CUMULUS MEDIA INC - FORM 10-Q - April 30, 2015

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
OR
¨
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
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
3280 Peachtree Road, NW Suite 2300,
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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
ý
  
Accelerated filer
  
¨
 
 
 
 
Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
As of April 21, 2015, the registrant had 233,281,577 outstanding shares of common stock consisting of: (i) 232,636,706 shares of Class A common stock; and (ii) 644,871 shares of Class C common stock.


CUMULUS MEDIA INC.
INDEX
 

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for per share data)
(Unaudited)
 
March 31, 2015
 
December 31, 2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
22,758

 
$
7,271

Restricted cash
8,414

 
10,055

Accounts receivable, less allowance for doubtful accounts of $5,158 and $6,004 at March 31, 2015 and December 31, 2014, respectively
217,824

 
248,308

Trade receivable
4,103

 
2,455

Assets held for sale
45,157

 
15,007

Prepaid expenses and other current assets
90,473

 
87,730

Total current assets
388,729

 
370,826

Property and equipment, net
193,459

 
221,497

Broadcast licenses
1,593,939

 
1,596,715

Other intangible assets, net
226,343

 
243,640

Goodwill
1,252,694

 
1,253,823

Other assets
58,222

 
58,940

Total assets
$
3,713,386

 
$
3,745,441

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
142,254

 
$
151,658

Trade payable
4,729

 
3,964

Total current liabilities
146,983

 
155,622

Long-term debt, excluding 7.75% senior notes
1,876,177

 
1,875,127

7.75% senior notes
610,000

 
610,000

Other liabilities
51,299

 
55,121

Deferred income taxes
495,593

 
507,991

Total liabilities
3,180,052

 
3,203,861

Commitments and Contingencies (Note 11)

 

Stockholders’ equity:
 
 
 
Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 255,280,514 and 254,997,925 shares issued, and 232,636,706 and 232,378,371 shares outstanding, at March 31, 2015 and December 31, 2014, respectively
2,552

 
2,549

Class C common stock, par value $0.01 per share; 644,871 shares authorized, issued and outstanding at both March 31, 2015 and December 31, 2014
6

 
6

Treasury stock, at cost, 22,643,808 and 22,619,554 shares at March 31, 2015 and December 31, 2014, respectively
(231,684
)
 
(231,588
)
Additional paid-in-capital
1,604,825

 
1,600,963

Accumulated deficit
(842,365
)
 
(830,350
)
Total stockholders’ equity
533,334

 
541,580

Total liabilities and stockholders’ equity
$
3,713,386

 
$
3,745,441

See accompanying notes to the unaudited condensed consolidated financial statements.

3

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except for share and per share data)
(Unaudited)
 
Three Months Ended 
 March 31,
 
2015
 
2014
Net revenue
$
271,079

 
$
292,044

Operating expenses:
 
 
 
Content costs
100,807

 
108,493

Selling, general & administrative expenses
116,307

 
115,335

Depreciation and amortization
25,311

 
28,881

LMA fees
2,498

 
1,557

Corporate expenses (including stock-based compensation expense of $3,863 and $4,091, respectively)
13,462

 
19,194

Loss (gain) on sale of assets or stations
819

 
(538
)
Total operating expenses
259,204

 
272,922

Operating income
11,875

 
19,122

Non-operating (expense) income:

 
 
Interest expense
(34,984
)
 
(36,265
)
Interest income
358

 
331

Other income (expense), net
379

 
(65
)
Total non-operating expense, net
(34,247
)
 
(35,999
)
Loss before income taxes
(22,372
)
 
(16,877
)
Income tax benefit
10,357

 
7,608

Net loss
$
(12,015
)
 
$
(9,269
)
Basic and diluted loss per common share (see Note 9, “Earnings (Loss) Per Share”):
 
 

Basic and diluted loss per share
$
(0.05
)
 
$
(0.04
)
Weighted average basic and diluted common shares outstanding
233,125,055

 
215,703,667

See accompanying notes to the unaudited condensed consolidated financial statements.

4

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(12,015
)
 
$
(9,269
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
25,311

 
28,881

Amortization of debt issuance costs/discounts
2,342

 
2,318

Provision for doubtful accounts
596

 
568

Loss (gain) on sale of assets or stations
819

 
(538
)
Fair value adjustment of derivative instruments
—

 
14

Deferred income taxes
(9,961
)
 
(7,631
)
Stock-based compensation expense
3,863

 
4,091

Changes in assets and liabilities:
 
 
 
Accounts receivable
29,888

 
32,065

Trade receivable
(1,648
)
 
234

Prepaid expenses and other current assets
(5,180
)
 
(10,303
)
Other assets
(574
)
 
(1,336
)
Accounts payable and accrued expenses
(9,406
)
 
4,087

Trade payable
765

 
(466
)
Other liabilities
(3,822
)
 
(5,839
)
Net cash provided by operating activities
20,978

 
36,876

Cash flows from investing activities:
 
 
 
Restricted cash
1,641

 
—

Proceeds from sale of assets or stations
3,055

 
1,054

Capital expenditures
(10,095
)
 
(1,335
)
Net cash used in investing activities
(5,399
)
 
(281
)
Cash flows from financing activities:
 
 
 
Repayment of borrowings under term loans and revolving credit facilities
—

 
(30,937
)
Deferred financing costs
—

 
(21
)
Tax withholding payments on behalf of employees
(93
)
 
(1,314
)
Proceeds from exercise of warrants
1

 
38

Proceeds from exercise of options
—

 
117

Net cash used in financing activities
(92
)
 
(32,117
)
Increase in cash and cash equivalents
15,487

 
4,478

Cash and cash equivalents at beginning of period
7,271

 
32,792

Cash and cash equivalents at end of period
$
22,758

 
$
37,270

Supplemental disclosures of cash flow information:
 
 
 
Interest paid
$
20,229

 
$
23,520

Income taxes (refunds) paid
(112
)
 
8,708

Supplemental disclosures of non-cash flow information:
 
 
 
Trade revenue
$
10,176

 
$
9,424

Trade expense
9,439

 
9,393

Equity interest in Pulser Media
435

 
1,887

See accompanying notes to the unaudited condensed consolidated financial statements.

5


1. Description of Business, Interim Financial Data and Basis of Presentation:
Description of Business
Cumulus Media Inc. (and its consolidated subsidiaries, except as the context may otherwise require, “Cumulus,” “Cumulus Media,” “we,” “us,” “our,” or the “Company”) is a Delaware corporation, organized in 2002, and successor by merger to an Illinois corporation with the same name that had been organized in 1997.
Nature of Business
The Company combines high-quality local programming with iconic, nationally syndicated media, sports and entertainment brands in order to deliver premium choices for listeners, provide substantial reach for advertisers and create opportunities for shareholders. As the largest pure-play radio broadcaster in the United States, the Company provides exclusive content that is fully distributed through approximately 460 owned and operated stations in 90 U.S. media markets, approximately 8,500 broadcast radio affiliates and numerous digital channels. The Company believes it is well-positioned in the widening digital audio space through a significant stake in the Rdio digital music service, featuring over 30 million songs on-demand in addition to custom playlists and exclusive curated channels. The Company is also the leading provider of country music and lifestyle content through its NASH brand, which serves country fans through radio programming, NASH magazine, concerts, licensed products and television/video.
Interim Financial Data
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company and the notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The accompanying unaudited condensed consolidated financial statements include the condensed consolidated accounts of Cumulus and its wholly-owned subsidiaries, with all intercompany balances and transactions eliminated in consolidation. The December 31, 2014 condensed balance sheet data was derived from audited financial statements. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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 GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of our results of operations for, and financial condition as of the end of, the interim periods have been made. The results of operations for the three months ended March 31, 2015, the cash flows for the three months ended March 31, 2015 and the Company’s financial condition as of March 31, 2015, are not necessarily indicative of the results of operations or cash flows that can be expected for, or the Company’s financial condition that can be expected as of the end of, any other interim period or for the fiscal year ending December 31, 2015.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to bad debts, intangible assets, income taxes, stock-based compensation, contingencies, litigation, and purchase price allocation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts and results may differ materially from these estimates.
Assets Held for Sale
During the three months ended March 31, 2015, the Company finalized a plan to sell certain land. During the year ended December 31, 2014, the Company entered into an agreement to sell certain land and buildings to a third party. The Company expects these sales to close in the next twelve months and, therefore, the carrying value of the identified assets has been classified as held for sale in the unaudited condensed consolidated balance sheets at March 31, 2015 and December 31, 2014. The estimated fair value of the land and buildings is in excess of the carrying value.

6

Adoption of New Accounting Standards
ASU 2014-08. In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-08. Under this ASU, only disposals that represent a strategic shift that has (or will have) a major effect on the entity’s results and operations would qualify as discontinued operations. This ASU (1) expands the disclosure requirements for disposals that meet the definition of a discontinued operation, (2) requires entities to disclose information about disposals of individually significant components, (3) defines “discontinued operations” similarly to how it is defined under International Financial Reporting Standards 5, and (4) requires entities to expand their disclosures about discontinued operations to include more information about assets, liabilities, income and expenses. In addition, this ASU will also require entities to disclose the pre-tax income attributable to a disposal of “an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements.” The Company adopted this guidance effective January 1, 2015. The adoption of this guidance did not have an impact on the consolidated financial statements.
Recent Accounting Standards Updates
ASU 2014-09. In May 2014, the FASB issued ASU 2014-09. The amended guidance under this ASU outlines a single comprehensive revenue model for entities to use in accounting for revenue arising from contracts with customers. The guidance supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the single comprehensive revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. The ASU is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016. In April 2015, the FASB voted for a one-year deferral of the effective date of the new revenue recognition standard. Transition to the new guidance may be done using either a full or modified retrospective method. The Company is currently assessing the expected impact that this ASU will have on the consolidated financial statements.
ASU 2014-15. In August 2014, the FASB issued ASU 2014-15. The amendments in this update provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in this ASU are effective for public and nonpublic entities for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The adoption of this guidance is not expected to have an impact on the consolidated financial statements.
ASU 2015-01. In January 2015, the FASB issued ASU 2015-01. The amendments in this ASU eliminate the concept of an extraordinary item from GAAP. As a result, an entity will no longer be required to segregate extraordinary items from the results of ordinary operations, to separately present an extraordinary item on its income statement, net of tax, after income from continuing operations or to disclose income taxes and earnings-per-share data applicable to an extraordinary item. However, the ASU will still retain the presentation and disclosure guidance for items that are unusual in nature and occur infrequently. The ASU will be effective for fiscal years beginning after December 15, 2015 and subsequent interim periods. Early adoption is permitted. The adoption of this guidance is not expected to have an impact on the consolidated financial statements.
ASU 2015-02. In February 2015, the FASB issued ASU 2015-02. The amendments in this ASU provide modifications to the evaluation of variable interest entities that may impact consolidation of reporting entities. The ASU will be effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently assessing the expected impact, if any, that this ASU will have on the consolidated financial statements.
ASU 2015-03. In April 2015, the FASB issued ASU 2015-03. The amendments in this ASU requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of long-term debt, consistent with debt discounts or premiums. Presently, debt issuance costs are reported as an asset. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The ASU will be effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. The new guidance would be applied retrospectively to all prior reporting periods presented. The Company is currently assessing the expected impact, if any, that this ASU will have on the consolidated financial statements.

2. Acquisitions and Dispositions

2014 Acquisitions and Dispositions

7

Country Weekly Acquisition
On November 7, 2014, the Company completed the purchase of Country Weekly magazine and its related business (“Country Weekly”) for $3.0 million in cash (the "Country Weekly Acquisition"). The Company had previously included NASH branded inserts into the Country Weekly publication.

Wise Brothers Acquisition
On August 1, 2014, the Company completed the purchase of Wise Brother Media, Inc. for $5.5 million in cash (the "Wise Brothers Acquisition"). Revenues attributable to the assets acquired in the Wise Brothers Acquisition were not material to the Company’s condensed consolidated statement of operations for the year ended December 31, 2014.
The table below summarizes the purchase price allocation in the Wise Brothers Acquisition (dollars in thousands):
Allocation
Amount
Property and equipment
$
50

Deferred income taxes
100

Other intangible assets
5,025

Goodwill
475

Current liabilities
(75
)
Other liabilities
(75
)
Total purchase price
$
5,500

The definite-lived intangible assets acquired in the Wise Brothers Acquisition are being amortized in relation to the expected economic benefits of such assets over their estimated useful lives and consist of the following (dollars in thousands):
Description
Estimated Useful Life in Years
Fair Value
Other intangibles - programming content
4
$
5,025

Pro forma financial information for the Country Weekly Acquisition and Wise Brothers Acquisition is not required, as such information is not material to the Company's financial statements.

3. Restricted Cash
As of March 31, 2015 and December 31, 2014, the Company’s balance sheet included approximately $8.4 million and $10.1 million, respectively, in restricted cash, of which $0.6 million relates to securing the maximum exposure generated by automated clearinghouse transactions in the Company's operating bank accounts and as dictated by the Company's bank's internal policies with respect to cash. At March 31, 2015 and December 31, 2014, the Company held $7.8 million and $9.5 million, respectively, relating to collateralizing standby letters of credit pertaining to certain leases and insurance policies.

4. Intangible Assets and Goodwill
The following table presents the changes in intangible assets, other than goodwill, during the periods from January 1, 2014 to December 31, 2014 and January 1, 2015 to March 31, 2015, and balances as of such dates (dollars in thousands):
 
Indefinite-Lived
 
Definite-Lived
 
Total
Intangible Assets:
 
 
 
 
 
Balance as of January 1, 2014
$
1,596,337

 
$
315,490

 
$
1,911,827

Purchase price allocation adjustments
963

 
—

 
963

Acquisitions
—

 
8,205

 
8,205

Dispositions
(585
)
 
(74
)
 
(659
)
Amortization
—

 
(79,981
)
 
(79,981
)
Balance as of December 31, 2014
1,596,715

 
243,640

 
1,840,355

Purchase price allocation adjustments
—

 
—

 
—

Acquisitions
—

 
—

 
—

Dispositions
(2,776
)
 
—

 
(2,776
)
Amortization
—

 
(17,297
)
 
(17,297
)
Balance as of March 31, 2015
$
1,593,939

 
$
226,343

 
$
1,820,282


8

The following table presents the changes in goodwill and accumulated impairment losses during the periods from January 1, 2015 to March 31, 2015 and January 1, 2014 to March 31, 2014, and balances as of such dates (dollars in thousands):
Goodwill:
2015
 
2014
Balance as of January 1:
 
 
 
       Goodwill
$
1,583,564

 
$
1,586,482

Accumulated impairment losses
(329,741
)
 
(329,741
)
Subtotal
1,253,823

 
1,256,741

Acquisition
—

 
886

Purchase price allocation adjustments
—

 
(3,188
)
Disposition
(1,129
)
 
(616
)
Balance as of March 31:
 
 
 
Goodwill
1,582,435

 
1,583,564

Accumulated impairment losses
(329,741
)
 
(329,741
)
Total
$
1,252,694

 
$
1,253,823

The Company has significant intangible assets recorded comprised primarily of broadcast licenses and goodwill acquired through acquisitions. The Company performs its annual impairment testing of broadcast licenses and goodwill during the fourth quarter and on an interim basis if events or circumstances indicate that broadcast licenses or goodwill may be impaired. The calculation of the fair value of each reporting unit is prepared using an income approach and discounted cash flow methodology. If the carrying value exceeds the estimate of fair value, the Company calculates impairment as the excess of the carrying value of goodwill over its estimated fair value and charges the impairment to results of operations in the period in which the impairment occurred. The Company reviews the carrying value of its definite-lived intangible assets for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. There were no triggering events as of March 31, 2015 to necessitate the test as fair value exceeded carrying value.

5. Long-Term Debt
The Company’s long-term debt consisted of the following as of March 31, 2015 and December 31, 2014 (dollars in thousands):
 
 
March 31, 2015
 
December 31, 2014
Term Loan and Securitization Facility:
 
 
 
Term loan
$
1,903,875

 
$
1,903,875

Securitization facility
—

 
—

Less: term loan discount
(27,698
)
 
(28,748
)
Total Term Loan and Securitization Facility
1,876,177

 
1,875,127

7.75% senior notes
610,000

 
610,000

Less: Current portion of long-term debt
—

 
—

Long-term debt, net
$
2,486,177

 
$
2,485,127


9

Amended and Restated Credit Agreement
On December 23, 2013, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), among the Company, Cumulus Media Holdings Inc., a direct wholly-owned subsidiary of the Company (“Cumulus Holdings”), as borrower, and certain lenders and agents. The Credit Agreement consists of a $2.025 billion term loan (the “Term Loan”) maturing in December 2020 and a $200.0 million revolving credit facility (the “Revolving Credit Facility”) maturing in December 2018. Under the Revolving Credit Facility, up to $30.0 million of availability may be drawn in the form of letters of credit.
Term Loan borrowings and borrowings under the Revolving Credit Facility bear interest, at the option of Cumulus Holdings, based on the Base Rate (as defined below) or the London Interbank Offered Rate (“LIBOR”), in each case plus 3.25% on LIBOR-based borrowings and 2.25% on Base Rate-based borrowings. LIBOR-based borrowings are subject to a LIBOR floor of 1.0% under the Term Loan. Base Rate-based borrowings are subject to a Base Rate Floor of 2.0% under the Term Loan. Base Rate is defined, for any day, as the fluctuating rate per annum equal to the highest of the (i) Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 1/2 of 1.0%, (ii) prime commercial lending rate of JPMorgan Chase Bank, N.A., as established from time to time, and (iii) 30 day LIBOR plus 1.0%. Amounts outstanding under the Term Loan amortize at a rate of 1.0% per annum of the original principal amount of the Term Loan, payable quarterly, with the balance payable on the maturity date.
At March 31, 2015, the Term Loan bore interest at 4.25% per annum.
The representations, covenants and events of default in the Credit Agreement are customary for financing transactions of this nature. Events of default in the Credit Agreement include, among others: (a) the failure to pay when due the obligations owing thereunder; (b) the failure to comply with (and not timely remedy, if applicable) certain covenants; (c) certain defaults and accelerations under other indebtedness; (d) the occurrence of bankruptcy or insolvency events; (e) certain judgments against the Company or any of its restricted subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use one or more of, any material FCC licenses; (g) any representation or warranty made, or report, certificate or financial statement delivered, to the lenders subsequently proven to have been incorrect in any material respect; and (h) the occurrence of a Change in Control (as defined in the Credit Agreement). Upon the occurrence of an event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights under the Credit Agreement and the ancillary loan documents as a secured party.
In the event amounts are outstanding under the Revolving Credit Facility or any letters of credit are outstanding that have not been collateralized by cash as of the end of each quarter, the Credit Agreement requires compliance with a consolidated first lien leverage ratio covenant. The required ratio at March 31, 2015 was 5.50 to 1, and the first lien net leverage ratio covenant periodically decreases until it reaches 4.0 to 1 on March 31, 2018. As the Company currently has no borrowings outstanding under the Revolving Credit Facility, the Company is not required to comply with such ratio. However, as of March 31, 2015 the Company's leverage was greater than the required ratio and, as a result, the Company did not have access to borrowings under the Revolving Credit Facility. The Company will not regain access until the Company is able to satisfy the first lien ratio requirement that would permit such borrowings.
Certain mandatory prepayments on the Term Loan are required upon the occurrence of specified events, including upon the incurrence of certain additional indebtedness, upon the sale of certain assets and upon the occurrence of certain condemnation or casualty events, and from excess cash flow.
The Company’s, Cumulus Holdings’ and their respective restricted subsidiaries’ obligations under the Credit Agreement are collateralized by a first priority lien on substantially all of the Company’s, Cumulus Holdings’ and their respective restricted subsidiaries’ assets (excluding the Company’s accounts receivable collateralizing the Company's revolving accounts receivable securitization facility (the “Securitization Facility”) with General Electric Capital Corporation (“GE”) as described below) in which a security interest may lawfully be granted, including, without limitation, intellectual property and substantially all of the capital stock of the Company’s direct and indirect domestic wholly-owned subsidiaries and 66% of the capital stock of any future first-tier foreign subsidiaries. In addition, Cumulus Holdings’ obligations under the Credit Agreement are guaranteed by the Company and substantially all of its restricted subsidiaries, other than Cumulus Holdings.
At March 31, 2015 and December 31, 2014, the Company had $1.904 billion outstanding under the Term Loan and no amounts outstanding under the Revolving Credit Facility.

10

7.75% Senior Notes
On May 13, 2011, the Company issued $610.0 million aggregate principal amount of its 7.75% Senior Notes due 2019 (the "7.75% Senior Notes"). Proceeds from the sale of the 7.75% Senior Notes were used to, among other things, repay the $575.8 million outstanding under the term loan facility under the Company's prior credit agreement.
On September 16, 2011, the Company and Cumulus Holdings entered into a supplemental indenture with the trustee under the indenture governing the 7.75% Senior Notes which provided for, among other things, the (i) assumption by Cumulus Holdings of all obligations of the Company; (ii) substitution of Cumulus Holdings for the Company as issuer; (iii) release of the Company from all obligations as original issuer; and (iv) Company’s guarantee of all of Cumulus Holdings’ obligations, in each case under the indenture and the 7.75% Senior Notes.
Interest on the 7.75% Senior Notes is payable on each May 1 and November 1 of each year. The 7.75% Senior Notes mature on May 1, 2019.
Cumulus Holdings, as issuer of the 7.75% Senior Notes, may redeem all or part of the 7.75% Senior Notes at any time on or after May 1, 2015 at a price equal to 100% of the principal amount, plus a “make-whole” premium. If Cumulus Holdings sells certain assets or experiences specific kinds of changes in control, it will be required to make an offer to purchase the 7.75% Senior Notes.
The indenture governing the 7.75% Senior Notes contains representations, covenants and events of default customary for financing transactions of this nature. At March 31, 2015, the Company was in compliance with all required covenants under the indenture governing the 7.75% Senior Notes.
In connection with the substitution of Cumulus Holdings as the issuer of the 7.75% Senior Notes, the Company has also guaranteed the 7.75% Senior Notes. In addition, each existing and future domestic restricted subsidiary that guarantees the Company’s indebtedness, Cumulus Holdings’ indebtedness or indebtedness of the Company’s subsidiary guarantors (other than the Company’s subsidiaries that hold the licenses for the Company’s radio stations) guarantees, and will guarantee, the 7.75% Senior Notes. The 7.75% Senior Notes are senior unsecured obligations of Cumulus Holdings and rank equally in right of payment to all existing and future senior unsecured debt of Cumulus Holdings and senior in right of payment to all future subordinated debt of Cumulus Holdings. The 7.75% Senior Notes guarantees are the Company’s and the other guarantors’ senior unsecured obligations and rank equally in right of payment to all of the Company’s and the other guarantors’ existing and future senior debt and senior in right of payment to all of the Company’s and the other guarantors’ future subordinated debt. The 7.75% Senior Notes and the guarantees are effectively subordinated to any of Cumulus Holdings’, the Company’s or the guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt. In addition, the 7.75% Senior Notes and the guarantees are structurally subordinated to all indebtedness and other liabilities, including preferred stock, of the Company’s non-guarantor subsidiaries, including all of the liabilities of the Company’s and the guarantors’ foreign subsidiaries and the Company’s subsidiaries that hold the licenses for the Company’s radio stations.
Accounts Receivable Securitization Facility
On December 6, 2013, the Company entered into a 5-year, $50.0 million Securitization Facility with GE, as a lender, as swingline lender and as administrative agent (together with any other lenders party thereto from time to time, the “Lenders”).
In connection with the entry into the Securitization Facility, pursuant to a Receivables Sale and Servicing Agreement, dated as of December 6, 2013 (the “Sale Agreement”), certain subsidiaries of the Company (collectively, the “Originators”) may sell and/or contribute their existing and future accounts receivable (representing all of the Company’s accounts receivable) to a special purpose entity and wholly owned subsidiary of the Company (the “SPV”). The SPV may thereafter make borrowings from the Lenders, which borrowings will be secured by those receivables, pursuant to a Receivables Funding and Administration Agreement, dated as of December 6, 2013 (the “Funding Agreement”). Cumulus Holdings services the accounts receivable on behalf of the SPV.
Advances available under the Funding Agreement at any time are subject to a borrowing base determined based on advance rates relating to the value of the eligible receivables held by the SPV at that time. The Securitization Facility matures on December 6, 2018, subject to earlier termination at the election of the SPV. Advances bear interest based on either LIBOR plus 2.50% or the Index Rate (as defined in the Funding Agreement) plus 1.00%. The SPV is also required to pay a monthly fee based on any unused portion of the Securitization Facility. The Securitization Facility contains representations and warranties, affirmative and negative covenants, and events of default that are customary for financings of this type.

11

At March 31, 2015 and December 31, 2014, there were no amounts outstanding under the Securitization Facility.
For each of the three months ended March 31, 2015 and 2014, the Company recorded an aggregate of $2.3 million of amortization of debt discount and debt issuance costs related to its Term Loan, 7.75% Senior Notes, and Securitization Facility respectively.

6. Fair Value Measurements
The three levels of the fair value hierarchy to be applied to financial instruments when determining fair value are described below:
Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access;
Level 2 — Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and
Level 3 — Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial assets and liabilities are measured at fair value on a recurring basis and non-financial assets and liabilities are measured at fair value on a non-recurring basis. Fair values as of March 31, 2015 and December 31, 2014 were as follows (dollars in thousands): 
 
 
 
Fair Value Measurements at March 31, 2015 Using
 
Total Fair
Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Financial assets:
 
 
 
 
 
 
 
Equity interest in Pulser Media (1)
$
17,774

 
$
—

 
$
—

 
$
17,774

Total assets
$
17,774

 
$
—

 
$
—

 
$
17,774

Financial liabilities:
 
 
 
 
 
 
 
Other current liabilities
 
 
 
 
 
 
 
Contingent consideration (2)
$
(181
)
 
$
—

 
$
—

 
$
(181
)
Total liabilities
$
(181
)
 
$
—

 
$
—

 
$
(181
)
 
 
 
 
Fair Value Measurements at December 31, 2014 Using
 
Total Fair
Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Financial assets:
 
 
 
 
 
 
 
Equity interest in Pulser Media (1)
$
17,339

 
$
—

 
$
—

 
$
17,339

Total assets
$
17,339

 
$
—

 
$
—

 
$
17,339

Financial liabilities:
 
 
 
 
 
 
 
Other current liabilities
 
 
 
 
 
 
 
Contingent consideration (2)
$
(181
)
 
$
—

 
$
—

 
$
(181
)
Total liabilities
$
(181
)
 
$
—

 
$
—

 
$
(181
)
 

12

(1)
On September 13, 2013, the Company and Pulser Media Inc. (the parent company of Rdio) ("Pulser"), entered into a five year strategic promotional partnership and sales arrangement (the "Rdio Agreement"). In exchange for $75 million of promotional commitments over five years, Cumulus will receive a 15% equity interest in Pulser, with the opportunity to earn additional equity, see Note 11, "Commitments and Contingencies". The fair value of the equity interest in Pulser was determined using inputs that are supported by little or no market activity (a Level 3 measurement). At March 31, 2015 the fair value of the equity interest in Pulser approximated its cost basis and the Company determined that the investment was not impaired.
(2)
The fair value of the contingent consideration was determined using inputs that are supported by little or no market activity (a Level 3 measurement). Contingent consideration represents the fair value of the additional cash consideration potentially payable as part of the Wise Brothers Acquisition and the Company's 2013 asset exchange with Family Stations, Inc. (the "WFME Asset Exchange").
The reconciliation below contains the components of the change in fair value associated with the equity interest in Pulser from January 1, 2015 to March 31, 2015 (dollars in thousands):
Description
Equity Interest in Pulser
Fair value balance at January 1, 2015
$
17,339

Add: Additions to equity interest in Pulser
435

Fair value balance at March 31, 2015
$
17,774

The reconciliation below contains the components of the change in continuing contingency associated with the contingent consideration from January 1, 2015 to March 31, 2015 (dollars in thousands):
Description
Contingent Consideration
Fair value balance at January 1, 2015
$
(181
)
Mark to market adjustment
—

Fair value balance at March 31, 2015
$
(181
)
Quantitative information regarding the significant unobservable inputs related to the WFME Asset Exchange contingent consideration as of March 31, 2015 was as follows (dollars in thousands):
Fair Value
  
Valuation Technique
 
Unobservable Inputs
$
31

  
Income Approach
 
Total term
5 years

 
  
 
 
Conditions
3

 
  
 
  
Bond equivalent yield discount rate
0.1
%
Significant increases (decreases) in any of the inputs in isolation would result in a lower (higher) fair value measurement.
Quantitative information regarding the significant unobservable inputs related to the Wise Brothers Acquisition contingent consideration as of March 31, 2015 was as follows (dollars in thousands):
Fair Value
  
Valuation Technique
 
Unobservable Inputs
$
150

  
Income Approach
 
Total term
2 years

 
  
 
 
Conditions
4

Significant increases (decreases) in any of the inputs in isolation would result in a lower (higher) fair value measurement.
The following table shows the gross amount and fair value of the Company’s Term Loan and 7.75% Senior Notes (dollars in thousands):

13

 
March 31, 2015
 
December 31, 2014
Term Loan:
 
 
 
Carrying value
$
1,903,875

 
$
1,903,875

Fair value - Level 2
1,875,317

 
1,856,278

7.75% Senior Notes:
 
 
 
Carrying value
$
610,000

 
$
610,000

Fair value - Level 2
597,800

 
617,625

As of March 31, 2015, the Company used trading prices of 98.50% to calculate the fair value of the Term Loan and 98.00% to calculate the fair value of the 7.75% Senior Notes.
As of December 31, 2014, the Company used trading prices of 97.50% to calculate the fair value of the Term Loan and 101.25% to calculate the fair value of the 7.75% Senior Notes.

7. Stockholders’ Equity
The Company is authorized to issue an aggregate of 1,450,644,871 shares of stock divided into four classes consisting of: (i) 750,000,000 shares designated as Class A common stock, (ii) 600,000,000 shares designated as Class B common stock, (iii) 644,871 shares designated as Class C common stock and (iv) 100,000,000 shares of preferred stock, each with a par value of $0.01 per share.
Common Stock
Except with regard to voting and conversion rights, shares of Class A, Class B and Class C common stock are identical in all respects. The preferences, qualifications, limitations, restrictions, and the special or relative rights in respect of the common stock and the various classes of common stock are as follows:

•
Voting Rights. The holders of shares of Class A common stock are entitled to one vote per share on any matter submitted to a vote of the stockholders of the Company, and the holders of shares of Class C common stock are entitled to ten votes for each share of Class C common stock held. Generally, the holders of shares of Class B common stock are not entitled to vote on any matter. However, holders of Class B common stock and Class C common stock are entitled to a separate class vote on any amendment or modification of any specific rights or obligations of the holders of Class B common stock or Class C common stock, respectively, that does not similarly affect the rights or obligations of the holders of Class A common stock. The holders of Class A common stock and of Class C common stock vote together, as a single class, on all matters submitted to a vote to the stockholders of the Company.

•
Conversion. Each holder of Class B common stock and Class C common stock is entitled to convert at any time all or any part of such holder’s shares into an equal number of shares of Class A common stock; provided, however, that to the extent that such conversion would result in the holder holding more than 4.99% of the Class A common stock following such conversion, the holder will first be required to deliver to the Company an ownership certification to enable the Company to (a) determine that such holder does not have an attributable interest in another entity that would cause the Company to violate applicable FCC rules and regulations and (b) obtain any necessary approvals from the FCC or the Department of Justice. During the year ended December 31, 2014, all of the approximately 15.4 million shares of outstanding Class B common stock were converted into shares of Class A common stock.
After payment of dividends to the holders of any outstanding shares of Series B Preferred Stock, the holders of all classes of common stock are entitled to share ratably in any dividends that may be declared by the board of directors of the Company.
2009 Warrants
In June 2009, in connection with the execution of an amendment to the Company's then-outstanding credit agreement, the Company issued warrants to the lenders thereunder that allow them to acquire up to 1.3 million shares of Class A common stock at an exercise price of $1.17 per share (the “2009 Warrants”). The 2009 Warrants expire on June 29, 2019. The number of shares of Class A common stock issuable upon exercise of the 2009 Warrants is subject to adjustment in certain circumstances, including upon the payment of a dividend in shares of Class A common stock. At March 31, 2015, 0.4 million 2009 Warrants remained outstanding.
Company Warrants
As a component of the Company's September 16, 2011 acquisition of Citadel Broadcasting Corporation (the "Citadel Merger") and the related financing transactions, the Company issued warrants to purchase an aggregate of 71.7 million shares of Class A common stock (the "Company Warrants") under a warrant agreement dated September 16, 2011 (the "Warrant Agreement"). The Company Warrants are exercisable at any time prior to June 3, 2030 at an exercise price of $0.01 per share. The exercise price of the Company Warrants is not subject to any anti-dilution protection, other than standard adjustments in the case of stock splits, dividends and the like. Pursuant to the terms and conditions of the Warrant Agreement, upon the request of a holder, the Company has the discretion to issue, upon exercise of the Company Warrants, shares of Class B common stock in lieu of an equal number of shares of Class A common stock and, upon request of a holder and at the Company’s discretion, the Company has the right to exchange such warrants to purchase an equivalent number of shares of Class B common stock for outstanding warrants to purchase shares of Class A common stock.
Conversion of the Company Warrants is subject to compliance with applicable FCC regulations, and the Company Warrants are exercisable provided that ownership of the Company’s securities by the holder does not cause the Company to violate applicable FCC rules and regulations relating to foreign ownership of broadcasting licenses.
Holders of Company Warrants are entitled to participate ratably in any distributions on the Company’s common stock on an as-exercised basis. No distribution will be made to holders of Company Warrants or common stock if (i) an FCC ruling, regulation or policy prohibits such distribution to holders of Company Warrants or (ii) the Company’s FCC counsel opines that such distribution is reasonably likely to cause (a) the Company to violate any applicable FCC rules or regulations or (b) any holder of Company Warrants to be deemed to hold an attributable interest in the Company.
During the three months ended March 31, 2015, approximately 0.3 million Company Warrants were converted into shares of Class A common stock. At March 31, 2015, 1.1 million Company Warrants remained outstanding.

14

Crestview Warrants
Also on September 16, 2011, but pursuant to a separate warrant agreement, the Company issued warrants to purchase 7.8 million shares of Class A common stock with an exercise price, as adjusted to date, of $4.34 per share (the "Crestview Warrants"). The Crestview Warrants are exercisable until September 16, 2021, and the per share exercise price is subject to standard weighted average adjustments in the event that the Company issues additional shares of common stock or common stock derivatives for less than the fair market value per share, as defined in the Crestview Warrants, as of the date of such issuance. In addition, the number of shares of Class A common stock issuable upon exercise of the Crestview Warrants, and the exercise price of the Crestview Warrants, are subject to adjustment in the, case of stock splits, dividends and the like. As of March 31, 2015, all 7.8 million Crestview Warrants remained outstanding.

8. Stock-Based Compensation Expense
On February 16, 2012, the Company granted 161,724 shares of time-vesting restricted Class A common stock, with an aggregate grant date fair value of $0.6 million, to the non-employee directors of the Company with a cliff vesting term of one year. In addition, on February 16, 2012, the Company granted time-vesting stock options to purchase 1.4 million shares of Class A common stock to certain Company employees, with an aggregate grant date fair value of $3.3 million. The options have an exercise price of $4.34 per share, with 30% of the awards having vested on each of September 16, 2012 and February 16, 2013, and 20% having vested on each of February 16, 2014 and February 16, 2015.
On December 27, 2012, the Company issued stock options to an officer of the Company exercisable for 0.8 million shares of Class A common stock with an aggregate grant date fair value of $1.1 million. The options have an exercise price of $4.34 per share, and provide for vesting on each of the first four anniversaries of the date of grant, with 30% of the award having vested on each of the first two anniversaries thereof, and 20% of the award vesting on each of the next two anniversaries thereof.
On May 22, 2014, the Company granted 93,312 shares of time-vesting restricted Class A common stock, with an aggregate grant fair value of $0.6 million, to the non-employee directors of the Company with a cliff vesting term of one year.
During the three months ended March 31, 2015, the Company granted 250,000 stock options with an aggregate grant date fair value of $0.6 million. During the three months ended March 31, 2014, the Company granted 0.4 million stock options with an aggregate grant date fair value of $1.7 million. The options range in exercise price from $2.91 to $7.74 per share, and provide for vesting on each of the first four anniversaries of the date of grant, with 30% of the award vesting on each of the first two anniversaries thereof, and 20% of the award vesting on each of the next two anniversaries thereof.
For the three months ended March 31, 2015, and 2014, the Company recognized approximately $3.9 million and $4.1 million, respectively, in stock-based compensation expense related to equity awards. 
As of March 31, 2015, unrecognized stock-based compensation expense of approximately $22.2 million related to equity awards is expected to be recognized over a weighted average remaining life of 2.47 years. Unrecognized stock-based compensation expense for equity awards will be adjusted for future changes in estimated forfeitures.
The total fair value of restricted stock awards that vested during the three months ended March 31, 2015 and March 31, 2014 was $0.1 million and $1.0 million, respectively. There were no stock options exercised during the three months ended March 31, 2015 and 1.1 million stock options were exercised during the three months ended March 31, 2014.

9. Earnings (Loss) Per Share
For all periods presented, the Company has disclosed basic and diluted earnings (loss) per common share utilizing the two-class method. Basic earnings (loss) per common share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. In accordance with the terms of the Company's certificate of incorporation, the Company allocates undistributed net income (loss) from continuing operations after any allocation for preferred stock dividends between each class of common stock on an equal basis.
Non-vested restricted shares of Class A common stock and the Company Warrants are considered participating securities for purposes of calculating basic weighted average common shares outstanding in periods in which the Company records net income. Diluted earnings (loss) per share is computed in the same manner as basic earnings (loss) per share after assuming issuance of common stock for all potentially dilutive equivalent shares, which includes stock options and certain other warrants to purchase common stock. Antidilutive instruments are not considered in this calculation. Under the two-class method, net income (loss) is allocated to common stock and participating securities to the extent that each security may share in earnings (loss), as if all of the earnings (loss) for the period had been distributed. Earnings (loss) are allocated to each participating security and common shares equally. The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three months ended March 31, 2015 and 2014 (amounts in thousands, except per share data):

15

 
 
Three Months Ended
March 31,
 
2015
 
2014
Basic Loss Per Share
 
 
 
Numerator:
 
 
 
Undistributed net loss from continuing operations
$
(12,015
)
 
$
(9,269
)
Less:
 
 
 
Participation rights of the Company Warrants in undistributed earnings
—

 
—

Participation rights of unvested restricted stock in undistributed earnings
—

 
—

Basic undistributed net loss attributable to common shares
$
(12,015
)
 
$
(9,269
)
Denominator:
 
 
 
Basic weighted average shares outstanding
233,125

 
215,704

Basic undistributed net loss per share attributable to common shares
$
(0.05
)
 
$
(0.04
)
Diluted Loss Per Share:
 
 
 
Numerator:
 
 
 
Undistributed net loss from continuing operations
$
(12,015
)
 
$
(9,269
)
Less:
 
 
 
Participation rights of the Company Warrants in undistributed net earnings
—

 
—

Participation rights of unvested restricted stock in undistributed earnings
—

 
—

Basic undistributed net loss attributable to common shares
$
(12,015
)
 
$
(9,269
)
Denominator:
 
 
 
Basic weighted average shares outstanding
233,125

 
215,704

Effect of dilutive stock options and warrants
—

 
—

Diluted weighted average shares outstanding
233,125

 
215,704

Diluted undistributed net loss per share attributable to common shares
$
(0.05
)
 
$
(0.04
)
    
10. Income Taxes
For the three months ended March 31, 2015, the Company recorded an income tax benefit of $10.4 million on a pre-tax loss of $22.4 million, resulting in an effective tax rate for the three months ended March 31, 2015 of approximately 46.4%. For the three months ended March 31, 2014, the Company recorded an income tax benefit of $7.6 million on pre-tax loss of $16.9 million, resulting in an effective tax rate for the three months ended March 31, 2014 of approximately 45.0%.    
The difference between the effective tax rate and the federal statutory rate of 35.0% for both the three months ended March 31, 2015, and 2014 primarily relates to state and local income taxes, an increase in the valuation allowance with respect to state net operating losses and the tax effect of certain statutory non deductible items.
The Company continually reviews the adequacy of the valuation allowance and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with Accounting Standards Codification ("ASC") Topic 740, Income Taxes ("ASC 740"). As of March 31, 2015, the Company continues to maintain a partial valuation allowance on certain state net operating loss carryforwards for which the Company does not believe they will be able to meet the more likely than not recognition standard for recovery. The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns as well as future profitability.
We believe our annual effective tax rate before discrete items for fiscal year 2015 will be approximately 44.8%. The difference between the annual estimated effective tax rate and the federal statutory rate of 35% primarily relates to the valuation allowance on certain forecasted state net operating losses in 2014.

16

11. Commitments and Contingencies
Future Commitments
Effective December 31, 2009, the Company’s radio music license agreements with the two largest performance rights organizations, The American Society of Composers, Authors and Publishers (“ASCAP”) and Broadcast Music, Inc. (“BMI”), expired. In January 2010, the Radio Music License Committee (the “RMLC”), which negotiates music licensing fees for most of the radio industry with ASCAP and BMI, filed motions in the New York courts against these organizations on behalf of the radio industry, seeking interim fees and a determination of fair and reasonable industry-wide license fees. During 2010, the courts approved reduced interim fees for ASCAP and BMI. On January 27, 2012, the Federal District Court for the Southern District of New York approved a settlement between the RMLC and ASCAP concerning the fees payable covering the period January 1, 2010 through December 31, 2016. Included in the agreement was a $75.0 million industry fee credit against fees previously paid in 2010 and 2011, with such fees to be credited over the remaining period of the contract. The Company began recognizing the ASCAP credits as a reduction in operating expenses on January 1, 2012. On August 28, 2012, the Federal District Court for the Southern District of New York approved a settlement between the RMLC and BMI concerning the fees payable covering the period January 1, 2010 through December 31, 2016. Included in the agreement was a $70.5 million industry fee credit against fees previously paid in 2010 and 2011, with such fees having been made immediately available to the industry.
The radio broadcast industry’s principal ratings service is Nielsen Audio, which publishes surveys for domestic radio markets. Certain of the Company’s subsidiaries have agreements with Nielsen Audio under which they receive programming ratings materials in a majority of their respective markets. The remaining aggregate obligation under the agreements with Nielsen Audio is approximately $135.1 million and is expected to be paid in accordance with the agreements through December 2017.
The Company engages Katz Media Group, Inc. (“Katz”) as its national advertising sales agent. The national advertising agency contract with Katz contains termination provisions that, if exercised by the Company during the term of the contract, would obligate the Company to pay a termination fee to Katz, calculated based upon a formula set forth in the contract.
On September 13, 2013, the Company and Pulser entered into the Rdio Agreement which provides that Cumulus will act as the exclusive promotional agent for Rdio ad products, including display, mobile, in-line audio, synced banners and other digital inventory that may become available from time to time. In exchange for $75.0 million of promotional commitments over five years, Cumulus will receive 15% of the equity interests of Pulser, with the opportunity to earn additional equity in the form of warrants based on the achievement of certain performance milestones over the term of the Rdio Agreement. The Company will record the equity received for services at fair value and will evaluate the investment for impairment in subsequent periods.
The Company is committed under various contractual agreements to pay for broadcast rights that include news services and to pay for executives, talent, research, weather and other services.
The Company from time to time enters into radio network contractual obligations to guarantee a minimum amount of revenue share to contractual counterparties on certain programming in future years. Generally, these guarantees are subject to decreases dependent on clearance targets achieved. As of March 31, 2015, the Company believes that it will meet such minimum obligations.
On January 2, 2014 (the "Commencement Date”), Merlin Media, LLC (“Merlin”) and the Company entered into an LMA. Under this LMA, the Company is responsible for operating two FM radio stations in Chicago, Illinois, for monthly fees payable to Merlin of approximately $0.3 million, $0.4 million, $0.5 million and $0.6 million in the first, second, third and fourth years following the Commencement Date, respectively, in exchange for the Company retaining the operating profits from these radio stations.
In connection therewith, the Company and Merlin also entered into an agreement pursuant to which the Company has the right to purchase these two FM radio stations until October 4, 2017, for an amount in cash equal to the greater of (i) $70.0 million minus the aggregate amount of monthly fees paid by the Company on or prior to the earlier of the closing date or the date that is four years after the Commencement Date; or (ii) $50.0 million, and Merlin has the right to require the Company to purchase these two FM radio stations at any time during a ten-day period commencing October 4, 2017 for $71.0 million, minus the aggregate amount of monthly fees paid by the Company on or prior to the earlier of the closing date and the date that is four years after the Commencement Date.
The Company determined through its review of the requirements of ASC Topic 810, Consolidation ("ASC 810") that the Company is not the primary beneficiary of the LMA with Merlin, and, therefore consolidation of the stations is not required.

17

On April 1, 2014, the Company initiated an exit plan for a lease due to a restructuring in connection with the acquisition of WestwoodOne (the "Exit Plan"), which includes charges related to terminated contract costs. As of March 31, 2015, liabilities related to the Exit Plan of $0.4 million were included in accounts payable and accrued expenses and are expected to be paid within one year and $4.1 million of non-current liabilities are included in other liabilities in the condensed consolidated balance sheet. We anticipate no additional future charges for the Exit Plan other than true-ups to closed facilities lease charges and accretion expense.
On April 25, 2014, the Company entered into an LMA with Universal Media Access, LLC “(Universal”) pursuant to which the Company is responsible for operating one FM radio station serving San Jose and San Francisco, California for a fixed fee to Universal of approximately $1.4 million each year for two years in exchange for the Company retaining the operating profits from this radio station.
In connection therewith, the Company and Universal also entered into an agreement pursuant to which the Company has the right to purchase the radio station at any time until April 5, 2016 for $14.8 million minus the aggregate amount of monthly LMA fees paid by the Company on or prior to the earlier of the closing date or the date that is 18 months after April 25, 2014. In addition, Universal has the right to require the Company to purchase the station at any time during a ten-day period commencing April 5, 2016 for $14.8 million, minus the aggregate amount of fees paid by the Company on or prior to the earlier of the closing date and the date that is two years after April 25, 2014.
The Company determined through its review of the requirements of ASC 810 that the Company is not the primary beneficiary of the LMA with Universal, and, therefore consolidation of the station is not required.
The Company may be required to pay additional cash consideration in connection with the WFME Asset Exchange in New York and the Wise Brothers Acquisition. In addition, as a component of the Country Weekly Acquisition, the Company entered into an agreement with one of the sellers to collaborate on the production, publication and distribution of Country Weekly for a fee of $1.0 million for a period of 6 years from date of the Country Weekly Acquisition.
Legal Proceedings
We are currently party to, or a defendant in, various claims or lawsuits that are generally incidental to our business. We also expect that from time to time in the future we will be party to, or a defendant in, various claims or lawsuits that are generally incidental to our business. We expect that we will vigorously contest any such claims or lawsuits and believe that the ultimate resolution of any known claim or lawsuit will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

12. Supplemental Condensed Consolidating Financial Information
At March 31, 2015, Cumulus (the "Parent Guarantor") and certain of its 100% owned subsidiaries (such subsidiaries, the “Subsidiary Guarantors”) provided guarantees of the obligations of Cumulus Holdings (the "Subsidiary Issuer") under the 7.75% Senior Notes. These guarantees are full and unconditional (subject to customary release provisions) as well as joint and several. Certain of the Subsidiary Guarantors may be subject to restrictions on their respective ability to distribute earnings to Cumulus Holdings or the Parent Guarantor. Not all of the subsidiaries of Cumulus and Cumulus Holdings guarantee the 7.75% Senior Notes (such non-guaranteeing subsidiaries, collectively, the “Subsidiary Non-guarantors”).
The following tables present (i) unaudited condensed consolidated statements of operations for the three months ended March 31, 2015 and 2014, (ii) unaudited condensed consolidated balance sheets as of March 31, 2015 and December 31, 2014, and (iii) unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2015 and 2014, of each of the Parent Guarantor, Cumulus Holdings, the Subsidiary Guarantors, and the Subsidiary Non-guarantors.
Investments in consolidated subsidiaries are held primarily by the Parent Guarantor in the net assets of its subsidiaries and have been presented using the equity method of accounting. The “Eliminations” entries in the following tables primarily eliminate investments in subsidiaries and intercompany balances and transactions. The columnar presentations in the following tables are not consistent with the Company’s business groups; accordingly, this basis of presentation is not intended to present the Company’s financial condition, results of operations or cash flows on a consolidated basis.


18

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2015
(Dollars in thousands)
(Unaudited)
 
Cumulus
Media Inc.
(Parent 
Guarantor)
 
Cumulus
Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 
Eliminations
 
Total
Consolidated
Net revenue
$
—

 
$
125

 
$
270,954

 
$
—

 
$
—

 
$
271,079

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Content costs
—

 
—

 
100,807

 
—

 
—

 
100,807

Selling, general & administrative expenses
—

 
—

 
115,776

 
531

 
—

 
116,307

Depreciation and amortization
—

 
260

 
25,051

 
—

 
—

 
25,311

LMA fees
—

 
—

 
2,498

 
—

 
—

 
2,498

Corporate expenses (including stock-based compensation expense of $3,863)
—

 
13,462

 
—

 
—

 
—

 
13,462

Loss on sale of assets or stations
—

 
—

 
819

 
—

 
—

 
819

Total operating expenses
—

 
13,722

 
244,951

 
531

 
—

 
259,204

Operating (loss) income
—

 
(13,597
)
 
26,003

 
(531
)
 
—

 
11,875

Non-operating (expense) income:
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(2,184
)
 
(32,753
)
 
—

 
(47
)
 
—

 
(34,984
)
Interest income
—

 
—

 
358

 
—

 
—

 
358

Other income, net
—

 
—

 
379

 
—

 
—

 
379

Total non-operating (expense) income, net
(2,184
)
 
(32,753
)
 
737

 
(47
)
 
—

 
(34,247
)
(Loss) income before income taxes
(2,184
)
 
(46,350
)
 
26,740

 
(578
)
 
—

 
(22,372
)
Income tax benefit (expense)
867

 
28,242

 
(10,617
)
 
(8,135
)
 
—

 
10,357

(Loss) income from continuing operations
(1,317
)
 
(18,108
)
 
16,123

 
(8,713
)
 
—

 
(12,015
)
(Loss) earnings from consolidated subsidiaries
(10,698
)
 
7,410

 
(8,713
)
 
—

 
12,001

 
—

Net (loss) income
$
(12,015
)
 
$
(10,698
)
 
$
7,410

 
$
(8,713
)
 
$
12,001

 
$
(12,015
)












19

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2014
(Dollars in thousands)
(Unaudited) 
 
Cumulus
Media Inc.
(Parent 
Guarantor)
 
Cumulus
Media
Holdings 
Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 
Eliminations
 
Total
Consolidated
Net revenue
$
—

 
$
104

 
$
291,940

 
$
—

 
$
—

 
$
292,044

Operating expenses:
 
 
 
 
 
 
 
 
 
 


Content costs
—

 
—

 
108,493

 
—

 
—

 
108,493

Selling, general & administrative expenses
—

 
—

 
114,744

 
591

 
—

 
115,335

Depreciation and amortization
—

 
458

 
28,423

 
—

 
—

 
28,881

LMA fees
—

 
—

 
1,557

 
—

 
—

 
1,557

Corporate expenses (including stock-based compensation expense of $4,091)
—

 
19,194

 
—

 
—

 
—

 
19,194

Gain on sale of assets or stations
—

 
—

 
(538
)
 
—

 
—

 
(538
)
Total operating expenses
—

 
19,652

 
252,679

 
591

 
—

 
272,922

Operating (loss) income
—

 
(19,548
)
 
39,261

 
(591
)
 
—

 
19,122

Non-operating (expense) income:
 
 
 
 
 
 
 
 
 
 


Interest expense
(2,576
)
 
(33,644
)
 
—

 
(45
)
 
—

 
(36,265
)
Interest income
—

 
—

 
331

 
—

 
—

 
331

Other expense, net
—

 
—

 
(65
)
 
—

 
—

 
(65
)
Total non-operating (expense) income, net
(2,576
)
 
(33,644
)
 
266

 
(45
)
 
—

 
(35,999
)
(Loss) income before income taxes
(2,576
)
 
(53,192
)
 
39,527

 
(636
)
 
—

 
(16,877
)
Income tax benefit (expense)
942

 
19,061

 
(12,599
)
 
204

 
—

 
7,608

(Loss) income from continuing operations
(1,634
)
 
(34,131
)
 
26,928

 
(432
)
 
—

 
(9,269
)
(Loss) earnings from consolidated subsidiaries
(7,635
)
 
26,496

 
(432
)
 
—

 
(18,429
)
 
—

Net (loss) income
$
(9,269
)
 
$
(7,635
)
 
$
26,496

 
$
(432
)
 
$
(18,429
)
 
$
(9,269
)











20

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2015
(Dollars in thousands, except for share and per share data)
(Unaudited)
 
Cumulus
Media Inc.
(Parent
Guarantor)
 
Cumulus
Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 
Eliminations
 
Total
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
22,758

 
$
—

 
$
—

 
$
—

 
$
22,758

Restricted cash
—

 
8,414

 
—

 
—

 
—

 
8,414

Accounts receivable, less allowance for doubtful accounts of $5,158
—

 
—

 
—

 
217,824

 
—

 
217,824

Trade receivable
—

 
—

 
4,103

 
—

 
—

 
4,103

Asset held for sale

 
—

 
45,157

 
—

 
—

 
45,157

Prepaid expenses and other current assets
—

 
63,795

 
26,678

 
—

 
—

 
90,473

Total current assets
—

 
94,967

 
75,938

 
217,824

 
—

 
388,729

Property and equipment, net
—

 
2,816

 
190,643

 
—

 
—

 
193,459

Broadcast licenses
—

 
—

 
—

 
1,593,939

 
—

 
1,593,939

Other intangible assets, net
—

 
—

 
226,343

 
—

 
—

 
226,343

Goodwill
—

 
—

 
1,252,694

 
—

 
—

 
1,252,694

Investment in consolidated subsidiaries
621,301

 
4,191,054

 
1,086,494

 
—

 
(5,898,849
)
 
—

Intercompany receivables, net
—

 
88,663

 
1,476,597

 
—

 
(1,565,260
)
 
—

Other assets
—

 
31,708

 
25,818

 
696

 
—

 
58,222

Total assets
$
621,301

 
$
4,409,208

 
$
4,334,527

 
$
1,812,459

 
$
(7,464,109
)
 
$
3,713,386

Liabilities and Stockholders’ Equity (Deficit)
 
 
 
 
 
 
 
 
 
 


Current liabilities:
 
 
 
 
 
 
 
 
 
 


Accounts payable and accrued expenses
$
—

 
$
40,777

 
$
101,477

 
$
—

 
$
—

 
$
142,254

Trade payable
—

 
—

 
4,729

 
—

 
—

 
4,729

Total current liabilities
—

 
40,777

 
106,206

 
—

 
—

 
146,983

Long-term debt, excluding 7.75% Senior Notes
—

 
1,876,177

 
—

 
—

 
—

 
1,876,177

7.75% Senior Notes
—

 
610,000

 
—

 
—

 
—

 
610,000

Other liabilities
—

 
2,180

 
49,119

 
—

 
—

 
51,299

Intercompany payables, net
87,967

 
1,258,773

 
—

 
218,520

 
(1,565,260
)
 
—

Deferred income taxes
—

 
—

 
(11,852
)
 
507,445

 
—

 
495,593

Total liabilities
87,967

 
3,787,907

 
143,473

 
725,965

 
(1,565,260
)
 
3,180,052

Stockholders’ equity (deficit):
 
 
 
 
 
 
 
 
 
 


Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 255,280,514 shares issued and 232,636,706 shares outstanding
2,552

 
—

 
—

 
—

 
—

 
2,552

Class C common stock, par value $0.01 per share; 644,871 shares authorized, issued and outstanding
6

 
—

 
—

 
—

 
—

 
6

Treasury stock, at cost, 22,643,808 shares
(231,684
)
 
—

 
—

 
—

 
—

 
(231,684
)
Additional paid-in-capital
1,604,825

 
248,869

 
4,193,276

 
2,070,394

 
(6,512,539
)
 
1,604,825

Accumulated (deficit) equity
(842,365
)
 
372,432

 
(2,222
)
 
(983,900
)
 
613,690

 
(842,365
)
Total stockholders’ equity (deficit)
533,334

 
621,301

 
4,191,054

 
1,086,494

 
(5,898,849
)
 
533,334

Total liabilities and stockholders’ equity (deficit)
$
621,301

 
$
4,409,208

 
$
4,334,527

 
$
1,812,459

 
$
(7,464,109
)
 
$
3,713,386


21

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2014
(Dollars in thousands, except for share and per share data)
(Unaudited) 
 
Cumulus
Media Inc.
(Parent
Guarantor)
 
Cumulus
Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 
Eliminations
 
Total
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
7,268

 
$
3

 
$
—

 
$
—

 
$
7,271

Restricted cash
—

 
10,055

 
—

 
—

 
—

 
10,055

Accounts receivable, less allowance for doubtful accounts of $6,004
—

 
—

 
—

 
248,308

 
—

 
248,308

Trade receivable
—

 
—

 
2,455

 
—

 
—

 
2,455

Asset held for sale
—

 
—

 
15,007

 
—

—

—

 
15,007

Prepaid expenses and other current assets
—

 
66,020

 
21,710

 
—

 
—

 
87,730

Total current assets
—

 
83,343

 
39,175

 
248,308

 
—

 
370,826

Property and equipment, net
—

 
2,653

 
218,844

 
—

 
—

 
221,497

Broadcast licenses
—

 
—

 
—

 
1,596,715

 
—

 
1,596,715

Other intangible assets, net
—

 
—

 
243,640

 
—

 
—

 
243,640

Goodwill
—

 
—

 
1,253,823

 
—

 
—

 
1,253,823

Investment in consolidated subsidiaries
627,363

 
4,154,147

 
1,097,404

 
—

 
(5,878,914
)
 
—

Intercompany receivables, net
—

 
86,527

 
1,462,776

 
—

 
(1,549,303
)
 
—

Other assets
—

 
32,776

 
25,420

 
744

 
—

 
58,940

Total assets
$
627,363

 
$
4,359,446

 
$
4,341,082

 
$
1,845,767

 
$
(7,428,217
)
 
$
3,745,441

Liabilities and Stockholders’ Equity (Deficit)
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
—

 
$
30,322

 
$
121,336

 
$
—

 
$
—

 
$
151,658

Trade payable
—

 
—

 
3,964

 
—

 
—

 
3,964

Total current liabilities
—

 
30,322

 
125,300

 
—

 
—

 
155,622

Long-term debt, excluding 7.75% Senior Notes
—

 
1,875,127

 
—

 
—

 
—

 
1,875,127

7.75% Senior Notes
—

 
610,000

 
—

 
—

 
—

 
610,000

Other liabilities
—

 
2,166

 
52,955

 
—

 
—

 
55,121

Intercompany payables, net
85,783

 
1,214,468

 
—

 
249,052

 
(1,549,303
)
 
—

Deferred income taxes
—

 
—

 
8,680

 
499,311

 
—

 
507,991

Total liabilities
85,783

 
3,732,083

 
186,935

 
748,363

 
(1,549,303
)
 
3,203,861

Stockholders’ equity (deficit):
 
 
 
 
 
 
 
 
 
 
 
Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 254,997,925 shares issued and 232,378,371 shares outstanding
2,549

 
—

 
—

 
—

 
—

 
2,549

Class C common stock, par value $0.01 per share; 644,871 shares authorized, issued and outstanding
6

 
—

 
—

 
—

 
—

 
6

Treasury stock, at cost, 22,619,554 shares
(231,588
)
 
—

 
—

 
—

 
—

 
(231,588
)
Additional paid-in-capital
1,600,963

 
244,233

 
4,163,779

 
2,072,591

 
(6,480,603
)
 
1,600,963

Accumulated (deficit) equity
(830,350
)
 
383,130

 
(9,632
)
 
(975,187
)
 
601,689

 
(830,350
)
Total stockholders’ equity (deficit)
541,580

 
627,363

 
4,154,147

 
1,097,404

 
(5,878,914
)
 
541,580

Total liabilities and stockholders’ equity (deficit)
$
627,363

 
$
4,359,446

 
$
4,341,082

 
$
1,845,767

 
$
(7,428,217
)
 
$
3,745,441


22

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2015
(Dollars in thousands)
(Unaudited) 
 
Cumulus
Media Inc.
(Parent 
Guarantor)
 
Cumulus Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 
Eliminations
 
Total
Consolidated
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(12,015
)
 
$
(10,698
)
 
$
7,410

 
$
(8,713
)
 
$
12,001

 
$
(12,015
)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
—

 
260

 
25,051

 
—

 
—

 
25,311

Amortization of debt issuance costs/discounts
—

 
2,295

 
—

 
47

 
—

 
2,342

Provision for doubtful accounts
—

 
—

 
596

 
—

 
—

 
596

Loss on sale of assets or stations
—

 
—

 
819

 
—

 
—

 
819

Deferred income taxes
(867
)
 
(27,846
)
 
10,617

 
8,135

 
—

 
(9,961
)
Stock-based compensation expense
—

 
3,863

 
—

 
—

 
—

 
3,863

Loss (earnings) from consolidated subsidiaries
10,698

 
(7,410
)
 
8,713

 
—

 
(12,001
)
 
—

         Changes in assets and liabilities
—

 
100,389

 
(90,897
)
 
531

 
—

 
10,023

Net cash (used in) provided by operating activities
(2,184
)
 
60,853

 
(37,691
)
 
—

 
—

 
20,978

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from sale of assets or stations
—

 
—

 
3,055

 
—

 
—

 
3,055

Restricted cash
—

 
1,641

 
—

 
—

 
—

 
1,641

Capital expenditures
—

 
(423
)
 
(9,672
)
 
—

 
—

 
(10,095
)
Net cash provided by (used in) investing activities
—

 
1,218

 
(6,617
)
 
—

 
—

 
(5,399
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Intercompany transactions, net
2,183

 
(46,488
)
 
44,305

 
—

 
—

 
—

Tax withholding payments on behalf of employees
—

 
(93
)
 
—

 
—

 
—

 
(93
)
Proceeds from exercises of warrants
1

 
—

 
—

 
—

 
—

 
1

Net cash provided by (used in) financing activities
2,184

 
(46,581
)
 
44,305

 
—

 
—

 
(92
)
Increase (decrease) in cash and cash equivalents
—

 
15,490

 
(3
)
 
—

 
—

 
15,487

Cash and cash equivalents at beginning of period
—

 
7,268

 
3

 
—

 
—

 
7,271

Cash and cash equivalents at end of period
$
—

 
$
22,758

 
$
—

 
$
—

 
$
—

 
$
22,758


23

CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2014
(Dollars in thousands)
(Unaudited) 
 
Cumulus Media
Inc.
(Parent 
Guarantor)
 
Cumulus Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 
Eliminations
 
Total
Consolidated
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(9,269
)
 
$
(7,635
)
 
$
26,496

 
$
(432
)
 
$
(18,429
)
 
$
(9,269
)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
—

 
458

 
28,423

 
—

 
—

 
28,881

Amortization of debt issuance costs/discount
—

 
2,270

 
—

 
48

 
—

 
2,318

Provision for doubtful accounts
—

 
—

 
568

 
—

 
—

 
568

Gain on sale of assets or stations
—

 
—

 
(538
)
 
—

 
—

 
(538
)
Fair value adjustment of derivative instruments
—

 
14

 
—

 
—

 
—

 
14

Deferred income taxes
—

 
(7,631
)
 
—

 
—

 
—

 
(7,631
)
Stock-based compensation expense
—

 
4,091

 
—

 
—

 
—

 
4,091

Earnings (loss) from consolidated subsidiaries
7,635

 
(26,496
)
 
432

 
—

 
18,429

 
—

       Changes in assets and liabilities
—

 
58,986

 
(73,561
)
 
33,017

 
—

 
18,442

Net cash (used in) provided by operating activities
(1,634
)
 
24,057

 
(18,180
)
 
32,633

 
—

 
36,876

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Proceeds from sale of assets or stations
—

 
—

 
1,054

 
—

 
—

 
1,054

Capital expenditures
—

 
(38
)
 
(1,297
)
 
—

 
—

 
(1,335
)
Net cash used in investing activities
—

 
(38
)
 
(243
)
 
—

 
—

 
(281
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Intercompany transactions, net
1,482

 
(12,337
)
 
18,488

 
(7,633
)
 
—

 
—

Repayments of borrowings under term loans and revolving credit facilities
—

 
(5,937
)
 
—

 
(25,000
)
 
—

 
(30,937
)
Tax withholding payments on behalf of employees
—

 
(1,314
)
 
—

 
—

 
—

 
(1,314
)
Proceeds from exercises of warrants
38

 
—

 
—

 
—

 
—

 
38

Proceeds from exercise of options
117

 
—

 
—

 
—

 
—

 
117

Deferred financing costs
—

 
(21
)
 
—

 
—

 
—

 
(21
)
Net cash provided (used in) by financing activities
1,637

 
(19,609
)
 
18,488

 
(32,633
)
 
—

 
(32,117
)
Increase in cash and cash equivalents
3

 
4,410

 
65

 
—

 
—

 
4,478

Cash and cash equivalents at beginning of period
11,804

 
20,988

 
—

 
—

 
—

 
32,792

Cash and cash equivalents at end of period
$
11,807

 
$
25,398

 
$
65

 
$
—

 
$
—

 
$
37,270


24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In the following Management's Discussion and Analysis, we provide information regarding the following areas:
l
General Overview;
 
 
 
l
Results of Operations; and
 
 
 
l
Liquidity and Capital Resources.
 
 
 
General
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report and our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2014. This discussion, as well as various other sections of this quarterly report, contains and refers to statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such statements relate to our intent, belief or current expectations primarily with respect to our future operating, financial and strategic performance. Any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties. Actual results may differ from those contained in or implied by the forward-looking statements as a result of various factors, including, but not limited to, risks and uncertainties relating to the need for additional funds to execute our business strategy, our ability to access borrowings under our revolving credit facility, our ability from time to time to renew one or more of our broadcast licenses, changes in interest rates, our ability to complete any acquisitions pending from time to time, the timing, costs and synergies resulting from the integration of any completed acquisitions, our ability to eliminate certain costs, our ability to manage rapid growth, the popularity of radio as a broadcasting and advertising medium, changing consumer tastes, any material changes from the preliminary to final purchase price allocations in completed acquisitions, the impact of general economic conditions in the United States or in specific markets in which we currently do, or expect to do, business, industry conditions, including existing competition and future competitive technologies, cancellation, disruptions or postponements of advertising schedules in response to national or world events, our ability to generate revenue from new sources, including technology-based initiatives, the impact of regulatory rules or proceedings that may affect our business, or any acquisitions, from time to time, and other risk factors described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2014 and any subsequently filed Quarterly Reports Forms 10-Q. Many of these risks and uncertainties are beyond our control, and the unexpected occurrence or failure to occur of any such events or matters could significantly alter our actual results of operations or financial condition.
For additional information about certain of the matters discussed and described in the following Management’s Discussion and Analysis of Financial Condition and Results of Operations, including certain defined terms used herein, see the notes to the accompanying unaudited condensed consolidated financial statements included elsewhere in this quarterly report.
Our Business
We combine high-quality local radio programming with iconic, nationally syndicated media, sports and entertainment brands in order to deliver premium choices for listeners, provide substantial reach for advertisers and create opportunities for long term growth and shareholders value. We believe we are well-positioned in the widening digital audio space through our significant stake in the Rdio digital music service, featuring over 30 million songs on-demand in addition to custom playlists and exclusive curated channels. We are also the leading provider of country music and lifestyle content through our NASH brand, which serves country fans through radio programming, NASH magazine, concerts, licensed products and television/video. Our recent acquisition of WestwoodOne gives us additional scale and an iconic radio industry brand to further syndicate our proprietary content and programming rights onto non-owned radio stations, satellite radio, and new online platforms. WestwoodOne also serves as our brand identity to reach national advertisers, complementing hundreds of well-known Cumulus Radio local sales brands.
We generate revenue through monetization of this programming content and other sources across four major product lines. These are broadcast advertising, digital advertising, political advertising, and non-advertising based license fees.

25

Broadcast advertising revenue. We generate most of our overall revenue through the sale of commercial advertising time to local, national and network clients across our 460 owned and operated radio stations and approximately 8,500 radio broadcast affiliations. Local spot advertising is sold by approximately 900 Cumulus employed sales executives across 90 U.S. media markets (including eight of the top ten). National spot advertising for our owned and operated stations is outsourced to Katz Media, which markets itself to advertisers as WestwoodOne Media Sales. Network advertising airing across our owned, operated and affiliated stations is sold by Cumulus employed account executives in regional hubs across the United States under the WestwoodOne Networks brand. At March 31, 2015, under LMAs, we provided sales and marketing services for 11 radio stations in the United States.
Digital advertising revenue.  We also generate revenue from the sale of advertising and promotional opportunities across our streaming audio network, digital commerce platform, websites and mobile applications. We operate the fourth largest streaming audio advertising network in the United States, including owned and operated internet radio simulcast stations, Rdio.com, and other third party internet companies with whom we have advertising reseller agreements. Our digital commerce platform utilizes couponing and discount daily deals to create promotional opportunities for local and national merchants under our Sweetjack, SweetDeals and Incentrev brands. We also sell banner and other display ads across more than 400 local radio station websites, mobile applications, and ancillary custom client microsites.
Political advertising revenue.  We generate political advertising revenue across all of our broadcast and digital assets, but highlight it as a separate category to distinguish its highly cyclical nature versus core revenue. Political advertising is generally strongest during even-numbered years, especially in the fourth quarter of such years, when most national and state elections are conducted. In addition to candidate advertising revenue, we also receive orders from special interest and advocacy groups.
License Fees & Other.  All other non-advertising based revenue types where the Company participates are aggregated in our License Fee & Other revenue category. This includes cash based fees we receive for content licensing, third party network compensation, proprietary software licensing, subleases and rents, and all other revenue.
Operating Overview
We believe that we have created a leading national audio advertising platform that allows us to leverage and expand upon our strengths, market presence and programming. Specifically we have an extensive radio station portfolio, including a presence in eight of the top 10 markets, and broad diversity in format, listener base, geography, advertiser base and revenue stream, designed to reduce our dependence on any single demographic, region or industry. As the largest pure-play radio broadcaster in the United States, the Company provides exclusive content that is fully distributed through approximately 460 owned and operated stations in 90 U.S. media markets, approximately 8,500 broadcast radio affiliates and numerous digital channels. Our nationwide platform generates premium content distributable through both broadcast and digital platforms, and our scale allows larger, significant investments in the local digital media marketplace enabling us to leverage our local digital platforms and strategies, including our social commerce initiatives, across additional markets. Our websites average over 12.2 million page views from approximately 10.7 million unique users on a monthly basis and stream music to approximately 4.2 million unique users each month. We believe our national platform perspective allows us to optimize our available advertising inventory while providing holistic and comprehensive solutions for our customers.
We further believe that our capital structure provides adequate liquidity and scale for us to operate and grow our current business, as well as pursue and finance potential strategic acquisitions in the future.
Liquidity Considerations
Historically, our principal needs for funds have been for acquisitions, expenses associated with our station, network advertising and corporate operations, capital expenditures, and interest and debt service payments. We believe that our funding needs in the future will be for substantially similar matters.
Our principal sources of funds have primarily been cash flow from operations and borrowings under credit facilities in existence from time to time. Our cash flow from operations is subject to factors such as changes in demand due to shifts in population, station listenership, demographics, audience tastes, and fluctuations in preferred advertising media. In addition, customers may not be able to pay, or may delay payment of, accounts receivable that are owed to us, which risks may be exacerbated in challenging economic periods. In recent periods, management has taken steps to mitigate this risk through heightened collection efforts and enhancements to our credit approval process, although no assurances as to the longer-term success of these efforts can be provided. In addition, we believe that our national platform and extensive station portfolio representing a broad diversity in format, listener base, geography, and advertiser base helps us maintain a more stable revenue stream by reducing our dependence on any single demographic, region or industry. We continually monitor our capital structure and from time to time have evaluated, and expect that we will continue to evaluate future opportunities to obtain, other public or private capital from the divestiture of radio stations or other assets that are not a part of, or do not complement, our strategic

26

operations, as well as the issuance of equity and/or debt securities, in each case subject to market and other conditions in existence at the appropriate time. No assurances can be provided that any source of funds would be available when needed on terms acceptable to the Company, or at all.
In furtherance of our strategy, we have entered into various agreements intended to strengthen our balance sheet and improve our cash flows. On December 23, 2013, we entered into the Amended and Restated Credit Agreement (the "Credit Agreement"). The Credit Agreement consists of a $2.025 billion term loan (the “Term Loan”) maturing in December 2020 and a $200.0 million revolving credit facility (the "Revolving Credit Facility") maturing in December 2018. Under the Revolving Credit Facility, up to $30.0 million of availability may be drawn in the form of letters of credit.
In the event amounts are outstanding under the Revolving Credit Facility or any letters of credit are outstanding that have not been collateralized by cash as of the end of each quarter, the Credit Agreement requires compliance with a consolidated first lien leverage ratio covenant. The required ratio at March 31, 2015 was 5.50 to 1, and that ratio periodically decreases until it reaches 4.0 to 1 on March 31, 2018. As we currently have no borrowings outstanding under the Revolving Credit Facility, the Company is not required to comply with that ratio. However, as of March 31, 2015 the Company's leverage was greater than the required ratio and, as a result, the Company did not have access to borrowings under the Revolving Credit Facility. The Company will not regain access to such borrowings until it is able to satisfy the first lien ratio requirement that would permit such borrowings.
On December 6, 2013, we entered into a 5-year, $50.0 million revolving accounts receivable securitization facility (the “Securitization Facility”) with General Electric Capital Corporation, as a lender, as swing line lender and as administrative agent (together with any other lenders party thereto from time to time, the “Lenders”). In connection with the entry into the Securitization Facility, pursuant to a Receivables Sale and Servicing Agreement, dated as of December 6, 2013 (the “Sale Agreement”), certain subsidiaries of the Company (collectively, the "Originators") may sell and/or contribute their existing and future accounts receivable to a special purpose entity and wholly owned subsidiary of the Company (the “SPV”). The SPV may thereafter make borrowings from the Lenders, which borrowings are secured by those receivables, pursuant to a Receivables Funding and Administration Agreement, dated as of December 6, 2013 (the “Funding Agreement”).
At March 31, 2015, our long-term debt consisted of $1.904 billion outstanding under the Term Loan and $610.0 million in 7.75% Senior Notes. No amounts were outstanding under the Securitization Facility.
We have assessed the current and expected business climate, our current and expected needs for funds and our current and expected sources of funds and determined, based on our financial condition as of March 31, 2015, that cash on hand, cash expected to be generated from operating activities, and cash expected to be available from various financing sources, excluding access to the Revolving Credit Facility, will be sufficient to satisfy our anticipated financing needs for working capital, capital expenditures, interest and debt service payments, and any repurchases of securities and other debt obligations for at least the next twelve months.
We have significant intangible assets recorded comprised primarily of broadcast licenses and goodwill acquired through acquisitions. We evaluate on an interim basis if events or circumstances indicate that broadcast licenses or goodwill may be impaired. The Company performs its annual impairment testing of broadcast licenses and goodwill during the fourth quarter. Although we did not record any impairment charges during the three months ended March 31, 2015, given the challenging advertising market being experienced by radio operators in our industry as well as significant ongoing macroeconomic volatility, we cannot make any assurances that we will not be required to incur any impairment charges in any future periods.
Advertising Revenue and Adjusted EBITDA
Our primary source of revenue is the sale of advertising time. Our sales of advertising time are primarily affected by the demand from local, regional and national advertisers, which impacts the advertising rates charged by us. Advertising demand and rates are based primarily on the ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by various ratings agencies on a periodic basis. We endeavor to develop strong listener loyalty, and we believe that the diversification of our formats and programs helps to insulate us from the effects of changes in the musical tastes of the public with respect to any particular format as a substantial portion of our revenue comes from non-music format and proprietary content. In addition, we believe that the platform that we own and operate, which has increased diversity in terms of format, listener base, geography, advertiser base and revenue stream as a result of our acquisitions and the development of our strategy to focus on radio stations in larger markets and geographically strategic regional clusters, will further reduce our revenue dependence on any single demographic, region or industry. Our larger markets are also supported with content through network programming.

27

We strive to maximize revenue by managing our on-air inventory of advertising time and adjusting prices up or down based on supply and demand. The optimal number of advertisements available for sale depends on the programming format of a particular radio program. Each sales vehicle has a general target level of on-air inventory available for advertising. This target level of advertising inventory may vary at different times of the day but tends to remain stable over time. We seek to broaden our base of advertisers in each of our markets by providing a wide array of audience demographic segments across each cluster of stations, thereby providing each of our potential advertisers with an effective means of reaching a targeted demographic group. In the broadcasting industry, we sometimes utilize trade or barter agreements that exchange advertising time for goods or services such as travel or lodging, instead of for cash. Trade revenue totaled $10.2 million and $9.4 million for the three months ended March 31, 2015 and 2014, respectively. Our advertising contracts are generally short-term. We generate most of our revenue from local and regional advertising, which is sold primarily by a station’s sales staff. Local and regional advertising typically represents a majority of our net revenues.
In addition to local advertising revenues, we monetize our available inventory in both national spot and network sales marketplaces using our national platform. To effectively deliver our network advertising for our customers, we distribute content and programming through third party affiliates in order to achieve a broader national audience. Typically, in exchange for the right to broadcast radio network programming, third party affiliates remit a portion of their advertising time, which is then aggregated into packages focused on specific demographic groups and sold by us to our advertiser clients that want to reach the listeners who comprise those demographic groups on a national basis.
Our advertising revenues vary by quarter throughout the year. As is typical with advertising revenue supported businesses, our first calendar quarter typically produces the lowest revenues of a last twelve month period, as advertising generally declines following the winter holidays. The second and fourth calendar quarters typically produce the highest revenues for the year. We continually evaluate opportunities to increase revenues through new platforms, including technology based initiatives. As a result of those revenue increasing opportunities through new platforms, accelerated by our acquisition of WestwoodOne, our operating results in any period may be affected by the incurrence of advertising and promotion expenses that typically do not have an effect on revenue generation until future periods, if at all. In addition, as part of this evaluation and our acquisition of WestwoodOne, we also have reorganized and discontinued certain redundant and/or unprofitable content vehicles across our platform which we expect will impact our broadcast revenues in the future. To date inflation has not had a material effect on our revenues or results of operations, although no assurances can be provided that material inflation in the future would not materially adversely affect us.
Adjusted EBITDA is the financial metric utilized by management to analyze the cash flow generated by our business. This measure isolates the amount of income generated by our core operations after the incurrence of corporate, general and administrative expenses. Management also uses this measure to determine the contribution of our core operations, including the corporate resources employed to manage the operations, to the funding of our other operating expenses and to the funding of debt service and acquisitions. In addition, Adjusted EBITDA is a key metric for purposes of calculating and determining our compliance with certain covenants contained in our Credit Agreement.
In deriving this measure, management excludes depreciation, amortization, and stock-based compensation expense, as these do not represent cash payments for activities directly related to our core operations. Management excludes any gain or loss on the exchange or sale of any assets as it does not represent a cash transaction. Management also excludes any gain or loss on derivative instruments as it does not represent a cash transaction nor are they associated with core operations. Expenses relating to acquisitions and restructuring costs are also excluded from the calculation of Adjusted EBITDA as they are not directly related to our core operations. Management excludes any impairment of goodwill and intangible assets as they do not require a cash outlay.
Management believes that Adjusted EBITDA, although not a measure that is calculated in accordance with GAAP, nevertheless is commonly employed by the investment community as a measure for determining the market value of a media company. Management has also observed that Adjusted EBITDA is routinely employed to evaluate and negotiate the potential purchase price for media companies and is a key metric for purposes of calculating and determining compliance with certain covenants in our credit facility. Given the relevance to our overall value, management believes that investors consider the metric to be extremely useful.
Adjusted EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating activities or any other measure for determining the Company’s operating performance or liquidity that is calculated in accordance with GAAP.
A quantitative reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, follows in this section.

28


Results of Operations
The following selected data from our unaudited condensed consolidated statements of operations and other supplementary data should be referred to while reading the results of operations discussion that follows (dollars in thousands):
 
 
Three Months Ended March 31,
 

 
2015

2014
 
% Change
STATEMENT OF OPERATIONS DATA:
 
 
 
 
 
Net revenue
$
271,079

 
$
292,044

 
(7.2
)%
Content costs
100,807

 
108,493

 
(7.1
)%
Selling, general & administrative expenses
116,307

 
115,335

 
0.8
 %
Depreciation and amortization
25,311

 
28,881

 
(12.4
)%
LMA fees
2,498

 
1,557

 
60.4
 %
Corporate expenses (including stock-based compensation expense)
13,462

 
19,194

 
(29.9
)%
Loss (gain) on sale of assets or stations
819

 
(538
)
 
**
Operating income
11,875

 
19,122

 
(37.9
)%
Interest expense
(34,984
)
 
(36,265
)
 
(3.5
)%
Interest income
358

 
331

 
8.2
 %
Other income (expense), net
379

 
(65
)
 
**
Loss before income taxes
(22,372
)
 
(16,877
)
 
32.6
 %
Income tax benefit
10,357

 
7,608

 
36.1
 %
Net loss
$
(12,015
)
 
$
(9,269
)
 
29.6
 %
KEY FINANCIAL METRIC:
 
 
 
 


Adjusted EBITDA
$
44,663

 
$
58,745

 
(24.0
)%
 
 
 
 
 
 
** Calculation is not meaningful
 
 
 
 
 
    
Three Months Ended March 31, 2015 Compared to the Three Months Ended March 31, 2014
Net Revenue
Net revenue consists of gross revenue less agency commissions, third party producer revenue shares and other direct costs. Agency commissions are variable as they are based upon a stated percentage of our gross billings.
Net revenue for the three months ended March 31, 2015 decreased $21.0 million, or 7.2%, to $271.1 million, compared to $292.0 million for the three months ended March 31, 2014. The decrease resulted from decreases of $18.8 million, $1.6 million, and $1.5 million in broadcasting advertising, digital advertising, and political advertising, respectively. The decrease was partially offset by an increase of $0.9 million in license fees and other revenue. The decrease in broadcast advertising was a result of decreases in local spot and national spot revenue at our markets and WestwoodOne.
Content Costs
Content costs consist of all costs related to the licensing, acquisition and development of our programming.
Content costs for the three months ended March 31, 2015 decreased $7.7 million, or 7.1%, to $100.8 million, compared to $108.5 million for the three months ended March 31, 2014. This decrease was primarily attributable to our ongoing rationalization of operating costs and a decrease in expenses at WestwoodOne.
Selling, General & Administrative Expenses
Selling, general & administrative expenses consist of expenses related to the distribution and monetization of our content across our platform and overhead expenses.
Selling, general & administrative expenses for the three months ended March 31, 2015 remained relatively flat, increasing less than 1.0% to $116.3 million compared to $115.3 million for the three months ended March 31, 2014.

29

Depreciation and Amortization
Depreciation and amortization for the three months ended March 31, 2015 decreased $3.6 million, or 12.4%, to $25.3 million, compared to $28.9 million for the three months ended March 31, 2014. This decrease was primarily due to a decrease in amortization expense on our definite-lived intangible assets, which resulted from the accelerated amortization methodology we have applied since acquisition of these assets that is based on the expected pattern in which the underlying assets' economic benefits are consumed.
Corporate Expenses, Including Stock-based Compensation Expense
Corporate expenses consist primarily of compensation and related costs for our executive, finance, human resources, information technology and legal personnel, and fees for professional services. Professional services are principally comprised of outside legal, audit and consulting services.
Corporate expenses, including stock-based compensation expense, for the three months ended March 31, 2015 decreased $5.7 million, or 29.9%, to $13.5 million, compared to $19.2 million for the three months ended March 31, 2014. This decrease was primarily due to a decrease in severance and legal costs related to our acquisition of Westwood One in December 2013.
Interest Expense
Total interest expense for the three months ended March 31, 2015 decreased $1.3 million, or 3.5%, to $35.0 million compared to $36.3 million for the three months ended March 31, 2014. Interest expense associated with outstanding debt decreased by $1.6 million to $32.0 million as compared to $33.6 million in the prior year period. This decrease was due to lower average indebtedness outstanding resulting from principal repayments.
The following summary details the components of our interest expense (dollars in thousands):
 
Three Months Ended March 31,
 
2015 vs 2014
 
2015
 
2014
 
$ Change
 
% Change
7.75% Senior Notes
$
11,819

 
$
11,819

 
$
—

 
—
 %
Bank borrowings – term loans and revolving credit facilities
20,229

 
21,840

 
(1,611
)
 
(7.4
)%
Other, including debt issue cost amortization
2,937

 
2,606

 
331

 
12.7
 %
Interest expense
$
34,985

 
$
36,265

 
$
(1,280
)
 
(3.5
)%
Income Taxes
For the three months ended March 31, 2015, the Company recorded an income tax benefit of $10.4 million on pre-tax loss of $22.4 million, resulting in an effective tax rate for the three months ended March 31, 2015 of approximately 46.4%. For the three months ended March 31, 2014, the Company recorded an income tax benefit of $7.6 million on pre-tax loss of $16.9 million, resulting in an effective tax rate for the three months ended March 31, 2014 of approximately 45.0%.
The difference between the effective tax rate and the federal statutory rate of 35.0% for both the three months ended March 31, 2015, and 2014 primarily relates to state and local income taxes, an increase in the valuation allowance with respect to state net operating losses and the tax effect of certain statutory non deductible items.
The Company continually reviews the adequacy of the valuation allowance and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with Accounting Standards Codification ("ASC") Topic 740, Income Taxes ("ASC 740"). As of March 31, 2015, the Company continues to maintain a partial valuation allowance on certain state net operating loss carryforwards for which the Company does not believe they will be able to meet the more likely than not recognition standard for recovery. The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns as well as future profitability.
We believe our annual effective tax rate before discrete items for fiscal year 2015 will be approximately 44.8%. The difference between the annual estimated effective tax rate and the federal statutory rate of 35% primarily relates to the valuation allowance on certain forecasted state net operating losses in 2014.

30

Adjusted EBITDA
As a result of the factors described above Adjusted EBITDA for the three months ended March 31, 2015 decreased $14.1 million to $44.7 million from $58.7 million for the three months ended March 31, 2014.
Reconciliation of Non-GAAP Financial Measure
The following table reconciles Adjusted EBITDA to net loss (the most directly comparable financial measure calculated and presented in accordance with GAAP) as presented in the accompanying consolidated statements of operations (dollars in thousands):
 
Three Months Ended March 31,
 
 
 
2015
 
2014
 
% Change
Net loss
$
(12,015
)
 
$
(9,269
)
 
29.6
 %
Income tax benefit
(10,357
)
 
(7,608
)
 
36.1
 %
Non-operating expenses, including interest expense
34,247

 
35,999

 
(4.9
)%
LMA fees
2,498

 
1,557

 
60.4
 %
Depreciation and amortization
25,311

 
28,881

 
(12.4
)%
Stock-based compensation expense
3,863

 
4,091

 
(5.6
)%
Loss (gain) on sale of assets or stations
819

 
(538
)
 
**
Acquisition-related and restructuring costs
—

 
5,382

 
(100.0
)%
Franchise and state taxes
297

 
250

 
18.8
 %
Adjusted EBITDA
$
44,663

 
$
58,745

 
(24.0
)%
 
 
 
 
 
 
** Calculation is not meaningful
 
 
 
 
 

Liquidity and Capital Resources

Cash Flows Provided by Operating Activities 
 
Three Months Ended March 31,
(Dollars in thousands)
2015
 
2014
Net cash provided by operating activities
$
20,978

 
$
36,876

For the three months ended March 31, 2015 compared to the three months ended March 31, 2014, net cash provided by operating activities decreased $15.9 million. The decrease was primarily due to a decrease in working capital driven by the timing of payments of our accounts payable and accrued expenses.
Cash Flows Used in Investing Activities
 
Three Months Ended March 31,
(Dollars in thousands)
2015
 
2014
Net cash used in investing activities
$
(5,399
)
 
$
(281
)
For the three months ended March 31, 2015, net cash used in investing activities was $5.4 million as compared to $0.3 million for the three months ended March 31, 2014. Capital expenditures for the three months ended March 31, 2015 totaled $10.1 million, the majority of which related to a new office and studio facility in our San Francisco market and technology upgrades across our broadcast platform, partially offset by proceeds from the sale of stations of $3.1 million. Capital expenditures during the three months ended March 31, 2014 were $1.3 million.

31

Cash Flows Used in Financing Activities
 
Three Months Ended March 31,
(Dollars in thousands)
2015
 
2014
Net cash used in financing activities
$
(92
)
 
$
(32,117
)
For the three months ended March 31, 2015 compared to the three months ended March 31, 2014, net cash used in financing activities decreased $32.0 million. The decrease in cash used in financing activities was primarily attributable to a decrease in repayments on borrowings.
For additional detail regarding the Company’s material liquidity considerations, see “Liquidity Considerations” above.

32

Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to our market risks from those disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”).

Item 4. Controls and Procedures
We maintain a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, the “Exchange Act”) designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Such disclosure controls and procedures are designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer (“CEO”) and Senior Vice President and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and, while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.
At the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2015.
There were no changes to our internal control over financial reporting during the fiscal quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
We are currently party to, or a defendant in, various claims or lawsuits that are generally incidental to our business. We also expect that from time to time in the future we will be party to, or a defendant in, various claims or lawsuits that are generally incidental to our business. We expect that we will vigorously contest any such claims or lawsuits and believe that the ultimate resolution of any known claim or lawsuit will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A. Risk Factors
Please refer to Part I, Item 1A, “Risk Factors,” in our 2014 Annual Report for information regarding known material risks that could affect our results of operations, financial condition and liquidity. In addition to these risks, other risks that we presently do not consider material, or other unknown risks, could materially adversely impact our business, financial condition and results of operations in future periods.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 21, 2008, our Board of Directors authorized the purchase, from time to time, of up to $75.0 million of our Class A Common Stock, subject to the terms and limitations obtained in any applicable agreements and compliance with other applicable legal requirements. During the three months ended March 31, 2015, we did not purchase any shares of our Class A Common Stock.



33



Item 6. Exhibits
31.1
 
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
31.2
 
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.1
 
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
101.INS
 
XBRL Instance Document.
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.LAB
 
XBRL Taxonomy Extension Labels Linkbase Document.
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.


34

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
CUMULUS MEDIA INC.
 
Date: April 30, 2015
By:
 
/s/ Joseph P. Hannan
 
 
Joseph P. Hannan
 
 
Senior Vice President, Treasurer and Chief
Financial Officer

EXHIBIT INDEX
 
31.1
 
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
31.2
 
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.1
 
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
101.INS
 
XBRL Instance Document.
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.LAB
 
XBRL Taxonomy Extension Labels Linkbase Document.
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.




35

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