited in part by the format of
a particular station and the local competitive environment. Although the number
of advertisements broadcast during a given time period may vary, the total
number of advertisements broadcast on a particular station generally does not
vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station
usually will engage a firm that specializes in soliciting radio advertising
sales on a national level. National sales representatives obtain advertising
principally from advertising agencies located outside the station's market and
receive commissions based on the revenue from the advertising they obtain.
Our stations also compete for advertising revenue with other media,
including newspapers, broadcast television, cable television, magazines, direct
mail, coupons and outdoor advertising. In addition, the radio broadcasting
industry is subject to competition from new media technologies that are being
developed or
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introduced, such as the delivery of audio programming by cable television
systems, by satellite and by digital audio broadcasting. The FCC has authorized
two companies to provide satellite digital audio service. Such service, when
implemented, is expected to deliver by satellite to nationwide and regional
audiences, multi-channel, multi-format, digital radio services with sound
quality equivalent to compact discs. The FCC has also sought public comment on
the introduction of terrestrial digital audio broadcasting (which is digital
audio broadcasting delivered using earth based equipment rather than
satellites). It is not known at this time whether any such digital technology
may be used in the future by existing radio broadcast stations, either on
existing or alternate broadcasting frequencies. In addition, as discussed below,
the FCC recently authorized a new low power FM service which may compete with
our stations for listeners and revenue. The delivery of radio signals and
information through the presently unregulated Internet also could create a new
form of competition.
The radio broadcasting industry historically has grown despite the
introduction of new technologies for the delivery of entertainment and
information, such as television broadcasting, cable television, audio tapes and
compact discs. A growing population and greater availability of radios,
particularly car and portable radios, have contributed to this growth. There can
be no assurance, however, that the development or introduction in the future of
any new media technology will not have an adverse effect on the radio
broadcasting industry.
ADVERTISING SALES
Virtually all of our revenue is generated from the sale of local, regional
and national advertising for broadcast on our radio stations. Approximately 89%,
89% and 88% of our net broadcasting revenue was generated from the sale of local
and regional advertising in 2000, 1999 and 1998, respectively. Additional
broadcasting revenue is generated from the sale of national advertising. The
major categories of our advertisers include:
- - Automotive - Telecommunications - Computers & Software
- - Retail - Fast Food - Entertainment
- - Healthcare - Beverage - Services
Each station's local sales staff solicits advertising either directly from
the local advertiser or indirectly through an advertising agency. We employ a
tiered commission structure to focus our individual sales staffs on new business
development. Consistent with our operating strategy of dedicated sales forces
for each of our stations, we have also increased the number of salespeople per
station. We believe that we can outperform the traditional growth rates of our
markets by (1) expanding our base of advertisers, (2) training newly hired sales
people and (3) providing a higher level of service to our existing base. This
requires larger sales staffs than most of the stations employ at the time they
are acquired by Cumulus. We support our strategy of building local direct
accounts by employing personnel in each of our markets to produce custom
commercials that respond to the needs of our advertisers. In addition, in-house
production provides advertisers greater flexibility in changing their commercial
messages with minimal lead-time.
Our national sales are made by Interep National Radio Sales, Inc., a firm
specializing in radio advertising sales on the national level, in exchange for a
commission that is based on our net revenue from the advertising obtained.
Regional sales, which we define as sales in regions surrounding our markets to
buyers that advertise in our markets, are generally made by our local sales
staff and market managers. Whereas we seek to grow our local sales through
larger and more customer-focused sales staffs, we seek to grow our national and
regional sales by offering to key national and regional advertisers groups of
stations within specific markets and regions that make our stations more
attractive. Many of these large accounts have previously been reluctant to
advertise in these markets because of the logistics involved in buying
advertising from individual stations. Certain of our stations had no national
representation before being acquired by us.
The number of advertisements that can be broadcast without jeopardizing
listening levels and the resulting ratings are limited in part by the format of
a particular station. We estimate the optimal number of advertisements available
for sale depending on the programming format of a particular station. Each of
our stations has a general target level of on-air inventory that it makes
available for advertising. This target level of inventory for sale may be
different at different times of the day but tends to remain stable over time.
Our
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stations strive to maximize revenue by managing their on-air inventory of
advertising time and adjusting prices up or down based on supply and demand. We
seek to broaden our base of advertisers in each of our markets by providing a
wide array of audience demographic segments across our cluster of stations,
thereby providing each of our potential advertisers with an effective means of
reaching a targeted demographic group. Our selling and pricing activity is based
on demand for our radio stations' on-air inventory and, in general, we respond
to this demand by varying prices rather than by varying our target inventory
level for a particular station. Most changes in revenue are explained by
demand-driven pricing changes rather than by changes in the available inventory.
Advertising rates charged by radio stations are based primarily on:
- a station's share of audiences generally, and in the demographic groups
targeted by advertisers (as measured by ratings surveys);
- the supply of and demand for radio advertising time generally and for
time targeted at particular demographic groups; and
- certain additional qualitative factors. Rates are generally highest
during morning and afternoon commuting hours.
A station's listenership is reflected in ratings surveys that estimate the
number of listeners tuned to the station and the time they spend listening. Each
station's ratings are used by its advertisers and advertising representatives to
consider advertising with the station and are used by Cumulus to chart audience
growth, set advertising rates and adjust programming. The radio broadcast
industry's principal ratings service is Arbitron, which publishes periodic
ratings surveys for significant domestic radio markets. These surveys are our
primary source of ratings data.
COMPETITION
The radio broadcasting industry is highly competitive. The success of each
of our stations depends largely upon its audience ratings and its share of the
overall advertising revenue within its market. Our audience ratings and
advertising revenue are subject to change, and any adverse change in a
particular market affecting advertising expenditures or an adverse change in the
relative market positions of the stations located in a particular market could
have a material adverse effect on the revenue of our radio stations located in
that market. There can be no assurance that any one or all of our stations will
be able to maintain or increase current audience ratings or advertising revenue
market share.
Our stations, including those to be acquired upon completion of the pending
acquisitions, compete for listeners and advertising revenues directly with other
radio stations within their respective markets, as well as with other
advertising media as discussed below. Radio stations compete for listeners
primarily on the basis of program content that appeals to a particular
demographic group. By building a strong listener base consisting of specific
demographic groups in each of our markets, we are able to attract advertisers
seeking to reach those listeners. Companies that operate radio stations must be
alert to the possibility of another station changing its format to compete
directly for listeners and advertisers. Another station's decision to convert to
a format similar to that of one of our radio stations in the same geographic
area or to launch an aggressive promotional campaign may result in lower ratings
and advertising revenue, increased promotion and other expenses and,
consequently, lower broadcast cash flow for Cumulus.
Factors that are material to a radio station's competitive position include
management experience, the station's local audience rank in its market,
transmitter power and location, assigned frequency, audience characteristics,
local program acceptance and the number and characteristics of other radio
stations and other advertising media in the market area. We attempt to improve
our competitive position in each market by extensively researching and improving
our stations' programming, by implementing advertising campaigns aimed at the
demographic groups for which our stations program and by managing our sales
efforts to attract a larger share of advertising dollars for each station
individually. However, we compete with some organizations that have
substantially greater financial or other resources than we do.
Recent changes in federal law and the FCC's rules and policies permit
increased ownership and operation of multiple local radio stations. Management
believes that radio stations that elect to take advantage of groups
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of commonly owned stations or joint arrangements such as LMAs may in certain
circumstances have lower operating costs and may be able to offer advertisers
more attractive rates and services. Although we currently operate multiple
stations in each of our markets and intend to pursue the creation of additional
multiple station groups, our competitors in certain markets include operators of
multiple stations or operators who already have entered into LMAs. We may also
compete with other broadcast groups for the purchase of additional stations.
Some of these groups are owned or operated by companies that have substantially
greater financial or other resources than we do.
Although the radio broadcasting industry is highly competitive, and
competition is enhanced to some extent by changes in existing radio station
formats and upgrades of power, among other actions, certain regulatory
limitations on entry exist. The operation of a radio broadcast station requires
a license from the FCC, and the number of radio stations that an entity can
operate in a given market is limited by the availability of FM and AM radio
frequencies allotted by the FCC to communities in that market, as well as by the
multiple ownership rules regulating the number of stations that may be owned or
programmed by a single entity. The multiple ownership provisions of the FCC's
rules have changed significantly as a result of the Telecom Act. For a
discussion of FCC regulation and the provisions of the Telecom Act, see
"-- Federal Regulation of Radio Broadcasting."
Our stations also compete for advertising revenue with other media,
including newspapers, broadcast television, cable television, magazines, direct
mail, coupons and outdoor advertising. In addition, the radio broadcasting
industry is subject to competition from new media technologies that are being
developed or introduced, such as the delivery of audio programming by cable
television systems, by satellite and by digital audio broadcasting. Digital
audio broadcasting may deliver by satellite to nationwide and regional
audiences, multi-channel, multi-format, digital radio services with sound
quality equivalent to compact discs. The delivery of broadcast signals and
information through the presently unregulated Internet also could create a new
form of competition. The radio broadcasting industry historically has grown
despite the introduction of new technologies for the delivery of entertainment
and information, such as television broadcasting, cable television, audio tapes
and compact discs. A growing population and greater availability of radios,
particularly car and portable radios, have contributed to this growth. There can
be no assurance, however, that the development or introduction in the future of
any new media technology will not have an adverse effect on the radio
broadcasting industry.
The FCC has recently authorized spectrum for the use of a new technology,
satellite digital audio radio services, to deliver audio programming. The FCC
has also authorized two companies to provide digital audio radio service.
Digital audio radio services may provide a medium for the delivery by satellite
or terrestrial means of multiple new audio programming formats to local and
national audiences. It is not known at this time whether this digital technology
also may be used in the future by existing radio broadcast stations either on
existing or alternate broadcasting frequencies.
The FCC also recently approved a new low power FM radio service. Under this
program, licenses to operate stations in this service would be available only to
persons or entities that do not currently own FM radio stations. We cannot
predict what effect, if any, the implementation of these services will have on
our operations. Low power FM radio stations may, however, cause interference to
our stations and compete with our stations for listeners and advertising
revenues.
We cannot predict what other matters might be considered in the future by
the FCC or the Congress, nor can we assess in advance what impact, if any, the
implementation of any of these proposals or changes might have on our business.
EMPLOYEES
At December 31, 2000, we employed approximately 2,700 people. None of our
employees are covered by collective bargaining agreements, and we consider our
relations with our employees to be satisfactory.
We employ several on-air personalities with large loyal audiences in their
respective markets. On occasion, we enter into employment agreements with these
personalities to protect our interests in those
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relationships that we believe to be valuable. The loss of any one of these
personalities could result in a short-term loss of audience share, but we do not
believe that any such loss would have a material adverse effect on our financial
condition or results of operations, taken as a whole.
FEDERAL REGULATION OF RADIO BROADCASTING
Introduction. The ownership, operation and sale of broadcast stations,
including those licensed to us, are subject to the jurisdiction of the FCC,
which acts under authority derived from the Communications Act of 1934. The
Telecom Act amended the Communications Act to make changes in several broadcast
laws and to direct the FCC to change certain of its broadcast rules. Among other
things, the FCC grants permits and licenses to construct and operate radio
stations; assigns frequency bands for broadcasting; determines whether to
approve changes in ownership or control of station licenses; regulates equipment
used by stations and the operating power and other technical parameters of
stations; adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment practices of stations;
regulates the content of some forms of radio broadcasting programming; and has
the power to impose penalties for violations of its rules under the
Communications Act.
The following is a brief summary of certain provisions of the
Communications Act, the Telecom Act and specific FCC rules and policies. This
description does not purport to be comprehensive, and reference should be made
to the Communications Act, the Telecom Act, the FCC's rules and the public
notices and rulings of the FCC for further information concerning the nature and
extent of federal regulation of radio broadcasting stations. Failure to observe
the provisions of the Communications Act and the FCC's rules and policies can
result in the imposition of various sanctions, including monetary forfeitures,
the grant of "short-term" (less than the maximum term) license renewal or, for
particularly egregious violations, the denial of a license renewal application,
the revocation of a license or the denial of FCC consent to acquire additional
broadcast properties.
License Grant and Renewal. Radio broadcast licenses are granted and renewed
for maximum terms of eight years. Licenses may be renewed through an application
to the FCC. Petitions to deny license renewal applications can be filed by
interested parties, including members of the public. We are not currently aware
of any facts that would prevent the timely renewal of our licenses to operate
our radio stations, although there can be no assurance that our licenses will be
renewed.
The area served by AM stations is determined by a combination of frequency,
transmitter power and antenna orientation. To determine the effective service
area of an AM station, its power, its operating frequency, its antenna patterns
and its day/night operating modes are required. The area served by FM stations
is determined by a combination of transmitter power and antenna height, with
stations divided into classes according to their anticipated service area.
Class C FM stations operate at 100 kilowatts of power with up to 1,968 feet
of antenna elevation above average terrain. They are the most powerful FM
stations, providing service to a large area, typically a substantial portion of
a state. Class B FM stations operate at up to 50 kilowatts of power with up to
492 feet of antenna elevation. These stations typically serve large metropolitan
areas as well as their associated suburbs. Class A FM stations operate at 6
kilowatts with up to 328 feet of antenna elevation, and serve smaller cities and
towns or suburbs of larger cities.
The minimum and maximum facilities requirements for a FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1, C-0, and C.
11
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The following table sets forth the market, call letters, FCC license
classification, antenna elevation above average terrain (for FM stations only),
power and frequency of each of the stations we own or operate, assuming the
consummation of all pending acquisitions, and the date on which each station's
FCC license will expire.
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION FCC TERRAIN ---------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------------- --------------- --------- --------------- ----- --------- --- -----
MIDWEST REGION
Appleton Oshkosh, WI... WWWX FM Oshkosh, WI 96.9 December 1, 2004 A 328 6.0 6.0
WVBO FM Winneconne, WI 103.9 December 1, 2004 C3 318 25.0 25.0
WNAM AM Neenah Menasha, WI 1280 December 1, 2004 B N.A. 20.0 5.0
WOSH AM Oshkosh, WI 1490 December 1, 2004 C N.A. 1.0 1.0
Dubuque, IA............ KLYV FM Dubuque, IA 105.3 February 1, 2005 C2 331 50.0 50.0
KXGE FM Dubuque, IA 102.3 February 1, 2005 A 410 1.7 1.7
WDBQ FM Galena, IL 107.5 February 1, 2005 A 328 3.0 3.0
WDBQ AM Dubuque, IA 1490 February 1, 2005 C N.A. 1.0 1.0
WJOD FM Asbury, IA 103.3 February 1, 2005 C3 643 6.6 6.6
Bismarck, ND........... KBYZ FM Bismarck, ND 96.5 April 1, 2005 C 1001 100.0 100.0
KACL FM Bismarck, ND 98.7 April 1, 2005 C 1093 100.0 100.0
KKCT FM Bismarck, ND 97.5 April 1, 2005 C1 830 100.0 100.0
KLXX AM Mandan, ND 1270 April 1, 2005 B N.A. 1.0 0.3
Canton, OH............. WRQK FM Canton, OH 106.9 October 1, 2003 B 341 27.5 27.5
WQXK FM Salem, OH 105.1 October 1, 2003 B 430 88.0 88.0
WSOM AM Salem, OH 600 October 1, 2003 D N.A 1.0 0.0
Cedar Rapids, IA....... KDAT FM Cedar Rapids, IA 104.5 February 1, 2005 C1 551 100.0 100.0
KHAK FM Cedar Rapids, IA 98.1 February 1, 2005 C1 459 100.0 100.0
KRNA FM Iowa City, IA 94.1 February 1, 2005 C1 981 100.0 100.0
Faribault-Owatonna-
Waseca, MN............. KRFO AM Owatonna, MN 1390 April 1, 2005 B N.A. 0.5 0.1
KRFO FM Owatonna, MN 104.9 April 1, 2005 A 174 4.7 4.7
KOWO AM Waseca, MN 1170 April 1, 2005 B N.A. 1.0 0.0
KRUE FM Waseca, MN 92.1 April 1, 2005 C3 285 25.0 25.0
KDHL AM Faribault, MN 920 April 1, 2005 B N.A. 5.0 5.0
KQCL FM Faribault, MN 95.9 April 1, 2005 A 328 3.0 3.0
KQPR FM Albert Lea, MN 96.1 April 1, 2005 A 328 6.0 6.0
Flint, MI.............. WDZZ FM Flint, MI 92.7 October 1, 2004 A 256 3.0 3.0
WRSR FM Owosso, MI 103.9 October 1, 2004 A 482 2.9 2.9
WWCK FM Flint, MI 105.5 October 1, 2004 B1 328 25.0 25.0
WFDF AM Flint, MI 910 October 1, 2004 B N.A. 5.0 1.0
WWCK AM Flint, MI 1570 October 1, 2004 D N.A. 1.0 0.1
Green Bay, WI.......... WOGB FM Kaukauna, WI 103.1 December 1, 2004 C3 879 25.0 25.0
WJLW FM Allouez, WI 106.7 December 1, 2004 C3 509 25.0 25.0
WXWX FM Brillion, WI 107.5 December 1, 2004 A 328 6.0 6.0
WQLH FM Green Bay, WI 98.5 December 1, 2004 C1 499 100.0 100.0
WDUZ AM Green Bay, WI 1400 December 1, 2004 C N.A. 1.0 1.0
Harrisburg, PA......... WNNK FM Harrisburg, PA 104.1 August 1, 2006 B 725 22.5 22.5
WTPA FM Mechanicsburg, PA 93.5 August 1, 2006 A 719 1.3 1.3
WNCE FM Palmyra, PA 92.1 August 1, 2006 A 299 3.3 3.3
WTCY AM Harrisburg, PA 1400 August 1, 2006 C N.A. 1.0 1.0
Kalamazoo, MI.......... WKFR FM Battle Creek, MI 103.3 October 1, 2004 B 482 50.0 50.0
WRKR FM Portage, MI 107.7 October 1, 2004 B 489 50.0 50.0
WKMI AM Kalamazoo, MI 1360 October 1, 2004 B N.A. 5.0 1.0
Monroe, MI............. WTWR FM Monroe, MI 98.3 October 1, 2004 A 466 1.4 1.4
Quad Cities, IA-IL..... WXLP FM Moline, IL 96.9 December 1, 2004 B 499 50.0 50.0
KORB FM Bettendorf, IA 93.5 February 1, 2005 A 896 6.0 6.0
KBEA FM Muscatine, IA 99.7 February 1, 2005 C1 318 100.0 100.0
KBOB FM DeWitt, IA 104.9 February 1, 2005 C3 469 12.5 12.5
KJOC AM Davenport, IA 1170 February 1, 2005 B N.A. 1.0 1.0
12
13
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION FCC TERRAIN ---------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------------- --------------- --------- --------------- ----- --------- --- -----
Rockford, IL........... WROK AM Rockford, IL 1440 December 1, 2004 B N.A. 5.0 0.3
WZOK FM Rockford, IL 97.5 December 1, 2004 B 430 50.0 50.0
WXXQ FM Freeport, IL 98.5 December 1, 2004 B1 492 11.0 11.0
WKMQ FM Lores Park, IL 96.7 December 1, 2004 A 161 5.0 5.0
Saginaw, MI............ WTLZ FM Saginaw, MI 107.1 October 1, 2004 A 361 4.9 4.9
Toledo, OH............. WKKO FM Toledo, OH 99.9 October 1, 2003 B 499 50.0 50.0
WRQN FM Bowling Green, OH 93.5 October 1, 2003 A 397 4.1 4.1
WTOD AM Toledo, OH 1560 October 1, 2003 B N.A. 5.0 0.0
WWWM FM Sylvania, OH 105.5 October 1, 2003 A 390 4.3 4.3
WLQR AM Toledo, OH 1470 October 1, 2003 B N.A. 1.0 1.0
WXKR FM Port Clinton, OH 94.5 October 1, 2003 B 630 30.0 30.0
WRWK FM Delta, OH 106.5 October 1, 2003 A 328 3.0 3.0
Topeka, KS............. KDVV FM Topeka, KS 100.3 August 1, 2005 C 984 100.0 100.0
KMAJ FM Topeka, KS 107.7 August 1, 2005 C 988 100.0 100.0
KMAJ AM Topeka, KS 1440 August 1, 2005 B N.A. 5.0 1.0
KTOP AM Topeka, KS 1490 August 1, 2005 C N.A. 1.0 1.0
KQTP FM St. Marys, KS 102.9 August 1, 2005 C2 318 50.0 50.0
KWIC FM Topeka, KS 99.3 August 1, 2005 A 292 6.0 6.0
Waterloo-Cedar Falls,
IA..................... KKCV FM Cedar Falls, IA 98.5 February 1, 2005 C3 423 15.1 15.1
KOEL FM Oelwein, IA 92.3 February 1, 2005 C 991 95.0 95.0
KOEL AM Oelwein, IA 950 February 1, 2005 B N.A. 5.0 0.5
KCRR FM Grundy Center, IA 97.7 February 1, 2005 C3 407 16.0 16.0
Youngstown, OH......... WBBW AM Youngstown, OH 1240 October 1, 2003 C N.A. 1.0 1.0
WPIC AM Sharon, PA 790 August 1, 2006 D N.A. 1.0 0.0
WYFM FM Sharon, PA 102.9 August 1, 2006 B 604 33.0 33.0
WHOT FM Youngstown, PA 101.1 October 1, 2003 B 705 24.5 24.5
WLLF FM Mercer, PA 96.7 August 1, 2006 A 486 1.4 1.4
WWIZ FM Mercer, PA 103.9 August 1, 2006 A 299 3.0 3.0
SOUTHEAST REGION
Albany, GA............. WNUQ FM Albany, GA 101.7 April 1, 2004 A 299 3.0 3.0
WEGC FM Sasser, GA 107.7 April 1, 2004 C3 328 25.0 25.0
WALG AM Albany, GA 1590 April 1, 2004 B N.A. 5.0 1.0
WJAD FM Leesburg, GA 103.5 April 1, 2004 C3 463 12.5 12.5
WKAK FM Albany, GA 104.5 April 1, 2004 C1 981 98.0 98.0
WGPC AM Albany, GA 1450 April 1, 2004 C N.A. 1.0 1.0
WQVE FM Camilla, GA 105.5 April 1, 2004 A 276 6.0 6.0
WWSG FM Sylvester, GA 102.1 April 1, 2004 A 328 6.0 6.0
Columbus-Starkville,
MS..................... WSSO AM Starkville, MS 1230 June 1, 2004 C N.A. 1.0 1.0
WMXU FM Starkville, MS 106.1 June 1, 2004 C2 502 40.0 40.0
WSMS FM Artesia, MS 99.9 June 1, 2004 C2 312 50.0 50.0
WKOR FM Columbus, MS 94.9 June 1, 2004 C2 492 50.0 50.0
WKOR AM Starkville, MS 980 June 1, 2004 B N.A. 1.0 0.0
WJWF AM Columbus, MS 1400 June 1, 2004 C N.A. 1.0 1.0
WMBC FM Columbus, MS 103.1 June 1, 2004 C2 755 22.0 22.0
Fayetteville, NC....... WRCQ FM Dunn, NC 103.5 December 1, 2003 C2 502 47.5 47.5
WFNC FM Lumberton, NC 102.3 December 1, 2003 A 269 3.0 3.0
WFNC AM Fayetteville, NC 640 December 1, 2003 B N.A. 10.0 1.0
WQSM FM Fayetteville, NC 98.1 December 1, 2003 C1 830 100.0 100.0
WKQB FM Southern Pines, NC 106.9 December 1, 2003 C2 482 50.0 50.0
Florence, SC........... WYNN FM Florence, SC 106.3 December 1, 2003 A 325 6.0 6.0
WYNN AM Florence, SC 540 December 1, 2003 B N.A. 0.3 0.2
WHLZ FM Manning, SC 92.5 December 1, 2003 C 1171 98.0 98.0
WYMB AM Manning, SC 920 December 1, 2003 B N.A. 2.3 1.0
WCMG FM Latta, SC 94.3 December 1, 2003 C3 502 10.5 10.5
WHSC AM Hartsville, SC 1450 December 1, 2003 C N.A. 1.0 1.0
WBZF FM Hartsville, SC 98.5 December 1, 2003 A 328 3.0 3.0
WFSF FM Marion, SC 100.5 December 1, 2003 C3 354 21.5 21.5
WMXT FM Pamplico, SC 102.1 December 1, 2003 C2 479 50.0 50.0
WWFN FM Lake City, SC 100.1 December 1, 2003 A 433 3.3 3.3
13
14
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION FCC TERRAIN ---------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------------- --------------- --------- --------------- ----- --------- --- -----
Lexington, KY.......... WVLK AM Lexington, KY 590 August 1, 2004 B N.A. 5.0 1.6
WVLK FM Lexington, KY 92.9 August 1, 2004 C1 850 100.0 100.0
WLTO FM Nicholasville, KY 102.5 August 1, 2004 A 400 2.0 2.0
WLRO FM Richmond, KY 101.5 August 1, 2004 C3 541 10.0 10.0
WXZZ FM Georgetown, KY 103.3 August 1, 2004 A 794 1.0 1.0
Melbourne-Titus-Cocoa,
FL..................... WHKR FM Rockledge, FL 102.7 February 1, 2004 C2 492 50.0 50.0
WAOA FM Melbourne, FL 107.1 February 1, 2004 C1 486 100.0 100.0
WAOA AM Melbourne, FL 1560 February 1, 2004 D N.A. 5.0 0.0
Mobile, AL............. WYOK FM Atmore, AL 104.1 April 1, 2004 C 1555 100.0 100.0
WGOK AM Mobile, AL 900 April 1, 2004 B N.A. 1.0 0.4
WBLX FM Mobile, AL 92.9 April 1, 2004 C 1555 98.0 98.0
WDLT FM Chickasaw, AL 98.3 April 1, 2004 C2 548 40.0 40.0
WDLT AM Fairhope, AL 660 April 1, 2004 B N.A. 10.0 0.0
Montgomery, AL......... WMSP AM Montgomery, AL 740 April 1, 2004 B N.A. 10.0 0.0
WNZZ AM Montgomery, AL 950 April 1, 2004 B N.A. 1.0 0.4
WMXS FM Montgomery, AL 103.3 April 1, 2004 C 1096 100.0 100.0
WLWI FM Montgomery, AL 92.3 April 1, 2004 C 1096 100.0 100.0
WHHY FM Montgomery, AL 101.9 April 1, 2004 C 1096 100.0 100.0
WLWI AM Montgomery, AL 1440 April 1, 2004 B N.A. 5.0 1.0
WXFX FM Prattville, AL 95.1 April 1, 2004 C2 476 50.0 50.0
Myrtle Beach, SC....... WSYN FM Georgetown, SC 106.5 December 1, 2003 C2 492 50.0 50.0
Pawley's Island,
WDAI FM SC 98.5 December 1, 2003 A 328 6.0 6.0
WIQB FM Conway, SC 93.9 December 1, 2003 A 420 3.7 3.7
WXJY FM Georgetown, SC 93.7 December 1, 2003 A 328 6.0 6.0
WJXY AM Conway, SC 1050 December 1, 2003 B N.A. 5.0 0.5
WSEA FM Atlantic Beach, SC 100.3 December 1, 2003 A 476 2.6 2.6
WYAK FM Surfside Beach, SC 103.1 December 1, 2003 C3 528 8.0 8.0
Pensacola, FL.......... WJLQ FM Pensacola, FL 100.7 February 1, 2004 C 1555 100.0 100.0
WCOA AM Pensacola, FL 1370 February 1, 2004 B N.A. 5.0 5.0
WRRX FM Gulf Breeze, FL 106.1 February 1, 2004 A 328 3.0 3.0
Savannah, GA........... WJCL FM Savannah, GA 96.5 April 1, 2004 C 1161 100.0 100.0
WIXV FM Savannah, GA 95.5 April 1, 2004 C1 856 100.0 100.0
WSIS FM Springfield, GA 103.9 April 1, 2004 A 328 6.0 6.0
WBMQ AM Savannah, GA 630 April 1, 2004 B N.A. 5.0 5.0
WEAS FM Savannah, GA 93.1 April 1, 2004 C1 981 97.0 97.0
WJLG AM Savannah, GA 900 April 1, 2004 B N.A. 4.4 0.2
WZAT FM Savannah, GA 102.1 April 1, 2004 C 1306 100.0 100.0
Tallahassee, FL........ WHBX FM Tallahassee, FL 96.1 February 1, 2004 C2 479 37.0 37.0
WBZE FM Tallahassee, FL 98.9 February 1, 2004 C1 604 100.0 100.0
WHBT AM Tallahassee, FL 1410 February 1, 2004 B N.A. 5.0 0.0
WWLD FM Tallahassee, FL 106.1 February 1, 2004 A 328 6.0 6.0
WGLF FM Tallahassee, FL 104.1 February 1, 2004 C 1394 90.0 90.0
Wilmington, NC......... WWQQ FM Wilmington, NC 101.3 December 1, 2003 C2 545 40.0 40.0
WGNI FM Wilmington, NC 102.7 December 1, 2003 C1 981 100.0 100.0
WMNX FM Wilmington, NC 97.3 December 1, 2003 C1 883 100.0 100.0
WKXS FM Leland, NC 94.1 December 1, 2003 A 148 5.0 5.0
WAAV AM Leland, NC 980 December 1, 2003 B N.A. 5.0 5.0
SOUTHWEST REGION
Abilene, TX............ KCDD FM Hamlin, TX 103.7 August 1, 2005 C1 745 100.0 100.0
KBCY FM Tye, TX 99.7 August 1, 2005 C 984 98.0 98.0
KFQX FM Anson, TX 98.1 August 1, 2005 C2 492 50.0 50.0
KHXS FM Merkel, TX 102.7 August 1, 2005 C1 1148 66.0 66.0
Amarillo, TX........... KZRK FM Canyon, TX 107.9 August 1, 2005 C1 476 100.0 100.0
KZRK AM Canyon, TX 1550 August 1, 2005 B N.A. 1.0 0.2
KARX FM Claude, TX 95.7 August 1, 2005 C1 390 100.0 100.0
KPUR AM Amarillo, TX 1440 August 1, 2005 B N.A. 5.0 1.0
KPUR FM Canyon, TX 107.1 August 1, 2005 A 315 6.0 6.0
KQIZ FM Amarillo, TX 93.1 August 1, 2005 C1 699 100.0 100.0
14
15
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION FCC TERRAIN ---------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------------- --------------- --------- --------------- ----- --------- --- -----
Beaumont-Port Arthur,
TX..................... KAYD FM Beaumont, TX 97.5 August 1, 2005 C 1200 100.0 100.0
KQXY FM Beaumont, TX 94.1 August 1, 2005 C 1099 100.0 100.0
KQHN AM Nederland, TX 1510 August 1, 2005 B N.A. 5.0 0.0
KIKR AM Beaumont, TX 1450 August 1, 2005 C N.A. 1.0 1.0
KTCX FM Beaumont, TX 102.5 August 1, 2005 C2 492 50.0 50.0
Fayetteville, AR....... KFAY FM Bentonville, AR 98.3 June 1, 2004 C1 617 100.0 100.0
KFAY AM Farmington, AR 1030 June 1, 2004 B N.A. 10.0 1.0
KKEG FM Fayetteville, AR 92.1 June 1, 2004 C3 548 7.6 7.6
KAMO FM Rogers, AR 94.3 June 1, 2004 C2 692 25.1 25.1
KMCK FM Siloam Springs, AR 105.7 June 1, 2004 C1 476 100.0 100.0
KZRA AM Springdale, AR 1590 June 1, 2004 B N.A. 2.5 0.1
KDAB FM Prairie Grove, AR 94.9 June 1, 2004 C2 761 21.0 21.0
Fort Smith, AR......... KLSZ FM Van Buren, AR 102.7 June 1, 2004 C3 476 12.0 12.0
KOMS FM Poteau, OK 107.3 June 1, 2005 C 1811 100.0 100.0
KBBQ FM Fort Smith, AR 100.7 June 1, 2005 C2 459 50.0 50.0
KAYR AM Van Buren, AR 1060 June 1, 2005 D N.A. 0.5 0.0
Grand Junction, CO..... KBKL FM Grand Junction, CO 107.9 April 1, 2005 C 1460 100.0 100.0
KEKB FM Fruita, CO 99.9 April 1, 2005 C 1542 79.0 79.0
KMXY FM Grand Junction, CO 104.3 April 1, 2005 C 1460 100.0 100.0
KKNN FM Delta, CO 95.1 April 1, 2005 C 1424 100.0 100.0
KEXO AM Grand Junction, CO 1230 April 1, 2005 C N.A. 1.0 1.0
Killeen-Temple, TX..... KLTD FM Temple, TX 101.7 August 1, 2005 C3 410 16.6 16.6
KOOC FM Belton, TX 106.3 August 1, 2005 C3 489 11.5 11.5
KSSM FM Copperas Cove, TX 103.1 August 1, 2005 C3 558 8.6 8.6
KUSJ FM Harker Heights, TX 105.5 August 1, 2005 C2 577 36.0 36.0
KTEM AM Temple, TX 1400 August 1, 2005 C N.A. 1.0 1.0
Lake Charles, LA....... KKGB FM Sulphur, LA 101.3 June 1, 2004 C3 289 25.0 25.0
KBIU FM Lake Charles, LA 103.7 June 1, 2004 C1 469 100.0 100.0
KYKZ FM Lake Charles, LA 96.1 June 1, 2004 C 1204 97.0 97.0
KXZZ AM Lake Charles, LA 1580 June 1, 2004 B N.A. 1.0 1.0
Odessa-Midland, TX..... KBAT FM Midland, TX 93.3 August 1, 2005 C1 440 100.0 100.0
KODM FM Odessa, TX 97.9 August 1, 2005 C1 1000 100.0 100.0
KNFM FM Midland, TX 92.3 August 1, 2005 C 984 100.0 100.0
KGEE FM Monahans, TX 99.9 August 1, 2005 C1 574 98.0 98.0
KMND AM Midland, TX 1510 August 1, 2005 B N.A. 2.4 0.0
KRIL AM Odessa, TX 1410 August 1, 2005 B N.A. 1.0 1.0
Shreveport, LA......... KMJJ FM Shreveport, LA 99.7 June 1, 2004 C2 463 50.0 50.0
KRMD FM Shreveport, LA 101.1 June 1, 2004 C 1119 98.0 98.0
KRMD AM Shreveport, LA 1340 June 1, 2004 C N.A. 1.0 1.0
KBED FM Shreveport, LA 102.9 June 1, 2004 C2 525 44.0 44.0
Wichita Falls, TX...... KLUR FM Wichita Falls, TX 99.9 August 1, 2005 C1 830 100.0 100.0
KQXC FM Wichita Falls, TX 102.5 August 1, 2005 A 312 4.5 4.5
KYYI FM Burkburnett, TX 104.7 August 1, 2005 C 1017 100.0 100.0
KOLI FM Electra, TX 94.9 August 1, 2005 C2 492 50.0 50.0
NORTHEAST REGION
Bangor, ME............. WQCB FM Brewer, ME 106.5 April 1, 2006 C 1079 98.0 98.0
WBZN FM Old Town, ME 107.3 April 1, 2006 C2 436 50.0 50.0
WWMJ FM Ellsworth, ME 95.7 April 1, 2006 B 1030 11.5 11.5
WEZQ FM Bangor, ME 92.9 April 1, 2006 B 787 20.0 20.0
WDEA AM Ellsworth, ME 1370 April 1, 2006 B 5.0 5.0 5.0
WEST REGION
Eugene-Springfield,
OR..................... KNRQ FM Creswell, OR 95.3 February 1, 2006 C3 1207 0.7 0.7
KNRQ AM Eugene, OR 1320 February 1, 2006 D N.A. 1.0 0.1
KZEL FM Eugene, OR 96.1 February 1, 2006 C 1093 100.0 100.0
KUGN AM Eugene, OR 590 February 1, 2006 B N.A. 5.0 5.0
KEHK FM Brownsville, OR 102.3 February 1, 2006 C1 919 100.0 100.0
KKTT FM Eugene, OR 97.9 February 1, 2006 C 1011 100.0 100.0
15
16
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION FCC TERRAIN ---------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------------- --------------- --------- --------------- ----- --------- --- -----
Oxnard-Ventura, CA..... KVEN AM Ventura, CA 1450 December 1, 2005 C N.A. 1.0 1.0
KHAY FM Ventura, CA 100.7 December 1, 2005 B 1211 39.0 39.0
KBBY FM Ventura, CA 95.1 December 1, 2005 B 876 12.3 12.3
Santa Barbara, CA...... KMGQ FM Santa Barbara, CA 97.5 December 1, 2005 B 2920 16.0 16.0
KKSB FM Goleta, CA 106.3 December 1, 2005 A 827 0.2 0.2
KRUZ FM Santa Barbara, CA 103.3 December 1, 2005 B 2979 105.0 105.0
We also own and operate five radio stations in various locations throughout
the English-speaking Eastern Caribbean, including Trinidad, St. Kitts-Nevis, St.
Lucia, Montserrat and Antigua-Barbuda, and we have been granted licenses for FM
stations covering Barbados and Tortola, British Virgin Islands. These Eastern
Caribbean stations are not regulated by the FCC.
Regulatory Approvals. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast license without the
prior approval of the FCC. In determining whether to grant an application for
assignment or transfer of control of a broadcast license, the Communications Act
requires the FCC to find that the assignment or transfer would serve the public
interest. The FCC considers a number of factors pertaining to the proposed
licensee, including compliance with various rules limiting common ownership of
media properties, financial qualifications of the licensee, the "character" of
the licensee and those persons holding "attributable" interests in the licensee,
and compliance with the Communications Act's limitation on non-U.S. ownership,
as well as compliance with other FCC rules and policies, including programming
and filing requirements. The FCC also reviews the effect of proposed assignments
and transfers of broadcast licenses on economic competition and diversity as
discussed below. Petitions to deny have been filed, and are currently pending
against certain of the Company's acquisitions in four markets, alleging that
those acquisitions would result in excessive market concentration or other
violations of the Communications Act or FCC rules and polices. See "-- Antitrust
and Market Concentration Considerations." Based on these petitions, the FCC
could take action to seek the termination of a local marketing agreement or halt
the consummation of an acquisition of the Company. The Company has responded to
each such petition. The Company believes no risk of a material adverse impact on
the operations of the Company taken as a whole exists related to actions which
may be taken by the Commission on those petitions.
Ownership Matters. Under the Communications Act, we are restricted to
having no more than one-fourth of our stock owned or voted by non-U.S. persons,
foreign governments or non-U.S. corporations. We are required to take
appropriate steps to monitor the citizenship of our shareholders, such as
through representative samplings on a periodic basis, to provide a reasonable
basis for certifying compliance with the foreign ownership restrictions of the
Communications Act.
The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of radio broadcast stations and television broadcast stations
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. The Telecom Act and the FCC's broadcast
multiple ownership rules also restrict the number of radio stations one person
or entity may own, operate or control on a local level.
None of these multiple and cross ownership rules requires any change in our
current ownership of radio broadcast stations or precludes consummation of our
pending acquisitions, other than the pending acquisition of one radio station.
These FCC rules and policies will limit the number of additional stations that
we may acquire in the future in our markets.
Because of these multiple and cross ownership rules, a purchaser of our
voting stock which acquires an "attributable" interest in us (as discussed
below) may violate the FCC's rules if such purchaser also has an attributable or
direct interest in other television or radio stations, or in daily newspapers,
depending on the number and location of those radio or television stations or
daily newspapers. Such a purchaser also may be restricted in the companies in
which it may invest, to the extent that these investments give rise to an
attributable interest. If an attributable shareholder of Cumulus violates any of
these ownership rules, we may
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be unable to obtain from the FCC one or more authorizations needed to conduct
our radio station business and may be unable to obtain FCC consents for certain
future acquisitions.
The FCC generally applies its television/radio/newspaper cross-ownership
rules and its broadcast multiple ownership rules by considering the
"attributable," or cognizable, interests held by a person or entity. A person or
entity can have such an interest in a radio station, television station or daily
newspaper by being an officer, director, partner, shareholder or, in certain
cases, a debtholder of a company that owns that station or newspaper. Whether
that interest is subject to the FCC's ownership rules is determined by the FCC's
attribution rules. If an interest is attributable, the FCC treats the person or
entity who holds that interest as the "owner" of the radio station, television
station or daily newspaper in question, and therefore subject to the FCC's
ownership rules.
With respect to a corporation, officers, directors and persons or entities
that directly or indirectly can vote 5% or more of the corporation's stock (10%
or more of such stock in the case of insurance companies, investment companies,
bank trust departments and certain other "passive investors" that hold such
stock for investment purposes only) generally are attributed with ownership of
the radio stations, television stations and daily newspapers the corporation
owns. As discussed below, a local marketing agreement with another station also
may result in an attributable interest. See "-- Local Marketing Agreements."
With respect to a partnership (or limited liability company), the interest
of a general partner is attributable, as is the interest of any limited partner
(or limited liability company member) who is "materially involved" in the
media-related activities of the partnership (or limited liability company). Debt
instruments, non-voting stock, options and warrants for voting stock that have
not yet been exercised, limited partnership or limited liability company
interests where the limited partner or member is not "materially involved" in
the media-related activities of the partnership or limited liability company,
and where the limited partnership agreement or limited liability company
agreement expressly "insulates" the limited partner or member from such material
involvement, and minority (under 5%) voting stock, generally do not subject
their holders to attribution, except that non-voting equity and debt interests
which in the aggregate constitute 33% or more of a licensee's total equity and
debt capitalization are considered attributable in certain circumstances.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." Broadcasters are required to present programming
that is responsive to community problems, needs and interests and to maintain
certain records demonstrating such responsiveness. Complaints from listeners
concerning a station's programming will be considered by the FCC when it
evaluates the licensee's renewal application, but such complaints may be filed
and considered at any time. Stations also must follow various FCC rules that
regulate, among other things, political advertising, the broadcast of obscene or
indecent programming, sponsorship identification, the broadcast of contests and
lotteries, and technical operations (including limits on radio frequency
radiation). Failure to observe these or other rules and policies can result in
the imposition of various sanctions, including monetary forfeitures, the grant
of "short-term" (less than the maximum term) license renewal or, for
particularly egregious violations, the denial of a license renewal application
or the revocation of a license.
Local Marketing Agreements. A number of radio stations, including certain
of our stations, have entered into what are commonly referred to as "local
marketing agreements" or "time brokerage agreements" (collectively, "LMAs"). In
a typical LMA, the licensee of a station makes available, for a fee, airtime on
its station to a party which supplies programming to be broadcast during that
airtime, and collects revenues from advertising aired during such programming.
LMAs are subject to compliance with the antitrust laws, the Communications Act,
and the FCC's rules and policies, including the requirement that the licensee of
each station maintain independent control over the programming and other
operations of its own station. The FCC has held that such agreements do not
violate the Communications Act as long as the licensee of the station that is
being substantially programmed by another entity maintains ultimate
responsibility for, and control over, operations of its broadcast stations and
otherwise ensures compliance with applicable FCC rules and policies.
A station that brokers substantial time on another station in its market or
engages in an LMA with a station in the same market will be considered to have
an attributable ownership interest in the brokered station
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for purposes of the FCC's ownership rules, discussed above. As a result, a
broadcast station may not enter into an LMA that allows it to program more than
15% of the broadcast time, on a weekly basis, of another local station that it
could not own under the FCC's local multiple ownership rules.
Proposed Changes. The FCC, in 1997, awarded two licenses for the provision
of satellite-delivered digital audio radio services. Under rules adopted for
this service, licensees must begin operating within four years after the date of
licensing, and must be operating their entire system within six years after that
date. Digital technology also may be used in the future by terrestrial radio
broadcast stations either on existing or alternate broadcasting frequencies, and
the FCC has stated that it will consider making changes to its rules to permit
AM and FM radio stations to offer digital audio broadcasting following industry
analysis of technical standards and has invited and received comments on a
petition requesting the FCC to initiate rule making with respect to terrestrial
digital audio broadcasting.
In January 2000, the FCC released a Report and Order adopting rules for a
new low power FM radio service consisting of two classes of stations, one with a
maximum power of 100 watts and the other with a maximum power of 10 watts. The
FCC has limited ownership and operation of low power FM stations to persons and
entities which do not currently have an attributable interest in any FM station
and has required that low power FM stations be operated on a non-commercial
educational basis. Various parties have appealed the FCC's decision in the
Report and Order. The Commerce, Justice, State Appropriations Act, which was
signed into law on December 21, 2000, included language from the Radio
Broadcasting Preservation Act of 2000 imposing restrictions on the operation of
low-power FM radio stations. A bill has been introduced to repeal this
provision, but no action has been taken on that bill to date. In light of the
passage of the Appropriations Act, the NAB and FCC have asked the D.C. Court of
Appeals to remand a court challenge to the FCC so the original low-power FM
rules can be brought into compliance with the new law. We cannot predict what
impact low power FM radio will have on our operations. Adverse effects of a new
low power FM service on our operations could include interference with our
stations, and competition by low power stations for listeners and revenues.
In addition, from time to time Congress and the FCC have considered, and
may in the future consider and adopt, new laws, regulations and policies
regarding a wide variety of matters that could, directly or indirectly, affect
the operation, ownership and profitability of our radio stations, result in the
loss of audience share and advertising revenues for our radio stations, and
affect the ability of Cumulus to acquire additional radio stations or finance
such acquisitions.
The foregoing is a brief summary of certain provisions of the
Communications Act, the Telecom Act and specific FCC rules and policies. This
description does not purport to be comprehensive, and reference should be made
to the Communications Act, the FCC's rules and the public notices and rulings of
the FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
Antitrust and Market Concentration Considerations. Certain of our future
acquisitions, to the extent they meet specified size thresholds, will be subject
to applicable waiting periods and possible review under the Hart-Scott-Radino
Antitrust Improvements Act of 1976, as amended ("HSR Act") by the Department of
Justice or the Federal Trade Commission, which evaluate transactions to
determine whether those transactions should be challenged under the federal
antitrust laws. In February 2001, amendments to the HSR Act become effective
providing that transactions will be subject to the HSR Act only if the
acquisition price or fair market value of the stations to be acquired is
$50,000,000 or more. Most of our past acquisitions have not met this threshold.
Acquisitions that are not required to be reported under the HSR Act may still be
investigated by the Department of Justice or the Federal Trade Commission under
the antitrust laws before or after consummation. At any time before or after the
consummation of a proposed acquisition, the Department of Justice or the Federal
Trade Commission could take such action under the antitrust laws as it deems
necessary, including seeking to enjoin the acquisition or seeking divestiture of
the business acquired or certain of our other assets. The Department of Justice
has reviewed numerous radio station acquisitions, where an operator proposes to
acquire additional stations in its existing markets or multiple stations in new
markets, and has challenged a number of such transactions. Some of these
challenges have resulted in consent decrees requiring the sale of certain
stations, the termination of LMAs or other relief. In general, the Department of
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Justice has more closely scrutinized radio mergers and acquisitions resulting in
local market shares in excess of 35% of local radio advertising revenues,
depending on format, signal strength and other factors. There is no precise
numerical rule, however, and certain transactions resulting in more than 35%
revenue shares have not been challenged, while certain other transactions may be
challenged based on other criteria such as audience shares in one or more
demographic groups as well as the percentage of revenue share. We estimate that
we have more than a 35% share of radio advertising revenues in many of our
markets.
We are aware that the Department of Justice has commenced, and subsequently
discontinued, investigations of several acquisitions and pending acquisitions by
Cumulus. The Department of Justice can be expected to continue to enforce the
antitrust laws in this manner, and there can be no assurance that one or more of
our pending or future acquisitions are not or will not be the subject of an
investigation or enforcement action by the Department of Justice or the Federal
Trade Commission. Similarly, there can be no assurance that the Department of
Justice, the Federal Trade Commission or the FCC will not prohibit such
acquisitions, require that they be restructured, or in appropriate cases,
require that the Company divest stations it already owns in a particular market.
In addition, private parties may under certain circumstances bring legal action
to challenge an acquisition under the antitrust laws.
As part of its review of certain radio station acquisitions, the Department
of Justice has stated publicly that it believes that commencement of operations
under LMAs, joint sales agreements and other similar agreements customarily
entered into in connection with radio station ownership transfers prior to the
expiration of the waiting period under the HSR Act could violate the HSR Act. In
connection with acquisitions subject to the waiting period under the HSR Act, we
will not commence operation of any affected station to be acquired under an LMA
or similar agreement until the waiting period has expired or been terminated.
In addition, where acquisitions would result in certain local radio
advertising revenue concentration thresholds being met, the FCC staff has a
policy of reviewing applications for proposed radio station acquisitions with
respect to local market concentration concerns. The FCC places a specific
notation on the public notices with respect to proposed radio station
acquisitions that it believes may raise local market concentration concerns
inviting public comment on such matters, and in some cases may request
additional information with respect to such acquisitions. Such policy may help
trigger petitions to deny and informal objections against FCC applications for
certain pending acquisitions and future acquisitions. Specifically, the FCC
staff has stated publicly that it will review proposed acquisitions with respect
to local radio market concentration if publicly available sources indicate that,
following such acquisitions, one party would receive 50% or more of the radio
advertising revenues in such local radio market, or that any two parties would
together receive 70% or more of such revenues, notwithstanding that the proposed
acquisitions would comply with the station ownership limits in the Telecom Act
and the FCC's multiple ownership rules. The FCC has, from time to time, placed
such notations on the public notices with respect to a number of Cumulus
applications and has conducted such reviews with respect to certain of these
applications. Competitors have also filed petitions to deny which are currently
pending before the FCC on the basis of market concentration and/or other alleged
non-compliance with the Communications Act and FCC rules and policies against
certain of the Company's pending acquisitions and dispositions in four markets
(Columbus-Starkville, Mississippi; Columbus, Georgia; Tallahassee, Florida; and
Topeka, Kansas). All such petitions and FCC concerns regarding market
concentration must be resolved before FCC approval can be obtained and the
acquisitions can be consummated. In addition, the FCC has recently proposed new
rules to define a "market" for purposes of the local radio station ownership
limits in the Telecom Act and the FCC's multiple ownership rules, which if
adopted potentially could reduce the number of stations that Cumulus would be
allowed to acquire in some markets, and could limit our ability to sell all of
the stations we own in certain markets to a single purchaser, which could
diminish the value of those markets to potential acquirers.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers of the Company as of March 1, 2001:
NAME AGE POSITION(S)
---- --- -----------
Lewis W. Dickey, Jr. ............. 39 Chairman, President and Chief Executive Officer
Jonathon G. Pinch................. 52 Executive Vice President, Chief Operating Officer
Martin R. Gausvik................. 43 Executive Vice President, Chief Financial Officer and
Treasurer
John Dickey....................... 33 Executive Vice President
LEWIS W. DICKEY, JR. has served as our Chairman, President and CEO since
December 2000, and as a Director since March 1998. Mr. Dickey was a founder and
an initial investor in Cumulus Media, LLC through his interest in CML Holdings
LLC and owns 75% of the outstanding equity interests of DBBC of Georgia, LLC,
which was a Managing Member of Cumulus Media, LLC. He served as Executive Vice
Chairman and a Director of Cumulus Media, LLC from its inception in April 1997
until its dissolution in June 1998. Mr. Dickey is the founder and was President
of Stratford Research, Inc. from September 1985 to March 1998 and owns 25% of
the outstanding capital stock of Stratford Research, Inc. Stratford Research,
Inc. is a strategy consulting and market research firm advising radio and
television broadcasters as well as other media related industries. From January
1988 until March 1998, Mr. Dickey served as President and Chief Operating
Officer of Midwestern Broadcasting Corporation, which operated two stations in
Toledo, Ohio that were acquired by the Company in November 1997. He also has an
ownership interest (along with members of his family and others) in three
stations in Nashville, Tennessee: WQQK-FM, WNPL-FM and WVOL-AM. Mr. Dickey is a
nationally regarded consultant on radio strategy and the author of The
Franchise -- Building Radio Brands, published by the National Association of
Broadcasters, one of the industry's leading texts on competition and strategy.
He holds Bachelor of Arts and Master of Arts degrees from Stanford University
and a Master of Business Administration degree from Harvard University. Mr.
Dickey is the brother of John Dickey.
JONATHON G. PINCH has served as our Executive Vice President and Chief
Operating Officer since December 2000. Mr. Pinch joined the Company effective
December 1, 2000, after a highly successful tenure as the President of Clear
Channel International Radio ("CCU International") (NYSE: CCU). At rapidly
growing CCU International, Mr. Pinch was responsible for the management of all
CCU radio operations outside of the United States, which included over 300
properties in 9 countries. Mr. Pinch is a 30 year broadcast veteran and has
previously served as Owner/President WTVK-TV Ft Myers-Naples Florida, General
Manager WMTX-FM/WHBO-AM Tampa Florida, General Manager/Owner WKLH-FM Milwaukee,
GM WXJY Milwaukee.
MARTIN R. GAUSVIK is our Executive Vice President, Chief Financial Officer
and Treasurer. Mr. Gausvik joined the Company effective May 29, 2000 and is a
17-year veteran of the radio industry, having served as Vice President Finance
for Jacor Communications from 1996 until the merger of Jacor's 250 radio station
group with Clear Channel Communications in May 1999. More recently, he was
Executive Vice President and Chief Financial Officer of Latin Communications
Group, the operator of 17 radio stations serving major markets in the Western
U.S. Prior to joining Jacor, from 1984 to 1996, Gausvik held various accounting
and financial positions with Taft Broadcasting, including Controller of Taft's
successor company, Citicasters.
JOHN DICKEY is our Executive Vice President. Mr. Dickey has served as
Executive Vice President of Stratford Research, Inc. since June 1988. He served
as Director of Programming for Midwestern Broadcasting from January 1990 to
March 1998 and is a partner in Stratford Research, Inc. as well as an ownership
interest (along with members of his family and Mr. Weening) in three stations in
Nashville, Tennessee: WQQK-FM, WNPL-FM and WVOL-AM. Mr. Dickey also owns 25% of
the outstanding capital stock of Stratford Research, Inc. and 25% of the
outstanding equity interests of DBBC of Georgia, LLC. Mr. Dickey holds a
Bachelor of Arts degree from Stanford University. Mr. Dickey is the brother of
Lewis W. Dickey, Jr.
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ITEM 2. PROPERTIES
The types of properties required to support each of our radio stations
include offices, studios, transmitter sites and antenna sites. A station's
studios are generally housed with its offices in business districts of the
station's community of license or largest nearby community. The transmitter
sites and antenna sites are generally located so as to provide maximum market
coverage.
At December 31, 2000, the Company owned studio facilities in thirty-nine
markets and it owned transmitter and antenna sites in forty markets. We lease
additional studio and office facilities in thirty-six markets and additional
transmitter and antenna sites in thirty-nine markets. In addition, the Company
leases corporate office space in Atlanta, GA, Chicago, IL, and Milwaukee, WI,
which in the aggregate approximates 30,166 sq. ft. During 2000, the Company
commenced a plan to close its Chicago and Milwaukee offices and consolidated its
corporate office in Atlanta, GA. We do not anticipate any difficulties in
renewing any facility leases or in leasing alternative or additional space, if
required. The Company owns or leases substantially all of its other equipment,
consisting principally of transmitting antennae, transmitters, studio equipment
and general office equipment.
No single property is material to our operations. We believe that our
properties are generally in good condition and suitable for our operations;
however, we continually look for opportunities to upgrade our properties and
intend to upgrade studios, office space and transmission facilities in certain
markets.
ITEM 3. LEGAL PROCEEDINGS
The Company had been named as a defendant in the following eleven class
action complaints: (1) Wolfe v. Weening, et al.; (2) Klar v. Cumulus Media Inc.,
et al.; (3) Atlas v. Cumulus Media Inc., et al.; (4) Steinberg and Steinberg v.
Cumulus Media Inc., et al.; (5) Wong v. Weening, et al.; (6) Pleatman v. Cumulus
Media Inc., et al.; (7) Kincer v. Weening, et al.; (8) Krim v. Cumulus Media
Inc., et al.; (9) Baldwin v. Cumulus Media, Inc., et al.; (10) Pabian v.
Weening, et al.; and (11) Demers v. Cumulus Media Inc., et al. Certain present
and former directors and officers of the Company, and certain underwriters of
the Company's stock, have also been named as defendants. The complaints have all
been filed in the United States District Court for the Eastern District of
Wisconsin. They were filed as class actions on behalf of persons who purchased
or acquired Cumulus Media common stock during various time periods between May
11, 1999 and April 24, 2000. On August 4, 2000, the eleven actions were
consolidated into a single action, also pending in the United States District
Court for the Eastern District of Wisconsin. On December 8, 2000, plaintiffs
served a Second Amended Consolidated Class Action Complaint, which alleges,
among other things, violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated there under, and Sections 11 and
12(a) of the Securities Act of 1933, and seeks unspecified damages. The
plaintiffs allege that the defendants issued false and misleading statements and
failed to disclose material facts concerning, among other things, the Company's
financial condition as a result of the restatement on May 26, 2000 of the
Company's results for the first three quarters of 1999. The plaintiffs further
allege that because of the issuance of false and misleading statements and/or
failure to disclose material facts, the price of Cumulus Media stock was
artificially inflated. On February 8, 2001, the Company served its motion to
dismiss the second amended complaint.
In 1999, the Company was served with a complaint filed in state court in
New York, seeking approximately $1.9 million in damages arising from the
Company's alleged breach of national representation agreements. To date, the
Company has filed an answer to the complaint which denies liability and asserts
a variety of affirmative defenses. On February 15, 2001, the Company's current
national representation agent agreed to indemnify, defend and hold harmless the
Company against any loss, liability, cost or expense in connection with this
matter.
In 1999, the Company was served with a complaint filed in county court in
Alabama alleging that in August 1997, an employee of Colonial Broadcasting,
Inc., which we acquired in July 1998, was at fault in connection with an
automobile accident. The plaintiff is seeking $8.5 million damages. We believe
we have a right to indemnification from the sellers of Colonial Broadcasting
under the related purchase agreement. The seller's insurance company has assumed
the defense of the matter.
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In addition, we currently and from time to time are involved in litigation
incidental to the conduct of our business. Other than as discussed above, the
Company is not a party to any lawsuit or proceeding which, in our opinion, is
likely to have a material adverse effect.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter, October 1, 2000 through December 31, 2000, there
were no matters submitted to a vote of security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Shares of the Company's Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), have been quoted on the Nasdaq National Market under
the symbol CMLS since the consummation of the initial public offering of the
Company's Class A Common Stock on July 1, 1998. The following table sets forth,
for the calendar quarters indicated, the high and low closing sales prices of
the Class A Common Stock on the Nasdaq National Market, as reported in published
financial sources.
YEAR HIGH LOW
- ---- ---- ---
1998
Third Quarter.......................................... $17.88 $ 7.75
Fourth Quarter......................................... $17.25 $ 4.88
1999
First Quarter.......................................... $17.88 $ 9.75
Second Quarter......................................... $21.88 $13.25
Third Quarter.......................................... $32.69 $20.00
Fourth Quarter......................................... $53.00 $29.25
2000
First Quarter.......................................... $50.38 $13.06
Second Quarter......................................... $14.63 $ 7.81
Third Quarter.......................................... $11.56 $ 4.06
Fourth Quarter......................................... $ 7.00 $ 3.19
2001
First Quarter (thru March 16, 2001).................... $ 8.25 $ 3.75
As of March 16, 2001, there were approximately 130 holders of record of the
Class A Common Stock.
The Company has not declared or paid any cash dividends on its Class A
Common Stock since its inception and does not currently anticipate paying any
cash dividends on its Class A Common Stock in the foreseeable future. The
Company intends to retain future earnings for use in its business. The Company
is currently subject to restrictions under the terms of the $225.0 million
senior credit facility ("Credit Facility"), the indenture (the "Indenture")
governing the $160.0 million of 10 3/8 Senior Subordinated Notes due 2008
("Notes") and the certificate of designations (the "Certificate of
Designations") governing the 13.75% Series A Cumulative Exchangeable Redeemable
Preferred Stock (the "Series A Preferred Stock") that limit the amount of cash
dividends that may be paid on its Class A Common Stock. The Company may pay cash
dividends on its Class A Common Stock in the future only if certain financial
tests set forth in the Credit Facility, the Indenture and the Certificate of
Designations are met and only if it fulfills its obligations to pay dividends to
the holders of its Series A Preferred Stock.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated historical financial data presented below has
been derived from the audited consolidated financial statements of Cumulus Media
Inc. as of and for the years ended December 31, 2000,
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1999 and 1998. The consolidated historical financial data of Cumulus Media Inc.
are not comparable from year to year because of the acquisition and disposition
of various radio stations by the Company during the periods covered. This data
should be read in conjunction with the audited, consolidated financial
statements of Cumulus Media Inc., the related notes thereto, as set forth in
Part II, Item 8 and with "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" set forth in Part II, Item 7 herein
(dollars in thousands, except per share data).
PERIOD FROM
YEAR YEAR YEAR INCEPTION ON
ENDED ENDED ENDED MAY 22, 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 1997
------------ ------------ ------------ ---------------
Net revenues................................ $ 225,911 $ 180,019 $ 98,787 $ 9,163
Station operating expenses excluding
depreciation and amortization............. 191,336 133,328 72,154 7,147
Depreciation and amortization............... 44,003 32,564 17,113 1,671
LMA fees.................................... 4,825 4,165 2,404 --
Corporate general and administrative
expenses (includes non-cash stock
compensation expense of $0, $0, $0 and
$1,689, respectively)..................... 18,232 8,204 5,607 2,965
Restructuring and other charges............. 16,226 -- -- --
--------- --------- --------- --------
Operating income (loss)..................... (48,711) 1,758 1,509 (2,620)
Net interest expense........................ (26,055) (22,877) (13,178) (837)
Other income (expense), net................. 73,280 627 (2) (54)
Loss before extraordinary item.............. (2,298) (13,622) (9,445) (3,578)
Extraordinary loss on early extinguishment
of debt................................... -- -- (1,837) --
Net loss.................................... (2,298) (13,622) (11,282) (3,578)
Preferred stock dividends, deemed dividends,
accretion of discount and redemption
premium................................... 14,875 23,790 13,591 274
Net loss attributable to common
stockholders.............................. $ (17,173) $ (37,412) $ (24,873) $ (3,852)
Basic and diluted loss per common share..... $ (0.49) $ (1.50) $ (1.55) $ (0.31)
OTHER FINANCIAL DATA:
Broadcast Cash Flow......................... $ 34,575 $ 46,691 $ 26,633 $ 2,016
EBITDA...................................... 16,343 38,487 21,026 740
Net cash used in operating activities....... (14,565) (13,644) (4,653) (1,887)
Net cash used in investing activities....... (190,274) (192,105) (351,025) (95,100)
Net cash (used in)/provided by
financing activities...................... (3,763) 400,445 378,990 98,560
BALANCE SHEET DATA:
Total assets................................ $ 954,935 $ 914,888 $ 514,363 $110,441
Long-term debt (including current
portion).................................. 285,228 285,247 222,767 42,801
Preferred stock subject to mandatory
redemption................................ 119,708 102,732 133,741 13,426
Stockholders' equity........................ 471,872 488,442 127,554 49,976
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following information in conjunction with our
consolidated financial statements and notes to our consolidated financial
statements appearing in pages F-1 through F-32 in this Form 10-K. This
discussion contains certain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
herein.
OVERVIEW
The following is a discussion of the key factors that have affected our
business since its inception on May 22, 1997. The following information should
be read in conjunction with the consolidated financial statements and related
notes thereto included elsewhere in this report.
For the period from our inception through December 31, 2000, we have
purchased or entered into local marketing, management and consulting agreements
with radio stations throughout the U.S. and Caribbean. The following discussion
of our financial condition and results of operations includes the results of
these acquisitions and local marketing, management and consulting agreements.
We currently own and operate 186 stations in 42 U.S. markets and provide
sales and marketing services under local marketing, management and consulting
agreements (pending FCC approval of acquisition) to 41 stations in 16 U.S.
markets. We currently own five stations and have obtained a license to commence
operations on one station in the Caribbean market. We are the second largest
radio broadcasting company in the U.S. based on number of stations. We believe
we are the tenth largest radio broadcasting company in the U.S. based on 2000
pro forma net revenues. We will own and operate a total of 225 radio stations
(164 FM and 61 AM) in 46 U.S. markets upon FCC approval of all pending
acquisitions and divestitures.
ADVERTISING REVENUE AND BROADCAST CASH FLOW
Our primary source of revenues is the sale of advertising time on our radio
stations. Our sales of advertising time are primarily affected by the demand for
advertising time from local, regional and national advertisers and the
advertising rates charged by our radio stations. Advertising demand and rates
are based primarily on a station's ability to attract audiences in the
demographic groups targeted by its advertisers, as measured principally by
Arbitron on a periodic basis, generally once, twice or four times per year.
Because audience ratings in local markets are crucial to a station's financial
success, we endeavor to develop strong listener loyalty. We believe that the
diversification of formats on our stations helps to insulate them from the
effects of changes in the musical tastes of the public with respect to any
particular format.
The number of advertisements that can be broadcast without jeopardizing
listening levels and the resulting rating is limited in part by the format of a
particular station. Our stations strive to maximize revenue by constantly
managing the number of commercials available for sale and adjusting prices based
upon local market conditions. In the broadcasting industry, radio stations
sometimes utilize trade or barter agreements that exchange advertising time for
goods or services such as travel or lodging, instead of for cash. Our use of
trade agreements resulted in immaterial operating income during the years ended
December 31, 2000, 1999 and 1998. We will seek to continue to minimize our use
of trade agreements.
Our advertising contracts are generally short-term. We generate most of our
revenue from local and regional advertising, which is sold primarily by a
station's sales staff. During the years ended December 31, 2000, 1999 and 1998
approximately 89%, 89% and 88%, respectively, of our revenues were from local
advertising. To generate national advertising sales, we engage Interep National
Radio Sales, Inc., a national representative company.
Our revenues vary throughout the year. As is typical in the radio
broadcasting industry, we expect our first calendar quarter will produce the
lowest revenues for the year, and the fourth calendar quarter will generally
produce the highest revenues for the year, with the exception of certain of our
stations, such as those in Myrtle Beach, South Carolina, where the stations
generally earn higher revenues in the second and third quarters of the year
because of the higher seasonal population in those communities. Our operating
results in any period
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may be affected by the incurrence of advertising and promotion expenses that
typically do not have an effect on revenue generation until future periods, if
at all.
Our most significant station operating expenses are employee salaries and
commissions, programming expenses, advertising and promotional expenditures,
technical expenses, and general and administrative expenses. We strive to
control these expenses by working closely with local station management. The
performance of radio station groups, such as ours, is customarily measured by
the ability to generate broadcast cash flow.
RESULTS OF OPERATIONS
Management's discussion and analysis of results of operations for the years
ended December 31, 2000, 1999 and 1998 have been presented on an historical
basis. Additionally, for net revenue, operating expenses, and operating income
before depreciation and amortization we have included management's discussion
and analysis of results of operations on a pro forma basis. The pro forma
results for 2000 compared to 1999 assume all of the acquisitions described in
Item I, Part I of this report had occurred on January 1, 1999.
YEAR ENDED DECEMBER 31, 2000 VERSUS THE YEAR ENDED DECEMBER 31, 1999
Net Revenues. Net revenues increased $45.9 million, or 25.5%, to $225.9
million for the year ended December 31, 2000 from $180.0 million for the year
ended December 31, 1999. This increase was primarily attributable to the
acquisition of radio stations during the year ended December 31, 2000
(approximately $22.3 million of increase), operating certain radio stations
acquired in 1999 for a full twelve months (approximately $8.4 million of
increase), and improved spot utilization.
In addition, on a same station basis, net revenue for the 160 stations in
30 markets operated for at least a full year increased $2.1 million or 1.7% to
$126.5 million for the year ended December 31, 2000, compared to net revenues of
$124.4 million for the year ended December 31, 1999. The increase in same
station net revenue is the result of additional local revenue generated from
improved spot utilization from the sale of radio spots.
Station Operating Expenses, excluding Depreciation, Amortization and LMA
Fees. Station operating expenses excluding depreciation, amortization and LMA
fees increased $58.0 million, or 43.5%, to $191.3 million for the year ended
December 31, 2000 from $133.3 million for the year ended December 31, 1999. This
increase was primarily attributable to the acquisition of radio stations during
the year ended December 31, 2000 (approximately $14.6 million of increase),
operating certain radio stations acquired in 1999 for a full twelve months
(approximately $5.5 million of increase), as well as the recognition of unusual
bad debt expense of approximately $20.2 million. The unusually high bad debt
expense recorded for the year ended December 31, 2000 was primarily the result
of the following factors: (1) the completion of the first and second phases of
the asset exchange and sales transactions with Clear Channel Communications, and
the coincidental loss of local employee incentive to enforce the collection of
receivables in divested markets, (2) the detrimental effects of certain
pre-existing credit and collection policies and sales employee compensation
policies, (3) significant turnover of management and sales force, including
representatives who maintained relationships with trade debtors and had
responsibility for ensuring collection of outstanding invoices, and (4) overall
declines in the U.S. economy. During the third quarter of 2000, the Company
implemented a new credit and collection policy across all markets designed to
ensure uniform procedures for the extension of credit and the collection of
receivables. The management team has also created incentives for the Company's
sales personnel in each of our markets to collect delinquent accounts
receivable. We believe that these policies and procedures will reduce the
Company's loss experience from uncollectible accounts receivable.
In addition, on a same station basis, for the 160 stations in 30 markets
operated for at least a full year, station operating expenses excluding
depreciation, amortization and LMA fees increased $4.6 million, or 5.0%, to
$96.9 million for the year ended December 31, 2000 compared to $92.3 million for
the year ended December 31, 1999. The increase in same station operating
expenses excluding depreciation, amortization and LMA fees are primarily
attributable to the increased variable selling costs associated with additional
same station net revenue discussed above (approximately $4.4 million of
increase).
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Depreciation and Amortization. Depreciation and amortization increased
$11.4 million, or 35.0%, to $44.0 million for the year ended December 31, 2000
compared to $32.6 million for the year ended December 31, 1999. This increase
was primarily attributable to depreciation and amortization relating to radio
station acquisitions consummated during 2000 and a full year of depreciation and
amortization on radio station acquisitions consummated during 1999.
LMA Fees. LMA fees increased $0.6 million, or 14.3%, to $4.8 million for
the year ended December 31, 2000 from $4.2 million for the year ended December
31, 1999. This increase was primarily attributable to local marketing,
management and consulting fees paid to sellers in connection with the
commencement of operations, management of or consulting services provided to
radio stations during 2000.
Corporate, General and Administrative Expenses. Corporate, general and
administrative expenses increased $10.0 million, or 122.2%, to $18.2 million for
the year ended December 31, 2000 compared to $8.2 million for the year ended
December 31, 1999. The increase in corporate general and administrative expense
was primarily attributable to corporate resources added during 2000 to
effectively manage the Company's new structure and growing radio station
portfolio; plus one-time, non-recurring expenses relative to the termination of
employees and employee moving expense (approximately $1.4 million of increase),
an aircraft lease which was also terminated (approximately $0.5 million of
increase) and increased audit, legal, and insurance fees (approximately $0.2
million of increase).
Other Income (Expense), Net. Other income, net, increased $72.7 million, to
$73.3 million for the year ended December 31, 2000 compared to $0.6 million for
the year ended December 31, 1999. This increase was primarily attributable to a
gain on sale of $75.6 million, realized upon the transfer of 53 stations in 10
markets along with certain tangible property associated with 44 stations in 8
markets to Clear Channel Communications in the third and fourth quarter of 2000,
offset by the write-off of $1.2 million of costs associated with failed
acquisitions and the write-off of commitment fees associated with unutilized
financing arrangements.
Income Tax Expense (Benefit). Income tax expense increased by $7.7 million
to $0.8 million for the year ended December 31, 2000 compared with an income tax
benefit of $6.9 million for the year ended December 31, 1999. This increase was
primarily attributable to deferred tax expense on the Company's third and fourth
quarter gain on sales of stations incurred as a result of the completion of the
asset sales with Clear Channel Communications.
Preferred Stock Dividends, Deemed Dividends, Accretion of Discount and
Premium on Redemption of Preferred Stock. Preferred stock dividends, accretion
of discount and premium on redemption of preferred stock decreased $8.9 million,
or 37.4%, to $14.9 million for the year ended December 31, 2000 compared to
$23.8 million for the year ended December 31, 1999. This decrease was
attributable to the redemption of 43,750 shares of the Company's Series A
Preferred Stock on October 1, 1999. The fair value of common stock purchase
warrants was recognized in the fourth quarter of 2000 as a deemed dividend on
the Series B Preferred Stock, increasing the net loss attributable to common
stockholders' by $0.1 million.
Net Loss Attributable to Common Stockholders. As a result of the factors
describe above, net loss attributable to common stockholders decreased $20.2
million, or 54.0%, to $17.2 million for the year ended December 31, 2000
compared to $37.4 million for the year ended December 31, 1999.
Broadcast Cash Flow. As a result of the factors described above, Broadcast
Cash Flow decreased $12.1 million, or 25.9%, to $34.6 million for the year ended
December 31, 2000 compared to $46.7 million for the year ended December 31,
1999.
EBITDA. As a result of the factors described above, EBITDA decreased $22.2
million, or 57.7%, to $16.3 million for the year ended December 31, 2000
compared to $38.5 million for the year ended December 31, 1999.
Intangible Assets. Intangible assets, net of amortization, were $763.0
million and $526.8 million as of December 31, 2000 and 1999, respectively. These
intangible asset balances primarily consist of broadcast licenses and goodwill,
although the Company possesses certain other intangible assets obtained in
connection with our acquisitions, such as non-compete agreements. The increase
in intangible assets, net during 2000 is
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attributable to acquisitions during the year, including the Connoisseur
acquisition, less the net dispositions in the asset exchange and sales
transactions with Clear Channel. Specifically identified intangible assets,
including broadcasting licenses, are recorded at their estimated fair value on
the date of the related acquisition. Goodwill represents the excess of purchase
price over the fair value of tangible assets and specifically identified
intangible assets. Although intangible assets are recorded in the Company's
financial statements at amortized cost, we believe that such assets, especially
broadcast licenses, can significantly appreciate in value by successfully
executing our operating strategy, which is described herein. The Company
recognized accounting gains of $75.6 million during 2000 from a series of asset
exchange and sales transactions with Clear Channel. We believe these gains
indicate that certain internally generated intangible assets, which are not
recorded for accounting purposes, can significantly increase the value of our
portfolio of stations over time. The Company's strategic initiative to focus on
its core radio business is designed to enhance the overall value of our stations
and maximize the value of the related broadcast licenses.
PRO FORMA -- YEAR ENDED DECEMBER 31, 2000 VERSUS THE YEAR ENDED DECEMBER 31,
1999
The pro forma results for 2000 compared to 1999 presented below assume that
the 225 radio stations owned or operated by the Company for any portion of 2000
were acquired effective January 1, 1999 (dollars in thousands).
YEAR ENDED YEAR ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- -----------------
Net revenues.................................. $218,011 $214,402
Station operating expenses excluding
depreciation and amortization and LMA
fees........................................ 163,430 156,128
-------- --------
Operating income before depreciation and
amortization and LMA fees................... $ 54,581 $ 58,274
======== ========
Pro forma net revenues for the year ended December 31, 2000 increased 1.7%
to $218.0 million. Pro forma station operating expenses excluding depreciation,
amortization and LMA fees for the year ended December 31, 2000 increased 4.7% to
$163.4 million. The majority of the increase in pro forma net revenues from 1999
to 2000 is due to an increase in political billings due to the 2000 elections as
well as improved spot utilization. The majority of the increase in pro forma
station operating expenses excluding depreciation, amortization and LMA fees is
due to increased bad debt expense associated with a deterioration of the
Company's accounts receivable as well as increased selling costs associated with
pro forma net revenue.
YEAR ENDED DECEMBER 31, 1999 VERSUS THE YEAR ENDED DECEMBER 31, 1998.
Net Revenues. Net revenues increased $81.2 million, or 82.2%, to $180.0
million for the year ended December 31, 1999 from $98.8 million for the year
ended December 31, 1998. This increase was primarily attributable to the
acquisition of radio stations (approximately $67.3 million of increase) and
revenues generated from local marketing, management and consulting agreements
entered into during the year ended December 31, 1999 (approximately $13.9
million of increase).
In addition, on a same station basis, net revenue for the 195 stations in
36 markets operated for at least a full year increased $21.2 million or 16.2% to
$152.3 million for the year ended December 31, 1999, compared to net revenues of
$131.1 million for the year ended December 31, 1998. The increase in same
station net revenue is the result of additional local revenue generated from
improved spot utilization from the sale of radio spots, combined with increases
in promotional and event revenue.
Station Operating Expenses, excluding Depreciation, Amortization and LMA
Fees. Station operating expenses excluding depreciation, amortization and LMA
fees increased $61.2 million, or 84.5%, to $133.3 million for the year ended
December 31, 1999 from $72.2 million for the year ended December 31, 1998. This
increase was primarily attributable to the acquisition of radio stations
(approximately $51.2 million of increase) and operating expenses incurred from
local marketing, management and consulting agreements entered into during the
year ended December 31, 1999 (approximately $10.0 million of increase).
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In addition, on a same station basis, for the 195 stations in 36 markets
operated for at least a full year, station operating expenses excluding
depreciation, amortization and LMA fees increased $13.9 million, or 14.1%, to
$112.5 million for the year ended December 31, 1999 compared to $98.6 million
for the year ended December 31, 1998. The increase in same station operating
expenses excluding depreciation, amortization and LMA fees are attributable to
the additional sales and programming personnel added in substantially all of the
markets we operated during the year, in addition to the increased variable
selling costs, and promotional and event costs associated with additional same
station net revenue discussed above.
Depreciation and Amortization. Depreciation and amortization increased
$15.5 million, or 90.2%, to $32.6 million for the year ended December 31, 1999
compared to $17.1 million for the year ended December 31, 1998. This increase
was primarily attributable to depreciation and amortization relating to radio
station acquisitions consummated during 1999 (approximately $4.4 million of
increase) and a full year of depreciation and amortization on radio station
acquisitions consummated during 1998 (approximately $11.1 million of increase).
LMA Fees. LMA fees increased $1.8 million, or 73.3 %, to $4.2 million for
the year ended December 31, 1999 from $2.4 million for the year ended December
31, 1998. This increase was primarily attributable to local marketing,
management and consulting fees paid to sellers in connection with the
commencement of operations, management of or consulting services provided to
radio stations during 1999.
Corporate, General and Administrative Expenses. Corporate, general and
administrative expenses increased $2.6 million, or 46.3%, to $8.2 million for
the year ended December 31, 1999 compared to $5.6 million for the year ended
December 31, 1998. The increase in corporate general and administrative expense
was primarily attributable to corporate resources added during 1999 to
effectively manage the Company's growing radio station portfolio.
Other Expense (Income). Interest expense, net of interest income, increased
by $9.7 million, or 73.6%, to $22.9 million for the year ended December 31, 1999
compared to $13.2 million for the year ended December 31, 1998. This increase
was primarily attributable to higher debt levels incurred to finance the
Company's acquisitions (approximately $9.0 million of increase). Additionally,
our borrowing rates increased 162.3 basis points over the second half of 1999 as
a result of increases in the underlying Eurodollar Base Rate as defined in the
Company's Credit Facility (approximately $0.7 million of increase).
Income Tax Expense (Benefit). The $4.6 million or 208.6% increase in the
tax benefit for the year ended December 31, 1999, compared to the year ended
December 31, 1998, is primarily attributable to an $8.8 million, or 74.5%,
increase in our loss before income taxes for the year ended December 31, 1999,
compared to the year ended December 31, 1998.
Preferred Stock Dividends, Deemed Dividends, Accretion of Discount and
Premium on Redemption of Preferred Stock. Preferred stock dividends, accretion
of discount and premium on redemption of preferred stock increased $10.2
million, or 75.0%, to $23.8 million for the year ended December 31, 1999
compared to $13.6 million for the year ended December 31, 1998. This increase
was attributable to the issuance of dividend shares paid in kind on the
Company's Series A Preferred Stock for the quarters ended March 31, June 30,
September 30 and December 31, 1999, and a $6.0 million redemption premium paid
on October 1, 1999 on the redemption of 43,750 shares of the Company's Series A
Preferred Stock.
Net Income (Loss) Attributable to Common Stockholders. As a result of the
factors described above, net loss attributable to common stockholders increased
$12.5 million, or 50.4%, to $37.4 million for the year ended December 31, 1999
compared to $24.9 million for the year ended December 31, 1998.
Broadcast Cash Flow. As a result of the factors described above, Broadcast
Cash Flow increased $20.1 million, or 75.3%, to $46.7 million for the year ended
December 31, 1999 compared to $26.6 million for the year ended December 31,
1998.
EBITDA. As a result of the factors described above, EBITDA increased $17.5
million, or 83.0%, to $38.5 million for the year ended December 31, 1999
compared to $21.0 million for the year ended December 31, 1998.
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PRO FORMA -- YEAR ENDED DECEMBER 31, 1999 VERSUS THE YEAR ENDED DECEMBER 31,
1998
The pro forma results for 1999 compared to 1998 presented below assume that
the 305 radio stations owned or operated by the Company for any portion of 1999
were acquired effective January 1, 1998 (dollars in thousands).
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
Net revenues.................................. $253,234 $230,184
Station operating expenses excluding
depreciation and amortization and LMA
fees........................................ 186,208 171,220
-------- --------
Operating income before depreciation and
amortization and LMA fees................... $ 67,026 $ 58,964
======== ========
Pro forma net revenues for the year ended December 31, 1999 increased 10.0%
to $253.2 million. Pro forma station operating expenses excluding depreciation,
amortization and LMA fees for the year ended December 31, 1999 increased 8.7% to
$186.2 million from $171.2 million for the year ended December 31, 1998. The
majority of the increase in pro forma net revenues from 1998 to 1999 is due to
an improvement in the utilization of advertising spot inventory at the station
level during the calendar year. The majority of the increase in pro forma
station operating expenses excluding depreciation, amortization and LMA fees is
due to the increase in programming, promotion and selling expenses associated
with the increase in personnel in the markets we operated during the year, along
with the expenses associated with the additional spot, promotion and event
revenue, and with the Company's operation of the radio stations subsequent to
the respective acquisition dates.
SEASONALITY
The Company expects that its operations and revenues will be seasonal in
nature, with generally lower revenue generated in the first quarter of the year
and generally higher revenue generated in the fourth quarter of the year. The
seasonality of the Company's business reflects the adult orientation of the
Company's formats and relationship between advertising purchases on these
formats with the retail cycle. This seasonality causes and will likely continue
to cause a variation in the Company's quarterly operating results. Such
variations could have an effect on the timing of the Company's cash flows.
LIQUIDITY AND CAPITAL RESOURCES
Our principal need for funds has been to fund the acquisition of radio
stations and to a lesser extent, working capital needs, capital expenditures and
interest and debt service payments. Our principal sources of funds for these
requirements have been cash flow from financing activities, such as the proceeds
from the offering of our debt and equity securities and borrowings under credit
agreements. Our principal need for funds in the future are expected to include
the need to fund future acquisitions, interest and debt service payments,
working capital needs and capital expenditures. We believe the Company's present
cash positions will be sufficient to meet our capital needs through late second
quarter or early third quarter 2001. Beyond that time, the Company will need to
raise approximately $40.0 million, through additional draws available under the
its current revolving credit facility or through the issuance of stock or other
securities to fund its pending acquisitions. We believe that availability under
our credit facility, cash generated from operations or future asset sales and
proceeds from future debt or equity financing will be sufficient to meet our
capital needs. The ability of the Company to complete its pending acquisitions
is, however, dependent upon on the Company's ability to obtain additional equity
and/or debt financing. There can be no assurance that the Company will be able
to obtain such financing.
For the year ended December 31, 2000, net cash used in operations increased
$0.9 million, to $14.6 million, from net cash used in operations of $13.6
million for the year ended December 31, 1999. This increase was due primarily to
the maturing of our markets and increased focus managing our current properties.
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For the year ended December 31, 2000, net cash used in investing activities
decreased $1.8 million, to $190.3 million, from $192.1 million for the year
ended December 31, 1999. This decrease was due primarily to the acquisition of
the Connoisseur markets on October 2, 2000.
For the year ended December 31, 2000, net cash used in financing activities
was $3.8 million, compared to net cash provided by financing activities of
$400.4 million during the year ended December 31, 1999. The decrease in cash
flows from financing activities during the year ended December 31, 2000 was the
result of funding our acquisitions with asset sales rather than debt and equity.
Historical Acquisitions. During the year ended December 31, 2000, the
Company completed 76 acquisitions across 28 markets for an aggregate purchase
price of $430.3 million.
Pending Acquisitions. As of December 31, 2000, the Company was a party to
various agreements to acquire stations across 16 markets for an aggregate
purchase price of approximately $186.6 million. Between January 1, 2001 and
January 18, 2001, the Company closed on the acquisition of 7 properties in 2
markets representing $106.2 million in purchase price. These acquisitions were
funded through the proceeds of asset exchanges (approximately $76.0 million) and
asset sales (approximately $106.5 million), also completed between January 1,
2001 and March 16, 2001. We intend to fund the pending acquisitions, which are
expected to approximate $80.4 million, with cash on hand, the proceeds of our
Credit Facility or future credit facilities, and other to be identified sources.
As of March 31, 2001, the Company believes it will need additional funding,
above cash on hand, of approximately $40.0 million to complete the pending
acquisitions. The ability of the Company to complete the pending acquisitions is
dependent upon the Company's ability to obtain additional equity and/or debt
financing. There can be no assurance that the Company will be able to obtain
such financing. As of December 31, 2000, $31.9 million of escrow deposits were
outstanding related to pending transactions. Subsequent to December 31, 2000,
$13.2 million of those deposits were applied toward transactions that were
completed. In the event that the Company is unable to obtain financing necessary
to consummate the remaining pending acquisitions, the Company could be liable
for approximately $18.7 million in purchase price.
We expect to consummate most of our pending acquisitions during the second,
third and fourth quarters of 2001, although there can be no assurance that the
transactions will be consummated within that time frame. In three of the markets
in which there are pending acquisitions petitions to deny have been filed
against the Company's FCC assignment applications. All such petitions and FCC
staff inquiries must be resolved before FCC approval can be obtained and the
acquisitions consummated. There can be no assurance that the pending
acquisitions will be consummated. In addition, from time to time the Company
completes acquisitions following the initial grant of an assignment application
by the FCC staff but before such grant becomes a final order, and a petition to
review such a grant may be filed. There can be no assurance that such grants may
not ultimately be reversed by the FCC or an appellate court as a result of such
petitions, which could result in the Company being required to divest the assets
it has acquired. The ability of the Company to make future acquisitions in
addition to the pending acquisitions is dependent upon on the Company's ability
to obtain additional equity and/or debt financing. There can be no assurance
that the Company will be able to obtain such financing.
Dispositions. On March 5, 2000 the Company entered into an Asset Purchase
Agreement (the "Phase 1 Purchase Agreement") with Capstar Radio Operating
Company ("Capstar ROC") and Capstar TX Limited Partnership ("Capstar TX"),
entities controlled by Clear Channel, to facilitate the acquisition and
disposition of certain radio station assets. Also on March 5, 2000 Cumulus Media
Inc. entered into an Asset Exchange Agreement (the "Phase 1 Exchange Agreement")
with Capstar ROC and Capstar TX pursuant to which the parties agreed to exchange
the Clear Channel Station Assets (defined therein) and the Exchange Party
Station Assets (defined therein). The parties intended the transaction
contemplated by this Exchange Agreement to be a like-kind exchange in accordance
with the provisions of Section 1031 of the Internal Revenue Code of 1986, as
amended (the "Code"). 3 On June 5, 2000 the parties to the Phase 1 Purchase
Agreement and the Phase 1 Exchange Agreement entered into an Amendment (the
"First Amendment") in which the Exchange Agreement and the Phase 1 Purchase
Agreement were amended to, among other things, 1) modify the radio station
assets to be included in the Phase 1 Exchange Agreement; and 2) modify the
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purchase price under the Phase 1 Purchase Agreement and the cash amount under
the Phase 1 Exchange Agreement.
On July 17, 2000 the parties to the Phase 1 Purchase Agreement and the
Phase 1 Exchange Agreement entered into a Second Amendment (the "Second
Amendment") whereby the Phase 1 Exchange Agreement and the Phase 1 Purchase
Agreement were amended to, among other things, 1) further modify the radio
station assets to be included in the Phase 1 Exchange Agreement; and 2) further
modify the purchase price under the Phase 1 Purchase Agreement and the cash
amount under the Phase 1 Exchange Agreement. The Phase 1 Purchase Agreement and
the Phase I Exchange Agreement, as amended, will hereafter be referred to as the
"Phase 1 Clear Channel Agreements".
The transactions contemplated by the Phase 1 Clear Channel Agreements were
consummated on August 25, 2000, whereby the Company transferred 25 stations in 5
markets to Clear Channel in exchange for 8 stations in 3 markets plus $91.5
million of cash proceeds.
On September 6, 2000, Cumulus Media Inc. entered into an Asset Purchase
Agreement (the "Phase 2 Asset Purchase Agreement") with Clear Channel
Broadcasting, Inc. ("Clear Channel Broadcasting") and Clear Channel Broadcasting
Licenses, Inc. ("Clear Channel Licenses"), entities controlled by Clear Channel.
On September 30, 2000, Cumulus Media Inc. entered into an amendment to the Phase
2 Asset Purchase Agreement (the "Phase 2 Amendment") with Clear Channel. Among
other things, the Phase 2 Amendment i) specified the transfer of the Station
Assets were as part of a like-kind exchange under Section 1031 of the Internal
Revenue Code, and ii) set the closing date for October 2, 2000.
The transactions contemplated by the Phase 2 Asset Purchase Agreement were
consummated on October 2, 2000, whereby the Company sold 28 stations in 5
markets for $68.9 million of initial cash proceeds. Upon receipt of regulatory
approval for 6 of the stations being sold, the Company will receive an
additional $6.0 million of cash proceeds.
On October 2, 2000, Cumulus Media Inc. entered into a Tangible Property
Purchase Agreement (the "Phase 3 Tangible Property Purchase Agreement") with
Capstar ROC. The transactions contemplated by the Phase 3 Tangible Property
Purchase Agreement were consummated on October 2, 2000, whereby the Company sold
the tangible assets associated with 44 stations in 8 markets to Clear Channel in
exchange for cash proceeds of $15.0 million. On October 2, 2000, Cumulus Media
Inc. entered into an Asset Exchange Agreement (the "Phase 3 Asset Exchange
Agreement") with Capstar ROC and Capstar TX.
Sources of Liquidity. We have financed our acquisitions primarily through
cash on hand and the proceeds from the asset divestitures mentioned above.
On August 31, 1999, the Company's $190.0 Credit Facility was amended and
restated to provide for aggregate principal commitments of $225.0 million. The
amended Credit Facility consisted of an eight-year term loan facility of $75.0
million, an eight and one-half year term loan facility of $50.0 million, a
seven-year revolving credit facility of $50.0 million and a revolving credit
facility of $50.0 million that would convert to a seven-year term loan, at the
option of the Company, 364 days from closing. The amount available under the
seven-year revolving credit facility will be automatically reduced by 5% of the
initial aggregate principal amount in each of the third and fourth years
following closing, 10% of the initial aggregate principal amount in the fifth
year following closing, 20% of the initial aggregate principal amount in the
sixth year following the closing and the remaining 60% of the initial aggregate
principal amount in the seventh year following closing. Under the terms of the
Credit Facility, the Company drew down $125.0 million of the term loan facility
on August 31, 1999, a portion of which was used to satisfy the principal amount
of indebtedness on its preexisting credit facility with the same lender.
On January 13, 2000, the Company entered into the First Amendment to the
Credit Facility, which among other things, modified the limitation on
investments provision in the pre-existing Credit Facility to allow loans by the
Company to officers of the Company (or their affiliates) in an amount not to
exceed $10.0 million, the proceeds of which were used to enable two executive
officers to purchase newly issued of Class C Common Stock.
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On March 10, 2000 the Company entered into the Second Amendment to the
Credit Facility, which among other things, modified the commitments available
related to letters of credit by increasing the amount from $25.0 million to
$50.0 million in the Credit Facility to allow the Company to issue additional
letters of credit in lieu of making escrow deposits in cash for pending
acquisitions.
On April 12, 2000 the Company received a waiver from its lenders that
waived any defaults or events of default arising under the Credit Facility
arising from the requirement that the annual financial statements for 1998
previously furnished to the lenders, and the quarterly financial statements for
the third and fourth quarters of 1998 and the first, second and third fiscal
quarters of fiscal 1999 previously furnished to the Lenders be complete and
accurate and all material respects and be prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") applied consistently throughout the
periods reflected therein. The waiver resulted from the Company's restatement of
its income tax benefit and deferred tax liabilities for the periods referenced
above.
On July 25, 2000, the Company received a waiver from its lenders that,
among other things, 1) waived certain requirements related to acquisitions in
the Credit Facility to the extent necessary to complete the acquisition of radio
broadcast assets from Clear Channel Communications as provided in the Asset
Exchange and Sale Agreements referenced above; and 2) waived the requirements of
the Credit Facility to the extent necessary to permit the asset sales and
exchanges with Clear Channel Communications referenced above; and 3) waived the
requirements of the Credit Facility to the extent necessary to permit
investments made prior to July 21, 2000 by the Company or any of its
subsidiaries in an aggregate amount up to $58.7 million in connection with the
proposed acquisition by the Cumulus subsidiaries of certain radio broadcast
assets to the extent such investments would not otherwise be permitted by the
Credit Facility. The waiver also modified the interest coverage ratio
requirement for the four consecutive fiscal quarters ending June 30, 2000 to a
ratio of no less than 1.50 to 1.00 and waived any default or event of default
arising from any non-compliance with the interest coverage ratio that may have
occurred as of June 30, 2000. Finally, the waiver required $91.5 million of
proceeds from the Asset Exchange and Sale Agreements with Clear Channel be
placed in escrow pursuant to an escrow agreement.
On August 29, 2000 the Company's ability to borrow under a $50.0 million
revolving credit facility that would convert to a seven-year term loan expired
in accordance with the terms of the Credit Facility. The Company did not seek
reinstatement of this facility.
On September 27, 2000, the Company and its lenders under the Credit
Facility entered into the Third Amendment, Consent and Waiver to the Amended and
Restated Credit Agreement dated as of August 31, 1999 (the "Third Amendment").
The Third Amendment allows the Company to complete the second and third phases
of the asset exchange and sale with Clear Channel Communications, the
acquisitions of radio station assets from Connoisseur Communications Partners,
L.P., Cape Fear Broadcasting and McDonald Media Inc. subject to the satisfaction
of renegotiated financial covenants. The Third Amendment also modified the
financial covenant requirements, including the consolidated leverage ratio, the
consolidated senior debt ratio, the consolidated interest coverage ratio, and
the consolidated fixed charge coverage ratio commencing with the trailing four
quarterly periods ended September 30, 2000. In addition to modifying certain
financial covenants, the methodology for the calculation of these covenants was
also modified. In consideration for entering into the Third Amendment, the
Company paid the administrative agent a fee in the amount of $0.9 million and
paid the lenders a fee of $0.8 million. In addition, the applicable maximum
Eurodollar Loan margin on Revolving Credit Loans was increased from 3.00% to
3.25%; the applicable maximum Eurodollar Loan margin on Term Loan B Loans was
increased from 3.000% to 3.375%; and the applicable maximum Eurodollar Loan
margin on Term Loan C Loans was increased from 3.125% to 3.50%. A copy of the
Third Amendment was filed with the Securities and Exchange Commission as an
exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000.
The Company's obligations under its Credit Facility are collateralized by
substantially all of its assets in which a security interest may lawfully be
granted (including FCC licenses held by its subsidiaries), including, without
limitation, intellectual property, real property, and all of the capital stock
of the Company's direct and indirect domestic subsidiaries, except the capital
stock of Broadcast Software International, Inc. ("BSI") and
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65% of the capital stock of any first-tier foreign subsidiary. The obligations
under the Credit Facility are also guaranteed by each of the direct and indirect
domestic subsidiaries, except BSI and are required to be guaranteed by any
additional subsidiaries acquired by Cumulus.
Both the revolving credit and term loan borrowings under the Credit
Facility bear interest, at the Company's option, at a rate equal to the Base
Rate (as defined under the terms of our credit facility, 9.5% as of December 31,
2000) plus a margin ranging between 0.50% to 2.125%, or the Eurodollar Rate (as
defined under the terms of the credit facility, 7.02% as of December 31, 2000)
plus a margin ranging between 1.50% to 3.125% (in each case dependent upon the
leverage ratio of the Company). At December 31, 2000 the Company's effective
interest rate on term loan amounts outstanding under the Credit Facility was
10.1%.
A commitment fee calculated at a rate ranging from 0.375% to 0.75% per
annum (depending upon the Company's utilization rate) of the average daily
amount available under the revolving lines of credit is payable quarterly in
arrears, and fees in respect of letters of credit issued under the Credit
Facility equal to the interest rate margin then applicable to Eurodollar Rate
loans under the seven-year revolving credit facility also will be payable
quarterly in arrears. In addition, a fronting fee of 0.125% is payable quarterly
to the issuing bank.
The eight-year term loan borrowings are repayable in quarterly installments
beginning in the fourth quarter of 2001. The scheduled annual amortization is
$0.8 million for each of the third, fourth, fifth, sixth and seventh years
following closing and $71.3 million in the eighth year following closing. The
eight and a half year term loan is repayable in two equal installments on
November 30, 2007 and February 28, 2008. The amount available under the
seven-year revolving credit facility will be automatically reduced in quarterly
installments as described in the Credit Agreement. Certain mandatory prepayments
of the term loan facility and the revolving credit line and reductions in the
availability of the revolving credit line are required to be made including: (i)
100% of the net proceeds from any issuance of capital stock or incurrence of
indebtedness; (ii) 100% of the net proceeds from certain asset sales; and (iii)
between 50% and 75% (dependent on our leverage ratio) of our excess cash flow.
Under the terms of the Credit Facility, the Company is subject to certain
restrictive financial and operating covenants, including but not limited to
maximum leverage covenants, minimum interest and fixed charge coverage
covenants, limitations on asset dispositions and the payment of dividends. The
failure to comply with the covenants would result in an event of default, which
in turn would permit acceleration of debt under those instruments. At December
31, 2000, the Company was in compliance with such financial and operating
covenants.
On April 12, 2000, July 25, 2000 and September 27, 2000 the Company
received the waivers or amendments of certain requirements of the Credit
Facility as described in detail above.
The terms of the Credit Facility contain events of default after expiration
of applicable grace periods, including failure to make payments on the Credit
Facility, breach of covenants, breach of representations and warranties,
invalidity of the agreement governing the credit facility and related documents,
cross default under other agreements or conditions relating to indebtedness of
Cumulus or the Company's restricted subsidiaries, certain events of liquidation,
moratorium, insolvency, bankruptcy or similar events, enforcement of security,
certain litigation or other proceedings, and certain events relating to changes
in control. Upon the occurrence of an event of default under the terms of the
Credit Facility, the majority of the lenders are able to declare all amounts
under our Credit Facility to be due and payable and take certain other actions,
including enforcement of rights in respect of the collateral. The majority of
the banks extending credit under each term loan facility and the majority of the
banks under each revolving credit facility may terminate such term loan facility
and such revolving credit facility, respectively, upon an event of default.
The Indenture and the Certificates of Designation limit the amount we may
borrow without regard to the other limitations on incurrence of indebtedness
contained therein under credit facilities to $150.0 million. As of December 31,
2000, we would be permitted, by the terms of the Indenture and the Certificates
of Designation, to incur approximately $25.0 million of additional indebtedness
under our credit facility without regard to the debt ratios included in our
indenture.
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We have issued $160.0 million in aggregate principal amount of our Notes.
The Notes are general unsecured obligations and are subordinated in right of
payment to all our existing and future senior debt (including obligations under
our credit facility). Interest on the Notes is payable semi-annually in arrears.
We issued $125.0 million of our Series A Preferred Stock in our initial
public offerings on July 1, 1998. The holders of the Series A Preferred Stock
are entitled to receive cumulative dividends at an annual rate equal to 13 3/4%
of the liquidation preference per share of Series A Preferred Stock, payable
quarterly, in arrears. On or before July 1, 2003, we may, at our option, pay
dividends in cash or in additional fully paid and non-assessable shares of
Series A Preferred Stock. From July 1, 1998 until December 31, 2000, we issued
an additional $37.9 million of shares of Series A Preferred Stock as dividends
on the Series A Preferred Stock. After July 1, 2003, dividends may only be paid
in cash. To date, all of the dividends on the Series A Preferred Stock have been
paid in shares, except for a $3.5 million cash dividend paid on January 1, 2000
to holders of record on December 15, 1999 for the period commencing October 1,
1999 and ending December 31, 1999. On October 1, 1999, the Company redeemed
43,750 shares of its Series A Preferred Stock for $51.3 million, including
redemption premium of $6.0 million and accrued but unpaid dividends of $1.5
million.
The shares of Series A Preferred Stock are subject to mandatory redemption
on July 1, 2009 at a price equal to 100% of the liquidation preference plus any
and all accrued and unpaid cumulative dividends.
We issued 250 shares of our Series B Preferred Stock on October 2, 2000 for
$2.5 million. The holders of the Series B Preferred Stock are entitled to
receive cumulative dividends at an annual rate equal to 12% of the liquidation
preference per share of Series B Preferred Stock, payable quarterly, in arrears
commencing on January 1, 2001. The Company may, at its option, pay dividends in
cash or in additional fully paid and non-assessable shares of Series B Preferred
Stock.
The shares of Series B Preferred Stock may be converted, at the holder's
discretion, on or after March 30, 2002 into Class B Common Stock at the then
effective conversion rate. The number of shares of Class B Common Stock that
will be issued upon conversion can be calculated by dividing the liquidation
preference of one share of Series B Preferred Stock by the lower of the closing
sales price of the Company's Class A Common Stock as reported by the NASDAQ
Stock Market on the conversion date or the average of the closing sales prices
of the Company's Class A Common Stock as reported by the NASDAQ Stock Market for
the twenty (20) day trading period prior to the conversion date. The shares of
Series B Preferred Stock are subject to mandatory redemption on October 3, 2009
at a price equal to 100% of the liquidation preference plus any and all accrued
and unpaid cumulative dividends.
The shares of Series B Preferred Stock can be redeemed at any time at the
Company's discretion with notice of not less than 30 days nor more than 60 days
prior to the date of redemption.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement standardizes the accounting for derivative instruments by requiring
that an entity recognize those items as assets or liabilities in the statement
of financial position and measure them at fair value. Statement 133 is amended
by Statement 137 "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133," and is
effective for years beginning after June 15, 2000. Management does not believe
adoption of this statement will materially impact the Company's financial
position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), which summarizes the views of the
Commission staff in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company's revenue recognition
principles are consistent with the guidance set forth in SAB 101, which the
Company adopted on July 1, 2000.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation -- an Interpretation of APB 25" ("FIN 44"). This Interpretation
clarifies issues relating to stock compensation. FIN 44 is effective July 1,
2000; however, certain
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conclusions in this Interpretation cover specific events that occurred prior to
July 1, 2000. The adoption of this interpretation on July 1, 2000 does not have
any impact on the Company's historical financial statements.
SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934 about us. Although we
believe that, in making any such statements, our expectations are based on
reasonable assumptions, any such statement may be influenced by factors that
could cause actual outcomes and results to be materially different from those
projected. When used in this document, the words "anticipates," "believes,"
"expects," "intends," and similar expressions, as they relate to us or our
management, are intended to identify such forward-looking statements. These
forward-looking statements are subject to numerous risks and uncertainties.
Important factors that could cause actual results to differ materially from
those in forward-looking statements, certain of which are beyond our control,
include:
- the impact of general economic conditions in the U.S. and in other
countries in which we currently do business;
- industry conditions, including competition;
- fluctuations in exchange rates and currency values;
- capital expenditure requirements;
- legislative or regulatory requirements;
- interest rates;
- taxes; and
- access to capital markets.
Our actual results, performance or achievements could differ materially
from those expressed in, or implied by, these forward-looking statements.
Accordingly, we cannot be certain that any of the events anticipated by the
forward-looking statements will occur or, if any of them do, what impact they
will have on us.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
At December 31, 2000, approximately 44% of the Company's long-term debt
bears interest at variable rates. Accordingly, the Company's earnings and after
tax cash flow are affected by changes in interest rates. Assuming the current
level of borrowings at variable rates and assuming a one percentage point change
in the 2000 average interest rate under these borrowings, it is estimated that
the Company's 2000 interest expense and net income would have changed by $1.3
million. In the event of an adverse change in interest rates, management would
likely take actions to further mitigate its exposure. However, due to the
uncertainty of the actions that would be taken and their possible effects,
additional analysis is not possible at this time. Further, such analysis would
not consider the effects of the change in the level of overall economic activity
that could exist in such an environment.
FOREIGN CURRENCY
As a result of the 1997 acquisition of Caribbean Communications Company
Ltd., ("CCC"), the Company has operations in 5 countries throughout the
English-speaking Eastern Caribbean. All foreign operations are measured in their
local currencies. As a result, the Company's financial results could be affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company has operations.
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The Company maintains no derivative instruments to mitigate the exposure to
translation and/or transaction risk. However, this does not preclude the
adoption of specific hedging strategies in the future. Our foreign operations
generated a net loss of $0.4 million for the year ended December 31, 2000.
It is estimated that a 5% change in the value of the U.S. dollar to the
Eastern Caribbean dollar or the Trinidad and Tobago dollar would change net
income for the year ended December 31, 2000 by an amount less than $0.1 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information in response to this item is included in the Company's
consolidated financial statements, together with the report thereon of KPMG LLP,
appearing on pages F-1 through F-32 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors is
incorporated by reference to the information set forth under the caption
"Members of the Board of Directors" in our Definitive Proxy Statement, expected
to be filed within 120 days of our fiscal year end. The required information
regarding executive officers of the Company is contained in Part I of this
report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
information set forth under the caption "Executive Compensation" in our
Definitive Proxy Statement, expected to be filed within 120 days of our fiscal
year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
The information required by this item is incorporate by reference to the
information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in our Definitive Proxy Statement, expected to
be filed within 120 days of our fiscal year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
information set forth under the caption "Certain Relationships and Related
Transactions" in our Definitive Proxy Statement, expected to be filed within 120
days of our fiscal year end.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Index to Financial Statements
Reports of Independent Accountants
2.
Financial Statements and Financial Statement Schedule
3.
The Financial Statements and Financial Statement Schedule
listed in the index to the Consolidated Financial Statements
of Cumulus Media Inc. that appear on page F1 of this Report
on Form 10-K are filed as a part of this report.
Exhibits
4.
The exhibits to this Report on Form 10-K are listed under
item 14(c) below.
(b) Reports on Form 8-K:
(1) Current Report on Form 8-K, filed with the SEC on October 17, 2000,
reporting, under item 2, the completion of the acquisition of 35 stations in 9
markets from Connoisseur Communications Partners, L.P., Continuity Partners,
L.P., Connoisseur Communications of Flint, L.P., Connoisseur Communications of
Mercer County, L.P., Connoisseur Communications of Muskegon, L.P., Connoisseur
Communications of Rockford, L.P., Connoisseur Communications of Saginaw, L.P.,
Connoisseur Communications of Waterloo, L.P., Connoisseur Communications of
Youngstown, L.P. and Abry Broadcast Partners III, L.P.
(2) Amendment No. 1 to Current Report on Form 8-K, filed on December 20,
2000, amending, under Item 5, the Form 8-K filed on October 17, 2000, to include
the following financial statements:
(A) Connoisseur Communications Partners, L.P.
Report of Independent Accountants
Financial Statements:
Consolidated Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999
Consolidated Statements of Operations for the nine months ended
September 30, 2000 (unaudited) and 1999 (unaudited) and for the year
ended December 31, 1999
Consolidated Statements of Partners' Capital for the nine months
ended September 30, 2000 (unaudited) and 1999 (unaudited) and for the
year ended December 31, 1999
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 (unaudited) and 1999 (unaudited) and for the year
ended December 31, 1999
Notes to Consolidated Financial Statements
(B) Pro Forma Financial Information
Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the
Year Ended December 31, 1999
Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the
Nine Months Ended September 30, 2000
Cumulus Media Inc. Unaudited Pro Forma Balance Sheet as of September 30,
2000
(3) Current Report on Form 8-K, filed with the SEC on February 2, 2001,
reporting, under Item 2 and 5, the completion of substantially all of the third
phase and final phase of an asset exchange and sale transaction with Clear
Channel Communications (NYSE: CCU) and its subsidiaries and related executed
agreements. The following financial statements were included with the February
2, 2001 filing:
(A) Pro forma Financial Information
Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the
Year Ended December 31, 1999.
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Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the
Nine Months Ended September 30, 2000.
Cumulus Media Inc. Unaudited Pro Forma Balance Sheet as of September
30, 2000.
(c) Exhibits:
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
2.1 Local Programming and Marketing Agreement dated December 17,
1997 between Cumulus Broadcasting, Inc. and New Frontier
Communications, Inc. (incorporated herein by reference to
Exhibit 2.1 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.2 Local Programming and Marketing Agreement dated January 1,
1998 between Cumulus Broadcasting, Inc. and Westwind
Broadcasting, Inc. (incorporated herein by reference to
Exhibit 2.2 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.3 Local Marketing Agreement dated February 10, 1998 between
Cumulus Broadcasting, Inc. and Wiskes/Abaris Communications
KQIZ Partnership. (incorporated herein by reference to
Exhibit 2.3 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.4 Time Brokerage Agreement dated December 15, 1997 between
Cumulus Broadcasting, Inc. and Clearly Superior Radio, LLC.
(incorporated herein by reference to Exhibit 2.4 of Form S-1
Registration Statement previously filed on June 25, 1998 and
declared effective on June 26, 1998 (Commission File No.
333-48849))
2.5 Local Marketing Agreement dated February 16, 1998 between
Cumulus Broadcasting, Inc. and Lyle Evans d/b/a Brillion
Radio Company. (incorporated herein by reference to Exhibit
2.5 of Form S-1 Registration Statement previously filed on
June 25, 1998 and declared effective on June 26, 1998
(Commission File No. 333-48849))
2.6 Program Service and Time Brokerage Agreement dated October
31, 1997 between Cumulus Broadcasting, Inc. and Tallahassee
Broadcasting Company. (incorporated herein by reference to
Exhibit 2.6 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.7 Local Marketing Agreement dated January 14, 1998 between
Cumulus Broadcasting, Inc. and Savannah Communications LP.
(incorporated herein by reference to Exhibit 2.7 of Form S-1
Registration Statement previously filed on June 25, 1998 and
declared effective on June 26, 1998 (Commission File No.
333-48849))
2.8 Local Programming and Marketing Agreement dated December 23,
1997 between Cumulus Broadcasting, Inc. and Lewis
Broadcasting Corporation. (incorporated herein by reference
to Exhibit 2.8 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.9 Local Marketing Agreement dated February 16, 1998 between
Cumulus Broadcasting, Inc. and Jon A. LeDuc. (incorporated
herein by reference to Exhibit 2.9 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.10 Program Services and Time Brokerage Agreement dated February
12, 1998 between Cumulus Broadcasting, Inc. and Pamplico
Broadcasting, LP. (incorporated herein by reference to
Exhibit 2.10 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
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NO. DESCRIPTION OF EXHIBIT
--- ----------------------
2.11 Asset Purchase Agreement dated December 1, 1997 among
Cumulus Broadcasting, Inc., Cumulus licensing Corporation
and West Jewell Management, Inc. (incorporated herein by
reference to Exhibit 2.11 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.12 Asset Purchase Agreement dated October 30, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
and KIKR Inc. (incorporated herein by reference to Exhibit
2.12 of Form S-1 Registration Statement previously filed on
June 25, 1998 and declared effective on June 26, 1998
(Commission File No. 333-48849))
2.13 Asset Purchase Agreement dated December 5, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
and Wiskes/Abaris Communications KQIZ Partnership
(incorporated herein by reference to Exhibit 2.13 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.14 Asset Purchase Agreement dated January 30, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Pacific Broadcasting of Beaumont, Inc., Beaumont Skyware
Inc., and Richard Dames. (incorporated herein by reference
to Exhibit 2.14 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.15 Asset Purchase Agreement dated December 30, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
and Sovereign Communications Corporation. (incorporated
herein by reference to Exhibit 2.15 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.16 Asset Purchase Agreement dated December 19, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Tryon-Seacoast Communications, Inc., Seacoast Broadcasting,
Inc., and Kennebec-Tryon Communications Corp. (incorporated
herein by reference to Exhibit 2.16 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.17 Asset Purchase Agreement dated February 18, 1998 among
Cumulus Broadcasting, Inc. Cumulus Licensing Corporation,
and George H. Buck, Jr. d/b/a WHSC Radio. (incorporated
herein by reference to Exhibit 2.17 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.18 Asset Purchase Agreement dated February 12, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Pamplico Broadcasting, LP. (incorporated herein by
reference to Exhibit 2.18 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.19 Asset Purchase Agreement dated October 8, 1997 among Cumulus
Broadcasting Inc., Cumulus Licensing Corporation, Connor FM
Broadcasting Co., Connor Broadcasting Corp., J. Parker
Connor and Susan C. Connor. (incorporated herein by
reference to Exhibit 2.19 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.20 Stock Purchase Agreement dated December 17, 1997 among
Cumulus Holdings, Inc., Tommy R. Vascocu, Elizabeth L.
Young, Michael L. Owens, Alan Owens, Robert Podolsky, Larry
Daniels, Sonja Erskine, and Jeffrey D. Erskine.
(incorporated herein by reference to Exhibit 2.20 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.21 Stock Purchase Agreement dated February 17, 1998 among
Cumulus Holdings, Inc. and John M. Borders, Don L. Turner,
Jerry Goos and Kan-D Land, Inc. (incorporated herein by
reference to Exhibit 2.21 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
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NO. DESCRIPTION OF EXHIBIT
--- ----------------------
2.22 Asset Purchase Agreement dated December 15, 1997 among
Cumulus Broadcasting Inc., Cumulus Licensing Corporation,
Clearly Superior Radio, L.L.C., 3-D Communications
Corporation and Dennis F. Doelitzsch. (incorporated herein
by reference to Exhibit 2.22 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.23 Asset Purchase Agreement dated February 12, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Lyle R. Evans d/b/a Brillion Radio Company.
(incorporated herein by reference to Exhibit 2.23 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.24 Asset Purchase Agreement dated January 14, 1998 among
Cumulus Broadcasting Inc., Cumulus Licensing Corporation and
Savannah Communications, LP. (incorporated herein by
reference to Exhibit 2.24 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.25 Asset Purchase Agreement dated December 23, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Lewis Broadcasting Corporation. (incorporated herein by
reference to Exhibit 2.25 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.26 Asset Purchase Agreement dated February 12, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Jon A. LeDuc and American Communications Company, Inc.
(incorporated herein by reference to Exhibit 2.26 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.27 Asset Purchase Agreement dated January 27, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Lesnick Communications, Inc. and Mrs. Betty Carey.
(incorporated herein by reference to Exhibit 2.27 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.28 Asset Purchase Agreement dated October 29, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Big Country Broadcasting, Inc., and Tye Broadcasting, Inc.
(incorporated herein by reference to Exhibit 2.28 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.29 Asset Purchase Agreement dated October 29, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Arbor Radio, LP. (incorporated herein by reference to
Exhibit 2.29 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.30 Asset Purchase Agreement dated March 5, 1997 between Wilks
Broadcasting Acquisitions, Inc. and Cumulus Media, LLC.
(incorporated herein by reference to Exhibit 2.30 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.31 Asset Purchase Agreement dated August 15, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and M & M
Partners. (incorporated herein by reference to Exhibit 2.31
of Form S-1 Registration Statement previously filed on June
25, 1998 and declared effective on June 26, 1998 (Commission
File No. 333-48849))
2.32 Stock Purchase Agreement dated October 16, 1997 between
Cumulus Holdings, Inc. and Philip T. Kelly. (incorporated
herein by reference to Exhibit 2.32 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
40
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NO. DESCRIPTION OF EXHIBIT
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2.33 Stock Purchase Agreement dated November 7, 1997 between
Cumulus Holdings, Inc. and James Maurer. (incorporated
herein by reference to Exhibit 2.33 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.34 Asset Purchase Agreement dated October 29, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Carolina Broadcasting, Inc., and Georgetown Radio, Inc.
(incorporated herein by reference to Exhibit 2.34 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.35 Asset Purchase Agreement dated October 9, 1997 among
Seacoast Radio Company, LLC., Cumulus Broadcasting, Inc. and
Cumulus Licensing Corporation. (incorporated herein by
reference to Exhibit 2.35 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.36 Asset Purchase Agreement dated October 9, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and Sunny
Broadcasters, Inc. (incorporated herein by reference to
Exhibit 2.36 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.37 Asset Purchase Agreement dated June 26, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, Venice
Michel and Venice Broadcasting Corporation. (incorporated
herein by reference to Exhibit 2.37 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.38 Agreement of Sale dated September 4, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Medical College of Georgia Foundation. (incorporated herein
by reference to Exhibit 2.38 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.39 Program Service and Time Brokerage Agreement dated August
18, 1997 between Cumulus Broadcasting, Inc. and Tally Radio,
LLC. (incorporated herein by reference to Exhibit 2.39 of
Form S-1 Registration Statement previously filed on June 25,
1998 and declared effective on June 26, 1998 (Commission
File No. 333-48849))
2.40 Asset Purchase Agreement dated August 18, 1997 among Tally
Radio, LLC and Cumulus Broadcasting, Inc. and Cumulus
Licensing Corporation. (incorporated herein by reference to
Exhibit 2.40 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.41 Asset Purchase Agreement dated August 18, 1997 among HVS
Partners and Cumulus Broadcasting, Inc. and Cumulus
Licensing Corporation. (incorporated herein by reference to
Exhibit 2.41 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.42 Asset Purchase Agreement dated August 25, 1997 among HVS
Partners and Cumulus Broadcasting, Inc. and Cumulus
Licensing Corporation. (incorporated herein by reference to
Exhibit 2.42 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.43 Letter Agreement dated January 16, 1998 between Benchmark
Radio Acquisition Fund IV Limited Partnership, Cumulus
Broadcasting, Inc. and Cumulus Licensing Corp. (incorporated
herein by reference to Exhibit 2.43 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.44 WZNY Agreement of Sale dated September 4, 1997 among George
G. Weiss and Cumulus Broadcasting, Inc. and Cumulus
Licensing Corporation. (incorporated herein by reference to
Exhibit 2.44 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
41
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NO. DESCRIPTION OF EXHIBIT
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2.45 Asset Purchase Agreement dated May 1, 1997 between HVS
Partners and Cumulus Media, LLC. (incorporated herein by
reference to Exhibit 2.45 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.46 Asset Purchase Agreement dated April 30, 1997 among Hara
Broadcasting, Inc. and DLM Communications, Inc. and Cumulus
Media, LLC. (incorporated herein by reference to Exhibit
2.46 of Form S-1 Registration Statement previously filed on
June 25, 1998 and declared effective on June 26, 1998
(Commission File No. 333-48849))
2.47 Asset Purchase Agreement dated June 24, 1997 among 62nd
Street Broadcasting of Toledo, LLC, 62nd Street Broadcasting
of Toledo License, LLC, 62nd Street Broadcasting, LLC,
Cumulus Broadcasting, Inc. and Cumulus Licensing
Corporation. (incorporated herein by reference to Exhibit
2.47 of Form S-1 Registration Statement previously filed on
June 25, 1998 and declared effective on June 26, 1998
(Commission File No. 333-48849))
2.48 Local Marketing Agreement dated February 15, 1998 among
Cumulus Broadcasting, Inc., Pacific Broadcasting of
Beaumont, Inc., and Beaumont Skyware Inc. (incorporated
herein by reference to Exhibit 2.48 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.49 Local Marketing Agreement dated December 31, 1997 between
Cumulus Broadcasting, Inc. and Sovereign Communications
Corporation and Madison Radio Group Inc. (incorporated
herein by reference to Exhibit 2.49 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.50 Asset Purchase Agreement dated March 23, 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Communications Corporation. (incorporated herein by
reference to Exhibit 2.50 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.51 Purchase Agreement dated November 20, 1996 between IQ Radio,
Inc. and Taylor Country Broadcasting, Inc. (incorporated
herein by reference to Exhibit 2.51 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.52 Assignment and Assumption Agreement dated January 20, 1998
among Taylor Country Broadcasting, Inc., Cumulus Licensing
Corp. and Cumulus Broadcasting, Inc. (incorporated herein by
reference to Exhibit 2.52 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.53 Asset Purchase Agreement dated January 2, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Westwind Broadcasting Inc. (incorporated herein by reference
to Exhibit 2.53 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.54 Asset Purchase Agreement dated March 16, 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and P and
T Broadcasting, Inc. (incorporated herein by reference to
Exhibit 2.54 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.55 Asset Purchase Agreement dated March 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Crystal Radio Group, Inc. (incorporated herein by reference
to Exhibit 2.55 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
42
43
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
2.56 Asset Purchase Agreement dated March 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Ocmulgee Broadcasting Co., Inc. (incorporated herein by
reference to Exhibit 2.56 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.57 Local Marketing Agreement dated March 16, 1998 between
Cumulus Broadcasting, Inc. and Phoenix Broadcast Partners,
Inc. (incorporated herein by reference to Exhibit 2.57 of
Form S-1 Registration Statement previously filed on June 25,
1998 and declared effective on June 26, 1998 (Commission
File No. 333-48849))
2.58 Asset Purchase Agreement dated February 1997 between Cumulus
Media, LLC and Value Radio Corporation
(WVBO-FM/WOSH-FM/WOGB-FM). (incorporated herein by reference
to Exhibit 2.58 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.59 Asset Purchase Agreement dated February 1997 between Cumulus
Media, LLC and Value Radio Corporation (WUSW-FM/WNAM-AM).
(incorporated herein by reference to Exhibit 2.59 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.60 Asset Purchase Agreement dated February 26, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Mustang Broadcasting Company. (incorporated herein by
reference to Exhibit 2.60 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.61 Asset Purchase Agreement dated March 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, Robert
Brooks d/b/a Brooks Broadcasting Company and K-Country, Inc.
(incorporated herein by reference to Exhibit 2.61 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.62 Asset Purchase Agreement dated March 24, 1998 among WSEA,
Inc., Cumulus Broadcasting, Inc., and Cumulus Licensing
Corporation. (incorporated herein by reference to Exhibit
2.62 of Form S-1 Registration Statement previously filed on
June 25, 1998 and declared effective on June 26, 1998
(Commission File No. 333-48849))
2.63 Asset Purchase Agreement dated March 30, 1998 among Cumulus
Broadcasting Inc., Cumulus Licensing Corporation and
Mountain Wireless, Inc. (incorporated herein by reference to
Exhibit 2.63 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
2.64 Asset Purchase Agreement dated February 5, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Castle Broadcasting Limited Partnership. (incorporated
herein by reference to Exhibit 2.64 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.65 Asset Purchase Agreement dated March 5, 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, Missouri
River Broadcasting, Inc. and JKJ Broadcasting, Inc.
(incorporated herein by reference to Exhibit 2.65 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.66 Asset Purchase Agreement dated March 11, 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Clarendon Country Broadcasting, Co., Inc. (incorporated
herein by reference to Exhibit 2.66 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
43
44
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
2.67 Asset Purchase Agreement dated April 1998, among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, and
Phoenix Broadcast Partners, Inc. (incorporated herein by
reference to Exhibit 2.67 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
2.68 Stock Purchase Agreement dated January 9, 1998 between
Cumulus Holdings, Inc. and Robert Lowder. (incorporated
herein by reference to Exhibit 2.68 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
2.69 Asset Purchase Agreement dated February 19, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
James Ingstad Broadcasting, Inc., Hometown Wireless, Inc.,
Radio Iowa Broadcasting, Inc. and Ingstad Mankato, Inc.
(incorporated herein by reference to Exhibit 2.69 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
2.70 Asset Purchase Agreement, dated as of April 2, 1998, by and
between Cumulus Broadcasting Inc., Cumulus Licensing Corp.,
Cumulus Wireless Services, Inc. and Phillips Broadcasting
Company (incorporated herein by reference to Exhibit 2.0 of
the Company's Form 8-K, filed on November 2, 1999)
2.71 Asset Purchase Agreement, dated as of March 9, 1999, by and
between Cumulus Broadcasting Inc., Cumulus Licensing Corp.,
Cumulus Wireless Services, Inc., HMH Broadcasting Inc., and
HMH Realty, LLC (incorporated herein by reference to Exhibit
2.1 of the Company's Form 8-K, filed on November 2, 1999)
2.72 Stock Purchase Agreement, dated June 15, 1999, among Cumulus
Media Inc., M&F Calendar Holdings, L.P., Kevin C. Whitman,
Nassau Capital Partners, L.P., NAS Partners I L.L.C., and
Philip J. Giordano (incorporated herein by reference to
Exhibit 2.2 of the Company's Form 8-K, filed on November 2,
1999)
2.73 Asset Purchase Agreement, dated as of June 29, 1999, by and
among Cumulus Broadcasting Inc., Cumulus Licensing Corp.,
and Coast Radio, L.L.C. (incorporated herein by reference to
Exhibit 2.3 of the Company's Form 8-K, filed on November 2,
1999)
2.74 Asset Purchase Agreement, dated as of September 23, 1999, by
and between Cumulus Broadcasting Inc., Cumulus Licensing
Corp., Cumulus Wireless Services, Inc., C.F. Radio, Inc.,
Cape Fear Radio, LLC, Cape Fear Broadcasting Company and
Cape Fear Tower Systems, LLC (incorporated herein by
reference to Exhibit 2.4 of the Company's Form 8-K, filed on
November 2, 1999)
2.75 Asset Purchase Agreement and Plan of Reorganization by and
between Cumulus Media Inc., Broadcast Software International
Inc. and Ron Burley, dated as of September 15, 1999
(incorporated herein by reference to Exhibit 2.1 of
Amendment No. 1 to Form S-3, filed on November 4, 1999
(Commission File No. 333-89825))
2.76 Option Agreement by and between Cumulus Broadcasting Inc.,
Cumulus Licensing Corp., Cumulus Wireless Services, Inc.
Services Inc. and Green Bay Broadcasting Company, Inc.,
dated as of September 15, 1999 (incorporated herein by
reference to Exhibit 2.2 of Amendment No. 1 to Form S-3,
filed on November 4, 1999 ( Commission File No. 333-89825))
2.77 Asset Purchase Agreement, dated as of November 29, 1999, by
and among Cumulus Broadcasting Inc. and the Connoisseur
Sellers (as defined therein) (incorporated herein by
reference to Exhibit 2.1 to the Company's Form 8-K, filed on
December 2, 1999)
2.78 Asset Purchase Agreement by and among Cumulus Broadcasting
Inc., Cumulus Licensing Corp., Cumulus Wireless Services,
Inc. Services Inc. and McDonald Media Group, Inc., with
respect to the California Stations (incorporated herein by
reference to Exhibit 2.2 to the Company's Form 8-K, filed on
January 18, 2000)
44
45
NO. DESCRIPTION OF EXHIBIT
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2.79 Asset Purchase Agreement, dated as of December 17, 1999, by
and among Cumulus Broadcasting Inc., Cumulus Licensing
Corp., Cumulus Wireless Services, Inc. Services and McDonald
Media Group, Inc., with respect to the Oregon Stations
(incorporated herein by reference to Exhibit 2.3 to the
Company's Form 8-K, filed on January 18, 2000)
2.80 Option Agreement, dated as of December 17, 1999, by and
among Cumulus Broadcasting Inc., Cumulus Licensing Corp.,
Cumulus Wireless Services, Inc. Services Inc., and McDonald
Media Group, Inc. with respect to the California Stations
((incorporated herein by reference to Exhibit 2.4 to the
Company's Form 8-K, filed on January 18, 2000)
2.81 Asset Purchase Agreement by and between Cumulus Broadcasting
Inc. and Cumulus Wireless Services, Inc. Services, Inc. and
Star Radio Operating Company and Star TX Limited
Partnership, dated March 5, 2000 (incorporated herein by
reference to Exhibit 2.1 to the Company's Form 8-K, filed on
February 2, 2001)
2.82 Asset Exchange Agreement by and between Cumulus Broadcasting
Inc., Cumulus Wireless Services, Inc. Services Inc. and
Cumulus Licensing Corp., and Star Radio Operating Company
and Star TX Limited Partnership, dated March 5, 2000
(incorporated herein by reference to Exhibit 2.2 to the
Company's Form 8-K, filed on February 2, 2001)
2.83 Amendment Agreement by and between Cumulus Broadcasting
Inc., Cumulus Wireless Services, Inc. Services Inc. and
Cumulus Licensing Corp., and Star Radio Operating Company
and Star TX Limited Partnership, dated June 5, 2000
(incorporated herein by reference to Exhibit 2.4 to the
Company's Form 8-K, filed on February 2, 2001)
2.84 Asset Purchase Agreement by and between Cumulus Broadcasting
Inc., Cumulus Wireless Services, Inc. Services Inc. and
Cumulus Licensing Corp., and Clear Channel Broadcasting
Licenses, Inc., dated September 6, 2000 (incorporated herein
by reference to Exhibit 2.5 to the Company's Form 8-K, filed
on February 2, 2001)
2.85 Amendment Agreement by and between Cumulus Broadcasting
Inc., Cumulus Wireless Services, Inc. Services Inc. and
Cumulus Licensing Corp., and Clear Channel Broadcasting,
Inc. and Clear Channel Broadcasting Licenses, Inc., dated
September 30, 2000 (incorporated herein by reference to
Exhibit 2.6 to the Company's Form 8-K, filed on February 2,
2001)
2.86 Tangible Property Purchase Agreement by and between Cumulus
Broadcasting Inc., Cumulus Wireless Services, Inc. Services
Inc., Cumulus Licensing Corp. and Star Radio Operating
Company, dated October 2, 2000 (incorporated herein by
reference to Exhibit 2.7 to the Company's Form 8-K, filed on
February 2, 2001)
2.87 Asset Exchange Agreement by and between Cumulus Broadcasting
Inc., Cumulus Wireless Services, Inc. Services Inc. and
Cumulus Licensing Corp., and Star Radio Operating Company,
and Star TX Limited Partnership, dated October 2, 2000
(incorporated herein by reference to Exhibit 2.8 to the
Company's Form 8-K, filed on February 2, 2001)
2.88 Amendment Agreement by and between Cumulus Broadcasting
Inc., Cumulus Wireless Services, Inc. Services Inc. and
Cumulus Licensing Corp., and Star Radio Operating Company,
and Star TX Limited Partnership, dated January 12, 2001
(incorporated herein by reference to Exhibit 2.9 to the
Company's Form 8-K, filed on February 2, 2001)
3.1 Articles of Incorporation of Cumulus Media Inc.
(incorporated herein by reference to Exhibit 3.1 of Form S-1
Registration Statement previously filed on June 25, 1998 and
declared effective on June 26, 1998 (Commission File No.
333-48849))
3.2 Forum of Amended and Restated Articles of Incorporation of
Cumulus Media Inc. (incorporated herein by reference to
Exhibit 3.2 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
3.3 Bylaws of Cumulus Media Inc. (incorporated herein by
reference to Exhibit 3.3 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
45
46
NO. DESCRIPTION OF EXHIBIT
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3.4 Form of Amended and Restated Bylaws of Cumulus Media Inc.
(incorporated herein by reference to Exhibit 3.4 of Form S-1
Registration Statement previously filed on June 25, 1998 and
declared effective on June 26, 1998 (Commission File No.
333-48849))
3.5 Form of Certificate of Designation with respect to Series A
Cumulative Exchangeable Redeemable Preferred Stock Due 2009.
(incorporated herein by reference to Exhibit 3.5 of Form S-1
Registration Statement previously filed on June 25, 1998 and
declared effective on June 26, 1998 (Commission File No.
333-48849))
3.6 Articles of Incorporation of Forjay Broadcasting
Corporation. (incorporated herein by reference to Exhibit
3.6 of Form S-1 Registration Statement previously filed on
June 25, 1998 and declared effective on June 26, 1998
(Commission File No. 333-48849))
3.7 Bylaws of Forjay Broadcasting Corporation. (incorporated
herein by reference to Exhibit 3.7 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
3.8 Articles of Incorporation of Minority Radio Associates, Inc.
(incorporated herein by reference to Exhibit 3.8 of Form S-1
Registration Statement previously filed on June 25, 1998 and
declared effective on June 26, 1998 (Commission File No.
333-48849))
3.9 Bylaws of Minority Radio Associates, Inc. (incorporated
herein by reference to Exhibit 3.9 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
3.10 Memorandum of Association of GEM Radio Five Ltd.
(incorporated herein by reference to Exhibit 3.10 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
3.11 Articles of Association of GEM Radio Five Ltd. (incorporated
herein by reference to Exhibit 3.11 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
3.12 Memorandum of Association of Caribbean Communications
Company Limited. (incorporated herein by reference to
Exhibit 3.12 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
3.13 Articles of Association of Caribbean Communications Company
Limited. (incorporated herein by reference to Exhibit 3.13
of Form S-1 Registration Statement previously filed on June
25, 1998 and declared effective on June 26, 1998 (Commission
File No. 333-48849))
3.14 Articles of Incorporation of Forjay Licensing Corp.
(incorporated herein by reference to Exhibit 3.14 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
3.15 Bylaws of Forjay Licensing Corp. (incorporated herein by
reference to Exhibit 3.15 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
3.16 Articles of Incorporation of MRA Licensing Corp.
(incorporated herein by reference to Exhibit 3.16 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
3.17 Bylaws of MRA Licensing Corp. (incorporated herein by
reference to Exhibit 3.17 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
3.18 Articles of Incorporation of Cumulus Broadcasting, Inc.
(incorporated herein by reference to Exhibit 3.18 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
46
47
NO. DESCRIPTION OF EXHIBIT
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3.19 Bylaws of Cumulus Broadcasting, Inc. (incorporated herein by
reference to Exhibit 3.19 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
3.20 Articles of Incorporation of Cumulus Licensing Corp.
(incorporated herein by reference to Exhibit 3.20 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
3.21 Bylaws of Cumulus Licensing Corp. (incorporated herein by
reference to Exhibit 3.21 Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
3.22 Form of Class A Common Stock Certificate. (incorporated
herein by reference to Exhibit 4.1 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
3.23 Form of Series A Preferred Stock Certificate. (incorporated
herein by reference to Exhibit 4.2 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
10.1 Credit Facility dated March 2, 1998 among Cumulus Media
Inc., Lehman Brothers Inc. and Lehman Commercial Paper Inc.
(incorporated herein by reference to Exhibit 10.1 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
10.2 First Amendment, dated May 1, 1998, to the Credit Facility
among Cumulus Media Inc., Lehman Brothers Inc. and Lehman
Commercial Paper. (incorporated herein by reference to
Exhibit 10.2 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
10.3 Second Amendment dated June 24, 1998, to the Credit Facility
among Cumulus Media Inc., Lehman Brothers Inc. and Lehman
Commercial Paper. (incorporated herein by reference to
Exhibit 10.3 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
10.4 Form of Indenture dated July 1, 1998 between Cumulus Media
Inc. and Firstar Bank of Minnesota, N.A., as Trustee
(incorporated herein by reference to Exhibit 10.4 of Form
S-1 Registration Statement previously filed on June 25, 1998
and declared effective on June 26, 1998 (Commission File No.
333-48849))
10.5 Form of Exchange Debenture Indenture, dated July 1, 1998
between Cumulus Media Inc. and U.S. Bank Trust National
Association, as Trustee (incorporated herein by reference to
Exhibit 10.5 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
10.6 Form of Employment Agreement between Cumulus Media Inc. and
Richard W. Weening (incorporated herein by reference to
Exhibit 10.6 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
10.7 Form of Employment Agreement between Cumulus Media Inc. and
Lewis W. Dickey, Jr. (incorporated herein by reference to
Exhibit 10.7 of Form S-1 Registration Statement previously
filed on June 25, 1998 and declared effective on June 26,
1998 (Commission File No. 333-48849))
10.8 Employment Agreement between Cumulus Media Inc. and William
M. Bungeroth (incorporated herein by reference to Exhibit
10.8 of Form S-1 Registration Statement previously filed on
June 25, 1998 and declared effective on June 26, 1998
(Commission File No. 333-48849))
47
48
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
10.9 Employment Agreement between Cumulus Media Inc. and Richard
J. Bonick, Jr. (incorporated herein by reference to Exhibit
10.9 of Form S-1 Registration Statement previously filed on
June 25, 1998 and declared effective on June 26, 1998
(Commission File No. 333-48849))
10.10 Form of Cumulus Media Inc. 1998 Employee Stock Incentive
Plan (incorporated herein by reference to Exhibit 10.10 of
Form S-1 Registration Statement previously filed on June 25,
1998 and declared effective on June 26, 1998 (Commission
File No. 333-48849))
10.11 Form of Cumulus Media Inc. 1998 Executive Stock Incentive
Plan (incorporated herein by reference to Exhibit 10.11 of
Form S-1 Registration Statement previously filed on June 25,
1998 and declared effective on June 26, 1998 (Commission
File No. 333-48849))
10.12 Services Agreement dated May 1, 1998 by and between QUAESTUS
Management Corporation and Cumulus Media Inc. (incorporated
herein by reference to Exhibit 10.12 of Form S-1
Registration Statement previously filed on June 25, 1998 and
declared effective on June 26, 1998 (Commission File No.
333-48849))
10.13 Services Agreement dated March 23, 1998 between Stratford
Research, Inc. and Cumulus Media Inc. (incorporated herein
by reference to Exhibit 10.13 of Form S-1 Registration
Statement previously filed on June 25, 1998 and declared
effective on June 26, 1998 (Commission File No. 333-48849))
10.14 Amended and Restated Credit Agreement among Cumulus Media
Inc., Lehman Brothers Inc., Barclays Capital and Lehman
Commercial Paper Inc., dated August 31, 1999 (incorporated
herein by reference to Exhibit 10.1 to Amendment No. 1 to
Form S-3, filed on November 4, 1999 (Commission File No.
333-89825))
10.15 Cumulus Media Inc. 1999 Employee Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.2 to
Amendment No. 1 to Form S-3, filed on November 4, 1999
(Commission File No. 33-89825))
10.16 Cumulus Media Inc. 1999 Executive Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.3 to
Amendment No. 1 to Form S-3, filed on November 4, 1999
(Commission File No. 33-89825))
10.17 Third Amendment, Consent and Waiver, dated as of September
27, 2000, to the Amended and Restated Credit Agreement among
Cumulus Media Inc., Lehman Brothers Inc., Barclays Capital
and Lehman Commercial Paper Inc. (incorporated herein by
reference to Exhibit 10.1 to Form 10-Q/A for the period
ended September 30, 2000, filed on March 28, 2001)
21.1 Subsidiaries of the Company (incorporated herein by
reference to Exhibit 21.1 of Form S-1 Registration Statement
previously filed on June 25, 1998 and declared effective on
June 26, 1998 (Commission File No. 333-48849))
23.1* Consent of KPMG LLP
23.2* Consent of PricewaterhouseCoopers LLP
- -------------------------
* Filed herewith
48
49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 2nd day of
April 2001.
CUMULUS MEDIA INC.
By /s/ MARTIN GAUSVIK
------------------------------------
Martin Gausvik
Executive Vice President,
Treasurer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LEWIS W. DICKEY, JR. Chairman, President, Chief Executive April 2, 2001
- ------------------------------------------ Officer and Director, (Principal
Lewis W. Dickey, Jr. Executive Officer)
/s/ MARTIN GAUSVIK Executive Vice President and Chief April 2, 2001
- ------------------------------------------ Financial Officer (Principal Financial
Martin Gausvik and Accounting Officer)
/s/ RALPH B. EVERETT Director April 2, 2001
- ------------------------------------------
Ralph B. Everett
/s/ ERIC P. ROBISON Director April 2, 2001
- ------------------------------------------
Eric P. Robison
/s/ ROBERT H. SHERIDAN, III Director April 2, 2001
- ------------------------------------------
Robert H. Sheridan, III
/s/ RICHARD W. WEENING Director April 2, 2001
- ------------------------------------------
Richard W. Weening
49
50
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Cumulus Media Inc. are
included in Item 8:
PAGE IN THIS
REPORT
------------
(1) Financial Statements
Reports of Independent Accountants.......................... F-3
Consolidated Balance Sheets at December 31, 2000 and 1999... F-4
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998.......................... F-5
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1998, 1999 and 2000.............. F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998.......................... F-7
Notes to Consolidated Financial Statements.................. F-8
(2) Financial Statement Schedule
Schedule II: Valuation and Qualifying Accounts.............. F-32
F-1
51
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CUMULUS MEDIA INC.:
We have audited the accompanying consolidated balance sheet of Cumulus
Media Inc. and subsidiaries as of December 31, 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. In connection with our audit of the consolidated financial
statements, we have also audited the financial statement schedule as listed in
the accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cumulus
Media Inc. and subsidiaries as of December 31, 2000, and the results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America. Also
in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Chicago, Illinois
March 14, 2001
F-2
52
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE STOCKHOLDERS OF CUMULUS MEDIA INC.:
In our opinion, the consolidated financial statements listed in the index
on page F-1 present fairly, in all material respects, the financial position of
Cumulus Media Inc. and subsidiaries at December 31, 1999, and the results of
their operations and their cash flows for each of the years in the two-year
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the index on page F-1 presents
fairly, in all material respects, the information set forth therein related to
the two year period ended December 31, 1999 when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these statements based on our
audits. We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above. We have not audited the consolidated financial
statements of Cumulus Media Inc. for any period subsequent to December 31, 1999.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
April 13, 2000
F-3
53
CUMULUS MEDIA INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
2000 1999
---- ----
Assets
Current assets:
Cash and cash equivalents................................. $ 10,979 $219,581
Accounts receivable, less allowance for doubtful accounts
of $17,348 and $3,118 respectively..................... 43,498 53,521
Prepaid expenses and other current assets................. 9,536 8,351
-------- --------
Total current assets................................... 64,013 281,453
Property and equipment, net................................. 79,829 66,963
Intangible assets, net...................................... 762,996 526,784
Other assets................................................ 48,097 39,688
-------- --------
Total assets........................................... $954,935 $914,888
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses..................... $ 45,858 $ 26,540
Current portion of long-term debt......................... 208 20
Other current liabilities................................. 679 1,010
-------- --------
Total current liabilities.............................. $ 46,745 $ 27,570
Long-term debt.............................................. 285,020 285,227
Other liabilities........................................... 1,924 1,977
Deferred income taxes....................................... 29,666 8,940
-------- --------
Total liabilities...................................... 363,355 323,714
-------- --------
Series A Cumulative Exchangeable Redeemable Preferred Stock
due 2009, stated value $1,000 per share, 113,643 and
102,702 shares issued and outstanding, respectively....... 117,530 102,732
Series B Cumulative Exchangeable Redeemable Preferred Stock
due 2009, stated value $10,000 per share, 250 and 0 shares
issued and outstanding, respectively...................... 2,178 --
Stockholders' equity:
Class A common stock, par value $.01 per share; 50,000,000
shares authorized; 28,378,976 and 26,052,393 shares
issued and outstanding................................. 284 261
Class B common stock, par value $.01 per share; 20,000,000
shares authorized; 4,479,343 and 6,629,343 shares
issued and outstanding................................. 45 66
Class C common stock, par value $.01 per share; 30,000,000
shares authorized; 2,307,277 and 2,151,277 shares
issued and outstanding................................. 23 21
Additional paid-in-capital................................ 512,284 516,576
Loans to officers......................................... (9,984) --
Accumulated deficit....................................... (30,780) (28,482)
-------- --------
Total stockholders' equity.................................. 471,872 488,442
-------- --------
Total liabilities and stockholders' equity................ $954,935 $914,888
======== ========
See Accompanying Notes to Consolidated Financial Statements
F-4
54
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
2000 1999 1998
---- ---- ----
Revenues................................................. $ 246,244 $ 194,940 $ 108,172
Less: agency commissions............................... (20,333) (14,921) (9,385)
---------- ---------- ----------
Net revenues........................................ 225,911 180,019 98,787
Operating expenses:
Station operating expenses, excluding depreciation,
amortization and LMA fees (including provision for
doubtful accounts of $23,751, $2,504 and $964
respectively)....................................... 191,336 133,328 72,154
Depreciation and amortization.......................... 44,003 32,564 17,113
LMA fees............................................... 4,825 4,165 2,404
Corporate general and administrative................... 18,232 8,204 5,607
Restructuring and other charges........................ 16,226 -- --
---------- ---------- ----------
Total operating expenses............................ 274,622 178,261 97,278
Operating income (loss)............................. (48,711) 1,758 1,509
---------- ---------- ----------
Nonoperating income (expense):
Interest expense....................................... (32,771) (27,041) (15,551)
Interest income........................................ 6,716 4,164 2,373
Other income (expense), net............................ 73,280 627 (2)
---------- ---------- ----------
Total nonoperating income (expenses), net........... 47,225 (22,250) (13,180)
---------- ---------- ----------
Loss before income taxes............................ (1,486) (20,492) (11,671)
Income tax (expense) benefit............................. (812) 6,870 2,226
---------- ---------- ----------
Loss before extraordinary item...................... (2,298) (13,622) (9,445)
Extraordinary loss on early extinguishment of debt....... -- -- (1,837)
---------- ---------- ----------
Net loss............................................ (2,298) (13,622) (11,282)
Preferred stock dividends, deemed dividends, accretion of
discount, and redemption premium....................... 14,875 23,790 13,591
---------- ---------- ----------
Net loss attributable to common stockholders........ $ (17,173) $ (37,412) $ (24,873)
========== ========== ==========
Basic and diluted loss per common share.................. $ (0.49) $ (1.50) $ (1.55)
========== ========== ==========
Weighted average common shares outstanding............... 35,138,650 24,938,276 16,085,000
---------- ---------- ----------
See Accompanying Notes to Consolidated Financial Statements
F-5
55
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
CLASS A CLASS B CLASS C
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
----------------- ------------------ ------------------ ----------------- ADDITIONAL
NUMBER PAR NUMBER PAR NUMBER PAR NUMBER PAR PAID-IN
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE CAPITAL
--------- ----- --------- ----- --------- ----- --------- ----- ----------
Balance at January 1, 1998..... 1,000 -- -- $ -- -- $ -- -- $ -- $ 53,549
====== == ========== ==== ========== ==== ========= ==== ========
Capital contribution........... -- -- -- -- -- -- -- -- 15,211
Preferred stock dividend and
accretion of discount........ -- -- -- -- -- -- -- -- (13,591)
Reorganization concurrent with
IPO.......................... (1,000) -- 1,346,932 14 -- -- -- -- --
Proceeds from IPO.............. -- -- 7,228,572 72 8,785,416 88 2,376,277 24 101,003
Preferred and common stock
offering costs............... -- -- -- -- -- -- -- -- (13,961)
Share exchange................. -- -- 125,000 1 (125,000) (1) -- -- --
Net loss and comprehensive
loss......................... -- -- -- -- -- -- -- -- --
------ -- ---------- ---- ---------- ---- --------- ---- --------
Balance at December 31, 1998... -- -- 8,700,504 $ 87 8,660,416 $ 87 2,376,277 $ 24 $142,211
====== == ========== ==== ========== ==== ========= ==== ========
Capital contribution........... -- -- 27,580 -- -- -- -- -- 384
Preferred stock dividend....... -- -- -- -- -- -- -- -- (17,776)
Proceeds from follow-on
offerings.................... -- -- 14,915,600 149 -- -- -- -- 416,244
Common stock offering costs.... -- -- -- -- -- -- -- -- (23,337)
Redemption of preferred
stock........................ -- -- -- -- -- (6,014)
BSI stock issuance............. -- -- 152,636 2 -- -- -- -- 4,864
Share exchange................. -- -- 2,256,073 23 (2,031,073) (21) (225,000) (3) --
Comprehensive loss:
Net loss..................... -- -- -- -- -- -- -- -- --
Other comprehensive income... -- -- -- -- -- -- -- -- --
------ -- ---------- ---- ---------- ---- --------- ---- --------
Total comprehensive loss....... -- -- -- -- -- -- -- -- --
------ -- ---------- ---- ---------- ---- --------- ---- --------
Balance at December 31, 1999... -- -- 26,052,393 $261 6,629,343 $ 66 2,151,277 $ 21 $516,576
====== == ========== ==== ========== ==== ========= ==== ========
Issuance of common stock....... -- -- 17,674 -- -- -- -- -- 251
Preferred stock dividend....... -- -- -- -- -- -- -- -- (14,875)
Common stock offering costs.... -- -- -- -- -- -- -- -- (381)
Share exchange................. -- -- 2,250,000 23 (2,150,000) (21) (100,000) (1) --
Issuance of common stock in
acquisition.................. -- -- 58,909 -- -- -- -- -- 732
Loans to officers for common
stock........................ -- -- -- -- -- -- 256,000 3 9,981
Net loss and comprehensive
loss......................... -- -- -- -- -- -- -- -- --
------ -- ---------- ---- ---------- ---- --------- ---- --------
Balance at December 31, 2000... -- -- 28,378,976 $284 4,479,343 $ 45 2,307,277 $ 23 $512,284
====== == ========== ==== ========== ==== ========= ==== ========
ACCUMULATED
OTHER TOTAL
LOANS TO ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
OFFICERS DEFICIT INCOME EQUITY
-------- ----------- ------------- -------------
Balance at January 1, 1998..... $ -- $ (3,578) $ 5 $ 49,976
======= ======== ==== ========
Capital contribution........... -- -- -- 15,211
Preferred stock dividend and
accretion of discount........ -- -- -- (13,591)
Reorganization concurrent with
IPO.......................... -- -- -- 14
Proceeds from IPO.............. -- -- -- 101,187
Preferred and common stock
offering costs............... -- -- -- (13,961)
Share exchange................. -- -- -- 0
Net loss and comprehensive
loss......................... -- (11,282) -- (11,282)
------- -------- ---- --------
Balance at December 31, 1998... $ $(14,860) $ 5 $127,554
======= ======== ==== ========
Capital contribution........... -- -- -- 384
Preferred stock dividend....... -- -- -- (17,776)
Proceeds from follow-on
offerings.................... -- -- -- 416,393
Common stock offering costs.... -- -- -- (23,337)
Redemption of preferred
stock........................ -- -- -- (6,014)
BSI stock issuance............. -- -- -- 4,866
Share exchange................. -- -- -- (1)
Comprehensive loss:
Net loss..................... -- (13,622) (13,622)
Other comprehensive income... -- -- (5) (5)
------- -------- ---- --------
Total comprehensive loss....... -- (13,622) (5) (13,627)
------- -------- ---- --------
Balance at December 31, 1999... $ $(28,482) $ 0 $488,442
======= ======== ==== ========
Issuance of common stock....... -- -- -- 251
Preferred stock dividend....... -- -- -- (14,875)
Common stock offering costs.... -- -- -- (381)
Share exchange................. -- -- -- 1
Issuance of common stock in
acquisition.................. -- -- -- 732
Loans to officers for common
stock........................ (9,984) -- -- --
Net loss and comprehensive
loss......................... -- (2,298) -- (2,298)
------- -------- ---- --------
Balance at December 31, 2000... $(9,984) $(30,780) $ 0 $471,872
======= ======== ==== ========
See Accompanying Notes to Consolidated Financial Statements
F-6
56
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(DOLLARS IN THOUSANDS)
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net loss.................................................. $ (2,298) $ (13,622) $ (11,282)
Adjustments to reconcile net loss to net cash used in
operating activities:
Extraordinary loss on early extinguishment of debt...... -- -- 1,837
Depreciation............................................ 13,178 8,123 3,590
Amortization of goodwill, intangible assets and other
assets................................................ 32,592 25,617 13,523
Provision for doubtful accounts......................... 23,751 2,504 964
Gain on sale of stations................................ (75,553) -- --
Deferred taxes.......................................... 812 (6,983) (2,352)
Asset write-down for restructuring and other charges.... 11,030 -- --
Changes in assets and liabilities, net of effects of
acquisitions/dispositions
Accounts receivable..................................... (15,695) (28,061) (22,238)
Prepaid expenses and other current assets............... (90) (2,375) (2,361)
Accounts payable and accrued expenses................... 135 6,725 14,216
Other assets............................................ (1,742) (2,136) (300)
Other liabilities....................................... (685) (3,436) (250)
--------- --------- ---------
Net cash used in operating activities.............. (14,565) (13,644) (4,653)
--------- --------- ---------
Cash flows from investing activities:
Acquisitions.............................................. (172,795) (152,737) (342,845)
Escrow deposits on pending acquisitions................... (9,133) (19,446) (1,335)
Capital expenditures...................................... (9,480) (18,561) (6,649)
Other..................................................... 1,134 (1,361) (196)
--------- --------- ---------
Net cash used in investing activities.............. (190,274) (192,105) (351,025)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from revolving line of credit.................... -- 176,950 175,000
Payments on revolving line of credit...................... -- (114,450) (155,035)
Proceeds from sale of senior subordinated notes........... -- -- 160,000
Payments for debt issuance costs.......................... (1,935) (4,209) (9,870)
Payments on promissory notes.............................. (19) (21) (278)
Proceeds from issuance of redeemable preferred stock...... 2,500 -- 106,724
Payment of dividend on Series A Preferred Stock........... (3,530) -- --
Payments for redemption of preferred stock................ -- (51,269) --
Proceeds from issuance of common stock.................... -- 416,781 116,527
Payments for preferred and common stock offering costs.... (779) (23,337) (14,078)
--------- --------- ---------
Net cash (used in) provided by financing
activities....................................... (3,763) 400,445 378,990
--------- --------- ---------
Increase(decrease) in cash and cash equivalents............. (208,602) 194,696 23,312
Cash and cash equivalents at beginning of year.............. 219,581 24,885 1,573
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 10,979 $ 219,581 $ 24,885
========= ========= =========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 31,827 $ 25,723 $ 7,258
Income taxes paid......................................... 67 112 26
========= ========= =========
Non-cash operating, investing and financing activities:
Trade revenue............................................. $ 12,961 $ 10,578 $ 6,226
Trade expense............................................. 12,773 10,301 6,157
Assets acquired through notes payable..................... 600 6,268 2,065
Liabilities assumed through acquisitions.................. 216 456 942
Capital contribution from Cumulus Media LLC............... -- -- 15,136
Advance on assets to be sold received directly into
restricted cash account................................. 11,978 -- --
Proceeds on sale of stations received directly into
restricted cash account................................. 175,363 -- --
Payments for acquisitions remitted directly from
restricted cash account................................. 187,341 -- --
========= ========= =========
See Accompanying Notes to Consolidated Financial Statements
F-7
57
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business
Cumulus Media Inc., ("Cumulus" or the "Company") is a radio broadcasting
corporation incorporated in the state of Illinois on May 22, 1997 focused on
acquiring, operating and developing commercial radio stations in mid-size radio
markets in the United States and the Eastern Caribbean.
Principles of Consolidation
The consolidated financial statements include the accounts of Cumulus and
its wholly owned subsidiaries. Significant intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Concentration of Credit Risks
In the opinion of management, credit risk with respect to accounts
receivable is limited due to the large number of diversified customers and the
geographic diversification of the Company's customer base. The Company performs
ongoing credit evaluations of its customers and believes that adequate
allowances for any uncollectible accounts receivable are maintained. During the
third quarter of 2000, the Company implemented a new credit and collection
policy across all markets designed to ensure uniform procedures for the
extension of credit and collection of receivables. The management team has also
created incentives for the Company's sales personnel in each of our markets to
collect delinquent accounts receivable. We believe these policies and procedures
will reduce the Company's loss experience from uncollectible accounts
receivable.
Property and Equipment
Property and equipment are recorded at cost. Property and equipment
acquired in business combinations are recorded at their estimated fair value on
the date of acquisition under the purchase method of accounting. Depreciation of
property and equipment is computed using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized using
the straight-line method over the shorter of the estimated useful life of the
asset or the remaining term of the lease. Routine maintenance and repairs are
expensed as incurred. Depreciation of construction in progress is not recorded
until the assets are placed into service.
Goodwill and Intangible Assets
Specifically identified intangible assets, primarily broadcast licenses,
are recorded at their estimated fair value on the date of acquisition under the
purchase method of accounting. Goodwill represents the excess of cost over the
fair value of tangible assets and specifically identified intangible assets.
Amortization is provided using the straight-line method over the estimated
useful lives of the assets. Deposits on pending acquisitions are deferred and
presented as other assets until the acquisition is consummated, at which time
the amounts are allocated between tangible and intangible assets under the
purchase method of accounting.
F-8
58
Impairment of Long-Lived Assets
The Company reviews the carrying value of its long-lived assets, including
property and equipment, goodwill and other intangible assets, for impairment
whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be fully recoverable. Recoverability of long-lived assets is
assessed by a comparison of the carrying amount of the asset to the estimated
future undiscounted net cash flows expected to be generated by the asset. If
estimated future undiscounted net cash flows are less than the
carrying amount of the asset, the asset is considered impaired and an expense is
recorded in an amount required to reduce the carrying amount of the asset to its
then fair value.
Software Development Costs
Costs of internal use software are accounted for in accordance with
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." Accordingly, certain software
costs are capitalized and amortized using the straight-line method over the
estimated useful lives of the assets. Capitalized internal use software costs
were insignificant in 2000. The Company capitalized $2.4 million of internal use
software costs in 1999.
Debt Issuance Costs
The costs related to the issuance of debt are capitalized and amortized to
interest expense over the life of the related debt. During the years ended
December 31, 2000, 1999 and 1998 the Company recognized amortization expense of
debt issuance costs of approximately, $1.8 million, $1.2 million and $0.6
million, respectively.
Revenue Recognition
Revenue is derived primarily from the sale of commercial airtime to local
and national advertisers. Revenue is recognized as commercials are broadcast.
Trade Agreements
The Company trades commercial airtime for goods and services used
principally for promotional, sales and other business activities. An asset and
liability is recorded at the fair market value of the goods or services
received. Trade revenue is recorded and the liability is relieved when
commercials are broadcast and trade expense is recorded and the asset relieved
when goods or services are received or used.
Local Marketing Agreements
In certain circumstances, the Company enters into a local marketing
agreement ("LMA") or time brokerage agreement with a Federal Communications
Commission ("FCC") licensee of a radio station. In a typical LMA, the licensee
of the station makes available, for a fee, airtime on its station to a party,
which supplies programming to be broadcast on that airtime, and collects
revenues from advertising aired during such programming. Revenues earned and LMA
fees incurred pursuant to local marketing agreements or time brokerage
agreements are recognized at their gross amounts in the accompanying
consolidated statements of operations.
Stock-based Compensation
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations, to account for its
fixed plan employee stock options. Under this method, compensation expense is
recorded on the date of grant only if the current market price of the underlying
stock exceeds the exercise price. Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," established
accounting and disclosure requirements using a fair value-based method of
accounting for stock-based employee compensation plans. As allowed by SFAS No.
123, the Company has
F-9
59
elected to continue to apply the intrinsic value-based method of accounting
described above, and has adopted the disclosure requirements of SFAS No. 123.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Earnings Per Share
Basic and diluted loss per share is computed in accordance with SFAS No.
128, "Earnings Per Share." Basic and diluted loss per share are the same,
because there were no securities outstanding which had a dilutive effect for the
years ended December 31, 2000, 1999, and 1998. The calculation of basic and
diluted loss per share for the year ended December 31, 1998 was determined after
giving effect to the exchange of the Company's shares by Cumulus Media, LLC for
the Company's initial public offering.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement standardizes the accounting for derivative instruments by requiring
that an entity recognize those items as assets or liabilities in the statement
of financial position and measure them at fair value. Statement 133 is amended
by Statement 137 "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133," and is
effective for years beginning after June 15, 2000. Management does not believe
adoption of this statement will materially impact the Company's financial
position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), which summarizes the views of the
Commission staff in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company's revenue recognition
principles are consistent with the guidance set forth in SAB 101, which the
Company adopted on July 1, 2000.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation -- an Interpretation of APB 25" ("FIN 44"). This Interpretation
clarifies issues relating to stock compensation. FIN 44 is effective July 1,
2000; however, certain conclusions in this Interpretation cover specific events
that occurred prior to July 1, 2000. The adoption of this interpretation on July
1, 2000 does not have any impact on the Company's historical financial
statements.
Reclassifications
Certain 1999 and 1998 balances have been reclassified to conform to the
2000 presentation.
2. ACQUISITIONS AND DISPOSITIONS
The Company completed acquisitions to purchase seventy-six, twenty-two, and
fifty-six radio stations for $430.3 million, $159.0 million and $344.0 million
in cash and stock during 2000, 1999 and 1998, respectively. The acquisitions
were funded with cash on hand, prior escrow deposits on pending acquisitions,
and restricted cash from asset exchanges. These aggregate acquisition amounts
include the assets acquired pursuant to the asset exchange and sales
transactions and other individually significant acquisitions described below.
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The aggregate purchase prices of the acquisitions described above include
direct costs relating to the acquisitions. An allocation of the aggregate
purchase prices to the estimated fair values of the assets acquired and
liabilities assumed is presented below (dollars in thousands).
2000 1999 1998
---- ---- ----
Current assets, other than cash................. $ 1,113 $ 1,707 $ 1,701
Property and equipment.......................... 45,636 15,087 30,192
Other assets.................................... -- -- 625
Intangible assets............................... 388,786 149,203 327,516
Current liabilities............................. (236) (456) (942)
Deferred liabilities............................ (5,034) (6,536) (15,074)
-------- -------- --------
$430,265 $159,005 $344,018
======== ======== ========
CLEAR CHANNEL ASSET SALES AND EXCHANGES
The Company entered into a series of asset exchange and sales agreements
with Clear Channel Communications, Inc. and subsidiaries ("Clear Channel")
during the year ended December 31, 2000, which were consummated in three phases.
The Company completed the first phase of the asset exchange and sales
transaction with Clear Channel ("Phase 1") on August 25, 2000, whereby the
Company transferred 25 stations in 5 markets to Clear Channel in exchange for 8
stations in 3 markets plus $91.5 million of cash proceeds. These proceeds were
received in a restricted cash account and were subsequently remitted to the
seller in connection with the acquisition of Connoisseur Communications Partners
LP ("Connoisseur") on October 2, 2000, as described below.
The Company consummated the second phase of the asset exchange and sales
transaction with Clear Channel on October 2, 2000, pursuant to which the Company
sold 28 stations in 5 markets for $68.9 million of initial cash proceeds. These
proceeds were received in a restricted cash account and were subsequently
remitted to the seller in connection with the acquisition of Connoisseur on
October 2, 2000, as described below. Upon receipt of regulatory approval for 6
of the stations being sold, the Company will receive an additional $6.0 million
of cash proceeds.
The Company sold the tangible assets of certain properties to Clear Channel
on October 2, 2000, for $15.0 million of cash proceeds. These proceeds were
received in a restricted cash account and were subsequently remitted to the
seller in connection with the acquisition of Connoisseur on October 2, 2000, as
described below.
The Company recorded $75.6 million of gains from the asset exchange and
sales transactions with Clear Channel for the year ended December 31, 2000,
which have been presented in other income in the accompanying statement of
operations. The $30.1 million tax liability arising from these gains on the sale
of assets has been deferred because the stations sold were replaced with
qualified assets. The proceeds from the divestitures were held in restricted
cash accounts until the replacement properties were purchased.
The Company subsequently consummated the third phase of the asset exchange
and sales transaction with Clear Channel ("Phase 3") on January 18, 2001, as
described in Note 20. The Company received a $12.0 million advance from Clear
Channel during 2000 for the assets sold pursuant to Phase 3, which has been
presented in accounts payable and accrued expenses in the accompanying
consolidated balance sheet as of December 31, 2000. The proceeds from this
advance were received in a restricted cash account and were subsequently
remitted to the seller in connection with the acquisition of Connoisseur on
October 2, 2000, as described below.
CONNOISSEUR ACQUISITION
On October 2, 2000, the Company completed the acquisition of 35 stations in
9 markets from Connoisseur for a total purchase price of $253.0 million.
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OTHER
On September 15, 1999, the Company acquired all of the assets of Broadcast
Software International, Inc. (BSI), a Eugene, Oregon-based developer of digital
audio software, for a total purchase price of $5.4 million in cash and stock.
BSI is a software development company specializing in digital audio applications
for broadcast radio and television as well as for Internet broadcasters.
Subsequent to the acquisition, BSI operated as a subsidiary of Cumulus with
operations remaining in its current Eugene, Oregon headquarters.
All of the Company's acquisitions were accounted for under the purchase
method of accounting, including stations acquired in the asset exchange and
sales transactions with Clear Channel. As such, the accompanying consolidated
balance sheets include the acquired assets and liabilities and the accompanying
consolidated statements of operations include the results of operations of the
acquired entities from their respective dates of acquisition. The accompanying
consolidated statements of operations include the results of operations of the
divested entities through the date of disposition.
PRO FORMA
The following unaudited condensed results of operations, prepared on a pro
forma basis, present the results of operations as if all of the above
acquisitions and dispositions of radio stations in 2000 and 1999 had been
completed as of January 1, 1999 (amounts in thousands, except per share data):
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
(UNAUDITED) (UNAUDITED)
Net revenues.......................................... $218,011 $214,402
Operating income (loss)............................... $(28,701) $ 13,341
Net income (loss)..................................... $(34,249) $ (5,345)
Net loss attributable to common stockholders.......... $(49,123) $(29,135)
======== ========
Basic and diluted loss per common share............... $ (1.40) $ (1.17)
Escrow funds of approximately $31.9 million and $22.8 million paid by the
Company in connection with pending acquisitions have been classified as Other
Assets at December 31, 2000 and December 31, 1999 respectively, in the
accompanying consolidated balance sheets.
The Company operated 41 and 114 stations under LMA's as of December 31,
2000 and 1999, respectively. The statements of operations for the years ended
December 31, 2000 and 1999 include the revenue and broadcast operating expenses
of these radio stations and any related fees associated with the LMA from the
effective date of the LMA through the earlier of the acquisition date or
December 31.
3. RESTRUCTURING AND OTHER CHARGES
During the year ended December 31, 2000, the Company recorded $16.2 million
in restructuring and other charges comprised of i) a $9.3 million Corporate
restructuring charge, ii) a $5.1 million charge related to the impairment of
goodwill on the Company's wholly owned subsidiary, BSI and iii) a $1.8 million
charge related to the impairment of the net assets of its wholly owned
subsidiary, The Advisory Board of Nevada.
During June 2000 the Company implemented two separate Board-approved
restructuring programs. During the quarter ended June 30, 2000, the Company
recorded a $9.3 million charge to operating expenses related to restructuring
costs.
The June 2000 restructuring programs were the result of Board-approved
mandates to discontinue the operations of Cumulus Internet Services and to
centralize the Company's corporate administrative organization and employees in
Atlanta, Georgia. The programs included severance and related costs associated
with the release of 37 employees and costs for vacated leased facilities,
impaired leasehold improvements at vacated leased facilities, and impaired
assets related to the Internet businesses.
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The following table depicts the amounts associated with and activity
related to the June 2000 restructuring programs through December 31, 2000
(dollars in thousands):
ASSET WRITE-OFF'S UNPAID BALANCE
THROUGH PAID THROUGH AS OF
RESTRUCTURING DECEMBER 31, DECEMBER 31, DECEMBER 31,
EXPENSE CATEGORY CHARGE 2000 2000 2000
---------------- ------------- ----------------- ------------ --------------
Employee severance and related costs.... $ 978 $ -- $ 450 $ 528
Lease termination costs................. 2,557 -- 178 2,379
Impaired leasehold improvements at
vacated facilities.................... 430 430 -- --
------ ------ ------ ------
Office relocation subtotal......... 3,965 430 628 2,907
------ ------ ------ ------
Internet asset write-off................ 4,100 4,100 -- --
Accrued internet contractual
obligations........................... 749 -- 374 375
Internet lease termination costs........ 482 -- 48 434
------ ------ ------ ------
Internet services subtotal......... 5,331 4,100 422 809
------ ------ ------ ------
Restructuring charge totals........ $9,296 $4,530 $1,050 $3,716
====== ====== ====== ======
As of December 31, 2000, approximately $3.7 million in accrued
restructuring costs remain related to the Company's June, 2000 restructuring
programs. This balance is comprised of $0.5 million in employee severance and
related charges, $2.4 million in lease termination costs, $0.4 million related
to amounts owed for software development and asset acquisitions related to
capitalized internet system and infrastructure assets, and $0.4 million in
Internet lease termination charges. The remaining portion of the unpaid balance
is expected to be paid by the end of June 2001, except for the Company's lease
obligations at the vacated facilities in Milwaukee and Chicago. Lease
obligations will be paid by the end of 2003.
In connection with the continued strategic initiative to focus on its core
radio business, the Company conducted a review of certain non-radio operations
during the fourth quarter of 2000. This strategic review triggered an impairment
review of the long-lived assets of these operations, and it was determined that
the carrying value of certain long-lived assets exceeded the projected
undiscounted future net cash flows expected to be generated by such assets. The
estimated future net cash flows were estimated based on present levels of sales
volume, because the Company does not expect to devote significant funding to the
development of products and services provided by these non-radio operations in
the future. Accordingly, the Company recorded a $6.9 million impairment
write-down consisting of the following: (i) a $5.1 million impairment charge to
write off goodwill of BSI, and (ii) a $1.8 million impairment charge to write
off the net assets of its wholly owned subsidiary, The Advisory Board of Nevada.
For the year ended December 31, 2000, net revenue and operating loss of BSI were
$1.2 million and $5.7 million, respectively. For the year ended December 31,
2000, net revenue and operating loss of The Advisory Board of Nevada were $1.3
million and $0.5 million, respectively. On March 13, 2001, the Company divested
of The Advisory Board of Nevada and received no proceeds.
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4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following: as of December 31, 2000
and 1999 (dollars in thousands):
ESTIMATED
USEFUL LIFE 2000 1999
----------- ---- ----
Land......................................... $ 4,806 $ 3,607
Broadcasting and other equipment............. 3 to 7 years 68,126 55,730
Furniture and fixtures....................... 5 years 8,658 6,361
Leasehold improvements....................... 5 years 3,138 2,554
Buildings.................................... 20 years 12,719 9,006
Construction in progress..................... 887 1,809
-------- --------
98,334 79,067
Less accumulated depreciation................ (18,505) (12,104)
-------- --------
$ 79,829 $ 66,963
======== ========
5. INTANGIBLE ASSETS
Intangible assets consist of the following as of December 31, 2000 and 1999
(dollars in thousands):
ESTIMATED
USEFUL LIFE 2000 1999
----------- ---- ----
Broadcasting licenses........................ 25 years $533,921 $261,644
Goodwill..................................... 25 years 272,293 288,673
Other intangibles............................ 2 to 5 years 14,655 13,984
-------- --------
820,869 564,301
Less accumulated amortization................ (57,873) (37,517)
-------- --------
$762,996 $526,784
======== ========
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following as of
December 31, 2000 and 1999 (dollars in thousands):
2000 1999
---- ----
Accounts payable........................................... $ 3,947 $ 4,522
Accrued compensation....................................... 2,094 830
Accrued royalties.......................................... 473 379
Accrued commissions........................................ 6,423 2,635
Accrued taxes.............................................. 329 --
Barter payable............................................. 1,766 1,584
Accrued professional fees.................................. 999 355
Due to seller of acquired companies........................ 964 1,325
Accrued restructuring costs................................ 3,716 --
Advance on assets to be sold............................... 11,978 --
Accrued interest........................................... 8,405 9,228
Preferred dividends payable................................ -- 3,530
Accrued equity offering cost............................... -- 371
Accrued employee benefits.................................. 631 --
Due to affiliates.......................................... 674 --
Accrued acquisition liabilities............................ 1,114 --
Other...................................................... 2,345 1,781
------- -------
Total accounts payable and accrued expenses........... $45,858 $26,540
======= =======
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7. LONG-TERM DEBT
The Company's long-term debt consists of the following at December 31, 2000
and 1999 (dollars in thousands):
2000 1999
---- ----
Term loan facility at 10.07% and 9.22%, respectively..... $125,000 $125,000
Senior Subordinated Notes, 10 3/8%, due 2008............. 160,000 160,000
Other.................................................... 228 247
-------- --------
285,228 285,247
Less: Current portion of long-term debt.................. (208) (20)
-------- --------
$285,020 $285,227
======== ========
A summary of the future maturities of long-term debt follows (dollars in
thousands):
2001........................................................ $ 211
2002........................................................ 775
2003........................................................ 777
2004........................................................ 780
2005........................................................ 783
Thereafter.................................................. 281,902
--------
$285,228
========
As of December 31, 2000, the Company had outstanding $160.0 million in
aggregate principal of its 10 3/8% Senior Subordinated Notes ("Notes") which
have a maturity date of July 1, 2008. The Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future senior debt of the Company (including obligations under its
credit facility). Interest on the Notes is payable semi-annually in arrears.
Debt issuance costs are being amortized as interest expense over eight
years for the credit facility and over 10 years for the Notes.
On August 31, 1999, the Company's existing $190.0 million Senior Credit
Facility ("Credit Facility")was amended and restated to provide for aggregate
principal commitments of $225.0 million. The amended Credit Facility consisted
of an eight-year term loan facility of $75.0 million, an eight and one-half year
term loan facility of $50.0 million, a seven-year revolving credit facility of
$50.0 million and a revolving credit facility of $50.0 million that is
convertible to a seven-year term loan, at the option of the Company, 364 days
from closing. The amount available under the seven-year revolving credit
facility will be automatically reduced by 5% of the initial aggregate principal
amount in each of the third and fourth years following closing, 10% of the
initial aggregate principal amount in the fifth year following closing, 20% of
the initial aggregate principal amount in the sixth year following the closing
and the remaining 60% of the initial aggregate principal amount in the seventh
year following closing. Under the terms of the Credit Facility, the Company drew
down $125.0 million of the term loan facility on August 31, 1999, a portion of
which was used to satisfy the principal amount of indebtedness on its
preexisting credit facility with the same lender.
On January 13, 2000 the Company entered into the First Amendment to the
Credit Facility, which among other things, modified the limitation on
investments provision in the Credit Facility to allow loans by the Company to
officers of the Company (or their affiliates) in an amount not to exceed $10.0
million, the proceeds of which were used to purchase newly issued Class C Common
Stock of the Company.
On March 10, 2000 the Company entered into the Second Amendment to the
Credit Facility, which among other things, modified the amounts available under
letters of credit by increasing the amount from $25.0 million to $50.0 million
in the Credit Facility to allow the Company to issue additional letters of
credit in lieu of escrow deposits for pending acquisitions.
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On April 12, 2000 the Company received a waiver from our lenders that
waived any defaults or events of default arising under the Credit Facility
arising from the requirement that the annual financial statements for 1998
previously furnished to the lenders, and the quarterly financial statements for
the third and fourth quarter of 1998 and the first, second and third fiscal
quarters of fiscal 1999 previously furnished to the lenders be complete and
accurate and all material respects ad be prepared in accordance with GAAP
applied consistently throughout the periods reflected therein. The waiver
resulted from the Company's restatement of its income tax expense and deferred
tax liability balances for the periods referenced above.
On July 25, 2000 the Company received a waiver from its lenders that, among
other things, 1) waived the requirements of the definition of permitted
acquisitions in the Credit Facility to the extent necessary to complete the
acquisition of radio broadcast assets from subsidiaries of Clear Channel
Communications as provided in the asset exchange and sale agreements described
in Note 2; and 2) waived the requirements of the Credit Facility to the extent
necessary to permit the asset sales and exchanges with subsidiaries of Clear
Channel Communications described in Note 2; and 3) waived the requirements of
the Credit Facility to the extent necessary to permit investments made prior to
July 21, 2000 by the Company or any of its restricted subsidiaries in an
aggregate amount up to $58.7 million in connection with the proposed acquisition
by the Cumulus subsidiaries of certain radio broadcast assets to the extent such
investments would not otherwise be permitted by the Credit Facility. The waiver
also modified the interest coverage ratio requirement of the Credit Facility for
the four consecutive fiscal quarters ending June 30, 2000 to a ratio of no less
than 1.50 to 1.00 and waived any default or event of default arising from any
non-compliance with the interest coverage ratio that may have occurred as of
June 30, 2000. Finally, the waiver required that $91.5 million of proceeds from
the asset exchange and sale agreements with subsidiaries of Clear Channel
Communications be placed in a restricted cash account to be used in the
Connoisseor acquisition.
On August 29, 2000 the Company's ability to borrow under a $50.0 million
revolving credit facility that would convert to a seven-year term loan expired
in accordance with the terms of the Credit Facility. The Company did not seek
reinstatement of this facility.
On September 27, 2000 the Company and its lenders under the Credit Facility
entered into the Third Amendment, Consent and Waiver to the Amended and Restated
Credit Agreement dated as of August 31, 1999 (the "Third Amendment"). The Third
Amendment allows the Company to complete the second and third phases of the
asset exchange and sale with subsidiaries of Clear Channel Communications, the
acquisitions of radio station assets from Connoisseur Communications Partners,
L.P., Cape Fear Broadcasting and McDonald Media Inc. subject to the satisfaction
of renegotiated financial covenants. The Third Amendment also modified the
financial covenant requirements, including the consolidated leverage ratio, the
consolidated senior debt ratio, the consolidated interest coverage ratio, and
the consolidated fixed charge coverage ratio commencing with the trailing four
quarters ended September 30, 2000. In addition to modifying certain financial
covenants, the methodology for the calculation of these covenants was also
modified. In consideration for entering into the Third Amendment, the Company
paid the administrative agent a fee in the amount of $0.9 million and paid the
lenders a fee of $0.8 million. In addition, the applicable maximum Eurodollar
Loan margin on Revolving Credit Loans was increased from 3.00% to 3.25%; the
applicable maximum Eurodollar Loan margin on Term Loan B Loans was increased
from 3.000% to 3.375%; and the applicable maximum Eurodollar Loan margin on Term
Loan C Loans was increased from 3.125% to 3.50%.
The Company's obligations under the Credit Facility are collateralized by
substantially all of its assets in which a security interest may lawfully be
granted (including FCC licenses held by its subsidiaries), including, without
limitation, intellectual property, real property, and all of the capital stock
of the Company's direct and indirect domestic subsidiaries, except the capital
stock of BSI and 65% of the capital stock of any first-tier foreign subsidiary.
The obligations under the credit facility are also guaranteed by each of the
direct and indirect domestic subsidiaries, except BSI and are required to be
guaranteed by any additional subsidiaries acquired by Cumulus.
Both the revolving credit and term loan borrowings under the Credit
Facility bear interest, at the Company's option, at a rate equal to the Base
Rate (as defined under the terms of our Credit Facility, 9.5% as of December 31,
2000) plus a margin ranging between 0.50% to 2.125%, or the Eurodollar Rate (as
defined
F-16
66
under the terms of the credit facility, 7.02% as of December 31, 2000) plus a
margin ranging between 1.50% to 3.125% (in each case dependent upon the leverage
ratio of the Company). At December 31, 2000 the Company's effective interest
rate on term loan amounts outstanding under the Credit Facility was 10.1%.
A commitment fee calculated at a rate ranging from 0.375% to 0.75% per
annum (depending upon the Company's utilization rate) of the average daily
amount available under the revolving lines of credit is payable quarterly in
arrears, and fees in respect of letters of credit issued under the Credit
Facility equal to the interest rate margin then applicable to Eurodollar Rate
loans under the seven-year revolving credit facility are payable quarterly in
arrears. In addition, a fronting fee of 0.125% is payable quarterly to the
issuing bank.
The eight-year term loan borrowings are repayable in quarterly installments
beginning in the fourth quarter of 2001. The scheduled annual amortization is
$0.8 million for each of the third, fourth, fifth, sixth and seventh years
following closing and $71.3 million in the eighth year following closing. The
eight and a half year term loan is repayable in two equal installments on
November 30, 2007 and February 28, 2008. The amount available under the
seven-year revolving credit facility will be automatically reduced in quarterly
installments as described in the Credit Facility. Certain mandatory prepayments
of the term loan facility and the revolving credit line and reductions in the
availability of the revolving credit line are required to be made including: (i)
100% of the net proceeds from any issuance of capital stock or incurrence of
indebtedness; (ii) 100% of the net proceeds from certain asset sales; and (iii)
between 50% and 75% (dependent on our leverage ratio) of our excess cash flow.
Under the terms of the Credit Facility, the Company is subject to certain
restrictive financial and operating covenants, including but not limited to
maximum leverage covenants, minimum interest and fixed charge coverage
covenants, limitations on asset dispositions and the payment of dividends. The
failure to comply with the covenants would result in an event of default, which
in turn would permit acceleration of debt under those instruments. At December
31, 2000, the Company was in compliance with such financial and operating
covenants.
On April 12, 2000, July 25, 2000 and September 27, 2000 the Company
received the waivers or amendments of certain requirements of the Credit
Facility as described in detail above.
The terms of the Credit Facility contain events of default after expiration
of applicable grace periods, including failure to make payments on the Credit
Facility, breach of covenants, breach of representations and warranties,
invalidity of the agreement governing the Credit Facility and related documents,
cross default under other agreements or conditions relating to indebtedness of
Cumulus or the Company's restricted subsidiaries, certain events of liquidation,
moratorium, insolvency, bankruptcy or similar events, enforcement of security,
certain litigation or other proceedings, and certain events relating to changes
in control. Upon the occurrence of an event of default under the terms of the
credit facility, the majority of the lenders are able to declare all amounts
under our Credit Facility to be due and payable and take certain other actions,
including enforcement of rights in respect of the collateral. The majority of
the banks extending credit under each term loan facility and the majority of the
banks under each revolving credit facility may terminate such term loan facility
and such revolving credit facility, respectively, upon an event of default.
The $160.0 million 10 3/8% Senior Subordinated Notes Due 2008 Indenture
("Indenture") and the Series A Preferred Stock Certificates of Designation
("Certificates of Designation") limit the amount we may borrow without regard to
the other limitations on incurrence of indebtedness contained therein under
credit facilities to $150.0 million. As of December 31, 2000, we would be
permitted, by the terms of the Indenture and the Certificates of Designation, to
incur approximately $25.0 million of additional indebtedness under our credit
facility without regard to the debt ratios included in our indenture.
8. REDEEMABLE PREFERRED STOCK
(a) Series A Preferred Stock
At December 31, 2000 and 1999 the Series A Cumulative Exchangeable
Redeemable Preferred Stock due 2009 presented on the balance sheet represents
113,643 and 102,702 shares outstanding (each with a $1,000 par value), plus
accrued dividends of $3.9 million and $0, respectively. Accrued dividends of
F-17
67
$3.9 million were paid in kind on January 2, 2001. Accrued dividends of $3.5
million at December 31, 1999, which were included in current liabilities, were
paid in cash on January 3, 2000.
On October 1, 1999, the Company redeemed 43,750 shares of its Series A
Preferred Stock for $51.3 million, including redemption premium of $6.0 million
and accrued but unpaid dividends of $1.5 million.
Holders of the Series A Preferred Stock have no voting rights.
On or before July 1, 2003, the Company may, at its option, pay dividends in
cash or in additional fully paid and non-assessable shares of Series A Preferred
Stock. After July 1, 2003, dividends may only be paid in cash. The shares of
Series A Preferred Stock are subject to mandatory redemption on July 1, 2009 at
a price equal to 100% of the liquidation preference of $1,000 per share plus any
and all accrued and unpaid cumulative dividends. The Series A Preferred Stock
may be redeemed by the Company prior to such date under certain circumstances.
The Company may at its option exchange all, but not less than all, of the
then outstanding Series A Preferred Stock into fully registered debentures
issued under an indenture between the Company and a trustee defined by the
Certificates of Designation. Such debentures would be unsecured and subordinated
in right of payment to debt in respect of the Credit Facility and the Notes.
Such debentures would be subject to mandatory redemption only upon a change of
control or as a result of certain asset divestitures, both as defined by the
related indenture.
(b) Series B Preferred Stock
We issued 250 shares of our Series B Preferred Stock on October 2, 2000 for
$2.5 million. The holders of the Series B Preferred Stock are entitled to
receive cumulative dividends at an annual rate equal to 12% of the liquidation
preference per share of Series B Preferred Stock, payable quarterly, in arrears
commencing on January 1, 2001. The Company may, at its option, pay dividends in
cash or in additional fully paid and non-assessable shares of Series B Preferred
Stock. There are no restrictions as to how dividends may be paid.
At December 31, 2000 and 1999 the Series B Cumulative Exchangeable
Redeemable Preferred Stock due 2009 disclosed on the balance sheet represents
250 and 0 shares outstanding (each with a $1,000 liquidation preference), plus
accrued dividends of $0.1 million and $0, respectively.
Holders of the Series B Preferred Stock have no voting rights.
Additionally, the shares of Series B Preferred Stock may be converted, at the
holder's discretion, on or after March 30, 2002 into Class B Common Stock at the
then effective conversion rate. The number of shares of Class B Common Stock
that will be issued upon conversion can be calculated by dividing the
liquidation preference of one share of Series B Preferred Stock by the lower of
the closing sales price of the Company's Class A Common Stock as reported by the
NASDAQ Stock Market on the conversion date or the average of the closing sales
prices of the Company's Class A Common Stock as reported by the NASDAQ Stock
Market for the twenty (20) day trading period prior to the conversion date. The
shares of Series B Preferred Stock are subject to mandatory redemption on
October 3, 2009 at a price equal to 100% of the liquidation preference plus any
and all accrued and unpaid cumulative dividends and can be redeemed at any time
at the Company's discretion with notice of not less than 30 days nor more than
60 days prior to the date of redemption.
In connection with the issuance of the Series B preferred stock, the
Company also issued warrants to acquire 22,221 shares of Class B common stock at
an exercise price of $5.8937 per share. The Series B preferred stockholder is
entitled to receive additional warrants to acquire 16,662 shares of Class B
common stock at an exercise price of $5.8937 if the outstanding Series B
preferred shares have not been redeemed as of December 31, 2001. The warrants
issued in 2000 were recorded as a deemed dividend at their estimated fair value
of $0.1 million. No warrants were exercised or cancelled during 2000.
In connection with the issuance of the Series B preferred stock, the
Company paid commitment fees to four entities, including two shareholders, who
provided the Company with funding commitments related to the Series B Preferred
Stock. Commitment fees totaling $1.0 million paid to three of these entities,
which did not
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68
purchase Series B Preferred Stock, have been expensed in the accompanying
statement of operations for the year ended December 31, 2000 as a component of
non-operating expenses.
9. STOCKHOLDERS' EQUITY
(a) Common Stock
Each share of Class A Common Stock entitles its holders to one vote.
Except upon the occurrence of certain events, holders of the Class B Common
Stock are not entitled to vote. The Class B Common Stock is convertible at any
time, or from time to time, at the option of the holder of such Class B Common
Stock (provided that the prior consent of any governmental authority required to
make such conversion lawful shall have been obtained) without cost to such
holder (except any transfer taxes that may be payable if certificates are to be
issued in a name other than that in which the certificate surrendered is
registered), into Class A Common Stock or Class C Common Stock on a
share-for-share basis; provided that the board of directors has determined that
the holder of Class A Common Stock at the time of conversion would not
disqualify the Company under, or violate, any rules and regulations of the FCC.
Subject to certain exceptions, each share of Class C Common Stock entitles
its holders to ten votes. The Class C Common Stock is convertible at any time,
or from time to time, at the option of the holder of such Class C Common Stock
(provided that the prior consent of any governmental authority required to make
such conversion lawful shall have been obtained) without cost to such holder
(except any transfer taxes that may be payable if certificates are to be issued
in a name other than that in which the certificate surrendered is registered),
into Class A Common Stock or Class C Common Stock on a share-for-share basis;
provided that the board of directors has determined that the holder of Class A
Common Stock at the time of conversion would not disqualify the Company under,
or violate, any rules and regulations of the FCC.
On July 27, 1999, the Company completed a follow-on public stock offering
selling 9,664,000 shares of its Class A Common Stock for $22.919 per share, net
of underwriter's discounts and commissions of $1.206 per share. The net proceeds
of the offering were approximately $221.5 million. In addition, on August 10,
1999 the U.S. underwriters exercised an option granted by the Company,
purchasing an additional 1,449,600 shares. Exercise of the option resulted in an
additional $33.2 million in net offering proceeds to the Company.
On November 18, 1999, the Company completed a follow-on public stock
offering selling 3,700,000 shares of its Class A Common Stock for $37.05 per
share, net of underwriter's discounts and commissions of $1.95 per share. The
net proceeds of the offering were approximately $137.1 million and were
primarily used to fund the Company's pending acquisitions in 2000. In addition,
on December 6, 1999 the underwriters exercised an option granted by the Company,
purchasing an additional 102,000 shares. Exercise of the option resulted in an
additional $3.8 million in net offering proceeds to the Company.
(b) Stock Purchase Plan
On November 2, 1999, the Company's Board of Directors adopted and the
Company's shareholders approved the Employee Stock Purchase Plan. The Employee
Stock Purchase Plan is designed to qualify for certain income tax benefits for
employees under the Section 423 of the Internal Revenue Code and contains
1,000,000 shares of Class A Common Stock. The plan allows qualifying employees
to purchase Class A Common Stock at the end of each calendar year, commencing
with the calendar year beginning January 1, 1999, at 85% of the lesser of the
fair market value of the Class A Common Stock on the first and last trading days
of the year. The amount each employee can purchase is limited to the lesser of
(i) 15% of pay or (ii) $0.025 million of stock value on the first trading day of
the year. An employee must be employed at least six months as of the first
trading day of the year in order to participate in the Employee Stock Purchase
Plan.
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69
10. STOCK OPTIONS
2000 STOCK INCENTIVE PLAN
The Board of Directors approved the 2000 Stock Incentive Plan on July 31,
2000, and subsequently amended the Plan on February 23, 2001 subject to approval
by the Company's shareholders. The purpose of the 2000 Stock Incentive Plan is
to attract and retain certain selected officers, key employees, non-employee
directors and consultants whose skills and talents are important to the
Company's operations and reward them for making major contributions to the
success of the Company. The aggregate number of shares of Class A Common Stock
subject to the 2000 Stock Incentive Plan is 2,750,000, all of which may be
granted as incentive stock options. In addition, no one person may receive
options over more than 500,000 shares of Class A Common Stock in any one
calendar year.
The 2000 Stock Incentive Plan permits the Company to grant nonqualified
stock options and incentive stock options ("ISOs"), as defined in Sections 422
of the Internal Revenue Code of 1986, as amended (the "Code"). No options may be
granted under the 2000 Stock Incentive Plan after October 4, 2010.
The Compensation Committee administers the 2000 Stock Incentive Plan. The
Compensation Committee has full and exclusive power to interpret the 2000 Stock
Incentive Plan and to adopt rules, regulations and guidelines for carrying out
the 2000 Stock Incentive Plan as it may deem necessary or proper.
Under the 2000 Stock Incentive Plan, current and prospective employees,
non-employee directors, consultants or other persons who provide services to the
Company are eligible to participate. As of December 31, 2000, there are
outstanding options to purchase a total of 1,728,300 shares of Class A Common
Stock exercisable at prices ranging from $3.9375 to $6.4375 per share under the
2000 Stock Incentive Plan. These options vest, in general, quarterly over four
years, with the possible acceleration of vesting for some options if certain
performance criteria are met. In addition, all options vest upon a change of
control as more fully described in the 2000 Stock Incentive Plan.
1999 STOCK INCENTIVE PLAN
On November 2, 1999, the Company's Board of Directors adopted and the
Company's shareholders approved the 1999 Stock Incentive Plan to provide
officers, other key employees and non-employee directors of the Company (other
than participants in the Company's Executive Plan described below), as well as
consultants to the Company, with additional incentives by increasing their
proprietary interest in the Company. An aggregate of 900,000 shares of Class A
Common Stock is subject to the 1999 Stock Incentive Plan, of which a maximum of
900,000 shares of Class A Common Stock is available to be awarded as incentive
stock options and a maximum of 100,000 shares of Class A Common Stock is
available to be awarded as restricted stock. In addition, subject to certain
equitable adjustments, no one person will be eligible to receive options for
more than 300,000 shares in any one calendar year and the maximum amount of
restricted stock, which will be awarded to any one person during any calendar
year, is $0.5 million.
The 1999 Stock Incentive Plan permits the Company to grant awards in the
form of stock options (including both incentive stock options that meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
and non-qualified stock options) and restricted shares of the Class A Common
Stock. All stock options awarded under the plan will be granted at an exercise
price of not less than fair market value of the Class A Common Stock on the date
of grant. No award will be granted under the 1999 Stock Incentive Plan after
August 30, 2009.
The 1999 Stock Incentive Plan is administered by the Compensation Committee
of the Board, which has exclusive authority to grant awards under the plan and
to make all interpretations and determinations affecting the plan. The
Compensation Committee has discretion to determine the individuals to whom
awards are granted, the amount of such award, any applicable vesting schedule,
whether awards vest upon the occurrence of a Change in Control (as defined in
the plan) and other terms of any award. The Compensation Committee may delegate
to certain senior officers of the Company its duties under the plan subject to
such conditions or limitations as the Compensation Committee may establish. Any
award made to a non-employee director must be approved by the Company's Board of
Directors. In the event of any changes in the capital structure of the
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70
Company, the Compensation Committee will make proportional adjustments to
outstanding awards so that the net value of the award is not changed.
As of December 31, 2000, there are outstanding options to purchase a total
of 819,188 shares of Class A Common Stock exercisable at a price of $27.875 per
share under the 1999 Stock Incentive Plan. These options vest, in general,
annually over five years, with the possible acceleration of vesting for some
options if certain performance criteria are met. In addition, all options vest
upon a change of control as more fully described in the 1999 Stock Incentive
Plan.
1998 STOCK INCENTIVE PLAN
During 1998, the Company's Board of Directors adopted the 1998 Stock
Incentive Plan. An aggregate of 1,288,834 shares of Class A Common Stock is
subject to the 1998 Stock Incentive Plan, of which a maximum of 1,288,834 shares
of Class A Common Stock are available to be awarded at subject to incentive
stock options and a maximum of 100,000 shares of Class A Common Stock is
available to be awarded as restricted stock. In addition, subject to certain
equitable adjustments, no one person will be eligible to receive options for
more than 300,000 shares in any one calendar year and the maximum amount of
restricted stock which will be awarded to any one person during any calendar
year is $500,000.
The 1998 Stock Incentive Plan permits the Company to grant awards in the
form of stock options (including both incentive stock options that meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
and non-qualified stock options) and restricted shares of the Class A Common
Stock. All stock options awarded under the plan will be granted at an exercise
price of not less than fair market value of the Class A Common Stock on the date
of grant. No award will be granted under the 1998 Stock Incentive Plan after
June 22, 2008.
The 1998 Stock Incentive Plan is administered by the Compensation Committee
of the Board, which has exclusive authority to grant awards under the plan and
to make all interpretations and determinations affecting the plan. The
Compensation Committee has discretion to determine the individuals to whom
awards are granted, the amount of such award, any applicable vesting schedule,
whether awards vest upon the occurrence of a Change in Control (as defined in
the 1998 Stock Incentive Plan) and other terms of and award. The Compensation
Committee may delegate to certain senior officers of the Company its duties
under the plan subject to such conditions or limitations as the Compensation
Committee may establish. Any award made to a non-employee director must be
approved by the Company's Board of Directors. In the event of any changes in the
capital structure of the Company, the Compensation Committee will make
proportional adjustments to outstanding awards so that the net value of the
award is not changed.
As of December 31, 2000, there are outstanding options to purchase a total
of 784,223 shares of Class A Common Stock exercisable at a price of $14.00 per
share under the 1998 Stock Incentive Plan. These options vest, in general, over
five years, with the possible acceleration of vesting for some options if
certain performance criteria are met. In addition, all options vest upon a
change of control as more fully described in the 1998 Stock Incentive Plan.
1999 EXECUTIVE STOCK INCENTIVE PLAN
On November 2, 1999, the Company's Board of Directors also adopted the 1999
Executive Stock Incentive Plan (the "1999 Executive Plan") to provide certain
key executives of the Company with additional incentives by increasing their
proprietary interest in the Company. An aggregate of 1,000,000 shares of Class C
Common Stock is subject to the 1999 Executive Plan. In addition, no one person
will be eligible to receive options for more than 500,000 shares in any one
calendar year. Richard W. Weening, Executive Chairman, Treasurer and Director,
and Lewis W. Dickey, Jr., Executive Vice Chairman and Director are the sole
participants in the 1999 Executive Plan.
The 1999 Executive Plan permits the Company to grant awards in the form of
stock options (including both incentive stock options that meet the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended, and
non-qualified stock options) of Class C Common Stock.
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Stock options under the 1999 Executive Plan were granted on August 30, 1999
at an exercise price of $27.875 per share and vest quarterly in equal
installments over a four-year period (subject to accelerated vesting in certain
circumstances).
The 1999 Executive Plan is administered by the Compensation Committee of
the Board, which will have exclusive authority to grant awards under the
Executive Plan and to make all interpretations and determinations affecting the
1999 Executive Plan. In the event of any changes in the capital structure of the
Company, the Compensation Committee will make proportional adjustments to
outstanding awards granted under the 1999 Executive Plan so that the net value
of the award is not changed. As of December 31, 2000, there are outstanding
options to purchase a total of 1,000,000 shares of Class C Common Stock under
the 1999 Executive Plan.
1998 EXECUTIVE STOCK INCENTIVE PLAN
The Company's Board of Directors has also adopted the 1998 Executive Stock
Incentive Plan (the "1998 Executive Plan"). An aggregate of 2,001,380 shares of
Class C Common Stock is subject to the 1998 Executive Plan. In addition, no one
person will be eligible to receive options for more than 1,000,690 shares in any
one calendar year. Richard W. Weening, Executive Chairman, Treasurer and
Director, and Lewis W. Dickey, Jr., Executive Vice Chairman and Director are the
sole participants in the 1998 Executive Plan.
The 1998 Executive Plan permits the Company to grant awards in the form of
stock options (including both incentive stock options that meet the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended, and
non-qualified stock options) of Class C Common Stock.
Stock options under the 1998 Executive Plan were granted on July 1, 1998
and are divided into three groups. Group 1 consists of time vested options with
an exercise price equal to $14.00 per share and vest quarterly in equal
installments over a four-year period (subject to accelerated vesting in certain
circumstances). Group 2 and Group 3 also consist of time-based options which
vest in four equal annual installments on July 1, 1999, July 1, 2000, July 1,
2001 and July 1, 2002 (subject to accelerated vesting in certain circumstances).
The first installment of both the Group 2 options and Group 3 options were
exercisable at a price of $14.00 per share on July 1, 1999 and subsequent
installments are exercisable at a price 15% (or 20% in the case of Group 3
options) greater than the prior year's exercise price for each of the next three
years.
The 1998 Executive Plan is administered by the Compensation Committee of
the Board, which will have exclusive authority to grant awards under the 1998
Executive Plan and to make all interpretations and determinations affecting the
1998 Executive Plan. In the event of any changes in the capital structure of the
Company, the Compensation Committee will make proportional adjustments to
outstanding awards granted under the 1998 Executive Plan so that the net value
of the award is not changed. As of December 31, 2000, there are outstanding
options to purchase a total of 2,001,380 shares of Class C Common Stock under
the 1998 Executive Plan.
Cumulus Media Inc. applies APB Opinion No. 25 in accounting for its Stock
Options issued to employees and SFAS No. 123 in accounting for stock options
issued to non-employees. Accordingly, no compensation cost has been recognized
for its stock options in the consolidated financial statements. Had Cumulus
Media Inc. determined compensation cost based on the fair value at the grant
date for its stock options under SFAS No. 123, the Company's net loss
attributable to common stockholders would have been increased $8.2 million, $6.8
million and $2.3 million, respectively, to the pro forma amounts for the years
ending December 31, 2000, 1999 and 1998 as indicated below (dollars in
thousands):
2000 1999 1998
---- ---- ----
Net loss:
As reported................................... $ (2,298) $(13,622) $(11,282)
Pro forma..................................... $(10,471) $(20,430) $(13,586)
Basic and diluted loss per common share:
As reported................................... $ (0.49) $ (1.50) $ (1.55)
Pro forma..................................... $ (0.72) $ (1.77) $ (1.69)
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The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants:
2000 Stock Incentive Plan: expected volatility of 65.0% for 2000; risk-free
interest rate of 6.25%; dividend yield of 0% and expected lives of four years
from the date of grant.
1999 Executive Stock Incentive Plan and 1999 Stock Incentive Plan: expected
volatility of 65.2% for 1999; risk-free interest rate of 5.70% and 5.78%,
respectively for the 1999 Executive Stock Incentive Plan and 1999 Stock
Incentive Plan; dividend yield of 0% and expected lives of four years and five
years from the date of grant for shares issued under the 1999 Executive Stock
Incentive Plan and the 1999 Stock Incentive Plan, respectively.
1998 Executive Stock Incentive Plan and 1998 Stock Incentive Plan: expected
volatility of 65.6% for 1998; risk-free interest rate of 4.73%; dividend yield
of 0% and expected lives of four years and five years from the date of grant for
shares issued under the 1998 Executive Stock Incentive Plan and 1998 Stock
Incentive Plan, respectively.
Following is a summary of activity in the employee option plans and
agreements discussed above for the years ended December 31, 2000, 1999 and 1998:
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------ ----------------
Outstanding at December 31, 1997............................ -- $ 0.00
Granted..................................................... 3,142,925 15.56
Exercised................................................... -- 0.00
Canceled.................................................... (20,800) 14.00
--------- ------
Outstanding at December 31, 1998............................ 3,122,125 15.55
--------- ------
Granted..................................................... 1,998,125 26.70
Exercised................................................... (27,580) 14.00
Canceled.................................................... (8,561) 14.00
--------- ------
Outstanding at December 31, 1999............................ 5,084,109 19.94
--------- ------
Granted..................................................... 2,063,431 6.19
Exercised................................................... -- 0.00
Canceled.................................................... (814,449) 19.28
--------- ------
Outstanding at December 31, 2000............................ 6,333,091 $15.74
--------- ------
The weighted average fair value of options granted during the years ended
December 31, 2000, 1999 and 1998 was $3.51, $13.49 and $6.43, respectively.
The following table summarizes information about stock options outstanding
at December 31, 2000:
OPTIONS OUTSTANDING
-------------------
WEIGHTED AT AVERAGE
NUMBER OUTSTANDING REMAINING WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES AT DECEMBER 31, 2000 CONTRACTUAL LIFE EXERCISE PRICE
------------------------ -------------------- ------------------- ----------------
$3.9375 (2000 SIP Shares).................. 200,000 3.75 years $3.9375
$6.4375 (2000 SIP Shares).................. 1,528,300 3.5 years $6.4375
$6.4375 (1999 SIP Shares).................. 300,000 3.5 years $6.4375
$14.00 (1998 SIP Class A Shares)........... 784,223 2.5 years $ 14.00
$14.00 (1998 ESIP Class C Shares).......... 969,419 1.5 years $ 14.00
$16.10 to $24.19 (1998 ESIP Class C
Shares).................................. 1,031,961 2.5 years $ 19.59
$27.875 (1999 SIP Class A Shares).......... 519,188 3.5 years $ 27.88
$27.875 (1999 ESIP Class C Shares)......... 1,000,000 2.5 years $ 27.88
--------- -------
6,333,091 $ 15.74
========= =======
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The following table summarizes information about stock options exercisable
at December 31, 2000:
OPTIONS EXERCISABLE
-------------------
WEIGHTED AT AVERAGE
NUMBER EXERCISABLE REMAINING WEIGHTED AVERAGE
AT DECEMBER 31, 2000 CONTRACTUAL LIFE EXERCISE PRICE
-------------------- ------------------- ----------------
$3.9375 (2000 SIP Shares).................. -- 3.75 years $3.9375
$6.4375 (2000 SIP Shares).................. -- 3.75 years $6.4375
$6.4375 (1999 SIP Shares).................. 114,269 3.75 years $6.4375
$14.00 (1998 SIP Class A Shares)........... 476,538 2.5 years $ 14.00
$14.00 (1998 ESIP Class C Shares).......... 522,571 1.5 years $ 14.00
$16.10 to $24.19 (1998 ESIP Class C
Shares).................................. 556,285 1.5 years $ 19.59
$27.875 (1999 SIP Class A Shares).......... 191,305 3.5 years $ 27.88
$27.875 (1999 ESIP Class C Shares)......... 375,000 2.5 years $ 27.88
--------- -------
2,235,968 $ 15.74
========= =======
11. INCOME TAXES
Income tax expense (benefit) for the years ended 2000, 1999, and 1998
consisted of the following (dollars in thousands):
2000 1999 1998
---- ---- ----
Current tax expense:
Federal............................................ $ -- $ -- $ --
State and local.................................... 126
---- ------- -------
Total current expense........................... $ -- $ -- $ 126
==== ======= =======
Deferred tax expense (benefit):
Federal............................................ 710 (6,032) $(4,057)
State and local.................................... 102 (838) (562)
Less: Change in valuation allowance.................. -- -- (335)
Change in valuation allowance due to purchase
accounting...................................... -- -- 2,602
---- ------- -------
Total deferred expense (benefit)................ 812 (6,870) (2,352)
---- ------- -------
Total income tax (benefit) expense.............. $812 $(6,870) $(2,226)
==== ======= =======
Total income tax expense differed from the amount computed by applying the
federal standard tax rate of 35% for the years ended December 31, 2000 and 1999
due to the following (dollars in thousands):
2000 1999 1998
---- ---- ----
Pretax loss at federal statutory rate............... $(520) $(7,172) $(4,108)
State income tax expense, net of federal 102 (838) (1,057)
benefit........................................
Nondeductible stock compensation.................. -- -- --
Nondeductible goodwill............................ 1,112 929 400
Other............................................. 118 211 272
Change in valuation allowance..................... -- -- (335)
Change in valuation allowance due to purchase -- -- 2,602
accounting.....................................
----- ------- -------
Net income tax (benefit) expense.................. $ 812 $(6,870) $(2,226)
===== ======= =======
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The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 2000 are
presented below (dollars in thousands):
2000 1999
---- ----
Deferred tax assets:
Net operating loss......................................... $46,109 $15,996
Accounts receivable...................................... 6,320 1,041
Property and equipment................................... -- 1,356
Accrued expenses and other............................... 5,646 479
------- -------
Total deferred tax assets........................... $58,075 $18,872
Deferred tax liabilities:
Intangible assets........................................ 51,553 25,100
Property and equipment................................... 6,079 2,678
Deferred gain on exchange of assets...................... 30,109 --
Other.................................................... -- 34
------- -------
Total deferred tax liabilities........................... 87,741 27,812
------- -------
Net deferred tax liability............................... $29,666 $ 8,940
======= =======
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes, such as net operating loss carryforward. In 1997 the
Company established a valuation allowance against its deferred tax assets
following an assessment of the likelihood of realizing such amounts. In arriving
at the determination as to the amount of the valuation allowance required, the
Company considered its operating history as well as significant acquisitions
made in 1998 and pending acquisitions, statutory restrictions on the use of
operating losses, tax planning strategies and its expectation of the level and
timing of future taxable income. The valuation allowance was eliminated in a
subsequent period. The Company has not recorded a valuation allowance against
its deferred tax assets as of December 31, 2000 and 1999 because management
believes that, after considering all the available objective evidence, it is
more than likely than not that these assets will be realized.
The foreign operations of the Company have incurred operating losses, the
benefit of which remains unlikely. Accordingly, the Company has not recognized a
tax benefit for these loss carry forwards since it is not assured it could
utilize the loss carry forward in the future.
At December 31, 2000, the Company has a federal net operating loss carry
forward available to offset future income of approximately $115.6 million, which
will begin to expire after 2012.
12. EARNINGS PER SHARE
The following table sets forth the computation of basic loss per share for
the years ended December 31, 2000, December 31, 1999 and December 31, 1998. In
order to reflect the initial public offering on July 1, 1998, the weighted
average number of shares outstanding for the period January 1, 1998 through June
30, 1998 was
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determined after giving effect to the exchange of the Company's shares by
Cumulus Media, LLC for the initial public offering (in thousands, except per
share data).
2000 1999 1998
---- ---- ----
Numerator:
Net loss before extraordinary item............ $ (2,298) $(13,622) $ (9,445)
Preferred stock dividend, including redemption
premium.................................... (14,875) (23,790) (13,591)
-------- -------- --------
Numerator for basic earnings per
share -- income available for common
stockholders............................... $(17,173) $(37,412) $(23,036)
-------- -------- --------
Denominator:
Denominator for basic earnings per share --
weighted average shares after giving effect
to initial public offering................. 35,139 24,938 16,085
-------- -------- --------
Basic and diluted loss per common
share -- before extraordinary item......... $ (0.49) $ (1.50) $ (1.43)
Extraordinary item............................ -- -- (0.12)
-------- -------- --------
Basic and diluted loss per common share....... $ (0.49) $ (1.50) $ (1.55)
======== ======== ========
During 2000 the Company issued options to key executives and employees to
purchase shares of common stock as part of the Company's stock option plans. At
December 31, 2000, 1999 and 1998 there were options issued to purchase the
following classes of common stock:
2000 1999 1998
---- ---- ----
Options to purchase Class A common stock...... 3,331,711 2,114,309 1,120,745
Options to purchase Class C common stock...... 3,001,380 3,001,380 2,001,380
The Series B Preferred Stock was convertible into 634,840 shares of Class B
Common Stock at December 31, 2000. Earnings per share assuming dilution has not
been presented as the effect of the options and the Series B Preferred Stock
would be antidilutive for the years ended December 31, 2000, 1999 and 1998.
13. LEASES
The Company has noncancelable operating leases, primarily for office space
and various capital leases primarily for equipment and vehicles. The operating
leases generally contain renewal options for periods ranging from one to ten
years and require the Company to pay all executory costs such as maintenance and
insurance. Rental expense for operating leases (excluding those with lease terms
of one month or less that were not renewed) was approximately $5.7 million, $3.9
million and $2.1 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 2000
are as follows (Dollars in thousands):
YEAR ENDING
DECEMBER 31:
------------
2001................................................... $4,871
2002................................................... 3,939
2003................................................... 3,567
2004................................................... 3,034
2005................................................... 2,390
Thereafter............................................. 4,134
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14. COMMITMENTS AND CONTINGENCIES
As of December 31, 2000 the Company has entered into various agreements to
acquire stations across 16 markets for an aggregate purchase price of
approximately $186.6 million. Between January 1, 2001 and January 18, 2001, the
Company closed on the acquisition of 7 properties in 2 markets representing
$106.2 million in purchase price. The ability of the Company to complete the
pending acquisitions is dependent upon the Company's ability to obtain
additional equity and/or debt financing. We intend to finance the pending
acquisitions with cash on hand, the proceeds of our credit facility or future
credit facilities, issuance of preferred stock and other to be identified
sources. There can be no assurance the Company will be able to obtain such
financing. As of December 31, 2000, $31.9 million of escrow deposits were
outstanding related to pending transaction. Subsequent to December 31, 2000,
$13.2 million of deposits were applied toward transactions completed. In the
event that the Company can not consummate these acquisitions because of breach
of contract, the Company may be liable for approximately $18.7 million in
purchase price.
The Company had been named as a defendant in the following eleven class
action complaints: (1) Wolfe v. Weening, et al.; (2) Klar v. Cumulus Media Inc.,
et al.; (3) Atlas v. Cumulus Media Inc., et al.; (4) Steinberg and Steinberg v.
Cumulus Media Inc., et al.; (5) Wong v. Weening, et al.; (6) Pleatman v. Cumulus
Media Inc., et al.; (7) Kincer v. Weening, et al.; (8) Krim v. Cumulus Media
Inc., et al.; (9) Baldwin v. Cumulus Media, Inc., et al.; (10) Pabian v.
Weening, et al.; and (11) Demers v. Cumulus Media Inc., et al. Certain present
and former directors and officers of the Company, and certain underwriters of
the Company's stock, have also been named as defendants. The complaints have all
been filed in the United States District Court for the Eastern District of
Wisconsin. They were filed as class actions on behalf of persons who purchased
or acquired Cumulus Media common stock during various time periods between May
11, 1999 and April 24, 2000. On August 4, 2000, the eleven actions were
consolidated into a single action, also pending in the United States District
Court for the Eastern District of Wisconsin. On December 8, 2000, plaintiffs
served a Second Amended Consolidated Class Action Complaint, which alleges,
among other things, violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Sections 11 and
12(a) of the Securities Act of 1933, and seeks unspecified damages. The
plaintiffs allege that the defendants issued false and misleading statements and
failed to disclose material facts concerning, among other things, the Company's
financial condition as a result of the restatement on May 26, 2000 of the
Company's results for the first three quarters of 1999. The plaintiffs further
allege that because of the issuance of false and misleading statements and/or
failure to disclose material facts, the price of Cumulus Media stock was
artificially inflated. On February 8, 2001, the Company served its motion to
dismiss the second amended complaint. Although the Company has certain defenses
it intends to vigorously assert in these proceedings, the Company cannot predict
how the plaintiffs' claims will ultimately be resolved. In the event there were
a decision adverse to the Company, or pursuant to a settlement agreement, the
Company could ultimately be obligated to make payments including payments which
may not be covered by insurance. Such payments could have a material adverse
effect on the Company's financial position, results of operations or cash flows.
In 1999, the Company was served with a complaint filed in state court in
New York, seeking approximately $1.9 million in damages arising from the
Company's alleged breach of national representation agreements. To date, the
Company has filed an answer to the complaint which denies liability and asserts
a variety of affirmative defenses. On February 15, 2001, the Company's current
national representation agent agreed to indemnify, defend and hold harmless the
Company against any loss, liability, cost or expense in connection with this
matter.
In 1999, the Company was served with a complaint filed in county court in
Alabama alleging that in August 1997, an employee of Colonial Broadcasting,
Inc., which we acquired in July 1998, was at fault in connection with an
automobile accident. The plaintiff is seeking $8.5 million damages. We believe
we have a right to indemnification from the sellers of Colonial Broadcasting
under the related purchase agreement. The seller's insurance company has assumed
the defense of the matter. At the present time, it is not possible to determine
the likelihood of a favorable outcome or estimate the range of potential loss in
this matter, if any.
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77
In addition, we currently and from time to time are involved in litigation
incidental to the conduct of our business. Other than as discussed above, the
Company is not a party to any lawsuit or proceeding which, in our opinion, is
likely to have a material adverse effect.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash equivalents, receivables, payables, and accrued
expenses approximate fair value due to the short maturity of these instruments.
The Company calculates the fair value of its debt using the present value
of the contractual interest and principal payment streams, at contractual
interest/coupon payment rates compared to market/trading rates and yields, as
published by the market makers in the Company's debt securities. At December 31,
2000 the carrying amount of the Notes was $160.0 million, and the fair value
approximated $128.0 million.
The Company calculates the fair value of the Series A Preferred Stock using
the present value of the contractual dividend and principal payment streams, at
contractual dividend rates compared to market trading rates, as published by the
market makers in the Company's Series A Preferred Stock. At December 31, 2000
the Company's carrying amount of the Series A Preferred Stock was $114.0
million, and the fair value approximated $82.0 million.
It is not practical to determine the fair value of the Series B Preferred
Stock.
16. RELATED PARTY TRANSACTIONS
Lewis W. Dickey, Jr. and John Dickey each have a 25% ownership interest in
Stratford Research, Inc., an entity that provides programming and marketing
consulting and market research services to the Company. Under an agreement with
Stratford Research, Inc., Stratford Research, Inc. receives $25,000 to evaluate
programming at target radio stations. Annual strategic studies cost the Company
a minimum of $25,000 negotiable depending on competitive market conditions.
Additionally, Stratford Research, Inc. will provide program-consulting services
for contractually specified amounts over the three years of the agreement. It is
management's belief that the contracted rates included in the agreement for
program research services to be provided are favorable to the Company as
compared with similar services provided by other unaffiliated parties in the
industry. Total fees paid to Stratford Research by the Company during 2000, 1999
and 1998 were $4.1 million, $4.4 million and $2.7 million, respectively. Of
these expenses paid in 2000, 1999 and 1998, $1.1 million, $1.1 million and $1.2
million were capitalized as acquisition costs. The remaining expenses have been
included as part of the station operating expenses in the statements of
operations. At December 31, 2000, 1999 and 1998 amounts payable to Stratford
Research, Inc. were approximately $0.2 million, $0.3 million and $0.4 million,
respectively.
QUAESTUS Management Corporation, an entity controlled by Mr. Weening,
historically provided industry research, market support and due diligence
support services, and transaction management for the Company's acquisitions and
provided certain corporate finance and related services in support of the
Company's treasury function. During 2000, 1999 and 1998, the Company paid
QUAESTUS Management Corporation $1.5 million, $1.4 million and $1.4 million
respectively for acquisition, corporate finance, and business and systems
development services. Under an agreement with QUAESTUS Management Corporation,
QUAESTUS Management Corporation received a specified rate per transaction
between $15,000 and $60,000 depending on the number of FM stations acquired in
the transaction, and conditioned on consummation of those transactions. In
addition, the Company was obligated to reimburse QUAESTUS Management Corporation
for all of its expenses incurred in connection with the performance of services
under such agreement. It is management's belief that the contract rates included
in the agreement for diligence support, transaction management and other
services were favorable to the Company and were comparable to similar rates
charged by unaffiliated parties in the market. On June 29, 2000 the Company's
Board of Directors terminated the QUAESTUS consulting contract effective June
30, 2000. Of the total payments made to QUAESTUS in 2000, 1999 and 1998, $0.5
million, $0.8 million, and $1.2 million were capitalized as acquisition costs.
The remaining expenses have been included as part of the corporate general and
administrative expenses in the statements of operations. At December 31, 2000,
1999 and 1998 amounts
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payable to Quaestus Management Corporation were approximately $0.3 million, $0.1
million and $0.1 million. In addition, QUAESTUS Management Corporation and the
Company share certain office facilities and administrative services, on a pro
rata basis according to usage.
The Company paid Cumulus Media, LLC management fees of $0.2 million in 1998
(with QUAESTUS Management Corporation receiving $0.1 million of such fees from
Cumulus Media, LLC and DBBC of Georgia, LLC, receiving $0.1 million of such fees
from Cumulus Media, LLC). The fees paid to Cumulus Media, LLC have terminated.
Lewis W. Dickey, Jr. and John Dickey have a 75% and 25% ownership interest in
DBBC of Georgia LLC, respectively.
Additionally, on November 23, 1999 QUAESTUS Management Corporation and the
Company entered into a Sublease Agreement as co-sublessees, which provided for
the use of a 1989 Cessna Citation III model aircraft. QUAESTUS Management
Corporation and the Company are obligated to pay the sublessor rent of $0.1
million per month, plus an hourly rate for each hour of flight. QUAESTUS
Management Corporation acted as the manager of the aircraft, hiring pilots,
arranging for maintenance and scheduling usage. Expenses for the use of the
aircraft were billed to the Company based upon the percentage of hours of
Company use. The Company incurred aircraft related expenses of $0.2 million and
$0.5 million in 1999 and 2000, respectively. As of December 31, 2000, there
remains $0.4 million payable to QUAESTUS under this agreement. The Company's
sublease agreement was terminated effective December 31, 2000.
On February 2, 2000 the Company loaned each of Mr. Weening and Mr. Dickey
$5.0 million, respectively for the purpose of enabling Mr. Weening and Mr.
Dickey to purchase 128,000 shares of newly issued shares of Class C Common Stock
from the Company. The price of the shares was $39.00 each, which was the
approximate market price for the Company's Class A Common Stock on that date.
The loans are represented by recourse promissory notes executed by each of Mr.
Weening and Mr. Dickey which provide for the payment of interest at the greater
of 9.0% or the maximum rate paid by the Company under its Credit Facility.
Interest accrues on the notes from February 2, 2000 through December 31, 2003
and is payable on that date. All accrued and unpaid interest and the principal
amount of the loans are due and payable in a lump sum on December 31, 2003. As
of December 31, 2000, the original principal of $5.0 million plus accrued
interest remains outstanding from both Mr. Weening and Mr. Dickey.
One of the Company's Directors is Mr. Ralph B. Everett. Mr. Everett is a
partner with the Washington, D.C. office of the law firm of Paul, Hastings,
Janofsky & Walker LLP, where he heads the Firm's Federal Legislative Practice
Group. The Company also engages the law firm of Paul, Hastings, Janofsky &
Walker LLP on numerous matters dealing with compliance with federal regulations
and corporate finance activities. Total amounts paid to Paul, Hastings, Janofsky
& Walker LLP during fiscal 2000, 1999 and 1998 were approximately $1.0 million,
$2.1 million and $1.2 million. Of these amounts paid in 2000, 1999 and 1998,
$0.8 million, $2.0 million and $1.1 million were capitalized as acquisition or
financing costs. The remaining amounts have been included as part of the
corporate general and administrative expenses in the statements of operations.
At December 31, 2000, 1999 and 1998 amounts remaining payable to Paul, Hastings,
Janofsky & Walker LLP were approximately $0.4 million, $0.3 million and $0.6
million.
One of the Company's Directors is Eric P. Robison. Since January 1994, Mr.
Robison has worked for Vulcan Northwest, Inc., the holding company that manages
all personal and business interests for investor Paul G. Allen. In this role Mr.
Robison serves as a Business Development Associate for Vulcan Ventures, Inc.,
the venture fund division of Vulcan and investigates and secures investment
opportunities. In 1999 and 2000, the Company retained Mr. Robison to provide
consulting services relating to the development of the Cumulus Internet Services
Inc. business plan. During 2000 and 1999, the Company paid Mr. Robison $15,000
and $10,000 respectively for consulting services.
17. DEFINED CONTRIBUTION PLAN
Effective January 1, 1998, the Company adopted a qualified profit sharing
plan under Section 401(k) of the Internal Revenue Code. All employees meeting
eligibility requirements are qualified for participation in the plan.
Participants in the plan may contribute 1% to 15% of their annual compensation
through payroll deductions. Under the plan, the Company will provide a matching
contribution of 25% of the first 6% of each
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participant's contribution. Matching contributions are to be remitted to the
plan by the Company monthly. During 2000 and 1999, the Company contributed
approximately $0.4 million and $0.3 million to the plan respectively.
18. GUARANTORS' FINANCIAL INFORMATION
Certain of the Company's direct and indirect subsidiaries (all such
subsidiaries are directly or indirectly wholly owned by the Company) will
provide full and unconditional guarantees for the Company's senior subordinated
notes on a joint and several basis. There are no significant restrictions on the
ability of the guarantor subsidiaries to pay dividends or make loans to the
Company.
The following tables provide consolidated condensed financial information
pertaining to the Company's subsidiary guarantors. The Company has not presented
separate financial statements for the subsidiary guarantors and non-guarantors
because management does not believe that such information is material to
investors (dollars in thousands).
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998
------------ ------------ ------------
Current assets............................ $ 127,959 $ 91,509 $ 44,861
Noncurrent assets......................... 1,040,000 594,670 444,977
Current liabilities....................... 14,885 12,135 8,370
Noncurrent liabilities.................... 260,671 61,048 32,396
DECEMBER DECEMBER DECEMBER
2000 1999 1998
-------- -------- --------
Net revenues.............................. $ 223,539 $177,667 $98,786
Operating expenses........................ 187,316 131,050 90,775
Income (loss) before extraordinary item... (11,599) (10,336) (7,744)
Net loss.................................. (11,599) (10,336) (7,744)
19. QUARTERLY RESULTS (UNAUDITED)
The following table presents the Company's selected unaudited quarterly
results for the eight quarters ended December 31, 2000 (dollars in thousands).
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
For the Year Ended December 31, 2000
Net revenue....................................... $ 47,717 $ 62,627 $ 58,127 $ 57,440
Operating income (loss)........................... (10,346) (8,940) (19,354) (10,071)
Net income (loss)................................. (10,120) (9,083) 24,298 (7,393)
Net income (loss) attributable to common
stockholders................................... (13,648) (12,725) 20,489 (11,289)
Basic and diluted loss per common share........... $ (0.39) $ (0.36) $ 0.58 $ (0.32)
For the Year Ended December 31, 1999
Net revenue....................................... $ 31,211 $ 45,846 $ 47,293 $ 55,669
Operating income (loss)........................... (4,838) 3,063 4,553 (1,020)
Net income (loss)................................. (7,125) (2,213) 184 (4,468)
Net loss attributable to common stockholders...... (11,670) (6,965) (4,764) (14,013)
Basic and diluted loss per common share........... $ (0.59) $ (0.35) $ (0.17) $ (0.43)
20. SUBSEQUENT EVENTS (UNAUDITED)
From January 1, 2001 through January 18, 2001, the Company completed
acquisitions of 7 radio stations in 2 separate markets for an aggregate purchase
price of approximately $106.2 million. These transactions will be accounted for
by the purchase method of accounting.
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On January 3, 2001, the Company borrowed $2.5 million under its seven-year
revolving credit facility. Proceeds from this borrowing we used to satisfy
operating cash needs. On February 2, 2001 and following the closing of the Phase
III Clear Channel divestitures, this borrowing was subsequently repaid in its
entirety.
On January 18, 2001, the Company completed substantially all of the third
and final phase of an asset exchange and sale transaction with certain
subsidiaries of Clear Channel Communications. Upon the closing , the Company
transferred 44 stations in 8 markets in exchange for 4 stations in 1 market and
approximately $36.2 million in cash. As of the close date, the Company also
received approximately $2.7 million in proceeds previously withheld from the
second phase of the Clear Channel transactions.
On March 13, 2001, the Company divested The Advisory Board of Nevada, a
wholly owned subsidiary of the Company. No proceeds were realized by the Company
upon divestiture.
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SCHEDULE II
CUMULUS MEDIA INC.
FINANCIAL STATEMENT SCHEDULE
VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
----------------------------------------------------------
BALANCE PROVISION
AT FOR BALANCE
BEGINNING DOUBTFUL ACQUIRED AT END
FISCAL YEAR OF YEAR ACCOUNTS STATIONS(1) WRITE-OFFS OF YEAR
----------- --------- --------- ----------- ---------- -------
2000
Allowance for doubtful accounts............ $3,118 23,751 1,859 (11,380) $17,348
1999
Allowance for doubtful accounts............ $ 895 2,504 61 (342) $ 3,118
1998
Allowance for doubtful accounts............ $ 125 964 97 (291) $ 895
- -------------------------
(1) Allowance for doubtful accounts receivable acquired in acquisitions.
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