<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 18, 2000
-----------------------
CUMULUS MEDIA INC.
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(Exact Name of Registrant as specified in its character)
<TABLE>
<CAPTION>
ILLINOIS 000-24525 36-4159663
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<S> <C> <C>
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
</TABLE>
3535 Piedmont Road, Building 14, 14th Floor, Atlanta, GA 30305
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (404) 949-0700
---------------------
NONE
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
As previously reported on a Current Report on Form 8-K filed on October 17,
2000, on November 29, 1999, Cumulus Broadcasting, Inc. ("Cumulus Broadcasting"),
a wholly owned subsidiary of Cumulus Media Inc. (the "Company"), entered into an
Asset Purchase Agreement (the "Connoisseur Asset Purchase Agreement") with
Connoisseur Communications Partners, L.P., Continuity Partners, L.P.,
Connoisseur Communications of Flint, L.P., Connoisseur Communications of Mercer
County, L.P., Connoisseur Communications of Muskegon, L.P., Connoisseur
Communications of Quad Cities, L.P., Connoisseur Communications of Rockford,
L.P., Connoisseur Communications of Evansville, L.P., Connoisseur Communications
of Canton, L.P., Connoisseur Communications of Saginaw, L.P., Connoisseur
Communications of Waterloo, L.P., Connoisseur Communications of Youngstown, L.P.
and Abry Broadcast Partners III, L.P. (collectively, the "Connoisseur Sellers").
Pursuant to the terms of the Asset Purchase Agreement, Cumulus Broadcasting was
to acquire 35 stations (the "Acquired Stations") in 9 Midwestern markets.
The markets and stations acquired are as follows:
YOUNGSTOWN-WARREN, OHIO (Market Rank # 97 of 276) - WHOT-FM, WYFM-FM, WPIC-AM,
and WSOM-AM. Also, in adjacent Western Pennsylvania, WWIZ-FM and WLLF-AM.
FLINT, MICHIGAN (Market Rank # 119) - WDZZ-FM, WRSR-FM, WWCK-FM, and WFDF-AM.
CANTON, OHIO (Market Rank # 123) - WQXK-FM and WRQK-FM.
SAGINAW-BAY CITY-MIDLAND, MICHIGAN (Market Rank # 125) - WTLZ-FM.
QUAD CITIES, ILLINOIS-IOWA (Market Rank # 133) - KBOB-FM, KORB-FM, KQLI-FM,
WXLP-FM, and KJOC-AM.
ROCKFORD, ILLINOIS (Market Rank # 148) - WLUV-FM, WXXQ-FM, WZOK-FM, and WROK-AM.
<PAGE> 2
EVANSVILLE, INDIANA (Market Rank # 152) - WGBF-FM, WTRI-FM, and WYNG-FM, and
WGBF-AM.
MUSKEGON, MICHIGAN (Market Rank # 217) - WMRR-FM, WMUS-FM, WSHZ-FM, WMHG-AM, and
WMUS-AM.
WATERLOO-CEDAR FALLS, IOWA (Market Rank # 233) - KCRR-FM, KKCV-FM, KOEL-FM, and
KOEL-AM.
On October 2, 2000 the Company completed the acquisition of the Acquired
Stations for a total purchase price of $253.0 million in cash.
Prior to this transaction, no material relationship existed between the
Company and the Connoisseur Sellers.
The completion of the Connoisseur Asset Purchase Agreements described
herein requires the filing, pursuant to Article 11 of Regulation S-X, of the pro
forma financial statements included herein and, pursuant to Section 3-05 of
Regulation S-X, the filing of the historical financial statements included
herein.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Connoisseur Communications Partners, L.P.
Index to Financial Statements attached hereto:
Report of Independent Accountants
Financial Statements:
Consolidated Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999
Consolidated Statements of Operations for nine months ended
September 30, 2000 (unaudited) and 1999 (unaudited) and for the
year ended December 31, 1999
Consolidated Statements of Partners' Capital for the nine months
ended September 30, 2000 (unaudited) and for the year December
31, 1999
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 (unaudited) and 1999 (unaudited) and for the
year ended December 31, 1999
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information.
Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the
Year Ended December 31, 1999.
Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the
Nine Months Ended September 30, 2000.
Cumulus Media Inc. Unaudited Pro Forma Balance Sheet as of September
30, 2000.
<PAGE> 3
(c) Exhibits:
2.1 Asset Purchase Agreement, dated as of November 29, 1999, by and among
Cumulus Broadcasting and the Connoisseur Sellers.**
23.1 Consent of Ernst & Young LLP.*
* Filed herewith.
** Incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K
filed on December 2, 1999.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be singed on its behalf by the
undersigned hereunto duly authorized.
CUMULUS MEDIA
By: /s/ Martin R. Gausvik
----------------------
Martin R. Gausvik
Executive Vice President
Chief Financial Officer
and Treasurer
Date: December 18, 2000
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ------------
<S> <C>
2.1 Asset Purchase Agreement, dated as of November 29,
1999, by and among Cumulus Broadcasting and the
Connoisseur Sellers.**
23.1 Consent of Ernst & Young LLP.*
</TABLE>
* Filed herewith.
** Incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K
filed on December 2, 1999.
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Connoisseur Communications Partners L.P.
Report of Independent Auditors......................................................
Consolidated Balance Sheets as of September 30, 2000 (unaudited) and December 31,
1999 ...............................................................................
Consolidated Statements of Operations for the nine months ended September 30,
2000 (unaudited) and 1999 (unaudited) and for the year ended December 31, 1999 .....
Consolidated Statements of Partners' Capital for the nine months ended
September 30, 2000 (unaudited) and for the year ended December 31, 1999 ............
Consolidated Statements of Cash Flows for the nine months ended September 30,
2000 (unaudited) and 1999 (unaudited) and for the year ended December 31, 1999 .....
Notes to Consolidated Financial Statements .........................................
</TABLE>
<PAGE> 5
Report of Independent Auditors
Partners
Connoisseur Communications Partners, L.P.:
We have audited the accompanying consolidated balance sheet of Connoisseur
Communications Partners, L.P. at December 31, 1999, and the related consolidated
statements of operations, partners' capital, and cash flows for the year ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Connoisseur
Communications Partners, L.P. at December 31, 1999, and the consolidated results
of its operations and its cash flows for the year ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
February 8, 2000
New York, New York
/s/ Ernst & Young LLP
<PAGE> 6
Connoisseur Communications Partners, L.P.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 1,502,109 $ 1,072,104
Accounts receivable (net of allowance for doubtful accounts of
$649,351 and $541,916 in 2000 and 1999, respectively) 7,359,551 6,830,361
Prepaid expenses 258,665 320,977
Other current assets 40,405 182,341
------------ ------------
Total current assets 9,160,730 8,405,783
Property, building and equipment (net of accumulated depreciation of
$6,795,571 and $5,379,941 in 2000 and 1999, respectively) 17,603,348 18,659,364
Intangible assets (net of accumulated amortization of $11,755,641 and
$9,248,466 in 2000 and 1999, respectively) 75,203,260 72,923,021
Other assets 374,603 561,412
------------ ------------
Total assets $102,341,941 $100,549,580
============ ============
Liabilities and partners' capital
Current liabilities:
Current portion of long-term debt $ 10,862 $ 2,789,753
Accounts payable 865,115 1,303,443
Accrued expenses 2,376,977 2,089,170
Accrued interest 79,317 107,477
Broker fee due Cumulus 2,226,254 1,041,459
------------ ------------
Total current liabilities 5,558,525 7,331,302
Deposits from Cumulus 37,837,958 7,869,267
Long-term debt 12,345,800 40,744,515
Deferred compensation 859,120 842,028
Other liabilities - 6,338
Minority interest 486,341 451,828
Partners' capital:
Partners' investment 52,868,302 52,684,352
Accumulated deficit (7,614,105) (9,380,050)
------------ ------------
Total partners' capital 45,254,197 43,304,302
------------ ------------
Total liabilities and partners' capital $102,341,941 $100,549,580
============ ============
</TABLE>
See accompanying notes.
<PAGE> 7
Connoisseur Communications Partners, L.P.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
December 31,
2000 1999 1999
----------- ----------- ---------------
(unaudited)
<S> <C> <C> <C>
Broadcast revenues:
Broadcasting $33,111,347 $30,238,160 $40,769,887
Barter 2,022,013 1,701,994 2,440,482
Less agency commissions and adjustments (3,658,750) (3,473,263) (4,630,079)
----------- ----------- -----------
Net broadcast revenues 31,474,610 28,466,891 38,580,290
LMA fee income 10,281,309 -- 730,733
Rental income and other 332,467 542,655 727,038
----------- ----------- -----------
Net revenue 42,088,386 29,009,546 40,038,061
Station operating expenses:
Selling 6,680,311 5,742,785 7,716,553
Programming 5,376,754 5,230,639 7,005,356
Promotions 1,303,755 974,203 1,396,705
Technical 931,111 822,184 1,109,912
General and administrative 5,121,730 4,835,364 6,350,700
Barter 1,957,682 1,711,997 2,438,731
Depreciation 1,415,630 1,324,802 1,797,599
Amortization 2,567,682 2,565,789 3,422,473
TBA and SRA expense 295,524 322,405 420,911
Broker fee 9,967,763 -- 1,041,459
----------- ----------- -----------
Total station operating expenses 35,617,942 23,530,168 32,700,399
----------- ----------- -----------
Other operating expenses:
Corporate and other expenses 1,897,043 2,426,471 2,960,808
Partners' fees and expenses 2,893 42,906 45,378
General partner management fee -- 112,994 146,228
Consulting expense -- 11,250 11,250
Non-cash compensation 201,042 706,625 797,853
Write-down on assets held for sale and loss on sale
of stations -- 5,916 8,144
----------- ----------- -----------
Total other operating expenses 2,100,978 3,306,162 3,969,661
----------- ----------- -----------
Total operating expenses 37,718,920 26,836,330 36,670,060
Operating income 4,369,466 2,173,216 3,368,001
Interest expense 1,905,841 3,219,594 4,296,518
Other expenses 697,680 70,549 687,861
Interest income from partners' loans -- (269,369) (348,300)
Interest income -- (14) (40)
----------- ----------- -----------
Net income (loss) $ 1,765,945 $(847,544) $(1,268,038)
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 8
Connoisseur Communications Partners, L.P.
Consolidated Statements of Partners' Capital
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
--------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1998 $754,786 $49,400,260 $50,155,046
Non-cash compensation - 417,098 417,098
Distributions (7,177) (5,992,627) (5,999,804)
Net (loss) (12,681) (1,255,357) (1,268,038)
--------- ------------ -----------
Balance at December 31, 1999 734,928 42,569,374 43,304,302
Non-cash compensation (unaudited) - 183,950 183,950
Net income (unaudited) 17,659 1,748,286 1,765,945
--------- ------------ -----------
Balance at September 30, 2000 (unaudited) $752,587 $44,501,610 $45,254,197
========= ============ ===========
</TABLE>
See accompanying notes.
<PAGE> 9
Connoisseur Communications Partners, L.P.
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
December 31,
2000 1999 1999
------------ ----------- ------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,765,945 $ (847,544) $ (1,268,038)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 1,415,630 1,324,802 1,797,599
Amortization 2,567,682 2,565,789 3,422,473
Bad debt expense 503,436 368,409 477,538
LMA fee income (10,281,309) - (730,733)
Non-cash compensation expense 201,042 706,624 797,853
Other 60,036 26,532 34,945
Changes in assets and liabilities, net of amounts acquired:
Increase in accounts receivable (1,032,626) (402,940) (480,255)
Decrease (increase) in prepaid expenses and other current assets 204,248 (29,720) 149,970
Decrease (increase) in interest receivable - (84,821) 94,143
Increase (decrease) in accounts payable (438,328) (292,921) 19,355
Increase in accrued expenses 1,444,442 185,111 907,816
Increase in deposits from Cumulus 4,600,000 - 8,600,000
Decrease in fees due to related parties - (40,625) (40,625)
Decrease in due to general partner - (57,100) (134,785)
------------ ----------- ------------
Net cash provided by operating activities 1,010,198 3,421,596 13,647,256
Cash flows from investing activities:
Deposits from Cumulus 35,650,000 - -
Acquisition of radio stations (4,747,785) (4,665,407) (4,689,413)
Capital expenditures (289,074) (1,520,437) (2,119,237)
Proceeds from sale of stations - 140,000 140,000
Repayment of loans to related parties - - 5,620,413
Other assets - (108,158) 45,642
------------ ----------- ------------
Net cash provided by (used in) investing activities 30,613,141 (6,154,002) (1,002,595)
Cash flows from financing activities:
Proceeds from bank loan 9,100,000 4,925,000 7,035,800
Payments on loans, including loan termination fee (40,286,996) (1,527,887) (13,250,926)
Other liabilities (6,338) (14,322) (19,205)
Distributions paid - (226,291) (5,999,804)
------------ ----------- -----------
Net cash (used in) provided by financing activities (31,193,334) 3,156,500 (12,234,135)
------------ ----------- -----------
Net increase (decrease) in cash 430,005 424,094 410,526
Cash at beginning of year 1,072,104 661,578 661,578
------------ ----------- -----------
Cash at end of year $ 1,502,109 $ 1,085,672 $ 1,072,104
============ =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,160,688 $ 3,488,253 $ 4,952,439
============ =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 10
1. Formation and Business Activity
Connoisseur Communications Partners, L.P. (the "Partnership"), a Delaware
limited partnership, was organized in August 1993 for the purpose of acquiring,
owning and operating radio stations in small and medium-sized markets. The
Partnership owns a 99% limited partnership interest in ten limited partnerships:
Connoisseur Communications of Flint, L.P. ("Flint"), Connoisseur Communications
of Quad Cities, L.P. ("Quad Cities"), Connoisseur Communications of Youngstown,
L.P. ("Youngstown"), Connoisseur Communications of Rockford, L.P. ("Rockford"),
Connoisseur Communications of Waterloo, L.P. ("Waterloo"), Connoisseur
Communications of Evansville, L.P. ("Evansville"), Connoisseur Communications of
Canton, L.P. ("Canton"), Connoisseur Communications of Muskegon, L.P.
("Muskegon"), Connoisseur Communications of Saginaw, L.P. ("Saginaw") and
Connoisseur Communications of Mercer County, L.P. ("Western PA"). Continuity
Partners, L.P. ("Continuity") is the 1% general partner in the Partnership. In
addition, Continuity is the 1% general partner in Flint, Quad Cities,
Youngstown, Rockford, Waterloo, Evansville, Canton, Muskegon, Saginaw and
Western PA, which is shown as minority interest for financial statement
purposes.
In November 1999, Connoisseur ("CCP") entered into an agreement of sale to sell
its ownership interest in all of its radio stations to Cumulus Broadcasting,
Inc. ("Cumulus"), a subsidiary of Cumulus Media, Inc., in an asset sale for
approximately $242,000,000 subject to certain adjustments (the "Agreement of
Sale"). The sale closed on October 2, 2000. In December 1999, Cumulus paid
Connoisseur a deposit of $8,600,000 and deposited a letter of credit in escrow
of $11,350,000. During the nine months ended September 30, 2000, Cumulus paid
Connoisseur additional deposits of $40,250,000 under the terms of the Agreement
of Sale and additional amendments made thereto.
In connection with the Agreement of Sale, the Partnership also entered into a
Local Marketing Agreement ("LMA") with Cumulus. Commencing with December 1999
and through closing of the sale, Connoisseur will pay Cumulus the monthly
station operating income, as adjusted per the terms of the LMA, in exchange for
providing programming and management services. The broker fee, based on
broadcast cash flow, amounted to $1,041,459 in 1999 and $9,967,763 for the nine
months ended September 30, 2000 (unaudited), which was recorded to broker fee
expense. Connoisseur continues to record all revenues and expense of operations.
The Partnership amortizes a portion of the deposit over the expected term of the
LMA agreement, recorded as LMA fee income. The amortization of the deposits for
the month of December 1999 was $730,733, and $10,281,309 for the nine months
ended September 30, 2000 (unaudited).
<PAGE> 11
1. Formation and Business Activity (continued)
Information with respect to the nine month periods ended September 30, 2000 and
1999 is unaudited. The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments considered necessary for a fair
presentation. Operating results for the nine months ended September 30, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000, or for any other interim period.
2. Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
accounts of the Partnership and Flint, Quad Cities, Youngstown, Rockford,
Waterloo, Evansville, Canton, Muskegon, Saginaw and Western PA. All significant
intercompany accounts and transactions have been eliminated. In this report,
actions of the Partnership and its 99% owned subsidiary partnerships are
referred to collectively or individually as actions of the Partnership.
Barter Transactions: Barter transactions represent the exchange of commercial
airtime for programming, merchandise, or services. The transactions are recorded
at the fair market value of the asset or service received. Revenue is recognized
when the advertisements are broadcast; expenses are recorded when the asset or
service received is utilized.
Intangibles: Intangibles include goodwill, broadcast licenses, covenants
not-to-compete and deferred financing costs. Goodwill represents the excess of
cost over the fair values of the identifiable tangible net assets acquired.
Goodwill and broadcast licenses are amortized on a straight-line basis over 40
years. Covenants not-to-compete are amortized on a straight-line basis over the
term of the agreements. Deferred financing costs are amortized over the term of
the related debt agreement on a straight-line basis.
<PAGE> 12
2. Significant Accounting Policies (continued)
The carrying values of goodwill and broadcast licenses are reviewed periodically
to determine whether they may have become impaired. If this review indicates
that goodwill and broadcast licenses will not be recoverable, as determined
based on the undiscounted cash flows of the entity acquired over the remaining
amortization period, the Partnership's carrying value of the goodwill and
broadcast licenses would be reduced by the difference between the carrying
amount and the estimated fair value and would be recognized as a charge to
income.
Property, Building and Equipment: Property, building and equipment are stated at
cost. Depreciation of property, building and equipment is calculated using the
straight-line method over their estimated useful lives as follows:
<TABLE>
<S> <C>
Building and improvements 30 to 40 years
Transmitters, towers and antennas 7 to 15 years
Broadcast and related equipment 3 to 10 years
Furniture and office equipment 3 to 7 years
</TABLE>
Income Taxes: The Partnership is not subject to federal, state, or local income
taxes and, accordingly, makes no provision for income taxes in its financial
statements. The partners are responsible for reporting their respective share of
the Partnership's taxable income or loss.
Revenue Recognition: The Partnership's primary source of revenue is the sale of
airtime to local, regional and national advertisers. Revenue is recorded when
advertisements are broadcast.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Time Brokerage Agreements ("TBAs")/Sales Representation Agreements ("SRAs"):
From time to time, the Partnership enters into TBAs and SRAs with respect to
radio stations owned by third parties, including radio stations which it intends
to acquire. Terms of the agreements generally require the Partnership to pay a
monthly fee in exchange for the right to provide station programming and sell
related advertising time in the case of a TBA or sell advertising
<PAGE> 13
2. Significant Accounting Policies (continued)
on behalf of the station in the case of a SRA. In instances in which the
stations are acquired, the agreements terminate upon the acquisition of the
stations. The fees are expensed as incurred and are classified as an operating
expense.
Interest Rate Swap Agreements: The Partnership has entered into interest rate
swap agreements to effectively convert a portion of its variable-rate borrowings
into fixed-rate obligations. The differential to be paid or received as interest
rates change is accounted for on the accrual method of accounting. The related
amount payable to or receivable from counterparties is included as an adjustment
to accrued interest in accrued liabilities.
Advertising: Advertising costs are expensed as incurred. Advertising expense
totaled $565,144 in 1999.
Reclassifications: Certain 1999 amounts have been reclassified to conform to the
2000 presentation.
3. Acquisitions and Dispositions
The following tables summarizes the acquisition activity of the Partnership for
year ended December 31, 1999:
<TABLE>
<CAPTION>
Acquisitions
-----------------------------------------------------------------------------------------
Date Market Station Purchase Price
--------------- ---------------- ----------------- ----------------------
<S> <C> <C> <C>
January 1999 Saginaw, MI WTLZ-FM $1,800,000
September 1999 Muskegon, MI WMHG-AM,WMRR-FM, WSHZ-FM 2,700,000
</TABLE>
The Partnership's consolidated results of operations reflect the results of
these radio stations from the respective dates the Partnership entered into a
TBA or SRA. The acquisitions were financed by capital contributions and bank
debt.
<PAGE> 14
3. Acquisitions and Dispositions (continued)
For financial statement purposes, both of the acquisitions described above were
accounted for using the purchase method, with the aggregate purchase price
allocated to the tangible and identifiable intangible assets based upon current
estimated fair market values. Certain of the recent transactions are based on
preliminary estimates of the fair value of the net assets acquired and subject
to final adjustment. The assets and liabilities of these acquisitions and the
results of their operations for the period from the date of acquisition have
been included in the accompanying consolidated financial statements.
The following tables summarizes the disposition activity of the Partnership for
the year ended December 31, 1999:
<TABLE>
<CAPTION>
Dispositions
-------------------------------------------------------------------------------------------------------------
Sales Holding Period
Date Market Station Proceeds Gain or (Loss) Income
-------------- ------------- ---------------- ------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C>
March 1999 Flint, MI WOAP-AM $140,000 $(322,944) $ --
</TABLE>
At December 31, 1998, included in current assets was the estimated net
realizable value of the assets of radio station WOAP-AM of $110,000.
4. Property, Building and Equipment
Property, building and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
December 31
1999
-------------
<S> <C>
Land $ 1,397,185
Building and improvements 5,906,580
Transmitters, towers and antennas 8,555,098
Broadcast and related equipment 5,118,781
Furniture and office equipment 3,061,661
-----------
24,039,305
Less accumulated depreciation (5,379,941)
-----------
$18,659,364
===========
</TABLE>
<PAGE> 15
5. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31
1999
-------------
<S> <C>
Broadcast licenses $43,911,359
Goodwill 32,296,371
Covenants not-to-compete 4,838,000
Deferred financing costs 1,125,757
-----------
82,171,487
Less accumulated amortization (9,248,466)
-----------
$72,923,021
===========
</TABLE>
6. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30 December 31
2000 1999
------------- -----------
(Unaudited)
<S> <C> <C>
Term loan $ -- $20,578,400
Revolving credit facility 12,345,800 22,945,800
Other debt 10,862 10,068
----------- -----------
12,356,662 43,534,268
Less current portion (10,862) (2,789,753)
----------- -----------
$12,345,800 $40,744,515
=========== ===========
</TABLE>
In August 1997, the Partnership entered into a Credit Agreement (the "Credit
Agreement") consisting of a Term Loan of $25,000,000, borrowing under a
revolving credit facility (the "Revolving Credit Facility") of up to
$35,000,000, and additional revolving credit loans pursuant to one or more
acquisition facilities ("Acquisition Credit Facility") of up to $50,000,000.
Commencing September 30, 1999, the amount available under the Revolving Credit
Facility is reduced by $1,750,000 quarterly. Commencing January 1, 2001, the
amount available under the Acquisition Credit Facility is reduced by $10,000,000
annually.
<PAGE> 16
6. Long-Term Debt (continued)
In February 2000, through an amendment to the Credit Agreement, the Partnership
arranged for $10,000,000 of availability under the Acquisition Credit Facility
for the purpose of providing a source of funding, if needed, for the acquisition
of radio station WKMQ-FM (formerly WLUV-FM). The amount available under the
Acquisition Credit Facility will be reduced by $500,000 per quarter commencing
March 31, 2001.
Under the Credit Agreement, outstanding principal balances bear interest at a
floating rate based on an increment over either (a) the base rate or (b) the
Eurodollar rate (the "Eurodollar Rate"), at the choice of the Partnership. The
increment to the base rate is from 0.000% to 1.625% and the increment to the
Eurodollar Rate is from 1.000% to 2.625%. The increment is subject to change
based upon changes in the ratio of outstanding indebtedness to operating cash
flows, as defined in the Credit Agreement (the "Leverage Ratio"), on a quarterly
basis. The weighted average interest rate at December 31, 1999 was 8.08%.
The Partnership is required to pay fees based on the unused commitment under the
Revolving Credit Facility of 0.500% or 0.375% per year depending upon the
Leverage Ratio, on a quarterly basis. At December 31, 1999, the rate was 0.500%.
The Partnership will be required to pay a commitment fee on the unused portion
available under the Acquisition Credit Facility at such time that borrowings are
made, at a rate to be determined.
The Credit Agreement is collateralized by a security interest in substantially
all of the assets of the radio stations, in addition to the Partnership's
interest in the radio stations. The Credit Agreement requires the Partnership to
maintain compliance with certain financial ratios, principally with respect to
maintaining levels of operating cash flow and debt service ratios, along with
other covenants, including limitations on certain distributions to the partners.
The Credit Agreement has been amended from time to time to accommodate certain
transactions of the Partnership. The fair value of the amounts outstanding
approximates its recorded value.
<PAGE> 17
6. Long-Term Debt (continued)
Principal payments on the currently outstanding long-term debt are due as
follows:
<TABLE>
<S> <C>
Years ending December 31:
2000 $ 2,789,753
2001 9,220,115
2002 10,770,000
2003 11,593,600
2004 9,160,800
-----------
$43,534,268
===========
</TABLE>
7. Interest Rate Swap
In 1998, the Partnership entered into an interest rate swap agreement that was
to expire in 2001 (extendable by the counterparty for another two years) to
manage its exposure to interest rate movements by effectively converting a
portion of its debt from variable to fixed rate. The swap agreement exchanged
5.6% fixed-rate payments for LIBOR-based interest payments on a notional amount
of $50 million. On January 10, 2000, in consideration of a receipt of $300,000,
the Partnership agreed to terminate the swap agreement. The termination of the
swap agreement resulted in a gain of approximately $230,000 which was recorded
as a reduction of interest expense.
In connection with the termination of the swap agreement above, the Partnership
entered a new swap agreement. The new agreement, which terminated in July 2000,
exchanged 6.22% fixed-rate payments for LIBOR-based interest payments on a
notional amount of $30 million.
The notional amounts do not represent amounts exchanged with the counterparty,
and thus are not a measure of exposure of the Partnership. The market risk
associated with the agreements is mitigated because increased interest payments
under the agreements resulting from a decrease in LIBOR are effectively offset
by decreased payments under the debt obligations. The Partnership is exposed to
credit losses for the periodic settlements of amounts due under the agreements.
However, the Partnership does not anticipate nonperformance by the counterparty,
which is also a counterparty to the Credit Agreement.
<PAGE> 18
8. Partners' Capital
The limited partners of the Partnership are ABRY (43%), Tinicum (32%), Putnam L.
Crafts, Jr. (10%), Jeffrey D. Warshaw (8%), and other individuals (6%).
Continuity, the 1% general partner, is owned and controlled by ABRY (35%),
Tinicum D.C.R., Inc. (35%), and Connoisseur, Inc. (30%), which is wholly-owned
by Jeffrey D. Warshaw.
9. Related Party Transactions
The Partnership was charged certain costs by partners totaling $45,378 in 1999.
These charges primarily represent managerial services provided to the
Partnership by employees of these partners.
On March 26, 1997, the Partnership loaned $20,000,000 to the limited partners
(the "Partner Loans"), excluding Jeffrey D. Warshaw and ABRY. The loans were to
mature on March 26, 2005, but principal may be prepaid at any time. Interest, at
the rate of 6.32% per annum, was due semi-annually. On December 20, 1999, the
principal balance outstanding on the loans and the accrued interest receivable
was fully repaid.
On March 26, 1997, the Partnership entered into a management agreement (the
"Management Agreement") with Continuity, whereby Continuity provides certain
services to the Partnership. As defined in the Management Agreement, the fee
(the "Management Fee") is payable semiannually. Included in other operating
expenses was the Management Fee of $146,893 for the year ended December 31,
1999.
10. Commitments
Future minimum lease payments under noncancellable operating leases are payable
as follows:
<TABLE>
<S> <C>
Years ending December 31:
2000 $ 496,574
2001 391,089
2002 303,448
2003 162,174
2004 117,077
Thereafter 898,222
----------
$2,368,584
==========
</TABLE>
The operating leases may be subject to Consumer Price Index adjustments.
The Partnership leases office space, antenna sites, vehicles and office
equipment. For the year ended December 31, 1999 rental expense amounted to
$476,804.
At December 31, 1999, the Partnership had outstanding under the Revolving Credit
Facility a letter of credit in the amount of $1,000,000 for the purchase of
WLUV-FM in Rockford, Illinois (Note 14).
The Partnership and certain investors have guaranteed, up to a maximum of
$7,000,000, debt of Jeffrey D. Warshaw for investments in the Partnership. The
amount of the underlying debt outstanding at December 31,1999 is $6,451,869.
<PAGE> 19
11. 401(k) Plan
The Partnership sponsors a savings plan for all eligible employees, which is a
qualified plan under Sections 401(a) and 401(k) of the Internal Revenue Code.
Pursuant to the plan, eligible participants may elect to contribute up to 15% of
their annual compensation up to the statutory maximum. Beginning in 1997, the
Partnership matches 25% of the participants' contribution up to a maximum of 3%
of the participants' compensation. For the year ended December 31, 1999, the
Partnership has recognized expense of $47,423, included in station operating
expenses.
12. Non-cash Compensation
The Partnership has issued certain appreciation rights ("Appreciation Rights")
to the general managers of its radio stations to attract more talented
individuals and to further motivate these managers. The Appreciation Rights
allow the individuals to share in the increase in the value of an assumed
investment in the Partnership and are subject to vesting provisions. The
Partnership has included a charge for the Appreciation Rights over the vesting
period as non-cash compensation in other operating expenses.
<PAGE> 20
12. Non-cash Compensation (continued)
In 1997, as part of an amendment to the partnership agreement, a Class B limited
partnership interest was created to allow certain members of management,
including Jeffrey D. Warshaw, to share in future profits of the Partnership.
These interests were granted in fixed percentages to management subject to
certain repurchase rights of the Partnership which expire over time. The Class B
partnership interests entitle the holders to approximately 5% to 15% of future
profits depending on the level of profits achieved. The Partnership has recorded
a charge for these interests as non-cash compensation in other operating
expenses.
Also in 1997, as part of an amendment to Continuity's partnership agreement,
certain limited partners of Continuity who were members of management had their
previously existing partnership interests converted into a fixed value of new
limited partnership interests.
Such value can be reduced by losses of Continuity, but may not be increased.
These interests are subject to a five year vesting period. The Partnership has
included a charge for the value of these limited partnership interests as
non-cash compensation in other operating expenses. In accordance with the
limited partnership agreement, the sale of the Partnership would constitute a
trigger event whereby the limited partnership interests issued become fully
vested.
13. Contingencies
In October 1999, a judgment was issued against one of the Partnerships in a case
involving a former employee. The Partnership has accrued $535,000 and $371,653
in 1999 and 2000 (unaudited), respectively, representing management's best
estimate of the ultimate liability under this litigation, which has been
included in other operating expenses.
14. Subsequent Events (Unaudited)
In May 1999, the Partnership entered into a Purchase Agreement to buy radio
station WKMQ-FM (formerly WLUV-FM) in Rockford, Illinois for $4,700,000. In
January 2000, under terms of the purchase agreement, the Partnership advanced
$1,000,000 to the seller and returned the letter of credit, cancelled (Note 10).
This acquisition was completed in June 2000 and was financed by cash on hand and
through borrowings of facilities available under the Credit Agreement. This
acquisition was included in the Agreement of Sale, but the transfer of the
license to Cumulus is still pending FCC approval. After October 2, 2000 until
FCC approval is granted, Cumulus is operating the station under a TBA.
In May, June and July 2000, Cumulus paid Connoisseur additional deposits of
$40,250,000 under the Agreement of Sale and amendments made thereto. The
proceeds of these deposits were used primarily to reduce senior debt.
<PAGE> 21
14. Subsequent Events (Unaudited) (continued)
The sale to Cumulus closed on October 2, 2000. The asset purchase price was
approximately $253,000,000 of which $730,733 and $10,281,309 at December 31,
1999 and September 30, 2000 (unaudited), respectively, have already been
recorded in net income (loss) as LMA fee income. The amount paid by Cumulus to
Connoisseur at closing was reduced by the deposits of $48,850,000 previously
advanced to Connoisseur. In addition, Cumulus paid Connoisseur approximately
$4,900,000 in connection with certain closing adjustments in accordance with the
Agreement of Sale.
At closing, senior debt was retired. In addition, the debt of Jeffrey D. Warshaw
(Note 10), which the Partnership and certain investors have guaranteed, was
retired.
The Partnership recorded approximately $985,000 of non-cash compensation for the
full vesting of the Appreciation Rights and Class B partnership interests upon
the change of control from the sale to Cumulus.
<PAGE> 22
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On October 2, 2000, Cumulus Media, Inc. (the "Company") completed the
acquisition of 35 stations (the "acquired stations") in 9 markets from
Connoisseur Communications Partners, LP ("Connoisseur") for a total purchase
price of $253.0 million in cash. This transaction will be accounted for under
the purchase method of accounting. The purchase price of the Connoisseur
acquisition was funded from (i) cash on hand, (ii) escrow deposits previously
made to Connoisseur in accordance with the related acquisition agreements, and
(iii) initial proceeds from a series of asset exchanges and sales to Clear
Channel Communications ("Clear Channel"). To facilitate closing of the
Connoisseur acquisition, the Company entered into a series of asset exchange and
sales agreements with Clear Channel, to be consummated in three phases. The
Company completed the first phase of the asset exchange and sales transaction
with Clear Channel on August 25, 2000, whereby the Company transferred 25
stations in 5 markets to Clear Channel in exchange for 7 stations in 3 markets
plus $91.5 million of cash proceeds. The Company consummated the second phase of
the asset exchange and sales transaction with Clear Channel on October 2, 2000,
whereby the Company would sell 30 stations in 5 markets for $68.9 million of
initial cash proceeds. Upon receipt of regulatory approval for 8 of the stations
being sold, the Company will receive an additional $8.0 million of cash
proceeds. On October 2, 2000, initial proceeds of $15.0 million were funded to
the Company in connection with the third phase of the asset exchange and sales
transaction with Clear Channel. Upon closing of this final phase, the Company
will transfer 45 stations in 8 markets to Clear Channel in exchange for 4
stations and approximately $37.0 million of additional cash proceeds.
The following unaudited pro forma financial statements are based on the
respective historical financial statements of the Company, giving effect to: (i)
the Company's acquisition of stations from Connoisseur, and (ii) the Company's
asset exchange and sale transactions with Clear Channel, using the assumptions
and adjustments described in the accompanying notes to the unaudited pro forma
financial statements. The unaudited pro forma financial statements reflect the
use of the purchase method of accounting for all acquisitions. The unaudited pro
forma statements of operations for the 9 months ended September 30, 2000 and the
year ended December 31, 1999 reflect adjustments as if the Connoisseur
acquisition and the Clear Channel asset exchange and sale transactions had
occurred on January 1, 1999. The unaudited pro forma balance sheet as of
September 30, 2000 gives effect to the Connoisseur acquisition and the Clear
Channel asset exchange and sale transactions as if they had occurred on
September 30, 2000. The information set forth under the heading "Company
Historical" in the pro forma statements of operations includes results relating
to local marketing agreements ("LMAs") with certain of the acquired stations.
The financial effects of the transactions presented in the unaudited pro forma
financial statements are not necessarily indicative of either the financial
position or results of operations that would have been obtained had the
acquisition actually occurred on the dates set forth above, nor are they
necessarily indicative of the results of future operations.
All pro forma financial information should be read in conjunction with our
consolidated financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in our Annual Report on
Form 10-K for the year ended December 31, 1999, as amended, and our Quarterly
Reports on Form 10-Q and the other information that we filed with the Securities
and Exchange Commission from time to time.
<PAGE> 23
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(E) (A)+(B)+(C)+
(B) (C) (D) PRO FORMA (D)+(E)=(F)
PRO FORMA PRO FORMA PRO FORMA ADJUSTMENTS FOR THE PRO FORMA AS
(A) ADJUSTMENTS FOR ADJUSTMENTS FOR ADJUSTMENTS FOR CUMULUS HISTORICAL, ADJUSTED FOR
THE COMPANY CLEAR CHANNEL CLEAR CHANNEL CONNOISSEUR THE DIVESTITURES AND THE DIVESTITURES AND
HISTORICAL ACQUISITIONS (1)DIVESTITURES (2) ACQUISITIONS (3) THE ACQUISITIONS THE ACQUISITIONS
-------------- --------------- ---------------- ---------------- -------------------- --------------------
<C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues $194,940 $13,017 $(43,153) $44,668 $ (1,041) (4) $208,431
Less: agency
commissions (14,921) (1,154) 3,473 (4,630) -- (17,232)
-------- ------- -------- ------- -------- --------
Net revenues 180,019 11,863 (39,680) 40,038 (1,041) 191,199
Operating expenses:
Station operating
expenses excluding
depreciation,
amortization and
LMA fees 133,328 8,281 (27,921) 27,060 (1,041) (4) 139,707
Depreciation and
amortization 32,564 1,147 (7,056) 5,220 11,602 (5) 43,477
LMA Fees 4,165 -- (555) 420 -- 4,030
Corporate general
and administrative
expenses 8,204 -- -- 3,172 -- 11,376
Non-cash stock
compensation
expense -- -- -- 798 -- 798
-------- ------- -------- ------- -------- --------
Operating Expenses 178,261 9,428 (35,532) 36,670 10,561 199,388
-------- ------- -------- ------- -------- --------
Operating income
(loss) 1,758 2,435 (4,148) 3,368 (11,602) (8,189)
-------- ------- -------- ------- -------- --------
Nonoperating
income (expense):
Interest expense (27,041) -- 24 (4,297) -- (31,314)
Interest income 4,164 -- -- -- (3,864) (6) 300
Gain (loss) on sale
of asset -- -- -- -- -- --
Other Income
(expense) 627 192 (1) (340) -- 478
-------- ------- -------- ------- -------- --------
Nonoperating
expenses, net (22,250) 192 23 (4,637) (3,864) (30,536)
Income (loss)
before income taxes (20,492) 2,627 (4,125) (1,269) (15,466) (38,725)
Income tax
(expense) benefit 6,870 (1,051) (7) 1,650 (7) 508 (7) 6,186 (7) 14,163
-------- ------- -------- ------- -------- --------
Net income (loss) (13,622) 1,576 (2,475) (761) (9,279) (24,562)
Preferred stock
dividends (23,790) -- -- -- -- (23,790)
-------- ------- -------- ------- -------- --------
Net income
(loss)
attributable to
common stockholders $(37,412) $ 1,576 $ (2,475) $ (761) $ (9,279) $(48,352)
======== ======= ======== ======= ======== ========
Basic and diluted
income (loss)
per share ($1.50) ($1.94)
Weighted average
common shares
outstanding 24,938 24,938
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated
Statement of Operations
<PAGE> 24
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
The pro forma financial results exclude the effects of estimated cost
savings which management believes will result from the integration of our
completed acquisitions.
(1) Reflects historical revenues and expenses of stations acquired by us from
Clear Channel Communications on August 25, 2000 for the period from
January 1, 1999 through December 31, 1999.
(2) Reflects the historical revenues and expenses of stations divested by us to
Clear Channel Communications on August 25th, 2000 and October 2nd, 2000 for
the period from January 1, 1999 through December 31, 1999.
(3) Reflects the historical revenues and expenses of stations acquired by us on
October 2, 2000 from Connoisseur Communications Partners, L.P. for the
period from January 1, 1999 through December 31, 1999.
(4) To eliminate $1,041 in management agreement revenue recorded by Cumulus in
the 1999 Company historical and the offsetting broker fee expense recorded
by Connoisseur Communications Partners, L.P. in their Consolidated
Statement of Operations for the year ending December 31, 1999.
(5) Reflects (i) the change in depreciation and amortization expense resulting
from conforming the estimated useful lives of our divested and acquired
assets to our policies and (ii) the additional depreciation and
amortization expense resulting from the allocation of the purchase price to
the estimated fair market value of the assets acquired net of assets
divested. On a pro forma basis, depreciation expense is $13,588 and
amortization expense is $29,889 after giving effect to the completed
divestitures and acquisitions. Depreciation expense has been calculated on
a straight line basis using a weighted average life of seven years for
property and equipment. Goodwill and other intangible assets' amortization
has been calculated on a straight line basis over 25 years. Non-compete
agreements are being amortized over the lives of the agreements which range
from one to three years.
We allocate the purchase prices of the acquired stations based on
evaluations of the assets acquired and the liabilities assumed. We believe
that the excess of cost over the fair value of tangible net assets of an
acquired radio station almost exclusively relates to the value of the FCC
broadcasting license and goodwill. We believe that the purchase price
allocation method described above is consistent with general practice in
the radio broadcasting industry.
<PAGE> 25
(6) Adjustment to reduce historical interest income to reflect the effects of
net cash used in our completed acquisitions for the year ended December 31,
1999.
(7) Adjustment to reflect the application of the Company's estimated effective
tax rate of 40% to the combined pre-tax income (loss) of the entities
divested and entities acquired on a pro forma basis for the period from
January 1, 1999 through December 31, 1999.
<PAGE> 26
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(A)+(B)+(C)+
(E) (D)+(E)=(F)
PRO FORMA PRO FORMA AS
(B) (C) (D) ADJUSTMENTS FOR ADJUSTED FOR
PRO FORMA PRO FORMA PRO FORMA THE COMPANY THE 2000
(A) ADJUSTMENTS FOR ADJUSTMENTS FOR ADJUSTMENTS FOR HISTORICAL, THE COMPLETED
THE COMPANY THE CLEAR CHANNEL CLEAR CHANNEL CONNOISSEUR DIVESTITURES AND DIVESTITURES AND
HISTORICAL ACQUISITIONS (1) DIVESTITURES (2) ACQUISITIONS(3) THE ACQUISITIONS ACQUISITIONS
-------------- ----------------- ----------------- --------------- ----------------- ----------------
<C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues $ 183,257 $ 8,032 $ (30,134) $ 45,747 $ (9,968)(4)$ 196,934
Less: agency
commissions (14,787) (750) 2,570 (3,659) -- (16,626)
-------------- ----------------- ---------------- -------------- ----------------- --------------
Net revenues 168,470 7,282 (27,564) 42,088 (9,968) 180,308
Operating Expenses:
Station operating
expenses excluding
depreciation,
amortization and
LMA Fees 151,137 4,635 (21,962) 31,338 (9,968)(4) 155,180
Depreciation and
amortization 30,477 3,246 (6,246) 3,984 1,146 (5) 32,607
LMA Fees 3,739 -- (7) 296 -- 4,028
Corporate general and
administrative
expenses 12,460 -- -- 1,900 -- 14,360
Restructuring and
other charges 9,296 -- -- -- -- 9,296
Non-cash stock
compensation
expense -- -- -- 201 -- 201
-------------- ----------------- ---------------- -------------- ----------------- --------------
Operating Expenses 207,109 7,881 (28,215) 37,719 (8,822) 215,672
Operating income
(loss) (38,639) (599) 651 4,369 (1,146) (35,364)
-------------- ----------------- ---------------- -------------- ----------------- --------------
Nonoperating income
(expense):
Interest expense (24,071) (2) 21 (1,906) -- (25,958)
Interest income 6,094 (1) -- -- (5,793)(6) 300
Gain (loss) on
sale of asset -- 8,632 -- -- (8,632)(7) --
Other income
(expense) 68,073 10 (1) (697) -- 67,385
-------------- ----------------- ---------------- -------------- ----------------- --------------
Nonoperating
income (expense),
net 50,096 8,639 20 (2,603) (14,425) 41,727
Income (loss)
before income
taxes 11,457 8,040 671 1,766 (15,571) 6,363
Income tax benefit
(expense) (6,361) (3,216)(8) (297)(8) (706)(8) 6,228 (8) (4,352)
-------------- ----------------- ---------------- -------------- ----------------- --------------
Net income (loss) 5,096 4,824 374 1,060 (9,343) 2,011
Preferred stock
dividends and
accretion of
discount (10,982) -- -- -- -- (10,982)
-------------- ----------------- ---------------- -------------- ----------------- --------------
Net income (loss)
attributable
to common
stockholders (5,886) 4,824 374 1,060 (9,343) (8,971)
============== ================= ================= ============== ================= ==============
Basic and
diluted income
(loss) per
share ($0.17) ($0.26)
Weighted average
common shares
outstanding 35,130 35,130
</TABLE>
See accompanying notes to Unaudited Pro Forma Consolidated Statement
of Operations
<PAGE> 27
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
The pro forma financial results exclude the effects of estimated cost
savings which management believes will result from the integration of our
completed and pending acquisitions.
(1) Reflects historical revenues and expenses of stations acquired by us from
Clear Channel Communications on August 25, 2000 for the period from January
1, 2000 through the date the stations were acquired by us.
(2) Reflects the historical revenues and expenses of stations divested by us to
Clear Channel Communications on or before October 2nd, 2000 for the period
from January 1, 2000 through the earlier of the date of divestiture or
September 30, 2000.
(3) Reflects the historical revenues and expenses of stations acquired by us
from Connoisseur Communications Partners, L.P. on October 2, 2000 for the
period from January 1, 2000 through September 30, 2000.
(4) To eliminate $9,968 in management agreement revenues recorded by Cumulus in
the September 30, 2000 Company historical and the offsetting broker fee
expense recorded by Connoisseur Communications Partners, L.P. in their
Consolidated Statement of Operations for the nine months ending
September 30, 2000.
(5) Reflects (i) the change in depreciation and amortization expense resulting
from conforming the estimated useful lives of our divested and acquired
assets, to our policies and (ii) the additional depreciation and
amortization expense resulting from the allocation of the purchase price to
the estimated fair market value of the assets acquired, net of assets
divested. On a pro forma basis, depreciation expense is $10,191 and
amortization expense is $22,416 after giving effect to the completed
acquisitions and divestitures. Depreciation expense has been calculated on
a straight-line basis using a weighted average life of seven years for
property and equipment. Goodwill and other intangible assets' amortization
has been calculated on a straight-line basis over 25 years. Non-compete
agreements are being amortized over the lives of the agreements which range
from one to three years.
We allocate the purchase prices of the acquired stations based on
evaluations of the assets acquired and the liabilities assumed. We believe
that the excess of cost over the fair value of tangible net assets of an
acquired radio station almost exclusively relates to the value of the FCC
broadcasting license and goodwill. We believe that the purchase price
allocation method described above is consistent with general practice in
the radio broadcasting industry.
<PAGE> 28
(6) Adjustments to reduce historical interest income to reflect the effects of
net cash used in our completed acquisitions for the nine months ended
September, 2000.
(7) Adjustment recorded to eliminate the non-recurring gain on sale of assets
recorded by Clear Channel Communications on the 2000 sale of radio stations
in Cedar Rapids, IA and Shreveport, LA to Cumulus.
(8) Adjustment to reflect the application of the Company's estimated effective
tax rate of 40% to the combined pre-tax income (loss) of the entities
divested and entities acquired on a pro forma basis for the period from
January 1, 2000 through September 30, 2000.
<PAGE> 29
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(Dollars in thousands)
<TABLE>
<CAPTION>
(B)
PRO FORMA (C)
ADJUSTMENTS PRO FORMA
(A) FOR THE CLEAR ADJUSTMENTS FOR (A) + (B) + (C)=(D)
THE COMPANY CHANNEL COMPLETED THE CONNOISSEUR PRO FORMA
HISTORICAL DIVESTITURES(1) ACQUISITIONS(3) COMBINED
-------------- ----------------- ---------------- -------------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 42,167 $ 76,956 $ (112,643) $ 21,780
$ 15,000(2)
Restricted Cash $ 91,467 $ -- $ (91,467) $ --
Accounts receivable, less allowance for doubtful
accounts 40,159 -- -- 40,159
Prepaid expenses and other current assets 9,672 -- -- 9,672
-------------- ----------------- ---------------- -------------------
Total current assets 183,765 91,956 (204,110) 71,611
Property and equipment, net 76,535 (6,712) 25,296 95,119
Intangible assets, net 569,360 (49,821) 227,666 747,205
Other assets 93,714 -- (48,852) 44,862
-------------- ----------------- ---------------- -------------------
TOTAL ASSETS $ 923,374 $ 35,423 $ -- $ 958,797
============== ================= ================ ===================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses $ 25,496 $ -- $ -- $ 25,496
Current portion of long-term debt 20 -- -- 20
Other current liabilities 848 15,000(2) -- 15,848
Total current liabilities 26,364 15,000 -- 41,364
Long-term debt 285,211 -- -- 285,211
Other liabilities 1,635 (47) -- 1,588
Deferred income taxes 11,810 7,875 -- 19,685
TOTAL LIABILITIES 325,020 22,828 -- 347,848
Series A Cumulative Exchangeable Redeemable Preferred
Stock due 2009, stated value $1,000 per share,
109,874 shares issued and outstanding 113,714 -- -- 113,714
Stockholders' equity:
Class A Common Stock, par value $.01 per share,
50,000,000 shares authorized: 28,378,975
shares issued and outstanding 284 -- -- 284
Class B Common Stock, par value $.01 per share,
20,000,000 shares authorized: 4,479,343
shares issued and outstanding 45 -- -- 45
Class A Common Stock par value $.01 per share,
30,000,000 shares authorized: 2,307,277
shares issued and outstanding 23 -- -- 23
Additional paid-in-capital 518,257 -- -- 518,257
Loans to Officers (10,583) -- -- (10,583)
Retained earnings (Accumulated deficit) (23,386) 12,595 -- (10,791)
-------------- ----------------- ---------------- -------------------
Total stockholders' equity 484,640 12,595 -- 497,235
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 923,374 $ 35,423 $ -- $ 958,797
============== ================= ================ ===================
</TABLE>
See accompanying notes to the unaudited consolidated pro forma balance sheet
<PAGE> 30
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
(1) To record the completion of the second phase of the Clear Channel asset
exchange and sale in which Cumulus sold 30 stations in five markets for
$76.9 million, $68.9 of which was received on October 2, 2000. The first
phase of the Clear Channel transaction was completed on August 25, 2000 and
is reflected in the Company's balance sheet at September 30, 2000.
(2) To record the receipt of initial proceeds of $15.0 million paid to the
Company as an advance on third phase of the asset exchange and sales
transaction with Clear Channel. The third phase of the transaction with
Clear Channel is expected to close in the first quarter of 2000.
(3) To record the allocation of the $253.0 million in purchase price paid for
the Connoisseur Communications Partners, L.P. acquisition consummated on
October 2, 2000. The pro forma allocation of the purchase price is as
follows:
<TABLE>
<S> <C>
Property and equipment............................................. $ 25,296
Intangible assets, principally broadcast licenses.................. 227,666
--------
$252,962
========
</TABLE>
