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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 00-24525
CUMULUS MEDIA INC.
(Exact Name of Registrant as Specified in Its Charter)
ILLINOIS 36-4159663
(State of Incorporation) (I.R.S. Employer Identification No.)
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
8,700,504 SHARES OF CLASS A COMMON STOCK; PAR VALUE $.01 PER SHARE
8,660,416 SHARES OF CLASS B COMMON STOCK; PAR VALUE $ .01 PER SHARE
2,376,277 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. [ ]
The aggregate market value of the registrant's outstanding common stock
held by non-affiliates of the registrant as of February 28, 1999 was
approximately $198.5 million. As of February 28, 1998, the registrant had
outstanding 19,737,197 shares of common stock consisting of (i) 8,700,504 shares
of Class A Common Stock; (ii) 8,660,416 shares of Class B Common Stock; and
(iii) 2,376,277 shares of Class C Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of our Definitive Proxy Statement for the 1999 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, 1998
ITEM PAGE
NUMBER NUMBER
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Index....................................................... 2
PART I
1. Business.................................................... 3
2. Properties.................................................. 25
3. Legal Proceedings........................................... 26
4. Submission of Matters to a Vote of Security Holders......... 26
PART II
5. Market for the Company's Common Equity and Related
Stockholder Matters....................................... 26
6. Selected Consolidated Financial Data........................ 27
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 28
7A. Quantitative and Qualitative Disclosure about Market Risk... 35
8. Financial Statements and Supplementary Data................. 36
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 36
PART III
10. Directors and Executive Officers of the Company............. 36
11. Executive Compensation...................................... 39
12. Security Ownership of Certain Beneficial Owners............. 39
13. Certain Relationships and Related Transactions.............. 40
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 41
Signatures.................................................. 46
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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.
A station's or station group's "power ratio" is defined as such station's
or station group's revenue market share divided by its audience market share.
"MSA" is defined as Metro Survey Area, as listed in the Arbitron Radio
Metro and Television Market Population Estimates 1996-1997. For example, "MSA
100-268" would mean the 100th largest market through the 268th 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 Spring 1998
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.
The terms "Broadcast Cash Flow" and "EBITDA before non-cash stock
compensation expense" are used in various places in this document.
Broadcast Cash Flow consists of:
- operating income (loss) before
-- depreciation,
-- amortization,
-- non-cash stock compensation expense and
-- corporate general and administrative expense.
EBITDA, before non-cash stock compensation expense, consists of:
- operating income (loss) before
-- depreciation,
-- amortization and
-- non-cash stock compensation expense.
EBITDA, before non-cash stock compensation expense, as defined by the
Company, may not be comparable to similarly titled measures used by other
companies. Although Broadcast Cash Flow and EBITDA, before non-cash stock
compensation expense, 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
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evaluate a radio company's operating performance. However, Broadcast Cash Flow
and EBITDA, before non-cash stock compensation expense, 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
Cumulus Media Inc. ("Cumulus" or the "Company") is a radio broadcasting
company focused on acquiring, operating and developing radio stations in
demographically attractive and fast growing mid-size radio markets in the U.S.
(primarily MSA 100-268), and as of March 19, 1999 owns and operates 180 stations
in 39 U.S. markets. We also provide sales and marketing services under LMAs
(pending FCC approval of acquisition) to 33 stations in 13 U.S. markets. Upon
consummation of certain pending acquisitions, we will be one of the three
largest radio broadcasting companies based on number of stations, and among the
twelve largest in the U.S. based on net revenues. Upon consummation of certain
pending acquisitions, we will own and operate a total of 221 radio stations (153
FM and 68 AM) in 42 U.S. markets. In 38 markets, we will rank first or second in
terms of revenue share and/or audience share.
Relative to the 100 largest markets in the U.S., we believe that the
mid-size markets (MSA 100-268) represent attractive operating environments and
generally are characterized by:
- faster real growth in the population and the economy;
- a greater reliance on 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; and
- lower historical susceptibility to economic downturns.
We believe that the attractive operating characteristics of mid-size
markets together with the relaxation of FCC ownership limits, create significant
opportunities to form groups of radio stations within markets and regions that
will enable us to achieve revenue growth, product improvement and cost
efficiencies. As a result, we believe that we can grow revenues at rates equal
to or better than larger market growth rates and generate Broadcast Cash Flow
margins that are comparable to the higher margins that in the past have
generally been achieved only in the top 100 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 169 U.S. radio markets ranked MSA 100-268.
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.
BUSINESS STRATEGY
Our operating strategy has the following principal components:
- ASSEMBLE LEADING STATION GROUPS. In each market, we have acquired
stations with diverse programming formats and FCC licenses that have full
signal coverage in the market area. In each market, we seek to assemble a
group or "cluster" of stations that immediately following acquisition
will rank first or second with the near term potential to rank first in
the market in terms of revenue and/or audience share.
- DEVELOP EACH STATION AS A UNIQUE ENTERPRISE. While each station in a
market shares a common infrastructure of support personnel and systems
and in many cases studio and office space, each station is programmed and
merchandised as a separate entity with its own brand identity,
programming and inventory of radio time slots for advertisers. Each
station targets a unique demographically defined audience of listeners.
Each station has its own program director, sales manager and sales
organization.
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- POSITION STATION CLUSTER TO COMPETE WITH PRINT AND TELEVISION. While each
station is generally sold independently, we also have the flexibility to
present the entire cluster. This affords major advertisers the
opportunity to target demographic segments comparable to newspapers and
television with greater cost effectiveness. By offering this new
flexibility, we are able to compete for a share of the relatively larger
advertising budgets spent on newspaper and television.
- LIVE ON-AIR TALENT AND RESEARCH TO SUPPORT PROGRAMMING. We use audience
research and music testing to refine each station's programming content
to match the preferences of the stations target demographic audience. We
also seek to enrich the listener experience by increasing both the
quality and quantity of local programming with live on-air personalities.
In addition, we have secured the services of the Associated Press to
provide each of our stations with the news resources to keep our
listeners informed as well as entertained. We believe this strategy is
the essence of successful radio and maximizes the number of listeners for
each station.
- EMPLOY INTERNET-BASED MANAGEMENT INFORMATION SYSTEMS. We have implemented
a proprietary set of computer applications using Internet software
standards to monitor daily sales performance, inventory and pricing
levels by station and by market. This system allows our managers to track
performance in near real-time comparing actual to historical and planned
levels as an early warning system for markets which stray off plan and to
insure optimal inventory and pricing levels. We also employ this same
platform as the basis for a company-wide information system that allows
our managers in each market to share their best ideas about programming,
sales and promotions.
ACQUISITION HISTORY
We completed the following acquisitions of radio stations for cash during
the year ended December 31, 1998. The respective purchase price listed below for
each transaction includes certain acquisition related costs paid in 1998 and
1997, and are rounded to the nearest thousand:
MARKETS AND STATIONS ACQUISITION DATE PURCHASE PRICE
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COLUMBUS, GEORGIA
M & M Partners
(WVRK-FM, WGSY-FM, WPNX-AM and WMLF-AM)................... January 6, 1998 $ 13,241
Minority Radio Associates
(WAGH-FM)................................................. March 17, 1998 $ 2,054
Smiths
(WBFA-FM)................................................. November 1, 1998 $ 1,800
TALLAHASSEE, FLORIDA
Tally Radio, L.C
(WWLD-FM)................................................. January 16, 1998 $ 1,200
HVS Partners
(WBZE-FM, WHBT-AM and WHBX-FM)............................ January 16, 1998 $ 15,650
TOLEDO, OHIO
Venice Broadcasting Corp.
(WXKR-FM)................................................. January 27, 1998 $ 5,009
SALISBURY, MARYLAND
Connor Broadcasting Corporation
(WSBY-FM and WJDY-AM)..................................... February 11, 1998 $ 1,361
WWFG-FM and WOSC-FM
(WOSC-FM and WWFG-FM)..................................... July 7, 1998 $ 7,564
ANN ARBOR, MICHIGAN
Arbor Radio LP
(WIQB-FM, WQKL-FM, WTKA-AM and WDEO-AM)................... March 2, 1998 $ 15,356
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MARKETS AND STATIONS ACQUISITION DATE PURCHASE PRICE
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MYRTLE BEACH, SOUTH CAROLINA
Carolina Broadcasting, Inc.
(WJXY-AM and WJXY-FM)..................................... March 16, 1998 $ 2,405
Seacoast Radio Company, LLC
WDAI-FM
Sunny Broadcasters, Inc.
(WSNY-FM)................................................. March 25, 1998 $ 8,229
WSEA Inc.
(WSEA-FM)................................................. July 31, 1998 $ 1,346
FLORENCE, SOUTH CAROLINA
Forjay Broadcasting Corporation
(WYNN-FM and WYNN-AM)..................................... March 23, 1998 $ 4,601
GHB Broadcasting
(WHSC-AM and WHSC-FM)..................................... May 1, 1998 $ 705
AMARILLO, TEXAS
Heritage Communications
(KZRK-AM and KZRK-FM)..................................... April 1, 1998 $ 1,032
West Jewel Management
(KARX-FM)................................................. April 8, 1998 $ 928
Wiskes-Abaris Communications
(KQIZ-FM)................................................. April 30, 1998 $ 3,207
Westwind Broadcasting
(KPUR-FM and KPUR-AM)..................................... June 9, 1998 $ 829
AUGUSTA, GEORGIA
Savannah Valley Broadcasting Radio Properties
(WBBQ-AM and WBBQ-FM)..................................... April 1, 1998 $ 10,206
WLOV P&T Broadcasting
(WLOV-FM and WLOV-AM)..................................... August 14, 1998 $ 533
ABILENE, TEXAS
IQ Radio, Inc.
(KHXS-FM)................................................. April 7, 1998 $ 385
Big Country Broadcasting
(KBCY-FM and KCDD-FM)..................................... April 15, 1998 $ 2,048
Esprit Communications Co.
(KFQX-FM)................................................. August 14, 1998 $ 1,695
BEAUMONT, TEXAS
Beaumont Skywave, Inc.
(KTCX-FM)................................................. May 15, 1998 $ 3,804
Ninety-Four Point One, Inc.
(KAYD-FM, KAYD-AM, KQXY-FM and KQHN-AM)................... May 15, 1998 $ 11,646
DUBUQUE, IOWA
KIKR, Inc.
(KIKR-FM)................................................. June 3, 1998 $ 1,350
Communications Properties, Inc.
(KLYV-FM, KXGE-FM, WJOD-FM and WDBQ-AM)................... September 15, 1998 $ 6,120
ODESSA-MIDLAND, TEXAS
New Frontier Communications, Inc.
(KBAT-FM, KODM-FM, KNFM-FM, KGEE-FM and KMND-AM).......... July 2, 1998 $ 15,083
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MARKETS AND STATIONS ACQUISITION DATE PURCHASE PRICE
-------------------- ---------------- --------------
CHATTANOOGA, TENNESSEE
Republic Corporation
(WUSY-FM)................................................. July 2, 1998 $ 20,640
Chattanooga Broadcasting Group
(WLMX-FM, WLMX-AM and WZST-FM)............................ July 31, 1998 $ 5,500
MONTGOMERY, ALABAMA
Republic Corporation
(WMSP-AM, WNZZ-AM, WMXS-FM and WLWI-FM)................... July 2, 1998 $ 20,724
MARION -- CARBONDALE, ILLINOIS
Clearly Superior Radio Properties, LLC
(WDDD-FM, WDDD-AM, WFRX-AM, WTAO-FM, WVZA-FM and
WQUL-FM).................................................. July 2, 1998 $ 12,795
SAVANNAH, GEORGIA
Lewis Broadcasting
(WJCL).................................................... July 6, 1998 $ 7,520
Savannah Communications, L.P.
(WIXV-FM, WSGF-FM and WBMQ-AM)............................ July 31, 1998 $ 5,268
Ocmulgee Broadcasting Co., Inc.
(WEAS-FM and WEAS-AM)..................................... September 24, 1998 $ 5,206
Phoenix Broadcast Partners
(WZAT-FM)................................................. September 30, 1998 $ 3,518
GRAND JUNCTION, COLORADO
Jan-Di Broadcasting, Inc.
(KBKL-FM, KEKB-FM and KMXY-FM)............................ July 8, 1998 $ 6,344
BANGOR, MAINE
Castle Broadcasting, L.P.
(WQCB-FM and WBZN-FM)..................................... July 10, 1998 $ 6,672
MONROE, MICHIGAN
Lesnick Communications, Inc.
(WTWR-FM)................................................. July 23, 1998 $ 3,393
LAKE CHARLES, LOUISIANA
Louisiana Media Interests, Inc.
(KKGB-FM, KBIU-FM, KYKZ-FM and KXZZ-AM)................... July 24, 1998 $ 16,392
KALAMAZOO, MICHIGAN
Crystal Radio Group, Inc.
(WKFR-FM, WRKR-FM and WKMI-AM)............................ July 31, 1998 $ 14,180
BISMARCK, NORTH DAKOTA
JKJ Broadcasting, Inc., Missouri River Broadcasting, Inc.,
Ingstad Mankato, Inc., James Ingstad Broadcasting, Inc.,
and Hometown Wireless, Inc.
(KBYZ-FM, KACL-FM, KKCT-FM and KLXX-AM)................... August 14, 1998 $ 7,539
NEW ULM -- SPRINGFIELD -- MARSHALL, MINNESOTA
JKJ Broadcasting, Inc., Missouri River Broadcasting, Inc.,
Ingstad Mankato, Inc., James Ingstad Broadcasting,
Inc.,and Hometown Wireless, Inc.
(KNUJ-FM, KNUJ-AM and KNSG-FM)............................ August 14, 1998 $ 5,460
WASECA, MINNESOTA
JKJ Broadcasting, Inc., Missouri River Broadcasting, Inc.,
Ingstad Mankato, Inc., James Ingstad Broadcasting, Inc.,
and Hometown Wireless, Inc.
(KOWO-AM and KRUE-FM)..................................... August 14, 1998 $ 2,488
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MARKETS AND STATIONS ACQUISITION DATE PURCHASE PRICE
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OWATONNA, MINNESOTA
JKJ Broadcasting, Inc., Missouri River Broadcasting, Inc.,
Ingstad Mankato, Inc., James Ingstad Broadcasting, Inc.,
and Hometown Wireless, Inc.
(KRFO-FM and KRFO-AM)..................................... August 14, 1998 $ 2,488
MANKATO, MINNESOTA
JKJ Broadcasting, Inc., Missouri River Broadcasting, Inc.,
Ingstad Mankato, Inc., James Ingstad Broadcasting, Inc.,
and Hometown Wireless, Inc.
(KXLP-FM, KYSM-AM and KYSM-FM)............................ August 14, 1998 $ 11,153
MASON CITY, IOWA
JKJ Broadcasting, Inc., Missouri River Broadcasting, Inc.,
Ingstad Mankato, Inc., James Ingstad Broadcasting, Inc.,
and Hometown Wireless, Inc.
(KCHA-FM, KGLO-AM, KIAI-FM and KLKK-FM)................... August 14, 1998 $ 11,404
FARIBAULT, MINNESOTA
Radio Ingstad Minnesota, Inc., Radio Albert Lea, Inc., and
KRCH of Minnesota
(KRCH-FM, KWEB-AM, KMFX-F and KMFX-AM).................... August 14, 1998 $ 4,197
ROCHESTER, MINNESOTA
Radio Ingstad Minnesota, Inc., Radio Albert Lea, Inc., and
KRCH of Minnesota
(KRCH-FM, KWEB-AM, KMFX-FM and KMFX-AM)................... August 14, 1998 $ 6,242
TOPEKA, KANSAS
Midland Broadcasters, Inc.
(KMAJ-FM, KMAJ-AM, KDVV-FM and KTOP-AM)................... September 30, 1998 $ 11,111
GREEN BAY, WISCONSIN
American Communications Company
(KJLW-FM)................................................. October 2, 1998 $ 2,606
Brillion Radio Company
(WEZR-FM)................................................. November 2, 1998 $ 2,115
AUGUSTA-WATERVILLE, MAINE
Tryon-Seacoast, Inc.
(WABK-FM, WKCG-FM, WIGY-FM, WCME-FM and WFAU-AM).......... October 16, 1998 $ 4,340
ALBANY, GEORGIA
K-Country, Inc.
(WEGC-FM and WJAD-FM)..................................... October 26, 1998 $ 1,911
TUPELO, MISSISSIPPI
Charisma Communications
(WESE-FM, WWZD-FM, WTUP-AM and WNRX-AM)................... December 29, 1998 $ 3,425
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TOTAL $344,018
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During the twelve months ended December 31, 1998, the Company operated the
following stations under local marketing agreements ("LMA"):
MARKET AND STATIONS LMA EFFECTIVE DATE
------------------- ------------------
GREEN BAY, WISCONSIN
American Communications Co.
(WJLW-FM)................................................. February 15, 1998
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MARKET AND STATIONS LMA EFFECTIVE DATE
------------------- ------------------
Brillion Radio Company
(WEZR-FM)................................................. February 15, 1998
AUGUSTA, GEORGIA
Savannah Valley Broadcasting Radio Properties
(WBBQ-AM and WBBQ-FM)..................................... September 4, 1997
SALISBURY, MARYLAND
WWFG-FM and WOSC-FM
(WWFG-FM and WOSC-FM)..................................... February 1, 1998
TALLAHASSEE, FLORIDA
HVS Partners
(WHBX-FM, WBZE-FM and WHBT-AM)............................ August 18, 1997
Tally Radio, L.C
(WWLD-FM)................................................. August 18, 1997
Tallahassee Broadcasting, Inc.
(WGLF-FM)................................................. August 18, 1997
ABILENE, TEXAS
Big Country Broadcasting
(KBCY-FM and KCDD-FM)..................................... November 1, 1997
IQ Radio, Inc.
(KHXS-FM)................................................. November 1, 1997
Esprit Communications
(KFQX-FM)................................................. April 1, 1998
AMARILLO, TEXAS
Westwind
(KPUR-FM and KPUR-AM)..................................... January 1, 1998
Heritage Communications
(KZRK-FM and KZRK-AM)..................................... January 1, 1998
West Jewel
(KARX-FM)................................................. January 1, 1998
Wiskes-Abaris
(KQIZ-FM)................................................. February 15, 1998
ODESSA-MIDLAND, TEXAS
New Frontier Communications, Inc.
(KGEE-FM, KODM-FM, KNFM-FM, KMND-AM and KBAT-FM).......... January 1, 1998
MARION CARBONDALE, ILLINOIS
Clearly Superior Radio Properties
(WDDD-FM, WDDD-AM, WTAO-FM, WVZA-FM, WQUL-FM and
WFRX-AM).................................................. January 1, 1998
COLUMBUS, GEORGIA
Minority Associates
(WAGH-FM)................................................. January 1, 1998
Solar Broadcasting Company, Inc.
(WSTH-FM and WDAK-AM)..................................... December 17, 1998
SAVANNAH, GEORGIA
Savannah Communications, L.P.
(WBMQ-AM, WIXV-FM and WSGF-FM)............................ January 1, 1998
WJCL-FM
(WJCL-FM)................................................. January 1, 1998
Phoenix Broadcast Partners, Inc.
(WZAT-FM)................................................. March 16, 1998
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MARKET AND STATIONS LMA EFFECTIVE DATE
------------------- ------------------
BEAUMONT, TEXAS
Beaumont Skywave, Inc.
(KTCX-FM)................................................. February 15, 1998
MYRTLE BEACH, SOUTH CAROLINA
Carolina Broadcasting, Inc.
(WXJY-FM)................................................. March 16, 1998
FLORENCE, SOUTH CAROLINA
Clarendon County Broadcasting
(WHLZ-FM and WYMB-AM)..................................... March 18, 1998
Pamplico Broadcasting, L.P.
(WBZF-FM, WMXT-FM and WWFN-FM)............................ March 16, 1998
MONTGOMERY, ALABAMA
Republic Corporation
(WMSP-AM, WNZZ-AM, WMXS-FM and WLWI-FM)................... February 11, 1998
McDonald Media Group, Inc.
(WHHY-AM, WJCC-FM and WXFX-FM)............................ August 17, 1998
CHATTANOOGA, TENNESSEE
Republic Corporation
(WUSY-FM)................................................. February 11, 1998
Marson Broadcasting, Inc.
(WKXJ-FM)................................................. July 1, 1998
AUGUSTA, GEORGIA
P&T Broadcasting, Inc.
(WLOV-AM and WLOV-FM)..................................... April 1, 1998
Estate of George G. Weiss
(WZNY-FM)................................................. December 14, 1998
DUBUQUE, IOWA
KIKR, INC.
(KIKR-FM)................................................. April 1, 1998
ALBANY, GEORGIA
Brooks Broadcasting Co.
(WKAK-FM, WEGC-FM, WALG-AM and WJAD-FM)................... April 1, 1998
Albany Broadcasting Co.
(WGPC-FM and WGPC-AM)..................................... June 1, 1998
Williams Communications Systems, Inc.
(WQVE-FM)................................................. July 2, 1998
MONROE, MICHIGAN
Lesnick Communications, Inc.
(WTWR-FM)................................................. April 1, 1998
FLORENCE, SOUTH CAROLINA
Nautical Broadcasting
(WCMG-FM)................................................. April 1, 1998
MYRTLE BEACH, SOUTH CAROLINA
Blue Dolphin of South Carolina, Inc.
(WSEA-FM)................................................. April 1, 1998
COLUMBUS -- STARKVILLE, MISSISSIPPI
Charisma Communications
(WSSO-AM, WMXU-FM, WSMS-FM, WKOR-FM, WKOR-AM and
WMSU-FM).................................................. September 30, 1998
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MARKET AND STATIONS LMA EFFECTIVE DATE
------------------- ------------------
TUPELO, MISSISSIPPI
Charisma Communications
(WESE-FM, WTUP-AM, WNRX-AM and WWZD-FM)................... September 30, 1998
The statement of operations for the twelve months ended December 31, 1998
includes 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 (i) the date of acquisition of such station by the
Company; or (ii) December 31, 1998.
In December of 1998 the Company formed Cumulus Wireless Services, Inc.
("Wireless Services") a wholly owned subsidiary of Cumulus Broadcasting Inc. to
develop additional revenue and cash flow from its broadcast towers. For the year
ended December 31, 1998 Wireless Services did not report any net revenue, net
income, or cash flow.
INDUSTRY OVERVIEW
Revenues for radio stations are generated primarily from the sale of
advertising time to local and national spot advertisers and national network
advertisers. 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 RAB's Radio Marketing Guide and Fact Book for
Advertisers 1998, each week radio reaches approximately 96% of all Americans
over the age of 12. More than 60% 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 24 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 80% 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 or 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, is limited in part by the format of
a particular station and the local competitive environment. Although the number
of advertisements broadcast during a given time period may vary, the total
number of advertisements broadcast on a particular station generally does not
vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station
usually will engage a firm that specializes in soliciting radio-advertising
sales on a national level. National sales representatives obtain advertising
principally from advertising agencies located outside the station's market and
receive commissions based on the revenue from the advertising they obtain.
GENERATION OF REVENUE
Virtually all of our revenue is generated from the sale of local, regional
and national advertising for broadcast on our radio stations. Approximately 89%
of our net broadcasting revenues were generated from the
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sale of local and regional advertising in each of 1998 and 1997. Additionally,
broadcasting revenues are generated from the sale of national advertising. Our
advertisers include companies in the following industries:
- - Automotive - Telecommunications - Movies
- - Retail - Fast Food - Entertainment
- - Healthcare - Beverage - Services
SALES AND MARKETING
Each station's local sales staff solicits advertising either directly from
the local advertiser or indirectly through an advertising agency. Cumulus
employs 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 increased the number of sales
persons per station. We believe that we can outperform the traditional growth
rates of our markets by: (i) expanding our customer base to include advertisers
who have historically not advertised or used other media such as newspaper and
television; (ii) expanding the sales organization to acquire and support an
expanded base of customers; (iii) providing more in-depth training to all sales
personnel; and (iv) providing a higher level of service to all advertisers. 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 firms 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.
The number of advertisements that can be broadcast without jeopardizing
listening levels and the resulting ratings is limited in part by the format of a
particular station. We estimate the optimal number of advertisements available
for sale depending on the programming format of a particular station. Each of
our stations has a general target level of on-air inventory that it makes
available for advertising. This target level of inventory for sale may be
different at different times of the day but tends to remain stable over time.
Our 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 the Company to chart
audience growth, set advertising rates and adjust programming. The radio
broadcasting industry's principal ratings service is
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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 compete for listeners and advertising revenue 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 the Company.
Factors that are material to a radio station's competitive position include
the station's audience rank in its market, transmitter power, assigned
frequency, audience characteristics, local program acceptance and the quality of
its sales and programming personnel. We attempt to improve our competitive
position in each market by researching listener response to programming,
implementing advertising campaigns aimed at the demographic groups targeted by
our stations; managing our sales efforts to attract a larger share of
advertising dollars for each station individually; and recruiting and training
quality sales and programming personnel for each station. However, we compete
with some organizations that have substantially greater financial or other
resources than we do.
The Telecommunications Act of 1996 (the "Telecom Act") permits common
ownership and operation of multiple radio stations in the same city or market.
These groups of stations within a market are called "clusters." Factors that are
material to a cluster's competitive position include the factors mentioned above
relating to each station, the over all quality of the cluster's management, and
the degree to which the cluster operates, by ownership or under LMA, the maximum
number of stations allowed by the Telecom Act. Although 76% of Cumulus's
clusters are completed to the maximum allowed by the Telecom Act and we are
working to complete the other clusters, there can be no assurance that we can
acquire the needed stations. In station acquisition we compete with companies
with substantially greater resources.
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 regulatory and technical restrictions on
operating additional stations in that market, as well as by the FCC's multiple
ownership rules regulating the number of stations that may be owned and
controlled by a single entity. The FCC's multiple ownership 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 directly for advertising revenue with other
media, especially newspapers, broadcast television, and cable television. 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
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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.
We cannot predict what other matters might be considered in the future by
the FCC, nor can we assess in advance what impact, if any, the implementation of
any of these proposals or changes might have on our business. See "Federal
Regulation of Radio Broadcasting."
EMPLOYEES
At December 31, 1998, we employed approximately 1,900 people. No 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 the Company, are subject to the jurisdiction of the
FCC, which acts under authority derived from the Communications Act of 1934, as
amended (the "Communications Act"). The Communications Act was amended in 1996
by the Telecommunications Act of 1996 (the "Telecom Act") to make changes in
several broadcast laws. 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 and of specific FCC regulations and policies. Failure to
observe these or other rules and policies can result in the imposition of
various sanctions, including monetary forfeitures, the grant of "short-term"
(less than the maximum term) license renewal or, for particularly egregious
violations, the denial of a license renewal application, the revocation of a
license or the denial of FCC consent to acquire additional broadcast properties.
Please refer to the Communications Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of broadcast stations.
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. The Communications Act requires that the FCC grant the renewal of a
station's license if the FCC finds that, during the preceding term of the
license, the station has served the public interest, convenience and necessity,
that there have been no serious
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violations by the licensee of the Communications Act or the rules and
regulations of the FCC, and that there have been no other violations by the
licensee of the Communications Act or the rules and regulations of the FCC that,
when taken together, would constitute a pattern of abuse.
Petitions to deny license renewal applications can be filed by interested
parties, including members of the public. Such petitions may raise various
issues before the FCC. The FCC is required to hold hearings on renewal
applications if the FCC is unable to determine that renewal of a license would
serve the public interest, convenience and necessity, or if a petition to deny
raises a "substantial and material question of fact" as to whether the grant of
the renewal application would be patently inconsistent with the public interest,
convenience and necessity. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license is
restricted. 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 FCC classifies each AM and FM station. An AM station operates on a
clear channel, a regional channel or a local channel. A clear channel is one on
which certain dominant AM stations are assigned to serve wide areas. Clear
channel AM stations are classified as one of the following:
- Class A stations, which operate on an unlimited time basis and are
designated to render primary and secondary service over an extended area;
- Class B stations, which operate on an unlimited time basis and are
designed to render service only over a primary service area;
- Class C stations operate on a local channel and are designed to render
service only over a primary service area that may be reduced as a
consequence of interference; and
- Class D stations, which operate either during daytime hours only, during
limited times only or on an unlimited time basis with low nighttime
power.
A regional channel is one on which Class B and Class D AM stations may
operate and serve primarily a principal center of population and the rural areas
contiguous to it. A local channel is one on which AM stations operate on an
unlimited time basis and serve primarily a community and the suburban and rural
areas immediately contiguous to that community.
The area served by AM stations is determined by a combination of frequency,
transmitter power and antenna orientation. Directional antenna arrays are often
used to avoid or reduce interference to stations in certain locations. AM
stations are often required to reduce power or change directional pattern at
night in order to avoid interference to other licensees. 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. Antenna systems are typically
non-directional and power is the same, day and night.
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.
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 owned or operated by the
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Company, assuming the consummation of the pending acquisitions, and the date on
which each station's FCC license expires.
HEIGHT POWER
ABOVE (IN
AVERAGE KILOWATTS)
EXPIRATION FCC TERRAIN -------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------- --------------- --------- --------------- ----- --------- --- -----
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
WDEO AM Saline, MI 1290 October 1, 2004 B N.A. 0.5 0.0
Appleton Oshkosh/Green
Bay, WI................ WUSW FM Oshkosh, WI 96.7 December 1, 2004 A 328 6.0 6.0
WVBO FM Oshkosh, WI 103.9 December 1, 2004 C3 318 25.0 25.0
WOGB FM Kaukauna, WI 103.1 December 1, 2004 C3 879 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
WJLW FM Allouez, WI 106.7 December 1, 2004 C3 509 25.0 25.0
WEZR FM Brillion, WI 107.5 December 1, 2004 A 328 6.0 6.0
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
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
Faribault, MN.......... 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
KNFX AM Austin, MN 970 April 1, 2005 B N.A. 5.0 0.5
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
Mankato, 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
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
New Ulm-Springfield-
Marshall, MN........... 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
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HEIGHT POWER
ABOVE (IN
AVERAGE KILOWATTS)
EXPIRATION FCC TERRAIN -------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------- --------------- --------- --------------- ----- --------- --- -----
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
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
WTWR FM Monroe, MI 98.3 October 1, 2004 A 466 1.4 1.4
WBUZ FM Delta, OH 106.5 October 1, 2003 A 328 3.0 3.0
WJZE FM Oak Harbor, OH 97.3 October 1, 2003 A 407 1.6 1.6
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
WRXR FM Aiken, SC 96.3 April 1, 2004 C2 889 15.0 15.0
WUUS 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
Chattanooga, TN........ WUSY FM Cleveland, TN 100.7 April 1, 2005 C 1191 100.0 100.0
WKXJ FM South Pittsburgh, 97.3 April 1, 2005 C2 856 16.0 16.0
WLMX FM Rossville, GA 105.5 April 1, 2004 A 646 1.6 1.6
Chattanooga, TN........ WLMX AM Rossville, GA 980 April 1, 2004 B N.A. 0.5 0.1
WLOV FM Signal Mountain, 98.1 April 1, 2005 A 794 1.0 1.0
Columbus, GA........... WVRK FM Columbus, GA 102.9 April 1, 2004 C 1519 100.0 100.0
WGSY FM Phenix City, GA 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, GA 1460 April 1, 2004 B N.A. 4.0 0.1
WAGH FM Ft. Mitchell, GA 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,
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, MA 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 FM Columbus, MS 1400 June 1, 2004 C N.A. 1.0 1.0
WMBC FM Columbus, MA 103.1 June 1, 2004 C2 755 22.0 22.0
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
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
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HEIGHT POWER
ABOVE (IN
AVERAGE KILOWATTS)
EXPIRATION FCC TERRAIN -------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------- --------------- --------- --------------- ----- --------- --- -----
WHLZ FM Manning, SC 92.5 December 1, 2003 C 1171 98.0 98.0
WYMB AM Manning, SC 920 December 1, 2003 B N.A. 2.3 1.0
WCMG FM Latta, SC 94.3 December 1, 2003 C3 502 10.5 10.5
WHSC AM Hartsville, SC 1450 December 1, 2003 C N.A. 1.0 1.0
WHSC FM Hartsville, SC 98.5 December 1, 2003 A 328 3.0 3.0
WBZF 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
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
Laurel-Hattiesburg,
MS..................... WEEZ 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
WHER FM Hattiesburg, MS 103.7 June 1, 2004 C 1057 100.0 100.0
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
WHHY 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
WDAI FM Pawley's Island, 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
Muscle Shoals, AL...... WLAY 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
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
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
Salisbury -- Ocean
City, MD............... 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
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
Wilmington, NC......... WWQQ FM Wilmington, NC 101.3 December 1, 2003 C2 545 40.0 40.0
WQSL FM Jacksonville, NC 92.3 December 1, 2003 C2 725 22.7 22.7
18
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HEIGHT POWER
ABOVE (IN
AVERAGE KILOWATTS)
EXPIRATION FCC TERRAIN -------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE CLASS (IN FEET) DAY NIGHT
------ -------- --------------- --------- --------------- ----- --------- --- -----
WXQR FM Jacksonville, NC 105.5 December 1, 2003 C2 794 19.0 19.0
WAAV FM Leland, NC 94.1 December 1, 2003 A 148 5.0 5.0
WAAV AM Leland, NC 980 December 1, 2003 B N.A. 5.0 5.0
SOUTHWEST REGION
Abilene, TX............ KCDD FM Hamlin, TX 103.7 August 1, 2005 C1 745 100.0 100.0
KBCY FM Tye, TX 99.7 August 1, 2005 C 984 98.0 98.0
KFQX FM 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
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
KQIL AM Grand Junction, CO 1340 April 1, 2005 C N.A. 1.0 1.0
Lake Charles, LA....... KKGB FM Sulphur, LA 101.3 June 1, 2004 C3 289 25.0 25.0
KBIU FM Lake Charles, LA 103.7 June 1, 2004 C1 469 100.0 100.0
KYKZ FM Lake Charles, LA 96.1 June 1, 2004 C 1204 97.0 97.0
KXZZ AM Lake Charles, LA 1580 June 1, 2004 B N.A. 1.0 1.0
Odessa-Midland, TX..... KBAT FM Midland, TX 93.3 August 1, 2005 C1 440 100.0 100.0
KODM FM Odessa, TX 97.9 August 1, 2005 C1 1000 100.0 100.0
KNFM FM Midland, TX 92.3 August 1, 2005 C 984 100.0 100.0
KGEE FM Monahans, TX 99.9 August 1, 2005 C1 574 98.0 98.0
Odessa -- Midland, TX 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
Topeka, KS............. KDVV FM Topeka, KS 100.3 August 1, 2005 C 984 100.0 100.0
KMAJ FM Topeka, KS 107.7 August 1, 2005 C 988 100.0 100.0
KMAJ AM Topeka, KS 1440 August 1, 2005 B N.A. 5.0 1.0
KTOP AM Topeka, KS 1490 August 1, 2005 C N.A. 1.0 1.0
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
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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 or renew a broadcast
license or permit it to be assigned or transferred, 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, 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.
Once a station purchase agreement has been signed, an application for FCC
consent to assignment of license or transfer of control (depending upon whether
the underlying transaction is an asset purchase or stock acquisition) is filed
with the FCC. The FCC publishes a notice assigning a file number to the
application and advising the public that the application has been "accepted for
filing." This notice begins a 30-day statutory waiting period, which provides
the opportunity for third parties to file formal petitions to deny the
transaction. Informal objections may be filed any time prior to the grant of an
application.
Once the 30-day public notice period ends, the staff generally will
complete its processing, assuming that no petitions or informal objections were
received and that the application is otherwise consistent with FCC rules and
acceptable to the staff. The staff often grants the application by delegated
authority approximately 10 to 15 days after the public notice period ends. At
this point, the parties are legally authorized to close the purchase, although
the FCC action is not legally a "final order," and is subject to petitions
seeking staff reconsideration or full FCC review of the staff action by the FCC
on its own motion.
If no such reconsideration or review is sought or undertaken within 40 days
after the grant of application, the grant becomes final by operation of law and
generally is no longer subject to administrative or judicial review, although
such action can nevertheless be set aside in rare circumstances.
The pendency of a license renewal application will alter the above
timetables, because the FCC will not issue an unconditional assignment grant if
the station's license renewal is pending.
Ownership Matters. Under the Communications Act, the Company is restricted
to having no more than one-fourth of its stock owned or voted by non-U.S.
persons, foreign governments or non-U.S. corporations. The Company will be
required to take appropriate steps to monitor the citizenship of its
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 a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these cross-ownership rules,
absent waivers, we would not be permitted to acquire any daily newspaper or
television broadcast station (other than low power television) in a local market
where we then owned any radio broadcast station. The FCC's rules provide for the
liberal grant of a waiver of the rule prohibiting common ownership of radio and
television stations in the same geographic market in the top 25 television
markets if certain conditions are satisfied. The Telecom Act directed the FCC to
extend this waiver policy to stations in the top 50 television markets, although
the FCC has not yet implemented this change. For purposes of these rules, a
"market" is defined by reference to the signal coverage(s) of the station(s)
involved.
The Telecom Act and the FCC's broadcast multiple ownership rules restrict
the number of radio stations one person or entity may own, operate or control on
a local level. These limits are:
- in a market with 45 or more commercial radio signals, an entity may own
up to eight commercial radio stations, not more than five of which are in
the same service (FM or AM);
- in a market with between 30 and 44 (inclusive) commercial radio signals,
an entity may own up to seven commercial radio stations, not more than
four of which are in the same service;
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- in a market with between 15 and 29 (inclusive) commercial radio signals,
an entity may own up to six commercial radio stations, not more than four
of which are in the same service; and
- in a market with 14 or fewer commercial radio signals, an entity may own
up to five commercial radio stations, not more than three of which are in
the same service, except that an entity may not own more than 50% of the
stations in such market
None of these multiple ownership rules requires any change in the Company's
current ownership of radio broadcast stations or precludes consummation of the
pending acquisitions, except that petitions to deny or informal objections have
been filed against the acquisition of stations in the Grand Junction, Colorado;
Tallahassee, Florida; Columbus-Starkville, Mississippi; and Augusta, Georgia
markets alleging that such acquisitions would result in undue market
concentration. These FCC rules and policies will limit the number of additional
stations, which the Company may acquire in the future in certain of its markets.
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 comment on
such applications. Such policy may help trigger petitions to deny and informal
objections against FCC applications for certain pending acquisitions and future
acquisitions.
Because of these multiple and cross-ownership rules, a purchaser of voting
stock of the Company which acquires an "attributable" interest in the Company
may violate the FCC's rules if it also has an attributable or a non-attributable
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 the Company 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 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.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
nonvoting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership and
where the limited partnership agreement expressly "insulates" the limited
partner from such material involvement, and minority (under 5%) voting stock,
generally do not subject their holders to attribution. However, the FCC is
currently reviewing its rules on attribution of broadcast interests, and it may
adopt stricter criteria. See "Proposed Changes" below.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock and otherwise
"insulated" limited partnership interests) and significant employment positions.
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22
This policy may limit the permissible investments a purchaser of the Company's
voting stock may make or hold. It also may limit the Company's ability to
acquire stations in the same local market in which any of the Company's
non-attributable investors has an attributable media interest.
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 pay regulatory and application fees to the FCC and
follow various FCC rules that regulate, among other things, political
advertising, the broadcast of obscene or indecent programming, sponsorship
identification and technical operations (including limits on radio frequency
radiation). In 1998, the U.S. Court of Appeals for the District of Columbia
Circuit ruled that the FCC's rules requiring licensees to develop and implement
programs designed to promote equal employment opportunities were
unconstitutional. Subsequently, the FCC suspended its requirement that licensees
submit reports to the FCC. The broadcast of contests and lotteries is regulated
by FCC rules.
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.
The FCC rules also require applicants for new broadcast stations, renewals
of broadcast licenses or modifications of existing licenses to inform the FCC at
the time of filing such applications whether a new or existing broadcast
facility would expose people to radio frequency radiation in excess of certain
guidelines. The Company anticipates that compliance with these radio frequency
radiation guidelines will not have a material effect on its business.
Local Marketing Agreements. Over the past six years, a number of radio
stations, including certain of the Company's 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
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 complete
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. FCC rules also prohibit a station from
simulcasting more than 25% of its programming on another station in the same
broadcast service (i.e., AM-AM or FM-FM) where the two stations serve
substantially the same geographic area, whether the licensee owns the stations
or owns one and programs the other through an LMA arrangement.
Proposed Changes. In December 1994, the FCC initiated a proceeding to
solicit comment on whether it should revise its radio and television ownership
"attribution" rules by, among other proposals:
- raising the basic benchmark for attributing ownership in a corporate
licensee from 5% to 10% of the licensee's voting stock;
- increasing from 10% to 20% of the licensee's voting stock the attribution
benchmark for "passive investors" in corporate licensees;
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- restricting the availability of the attribution exemption when a single
party controls more than 50% of the voting stock of a corporate licensee;
and
- considering joint sales agreements, debt and non-voting stock interests
to be attributable under certain circumstances.
The FCC has made no decision in these matters. At this time, no
determination can be made as to what effect, if any, this proposed rulemaking
will have on the Company.
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 the Company's radio stations, result in the loss
of audience share and advertising revenues for the Company's radio stations, and
affect the ability of the Company to acquire additional radio stations or
finance such acquisitions. Such matters include:
- the FCC's rules and regulations relating to political broadcasting;
technical and frequency allocation matters;
- proposals to restrict or prohibit the advertising of beer, wine and other
alcoholic beverages on radio;
- changes in the FCC's cross-interest, multiple ownership and
cross-ownership policies;
- changes to broadcast technical requirements; proposals to allow telephone
or cable television companies to deliver audio and video programming to
the home through existing phone lines; and
- proposals to limit the tax deductibility of advertising expenses by
certain types of advertisers.
In February, 1999 the FCC proposed rules to authorize the operation of two
new classes of low power FM radio stations; a 1,000-watt service and a 100-watt
service. The FCC also requested comment on whether a third 1 to 10-watt service
should be established, and whether any or all of such classes of new low power
FM stations should be limited to non-commercial operations. While the Company
cannot predict whether such rules will ultimately be adopted, such new low power
stations, if permitted to be established, may compete with the Company's
stations for advertising and other revenues and may cause interference with the
Company's broadcast signals.
The FCC, on April 2, 1997, awarded two licenses for the provision of
digital audio radio services. Under rules adopted for this service, licensees
must begin construction of their space stations within one year, begin operating
within four years, and be operating their entire system within six years. The
Company cannot predict whether the service will be subscription-based or
advertiser-supported. 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 a rule making
with respect to digital audio broadcasting. In addition, the FCC has authorized
an additional 100 kHz of bandwidth for the AM band and on March 17, 1997,
adopted an allotment plan for the expanded band which identified the 88 AM radio
stations selected to move into the band. At the end of a five-year transition
period, those licensees will be required to return to the FCC either the license
for their existing AM band station or the license for the expanded AM band
station.
In November, 1998 the FCC proposed rules that would require broadcast
licensees to inform women and members of minority groups of job vacancies.
The Company cannot predict whether any of the foregoing proposed changes
will be adopted or what other matters might be considered in the future, nor can
it judge in advance what impact, if any, the implementation of any of these
proposals or changes might have on its business.
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
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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. The Department of
Justice, which evaluates transactions to determine whether those transactions
should be challenged under the federal antitrust laws, has been active recently
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. The Department of Justice has opened investigations
with respect to the Company's pending acquisitions in Grand Junction, Colorado;
and Tallahassee, Florida areas, which potentially affect the acquisition of up
to an additional four stations in the aggregate. The Department of Justice has
issued civil investigation demands to the Company and to other parties to those
pending acquisitions and to the Company and the other party to an LMA with
respect to three stations in the Montgomery, Alabama area, seeking additional
information regarding market concentration issues. The Department of Justice has
also informally requested that the Company supply certain information regarding
the acquisition of additional two stations in the Augusta-Waterville, Maine
area, and additional two stations in the Columbus, Georgia area. There can be no
assurance that one or more of these pending acquisitions will not be the subject
of an enforcement action by the Department of Justice or the Federal Trade
Commission or that other pending acquisitions will not be the subject of
investigation or action by the Department of Justice or the FCC. In addition,
the FCC staff has stated publicly that it is currently reviewing 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
rule.
The FCC places a specific notation on the public notices with respect to
proposed radio station acquisitions that it believes may raise local market
concentration concerns inviting public comment on such matters. The FCC has
placed such specific notations on the public notices with respect to the
Company's pending acquisitions in the Tallahassee, Florida, Augusta-Waterville,
Maine, and the Columbus, Georgia areas. FCC approval of a number of pending
radio station acquisitions by various parties, including acquisitions by the
Company in several markets has been delayed while this review is taking place.
The FCC has issued a Notice of Inquiry, which, among other things, seeks public
comment on these issues. There can be no assurance that the Department of
Justice, the Federal Trade Commission or the FCC will not prohibit or require
the restructuring of future acquisitions, including one or more of the pending
acquisitions.
Competitors have also filed petitions or informal objections before the FCC
on market concentration grounds in four markets (Grand Junction, Colorado;
Columbus-Starkville, Mississippi; Tallahassee, Florida; and Augusta Georgia),
and all such petitions or objections must be resolved before FCC approval can be
obtained and the acquisitions consummated. The purchase agreements with respect
to the proposed acquisitions permit either party to terminate such agreement if
the acquisition has not been consummated by a certain date. While we have not
been notified of the intent of any other party to a proposed acquisition to
terminate a purchase agreement due to delays resulting from the failure of the
FCC to approve a proposed acquisition, there can be no assurance that one or
more agreements will not be terminated in the future.
For an acquisition meeting certain size thresholds, the Hart-Scott Rodino
Act (the "HSR Act") and the rules promulgated thereunder require the parties to
file Notification and Report Forms with the Federal Trade Commission and the
Department of Justice and to observe specified waiting period requirements
before consummating the transaction. If the agencies determine that the
transaction does not raise significant antitrust issues, then they will either
terminate the waiting period or allow it to expire after the initial thirty
days. On the other hand, if either of the agencies determines that the
transaction requires a more detailed investigation, then at the conclusion of
the initial thirty-day period, it will issue a formal request for additional
information ("Second Request").
During the initial thirty-day period after the filing, the agencies decide
which of them will investigate the acquisition, which in the case of radio
broadcasting has generally been the Department of Justice. The
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issuance of a Second Request extends the waiting period until the twentieth
calendar day after the date of substantial compliance by all parties to the
acquisition.
Thereafter, such waiting period may only be extended by court order or with
the consent of the parties. In practice, complying with a Second Request can
take a significant amount of time. In addition, if the investigating agency
raises substantive issues in connection with a proposed transaction, then the
parties frequently engage in lengthy discussions or negotiations with the
investigating agency concerning possible means of addressing those issues,
including, but not limited to, persuading the agency that the proposed
acquisition would not violate the antitrust laws, restructuring the proposed
acquisition, divestiture of other assets of one or more parties, or abandonment
of the transaction. Such discussions and negotiations can be time-consuming, and
the parties may agree to delay consummation of the acquisition during their
pendency.
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 or desirable in the public
interest, including seeking to enjoin the acquisition or seeking divestiture of
the business acquired or other assets of the Company. Acquisitions that are not
required to be reported under the HSR Act also may be investigated by the
Department of Justice or the Federal Trade Commission under the antitrust laws
before or after consummation. The Department of Justice can issue Civil
Investigative Demands to require the production of documents and/or the
testimony of witness, and may sue to enforce such demands in federal court.
The Department of Justice thus far has issued Civil Investigative Demands
to the Company and to sellers of stations proposed to be acquired by the Company
in three markets (Grand Junction, Colorado; Tallahassee, Florida; and
Montgomery, Alabama), and has informally requested information with respect to
pending acquisitions in two other markets; Augusta-Waterville, Maine and
Columbus, Georgia; and there can be no assurance that additional demands will
not be issued for other pending acquisitions or future acquisitions. In
addition, private parties may under certain circumstances bring legal action to
challenge an acquisition under the antitrust laws.
As part of its increased scrutiny of radio station acquisitions, the
Department of Justice has stated publicly that it believes that commencement of
operations under LMAs, joint sale 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, the Company 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, 1998, the Company owned studio facilities in seventeen
markets and it owned transmitter and antenna sites in thirty-seven markets. We
lease additional studio and office facilities in twenty-five markets and
additional transmitter and antenna sites in nineteen markets. In addition, the
Company leases corporate office space in Atlanta, GA, Chicago, IL, and
Milwaukee, WI, which in the aggregate approximates 19,000 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.
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ITEM 3. LEGAL PROCEEDINGS
We currently and from time to time are involved in litigation incidental to
the conduct of our business, but 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
No matters were submitted to a vote of security holders during the fourth
quarter of 1998.
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.
YEAR HIGH LOW
- ---- ---- ---
1998
Third Quarter........................................... $17.88 $7.75
Fourth Quarter.......................................... $17.25 $4.88
1999 First Quarter (through February 28th)................... $18.00 $9.13
As of February 28, 1999, there were approximately 20 holders of record of
the Class A Common Stock. The Company was informed by the underwriters in its
initial public offering that such underwriters expected that subsequent to such
offering there would be a sufficient number of beneficial owners of the
Company's common stock to comply with the minimum shareholder maintenance
standards set by the Nasdaq Stock Market.
The Company has not declared or paid any cash dividends on its common stock
since its inception and does not currently anticipate paying any cash dividends
on its 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
certificates 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.
Pursuant to a Registration Statement on Form S-1 (Commission File No.
333-48849) declared effective by the Securities and Exchange Commission on June
26, 1998 (the "Registration Statement"), the Company sold 7,228,572 shares
(including 800,000 shares pursuant to the exercise of the Underwriters' over
allotment options) of the Class A Common Stock, in an initial public offering
(the "Common Stock Offering"). An additional 1,170,000 shares of the Class A
Common Stock were sold by a selling stockholder in the Common Stock Offering. Of
the 7,598,572 shares of Class A Common Stock sold, 1,519,714 shares were sold in
an offering outside the U.S. and Canada (the "International Common Stock
Offering", and together with the Common Stock Offering, the "Common Stock
Offerings"). The offering price of the Class A Common Stock was $14.00 per
share, resulting in an aggregate offering price of $101.2 million for the
account of the Company and $16.4 million for the selling stockholder. After
underwriting discounts, the proceeds to the Company from
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the Common Stock Offerings were $94.2 million and the proceeds to the selling
stockholder were $15.2 million. All of the shares registered in the Common Stock
Offerings were sold.
Concurrently with the Common Stock Offerings, the Company sold in a
Preferred Stock Offering of $125.0 million of its 13 3/4% Series A Cumulative
Exchangeable Redeemable Preferred Stock Due 2009 (the "Preferred Stock
Offering"). Concurrently with the Common Stock Offering and the Preferred Stock
Offering, the Company sold in a debt offering of $160.0 million of its 10 3/8%
Senior Subordinated Notes due 2008 (the "Debt Offering"). The net proceeds of
the Preferred Stock Offering and the Debt Offering were $87.3 million and $156.0
million, respectively.
The Common Stock Offering closed on July 1, 1998 and the managing
underwriters for the Common Stock Offering were Lehman Brothers Inc., Bear,
Stearns & Co. Inc., and BT Alex