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 September 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) 3535 Piedmont Road, Building 14, Fl 14, Atlanta, GA (Address of principal executive offices) |
36-4159663 (I.R.S. Employer Identification No.) 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 o
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 October 31, 2003, the registrant had outstanding 65,271,659 shares of common stock consisting of (i) 52,996,029 shares of Class A Common Stock; (ii) 11,630,759 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 | 3 | |
| Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002 | 3 | ||
| Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2003 and 2002 | 4 | ||
| Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002 | 5 | ||
| Notes to Consolidated Financial Statements | 6 | ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 25 | |
| Item 4. | Controls and Procedures | 25 | |
| PART II | OTHER INFORMATION | ||
| Item 1 | Legal Proceedings | 26 | |
| Item 2 | Changes in Securities and Use of Proceeds | 26 | |
| Item 3 | Defaults Upon Senior Securities | 26 | |
| Item 4 | Submission of Matters to a Vote of Security Holders | 26 | |
| Item 5 | Other Information | 26 | |
| Item 6 | Exhibits and Reports on Form 8-K | 26 | |
| Signatures | 26 | ||
| Exhibit Index | 26 |
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) | |||||||||||
| September 30, | December 31, | ||||||||||
| 2003 | 2002 | ||||||||||
| Assets | |||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 5,192 | $ | 60,380 | |||||||
Restricted cash |
— | 13,000 | |||||||||
Accounts receivable, less allowance for doubtful accounts of $2,398 and $2,337 respectively |
51,047 | 47,367 | |||||||||
Prepaid expenses and other current assets |
11,036 | 9,525 | |||||||||
Deferred tax assets |
894 | 1,156 | |||||||||
Total current assets |
68,169 | 131,428 | |||||||||
Property and equipment, net |
92,234 | 92,064 | |||||||||
Intangible assets, net |
1,267,401 | 1,117,842 | |||||||||
Other assets |
11,334 | 14,180 | |||||||||
Total assets |
$ | 1,439,138 | $ | 1,355,514 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities: |
|||||||||||
Accounts payable and accrued expenses |
$ | 20,884 | $ | 45,165 | |||||||
Current portion of long-term debt |
14,500 | 5,558 | |||||||||
Other current liabilities |
1,401 | 458 | |||||||||
Total current liabilities |
36,785 | 51,181 | |||||||||
Long-term debt |
468,563 | 414,704 | |||||||||
Other liabilities |
1,984 | 1,941 | |||||||||
Deferred income taxes |
175,879 | 152,680 | |||||||||
Total liabilities |
683,211 | 620,506 | |||||||||
Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009, stated value
$1,000 per share, 0 and 14,168 shares issued and outstanding, respectively |
— | 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: 0 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; 50,654,535 and
48,843,191 shares issued and outstanding |
507 | 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 |
(1,215 | ) | — | ||||||||
Additional paid-in-capital |
920,417 | 884,284 | |||||||||
Accumulated deficit |
(153,944 | ) | (154,086 | ) | |||||||
Loan to officers |
(9,984 | ) | (9,984 | ) | |||||||
Total stockholders’ equity |
755,927 | 720,840 | |||||||||
Total liabilities and stockholders’ equity |
$ | 1,439,138 | $ | 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 | Nine Months | Nine Months | ||||||||||||||||
| Ended | Ended | Ended | Ended | ||||||||||||||||
| September 30, 2003 | September 30, 2002 | September 30, 2003 | September 30, 2002 | ||||||||||||||||
Revenues |
$ | 81,878 | $ | 73,635 | $ | 227,445 | $ | 200,394 | |||||||||||
Less: agency commissions |
(7,314 | ) | (6,911 | ) | (20,385 | ) | (18,550 | ) | |||||||||||
Net revenues |
74,564 | 66,724 | 207,060 | 181,844 | |||||||||||||||
Operating expenses: |
|||||||||||||||||||
Station operating expenses, excluding depreciation,
amortization and LMA fees (including provision for
doubtful accounts of $704, $603, $2,126 and $1,458,
respectively) |
46,774 | 41,185 | 131,895 | 115,844 | |||||||||||||||
Depreciation and amortization |
4,848 | 4,613 | 14,325 | 13,533 | |||||||||||||||
LMA fees |
577 | 59 | 1,208 | 316 | |||||||||||||||
Corporate general and administrative (excluding non-cash
stock compensation (income) expense of $(41), $280, $218
and $337, respectively) |
3,131 | 3,468 | 9,981 | 10,448 | |||||||||||||||
Non-cash stock compensation |
(41 | ) | 280 | 218 | 337 | ||||||||||||||
Restructuring
charges (credits) |
(85 | ) | (931 | ) | (268 | ) | (931 | ) | |||||||||||
Total operating expenses |
55,204 | 48,674 | 157,359 | 139,547 | |||||||||||||||
Operating income |
19,360 | 18,050 | 49,701 | 42,297 | |||||||||||||||
Nonoperating income (expense): |
|||||||||||||||||||
Interest expense |
(4,823 | ) | (8,277 | ) | (17,488 | ) | (23,628 | ) | |||||||||||
Interest income |
110 | 1,337 | 501 | 1,962 | |||||||||||||||
Loss on early extinguishment of debt |
(1,010 | ) | — | (15,243 | ) | (6,291 | ) | ||||||||||||
Other income (expense), net |
(100 | ) | (21 | ) | (256 | ) | 1,459 | ||||||||||||
Total nonoperating expenses, net |
(5,823 | ) | (6,961 | ) | (32,486 | ) | (26,498 | ) | |||||||||||
Income before income taxes |
13,537 | 11,089 | 17,215 | 15,799 | |||||||||||||||
Income tax expense |
(5,862 | ) | (4,863 | ) | (17,072 | ) | (72,654 | ) | |||||||||||
Income (loss) before the cumulative effect of a change in
accounting principle, net of tax |
7,675 | 6,226 | 143 | (56,855 | ) | ||||||||||||||
Cumulative effect of a change in accounting principle, net of
tax |
— | — | — | (41,700 | ) | ||||||||||||||
Net income (loss) |
7,675 | 6,226 | 143 | (98,555 | ) | ||||||||||||||
Preferred stock dividends and redemption premiums |
659 | 10,358 | 1,908 | 19,604 | |||||||||||||||
Net income (loss) attributable to common stockholders |
$ | 7,016 | $ | (4,132 | ) | $ | (1,765 | ) | $ | (118,159 | ) | ||||||||
Basic income (loss) per common share |
|||||||||||||||||||
Income (loss) per common share before the cumulative
effect of a change in accounting principle |
$ | 0.11 | $ | (0.07 | ) | $ | (0.03 | ) | $ | (1.48 | ) | ||||||||
Cumulative effect of a change in accounting principle |
— | — | — | (0.81 | ) | ||||||||||||||
Income (loss) per common share |
$ | 0.11 | $ | (0.07 | ) | $ | (0.03 | ) | $ | (2.29 | ) | ||||||||
Diluted income (loss) per common share |
|||||||||||||||||||
Income (loss) per common share before the cumulative effect
of a change in accounting principle |
$ | 0.10 | $ | (0.07 | ) | $ | (0.03 | ) | $ | (1.48 | ) | ||||||||
Cumulative effect of a change in accounting principle |
— | — | — | (0.81 | ) | ||||||||||||||
Income (loss) per common share |
$ | 0.10 | $ | (0.07 | ) | $ | (0.03 | ) | $ | (2.29 | ) | ||||||||
Weighted average basic common shares outstanding |
64,876,925 | 62,331,962 | 63,897,237 | 51,687,930 | |||||||||||||||
Weighted average diluted common shares outstanding |
67,656,150 | 62,331,962 | 63,897,237 | 51,687,930 | |||||||||||||||
See Accompanying Notes to Consolidated Financial Statements
4
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
| (Unaudited) | ||||||||||
| Nine Months | Nine Months | |||||||||
| Ended | Ended | |||||||||
| September 30, 2003 | September 30, 2002 | |||||||||
Cash flows from operating activities: |
||||||||||
Net income (loss) |
$ | 143 | $ | (98,555 | ) | |||||
Adjustments
to reconcile net income (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 |
4,381 | 6,291 | ||||||||
Depreciation |
13,608 | 13,475 | ||||||||
Amortization of intangible assets and other assets |
1,055 | 1,183 | ||||||||
Provision for doubtful accounts |
2,126 | 1,458 | ||||||||
Adjustment of the fair value of derivative instruments |
(351 | ) | — | |||||||
Loss/(gain) on sale of assets or stations |
118 | (4,672 | ) | |||||||
Stock issuance portion of litigation settlement |
— | 1,325 | ||||||||
Deferred taxes |
17,072 | 72,654 | ||||||||
Non-cash stock compensation |
218 | 337 | ||||||||
Adjustment of restructuring charges |
(268 | ) | (931 | ) | ||||||
Changes in assets and liabilities, net of effects of acquisitions: |
||||||||||
Restricted cash |
13,000 | — | ||||||||
Accounts receivable |
(5,812 | ) | (9,843 | ) | ||||||
Prepaid expenses and other current assets |
(11 | ) | (205 | ) | ||||||
Accounts payable and accrued expenses |
(18,761 | ) | 10,467 | |||||||
Other assets |
(2,523 | ) | (605 | ) | ||||||
Other liabilities |
(838 | ) | (1,325 | ) | ||||||
Net cash provided by operating activities |
23,157 | 32,754 | ||||||||
Cash flows from investing activities: |
||||||||||
Acquisitions |
(126,013 | ) | (131,724 | ) | ||||||
Dispositions |
715 | 7,049 | ||||||||
Escrow deposits on pending acquisitions |
(45 | ) | (336 | ) | ||||||
Capital expenditures |
(6,756 | ) | (8,788 | ) | ||||||
Acquisition costs and other |
(3,055 | ) | (3,417 | ) | ||||||
Net cash used in investing activities |
(135,154 | ) | (137,216 | ) | ||||||
Cash flows from financing activities: |
||||||||||
Proceeds from revolving line of credit |
430,500 | 287,500 | ||||||||
Payments on revolving line of credit |
(234,938 | ) | (159,813 | ) | ||||||
Payments for repurchase of 10 3/8% Senior Subordinated Notes |
(132,582 | ) | — | |||||||
Payments on promissory notes |
(163 | ) | (19 | ) | ||||||
Payments for debt issuance costs |
— | (3,743 | ) | |||||||
Payment of dividends on Series A Preferred Stock |
(1,146 | ) | (9,245 | ) | ||||||
Payments for redemption of preferred stock |
(15,417 | ) | (75,288 | ) | ||||||
Proceeds from issuance of common stock |
10,555 | 202,638 | ||||||||
Net cash provided by financing activities |
56,809 | 242,030 | ||||||||
Increase (decrease) in cash and cash equivalents |
(55,188 | ) | 137,568 | |||||||
Cash and cash equivalents at beginning of period |
$ | 60,380 | $ | 5,308 | ||||||
Cash and cash equivalents at end of period |
$ | 5,192 | $ | 142,876 | ||||||
Non-cash operating and financing activities: |
||||||||||
Trade revenue |
$ | 12,735 | $ | 11,013 | ||||||
Trade expense |
12,174 | 10,222 | ||||||||
Assets acquired through notes payable |
— | 2,387 | ||||||||
Preferred stock dividends paid in kind, deemed dividends and accretion of discount |
— | 4,469 | ||||||||
Issuance of common stock and warrants in exchange for acquired businesses |
1,593 | 209,093 | ||||||||
See Accompanying Notes to Consolidated Financial Statements
5
Cumulus Media Inc. Notes to Consolidated Financial Statements (Unaudited)
1. Interim Financial Data
Interim Financial Data
The 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, 2002. 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, 2003 are not necessarily indicative of the results that can be expected for the entire fiscal year ending December 31, 2003.
Certain 2002 balances have been reclassified to conform to the 2003 presentation.
2. Recent Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (“FIN 46”). FIN 46 addresses the consolidation by business enterp