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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 00-24525

Cumulus Media Inc.

3535 Piedmont Road

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:

      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 þ          No o

      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.     o

      The aggregate market value of the registrant’s outstanding common stock held by non-affiliates of the registrant as of February 15, 2002 was approximately $475.6 million. As of February 15, 2002, the registrant had outstanding 35,751,108 shares of common stock consisting of (i) 28,307,488 shares of Class A Common Stock; (ii) 5,914,343 shares of Class B Common Stock; and (iii) 1,529,277 shares of Class C Common Stock.

Documents Incorporated by Reference:

      Portions of the registrant’s Proxy Statement for the 2002 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission on or prior to April 30, 2002, have been incorporated by reference in Items 10, 11, 12 and 13 of Part III of this Annual Report on Form 10-K.

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CUMULUS MEDIA INC.

ANNUAL REPORT ON FORM 10-K

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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 another party. The other party provides programming to be broadcast during such airtime and collects revenues from advertising it sells for broadcast during such programming. In addition to entering into LMAs, we will from time to time enter into management or consulting agreements that provide us with the ability, as contractually specified, to assist current owners in the management of radio station assets that we have contracted to purchase, subject to FCC approval. In such arrangements, we generally receive a contractually specified management fee or consulting fee in exchange for the services provided.

      In this Form 10-K the terms “Company”, “Cumulus”, “we”, “us”, and “our” refer to Cumulus Media Inc. and its consolidated subsidiaries.

      “MSA” is defined as Metro Survey Area, as listed in the Arbitron Radio Metro and Television Market Population Estimates 2000-2001. For example, “MSA 100-286” would mean the 100th largest market through the 286th largest market, as listed in the Arbitron Radio Metro and Television Market Population Estimate.

      Unless otherwise indicated:

	•	we obtained total industry listener and revenue levels from the Radio Advertising Bureau (“RAB”);
	•	we derived all audience share data and audience rankings, including ranking by population, except where otherwise stated to the contrary, from surveys of people ages 12 and over (“Adults 12+”), listening Monday through Sunday, 6 a.m. to 12 midnight, and based on the Fall 2001 Arbitron Market Report, referred to as the Arbitron Market Report, pertaining to each market; and
	•	All dollar amounts are rounded to the nearest thousand.

      The terms “Broadcast Cash Flow” and “EBITDA” are used in various places in this document.

      Broadcast Cash Flow consists of:

	•	operating income (loss) before depreciation, amortization, LMA fees, corporate general and administrative expense, and restructuring and impairment charges.

      EBITDA, consists of:

	•	operating income (loss) before depreciation, amortization, LMA fees and restructuring and impairment charges.

      Broadcast Cash Flow and EBITDA, as defined by the Company, may not be comparable to similarly titled measures used by other companies. Although Broadcast Cash Flow and EBITDA are not measures of performance calculated in accordance with generally accepted accounting principles (“GAAP”), we believe that they are useful to an investor in evaluating the Company because they are measures widely used in the broadcast industry to evaluate a radio company’s operating performance. However, Broadcast Cash Flow and EBITDA should not be considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP, or as measures of liquidity or profitability.

Company Overview

      We are a radio broadcasting company focused on acquiring, operating and developing radio stations in mid-size radio markets in the U.S. and, as of December 31, 2001, own and operate 208 stations (153 FM and

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      Relative to the 50 largest markets in the U.S., we believe that the mid-size markets represent attractive operating environments and generally are characterized by:

	•	a greater use of radio advertising as evidenced by the greater percentage of total media revenues captured by radio than the national average;
	•	rising advertising revenues as the larger national and regional retailers expand into these markets;
	•	small independent operators, many of whom lack the capital to produce high quality locally originated programming or to employ more sophisticated research, marketing, management and sales techniques; and
	•	lower overall susceptibility to economic downturns.

      We believe that the attractive operating characteristics of mid-size markets, together with the relaxation of radio station ownership limits under the Telecommunications Act of 1996 (“the Telecom Act”) and FCC rules, create significant opportunities for growth from the formation of groups of radio stations within these markets. We believe that mid-size radio markets provide an excellent opportunity to acquire attractive properties at favorable purchase prices due to the size and fragmented nature of ownership in these markets and to the greater attention historically given to the larger markets by radio station acquirers. According to the FCC’s records, there are approximately 8,285 FM and 4,727 AM stations in the U.S.

      To maximize the advertising revenues and Broadcast Cash Flow of our stations, we seek to enhance the quality of radio programs for listeners and the attractiveness of our radio stations in a given market. We also increase the amount of locally originated programming content which airs on each station. Within each market, our stations are diversified in terms of format, target audience and geographic location, enabling us to attract larger and broader listener audiences and thereby a wider range of advertisers. This diversification, coupled with our favorable advertising pricing, also has provided us with the ability to compete successfully for advertising revenue against other media competitors such as print media and television.

      We believe that we are in a position to generate revenue growth, increase audience and revenue shares within these markets and, by capitalizing on economies of scale and by competing against other media for incremental advertising revenue, increase our Broadcast Cash Flow growth rates and margins to those levels found in large markets. As we have assembled our portfolio of stations over the past five years, many of our markets are still in the development stage with the potential for substantial growth as we implement our operating strategy.

Operating Strategy

      Our operating strategy has the following principal components:

	•	Assemble and Develop Leading Station Groups. In each market, we acquire leading stations in terms of signal coverage, revenue or audience share as well as under-performing stations that we believe create an opportunity for growth. Each station within a market generally has a different format and an FCC license that provides for full signal coverage in the market area.

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	•	Develop Each Station as a Unique Enterprise. While stations within a market share common infrastructure in terms of office or studio space, support personnel and certain senior management, each station is developed and marketed as an individual brand with its own identity, programming content, programming personnel, inventory of time slots and sales force. We believe that this strategy maximizes the audience share and revenues per station and of the group as a whole.
	•	Use Research to Guide Programming. We use audience research and music testing to refine each station’s programming content to match the preferences of the station’s target demographic audience. We also seek to enrich our listeners’ experiences by increasing both the quality and quantity of local programming. We believe this strategy maximizes the number of listeners for each station.
	•	Position Station Groups to Compete With Print and Television. While advertising for each station is typically sold independently of other stations, the diverse station formats within each market have enabled us to attract a larger and broader listener audience which in turn has attracted a wider range of advertisers. We believe this diversification, coupled with our favorable advertising pricing, has provided us with the ability to compete successfully against not only traditional radio competitors, but also against print media and television.
	•	Organize Markets in Advertiser Regions. Our markets are located primarily in five regional concentrations: the Southeast, Midwest, Southwest, Northeast and the Far West. By assembling market clusters with a regional concentration, we believe that we will be able to increase revenues by offering regional coverage of key demographic groups that were previously unavailable to national and regional advertisers.
	•	Maximize Operating Cost Efficiencies. By consolidating stations in a market into a cluster we are able to achieve cost efficiencies associated with common infrastructure, administrative personnel and management. In addition, by implementing various cost control strategies, we strive to minimize fixed expense base growth and variable cost of sale expenses, which in turn maximizes margins. The Company’s credit and collection policies also serve to maximize our collection experience and minimize bad debt exposure.
	•	Employ Internet-Based Management Information Systems. We have implemented an Internet-based proprietary software application which enables us to monitor daily sales performance by station and by market compared to their respective budgets. It also enables us to identify any under-performing stations, determine the explanation for the under-performance and take corrective action quickly. In addition, our Internet-based system provides all of our stations with a cost-efficient and rapid medium to exchange ideas and views regarding station operations and ways to increase advertising revenues. We also use this system to electronically deliver to our stations ads and program elements which are produced at a central production facility.

Acquisitions

      We completed the acquisition of 26 radio stations for cash during the year ended December 31, 2001. The aggregate purchase price of $188.1 million for these transactions includes the assets acquired pursuant to the asset exchange and sales transactions described below. The aggregate purchase price also includes certain acquisition-related costs paid in 2001 and 2000.

      On January 18, 2001, we completed substantially all of the third and final phase of an asset exchange and sale transaction with certain subsidiaries of Clear Channel Communications. Upon the closing of this transaction, the Company transferred 44 stations in 8 markets in exchange for 4 stations in 1 market and approximately $36.2 million in cash. As of the close date, the Company also received approximately $2.7 million in proceeds previously withheld from the second phase of the Clear Channel transactions.

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      On May 2, 2001, we completed an asset exchange and sale with Next Media Group and certain of its subsidiaries. Upon the closing of that transaction, we transferred two stations in Jacksonville, North Carolina in exchange for one station in Myrtle Beach, South Carolina and approximately $2.0 million in cash.

      The statement of operations data for the year ended December 31, 2001 includes the revenue and broadcast operating expenses, or in the case of local marketing, management or consulting agreements, the respective contractual income, of these radio stations and any related fees associated with the LMA from the effective date of the LMA through the earlier of (i) the date of acquisition of such station by the Company; (ii) December 31, 2001; or (iii) in the case of KBMR-AM, KSSS-FM and KXMR-AM in Bismarck, North Dakota, the termination date of the LMA.

Dispositions

      In addition to the assets sold as part of the Clear Channel and Next Media transactions discussed above, we completed the sale of 8 radio stations in 4 markets during 2001 for $9.3 million in cash.

Pending Transactions

      As of December 31, 2001 the Company was a party to various agreements to acquire 37 stations across 13 markets for an aggregate purchase price of approximately $344.9 million in cash and stock. Between January 1, 2002 and February 15, 2002 the Company closed the acquisitions of 3 of those stations across 2 markets, representing $7.4 million in purchase price. The aggregate pending acquisition amount as of December 31, 2001 includes the assets to be acquired pursuant to the two transactions summarized below.

      On November 19, 2001, we announced that we had entered into a definitive agreement to acquire Aurora Communications, LLC (“Aurora”) for $93.0 million in cash or assumed debt, 10.6 million shares of our common stock and warrants to purchase an additional 0.8 million shares of common stock. As a result of the transaction, which is subject to the approval of the shareholders of Cumulus, and of the Federal Communications Commission, as well as clearance under the Hart-Scott-Rodino Act and other customary closing conditions, the Company will acquire 18 stations (11 FM and 7 AM) in Connecticut and New York.

      Bank of America Capital Investors, through BA Capital Company, L.P. (“BA Capital”), currently owns approximately 840,000 shares of Cumulus’ publicly traded Class A Common Stock, and approximately 2 million shares of Cumulus’ nonvoting Class B Common Stock. An affiliate of BA Capital owns a majority of the equity of Aurora, and will receive approximately 9 million shares of nonvoting Class B Common Stock of Cumulus in the acquisition. Those shares convert into voting shares upon their transfer to another party or as otherwise permitted by FCC regulations.

      In connection with the proposed acquisition of Aurora, the Company entered into an escrow agreement pursuant to which the Company issued 770,000 shares of Class A Common Stock into an escrow account. These shares are presented as Issued Class A Common Stock Held in Escrow in the accompanying consolidated balance sheet at December 31, 2001. The shares placed in escrow will be released to Aurora if the related acquisition agreement is terminated under circumstances specified in the escrow agreement, otherwise, the shares placed in escrow will be released back to the Company upon consummation of the acquisition of Aurora.

      On December 17, 2001, we announced that we had entered into an Agreement and Plan of Merger with DBBC, L.L.C. in connection with the acquisition of three radio stations in Nashville, Tennessee. The agreement provides for us to issue 5.3 million shares of our Class A Common Stock, a warrant to purchase 0.3 million shares of additional Class A Common Stock and the assumption of approximately $21.0 million in liabilities of DBBC, L.L.C. in exchange for the stations. The DBBC, L.L.C. acquisition is subject to the

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      DBBC, L.L.C. is principally controlled by Lewis W. Dickey, Jr., the Chairman, President and Chief Executive Officer of Cumulus, John W. Dickey, Executive Vice President of Cumulus, and their brothers David W. Dickey and Michael W. Dickey.

Industry Overview

      The primary source of revenues for radio stations is the sale of advertising time to local, regional and national spot advertisers and national network advertisers. National spot advertisers assist advertisers in placing their advertisements in a specific market. National network advertisers place advertisements on a national network show and such advertisements will air in each market where the network has an affiliate. During the past decade, local advertising revenue as a percentage of total radio advertising revenue in a given market has ranged from approximately 72% to 87%. The growth in total radio advertising revenue tends to be fairly stable. With the exception of 1991 and 2001, when total radio advertising revenue fell by approximately 3.1% and 8.0%, respectively, advertising revenue has generally risen in each of the past 16 years faster than both inflation and the gross national product.

      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, rock, adult contemporary, oldies and news/talk. A station’s format and style of presentation enables it to target specific segments of listeners sharing certain demographic features. By capturing a specific share of a market’s radio listening audience, with particular concentration in a targeted demographic, a station is able to market its broadcasting time to advertisers seeking to reach a specific audience. Advertisers and stations use data published by audience measuring services, such as Arbitron, to estimate how many people within particular geographical markets and demographics listen to specific stations.

      The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting ratings are limited in part by the format of a particular station and the local competitive environment. Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year.

      A station’s local sales staff generates the majority of its local and regional advertising sales through direct solicitations of local advertising agencies and businesses. To generate national advertising sales, a station usually will engage a firm that specializes in soliciting radio-advertising sales on a national level. National sales representatives obtain advertising principally from advertising agencies located outside the station’s market and receive commissions based on the revenue from the advertising they obtain.

      Our stations also compete for advertising revenue with other media, including newspapers, broadcast television, cable television, magazines, direct mail, coupons and outdoor advertising. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, by satellite and by digital audio broadcasting. The FCC has authorized two companies to provide satellite digital audio service. Such service, when implemented, is expected to deliver by satellite to nationwide and regional audiences, multi-channel, multi-format, digital radio services with sound quality equivalent to compact discs. The FCC has also sought public comment on the introduction of terrestrial digital audio broadcasting (which is digital audio broadcasting delivered using earth based equipment rather than satellites). It is not known at this time whether any such digital technology may be used in the future by existing radio broadcast stations, either on existing or alternate broadcasting frequencies. In addition, as discussed below, the FCC recently authorized a new low power FM service which may compete with our stations for listeners and revenue. The delivery of radio signals and information through the presently unregulated Internet also could create a new form of competition.

      The radio broadcasting industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, such as television broadcasting, cable television, audio tapes

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Advertising Sales

      Virtually all of our revenue is generated from the sale of local, regional and national advertising for broadcast on our radio stations. Approximately 88%, 89% and 89% of our net broadcasting revenue was generated from the sale of local and regional advertising in 2001, 2000 and 1999, respectively. Additional broadcasting revenue is generated from the sale of national advertising. The major categories of our advertisers include:

      Each station’s local sales staff solicits advertising either directly from the local advertiser or indirectly through an advertising agency. We employ a tiered commission structure to focus our individual sales staffs on new business development. Consistent with our operating strategy of dedicated sales forces for each of our stations, we have also increased the number of salespeople per station. We believe that we can outperform the traditional growth rates of our markets by (1) expanding our base of advertisers, (2) training newly hired sales people and (3) providing a higher level of service to our existing customer base. This requires larger sales staffs than most of the stations employ at the time they are acquired by Cumulus. We support our strategy of building local direct accounts by employing personnel in each of our markets to produce custom commercials that respond to the needs of our advertisers. In addition, in-house production provides advertisers greater flexibility in changing their commercial messages with minimal lead-time.

      Our national sales are made by Interep National Radio Sales, Inc., a firm specializing in radio advertising sales on the national level, in exchange for a commission that is based on our net revenue from the advertising obtained. Regional sales, which we define as sales in regions surrounding our markets to buyers that advertise in our markets, are generally made by our local sales staff and market managers. Whereas we seek to grow our local sales through larger and more customer-focused sales staffs, we seek to grow our national and regional sales by offering to key national and regional advertisers groups of stations within specific markets and regions that make our stations more attractive. Many of these large accounts have previously been reluctant to advertise in these markets because of the logistics involved in buying advertising from individual stations. Certain of our stations had no national representation before being acquired by us.

      We are also party to an agreement with Jeff McCluskey and Associates, Inc. (“McCluskey”) which commenced December 11, 1998 and which, as amended by letter agreement dated December 19, 2001, expires on December 31, 2002. Pursuant to the agreement, we have designated McCluskey as our exclusive music promotion representative for all of the stations licensed to the Company and its subsidiaries in certain specific programming formats identified in the agreement. Under the agreement, in exchange for the right to serve as our independent music promotion representative, McCluskey agrees to compensate the Company based upon an agreed upon annual rate per station, varying by programming format for the applicable programming formats represented by McCluskey. For the years ended December 31, 2001, 2000 and 1999, the Company recorded revenues of $1.2 million, $1.1 million, and $0.9 million, respectively, in accordance with the rates per station specified in the agreement.

      The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting ratings are limited in part by the format of a particular station. We estimate the optimal number of advertisements available for sale depending on the programming format of a particular station. Each of our stations has a general target level of on-air inventory that it makes available for advertising. This target level of inventory for sale may be different at different times of the day but tends to remain stable over time. Our

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	•	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.

      A station’s listenership is reflected in ratings surveys that estimate the number of listeners tuned to the station and the time they spend listening. Each station’s ratings are used by its advertisers and advertising representatives to consider advertising with the station and are used by Cumulus to chart audience growth, set advertising rates and adjust programming. The radio broadcast industry’s principal ratings service is Arbitron, which publishes periodic ratings surveys for significant domestic radio markets. These surveys are our primary source of ratings data.

Competition

      The radio broadcasting industry is highly competitive. The success of each of our stations depends largely upon its audience ratings and its share of the overall advertising revenue within its market. Our audience ratings and advertising revenue are subject to change, and any adverse change in a particular market affecting advertising expenditures or an adverse change in the relative market positions of the stations located in a particular market could have a material adverse effect on the revenue of our radio stations located in that market. There can be no assurance that any one or all of our stations will be able to maintain or increase current audience ratings or advertising revenue market share.

      Our stations, including those to be acquired upon completion of the pending acquisitions, compete for listeners and advertising revenues directly with other radio stations within their respective markets, as well as with other advertising media as discussed below. Radio stations compete for listeners primarily on the basis of program content that appeals to a particular demographic group. By building a strong brand identity with a targeted listener base consisting of specific demographic groups in each of our markets, we are able to attract advertisers seeking to reach those listeners. Companies that operate radio stations must be alert to the possibility of another station changing its format to compete directly for listeners and advertisers. Another station’s decision to convert to a format similar to that of one of our radio stations in the same geographic area or to launch an aggressive promotional campaign may result in lower ratings and advertising revenue, increased promotion and other expenses and, consequently, lower Broadcast Cash Flow for Cumulus.

      Factors that are material to a radio station’s competitive position include station brand identity and loyalty, management experience, the station’s local audience rank in its market, transmitter power and location, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other radio stations and other advertising media in the market area. We attempt to improve our competitive position in each market by extensively researching and improving our stations’ programming, by implementing advertising campaigns aimed at the demographic groups for which our stations program and by managing our sales efforts to attract a larger share of advertising dollars for each station individually. However, we compete with some organizations that have substantially greater financial or other resources than we do.

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      Changes in federal law and the FCC’s rules and policies, which became effective in 1996, permit increased ownership and operation of multiple local radio stations. Management believes that radio stations that elect to take advantage of groups of commonly owned stations or joint arrangements such as LMAs may in certain circumstances have lower operating costs and may be able to offer advertisers more attractive rates and services. Although we currently operate multiple stations in each of our markets and intend to pursue the creation of additional multiple station groups, our competitors in certain markets include operators of multiple stations or operators who already have entered into LMAs. We may also compete with other broadcast groups for the purchase of additional stations. Some of these groups are owned or operated by companies that have substantially greater financial or other resources than we do.

      Although the radio broadcasting industry is highly competitive, and competition is enhanced to some extent by changes in existing radio station formats and upgrades of power, among other actions, certain regulatory limitations on entry exist. The operation of a radio broadcast station requires a license from the FCC, and the number of radio stations that an entity can operate in a given market is limited by the availability of FM and AM radio frequencies allotted by the FCC to communities in that market, as well as by the multiple ownership rules regulating the number of stations that may be owned or programmed by a single entity. The multiple ownership provisions of the FCC’s rules have changed significantly as a result of the Telecom Act. For a discussion of FCC regulation and the provisions of the Telecom Act, see “— Federal Regulation of Radio Broadcasting.”

      Our stations also compete for advertising revenue with other media, including satellite radio (see below), newspapers, broadcast television, cable and satellite television, magazines, direct mail, coupons and outdoor advertising. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, by satellite and by digital audio broadcasting. Digital audio broadcasting may deliver by satellite to nationwide and regional audiences, multi-channel, multi-format, digital radio services with sound quality equivalent to compact discs. The delivery of broadcast signals and information through the presently unregulated Internet also could create a new form of competition. The radio broadcasting industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, such as television broadcasting, cable television, audio tapes and compact discs. A growing population and greater availability of radios, particularly car and portable radios, have contributed to this growth. There can be no assurance, however, that the development or introduction in the future of any new media technology will not have an adverse effect on the radio broadcasting industry.

      The FCC has authorized spectrum for the use of a new technology, satellite digital audio radio services (“satellite radio”), to deliver audio programming. The FCC has authorized two companies to provide such service. One of these companies recently launched its service, and the other has stated its intention of initiating service in the first quarter of 2002. Digital audio radio services may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and national audiences. It is not known at this time whether this digital technology also may be used in the future by existing radio broadcast stations either on existing or alternate broadcasting frequencies.

      The FCC also recently approved a new low power FM radio service, and has granted construction permits for low power FM stations to numerous applicants. Under this program, licenses to operate stations in this service are available only to persons or entities that do not currently own FM radio stations. We cannot predict what effect, if any, the implementation of these services will have on our operations. Low power FM radio stations may, however, cause interference to our stations and compete with our stations for listeners and advertising revenues.

      We cannot predict what other matters might be considered in the future by the FCC or the Congress, nor can we assess in advance what impact, if any, the implementation of any of these proposals or changes might have on our business.

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Employees

      At December 31, 2001, we employed approximately 2,400 people. None of our employees are covered by collective bargaining agreements, and we consider our relations with our employees to be satisfactory.

      We employ several on-air personalities with large loyal audiences in their respective markets. On occasion, we enter into employment agreements with these personalities to protect our interests in those relationships that we believe to be valuable. The loss of any one of these personalities could result in a short-term loss of audience share, but we do not believe that any such loss would have a material adverse effect on our financial condition or results of operations, taken as a whole.

      We generally employ one market manager for each radio market in which we own or operate stations. Each market manager is responsible for all employees of the market and for managing all aspects of the radio operations. On occasion, we enter into employment agreements with market managers to protect our interests in those relationships that we believe to be valuable. The loss of any one market manager could result in a short-term loss of performance in a market, but we do not believe that any such loss would have a material adverse effect on our financial condition or results of operations, taken as a whole.

Federal Regulation of Radio Broadcasting

      Introduction. The ownership, operation and sale of broadcast stations, including those licensed to us, are subject to the jurisdiction of the FCC, which acts under authority derived from the Communications Act of 1934 (the “Communications Act”). The Telecom Act amended the Communications Act to make changes in several broadcast laws and to direct the FCC to change certain of its broadcast rules. Among other things, the FCC grants permits and licenses to construct and operate radio stations; assigns frequency bands for broadcasting; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations and the operating power and other technical parameters of stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; regulates the content of some forms of radio broadcasting programming; and has the power to impose penalties for violations of its rules under the Communications Act.

      The following is a brief summary of certain provisions of the Communications Act, the Telecom Act and specific FCC rules and policies. This description does not purport to be comprehensive, and reference should be made to the Communications Act, the Telecom Act, the FCC’s rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of radio broadcasting stations. Failure to observe the provisions of the Communications Act and the FCC’s rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of “short-term” (less than the maximum term) license renewal or, for particularly egregious violations, the denial of a license renewal application, the revocation of a license or the denial of FCC consent to acquire additional broadcast properties.

      License Grant and Renewal. Radio broadcast licenses are granted and renewed for maximum terms of eight years. Licenses may be renewed through an application to the FCC. Petitions to deny license renewal applications can be filed by interested parties, including members of the public. We are not currently aware of any facts that would prevent the timely renewal of our licenses to operate our radio stations, although there can be no assurance that our licenses will be renewed.

      The area served by AM stations is determined by a combination of frequency, transmitter power and antenna orientation. To determine the effective service area of an AM station, its power, its operating frequency, its antenna patterns and its day/night operating modes are required. The area served by FM stations is determined by a combination of transmitter power and antenna height, with stations divided into classes according to their anticipated service area.

      Class C FM stations operate at 100 kilowatts of power with up to 1,968 feet of antenna elevation above average terrain. They are the most powerful FM stations, providing service to a large area, typically a substantial portion of a state. Class B FM stations operate at up to 50 kilowatts of power with up to 492 feet of antenna elevation. These stations typically serve large metropolitan areas as well as their associated suburbs.

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      The minimum and maximum facilities requirements for a FM station are determined by its class. FM class designations depend upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1, C-0, and C.

      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 all owned and operated stations as of 12/31/01, all pending station acquisitions operated under an LMA Agreement as of 12/31/01 and all pending station acquisitions not operated as of 12/31/01.