UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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 June 30, 2003. |
| o | 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.
| Delaware (State or other jurisdiction of incorporation or organization) |
36-4159663 (I.R.S. Employer Identification No.) |
|||
| 3535 Piedmont Road, Building 14, Fl 14, Atlanta, GA (Address of principal executive offices) |
30305 (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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
As of July 31, 2003, the registrant had outstanding 65,147,629 shares of common stock consisting of (i) 50,551,380 shares of Class A Common Stock; (ii) 13,951,378 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 June 30, 2003 and December 31, 2002 | ||||
| Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2003 and 2002 | ||||
| Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 | ||||
| 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 |
2
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) | ||||||||||||
| June 30, | December 31, | |||||||||||
| 2003 | 2002 | |||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 29,384 | $ | 60,380 | ||||||||
Restricted cash |
— | 13,000 | ||||||||||
Accounts receivable, less allowance for doubtful accounts of $2,307 and
$2,337 respectively |
51,970 | 47,367 | ||||||||||
Prepaid expenses and other current assets |
8,496 | 9,525 | ||||||||||
Deferred tax assets |
1,156 | 1,156 | ||||||||||
Total current assets |
91,006 | 131,428 | ||||||||||
Property and equipment, net |
89,417 | 92,064 | ||||||||||
Intangible assets, net |
1,183,222 | 1,117,842 | ||||||||||
Other assets |
10,574 | 14,180 | ||||||||||
Total assets |
$ | 1,374,219 | $ | 1,355,514 | ||||||||
Liabilities and Stockholders’ Equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable and accrued expenses |
$ | 22,845 | $ | 45,165 | ||||||||
Current portion of long-term debt |
11,715 | 5,558 | ||||||||||
Other current liabilities |
883 | 458 | ||||||||||
Total current liabilities |
35,443 | 51,181 | ||||||||||
Long-term debt |
437,427 | 414,704 | ||||||||||
Other liabilities |
4,374 | 1,941 | ||||||||||
Deferred income taxes |
163,636 | 152,680 | ||||||||||
Total liabilities |
640,880 | 620,506 | ||||||||||
Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009, stated value
$1,000 per share, 9,268 and 14,168 shares issued and outstanding, respectively |
9,268 | 14,168 | ||||||||||
Stockholders’ equity: |
||||||||||||
Preferred stock, 20,262,000 shares authorized, par value $0.01 per share, including: 250,000 shares
designated as 13 3/4% Series A Cumulative Exchangeable Redeemable Stock due 2009, stated
value $1,000 per share, and 12,000 shares designated as 12% Series B Cumulative Preferred
Stock,
stated value $10,000 per share: 9,268 and 14,168 shares of Series A Cumulative Exchangeable
Preferred Stock issued and outstanding, respectively |
— | — | ||||||||||
Class A common stock, par value $.01 per share; 100,000,000 shares authorized;
49,296,280 and 48,843,191 shares issued and outstanding |
493 | 488 | ||||||||||
Class B common stock, par value $.01 per share; 20,000,000 shares authorized;
13,951,378 and 13,244,954 shares issued and outstanding |
140 | 132 | ||||||||||
Class C common stock, par value $.01 per share; 30,000,000 shares authorized;
644,871 shares issued and outstanding |
6 | 6 | ||||||||||
Accumulated other comprehensive income |
(2,845 | ) | — | |||||||||
Additional paid-in-capital |
897,879 | 884,284 | ||||||||||
Accumulated deficit |
(161,618 | ) | (154,086 | ) | ||||||||
Loan to officers |
(9,984 | ) | (9,984 | ) | ||||||||
Total stockholders’ equity |
724,071 | 720,840 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 1,374,219 | $ | 1,355,514 | ||||||||
See Accompanying Notes to Consolidated Financial Statements
3
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except for share and per share data)
| (Unaudited) | ||||||||||||||||||||
| Three Months | Three Months | Six Months | Six Months | |||||||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||||||
| June 30, 2003 | June 30, 2002 | June 30, 2003 | June 30, 2002 | |||||||||||||||||
Revenues |
$ | 81,929 | $ | 77,244 | $ | 145,567 | $ | 126,759 | ||||||||||||
Less: agency commissions |
(7,409 | ) | (7,240 | ) | (13,072 | ) | (11,640 | ) | ||||||||||||
Net revenues |
74,520 | 70,004 | 132,495 | 115,119 | ||||||||||||||||
Operating expenses: |
||||||||||||||||||||
Station operating expenses, excluding depreciation, amortization
and LMA fees (including provision for doubtful accounts of $784,
$505, $1,422 and $856, respectively) |
44,053 | 41,052 | 85,121 | 74,659 | ||||||||||||||||
Depreciation and amortization |
4,760 | 4,748 | 9,477 | 8,920 | ||||||||||||||||
LMA fees |
538 | 172 | 631 | 257 | ||||||||||||||||
Corporate general and administrative (excluding non-cash stock
compensation (income) expense of $229, $(105), $258 and $57,
respectively) |
3,455 | 3,431 | 6,849 | 6,979 | ||||||||||||||||
Non-cash stock compensation |
229 | (105 | ) | 258 | 57 | |||||||||||||||
Restructuring charges |
(127 | ) | — | (183 | ) | — | ||||||||||||||
Total operating expenses |
52,908 | 49,298 | 102,153 | 90,872 | ||||||||||||||||
Operating income |
21,612 | 20,706 | 30,342 | 24,247 | ||||||||||||||||
Nonoperating income (expense): |
||||||||||||||||||||
Interest expense |
(6,347 | ) | (8,325 | ) | (12,664 | ) | (15,351 | ) | ||||||||||||
Interest income |
170 | 374 | 391 | 624 | ||||||||||||||||
Loss on early extinguishments of debt |
(11,107 | ) | — | (14,233 | ) | (6,291 | ) | |||||||||||||
Other income (expense), net |
(131 | ) | 2,674 | (157 | ) | 1,480 | ||||||||||||||
Total nonoperating expenses, net |
(17,415 | ) | (5,277 | ) | (26,663 | ) | (19,538 | ) | ||||||||||||
Income before income taxes |
4,197 | 15,429 | 3,679 | 4,709 | ||||||||||||||||
Income tax expense |
(5,409 | ) | (5,386 | ) | (11,210 | ) | (67,790 | ) | ||||||||||||
Income (loss) before the cumulative effect of a change in
accounting principle, net of tax |
(1,212 | ) | 10,043 | (7,531 | ) | (63,081 | ) | |||||||||||||
Cumulative effect of a change in accounting principle, net of tax |
— | — | — | (41,700 | ) | |||||||||||||||
Net income (loss) |
(1,212 | ) | 10,043 | (7,531 | ) | (104,781 | ) | |||||||||||||
Preferred stock dividends and redemption premiums |
318 | 4,623 | 1,250 | 9,245 | ||||||||||||||||
Net income (loss) attributable to common
stockholders |
$ | (1,530 | ) | $ | 5,420 | $ | (8,781 | ) | $ | (114,026 | ) | |||||||||
Basic income (loss) per common share |
||||||||||||||||||||
Income (loss) per common share before the cumulative effect of a
change in accounting principle |
$ | (0.02 | ) | $ | 0.10 | $ | (0.14 | ) | $ | (1.56 | ) | |||||||||
Cumulative effect of a change in accounting principle |
— | — | — | (0.90 | ) | |||||||||||||||
Income (loss) per common share |
$ | (0.02 | ) | $ | 0.10 | $ | (0.14 | ) | $ | (2.46 | ) | |||||||||
Diluted income (loss) per common share |
||||||||||||||||||||
Income (loss) per common share before the cumulative effect of a
change in accounting principle |
$ | (0.02 | ) | $ | 0.09 | $ | (0.14 | ) | $ | (1.56 | ) | |||||||||
Cumulative effect of a change in accounting principle |
— | — | — | (0.90 | ) | |||||||||||||||
Income (loss) per common share |
$ | (0.02 | ) | $ | 0.09 | $ | (0.14 | ) | $ | (2.46 | ) | |||||||||
Weighted average basic common shares outstanding |
63,786,284 | 56,066,509 | 63,399,275 | 46,277,704 | ||||||||||||||||
Weighted average diluted common shares outstanding |
63,786,284 | 59,296,615 | 63,399,275 | 46,277,704 | ||||||||||||||||
See Accompanying Notes to Consolidated Financial Statements
4
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
| (Unaudited) | ||||||||||
| Six Months | Six Months | |||||||||
| Ended | Ended | |||||||||
| June 30, 2003 | June 30, 2002 | |||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$ | (7,531 | ) | $ | (104,781 | ) | ||||
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
||||||||||
Cumulative effect of a change in accounting principle |
— | 41,700 | ||||||||
Write-off of debt issue costs |
4,083 | 6,291 | ||||||||
Depreciation |
8,980 | 8,172 | ||||||||
Amortization of intangible assets and other assets |
768 | 1,590 | ||||||||
Provision for doubtful accounts |
1,422 | 856 | ||||||||
Adjustment of the fair value of derivative instruments |
121 | — | ||||||||
Loss/(gain) on sale of assets or stations |
118 | (4,339 | ) | |||||||
Stock issuance portion of litigation settlement |
— | 1,325 | ||||||||
Deferred taxes |
10,957 | 67,790 | ||||||||
Non-cash stock compensation |
258 | 57 | ||||||||
Adjustment of restructuring charges |
(183 | ) | ||||||||
Changes in assets and liabilities, net of effects of acquisitions: |
||||||||||
Restricted cash |
13,000 | — | ||||||||
Accounts receivable |
(6,025 | ) | (12,541 | ) | ||||||
Prepaid expenses and other current assets |
1,029 | 1,475 | ||||||||
Accounts payable and accrued expenses |
(18,188 | ) | 11,243 | |||||||
Other assets |
(442 | ) | (425 | ) | ||||||
Other liabilities |
(544 | ) | (567 | ) | ||||||
Net cash provided by operating activities |
7,823 | 17,846 | ||||||||
Cash flows from investing activities: |
||||||||||
Acquisitions |
(65,295 | ) | (123,373 | ) | ||||||
Dispositions |
715 | 4,149 | ||||||||
Escrow deposits on pending acquisitions |
(25 | ) | (316 | ) | ||||||
Capital expenditures |
(4,235 | ) | (4,705 | ) | ||||||
Acquisition costs and other |
(2,012 | ) | (3,380 | ) | ||||||
Net cash used in investing activities |
(70,852 | ) | (127,625 | ) | ||||||
Cash flows from financing activities: |
||||||||||
Proceeds from revolving line of credit |
368,000 | 287,500 | ||||||||
Payments on revolving line of credit |
(220,219 | ) | (159,813 | ) | ||||||
Payments for repurchase of 10 3/8% Senior Subordinated Notes |
(118,891 | ) | — | |||||||
Payments on promissory notes |
— | (12 | ) | |||||||
Payments for debt issuance costs |
— | (3,731 | ) | |||||||
Payment of dividends on Series A Preferred Stock |
(806 | ) | (9,245 | ) | ||||||
Payments for redemption of preferred stock |
(5,512 | ) | — | |||||||
Proceeds from issuance of common stock |
9,461 | 199,237 | ||||||||
Net cash provided by financing activities |
32,033 | 313,936 | ||||||||
Increase (decrease) in cash and cash equivalents |
(30,996 | ) | 204,157 | |||||||
Cash and cash equivalents at beginning of period |
$ | 60,380 | $ | 5,308 | ||||||
Cash and cash equivalents at end of period |
$ | 29,384 | $ | 209,465 | ||||||
Non-cash operating and financing activities: |
||||||||||
Trade revenue |
$ | 8,326 | $ | 6,838 | ||||||
Trade expense |
7,802 | 6,382 | ||||||||
Assets acquired through notes payable |
||||||||||