<PAGE>
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1998.
|_| 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 000-24525
CUMULUS MEDIA INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Illinois 36-4159663
------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
111 E. Kilbourn Ave., Suite 2700, Milwaukee, WI 53202
----------------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
(414) 615-2800
--------------
Registrant's Telephone Number, Including Area Code:
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 |_| No |X|
As of July 31, 1998, the registrant had outstanding 19,737,198 shares of
common stock.
<PAGE>
CUMULUS MEDIA INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Pro Forma Consolidated Balance Sheet as of June 30, 1998
and Consolidated Balance Sheets as of June 30, 1998 and
December 31, 1997.....................................................
Consolidated Statements of Operations for the three and six
months ended June 30, 1998 and the period from inception on
May 22, 1997 to June 30, 1997.........................................
Consolidated Statements of Cash Flows for the six months ended
June 30, 1998 and the period from inception on May 22, 1997 to
June 30, 1997 ........................................................
Notes to Consolidated Financial Statements............................
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................
Item 2. Changes in Securities and Use of Proceeds...........................
Item 3. Defaults Upon Senior Securities ....................................
Item 4. Submission of Matters to a Vote of Security Holders.................
Item 5. Other Information...................................................
Item 6. Exhibits and Reports on Form 8-K....................................
Signatures......................................................................
Exhibit Index...................................................................
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Cumulus Media Inc.
Consolidated Balance Sheets
(Dollars in thousands, except for share data)
<TABLE>
<CAPTION>
Pro Forma
June 30, June 30, December 31,
1998 1998 1997
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................... $255,042 $ 1,867 $ 1,573
Accounts receivable, less allowance for doubtful accounts
of $405, $405, and $125 respectively............................. 20,108 20,108 5,241
Prepaid expenses and other current assets.......................... 2,824 2,824 288
-------- -------- --------
Total current assets........................................... 277,974 24,799 7,102
Property and equipment, net.......................................... 17,350 17,350 8,120
Intangible assets, net............................................... 181,515 181,515 90,217
Other assets......................................................... 25,187 18,849 5,002
-------- -------- --------
Total assets................................................... $502,026 $242,513 $110,441
-------- -------- --------
-------- -------- --------
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable and accrued expenses.............................. $ 11,240 $ 11,240 $ 3,643
Current portion of long-term debt.................................. 12 12 12
Other current liabilities.......................................... -- -- 195
--------- -------- --------
Total current liabilities...................................... 11,252 11,252 3,850
Long-term debt
Credit Facility, excluding current portion......................... 62,749 142,249 42,789
Notes.............................................................. 160,000 -- --
Other liabilities.................................................... 921 921 400
Deferred income taxes................................................ 1,083 1,083 --
--------- -------- --------
Total liabilities.............................................. 236,005 155,505 47,039
--------- -------- --------
Preferred stock subject to mandatory redemption, stated value
$10,000 per share, 12,000 shares authorized, 3,250 shares and
1,625 shares outstanding respectively................................ -- 31,602 13,426
--------- -------- --------
Series A Cumulative Exchangeable Redeemable Preferred
Stock due 2009, Stated value $1,000 per share,
125,000 shares outstanding......................................... 125,000 -- --
--------- --------- --------
Commitments and contingencies (Note 10)
Stockholder's equity:
Class A common stock, par value $.01 per share;
50,000,000 shares authorized; 8,575,505 shares outstanding....... 86 -- --
Class B common stock, par value $.01 per share;
20,000,000 shares authorized; 8,785,416 shares outstanding....... 88 -- --
Class C common stock, par value $.01 per share;
30,000,000 shares authorized; 2,376,277 shares outstanding....... 24 -- --
Common stock, $.01 par value; authorized 10,000 shares;
issued 1,000 shares.............................................. -- -- --
Additional paid-in-capital......................................... 152,175 66,758 53,549
Accumulated other comprehensive income............................. 5 5 5
Accumulated deficit................................................ (11,357) (11,357) (3,578)
-------- -------- --------
Total stockholder's equity..................................... 141,021 55,406 49,976
-------- -------- --------
Total liabilities and stockholder's equity..................... $502,026 $242,513 $110,441
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
Cumulus Media Inc.
Consolidated Statements of Operations
(Dollars in thousands, except for share data)
(Unaudited)
<TABLE>
<CAPTION>
For the period
Three Months Six Months from inception on
Ended Ended May 22, 1997 to
June 30, 1998 June 30, 1998 June 30, 1997
------------- ------------- ----------------
<S> <C> <C> <C>
Revenues............................................................. 24,155 37,937 84
Less: agency commissions............................................. (2,268) (3,555) (2)
-------- -------- --------
Net revenues................................................... 21,887 34,382 82
Operating expenses:
Station operating expenses, excluding depreciation and
amortization..................................................... 16,372 27,275 296
Depreciation and amortization...................................... 4,154 6,901 78
Corporate general and administrative............................... 1,270 2,231 137
-------- -------- --------
Operating expenses............................................... 21,796 36,407 511
-------- -------- --------
Operating income (loss)........................................ 91 (2,025) (429)
-------- -------- --------
Nonoperating income (expense):
Interest expense................................................... (2,732) (4,249) --
Interest income.................................................... 212 355 8
Other income (expense), net........................................ 4 (2) (24)
-------- -------- --------
Nonperating expenses, net........................................ (2,516) (3,896) (16)
-------- -------- --------
Loss before income taxes......................................... (2,425) (5,921) (445)
Income tax expense............................................... (21) (21) --
-------- -------- --------
Loss before extraordinary item................................... (2,446) (5,942) (445)
Extraordinary loss of early extinguishment of debt............... -- (1,837) --
-------- -------- --------
Net loss......................................................... (2,446) (7,779) (445)
Preferred stock dividend............................................. 1,084 1,926 --
-------- -------- --------
Net loss attributable to common stockholders..................... $ (3,530) $ (9,705) $ (445)
-------- -------- --------
-------- -------- --------
Basic and diluted loss per share..................................... $ (3,530) $ (9,705) $ (445)
-------- -------- --------
-------- -------- --------
Average shares outstanding........................................... 1,000 1,000 1,000
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
Cumulus Media Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the period
Six Months from inception on
Ended May 22, 1997 to
June 30, 1998 June 30, 1997
------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................... $ (7,779) $ (445)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Extraordinary loss on early extinguishement of debt............ 1,837 --
Depreciation................................................... 1,075 33
Amortization of goodwill, intangible assets and other assets... 4,030 45
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable............................................ (14,214) 4
Prepaid expenses and other current assets...................... (2,523) (4)
Accounts payable and accrued expenses.......................... 7,247 135
Other assets................................................... (3,058) (44)
Other liabilities.............................................. (382) 15
---------- --------
Net cash used in operating activities.......................... (13,767) (261)
---------- --------
Cash flows from investing activities:
Acquisitions....................................................... (103,741) (148)
Escrow deposits on pending acquisitions............................ (7,735) (4,438)
Capital expenditures............................................... (1,752) (37)
Other.............................................................. (348) (113)
---------- --------
Net cash used by investing activities.......................... (113,576) (4,736)
---------- --------
Cash flows from financing activities:
Net proceeds from revolving line of credit......................... 175,000 --
Payments on revolving line of credit............................... (75,535) --
Payments on promissory notes....................................... (5) --
Proceeds from issuance of common stock............................. 15,135 8,757
Proceeds from issuance of preferred stock.......................... 16,250 --
Payments for debt issuance costs................................... (3,208) --
---------- --------
Net cash provided by financing activities...................... 127,637 8,757
---------- --------
Increase in cash and cash equivalents................................ 294 3,760
Cash and cash equivalents at beginning of period..................... 1,573 --
---------- --------
Cash and cash equivalents at end of period........................... 1,867 3,760
---------- --------
---------- --------
Supplemental disclosures of cash information:
Interest paid...................................................... $ 4,249 --
---------- --------
---------- --------
Non-cash operating and financing activities:
Trade revenue...................................................... $ 2,472 $ 18
---------- --------
---------- --------
Trade expense...................................................... $ 2,449 $ 17
---------- --------
---------- --------
Assets acquired through notes payable.............................. $ 1,051 $ --
---------- --------
---------- --------
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
Cumulus Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Interim financial data
The consolidated financial statements should be read in conjunction with
the consolidated financial statements of Cumulus Media Inc. ("Cumulus" or
the "Company") for the period from inception on May 22, 1997 to December
31, 1997, including the notes thereto, included in the Company's Registration
Statement on Form S-1 (No. 333-48849). The accompanying unaudited financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
necessary for a fair presentation of results of the interim periods have been
made and such adjustments were of a normal and recurring nature. The results
of operations for the three months and six months ended June 30, 1998 and
cash flows for the six months ended June 30, 1998 are not necesssarily
indicative of the results that can be expected for the entire fiscal year
ending December 31, 1998.
2. Initial Public Offering
On July 1, 1998, the Company completed its initial public offering of common
and preferred stock and debt totaling $391 million. The common stock offering
was for 7,598,572 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), including 6,428,572 shares sold by the Company
and 1,170,000 shares sold by State of Wisconsin Investment Board. Of the
7,598,572 shares of Class A Common Stock sold, 1,519,714 shares were sold in
an offering outside the U.S. and Canada and 6,078,858 shares were sold in a
concurrent offering in the United States and Canada. In addition, on July 31,
1998 the underwriters exercised a portion of the over-allotment options and
the Company sold an additional 800,000 shares of Class A Common Stock for net
proceeds to the Company of $10.4 million. These offerings are collectively
referred to as the "Stock Offering." Concurrently with the Stock Offering,
the company sold in a preferred stock offering (the "Preferred Stock
Offering") $125.0 million of 13 3/4% Series A Cumulative Exchangeable
Redeemable Preferred Stock Due 2009 (the "Series A Preferred Stock")
approximately $34.5 million of which was sold directly by the Company to The
Northwestern Mutual Life Insurance Company at a purchase price equal to the
price to the public and $160.0 million of 10 3/8% Senior Subordinated Notes
Due 2008 (the "Notes") (the "Debt Offering" and, together with the stock
Offerings and the Preferred Stock Offering, the "Offerings").
Immediately prior to the completion of the Offerings, (i) all shares of the
Company's 12% Class A Cumulative Preferred Stock which were held by The
Northwestern Mutual Life Insurance Company (the "NML Preferred Stock") plus
all accrued and unpaid dividends thereon as of the exchange date were
exchanged for shares of Series A Preferred Stock having an equivalent
aggregate liquidation value pursuant to The Preferred Stock Offering; and
(ii) Media LLC was liquidated and the Shares of Class A Common Stock, Class B
Common Stock and Class C Common Stock of the Company held by Media LLC was
distributed by Media LLC to its members in liquidation (the "Reorganization").
Prior to the completion of the Offerings, the Company financed its
acquisitions primarily through private equity financings and borrowings under
a credit agreement (the "Old Credit Agreement"). In March 1998, the Company
entered into a $190.0 million senior credit facility (the "Credit
Facility"). The Credit Facility was amended as of May 1, 1998, as of June 24,
1998 and as of June 26, 1998, to provide for a revolving credit line of
$25.0 million until March 2, 2006 and an eight-year term loan facility of
$125.0 million. Under the terms of the Credit Facility, the Company drew down
$62.5 million of the term facility upon the closing of the Offerings.
The unaudited pro forma consolidated balance sheet of the Company as of June
30, 1998 gives effect to the Reorganization, borrowing under the Credit
Facility and the Offerings (collectively referred to as the
"Transactions"). The unaudited pro forma consolidated balance sheet is
presented for illustrative purposes only and is not indicative of the
financial position that would have occurred if transactions had been
consummated on June 30, 1998.
6
<PAGE>
Cumulus Media Inc.
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except for per share data)
(Unaudited)
3. Acquisitions and Disposition:
The Company completed the following acquisitions of radio stations for
cash during the six months ended June 30, 1998:
<TABLE>
<CAPTION>
Markets and Stations Acquisition Date Purchase Price(1)
- -------------------- ---------------- -----------------
<S> <C> <C>
Columbus, GA
M & M Partners
(WVRK-FM, WGSY-FM, WPNX-AM and WMLF-AM)........ January 6, 1998 $ 12,842
Minority Radio Associates
(WAGH-FM)...................................... March 17, 1998 $ 2,054
Tallahassee, Florida
Tally Radio, L.C.
(WWLD-FM)...................................... January 16, 1998 $ 1,200
HVS Partners
(WBZE-FM, WHBT-AM and WHBX-FM)................. January 16, 1998 $ 15,596
Toledo, Ohio
Venice Broadcasting Corp.
(WXKR-FM)...................................... January 27, 1998 $ 5,009
Salisbury, Maryland
Connor Broadcasting Corporation
(WSBY-FM and WJDY-AM).......................... February 11, 1998 $ 1,361
Ann Arbor, Michigan
Arbor Radio LP
(WIQB-FM, WQKL-FM, WTKA-AM and WDEO-AM)........ March 2, 1998 $ 15,170
Myrtle Beach, South Carolina
Carolina Broadcasting, Inc.
(WJXY-AM and WJXY-FM).......................... March 16, 1998 $ 2,307
Seacoast Radio Company, LLC
WDAI-FM
Sunny Broadcasters, Inc.
(WSNY-FM)...................................... March 25, 1998 $ 8,229
Florence, South Carolina
Forjay Broadcasting Corporation
(WYNN-FM and WYNN-AM).......................... March 23, 1998 $ 4,393
Amarillo, Texas
Heritage Communications
(KZRK-AM and KZRK-FM).......................... April 1, 1998 $ 1,004
Augusta, Georgia
Savannah Valley Broadcasting Radio Properties
(WBBQ-AM AND WBBQ-FM).......................... April 1, 1998 $ 10,206
Abilene, Texas
IO Radio, Inc.
(KHXS-FM)...................................... April 7, 1998 $ 385
Amarillo, Texas
West Jewel
(KARX-FM)...................................... April 8, 1998 $ 888
Abilene, Texas
Big Country Broadcasting
(KBCY-FM and KCDD-FM).......................... April 15, 1998 $ 1,888
Amarillo, Texas
Wiskes-Abaris
(KQIZ-FM)...................................... April 30, 1998 $ 3,178
Florence, South Carolina
GHB Broadcasting
(WHSC-AM and WHSC-FM).......................... May 1, 1998 $ 705
Beaumont, Texas
Beaumont Skywave, Inc.
(KTCX-FM)...................................... May 15, 1998 $ 3,736
Beaumont, Texas
Ninety-Four Point One, Inc.
(KAYD-FM, KAYD-AM, KQXY-FM, KQHN-AM)........... May 15, 1998 $ 11,596
Dubuque, Iowa
KIKR, Inc.
(KIKR-FM)...................................... June 3, 1998 $ 1,350
Amarillo, Texas
Westwind
(KPUR-FM and KPUR-AM).......................... June 9, 1998 $ 829
--------
$103,926
--------
--------
</TABLE>
(1) Includes acquisition related costs.
The aforementioned acquisitions were accounted for by the purchase method
of accounting. As such, the accompanying consolidated June 30, 1998 balance
sheet includes the acquired assets and
7
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(Unaudited)
3. ACQUISITIONS AND DISPOSITION: (CONTINUED)
liabilities and the statements of operations for the three and six months
ended June 30, 1998 include the results of operations of the acquired
entities from their respective dates of acquisition.
An allocation of the purchase prices to the estimated fair values of the
assets acquired and liabilities assumed is presented below.
<TABLE>
<S> <C>
Current assets, other than cash................... $ 657
Property and equipment............................ 8,660
Intangible assets................................. 95,710
Other liabilities................................. (1,101)
--------
$103,926
--------
--------
</TABLE>
The unaudited consolidated condensed pro forma results of operations
data for the six months ended June 30, 1998 as if the acquisitions had
occurred on January 1, 1998 follows:
<TABLE>
<S> <C>
Net revenues...................................... $ 39,073
--------
--------
Operating loss.................................... $ 1,525
--------
--------
Net loss.......................................... $ (7,278)
--------
--------
Net loss attributable to common stockholders...... $ (9,204)
--------
--------
Basic loss per common share (in dollars).......... $ (9,204)
--------
--------
</TABLE>
Escrow funds of approximately $9,734 paid by the Company in
connection with transactions completed subsequent to June 30, 1998 and for
transactions which the Company has signed an agreement for the purchase of an
entity have been classified as other assets at June 30, 1998 in the
accompanying consolidated balance sheet.
8
<PAGE>
Cumulus Media Inc.
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except for per share data)
(Unaudited)
3. Acquisitions and Disposition: (Continued)
During the six months ended June 30, 1998, the Company operated the
following stations under local marketing agreements ("LMA"):
<TABLE>
<CAPTION>
Market and Stations LMA Effective Date
------------------- -------------------
<S> <C>
Green Bay, Wisconsin
American Communications Co.
(WJLW-FM)........................................... February 15, 1998
Brillion Radio Company
(WEZR-FM)........................................... February 15, 1998
Augusta, Georgia
Savannah Valley Broadcasting Radio Properties
(WBBQ-AM and WBBQ-FM).............................. September 4, 1997
Salisbury, Maryland
WWFG-FM and WOSC-FM
(WWFG-FM and WOSC-FM).............................. February 1, 1998
Tallahassee, Florida
HVS Partners
(WHBX-FM, WBZE-FM and WHBT-AM)..................... August 18, 1997
Tally Radio, L.C.
(WWLD-FM).......................................... August 18, 1997
Tallahassee Broadcasting, Inc.
(WGLF-FM).......................................... August 18, 1997
Abilene, Texas
Big Country Broadcasting
(KBCY-FM and KCDD-FM).............................. November 1, 1997
IQ Radio, Inc.
(KHXS-FM).......................................... November 1, 1997
Amarillo, Texas
Westwind
(KPUR-FM and KPUR-AM).............................. January 1, 1998
Heritage Communications
(KZRK-FM and KZRK-AM).............................. January 1, 1998
West Jewel
(KARX-FM).......................................... January 1, 1998
Wiskes-Abaris
(KQIZ-FM).......................................... February 15, 1998
</TABLE>
9
<PAGE>
Cumulus Media Inc.
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except for per share data)
(Unaudited)
3. Acquisitions and Disposition: (Continued)
<TABLE>
<CAPTION>
<S> <C>
Odessa-Midland, Texas
New Frontier Communications, Inc.
(KGEE-FM, KODM-FM, KNFM-FM, KMND-AM and
KBAT-FM).......................................... January 1, 1998
Marion Carbondale, Illinois
Clearly Superior Radio Properties
(WDDD-FM, WDDD-AM, WTAO-FM, WVZA-FM,
WQUL-FM and WFRX-AM).............................. January 1, 1998
Columbus, Georgia
Minority Associates
(WAGH-FM)........................................... January 1, 1998
Savannah, Georgia
Savannah Communications, L.P.
(WBMQ-AM, WIXV-FM and WSGF-FM)...................... January 1, 1998
WJCL-FM
(WJCL-FM)........................................... January 1, 1998
Phoenix Broadcast Partners, Inc.
(WZAT-FM)........................................... March 16, 1998
Beaumont, Texas
Beaumont Skywave, Inc.
(KTCX-FM)........................................... February 15, 1998
Myrtle Beach, South Carolina
Carolina Broadcasting, Inc.
(WXJY-FM)........................................... March 16, 1998
Florence, South Carolina
Clarendon County Broadcasting
(WHLZ-FM, WYMB-AM).................................. March 18, 1998
Pamplico Broadcasting, L.P.
(WBZF-FM, WMXT-FM, WWFN-FM)......................... March 16, 1998
Montgomery, Alabama
Republic Corporation
(WMSP-AM, WNZZ-AM, WMXS-FM and WLWI-FM)............. February 11, 1998
Chattanooga, Tennessee
Republic Corporation
(WUSY-FM)........................................... February 11, 1998
Augusta, Georgia
P&T Broadcasting, Inc.
(WLOV-AM, WLOV-FM).................................. April 1, 1998
Dubuque, Iowa
KIKR, INC.
(KIKR-FM)........................................... April 1, 1998
Albany, Georgia
Brooks Broadcasting Co.
(WKAK-FM, WEGC-FM, WALG-AM,
WJAD-FM)........................................... April 1, 1998
Monroe, Michigan
Lesnick Communications, Inc.
(WTWR-FM)........................................... April 1, 1998
Abilene, Texas
I-Q Radio, Inc.
(KFQX-FM).......................................... April 1, 1998
Florence, South Carolina
Nautical Broadcasting
(WCMG-FM)............................................... April 1, 1998
Myrtle Beach, South Carolina
Blue Dolphin of South Carolina, Inc.
(WSEA-FM)................................................ April 1, 1998
Albany, Georgia
Albany Broadcasting Co.
(WGPC-FM and WGPC-AM).................................... June 1, 1998
</TABLE>
The statements of operations for the three and six months ended June 30,
1998 include the revenue and broadcast operating expenses of these radio
stations and any related fees associated with the LMA from the effective date
of the LMA through the earlier of the acquisition date or June 30, 1998.
10
<PAGE>
4. Guarantor's Financial Information
The Company has registered and issued the Notes under the Securities Act
of 1933, as amended (the ''Act''). Pursuant to the registration and issuance
of the Notes under the Act, all of the direct and indirect subsidiaries
(all such subsidiaries are directly or indirectly wholly-owned by the
Company) of the Company (the "Guarantor Subsidiaries") provided full and
unconditional senior subordinated guarantees for the senior subordinated
notes on a joint and several basis. There are no significant restrictions on
the ability of the guarantor subsidiaries to pay dividends or make loans to
the Company.
11
<PAGE>
Cumulus Media Inc.
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except for per share data)
(Unaudited)
4. Guarantor's Financial Information (Continued)
Following is consolidating condensed financial information pertaining to
the Company and the Guarantor Subsidiaries. The Company has not presented
separate financial statements for the Guarantor Subsidiaries because
management has determined that such information is not material to investors.
<TABLE>
<CAPTION>
For the Period from Inception on May 22,
1997 to June 30, 1997
----------------------------------------
Guarantor Total
Parent Subsidiaries Eliminations Consolidated
------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net revenues.......................................... $ -- $ 82 $ -- $ 82
Operating expenses.................................... 137 374 -- 511
-------- --------- ------------ -------------
Operating income (loss)............................... (137) (292) -- (429)
Net interest income (expense) and other............... (16) -- -- (16)
-------- --------- ------------ -------------
Income (loss) before income taxes..................... (153) (292) -- (445)
Income tax expense.................................... -- -- -- --
-------- --------- ------------ -------------
Income (loss) before equity income in
subsidiaries........................................ (153) (292) -- $ (445)
Equity income (loss) in subsidiaries.................. (292) -- 292 --
-------- --------- ------------ -------------
Net income (loss) attributable to common
stockholders........................................ $ (445) $ (292) $ 292 $ (445)
-------- --------- ------------ -------------
-------- --------- ------------ -------------
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1997
------------------------------------------------------
Guarantor Total
Parent Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current assets........................................ $ 3,588 $ 3,514 $ -- $ 7,102
Property and equipment, net........................... 317 7,803 -- 8,120
Investment in subsidiaries............................ 101,732 40 (101,772) --
Intangible assets, net................................ -- 90,217 -- 90,217
Other assets.......................................... 2,706 2,296 -- 5,002
------- ------- -------- --------
Total assets........................................ $108,343 $103,870 $(101,772) $110,441
------- ------- -------- --------
------- ------- -------- --------
Current liabilities................................... $ 1,869 $ 1,981 $ -- $ 3,850
Long-term debt, excluding current portion............. 42,789 -- -- 42,789
Other liabilities..................................... 286 2,269 (2,155) 400
------- ------- -------- --------
Total liabilities................................... 44,944 4,250 (2,155) 47,039
------- ------- -------- --------
Preferred stock....................................... 13,426 -- -- 13,426
------- ------- -------- --------
Stockholder's equity.................................. 49,973 99,620 (99,617) 49,976
------- ------- -------- --------
Total liabilities and stockholder's equity.......... $108,343 $103,870 $(101,772) $110,441
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
12
<PAGE>
Cumulus Media Inc.
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except for per share data)
(Unaudited)
4. Guarantor's Financial Information (Continued)
<TABLE>
<CAPTION>
For the Period from Inception on May 22,
1997 to June 30, 1997
----------------------------------------
Guarantor Total
Parent Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net cash (used in) provided by operating activities................. $ (156) $ (105) $ -- $ (261)
Cash flows from investing activities:
Acquisitions........................................................ -- (148) -- (148)
Investment in subsidiaries.......................................... (205) -- 205 --
Escrow deposits on pending acquisitions............................. (4,438) -- -- (4,438)
Other............................................................... (127) (23) -- (150)
-------- ------ ------ --------
Net cash used by investing activities.............................. $(4,770) $ (171) $205 $(4,736)
-------- ------ ------ --------
Cash flows from financing activities:
Proceeds from issuance of common stock.............................. 8,757 -- -- 8,757
-------- ------ ------ --------
Net cash provided by financing activities.......................... 8,757 -- -- 8,757
-------- ------ ------ --------
Increase in cash and cash equivalents.............................. 3,831 (276) 205 3,760
Cash and cash equivalents at beginning of period................... -- -- -- --
-------- ------ ------ --------
Cash and cash equivalents at end of period......................... $ 3,831 $(276) $205 $ 3,760
-------- ------ ------ --------
-------- ------ ------ --------
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1998
(unaudited)
------------------------------------------------------
Guarantor Total
Parent Subsidiaries Eliminations Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues......................................................... $ -- $ 34,382 $ -- $ 34,382
Operating expenses................................................... 2,472 33,935 -- 36,407
------------ ------------ ------------ ------------
Operating income (loss).............................................. (2,472) 447 -- (2,025)
Net interest, income (expense) and other............................. (3,881) (15) -- (3,896)
------------ ------------ ------------ ------------
Income (Loss) before income taxes.................................... (6,353) 432 -- (5,921)
Income tax expense................................................... (21) -- -- (21)
------------ ------------ ------------ ------------
Income (Loss) before extraordinary item.............................. (6,374) 432 -- (5,942)
Extraordinary loss................................................... (1,837) -- -- (1,837)
------------ ------------ ------------ ------------
Net loss before equity adjustment.................................... (8,211) 432 -- (7,779)
Equity Income (loss) in subsidiaries................................. 432 -- (432) --
------------ ------------ ------------ ------------
Net loss............................................................. (7,779) 432 (432) (7,779)
Preferred stock dividend............................................. 1,926 -- -- 1,926
------------ ------------ ------------ ------------
Net loss attributable to common stockholders........................ $ (9,705) $ 432 $ (432) $ (9,705)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
13
<PAGE>
Cumulus Media Inc.
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except for per share data)
(Unaudited)
4. Guarantor's Financial Information (Continued)
<TABLE>
<CAPTION>
As of June 30, 1998
--------------------------------------------------------
Guarantor Total
Parent Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current assets.............. $ 966 $ 23,833 $ -- $ 24,799
Property and equipment, net. 288 17,062 -- 17,350
Investment in subsidiaries.. 211,966 564 (212,530) --
Intangible assets, net...... -- 181,515 -- 181,515
Other assets................ 18,849 -- -- 18,849
-------- -------- -------- --------
Total assets.............. 232,069 222,974 (212,530) 242,513
-------- -------- -------- --------
Current liabilities......... 2,378 8,874 -- 11,252
Long-term debt, excluding
current portion............ 142,249 -- -- 142,249
Other liabilities........... 1,332 8,163 (8,574) 921
Deferred income taxes....... -- 1,083 -- 1,083
-------- -------- -------- --------
Total liabilities........... 145,959 18,120 (8,574) 155,505
-------- -------- -------- --------
Preferred stock............. 31,602 -- -- 31,602
-------- -------- -------- --------
Stockholder's equity........ 54,508 204,854 (203,956) 55,406
-------- -------- -------- --------
Total liabilities and
stockholder's equity..... $232,069 $222,974 $(212,530) $242,513
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1998
--------------------------------------------------------
Guarantor Total
Parent Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net cash (used in) provided
by operating activities... $ (16,367) $ 2,600 $ -- $ (13,767)
--------- --------- ----------
Cash flows from investing
activities:
Acquisitions............... -- (103,741) -- (103,741)
Investment in subsidiaries. (103,741) -- 103,741 --
Escrow deposits on pending
acquisitions.............. (7,735) -- -- (7,735)
Other...................... (353) (1,747) -- (2,100)
--------- --------- ---------- ----------
Net cash used in investing
activities............... (111,829) (105,488) 103,741 (113,576)
Cash flows from financing
activities:
Net proceeds from revolving
line of credit............ 96,252 -- -- 96,252
Contribution from parent... -- 103,741 (103,741) --
Proceeds from issuance of
preferred stock........... 16,250 -- -- 16,250
Proceeds from issuance of
common stock.............. 15,135 -- -- 15,135
--------- --------- ---------- ----------
Net cash provided by
financing activities..... 127,637 103,741 (103,741) 127,637
Increase in cash and cash
equivalents.............. (559) 853 -- 294
Cash and cash equivalents
at beginning of period... 1,080 493 -- 1,573
--------- --------- ---------- ----------
Cash and cash equivalents
at end of period......... $ 521 $ 1,346 $ -- $ 1,867
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
14
<PAGE>
5. Subsequent Events
Subsequent to June 30, 1998 the Company completed acquisitions of 40 radio
stations in 12 separate markets for an aggregate purchase price of
approximately $137,900. These transactions will be accounted for by the
purchase method of accounting. The Company intends to execute a supplemental
indenture pursuant to which any subsidiaries acquired in these transactions
would become Guarantor Subsidiaries.
The Company has also entered into various agreements to acquire 81 stations
in 17 markets for an aggregate purchase price of $108,915.
15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The following discussion of the consolidated financial condition and results
of operations of Cumulus Media Inc. ("Cumulus" or the "Company") should
be read in conjunction with the consolidated financial statements and related
notes thereto of the Company included elsewhere in this Quarterly Report.
This Quarterly Report contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such statements appear in a number of places in this Quarterly
Report and include statements regarding the intent, belief or current
expectations of the Company, its directors or its officers primarily with
respect to the future operating performance of the Company. Any such
forward-looking statements are not guarantees of future performance and may
involve risks and uncertainties and actual results may differ from those in
the forward-looking statements as a result of various factors (including,
without limitation, risks and uncertainties relating to leverage, the need
for additional funds, the inability of the Company to renew one or more of
its broadcast licenses, changes in interest rates, consummation of the
Company's pending acquisitions, integration of the pending acquisitions, the
ability of the Company to eliminate certain costs, the management of rapid
growth, the popularity of radio as a broadcasting and advertising medium and
changing consumer tastes), many of which are beyond the control of the
Company. This discussion identifies important factors that could cause such
differences. The occurrence of any such factors not currently expected by the
Company would significantly alter the results set forth in these statements.
A radio broadcast company's revenues are derived primarily from the sale of
advertising time to local and national advertisers. Those revenues are affected
by the advertising rates that a radio station is able to charge and the number
of advertisements that can be broadcast without jeopardizing listener levels
(and resulting ratings). Advertising rates tend to be based upon demand for a
station's advertising inventory and its ability to attract audiences in targeted
demographic groups, as measured principally by Arbitron. Radio stations attempt
to maximize revenues by adjusting rates based upon local market conditions,
controlling advertising inventory and creating demand and audience ratings.
Seasonal revenue fluctuations are common in the radio broadcasting industry and
are due primarily to fluctuations in advertising expenditures by local and
national advertisers, with revenues typically being lowest in the first calendar
quarter and higher in the second, third and fourth calendar quarters of each
year. A radio station's operating results in any period may be affected by the
occurrence of advertising and promotion expenses that do not produce
commensurate revenues in the period in which the expenditures are made. Because
Arbitron
16
<PAGE>
reports audience ratings on a semi-annual basis in most of the Company's
markets, a radio station's ability to realize revenues as a result of increased
advertising and promotional expenses and any resulting audience ratings
improvements may be delayed for several months.
The Company's results of operations from period to period are not historically
comparable because the Company began operations on May 22, 1997 and also due to
the impact of the various acquisitions and dispositions that the Company has
since completed.
As of June 30, 1998, the Company owns and operates, provides programming to or
sells advertising on behalf of 111 radio stations located in 23 U.S. markets.
Following completion of all of its pending acquisitions, the Company will own
and operate, provide programming to or sell advertising on behalf of 176 radio
stations located in 34 U.S. markets. The Company anticipates that it will
consummate the pending acquisitions, however the closing of each such
acquisition is subject to various conditions, including FCC and other
governmental approvals, which are beyond the Company's control. No assurances
can be given that the regulatory approval will be received or that the Company
will complete the pending acquisitions on a timely basis, if at all.
In the following analysis, management discusses broadcast cash flow and EBITDA
(before noncash compensation expense). Broadcast cash flow consists of operating
income (loss) before depreciation, amortization, corporate expenses and noncash
compensation expense. EBITDA (before noncash compensation expense) consists of
operating income (loss) before depreciation, amortization and noncash
compensation expense. Although broadcast cash flow and EBITDA (before noncash
compensation expense) are not measures of performance calculated in accordance
with generally accepted accounting principles ("GAAP"), management believes that
they are 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, they 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.
17
<PAGE>
RESULTS OF OPERATIONS
The following table presents summary historical consolidated financial
information and other supplementary data of Cumulus for the three and six
month periods ended June 30, 1998 and from the period from the Company's
inception, May 22, 1997, through June 30, 1997.
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the
period
from May 22, For the Three For the Six
1997 through Months Ended Months Ended
June 30, 1997 June 30, 1998 June 30, 1998
<S> <C> <C> <C>
OPERATING DATA:
Net broadcast revenue $ 82 $ 21,887 $ 34,382
Stations operating expenses
Excluding depreciation & amortization 296 16,372 27,275
Depreciation and amortization 78 4,154 6,901
Corporate expenses 137 1,270 2,231
Operating income (loss) (429) 91 (2,025)
Interest expense -- 2,732 4,249
Net income (loss) attributable to common stock $ (445) $ (3,530) $ (9,705)
OTHER DATA:
Broadcast cash flow (1) $ (214) $ 5,515 $ 7,107
Broadcast cash flow margin N/A 25.2% 20.7%
EBITDA
(before noncash compensation expense)(2) $ (351) $ 4,245 $ 4,876
Cash flows related to:
Operating activities $ (261) N/A $ (13,767)
Investing activities $ (4,736) N/A $(113,576)
Financing activities $ 8,757 N/A $ 127,637
Capital expenditures $ 37 N/A $ 1,752
</TABLE>
(1) Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expenses, and noncash stock compensation expense.
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.
18
<PAGE>
(2) EBITDA (before noncash stock compensation expense) consists of operating
income (loss) before depreciation, amortization, and noncash stock compensation
expense. Although EBITDA (before noncash stock compensation expense) 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 (before noncash stock compensation expense), is not a measure
calculated in accordance with GAAP, this measure may not be compared to
similarly titled measures employed by other companies.
PERIOD FROM INCEPTION ON MAY 22, 1997 TO JUNE 30, 1997
COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Net Broadcast Revenue. As a result of the stations acquired since the Company's
inception and the other factors described above, net broadcast revenue increased
$ 21.8 million to $ 21.9 million for the three months ended June 30, 1998 from
$ .1 million for the period from the Company's inception, May 22, 1997, through
June 30, 1997. This increase was attributable to the acquisition of radio
stations and revenue generated from LMA's entered into since the Company's
inception on May 22, 1997.
On a same station basis, (defined as the 59 stations owned or operated
from January 1, 1998 through June 30, 1998), net revenue increased $ 2.1
million or 21.3% to $ 12.2 million for the three months ended June 30, 1998,
compared to the prior owner's three months ended June 30, 1997. This increase
was primarily attributable to growth in the sale of commercial time to local
and national advertisers.
Station Operating Expenses excluding Depreciation & Amortization. As a result of
the factors described above, station operating expenses, excluding depreciation
and amortization, increased $ 16.1 million to $ 16.4 million for the three
months ended June 30, 1998 from $ .3 million for the period from the Company's
inception, May 22, 1997, through June 30, 1997. The increase was attributable to
the station operating expenses of the acquired stations and the LMA's entered
into since the Company's inception.
Corporate Expenses. As a result of the Company's inception on May 22, 1997,
the factors described above, and due to certain franchise tax expenses and
recruiting expenses which were incurred during the quarter, corporate expense
increased $1.2 million to $1.3 million for the three months ended June 30,
1998.
19
<PAGE>
Other Operating Expenses. Depreciation and amortization increased $ 4.1 million
to $ 4.2 million for the three months ended June 30, 1998 from $ .1 million for
the period from the Company's inception, May 22, 1997, through June 30, 1997
primarily due to the impact of various acquisitions consummated since the
Company's inception.
Other Expense (Income). Interest expense increased from zero during the
period from the Company's inception, May 22, 1997, through June 30, 1997 to
$ 2.7 million for the three months ended June 30, 1998 primarily due to
indebtedness incurred in connection with the Company's acquisitions. An
extraordinary loss of approximately $ 1.9 million on extinquishment of debt
was recorded in the first quarter of 1998, related to the write-off of
deferred financing fees in connection with the refinancing of the Company's
credit facility during the first quarter.
Net Income (Loss) Attributable to Common Stock. As a result of the factors
described above; and the accrual of dividends on the Company's issued and
outstanding preferred stock; net loss attributable to common stock increased
$ 3.1 million to $ 3.5 million for the three months ended June 30, 1998 from
$ .4 million for the period from the Company's inception, May 22, 1997, through
June 30, 1997.
Broadcast Cash Flow. As a result of the factors described above, broadcast cash
flow increased $ 5.7 million to $ 5.5 million for the three months ended June
30, 1998 from a negative $ .2 million for the period from the Company's
inception, May 22, 1997, through June 30, 1997. The broadcast cash flow margin
was 25.2% for the three months ended June 30, 1998.
EBITDA (before noncash compensation expense). As a result of the factors
described above, EBITDA (before noncash compensation expense) increased $ 4.6
million to $ 4.2 million for the three months ended June 30, 1998 from a
negative $ .4 million for the period from the Company's inception, May 22, 1997,
through June 30, 1997.
20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1998, net cash used in operations increased
$ 13.5 million to $ 13.8 million from net cash used in operations of $ .3
million for the period from the Company's inception, May 22, 1997, through June
30, 1997, primarily due to the investment in working capital and other current
assets made in connection with acquisitions completed since the Company's
inception.
For the six months ended June 30, 1998, net cash used in investing activities,
primarily for acquisitions, increased $ 108.9 million to $113.6 million from
$ 4.7 million in the period from the Company's inception, May 22, 1997, through
June 30, 1997.
For the six months ended June 30, 1998, net cash provided from financing
activities was $ 127.6 million compared to $ 8.8 million in the period from the
Company's inception, May 22, 1997, through June 30, 1997. This increase is the
result of increased borrowings in the 1998 period for acquisitions offset by a
decrease in capital contributions from Cumulus Media, LLC, the Company's
immediate parent prior to the consummation of the offerings.
In addition to acquisitions and debt service, the Company's principal
liquidity requirements will be for working capital and general corporate
purposes, including capital expenditures. Management believes that cash from
operating activities, proceeds from the Offerings (as defined below), and
revolving loans under the Company's credit facility should be sufficient to
permit the Company to meet its financial obligations and to fund its
operations for at least the next 12 months, although additional capital
resources may be required in connection with the further implementation of
the Company's acquisition strategy.
On July 1, 1998, the Company completed its initial public offering of common
and preferred stock and debt totalling $391 million. The common stock
offering was for 7,598,572 shares of Class A Common Stock ( the "Class A
Common Stock"), including 6,428,572 shares sold by the Company and 1,170,000
sold by State of Wisconsin Investment Board. Of the 7,598,572 shares of Class
A Common Stock sold, 1,519,714 shares were sold in an offering outside the
U.S. and Canada and 6,078,858 shares were sold in a concurrent offering in
the United States and Canada. In addition, on July 31, 1998, the underwriters
exercised a portion of the over-allotment options and the Company sold an
additional 800,000 shares of Class A Common Stock for net proceeds to the
Company of $10.4 million. These offerings are collectively referred to as the
"Stock Offerings." Concurrently with the Stock Offerings, the Company sold in
a preferred stock offering (the "Preferred Stock Offering") $125.0 million of
13 3/4% Series A Cumulative Exchangeable Redeemable Preferred Stock Due 2009
(the "Series A Preferred Stock"), approximately $34.5 million of which was
sold directly by the Company to The Northwestern Mutual Life Insurance
Company at a purchase price equal to the price to the public; and $160.0
million of 10 3/8% Senior Subordinated Notes Due 2008 (the "Notes") (the
"Debt Offering" and, together with the Stock Offerings and the
21
<PAGE>
Preferred Stock Offering, the "Offerings").
Immediately prior to the completion of the Offerings: (i) all shares of the
Company's 12% Class A Cumulative Preferred Stock which were held by The
Northwestern Mutual Life Insurance Company (the "NML Preferred Stock") plus
all accrued and unpaid dividends thereon as of the exchange date were
exchange for shares of Series A Preferred Stock having an equivalent
aggregated liquidation value pursuant to the Preferred Stock Offering; and
(ii) Media LLC was liquidated and the shares of Class A Common Stock, Class B
Common Stock and Class C Common Stock of the Company held by Media LLC was
distributed by Media LLC to its members in liquidation (the
"Reorganization"). Prior to the completion of the Offerings, the Company
financed its acquisitions primarily through private equity financing and
borrowings under a credit agreement (the "Old Credit Agreement"). In March
1998, the Company enetered into a $190.0 million senior credit facility (the
"Credit Facility"). The Credit Facility was amended most recently as of June
26, 1998, to provide for a revolving credit line of $25.0 million until March
2, 2006 and an eight-year term loan facility of $125.0 million. Under the
terms of the Credit Facility, the Company drew down $62.5 million of the term
facility upon the closings of the Offerings.
Subsequent to June 30, 1998, the Company completed acquisitions of 40 radio
stations in 11 separate markets for an aggregate purchase price of approximately
$137,900. These transactions will be accounted for by the purchase method of
accounting.
The Company has also entered into various agreements to acquire 81 stations in
17 markets for an aggregate purchase price of $108,915.
The Company's senior credit facility, as amended, as of May 1, 1998, as of June
24, 1998 and as of June 26, 1998 (the "Credit Facility") with Lehman Brothers
Inc., as Arranger and Lehman Commercial Paper Inc., as Lender, Syndication Agent
and Administrative Agent (the "Credit Facility") provides for a revolving credit
line of $25.0 million until March 2, 2006, and an eight-year loan facility of
$125.0 million. Under the terms of the Credit Facility, the Company drew down
$62.5 million of term loan facility upon the closing of the offerings. The
remaining $62.5 million of term loan facility is available for three months
thereafter. The proceeds of the borrowings under the Credit Facility have been
used to finance acquisitions and repay the Company's outstanding indebtedness
under its previous credit facility, and to secure outstanding letters of Credit
issued under its previous credit facility in an aggregated amount equal to
approximately $10.0 million.
The Company's obligations under the Credit Facility are secured by substantially
all of its assets in which a security interest may lawfully be granted
(including FCC licenses held by the
22
<PAGE>
Company's subsidiaries). The obligations under the Credit Facility are also
guaranteed by each of the domestic subsidiaries of the Company and are required
to be guaranteed by any additional subsidiaries acquired by the Company.
Both 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 the Credit Facility) plus a margin ranging between 0.50% to
1.75% or the Eurodollar Rate (as defined under the terms of the credit facility)
plus a margin ranging between 1.50 to 2.75% (in each case dependent upon the
leverage ratio of the Company). The revolving credit and term loan borrowings
are repayable in quarterly installments beginning in 2000, subject to mandatory
prepayment in certain circumstances. The scheduled annual amortization of the
term loans is $2.0 million in each of the years 2000 through 2002, $10.0 million
in 2003, $20.0 million in 2004, $69.0 million in 2005, and $20.0 million at
maturity. The scheduled annual reduction in availability under the revolving
credit loans is $7.5 million in each of the years 2004 through 2005, and $ 2.5
million in 2006.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Restated Information," which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which significantly changes current
financial statement disclosure requirements from those that were required under
SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS No. 132 does not change the
existing measurement or recognition provision of SFAS Nos. 87, 88, or 106.
These pronouncements are effective for financial statements issued for periods
beginning after December 15, 1997. Management does not believe the
implementation of these accounting pronouncements will have a material effect on
its consolidated financial statements.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP 98-5, "Accounting for
the Costs of Start-Up Activities." SOP 98-5, effective for 1999, requires
organization costs to be expensed as incurred. Management believes that
adoption of SOP 98-5 in the first quarter of 1999 will result in a non-cash
charge of approximately $200.
23
<PAGE>
INFLATION
The Company does not believe that inflation has a significant effect on
its operations.
YEAR 2000 RISK
The Company has completed a Year 2000 review of its Company-wide
information systems. The Company's internet-based sales and inventory
performance systems were Year 2000 compliant when installed and all
subsequent systems upgrades were Year 2000 compliant when installed. The
Company anticipates the completion of an upgrade of its accounting and
financial reporting systems that will render such systems Year 2000 compliant
by the end of fiscal year 1998.
The Company is currently conducting a review of the systems at its
acquired radio stations to determine whether such systems are Year 2000
compliant. The Company anticipates completing the review of their radio
stations by the end of fiscal year 1998 and expects to complete the upgrade
of all of the systems at its radio stations to render them Year 2000
compliant in 1999.
The Company does not expect the costs of rendering its accounting
systems and the systems at its radio stations Year 2000 compliant to be
material and expects to complete these upgrades on timely basis. There can,
however, be no assurance that this will be the case. Further, the ability of
third parties with whom the Company transacts business to adequately address
their Year 2000 issues is outside of the Company's control. There can be no
assurance that the failure of the Company of such third parties to adequately
address their Year 2000 issues will not have a material adverse effect on the
Company's business, financial condition, cash flows and results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
24
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No items to report.
Item 2. Changes in Securities and Use of Proceeds
Pursuant to a Registration Statement on Form S-1 (Commission File No.
333-48849) declared effective by the Securities and Exchange Commission on
June 26, 1998 (the "Registration Statement"), the Company sold 7,228,572
shares (including 800,000 shares pursuant to the exercise of an overallotment
option) of its Class A Common Stock, par value $.01 per share (the "Class A
Common Stock") in an initial public offering (the "Common Stock Offering").
An additional 1,170,000 shares of the Class A Common Stock were sold by a
selling stockholder in the Common Stock Offering. Of the 7,598,572 shares of
Class A Common Stock sold, 1,519,714 shares were sold in an offerings outside
the U.S. and Canada (the "International Common Stock Offering", and together
with the Common Stock Offering, the "Common Stock Offerings"). The offering
price of the Class A Common Stock was $14.00 per share, resulting in an
aggregate offering price of $101.2 million for the account of the Company and
$16.4 million for the selling stockholder. After underwriting discounts, the
proceeds to the Company from the Common Stock Offerings were $94.1 million
and the proceeds to the selling stockholder were $15.2 million. All of the
shares registered in the Common Stock Offerings were sold.
Concurrently with the Common Stock Offerings, the Company sold in a
preferred stock offering $125.0 million of its 13 3/4% Series A Cumulative
Exchangeable Redeemable Preferred Stock Due 2009 (the "Preferred Stock
Offering"). Concurrently with the Common Stock Offering and the Preferred
Stock Offering, the Company sold in a debt offering $160.0 million of its 10
3/8% Senior Subordinated Notes due 2008 (the "Debt Offering"). The net
proceeds of the Preferred Stock Offering and the Debt Offering were $87.3
million and $156.0 million, respectively.
The Common Stock Offering closed on July 1, 1998 and the managing
underwriters for the Common Stock Offering were Lehman Brothers Inc., Bear,
Stearns & Co. Inc., and BT Alex. Brown. The International Common Stock
Offering also closed on July 1, 1998 and the managing underwriters for the
Common Stock Offering were Lehman Brothers International, Bear, Stearns
International Limited, BT Alex. Brown International, and Credit Lyonnais
Securities.
The Preferred Stock Offering closed on July 1, 1998 and the managing
underwriters for the Preferred Stock Offering were Bear, Stearns & Co. Inc. and
Lehman Brothers Inc. The Debt Offering closed on July 1, 1998 and the managing
underwriters for the Debt Offering were Bear, Stearns
25
<PAGE>
&Co. Inc. and Lehman Brothers Inc.
The amount of expenses incurred for the Company's account in connection
with the Offering were as follows:
Underwriters' discounts 15,459,000
Other expenses (approximate) 9,541,000
Total 25,000,000
Of these amounts, 0 were direct or indirect payments to officers,
directors or their associates, or persons owning 10% or more of any class of
equity securities of the Company and $25.0 million were direct or indirect
payments to others.
The net offering proceeds to the Company were used for repayment of
bank debt (approximately $80.0 million); to complete the Pending Acquisitions
(approximately $138.0 million of which have closed to date, and the balance
of which will close over the next three to six months, subject to all
applicable regulatory approvals), and finally to fund working capital,
capital expenditures, and other general corporate purposes.
Of these amounts, none were direct or indirect payments to officers,
directors or their associates, or persons owning 10% or more of any class of
equity securities of the Company. All material use of proceeds were direct or
indirect payments to others.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
26
<PAGE>
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CUMULUS MEDIA INC.
Date: August 14, 1998 By: /s/ Richard J. Bonick
-----------------------
Richard J. Bonick
Principal Financial and
Accounting Officer
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001058623
<NAME> CUMULUS MEDIA INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,867,000
<SECURITIES> 0
<RECEIVABLES> 20,108,000
<ALLOWANCES> 405,000
<INVENTORY> 0
<CURRENT-ASSETS> 24,799,000
<PP&E> 17,350,000
<DEPRECIATION> 1,466,000
<TOTAL-ASSETS> 242,513,000
<CURRENT-LIABILITIES> 11,252,000
<BONDS> 142,249,000
31,602,000
0
<COMMON> 0
<OTHER-SE> 55,406,000
<TOTAL-LIABILITY-AND-EQUITY> 242,513,000
<SALES> 0
<TOTAL-REVENUES> 37,937,000
<CGS> 0
<TOTAL-COSTS> 3,555,000
<OTHER-EXPENSES> 36,407,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,249,000
<INCOME-PRETAX> (5,921,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,921,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,837,000)
<CHANGES> 0
<NET-INCOME> (7,779,000)
<EPS-PRIMARY> (9,705)
<EPS-DILUTED> 0
</TABLE>
