CUMULUS MEDIA INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 1O-Q


[ X ]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

		For the Quarterly Period Ended September 30, 2002.

[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the Transition Period from to

Commission File Number 000-24525

CUMULUS MEDIA INC.
(Exact name of registrant as specified in its charter)


Delaware		36-4159663
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3535 Piedmont Road, Building 14, Fl 14, Atlanta, GA		30305
(Address of principal executive offices)		(Zip code)

(404) 949-0700
Registrant’s telephone number, including area code:

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

As of October 31, 2002, the registrant had outstanding 62,701,291 shares of common stock consisting of (i) 48,811,466 shares of Class A Common Stock; (ii) 13,244,954 shares of Class B Common Stock; and (iii) 644,871 shares of Class C Common Stock.

CUMULUS MEDIA INC.

INDEX


PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements
		Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001
		Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and 2001
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001
		Notes to Consolidated Financial Statements
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
PART II.		OTHER INFORMATION
Item 1		Legal Proceedings
Item 2		Changes in Securities and Use of Proceeds
Item 3		Defaults Upon Senior Securities
Item 4		Submission of Matters to a Vote of Security Holders
Item 5		Other Information
Item 6		Exhibits and Reports on Form 8-K
Signatures
Exhibit Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CUMULUS MEDIA INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for share and per share data)


					(Unaudited)
					September 30,			December 31,
					2002			2001

				Assets
Current assets:
	Cash and cash equivalents				$	142,876		$	5,308
	Restricted cash					13,000			13,000
	Accounts receivable, less allowance for doubtful accounts of $2,431 and $2,633, respectively					49,338			34,394
	Prepaid expenses and other current assets					7,128			6,656
	Deferred tax assets					673			6,689

		Total current assets				213,015			66,047
Property and equipment, net						94,707			82,974
Intangible assets, net						1,113,082			791,863
Other assets						17,710			24,433

		Total assets			$	1,438,514		$	965,317

			Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable and accrued expenses				$	53,237		$	50,271
	Current portion of long-term debt					3,714			770
	Other current liabilities					498			808

				Total current liabilities		57,449			51,849
Long-term debt						443,973			319,248
Other liabilities						1,907			2,984
Deferred income taxes						146,812			32,863

				Total liabilities		650,141			406,944

Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009, stated value $1,000 per share, 66,987 and 130,020 shares issued and outstanding, respectively						66,987			134,489

Stockholders’ equity:
	Class A common stock, par value $.01 per share; 100,000,000 shares authorized; 48,721,810 and 28,505,887 shares issued; 48,721,810 and 27,735,887 shares outstanding					487			285
	Class B common stock, par value $.01 per share; 20,000,000 shares authorized; 13,244,954 and 5,914,343 shares issued and outstanding					132			59
	Class C common stock, par value $.01 per share; 30,000,000 shares authorized; 644,871 and 1,529,277 shares issued and outstanding					6			15
	Additional paid-in-capital					890,633			504,259
	Accumulated deficit					(159,888	)		(61,333	)
	Issued Class A common stock held in escrow; 0 and 770,000 shares issued					—			(9,417	)
	Notes receivable for common stock					(9,984	)		(9,984	)

				Total stockholders’ equity		721,386			423,884

				Total liabilities and stockholders’ equity	$	1,438,514		$	965,317

See Accompanying Notes to Consolidated Financial Statements

CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except for share and per share data)


					(Unaudited)

					Three Months			Three Months			Nine Months			Nine Months
					Ended			Ended			Ended			Ended
					September 30, 2002			September 30, 2001			September 30, 2002			September 30, 2001

Revenues					$	73,635		$	56,293		$	200,394		$	166,224
Less: agency commissions						(7,114	)		(5,478	)		(19,143	)		(15,749	)

		Net revenues				66,521			50,815			181,251			150,475
Operating expenses:
		Station operating expenses, excluding depreciation, amortization and LMA fees (including provision for doubtful accounts of $603, $1,488, $1,458 and $4,137, respectively)				40,982			35,260			115,251			107,391
	Depreciation and amortization					4,613			12,643			13,533			37,008
	LMA fees					59			391			316			2,560
	Corporate general and administrative (excluding non-cash stock compensation expense of $280, $0, $337 and $0, respectively)					3,468			4,117			10,448			11,620
	Non-cash stock compensation					280			—			337			—
	Restructuring and other charges					(931	)		—			(931	)		(33	)

				Total operating expenses		48,471			52,411			138,954			158,546

				Operating income (loss)		18,050			(1,596	)		42,297			(8,071	)

Nonoperating income (expense):
	Interest expense					(8,277	)		(7,949	)		(23,628	)		(23,670	)
	Interest income					1,337			298			1,962			1,997
	Loss on early extinguishment of debt					—			—			(6,291	)		—
	Other income (expense), net					(21	)		1,672			1,459			9,070

				Total nonoperating expenses, net		(6,961	)		(5,979	)		(26,498	)		(12,603	)

				Income (loss) before income taxes		11,089			(7,575	)		15,799			(20,674	)
Income tax (expense) benefit						(4,863	)		594			(72,654	)		2,238

	Income (loss) before the cumulative effect of a change in accounting principle, net of tax					6,226			(6,981	)		(56,855	)		(18,436	)
Cumulative effect of a change in accounting principle, net of Tax						—			—			(41,700	)		—

			Net income (loss)			6,226			(6,981	)		(98,555	)		(18,436	)
Preferred stock dividends, deemed dividends, accretion of discount and redemption premiums						10,358			4,501			19,604			12,977

			Net loss attributable to common stockholders		$	(4,132	)	$	(11,482	)	$	(118,159	)	$	(31,413	)

Basic and diluted loss per common share
Basic and diluted loss per common share before the cumulative effect of a change in accounting principle					$	(0.07	)	$	(0.33	)	$	(1.48	)	$	(0.89	)
	Cumulative effect of a change in accounting principle					—			—			(0.81	)		—

Basic and diluted loss per common share					$	(0.07	)	$	(0.33	)	$	(2.29	)	$	(0.89	)

Weighted average common shares outstanding						62,331,962			35,218,238			51,687,930			35,212,933

See Accompanying Notes to Consolidated Financial Statements

CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)


			(Unaudited)
			Nine Months			Nine Months
			Ended			Ended
			September 30, 2002			September 30, 2001

Cash flows from operating activities:
Net loss			$	(98,555	)	$	(18,436	)
Adjustments to reconcile net loss to net cash provided by operating activities:
	Cumulative effect of a change in accounting principle			41,700			—
	Loss on early extinguishments of debt			6,291			—
	Depreciation			12,350			11,020
	Amortization of goodwill and intangible assets			1,183			25,988
	Amortization of deferred finance costs			1,125			1,613
	Provision for doubtful accounts			1,458			4,137
	Gain on sale of stations			(4,672	)		(16,246	)
	Stock issuance portion of litigation settlement			1,325			1,618
	Deferred income taxes			72,654			(2,238	)
	Non-cash stock compensation			337			—
	Adjustment to restructuring liability			(931	)		—
Changes in assets and liabilities, net of effects of acquisitions:
	Accounts receivable			(9,843	)		3,123
	Prepaid expenses and other current assets			(205	)		5,339
	Accounts payable and accrued expenses			10,467			(4,888	)
	Other assets			(605	)		(1,572	)
	Other liabilities			(1,325	)		(732	)

		Net cash provided by operating activities		32,754			8,726

Cash flows from investing activities:
	Acquisitions			(131,724	)		(82,001	)
	Dispositions			7,049			38,186
	Escrow deposits on pending acquisitions			(336	)		(1,169	)
	Capital expenditures			(8,788	)		(7,689	)
	Acquisition costs and other			(3,417	)		(3	)

		Net cash (used in) investing activities		(137,216	)		(52,676	)

Cash flows from financing activities:
	Proceeds from revolving line of credit			287,500			46,500
	Payments on revolving line of credit			(159,813	)		(6,500	)
	Payments on promissory notes			(19	)		(811	)
	Payments for debt issuance costs			(3,743	)		(18	)
	Payment of dividends on Series A Preferred Stock			(9,245	)		—
	Repurchases of Series A Preferred Stock			(75,288	)		—
	Net proceeds from issuance of common stock			202,638			23

		Net cash provided by financing activities		242,030			39,194

Increase (decrease) in cash and cash equivalents				137,568			(4,756	)
Cash and cash equivalents at beginning of period			$	5,308		$	10,979
Cash and cash equivalents at end of period			$	142,876		$	6,223
Non-cash operating and financing activities:
	Trade revenue		$	11,013		$	9,368
	Trade expense			10,222			9,134
	Assets acquired through notes payable			2,387			—
	Preferred stock dividends paid in kind, deemed dividends and accretion of discount			4,469			12,977
	Issuance of common stock and warrants in exchange for acquired businesses			209,093			—

See Accompanying Notes to Consolidated Financial Statements

Cumulus Media Inc. Notes to Consolidated Financial Statements (Unaudited)

1. Interim Financial Data

Interim Financial Data

These consolidated financial statements should be read in conjunction with the consolidated financial statements of Cumulus Media Inc., referred to as the Company, and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of results of the interim periods have been made and such adjustments were of a normal and recurring nature. The results of operations and cash flows for the nine months ended September 30, 2002 are not necessarily indicative of the results that can be expected for the entire fiscal year ending December 31, 2002.

2. Acquisitions and Dispositions:

Pending Acquisitions

As of September 30, 2002, the Company was a party to various agreements to acquire 20 stations across eight markets. The aggregate purchase price of those pending acquisitions is expected to be approximately $77.7 million, of which $74.7 million would be paid in cash and $3.0 million would be paid in shares of the Company’s common stock.

Completed Acquisitions

During the quarter ended September 30, 2002, the Company completed two acquisitions of three radio stations in two markets for $8.6 million in purchase price. Of the $8.6 million required to fund the acquisitions, $8.3 million was funded in cash, $0.1 million represented capitalizable acquisition costs and $0.2 million had been previously funded as escrow deposits on the pending acquisitions.

During the quarter ended June 30, 2002, the Company completed two acquisitions of six radio stations in two markets for $5.2 million in purchase price. Of the $5.2 million required to fund the acquisitions, $4.0 million was funded in cash, $0.1 million represented capitalizable acquisition costs and $1.1 million had been previously funded as escrow deposits on the pending acquisitions.

During the quarter ended March 31, 2002, the Company completed 5 acquisitions of 25 radio stations in 9 markets for $333.5 million in purchase price. Of the $333.5 million required to fund the acquisitions, $205.0 million was paid in the form of shares of Class A and Class B Common Stock (as described below), $4.1 million was provided in the form of warrants to purchase common stock (as described below), $119.4 million was funded in cash, $2.6 million represented capitalizable acquisition costs and $2.4 million had been previously funded as escrow deposits on the pending acquisitions. These aggregate acquisition amounts include the assets acquired pursuant to the transactions described below.

Aurora Communications, LLC

On March 28, 2002, the Company completed the acquisition of Aurora Communications, LLC (“Aurora”), which owned and operated 18 radio stations in Connecticut and New York. In acquiring Aurora, the Company issued to the former owners (1) 10,551,182 shares of common stock, consisting of 1,606,843 shares of Class A Common Stock and 8,944,339 shares of Class B Common Stock and, (2) warrants, exercisable until March 28, 2003, to purchase up to an aggregate of 833,333 shares of common stock at an exercise price of $12.00 per share, and paid $93.0 million in cash. The Company also paid approximately $1.0 million in capitalizable acquisition costs in connection with the acquisition. As a result of this acquisition, the Company increased its presence in the northeast region of the United States and provided itself with an entrée into the strategically vital metropolitan New York City markets.

An affiliate of BA Capital Company, L.P. (“BA Capital”), one of our principal shareholders, owned a majority of the equity of Aurora, and received approximately 8.9 million shares of nonvoting Class B Common Stock of Cumulus in the acquisition. Those

shares may be converted into shares of Class A Common Stock at the option of the holder subject to FCC regulations, and automatically convert into shares of Class A Common Stock upon their transfer to another party. BA Capital owned approximately 840,000 shares of Cumulus’ publicly traded Class A Common Stock, and approximately 2 million shares of Cumulus’ nonvoting Class B Common Stock prior to the consummation of the acquisition.

The following table details the aggregate purchase price of the Aurora acquisition (dollars in thousands, except for share and per share data):