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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, 1999
[ ] 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)
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<S> <C>
ILLINOIS 36-4159663
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
111 E. KILBOURN AVENUE, SUITE 2700
MILWAUKEE, WI 53202
TELEPHONE: (414) 615-2800
(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:
$160.0 MILLION OF 10 3/8% SENIOR SUBORDINATED NOTES DUE 2008
$125.0 MILLION OF 13 3/4% SERIES A CUMULATIVE EXCHANGEABLE
REDEEMABLE PREFERRED STOCK DUE 2009
28,378,976 SHARES OF CLASS A COMMON STOCK; PAR VALUE $.01 PER SHARE
4,479,343 SHARES OF CLASS B COMMON STOCK; PAR VALUE $ .01 PER SHARE
2,307,277 SHARES OF CLASS C 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. [X]
The aggregate market value of the registrant's outstanding common stock
held by non-affiliates of the registrant as of March 17, 2000 was approximately
$459.4 million. As of March 17, 2000, the registrant had outstanding 35,165,596
shares of common stock consisting of (i) 28,378,976 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 our Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders, expected to be filed within 120 days of our fiscal year end, are
incorporated by reference into Part III.
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CUMULUS MEDIA INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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ITEM PAGE
NUMBER NUMBER
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Index.......................................................
PART I
1. Business....................................................
2. Properties..................................................
3. Legal Proceedings...........................................
4. Submission of Matters to a Vote of Security Holders.........
PART II
5. Market for the Company's Common Equity and Related
Stockholder Matters.......................................
6. Selected Consolidated Financial Data........................
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................
7A. Quantitative and Qualitative Disclosure about Market Risk...
8. Financial Statements and Supplementary Data.................
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................
PART III
10. Directors and Executive Officers of the Company.............
11. Executive Compensation......................................
12. Security Ownership of Certain Beneficial Owners.............
13. Certain Relationships and Related Transactions..............
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.......................................................
Signatures..................................................
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PART 1
ITEM 1. BUSINESS
CERTAIN DEFINITIONS
We use the term "local marketing agreement" ("LMA") in various places in
this report. A typical LMA is an agreement under which a Federal Communications
Commission ("FCC") licensee of a radio station makes available, for a fee, air
time on its station to a party. Such party provides programming to be broadcast
during such airtime and collects revenues from advertising it sells for
broadcast during such programming. In addition to entering into LMAs, we will
from time to time enter into management or consulting agreements that provide us
with the ability, as contractually specified, to assist current owners in the
management of radio station assets that we have contracted to purchase, subject
to FCC approval. In such arrangements, we receive a contractually specified
management fee or consulting fee in exchange for the services provided.
In this Form 10-K the terms "Company", "Cumulus", "we", "us", and "our"
refer to Cumulus Media Inc. and its consolidated subsidiaries.
"MSA" is defined as Metro Survey Area, as listed in the Arbitron Radio
Metro and Television Market Population Estimates 1998-1999. For example, "MSA
100-276" would mean the 100th largest market through the 276th 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 1999
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, and
-- corporate general and administrative expense.
EBITDA, consists of:
- operating income (loss) before
-- depreciation,
-- amortization,
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-- LMA fees, and
-- non-cash stock compensation expense.
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 currently
own and operate 226 stations in 46 U.S. markets. We also provide sales and
marketing services under local marketing, management and consulting agreements
(pending FCC approval of acquisition) to 90 stations in 32 U.S. markets. We are
the third largest radio broadcasting company in the U.S. based on number of
stations and believe we will be the second largest such company following
completion of the acquisition of AMFM, Inc. by Clear Channel Communications,
Inc. We believe we are the eighth largest radio broadcasting company in the U.S.
based on 1999 pro forma net revenues and believe we will be the seventh largest
such company following completion of Clear Channel's acquisition of AMFM. We
will own and operate a total of 324 radio stations (228 FM and 96 AM) in 64 U.S.
markets upon consummation of our pending acquisitions. 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 an historical basis, for
the twelve months ended December 31, 1999, we had net revenues of $180.0 million
and Broadcast cash Flow of $46.7 million.
Relative to the 100 largest markets in the U.S., we believe that the
mid-size markets represent attractive operating environments and generally are
characterized by:
- a greater use of radio advertising as evidenced by the greater percentage
of total media revenues captured by radio than the national average;
- rising advertising revenues as the larger national and regional retailers
expand into these markets;
- small independent operators, many of whom lack the capital to produce
high quality locally-originated programming and/or to employ more
sophisticated research, marketing, management and sales techniques; and
- lower overall susceptibility to economic downturns.
We believe that the attractive operating characteristics of mid-size
markets, together with the relaxation of radio station ownership limits under
the Telecommunications Act of 1996 ("the Telecom Act") and FCC rules, create
significant opportunities for growth from the formation of groups of radio
stations within these markets. We believe that mid-size radio markets provide an
excellent opportunity to acquire attractive properties at favorable purchase
prices due to the size and fragmented nature of ownership in these markets and
to the greater attention historically given to the larger markets by radio
station acquirers. According to BIA, there are approximately 1,656 FM and 1,035
AM stations in the 177 US radio markets ranked MSA 100-276. 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 audiences and thereby a wider
range of advertisers. This diversification, coupled with our favorable
advertising
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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 three 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 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 HISTORY
We completed the acquisitions of the following radio stations for cash
during the year ended December 31, 1999. The respective purchase price listed
below for each transaction includes certain acquisition-related costs paid in
1999 and 1998, and is rounded to the nearest thousand:
<TABLE>
<CAPTION>
MARKETS AND STATIONS ACQUISITION DATE PURCHASE PRICE
-------------------- ---------------- --------------
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ALBANY, GEORGIA
Brooks Broadcasting Co.
(WKAK-FM and WALG-AM)..................................... January 4, 1999 $ 2,318
Albany Broadcasting Co.
(WGPC-FM and WGPC-AM)..................................... January 5, 1999 $ 2,365
AUGUSTA-WATERVILLE, MAINE
Mountain Wireless Incorporated
(WCTB-FM and WSKW-AM)..................................... January 5, 1999 $ 2,400
CHATTANOOGA, TENNESSEE
Marson Broadcasting, Inc.
(WKXJ-FM)................................................. January 8, 1999 $ 3,018
FAYETTEVILLE, ARKANSAS
Hochman Communications Inc.
(KAMO-FM, KBRS-FM, and KZRA-AM)........................... February 3, 1999 $ 5,137
Demaree Media Inc.
(KFAY-FM, KFAY-AM, and KKEG-FM)........................... March 23, 1999 $ 6,016
FLORENCE-MUSCLE SHOALS, ALABAMA
U.S. South Broadcasting Company, Inc.
(WLAY-FM, WLAY-AM, and WKGL-FM)........................... March 1, 1999 $ 6,426
LAUREL-HATTIESBURG, MISSISSIPPI
Pine Belt Broadcasting, Inc.
(WHER-FM)................................................. March 15, 1999 $ 1,090
Radio Hattiesburg, Inc.
(WFOR-AM and WUSW-FM)..................................... April 2, 1999 $ 2,346
BANGOR, MAINE
Dudman Communications Corporation
(WDEA-AM, WEZQ-FM, and WWMJ-FM)........................... May 5, 1999 $ 4,092
FLORENCE, SOUTH CAROLINA
Clarendon County Broadcasting Co., Inc.
(WHLZ-FM and WYMB-AM)..................................... June 3, 1999 $ 3,329
Seaside Broadcasting, Inc.
(WCMG-FM)................................................. June 7, 1999 $ 574
Pamplico Broadcasting L.P.
(WBZF-FM and WMXT-FM)..................................... June 17, 1999 $ 3,529
FORT SMITH, ARKANSAS
Elkhead Broadcasting, LLC
(KLSZ-FM)................................................. July 7, 1999 $ 1,205
Pinnacle Radio Group
(KMOS-FM)................................................. July 7, 1999 $ 979
Hernreich Radio Stations, Inc.
(KBBQ-FM)................................................. October 19, 1999 $ 1,245
EAU CLAIRE, WISCONSIN
Phillips Broadcasting Co.
(WATQ-FM, WBIZ-FM, WBIZ-AM, WMEQ-FM,
WMEQ-AM, and WQRB-FM)..................................... September 15, 1999 $ 15,016
</TABLE>
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<TABLE>
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MARKETS AND STATIONS ACQUISITION DATE PURCHASE PRICE
-------------------- ---------------- --------------
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LEXINGTON-FAYETTE, KY
HMH Broadcasting Inc.
(WLRO-FM, WLTO-FM, WVLK-FM, WVLK-AM, and WXZZ-FM)......... September 15, 1999 $ 45,083
ODESSA-MIDLAND, TX
Eclectica, Inc.
(KRIL-AM)................................................. October 21, 1999 $ 237
WICHITA FALLS, TEXAS
High I-Q Radio, Inc.
(KOLI-FM)................................................. October 27, 1999 $ 445
MCALLEN-BROWNSVILLE-HARLINGEN, TEXAS
M & F Calendar Holdings, L.P.
(KBFM-FM and KTEX-FM)..................................... November 1, 1999 $ 17,998
MOBILE, ALABAMA
M & F Calendar Holdings, L.P.
(WBLX-FM, WDLT-FM, and WDLT-AM)........................... November 1, 1999 $ 17,828
PENSACOLA, FLORIDA
Coast Radio, L.C
(WWRO-FM and WCOA-AM)..................................... November 24, 1999 $ 9,139
--------
TOTAL $151,815
========
</TABLE>
During the twelve months ended December 31, 1999, the Company managed,
provided consulting services to, or operated the following stations under local
marketing agreements ("LMA") or management or consulting agreements:
<TABLE>
<CAPTION>
MARKET AND STATIONS EFFECTIVE DATE
------------------- --------------
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TALLAHASSEE, FLORIDA
Tallahassee Broadcasting Company
(WGLF-FM)................................................. August 18, 1997
FLORENCE, SOUTH CAROLINA
Pamplico Broadcasting, L.P.
(WBZF-FM and WMXT-FM)..................................... March 16, 1998
Florence County Broadcasting
(WWFN-FM)................................................. March 16, 1998
Clarendon County Broadcasting Co., Inc.
(WHLZ-FM and WYMB-AM)..................................... March 18, 1998
Seaside Broadcasting, Inc.
(WCMG-FM)................................................. April 1, 1998
ALBANY, GEORGIA
Brooks Broadcasting Co.
(WKAK-FM and WALG-AM)..................................... April 1, 1998
Albany Broadcasting Co.
(WGPC-FM and WGPC-AM)..................................... June 1, 1998
Williams Communications Systems, Inc.
(WQVE-FM)................................................. July 2, 1998
CHATTANOOGA, TENNESSEE
Marson Broadcasting, Inc.
(WKXJ-FM)................................................. July 1, 1998
MONTGOMERY, ALABAMA
McDonald Media Group, Inc.
(WHHY-AM, WJCC-FM and WXFX-FM)............................ August 17, 1998
</TABLE>
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<TABLE>
<CAPTION>
MARKET AND STATIONS EFFECTIVE DATE
------------------- --------------
<S> <C>
COLUMBUS -- STARKVILLE, MISSISSIPPI
Charisma Broadcasting Co.
(WSSO-AM, WMXU-FM, WSMS-FM, WKOR-FM, and WKOR-AM)......... September 30, 1998
Radio Columbus, Inc.
(WJWF-AM and WMBC-FM)..................................... October 1, 1999
AUGUSTA, GEORGIA
Estate of George G. Weiss
(WZNY-FM)................................................. December 14, 1998
COLUMBUS, GEORGIA
Solar Broadcasting Company, Inc.
(WSTH-FM and WDAK-AM)..................................... December 17, 1998
BISMARCK, NORTH DAKOTA
Anderson Broadcasting Corp.
(KBMR-AM, KQDY-FM, KSSS-FM, and KXMR-AM).................. January 1, 1999
TOLEDO, OHIO
Toledo Radio, Inc.
(WBUZ-FM and WJZE-FM*).................................... January 7, 1999
*WJZE-FM is not a pending acquisition
AUGUSTA-WATERVILLE, MAINE
Mountain Wireless Incorporated
(WCTB-FM and WSKW-AM)..................................... January 22, 1999
FORT SMITH, ARKANSAS
Elkhead Broadcasting, LLC
(KLSZ-FM)................................................. March 1, 1999
Pinnacle Radio Group
(KOMS-FM)................................................. March 1, 1999
Hernreich Radio Stations, Inc.
(KBBQ-FM)................................................. May 3, 1999
L.K.R. Communications, Inc.
(KAYR-AM)................................................. December 1, 1999
EAU CLAIRE, WISCONSIN
Phillips Broadcasting Co.
(WATQ-FM, WBIZ-FM, WBIZ-AM, WMEQ-FM, WMEQ-AM, and
WQRB-FM).................................................. April 6, 1999
LEXINGTON-FAYETTE, KENTUCKY
HMH Broadcasting, Inc.
(WLRO-FM, WLTO-FM, WVLK-FM, WVLK-AM, and WXZZ-FM)......... April 7, 1999
MOBILE, ALABAMA
Roberds Broadcasting, Inc.
(WGOK-AM and WYOK-FM)..................................... July 1, 1999
TOPEKA, KANSAS
Shawnee Broadcasting Corporation
(KQTP-FM and KWIC-FM)..................................... July 1, 1999
WILMINGTON, NORTH CAROLINA
Cape Fear Radio, LLC
(WGNI-FM and WMNX-FM)..................................... September 1, 1999
FAYETTEVILLE, NORTH CAROLINA
Cape Fear Radio, LLC
(WFNC-FM, WFNC-AM, WQSM-FM, and WRCQ-FM).................. September 1, 1999
</TABLE>
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<TABLE>
<CAPTION>
MARKET AND STATIONS EFFECTIVE DATE
------------------- --------------
<S> <C>
TUPELO, MISSISSIPPI
Broadcasters and Publishers, Inc.
(WWKZ-FM)................................................. September 1, 1999
FLORENCE-MUSCLE SHOALS, ALABAMA
Elton H. Darby
(WVNA-FM and WVNA-AM)..................................... September 1, 1999
KILLEEN-TEMPLE, TEXAS
Stellar Radio Group, Inc.
(KYUL-FM)................................................. September 15, 1999
Centroplex Communications, Ltd.
(KOOV-FM)................................................. September 15, 1999
Sheldon Communications, Ltd.
(KOOC-FM)................................................. September 15, 1999
KenCannon Communications, LLC
(KLTD-FM)................................................. September 15, 1999
GREEN BAY, WISCONSIN
Green Bay Broadcasting Co.
(WQLH-FM and WDUZ-AM)..................................... September 15, 1999
JONESBORO, ARKANSAS
Duke Broadcasting Corporation
(KBTM-AM, KFIN-FM, KIYS-FM, and Southern Outdoor Graphics,
Inc.)..................................................... November 1, 1999
EUGENE-SPRINGFIELD, OREGON
McDonald Media Group, Inc.
(KNRQ-FM, KNRQ-AM, and KZEL-FM)........................... November 1, 1999
OXNARD-VENTURA, CALIFORNIA
McDonald Media Group, Inc.
(KBBY-FM, KHAY-FM, and KVEN-AM)........................... November 1, 1999
SANTA BARBARA, CALIFORNIA
McDonald Media Group, Inc.
(KKSB-FM and KMGQ-FM)..................................... November 1, 1999
CANTON, OHIO
Connoisseur Communications Partners, L.P
(KRQK-FM)................................................. December 1, 1999
EVANSVILLE, INDIANA
Connoisseur Communications Partners, L.P.
(WGBF-FM, WGBF-AM, WTRI-FM, and WYNG-FM).................. December 1, 1999
Newburgh Broadcasting Corporation
(WDKS-FM and WGAB-AM)*.................................... December 1, 1999
*not a pending acquisition
FLINT, MICHIGAN
Connoisseur Communications Partners, L.P.
(WDZZ-FM, WFDF-AM, WRSR-FM, WWCK-FM, and WWCK-AM)......... December 1, 1999
MUSKEGON, MICHIGAN
Connoisseur Communications Partners, L.P.
(WMHG-AM, WMRR-FM, WMUS-FM, WMUS-AM, and WSHZ-FM)......... December 1, 1999
QUAD CITIES, ILLINOIS AND IOWA
Connoisseur Communications Partners, L.P.
(KBOB-FM, KJOC-AM, KORB-FM, KQLI-FM, and WXLP-FM)......... December 1, 1999
ROCKFORD, ILLINOIS
Connoisseur Communications Partners, L.P.
(WROK-AM, WXXQ-FM, and WZOK-FM)........................... December 1, 1999
</TABLE>
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<TABLE>
<CAPTION>
MARKET AND STATIONS EFFECTIVE DATE
------------------- --------------
<S> <C>
SAGINAW-BAY CITY-MIDLAND, MICHIGAN
Connoisseur Communications Partners, L.P.
(WTLZ-FM)................................................. December 1, 1999
WATERLOO-CEDAR FALLS, IOWA
Connoisseur Communications Partners, L.P.
(KCRR-FM, KKCV-FM, KOEL-FM, and KOEL-AM).................. December 1, 1999
YOUNGSTOWN-WARREN, OHIO (INCL. MERCER COUNTY, PENNSYLVANIA)
Connoisseur Communications Partners, L.P.
(WBBW-AM, WHOT-FM, WLLF-FM, WPIC-AM, WQXK-FM, WSOM-AM,
WWIZ-FM, and WYFM-FM)..................................... December 1, 1999
</TABLE>
The statement of operations for the twelve months ended December 31, 1999
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, 1999; or (iii) in
the case of WJZE-FM, the termination date of the LMA.
We also completed the acquisition of Broadcast Software International,
Inc., a media operations software and systems company, on September 15, 1999.
The purchase consideration included 152,636 shares of our Class A Common Stock,
par value $.01 per share (the "Class A Common Stock") and $500,000 in cash,
including certain acquisition related costs. The closing price of our Class A
Common on September 15, 1999 Stock was $31.88 per share.
As of December 31, 1999 the Company is a party to various agreements to
acquire stations across 35 markets for an aggregate purchase price of
approximately $444,359. Between January 1, 2000 and March 31, 2000 the Company
closed the acquisitions of twelve stations across 7 markets representing $28,918
in purchase price, and signed 6 asset purchase agreements across 8 markets
representing $168,575 in purchase price.
On February 2, 2000 we announced the purchase of the assets of The AdVisory
Board Inc., d/b/a The Lytle Organization, a sales training company serving the
radio broadcasting industry. We created a wholly owned subsidiary of the
Company, the AdVisory Board of Nevada, Inc., to acquire these assets and to
operate this sales training business. The AdVisory Board, its founder Chris
Lytle, and his staff will provide training services to the Company's sales
organization, non-competing broadcasters and to the general business market.
Cumulus Wireless Services Inc. ("Wireless Services"), a wholly owned
subsidiary of Cumulus Broadcasting, Inc., was formed in December 1998 to serve
as the Company's marketing and sales organization for the negotiation and
execution of long-term third party leases for space on the broadcast towers we
have acquired in connection our acquisitions of broadcast radio licenses, assets
and operations. During the year ended December 31, 1999, Wireless Services
commenced operations, developed marketing and sales materials and entered third
party leases for utilization of tower space. For the year ending December 31,
1999 Wireless Services had net revenue of $25, and an approximate net loss from
operations of $302. The Company believes the financial performance of Wireless
Services was immaterial in relation to the Company as a whole for the year
ending December 31, 1999 and as a result Wireless Services has not been shown as
a separate segment for financial reporting.
Cumulus Internet Services Inc. ("Internet Services"), a wholly owned
subsidiary of Cumulus Media Inc., was formed in January 1999. Internet Services'
strategy is premised on leveraging the presence, reach and branding capabilities
of our radio properties, as well as the existing business relationships we have
with several hundred local advertisers and businesses, in each of the
communities we serve. Each of our radio clusters reaches, and has an influence
on, a significant listener base which typically exceeds the total circulation of
the daily newspaper in the market. As a result, our clusters comprise a powerful
medium to drive traffic to and otherwise support and enhance Internet-based
services.
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With local advertising (offline and online) commanding a significant share
of all advertising, a principal element of Internet Services' strategy is to
remain highly local and to operate in close collaboration with our radio
stations. For the year ending December 31, 1999, the activities within Internet
Services were comprised entirely of the development of several Internet based
services designed to combine the strengths of the Internet and radio media. For
the twelve months ending December 31, 1999 we invested $2.4 million in the
systems architecture and software required to deliver and support Internet
Services' products. We believe that Internet Services' cross-media and
"fused-media" solutions will enhance the revenue and cash flow of our existing
business. We anticipate the commencement of operations within Internet Services
during the late third or early fourth quarter of 2000. The Company believes the
financial performance of Internet Services was immaterial in relation to the
Company as a whole for the year ending December 31, 1999 and as a result
Internet Services has not been shown as a separate segment for financial
reporting.
Cumulus Telecommunications Inc. ("Telecommunications"), a wholly owned
subsidiary of Cumulus Media Inc. was formed in June 1999. Telecommunications
holds authorizations to provide certain regulated communications services in
three states. Aside from acquiring these regulatory authorizations, no business
was conducted by Telecommunications for the year ending December 31, 1999 and as
a result Telecommunications has not been shown as a separate segment for
financial reporting.
INDUSTRY OVERVIEW
The primary source of revenues for radio stations is the sale of
advertising time to local 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 96% of all Americans over the age of 12. More than 63% 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 four
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 82% 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
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<PAGE> 12
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 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. 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 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%
and 88% of our net broadcasting revenue was generated from the sale of local and
regional advertising in 1999 and 1998, respectively. Additional broadcasting
revenue is generated from the sale of national advertising. The major categories
of our advertisers include:
<TABLE>
<S> <C> <C>
- 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
12
<PAGE> 13
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 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
13
<PAGE> 14
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 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 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.
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<PAGE> 15
EMPLOYEES
At December 31, 1999, we employed approximately 3,200 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 relationships that we believe to
be valuable. The loss of 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. In 1996, 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 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
500 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 and C.
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<PAGE> 16
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 the 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
------ -------- --------------- --------- --------------- ----- --------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MIDWEST REGION
Ann Arbor, MI.......... WIQB FM Ann Arbor, MI 102.9 October 1, 2004 B 499 49.0 49.0
WQKL FM Ann Arbor, MI 107.1 October 1, 2004 A 289 3.0 3.0
WTKA AM Ann Arbor, MI 1050 October 1, 2004 B N.A. 10.0 0.5
WYBN AM Saline, MI 1290 October 1, 2004 B N.A. 0.5 0.0
Appleton-Oshkosh, WI... WWWX FM Oshkosh, WI 96.7 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 Bismarck, ND 1270 April 1, 2005 B N.A. 1.0 0.3
KSSS FM Bismarck, ND 101.5 April 1, 2005 C 988 100.0 100.0
KBMR AM Bismarck, ND 1130 April 1, 2005 B N.A. 10.0 0.0
KXMR AM Bismarck, ND 710 April 1, 2005 A N.A. 50.0 4.0
Canton, OH............. WRQK FM Canton, OH 106.9 October 1, 2003 B 341 27.5 27.5
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
Eau Claire, WI......... WBIZ AM Eau Claire, WI 1400 December 1, 2004 C N.A. 1.0 1.0
WBIZ FM Eau Claire, WI 100.7 December 1, 2004 C1 482 100.0 100.0
WMEQ AM Menomonie, WI 880 December 1, 2004 B N.A. 10.0 0.2
WMEQ FM Menomonie, WI 92.1 December 1, 2004 C2 699 18.0 18.0
WQRB FM Bloomer, WI 95.1 December 1, 2004 C3 545 8.9 8.9
WATQ FM Chetek, WI 106.7 December 1, 2004 C2 584 35.0 35.0
Evansville, IN......... WTRI FM Mt. Carmel, IL 94.9 December 1, 2004 B 420 50.0 50.0
WGBF AM Evansville, IN 1280 August 1, 2004 B N.A. 5.0 1.0
WGBF FM Henderson, KY 103.1 August 1, 2004 A 453 3.2 3.2
WYNG FM Evansville, IN 105.3 August 1, 2004 B 492 50.0 50.0
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
</TABLE>
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<PAGE> 17
<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
------ -------- --------------- --------- --------------- ----- --------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Harrisburg-Lebanon-
Carlisle, 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
Mankato-New Ulm-St
Peter, MN.............. KXLP FM New Ulm, MN 93.1 April 1, 2005 C1 489 100.0 100.0
KYSM AM Mankato, MN 1230 April 1, 2005 C N.A. 1.0 1.0
KYSM FM Mankato, MN 103.5 April 1, 2005 C1 541 100.0 100.0
KNUJ AM New Ulm, MN 860 April 1, 2005 B N.A. 1.0 0.1
KNUJ FM Sleepy Eye, MN 107.3 April 1, 2005 A 400 1.9 1.9
KNSG FM Springfield, MN 94.7 April 1, 2005 C2 472 50.0 50.0
Marion-Carbondale,
IL..................... WDDD FM Marion, IL 107.3 December 1, 2004 B 492 50.0 50.0
WDDD AM Johnston City, IL 810 December 1, 2004 B N.A. 0.3 0.3
WFRX AM West Frankfort, IL 1300 December 1, 2004 B N.A. 1.0 0.1
WTAO FM Murphysboro, IL 105.1 December 1, 2004 B1 308 25.0 25.0
WVZA FM Herrin, IL 92.7 December 1, 2004 B1 328 25.0 25.0
WQUL FM West Frankfort, IL 97.7 December 1, 2004 A 433 3.5 3.5
Mason City, IA......... KCHA FM Charles City, IA 95.9 February 1, 2005 A 299 3.0 3.0
KGLO AM Mason City, IA 1300 February 1, 2005 B N.A. 5.0 5.0
KIAI FM Mason City, IA 93.9 February 1, 2005 C1 791 100.0 100.0
KLKK FM Clear Lake, IA 103.1 February 1, 2005 A 308 6.0 6.0
KCHA AM Charles City, IA 1580 February 1, 2005 B N.A. 0.5 0.0
KCZE FM New Hampton, IA 95.1 February 1, 2005 A 338 5.5 5.5
KWMM FM Osage, IA 103.7 February 1, 2005 A 154 6.0 6.0
Monroe, MI............. WTWR FM Monroe, MI 98.3 October 1, 2004 A 466 1.4 1.4
Muskegon, MI........... WMUS AM Muskegon, MI 1090 October 1, 2004 D N.A. 1.0 0.0
WMUS FM Muskegon, MI 106.9 October 1, 2004 B 367 15.5 15.5
Muskegon Heights,
WMRR FM MI 101.7 October 1, 2004 B1 305 12.0 12.0
WSHZ FM Muskegon, MI 107.9 October 1, 2004 B1 420 15.0 15.0
WMHG AM Muskegon, MI 1600 October 1, 2004 B N.A. 5.0 5.0
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
Rochester, MN.......... KRCH FM Rochester, MN 101.7 April 1, 2005 C2 554 39.0 39.0
KWEB AM Rochester, MN 1270 April 1, 2005 B N.A. 5.0 1.0
KMFX FM Lake City, MN 102.5 April 1, 2005 C3 528 9.4 9.4
KMFX AM Wabasha, MN 1190 April 1, 2005 B N.A. 1.0 0.0
KNFX AM Austin, MN 970 April 1, 2005 B N.A. 5.0 0.5
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
WLUV FM Rockford, IL 96.7 December 1, 2004 A 161 5.0 5.0
Saginaw-Bay City-
Midland, 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
WBUZ 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
</TABLE>
17
<PAGE> 18
<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
------ -------- --------------- --------- --------------- ----- --------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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-Warren, OH.. 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
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
Augusta, GA............ WEKL FM Augusta, GA 102.3 April 1, 2004 A 666 1.5 1.5
WKSP FM Aiken, SC 96.3 April 1, 2004 C2 889 15.0 15.0
WPRW FM Martinez, GA 107.7 April 1, 2004 C2 577 24.5 24.5
WGUS AM N. Augusta, SC 1380 April 1, 2004 B N.A. 4.0 0.1
WBBQ FM Augusta, GA 104.3 April 1, 2004 C 1001 100.0 100.0
WBBQ AM Augusta, GA 1340 April 1, 2004 C N.A. 1.0 1.0
WXKT FM Washington, GA 100.1 April 1, 2004 A 322 2.4 2.4
WLOV AM Washington, GA 1370 April 1, 2004 B N.A. 1.0 0.0
WZNY FM Augusta, GA 105.7 April 1, 2004 C 1168 100.0 100.0
Columbus, GA........... WVRK FM Columbus, GA 102.9 April 1, 2004 C 1519 100.0 100.0
WGSY FM Phenix City, AL 100.1 April 1, 2004 A 328 6.0 6.0
WMLF AM Columbus, GA 1270 April 1, 2004 B N.A. 5.0 0.2
WPNX AM Phenix City, AL 1460 April 1, 2004 B N.A. 4.0 0.1
WAGH FM Ft. Mitchell, AL 98.3 April 1, 2004 A 328 6.0 6.0
WSTH FM Alexander City, AL 106.1 April 1, 2004 C1 981 81.0 81.0
WDAK AM Columbus, GA 540 April 1, 2004 B N.A. 5.0 0.5
WBFA FM Smiths, AL 101.3 April 1, 2004 A 328 6.0 6.0
Columbus-Starkville-
Westpoint, 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
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
</TABLE>
18
<PAGE> 19
<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
------ -------- --------------- --------- --------------- ----- --------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
Greenville-New Bern-
Jacksonville, NC....... WQSL FM Jacksonville, NC 92.3 December 1, 2003 C2 725 22.7 22.7
WXQR FM Jacksonville, NC 105.5 December 1, 2003 C2 794 19.0 19.0
Lexington-Fayette,
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
Laurel-Hattiesburg,
MS..................... WHER FM Heidelberg, MS 99.3 June 1, 2004 C2 492 50.0 50.0
WFOR AM Hattiesburg, MS 1400 June 1, 2004 C N.A. 1.0 1.0
WUSW FM Hattiesburg, MS 103.7 June 1, 2004 C 1057 100.0 100.0
WNSL FM Laurel, MS 100.3 June 1, 2004 C 1066 100.0 100.0
WEEZ AM Laurel, MS 890 June 1, 2004 B N.A. 10.0 0.0
WJKX FM Ellisville, MS 102.5 June 1, 2004 C2 492 50.0 50.0
WMFM FM Petal, MS 106.3 June 1, 2004 A 400 1.8 0.0
Melbourne-Titusville-
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
WTMS 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
WJXY 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
Florence-Muscle Shoals,
AL..................... WVNA FM Muscle Shoals, AL 105.5 April 1, 2004 A 742 1.1 1.1
WLAY AM Muscle Shoals, AL 1450 April 1, 2004 C N.A. 1.0 1.0
WKGL FM Russellville, AL 97.7 April 1, 2004 A 430 3.5 3.5
WLAY FM Tuscumbia, AL 100.3 April 1, 2004 C1 246 100.0 100.0
WVNA AM Tuscumbia, AL 1590 April 1, 2004 B N.A. 5.0 1.0
Pensacola, FL.......... WWRO 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
WZRO FM Gulf Breeze, FL 106.1 February 1, 2004 A 436 3.9 3.9
Salisbury-Ocean City,
MD..................... WLVW FM Salisbury, MD 105.5 October 1, 2003 A 384 2.1 2.1
WLBW FM Fenwick Island, DE 92.1 August 1, 2006 A 308 6.0 6.0
WQHQ FM Salisbury, MD 104.7 October 1, 2003 B 610 33.0 33.0
WTGM AM Salisbury, MD 960 October 1, 2003 B N.A. 5.0 5.0
WOSC FM Bethany Beach, DE 95.9 October 1, 2003 B1 377 18.8 18.8
WWFG FM Ocean City, MD 99.9 October 1, 2003 B 315 50.0 50.0
</TABLE>
19
<PAGE> 20
<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
------ -------- --------------- --------- --------------- ----- --------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WSBY FM Salisbury, MD 98.9 October 1, 2003 A 325 6.0 6.0
WJDY AM Salisbury, MD 1470 October 1, 2003 B N.A. 5.0 0.0
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
Tupelo, MS............. WESE FM Baldwyn, MS 92.5 June 1, 2004 A 328 5.4 5.4
WTUP AM Tupelo, MS 1490 June 1, 2004 C N.A. 1.0 1.0
WNRX AM Tupelo, MS 1060 June 1, 2004 B N.A. 9.6 0.0
WWZD FM New Albany, MS 106.7 June 1, 2004 C2 656 28.0 28.0
WWKZ FM Aberdeen, MS 105.3 June 1, 2004 C2 673 28.0 28.0
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
KKHR FM Abilene, TX 106.3 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
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
Jonesboro, AR.......... KBTM AM Jonesboro, AR 1230 June 1, 2004 C N.A. 1.0 1.0
KFIN FM Jonesboro, AR 107.9 June 1, 2004 C1 1060 100.0 100.0
</TABLE>
20
<PAGE> 21
<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
------ -------- --------------- --------- --------------- ----- --------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KIYS FM Jonesboro, AR 101.9 June 1, 2004 C 600 98.0 98.0
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
KOOV FM Copperas Cove, TX 103.1 August 1, 2005 C3 558 8.6 8.6
KYUL 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
McAllen-Brownsville-
Harlingen, TX.......... KBFM FM Edinburg, TX 104.1 August 1, 2005 C 1001 100.0 100.0
KTEX FM Brownsville, TX 100.3 August 1, 2005 C 1125 100.0 100.0
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
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
Augusta-Waterville,
ME..................... WABK FM Gardiner, ME 104.3 April 1, 2006 B 371 50.0 50.0
WKCG FM Augusta, ME 101.3 April 1, 2006 B 322 50.0 50.0
WIGY FM Madison, ME 97.5 April 1, 2006 A 328 6.0 6.0
Boothbay Harbor,
WCME FM ME 96.7 April 1, 2006 B1 417 15.5 15.5
WFAU AM Gardiner, ME 1280 April 1, 2006 B N.A. 5.0 5.0
WTOS FM Skowhegan, ME 105.1 April 1, 2006 C 243 50.0 50.0
WCTB FM Fairfield, ME 93.5 April 1, 2006 C3 499 10.5 10.5
WSKW AM Skowhegan, ME 1160 April 1, 2006 B N.A. 10.0 7.3
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
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.
21
<PAGE> 22
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 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 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."
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. 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
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 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 or shareholder 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
22
<PAGE> 23
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) 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." 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 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, and must be
operating their entire system within six years. 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 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. 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, competition by low power stations
for listeners and revenues, and a lower likelihood the
23
<PAGE> 24
Company's stations could be permitted to commence digital audio broadcasting
operations on their existing frequencies at some future time.
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 pending
acquisitions which meet specified size thresholds are subject to applicable
waiting periods and possible review under the 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. 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 been active in its review of radio
station acquisitions, particularly 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 and other relief. In general, the Department of Justice has
more closely scrutinized radio mergers and acquisitions resulting in local
market shares in excess of 35% of 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 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 future acquisitions will
not be the subject of such investigation or action, or that the Department of
Justice, the Federal Trade Commission or the FCC will not prohibit such
acquisitions, require that they be restructured, or 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.
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 and specifically invites public
comments on such applications. 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 places a specific notation on
the public notices with respect to proposed radio station acquisitions that it
believes may raise local market concentration
24
<PAGE> 25
concerns inviting public comment on such matters, and in some cases may request
additional information with respect to such acquisitions. The FCC has placed
such notations on the public notices with respect to a number of pending
acquisitions, and there can be no assurance that the FCC will ultimately approve
any such acquisition. 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 in four markets (Columbus-Starkville, Mississippi; Columbus, Georgia;
Wilmington, North Carolina; and Topeka, Kansas). All such petitions and FCC
concerns regarding market concentration must be resolved before FCC approval can
be obtained and the acquisitions consummated. In addition, the FCC has indicated
that it may propose 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.
As part of its ongoing scrutiny of 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.
ITEM 2. PROPERTIES
The types of properties required to support each of our radio stations
include offices, studios, transmitter sites and antenna sites. A station's
studios are generally housed with its offices in business districts of the
station's community of license or largest nearby community. The transmitter
sites and antenna sites are generally located so as to provide maximum market
coverage.
At December 31, 1999, the Company owned studio facilities in forty-five
markets and it owned transmitter and antenna sites in fifty-five markets. We
lease additional studio and office facilities in forty-nine markets and
additional transmitter and antenna sites in thirty-two markets. In addition, the
Company leases corporate office space in Atlanta, GA, Chicago, IL, and
Milwaukee, WI, which in the aggregate approximates 23,200 sq.ft. We do not
anticipate any difficulties in renewing any facility leases or in leasing
alternative or additional space, if required. The Company owns substantially all
of its other equipment, consisting principally of transmitting antennae,
transmitters, studio equipment and general office equipment.
No single property is material to our operations. We believe that our
properties are generally in good condition and suitable for our operations;
however, we continually look for opportunities to upgrade our properties and
intend to upgrade studios, office space and transmission facilities in certain
markets.
ITEM 3. LEGAL PROCEEDINGS
The Company has been named as a defendant in the following six class action
complaints: (1) Wolfe v. Weening, et al.; (2) Klar v. Cumulus Media Inc., et
al.; (3) Atlas v. Cumulus Media Inc., et al.; (4) Steinberg and Steinberg v.
Cumulus Media Inc., et al.; (5) Wong v. Weening, et al.; and (6) Pleatman v.
Cumulus Media Inc., et al. Certain present and former directors and officers of
the Company, and certain underwriters of the Company's stock, have also been
named as defendants. The complaints have all been filed in the United States
District Court for the Eastern District of Wisconsin. They were filed as class
actions on behalf of persons who purchased or acquired Cumulus Media common
stock during various time periods between May 11, 1999 and March 16, 2000.
The complaints allege, among other things, violations of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, and Sections 11 and 12(a) of the Securities Act of 1933, and seek
unspecified damages. The plaintiffs allege that the defendants issued false and
misleading statements and failed to disclose material facts concerning, among
other things, the Company's financial condition as a result of the restatement
on March 16, 2000 of the Company's results for the first three
25
<PAGE> 26
quarters of 1999. The plaintiffs further allege that because of the issuance of
false and misleading statements and/or failure to disclose material facts, the
price of Cumulus Media stock was artificially inflated.
In 1999, the Company was served with a complaint filed in state court in
New York, seeking approximately $1.9 million in damages arising from the
Company's alleged breach of national representation agreements. The action is
currently in discovery.
In 1999, the Company was served with a complaint filed in county court in
Alabama alleging that in August 1997, an employee of Colonial Broadcasting,
Inc., which we acquired in July 1998, was at fault in connection with an
automobile accident. The plaintiff is seeking $8.5 million damages. We believe
we have a right to indemnification from the sellers of Colonial Broadcasting
under the related purchase agreement. The sellers' insurance company has assumed
the defense of the matter.
In addition, we currently and from time to time are involved in litigation
incidental to the conduct of our business. Other than as discussed above, the
Company is not a party to any lawsuit or proceeding which, in our opinion, is
likely to have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual meeting of shareholders of the Company was held on November 2,
1999. Richard W. Weening, Lewis W. Dickey, Jr., William M. Bungeroth, Robert H.
Sheridan, III, Ralph B. Everett and Eric P. Robison were elected as directors of
the Company, each to hold office until the next annual meeting of shareholders
or until his successor has been elected and qualified, subject to earlier
resignation and removal. The shareholders approved the selection of
PricewaterhouseCoopers LLP as independent auditors for the year ending December
31, 1999. The shareholders approved the Company's 1998 Amended and Restated
Employee Stock Purchase Plan, the Company's 1999 Stock Incentive Plan, and the
Company's 1999 Executive Stock Incentive Plan. The shareholders also approved
two amendments to the Company's Amended and Restated Articles of Incorporation;
increasing the number of authorized shares of Common Stock from 50 million to
100 million, and providing for the staggered terms of directors by dividing the
Board of Directors into three groups, designated as Class I (William M.
Bungeroth and Ralph B. Everett), Class II (Robert H. Sheridan, III and Eric P.
Robison) and Class III (Richard W. Weening and Lewis W. Dickey, Jr.).
The results of voting at the annual meeting of the shareholders were as
follows:
Proposal No. 1 (Election of Directors)
<TABLE>
<CAPTION>
NOMINEE FOR ABSTAIN/ WITHHELD
------- ---------- -----------------
<S> <C> <C>
Richard W. Weening........ 35,858,011 143,400
Lewis W. Dickey, Jr....... 35,868,576 132,835
William B. Bungeroth...... 35,869,036 132,375
Robert H. Sheridan, III... 35,984,356 17,055
Ralph B. Everett.......... 35,868,711 132,700
Eric P. Robison........... 35,984,356 17,055
</TABLE>
Proposal No. 2 (Selection of PricewaterhouseCoopers LLP as Independent
Auditors for the year ending December 31, 1999)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN/ WITHHELD
---------- ------- -----------------
<S> <C> <C>
34,024,027 0 0
</TABLE>
Proposal No. 3 (the Company's 1998 Amended and Restated Employee Stock
Purchase Plan)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN/ WITHHELD
---------- ------- -----------------
<S> <C> <C>
33,995,137 0 0
</TABLE>
26
<PAGE> 27
Proposal No. 4 (the Company's 1999 Stock Incentive Plan)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN/ WITHHELD
---------- ------- -----------------
<S> <C> <C>
33,459,852 0 0
</TABLE>
Proposal No. 5 (the Company's 1999 Executive Stock Incentive Plan) For
Withhold/Against Exceptions/Abstain
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN/ WITHHELD
---------- ------- -----------------
<S> <C> <C>
28,389,097 0 0
</TABLE>
Proposal No. 6 (amendments to the Company's Amended and Restated Articles
of Incorporation increasing the number of authorized shares of Common Stock from
50 million to 100 million)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN/ WITHHELD
---------- ------- -----------------
<S> <C> <C>
34,997,233 0 0
</TABLE>
Proposal No. 7 (amendments to the Company's Amended and Restated Articles
of Incorporation providing for the staggered terms of directors by dividing the
Board of Directors into three groups, designated as Class I, Class II and Class
III)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN/ WITHHELD
---------- ------- -----------------
<S> <C> <C>
27,123,387 0 0
</TABLE>
Effective March 16, 2000, William M Bungeroth left his position as
President and Director of the Company. As a result, as of March 17, 2000 there
has been a vacancy on the Company's Board of Directors which as of the date of
this Form 10-K has not been filled through the election of another qualified
director.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Shares of the Company's Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), have been quoted on the NASDAQ Stock Market under the
symbol CMLS since the consummation of the initial public offering of the
Company's Class A Common Stock on June 26, 1998. The following table sets forth,
for the calendar quarters indicated, the high and low closing sales prices of
the Class A Common Stock on the NASDAQ Stock Market, as reported in published
financial sources.
<TABLE>
<CAPTION>
YEAR HIGH LOW
---- ---- ---
<C> <S> <C> <C>
1998
Third Quarter.......................................... $17.88 $ 7.75
Fourth Quarter......................................... $17.25 $ 4.88
1999
First Quarter.......................................... $17.88 $ 9.75
Second Quarter......................................... $21.88 $13.25
Third Quarter.......................................... $32.69 $20.00
Fourth Quarter......................................... $53.00 $29.25
2000
First Quarter.......................................... $50.38 $13.06
Second Quarter (through April 7th)..................... $14.63 $13.75
</TABLE>
As of March 31, 2000, there were approximately 123 holders of record of the
Class A Common Stock.
27
<PAGE> 28
The Company has not declared or paid any cash dividends on its Class A
Common Stock since its inception and does not currently anticipate paying any
cash dividends on its Class A Common Stock in the foreseeable future. The
Company intends to retain future earnings for use in its business. The Company
is currently subject to restrictions under the terms of the Credit Facility (as
defined herein), the indenture (the "Indenture") governing the Notes (as defined
herein) and the certificate of designations (the "Certificate of Designations")
governing the 13.75% Series A Cumulative Exchangeable Redeemable Preferred Stock
(the "Series A Preferred Stock") that limit the amount of cash dividends that
may be paid on its Class A Common Stock. The Company may pay cash dividends on
its Class A Common Stock in the future only if certain financial tests set forth
in the Credit Facility, the Indenture and the Certificates of Designation are
met and only if it fulfills its obligations to pay dividends to the holders of
its Series A Preferred Stock.
28
<PAGE> 29
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
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, 1999 and 1998 and the period
from inception on May 22, 1997 to December 31, 1997. 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.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR YEAR INCEPTION ON
ENDED ENDED MAY 22, 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ---------------
<S> <C> <C> <C>
Net revenues............................................ $ 180,019 $ 98,787 $ 9,163
Station operating expenses excluding depreciation and
amortization.......................................... 133,328 72,154 7,147
Depreciation and amortization........................... 32,564 17,180 1,671
LMA fees................................................ 4,165 2,404 --
Corporate general and administrative expenses(1)........ 8,204 5,607 1,276
Non-cash stock compensation expense..................... -- -- 1,689
--------- --------- --------
Operating income (loss)................................. 1,758 1,442 (2,620)
Net interest expense.................................... 22,877 13,178 837
Loss before extraordinary item.......................... (13,622) (6,910) (3,578)
Extraordinary loss on early extinguishment of debt...... -- (1,104) --
Preferred stock dividends, accretion of discount and
redemption premium.................................... 23,790 13,591 274
Net loss attributable to common stockholders............ $ (37,412) $ (21,605) $ (3,852)
Basic and diluted loss per common share................. $ (1.50) $ (1.34) $ (.31)
OTHER FINANCIAL DATA:
Broadcast Cash Flow..................................... $ 46,691 $ 26,633 $ 2,016
EBITDA.................................................. 38,487 21,026 740
Net cash used in operating activities................... (13,664) (4,653) (1,887)
Net cash used in investing activities................... (192,105) (351,025) (95,100)
Net cash provided by financing activities............... 400,445 378,990 98,560
BALANCE SHEET DATA:
Total assets............................................ $ 918,156 $ 517,631 $110,441
Long-term debt (including current portion).............. 285,247 222,767 42,801
Preferred stock subject to mandatory redemption......... 102,732 133,741 13,426
Stockholders' equity.................................... 491,710 130,822 49,976
</TABLE>
(1) Excluding noncash stock compensation expense of $1,689 shown below.
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-23 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.
29
<PAGE> 30
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. Unless otherwise indicated,
amounts set forth herein are expressed in thousands.
We commenced operations in May 1997. For the period from our inception
through December 31, 1999, we purchased or entered into local marketing,
management and consulting agreements with a total of 305 stations in 60 U.S.
markets and five stations and obtained a license to commence operations on one
station in the Caribbean market. 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 226 stations in 46 U.S. markets and provide
sales and marketing services under local marketing, management and consulting
agreements (pending FCC approval of acquisition) to 90 stations in 32 U.S.
markets. We are the third largest radio broadcasting company in the U.S. based
on number of stations and believe we will be the second largest such company
following completion of the acquisition of AMFM by Clear Channel. We believe we
are the eighth largest radio broadcasting company in the U.S. based on 1999 pro
forma net revenues and believe we will be the seventh largest such company
following completion of the Clear Channel/AMFM acquisition. We will own and
operate a total of 324 radio stations (228 FM and 96 AM) in 64 U.S. markets upon
consummation of our pending acquisitions.
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 which exchange advertising time for
goods or services such as travel or lodging, instead of for cash. Our use of
trade agreements was immaterial during the twelve months ended December 31, 1999
and 1998, and for the period from our inception on May 22, 1997 through December
31, 1997. 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 advertising, which is sold primarily by a station's sales
staff. During the twelve months ended December 31, 1999 and 1998 and for the
period from our inception on May 22, 1997 through December 31, 1997
approximately 89%, 88% 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 Salisbury-Ocean City, Maryland and 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 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.
30
<PAGE> 31
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. Broadcast cash flow
consists of operating income (loss) before depreciation and amortization, LMA
fees, corporate general and administrative expenses and non-cash stock
compensation expense. EBITDA consists of operating income (loss) before
depreciation and amortization, LMA fees and non-cash stock compensation expense.
Broadcast Cash Flow and EBITDA, as defined by us, 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 GAAP,
management believes that they are useful to an investor in evaluating us 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 a measures of liquidity or profitability.
RESULTS OF OPERATIONS
Management's discussion and analysis of results of operations for the years
ended December 31, 1999, 1998 and 1997 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 1999 compared to 1998 assume all of the acquisitions described in
Item I, Part I of this report had occurred on January 1, 1998. The pro forma
results for 1998 compared to 1997 assume all of the acquisitions consummated in
1998 had occurred on January 1, 1997.
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 twelve months ended December 31, 1999 from $98.8 million for the
twelve months ended December 31, 1998. This increase was primarily attributable
to the acquisition of radio stations and revenues generated from local
marketing, management and consulting agreements entered into during the year
ended December 31, 1999.
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 twelve months ending December 31, 1999, compared to net
revenues of $131.1 million for the twelve month period ending 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 twelve months
ending December 31, 1999 from $72.2 million for the twelve months ending
December 31, 1998. This increase was primarily attributable to the acquisition
of radio stations and operating expenses incurred from local marketing,
management and consulting agreements entered into during the year ended December
31, 1999.
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 twelve months ending December 31, 1999 compared to $98.6
million for the twelve months ending 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.
31
<PAGE> 32
Depreciation and Amortization. Depreciation and amortization increased
$15.4 million, or 89.5%, to $32.6 million for the twelve month period ending
December 31, 1999 compared to $17.2 million for the twelve month period ending
December 31, 1998. This increase was primarily attributable to depreciation and
amortization relating to radio station acquisitions consummated during 1999 and
a full year of depreciation and amortization on radio station acquisitions
consummated during 1998.
LMA Fees. LMA fees increased $1.8 million, or 73.3 %, to $4.2 million for
the twelve months ending December 31, 1999 from $ 2.4 million for the twelve
months ending 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 twelve months ending December 31, 1999 compared to $5.6 million for the
twelve months 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 twelve months ending
December 31, 1999 compared to $13.2 million for the twelve months ended December
31, 1998. This increase was primarily attributable to higher debt levels
incurred to finance the Company's acquisitions. 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.
Income Tax Expense (Benefit). Subsequent to the end of 1999 as part of our
year end tax review, we determined that due to the existence of offsetting
deferred tax liabilities the valuation allowance against deferred tax assets
established in 1998 was no longer required. As a result, in April 2000 the
Company restated its results for 1998 and recorded tax benefits for the years
ended December 31, 1999 and 1998 in the amounts of $6.9 million and $5.6
million, respectively. The $1.3 million or 23.2% increase in the tax benefit for
the year ended December 31, 1999 compared to the year ended December 31, 1998 is
primarily attributable to a $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, 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 twelve months ending December 31, 1999 compared to $13.6 million
for the twelve months 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 ending 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 Stock. As a result of the factors
described above, net loss attributable to common stock increased $15.8 million,
or 73.2%, to $37.4 million for the twelve months ending December 31, 1999
compared to $21.6 million for the twelve months 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 twelve
months ending December 31, 1999 compared to $26.6 million for the twelve months
ended December 31, 1998.
EBITDA. As a result of the factors described above, EBITDA increased $17.5
million, or 83.0%, to $38.5 million for the twelve months ending December 31,
1999 compared to $21.0 million for the twelve months ended December 31, 1998.
32
<PAGE> 33
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.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
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>
Net revenue for the year ended December 31, 1999 increased 10.0% to
$253,234. Station operating expenses excluding depreciation, amortization and
LMA fees for this twelve-month period increased 8.7% to $186,208. The majority
of the increase in pro forma net revenue 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.
YEAR ENDED DECEMBER 31, 1998 VERSUS THE PERIOD FROM INCEPTION ON MAY 22, 1997
THROUGH DECEMBER 31, 1997.
The growth in net revenues from $9.2 million in 1997 to $98.8 million in
1998 and the growth in station operating expenses, excluding depreciation and
amortization from $7.1 million in 1997 to $72.2 million in 1998 was primarily
attributable to two factors: (1) we commenced operations on May 22, 1997, and
only began acquiring radio stations during the second half of 1997; and (2)
there were additional revenues, station operating expenses excluding
depreciation and amortization, and depreciation and amortization expenses
associated with the radio properties acquired during 1998.
The tangible and intangible assets associated with the above mentioned
radio station acquisitions account for the majority of the increase in
historical depreciation and amortization from $1.7 million in 1997 to $17.2
million in 1998. LMA fees paid increased $2.4 million to $2.4 million in 1998
versus the period from inception to December 31, 1997. 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 1998.
The increase in corporate general and administrative expenses from $1.3
million in 1997 to $5.6 million in 1998 was directly attributable in part to the
investment in additional corporate resources to effectively manage growth and
our growing radio station portfolio. In addition, the increases in depreciation
and amortization and corporate general and administrative expenses also reflect
the effect of a full year of operations in 1998 as compared to a partial year of
operations in 1997.
The increase in net interest expense from $0.8 million in 1997 to $13.2
million in 1998 was primarily attributable to (1) additional borrowings under
our term loan facilities to finance acquisitions, (2) the issuance the Notes on
July 1, 1998 and the resulting greater average outstanding long term debt levels
and (3) the incurrence of interest expense for a full year.
Subsequent to the end of 1999 as part of our year end tax review, we
determined that due to the existence of offsetting deferred tax liabilities the
valuation allowance against deferred tax assets established in 1998 was not
required. As a result, in April 2000 the Company restated its results for 1998
and recorded a tax benefit for the year ended December 31, 1998 in the amount of
$5.6 million. The $5.6 million increase in the tax benefit
33
<PAGE> 34
for the year ended December 31, 1998 compared to the period from inception on
May 22, 1997 to December 31, 1997 is primarily attributable to a $8.2 million
increase in our loss before income taxes for the year ended December 31, 1998
compared to the period from inception on May 22, 1997 to December 31, 1997. See
Restatement of Previously Issued Financial Statements below for additional
detail on this matter.
Preferred stock dividends increased $13.3 million as a result of the
issuance of our Series A Preferred Stock on July 1, 1998. Additionally, on
September 30, 1998, we recorded a one-time charge of $2.9 million associated
with the accelerated accretion of discount on our 12% Class A Cumulative
Preferred Stock that was exchanged for the Series A Preferred Stock.
On March 2, 1998, we recorded an extraordinary loss of $1.8 million ($1.1
million net of tax benefit) related to the write-off of previously capitalized
debt issuance costs related to our old credit facility. For 1998 the net loss
attributable to common stockholders (including an extraordinary loss of $1.8
million and the one-time charge of $2.9 million) was $21.6 million. The growth
in Broadcast Cash Flow from $2.0 million in 1997 to $26.6 million in 1998 was
primarily attributable to the growth in net revenues, partially offset by the
growth in station operating expenses, excluding depreciation and amortization as
described above.
PRO FORMA -- YEAR ENDED DECEMBER 31, 1998 VERSUS THE YEAR ENDED DECEMBER 31,
1997.
The pro forma results for 1998 compared to 1997 presented below assume that
the 195 radio stations owned or operated by the Company for any portion of 1998
were acquired effective January 1, 1997.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Net revenues.......................................... $131,099 $116,987
Station operating expenses excluding depreciation and
amortization and LMA fees........................... 98,533 92,216
-------- --------
Operating income before depreciation and amortization
and LMA fees........................................ $ 32,566 $ 24,771
======== ========
</TABLE>
Net revenue for the year ended December 31, 1998 increased 12.1% to
$131,099. Station operating expenses excluding depreciation, amortization and
LMA fees for this twelve-month period increased 6.9% to $98,533. The majority of
the increase in pro forma net revenue from 1997 to 1998 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 revenue, and with the Company's operation of the radio stations
subsequent to the respective acquisition dates.
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Subsequent to the end of 1999 as part of our year end tax review, we
determined that due to the existence of offsetting deferred tax liabilities the
valuation allowance against deferred tax assets established in 1998 was not
required. As a result, in April 2000 the Company restated its results for 1998
and recorded a tax benefit for the year ended December 31, 1998 in the amount of
$5.6 million.
34
<PAGE> 35
The following table reconciles the amounts previously reported to the
amounts currently being reported in the consolidated statements of operations
for the year ended December 31, 1998:
<TABLE>
<CAPTION>
NET LOSS EXTRAORDINARY
LOSS TAX BEFORE LOSS ON EARLY EARNINGS
BEFORE PROVISION EXTRAORDINARY EXTINGUISHMENT NET PER
TAXES (BENEFIT) ITEM OF DEBT LOSS SHARE
-------- --------- ------------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
As previously
reported............ $(11,738) $ 126 $(11,864) $(1,837) $(13,701) $(1.70)
Restatement associated
with removal of
deferred tax
valuation
allowance........... -- $(4,954) $ 4,954 $ 733 $ 5,687 $ 0.36
-------- ------- -------- ------- -------- ------
As restated........... $(11,738) $(4,828) $ (6,910) $(1,104) $ (8,014) $(1.34)
======== ======= ======== ======= ======== ======
</TABLE>
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 that availability
under our credit facility, cash generated from operations and proceeds from
future debt or equity financing will be sufficient to meet our capital needs.
The ability of the Company to complete 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.
For the twelve months ended December 31, 1999, net cash used in operations
increased $9.0 million to $13.6 million from net cash used in operations of $4.6
million for the twelve months ended December 31, 1998. This increase was due
primarily to the increase in our net loss in 1999 in addition to the additional
investment in working capital made in connection with acquisitions completed
during fiscal 1999.
For the twelve months ended December 31, 1999, net cash used in investing
activities decreased $158.9 million to $192.1 million from $351.0 million for
the twelve months ended December 31, 1998. This decrease was due primarily to
lower acquisition activity during fiscal 1999.
For the twelve months ended December 31, 1999, net cash provided from
financing activities increased $21.4 million to $400.4 million compared to
$379.0 million during the twelve months ended December 31, 1998. This increase
in net cash provided from financing activities during the twelve months ended
December 31, 1999 was the result of the equity offerings described below.
On July 27, 1999, we completed a follow-on public stock offering of
9,664,000 shares of our Class A Common Stock for $22.919 per share, after
underwriter's discounts and commissions. The net proceeds of the offering were
approximately $221.5 million. We used the net proceeds from the offering to
redeem a portion of our Series A Preferred Stock, repay the principal amount of
indebtedness outstanding under our old credit facility and fund the completion
of a portion of our pending acquisitions. We sold an additional 1,449,600
35
<PAGE> 36
shares of our Class A common stock as a result of the exercise of underwriters'
overallotment option, for $22.919 per share, resulting in $33.2 million
additional net proceeds to Cumulus.
On November 18, 1999, the Company completed a follow-on, secondary public
stock offering selling 4,700,000 (3,700,000 primary and 1,000,000 secondary)
shares of its Class A Common Stock for $37.05 per share, after underwriter's
discounts and commissions. The net proceeds of the offering were approximately
$137.1 million. In addition, on November 24, 1999, the underwriters exercised
their option to purchase an additional 204,000 shares of Class A Common Stock
(102,000 primary shares and 102,000 secondary shares) at $37.05 per share.
Exercise of the option resulted in an additional $3.8 million in net offering
proceeds to the Company.
Historical Acquisitions. During the year ended December 31, 1999, the
Company completed twenty-two acquisitions across sixteen markets having an
aggregate purchase price of $151.8 million. Additional acquisitions have been
subsequently completed in 2000 in seven markets for an aggregate purchase price
of $28.9 million. The sources of funds for these acquisitions were primarily the
proceeds from the offering of the Company's equity securities.
Pending Acquisitions. The aggregate purchase price of the pending
acquisitions is expected to be approximately $584.0 million, consisting almost
entirely of cash and net of a single market swap. We intend to finance the
pending acquisitions with cash on hand, the proceeds of our Credit Facility or
future credit facilities, and other to be identified sources. The ability of the
Company to complete 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.
We expect to consummate most of our pending acquisitions during the second,
third and fourth quarters of 2000, although there can be no assurance that the
transactions will be consummated within that time frame. In four of the markets
in which there are pending acquisitions (Columbus-Starkville, MS; Columbus, GA,
Wilmington, NC and Topeka, KS), 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.
Sources of Liquidity. We financed our acquisitions primarily through the
July 1999 and November 1999 equity financings described above and borrowings
under our credit facilities.
Our credit facility with Lehman Brothers Inc. as arranger, Barclays
Capital, as syndication agent and Lehman Brothers Commercial Paper Inc., as
administrative agent, consists of a seven-year revolving credit facility of
$50.0 million, a revolving credit facility of $50.0 million that will convert
into a seven-year term loan 364 days after closing, an eight-year term loan
facility of $75.0 million and an eight and one-half year term loan facility of
$50.0 million. 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 the 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 the closing.
We have issued $160.0 million in aggregate principal amount of our Notes
which have a maturity date of July 1, 2008. The Notes are our 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.
36
<PAGE> 37
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, 1999, we issued
an additional $23.1 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.
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. On October 1, 1999 we used
$51.3 million of the proceeds of our July 1999 offering of our Class A Common
Stock to redeem a portion of our Series A Preferred Stock, including a $ 6.0
million redemption premium and $ 1.5 million in accrued and unpaid dividends as
of the redemption date.
The Indenture and the Certificate 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,
1999, we would be permitted, by the terms of the indenture and the certificate
of designation, to incur approximately $125 million of additional indebtedness
under our credit facility without regard to the debt ratios included in our
indenture.
ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income". Statement 130 establishes
standards for the reporting and display of comprehensive income and its
components. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from nonowner sources, which are excluded from net income.
Statement 130 requires unrealized gains or losses on foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in comprehensive income. The adoption of
this Statement had no impact on our net income or stockholders' equity.
As of January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and Related
Information". Statement 131 establishes new guidelines for identifying and
reporting information about an entity's operating segments. This standard
requires that management identify operating segments based upon the way
management disaggregates the enterprise for making internal operating decisions.
For the twelve months ending December 31, 1999 and 1998, Company management has
maintained only one operating segment, radio broadcasting. As of and for the
year ended December 31, 1999 the Company's investments in and operations of
Cumulus Wireless Services Inc. and Cumulus Internet Services Inc. were
inconsequential to the overall operations of the Company. As a result, they have
not been accounted for as segments under this pronouncement. As the operations
of Cumulus Wireless Services Inc. and Cumulus Internet Services Inc. develop,
segment reporting may be required.
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 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. The Company's adoption of
SOP-98-5 in 1999 had an immaterial effect on the results of operations for the
year.
37
<PAGE> 38
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-1
("SOP 98-1"),"Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." This standard requires companies to capitalize
qualifying computer software costs that are incurred during the application
development stage and amortize them over the software's estimated useful life.
SOP 98-1 is effective for fiscal years beginning after December 15, 1998. During
1999, the Company capitalized $2,419 of software development costs in connection
with the adoption of the statement.
SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934 about us. Although we
believe that, in making any such statements, our expectations are based on
reasonable assumptions, any such statement may be influenced by factors that
could cause actual outcomes and results to be materially different from those
projected. When used in this document, the words "anticipates," "believes,"
"expects," "intends," and similar expressions, as they relate to us or our
management, are intended to identify such forward-looking statements. These
forward-looking statements are subject to numerous risks and uncertainties.
Important factors that could cause actual results to differ materially from
those in forward-looking statements, certain of which are beyond our control,
include:
- the impact of general economic conditions in the U.S. and in other
countries in which we currently do business;
- industry conditions, including competition;
- fluctuations in exchange rates and currency values;
- capital expenditure requirements;
- legislative or regulatory requirements;
- interest rates;
- taxes; and
- access to capital markets.
Our actual results, performance or achievements could differ materially
from those expressed in, or implied by, these forward-looking statements.
Accordingly, we cannot be certain that any of the events anticipated by the
forward-looking statements will occur or, if any of them do, what impact they
will have on us.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
At December 31, 1999, approximately 44% of the Company's long-term debt
bears interest at variable rates. Accordingly, the Company's earnings and after
tax cash flow are affected by changes in interest rates. Assuming the current
level of borrowings at variable rates and assuming a two percentage point change
in the 1999 average interest rate under these borrowings, it is estimated that
the Company's 1999 interest expense and net income would have changed by $2.5
million. In the event of an adverse change in interest rates, management would
likely take actions to further mitigate its exposure. However, due to the
uncertainty of the actions that would be taken and their possible effects,
additional analysis is not possible at this time. Further, such analysis would
not consider the effects of the change in the level of overall economic activity
that could exist in such an environment.
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<PAGE> 39
FOREIGN CURRENCY
As a result of the 1997 acquisition of Caribbean Communications Company
Ltd., ("CCC"), the Company has operations in 5 countries throughout the
English-speaking Eastern Caribbean. All foreign operations are measured in their
local currencies. As a result, the Company's financial results could be affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company has operations.
The Company maintains no derivative instruments to mitigate the exposure to
translation and/or transaction risk. However, this does not preclude the
adoption of specific hedging strategies in the future. Our foreign operations
reported a net loss attributable to common stock of $377 for the year ended
December 31, 1999.
It is estimated that a 5% change in the value of the U.S. dollar to the
Eastern Caribbean dollar or the Trinidad and Tobago dollar would change net
income for the year ended December 31, 1999 by an amount less than $100,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information in response to this item is included in the Company's
consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP, appearing on pages F-1 through F-25 of this Form
10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers and managers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Richard W. Weening(1).................. 53 Executive Chairman, Treasurer and Director
Lewis W. Dickey, Jr.(1)................ 37 Executive Vice Chairman and Director; President of
Cumulus Broadcasting, Inc.
Terrence Baun.......................... 51 Director of Engineering
John Dickey............................ 33 Executive Vice President, Programming
Terrence Leahy......................... 45 Secretary and General Counsel
Daniel O'Donnell....................... 40 Vice President, Finance
Jill Schmitt........................... 37 Vice President, Director of Facilities
Mini Srivathsa......................... 29 Director of Technology
Jeffrey J. Roznowski................... 42 Vice President and General Manager, Cumulus Wireless
Services, Inc.
Robert H. Sheridan, III(2)(3).......... 37 Director
Eric P. Robison(2)(3).................. 40 Director
Ralph B. Everett(3).................... 47 Director
</TABLE>
-------------------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
39
<PAGE> 40
RICHARD W. WEENING has served as our Executive Chairman, Treasurer and a
Director since March 1998. Mr. Weening served as our Chairman from our inception
on May 22, 1997 until March 1998. Mr. Weening was a founder and an initial
investor in Cumulus Media, LLC through his ownership interest in CML Holdings
LLC, an investment fund managed by QUAESTUS Management Corporation, a private
equity investment and advisory firm specializing in information services and
media and new media companies. QUAESTUS Management Corporation was also a
Managing Member of Cumulus Media, LLC. Mr. Weening served as Chairman and Chief
Executive Officer of Cumulus Media, LLC from its inception in April 1997 until
its dissolution in June 1998. Mr. Weening founded QUAESTUS Management
Corporation in 1989 and served as its Chairman and Chief Executive Officer until
March 1998. See "Certain Relationships and Related Transactions." Mr. Weening
has over 20 years experience as a chief executive officer and investor in the
information and media industry including, text and reference book publishing and
business magazine publishing, radio broadcasting, interactive information
services and electronic commerce software and services. In 1985, Mr. Weening
founded Caribbean Communications Company Ltd., a radio broadcasting company
acquired by Cumulus in May 1997. He currently serves as a director of QUAESTUS
Management Corporation and ARI Network Services, Inc. He holds a Bachelor of
Arts degree from St. John's University.
LEWIS W. DICKEY, JR. has served as our Executive Vice Chairman and a
Director since March 1998 and was named President, Cumulus Broadcasting, Inc. on
March 16, 2000. 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. See "Certain Relationships
and Related Transactions." He also has 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 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.
TERRENCE M. BAUN has served as our Director of Engineering and Vice
President of Cumulus Broadcasting, Inc. since January 1998. Prior to joining
Cumulus, Mr. Baun was President of Criterion Broadcast Services, a broadcast
engineering technical support company serving clients in Wisconsin and Illinois,
from January 1988 to January 1998. Prior to January 1988, he was Technical
Director of Multimedia Broadcasting's Radio Division, and a Chief Engineer at
several Milwaukee stations. Mr. Baun is certified by the Society of Broadcast
Engineers ("SBE") as a Professional Broadcast Engineer and recently concluded
two years of service as SBE President. He is a 20-year member of the Audio
Engineering Society, and holds a Bachelor of Sciences degree from Marquette
University.
JOHN DICKEY is our Executive Vice President and Director of Programming.
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. See "Certain Relationships and Related Transactions." Mr.
Dickey holds a Bachelor of Arts degree from Stanford University. Mr. Dickey is
the brother of Lewis W. Dickey, Jr.
TERRENCE J. LEAHY has served as our Secretary and General Counsel and Vice
President of Cumulus Broadcasting, Inc. since March 1998. Prior to March 1998,
Mr. Leahy served Cumulus in the same capacity
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as a Managing Director of QUAESTUS Management Corporation and Vice President of
the Company. Mr. Leahy began his career practicing media, telecommunications and
corporate law and litigation in Washington, D.C. with the law firms of Wilmer,
Cutler & Pickering and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. He joined
QUAESTUS Management Corporation in April 1992 and was appointed General Counsel
and Managing Director in January 1995. Mr. Leahy played a key role in the
founding of Cumulus Media, LLC. He is an honors graduate of Princeton
University, Harvard Law School, and the Executive MBA program at The Wharton
School at the University of Pennsylvania.
DANIEL O'DONNELL has served as our Vice President, Finance since June 1998
and our Director of Corporate Finance and Vice President of Cumulus
Broadcasting, Inc. since March 1998. Prior to joining Cumulus in March 1998, Mr.
O'Donnell was a Senior Vice President in the Corporate Finance Group of Heller
Financial, Inc. from October 1994 to March 1998. Prior to joining Heller
Financial Inc.'s Corporate Finance Group in 1992, Mr. O'Donnell held a number of
offices within Heller Financial, Inc., including Vice President, Portfolio
Manager for the Corporate Finance Group's media portfolio, Vice President of
Heller's Corporate Asset Quality Group, and Vice President, Finance for Heller
International Corporation. Prior to joining Heller Financial, Inc., Mr.
O'Donnell was a manager and audit supervisor for Arthur Young & Company in the
Chicago office, which he joined in 1982. Mr. O'Donnell holds a Bachelor of Arts
degree in Accounting from Loyola University in Chicago, and is a Certified
Public Accountant.
JEFFREY ROZNOWSKI has served as Vice President and General Manager of
Cumulus Wireless Services, Inc. since December 1998. Prior to joining Cumulus,
Mr. Roznowski had an 18-year career with Ameritech Corp. where he held a variety
of engineering, financial, and operational positions, most recently serving as
Director of Operations for Ameritech Cellular. He is certified as a professional
engineer in the State of Wisconsin and serves on the faculty for the University
of Wisconsin's Department of Engineering Professional Development. He holds a
Bachelor of Science and Masters of Business Administration degrees from the
University of Wisconsin.
JILL SCHMITT is Vice President, Director of Facilities, for Cumulus
Broadcasting, Inc. Prior to joining Cumulus in June 1998, Ms. Schmitt held the
position of Field Facilities Manager at the corporate headquarters of Manpower
Inc. in Glendale, Wisconsin. As Manager, she was responsible for the
coordination and implementation of all processes involved with the opening,
relocation, and renewal of approximately 600 leased premises in the U.S. The
management of these projects included site selection, lease negotiation,
procurement of related services and construction management. Ms. Schmitt studied
at Brooks College in Long Beach, California.
MINI SRIVATHSA has served as our Director of Technology and Vice President
of Cumulus Broadcasting, Inc. since January 1998. Prior to joining Cumulus, Ms.
Srivathsa was a Senior Consultant for Keane, Inc. from February 1997 to January
1998 and a Vice President of Wisconsin Java Users Group from July 1996 to May
1997. From December 1993 to February 1997, she served as a Systems Architect for
ARI Network Services where she served as the lead architect for an
object-oriented, distributed nation-wide ordering system and worldwide web-based
search engine. From December 1992 to December 1993, Ms. Srivathsa was a
consultant in the Consultant Services Division at the University of Wisconsin.
Ms. Srivathsa has extensive experience in Internet-based applications,
object-oriented technologies and electronic commerce. She was Vice President of
the Wisconsin Java User Group and is a voting committee member of the Internet
Developers Association. She has also published several articles on Internet
technology. She holds a Bachelor of Science degree in Computer Science from
Bangalore University and a Masters of Science degree in Computer Science from
the University of Wisconsin.
ROBERT H. SHERIDAN, III has served as our Director since July 1998. Mr.
Sheridan served as a member of the Investment Committee of Cumulus Media, LLC
from April 1997 until its dissolution in June 1998. Mr. Sheridan has served as a
Managing Director of Bank of America Capital Investors, the principal investment
group within Bank of America Corporation since January 1998, and is a Senior
Vice President of BA Capital Company, L.P., formerly known as NationsBanc
Capital Corp. He was a Director of NationsBank Capital Investors, the
predecessor of Bank of America Capital Investors, from January 1996 to January
1998. BA Capital Company, L.P., is a stockholder of the Company. Prior to
joining NationsBank Capital Investors
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in January 1994, Mr. Sheridan worked in the corporate bank division of
NationsBank Corporation, the predecessor of Bank of America Corporation from
June 1989 to January 1994. Mr. Sheridan holds a Bachelor of Arts degree from
Vanderbilt University and a Master of Business Administration from Columbia
University. See "Principal and Selling Shareholders."
RALPH B. EVERETT has served as our Director since July 1998. Since 1989,
Mr. Everett has been a partner with the Washington, D.C. office of the law firm
of Paul, Hastings, Janofsky & Walker LLP, where he heads the firm's Federal
Legislative Practice Group. Prior to 1989, he was Chief Counsel and Staff
Director of the United States Senate Committee on Commerce, Science and
Transportation. He is a Director and a member of the Investment Committee of
Shenandoah Life Insurance Company. He is also a member of the Board of Visitors
of Duke University Law School and the Norfolk Southern Corporation Advisory
Board. Mr. Everett holds a Bachelor of Arts degree from Morehouse College and a
Juris Doctor degree from Duke University.
ERIC P. ROBISON has served as our Director since August 1999. Since January
1994, Mr. Robison has worked for Vulcan Northwest, Inc., the holding company
that manages all personal and business interests for investor Paul G. Allen. In
this role Mr. Robison serves as a Business Development Associate for Vulcan
Ventures, Inc., the venture fund division of Vulcan and investigates and secures
investment opportunities. Mr. Robison also serves on the board of directors of
C/NET, Inc., and Liquid Audio, Inc. Prior to joining Vulcan, Mr. Robison was
co-founder and vice president of the Stanton Robison Group, Inc., a business
development, marketing and advertising consulting firm. Mr. Robison has served
in marketing management positions with SGS, Inc., Ashton-Tate, Inc., Denny's
Inc. He has also worked on the account staff of several advertising agencies
including McCann Erickson, Doyle Dane Bernbach and Foote Cone and Belding. Mr.
Robison holds a Bachelor of Arts degree in communication studies from California
State University, Sacramento, and a Master of Business Administration in general
management from the University of California, Davis.
Effective March 16, 2000, William M. Bungeroth left his position as
President and Chief Executive Officer of Cumulus Broadcasting, Inc. Lewis W.
Dickey, Jr. was named President, Cumulus Broadcasting, Inc. on March 16, 2000.
Also, as part of a reorganization of reporting lines in the financial
department, effective January 5, 2000, Richard J. Bonick resigned from his
position as Vice President and Chief Financial Officer of the Company.
Messrs. Bungeroth and Bonick were two of the four founding executives of
the Company along with Messrs. Weening and Dickey. From our inception Mr.
Bungeroth was responsible for all aspects of station level operations at the
Company's operating subsidiary Cumulus Broadcasting. Mr. Bonick was responsible
for controllership and financial operations at Cumulus Broadcasting Inc.,
reporting to Mr. Bungeroth. On February 1, 2000 Mr. Bonick's responsibilities
were assumed by Michael Bavely, who was promoted from Assistant Controller to
Controller in charge of financial reporting, and Jorge Garcia, who was promoted
from Assistant Controller to Controller in charge of financial operations. Mr.
Bavely and Mr. Garcia report to Mr. O'Donnell and Mr. Weening. As of the date of
this Form 10-K, the Company had not appointed anyone to replace Mr. Bonick. The
Company does not expect the departures of Messrs. Bungeroth and Bonick to have a
material adverse effect on the Company's business, results of operations and
financial position.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Under U.S. securities laws, directors, certain executive officers and
persons holding more than 10% of Cumulus Media Inc.'s Class A Common Stock must
report their initial ownership of the Class A Common Stock and any changes in
that ownership to the Securities and Exchange Commission. The Commission has
designated specific due dates for these reports and Cumulus must identify in
this Form 10-K those persons for whom these reports were not filed when due. We
believe, based upon a review of copies of such reports and written materials
that no other reports were required, and that during 1999 all Section 16 filing
requirements applicable to Cumulus' directors, executive officers and greater
than 10% beneficial owners were complied with. We believe each of these matters
was reported correctly as required.
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued for
services rendered to the Company in all capacities, for the years ended December
31, 1999, 1998 and 1997 by the Chief Executive Officer and each of the other
executive officers of the Company employed as of December 31, 1999 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION(3)
--------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Richard W. Weening............. 1999 $303,750 $ -- 530,000 $ --
Executive Chairman & 1998 $300,000 $ -- 1,000,690 $ --
Treasurer 1997(1) $ -- $ -- -- $ --
Lewis W. Dickey................ 1999 $303,750 $ -- 530,000 $ --
Executive Vice Chairman 1998 $300,000 $ -- 1,000,690 $ --
1997(1) -- $ -- -- $ --
William M. Bungeroth(2)........ 1999 $350,000 $100,000 50,000 $ 4,099
President 1998 $275,000 $ -- 235,000 $ 14,160
1997 $170,000 $ 0,000 -- $211,950
John Dickey.................... 1999 $279,812 $ 60,000 76,354 $ 12,000
Director of Programming 1998 $250,000 $ -- 152,708 $ --
1997(1) $ -- $ -- -- $ --
Richard J. Bonick, Jr.(2)...... 1999 $251,250 $ 25,000 10,000 $ 13,099
Vice President & CFO 1998 $250,000 $ -- 36,620 $ 14,145
1997 $170,000 $ 25,000 -- $211,950
</TABLE>
-------------------------
(1) During 1997, Messrs. Weening, L. Dickey and J. Dickey dedicated
approximately 85%, 80% and 0% of their time, respectively, to matters
directly related to the Company and its business, since the Company's
inception. Messrs. Weening, L. Dickey and J. Dickey did not receive any
compensation directly from the Company. However, during 1997 the Company
paid $297,000 to Quaestus, an entity controlled by Mr. Weening, for
acquisition and corporate finance services performed on behalf of the
company. In addition, during 1997 the Company paid $184,000 to Stratford
Research, an entity controlled by L. Dickey and J. Dickey, for programming
research and broadcast strategy consulting services. At December 31, 1997,
the Company owned an additional $240,000 to Stratford Research for services
rendered.
During 1997, the Company also paid a non-recurring organization fee of
$300,000 (with Quaestus receiving $180,000 of such fee and DBBC, an entity
controlled by Mr. L. Dickey receiving $120,000 of such fee), and (ii) a
management fee of $206,000 (with Quaestus receiving $123,600 of such fee
and DBBC receiving $82,400 of such fee).
On August 30, 1999 Mr. Weening and Lew Dickey each received options to
purchase 30,000 shares of Class A Common Stock in lieu of a cash bonus in
1999 for calendar year 1998. These options vest and are exercisable at any
time on or after August 30, 1999.
(2) Effective January 5, 2000, Richard Bonick resigned from his position as Vice
President and Chief Financial Officer of the Company. Effective March 16,
2000, William Bungeroth left his position as President and Chief Executive
Officer of the Company. The terms of severance for Mr. Bonick and Mr.
Bungeroth are currently being negotiated between the Company and the
respective individuals.
(3) During the fiscal year ending December 31, 1999 Mr. Bungeroth, Mr. John
Dickey and Mr. Bonick received $4,099, $12,000 and $13,099 respectively in
other compensation representing (i) a $3,000
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automobile allowance for Mr. Bungeroth and a $12,000 automobile allowances
for each of John Dickey and Mr. Bonick and; and (ii) $1,099 and $1,099 for
each of Mr. Bungeroth and Mr. Bonick, respectively for the matching Company
contributions under the Company's Defined Contribution Plan (the "401(k)
Plan").
During the fiscal year ending December 31, 1998 Mr. Bungeroth and Mr.
Bonick received $14,160 and $14,145 respectively in other compensation
representing (i) $12,000 automobile allowances for each of Mr. Bungeroth
and Mr. Bonick; and $2,160 and $2,145 for each of Mr. Bungeroth and Mr.
Bonick, respectively for the matching Company contributions under the
Company's Defined Contribution Plan (the "401(k) Plan"). No other
executives were eligible to participate in the 401(k) Plan in 1998.
1998 EXECUTIVE STOCK INCENTIVE PLAN
The Company's Board of Directors has adopted the Executive Stock Incentive
Plan (the "Executive Plan") to provide certain key executives of the Company
with additional incentives by increasing their proprietary interest in the
Company. An aggregate of 2,001,380 shares of Class C Common Stock is subject to
the Executive Plan. In addition, no one person will be eligible to receive
options for more than 1,000,690 shares in any one calendar year. Richard W.
Weening and Lewis W. Dickey, Jr. are the sole participants in the Executive
Plan.
The Executive Plan permits the Company to grant awards in the form of stock
options (including both incentive stock options that meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified
stock options) of Class C Common Stock.
Stock options under the Executive Plan were granted on July 1, 1998 and are
divided into three groups. Group 1 consists of time vested options with an
exercise price equal to $14.00 per share and vest quarterly in equal
installments over a four-year period (subject to accelerated vesting in certain
circumstances as described under "Employment Agreements"). Group 2 and Group 3
consist of time vested options which vest in four equal annual installments on
July 1, 1999, July 1, 2000, July 1, 2001 and July 1, 2002 (subject to
accelerated vesting in certain circumstances as described below under
"Employment Agreements"). The first installment of both the Group 2 options and
Group 3 options are exercisable at a price of $14.00 per share on July 1, 1999
and subsequent installments are exercisable at a price 15% (or 20% in the case
of Group 3 options) greater than the prior year's exercise price for each of the
next three years. All options vest upon a change of control of the Company as
described below under "Employment Agreements".
The Executive Plan is administered by the Compensation Committee of the
Board, which has exclusive authority to grant awards under the Executive Plan
and to make all interpretations and determinations affecting the Executive Plan.
In the event of any changes in the capital structure of the Company, the
Compensation Committee will make equitable adjustments to outstanding awards
granted under the Executive Plan so that the net value of the award is not
changed. As of December 31, 1999 there are outstanding options to purchase a
total of 2,001,380 shares of Class C Common Stock under the Executive Plan.
1999 EXECUTIVE STOCK INCENTIVE PLAN
Our Board of Directors adopted and our shareholders, at our November 2,
1999 annual meeting of shareholders, approved the 1999 Executive Stock Incentive
Plan (the "1999 Executive Plan") to provide certain of our key executives with
additional incentives by increasing their proprietary interest in Cumulus. An
aggregate of 1,000,000 shares of Class C Common Stock is subject to the 1999
Executive Plan. In addition, no one person will be eligible to receive options
for more than 500,000 shares in any one calendar year. Richard W. Weening,
Executive Chairman, Treasurer and Director, and Lewis W. Dickey, Jr., Executive
Vice Chairman and Director are the sole participants in the 1999 Executive Plan.
The 1999 Executive Plan permits Cumulus to grant awards in the form of stock
options (including both incentive stock options that meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified
stock options) of Class C Common Stock. Stock options under the 1999 Executive
Plan were granted on August 30, 1999 at an exercise price of $27.875 per share
and vest quarterly in equal installments over a four
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<PAGE> 45
year period (subject to accelerated vesting in certain circumstances). The 1999
Executive Plan is administered by the Compensation Committee of the Board, which
will have exclusive authority to grant awards under the Executive Plan and to
make all interpretations and determinations affecting the 1999 Executive Plan.
In the event of any changes in Cumulus' capital structure, the Compensation
Committee will make equitable adjustments to outstanding awards granted under
the Executive Plan so that the net value of the award is not changed. As of
December 31, 1999, there are outstanding options to purchase a total of
1,000,000 shares of Class C Common Stock under the 1999 Executive Plan.
1998 STOCK INCENTIVE PLAN
The Company's Board of Directors has also adopted the 1998 Stock Incentive
Plan to provide officers, other key employees and non-employee directors of the
Company (other than participants in the Company's Executive Plan described
above), as well as consultants to the Company, with additional incentives by
increasing their proprietary interest in the Company. An aggregate of 1,288,834
shares of Class A Common Stock is subject to the 1998 Stock Incentive Plan, of
which a maximum of 1,288,834 shares of Class A Common Stock is subject to
incentive stock options and a maximum of 100,000 shares of Class A Common Stock
is available to be awarded as restricted stock. In addition, subject to certain
equitable adjustments, no one person will be eligible to receive options for
more than 300,000 shares in any one calendar year and the maximum amount of
restricted stock which will be awarded to any one person during any calendar
year is $500,000.
The 1998 Stock Incentive Plan permits us to grant awards in the form of
stock options (including both incentive stock options that meet the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended, and
non-qualified stock options) and restricted shares of the Class A Common Stock.
All stock options awarded under the plan will be granted at an exercise price of
not less than fair market value of the Class A Common Stock on the date of
grant. No award will be granted under the 1998 Stock Incentive Plan after June
22, 2008.
The 1998 Stock Incentive Plan is administered by the Compensation Committee
of the Board, which has exclusive authority to grant awards under the plan and
to make all interpretations and determinations affecting the plan. The
Compensation Committee has discretion to determine the individuals to whom
awards are granted, the amount of such award, any applicable vesting schedule,
whether awards vest upon the occurrence of a Change in Control (as defined in
the 1998 Stock Incentive Plan) and other terms of any award. The Compensation
Committee may delegate to certain senior officers of the Company its duties
under the plan subject to such conditions or limitations as the Compensation
Committee may establish. Any award made to a non-employee director must be
approved by the Company's Board of Directors. In the event of any changes in the
capital structure of the Company, the Compensation Committee will make equitable
adjustments to outstanding awards so that the net value of the award is not
changed.
As of December 31, 1999, there are outstanding options to purchase a total
of 1,253,704 shares of Class A Common Stock exercisable at a price of $14.00 per
share under the 1998 Stock Incentive Plan. These options vest, in general, over
five years starting on July 1, 1998, with the possible acceleration of vesting
for some options if certain performance criteria are met. In addition, all
options vest upon a change of control as more fully described in the 1998 Stock
Incentive Plan.
1999 STOCK INCENTIVE PLAN
Our Board of Directors adopted and our shareholders, at our November 2,
1999 annual meeting of shareholders, approved the 1999 Stock Incentive Plan. An
aggregate of 900,000 shares of Class A Common Stock are subject to the 1999
Stock Incentive Plan, of which a maximum of 900,000 shares of Class A Common
Stock is subject to incentive stock options and a maximum of 100,000 shares of
Class A Common Stock is available to be awarded as restricted stock. In
addition, subject to certain equitable adjustments, no one person will be
eligible to receive options for more than 300,000 shares in any one calendar
year and the maximum amount of restricted stock which will be awarded to any one
person during any calendar year is $500,000. The 1999 Stock Incentive Plan
permits the Company to grant awards in the form of stock options
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<PAGE> 46
(including both incentive stock options that meet the requirements of Section
422 of the Internal Revenue Code of 1986, as amended, and non-qualified stock
options) and restricted shares of the Class A Common Stock. All stock options
awarded under the plan will be granted at an exercise price of not less than
fair market value of the Class A Common Stock on the date of grant. No award is
allowed to be granted under the 1999 Stock Incentive Plan after August 30, 2009.
The 1999 Stock Incentive Plan is administered by the Compensation Committee of
the Board, which has exclusive authority to grant awards under the plan and to
make all interpretations and determinations affecting the plan. The Compensation
Committee has discretion to determine the individuals to whom awards are
granted, the amount of such award, any applicable vesting schedule, whether
awards vest upon the occurrence of a Change in Control (as defined in the 1999
Stock Incentive Plan) and other terms of any award. The Compensation Committee
may delegate to certain senior officers of Cumulus its duties under the plan
subject to such conditions or limitations as the Compensation Committee may
establish. Any award made to a non-employee director must be approved by the
Company's Board of Directors. In the event of any changes in Cumulus' capital
structure, the Compensation Committee will make equitable adjustments to
outstanding awards so that the net value of the award is not changed. As of
December 31, 1999, there were outstanding options to purchase a total of 829,025
shares of Class A Common Stock exercisable at a price of $27.875 per share under
the 1999 Stock Incentive Plan. These options vest, in general, over five years
starting on August 30, 1999, with the possible acceleration of vesting for some
options if certain performance criteria are met. In addition, all options vest
upon a change of control as more fully described in the 1999 Stock Incentive
Plan.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our Board of Directors adopted and our shareholders, at our November 2,
1999 annual meeting of shareholders, approved the 1999 Employee Stock Purchase
Plan. The 1999 Employee Stock Purchase Plan is designed to qualify for certain
income tax benefits for employees under Section 423 of the Internal Revenue Code
of 1986, as amended, and contains 1,000,000 shares of Class A Common Stock. The
plan allows qualifying employees to purchase Class A Common Stock at the end of
each calendar year, commencing with the calendar year beginning January 1, 1999,
at 85% of the lesser of the fair market value of the Class A Common Stock on the
first or last trading days of the year. The amount each employee can purchase is
limited to the lesser of (i) 15% of pay or (ii) $25,000 of stock valued on the
first trading day of the year. An employee must be employed at least six months
as of the first trading day of the year in order to participate in the 1999
Employee Stock Purchase Plan. Cumulus Media Inc. applies APB Opinion No. 25 in
accounting for its Stock Options issued to employees and SFAS No. 123 in
accounting for stock options issued to non-employees. Accordingly, no
compensation cost has been recognized for its stock options in the consolidated
financial statements. As of March 17, 2000, 17,674 shares of Class A Common
Stock had been issued and were outstanding under the 1999 Employee Stock
Purchase Plan.
EMPLOYMENT AGREEMENTS
As discussed more particularly below, the Company has entered into
employment agreements with certain of the Named Executive Officers. Subject to
certain exceptions, such employment agreements prohibit each of the Named
Executive Officers from competing with the Company for a specified period after
termination of employment (18 months for Messrs. Weening and Dickey and 12
months for Messrs. Bungeroth and Bonick).
Mr. Weening serves as Executive Chairman and Treasurer of the Company under
an employment agreement with the Company. Under the terms of Mr. Weening's
employment agreement, he is entitled to receive an annual base salary of
$315,000. Such base salary will increase by 5.0% during each year of the term of
the employment agreement, subject to merit increases, as the Compensation
Committee deems appropriate. The agreement provides that Mr. Weening may receive
a bonus of up to 50% of his base salary, with bonus targets to be based on
budgeted Broadcast Cash Flow as determined by the Compensation Committee. Mr.
Weening's employment agreement has a three-year term, which automatically
extends each year for one additional year, subject to non-renewal. The terms of
the agreement also provide that upon the death or disability of Mr. Weening, the
Company shall continue to pay Mr. Weening's base salary for the twelve-month
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<PAGE> 47
period immediately following such event, all unvested time vested options will
vest and the Company will continue to provide benefits to Mr. Weening and his
dependents for twelve months.
In addition, in the event (i) the death or disability occurs after the
mid-point of a particular vesting year and (ii) the fair market value of the
Class A Common Stock as of the date of such death or disability equals or
exceeds the exercise price per share of the performance options scheduled to
vest at the end of such vesting year, such performance options will vest. The
agreement also provides that in the event Mr. Weening is terminated by the
Company without cause or terminates his employment for good reason, the Company
will pay to Mr. Weening an amount equal to the greater of (i) the base salary
owed to Mr. Weening for the remainder of the term of the agreement and (ii) one
hundred percent of his annual base salary in effect as of the date of
termination plus the last bonus received by Mr. Weening, all unvested time
vested options will vest and the Company will continue to provide benefits to
Mr. Weening and his dependents for twelve months. In addition, if the fair
market value of the Class A Common Stock as of the date of such termination
equals or exceeds the exercise price per share of the unvested performance
options; such performance options will vest.
Further, if the cumulative total return of the Class A Common Stock from
July 1, 1998 to the date of termination exceeds the total return of a peer group
of companies, the performance options will vest. Such performance options that
become vested shall remain exercisable until 90 days following the date that
such performance options would otherwise have become vested and exercisable. If,
within the one-year period following a change of control, the Company terminates
Mr. Weening's employment for any reason other than death or disability or for
cause or Mr. Weening terminates his employment for good reason, Mr. Weening will
be paid the same amount as if he were terminated without cause if no change of
control had occurred and all unvested time vested options and performance
options will vest.
Mr. Dickey serves as Executive Vice Chairman of the Company under an
employment agreement with the Company. Under the terms of Mr. Dickey's
employment agreement he is entitled to receive an annual base salary of
$315,000. Such base salary will increase by 5.0% during each year of the term of
the employment agreement, subject to merit increases, as the Compensation
Committee deems appropriate. The agreement provides that Mr. Dickey may receive
a bonus of up to 50% of his base salary, with bonus targets to be based on
budgeted Broadcast Cash Flow as determined by the Compensation Committee. Mr.
Dickey's employment agreement has a three-year term, which automatically extends
each year for one additional year, subject to non-renewal.
The terms of the agreement also provide that upon the death or disability
of Mr. Dickey, the Company shall continue to pay Mr. Dickey's base salary for
the twelve-month period immediately following such event, all unvested time
vested options will vest and the Company will continue to provide benefits to
Mr. Dickey and his dependents for twelve months. In addition, if (i) the death
or disability occurs after the mid-point of a particular vesting year and (ii)
the fair market value of the Class A Common Stock as of the date of such death
or disability equals or exceeds the exercise price per share of the performance
options scheduled to vest at the end of such vesting year, such performance
options will vest.
The agreement also provides that in the event Mr. Dickey is terminated by
the Company without cause or terminates his employment for good reason, the
Company will pay to Mr. Dickey an amount equal to the greater of (i) the base
salary owed to Mr. Dickey for the remainder of the term of the agreement and
(ii) one times annual base salary in effect as of the date of termination plus
the last bonus received by Mr. Dickey and all unvested time vested options will
vest. In addition, the fair market value of the Class A Common Stock as of the
date of such termination equals or exceeds the exercise price per share of the
unvested performance options, such performance options will vest. Further, if
the cumulative total return of the Class A Common Stock from July 1, 1998 to the
date of termination exceeds the total return of a peer group of companies, the
performance options will vest. Such performance options that become vested shall
remain exercisable until 90 days following the date that such performance
options would otherwise have become vested and exercisable. If, within the
one-year period following a change of control, the Company terminates Mr.
Dickey's employment for any reason other than death or disability or for cause,
or Mr. Dickey terminates his employment for good reason, Mr. Dickey will be paid
the same amount as if he were terminated without
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cause if no change of control had occurred and all vested time vested options
and performance options will vest.
In 1999 the Company entered into a revised employment agreement with Mr.
Bungeroth under which Mr. Bungeroth served as President of the Company. Under
the terms of Mr. Bungeroth's employment agreement, he was entitled to receive an
annual base salary of $500,000. The agreement provides that Mr. Bungeroth would
receive a base bonus of $12,500, and additional bonus of up to 20% of base
salary based upon achievement of the Company's Broadcast Cash Flow budget and
other factors, and an extraordinary bonus of up to 20% of base salary if the
Company exceeds its targets for Broadcast Cash Flow by 10% or more. Mr.
Bungeroth's employment agreement had a three year term. The agreement provides
that in the event Mr. Bungeroth is terminated by the Company without cause or
terminates his employment for good reason, the Company will pay Mr. Bungeroth an
amount equal to the base salary owed to Mr. Bungeroth for a one-year period, and
Mr. Bungeroth would receive vesting in options which would have vested had Mr.
Bungeroth remained employed for one year beyond the date of termination. In the
event Mr. Bungeroth is terminated with cause or resigns voluntarily, Mr.
Bungeroth is entitled to earned but unpaid base salary through the date of
termination and any accrued rights to unemployment benefits through that date.
Mr. Bungeroth left the Company on March 16, 2000 and his severance arrangement
is currently being negotiated.
OPTION GRANTS FOR THE TWELVE MONTHS ENDING DECEMBER 31, 1999
The following table sets forth information regarding options to purchase
Common Stock granted by the Company to the Executive Chairman and the other
executive officers named in the Summary Compensation Table during the 1999
calendar year:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE PRESENT VALUE(1)
---- --------------- ------------------ ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Richard W. Weening...... 530,000 29.00% $27.88 August 30, 2009 $6,867
Lewis W. Dickey, Jr..... 530,000 29.00% $27.88 August 30, 2009 $6,867
William M. Bungeroth.... 50,000 2.73% $27.88 August 30, 2009 $ 711
Richard J. Bonick,
Jr.................... 10,000 0.55% $27.88 August 30, 2009 $ 142
John Dickey............. 76,354 4.17% $27.88 August 30, 2009 $1,086
</TABLE>
-------------------------
(1) The present value of each grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0.00% for all years; expected volatility of
65.18%; risk-free interest rate of 5.70% (Executive Plan options) and 5.78%
(Stock Incentive Plan options); and expected life of four years for the 1999
Executive Stock Incentive Plan and five years for the 1999 Stock Incentive
Plan.
48
<PAGE> 49
AGGREGATED OPTION EXERCISES FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND
YEAR-END VALUES
The following table sets forth information concerning option exercises in
the year ended December 31, 1999 by the Company's Executive Chairman and the
other executive officers named in the Summary Compensation Table, and the value
of each such executive officer's unexercised options at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, DECEMBER 31, 1999
SHARES 1999 (#) ($000)(1)
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Weening.............. 0 $0 330,964 1,199,726 $11,313 $34,702
Lewis W. Dickey, Jr............. 0 $0 330,964 1,199,726 $11,313 $34,702
William M. Bungeroth............ 0 $0 47,000 238,000 $ 1,727 $ 8,053
Richard J. Bonick, Jr........... 0 $0 7,324 39,296 $ 269 $ 1,305
John Dickey..................... 0 $0 30,542 198,520 $ 1,122 $ 6,236
</TABLE>
---------------
(1) Based upon a per share price for Common Stock of $50.750. This price
represents the closing price for the Common Stock on the NASDAQ National
Market System on December 31, 1999.
NON-EMPLOYEE DIRECTOR COMPENSATION
Our directors who are not employees receive a fee of $1,000 for each Board
meeting which they attend, plus out-of-pocket expenses incurred in connection
with attendance at each such meeting. In addition, upon the completion of our
initial public offering in July 1998, each non-employee director received
options to purchase a total of 30,000 shares of Class A common stock and Mr.
Robison received options to purchase 50,000 shares of Class A common stock upon
his appointment to the Board on August 30, 1999. BA Capital Company, L.P. and
Mr. Everett received options to purchase an additional 10,000 shares of Class A
common stock on August 30, 1999. Such options will be exercisable at the fair
market value of the Class A common stock at the date of grant. These options
will vest 20% per year with each option being fully exercisable five years from
the date of grant, subject to acceleration under certain circumstances.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From the period commencing on August 30, 1999 through and including
December 31, 1999, the Compensation Committee consisted of Mr. Robert H.
Sheridan, III (Chairman) and Mr. Eric P. Robison, neither of whom is an officer
or employee of the Company or any of the Company's subsidiaries. From January 1,
1999 through August 29, 1999 the Compensation Committee consisted of Mr. Robert
H. Sheridan, III (Chairman) and Mr. Ralph B. Everett, neither of whom is an
officer or employee of the Company or any of the Company's subsidiaries. The
Compensation Committee is responsible for making recommendations to the Board
concerning the compensation levels of the executive officers of the Company. The
Compensation Committee also administers the Company's 1999 Stock Incentive Plan,
the 1998 Stock Incentive Plan, the 1999 Executive Stock Incentive Plan, and the
Executive Stock Incentive Plan and determines awards to be made under such plans
to the Company's executive officers and to other eligible individuals. The
Compensation Committee reviews compensation programs for executive officers
annually. With respect to 1999, substantially all of the compensation decisions
for executive officers were made by the Company's Compensation Committee.
49
<PAGE> 50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
The following table sets forth as of March 31, 1999 certain information
regarding beneficial ownership of our Common Stock by (i) each person who is
known to us to be the beneficial owner of more than five percent of the
outstanding shares of common stock, (ii) each director, (iii) each of the five
most highly compensated officers at December 31, 1999 and (iv) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON STOCK(1) COMMON STOCK(1) COMMON STOCK(1)(2)
---------------------- ---------------------- ----------------------
NUMBER NUMBER NUMBER
NAME OF SHARES PERCENTAGE OF SHARES PERCENTAGE OF SHARES PERCENTAGE
---- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
State of Wisconsin Investment
Board(3)....................... -- -- 3,240,619 72.3% -- --
BA Capital Company, L.P.(4)...... 2,275,250 8.0% 544,996 12.2% -- --
The Northwestern Mutual Life
Insurance Company(5)........... -- -- 693,728 15.5% -- --
CML Holdings, LLC(6)............. 201,100 * -- -- 1,522,422 50.6%
QUAESTUS Management
Corporation(6)................. 201,000 * -- -- 237,313 7.9%
QUAESTUS Partner Fund(6)......... 100,000 * -- -- -- --
DBBC of Georgia, LLC(7).......... 95,000 * -- -- 291,542 9.7%
Putnam Investment Management(8).. 2,640,425 9.3% -- -- -- --
Janus Capital Corporation(9)..... 1,570,620 5.5% -- -- -- --
Richard W. Weening(10)........... 332,000 1.2% -- -- 717,071 23.8%
Lewis W. Dickey, Jr.(10)......... 191,740 * -- -- 771,300 25.6%
John Dickey(11).................. 65,541 * -- -- -- --
William B. Bungeroth(11)......... 135,466 * -- -- -- --
Richard J. Bonick(11)............ 95,790 * -- -- -- --
Robert H. Sheridan, III(12)...... 6,000 * -- -- -- --
Ralph B. Everett(12)............. 8,000 * -- -- -- --
Eric P. Robison(12).............. 0 * -- -- -- --
All Executive Officers and
Directors, as a group (8
persons)....................... 834,537 2.9% -- -- 1,488,371 49.4%
</TABLE>
------------------
* Indicates less than one percent
(1) Except upon the occurrence of certain events, holders of Class B Common
Stock are not entitled to vote, whereas each share of Class A Common Stock
entitles its holders to one vote and subject to certain exceptions, each
share of Class C Common Stock entitles its holders to ten votes. Under
certain conditions and subject to prior governmental approval, shares of
Class B Common Stock are convertible into shares of Class A Common Stock
and/or Class C Common Stock.
(2) Subject to certain exceptions, each share of Class C Common Stock entitles
its holders to ten votes. Under certain conditions and subject to prior
governmental approval, shares of Class C Common Stock are convertible into
shares of Class A Common Stock.
(3) The address of the State of Wisconsin Investment Board is P.O. Box 7842,
Madison, Wisconsin 53707. This information is based on a Schedule 13G dated
February 10, 2000.
(4) The address of BA Capital Company, L.P. is 100 North Tryon Street, Floor
25, Bank of America Corporate Center, Charlotte, North Carolina 28255. Does
not include options to purchase 6,000 shares of Class A Common Stock
granted to BA Capital Company, L.P. in connection with its participation in
designating a member to serve on our Board of Directors. This information
is based on a Schedule 13G dated December 3, 1999.
(5) The address of the Northwestern Mutual Life Insurance Company is 720 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. This information is based on
a Schedule 13G dated February 2, 2000.
50
<PAGE> 51
(6) The address of CML Holdings, LLC, QUAESTUS Management Corporation and
QUAESTUS Partner Fund is 111 East Kilbourn Avenue, Suite 2700, Milwaukee,
Wisconsin 53211. This information is based on a Schedule 13G dated February
14, 2000.
(7) The address of DBBC of Georgia, LLC is 3060 Peachtree Road, N.W., Suite
730, Atlanta, Georgia 30305. This information is based on a Schedule 13G
dated February 14, 2000.
(8) The address of Putnam Investments, Inc. is One Post Office Square, Boston,
Massachusetts 02109. This information is based on a Schedule 13G dated
February 17, 2000. Of these shares, Putnam Investments, Inc. has shared
voting power as to 478,200 shares and shared dispositive power as to all
2,640,425 shares of Class A Common Stock.
(9) The address of Janus Capital Corporation is 100 Fillmore Street, Denver,
Colorado 80206. This information is based on a Schedule 13G dated February
15, 2000.
(10) Represents beneficial ownership attributable to Mr. Weening as a result of
his controlling interests in QUAESTUS Management Corporation and QUAESTUS
Partner Fund and beneficial ownership attributable to Mr. L. Dickey as a
result of his controlling interest in DBBC of Georgia, LLC. Includes (i)
options to purchase 351,758 shares of Class C Common Stock granted to each
of Messrs. Weening and L. Dickey under our 1999 and 1998 Executive Stock
Incentive Plan, and (ii) 30,000 shares of Class A Common Stock granted
under the 1999 Stock Incentive Plan to each of Messrs. Weening and L.
Dickey in lieu of a bonus in 1999.
(11) Includes options to purchase 30,541, 47,000, and 7,324 shares of Class A
Common Stock exercisable within 60 days granted to Messrs. J. Dickey,
Bungeroth, and Bonick, respectively, under our 1999 and 1998 stock
incentive plan.
(12) Includes options to purchase 6,000 shares of Class A Common Stock
exercisable within 60 days granted to each of Messrs. Sheridan and Everett
and 10,000 shares of Class A Common Stock exercisable within 60 days
granted to Mr. Robison upon their election to Board of Directors. Mr.
Sheridan's options are held for the benefit of BA Capital Company, L.P.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lewis W. Dickey, Jr. and John Dickey each have a 25% ownership interest in
Stratford Research, Inc., an entity that provides programming and marketing
consulting and market research services to the Company. Under an agreement with
Stratford Research, Inc., Stratford Research, Inc. receives $25 to evaluate
programming at target radio stations. Annual strategic studies cost the Company
a minimum of $25 negotiable depending on competitive market conditions.
Additionally, Stratford Research, Inc. will provide program-consulting services
for contractually specified amounts over the three years of the agreement. Total
fees paid to Stratford Research by the Company during 1999 and 1998 were $4,407
and $2,735, respectively. Of these expenses paid in 1999 and 1998, $1,136 and
$1,204 were capitalized as acquisition costs. The remaining expenses have been
included as part of the station operating expenses in the statement of
operations. At December 31, 1999 and 1998 amounts payable to Stratford Research,
Inc. were approximately $261 and $371, respectively.
QUAESTUS Management Corporation, an entity controlled by Mr. Weening,
provides industry research, market support and due diligence support services,
and transaction management for the Company's acquisitions and provides certain
corporate finance and related services in support of the Company's treasury
function. During 1999 and 1998, the Company paid QUAESTUS Management Corporation
$1,394 and $1,423 respectively for acquisition, corporate finance, and business
and systems development services. Under an agreement with QUAESTUS Management
Corporation, QUAESTUS Management Corporation receives a specified rate per
transaction between $15 and $60 depending on the number of FM stations acquired
in the transaction, and conditioned on consummation of those transactions. In
addition, the Company is obligated to reimburse QUAESTUS Management Corporation
for all of its expenses incurred in connection with the performance of services
under such agreement. Of the total payments made to QUAESTUS in 1999 and 1998,
$807 and $1,223 were capitalized as acquisition costs. The remaining expenses
have been included as part of the corporate general and administrative expenses
in the statement of operations. At December 31,
51
<PAGE> 52
1999 and 1998 amounts payable to Quaestus Management Corporation were
approximately $108 and $78. In addition, QUAESTUS Management Corporation and the
Company share certain office facilities and administrative services, on a pro
rata basis according to usage.
The Company paid Cumulus Media, LLC fees in 1998 and 1997 consisting of (i)
a non-recurring organizational fee of $300 in 1997 (with QUAESTUS Management
Corporation receiving $180 of such fee and DBBC of Georgia, LLC, receiving $120
of such fee) and (ii) management fees of $150 and $206 (with QUAESTUS Management
Corporation receiving $90 and $123 respectively, of such fees from Cumulus
Media, LLC and DBBC of Georgia, LLC, receiving $60 and $834 respectively, of
such fees from Cumulus Media, LLC). The fees paid to Cumulus Media, LLC have
terminated. Lewis W. Dickey, Jr. and John Dickey have a 75% and 25% ownership
interest in DBBC of Georgia LLC, respectively.
On November 23, 1999 QUAESTUS Management Corporation and the Company
entered into a Sublease Agreement as co-sublessees, which provides for the use
of a 1989 Cessna Citation III model aircraft. QUAESTUS Management Corporation
and the Company are obligated to pay the sublessor rent of $62.5 per month, plus
an hourly rate for each hour of flight. QUAESTUS Management Corporation acts as
the manager of the aircraft, hiring pilots, arranging for maintenance and
scheduling usage. Expenses for the use of the aircraft are billed to the Company
based upon the percentage of hours of Company use. QUAESTUS Management
Corporation also has an option to purchase the aircraft as of December 31, 2000.
On February 2, 2000 the Company loaned each of Mr. Weening and Mr. Dickey
$4,992, respectively for the purpose of enabling Mr. Weening and Mr. Dickey to
purchase 128,000 shares of newly issued shares of Class C Common Stock from the
Company. The price of the shares was $39.00 each which was the approximate
market price for the Company's Class A Common Stock on that date. The loans are
represented by recourse promissory notes executed by each of Mr. Weening and Mr.
Dickey which provide for the payment of interest at the greater of 9.0% or the
maximum rate paid by the Company under its Credit Facility. Interest accrues on
the notes from February 2, 2000 through December 31, 2003 and is payable on that
date. All accrued and unpaid interest and the principal amount of the loans are
due and payable in a lump sum on December 31, 2003.
One of the Company's Directors is Mr. Ralph B. Everett. Mr. Everett is a
partner with the Washington, D.C. office of the law firm of Paul, Hastings,
Janofsky & Walker LLP, where he heads the Firm's Federal Legislative Practice
Group. The Company also engages the law firm of Paul, Hastings, Janofsky &
Walker LLP on numerous matters dealing with compliance with federal regulations
and corporate finance activities. Total expenses paid to Paul, Hastings,
Janofsky & Walker LLP during fiscal 1999 and 1998 were approximately $2,120 and
$1,190. Of these expenses paid in 1999 and 1998, $1,969 and $1,131 were
capitalized as acquisition or financing costs. The remaining expenses have been
included as part of the corporate general and administrative expenses in the
statement of operations. At December 31, 1999 and 1998 amounts payable to Paul,
Hastings, Janofsky & Walker LLP were approximately $267 and $642.
One of the Company's Directors is Eric P. Robison. Since January 1994, Mr.
Robison has worked for Vulcan Northwest, Inc., the holding company that manages
all personal and business interests for investor Paul G. Allen. In this role Mr.
Robison serves as a Business Development Associate for Vulcan Ventures, Inc.,
the venture fund division of Vulcan and investigates and secures investment
opportunities. In September 1999 the Company retained Mr. Robison to provide
consulting services relating to the development of the Cumulus Internet Services
Inc. business plan. During 1999 and 1998, the Company paid Mr. Robison $10 and
$0 respectively for consulting services.
52
<PAGE> 53
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K
<TABLE>
<S> <C> <C>
(a) 1. Index to Financial Statements
Report of Independent Accountants
2.
Financial Statements and Financial Statement Schedule
3.
The Financial Statements and Financial Statement Schedule
listed in
the index to Consolidated Financial Statements of Cumulus
Media
Inc. that appear on page F1 of this Report on Form 10-K are
filed
as a part of this Report.
Exhibits
4.
The exhibits to this Report on Form 10-K are listed under
item 14(c) below.
(b) Not Applicable
(c) Exhibits:
</TABLE>
<TABLE>
<CAPTION>
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
<C> <S>
2.1* Local Programming and Marketing Agreement dated December 17,
1997 between Cumulus Broadcasting, Inc. and New Frontier
Communications, Inc.
2.2* Local Programming and Marketing Agreement dated January
1,1998 between Cumulus Broadcasting, Inc. and Westwind
Broadcasting, Inc.
2.3* Local Marketing Agreement dated February 10, 1998 between
Cumulus Broadcasting, Inc. and Wiskes/Abaris Communications
KQIZ Partnership.
2.4* Time Brokerage Agreement dated December 15, 1997 between
Cumulus Broadcasting, Inc. and Clearly Superior Radio, LLC.
2.5* Local Marketing Agreement dated February 16, 1998 between
Cumulus Broadcasting, Inc. and Lyle Evans d/b/a Brillion
Radio Company.
2.6* Program Service and Time Brokerage Agreement dated October
31, 1997 between Cumulus Broadcasting, Inc. and Tallahassee
Broadcasting Company.
2.7* Local Marketing Agreement dated January 14, 1998 between
Cumulus Broadcasting, Inc. and Savannah Communications LP.
2.8* Local Programming and Marketing Agreement dated December 23,
1997 between Cumulus Broadcasting, Inc. and Lewis
Broadcasting Corporation.
2.9* Local Marketing Agreement dated February 16, 1998 between
Cumulus Broadcasting, Inc. And Jon A. LeDuc.
2.10* Program Services and Time Brokerage Agreement dated February
12, 1998 between Cumulus Broadcasting, Inc. and Pamplico
Broadcasting, LP.
2.11* Asset Purchase Agreement dated December 1, 1997 among
Cumulus Broadcasting, Inc., Cumulus licensing Corporation
and West Jewell Management, Inc.
2.12* Asset Purchase Agreement dated October 30, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
and KIKR Inc.
2.13* Asset Purchase Agreement dated December 5, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
and Wiskes/Abaris Communications KQIZ Partnership
2.14* Asset Purchase Agreement dated January 30, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Pacific Broadcasting of Beaumont, Inc., Beaumont Skyware
Inc., and Richard Dames.
2.15* Asset Purchase Agreement dated December 30, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
and Sovereign Communications Corporation.
</TABLE>
53
<PAGE> 54
<TABLE>
<CAPTION>
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
<C> <S>
2.16* Asset Purchase Agreement dated December 19, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Tryon-Seacoast Communications, Inc., Seacoast Broadcasting,
Inc., and Kennebec-Tryon Communications Corp.
2.17* Asset Purchase Agreement dated February 18, 1998 among
Cumulus Broadcasting. Inc. Cumulus Licensing Corporation,
and George H. Buck. Jr. d/b/a WHSC Radio.
2.18* Asset Purchase Agreement dated February 12, 1998 among
Cumulus Broadcasting. Inc., Cumulus Licensing Corporation
and Pamplico Broadcasting, LP.
2.19* Asset Purchase Agreement dated October 8. 1997 among Cumulus
Broadcasting Inc., Cumulus Licensing Corporation, Connor FM
Broadcasting Co., Connor Broadcasting Corp., J. Parker
Connor and Susan C. Connor.
2.20* Stock Purchase Agreement dated December 17, 1997 among
Cumulus Holdings, Inc., Tommy R. Vascocu, Elizabeth L.
Young, Michael L. Owens, Alan Owens, Robert Podolsky, Larry
Daniels, Sonja Erskine, and Jeffrey D. Erskine.
2.21* Stock Purchase Agreement dated February 17, 1998 among
Cumulus Holdings, Inc. and John M. Borders, Don L. Turner,
Jerry Goos and Kan-D Land, Inc.
2.22* Asset Purchase Agreement dated December 15, 1997 among
Cumulus Broadcasting Inc., Cumulus Licensing Corporation,
Clearly Superior Radio. L.L.C., 3-D Communications
Corporation and Dennis F. Doelitzsch.
2.23* Asset Purchase Agreement dated February 12, 1998 among
Cumulus Broadcasting. Inc., Cumulus Licensing Corporation
and Lyle R. Evans d/b/a Brillion Radio Company.
2.24* Asset Purchase Agreement dated January 14, 1998 among
Cumulus Broadcasting Inc., Cumulus Licensing Corporation and
Savannah Communications, LP.
2.25* Asset Purchase Agreement dated December 23, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Lewis Broadcasting Corporation.
2.26* Asset Purchase Agreement dated February 12, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Jon A. LeDuc and American Communications Company, Inc.
2.27* Asset Purchase Agreement dated January 27,1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, Lesnick
Communications, Inc. and Mrs. Betty Carey.
2.28* Asset Purchase Agreement dated October 29, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Big Country Broadcasting, Inc., and Tye Broadcasting, Inc.
2.29* Asset Purchase Agreement dated October 29, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Arbor Radio, LP.
2.30* Asset Purchase Agreement dated March 5, 1997 between Wilks
Broadcasting Acquisitions, Inc. and Cumulus Media, LLC.
2.31* Asset Purchase Agreement dated August 15, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and M & M
Partners.
2.32* Stock Purchase Agreement dated October 16, 1997 between
Cumulus Holdings, Inc. and Philip T. Kelly.
2.33* Stock Purchase Agreement dated November 7, 1997 between
Cumulus Holdings, Inc. and James Maurer.
2.34* Asset Purchase Agreement dated October 29, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
Carolina Broadcasting. Inc., and Georgetown Radio, Inc.
2.35* Asset Purchase Agreement dated October 9, 1997 among
Seacoast Radio Company, LLC., Cumulus Broadcasting, Inc. and
Cumulus Licensing Corporation.
2.36* Asset Purchase Agreement dated October 9, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and Sunny
Broadcasters, Inc.
</TABLE>
54
<PAGE> 55
<TABLE>
<CAPTION>
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
<C> <S>
2.37* Asset Purchase Agreement dated June 26, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, Venice
Michel and Venice Broadcasting Corporation.
2.38* Agreement of Sale dated September 4, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Medical College of Georgia Foundation.
2.39* Program Service and Time Brokerage Agreement dated August
18, 1997 between Cumulus Broadcasting, Inc. and Tally Radio,
LLC.
2.40* Asset Purchase Agreement dated August 18, 1997 among Tally
Radio, LLC and Cumulus Broadcasting, Inc. and Cumulus
Licensing Corporation.
2.41* Asset Purchase Agreement dated August 18, 1997 among HVS
Partners and Cumulus Broadcasting, Inc. and Cumulus
Licensing Corporation.
2.42* Asset Purchase Agreement dated August 25, 1997 among HVS
Partners and Cumulus Broadcasting, Inc. and Cumulus
Licensing Corporation.
2.43* Letter Agreement dated January 16, 1998 between Benchmark
Radio Acquisition Fund IV Limited Partnership, Cumulus
Broadcasting, Inc. and Cumulus Licensing Corp.
2.44* WZNY Agreement of Sale dated September 4, 1997 among George
G. Weiss and Cumulus Broadcasting, Inc. and Cumulus
Licensing Corporation.
2.45* Asset Purchase Agreement dated May 1, 1997 between HVS
Partners and Cumulus Media, LLC.
2.46* Asset Purchase Agreement dated April 30, 1997 among Hara
Broadcasting, Inc. and DLM Communications, Inc. and Cumulus
Media, LLC.
2.47* Asset Purchase Agreement dated June 24, 1997 among 62nd
Street Broadcasting of Toledo, LLC, 62nd Street Broadcasting
of Toledo License, LLC, 62nd Street Broadcasting, LLC,
Cumulus Broadcasting, Inc. and Cumulus Licensing
Corporation.
2.48* Local Marketing Agreement dated February 15, 1998 among
Cumulus Broadcasting, Inc., Pacific Broadcasting of
Beaumont, Inc., and Beaumont Skyware Inc.
2.49* Local Marketing Agreement dated December 31, 1997 between
Cumulus Broadcasting, Inc. and Sovereign Communications
Corporation and Madison Radio Group Inc.
2.50* Asset Purchase Agreement dated March 23, 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Communications Corporation.
2.51* Purchase Agreement dated November 20, 1996 between IQ Radio,
Inc. and Taylor Country Broadcasting, Inc.
2.52* Assignment and Assumption Agreement dated January 20, 1998
among Taylor Country Broadcasting, Inc., Cumulus Licensing
Corp. and Cumulus Broadcasting, Inc.
2.53* Asset Purchase Agreement dated January 2, 1997 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Westwind Broadcasting Inc.
2.54* Asset Purchase Agreement dated March 16, 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and P and
T Broadcasting, Inc.
2.55* Asset Purchase Agreement dated March 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Crystal Radio Group, Inc.
2.56* Asset Purchase Agreement dated March 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Ocmulgee Broadcasting Co., Inc.
2.57* Local Marketing Agreement dated March 16, 1998 between
Cumulus Broadcasting, Inc. and Phoenix Broadcast Partners,
Inc.
2.58* Asset Purchase Agreement dated February 1997 between Cumulus
Media, LLC and Value Radio Corporation
(WVBO-FM/WOSH-FM/WOGB-FM).
</TABLE>
55
<PAGE> 56
<TABLE>
<CAPTION>
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
<C> <S>
2.59* Asset Purchase Agreement dated February 1997 between Cumulus
Media, LLC and Value Radio Corporation (WUSW-FM/WNAM-AM).
2.60* Asset Purchase Agreement dated February 26, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Mustang Broadcasting Company.
2.61* Asset Purchase Agreement dated March 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, Robert
Brooks d/b/a Brooks Broadcasting Company and K-Country, Inc.
2.62* Asset Purchase Agreement dated March 24, 1998 among WSEA,
Inc., Cumulus Broadcasting, Inc., and Cumulus Licensing
Corporation.
2.63* Asset Purchase Agreement dated March 30, 1998 among Cumulus
Broadcasting Inc., Cumulus Licensing Corporation and
Mountain Wireless, Inc.
2.64* Asset Purchase Agreement dated February 5, 1998 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation
and Castle Broadcasting Limited Partnership.
2.65* Asset Purchase Agreement dated March 5, 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, Missouri
River Broadcasting, Inc. and JKJ Broadcasting, Inc.
2.66* Asset Purchase Agreement dated March 11, 1998 among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation and
Clarendon Country Broadcasting, Co., Inc.
2.67* Asset Purchase Agreement dated April 1998, among Cumulus
Broadcasting, Inc., Cumulus Licensing Corporation, and
Phoenix Broadcast Partners, Inc.
2.68* Stock Purchase Agreement dated January 9, 1998 between
Cumulus Holdings, Inc. and Robert Lowder.
2.69* Asset Purchase Agreement dated February 19, 1997 among
Cumulus Broadcasting, Inc., Cumulus Licensing Corporation,
James Ingstad Broadcasting, Inc., Hometown Wireless, Inc.,
Radio Iowa Broadcasting, Inc. and Ingstad Mankato, Inc.
3.1* Articles of Incorporation of Cumulus Media Inc.
3.2* Forum of Amended and Restated Articles of Incorporation of
Cumulus Media Inc.
3.3* Bylaws of Cumulus Media Inc.
3.4* Form of Amended and Restated Bylaws of Cumulus Media Inc.
3.5* Form of Certificate of Designation with respect to Series A
Cumulative Exchangeable Redeemable Preferred Stock Due 2009.
3.6* Articles of Incorporation of Forjay Broadcasting
Corporation.
3.7* Bylaws of Forjay Broadcasting Corporation.
3.8* Articles of Incorporation of Minority Radio Associates, Inc.
3.9* Bylaws of Minority Radio Associates, Inc.
3.10* Memorandum of Association of GEM Radio Five Ltd.
3.11* Articles of Association of GEM Radio Five Ltd.
3.12* Memorandum of Association of Caribbean Communications
Company Limited.
3.13* Articles of Association of Caribbean Communications Company
Limited.
3.14* Articles of Incorporation of Forjay Licensing Corp.
3.15* Bylaws of Forjay Licensing Corp.
3.16* Articles of Incorporation of MRA Licensing Corp.
3.17* Bylaws of MRA Licensing Corp.
3.18* Articles of Incorporation of Cumulus Broadcasting, Inc.
3.19* Bylaws of Cumulus Broadcasting, Inc.
3.20* Articles of Incorporation of Cumulus Licensing Corp.
</TABLE>
56
<PAGE> 57
<TABLE>
<CAPTION>
NO. DESCRIPTION OF EXHIBIT
--- ----------------------
<C> <S>
3.21* Bylaws of Cumulus Licensing Corp.
3.22* Form of Class A Common Stock Certificate.
3.23* Form of Series A Preferred Stock Certificate.
10.1* Credit Facility dated March 2, 1998 among Cumulus Media
Inc., Lehman Brothers Inc. and Lehman Commercial Paper Inc.
10.2* First Amendment, dated May 1, 1998, to the Credit Facility
among Cumulus Media Inc., Lehman Brothers Inc. and Lehman
Commercial Paper.
10.3* Second Amendment dated June 24, 1998, to the Credit Facility
among Cumulus Media Inc., Lehman Brothers Inc. and Lehman
Commercial Paper.
10.4* Form of Indenture dated July 1, 1998 between Cumulus Media
Inc. and Firstar Bank of Minnesota, N.A., as Trustee
10.5* Form of Exchange Debenture Indenture, dated July 1, 1998
between Cumulus Media Inc. and U.S. Bank Trust National
Association, as Trustee
10.6* Form of Employment Agreement between Cumulus Media Inc. and
Richard W. Weening
10.7* Form of Employment Agreement between Cumulus Media Inc. and
Lewis W. Dickey, Jr.
10.8* Employment Agreement between Cumulus Media Inc. and William
M. Bungeroth
10.9* Employment Agreement between Cumulus Media Inc. and Richard
J. Bonick, Jr.
10.10* Form of Cumulus Media Inc. 1998 Employee Stock Incentive
Plan
10.11* Form of Cumulus Media Inc. 1998 Executive Stock Incentive
Plan
10.12* Services Agreement dated May 1, 1998 by and between QUAESTUS
Management Corporation and Cumulus Media Inc.
10.13* Services Agreement dated March 23, 1998 between Stratford
Research, Inc. and Cumulus Media Inc.
12.1** Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividend Requirements
13.1* Form 10-Q filed on November 16, 1998
13.2* Annual Report to Shareholders
21.1* Subsidiaries of the Company
23.1** Consent of PricewaterhouseCoopers LLP
24.1* Powers of Attorney, included on page 11.6
27.1** Financial Data Schedule
99.1* Affidavit to dispense with consent of certain directors
</TABLE>
-------------------------
* Incorporated by reference to the Form S-1 Registration Statement declared
effective on June 26, 1998
** Filed herewith
*** All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
57
<PAGE> 58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 26th day of
May, 2000.
CUMULUS MEDIA INC.
By /s/ DANIEL O'DONNELL
------------------------------------
Daniel O'Donnell
Vice President, Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RICHARD W. WEENING Executive Chairman and Treasurer, and May 26, 2000
------------------------------------------ Director (Principal Executive Officer)
Richard W. Weening
/s/ LEWIS W. DICKEY, JR. Executive Vice Chairman and Director May 26, 2000
------------------------------------------
Lewis W. Dickey, Jr.
/s/ DANIEL O'DONNELL Vice President, Finance May 26, 2000
------------------------------------------ (Principal Financial Officer)
Daniel O'Donnell
/s/ ROBERT H. SHERIDAN, III Director May 26, 2000
------------------------------------------
Robert H. Sheridan, III
/s/ ERIC P. ROBISON Director May 26, 2000
------------------------------------------
Eric P. Robison
/s/ RALPH E. EVERETT Director May 26, 2000
------------------------------------------
Ralph E. Everett
</TABLE>
58
<PAGE> 59
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Cumulus Media Inc. are
included in Item 8:
<TABLE>
<CAPTION>
PAGE IN THIS
REPORT
------------
<S> <C>
(1) Financial Statements
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets at December 31, 1999 and 1998... F-3
Consolidated Statements of Operations for the fiscal years
ended December 31, 1999 and December 31, 1998 and for the
period from inception on May 22, 1997 to December 31,
1997...................................................... F-4
Consolidated Statements of Stockholders' Equity for the
fiscal years ended December 31, 1999 and 1998 and for the
period from inception on May 22, 1997 to December 31,
1997...................................................... F-5
Consolidated Statements of Cash Flows for the fiscal years
ended December 31, 1999 and December 31, 1998 and for the
period from inception on May 22, 1997 to December 31,
1997...................................................... F-6
Notes to Consolidated Financial Statements.................. F-7
(2) Financial Statement Schedule
Schedule II: Valuation and Qualifying Accounts.............. F-24
</TABLE>
F-1
<PAGE> 60
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE STOCKHOLDERS OF CUMULUS MEDIA INC.
In our opinion, the consolidated financial statements listed in the index
on page F-1, after the restatement described in Note 1, present fairly, in all
material respects, the financial position of Cumulus Media Inc. and subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the years in the period ended December 31, 1999 and 1998
and for the period from inception (May 22, 1997) through December 31, 1997 in
conformity accounting principles generally accepted in the United States. In
addition, in our opinion, the financial statement schedule listed in the index
on page F-1 presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, Cumulus
Media Inc. has restated previously issued consolidated financial statements to
change its accounting for deferred taxes.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
April 13, 2000
F-2
<PAGE> 61
CUMULUS MEDIA INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
RESTATED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................. $219,581 $ 24,885
Accounts receivable, less allowance for doubtful accounts
of $3,118 and $895 respectively........................ 53,521 28,056
Prepaid expenses and other current assets................. 8,351 2,808
-------- --------
Total current assets................................... 281,453 55,749
Property and equipment, net................................. 66,963 41,438
Intangible assets, net...................................... 530,052 404,220
Other assets................................................ 39,688 16,224
-------- --------
Total assets........................................... $918,156 $517,631
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses..................... $ 26,540 $ 19,028
Current portion of long-term debt......................... 20 20
Other current liabilities................................. 1,010 768
-------- --------
Total current liabilities.............................. $ 27,570 $ 19,816
Long-term debt.............................................. 285,227 222,747
Other liabilities........................................... 1,977 1,118
Deferred income taxes....................................... 8,940 9,387
-------- --------
Total liabilities...................................... 323,714 253,068
-------- --------
Series A Cumulative Exchangeable Redeemable Preferred Stock
due 2009, stated value $1,000 per share, 102,702 and
129,296 shares issued and outstanding, respectively....... 102,732 133,741
Commitments and Contingencies (Note 11)
Stockholders' equity:
Class A common stock, par value $.01 per share;
100,000,000 shares authorized; 26,052,393 and 8,700,504
shares issued and outstanding.......................... 261 87
Class B common stock, par value $.01 per share; 20,000,000
shares authorized; 6,629,343 and 8,660,416 shares
issued and outstanding................................. 66 87
Class C common stock, par value $.01 per share; 30,000,000
shares authorized; 2,151,277 and 2,376,277 shares
issued and outstanding................................. 21 24
Additional paid-in-capital................................ 516,576 142,211
Accumulated other comprehensive income.................... -- 5
Accumulated deficit....................................... (25,214) (11,592)
-------- --------
Total stockholders' equity.................................. 491,710 130,822
-------- --------
Total liabilities and stockholders' equity................ $918,156 $517,631
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-3
<PAGE> 62
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
FROM THE PERIOD
RESTATED FROM INCEPTION ON
YEAR ENDED YEAR ENDED MAY 22, 1997 TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues..................................... $194,940 $108,172 $10,134
Less: agency commissions..................... (14,921) (9,385) (971)
-------- -------- -------
Net Revenues............................... 180,019 98,787 9,163
Operating expenses:
Station operating expenses, excluding
depreciation, amortization and LMA fees.... 133,328 72,154 7,147
Depreciation and amortization................ 32,564 17,180 1,671
LMA fees..................................... 4,165 2,404 --
Corporate general and administrative expenses
(excluding $1,689 of non-cash stock
compensation expense shown below).......... 8,204 5,607 1,276
Non-cash stock compensation expense.......... -- -- 1,689
-------- -------- -------
Operating expenses........................... 178,261 97,345 11,783
Operating income (loss)...................... 1,758 1,442 (2,620)
-------- -------- -------
Nonoperating income (expense):
Interest expense............................. (27,041) (15,551) (992)
Interest income.............................. 4,164 2,373 155
Other income (expense), net............. 627 (2) (54)
-------- -------- -------
Nonoperating expenses, net................... (22,250) (13,180) (891)
-------- -------- -------
Loss before income taxes..................... (20,492) (11,738) (3,511)
Income tax expense........................... (6,870) (4,828) 67
-------- -------- -------
Loss before extraordinary item............... (13,622) (6,910) (3,578)
Extraordinary loss on early extinguishment of
debt....................................... -- (1,104) --
-------- -------- -------
Net loss..................................... (13,622) (8,014) (3,578)
Preferred stock dividend, accretion of
discount, and redemption premium........... 23,790 13,591 274
-------- -------- -------
Net loss attributable to common
stockholders............................... $(37,412) $(21,605) $(3,852)
======== ======== =======
Basic and diluted loss per share............. $ (1.50) $ (1.34) $ (0.31)
======== ======== =======
Average shares outstanding................... 24,938 16,085 12,509
-------- -------- -------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-4
<PAGE> 63
CUMULUS MEDIA, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
----------------- ------------------- ------------------ ----------------- ADDITIONAL
NUMBER OF PAR NUMBER OF PAR NUMBER OF PAR NUMBER OF PAR PAID-IN
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE CAPITAL
--------- ----- --------- ----- --------- ----- --------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock......... 1,000 -- -- $ -- -- $ -- -- $-- $ 52,748
Comprehensive income (cumulative
translation adjustment)........ -- -- -- -- -- -- -- -- --
Preferred and common stock
offering costs................. -- -- -- -- -- -- -- -- (614)
Preferred stock dividend and
acretion of discount........... -- -- -- -- -- -- -- -- (274)
Non-cash stock compensation...... -- -- -- -- -- -- -- -- 1,689
Net loss......................... -- -- -- -- -- -- -- -- --
------ -- ----------- ---- ---------- ---- --------- --- --------
Balance at December 31, 1997..... 1,000 -- -- $ -- -- $ -- -- $-- $ 53,549
====== == =========== ==== ========== ==== ========= === ========
Capital contribution............. -- -- -- -- -- -- -- -- 15,211
Preferred stock dividend and
accretion of discount.......... -- -- -- -- -- -- -- -- (13,591)
Reorganization concurrent with
IPO............................ (1,000) -- 1,346,932 14 -- -- -- -- --
Proceeds from IPO................ -- -- 7,228,572 72 8,785,416 88 2,376,277 24 101,003
Preferred and common stock
offering costs................. -- -- -- -- -- -- -- -- (13,961)
Share exchange................... -- -- 125,000 1 (125,000) (1) -- -- --
Net loss......................... -- -- -- -- -- -- -- -- --
------ -- ----------- ---- ---------- ---- --------- --- --------
Restated balance at December 31,
1998........................... -- -- 8,700,504 $ 87 8,660,416 $ 87 2,376,277 $24 $142,211
====== == =========== ==== ========== ==== ========= === ========
Capital contribution............. -- -- 27,580 -- -- -- -- 384
Preferred stock dividend......... -- -- -- -- -- -- -- -- (17,776)
Proceeds from follow-on
offerings...................... -- -- 14,915,600 149 -- -- -- -- 416,244
Common stock offering costs...... -- -- -- -- -- -- -- -- (23,337)
Redemption of preferred stock.... -- -- -- -- -- (6,014)
Stock issued for acquisition..... -- -- 152,636 2 -- -- -- -- 4,864
Share exchange................... -- -- 2,256,073 23 (2,031,073) (21) (225,000) (3) --
Other comprehensive income....... -- -- -- -- -- -- -- -- --
Net loss......................... -- -- -- -- -- -- -- -- --
------ -- ----------- ---- ---------- ---- --------- --- --------
Balance at December 31, 1999..... -- -- 26,052,393 $261 6,629,343 $ 66 2,151,277 $21 $516,576
====== == =========== ==== ========== ==== ========= === ========
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE ACCUMULATED COMPREHENSIVE
INCOME DEFICIT LOSS
------------- ----------- -------------
<S> <C> <C> <C>
Issuance of common stock......... $-- $ -- $ --
Comprehensive income (cumulative
translation adjustment)........ 5 -- 5
Preferred and common stock
offering costs................. -- -- --
Preferred stock dividend and
acretion of discount........... -- -- --
Non-cash stock compensation...... -- -- --
Net loss......................... -- (3,578) (3,578)
--- -------- --------
Balance at December 31, 1997..... $ 5 $ (3,578) $ (3,573)
=== ======== ========
Capital contribution............. -- -- --
Preferred stock dividend and
accretion of discount.......... -- -- --
Reorganization concurrent with
IPO............................ -- -- --
Proceeds from IPO................ -- -- --
Preferred and common stock
offering costs................. -- -- --
Share exchange................... -- -- --
Net loss......................... -- (8,014) (8,014)
--- -------- --------
Restated balance at December 31,
1998........................... $ 5 $(11,592) $ (8,014)
=== ======== ========
Capital contribution............. -- -- --
Preferred stock dividend......... -- -- --
Proceeds from follow-on
offerings...................... -- -- --
Common stock offering costs...... -- -- --
Redemption of preferred stock.... -- -- --
Stock issued for acquisition..... -- -- --
Share exchange................... -- -- --
Other comprehensive income....... (5) -- (5)
Net loss......................... -- (13,622) (13,622)
--- -------- --------
Balance at December 31, 1999..... $-- $(25,214) $(13,627)
=== ======== ========
</TABLE>
F-5
<PAGE> 64
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
RESTATED FROM INCEPTION ON
YEAR ENDED YEAR ENDED MAY 22, 1997 TO
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................... $ (13,622) $ (8,014) $ (3,578)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Extraordinary loss on early
extinguishment of debt................ -- 1,104 --
Depreciation............................ 8,123 3,590 391
Amortization of goodwill, intangible
assets and other assets............... 25,617 13,590 1,064
Deferred taxes.......................... (6,983) (4,954) --
Non-cash stock compensation............. -- -- 1,689
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable..................... (25,557) (21,274) (4,546)
Prepaid expenses and other current
assets................................ (2,375) (2,361) (235)
Accounts payable and accrued expenses... 6,725 14,216 3,401
Other assets............................ (2,136) (300) (166)
Other liabilities....................... (3,436) (250) 93
--------- --------- --------
Net cash used in operating
activities....................... (13,644) (4,653) (1,887)
--------- --------- --------
Cash flows from investing activities:
Acquisitions............................... (152,737) (342,845) (91,289)
Escrow deposits on pending acquisitions.... (19,446) (1,335) (1,999)
Capital expenditures....................... (18,561) (6,649) (869)
Other...................................... (1,361) (196) (943)
--------- --------- --------
Net cash used by investing
activities....................... (192,105) (351,025) (95,100)
--------- --------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit..... 176,950 175,000 74,525
Payments on revolving line of credit....... (114,450) (155,035) (31,990)
Proceeds from sale of senior subordinated
notes................................... -- 160,000 --
Payments for debt issuance costs........... (4,209) (9,870) (1,754)
Payments on promissory notes............... (21) (278) (4)
Proceeds from issuance of preferred
stock................................... -- 106,724 13,152
Payments for redemption of preferred
stock................................... (51,269) -- --
Proceeds from issuance of common stock..... 416,781 116,527 45,245
Payments for preferred and common stock
offering costs.......................... (23,337) (14,078) (614)
--------- --------- --------
Net cash provided by financing
activities....................... 400,445 378,990 98,560
--------- --------- --------
Increase in cash and cash equivalents........ 194,696 23,312 1,573
Cash and cash equivalents at beginning of
period..................................... 24,885 1,573 --
--------- --------- --------
Cash and cash equivalents at end of period... $ 219,581 $ 24,885 $ 1,573
========= ========= ========
Supplemental disclosures of cash information:
Interest paid.............................. $ 25,723 $ 7,258 $ 25
Taxes paid................................. 112 26 --
Non-cash operating and financing activities:
Trade revenue.............................. 10,578 6,226 757
Trade expense.............................. 10,301 6,157 712
Assets acquired through notes payable...... 6,268 2,065 520
Liabilities assumed through acquisitions... 456 942 --
Capital contribution from Cumulus Media
LLC..................................... -- 15,136 7,503
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-6
<PAGE> 65
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Restatement of 1998 Financial Statements
Subsequent to the end of 1999, the Company determined as part of its year
end tax review, that due to the existence of offsetting deferred tax liabilities
the valuation allowance against deferred taxes established in 1998 was not
required. As a result, the Company has restated its results for 1998 and
recorded a tax benefit for the year ended December 31, 1998 in the amount of
$4.9 million.
The following table reconciles the amounts previously reported to the
amounts currently being reported in the consolidated statements of operations
for the year ended December 31, 1998:
<TABLE>
<CAPTION>
EXTRAORDINARY
LOSS TAX NET LOSS LOSS ON EARLY LOSS
BEFORE PROVISION BEFORE EXTINGUISHMENT OF NET PER
TAXES (BENEFIT) EXTRAORDINARY ITEM DEBT LOSS SHARE
-------- --------- ------------------ ----------------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
1998
As previously reported..... $(11,738) $ 126 $(11,864) $(1,837) $(13,701) $(1.70)
Restatement associated with
elimination of deferred
tax asset valuation
allowance................ -- $(4,954) $ 4,954 $ 733 $ 5,687 $ 0.36
-------- ------- -------- ------- -------- ------
As restated................ $(11,738) $(4,828) $ (6,910) $(1,104) $ (8,014) $(1.34)
======== ======= ======== ======= ======== ======
</TABLE>
Description of Business
Cumulus Media Inc., ("Cumulus" or the "Company") is a radio broadcasting
corporation incorporated in the state of Illinois on May 22, 1997 focused on
acquiring, operating and developing commercial radio stations in mid-size radio
markets in the United States and the Eastern Caribbean.
Principles of Consolidation
The consolidated financial statements include the accounts of Cumulus and
its wholly owned subsidiaries. Significant intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all cash balances and highly liquid investments with
original maturities of three months or less to be cash and cash equivalents.
Concentration of Credit Risks
In the opinion of management, credit risk with respect to accounts
receivable is limited due to the large number of diversified customers and the
geographic diversification of the Company's customer base. The Company performs
ongoing credit evaluations of its customers and believes that adequate
allowances for any uncollectible accounts receivable are maintained.
F-7
<PAGE> 66
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
Intangible Assets and Valuation of Long Lived Assets
Intangible assets consist primarily of broadcast licenses, goodwill and
other identifiable intangible assets. The Company amortizes such intangible
assets using the straight-line method over their estimated useful lives. The
Company evaluates the carrying value of broadcast licenses, goodwill and other
intangible assets in relation to the projected future undiscounted net cash
flows, in order to determine if an impairment has occurred. The Company
evaluates the carrying value of intangible assets, when events and circumstances
warrant such a review. The carrying value of intangible assets is considered
impaired when the anticipated undiscounted cash flow from such asset is
separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the asset. Intangible assets to be disposed are reported at
the lower of carrying amount or fair value less cost to sell.
Software Development Costs
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-1
("SOP 98-1"),"Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." This standard requires companies to capitalize
qualifying computer software costs and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. During 1999, the Company capitalized $2,419 of software
development costs in connection with the adoption of the statement.
Organization Costs
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, which became effective for 1999,
requires organization costs to be expensed as incurred. The Company's adoption
of SOP 98-5 in 1999 had an immaterial effect on the results of operations.
Debt Issuance Costs
The costs related to the issuance of debt are capitalized and amortized to
interest expense over the life of the related debt. During the periods ended
December 31, 1999, 1998 and 1997, the Company recognized amortization expense of
debt issuance costs of approximately $672, $210 and $65 respectively.
Revenue Recognition
Revenue is derived primarily from the sale of commercial air-time to local
and national advertisers. Revenue is recognized as commercials are broadcast.
Trade Agreements
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability is recorded at the fair market value of the goods or services
received. Trade revenue is recorded and the liability relieved when commercials
are broadcast and trade expense is recorded and the asset relieved when goods or
services are received or used.
Local Marketing Agreements
In certain circumstances, the Company enters into a local marketing
agreement ("LMA") or time brokerage agreement with a Federal Communications
Commission licensee of a radio station. In a typical
F-8
<PAGE> 67
LMA, the licensee of the station makes available, for a fee, airtime on its
station to a party, which supplies programming to be broadcast on that airtime,
and collects revenues from advertising aired during such programming.
Stock-based Compensation
The Company applies Accounting Principles Board (APB) Opinion 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for stock issued to employees as defined by APB No. 25. In addition,
the Company applies Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock Based Compensation", for stock issued to individuals or
groups other than employees.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts based on enacted tax laws and statutory tax rates.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount more likely than not to be realized.
Earnings Per Share
The calculation of basic and diluted loss per share was determined by
dividing net loss attributable to common stockholders by the average number of
shares outstanding after giving effect to the exchange of the Company's shares
by Cumulus Media, LLC for the initial public offering.
New Accounting Pronouncements
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income". Statement 130
establishes standards for the reporting and display of comprehensive income and
its components. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from nonowner sources, which are excluded from net income.
Statement 130 requires unrealized gains or losses on foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in comprehensive income. The adoption of
this Statement had no impact on net income or stockholders' equity.
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information". Statement 131 establishes new guidelines for identifying
and reporting information about an entity's operating segments. This standard
requires that management identify operating segments based upon the way
management disaggregates the enterprise for making internal operating decisions.
For the twelve months ending December 31, 1998, Company management has
maintained only one operating segment, radio broadcasting. As of and for the
year ended December 31, 1999 the Company's investments in and operations of
Cumulus Wireless Services Inc. and Cumulus Internet Services Inc. were
inconsequential to the overall operations of the Company. As a result, they have
not been accounted for as segments under this pronouncement. As the operations
of Cumulus Wireless Services Inc. and Cumulus Internet Services Inc. develop,
segment reporting may be required.
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.
F-9
<PAGE> 68
2. ACQUISITIONS AND DISPOSITIONS
The Company completed twenty-two, fifty-six and ten acquisitions of radio
stations for $159.0 million, $344.0 million and $99.1 million in cash and stock
during 1999, 1998 and 1997 respectively. The aggregate purchase price mentioned
above includes certain acquisition related costs incurred in 1999, 1998 and
1997.
On September 15, 1999, the Company acquired all of the assets of Broadcast
Software International, Inc. (BSI), a Eugene, Oregon-based developer of digital
audio software, for a total purchase price of $5.4 million in cash and stock.
BSI is a software development company specializing in digital audio applications
for broadcast radio and television as well as for Internet broadcasters. BSI
will operate as a subsidiary of Cumulus with operations remaining in its current
Eugene, Oregon headquarters.
The aforementioned acquisitions were accounted for by the purchase method
of accounting. As such, the accompanying consolidated balance sheet includes the
acquired assets and liabilities and the statement of operations includes the
results of operations of the acquired entities from their respective dates of
acquisition.
An allocation of the aggregate purchase prices to the estimated fair values
of the assets acquired and liabilities assumed is presented below.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Current assets, other than cash.................. $ 1,707 1,701 757
Property and equipment........................... 15,087 30,192 7,708
Other assets..................................... -- 625 --
Intangible assets................................ 149,203 327,516 91,121
Current liabilities.............................. (456) (942) (483)
Deferred liabilities............................. (6,536) (15,074) --
-------- -------- -------
$159,005 $344,018 $99,103
======== ======== =======
</TABLE>
The unaudited consolidated condensed pro forma results of operations data
for the twelve month periods ended December 31, 1999 and 1998 as if the
acquisitions had occurred on January 1, 1998 appears below:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Net revenues.................................. $253,234 $230,184
Operating income.............................. $ 16,272 $ 8,210
Net loss...................................... $ (2,395) $(11,943)
Net loss attributable to common
stockholders................................ $(26,185) $(25,534)
======== ========
Basic loss per common share (in dollars)...... $ (0.76) $ (0.73)
</TABLE>
Escrow funds of approximately $22.8 million and $3.3 million paid by the
Company in connection with pending acquisitions have been classified as other
assets at December 31, 1999 and December 31, 1998 respectively, in the
accompanying consolidated balance sheet.
During the twelve months ended December 31, 1999 and 1998, the Company
operated 114 and 31 stations under LMA's respectively. The statement of
operations for the years ended December 31, 1999 and 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 December 31.
F-10
<PAGE> 69
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE 1999 1998
--------------------- ---- ----
<S> <C> <C> <C>
Land..................................... $ 3,607 $ 3,059
Broadcasting and other equipment......... 3 to 7 years 55,730 28,820
Furniture and fixtures................... 5 years 6,361 4,661
Buildings and improvements............... 20 years 11,560 8,191
Construction in process.................. 1,809 688
-------- -------
79,067 45,419
Less accumulated depreciation............ (12,104) (3,981)
-------- -------
$ 66,963 $41,438
======== =======
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE 1999 1998
--------------------- ---- ----
<S> <C> <C> <C>
Broadcasting licenses and Goodwill...... 25 years $553,652 $406,010
Other intangibles....................... 2 to 5 years 13,984 11,785
-------- --------
567,636 417,795
Less accumulated amortization........... (37,584) (13,575)
-------- --------
$530,052 $404,220
======== ========
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Accounts payable........................................... $ 4,522 $ 1,960
Accrued compensation....................................... 830 934
Accrued royalties.......................................... 379 390
Accrued commissions........................................ 2,635 1,183
Accrued state income taxes................................. -- 152
Barter payable............................................. 1,584 1,326
Accrued professional fees.................................. 355 642
Due to seller of acquired companies........................ 1,325 1,142
Accrued interest........................................... 9,228 9,195
Preferred dividends payable................................ 3,530 --
Accrued equity offering cost............................... 371 --
Other...................................................... 1,781 2,104
------- -------
Total accounts payable and accrued expenses................ $26,540 $19,028
======= =======
</TABLE>
F-11
<PAGE> 70
6. LONG-TERM DEBT
The Company's long-term debt at December 31, 1999 and 1998 is summarized as
follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Term loan facility at 9.22% and 8.5%, respectively...... 125,000 62,500
Senior Subordinated Notes, 10 3/8%, due 2008............ 160,000 160,000
Other................................................... 247 267
-------- --------
285,247 222,767
Less: Current portion of long-term debt................. (20) (20)
-------- --------
$285,227 $222,747
======== ========
</TABLE>
A summary of the future maturities of long-term debt follows:
<TABLE>
<S> <C>
2000........................................................ $ 20
2001........................................................ 211
2002........................................................ 775
2003........................................................ 778
2004........................................................ 780
Thereafter.................................................. 282,683
--------
$285,247
========
</TABLE>
As of December 31, 1999, the Company had outstanding $160.0 million in
aggregate principal of its 10 3/8% Senior Subordinated Notes which have a
maturity date of July 1, 2008. The Senior Subordinated Notes are general
unsecured obligations of the Company and are subordinated in right of payment to
all existing and future senior debt of the Company (including obligations under
its credit facility). Interest on the Senior Subordinated Notes is payable
semi-annually in arrears.
Debt fees and offering costs are being amortized as interest expense over
eight years for the Credit Facility, and over 10 years, for the Notes. The
Company calculates the fair value of its debt using the present value of the
contractual interest and principal payment streams, at contractual
interest/coupon payment rates compared to market/trading rates and yields, as
published by the market makers in the Company's debt securities. At December 31,
1999 the carrying amount of the 10 3/8% Senior Subordinated Notes was $160.0
million, and the fair value approximated $179.0 million.
On August 31, 1999, the Company's existing $190.0 million senior credit
facility was amended and restated to provide for aggregate principal commitments
of $225 million. The amended facility consists of an eight-year term loan
facility of $75 million, an eight and one-half year term loan facility of $50
million, a seven-year revolving credit facility of $50 million and revolving
credit facility of $50 million that will 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
facility, the Company drew down $125 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.
The Company's obligations under its current 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., Cumulus
Internet Services Inc. and Cumulus Telecommunications, Inc., and 65% of the
capital stock of any first-tier foreign subsidiary. The obligations under the
credit facility are also guaranteed by each of the direct
F-12
<PAGE> 71
and indirect domestic subsidiaries, except Broadcast Software, Cumulus Internet
services and Cumulus Telecommunications, 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, 10.625% as of December
31, 1999) plus a margin ranging between 0.50% to 2.125%, or the Eurodollar Rate
(as defined under the terms of the credit facility, 6.17 % as of December 31,
1999) plus a margin ranging between 1.50% to 3.125% (in each case dependent upon
the leverage ratio of the Company). At December 31, 1999 the Company's effective
interest rate on term loan amounts outstanding under the credit facility was
9.22%.
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 2001. The scheduled annual amortization is $0.75 million for each
of the third, fourth, fifth, sixth and seventh years following closing and
$71.25 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 first revolving credit loan, upon conversion to a
seven-year term loan, is repayable in quarterly installments beginning in 2001.
The scheduled annual amortization is 10% of the initial aggregate principal
amount in each of the third and fourth years following closing, 15% of the
initial aggregate principal amount in each of the fifth and sixth years
following closing and the remaining 50% of the initial aggregate principal
amount in the seventh year following closing. The amount available under the
second revolving credit facility will be automatically reduced in quarterly
installments as described in the first paragraph above. 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 amended and restated 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, 1999, the Company was in compliance with such
financial and operating covenants. On April 12, 2000 the Company received a
waiver of certain technical requirements of the Credit Agreement related to the
requirement that the annual financial statements for fiscal 1998 previously
furnished to the Lenders pursuant to Section 6.1(a), and the quarterly financial
statements for the third and fourth fiscal quarters of fiscal 1998 and the
first, second and third fiscal quarters of fiscal 1999 previously furnished to
the Lenders pursuant Section 6.1(b), be complete and correct in all material
respects. The waiver was requested as a result of the restatement of its first,
second and third quarter of fiscal 1999 quarterly financial statements and the
determination subsequent to the end of 1999 as part of our year end tax review
that due to the existence of offsetting deferred tax liabilities the valuation
allowance against deferred tax assets established in 1998 was not required.
The terms of the 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
F-13
<PAGE> 72
and the majority of the banks under each revolving credit facility may terminate
such term loan facility and such revolving credit facility, respectively.
7. SERIES A PREFERRED STOCK AND COMMON STOCK
(a) Series A Preferred Stock
At December 31, 1999 and 1998 the Series A Cumulative Exchangeable
Redeemable Preferred Stock due 2009 disclosed on the balance sheet represents
102,702 and 129,286 shares outstanding (each with a $1,000 par value), plus
accrued dividends of $0 and $4,445, respectively. Accrued dividends of $3,530
are included in current liabilities as of December 31, 1999 and were paid in
cash on January 3, 2000. Accrued dividends at December 31, 1998 were paid in
additional shares of preferred stock on January 1, 1999.
On October 1, 1999, the Company redeemed 43,750 shares of its Series A
Preferred Stock for $51,270, including redemption premium of $6,014 and accrued
but unpaid dividends of $1,506.
On or before July 1, 2003, the Company may, at its option, pay dividends in
cash or in additional fully paid and non-assessable shares of Series A Preferred
Stock. After July 1, 2003, dividends may only be paid in cash. The shares of
Series A Preferred Stock are subject to mandatory redemption on July 1, 2009 at
a price equal to 100% of the liquidation preference plus any and all accrued and
unpaid cumulative dividends. The Series A Preferred Stock may be redeemed by the
Company prior to such date under certain circumstances
The Company calculates the fair value of the Series A Preferred Stock using
the present value of the contractual dividend and principal payment streams, at
contractual dividend rates compared to market trading rates, as published by the
market makers in the Company's Series A Preferred Stock. At December 31, 1999
the Company carrying amount of the Series A Preferred Stock was $102.7 million,
and the fair value approximated $148.5 million.
(b) Secondary Offerings
On July 27, 1999, the Company completed a follow-on public stock offering
selling 9,664,000 shares of its Class A Common Stock for $22.919 per share, net
of underwriter's discounts and commissions of $1.206 per share. The net proceeds
of the offering were approximately $221.5 million. In addition, on August 10,
1999 the U.S. underwriters exercised an option granted by the Company,
purchasing an additional 1,449,600 shares. Exercise of the option resulted in an
additional $33.2 million in net offering proceeds to the Company.
On November 18, 1999, the Company completed a follow-on public stock
offering selling 3,700,000 shares of its Class A Common Stock for $37.05 per
share, net of underwriter's discounts and commissions of $1.95 per share. The
net proceeds of the offering were approximately $137.1 million and will be used
to fund the Company's pending acquisitions. In addition, on December 6, 1999 the
U.S. underwriters exercised an option granted by the Company, purchasing an
additional 102,000 shares. Exercise of the option resulted in an additional $3.8
million in net offering proceeds to the Company.
(c) Stock Purchase Plan
1999 STOCK PURCHASE PLAN
On November 2, 1999, the Company's Board of Directors adopted and the
Company's shareholders approved the 1999 Employee Stock Purchase Plan. The 1999
Employee Stock Purchase Plan is designed to qualify for certain income tax
benefits for employees under the Section 423 of the Internal Revenue Code and
contains 1,000,000 shares of Class A Common Stock. The plan allows qualifying
employees to purchase Class A Common Stock at the end of each calendar year,
commencing with the calendar year beginning January 1, 1999, at 85% of the
lesser of the fair market value of the Class A Common Stock on the first and
last trading days of the year. The amount each employee can purchase is limited
to the lesser of (i) 15% of pay or (ii) $25,000 of stock value on the first
trading day of the year. An employee must be employed at least six months as of
the first trading day of the year in order to participate in the 1999 Employee
Stock Purchase Plan.
F-14
<PAGE> 73
(d) Stock Options
1999 STOCK INCENTIVE PLANS
On November 2, 1999, the Company's Board of Directors adopted and the
Company's shareholders approved the 1999 Stock Incentive Plan to provide
officers, other key employees and non-employee directors of the Company (other
than participants in the Company's Executive Plan described below), as well as
consultants to the Company, with additional incentives by increasing their
proprietary interest in the Company. An aggregate of 900,000 shares of Class A
Common Stock is subject to the 1999 Stock Incentive Plan, of which a maximum of
900,000 shares of Class A Common Stock is available to be awarded as incentive
stock options and a maximum of 100,000 shares of Class A Common Stock is
available to be awarded as restricted stock. In addition, subject to certain
equitable adjustments, no one person will be eligible to receive options for
more than 300,000 shares in any one calendar year and the maximum amount of
restricted stock, which will be awarded to any one person during any calendar
year, is $500,000.
The 1999 Stock Incentive Plan permits the Company to grant awards in the
form of stock options (including both incentive stock options that meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
and non-qualified stock options) and restricted shares of the Class A Common
Stock. All stock options awarded under the plan will be granted at an exercise
price of not less than fair market value of the Class A Common Stock on the date
of grant. No award will be granted under the 1999 Stock Incentive Plan after
August 30, 2009.
The 1999 Stock Incentive Plan is administered by the Compensation Committee
of the Board, which has exclusive authority to grant awards under the plan and
to make all interpretations and determinations affecting the plan. The
Compensation Committee has discretion to determine the individuals to whom
awards are granted, the amount of such award, any applicable vesting schedule,
whether awards vest upon the occurrence of a Change in Control (as defined in
the plan) and other terms of any award. The Compensation Committee may delegate
to certain senior officers of the Company its duties under the plan subject to
such conditions or limitations as the Compensation Committee may establish. Any
award made to a non-employee director must be approved by the Company's Board of
Directors. In the event of any changes in the capital structure of the Company,
the Compensation Committee will make proportional adjustments to outstanding
awards so that the net value of the award is not changed.
As of December 31, 1999, there are outstanding options to purchase a total
of 829,025 shares of Class A Common Stock exercisable at a price of $27.875 per
share under the 1999 Stock Incentive Plan. These options vest, in general, over
five years, with the possible acceleration of vesting for some options if
certain performance criteria are met. In addition, all options vest upon a
change of control as more fully described in the 1999 Stock Incentive Plan.
1998 STOCK INCENTIVE PLAN
During 1998, the Company's Board of Directors adopted the 1998 Stock
Incentive Plan. An aggregate of 1,288,834 shares of Class A Common Stock is
subject to the 1998 Stock Incentive Plan, of which a maximum of 1,288,834 shares
of Class A Common Stock are available to be awarded at subject to incentive
stock options and a maximum of 100,000 shares of Class A Common Stock is
available to be awarded as restricted stock. In addition, subject to certain
equitable adjustments, no one person will be eligible to receive options for
more than 300,000 shares in any one calendar year and the maximum amount of
restricted stock which will be awarded to any one person during any calendar
year is $500,000.
The 1998 Stock Incentive Plan permits the Company to grant awards in the
form of stock options (including both incentive stock options that meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
and non-qualified stock options) and restricted shares of the Class A Common
Stock. All stock options awarded under the plan will be granted at an exercise
price of not less than fair market value of the Class A Common Stock on the date
of grant. No award will be granted under the 1998 Stock Incentive Plan after
June 22, 2008.
F-15
<PAGE> 74
The 1998 Stock Incentive Plan is administered by the Compensation Committee
of the Board, which has exclusive authority to grant awards under the plan and
to make all interpretations and determinations affecting the plan. The
Compensation Committee has discretion to determine the individuals to whom
awards are granted, the amount of such award, any applicable vesting schedule,
whether awards vest upon the occurrence of a Change in Control (as defined in
the 1998 Stock Incentive Plan) and other terms of any award. The Compensation
Committee may delegate to certain senior officers of the Company its duties
under the plan subject to such conditions or limitations as the Compensation
Committee may establish. Any award made to a non-employee director must be
approved by the Company's Board of Directors. In the event of any changes in the
capital structure of the Company, the Compensation Committee will make
proportional adjustments to outstanding awards so that the net value of the
award is not changed.
As of December 31, 1999, there are outstanding options to purchase a total
of 1,285,284 shares of Class A Common Stock exercisable at a price of $14.00 per
share under the 1998 Stock Incentive Plan. These options vest, in general, over
five years, with the possible acceleration of vesting for some options if
certain performance criteria are met. In addition, all options vest upon a
change of control as more fully described in the 1998 Stock Incentive Plan.
1999 EXECUTIVE STOCK INCENTIVE PLAN
On November 2, 1999, the Company's Board of Directors also adopted the 1999
Executive Stock Incentive Plan (the "1999 Executive Plan") to provide certain
key executives of the Company with additional incentives by increasing their
proprietary interest in the Company. An aggregate of 1,000,000 shares of Class C
Common Stock is subject to the 1999 Executive Plan. In addition, no one person
will be eligible to receive options for more than 500,000 shares in any one
calendar year. Richard W. Weening, Executive Chairman, Treasurer and Director,
and Lewis W. Dickey, Jr., Executive Vice Chairman and Director are the sole
participants in the 1999 Executive Plan.
The 1999 Executive Plan permits the Company to grant awards in the form of
stock options (including both incentive stock options that meet the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended, and
non-qualified stock options) of Class C Common Stock.
Stock options under the 1999 Executive Plan were granted on August 30, 1999
at an exercise price of $27.875 per share and vest quarterly in equal
installments over a four-year period (subject to accelerated vesting in certain
circumstances).
The 1999 Executive Plan is administered by the Compensation Committee of
the Board, which will have exclusive authority to grant awards under the
Executive Plan and to make all interpretations and determinations affecting the
1999 Executive Plan. In the event of any changes in the capital structure of the
Company, the Compensation Committee will make proportional adjustments to
outstanding awards granted under the 1999 Executive Plan so that the net value
of the award is not changed. As of December 31, 1999, there are outstanding
options to purchase a total of 1,000,000 shares of Class C Common Stock under
the 1999 Executive Plan.
1998 EXECUTIVE STOCK INCENTIVE PLAN
The Company's Board of Directors has also adopted the 1998 Executive Stock
Incentive Plan (the "1998 Executive Plan"). An aggregate of 2,001,380 shares of
Class C Common Stock is subject to the 1998 Executive Plan. In addition, no one
person will be eligible to receive options for more than 1,000,690 shares in any
one calendar year. Richard W. Weening, Executive Chairman, Treasurer and
Director, and Lewis W. Dickey, Jr., Executive Vice Chairman and Director are the
sole participants in the 1998 Executive Plan.
The 1998 Executive Plan permits the Company to grant awards in the form of
stock options (including both incentive stock options that meet the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended, and
non-qualified stock options) of Class C Common Stock.
Stock options under the 1998 Executive Plan were granted on July 1, 1998
and are divided into three groups. Group 1 consists of time vested options with
an exercise price equal to $14.00 per share and vest
F-16
<PAGE> 75
quarterly in equal installments over a four-year period (subject to accelerated
vesting in certain circumstances). Group 2 and Group 3 also consist of
time-based options which vest in four equal annual installments on July 1, 1999,
July 1, 2000, July 1, 2001 and July 1, 2002 (subject to accelerated vesting in
certain circumstances). The first installment of both the Group 2 options and
Group 3 options were exercisable at a price of $14.00 per share on July 1, 1999
and subsequent installments are exercisable at a price 15% (or 20% in the case
of Group 3 options) greater than the prior year's exercise price for each of the
next three years.
The 1998 Executive Plan is administered by the Compensation Committee of
the Board, which will have exclusive authority to grant awards under the 1998
Executive Plan and to make all interpretations and determinations affecting the
1998 Executive Plan. In the event of any changes in the capital structure of the
Company, the Compensation Committee will make proportional adjustments to
outstanding awards granted under the 1998 Executive Plan so that the net value
of the award is not changed. As of December 31, 1999, there are outstanding
options to purchase a total of 2,001,380 shares of Class C Common Stock under
the 1998 Executive Plan.
Cumulus Media Inc. applies APB Opinion No. 25 in accounting for its Stock
Options issued to employees and SFAS No. 123 in accounting for stock options
issued to non-employees. Accordingly, no compensation cost has been recognized
for its stock options in the consolidated financial statements. Had Cumulus
Media Inc. determined compensation cost based on the fair value at the grant
date for its stock options under SFAS No. 123, the Company's net loss
attributable to common shareholders would have been increased to the pro forma
amounts for the years ending December 31, 1999 and 1998 indicated below:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net loss attributable to Common Shareholders:
As reported............................................ $(37,412) $(21,605)
Pro forma.............................................. $(44,220) $(23,909)
Basic and diluted loss per common share:
As reported............................................ $(1.50) $(1.34)
Pro forma.............................................. $(1.77) $(1.48)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants:
1999 Executive Stock Incentive Plan and 1999 Stock Incentive Plan: expected
volatility of 65.2% for 1999; risk-free interest rate of 5.70% and 5.78%,
respectively for the 1999 Executive Stock Incentive Plan and 1999 Stock
Incentive Plan; dividend yield of 0% and expected lives of four years and five
years from the date of grant for shares issued under the 1999 Executive Stock
Incentive Plan and the 1999 Stock Incentive Plan, respectively.
1998 Executive Stock Incentive Plan and 1998 Stock Incentive Plan: expected
volatility of 65.6% for 1998; risk-free interest rate of 4.73%; dividend yield
of 0% and expected lives of four years and five years from the date of grant for
shares issued under the 1998 Executive Stock Incentive Plan and 1998 Stock
Incentive Plan, respectively.
Following is a summary of activity in the employee option plans and
agreements discussed above for the year ended December 31, 1999:
<TABLE>
<CAPTION>
1999
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------ ----------------
<S> <C> <C>
Outstanding at beginning of year............................ 3,122,125 $15.55
Granted..................................................... 1,998,125 26.70
Exercised................................................... (27,580) 14.00
Canceled.................................................... (8,561) 14.00
---------- ------
Outstanding at end of year.................................. 5,084,109 $19.94
---------- ------
Options exercisable at year end............................. 5,084,109
----------
Weighted average fair value of options granted during the
year...................................................... $ 13.49
</TABLE>
F-17
<PAGE> 76
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------
NUMBER OUTSTANDING WEIGHTED AT AVERAGE
AND EXERCISABLE AT REMAINING WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES DECEMBER 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE
------------------------ ------------------ ------------------- ----------------
<S> <C> <C> <C>
$14.00 (1998 SIP Class A Shares)............... 1,253,704 4.5 years $14.00
$14.00 (1998 ESIP Class C Shares).............. 969,419 3.5 years $14.00
$16.10 to $24.19 (1998 ESIP Class C Shares).... 1,031,961 3.5 years $19.59
$27.875 (1999 SIP Class A Shares).............. 829,025 4.5 years $27.88
$27.875 (1999 ESIP Class C Shares)............. 1,000,000 3.5 years $27.88
--------- ------
5,084,109 $19.94
========= ======
</TABLE>
8. INCOME TAXES
Income tax expense (benefit) for the years ended 1999, 1998 and for the
period from inception (May 22, 1997) through December 31, 1997 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current tax expense:
Federal........................................... $ -- $ -- $ --
State and local................................... 126 67
------- ------- -------
Total current expense.......................... $ -- $ 126 $ 67
======= ======= =======
Deferred tax expense (benefit):
Federal........................................... (6,032) $(4,057) $ (356)
State and local................................... (838) (562) 21
Less: Change in valuation allowance................. -- (335) 335
------- ------- -------
Total deferred expense......................... (6,870) (4,954) 0
------- ------- -------
Total income tax (benefit) expense............. $(6,870) $(4,828) $ 67
======= ======= =======
</TABLE>
Total income tax expense differed from the amount computed by applying the
federal standard tax rate of 35% for the periods ended December 31, 1999 and
1998 due to the following:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Pretax loss at federal statutory rate............... $(7,172) $(4,108) $(1,194)
State income tax expense, net of federal
benefit........................................ (838) (1,057) 58
Nondeductible stock compensation.................. -- -- 574
Nondeductible goodwill............................ 929 400 --
Other............................................. 211 272 294
Change in valuation allowance..................... -- (335) 335
------- ------- -------
Net income tax (benefit) expense.................. $(6,870) $(4,828) $ 67
======= ======= =======
</TABLE>
F-18
<PAGE> 77
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1999 are
presented below:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Deferred tax asset:
Net operating loss......................................... $15,996 $ 7,697
Accounts receivable...................................... 1,041 340
Property, plant and equipment............................ 1,356 --
Other.................................................... 479 215
------- -------
Total deferred tax assets............................. $18,872 $ 8,252
Deferred tax liabilities:
Intangible assets........................................ 25,100 17,542
Property and Equipment................................... 2,678 --
Other.................................................... 34 97
------- -------
Total deferred tax liabilities........................... 27,812 $17,639
------- -------
Net deferred tax liability............................... $ 8,940 $ 9,387
======= =======
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes, such as net operating loss carryforward. In 1997 the
Company established a valuation allowance against its deferred tax assets
following an assessment of the likelihood of realizing such amounts. In arriving
at the determination as to the amount of the valuation allowance required, the
Company considered its operating history as well as significant acquisitions
made in 1998 and pending acquisitions, statutory restrictions on the use of
operating losses, tax planning strategies and its expectation of the level and
timing of future taxable income. The valuation allowance was eliminated in a
subsequent period.
The foreign operations of the Company have incurred operating losses, the
benefit of which remains unlikely. Accordingly, the Company has not recognized a
tax benefit for these loss carryforwards since it is not assured it could
utilize the loss carryforward in the future.
At December 31, 1999, the Company has a federal net operating loss
carryforward available to offset future income of approximately $40,115, which
will expire after 2012.
F-19
<PAGE> 78
9. EARNINGS PER SHARE
The following table sets forth the computation of basic loss per share for
the years ended December 31, 1999 and December 31, 1998 and for the period from
inception on May 22, 1997 to December 31, 1997. In order to reflect the initial
public offering on July 1, 1998, the weighted average number of shares
outstanding for the period from May 22, 1997 through December 31, 1997 and from
January 1, 1998 through June 30, 1998 were determined after giving effect to the
exchange of the Company's shares by Cumulus Media, LLC for the initial public
offering.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Numerator:
Net loss before extraordinary item........................ $(13,622) $ (6,910) $(3,578)
Preferred stock dividend, including redemption premium.... (23,790) (13,591) (274)
-------- -------- -------
Numerator for basic earnings per share -- income available
for common stockholders................................ $(37,412) $(20,501) $(3,852)
-------- -------- -------
Denominator:
Denominator for basic earnings per share -- weighted
average shares after giving effect to initial public
offering............................................... 24,938 16,085 12,509
-------- -------- -------
Net loss per common share -- before extraordinary item.... $ (1.50) $ (1.27) $ (.31)
Extraordinary item........................................ -- (0.07) --
-------- -------- -------
Net loss per common share................................. $ (1.50) $ (1.34) $ (0.31)
======== ======== =======
</TABLE>
During 1999 the Company issued options to key executives and employees to
purchase shares of common stock as part of the Company's stock option plans (see
Note 7). At December 31, 1999 there were options issued to purchase the
following classes of common stock:
<TABLE>
<S> <C>
Options to purchase class A common stock.................... 2,114,309
Options to purchase class C common stock.................... 3,001,380
</TABLE>
Earnings per share assuming dilution has not been presented as the effect
of the options above would be antidilutive.
10. LEASES
The Company has noncancelable operating leases, primarily for office space
and various capital leases primarily for equipment and vehicles. The operating
leases generally contain renewal options for periods ranging from one to ten
years and require the Company to pay all executory costs such as maintenance and
insurance. Rental expense for operating leases (excluding those with lease terms
of one month or less that were not renewed) was approximately $3,932, $2,073 and
$201 for the period ended December 31, 1999, 1998 and 1997, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1999
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31:
------------
<S> <C>
2000................................................... $4,293
2001................................................... 3,914
2002................................................... 3,512
2003................................................... 2,702
2004................................................... 2,131
Thereafter............................................. 8,356
</TABLE>
F-20
<PAGE> 79
11. COMMITMENTS AND CONTINGENCIES
As of December 31, 1999 the Company has entered into various agreements to
acquire stations across 35 markets for an aggregate purchase price of
approximately $444,359. Between January 1, 2000 and March 31, 2000, the Company
closed on the acquisition of 12 properties in 7 markets representing $28,918 in
purchase price, and signed additional asset purchase agreements for 6
transactions across 8 markets representing $168,575 in purchase price. The
ability of the Company to complete the pending acquisitions is dependent upon
the Company's ability to obtain additional equity and/or debt financing. We
intend to finance the pending acquisitions with cash on hand, the proceeds of
our credit facility or future credit facilities, and other to be identified
sources. There can be no assurance the Company will be able to obtain such
financing. In the event that the Company can not consummate these acquisitions
because of breach of contract, the Company may be liable for approximately $67.2
million in purchase price.
Subsequent to December 31, 1999, six separate civil actions were filed in
United States District Court for the Eastern District of Wisconsin, alleging
that the Company and certain present and former directors and officers violated
various provisions of the Securities and Exchange Act of 1934 and the Securities
Act of 1933, and various rules and regulations under those statutes. The actions
are based on the Company's decision to restate its financial statements for the
first three quarters of fiscal year 1999. The plaintiffs seek significant
damages on their own behalf and on behalf of certain classes of shareholders of
the Company. It is possible that additional claims may be filed against the
Company in connection with these events, although ultimately all similar claims
likely will be consolidated into one proceeding. Although the Company has
certain defenses it may assert in these proceedings, we cannot predict how the
plaintiffs' claims will ultimately be resolved. The Company ultimately may be
required to pay significant damages either as a result of a judgement or a
negotiated settlement, including damages which would be covered by insurance.
Such damages could have a material effect on the Company's financial position,
results of operations or cash flows.
The Company is also a defendant from time to time in various lawsuits,
which are generally incidental to its business. The Company is vigorously
contesting all such matters and believes that their ultimate resolution will not
have a material adverse effect on its consolidated financial position, results
of operations or cash flows.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of receivables, payables, and accrued expenses
approximate fair value due to the short maturity of these instruments. The
estimated fair value of long term debt and preferred stock subject to mandatory
redemption are estimated based on current market rates and approximate the
carrying value.
13. RELATED PARTY TRANSACTIONS
On November 12, 1997, the Company purchased substantially all of the assets
of The Midwestern Broadcasting Company, including WWWM-FM and WLQR-AM, for
approximately $10,000. The President of the Midwestern Broadcasting Company is
the Executive Vice-Chairman and a Director of the Company.
Substantially all of the Company's broadcast strategy consulting services
and programming research are contracted with Stratford Research the co-owner of
which is the Executive Vice Chairman, and a Director of the Company. Total fees
paid to Stratford Research during fiscal 1999, 1998 and 1997 were approximately
$4,407, $2,735 and $184 respectively. Of these expenses paid in 1999, 1998 and
1997, $1,136, $1,204 and $117 were capitalized as acquisition costs. The
remaining expenses have been included as part of the station operating expenses
in the statement of operations. At December 31, 1999 and 1998 amounts owed to
Stratford Research were approximately $261 and $371, respectively.
During 1999, 1998 and 1997, the Company remitted $0, $150 and $206
respectively, to Cumulus Media, LLC representing fees for management services.
These fees are included in corporate general and administrative expenses.
During 1999, 1998 and 1997, the Company paid $1,394, $1,423 and $297
respectively to QUAESTUS Management Corporation for services rendered in
connection with the acquisition of stations, corporate finance services and
internal development services. Of these expenses paid in 1999, 1998 and 1997,
$807,
F-21
<PAGE> 80
$1,223 and $297 were capitalized as acquisition costs. The remaining expenses
have been included as part of the corporate general and administrative expenses
in the statement of operations. Amounts owed to QUAESTUS at December 31, 1999
and 1998 totaled $108 and $78, respectively.
During the second half of 1999, as a result of comments regarding the
agreements from shareholders, representatives of the Company and of QUAESTUS and
Stratford Research discussed a modification to the terms of the agreements
between those parties. Pursuant to these discussions, the Company and Stratford
Research executed an amendment to the Stratford Research agreement in the first
quarter of 2000 providing that fees paid by the Company to Stratford Research
would potentially be reduced in the event the Company's quarterly or year to
date performance fell short of published analyst consensus estimates, or
increased if performance exceeded the Company's approved budget. A comparable
amendment was prepared as to QUAESTUS in the first quarter of 2000 but never
signed. Subsequent entries reducing expenses on the Company's 1999 books and
records pursuant to these amendments were reversed based on an opinion from
counsel that the amendments were unenforceable. Reported financial performance
and the Company's equity for the year were therefore unaffected.
In November 23, 1999 QUAESTUS Management Corporation and the Company
entered into a Sublease Agreement as co-sublessees, which provides for the use
of a 1989 Cessna Citation III model aircraft. QUAESTUS Management Corporation
and the Company are obligated to pay the sublessor rent of $62.5 per month, plus
an hourly rate for each hour of flight. QUAESTUS Management Corporation acts as
the manager of the aircraft, hiring pilots, arranging for maintenance and
scheduling usage. Expenses for the use of the aircraft are billed to the Company
based upon the percentage of hours of Company use. QUAESTUS Management
Corporation also has an option to purchase the aircraft as of December 31, 2000.
One of the Company's Directors is a partner with the Washington, D.C.
office of the law firm of Paul, Hastings, Janofsky & Walker LLP, where he heads
the Firm's Federal Legislative Practice Group. The Company also engages the law
firm of Paul, Hastings, Janofsky & Walker LLP on numerous matters dealing with
compliance with federal regulations and corporate finance activities. Total
expenses paid to Paul, Hastings, Janofsky & Walker LLP during fiscal 1999, 1998
and 1997 were approximately $2,120, $1,190 and $0. Of these expenses paid in
1999, 1998 and 1997, $1,987, $1,131 and $0 were capitalized as acquisition or
financing costs. The remaining expenses have been included as part of the
corporate general and administrative expenses in the statement of operations. At
December 31, 1999 and 1998 amounts payable to Paul, Hastings, Janofsky & Walker
LLP were approximately $267 and $642.
14. DEFINED CONTRIBUTION PLAN
Effective January 1, 1998, the Company adopted a qualified profit sharing
plan under Section 401(k) of the Internal Revenue Code. All employees meeting
eligibility requirements are qualified for participation in the plan.
Participants in the plan may contribute 1% to 15% of their annual compensation
through payroll deductions. Under the plan, the Company will provide a matching
contribution of 25% of the first 6% of each participant's contribution. Matching
contributions are to be remitted to the plan by the Company monthly. During 1999
and 1998, the Company contributed approximately $340 and $200 to the plan
respectively.
15. GUARANTORS' FINANCIAL INFORMATION
Certain of the Company's direct and indirect subsidiaries (all such
subsidiaries are directly or indirectly wholly owned by the Company) will
provide full and unconditional guarantees for the Company's senior subordinated
notes on a joint and several basis. There are no significant restrictions on the
ability of the guarantor subsidiaries to pay dividends or make loans to the
Company.
F-22
<PAGE> 81
The following tables provide consolidated condensed financial information
pertaining to the Company's subsidiary guarantors. The Company has not presented
separate financial statements for the subsidiary guarantors and non-guarantors
because management does not believe that such information is material to
investors.
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current assets.......................................... $ 91,509 $ 44,861 $ 3,514
Noncurrent assets....................................... 597,938 448,245 100,356
Current liabilities..................................... 12,135 8,370 1,981
Noncurrent liabilities.................................. 61,048 32,396 2,269
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED FOR THE PERIOD
------------------------------ FROM INCEPTION ON
DECEMBER DECEMBER MAY 22, 1997 TO
1999 1998 DECEMBER 31, 1997
------------- ------------- -----------------
<S> <C> <C> <C>
Net revenues.................................... $177,667 $98,786 $9,163
Operating expenses.............................. 131,050 90,842 8,711
Income (loss) before extraordinary item......... 10,336 7,811 452
Net loss........................................ 10,336 7,811 452
</TABLE>
16. SUBSEQUENT EVENTS
From January 1, 2000 through March 31, 2000, the Company completed
acquisitions of 12 radio stations in 7 separate markets for an aggregate
purchase price of approximately $28,918. These transactions will be accounted
for by the purchase method of accounting.
On February 2, 2000, the Company purchased The AdVisory Board Inc. (TAB),
dba The Lytle Organization, a Madison, Wisconsin based sales training company
serving the radio broadcasting industry. TAB, to be operated as a wholly owned
subsidiary of Cumulus Media Inc, will provide training services to the Cumulus
sales organization, other non-competing broadcasters and the general business
market. This transaction will be accounted for by the purchase method of
accounting.
Between January 1, 2000 and March 31, the Company signed asset purchase
agreements for 5 transactions across eight markets representing $168,575 in
purchase price. The Company believes its existing available credit facilities
and cash flow from operations are sufficient to fund the purchase price for
these transactions upon consummation.
On February 2, 2000 the Company loaned each of Mr. Weening and Mr. Dickey
$4,992, respectively for the purpose of enabling Mr. Weening and Mr. Dickey to
purchase 128,000 shares of newly issued shares of Class C Common Stock from the
Company. The price of shares was $39.00 each which was the approximate market
price for the Company's Class A Common Stock on that date. The loans are
represented by recourse promissory notes executed by each of Mr. Weening and Mr.
Dickey which provide for the payment of interest at the greater of 9% or the
maximum rate paid by the Company under its Credit Facility. Interest accrues on
the notes from February 2, 2000 through December 31, 2003. All accrued and
unpaid interest and the principal amount of the loans are due and payable in a
lump sum on December 31, 2003.
F-23
<PAGE> 82
SCHEDULE II
CUMULUS MEDIA INC.
FINANCIAL STATEMENT SCHEDULE
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-------------------------------------------------------------------
BALANCE AT PROVISION FOR BALANCE
BEGINNING DOUBTFUL ACQUIRED AT END
FISCAL YEAR OF YEAR ACCOUNTS STATIONS(1) WRITE-OFFS OF YEAR
----------- ---------- ------------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
1999
Allowance for bad debts.................. $895 2,504 61 (342) $3,118
1998
Allowance for bad debts.................. $125 964 97 (291) $ 895
1997
Allowance for bad debts.................. $ -- 95 30 -- $ 125
</TABLE>
-------------------------
(1) Allowance for doubtful accounts receivable acquired in acquisitions.
F-24
