UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 1O-Q

For or the transition period from ____ to ____.

Commission file number 000-24525

CUMULUS MEDIA INC.

(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, 2004, the registrant had outstanding 69,927,846 shares of common stock consisting of (i) 57,652,216 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

CUMULUS MEDIA INC.

See Accompanying Notes to Consolidated Financial Statements

CUMULUS MEDIA INC.

See Accompanying Notes to Consolidated Financial Statements

CUMULUS MEDIA INC.

See Accompanying Notes to Consolidated Financial Statements

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

1. Interim Financial Data and Basis of Presentation

Interim Financial Data

     The consolidated financial statements should be read in conjunction with the consolidated financial statements of Cumulus Media Inc. (“Cumulus” or the “Company”) and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. 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, 2004 are not necessarily indicative of the results that can be expected for the entire fiscal year ending December 31, 2004.

2. Stock Based Compensation

     The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25, issued in March 2000, to account for its fixed plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Statement of Financial Accounting Standard (“SFAS”) No. 123, Accounting for Stock-Based Compensation, established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123. The following table illustrates the pro forma effect on net income (loss) attributable to common stockholders if the fair value-based method had been applied to all outstanding and unvested awards in each period.

3. Restructuring Charges

     During June 2000 the Company implemented two separate Board-approved restructuring programs. During the second quarter of 2000, the Company recorded a $9.3 million charge to operating expenses related to the restructuring costs.

     The June 2000 restructuring programs were the result of Board-approved mandates to discontinue the operations of Cumulus Internet Services and to centralize the Company’s corporate and administrative organization and employees in Atlanta, Georgia. The programs included severance and related costs and costs for vacated leased facilities, impaired leasehold improvements at vacated leased facilities, and impaired assets related to the Internet businesses. As of June 30, 2001, the Company had completed the restructuring programs. The remaining portion of the unpaid balance as of that date represents lease obligations and various contractual obligations for services related to the Internet business and has been paid by the Company through the present day consistent with the contracted terms.

     The following table presents the restructuring liability at December 31, 2003 and September 30, 2004 and the related activity applied to the balances for the nine months ended September 30, 2004 (dollars in thousands):

4. Derivative Financial Instruments

     The Company accounts for derivative financial instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This standard requires the Company to recognize all derivatives on the balance sheet at fair value. Derivative value changes are recorded in income for any contracts not classified as qualifying hedging instruments. For derivatives qualifying as cash flow hedge instruments, the effective portion of the derivative fair value change must be recorded through other comprehensive income, a component of stockholders’ equity.

     Cumulus entered into a LIBOR based interest rate swap arrangement in March of 2003 to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR. The interest rate swap changes the variable-rate cash flow exposure on the long-term notes and revolving facility to fixed-rate cash flows by entering into a receive-variable, pay-fixed interest rate swap. Under the interest rate swap, Cumulus receives LIBOR based variable interest rate payments and makes fixed interest rate payments, thereby creating fixed-rate long-term debt. This swap agreement is accounted for as a qualifying cash flow hedge of the future variable rate interest payments in accordance with SFAS No. 133, whereby changes in the fair market value are reflected as adjustments to the fair value of the derivative instrument as reflected on the accompanying balance sheets.

     The fair value of the interest rate swap agreement is determined periodically by obtaining quotations from the financial institution that is the counterparty to the Company’s swap arrangement. The fair value represents an estimate of the net amount that Cumulus would receive if the agreement was transferred to another party or cancelled as of the date of the valuation. Changes in the fair value of the interest rate swap are reported in accumulated other comprehensive income, or AOCI, which is an element of stockholders’ equity. These amounts subsequently are reclassified into interest expense as a yield adjustment in the same period in which the related interest on the floating-rate debt obligations affects earnings. During the three and nine months ended September 30, 2004, approximately $0.4 million and $1.8 million, respectively, related to the interest rate swap were reported as interest expense and represent a yield adjustment of the hedged debt obligation. The balance sheet as of September 30, 2004 reflects other long-term assets of $2.7 million to reflect the fair value of the swap agreement.

     In order to effect the lowest fixed rate under the swap arrangement, Cumulus also entered into an interest rate option agreement, which provides for the counterparty to the agreement, Bank of America, to unilaterally extend the period of the swap for two additional years, from March of 2006 through March of 2008. This option may only be exercised in March of 2006. This instrument is not highly effective in mitigating the risks in cash flows, and therefore is deemed speculative and its changes in value are accounted for as a current element of operating results. Interest expense for the three months ended September 30, 2004 includes $0.2 million of net losses related to the current period change in the fair value of the interest rate option agreement. Interest expense for the nine months ended September 30, 2004 includes $0.2 million of net gains which increased the fair value of the option agreement. The balance sheet as of September 30, 2004 reflects other long-term liabilities of $0.3 million to reflect the fair value of the option agreement. This amount represents the ineffectiveness of this instrument in effectively managing cash flow risk.

5. Acquisitions

Pending Acquisitions

     As of September 30, 2004, the Company was a party to various agreements to acquire 13 stations across 7 markets. The aggregate purchase price of those pending acquisitions is expected to be approximately $81.6 million. The Company may, at its option, pay up to $72.0 million of the purchase price of the pending acquisitions in shares of Class A Common Stock.

Completed Acquisitions

     During the quarter ended September 30, 2004, the Company completed the acquisition of seven radio stations in one market and a tract of land for a tower site for $8.7 million in purchase price, of which $3.8 million was funded in cash, $4.7 million had been previously funded as an escrow deposit, $0.1 million represented capitalizable acquisition costs and $0.1 million was deferred beyond the closing of the transaction.

     During the quarter ended June 30, 2004, the Company completed the acquisition of one radio station for $0.8 million in purchase price, all of which was funded in cash.

     During the quarter ended March 31, 2004, the Company completed 5 acquisitions of 17 radio stations in 4 markets for $83.1 million in purchase price. Of the $83.1 million required to fund the acquisitions, $71.3 million was funded in the form of shares of Class A Common Stock, $6.4 million was funded in cash, $0.4 million represented capitalizable acquisition costs and $5.0 million was deferred beyond the closing of the transaction. With regard to the $5.0 million of deferred purchase price, the Company began to pay the amount in cash in 60 monthly installments commencing in April 2004, consistent with the terms of the purchase agreement. These aggregate acquisition amounts include the assets acquired pursuant to the transactions described briefly below.

     On March 29, 30 and 31, 2004, the Company completed the acquisitions of KYBB-FM, KIKN-FM, KKLS-FM, KMXC-FM, KSOO-AM and KXRB-AM serving Sioux Falls, South Dakota and KROC-AM, KROC-FM, KYBA-FM, KFIL-FM, KFIL-AM, KVGO-FM, KOLM-AM, KWWK-FM and KLCX-FM serving Rochester, Minnesota from three separate parties. In connection with the acquisitions, the Company paid $1.2 million in cash and issued 3,569,135 shares of Class A Common Stock.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in connection with the acquisitions completed during the nine months ended September 30, 2004 (dollars in thousands):

     All of the Company’s acquisitions have been accounted for by the purchase method of accounting. As such, the accompanying consolidated balance sheets include the acquired assets and liabilities and the accompanying statements of operations include the results of operations of the acquired entities from their respective dates of acquisition.

     The following unaudited consolidated condensed pro forma results of operations data for the three and nine months ended September 30, 2004 and 2003, reflect adjustments as if all acquisitions and dispositions completed during 2003 and during the first, second and third quarters of 2004 occurred at January 1, 2003 (dollars in thousands, except per share data):

     Escrow funds of approximately $4.9 million paid by the Company in connection with pending acquisitions have been classified as Other Assets at September 30, 2004 in the accompanying consolidated balance sheet.

     At September 30, 2004 the Company operated 12 stations under local marketing agreements (“LMAs”), pending FCC approval of our acquisition of those stations. The consolidated statements of operations for the three and nine months ended September 30, 2004 includes the revenue and broadcast operating expenses of these radio stations and any related fees associated with the LMAs from the effective date of the LMAs through the earlier of the acquisition date or September 30, 2004.

Goodwill and Other Intangible Assets

     The following tables summarize the September 30, 2004 gross carrying amounts and accumulated amortization of amortized and unamortized intangible assets, amortization expense for the nine months ended September 30, 2004 and September 30, 2003 and the estimated amortization expense for the five succeeding fiscal years (dollars in thousands):

     A summary of changes in the carrying amount of goodwill for the nine months ended September 30, 2004 follows (dollars in thousands):

6. Long-Term Debt

     On January 29, 2004 the Company completed an amendment and restatement of its existing Credit Agreement, which reduced the margin applicable to both Alternative Base Rate and Adjusted LIBO Rate borrowings under its $325.0 million eight-year term loan facility. The January 29, 2004 amendment and restatement did not change any other material terms or restrictive covenants under the Credit Agreement. In connection with the amendment and restatement, the Company incurred $0.5 million of professional fees, which have been included in losses on early extinguishment of debt on the consolidated statements of operations.

     On July 15, 2004 the Company completed another amendment and restatement of its existing Credit Agreement. Under the terms of this amendment and restatement, $100.0 million of principal outstanding under the eight-year term loan facility was retired and simultaneously redrawn under the seven-year term loan facility. In the aggregate there were no changes in amounts outstanding under the Credit Agreement as a result of the amendment and restatement. The amendment and restatement also reduced by 0.5% the margin applicable to both Alternate Base Rate and Adjusted LIBO Rate borrowings under both the seven-year and eight-year term loan facilities. In addition, certain financial restrictive covenants were amended as a part of the amendment and restatement, which generally give the Company greater flexibility during fiscal years 2004 and 2005. The terms of the seven-year revolving commitment were not amended.

     In connection with the amendment and restatement of the Credit Agreement, the Company recorded a loss on early extinguishments of debt of $2.1 million, which was comprised of a $1.5 million write-off of previously capitalized debt issuance costs and $0.6 million of legal and professional fees.

     As a result of the reallocation of amounts outstanding under the seven-year term loan and eight-year term loan, the amounts repayable on a quarterly basis were effectively increased. As of September 30, 2004, the remaining scheduled annual amortization under the seven-year term loan borrowing is $7.6 million for 2004 (October 1, 2004 through December 31, 2004), $38.0 million for fiscal 2005, $40.5 million in each of fiscal years 2006, 2007 and 2008 and $27.9 million for fiscal 2009. As of September 30, 2004, the remaining scheduled annual amortization under the eight-year term loan borrowing is $0.6 million for fiscal 2004 (October 1, 2004 through December 31, 2004), $2.2 million in each of fiscal years 2005, 2006, 2007 and 2008, $156.3 million in fiscal 2009 and $54.7 million in fiscal 2010.

7. Earnings Per Share

     Basic income (loss) per share is computed on the basis of the weighted average number of common shares outstanding. Diluted income (loss) per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of outstanding stock options using the “treasury stock” method.

     The following table sets forth the computation of basic and diluted income (loss) per share for the three and nine month periods ended September 30, 2004 and 2003 (in thousands, except per share data).