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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
(AMENDMENT NO. 1)
[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)
<Table>
ILLINOIS 36-4159663
(State of Incorporation) (I.R.S. Employer Identification No.)
</Table>
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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2
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. 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. Although broadcast cash flow is not a measure of performance
calculated in accordance with GAAP, management believes that it is useful to an
investor in evaluating the Company because it is a measure widely used in the
broadcasting industry to evaluate a radio Company's operating performance.
Nevertheless, it should not be considered in isolation or as a substitute for
net income, operating income (loss), cash flows from operating activities or
any other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. As broadcast cash flow is
not a measure calculated in accordance with GAAP, this measure may not be
compared to similarly titled measures employed by other companies.
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:
<Table>
- - Automotive - Telecommunications - Computers & Software
- - Retail - Fast Food - Entertainment
- - Healthcare - Beverage - Services
</Table>
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
10
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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.
<Table>
<Caption>
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
</Table>
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12
<Table>
<Caption>
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
</Table>
13
13
<Table>
<Caption>
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
</Table>
14
14
<Table>
<Caption>
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
</Table>
15
15
<Table>
<Caption>
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
</Table>
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
18
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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:
<Table>
<Caption>
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
</Table>
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 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, 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).
<Table>
<Caption>
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 (1)..................... $ 34,575 $ 46,691 $ 26,633 $ 2,016
EBITDA (2).................................. 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
</Table>
(1) 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. Although
broadcast cash flow is not a measure of performance calculated in accordance
with GAAP, management believes that it is useful to an investor in evaluating
the Company because it is a measure widely used in the broadcasting industry to
evaluate a radio Company's operating performance. Nevertheless, it should not be
considered in isolation or as a substitute for net income, operating income
(loss), cash flows from operating activities or any other measure for
determining the Company's operating performance or liquidity that is calculated
in accordance with GAAP. As broadcast cash flow is not a measure calculated in
accordance with GAAP, this measure may not be compared to similarly titled
measures employed by other companies.
(2) EBITDA consists of operating income (loss) before depreciation,
amortization, LMA fees, non-cash stock compensation expense and restructuring
and other charges. Although EBITDA is not a measure of performance calculated
in accordance with GAAP, management believes that it is useful to an investor in
evaluating the Company because it is a measure widely used in the broadcasting
industry to evaluate a radio company's operating performance. Nevertheless, it
should not be considered in isolation or as a substitute for net income,
operating income (loss), cash flows from operating activities or any other
measure for determining the Company's operating performance or liquidity that is
calculated in accordance with GAAP. As EBITDA, is not a measure calculated in
accordance with GAAP, this measure may not be compared to similarly titled
measures employed by other companies. 23
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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
24
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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. 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. Although broadcast cash flow is not a measure of performance
calculated in accordance with GAAP, management believes that it is useful to
an investor in evaluating the Company because it is a measure widely used in
the broadcasting industry to evaluate a radio Company's operating performance.
Nevertheless, it should not be considered in isolation or as a substitute for
net income, operating income (loss), cash flows from operating activities or
any other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. As broadcast cash flow is
not a measure calculated in accordance with GAAP, this measure may not be
compared to similarly titled measures employed by other companies.
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. EBITDA consists
of operating income (loss) before depreciation, amortization, LMA fees, non-cash
stock compensation expense and restructuring and other charges. Although EBITDA
is not a measure of performance calculated in accordance with GAAP, management
believes that it is useful to an investor in evaluating the Company because it
is a measure widely used in the broadcasting industry to evaluate a radio
company's operating performance. Nevertheless, it should not be considered in
isolation or as a substitute for net income, operating income (loss), cash flows
from operating activities or any other measure for determining the Company's
operating performance or liquidity that is calculated in accordance with GAAP.
As EBITDA, is not a measure calculated in accordance with GAAP, this measure may
not be compared to similarly titled measures employed by other companies.
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).
<Table>
<Caption>
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
======== ========
</Table>
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).
27
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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. 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. Although broadcast cash flow is not a measure of performance
calculated in accordance with GAAP, management believes that it is useful to an
investor in evaluating the Company because it is a measure widely used in the
broadcasting industry to evaluate a radio Company's operating performance.
Nevertheless, it should not be considered in isolation or as a substitute for
net income, operating income (loss), cash flows from operating activities or
any other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. As broadcast cash flow is
not a measure calculated in accordance with GAAP, this measure may not be
compared to similarly titled measures employed by other companies.
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. EBITDA consists
of operating income (loss) before depreciation, amortization, LMA fees, non-cash
stock compensation expense and restructuring and other charges. Although EBITDA
is not a measure of performance calculated in accordance with GAAP, management
believes that it is useful to an investor in evaluating the Company because it
is a measure widely used in the broadcasting industry to evaluate a radio
company's operating performance. Nevertheless, it should not be considered in
isolation or as a substitute for net income, operating income (loss), cash
flows from operating activities or any other measure for determining the
Company's operating performance or liquidity that is calculated in accordance
with GAAP. As EBITDA, is not a measure calculated in accordance with GAAP, this
measure may not be compared to similarly titled measures employed by other
companies.
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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).
<Table>
<Caption>
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
======== ========
</Table>
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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27
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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29
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.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 29th
day of August 2001.
CUMULUS MEDIA INC.
By /s/ MARTIN GAUSVIK
------------------------------------
Martin Gausvik
Executive Vice President,
Treasurer
and Chief Financial Officer
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