UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2017
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¨ | 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 00-24525001-38108
Cumulus Media Inc.
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)
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| Delaware | | | | | 82-5134717 |
(State or Other Jurisdiction of
Incorporation or Organization) | | | | | (I.R.S. Employer
Identification No.) |
| Delaware
| 780 Johnson Ferry Road NE | Suite 500 | 36-4159663Atlanta, | GA | | 30342 |
(StateAddress of Incorporation)Principal Executive Offices) | | | | | (I.R.S. Employer Identification No.)ZIP Code) |
3280 Peachtree Road, N.W.
Suite 2200
Atlanta, GA 30305
(404) 949-0700
(Address, including zip code, and telephone number, including area code, of registrant’s principal offices)
Securities Registered Pursuant to Section 12(b) of the Act:
None | | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Class A common stock, par value $0.0000001 per share | CMLS | Nasdaq Global Market |
| Class A common stock purchase rights | N/A | Nasdaq Global Market |
Securities Registered Pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per shareNone
Preferred Stock Purchase Rights
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer”, “accelerated filer,” “smaller" "accelerated filer," "smaller reporting company,”" and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):
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| Large accelerated filer | | ¨ | | Accelerated filer | | ¨þ |
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| Non-accelerated filer | | ¨ (Do not check if a smaller reporting company) | | Smaller reporting company | | þ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No þ
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
The aggregate market value of the registrant’sregistrant's outstanding voting and non-voting common stock held by non-affiliates of the registrant (assuming, solely for the purposes hereof, that all officers and directors (and their respective affiliates), and 10% or greater stockholders of the registrant are affiliates of the registrant, some of whom may not be deemed to be affiliates upon judicial determination) as of June 30, 2017,2023, the last business day of the registrant’sregistrant's most recently completed second fiscal quarter, was approximately $5.9$65.0 million.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No ¨
As of March 21, 2018,February 20, 2024, the registrant had outstanding 29,306,37416,673,700 shares of common stock consisting of (i) 29,225,76516,361,659 shares of Class A common stock; and (ii) 80,609312,041 shares of Class CB common stock.
DOCUMENTS INCORPORATED BY REFERENCE
NonePortions of the registration's definitive proxy statement for the 2024 Annual Meeting of Stockholders, which is expected to be filed no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, have been incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K.
CUMULUS MEDIA INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 20172023
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PART I
Description of Certain Definitions and DataCautionary Statement Regarding Forward-Looking Statements
In this Annual Report on Form 10-K (this “Form 10-K”"Form 10-K" or this “Report”"Report") the terms “Company,” “Cumulus,” “we,” “us,”"Company," "Cumulus," "we," "us," and “our”"our" refer to Cumulus Media Inc. and its consolidated subsidiaries.
We useThis Form 10-K contains and incorporates by reference "forward-looking statements" within the term “local marketing agreement” (“LMA”meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For purposes of federal and state securities laws, forward-looking statements are all statements other than those of historical fact and are typically identified by the words "believes," "contemplates," "expects," "anticipates," "continues," "intends," "likely," "may," "plans," "potential," "should," "will" and similar expressions, whether in the negative or the affirmative. These statements include statements regarding the intent, belief or current expectations of Cumulus and its directors and officers with respect to, among other things, future events, financial results and financial trends expected to impact Cumulus.
Such forward-looking statements are and will be, as the case may be, subject to change and subject to many risks, uncertainties and other factors relating to our operations and business environment, which may cause our actual results to be materially different from any future results, expressed or implied, by such forward-looking statements, depending on a variety of important factors, including, but not limited to, those identified in Item 1A, "Risk Factors" in this Report. InForm 10-K.
Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following:
•the ongoing impact of weakening or uncertain economic conditions on our results of operations, financial condition and liquidity;
•our achievement of certain expected revenue results, including as a typical LMA,result of factors or events that are unexpected or otherwise outside of our control;
•our ability to generate sufficient cash flows to service our debt and other obligations and our ability to access capital, including debt or equity;
•general economic or business conditions affecting the licenseeradio broadcasting industry which may be less favorable than expected, decreasing spending by advertisers;
•changes in market conditions which could impair our intangible assets and the effects of aany material impairment of our intangible assets;
•our ability to execute our business plan and strategy;
•our ability to attract, motivate and/or retain key executives and associates;
•increased competition in and with the radio station makes available, for a fee and reimbursement of its expenses, airtime on its station to a party which supplies programming to be broadcast during that airtime, and collects revenues from advertising aired during such programming.
Unless otherwise indicated, as disclosed herein we:
obtained total radio industry listener and revenue levels from the Radio Advertising Bureau;
derived historical market revenue statistics and market revenue share percentages from data published by Miller Kaplan, Arase LLP, a public accounting firm that specializes in serving the broadcasting industry and BIA/Kelsey (“BIA”), a mediaour ability to respond to changes in technology in order to remain competitive;
•shift in population, demographics, audience tastes and telecommunications advisory services firm;listening preferences;
•disruptions or security breaches of our information technology infrastructure;
•the impact of current, pending or future legislation and regulations, antitrust considerations, and pending or future litigation or claims;
derived all audience share data•changes in regulatory or legislative policies or actions or in regulatory bodies;
•changes in uncertain tax positions and audience rankings, including ranking by population, from surveys of people ages 12 and over, listening Monday through Sunday, 6 a.m. to 12 midnight, as reportedtax rates;
•changes in the Nielsen Audio Market Report.financial markets;
•changes in capital expenditure requirements;
Current Bankruptcy Proceedings•changes in interest rates;
On November 29, 2017 (the "Petition Date"), •the Companypossibility that we may be unable to achieve any expected cost-saving or operational synergies in connection with any acquisitions or business improvement initiatives, or achieve them within the expected time periods;and
•other risks and certain of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (the “Bankruptcy Petitions”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”. The Debtors' chapter 11 cases are being jointly administered under the caption In re Cumulus Media Inc., et al, Case No. 17-13381.
Immediately prior to the commencement of the chapter 11 cases the Debtors entered into a Restructuring Support Agreement (the “Restructuring Support Agreement”) with certain creditors (the “Consenting Creditors”) under that certain Amended and Restated Credit Agreement, dated as of December 23, 2013 (the “Credit Agreement”), by and among the Company, Cumulus Media Holdings Inc., as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party theretouncertainties referenced from time to time in this Form 10-K and Crestview Radio Investors, LLCother filings of ours with the SEC or not currently known to us or that we do not currently deem to be material.
Many of these factors are beyond our control or are difficult to predict, and certain of its affiliates (the “Consenting Equityholders”). The Restructuring Support Agreement contemplates the implementation of a financial restructuringtheir ultimate impact could be material. We caution you not to place undue reliance on any forward-looking statements, which speak only as of the Debtors (as described below) through a conversiondate of more than $1.0 billion of the Company’s funded debt into equity (collectively, the “Restructuring”). The Restructuring willthis Form 10-K. Except as may be effectuatedrequired by a joint plan of reorganization (the “Plan”) under chapter 11 of the Bankruptcy Code if confirmed by the Bankruptcy Court.
On December 1, 2017, the Bankruptcy Court approved certain motions and applications the Debtors filed on the Petition Date (the “First Day Motions”), certain of which were approved on an interim basis. On December 21, 2017, the Bankruptcy Court approved all of the Company’s First Day Motions on a final basis. Pursuantlaw, we do not undertake any obligation to the First Day Motions, and subject to certain terms and dollar limits included therein, the Company was authorized to continue to use its unrestricted cash on hand, as well as all cash generated from daily operations, which is being used to continue the Company’s operations without interruption during the course of its restructuring. Also pursuant to the First Day Motions, the Company received Bankruptcy Court authorization to, among other things and subject to the terms and conditions set forth in the applicable orders, pay certain pre-petition employee wages, salaries, health benefits and other employee obligations during its restructuring, pay certain claims relating to on-air talent and taxes, continue its cash management programs and insurance policies, as well as continue to honor its current customer programs. The Company is authorized under the Bankruptcy Code to pay post-petition expenses incurred in the ordinary course of business without seeking Bankruptcy Court approval. Until a plan of reorganization is approved and effective, the Debtors will continue to manage their properties and operate their businessesupdate or alter any forward-looking statements, whether as a “debtor in possession” under the jurisdictionresult of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.new information, future events or otherwise.
PART I
On December 9, 2017, the Debtors filed the Plan with the Bankruptcy Court and a related disclosure statement (the "Disclosure Statement") pursuant to chapter 11 of the Bankruptcy Code. On January 18, 2018, the Debtors filed with the Bankruptcy Court a first modified joint plan of reorganization and the related first modified disclosure statement for the Plan pursuant to chapter 11 of the Bankruptcy Code. The Plan and Disclosure Statement were further modified on January 31, 2018, February 2, 2018, February 12, 2018, and March 16, 2018. On February 2, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement and authorizing the solicitation of votes on the Plan.
Pursuant to the Plan, holders of claims with respect to the Term Loans (“Term Loan Claims”) would receive their pro rata share of approximately $1.3 billion in principal amount of new first lien term loans maturing in 2022 (the “New First Lien Debt”) and 83.5% of the issued and outstanding amount of common stock (the “Reorganized Common Equity”) to be issued by the reorganized Company (“Reorganized Cumulus”), subject to dilution by any Reorganized Common Equity issued pursuant to a post-emergence equity management incentive compensation plan (the “MIP”). Holders of unsecured claims against the Company, including claims arising from the Company’s 7.75% Senior Notes due 2019 (the “Notes”), would receive, in the aggregate, 16.5% of the Reorganized Common Equity, subject to dilution by the MIP. The New First Lien Debt would accrue interest at the London Inter-bank Offered Rate ("LIBOR") plus 4.50% per annum, subject to a LIBOR floor of 1.00% or, at Reorganized Cumulus’s option, an alternate base rate plus 3.50% per annum, subject to an alternate base rate floor of 2.00%. Reorganized Cumulus would be permitted to enter into a revolving credit facility or receivables facility providing commitments of up to $50.0 million. The New First Lien Debt would amortize in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount of the New First Lien Debt with the balance payable on the maturity date. Reorganized Cumulus would be able to voluntarily prepay the New First Lien Debt in whole or in part without premium or penalty, except that any prepayment during the period of six months following the issuance of the New First Lien Debt would require a premium equal to 1% of the prepaid principal amount. Certain mandatory prepayments on the New First Lien Debt would be required upon the occurrence of specified events as set forth in the Credit Agreement, including upon the sale of certain assets and from excess cash flow as defined. The New First Lien Debt would not have any financial maintenance covenants. The other terms and conditions of the New First Lien Debt would generally be similar to those set forth in the Credit Agreement, except as set forth in the term sheet attached to the Restructuring Support Agreement (the "Term Sheet"). The New First Lien Debt would be secured by first priority security interests in substantially all the assets of Reorganized Cumulus and the Guarantors (as defined below) in a manner substantially consistent with the Credit Agreement, subject to the terms of the term sheet. In addition, the direct parent of Reorganized Cumulus (the “Parent”) and all present and future wholly-owned subsidiaries of the Parent, subject to exceptions that are substantially consistent with those set forth in the Credit Agreement, would guarantee the New First Lien Debt (the "Guarantors"). The Plan contemplates that the Board of Directors of Reorganized Cumulus would consist of the President and Chief Executive Officer of the Company and six directors chosen by the Consenting Creditors. Even if the requisite acceptances of the Plan are received, the Bankruptcy Court is not obligated to confirm the Plan as proposed. Company Overview
A leader in the radio broadcasting industry, Cumulus (PINK: CMLSQ) combinesMedia is an audio-first media company delivering premium content to over a quarter billion people every month — wherever and whenever they want it.Cumulus Media engages listeners with high-quality local programming with iconic, nationally syndicated media,through 403 owned-and-operated radio stations across 85 markets; delivers nationally-syndicated sports, news, talk, and entertainment programming from iconic brands to deliver premium content choices to the 245 million people reached each week through its 445 owned-and-operated stations broadcasting in 90 U.S. media markets (including eight of the top 10), approximately 8,000 broadcast radio stations affiliated with its Westwood One network and numerous digital channels. Together, the Cumulus/Westwood One platforms make Cumulus one of the few media companies that can provide advertisers with national reach and local impact. Cumulus/Westwood One is the exclusive radio broadcast partner to some of the largest brands in sports, entertainment, news, and talk, including the NFL, the NCAA, the Masters, the Olympics, the GRAMMYs,CNN, AP News, the Academy of Country Music Awards, and many other world-class partners across more than 9,800 affiliated stations through Westwood One, the American Music Awards,largest audio network in America; and inspires listeners through the Billboard Music Awards,Cumulus Podcast Network, its rapidly growing network of original podcasts that are smart, entertaining and more. Additionally, itthought-provoking. Cumulus Media provides advertisers with personal connections, local impact and national reach through broadcast and on-demand digital, mobile, social, and voice-activated platforms, as well as integrated digital marketing services, powerful influencers, full-service audio solutions, industry-leading research and insights, and live event experiences. Cumulus Media is the nation's leading provider of country musiconly audio media company to provide marketers with local and lifestyle content through its NASH brand, which serves country fans nationwide through radio programming, exclusive digital content, and live events.national advertising performance guarantees. For more information visit www.cumulusmedia.com.
We are a Delaware corporation, organized in 2002,2018, and the successor by merger to an Illinoisa Delaware corporation with the same name that was organized in 1997.2002. Our predecessor, CM Wind Down Topco Inc. (formerly known as Cumulus Media, Inc., "Old Cumulus"), and certain of its direct and indirect subsidiaries filed voluntary petitions for bankruptcy relief in November 2017. Old Cumulus and its debtor subsidiaries emerged from Chapter 11 bankruptcy on June 4, 2018 and, prior to winding down its business, it transferred substantially all of its remaining assets to an indirect wholly owned subsidiary of reorganized Cumulus Media Inc. (formerly known as CM Emergence Newco Inc. and now known as Cumulus Media Inc. and referred to herein as "Cumulus Media" or the "Company").
Strategic OverviewSources of Revenue
Our initial historical strategic focus was on mid-sized radio markets in the United States, as we believed that the attractive operating characteristics of mid-sized markets, together with the relaxation of radio station ownership limits under the Telecommunications Act of 1996 (the “Telecom Act”) and Federal Communications Commission (the "FCC") rules, created significant opportunities for growth from the formation of groups of radio stations within these markets.
We focused on acquiring groups of stations in attractive markets at favorable purchase prices, taking advantage of the fragmented nature of ownership in those markets and the greater attention historically given to larger markets by radio station acquirers.
Our strategy has evolved as we have recognized that large radio markets can provide an attractive combination of scale, stability and opportunity for future growth, particularly for emerging digital advertising initiatives. According to BIA, many of these markets typically have per capita and household income in excess of the national average, which we believe makes radio broadcasters in these markets attractive to a broad base of advertisers, and allows a radio broadcaster to reduce its dependence on any one economic sector or specific advertiser. Our operating strategy is based upongenerate revenue across the following principles that we expect will continue to position us for growth.three major revenue streams:
Focus on unique brands.
We view eachBroadcast radio revenue. Most of our radio stations and content assets as a unique brand that serves a local and distinct community of listeners. Our business modelrevenue is designed to offer local businesses access to each of our stations’ communities of listenersgenerated through the sale of terrestrial, broadcast radio spot advertising time to local, regional, and national clients. Local spot and regional spot advertising is sold by Cumulus-employed sales personnel. National spot advertising for our owned and operated stations is marketed and sold by both our internal national sales team and Katz Media Group, Inc. ("Katz") in an outsourced arrangement.
In addition to local, regional and national spot advertising revenues, we monetize our available inventory in the network sales marketplace. To effectively deliver network advertising for our customers, we distribute content and programming through third party affiliates in order to reach 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 to us, which is then aggregated into packages focused on specific demographic groups and sold by us to our advertiser clients that want to reach those demographic groups on a national basis. Network advertising airing across our owned, operated and affiliated stations is sold by our internal sales team located across the U.S. to predominantly national and regional advertisers.
We strive to maximize revenue by managing our on-air inventory of advertising time and adjusting prices based on supply and demand. The optimal number of advertisements available for sale depends on the programming format of a particular radio program. Each program 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 endeavorseek to create demand through strategic investments to drive ratings growth. We believe this focused model will allow us to continue to provide a high levelbroaden our base of service to our advertisers and further expand our advertiser base. We use this scalable and repeatable business model in each of our markets.markets by providing a wide array of audience demographic segments across each cluster of stations, thereby providing potential advertisers with an effective means to reach a targeted demographic group. Our advertising contracts are generally short-term.
Enhance
Digital revenue. We generate digital advertising revenue from the sale of advertising and promotional opportunities across our podcasting network, streaming audio network, websites, mobile applications and digital marketing services. We sell premium advertising adjacent to, or embedded in, podcasts through our network of owned and distributed podcasts. We also operate one of the largest streaming audio advertising networks in the U.S., including owned and operated internet radio simulcasted stations with either digital ad-inserted or simulcasted ads. We sell display ads across more than 400 local radio station websites, mobile applications, and ancillary custom client microsites. In addition, we sell an array of local digital marketing services to new and existing advertisers such as, email marketing, geo-targeted display, video solutions and search
engine marketing within our Cumulus C-suite portfolio, and website and microsite building and hosting, social media management, reputation management, listing management, and search engine optimization within our Boost product suite.
Other revenue. Other revenue includes trade and barter transactions, remote and event revenues, and non-advertising revenue.Non-advertising revenue represents fees received for licensing content, imputed tower rental income, satellite rental income, and proprietary software licensing.
Strategic Overview
We are focused on building our competitive position in the expanding audio landscape by achieving leadership positions in the markets in which we operate and leveraging those positions in conjunction with our network platform, national scale, and local advertiser relationships to build value for all of our stakeholders. The Company seeks to achieve its objective through the execution of three specific strategies:
•enhancing operating performance across our portfolio of radio stations to drive efficiencies.
Our business is designedcash flow generation through the execution of a range of initiatives across both our radio station and network platforms to drive sales growth andmaintain or grow market share, reduce costs at each radio station. By focusing on performing the day-to-day operationsand improve efficiency;
•expanding high growth digital businesses in local marketing services and new audio formats such as podcasting and streaming; and
•optimizing our asset portfolio by taking advantage of the Company efficiently and ensuring thatopportunities to strengthen our employees' efforts are effectively and consistently directed and supported, we believeposition in markets where we are, much better positionedor can become, leaders and to achieve positive results and drive growth.exit markets or dispose of assets that are not supportive of our objectives if we can do so accretively.
Competitive Strengths
We believe our success is, and future performance will be, directly related to the following combination of strengthscharacteristics that will enable us to implementfacilitate the implementation of our strategies:
A leaderLeadership in the radio broadcasting industry with a broad national reach.and new audio formats
Currently, we offer advertisers access to a broad portfolioportfolio of 445403 owned and operated stations, comprisedoperating in 85 markets and more than 9,800 network affiliates with an aggregate monthly reach of 16 large marketover a quarter billion listeners. Our stations and 74 small and mid-sized market stations in 90 U.S. media markets. Our stationsaffiliates cover a wide variety of programming formats, geographic regions and audience demographics, and advertising clients. We believe thiswe engage with audiences through over-the-air, digital (including streaming and podcasting) and live interactions. This scale and diversity allowsallow us to offer advertisers the ability to customize advertising campaigns on a national, regional and local basis through broadcast, digital and mobile mediums, as well as through live events, enabling us to compete effectively with other media and engage listeners whenever they want and wherever they are.
Leading Digital Platform
The Cumulus Podcast Network connects passionate listeners with America’s most influential voices. Ranked among the top podcast networks in the country, we focus on personality-driven talk partnering with extraordinary content creators to build national, multi-platform franchises. We also create local podcasts in 85 markets whose content entertains and informs the communities they serve. We monetize audiences through our extensive national and local ad sales teams and deep, longstanding relationships with performance and brand advertisers. Podcast advertisements include prerecorded spots and on-air reads by talent who provide personal endorsements of advertisers' products. To the extent our talent has won the trust of their audiences, such endorsements can be well-received by listeners and therefore valuable to advertisers who are eager to capture the favorable attention of new and existing customers for their products. We also operate a leading streaming audio advertising network in the United States (the "U.S"), including internet simulcasts of our owned and operated radio stations, which are distributed through multiple outlets (both owned and non-owned) and monetized through local, national, network and programmatic advertising channels. In addition, we sell an array of local digital marketing services such as email marketing, geo-targeted display and video solutions, website and microsite building and hosting, social media management, reputation management, listing management, and search engine marketing and optimization within our Cumulus C-Suite digital marketing solutions portfolio to existing and new advertisers.
National reach
As one of the largest radio advertising and content providers in the United States. With approximately 8,000radio broadcast affiliations, our radio station platform reaches approximately 245 million listeners a week, and providesU.S., we provide a national platform which allows us to more effectively and efficiently compete for national and network advertising dollars. Our exclusive radio broadcast partnerships with the NFL and NCAA allow us to provide advertisers with national reach and the ability to create compelling campaigns from a local to a national level across broadcast, digital and live event offerings.
In addition, thisour national network platform provides targeted access and moreto diverse demographics and age groups to better meet our customers’ needs and allow for more focused marketing.customers' needs. Our sales team has the ability to aggregate advertising inventory time across our owned and operated and/or affiliate network,networks, and divide it into packages focused on specific demographics that can be sold to national advertisers looking to reach specific national or regional audiences.
Diversified customer base and geographic mix.
We generate substantially all of our revenue from the sale of advertising time to a broad and diverse customer base, that extends to 90including local advertisers based in our 85 cities or "markets" nationwide.in which we own radio stations as well as advertisers based outside those markets through our national network and spot ad sales. We sell our advertising time both nationally and locally through an integrated sales approach, that ranges from traditional radio spots to non-traditional sales programs, including on-lineonline couponing and various on-air and Internet-relateddigital integrated marketing programs.
Our advertising exposure is highly diversified across a broad range of industries, which lessens the impact of the economic conditions applicable to any one specific industry or customer group. Our top industry segments by advertising volume include professional services, entertainment, automotive, restaurants, entertainment, financial,home products, and communications.general services. We derive additional revenue from political candidates, political parties and special interest groups, particularly in even-numbered years in advance of various elections. Because
Ability to leverage content and advertiser relationships across platforms
Our various content platforms, including local stations, the Westwood One network and our growing podcast and streaming businesses, provide diversified content to build relationships with listeners as well as access to a broader base of talent across those platforms. We have had recent success in extending content from one platform to another (such as from local radio to network syndication and from podcasting to broadcast radio) to build audiences and monetization opportunities and expect to continue to do so increasingly in the localized naturefuture. Additionally, the multiple contacts our local sales people have with their clients over the course of a year often give them a degree of familiarity with their clients' needs and the ability to tailor campaigns to help them achieve success. Those interactions allow us to expand our support of new and existing clients' business we have a broad distribution of advertisers across all of our stations.objectives by offering additional products, including, most importantly, digital marketing services, which generally supplement radio buys.
Focus on corporateculture
We believe developingmaintaining a corporate culture that encouragessupports employee engagement ishas been, and will continue to be, important to our continued success. Through an internalWe believe our rigorous and systematic cultural values framework, FORCE (Focused, Responsible, Collaborative, and Empowered), we believe we havehas created an engaged and motivated employee base, which is the foundation to achieving higher performance.
Leveraging network to create content.
We believe thereemployees who are continued growth opportunitiesinvested in country, news/talk, sports and traffic content offerings with shared risk and revenue relationships. The content we create is distributed domestically to broadcast and digital platforms and we intend to grow by continuing to develop additional content.
Industry Overview
The primary source of revenues for radio broadcasting companies is the sale of advertising time to local, regional and national spot and network advertisers.
Generally, radio is considered an efficient, cost-effective means of reaching specifically identified demographic groups with advertising. Stations are typically classified byboth their on-air format, such as country, rock, adult contemporary, oldies and news/talk. A station’s format and style of presentation enables it to target specific segments of listeners sharing certain demographic qualities. Advertisers and stations use data published by audience measuring services, such as Nielsen Audio, to estimate how many people within particular geographical markets and demographics listen to specific stations. By capturing a specific share of a market’s radio listening audience with particular concentration in a targeted demographic, a station is able to market its broadcasting time to advertisers seeking to reach a specific audience.
The number of advertisements that can be broadcast by a station without jeopardizing listening levelsjobs and the resulting ratings is generally dictated in part by the format of a particular station and the local competitive environment. Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year.
A station’s local sales staff generates the majority of its local and regional advertising sales through direct solicitations of local advertising agencies and businesses. To generate national advertising sales, a station usually will engage a firm that specializes in soliciting radio-advertising sales on a national level. Stations also may engage directly with an internal national sales team that supports the efforts of our third-party representatives. National sales representatives obtain advertising principally from advertising agencies located outside the station’s market and receive commissions based on the revenue from the advertising they obtain.
Our stations compete for advertising revenue with other broadcast radio stations in their particular marketCompany's progress as well as other media, including newspapers, broadcast television, cable television, magazines, direct mail, and outdoor advertisinga culture that serves as well as search engine, e-commerce and other websites and satellite-based digital radio and music services. We cannot predict how existing, new or any future sources of competition will affect oura critical catalyst to driving higher performance and results of operations.attracting new talent to the Company.
Advertising Sales
The majority of our revenue is generated from the sale of local, regional, and national advertising for broadcast on our radio stations. In addition, we generate revenue from the sale of our network programming and services. In exchange for our network programs and services, we primarily receive commercial air time from radio stations and aggregate the air time to sell to national advertisers and, to a lesser extent, we receive cash. A majority of our broadcasting revenue is generated from the sale of local and regional advertising. Additional broadcasting revenue is generated from the sale of national advertising. Our major advertiser categories are:
| | | | | | | | | | | | | | |
| Automotive | | General services | | Restaurants |
| Entertainment | | Home products | | Retail |
Amusement and recreationFinancial | | Banking and mortgageProfessional services | | Healthcare servicesTelecommunications/Media |
| Arts and entertainment | | Food and beverage | | Telecommunications
Automotive | | Furniture and home furnishings | | |
Each station’sstation's local sales staff solicits advertising, both broadcast and digital, either directly from a local advertiser or indirectly through an advertising agency. When our local sales account executives engage with local advertisers to help them grow their businesses, they sell a diversified product offering including broadcast radio and digital products. We use a tiered commission structure to focus our sales staff on new business development. We believe that we can outperform our competitors by (1) expanding our base of advertisers, (2) properly training sales people and (3) providing a higher level of service to our existing customer base.
National salesnational spot advertisers for our radio stations are made by a firm specializing in radio advertising salesKatz on the national level, in exchange for a commission that is based on the gross revenue from the advertising generated. Regional sales, which we define as sales in regions surrounding our markets to buyers that advertise in our markets, are generally made by our local sales staff and market managers. While we seek to grow our local sales through more customer-focused sales staffs,staff, we seek to grow our national and regional sales by offering key national and regional advertisers access to groups of stations within specific markets and regions that make us a more attractive platform.
EachOur network sales team leverages scale, efficiency and marquee name brand content to sell inventory directly to national advertisers and/or their advertising agencies across a wide spectrum of our stations has a certain amount of on-air inventory, or advertising slots, in whichdelivery platforms. They have the ability to place advertising spots. This target level ofaggregate advertising inventory may vary at different times of the day but tendstime across our owned and operated and/or affiliate networks to remain stable over time. Our stations strivesell to maximize revenue by managing their on-air advertising inventorynational advertisers and adjusting prices up or downare incented based on supply and demand. We seek to broaden our advertiser base in each market by providing a wide array of audience demographic groups across each cluster of stations, thereby providing potential advertisers with an effective means to reach a targeted demographic group. Our sales volume, new business development and pricing is based on demand for our radio stations’ on-air inventory. Most changes in revenue are explained by a combinationmix of demand-driven pricing changes and changes in inventory utilization rather than by changes in available inventory. Advertising rates charged by radio stations, which are generally highest during morning and afternoon commuting hours, are based primarily on:
a station’s share of audiences and the demographic groups targeted by advertisers (as measured by ratings surveys);
the supply and demand for radio advertising time and for time targeted at particular demographic groups; and
certain additional qualitative factors, such as the brand loyalty of listeners to a specific station.
A station’s listenership is reflected in ratings surveys that estimate the number of listeners tuned in to the station, and the time they spend listening. Each station’s ratings are used by its advertisers and advertising representatives to consider advertising with the station and are used by Cumulus to chart changes in audience, set advertising rates and adjust programming.sold.
Competition
The radio broadcasting industry is very competitive. Our stations compete for listeners and advertising revenues directly with other radio stations within their respective markets, as well as with other advertising media. Radio stations compete for listeners primarily on the basis of program content that appeals to a particular demographic group. Factors that affect a radio station’s competitive position include station brand identitymedia, including newspapers, broadcast television, cable television, magazines, direct mail, and loyalty, the station’s local audience rank in its market, transmitter power and location, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other radio stations and other advertising media in the market area. We attempt to improve our competitive position in each market through research, seeking to improve our stations’ programming, implementing targeted advertising campaigns aimed at the demographic groups for which our stations program and managing our sales efforts to attract a larger share of advertising dollars for each station individually. We also seek to improve our competitive position by focusing on building a strong brand identity with a targeted listener base consisting of specific demographic groups in each of our markets, which we believe will allow us to better attract advertisers seeking to reach those listeners.outdoor advertising. Additionally, we compete with various digital platforms and services, including podcasts, streaming music, and other entertainment services for both listeners and advertisers.advertisers as well as search engine, e-commerce and other websites and satellite-based digital radio and music services. We cannot predict how existing or new sources of competition will affect our performance and results of operations.
The successWe attempt to improve our competitive position through our broad portfolio of each ofofferings across various content platforms including local stations, the Westwood One network, the growing Cumulus Podcast Network, our stations depends largely upon rates it can charge for itsleading U.S. streaming audio advertising which in turn is affected by the numbernetwork and an array of local digital marketing services. We have had success in extending content from one platform to another to build audiences and monetization opportunities and expect to continue to do so. We also provide a national platform which allows us to more effectively and efficiently compete for national and network advertising competitors,dollars. Our high quality broadcast and podcast programming and exclusive radio broadcast partnerships with the NFL and NCAA allow us to provide advertisers with national reach and the overall demand for advertising within individual markets. These conditions may fluctuate and are highly susceptibleability to changes in bothcreate compelling campaigns from a local markets and general macroeconomic conditions. Specifically, a radio station’s competitive position can be enhanced or negatively impacted by a variety of factors, including the changing of, or another station changing, its format to compete directly for a certain demographic of listeners and advertisers or an upgrade of the station’s authorized power through the relocation or upgrade of transmission equipment. Another station’s decision to convert to a similar format to that of one of our radio stations in the same geographic area, to improve its signal reach through equipment changes or upgrades, or to launch an aggressive promotional campaign may result in lower ratingsnational level across broadcast, digital and advertising revenue for our station. Any adverse change affecting advertising expenditures in a particular market or in the relative market share of our stations located in a particular market could have a material adverse effect on the results of our radio stations located in that market or, possibly, the Company as a whole. There can be no assurance that any one or all of our stations will be able to maintain or increase advertising revenue market share.live event offerings.
Human Capital
Under federal laws and FCC rules, a single party can own and operate multiple stations in a local market, subject to certain limitations described below. We believe that companies that form groups of commonly owned stations or joint arrangements, such as LMAs,our rigorous focus on our culture strategy has motivated our employees who are invested in a particular market may, in certain circumstances, have lower operating costsboth their jobs and may be ablethe Company's progress. Their engagement serves not only to offer advertisers in those markets more attractive rates and services. Although we currently operate multiple stations in mostdrive higher performance, but also helps to attract new talent to the Company. It also enables us to retain valuable members of our marketsteam. We invest in training and may pursuedevelopment opportunities to provide our employees the creationtools to be effective and reach their full potential. In addition, we consistently monitor our cultural progress through frequent survey and feedback mechanisms. This allows us to build on proven practices, while adjusting as necessary in order to achieve the highest possible levels of additional multiple station groups in particular markets,employee engagement. The high engagement of our competitors in certain markets include other parties that ownworkforce underpins the Company’s ability to swiftly react to challenges as they arise. See "Competitive Strengths" above for more information on how we use our cultural values framework FORCE to maintain a Company focus on a strong corporate culture.
As part of our focus on culture, we are committed to advancing and operate as many or more stations ascultivating an environment where diversity, equity and inclusion ("DEI") combine to create a sense of belonging for all. Providing resources to raise awareness and increase learning on DEI topics has been central to laying the foundations for our DEI work. Since 2020, we do.have maintained a Diversity, Equity, and Inclusion Steering Committee, led by our CEO. This group comprises six members of the company’s Senior Leadership Team. The committee is responsible for defining and leading the ongoing Cumulus DEI strategy and tactical plans.
SomeAs of these regulations, however, can serve to protect the competitive position of existing radio stations to some extent by creating certain regulatory barriers to new entrants. The ownership of a radio broadcast station requires an FCC license, and the number of radio stations that an entity can own in a given market is limited under certain FCC rules. The number of radio stations that a party can own in a particular market is dictated largely by whether the station is in a defined “Nielsen Audio Metro" (a designation designed by a private party for use in advertising matters), and, if so, the number of stations included in that Nielsen Audio Metro. In those markets that are not in a Nielsen Audio Metro, the number of stations a party can own in the particular market is dictated by the number of AM and FM signals that overlap, which constitutes a radio market under FCC rules. These FCC ownership rules may, in some instances, limit the number of stations we or our competitors can own or operate, or may limit potential new market entrants. However, FCC ownership rules may change in the future to limit any protections they currently provide. We also cannot predict what other matters might be considered in the future by the FCC or Congress, nor can we assess in advance what impact, if any, the implementation of any of these proposals or changes might have on our business. For a discussion of FCC regulation (including recent changes), see “- Federal Regulation of Radio Broadcasting.”
Employees
At December 31, 2017, we employed 5,2132023, our workforce comprised 3,367 people, 3,5152,464 of whom were employed full time.full-time. Of these employees, approximately 24482 employees were covered by collective bargaining agreements. We have not experienced any material work stoppages by our employees covered by collective bargaining agreements, and overall, we consider our relations with our employees to be positive.
On occasion, we enter into contracts with various on-air personalities withwho have large, loyal audiences in their respective marketsmarkets. We do that in order to protect our interests in those relationships that we believe to be valuable. The loss of one of these personalities could result in a short-term loss of audience share, but we do not believe that any such loss would have a material adverse effect on our financial condition or results of operations, taken as a whole.operations.
Seasonality and Cyclicality
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 any quarter during the year, as advertising generally declines following the winter holidays. The second and fourth calendar quartersquarter typically produceproduces the highest revenues for the year. In addition, our revenues tend to fluctuate between years, consistent with, among other things, increased advertising expenditures in even-numbered years by political candidates, political parties and special interest groups. ThisTypically, this political spending typically is heaviest during the fourth quarter.
Inflation
To date,Inflation has affected our costs in areas including, but not limited to, personnel and equipment. Inflation is a factor in our business and we continue to seek ways to mitigate its effect. We attempt to mitigate the impact of inflation has not hadby implementing continuous process improvement solutions to enhance productivity and efficiency and, as a material effect on our revenues, expenses, or results of operations, although no assurances can be provided that inflation in the future would not materially adversely affect us.
result, lower costs and operating expenses.
Federal Regulation of Radio Broadcasting
There are also regulations that impact competition within the radio industry. The ownership, operation and sale of radio broadcast stations, including those licensed to us, are subject to the jurisdiction of the FCC,Federal Communications Commission ("FCC"), which acts under authority of the Communications Act of 1934, as amended (the “Communications Act”"Communications Act"). Among its other regulatory responsibilities, the FCC issues permits and licenses to construct and operate radio stations; assigns broadcast frequencies; determines whether to approve changes in ownership or control of station licenses; regulates transmission equipment, operating power, and other technical parameters of stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; regulates the content of some forms of radio broadcast programming; and has the authority under the Communications Act to impose penalties for violations of its rules.
The following is a brief summary of certain provisions of the Communications Act, and related FCC rules and policies (collectively, the “Communications Laws”"Communications Laws"). This description does not purport to be comprehensive, and reference should be made to the Communications Laws, public notices, and decisions issued by the FCC for further information concerning the nature and extent of federal regulation of radio broadcast stations. Failure to observe the provisions of the Communications Laws can result in the imposition of various sanctions, including monetary forfeitures and the grant of a “short-term”"short-term" (less than the maximum term) license renewal. For particularly egregious violations, the FCC may deny a station’sstation's license renewal application, revoke a station’sstation's license, or deny applications in which an applicant seeks to acquire additional broadcast properties.
License Grant and Renewal
Radio broadcast licenses are generally granted and renewed for terms of up to eight years at a time. Licenses are renewed by filing an application with the FCC, which is subject to review and approval. The Communications Act expressly provides that a radio station is authorized to continue to operate after the expiration date of its existing license until the FCC acts on a pending renewal application. Petitions to deny license renewal applications may be filed by interested parties, including members of the public. The most recent renewal cycle for radio licenses began in June 2019 and concluded in April 2022. While we are not currently aware of any facts that would prevent the renewal ofhave historically been able to renew our licenses, to operate our radio stations, there can be no assurance that all of our licenses will be renewed in the future for a full term, or at all. Our inability to renew a significant portion of our radio broadcast licenses could result in a material adverse effect on our results of operations and financial condition.
Service Areas
The area served by an AM station is determined by a combination of frequency, transmitter power, antenna orientation, and soil conductivity. To determine the effective service area of an AM station, the station’sstation's power, operating frequency, antenna patterns and its day/night operating modes are evaluated. The area served by an FM station is determined by a combination of effective radiated power (“ERP”("ERP"), antenna height and terrain, with stations divided into eight classes according to these technical parameters.
Each class of FM radio station has the right to broadcast with a certain amount of ERP from an antenna located at a certain height above average terrain. The most powerful FM radio stations, which are generally those with the largest geographic reach, are Class C FM stations, which operate with up to the equivalent of 100 kilowatts (“kW”("kW") of ERP at an antenna height of 1,968 feet above average terrain. These stations typically provide service to a large area that covers one or more counties (which may or may not be in the same state). There are also Class C0, C1, C2 and C3 FM radio stations which operate with progressively less power and/or antenna height above average terrain and, thus, less geographic reach. In addition, Class B FM stations operate with the equivalent of up to 50 kW ERP at an antenna height of 492 feet above average terrain. Class B stations can serve large metropolitan areas and their outer suburban areas. Class B1 stations can operate with up to the equivalent of 25 kW ERP at an antenna height of 328 feet above average terrain. Class A FM stations operate with up to the equivalent of 6 kW ERP at an antenna height of 328 feet above average terrain, and often serve smaller cities or suburbs of larger cities.
The following table sets forth, as of March 21, 2018,February 20, 2024, by market, the market, call letters, city of license, frequency and FCC license expiration datenumber of all our owned and/orand operated stations, including stations operated under an LMA, whether or not pending acquisition, and all other announced pending station acquisitions, if any. Stations with a license expiration date prior to March 21, 2018 represent stations for which a renewal application has been timely filed with the FCC and is currently pending before the FCC. The Communications Act expressly provides that a radio station is authorized to continue to operate after the expiration date of its existing license until the FCC acts on a pending renewal application.
| | | | | | | | | | | | | | | | |
| Market | | Stations | | | | | | | | |
| Abilene, TX | | Market4 | | | Stations | | City of License | | Frequency | | Expiration
Date of License
| Albuquerque, NM | | 8 | | | | | | | | |
| Allentown, PA | | Abilene, TX5 | | | KBCY FM | | Tye, TX | | 99.7 | | August 1, 2021
| Amarillo, TX | | 5 | | | KCDD FM | | Hamlin, TX | | 103.7 | | August 1, 2021
| | | KHXS FM | | Merkel, TX | | 102.7 | | August 1, 2021 |
| | | KTLT FM | | Anson, TX | | 98.1 | | August 1, 2021 |
| Albany, GA | | WALG AM | | Albany, GA | | 1590 | | April 1, 2020 |
| | | WEGC FM | | Sasser, GA | | 107.7 | | April 1, 2020 |
| | | WJAD FM | | Leesburg, GA | | 103.5 | | April 1, 2020 |
| | | WKAK FM | | Albany, GA | | 104.5 | | April 1, 2020 |
| | | WNUQ FM | | Sylvester, GA | | 102.1 | | April 1, 2020 |
| | | WQVE FM | | Albany, GA | | 101.7 | | April 1, 2020 |
| Albuquerque, NM | | KKOB AM | | Albuquerque, NM | | 770 | | October 1, 2021 |
| | | KKOB FM | | Albuquerque, NM | | 93.3 | | October 1, 2021 |
| | | KMGA FM | | Albuquerque, NM | | 99.5 | | October 1, 2021 |
| | | KNML AM | | Albuquerque, NM | | 610 | | October 1, 2021 |
| | | KRST FM | | Albuquerque, NM | | 92.3 | | October 1, 2021 |
| | | KTBL AM | | Los Ranchos, NM | | 1050 | | October 1, 2021 |
| | | KDRF FM | | Albuquerque, NM | | 103.3 | | October 1, 2021 |
| | | KBZU FM | | Albuquerque, NM | | 96.3 | | October 1, 2012 |
| Allentown, PA | | WCTO FM | | Easton, PA | | 96.1 | | August 1, 2022 |
| | | WLEV FM | | Allentown, PA | | 100.7 | | August 1, 2022 |
| Amarillo, TX | | KPUR FM | | Claude, TX | | 95.7 | | August 1, 2021 |
| | | KPUR AM | | Amarillo, TX | | 1440 | | August 1, 2021 |
| | | KARX FM | | Canyon, TX | | 107.1 | | August 1, 2021 |
| | | KQIZ FM | | Amarillo, TX | | 93.1 | | August 1, 2021 |
| | | KNSH AM | | Canyon, TX | | 1550 | | August 1, 2021 |
| | | KZRK FM | | Canyon, TX | | 107.9 | | August 1, 2021 |
| Ann Arbor, MI | | 4 | | WLBY AM | | Saline, MI | | 1290 | | October 1, 2020 |
| Appleton, WI / Green Bay, MI | | 10 | | | WQKL FM | | Ann Arbor, MI | | 107.1 | | October 1, 2020
| Atlanta, GA | | 3 | | | WTKA AM | | Ann Arbor, MI | | 1050 | | October 1, 2020
| | | WWWW FM | | Ann Arbor, MI | | 102.9 | | October 1, 2020 |
| Appleton, WI | | WNAM AM | | Neenah Menasha, WI | | 1280 | | December 1, 2020 |
| | | WOSH AM | | Oshkosh, WI | | 1490 | | December 1, 2020 |
| | | WVBO FM | | Winneconne, WI | | 103.9 | | December 1, 2020 |
| | | WWWX FM | | Oshkosh, WI | | 96.9 | | December 1, 2020 |
| Atlanta, GA | | WKHX FM | | Marietta, GA | | 101.5 | | April 1, 2020 |
| | | WYAY FM | | Gainesville, GA | | 106.7 | | April 1, 2020 |
| | | WWWQ FM | | Atlanta, GA | | 99.7 | | April 1, 2020 |
| | | WNNX FM | | College Park, GA | | 100.5 | | April 1, 2020 |
| Baton Rouge, LA | | 4 | | KQXL FM | | New Roads, LA | | 106.5 | | June 1, 2020 |
| Beaumont, TX | | 5 | | | WRQQ FM | | Hammond, LA | | 103.3 | | June 1, 2020
| Birmingham, AL | | 6 | | | WEMX FM | | Kentwood, LA | | 94.1 | | June 1, 2020
| Bloomington, IL | | 5 | | | WIBR AM | | Baton Rouge, LA | | 1300 | | June 1, 2012
| Boise, ID | | 6 | | | WXOK AM | | Port Allen, LA | | 1460 | | June 1, 2020
| Buffalo, NY | | Beaumont, TX5 | | | KAYD FM | | Silsbee, TX | | 101.7 | | August 1, 2021
| Charleston, SC | | 5 | | | KBED AM | | Nederland, TX | | 1510 | | August 1, 2021
| Chattanooga, TN | | 4 | | | KIKR AM | | Beaumont, TX | | 1450 | | August 1, 2021
| Chicago, IL | | 3 | | | KQXY FM | | Beaumont, TX | | 94.1 | | August 1, 2021
| Cincinnati, OH | | 5 | | | | | | | | |
| Colorado Springs, CO | | KTCX FM6 | | | | | | | | |
| Columbia, MO | | Beaumont,7 | | | | | | | | |
| Columbia, SC | | 5 | | | | | | | | |
| Columbus-Starkville, MS | | 5 | | | | | | | | |
| Dallas, TX | | 7 | | 102.5 | | | | | | |
| Des Moines, IA | | 5 | | August | | | | | | |
| Detroit, MI | | 2 | | | | | | | | |
| Erie, PA | | 4 | | | | | | | | |
| Eugene, OR | | 5 | | | | | | | | |
| Fayetteville, AR | | 7 | | | | | | | | |
| Fayetteville, NC | | 4 | | | | | | | | |
| Flint, MI | | 5 | | | | | | | | |
| Florence, SC | | 8 | | | | | | | | |
| Fort Smith, AR | | 3 | | | | | | | | |
| Fresno, CA | | 5 | | | | | | | | |
| Ft. Walton Beach, FL | | 5 | | | | | | | | |
| Grand Rapids, MI | | 5 | | | | | | | | |
| Harrisburg, PA | | 5 | | | | | | | | |
| Houston, TX | | 1 2021 | | | | | | | | |
| Huntsville, AL | | 6 | | | | | | | | |
| Indianapolis, IN | | 6 | | | | | | | | |
| Johnson City, TN | | 5 | | | | | | | | |
| Kansas City, MO-KS | | 6 | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Market | | Stations | | | | | | | | |
| Knoxville, TN | | Market4 | | | Stations | | City of License | | Frequency | | Expiration
Date of License
| Kokomo, IN | | 1 | | | | | | | | |
| Lafayette, LA | | Birmingham, AL5 | | | WAPI AM | | Birmingham, AL | | 1070 | | April 1, 2020
| | | WJOX AM | | Birmingham, AL | | 690 | | April 1, 2020 |
| | | WJOX FM | | Birmingham, AL | | 94.5 | | April 1, 2020 |
| | | WZRR FM | | Birmingham, AL | | 99.5 | | April 1, 2020 |
| | | WUHT FM | | Birmingham, AL | | 107.7 | | April 1, 2020 |
| | | WJQX FM | | Birmingham, AL | | 100.5 | | April 1, 2020 |
| Blacksburg, VA | | WBRW FM | | Blacksburg, VA | | 105.3 | | October 1, 2019 |
| | | WFNR AM | | Blacksburg, VA | | 710 | | October 1, 2019 |
| | | WNMX FM | | Christiansburg, VA | | 100.7 | | October 1, 2019 |
| | | WRAD AM | | Radford, VA | | 1460 | | October 1, 2019 |
| | | WWBU FM | | Radford, VA | | 101.7 | | October 1, 2019 |
| | | WPSK FM | | Pulaski, VA | | 107.1 | | October 1, 2019 |
| Bloomington, IL | | WBNQ FM | | Bloomington, IL | | 101.5 | | December 1, 2020 |
| | | WBWN FM | | Le Roy, IL | | 104.1 | | December 1, 2020 |
| | | WJEZ FM | | Dwight, IL | | 98.9 | | December 1, 2020 |
| | | WJBC AM | | Bloomington, IL | | 1230 | | December 1, 2020 |
| | | WJBC FM | | Pontiac, IL | | 93.7 | | December 1, 2020 |
| Boise, ID | | KBOI AM | | Boise, ID | | 670 | | October 1, 2021 |
| | | KIZN FM | | Boise, ID | | 92.3 | | October 1, 2021 |
| | | KKGL FM | | Nampa, ID | | 96.9 | | October 1, 2021 |
| | | KQFC FM | | Boise, ID | | 97.9 | | October 1, 2021 |
| | | KTIK FM | | New Plymouth, ID | | 93.1 | | October 1, 2021 |
| | | KTIK AM | | Nampa, ID | | 1350 | | October 1, 2021 |
| Bridgeport, CT | | WEBE FM | | Westport, CT | | 107.9 | | April 1, 2022 |
| | | WICC AM | | Bridgeport, CT | | 600 | | April 1, 2022 |
| Buffalo, NY | | WEDG FM | | Buffalo, NY | | 103.3 | | June 1, 2022 |
| | | WGRF FM | | Buffalo, NY | | 96.9 | | June 1, 2022 |
| | | WHLD AM | | Niagara Falls, NY | | 1270 | | June 1, 2022 |
| | | WHTT FM | | Buffalo, NY | | 104.1 | | June 1, 2022 |
| | | WBBF AM | | Buffalo, NY | | 1120 | | June 1, 2022 |
| Charleston, SC | | WSSX FM | | Charleston, SC | | 95.1 | | December 1, 2019 |
| | | WIWF FM | | Charleston, SC | | 96.9 | | December 1, 2019 |
| | | WTMA AM | | Charleston, SC | | 1250 | | December 1, 2019 |
| | | WWWZ FM | | Summerville, SC | | 93.3 | | December 1, 2019 |
| | | WMGL FM | | Ravenel, SC | | 107.3 | | December 1, 2019 |
| Chattanooga, TN | | WGOW AM | | Chattanooga, TN | | 1150 | | August 1, 2020 |
| | | WGOW FM | | Soddy-Daisy, TN | | 102.3 | | August 1, 2020 |
| | | WOGT FM | | East Ridge, TN | | 107.9 | | August 1, 2020 |
| | | WSKZ FM | | Chattanooga, TN | | 106.5 | | August 1, 2020 |
| Chicago, IL | | WLS AM | | Chicago, IL | | 890 | | December 1, 2020 |
| | | WLS FM | | Chicago, IL | | 94.7 | | December 1, 2020 |
| | | WKQX FM | | Chicago, IL | | 101.1 | | December 1, 2020 |
| Cincinnati, OH | | WNNF FM | | Cincinnati, OH | | 94.1 | | October 1, 2020 |
| | | WOFX FM | | Cincinnati, OH | | 92.5 | | October 1, 2020 |
| | | WRRM FM | | Cincinnati, OH | | 98.5 | | October 1, 2020 |
| | | WGRR FM | | Hamilton, OH | | 103.5 | | October 1, 2020 |
| | | WFTK FM | | Lebanon, OH | | 96.5 | | October 1, 2020 |
| Colorado Springs, CO | | KKFM FM | | Colorado Springs, CO | | 98.1 | | April 1, 2021 |
| | | KKMG FM | | Pueblo, CO | | 98.9 | | April 1, 2021 |
| | | KKPK FM | | Colorado Springs, CO | | 92.9 | | April 1, 2021 |
| | | KCSF AM | | Colorado Springs, CO | | 1300 | | April 1, 2021 |
| | | KVOR AM | | Colorado Springs, CO | | 740 | | April 1, 2021 |
| | | KATC FM | | Colorado Springs, CO | | 95.1 | | April 1, 2021 |
|
| | | | | | | | | |
| Market | | Stations | | City of License | | Frequency | | Expiration
Date of License
|
|
| Columbia, MO | | KBBM FM | | Jefferson City, MO | | 100.1 | | February 1, 2021 |
| | | KBXR FM | | Columbia, MO | | 102.3 | | February 1, 2021 |
| | | KFRU AM | | Columbia, MO | | 1400 | | February 1, 2021 |
| | | KJMO FM | | Linn, Mo | | 97.5 | | February 1, 2021 |
| | | KLIK AM | | Jefferson City, MO | | 1240 | | February 1, 2021 |
| | | KOQL FM | | Ashland, MO | | 106.1 | | February 1, 2021 |
| | | KPLA FM | | Columbia, MO | | 101.5 | | February 1, 2021 |
| | | KZJF FM | | Jefferson City, MO | | 104.1 | | February 1, 2021 |
| Columbia, SC | | WISW AM | | Columbia, SC | | 1320 | | December 1, 2019 |
| | | WLXC FM | | Columbia, SC | | 103.1 | | December 1, 2019 |
| | | WNKT FM | | Eastover, SC | | 107.5 | | December 1, 2019 |
| | | WOMG FM | | Lexington, SC | | 98.5 | | December 1, 2019 |
| | | WTCB FM | | Orangeburg, SC | | 106.7 | | December 1, 2019 |
| Columbus-Starkville, MS | | WKOR FM | | Columbus, MS | | 94.9 | | June 1, 2020 |
| | | WMXU FM | | Starkville, MS | | 106.1 | | June 1, 2020 |
| | | WNMQ FM | | Columbus, MS | | 103.1 | | June 1, 2020 |
| | | WSMS FM | | Artesia, MS | | 99.9 | | June 1, 2020 |
| | | WSSO AM | | Starkville, MS | | 1230 | | June 1, 2020 |
| Dallas, TX | | WBAP AM | | Fort Worth, TX | | 820 | | August 1, 2021 |
| | | KSCS FM | | Fort Worth, TX | | 96.3 | | August 1, 2021 |
| | | KLIF AM | | Dallas, TX | | 570 | | August 1, 2021 |
| | | KPLX FM | | Fort Worth, TX | | 99.5 | | August 1, 2021 |
| | | KLIF FM | | Haltom City, TX | | 93.3 | | August 1, 2021 |
| | | KTCK AM | | Dallas, TX | | 1310 | | August 1, 2021 |
| | | KTCK FM | | Flower Mound, TX | | 96.7 | | August 1, 2021 |
| | | KESN FM | | Allen, TX | | 103.3 | | August 1, 2021 |
| Des Moines, IA | | KBGG AM | | Des Moines, IA | | 1700 | | February 1, 2021 |
| | | KHKI FM | | Des Moines, IA | | 97.3 | | February 1, 2021 |
| | | KGGO FM | | Des Moines, IA | | 94.9 | | February 1, 2021 |
| | | KJJY FM | | West Des Moines, IA | | 92.5 | | February 1, 2021 |
| | | KWQW FM | | Boone, IA | | 98.3 | | February 1, 2021 |
| Detroit, MI | | WJR AM | | Detroit, MI | | 760 | | October 1, 2020 |
| | | WDVD FM | | Detroit, MI | | 96.3 | | October 1, 2020 |
| | | WDRQ FM | | Detroit, MI | | 93.1 | | October 1, 2020 |
| Erie, PA | | WXKC FM | | Erie, PA | | 99.9 | | August 1, 2022 |
| | | WXTA FM | | Edinboro, PA | | 97.9 | | August 1, 2022 |
| | | WRIE AM | | Erie, PA | | 1260 | | August 1, 2022 |
| | | WQHZ FM | | Erie, PA | | 102.3 | | August 1, 2022 |
| Eugene, OR | | KEHK FM | | Brownsville, OR | | 102.3 | | February 1, 2022 |
| | | KSCR AM | | Eugene, OR | | 1320 | | February 1, 2022 |
| | | KUGN AM | | Eugene, OR | | 590 | | February 1, 2022 |
| | | KUJZ FM | | Creswell, OR | | 95.3 | | February 1, 2022 |
| | | KZEL FM | | Eugene, OR | | 96.1 | | February 1, 2022 |
| Fayetteville, AR | | KAMO FM | | Rogers, AR | | 94.3 | | June 1, 2020 |
| | | KFAY AM | | Farmington, AR | | 1030 | | June 1, 2020 |
| | | KQSM FM | | Fayetteville, AR | | 92.1 | | June 1, 2020 |
| | | KMCK FM | | Prairie Grove, AR | | 105.7 | | June 1, 2020 |
| | | KKEG FM | | Bentonville, AR | | 98.3 | | June 1, 2020 |
| | | KYNG AM | | Springdale, AR | | 1590 | | June 1, 2020 |
| | | KRMW FM | | Cedarville, AR | | 95 | | June 1, 2020 |
| Fayetteville, NC | | WFNC AM | | Fayetteville, NC | | 640 | | December 1, 2019 |
| | | WMGU FM | | Southern Pines, NC | | 106.9 | | December 1, 2019 |
| | | WQSM FM | | Fayetteville, NC | | 98.1 | | December 1, 2019 |
| | | WRCQ FM | | Dunn, NC | | 103.5 | | December 1, 2019 |
|
| | | | | | | | | |
| Market | | Stations | | City of License | | Frequency | | Expiration
Date of License
|
|
| Flint, MI | | WDZZ FM | | Flint, MI | | 92.7 | | October 1, 2020 |
| | | WWCK AM | | Flint, MI | | 1570 | | October 1, 2020 |
| | | WWCK FM | | Flint, MI | | 105.5 | | October 1, 2020 |
| | | WFBE FM | | Flint, MI | | 95.1 | | October 1, 2020 |
| | | WTRX AM | | Flint, MI | | 1330 | | October 1, 2020 |
| Florence, SC | | WBZF FM | | Hartsville, SC | | 98.5 | | December 1, 2019 |
| | | WCMG FM | | Latta, SC | | 94.3 | | December 1, 2019 |
| | | WQPD FM | | Marion, SC | | 100.5 | | December 1, 2019 |
| | | WMXT FM | | Pamplico, SC | | 102.1 | | December 1, 2019 |
| | | WWFN FM | | Lake City, SC | | 100.1 | | December 1, 2019 |
| | | WYMB AM | | Manning, SC | | 920 | | December 1, 2019 |
| | | WYNN AM | | Florence, SC | | 540 | | December 1, 2019 |
| | | WYNN FM | | Florence, SC | | 106.3 | | December 1, 2019 |
| Fort Smith, AR | | KBBQ FM | | Van Buren, AR | | 102.7 | | June 1, 2020 |
| | | KLSZ FM | | Fort Smith, AR | | 100.7 | | June 1, 2020 |
| | | KOMS FM | | Poteau, OK | | 107.3 | | June 1, 2021 |
| Fort Walton Beach, FL | | WFTW AM | | Ft Walton Beach, FL | | 1260 | | February 1, 2020 |
| | | WKSM FM | | Ft Walton Beach, FL | | 99.5 | | February 1, 2020 |
| | | WNCV FM | | Shalimar, FL | | 93.3 | | February 1, 2020 |
| | | WYZB FM | | Mary Esther, FL | | 105.5 | | February 1, 2020 |
| | | WZNS FM | | Ft Walton Beach, FL | | 96.5 | | February 1, 2020 |
| Fresno, CA | | KSKS FM | | Fresno, CA | | 93.7 | | December 1, 2021 |
| | | KMJ FM | | Fresno, CA | | 105.9 | | December 1, 2021 |
| | | KMJ AM | | Fresno, CA | | 580.0 | | December 1, 2021 |
| | | KMGV FM | | Fresno, CA | | 97.9 | | December 1, 2021 |
| | | KWYE FM | | Fresno, CA | | 101.1 | | December 1, 2021 |
| Grand Rapids, MI | | WJRW AM | | Grand Rapids, MI | | 1340 | | October 1, 2020 |
| | | WTNR FM | | Holland, MI | | 94.5 | | October 1, 2020 |
| | | WLAV FM | | Grand Rapids, MI | | 96.9 | | October 1, 2020 |
| | | WBBL FM | | Greenville, MI | | 107.3 | | October 1, 2020 |
| | | WHTS FM | | Coopersville, MI | | 105.3 | | October 1, 2020 |
| Green Bay, WI | | WDUZ AM | | Green Bay, WI | | 1400 | | December 1, 2020 |
| | | WDUZ FM | | Brillion, WI | | 107.5 | | December 1, 2020 |
| | | WKRU FM | | Allouez, WI | | 106.7 | | December 1, 2020 |
| | | WOGB FM | | Reedsville, WI | | 103.1 | | December 1, 2020 |
| | | WPCK FM | | Denmark, WI | | 104.9 | | December 1, 2020 |
| | | WQLH FM | | Green Bay, WI | | 98.5 | | December 1, 2020 |
| Harrisburg, PA | | WHGB AM | | Harrisburg, PA | | 1400 | | August 1, 2022 |
| | | WNNK FM | | Harrisburg, PA | | 104.1 | | August 1, 2022 |
| | | WWKL FM | | Mechanicsburg, PA | | 93.5 | | August 1, 2022 |
| | | WZCY FM | | Hershey, PA | | 106.7 | | August 1, 2022 |
| | | WQXA FM | | York, PA | | 105.7 | | August 1, 2022 |
| Houston, TX | | KRBE FM | | Houston, TX | | 104.1 | | August 1, 2021 |
| Huntsville, AL | | WHRP FM | | Gurley, AL | | 94.1 | | April 1, 2020 |
| | | WUMP AM | | Madison, AL | | 730 | | April 1, 2020 |
| | | WVNN AM | | Athens, AL | | 770 | | April 1, 2020 |
| | | WVNN FM | | Trinity, AL | | 92.5 | | April 1, 2020 |
| | | WWFF FM | | New Market, AL | | 93.3 | | April 1, 2020 |
| | | WZYP FM | | Athens, AL | | 104.3 | | April 1, 2020 |
| Indianapolis, IN | | WJJK FM | | Noblesville, IN | | 104.5 | | August 1, 2020 |
| | | WFMS FM | | Fishers, IN | | 95.5 | | August 1, 2020 |
|
| | | | | | | | | |
| Market | | Stations | | City of License | | Frequency | | Expiration
Date of License
|
|
| | | WYRG FM | | Lawrence, IN | | 93.9 | | August 1, 2020 |
| Johnson City, TN | | WXSM AM | | Blountville, TN | | 640 | | August 1, 2020 |
| | | WJCW AM | | Johnson City, TN | | 910 | | August 1, 2020 |
| | | WGOC AM | | Kingsport, TN | | 1320 | | August 1, 2020 |
| | | WKOS FM | | Kingsport, TN | | 104.9 | | August 1, 2020 |
| | | WQUT FM | | Johnson City, TN | | 101.5 | | August 1, 2020 |
| Kansas City, MO | | KCFX FM | | Harrisonville, MO | | 101.1 | | February 1, 2021 |
| | | KCHZ FM | | Ottawa, KS | | 95.7 | | June 1, 2021 |
| | | KCJK FM | | Garden City, MO | | 105.1 | | February 1, 2021 |
| | | KCMO AM | | Kansas City, MO | | 710 | | February 1, 2021 |
| | | KCMO FM | | Shawnee, KS | | 94.9 | | June 1, 2021 |
| | | KMJK FM | | North Kansas City, MO | | 107.3 | | February 1, 2021 |
| Knoxville, TN | | WIVK FM | | Knoxville, TN | | 107.7 | | August 1, 2020 |
| | | WNML AM | | Knoxville, TN | | 990 | | August 1, 2020 |
| | | WNML FM | | Friendsville, TN | | 99.1 | | August 1, 2020 |
| | | WOKI FM | | Oliver Springs, TN | | 98.7 | | August 1, 2020 |
| Kokomo, IN | | WWKI FM | | Kokomo, IN | | 100.5 | | August 1, 2020 |
| Lafayette, LA | | KNEK AM | | Washington, LA | | 1190 | | June 1, 2020 |
| | | KRRQ FM | | Lafayette, LA |
| 95.5 |
| June 1, 2020 |
| | | KSMB FM | | Lafayette, LA | | 94.5 | | June 1, 2020 |
| | | KXKC FM | | New Iberia, LA | | 99.1 | | June 1, 2020 |
| | | KNEK FM | | Washington, LA | | 104.7 | | June 1, 2020 |
| Lake Charles, LA | | 5 | | KAOK AM | | Lake Charles, LA | | 1400 | | June 1, 2020 |
| Lancaster, PA | | 1 | | | KBIU FM | | Lake Charles, LA | | 103.3 | | June 1, 2020
| Lexington, KY | | 5 | | | KKGB FM | | Sulphur, LA | | 101.3 | | June 1, 2020
| | | KQLK FM | | DeRidder, LA | | 97.9 | | June 1, 2020 |
| | | KXZZ AM | | Lake Charles, LA | | 1580 | | June 1, 2020 |
| | | KYKZ FM | | Lake Charles, LA | | 96.1 | | June 1, 2020 |
| Lancaster, PA | | WIOV FM | | Ephrata, PA | | 105.1 | | August 1, 2022 |
| | | WIOV AM | | Reading, PA | | 1240 | | August 1, 2022 |
| Lexington, KY | | WCYN FM | | Cynthiana, KY | | 102.3 | | August 1, 2020 |
| | | WLTO FM | | Nicholasville, KY | | 102.5 | | August 1, 2020 |
| | | WLXX FM | | Lexington, KY | | 92.9 | | August 1, 2020 |
| | | WVLK AM | | Lexington, KY | | 590 | | August 1, 2020 |
| | | WVLK FM | | Richmond, KY | | 101.5 | | August 1, 2020 |
| | | WXZZ FM | | Georgetown, KY | | 103.3 | | August 1, 2020 |
| Little Rock, AR | | 7 | | KAAY AM | | Little Rock, AR | | 1090 | | June 1, 2020 |
| | | KARN AM | | Little Rock, AR | | 920 | | June 1, 2020 |
| | | KIPR FM | | Pine Bluff, AR | | 92.3 | | June 1, 2020 |
| | | KLAL FM | | Wrightsville, AR | | 107.7 | | June 1, 2020 |
| | | KPZK AM | | Little Rock, AR | | 1250 | | June 1, 2020 |
| | | KURB FM | | Little Rock, AR | | 98.5 | | June 1, 2020 |
| | | KARN FM | | Sheridan, AR | | 102.9 | | June 1, 2020 |
| Los Angeles, CA | | 1 | | KABC AM | | Los Angeles, CA | | 790 | | December 1, 2021 |
| Macon, GA | | 5 | | | KLOS FM | | Los Angeles, CA | | 95.5 | | December 1, 2021
| Melbourne, FL | | Macon, GA4 | | | WAYS AM | | Macon, GA | | 1500 | | April 1, 2020
| Memphis, TN | | 4 | | | WDEN FM | | Macon, GA | | 99.1 | | April 1, 2020
| Minneapolis, MN | | 5 | | | WLZN FM | | Macon, GA | | 92.3 | | April 1, 2020
| Mobile, AL | | 5 | | | WMAC AM | | Macon, GA | | 940 | | April 1, 2020
| Modesto, CA / Stockton, CA | | 8 | | | WMGB FM | | Montezuma, GA | | 95.1 | | April 1, 2020
| Montgomery, AL | | 6 | | | WPEZ FM | | Jeffersonville, GA | | 93.7 | | April 1, 2020
|
| Muncie, IN | | 2 | | | | | | | | |
| Muskegon, MI | | Market5 | | | Stations | | City of License | | Frequency | | Expiration
Date of License
|
| Melbourne, FL | | WAOA FM | | Melbourne, FL | | 107.1 | | February 1, 2020 |
| | | WHKR FM | | Rockledge, FL | | 102.7 | | February 1, 2020 |
| | | WLZR AM | | Melbourne, FL | | 1560 | | February 1, 2020 |
| | | WROK-FM | | Sebastian, FL | | 95.9 | | February 1, 2020 |
| Memphis, TN | | WRBO FM | | Como, MS | | 103.5 | | June 1, 2020 |
| | | WGKX FM | | Memphis, TN | | 105.9 | | August 1, 2020 |
| | | WXMX FM | | Millington, TN | | 98.1 | | August 1, 2020 |
| | | WKIM FM | | Munford, TN | | 98.9 | | August 1, 2020 |
| Minneapolis, MN | | KQRS FM | | Golden Valley, MN | | 92.5 | | April 1, 2021 |
| | | KXXR FM | | Minneapolis, MN | | 93.7 | | April 1, 2021 |
| | | WGVX FM | | Lakeville, MN | | 105.1 | | April 1, 2021 |
| | | WRXP FM | | Cambridge, MN | | 105.3 | | April 1, 2021 |
| | | WWWM FM | | Eden Prairie, MN | | 105.7 | | April 1, 2021 |
| Mobile, AL | | WBLX FM | | Mobile, AL | | 92.9 | | April 1, 2020 |
| | | WDLT FM | | Saraland, AL | | 104.1 | | April 1, 2020 |
| | | WGOK AM | | Mobile, AL | | 900 | | April 1, 2020 |
| | | WXQW AM | | Fairhope, AL | | 660 | | April 1, 2020 |
| | | WABD FM | | Mobile, AL | | 97.5 | | April 1, 2020 |
| Modesto, CA | | KATM FM | | Modesto, CA | | 103.3 | | December 1, 2021 |
| | | KDJK FM | | Mariposa, CA | | 103.9 | | December 1, 2021 |
| | | KESP AM | | Modesto, CA | | 970 | | December 1, 2021 |
| | | KHKK FM | | Modesto, CA | | 104.1 | | December 1, 2021 |
| | | KHOP FM | | Oakdale, CA | | 95.1 | | December 1, 2021 |
| | | KWNN FM | | Turlock, CA | | 98.3 | | December 1, 2021 |
| Montgomery, AL | | WHHY FM | | Montgomery, AL | | 101.9 | | April 1, 2020 |
| | | WLWI AM | | Montgomery, AL | | 1440 | | April 1, 2020 |
| | | WLWI FM | | Montgomery, AL | | 92.3 | | April 1, 2020 |
| | | WMSP AM | | Montgomery, AL | | 740 | | April 1, 2020 |
| | | WMXS FM | | Montgomery, AL | | 103.3 | | April 1, 2020 |
| | | WXFX FM | | Prattville, AL | | 95.1 | | April 1, 2020 |
| Muncie, IN | | WLTI AM | | New Castle, IN | | 1550 | | August 1, 2020 |
| | | WMDH FM | | New Castle, IN | | 102.5 | | August 1, 2020 |
| Muskegon, MI | | WLCS FM | | North Muskegon, MI | | 98.3 | | October 1, 2020 |
| | | WKLQ AM | | Whitehall, MI | | 1490 | | October 1, 2020 |
| | | WVIB FM | | Holton, MI | | 100.1 | | October 1, 2020 |
| | | WLAW FM | | Newaygo, MI | | 92.5 | | October 1, 2020 |
| | | WWSN FM | | Whitehall, MI | | 97.5 | | October 1, 2020 |
| Myrtle Beach, SC | | 5 | | WDAI FM | | Pawleys Island, SC | | 98.5 | | December 1, 2011 |
| Nashville, TN | | 5 | | | WLFF FM | | Georgetown, SC | | 106.5 | | December 1, 2011
| | | WSEA FM | | Atlantic Beach, SC | | 100.3 | | December 1, 2011 |
| | | WSYN FM | | Surfside Beach, SC | | 103.1 | | December 1, 2011 |
| | | WRWM AM | | Conway, SC | | 1050 | | December 1, 2011 |
| Nashville, TN | | WQQK FM | | Goodlettsville, TN | | 92.1 | | August 1, 2020 |
| | | WSM FM | | Nashville, TN | | 95.5 | | August 1, 2020 |
| | | WWTN FM | | Hendersonville, TN | | 99.7 | | August 1, 2020 |
| | | WGFX FM | | Gallatin, TN | | 104.5 | | August 1, 2020 |
| | | WKDF FM | | Nashville, TN | | 103.3 | | August 1, 2020 |
| New London, CT | | 3 | | WQGN FM | | Groton, CT | | 105.5 | | April 1, 2022 |
| | | WXLM AM | | Groton, CT | | 980 | | April 1, 2022 |
| | | WMOS FM | | Stonington, CT | | 102.3 | | April 1, 2022 |
| New Orleans, LA | | 4 | | KMEZ FM | | Port Sulphur, LA | | 106.7 | | June 1, 2020 |
| | | KKND FM | | Belle Chasse, LA | | 102.9 | | June 1, 2020 |
| | | WRKN FM | | Laplace, LA | | 92.3 | | June 1, 2020 |
| | | WZRH FM | | Picayune, MS | | 106.1 | | June 1, 2020 |
|
| | | | | | | | | |
| Market | | Stations | | City of License | | Frequency | | Expiration
Date of License
|
|
| New York, NY | | WABC AM | | New York, NY | | 770 | | June 1, 2022 |
| | | WPLJ FM | | New York, NY | | 95.5 | | June 1, 2022 |
| | | WNSH FM | | Newark, NJ | | 94.7 | | June 1, 2022 |
| | | WNBM FM | | Bronxville, NY | | 103.9 | | June 1, 2022 |
| Oklahoma City, OK | | 6 | | KATT FM | | Oklahoma City, OK | | 100.5 | | June 1, 2021 |
| | | KKWD FM | | Bethany, OK | | 104.9 | | June 1, 2021 |
| | | WWLS FM | | The Village, OK | | 98.1 | | June 1, 2021 |
| | | KYIS FM | | Oklahoma City, OK | | 98.9 | | June 1, 2021 |
| | | KWPN AM | | Moore, OK | | 640 | | June 1, 2021 |
| | | WKY AM | | Oklahoma City, OK | | 930 | | June 1, 2021 |
| | | KQOB FM | | Enid, OK | | 96.9 | | June 1, 2021 |
| Oxnard-Ventura, CA | | KBBY FM | | Ventura, CA | | 95.1 | | December 1, 2021 |
| | | KHAY FM | | Ventura, CA | | 100.7 | | December 1, 2021 |
| | | KVEN AM | | Ventura, CA | | 1450 | | December 1, 2021 |
| | | KVYB FM | | / Santa Barbara, CA | | 4 | | 103.3 | | December 1, 2021 | | | | |
| Pensacola, FL | | 5 | | WCOA AM | | Pensacola, FL | | 1370 | | February 1, 2020 |
| Peoria, IL | | 5 | | | WRRX FM | | Gulf Breeze, FL | | 106.1 | | February 1, 2020
| Providence, RI | | 6 | | | WXBM FM | | Milton, FL | | 102.7 | | February 1, 2020
| Reno, NV | | 4 | | | WMEZ FM | | Pensacola, FL | | 94.1 | | February 1, 2020
| Saginaw, MI | | 4 | | | WJTQ FM | | Pensacola, FL | | 100.7 | | February 1, 2020
| Peoria, IL | | WGLO FM | | Pekin, IL | | 95.5 | | December 1, 2020 |
| | | WVEL AM | | Pekin, IL | | 1140 | | December 1, 2020 |
| | | WIXO FM | | Peoria, IL | | 105.7 | | December 1, 2020 |
| | | WFYR FM | | Elmwood, IL | | 97.3 | | December 1, 2020 |
| | | WZPW FM | | Peoria, IL | | 92.3 | | December 1, 2020 |
| Providence, RI | | WPRO AM | | Providence, RI | | 630 | | April 1, 2022 |
| | | WPRO FM | | Providence, RI | | 92.3 | | April 1, 2022 |
| | | WPRV AM | | Providence, RI | | 790 | | April 1, 2022 |
| | | WEAN FM | | Wakefield-Peacedale, RI | | 99.7 | | April 1, 2022 |
| | | WWLI FM | | Providence, RI | | 105.1 | | April 1, 2022 |
| | | WWKX FM | | Woonsocket, RI | | 106.3 | | April 1, 2022 |
| Reno, NV | | KBUL FM | | Carson City, NV | | 98.1 | | October 1, 2021 |
| | | KKOH AM | | Reno, NV | | 780 | | October 1, 2021 |
| | | KNEV FM | | Reno, NV | | 95.5 | | October 1, 2021 |
| | | KWYL FM | | South Lake Tahoe, CA | | 102.9 | | December 1, 2021 |
| Saginaw, MI | | WHNN FM | | Bay City, MI | | 96.1 | | October 1, 2020 |
| | | WILZ FM | | Saginaw, MI | | 104.5 | | October 1, 2020 |
| | | WIOG FM | | Bay City, MI | | 102.5 | | October 1, 2020 |
| | | WKQZ FM | | Midland, MI | | 93.3 | | October 1, 2020 |
| Salt Lake City, UT | | 6 | | KKAT AM | | Salt Lake City, UT | | 860 | | October 1, 2021 |
| | | KBEE FM | | Salt Lake City, UT | | 98.7 | | October 1, 2021 |
| | | KBER FM | | Ogden, UT | | 101.1 | | October 1, 2021 |
| | | KENZ FM | | Provo, UT | | 101.9 | | October 1, 2021 |
| | | KHTB FM | | Ogden, UT | | 94.9 | | October 1, 2021 |
| | | KUBL FM | | Salt Lake City, UT | | 93.3 | | October 1, 2021 |
| | | KRRF AM | | Murray, UT | | 1230 | | October 1, 2021 |
| San Francisco, CA | | 6 | | KGO AM | | San Francisco, CA | | 810 | | December 1, 2021 |
| Savannah, GA | | 4 | | | KSFO AM | | San Francisco, CA | | 560 | | December 1, 2021
| Shreveport, LA | | 5 | | | KFFG FM | | Los Gatos, CA | | 97.7 | | December 1, 2021
| Syracuse, NY | | 3 | | | KFOG FM | | San Francisco, CA | | 104.5 | | December 1, 2021
| Tallahassee, FL | | 4 | | | KNBR AM | | San Francisco, CA | | 680 | | December 1, 2021
| Toledo, OH | | 5 | | | KSAN FM | | San Mateo, CA | | 107.7 | | December 1, 2021
| Topeka, KS | | 6 | | | KTCT AM | | San Mateo, CA | | 1050 | | December 1, 2021
|
| Tucson, AZ | | 5 | | | | | | | | |
| Washington, DC | | Market2 | | | Stations | | City of License | | Frequency | | Expiration
Date of License
| Westchester, NY | | 1 | | | | | | | | |
| Santa Barbara, CA | | KRUZ FM | | Oak View, CA | | 106.3 | | December 1, 2021 |
| Savannah, GA | | WBMQ AM | | Savannah, GA | | 630 | | April 1, 2020 |
| | | WEAS FM | | Springfield, GA | | 93.1 | | April 1, 2020 |
| | | WIXV FM | | Savannah, GA | | 95.5 | | April 1, 2020 |
| | | WJCL FM | | Savannah, GA | | 96.5 | | April 1, 2020 |
| | | WJLG AM | | Savannah, GA | | 900 | | April 1, 2020 |
| | | WZAT FM | | Tybee Island, GA | | 102.1 | | April 1, 2020 |
| | | WTYB FM | | Bluffton, SC | | 103.9 | | December 1, 2019 |
| Shreveport, LA | | KMJJ FM | | Shreveport, LA | | 99.7 | | June 1, 2020 |
| | | KQHN FM | | Waskom, TX | | 97.3 | | August 1, 2021 |
| | | KRMD AM | | Shreveport, LA | | 1340 | | June 1, 2020 |
| | | KRMD FM | | Oil City, LA | | 101.1 | | June 1, 2020 |
| | | KVMA FM | | Shreveport, LA | | 102.9 | | June 1, 2020 |
| Springfield, MA | | WHLL AM | | Springfield, MA | | 1450 | | April 1, 2022 |
| | | WMAS FM | | Enfield, CT | | 94.7 | | April 1, 2022 |
| Stockton, CA | | KJOY FM | | Stockton, CA | | 99.3 | | December 1, 2021 |
| | | KWIN FM | | Lodi, CA | | 97.7 | | December 1, 2021 |
| Syracuse, NY | | WAQX FM | | Manlius, NY | | 95.7 | | June 1, 2022 |
| | | WXTL FM | | Syracuse, NY | | 105.9 | | June 1, 2022 |
| | | WSKO AM | | Syracuse, NY | | 1260 | | June 1, 2022 |
| | | WNTQ FM | | Syracuse, NY | | 93.1 | | June 1, 2022 |
| Tallahassee, FL | | WBZE FM | | Tallahassee, FL | | 98.9 | | February 1, 2020 |
| | | WGLF FM | | Tallahassee, FL | | 104.1 | | February 1, 2020 |
| | | WHBT AM | | Tallahassee, FL | | 1410 | | February 1, 2020 |
| | | WHBX FM | | Tallahassee, FL | | 96.1 | | February 1, 2020 |
| | | WWLD FM | | Cairo, GA | | 102.3 | | April 1, 2020 |
| Toledo, OH | | WKKO FM | | Toledo, OH | | 99.9 | | October 1, 2020 |
| | | WRQN FM | | Bowling Green, OH | | 93.5 | | October 1, 2020 |
| | | WQQO FM | | Sylvania, OH | | 105.5 | | October 1, 2020 |
| | | WXKR FM | | Port Clinton, OH | | 94.5 | | October 1, 2020 |
| | | WTOD FM | | Delta, OH | | 106.5 | | October 1, 2020 |
| | | WMIM FM | | Luna Pier, MI | | 98.3 | | October 1, 2020 |
| Topeka, KS | | KDVB FM | | Effingham, KS | | 96.9 | | June 1, 2021 |
| | | KDVV FM | | Topeka, KS | | 100.3 | | June 1, 2021 |
| | | KMAJ AM | | Topeka, KS | | 1440 | | June 1, 2021 |
| | | KMAJ FM | | Carbondale, KS | | 107.7 | | June 1, 2021 |
| | | KTOP FM | | St. Marys, KS | | 102.9 | | June 1, 2021 |
| | | KRWP FM | | Stockton, MO | | 107.7 | | February 1, 2021 |
| | | KTOP AM | | Topeka, KS | | 1490 | | June 1, 2021 |
| | | KWIC FM | | Topeka, KS | | 99.3 | | June 1, 2021 |
| Tucson, AZ | | KCUB AM | | Tucson, AZ | | 1290 | | October 1, 2021 |
| | | KHYT FM | | Tucson, AZ | | 107.5 | | October 1, 2021 |
| | | KIIM FM | | Tucson, AZ | | 99.5 | | October 1, 2021 |
| | | KSZR FM | | Oro Valley, AZ | | 97.5 | | October 1, 2021 |
| | | KTUC AM | | Tucson, AZ | | 1400 | | October 1, 2021 |
| Washington, DC | | WMAL AM | | Washington, DC | | 630 | | October 1, 2019 |
| | | WRQX FM | | Washington, DC | | 107.3 | | October 1, 2019 |
| | | WMAL FM | | Woodbridge, VA | | 105.9 | | October 1, 2019 |
| Westchester, NY | | WFAS AM | | White Plains, NY | | 1230 | | June 1, 2022 |
| Wichita Falls, TX | | 4 | | KLUR FM | | Wichita Falls, TX | | 99.9 | | August 1, 2021 |
| Wilkes-Barre, PA | | 5 | | | KOLI FM | | Electra, TX | | 94.9 | | August 1, 2021
| Wilmington, NC | | 5 | | | KQXC FM | | Wichita Falls, TX | | 103.9 | | August 1, 2021
| Worcester, MA | | 3 | | | KYYI FM | | Burkburnett, TX | | 104.7 | | August 1, 2021
|
| York, PA | | 3 | | | | | | | | |
| Youngstown, OH | | Market8 | | | Stations | | City of License | | Frequency | | Expiration
Date of License
|
| | Wilkes-Barre, PA | | WARM AM | | Scranton, PA | | 590 | | August 1, 2022
| | | WBHT FM | | Mountain Top, PA | | 97.1 | | August 1, 2022 |
| | | WBSX FM | | Hazleton, PA | | 97.9 | | August 1, 2022 |
| | | WSJR FM | | Dallas, PA | | 93.7 | | August 1, 2022 |
| | | WBHD FM | | Olyphant, PA | | 95.7 | | August 1, 2022 |
| | | WMGS FM | | Wilkes-Barre, PA | | 92.9 | | August 1, 2022 |
| Wilmington, NC | | WAAV AM | | Leland, NC | | 980 | | December 1, 2019 |
| | | WGNI FM | | Wilmington, NC | | 102.7 | | December 1, 2019 |
| | | WKXS FM | | Leland, NC | | 94.5 | | December 1, 2019 |
| | | WMNX FM | | Wilmington, NC | | 97.3 | | December 1, 2019 |
| | | WWQQ FM | | Wilmington, NC | | 101.3 | | December 1, 2019 |
| Worcester, MA | | WORC FM | | Webster, MA | | 98.9 | | April 1, 2022 |
| | | WWFX FM | | Southbridge, MA | | 100.1 | | April 1, 2022 |
| | | WXLO FM | | Fitchburg, MA | | 104.5 | | April 1, 2022 |
| York, PA | | WSOX FM | | Red Lion, PA | | 96.1 | | August 1, 2022 |
| | | WSBA AM | | York, PA | | 910 | | August 1, 2022 |
| | | WGLD AM | | Manchester Township, PA | | 1440 | | August 1, 2022 |
| | | WARM FM | | York, PA | | 103.3 | | August 1, 2022 |
| Youngstown, OH | | WBBW AM | | Youngstown, OH | | 1240 | | October 1, 2020 |
| | | WHOT FM | | Youngstown, OH | | 101.1 | | October 1, 2020 |
| | | WLLF FM | | Mercer, PA | | 96.7 | | August 1, 2022 |
| | | WPIC AM | | Sharon, PA | | 790 | | August 1, 2022 |
| | | WQXK FM | | Salem, OH | | 105.1 | | October 1, 2020 |
| | | WSOM AM | | Salem, OH | | 600 | | October 1, 2020 |
| | | WWIZ FM | | West Middlesex, PA | | 103.9 | | August 1, 2022 |
| | | WYFM FM | | Sharon, PA | | 102.9 | | August 1, 2022 |
Regulatory Approvals
The Communications Laws prohibit the assignment or transfer of control of a broadcast license without the prior approval of the FCC. In determining whether to grant an application for assignment or transfer of control of a broadcast license, the Communications Act requires the FCC to find that the assignment or transfer would serve the public interest. The FCC considers a number of factors in making this determination, including (1) compliance with various rules limiting common ownership or control of media properties,radio stations, (2) the financial and “character”"character" qualifications of the assignee or transferee (including those parties holding an “attributable”"attributable" interest in the assignee or transferee), (3) compliance with the Communications Act’sAct's foreign ownership restrictions, and (4) compliance with other Communications Laws, including those related to programming and filing requirements. As discussed in greater detail below, the FCC may also review the effect of proposed assignments and
transfers of broadcast licenses on economic competition and diversity. See “- Antitrust"Antitrust and Market Concentration Considerations.”Considerations" within Item 1, "Business."
In connection with our 2011 acquisition of Citadel Broadcasting Corporation and our emergence from Chapter 11 in June 2018, we acquired certain stations which Citadel waswere required to place in a divestiture trust in June 2007. Those were assigned to a trustee undercertain stations into divestiture trusts that complyin compliance with the FCC rules. The trust agreementagreements stipulated that we must fund any operating shortfalls from the activities of the stations in the trusts, and any excess cash flow generated by such stations will be distributed to us until the stations are sold. There are currently are onlyDuring the year ended December 31, 2023 and as of February 20, 2024, two stations remainingremain in that trust.
Ownership Matters
The Communications Act generally restricts uscompanies which control broadcast licenses from having more than 25% of ourtheir capital stock owned or voted by non-U.S. persons, foreign governments or non-U.S. corporations. The FCC granted a petition allowing us to have 100% foreign voting and/or equity ownership, subject to certain conditions. We are required to take steps to monitor the citizenship of our stockholders based principally on our review of ownership information that is known or reasonablereasonably should be known to us to establish a reasonable basis for certifying compliance with the foreign ownership restrictions of the Communications Act. In November 2013, the FCC issued a declaratory ruling in which it stated that it would review requests for companies to exceed the 25% alien ownership threshold in the Communications Act on a case-by-case basis. Since that time, the FCC acted on several petitions for declaratory ruling which requested that various entities be permitted to exceed the 25% foreign equity and voting limitations. In those cases, the FCC permitted foreign ownership of as much as 100% by both specifically-identified foreign persons and generally, subject to various conditions. These rulings were based upon the specific facts relating to the respective case, and it is uncertain how the FCC would treat any request which might be made to increase alien ownership of our stock in excess of the current threshold.
In September 2016, the FCC issued new policies governing how broadcast companies calculate the amount of their stock which is foreign held. These new policies permit a public company, which takes adequate steps to determine the extent to which its stock is foreign-owned or voted, to presume that shares as to which it lacks knowledge of foreign ownership or voting control do not raise a foreign ownership issue. Under previous FCC policies, stock which could not specifically be identified as owned and voted by U.S. citizens was presumed to be foreign held. The new rules also permit a specific foreign investor which has been approved by the FCC in a non-control context to increase its ownership in a broadcast company to 49.99%, and one which has been approved as a controlling party to increase its ownership to 100%, without further FCC approval.
The Communications Laws also generally restrict the number of radio stations one person or entity may own, operate or control in a local market. The Communications Laws formerly restricted (1) the common ownership, operation or control of radio broadcast stations and television broadcast stations serving the same local market, and (2) the common ownership, operation or control of a radio broadcast station and a daily newspaper serving the same local market, but those “cross ownership” rules were lifted byIn December 2022, the FCC effective in February 2018. However,released a Public Notice to commence its 2022 quadrennial review of its multiple ownership rules. The 2022 Public Notice is ongoing and did not make any specific proposals, but instead sought comment regarding whether the FCC’s action in liftinglocal radio ownership rule limits should be modified. In December 2023, the crossFCC issued a Report and Order completing the 2018 quadrennial review without making any significant changes to the radio ownership rules is currentlyrules. We cannot predict whether the subject of a petition for review filed in March 2018 by several public interest organizationsFCC in the U.S. Court of Appeals forfuture will adopt changes to the District of Columbia.local radio ownership rule or what impact any such changes would have on our holdings.
To our knowledge, these multiple ownership rules do not require any change in our current ownership of radio broadcast radio stations. The Communications Laws limit the number of additional stations that we may acquire in the future in our existing markets as well as any new markets. Notwithstanding the foregoing, we currently have grandfathered attributable interests in one (1) FM station in each of the following radio markets: Albany, GA, Columbia, MO, Green Bay, WI, and Toledo, OH. In connection with our emergence from bankruptcy, we will be required to divest one FM station in each of those radio markets.
Because of these multiple ownership rules, a purchaser of our voting stock who acquires an “attributable”"attributable" interest in Cumulus (as discussed below) may violate the Communications Laws if such purchaser also has an attributable interest in other radio broadcast stations, depending on the number and location of those radio stations. Such a purchaser may also may be restricted in theother companies in which it may invest to the extent that those investments give rise to an attributable interest. If one of our stockholders with an attributable interest violates any of these ownership rules, we may be unable to obtain from the FCC one or more authorizations from the FCC needed to conduct our radio station business and may be unable to obtain FCC consents for certain future acquisitions.
The FCC generally applies its broadcast multiple ownership rules by considering the “attributable”"attributable" interests held by a person or entity. With some exceptions, a person or entity will be deemed to hold an attributable interest in a radiobroadcast station if the person or entity serves as an officer, director, partner, stockholder, member, or, in certain cases, a debt holder of a company that owns that station. If an interest is attributable, the FCC treats the person or entity that holds that interest as the “owner”"owner" of the radio station in question, and, thus, that interest thus is attributed to the person in determining compliance with the FCC’sFCC's ownership rules.
With respect to a corporation, officers, directors and persons or entities that directly or indirectly hold 5% or more of the corporation’scorporation's voting stock (20% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other “passive investors”"passive investors" that hold such stock for investment purposes only) generally are attributed with ownership of the radio stationsmedia outlets owned by the corporation.corporation, unless the corporation has a single stockholder which owns more than 50% of the corporation’s voting stock. As discussed below, participation in an LMA or a joint sales agreement (“JSA”Joint Sales Agreement ("JSA") also may result in an attributable interest. See “- Local"Local Marketing Agreements”Agreements" and "-Joint"Joint Sales Agreements.Agreements" within Item 1, "Business."
With respect to a partnership (or limited liability company), the interest of a general partner (or managing member) is attributable. The following interests generally are not attributable: (1) debt instruments, non-voting stock, and options and warrants for voting stock, partnership interests or membership interests that have not yet been exercised; (2) limited partnership or limited liability company membership interests where (a) the limited partner or member is not “materially involved”"materially involved" in the media-related activities of the partnership or limited liability company, and (b) the limited partnership agreement or limited liability company agreement expressly “insulates”"insulates" the limited partner or member from such material involvement by inclusion of provisions specified in FCC rules;specific provisions; and (3) holdings of less than 5% of an entity’sa corporation's voting stock, non-voting equity and debt interests (unlessunless in any such case stock or other equity holdings, whether voting or non-voting and whether insulated or not, and/or debt interests, collectively constitute more
than 33% of a station’s “enterprisebroadcast station's "enterprise value," which consists of the total equity and debt capitalization, and the non-voting stockholder or equity-holder/debt holder has an attributable interest in another radio station in the same market or supplies more than 15% of the programming of the station owned by the entity in which such holder holds such stock, equity or debt interests).
Programming and Operation
The Communications Act requires broadcasters to serve the “public"public interest.”" To satisfy that obligation broadcasters are required by FCC rules and policies to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. FCC rules require that each radio broadcaster place a list in its public inspection file at the end of each quarter whichthat identifies important community issues and the programs the radio broadcaster used in the prior quarter to address those issues. The FCC requires that certain portions of a radio station’sRadio station public inspection file be uploadedfiles are maintained on the FCC's publicly-accessible online database, and station licensees are required to the FCC’s online data base.upload required information to their respective files.
Complaints from listeners concerning a station’sstation's programming may be filed at any time and will be considered by the FCC both at the time they are filed and in connection with a licensee’slicensee's renewal application. FCC rules also require broadcasters to provide equal employment opportunities (“EEO”("EEO") in the hiring of personnel, to abide by certain procedures in advertising employment opportunities, to make information available on employment opportunities on their website (if they have one), and maintain certain records concerning their compliance with EEO rules. The FCC will entertain individual complaints concerning a broadcast licensee’slicensee's failure to abide by the EEO rules butand also conducts random audits on broadcast licensees’licensees' compliance with EEO rules. We have been subject to numerous EEO audits. To date, none of those audits hashave disclosed any major violation that would have a material adverse effect on our cash flows, financial condition or operations. Stations also must follow provisions in the Communications Laws that regulate a variety of other activities, including political advertising, the broadcast of obscene or indecent programming, sponsorship identification, the broadcast of contests and lotteries, and technical operations (including limits on radio frequency radiation). In September 2015, the FCC adopted an order revising its rules that require a radio station to broadcast the material terms and conditions of any on-air contest. Under these, stations may satisfy that disclosure obligation by posting the material terms and conditions of an on-air contest on the station’s web site or on another publicly-available Internet site instead of broadcasting them over the air.
In October 2015, the FCC made changes to certain technical rules regarding the AM radio service, and also adopted procedures designed to make it easier for owners of AM stations to use FM translators to rebroadcast their AM stations’ signals. We cannot predict at this time the extent, if any, to which those rule changes and procedures will affect our operations.
We are and have been subject to listener complaints and FCC enforcement actions from time to time on a variety of matters, and, whilematters. While none of them hashave had a material adverse effect on our cash flows, financial condition or operations as a whole to date, we cannot predict whether any future complaint or action might have a material adverse effect on our futurecash flows, financial condition or results of operations.
Local Marketing Agreements
A number ofFrom time to time, radio stations including certain of our stations, have enteredenter into LMAs.Local Marketing Agreements ("LMAs"). In a typical LMA, the licensee of a station makes available, for a fee and reimbursement of its expenses, airtime on its station to a party which supplies programming to be broadcast during that airtime, and collects revenues from advertising aired during such programming. LMAs are subject to compliance with the antitrust laws and the Communications Laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances. As of December 31, 2023 and 2022, the Company did not operate any stations under LMA.
A station that brokers more than 15% of the weekly programming hours on another station in its market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC’sFCC's ownership rules. As a result, a radio station may not enter into an LMA that allows it to program more than 15% of the weekly programming hours of another station in the same market that it could not own under the FCC’sFCC's multiple ownership rules.
Joint Sales Agreements
From time to time, radio stations enter into a Joint Sales AgreementAgreements ("JSA"JSAs"). A typical JSA authorizes one party or station to sell another station’sstation's advertising time and retain the revenue from the sale of that airtime in exchange for a periodic payment to the station whose airtime is being sold (which may include a share of the revenue collected from the sale of airtime). Like LMAs, JSAs are subject to compliance with antitrust laws and the Communications Laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances.
Under the FCC’sFCC's ownership rules, a radio station that sells more than 15% of the weekly advertising time of another radio station in the same market will be attributed with the ownership of that other station. For that reason, a radio station cannot have a JSA with another radio station in the same market if the FCC’sFCC's ownership rules would otherwise prohibit that common ownership.
In January 2000, As of December 31, 2023 and 2022, the FCC released a Report and Order adopting rules for a new Low Power FM (“LPFM”) service consisting of two classes of radio stations, one with a maximum power of 100 watts and the other with a maximum power of 10 watts. On December 11, 2007, the FCC released a Report and Order which made changes in the rules and provided further protection for LPFM radio stations and, in certain circumstances, required full power stations (like the ones we own) to provide assistance to LPFM stations in the event they are subject to interference or are required to relocate their facilities to accommodate the inauguration of new or modified service by a full power radio station. The FCC has limited ownership and operation of LPFM stations to persons and entities that do not currently have an attributable interest in any FM station and has required that LPFM stations be operated on a non-commercial educational basis. The FCC has granted numerous construction permits for LPFM stations and many LPFM stations are now operating around the country. To date, LPFM radio stations have not had a material adverse effect on our financial condition or results of operations. The Local Radio Community Act of 2010 (the “LRCA”), which was signed into law in January 2011, requires the FCC to, among other things, (1) modify its rules to authorize LPFM stations to operate on second-adjacent channels to full-power radio stations, and (2) waive second-adjacent channel separation requirements if the proposed operation of an LPFM station would not cause interference to any authorized full-power station. This law required the FCC to complete a study within one year of enactment to assess the economic impact that LPFM stations have on full-power radio stations like the stations we own. In compliance with this law, the FCC issued several reports in 2012 in which it found that LPFM stations generally serve areas that are substantially smaller in size and population than those served by full-service commercial radio stations, that LPFM stations have less of an Internet presence than full-power stations, that LPFM stations offer program formats different than full-power stations, and that the average LPFM station located in a Nielsen Audio market has negligible ratings and a significantly smaller audience than most full-power stations in the same market.
The FCC’s action under the LRCA could increase the number of LPFM stations in markets where we have stations, and that increase could produce interference from LPFM stations to our stations. We cannot predict at this time whether the LRCA in particular or the advent of LPFM service in general will have a material adverse impact on our operations in the future. We also cannot predict whether LPFM service could increase competition for listeners and revenues and have a material adverse effect on our financial condition or results of operations.
On March 3, 2011, the FCC issued an order which would limit the ability of a broadcaster to move a radio station from one community to another. The FCC created a rebuttable presumption that would apply when a proposed community is located in an urbanized area or when the station could cover more than 50% of an urbanized area through the proposed community. In either of those circumstances, it would be presumed that the broadcaster intends to serve the entire urbanized area rather than the specified community and would not be allowed to change the station’s community of license unless the broadcaster presented a compelling case showing that (1) the proposed community is “truly” independent of the urbanized area, (2) the proposed community has a specific need for an outlet for local expression separate from the urbanized area, and (3) the station would be able to serve the community’s need for a local outlet. The FCC further explained that (1) in no event would it approve any proposal that would create an area that had no access to radio services or access to only one radio service, and (2) the FCC would “strongly disfavor” any community change that would result in the loss of third, fourth or fifth radio service to more than 15% of the population within a station’s existing service area or that would deprive any community of “substantial size” (meaning a community with a population of 7,500 or greater) of its second local service. In subsequent decisions, the FCC has clarified that its policyCompany does not apply to situations where a station is moving its community of license from one urbanized area to another urbanized area or from a community inside an urbanized area to another community in the same urbanized area. The FCC’s policy could nonetheless limit our options in relocating or acquiring radio stations and, to that extent, may have a material adverse impact on our operations.
operate under any JSAs.
Content, Licenses and Royalties
We must pay royalties to song composers and publishers whenever we broadcast musical compositions. Such copyright owners of musical compositions most often rely on intermediaries known as performing rights organizations ("PROs") to negotiate licenses with copyright users for the public performance of their compositions, collect royalties under such licenses and distribute them to copyright owners. We have obtained public performance licenses from, and pay license fees to, the three major PROs in the U.S., which are the American Society of Composers, Authors and Publishers ("ASCAP"), Broadcast Music, Inc. ("BMI") and SESAC, Inc. ("SESAC"). There is no guarantee that a given songwriter or publisher will remain associated with ASCAP, BMI or SESAC or that additional PROs will not emerge. In addition, from time to time the PROs conduct audits of royalty payments under their respective licenses, which could result in our being required to pay additional royalties.
In 2013, a new PRO was formed named Global Music Rights ("GMR"). GMR has secured the rights to certain copyrights and is seeking to negotiate individual licensing agreements with radio stations for songs in its repertoire. GMR and the Radio Music License Committee, Inc. ("RMLC"), which negotiates music licensing fees with PROs on behalf of many U.S. radio stations, instituted antitrust litigation against one another. During the pendency of the litigation, the Company accessed GMR’s library of songs through an interim license, and subsequently entered into a long-term license agreement with GMR in July 2021. In January 2022, RMLC and GMR reached a settlement of the litigation. Under that settlement, GMR offered radio stations which have not otherwise entered into a long-term agreement with GMR the opportunity to enter into a long-term license agreement as negotiated by the RMLC. Notwithstanding the foregoing, the withdrawal of a significant number of musical composition copyright owners from the three established PROs, or the emergence of one or more additional PROs in the future, could impact, and in some circumstances increase, our royalty rates and negotiation costs.
Federal law provides that owners of terrestrial broadcast stations such as those operated by Cumulus generally are not required to pay royalties to the holders of copyrights in sound recordings, such as recording artists and record labels, with respect to sound recordings broadcast over the air on those stations. From time to time, legislation has been introduced in the U.S. Congress which would require radio stations to pay such royalties. There can be no assurance that such legislation will not be enacted into law at some time in the future, nor as to the impact that such an obligation to pay royalties for sound recordings broadcast over the air would have on our results from operations, cash flows or financial position. We do pay royalties to holders of copyrights in sound recordings which we distribute through digital streaming platforms under a statutory license by making payments to Sound Exchange, the organization designated by the Copyright Royalty Board to collect and distribute royalties under that statutory license. From time-to-time Sound Exchange conducts audits of such royalty payments, which could result in our being required to pay additional royalties.
Antitrust and Market Concentration Considerations
In addition, fromFrom time to time, Congress and the FCC have considered, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership or profitability of our radio stations, result in the loss of audience share and advertising revenues for our radio stations, or affect our ability to acquire additional radio stations or finance such acquisitions.
The ownership of a radio broadcast station requires an FCC license, and the number of radio stations that an entity can own in a given market is limited under certain FCC rules. These FCC ownership rules may, in some instances, limit the number of stations we or our competitors can own or operate, or may limit potential new market entrants. However, FCC ownership rules may change in the future to reduce any protections they currently provide. We also cannot predict what other matters might be considered in the future by the FCC or Congress, including, for instance, radio royalty bills, nor can we assess in advance what impact, if any, the implementation of any of these proposals or changes might have on our business.
Potential future acquisitions, to the extent they meet specified size thresholds, will be subject to applicable waiting periods and possible review under the Hart-Scott-Rodino Act (“HSR Act”(the "HSR Act"), by the Department of Justice (the "DOJ”"DOJ") or the Federal Trade Commission (the “FTC”"FTC"), either of which can be required to, or can otherwise determinedecide to, evaluate a transaction to determine whether that transaction should be challenged under the federal antitrust laws. Transactions generally are subject to the HSR Act if the acquisition price or fair market value of the stations to be acquired is $80.8$111 million or more.more; however, the FTC recently announced an increase to the HSR size-of-transaction threshold to $119.5 million, which will become effective on March 6, 2024. Acquisitions that are not required to be reported under the HSR Act may still be investigated by the DOJ or the FTC under the antitrust laws before or after consummation. At any time before or after the consummation of a proposed acquisition, the DOJ or the FTC could take such action under the antitrust laws as it deems necessary, including seeking to enjoin the acquisition or seeking divestiture of the business acquired or certain of our other assets. The DOJ has reviewed numerous potential radio station acquisitions where an operator proposed to acquire additional stations in its existing markets or
multiple stations in new markets, and has challenged a number of such transactions. Some of these challenges have resulted in consent decrees requiring the sale of certain stations, the termination of LMAs or other relief. In general, the DOJ has more closely scrutinized radio mergers and acquisitions resulting in local market shares in excess of 35% of local radio advertising revenues, depending on format, signal strength and other factors. In December, 2023, the DOJ and FTC released merger guidelines adopting, among other things, a rebuttable presumption that mergers which result in a company having a greater than 30% market share, together with other factors, would harm competition. There is no precise numerical rule, however, and certain transactions resulting in more than 35% revenue shares have not been challenged, while certain other transactions may be challenged based on other criteria such as audience shares in one or more demographic groups as well as the percentage of revenue share. We estimate that we have more than a 35% share of radio advertising revenues in many of our markets.
We are aware that the DOJ commenced, and subsequently discontinued, investigations of several of our prior acquisitions. The DOJ can be expected to continue to enforce the antitrust laws in this manner, and there can be no assurance that future mergers, acquisitions and divestitures will not be the subject of an investigation or enforcement action by the DOJ or the FTC. Similarly, there can be no assurance that the DOJ, the FTC or the FCC will not prohibit such mergers, acquisitions and divestitures, require that they be restructured, or in appropriate cases, require that we divest stations we already own in a particular market or divest specific lines of business. In addition, private parties may under certain circumstances bring legal action to challenge ana merger, acquisition or divestiture under the antitrust laws.
As part of its review of certain radio station acquisitions, the DOJ has stated publicly that it believes that commencement of operations under LMAs, JSAs and other similar agreements customarily entered into in connection with radio station ownership assignments and transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act. In connection with acquisitions subject to the waiting period under the HSR Act, we will not commence operation of any affected station to be acquired under ana LMA, a JSA, or similar agreement until the waiting period has expired or been terminated.
No assurances can be provided that actual, threatened or possible future DOJ or FTC action in connection with potential transactions would not have a material adverse effect on our ability to enter into or consummate various transactions, or operate any acquired stations at any time in the future.
Information about our Executive Officers of the Company
The following table sets forth certain information with respect to our executive officers as of March 21, 2018:
| | | | | | | | | | | | | | |
| Name | | Age | | Position(s) |
| | | | |
Name | | Age | | Position(s) |
| Mary G. Berner | | 64 | | 58 | President and Chief Executive Officer |
John AbbotFrancisco J. Lopez-Balboa | | 63 | | 55 | Executive Vice President, Treasurer and Chief Financial Officer |
| Richard S. Denning | | 57 | | 51 | Senior Vice President, Secretary and General Counsel |
Suzanne M. Grimes | | 59 | | Executive Vice President, ofGeneral Counsel and Secretary |
| Collin R. Jones | | 37 | | Executive Vice President, Corporate MarketingStrategy and Development and President of Westwood One |
| Dave Milner | | 55 | | President of Operations |
| Bob Walker | | 63 | | President of Operations
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Mary G. Berner is our President and Chief Executive Officer.Officer ("CEO"). Ms. Berner was initially elected to the Board of Directors at our 2015 annual meeting of stockholders. Prior to being appointed as Chief Executive OfficerCEO in October 2015, Ms. Berner served as President and Chief Executive OfficerCEO of MPA - The Association of Magazine Media, a nonprofit trade association for the magazine media industry, since September 2012. From 2007 to 2011, she served as Chief Executive OfficerCEO of Reader's Digest Association. Before that, from November 1999 until January 2006, she led Fairchild Publications, Inc., first as President and Chief Executive OfficerCEO and then as President of Fairchild and as an officer of Condé Nast. She has also held leadership roles at Glamour and TV Guide, W, Women’s Wear Daily, Every Day with Rachael Ray and Allrecipes.com.Guide. Ms. Berner serves and has served on numerousa variety of industry and not-for-profit boards. Ms. Berner received her Bachelor of Arts degree in History from the College of the Holy Cross (Massachusetts).Cross.
John Abbot Francisco J. Lopez-Balboaisour Executive Vice President, Treasurer, and Chief Financial Officer.Officer ("CFO"). Mr. AbbotLopez-Balboa joined Cumulus Mediathe Company in July 2016, having most recentlyMarch 2020. Prior to joining the Company, Mr. Lopez-Balboa served as Executive Vice President and Chief Financial OfficerCFO of Telx HoldingsUnivision Communications Inc., a("Univision"), the leading provider of connectivity, co-location and cloud servicesmedia company serving Hispanic America, from 2015 to 2018. He has deep experience in the data center industry, from 2014media sector; prior to 2015. Prior to his service at Telx, whichjoining Univision, Mr. Lopez-Balboa was sold to Digital Realty Trust in October 2015, Mr. Abbot served as Chief Financial Officer of Insight Communications Company, Inc., a cable television business, for eight years. During the prior nine years, he worked in the Globalan investment banker working with Telecom, Media and Communications Group of the Investment Banking Division at Morgan Stanley, where heTechnology ("TMT") companies. Mr. Lopez-Balboa was a Managing Director. Mr. Abbot began his financial career as an associateDirector at Goldman, Sachs & Co., and prior to that served as a Surface Warfare Officer for more than 20 years where he last led the firm’s TMT Investment Grade Debt Financing business. Mr. Lopez-Balboa began his career in the U.S. Navy. He receivedInvestment Banking Capital Markets Group at Merrill, Lynch & Co. Mr. Lopez-Balboa currently serves on the board of directors of United Rentals, Inc. (NYSE: URI) and is a bachelor’s degreemember of that company’s Audit and
Compensation Committees.. Mr. Lopez-Balboa is an Emeritus Trustee of the Board of Visitors for the undergraduate college at Columbia University and is a Trustee and member of the Finance and Investment Committees for St. Mark’s School in Systems Engineering from the U.S. Naval Academy, an ME in Industrial Engineering from The Pennsylvania State University, andSouthborough, Massachusetts. Mr. Lopez-Balboa holds an MBA from Harvard Business School.University and Bachelor of Arts in Economics from Columbia University.
Richard S. Denning is our SeniorExecutive Vice President, SecretaryGeneral Counsel and General Counsel.Secretary. Prior to joining the Company in February 2002, Mr. Denning was an attorney with Dow, Lohnes & Albertson, PLLC (“("DL&A”&A") within DL&A’s&A's corporate practice group in Atlanta, advising a number of media and communications companies on a variety of corporate and transactional matters. Mr. Denning also spent four years in DL&A’s&A's Washington, D.C. office and has extensive experience in regulatory proceedings before the FCC. Mr. Denning has been a member of the Pennsylvania Bar since 1991, the District of Columbia Bar since 1993, and the Georgia Bar since 2000. He is a graduate of The National Law Center, George Washington University.
Suzanne M. GrimesCollin R. Jones is our Executive Vice President of Corporate MarketingStrategy & Development and President of Westwood One. In this role, he oversees strategic initiatives, investor relations and corporate development for the Company as well as leads our radio network, Westwood One; the Cumulus Podcast Network; and our daily deals and e-commerce platform, IncentRev/Sweet Deals. Mr. Jones began serving as President of Westwood One in January 2024 and joined the Company in November 2011 as Director of Corporate Strategy & Development. Prior to joining Cumulus Media in 2011, Mr. Jones held investment banking roles with Macquarie Capital and Argentum Group. He currently serves as the Radio Board Chair of the National Association of Broadcasters, and he previously served as the Vice Chair of the Radio Music License Committee. Mr. Jones received his Bachelor of Science degree in Economics from Duke University.
Dave Milner is our CompanyPresident of Operations since July 2021.In this role, he leads operations for our large market portfolio. Mr. Milner joined Cumulus Media in December 2014 as SVP, Operation of the Western Region. Prior to joining Cumulus Media, he was President/Market Manager of iHeart's Sacramento Market. Other key roles in his 30-year broadcasting career include Vice President of Sales for Entercom San Francisco, as well as Clear Channel Portland. He received a bachelor's degree from the University of Oregon.
Bob Walker is our President of Operations since July 2021. In this role, Bob's responsibility is for the vast majority of the markets where audiences are measured by Nielsen Audio ("Nielsen") using the Diary methodology or smaller markets with no audience measurement by Nielsen. He is also the co-Head of the Office of Programming for the Company. Mr. Walker joined Cumulus in January 2016, Ms. Grimes servedof 2013 as Founder and Chief Executive Officerthe Senior Vice President of Jott LLC since January 2015. From December 2012 to September 2014, Ms. Grimes served as President and Chief Operating Officer of Clear Channel Outdoor North America.Brand Solutions. Prior to that, Ms. Grimes founded SMG Advisors, a consultancyjoining Cumulus, Mr. Walker was the Executive Vice President-General Manager at The Weather Channel responsible for mediathe cable network. Mr. Walker began his career with Gannett (now Tegna) at WXIA-TV in Atlanta in 1988 and technology start-ups. Ms. Grimes has also held leadership rolesremained with Gannett for nearly 22 years where he ultimately became President-General Manager. Mr. Walker began his professional career at News Corp, Condé Nast and Reader’s Digest and previously served onArthur Andersen with the Board of the Outdoor Advertising Association of America and MPA - The Association of Magazine Media. Ms. Grimes earned aDenver office in 1982. He received his Bachelor of Science degree in Business Administration and Management from Georgetown University.the University of Colorado-Boulder.
Available Information
The Company files annual, quarterly and current reports, proxy statements and other information with the SEC.Securities Exchange Commission (the "SEC"). The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our Internet site address is www.cumulus.com.www.cumulusmedia.com. The information on our website is not incorporated by reference or part of this or any report we file with or furnish to the SEC. On our site, we make available, free of charge, our most recent Annual Report on Form 10-K, subsequent quarterly reports, current reports, our proxy statements and other information we file with the SEC, as soon as reasonably practicable after such documents are filed. You can access our SEC filings through our website by clicking the "SEC Filings" section under the "INVESTORS" tab.
Many statementsYou should carefully consider the risks described below and all of the information contained or incorporated by reference in this Report are forward-looking in nature. These statements are based on our current plans, intentions or expectations, and actual results could differ materially as we cannot guarantee that we will achieve these plans, intentions or expectations. See “— Cautionary Statement Regarding Forward-Looking Statements.” Forward-looking statements are subject to numerousReport. The risks and uncertainties including those specifically identified below. Thedescribed below are not the only risks and uncertainties that the Company cautions you not to place undue reliance on forward-looking statements, which speak only as of the date hereof.faces. Additional factorsrisks and uncertainties not presently known to the Company or that the Company does not currently believe to be material,deems immaterial may also cause actual results to differ materially from expectations. Except as may be required by law,impair the Company undertakes no obligation to update or alter these forward-looking statements, whether as a result of new information, future events, or otherwise.
We may not be able to obtain confirmation of the Plan.
With regard to any proposed plan of reorganization under chapter 11, a debtor seeking confirmation of a plan may not receive the requisite acceptances to confirm such plan.Company’s business operations. If the requisite acceptances of our Plan are received, we intend to seek confirmation of the Plan by the Bankruptcy Court. If the requisite acceptances of our Plan are not received from all classes of voting creditors, we may nevertheless seek confirmation of the Plan notwithstanding the existence of a dissenting class or classes. The Bankruptcy Court may confirm the Plan over the objection of a class of creditors pursuant to the provisions of the Bankruptcy Code if the plan satisfies section 1129(b) of the Bankruptcy Code. To confirm a plan over the objection of a dissenting class, the Bankruptcy Court also must find that at least one impaired class (which cannot be an “insider” class) has accepted the plan.
Even if the requisite acceptances of a proposed plan are received, the Bankruptcy Court is not obligated to confirm the plan as proposed. A dissenting holder of a claim against us could challenge the balloting procedures as not being in compliance with the Bankruptcy Code, which could mean that the results of the balloting may be invalid. If the Bankruptcy Court determined that the balloting procedures were appropriate and the results were valid, the Bankruptcy Court could still decline to confirm the Plan, if the Bankruptcy Court found that any of those risks occur, the statutory requirements for confirmation had not been met.
If our Plan is not confirmed by the Bankruptcy Court, (a) we may not be able to reorganize our businesses; (b) the distributions that holders of claims ultimately would receive, if any, with respect to their claims are uncertain; and (c) there is no assurance that we will be able to successfully develop, execute, confirm, and consummate an alternative plan that will be acceptable to the Bankruptcy Court and the holders of claims. It is also possible that third parties may seek and obtain approval from the Bankruptcy Court to terminate or shorten the exclusivity period during which only we may propose and confirm a plan of reorganization.
Our emergence from chapter 11 of the Bankruptcy Code is not assured.
While we expect to emerge from chapter 11 of the Bankruptcy Code, there can be no assurance that we will successfully reorganize or when this reorganization will occur, irrespective of our obtaining confirmation of the Plan.
Indebtedness may adversely affect Reorganized Cumulus operations and financial condition.
According to the terms and conditions of the Plan, upon confirmation, Reorganized Cumulus is expected to have outstanding indebtedness of approximately $1.3 billion under the New Term Loan.
Reorganized Cumulus's ability to service its debt obligations will depend upon, among other things, its future operating performance. These factors depend partly on economic, financial, competitive and other factors beyond Reorganized Cumulus’s control. Reorganized Cumulus may not be able to generate sufficient cash from operations to meet its debt service obligations as well as fund necessary capital expenditures. In addition, if Reorganized Cumulus needs to refinance its debt, obtain additional financing or sell assets or equity, it may not be able to do so on commercially reasonable terms, if at all.
Any default under the New First Lien Debt could adversely affect our growth, financial condition, results of operations, the value of our equity and ability to make payments on such debt. Reorganized Cumulus may incur significant additional debt in the future.
We may not be able to achieve our projected financial results.
The financial projections that we set forth represented management's best estimate of our future financial performance based on the information that was available to management at the time of the estimate. The estimates provided include information regarding future operations and the U.S. and world economies in our particular industry. Our actual financial results may differ significantly from the projections and, as such, could impact the Plan and confirmation of the Plan. If we do not achieve our projected financial results, the trading prices of our Reorganized Common Equity may be negatively affected, which could in turn prevent us from obtaining additional liquidity in the event we lack sufficient liquidity to continue operating as planned after the effective date of the Plan. Moreover, theCompany’s business, financial condition and results of operations could suffer. The risks discussed below also include forward-looking statements, and the Company’s actual results may differ substantially from those discussed in these forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements" for further information.
Operating Risks
Continued uncertain financial and after the effective date of the Planeconomic conditions. including inflation, may not be comparable to the financial condition orhave an adverse impact on our business, results of operations reflected in our historicalor financial statements.condition.
The New Term Loan Agreement is expected to contain certain restrictions and limitations that could significantly affect Reorganized Cumulus’s ability to operate its business, as well as significantly affect its liquidity.
The New Term Loan Agreement is expected to contain a number of significant covenants that could adversely affect Reorganized Cumulus’s ability to operate its businesses, as well as significantly affect its liquidity, and therefore could adversely affect Reorganized Cumulus’s results of operations. These covenants are expected to restrict (subject to certain exceptions) Reorganized Cumulus’s ability to: incur additional indebtedness; grant liens; consummate mergers, acquisitions, consolidations, liquidations and dissolutions; sell assets; make investments, loans and advances; make payments and modifications to subordinated and other material debt instruments; enter into transactions with affiliates; consummate sale-leaseback transactions; change its fiscal year; enter into hedging arrangements; allow third parties to manage its stations, and sell substantially all ofbe uncertain over the stations’ programming or advertising; transfer or assign FCC licenses to third parties; and change its lines of business.
The breach of any covenants or obligations in the New Term Loan, not otherwise waived or amended, could result in a default under the New Term Loan Agreement and could trigger acceleration of those obligations. Any default under the New Term Loan could adversely affect Reorganized Cumulus’s growth, financial condition, results of operations and ability to make payments on debt.
Upon our emergence from bankruptcy, the composition of our board of directors will change significantly.
Under the Plan, the composition of our board of directors will change significantly. The Restructuring Support Agreement contemplates upon emergence, the board of directors will be comprised of seven directors. The Consenting Creditors will designate six members in the aggregate,longer term and the remaining director will be the Presidentcontinuation or worsening of such conditions, including prolonged or increased inflationary developments, could reduce consumer confidence and Chief Executive Officer of Reorganized Cumulus. Accordingly, six of our seven directors are expected to be new to the Company. The new directors are likely to have different backgrounds, experiences and perspectives from those individuals who previously served on our board of directors and, thus, may have different views on the issues that will determine the future of the Company. As a result, the future strategy and plans of the Company may differ materially from those of the past.
The pursuit of the bankruptcy filing has consumed and will continue to consume a substantial portion of the time and attention of our management, which may have a materialan adverse effect on our business, and results of operations and/or financial condition. If consumer confidence were to decline, this decline could negatively affect our advertising customers’ businesses and we may face increased levels of employee attrition.
Leading up to and following commencement oftheir advertising budgets. In addition, volatile economic conditions could have a negative impact on our industry or the chapter 11 cases, our management was required to spend a significant amount of time and effort focusing on the filings. This diversion of attention may materially adversely affect the conductindustries of our customers who advertise on our stations, resulting in reduced advertising sales. Furthermore, it may be possible that actions taken by any governmental or regulatory body for the purpose of stabilizing the economy or financial markets will not achieve their intended effect. In addition to any negative direct consequences to our business and, as a result, our financial condition andor results of operations particularly if the Plan is not confirmed. During the continued pendencyarising from these financial and economic developments, some of the chapter 11 cases,these actions may adversely affect financial institutions, capital providers, advertisers or other consumers on whom we rely, including for access to future capital or financing arrangements necessary to support our employees are facing considerable distractionbusiness. Our inability to obtain financing in amounts and uncertainty and we may experience increased levels of employee attrition. A loss of key personnelat times necessary could make it more difficult or material erosion of employee morale could have a material adverse effect on our abilityimpossible to meet customer expectations, thereby adversely affecting our business and results of operations. In addition, we could experience losses of customers who may be concerned about our long-term viability.
Operating in bankruptcy for a long period of time may harm our business.
Our future results will be dependent upon the successful implementation of the Plan. A long period of operations under Bankruptcy Court protection could have a material adverse effect on our business, financial condition, results of operations, and liquidity. The longer the proceedings related to the Bankruptcy Filings continue, the more likely it is that customers and suppliers will lose confidenceobligations or otherwise take actions in our ability to reorganize our business successfully and will seek to establish alternative commercial relationships. So long as the proceedings related to these cases continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the Bankruptcy Filings, including the cost of litigation.
Our shares of common stock are not listed for trading on a national securities exchange.
Our Class A common stock currently trades on the OTC Pink Sheets maintained by the OTC Markets Group, Inc. (the “OTC Market”) and is not listed for trading on a national securities exchange. Investments in securities trading on the OTC Market are generally less liquid than investments in securities trading on a national securities exchange.
best interests.
The success of our business is dependent upon advertising revenues, which are seasonal and cyclical, and also fluctuate as a result of a number of factors, some of which are beyond our control.
Our main source of revenue is the sale of advertising. Our ability to sell advertising depends on, among other things:
•economic conditions in the areas where our stations are located and in the nation as a whole;
•national and local demand for radio and digital advertising;
•the popularity of the programming offered by our stations;programming;
•changes in the population demographics in the areas where our stations are located;
•local and national advertising price fluctuations, which can be affected by the availability of programming, the popularity of programming, and the relative supply of and demand for commercial advertising;
•the capability and effectiveness of our sales organization;
•our competitors’competitors' activities, including increased competition from other advertising-based mediums;
•decisions by advertisers to withdraw or delay planned advertising expenditures for any reason; and
•other factors beyond our control.
Our operations and revenues also tend to be seasonal in nature, with generally lower revenue generated in the first quarter of the year and generally higher revenue generated in the second and fourth quarters of the year. The seasonality of our business reflects the adult orientation of our formats and relationship between advertising purchases on these formats and the retail cycle. This seasonality causes and will likely continue to cause a variation in our quarterly operating results. Such variations could have a material effect on the timing of our cash flows. In addition, our revenues tend to fluctuate between years, consistent with, among other things, increased advertising expenditures in even-numbered years by political candidates, political parties and special interest groups. This political spending typically is heaviest during the fourth quarter.
We operate in a very competitive business environment and a decrease in our ratings or market share would adversely affect our revenues.
The radio broadcasting industry is very competitive. The success of each of our stations depends largely upon rates it can charge for its advertising which, in turn, depends on, among other things, the number of local advertising competitors and the overall demand for advertising within individual markets. These conditions are subject to change and highly susceptible to both micro- and macro-economic conditions.
Audience ratings and market shares fluctuate, and any adverse change in a particular market could have a material adverse effect on ratings and, consequently, the revenue of stations located in that market. While we already compete with other stations with comparable programming formats in many of our markets, any one of our stations could suffer a reduction in ratings or revenue and could require increased promotion and other expenses, and, consequently, could experience reduced operating results, if:
another radio station in the market were to convert its programming format to a format similar to our station or launch aggressive promotional campaigns;
a new station were to adopt a competitive format;
we experience increased competition from non-radio sources;
there is a shift in population, demographics, audience tastes or other factors beyond our control;
an existing competitor were to strengthen its operations; or
any one or all of our stations were unable to maintain or increase advertising revenue or market share for any other reasons.
The Telecommunications Act of 1996 ("Telecom Act") opened up markets to competition by removing regulatory barriers to entry. The Telecom Act may allow for the further consolidation of ownership of radio broadcasting stations in markets in which we operate or may operate in the future, which could further increase competition in these markets. In addition, some competing owners may be larger and have substantially more financial and other resources than we do, which could provide them with certain advantages in competing against us. The lifting of cross ownership rules by the FCC in 2018 further removed barriers to competition from local media companies who might purchase radio station in our markets. As a result of all the foregoing, there can be no assurance that the competitive environment will not affect us, and that any one or all of our stations will be able to maintain or increase advertising revenue market share.
The loss of affiliation agreements by our radio networks could materially adversely affect our financial condition and results of operations.
We have approximately 8,000more than 9,800 broadcast radio stations affiliated with our Westwood One network. Westwood One receives advertising inventory from its affiliated stations, either in the form of stand-alone advertising time within a specified time period or commercials inserted by its radio networks into their programming. In addition, primarily with respect to satellite radio providers, we receive a fee for providing such programming. The loss of network affiliation agreements by Westwood One could adversely affect our results of operations by reducing the advertising inventory available to us to sell and the audience available for our network programming and, therefore, its attractiveness to advertisers. Renewals of such agreements on less favorable terms may also adversely affect our results of operations through reductions of advertising revenue or increases in expenses.
Disruptions or security breaches of our information technology infrastructure could interfere with our operations, compromise client information and expose us to liability, possibly causing our business and reputation to suffer.
Any internal technology error or failure impacting systems hosted internally or externally by us or our third party service providers, or any interruption in technology infrastructure and access to data that we depend on, such as power, telecommunications or the Internet, may disrupt our business operations. Any individual, sustained or repeated failure or disruption of our third party service providers' technology or data could negatively impact our operations and result in increased costs or reduced revenues. Our technology systems and related data and those of our third party providers also may be
vulnerable to a variety of sources of interruption as a result of events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers, ransomware or other cybersecurity threats, and other information security issues. While we have in place, and continue to invest in, technology security initiatives and disaster recovery plans, these measures may not be adequate or implemented properly to prevent a business disruption and its adverse financial impact and consequences to our business's reputation.
In addition, as a part of our ordinary business operations, we may collect and store data about advertisers, vendors or other business partners and employees. The secure operation of the networks and systems on which this type of information is stored, processed and maintained is critical to our business operations and strategy. Any compromise of our technology systems resulting from cybersecurity incidents by hackers or breaches as a result of employee error or malfeasance could result in the loss, disclosure, misappropriation of or access to advertisers', vendors', employees', listeners' or business partners' information. Any such loss, disclosure, misappropriation or access could result in legal claims or proceedings, significant liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations and damage our reputation, any or all of which could have a material adverse effect on our business.
Although we have systems and processes in place to protect against risks associated with these incidents, including cybersecurity incidents, depending on the nature of an incident, these protections may not be fully sufficient. In addition, because techniques used in cybersecurity threats change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. An incident may not be detected until well after it occurs and the severity and potential impact may not be fully known for a substantial period of time after it has been discovered. We have experienced targeted cybersecurity threats and incidents in the past that have resulted in unauthorized persons gaining access to certain of our information systems, however, we are not aware of any incident having a material adverse effect on our business, results of operations or financial condition to date, and there can be no assurance that we will not experience future incidents that may be material.
We are dependent on key personnel.
Our business is and is expected to continue to be managed by a small number of key management and operating personnel, and the loss of one or more of these individuals could have a material adverse effect on our business. We believe that our future success will depend in large part on our ability to attract and retain highly skilled and qualified personnel and to effectively train and manage our employee base. Although we have entered into employment and other retention agreements with some of our key management personnel that include provisions restricting their ability to compete with us under specified circumstances, we cannot be assured that all of those restrictions would be enforced if challenged in court.
We also from time to time enter into agreements with on-air personalities with large loyal audiences in their individual markets and within the Westwood One network to protect our interests in those relationships that we believe to be valuable. The loss of one or more of these personalities could result in losses of audience share in that particular market which, in turn, could adversely affect revenues in that particular market.
Industry Risks
We operate in a very competitive business environment and a decrease in our ratings or market share would adversely affect our revenues.
We operate in a highly competitive industry, and we may not be able to maintain or increase our current audience ratings and advertising revenues. The success of each of our stations and digital offerings depends largely upon rates we can charge for advertising which, in turn, depends on, among other things, the audience ratings, the number of local advertising competitors and the overall demand for advertising within individual markets. These conditions are subject to change and highly susceptible to both micro- and macro-economic conditions.
Audience ratings and market shares fluctuate, and any adverse change in a particular market could have a material adverse effect on ratings and, consequently, the revenue of stations located in that market or digital offerings.
While we already compete with other stations with comparable programming formats in many of our markets, any one of our stations could suffer a reduction in ratings or revenue and could require increased promotion and other expenses, and, consequently, could experience reduced operating results, if:
•another radio station in the market were to convert its programming format to a format similar to our station or launch aggressive promotional campaigns;
•a new station were to adopt a competitive format;
•we experience increased competition for advertising revenues from non-radio sources, including large scale online advertising platforms, such as Amazon, Facebook and Google;
•there is a shift in population, demographics, audience tastes and listening preferences or other factors beyond our control;
•an existing competitor were to strengthen its operations; or
•any one or all of our stations were unable to maintain or increase advertising revenue or market share for any other reasons.
Similarly, our digital offerings continue to face competition from comparable offerings and formats, and may be subject to a reduction in ratings or revenue based on a number of factors, including, but not limited to, a shift in population, demographics, audience tastes and listening preferences or other factors beyond our control.
Some competing media companies are larger and have substantially more financial and other resources than we do, which could provide them with certain advantages in competing against us. In addition, any future relaxation of ownership rules by the FCC could remove existing barriers to competition from other media companies who might purchase radio stations in our markets. As a result of all the foregoing, there can be no assurance that the competitive environment will not affect us, and that any one or all of our stations will be able to maintain or increase advertising revenue market share.
We must continue to respond to the rapid changes in technology, services and standards that characterize our industry in order to remain competitive. Our failure to timely or appropriately respond to any such changes could materially adversely affect our business and results of operations.
The radio broadcasting industry is subject to technological change, evolving industry standards and the emergence of other media technologies and services with which we compete for listeners and advertising dollars. We may not have the resources to acquire and deploy other technologies or to create or introduce new services that could effectively compete with these other technologies. Competition arising from other technologies or regulatory change may have a material adverse effect on us, and on the radio broadcasting industry as a whole. Various other audio technologies and services have been developed which compete for listeners and advertising dollars traditionally spent on radio advertising including:
◦personal digital audio and video devices (e.g. smart phones, tablets);
◦satellite delivered digital radio services that offer numerous programming channels such as Sirius Satellite Radio;
◦audio programming by internet content providers, internet radio stations such as Spotify and Pandora, cable systems, direct broadcast satellite systems and other digital audio broadcast formats;
◦low power FM radio stations, which are non-commercial FM radio broadcast outlets that serve small, localized areas;
◦applications that permit users to listen to programming on a time-delayed basis and to fast-forward through programming and/or advertisements (e.g. podcasts); and
◦search engine and e-commerce websites where a significant portion of their revenues are derived from advertising dollars such as Google, Facebook and Yelp.
These or other new technologies have the potential to change the means by which advertisers can reach target audiences most effectively. We cannot predict the effect, if any, that competition arising from these or other technologies or regulatory change may have on the radio broadcasting industry as a whole.
Disruptions or security breachesFinancial Risks
The level and certain terms of our information technology infrastructureindebtedness could interfere withadversely affect our operations, compromise client informationfinancial condition and expose usimpair our ability to liability, possibly causingoperate our businessbusiness.
Our debt agreements contain a number of significant covenants that could adversely affect Cumulus's ability to operate its businesses, as well as significantly affect its liquidity, and reputationtherefore could adversely affect Cumulus's results of operations. These covenants restrict (subject to suffer.
Any internal technology error or failure impacting systems hosted internally or externally, or any large scale external interruption in technology infrastructure we depend on, such as power, telecommunications or the Internet, may disrupt our technology network. Any individual, sustained or repeated failure of technology could negatively impact our operationscertain exceptions) Cumulus's ability to: incur additional indebtedness; grant liens; consummate mergers, acquisitions, consolidations, liquidations and customer servicedissolutions; sell assets; make investments, loans and result in increased costs or reduced revenues. Our technology systemsadvances; make payments and related data also may be vulnerablemodifications to a variety of sources of interruption as a result of events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackerssubordinated and other security issues. While we have in place,material debt instruments; enter into transactions with affiliates; consummate sale-leaseback transactions; enter into hedging arrangements; allow third parties to manage its stations, and continue to invest in, technology security initiatives and disaster recovery plans, these measures may not be adequate or implemented properly to prevent a business disruption and its adverse financial impact and consequences to our business's reputation.
In addition, as a part of our ordinary business operations, we may collect and store sensitive data, including personal information of our clients, listeners and employees. The secure operationsell substantially all of the networksstations' programming or advertising; transfer or assign FCC licenses to third parties; and systems on which this typechange its lines of information is stored, processed and maintained is critical tobusiness.
The breach of any covenants or obligations in our business operations and strategy. Any compromise of our technology systems resulting from attacks by hackersdebt agreements, not otherwise waived or breaches as a result of employee error or malfeasanceamended, could result in a default under the loss, disclosure, misappropriationagreements and could trigger acceleration of or access to clients’, listeners’, employees’ or business partners’ information.those obligations. Any such loss, disclosure, misappropriation or accessdefault under our debt could result in legal claims or proceedings, significant liability or regulatory penalties under laws protecting the privacyadversely affect Cumulus's financial condition, results of personal information, disrupt operations and damage our reputation, any or all of which could have a material adverse affect our business.
ability to make payments on debt.
We have written off, and could in the future be required to write off a significant portion of the fair value of our FCC licenses, and goodwill, which may adversely affect our financial condition and results of operations.
As of December 31, 2017,2023, our FCC licenses and goodwill comprised 66.0%51.5% of our assets. Each year, and more frequently on an interim basis if appropriate, we are required by Accounting Standards Codification ("ASC") Topic 350, Intangibles — Goodwill and Other("ASC 350"), to assess the fair value of our FCC broadcast licenses and goodwill to determine whether the carrying valueamount of those assets is impaired. Significant judgments are required to estimate the fair value of reporting unitsthese assets including estimating future cash flows, near-term and long-term revenue growth, and determining appropriate discount rates, among other assumptions. During the year ended December 31, 2017,2023, we recorded ana total impairment charge of $335.9 million on our FCC licenses. During the year ended December 31, 2016, welicenses of $64.5 million which is recorded an impairment chargewithin Impairment of $603.1 millionIntangible Assets on our goodwill and FCC licenses.Consolidated Statements of Operations. Future impairment reviews could result in additional impairment charges. Any such impairment charges could materially adversely affect our financial results for the periods in which they are recorded.
Disruptions in the capital and credit markets, our bankruptcy filing or our substantial indebtedness could restrict our ability to access financing in the future.
Following our emergence from chapter 11 protection, Reorganized Cumulus may in the future need to rely on the capital and credit markets to meet our financial commitments or short-term liquidity needs if internal funds from operations are not sufficient for these purposes. Disruptions in the capital and credit markets could adversely affect our ability to access capital. Disruptions in the capital and credit markets may also result in increased costs associated with bank credit facilities and other sources of capital.
Longer term disruptions in the capital and credit markets as a result of market or business uncertainty, changing or increased regulation, or reduced financing alternatives could adversely affect our ability to access or obtain any future financing. Any such disruption could increase our costs, require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding could be arranged. Such measures could include higher cost financings, deferring capital expenditures and reducing or eliminating future uses of cash, any of which could materially adversely affect our business and results of operations.
In addition, access to capital markets or credit markets may not be available on favorable terms, or at all, because of our bankruptcy filings, our substantial level of indebtedness or otherwise. If we raise additional capital through debt financing, the financing may involve covenants that would further restrict our business activities. Restrictions on the access to necessary additional funding may cause us to cancel or delay certain projects, initiatives, or business activities and could have a material adverse effect on our financial condition and operating results.
We are exposed to credit risk on our accounts receivable. This risk is heightened during periods of uncertain economic conditions.
Our outstanding accounts receivable are not covered by collateral or credit insurance. While we have procedures to monitor and limit exposure to credit risk on our receivables, which risk is heightened during periods of uncertain economic conditions, there can be no assurance such procedures will effectively limit our credit risk and enable us to avoid losses, which could have a material adverse effect on our financial condition and operating results. We also maintain reserves to cover the uncollectibiltyuncollectibility of a portion of our accounts receivable. There can be no assurance that such bad debt reserves will be sufficient.
We are dependent on key personnel.
Our business isa holding company with no material independent assets or operations and is expected to continue to be managed by a small number of key management and operating personnel, and our loss of one or more of these individuals could have a material adverse effectwe depend on our business. subsidiaries for cash.
We believe thatare a holding company with no material independent assets or operations, other than our future success will dependinvestments in large part on our subsidiaries. Because we are a holding company, we are dependent upon the payment of dividends, distributions, loans or advances to us by our subsidiaries to fund our obligations. These payments could be or become subject to restrictions under applicable laws in the jurisdictions in which our subsidiaries operate. Payments by our subsidiaries are also contingent upon the subsidiaries' earnings. If we are unable to obtain sufficient funds from our subsidiaries to fund our obligations, our financial condition and ability to attractmeet our obligations may be adversely affected.
Legal and retain highly skilled and qualified personnel and to effectively train and manage our employee base. Although we have entered into employment and other retention agreements with some of our key management personnel that include provisions restricting their ability to compete with us under specified circumstances, we cannot be assured that all of those restrictions would be enforced if challenged in court.
We also from time to time enter into agreements with on-air personalities with large loyal audiences in their individual markets to protect our interests in those relationships that we believe to be valuable. The loss of one or more of these personalities could result in losses of audience share in that particular market which, in turn, could adversely affect revenues in that particular market.
Regulatory Risks
The broadcasting industry is subject to extensive and changing federal regulation.
The radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act. We are required to obtain licenses from the FCC to operate our stations. Licenses are normally granted for a term of eight years and are renewable. Although the vast majority of FCC radio station licenses are routinely renewed, we cannot assure you that the FCC will grant our existing or future renewal applications or that the renewals will not include conditions out of the ordinary course. The non-renewal, or renewal with conditions, of one or more of our licenses could have a material adverse effect on us.
We must also comply with the extensive FCC regulations and policies on the ownership and operation of our radio stations. FCC regulations limit the number of radio stations that a licensee can own in a market, which could restrict our ability to acquire radio stations that could be material to our overall financial performance or our financial performance in a particular market.
The FCC also requires radio stations to comply with certain technical requirements to limit interference between two or more radio stations. Despite those limitations, a dispute could arise whether another station is improperly interfering with the operation of one of our stations or another radio licensee could complain to the FCC that one of our stations is improperly interfering with that licensee’slicensee's station. There can be no assurance as to how the FCC might resolve thatsuch a dispute. These FCC regulations and others may change over time, and we cannot assure you that those changes would not have a material adverse effect on our business and results of operations.
Legislation and regulation of digital media businesses, including privacy and data protection regimes, could create unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change our digital media technology platform or business model.
U.S. and foreign governments have enacted, considered or are currently considering legislation or regulations that relate to digital advertising, including, for example, regulations related to the online collection and use of anonymous user data
and unique device identifiers, such as Internet Protocol addresses ("IP address"), unique mobile device identifiers or geo-location data and other privacy and data protection regulation. Such legislation or regulations could affect the costs of doing business online, and could reduce the demand for our digital solutions or otherwise harm our digital operations. For example, a wide variety of state, national and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. While we take measures to protect the security of information that we collect, use and disclose in the operation of our business, such measures may not always be effective. Data protection and privacy-related laws and regulations are evolving and could result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. In addition, it is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our business practices. Any failure, or perceived failure, by us to comply with U.S. federal, state, or international laws, including laws and regulations governing privacy, data security or consumer protection, could result in proceedings against us by governmental entities, consumers or others. Any such proceedings could force us to spend significant amounts in defense of these proceedings, distract our management, result in fines or require us to pay significant monetary damages, damage our reputation, adversely affect the demand for our services, increase our costs of doing business or otherwise cause us to change our business practices or limit or inhibit our ability to operate or expand our digital operationsoperations.
The FCC has been vigorous in its enforcement of its rules and regulations, including its indecency, sponsorship identification and EASEmergency Alert System ("EAS") rules, violations of which could have a material adverse effect on our business.
The Company is subject to many rules and regulations that govern the operations of its radio stations.stations, and these rules may change from time to time. The FCC has previously imposed, or sought tomay impose fines, on the Company, such as a $540,000 penalty imposed on us in early 2016 for sponsorship identification violations occurring in 2011, nearly all of which occurred prior to the Company’s ownership of the station and continued for approximately one month thereafter. The FCC also has shortened theshorten license renewal terms, for certain of our radio stationsor in rare cases fail to renew licenses, in response to rule violations. It also is not uncommon for a radio station and the FCC to seek to settle alleged rule violations prior to the issuance of an order that would impose fines and other penalties, but such settlements or consent decrees usually result in the station owner paying money to the FCC. NotwithstandingThe Company has been subject to FCC penalties in the past, and notwithstanding the efforts by the Company to prevent violations of FCC rules and regulations, however, it is likely that the Company will continue to be subject to such penalties (whether through the issuance of orders by the FCC or the execution of settlement agreements) given the number of radio stations owned and/orand operated by the Company, and those penalties cancould be substantial.
The FCC’sFCC regulations for instance, prohibit the broadcast of “obscene”"obscene" material at any time, and “indecent”"indecent" material between the hours of 6:00 a.m. and 10:00 p.m. ViolationsThe FCC has historically enforced licensee compliance in this area through the assessment of this rule can result in finesmonetary forfeitures. Such forfeitures may include: (i) imposition of the maximum authorized fine for egregious cases ($495,500 for a single violation or each day of a continuing violation, up to $325,000a maximum of $4,753,840 for each violation.a continuing violation); and (ii) imposition of fines on a per utterance basis instead of a single fine for an entire program. While we have no knowledge of any pending complaints before the FCC alleging that obscene or indecent material has been broadcast on any of our stations, such complaints may have been, or in the future may be, filed against our stations.
The FCC has recently increased its enforcement of regulations requiring a radio station to include an on-air announcement which identifies the sponsor of all advertisements and other matter broadcast by any radio station for which any money, service or other valuable consideration is received. Fines for such violations can be substantial as they are dependent on the number of times a particular advertisement is broadcast. In addition, the FCC has recently increased its enforcement with respect to failure to comply with requirements regarding the maintenance of public inspection files for each radio station, which are maintained on an FCC database and therefore are easily accessible by members of the public and the FCC. Similarly, the FCC has recently sought to impose substantial fines on broadcasters who transmit Emergency Alert System (“EAS”)EAS codes, or simulations thereof, in the absence of an actual emergency or authorized test of the EAS. In 2014, for instance, the FCC imposed a fine of $1.9 million on three media companies, and last yearin 2015, it imposed a fine of $1 million on a radio broadcaster, in 2019, it imposed a fine of $395,000 on a television network, and in 2023 it found a television network apparently liable for a fine of $504,000, in each case based on a determined misuse of EAS tones.
The Company is currently subject to, and may become subject to new, FCC inquiries or proceedings related to our stations’stations' broadcasts or operations. We cannot predict the outcome of such inquiries and proceedings, but to the extent that such inquiries or proceedings result in the imposition of fines (alone or in the aggregate), a settlement with the FCC, revocation of any of our station licenses or denials of license renewal applications, our results of operationoperations and business could be materially adversely affected.
Legislation could require radio broadcasters to pay additional royalties, including to additional parties such as record labels or recording artists.
We currently pay royalties to song composers and publishers through Broadcast Music Inc., the American Society of Composers, AuthorsBMI, ASCAP, SESAC and Publishers, SESAC, Inc. and Global Music Rights, LLCGMR but not to record labels or recording artists for exhibition or use of over the air broadcasts of music. From time to time, Congress considers legislation which could change the copyright fees and the procedures by which the fees are determined. Thedetermined and the entities to whom fees must be paid. Such legislation historically has been the subject of considerable debate and activity by the broadcast industry and other parties affected by the proposed legislation. It cannot be predicted whether any proposed future legislation will become law or what impact it would have on our results from operations, cash flows or financial position.
We are a holding company with no material independent assets or operations and we depend onRisks Related to Ownership of Our Class A Common Stock
The public market for our subsidiaries for cash.
We are a holding company with no material independent assets or operations, other than our investments in our subsidiaries. Because we are a holding company, we are dependent upon the payment of dividends, distributions, loans or advances to us by our subsidiaries to fund our obligations. These payments could be or become subject to restrictions under applicable laws in the jurisdictions in which our subsidiaries operate. Payments by our subsidiaries are also contingent upon the subsidiaries’ earnings. If we are unable to obtain sufficient funds from our subsidiaries to fund our obligations, our financial condition and ability to meet our obligationsClass A Common Stock may be adversely affected.volatile.
Cautionary Statement Regarding Forward-Looking Statements
This Form 10-K contains and incorporates by reference “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). For purposes of federal and state securities laws, forward-looking statements are all statements other than those of historical fact and are typically identified by the words “believes,”, "contemplates", “expects,” “anticipates,” “continues,” “intends,” “likely,” “may,” “plans,” “potential,” “should,” “will” and similar expressions, whether in the negative or the affirmative. These statements include statements regarding the intent, belief or current expectations of Cumulus and its directors and officers with respect to, among other things, future events, financial results and financial trends expected to impact Cumulus.
Such forward-looking statements are and will be, as the case mayThe market price for our Class A common stock could be subject to change and subject to many risks, uncertainties and other factors relating to our operations and business environment, which may cause our actual results to be materially different from any future results, expressed or implied, by such forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following:
our achievement of certain expected revenue results, includingwide fluctuations as a result of such factors or events that are unexpected or otherwise outsideas:
•the total number of shares of Class A common stock available to trade and the low trading volume of the stock;
•the total amount of our control;
the successful reorganization of our business in chapter 11, or when this reorganization will occur, irrespective of our obtaining confirmation of the Plan;
our capital structure upon any reorganization;
our ability to generate sufficient cash flows to service our debt and other obligationsindebtedness and our ability to access capital, including debt or equity;service that debt;
general economic or business •conditions affectingand trends in the radio broadcasting industry which may be less favorable than expected, decreasing spending by advertisers;industry;
•actual or anticipated variations in our operating results, including audience share ratings and financial results;
•estimates of our future performance and/or operations;
•changes in market conditions which could impair our goodwillfinancial estimates by securities analysts;
•technological innovations;
•competitive developments;
•adoption of new accounting standards affecting companies in general or intangible assets and the effects of any material impairment of our goodwill or intangible assets;
our ability to execute our business plan and strategy;
our ability to attract, motivate and/or retain key executives and associates;
increased competitionaffecting companies in the radio broadcasting industry in particular; and
•general market conditions and other factors.
Further, the stock markets, and in particular the NASDAQ Global Market, the market on which our abilityClass A common stock is listed, from time to time have experienced extreme price and volume fluctuations that were not necessarily related or proportionate to the operating performance of the affected companies. In addition, general economic, political and market conditions such as recessions, interest rate movements or international currency fluctuations, may adversely affect the market price of our Class A common stock.
The rights plan adopted by our Board may impair a takeover attempt.
On February 21, 2024, our Board adopted a rights plan and declared a dividend of (a) one Class A right (a "Class A Right") in respect of each share of Class A common stock and (b) one Class B right (a "Class B Right") in respect of each share of the Company's Class B common stock. The dividend is payable on March 4, 2024 to the Company’s stockholders of record on that date. If the Rights become exercisable, (a) each Class A Right would allow its holder to purchase from the Company one ten-thousandth of a Class A Common Share for a purchase price of $25.00 and (b) each Class B Right would allow its holder to purchase from the Company one ten-thousandth of a Class B Common Share for a purchase price of $25.00.
Generally, the Rights Agreement imposes a significant penalty upon any person or group (other than the Company or certain related persons) that is or becomes the beneficial owner of 15% or more of the outstanding Class A common stock without the prior approval of the Board. As a result, the shareholder rights plan could make it more difficult for a third party to acquire the Company or a large block of our common stock without the approval of our Board. Unless earlier redeemed or exchanged, the Rights will expire on February 20, 2025.
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| Item 1B. | Unresolved Staff Comments |
None.
Risk Management and Strategy
The Company has an integrated, cross-organizational risk management approach. As part of our overall risk management processes, we assess, identify and manage material risks from cybersecurity threats through our cybersecurity risk management program which leverages the National Institute of Standards and Technology (NIST) framework, organizing
cybersecurity risks into five categories: identify, protect, detect, respond and recover. However, this should not be interpreted to mean that we meet any particular technical standards, specifications, or requirements, only that we leveraged the NIST framework as a guide in the creation of our cybersecurity risk management program. We regularly assess the threat landscape and take a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection and mitigation. Our Chief Technology Officer and security team, led by the SVP of Information Technology and Security, (collectively, the "Cumulus Security Team") monitor cybersecurity incidents using a variety of security information and event management tools. Alerts from those tools are monitored 24/7 and addressed accordingly. The type of incident identified and severity level determine how issues are escalated and who is engaged for resolution. If a cybersecurity incident or aggregated series of incidents is deemed material, the incident is communicated to various members of the Company's leadership team and the Board of Directors. Disaster recovery plans are documented for key systems and would be followed in the event a security incident occurs.
The Company’s cybersecurity risk management program includes ongoing monitoring and testing of its information systems and data to identify and respond to changespotential cybersecurity threats. Internally, the Company utilizes various incident event management tools to monitor unauthorized account access, data exfilitration and server and network security. Multi-factor authentication and complex password requirements are enabled on all key systems and privileged account holders have separate administrative accounts. The Company engages consultants from time to time with expertise in technologynetwork vulnerabilities to perform periodic network penetration testing.
The Company’s cyber risk management program also includes regular security awareness training to educate employees and new hires on the Company’s cybersecurity policies, standards and practices. This training is supplemented by Company-wide testing initiatives, including periodic phishing tests. The Company provides specialized security training for certain employee roles such as application developers and privileged account holders.
In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with the use of third-party service providers. The Company utilizes an external risk management tool to assist with oversight and monitoring of third-party cybersecurity risk. Each third-party service provider is vetted, evaluated and scored based on its cybersecurity methodology. For many vendors of third-party hosted applications, we request copies of standard security reports or assessments, such as System and Organization Controls ("SOC") reports to support our assessment of our vendors’ security practices. If a third-party vendor was not able to provide the requested reports, we would take additional steps to assess their cybersecurity preparedness. Our assessment of risks associated with use of third-party providers is part of our overall cybersecurity risk management framework.
We have experienced targeted cybersecurity threats and incidents in orderthe past that have resulted in unauthorized persons gaining access to remain competitive;
disruptionscertain of our information systems, and we could in the future experience similar incidents. To date, no cybersecurity incident, or any risk from cybersecurity threats, has materially affected or has been determined to be reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition. For additional information regarding the risks from cybersecurity threats we face, see the section captioned "Operating Risks – Disruptions or security breaches of our information technology infrastructure;infrastructure could interfere with our operations, compromise client information and expose us to liability, possibly causing our business and reputation to suffer" within Part I, Item 1A "Risk Factors".
Governance
Our Board of Directors (our "Board") is responsible for risk oversight, and may delegate specific areas of oversight to committees of the impactBoard, which report to the full Board. The Audit Committee of current, pending or future legislationthe Board in turn is specifically charged with reviewing cybersecurity risk management and regulations, antitrust considerations,the steps management takes to monitor, control and pending or future litigation or claims;mitigate such risks. In connection with such review, the Audit Committee receives quarterly reports from the Chief Technology Officer on, among other things, the Company’s cybersecurity risks and threats, the status of projects to strengthen the Company’s information security systems, assessments of the Company’s security program and the emerging threat landscape. In addition to the quarterly reports, the Audit Committee performs an annual review of the Company’s cybersecurity program. The annual review consists of a summary of all systems, processes and staffing in place to mitigate a cybersecurity incident using the NIST framework as a guideline.
changes in regulatory or legislative policies or actions or in regulatory bodies;
changes in uncertain tax positionsOur Chief Technology Officer manages and tax rates;
changesmonitors the Company’s cybersecurity risk and has over 40 years of experience in the financial markets;
changes in capital expenditure requirements;
changes in interest rates;technology field. The Cumulus Security Team is responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture and processes.
the possibility that we may be unable to achieve any expected cost-saving or operational synergies in connection with any acquisitions or business improvement initiatives, or achieve them within the expected time periods;and23
other risks and uncertainties referenced from time to time in this Form 10-K and other filings
Many of these factors are beyond our control or are difficult to predict, and their ultimate impact could be material. We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date of this Form 10-K. Except as may be required by law, we do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.
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Item 1B. | Unresolved Staff Comments |
Not applicable.
The types of properties required to support each of our radio stations include studios, sales offices, and tower sites. A station’sstation's studios are generally housed with its offices in a business district within the station’sstation's community of license or largest nearby community. The tower sites are generally located in an area to provide maximum market coverage.
We own properties throughout our markets and also lease additional studio, office facilities, and tower sites in support of our business operations. We also lease corporate office space in Atlanta, Georgia, and office space in New York, New York; Dallas, Texas; Denver, ColoradoColorado; and Los Angeles, California, for the production and distribution of our radio network. We do not anticipate any difficulties in renewing any facility leases or in leasing alternative or additional space, if required. We own substantially all of our other equipment used in operating our stations and network, consisting principally of transmitting antennae, transmitters, studio equipment, and general office equipment.
No single property is material to our operations. We believe that our properties are generally in good condition and suitable for our operations; however, our studios, office space and transmission facilities require periodic maintenance and refurbishment.
On March 1, 2011, the Company and certain of our subsidiaries were named as defendants along with other radio companies, including Beasley Broadcast Group, Inc., CBS Radio, Inc., Entercom Communications, Greater Media, Inc. and Townsquare Media, LLC in a patent infringement suit. The case, Mission Abstract Data L.L.C., d/b/a Digimedia ("Plaintiff") v. Beasley Broadcast Group, Inc., et. al., Civil Action Case No: 1:11-mc-00176-LPS, U.S. District Court for the District of Delaware, alleged that the defendants have infringed on two of plaintiff’s patents entitled “Selection and Retrieval of Music from a Digital Database.” The Complaint sought unspecified damages. The Court stayed the case on November 14, 2011 pending reexamination of the patents-in-suit before the U.S. Patent Office. On June 6, 2012, Plaintiff filed a motion to lift the stay. On March 25, 2013, the Court entered an order denying Plaintiff’s motion to lift the stay. However, the Court ordered that “the stay shall be lifted upon the issuance of the Notice of Intent to Issue Reexamination Certifications (‘NIRC’)” for the two patents-in-suit. By operation of the Court’s Order, the stay was lifted on July 8, 2013, when the final NIRC was issued for the two patents-in-suit. Notwithstanding the foregoing, on November 27, 2017, the Plaintiff and defendants filed a stipulation of dismissal of the action and the action was dismissed with prejudice by court order in early December, 2017, thereby concluding the case.
In August 2015, the Company was named as a defendant in two separate putative class action lawsuits relating to its use and public performance of certain sound recordings fixed prior to February 15, 1972 (the "Pre-1972 Recordings"). The first suit, ABS Entertainment, Inc., et. al. v,v. Cumulus Media Inc., was filed in the United StatesU.S. District Court for the Central District of California and alleged, among other things, copyright infringement under California state law, common law conversion, misappropriation and unfair business practices. On December 11, 2015, this suit was dismissed without prejudice. The second suit, ABS Entertainment, Inc., v. Cumulus Media Inc., was filed in the United StatesU.S. District Court for the Southern District of New York and claimed, among other things, common law copyright infringement and unfair competition. The New York lawsuit was stayed pending an appeal before the Second Circuit involving unrelated third parties over whether the owner of a Pre-1972 Recording holds an exclusive right to publicly perform that recording under New York common law. On December 20, 2016, the New York Court of Appeals held that New York common law does not recognize a right of public performance for owners of pre-1972 Recordings. As a result of that case (to which Cumulus Media Inc., was not a party) the New York case against Cumulus Media Inc., was voluntarily dismissed by the plaintiffs on April 3, 2017. On October 11, 2018, President Trump signed the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (the "Music Modernization Act") into law, which, among other things, provides new federal rights going forward for owners of pre-1972 Recordings. The question of whether public performance rights existexisted for Pre-1972 recordings under state laws islaw prior to the enactment of the new Music Modernization Act was, until recently, still being litigated by other parties in California. On August 23, 2021, the Ninth Circuit held in the Ninthmatter of Flo & Eddie, Inc. v. Sirius XM Radio Inc., Case No. 17-55844, that no such public performance right exists under California law. But those plaintiffs continue to litigate a separate case, Flo & Eddie, Inc. v. Pandora Media, LLC, which is pending in the Central District of California (2:14-cv-07648-PSG-GJS). Pandora attempted to dismiss the lawsuit under California’s anti-SLAPP statute, claiming that its broadcast of Pre-1972 recordings constituted speech on an issue of public interest and Eleventh Circuits as a result of cases filed in California and Florida. Cumulus isthat Flo & Eddie’s claims have no merit. The district court denied the motion on the ground that the anti-SLAPP statute did not a party to those cases,cover Pandora’s conduct, and the Company is not yet ableNinth Circuit affirmed the denial (No. 20-56134). Following the Ninth Circuit’s direction to determine what effect those proceedings will have, if any,consider expedited motion practice on its financial position, resultsthe legal validity of operations or cash flows. The Company currently is, and expects that from time to timeFlo & Eddie’s claims given the Ninth Circuit’s decision in the future it will be, partySirius XM Radio case, the district court set a schedule for Pandora to orfile a defendantmotion for summary judgment, which was subsequently filed and briefed The motion was granted on July 25, 2023 in various other claims or lawsuitsPandora's favor. The district court found that are generally incidentalthere is an absence of a public performance right owned by plaintiff. A notice of appeal was filed by plaintiff on August 25, 2023, and subsequently dismissed by the court on September 19, 2023 in response to its business. The Company expects that it will vigorously contest any such claims or lawsuits and believes that the ultimate resolutionfiling by plaintiff of any such known claim or lawsuit will not have a material adverse effectmotion for voluntary dismissal. Based on the final determination of the dispute in Pandora's favor, the proceeding is unlikely to pose any material risk to the Company's consolidated financial position, results of operations or cash flows.
In the first quarter of 2016, CBS Radio Inc. ("CBS")On February 24, 2020, two individual plaintiffs filed a demandputative class action lawsuit against the Company in the U.S. District Court for arbitration against certainthe Northern District of Georgia (the "District Court") alleging claims regarding the Cumulus Media Inc. 401(k) Plan (the "Plan"). The case alleges that the Company breached its fiduciary duties under the Employee Retirement Income Security Act of 1974 in the oversight of the Company's subsidiaries. This action allegedPlan, principally by selecting and retaining certain investment options despite their higher fees and costs than other available investment options, causing participants in the Plan to pay excessive recordkeeping fees, and by failing to monitor other fiduciaries. The plaintiffs seek unspecified damages on behalf of a class of Plan participants from February 24, 2014 through the date of any judgment (the "Class Period"). On May 28, 2020, the Company filed a motion to dismiss the complaint. On December 17, 2020, the District Court entered an order dismissing one of the individual plaintiffs and all claims against the Company except those that certainarose on or after February 24, 2019 (i.e., one year prior to the filing of the Complaint). On March 24, 2021, the Company filed a motion seeking dismissal of all remaining claims. On October 15, 2021, the District Court entered an order granting the Company’s motion and dismissing all remaining claims. On November 12, 2021, one of the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. While the appeal was pending, the parties agreed to a settlement, that if granted final approval, will resolve all of the claims against the Company on a class-wide basis for the entire Class Period, and will provide the Company a general release. On February 16, 2023, the District Court granted preliminary approval to the settlement. On July 10, 2023, the Court held a fairness hearing and on July 11, 2023, the Court issued an order granting final approval to the settlement. All applicable appeal deadlines have expired and the Court's order approving the settlement is now final. The Company has made a settlement payment for which the Company was indemnified by one of its subsidiaries breachedinsurance carriers. The proceeds of the termssettlement are being distributed according to a plan of one or more contracts with CBS relating
to sports network radio programming and content. As previously disclosed, inallocation by the third quarter of 2016, the Company settled these claims in exchange for a one-time payment of $13.3 million. This payment was classified as a content cost in the accompanying Consolidated Statement of Operations for the year ended December 31, 2016.
District Court.
The Company currently is, and expects that from time to time in the future it will be, party to, or a defendant in, various other claims or lawsuits that are generally incidental to its business. The Company expects that it will vigorously contest any such claims or lawsuits and believes that the ultimate resolution of any such known claim or lawsuit will not have a material adverse effect on the Company's consolidatedCompany’s financial position, results of operations or cash flows.
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| Item 4. | Mine Safety Disclosures |
Not applicable.
PART II
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| Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Market Information Forfor Common Stock
On October 12, 2016, we effected a one-for-eight (1:8) reverse stock split (the "Reverse Stock Split"). As a result of the Reverse Stock Split, every eight shares of each class of the Company's outstandingOur Class A common stock were combined into one share ofis listed on the same class of common stock andNASDAQ Global Market under the authorized shares of each class of the Company's common stock were reduced by the same ratio. The par value of the Company's common stock was not adjusted as a result of the Reverse Stock Split.
symbol "CMLS." Shares of our Class AB common stock par value $0.01 per share, were delisted from the National Association of Securities Dealers Automated Quotations (the "NASDAQ") Capital Market as of November 22, 2017, because the Company wasare not compliant with Nasdaq Listing Rules 5550(a)(2) and 5550(b)(1). On November 29, 2017, the Company's stock began tradingpublicly traded, but they are convertible on the OTC Markets.
The following table sets forth, for the calendar quarters indicated, the high and low sales prices of thea share-for-share basis into Class A common stock as reported in published financial sources. Sales prices have been adjusted for all periods presented to reflect the impact of the Reverse Stock Split.
|
| | | | | | | |
| Year | High | | Low |
| 2016 | | | |
| First Quarter | $ | 0.60 |
| | $ | 0.18 |
|
| Second Quarter | $ | 0.50 |
| | $ | 0.26 |
|
| Third Quarter | $ | 0.45 |
| | $ | 0.29 |
|
| Fourth Quarter | $ | 2.40 |
| | $ | 0.30 |
|
| 2017 | | | |
| First Quarter | $ | 1.20 |
| | $ | 0.32 |
|
| Second Quarter | $ | 0.84 |
| | $ | 0.22 |
|
| Third Quarter | $ | 0.58 |
| | $ | 0.30 |
|
| Fourth Quarter | $ | 0.72 |
| | $ | 0.04 |
|
Holders
stock. As of March 21, 2018,February 20, 2024, there were approximately 606177 holders of record of our Class A common stock and one holder24 holders of record of our Class CB common stock. The number of holders of our Class A common stock does not include any estimate of the number of beneficial holders whose shares may be held of record by brokerage firms or clearing agencies.
Company Purchases
The table below sets forth information with respect to purchases of the Company's Class A common stock made by the Company during the quarter ended December 31, 2023:
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| Period | | Total Number of Shares Purchased (1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (3) |
| October 1, 2023 to October 31, 2023 | | — | | | $ | — | | | — | | | $ | 25,000 | |
| November 1, 2023 to November 30, 2023 | | — | | | — | | | — | | | 25,000 | |
| December 1, 2023 to December 31, 2023 | | — | | | — | | | | | 25,000 | |
| Total | | — | | | $ | — | | | — | | | $ | 25,000 | |
(1) During the three months ended December 31, 2023, the Company did not repurchase any shares of its outstanding Class A common stock.
(2) On May 4, 2022, the Board of Directors authorized a share repurchase program (the "prior share repurchase authorization") for up to $50.0 million of outstanding Class A common stock. The prior share repurchase authorization expired on November 3, 2023. On October 27, 2023, the Company announced that the Board of Directors authorized a new share repurchase program (the "current share repurchase authorization") for up to $25.0 million of outstanding Class A common stock. The current share repurchase authorization superseded and replaced our prior share repurchase authorization and expires on May 15, 2025. Purchases made pursuant to the program may be made from time to time, at the Company’s discretion, in the open market, through privately negotiated transactions or through other manners as permitted by federal securities laws including, but not limited to, 10b5-1 trading plans, accelerated stock repurchase programs and tender offers. The extent that the Company repurchases its shares, the number of shares and the timing of any repurchases will depend on general economic and market conditions, regulatory and legal requirements, alternative investment opportunities and other considerations. The repurchase program does not require the company to repurchase a minimum number of shares, and it may be modified, suspended or terminated at any time without prior notice.
(3) The Company's remaining outstanding Class A common stock available for repurchase under the share repurchase authorization excludes fees and expenses.
Dividends
We have not declared or paid any cash dividends on our common stock or repurchased stock since our inception and do not currently anticipate paying any cashinception. We may in the future pay dividends on our common stock inand/or repurchase stock depending on many factors, including, but not limited to, our earnings, financial condition and business environment, at the foreseeable future. We intend to retain future earnings for use indiscretion of our business. WeBoard of Directors. Also, we are currently subject to certain restrictions under the terms of our credit agreements with respect to the Credit Agreement and the Plan and our New First Lean Debt, and expect to be subject to restrictions under any credit agreement we enter into in connection with our emergence from protection under the Bankruptcy Code, that limit the amountpayment of dividends that we may pay on our common stock.dividends. For a more detailed discussion of the restrictions in our Credit Agreement,credit agreements, see Note 6, “Long-Term Debt”7, "Long-Term Debt" in the accompanying audited consolidated financial statements included elsewhere in this Form 10-K.
Stock Performance GraphSecurities Authorized for Issuance Under Equity Compensation Plans
The following graph compares the total stockholder return on our Class A common stock for the five-year period ended December 31, 2017 with thatinformation required by Item 201(d) of (1) the Standard & Poor’s 500 Stock Index (“S&P 500”); (2) NASDAQ; and (3) an index (the “Radio Index”) comprised of radio broadcast and media companies (see note (1) below). The total return calculationRegulation S-K is set forth below assumes $100 invested on December 31, 2012 with reinvestmentunder "Item 12. Security Ownership of dividends into additional shares of the same class of securities at the frequency with,Certain Beneficial Owners and in the amounts on, which dividends were paid on such securities through December 31, 2017. The stock price performance shown in the graph below should not be considered indicative of expected future stock price performance.
CUMULATIVE TOTAL RETURN
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 12/31/2012 | | 12/31/2013 | | 12/31/2014 | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 |
| Cumulus (1) | $ | 100.00 |
| | $ | 179.53 |
| | $ | 98.14 |
| | $ | 7.42 |
| | $ | 23.67 |
| | $ | 6.03 |
|
| S&P 500 Index | 100.00 |
| | 146.97 |
| | 163.71 |
| | 162.52 |
| | 178.02 |
| | 223.06 |
|
| NASDAQ Index | 100.00 |
| | 157.44 |
| | 178.53 |
| | 188.75 |
| | 209.51 |
| | 276.22 |
|
| Radio Index (2) | 100.00 |
| | 158.17 |
| | 131.44 |
| | 103.63 |
| | 146.87 |
| | 129.97 |
|
| |
(1) | As discussed in further detail above, the Company's common stock was delisted from the NASDAQ as of November 21, 2017, as such, the Company's stock price performance was calculated through that date. |
| |
(2) | The Radio Index consists of the following companies: Beasley Broadcast Group, Inc., iHeartMedia, Inc. (formerly Clear Channel Holdings, Inc.), Emmis Communications Corp., Entercom Communications Corp., Urban One, Inc. (formerly Radio One, Inc.), and Saga Communications, Inc. |
Pursuant to SEC rules, this “Stock Performance Graph” sectionManagement and Related Stockholder Matters" of this Form 10-K which information is not deemed “filed” with the SEC and shall not be deemed incorporated herein by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
|
| |
Item 6. | Selected Financial Data |
Set forth below is selected historical consolidated financial information for Cumulus as of and for the fiscal years ended December 31, 2017, 2016, 2015, 2014 and 2013 (dollars in thousands, except per share data). The selected historical consolidated financial information as of December 31, 2017 and 2016, and for the years ended December 31, 2017, 2016 and 2015, has been derived from our consolidated financial statements and related notes beginning on page F-2 of this Form 10-K. The selected historical consolidated financial information as of December 31, 2015, 2014 and 2013, and for the years ended December 31, 2014 and 2013, has been derived from our consolidated financial statements, and related notes previously filed with the SEC but not included or incorporated by reference herein.
Primarily as a result of our completion of a number of significant transactions in various of the periods reported, including the December 12, 2013 completion of our acquisition of Westwood One, Inc. (the "Westwood One Acquisition"), the November 14, 2013 completion of the sale to Townsquare Media, LLC (“Townsquare”) of 53 radio stations in twelve small and mid-sized markets for $235.0 million in cash and the swap with Townsquare of 15 radio stations in two small and mid-sized markets in exchange for 5 radio stations in Fresno, California (the "Townsquare Transaction") (with the stations swapped to Townsquare therein being treated as discontinued operations in all periods presented), each of whose operating results have been included in Cumulus’ financial statements since their respective dates of acquisition, and excluded since their dates of sale and various refinancing transactions from time to time, we believe that our results of operations for any period, and our financial condition at any date, provide only limited comparability to other periods. You are cautioned to not place undue reliance on any such comparison.
The selected historical consolidated financial information, which has been adjusted to reflect our October 12, 2016 one-for-eight (1:8) reverse stock split, presented below does not contain all of the information you should consider when evaluating Cumulus and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, and notes thereto, beginning on page F-2 of this Form 10-K. Various factors are expected to have an effect on our financial condition and results of operations in the future. You should also read this selected historical consolidated financial information in conjunction with the information under “Risk Factors” included elsewhere in this Annual Report on Form 10-K.
|
| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| STATEMENT OF OPERATIONS DATA: | | | | | | | | | |
| Net revenue | $ | 1,135,662 |
| | $ | 1,141,400 |
| | $ | 1,168,679 |
| | $ | 1,263,423 |
| | $ | 1,026,138 |
|
| Content costs | 402,978 |
| | 427,780 |
| | 396,426 |
| | 433,596 |
| | 264,871 |
|
| Selling, general & administrative expenses | 477,535 |
| | 472,900 |
| | 477,327 |
| | 470,441 |
| | 403,381 |
|
| Depreciation and amortization | 62,239 |
| | 87,267 |
| | 102,105 |
| | 115,275 |
| | 112,511 |
|
| LMA fees | 10,884 |
| | 12,824 |
| | 10,129 |
| | 7,195 |
| | 3,716 |
|
| Corporate expenses (including non-cash stock-based compensation expense) | 59,062 |
| | 40,148 |
| | 73,403 |
| | 76,428 |
| | 59,830 |
|
| (Gain) loss on sale of assets or stations | (2,499 | ) | | (95,695 | ) | | 2,856 |
| | (1,342 | ) | | (3,685 | ) |
| Impairment of intangible assets and goodwill (1) | 335,909 |
| | 604,965 |
| | 565,584 |
| | — |
| | — |
|
| Impairment charges - equity interest in Pulser Media Inc. | — |
| | — |
| | 19,364 |
| | — |
| | — |
|
| Operating (loss) income | (210,446 | ) | | (408,789 | ) | | (478,515 | ) | | 161,830 |
| | 187,366 |
|
| Reorganization items, net (2) | (31,603 | ) | | — |
| | — |
| | — |
| | — |
|
| Interest expense | (126,952 | ) | | (138,634 | ) | | (141,679 | ) | | (145,533 | ) | | (178,274 | ) |
| Interest income | 136 |
| | 493 |
| | 433 |
| | 1,388 |
| | 1,293 |
|
| (Loss) gain on early extinguishment of debt | (1,063 | ) | | 8,017 |
| | 13,222 |
| | — |
| | (34,934 | ) |
| Other (expense) income, net | (363 | ) | | 2,039 |
| | 14,205 |
| | 4,338 |
| | (302 | ) |
| (Loss) income from continuing operations before income taxes | (370,291 | ) | | (536,874 | ) | | (592,334 | ) | | 22,023 |
| | (24,851 | ) |
| Income tax benefit (expense) | 163,726 |
| | 26,154 |
| | 45,840 |
| | (10,254 | ) | | 68,464 |
|
| (Loss) income from continuing operations | (206,565 | ) | | (510,720 | ) | | (546,494 | ) | | 11,769 |
| | 43,613 |
|
| Income from discontinued operations, net of taxes | — |
| | — |
| | — |
| | — |
| | 132,470 |
|
| Net (loss) income | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) | | $ | 11,769 |
| | $ | 176,083 |
|
| Less: dividends declared and accretion of redeemable preferred stock | — |
| | — |
| | — |
| | — |
| | 10,676 |
|
| (Loss) income attributable to common shareholders | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) | | $ | 11,769 |
| | $ | 165,407 |
|
| Basic (loss) income per common share | $ | (7.05 | ) | | $ | (17.45 | ) | | $ | (18.72 | ) | | $ | 0.40 |
| | $ | 6.08 |
|
| Diluted (loss) income per common share | $ | (7.05 | ) | | $ | (17.45 | ) | | $ | (18.72 | ) | | $ | 0.40 |
| | $ | 6.00 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | |
| OTHER DATA: | | | | | | | | | | |
| Cash flows related to: | | | | | | | | | | |
| Operating activities | $ | 86,596 |
| | $ | 35,745 |
| | $ | 82,432 |
| | $ | 136,796 |
| | $ | 121,141 |
| |
| Investing activities | (26,816 | ) | | 83,854 |
| | (7,961 | ) | | (15,572 | ) | | (92,625 | ) | |
| Financing activities | (88,148 | ) | | (19,997 | ) | | (50,085 | ) | | (146,745 | ) | | 83,774 |
| |
| Capital expenditures | (31,932 | ) | | (23,037 | ) | | (19,236 | ) | | (19,006 | ) | | (11,081 | ) | |
| BALANCE SHEET DATA: | | | | | | | | | | |
| Total assets | $ | 2,027,319 |
| | $ | 2,412,691 |
| | $ | 3,002,388 |
| | $ | 3,717,572 |
| | $ | 3,838,128 |
| |
| Long-term debt (including current portion) | 2,332,209 |
| (3 | ) | 2,384,157 |
| | 2,402,901 |
| | 2,457,258 |
| | 2,594,586 |
| |
| Total stockholders’ (deficit) equity | $ | (696,115 | ) | | $ | (491,738 | ) | | $ | 16,032 |
| | $ | 541,580 |
| | $ | 512,740 |
| |
| |
(1) | Impairment charges in 2017, 2016 and 2015 were recorded in connection with our interim and annual impairment testing under ASC 350. See Note 4, “Intangible Assets and Goodwill,” in the consolidated financial statements included elsewhere in this Form 10-K for further discussion. |
| |
(2) | Reorganization items recorded in connection with our chapter 11 cases. See Note 9, “Reorganization Items, net,” in the consolidated financial statements included elsewhere in this Form 10-K for further discussion. |
| |
(3) | Long-term debt has been classified in the Company's liabilities subject to compromise as of December 31, 2017. |
| | | | | |
| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
General Overview
The following discussion of our financial condition and results of operations should be read in conjunction with the other information contained in this Form 10-K, including our consolidated financial statements and notes thereto beginning on page F-2 in this Form 10-K, as well as the information set forth in Item 1 "Business - Current Bankruptcy Proceedings" and Item 1A, "Risk Factors." This discussion, as well as various other sections of this Annual Report, contains and refers to statements that constitute “forward-looking statements”"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such statements are any statements other than those of historical fact and 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. For more information, see "Cautionary StatementsStatement Regarding Forward-Looking Statements.Statements" within Item 1A, "Risk Factors."
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 audited consolidated financial statements included elsewhere in this Annual Report. In addition, for information relating to our current expectations for liquidity and capital structure upon our emergence from chapter 11 of the Bankruptcy Code, see Item 1 "Business - Current Bankruptcy Proceedings." No assurances can be provided that our actual liquidity and capital structure will not differ materially from our expectations set out therein.Form 10-K.
Our Business and Operating Overview
A leader in the radio broadcasting industry, Cumulus (PINK: CMLSQ) combinesMedia is an audio-first media company delivering premium content to over a quarter billion people every month — wherever and whenever they want it. Cumulus Media engages listeners with high-quality local programming with iconic, nationally syndicated media,through 403 owned-and-operated stations across 85 markets; delivers nationally-syndicated sports, news, talk, and entertainment programming from iconic brands to deliver premium content choices to the 245 million people reached each week through its 445 owned-and-operated stations broadcasting in 90 US media markets (including eight of the top 10), approximately 8,000 broadcast radio stations affiliated with its Westwood One network and numerous digital channels. Together, the Cumulus/Westwood One platforms make Cumulus one of the few media companies that can provide advertisers with national reach and local impact. Cumulus/Westwood One is the exclusive radio broadcast partner to some of the largest brands in sports, entertainment, news, and talk, including the NFL, the NCAA, the Masters, the Olympics, the GRAMMYs,CNN, AP News, the Academy of Country Music Awards, the American Music Awards, the Billboard Music Awards,and many other world-class partners across more than 9,800 affiliated stations through Westwood One, News,the largest audio network in America; and more. Additionally,inspires listeners through the Cumulus Podcast Network, its rapidly growing network of original podcasts that are smart, entertaining and thought-provoking. Cumulus Media provides advertisers with personal connections, local impact and national reach through broadcast and on-demand digital, mobile, social, and voice-activated platforms, as well as integrated digital marketing services, powerful influencers, full-service audio solutions, industry-leading research and insights, and live event experiences. Cumulus Media is the nation's leading provider of country musiconly audio media company to provide marketers with local and lifestyle content through its NASH brand, which serves country fans nationwide through radio programming, exclusive digital content, and live events.national advertising performance guarantees.
We generate revenue through monetization of our programming content and other sources across the following fourthree major revenue streams:
Broadcast advertisingradio revenue. Most of our revenue is generated through the sale of terrestrial, also known as broadcast radio spot advertising time to local, regional, and national clients. Local spot and regional spot advertising is sold by Cumulus employedCumulus-employed sales executives.personnel. National spot advertising for our owned-and-operatedowned and operated stations is marketed and sold by both Katz Media in an outsourced arrangement as well as our own internal national sales team and Katz Media Group, Inc., in an outsourced arrangement.
In addition to local, regional and national spot advertising revenues, we monetize our available inventory in the network sales marketplace. To effectively deliver network advertising for our customers, we distribute content and programming through third party affiliates in order to reach 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 to us, which collectively marketsis then aggregated into packages focused on specific demographic groups and sold by us to advertisers under the sales brand of Westwood One Media Sales.our advertiser clients that want to reach those demographic groups on a national basis. Network advertising airing across our owned, operated and affiliated stations is sold by our internal sales team located across the United States under the Westwood One Networks brandU.S. to predominantly national and regional advertisers.
Digital advertising revenue. We generate digital advertising revenue from the sale of advertising and promotional opportunities across our streaming audio network, digital commerce platform, websites and mobile applications. We operate one of the largest streaming audio advertising networks in the United States, including owned and operated internet radio simulcast stations, and other third party digital audio companies with whom we have advertising reseller agreements. Through Cumulus Digital C-Suite, a comprehensive portfolio of digital marketing solutions, we sell digital advertising adjacent to, or embedded in, podcasts through our network of owned and third party podcasts. Additionally, our digital commerce platform utilizes couponing and discounted daily deals to create promotional opportunities for local, regional and national clients under our Sweet Deals 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. Political advertising revenue is generated across all of our broadcast and digital assets, but we 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 advertising revenue from special interest and advocacy groups.
License fees & other. All other non-advertising based revenue types in which the Company participates are aggregated in our License fees & other revenue category. This includes fees we receive for content licensing, third party network compensation, proprietary software licensing, subleases and rents (predominantly for owned towers), and all other revenue.
Current Bankruptcy Proceedings; Liquidity and Going Concern Considerations
On November 29, 2017 (the "Petition Date"), the Company and certain of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (the “Bankruptcy Petitions”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”. The Debtors' chapter 11 cases are being jointly administered under the caption In re Cumulus Media Inc., et al, Case No. 17-13381.
Immediately prior to the commencement of the case the Debtors entered into a Restructuring Support Agreement (the “Restructuring Support Agreement”) with certain creditors (the “Consenting Creditors”) under that certain Amended and Restated Credit Agreement, dated as of December 23, 2013 (the “Credit Agreement”), by and among the Company, Cumulus Media Holdings Inc., as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto from time to time, and Crestview Radio Investors, LLC and certain of its affiliates (the “Consenting Equityholders”). The Restructuring Support Agreement contemplates the implementation of a financial restructuring of the Debtors (as described below) through a conversion of more than $1.0 billion of the Company’s funded debt into equity (collectively, the “Restructuring”). The Restructuring will be effectuated by a joint plan of reorganization (the “Plan”) under chapter 11 of the Bankruptcy Code if confirmed by the Bankruptcy Court.
On December 1, 2017, the Bankruptcy Court approved certain motions and applications the Debtors filed on the Petition Date (the “First Day Motions”), certain of which were approved on an interim basis. On December 21, 2017, the Bankruptcy Court approved all of the Company’s First Day Motions on a final basis. Pursuant to the First Day Motions, and subject to certain terms and dollar limits included therein, the Company was authorized to continue to use its unrestricted cash on hand, as well as all cash generated from daily operations, which is being used to continue the Company’s operations without interruption during the course of its restructuring. Also pursuant to the First Day Motions, the Company received Bankruptcy Court authorization to, among other things and subject to the terms and conditions set forth in the applicable orders, pay certain pre-petition employee wages, salaries, health benefits and other employee obligations during its restructuring, pay certain claims relating to on-air talent and taxes, continue its cash management programs and insurance policies, as well as continue to honor its current customer programs. The Company is authorized under the Bankruptcy Code to pay post-petition expenses incurred in the ordinary course of business without seeking Bankruptcy Court approval. Until a plan of reorganization is approved and effective, the Debtors will continue to manage their properties and operate their businesses as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.
On December 9, 2017, the Debtors filed the Plan with the Bankruptcy Court and a related disclosure statement (the "Disclosure Statement") pursuant to chapter 11 of the Bankruptcy Code. On January 18, 2018, the Debtors filed with the Bankruptcy Court a first modified joint plan of reorganization and the related first modified disclosure statement for the Plan pursuant to chapter 11 of the Bankruptcy Code. The Plan and Disclosure Statement were further modified on January 31, 2018, February 2, 2018, February 12, 2018, and March 16, 2018. On February 2, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement and authorizing the solicitation of votes on the Plan.
Pursuant to the Plan, holders of claims with respect to the Term Loans (“Term Loan Claims”) would receive their pro rata share of approximately $1.3 billion in principal amount of new first lien term loans maturing in 2022 (the “New First Lien Debt”) and 83.5% of the issued and outstanding amount of common stock (the “Reorganized Common Equity”) to be issued by the reorganized Company (“Reorganized Cumulus”), subject to dilution by any Reorganized Common Equity issued pursuant to a post-emergence equity management incentive compensation plan (the “MIP”). Holders of unsecured claims against the Company, including claims arising from the Company’s 7.75% Senior Notes due 2019 (the “Notes”), would receive, in the aggregate, 16.5% of the Reorganized Common Equity, subject to dilution by the MIP. The New First Lien Debt would accrue interest at the London Inter-bank Offered Rate ("LIBOR") plus 4.50% per annum, subject to a LIBOR floor of 1.00% or, at Reorganized Cumulus’s option, an alternate base rate plus 3.50% per annum, subject to an alternate base rate floor of 2.00%. Reorganized Cumulus would be permitted to enter into a revolving credit facility or recievables providing commitments of up to $50.0 million. The New First Lien Debt would amortize in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount of the New First Lien Debt with the balance payable on the maturity date. Reorganized Cumulus would be able to voluntarily prepay the New First Lien Debt in whole or in part without premium or penalty, except that any prepayment during the period of six months following the issuance of the New First Lien Debt would require a premium equal to 1% of the prepaid principal amount. Certain mandatory prepayments on the New First Lien Debt would be required upon the occurrence of specified events as set forth in the Credit Agreement, including upon the sale of certain assets and from excess cash flow as defined. The New First Lien Debt would not have any financial maintenance covenants. The other terms and conditions of the New First Lien Debt would generally be similar to those set forth in the Credit Agreement, except as set forth in the term sheet attached to the Restructuring Support Agreement (the "Term Sheet"). The New First Lien Debt would be secured by first priority security interests in substantially all the assets of Reorganized Cumulus and the Guarantors (as defined below) in a manner substantially consistent with the Credit Agreement, subject to the terms of the term sheet. In addition, the direct parent of Reorganized Cumulus (the “Parent”) and all present and future wholly-owned subsidiaries of the Parent, subject to exceptions that are substantially consistent with those set forth in the Credit Agreement, would guarantee the New First Lien Debt (the "Guarantors"). The Plan contemplates that the Board of Directors of Reorganized Cumulus would consist of the President and Chief Executive Officer of the Company and six directors chosen by the Consenting Creditors. Even if the requisite acceptances of the Plan are received, the Bankruptcy Court is not obligated to confirm the Plan as proposed.
As of December 31, 2017, the Company had $102.9 million of unrestricted cash and cash equivalents. The Company has generated positive cash flows from operating activities of $86.6 million and $35.7 million for the years ended December 31, 2017 and 2016, respectively.
Prior to the filing of the Bankruptcy Petitions, our principal sources of funds had primarily been cash flow from operations and borrowings under credit facilities in existence from time to time. Our cash flow from operations remains subject to factors such as fluctuations in advertising media preferences and changes in demand caused by shifts in population, station listenership, demographics, and audience tastes. In addition, our cash flows may be affected if customers are not able to pay, or delay payment of, accounts receivable that are owed to us, which risks may be exacerbated in challenging or otherwise uncertain economic periods. In recent periods, the Company has experienced reductions in revenue and profitability from prior historical periods because of continuing market revenue pressures and cost escalations built into certain contracts. Notwithstanding this, 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. Future reductions in revenue or profitability are possible and could have a material adverse effect on the Company's results of operations, financial condition or liquidity.
From time to time we have evaluated, and expect that we will continue to evaluate, opportunities to obtain additional capital from the divestiture of radio stations or other assets where the net value accretion realized in a sale exceeds the value that management believes could be realized over time by continuing to operate the assets, that are not a part of, or do not complement, our strategic operations, subject to market and other conditions in existence at that time.
As of December 31, 2017, the Company had a $1.722 billion term loan outstanding under its Amended and Restated Credit Agreement, dated as of December 23, 2013 (the "Credit Agreement") which consists of a term loan (the "Term Loan") and a $200.0 million revolving credit facility (the "Revolving Credit Facility"). On May 13, 2011, the Company had $610.0 million of 7.75% Senior Notes (the "Senior Notes") outstanding. Amounts outstanding under the term loan are scheduled to mature on December 23, 2020 and the 7.75% Senior Notes mature on May 1, 2019. Notwithstanding these maturity dates, and as disclosed further in Note 6, the Credit Agreement includes a springing maturity provision that provides that if on January 30, 2019 the aggregate principal amount of 7.75% Senior Notes outstanding exceeds $200.0 million, the maturity date of the term loan will be accelerated to January 30, 2019. If the Plan is not approved, or the Company is unable to take other steps to create additional liquidity or otherwise avoid the occurrence of the springing maturity, forecasted cash flows would not be sufficient for the Company to meet its obligations as of January 30, 2019.
In connection with the Company's chapter 11 cases, the Company is required to make adequate protection payments on the Term Loan. The amounts of these payments are calculated under the terms described in Note 6 in the consolidated financial statements included elsewhere in the Form 10-K. During the pendency of the Bankruptcy Petitions, ASC 852 requires the Company to recognize the adequate protection payments as a reduction to the principal balance of the Term Loan.
In the event amounts were outstanding under the Revolving Credit Facility or any letters of credit were outstanding that had not been collateralized by cash as of the end of each quarter, the Credit Agreement required compliance with a consolidated first lien leverage ratio covenant. The required ratio at December 31, 2017 and 2016 was 4.25 to 1 and 5.00 to 1, respectively. The ratio was to decrease to 4.0 to 1 at March 31, 2018. At December 31, 2017, the Company's actual leverage ratio would have been in excess of the required ratio. As a result of our Bankruptcy Petitions, the Revolving Credit Facility was terminated, as such, at December 31, 2017 we had no borrowings outstanding under the Revolving Credit Facility.
On October 30, 2017, the Restructuring Committee of the Board of Directors authorized the Company to forgo the scheduled interest payment on the 7.75% Senior Notes on November 1, 2017 of approximately $23.6 million. This nonpayment constituted a default under the terms of the indenture governing the 7.75% Senior Notes. The Company will continue to forgo future interest payments while under bankruptcy protection. The commencement of the chapter 11 cases also constituted an event of default under the terms of the indenture governing the 7.75% Senior Notes and under the terms of the Credit Agreement and accelerated the Company’s obligations under the indenture and the Credit Agreement. Any efforts to enforce obligations upon the occurrence of an event of default have been automatically stayed as a result of the Company's Bankruptcy Petition and the holders of the Term Loan and Senior Notes rights of enforcement in respect to any obligations are subject to the applicable provisions of the Bankruptcy Code.
On June 5, 2017, the Company’s Board of Directors adopted a stockholder rights plan which is scheduled to expire in June 2018. Pursuant to the rights plan, the Company declared a dividend of one right for each outstanding share of Class A common stock of the Company, payable to holders of record on June 15, 2017. The rights initially trade with the Company’s Class A common stock and will generally become exercisable only if any person (or any persons acting in concert or as a group) acquires a voting or economic position in 4.99% or more of the Company’s outstanding Class A common stock. If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of Class A common stock at a 50% discount or the Company may exchange each right held by such holders for one share of Class A common stock. Under the rights plan, any person that owned more than 4.99% of the Company’s outstanding Class A common stock may continue to own its shares of Class A common stock but may not acquire a voting or economic interest in any additional shares of Class A common stock without triggering the rights plan. Pursuant to the Plan and Disclosure Statement filed on February 12, 2018, if the Plan is confirmed by the Bankruptcy Court all of the equity interests in the Company (including the Class A common Stock and rights under the rights plan) are expected to be cancelled or extinguished on the date that the Company emerges from bankruptcy.
As previously disclosed, based on the results of required annual or interim impairment testing in certain recent historical periods, we incurred non-cash impairment charges against intangible assets and goodwill, including a non-cash impairment charge against our FCC licenses of $335.9 million for the year ended December 31, 2017 and charges of $603.1 million for the year ended December 31, 2016. Such non-cash charges reduced our reported operating results in those periods; however, as these charges did not require a cash outlay, they had no effect on our liquidity position in the near term. Any future impairment charges could materially adversely affect our financial results in the periods in which they are recorded.
In recent periods, both prior to and following our filing of the Bankruptcy Petitions on November 29, 2017, we took a number of actions impacting our liquidity:
On August 29, 2017, we used proceeds from the sale of certain land and buildings to repay approximately $81.7 million of Term Loan borrowings in accordance with the terms of such agreement.
On October 26, 2017, we appealed NASDAQ's determination to delist the Company's securities from The NASDAQ Capital Market. On November 20, 2017, we received a notification from The NASDAQ Stock Market LLC indicating that as a result of the Company's previously disclosed non-compliance with certain NASDAQ listing rules, trading in the Company’s Class A common stock would be suspended effective at the open of business, on November 22, 2017. The Company's Class A common stock has been quoted on the OTC Markets since such date.
On October 30, 2017, as described above, the Restructuring Committee of the Board of Directors authorized the Company to forgo the November 1, 2017 scheduled interest payment of $23.6 million on the Company's 7.75% Senior Notes. The Company will continue to forgo interest payments on the 7.75% Senior Notes. while under bankruptcy protection.
On November 28, 2017, we voluntarily terminated our $50.0 million revolving accounts receivable securitization facility entered into on December 6, 2013 (the “Securitization Facility”) with Wells Fargo (as successor to General Electric Capital Corporation), as a lender, swing line lender and administrative agent (together with any other lenders party thereto from time to time, the “Lenders”). Pursuant to a Receivables Sale and Servicing Agreement, dated as of December 6, 2013 (the “Sale Agreement”), certain subsidiaries of the Company were eligible to sell and/or contribute their accounts receivable to a special purpose entity and wholly-owned subsidiary of the Company (the “SPV”). The SPV could thereafter make borrowings from the Lenders, which borrowings were secured by those receivables, pursuant to an Amended and Restated Receivables Funding and Administration Agreement, dated as of March 15, 2017 (the “Funding Agreement”). No borrowings were outstanding under the Securitization Facility as of the termination date.
On February 1, 2018, the Company and Merlin Media, LLC ("Merlin") agreed to terminate certain obligations under which the Company was required to purchase two FM stations and to allow the Company to continue to operate those stations under an amended local marketing agreement. Merlin and the Company originally entered into a local marketing agreement relating to these stations on January 2, 2014. Under this local marketing agreement, the Company was responsible for programming 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 October 3, 2014, respectively, in exchange for the Company retaining the operating profits from these radio stations.
In accordance with the requirements of Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40), and Accounting Standards Codification ("ASC") 205-40, the Company has the responsibility to evaluate at each reporting period, including interim periods, whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations. In its evaluation for this report, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s conditional and unconditional obligations due for 12 months following the date of issuance of this Annual Report on Form 10-K. Based on the Company's substantial level of indebtedness and, as described above, the Company's filing for relief under chapter 11 of the Bankruptcy Code as well as the uncertainty surrounding such filings, the Company determined that there is substantial doubt as to the Company’s ability to continue as a going concern for a period of 12 months following the date of issuance of this Form 10-K.
Notwithstanding the aforementioned, the accompanying consolidated financial statements of the Company have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the ability to continue as a going concern.
Advertising Revenue
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 also impacts the advertising rates we charge. Advertising demand and rates are based primarily on the ability to attract audiences in the demographic groups targeted by such advertisers, as measured principally by various ratings agencies on a periodic basis. We endeavor to provide compelling programming and form connections between our on-air talent and listeners in order to develop strong listener loyalty, and we believe that the diversification of our formats and programs, including non-music formats and proprietary content, helps to insulate us from the effects of changes in the musical tastes of the public with respect to any particular format.
We strive to maximize revenue by managing our on-air inventory of advertising time and adjusting prices based on supply and demand. The optimal number of advertisements available for sale depends on the programming format of a particular radio program. Each program 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 potential advertisers with an effective means to reach a targeted demographic group. Our advertising contracts are generally short-term.
Digital revenue.We generate most of ourdigital advertising revenue from the sale of advertising and promotional opportunities across our podcasting network, streaming audio network, websites, mobile applications and digital marketing services. We sell
premium advertising adjacent to, or embedded in, podcasts through our network of owned and distributed podcasts. We also operate one of the largest streaming audio advertising networks in the U.S., including owned and operated internet radio simulcasted stations with either digital ad-inserted or simulcasted ads. We sell display ads across more than 400 local radio station websites, mobile applications, and regional advertising, which is sold primarily by a station’s sales staff.
ancillary custom client microsites. In addition, we sell an array of local digital marketing services to localnew and regional advertising revenues, we monetize our available inventory in both national spot and network sales marketplaces using our national platform. To effectively deliver network advertising for our customers, we distribute content and programming through third party affiliates in order to reach 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 to us, which is then aggregated into packages focused on specific demographic groups and sold by us to our advertiser clients that want to reach those demographic groups on a national basis.
In the broadcasting industry, we sometimes utilize trade or barter agreements that exchange advertising time for goods or servicesexisting advertisers such as, travel or lodging, instead ofemail marketing, geo-targeted display, video solutions and search engine marketing within our Cumulus C-suite portfolio, and website and microsite building and hosting, social media management, reputation management, listing management, and search engine optimization within our Boost product suite.
Other revenue. Other revenue includes trade and barter transactions, remote and event revenues, and non-advertising revenue. Non-advertising revenue represents fees received for cash. Trade revenue totaled $40.1 million, $37.7 millionlicensing content, imputed tower rental income, satellite rental income, and $39.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.
proprietary software licensing.
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, 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 we also from time to time reorganize and discontinue 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
Seasonality and Cyclicality
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 any quarter during the year, as advertising generally declines following the winter holidays. The fourth calendar quarter typically produces the highest revenues for the year. In addition, our revenues or results of operations, although no assurances can be provided that material inflationtend to fluctuate between years, consistent with, among other things, increased advertising expenditures in even-numbered years by political candidates, political parties and special interest groups. Typically, this political spending typically is heaviest during the future would not materially adversely affect us.fourth quarter.
Non-GAAP Financial Measure
From time to time, we utilize certain financial measures that are not prepared or calculated in accordance with GAAP to assess our financial performance and profitability. Consolidated adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA") and segment Adjusted EBITDA areis the financial metricsmetric by which management and the chief operating decision maker allocate resources of the Company and analyze the performance of the Company as a whole and each of our reportable segments, respectively.whole. Management also uses this measure to determine the contribution of our core operations to the funding of our corporate resources utilized to manage our operations and our non-operating expenses including debt service and acquisitions. In addition, consolidated Adjusted EBITDA excluding the impact of local marketing agreement fees, is a key metric for purposes of calculating and determining our compliance with certain covenants contained in our Refinanced Credit Agreement.
The Company excludes fromIn determining Adjusted EBITDA, items not related to core operations and those that are non-cash including:we exclude the following from net income: interest, taxes, depreciation, amortization, stock-based compensation expense, gain or loss on the exchange, sale, or saledisposal of any assets or stations or early extinguishment of debt, local marketing agreement fees, restructuring costs, expenses relating to acquisitions restructuring costs, reorganization itemsand divestitures, non-routine legal expenses incurred in connection with certain litigation matters, and non-cash impairments of assets.
assets, if any.
Management believes that Adjusted EBITDA, although not a measure that is calculated in accordance with GAAP, is commonly employed by the investment community as a measure for determining the market value of a media company and comparing the operational and financial performance among media companies. Management has also observed that Adjusted EBITDA is routinely utilized to evaluate and negotiate the potential purchase price for media companies. 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, (loss), operating income, cash flows from operating activities or any other measure for determining the Company’sour operating performance or liquidity that is calculated in accordance with GAAP. In addition, Adjusted EBITDA may be defined or calculated differently by other companies, and comparability may be limited.
Consolidated Results of Operations
Analysis of Consolidated Statements of Operations
The following selected data from our audited consolidated statementsConsolidated Statements of Operations and other supplementary data
provides information that our management believes is relevant to an assessment and understanding of our results of operations and other supplementary datafinancial condition. This discussion should be referred to while reading the resultsread in conjunction with our audited Consolidated Statements of operations discussion that followsOperations and notes thereto appearing elsewhere herein (dollars in thousands):.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2023 | | Year Ended December 31, 2022 | | | | | 2023 vs 2022 Change | | | |
| | | | | | | | $ | | % | | | | | | | |
| STATEMENT OF OPERATIONS DATA: | | | | | | | | | | | | | | | | | |
| Net revenue | $ | 844,548 | | | $ | 953,506 | | | | | | $ | (108,958) | | | -11.4 | % | | | | | | | |
| Content costs | 331,359 | | | 357,478 | | | | | | (26,119) | | | -7.3 | % | | | | | | | |
| Selling, general & administrative expenses | 377,032 | | | 383,375 | | | | | | (6,343) | | | -1.7 | % | | | | | | | |
| Depreciation and amortization | 58,176 | | | 56,386 | | | | | | 1,790 | | | 3.2 | % | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Corporate expenses | 70,011 | | | 62,471 | | | | | | 7,540 | | | 12.1 | % | | | | | | | |
| Gain on sale of assets or stations | (16,064) | | | (1,537) | | | | | | (14,527) | | | 945.2 | % | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Impairment of intangible assets | 65,312 | | | 15,544 | | | | | | 49,768 | | | 320.2 | % | | | | | | | |
| Operating (loss) income | (41,278) | | | 79,789 | | | | | | (121,067) | | | N/A | | | | | | | |
| Interest expense | (71,269) | | | (64,890) | | | | | | (6,379) | | | 9.8 | % | | | | | | | |
| Interest income | 2,359 | | | 340 | | | | | | 2,019 | | | 593.8 | % | | | | | | | |
| Gain on early extinguishment of debt | 9,849 | | | 4,496 | | | | | | 5,353 | | | 119.1 | % | | | | | | | |
| Other expense, net | (357) | | | (130) | | | | | | (227) | | | 174.6 | % | | | | | | | |
| (Loss) income before income taxes | (100,696) | | | 19,605 | | | | | | (120,301) | | | N/A | | | | | | | |
| Income tax expense | (17,183) | | | (3,370) | | | | | | (13,813) | | | 409.9 | % | | | | | | | |
| Net (loss) income | $ | (117,879) | | | $ | 16,235 | | | | | | $ | (134,114) | | | N/A | | | | | | | |
| KEY NON-GAAP FINANCIAL METRIC: | | | | | | | | | | | | | | | | | |
| Adjusted EBITDA | $ | 90,728 | | | $ | 165,982 | | | | | | $ | (75,254) | | | -45.3 | % | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | 2017 vs 2016 | | 2016 vs 2015 |
| | 2017 | | 2016 | | 2015 | | $ Change | | % Change | | $ Change | | % Change |
| STATEMENT OF OPERATIONS DATA: | | | | | | | | | | | | | |
| Net revenue | $ | 1,135,662 |
| | $ | 1,141,400 |
| | $ | 1,168,679 |
| | $ | (5,738 | ) | | -0.5 | % | | $ | (27,279 | ) | | -2.3 | % |
| Content costs | 402,978 |
| | 427,780 |
| | 396,426 |
| | (24,802 | ) | | -5.8 | % | | 31,354 |
| | 7.9 | % |
| Selling, general & administrative expenses | 477,535 |
| | 472,900 |
| | 477,327 |
| | 4,635 |
| | 1.0 | % | | (4,427 | ) | | -0.9 | % |
| Depreciation and amortization | 62,239 |
| | 87,267 |
| | 102,105 |
| | (25,028 | ) | | -28.7 | % | | (14,838 | ) | | -14.5 | % |
| Local marketing agreement fees | 10,884 |
| | 12,824 |
| | 10,129 |
| | (1,940 | ) | | -15.1 | % | | 2,695 |
| | 26.6 | % |
| Corporate expenses (including stock-based compensation expense) | 59,062 |
| | 40,148 |
| | 73,403 |
| | 18,914 |
| | 47.1 | % | | (33,255 | ) | | -45.3 | % |
| (Gain) loss on sale of assets or stations | (2,499 | ) | | (95,695 | ) | | 2,856 |
| | 93,196 |
| | ** | | (98,551 | ) | | ** |
| Impairment of intangible assets and goodwill | 335,909 |
| | 604,965 |
| | 565,584 |
| | (269,056 | ) | | -44.5 | % | | 39,381 |
| | 7.0 | % |
| Impairment charges - equity interest in Pulser Media Inc. | — |
| | — |
| | 19,364 |
| | — |
| | ** | | (19,364 | ) | | ** |
| Operating loss | (210,446 | ) | | (408,789 | ) | | (478,515 | ) | | 198,343 |
| | -48.5 | % | | 69,726 |
| | ** |
| Reorganization items, net | (31,603 | ) | | — |
| | — |
| | ** | | ** | | ** | | ** |
| Interest expense | (126,952 | ) | | (138,634 | ) | | (141,679 | ) | | 11,682 |
| | 8.4 | % |
| 3,045 |
|
| 2.1 | % |
| Interest income | 136 |
| | 493 |
| | 433 |
| | (357 | ) | | -72.4 | % | | 60 |
| | 13.9 | % |
| (Loss) gain on early extinguishment of debt | (1,063 | ) | | 8,017 |
| | 13,222 |
| | (9,080 | ) | | ** | | (5,205 | ) | | -39.4 | % |
| Other (expense) income, net | (363 | ) | | 2,039 |
| | 14,205 |
| | 3 |
| | ** | | (12,166 | ) | | -85.6 | % |
| Loss from continuing operations before income taxes | (370,291 | ) | | (536,874 | ) | | (592,334 | ) | | 166,583 |
| | 31.0 | % | | 55,460 |
| | 9.4 | % |
| Income tax benefit | 163,726 |
| | 26,154 |
| | 45,840 |
| | 137,572 |
| | ** | | (19,686 | ) | | -42.9 | % |
| Net loss | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) | | $ | 304,155 |
| | 59.6 | % | | $ | 35,774 |
| | 6.5 | % |
| OTHER DATA: | | | | | | | | | | | | | |
| Adjusted EBITDA | $ | 217,751 |
|
| $ | 205,867 |
| | $ | 259,145 |
| | $ | 11,884 |
| | 5.8 | % | | $ | (53,278 | ) | | -20.6 | % |
|
| |
** | Calculation is not meaningful. |
Year Ended December 31, 20172023 compared to the Year Ended December 31, 20162022
Net Revenue
Net revenue for the year ended December 31, 2017 decreased$5.7 million, or 0.5%, to$1,135.7 million2023 compared to $1,141.4 millionnet revenue for the year ended December 31, 2016.2022 decreased $109.0 million or 11.4%. The decrease resulted from declinesis primarily driven by reductions in spot and network revenues of $12.1$67.8 million and $0.9$47.3 million, respectively, as a result of current macroeconomic conditions. These decreases were slightly offset by $4.1 million of higher digital advertising revenue driven by growth in political advertisingdigital marketing services and broadcast advertising, respectively,streaming which were partially offset by increases of $4.6 million and $2.7 million in digital advertising and license fees andlower podcasting revenue. In addition, other revenue respectively. Forincreased $2.0 million which was primarily driven by an increase in barter, trade, and event revenues resulting from higher volume in 2023. These increases were partially offset by an $8.3 million decrease in other revenue which was the result of a discussionfee received in 2022 from the early termination of neta revenue by segment and a comparison between the year ended December 31, 2017 and the year ended December 31, 2016, see the discussion under "Segment Results of Operations."
agreement.
Content Costs
Content costs consist of all costs related to the licensing, acquisition and development of our programming. Content costs for the year ended December 31, 2017 decreased $24.8 million, or 5.8%, to $403.0 million2023 compared to $427.8 millioncontent costs for the year ended December 31, 2016. The decrease was2022 decreased $26.1 million or 7.3% primarily driven by the impactas a result of an expense of $14.4 million at Westwood One incurred during the third quarter of 2016, related to payments to CBS to resolve previously disputedlower syndicated programming and networkmusic licensing fees attributed to reduced revenue, lower personnel costs and a $2.0 million reduction in third party station inventory expenses, and lower content costs at the Station Group,from a fair value reassessment of contingent consideration. These decreases were partially offset by higher contentdigital costs, at Westwood One associatedwhich grew in line with increaseddigital advertising revenue.
Selling, General & Administrative Expenses
Selling, general &and administrative expenses consist of expenses related to our sales efforts and distribution of our content across our platform and overhead in our markets. Selling, general and administrative expenses for the year ended December 31, 2017 increased by $4.6 million, or 1.0%, to $477.5 million2023 compared to $472.9 millionselling, general and administrative expenses for the year ended December 31, 2016.2022 decreased $6.3 million or 1.7%. The increase resultedselling, general and administrative expenses decrease was primarily driven by reduced research expense resulting from an increasea contract renewal, lower incentive compensation attributed to a decline in broadcast revenue, lower rent expense resulting from a consolidated real estate footprint, and reduced bank fees. These decreases were partially offset by higher barter, trade and event expenses which grew in line with the related revenues.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2017 decreased $25.0 million, or 28.7%, to $62.2 million2023 compared to $87.3 milliondepreciation and amortization for the year ended December 31, 2016. This decrease was2022 increased $1.8 million or 3.2% primarily causedas a result of additional fixed assets placed into service which were mostly offset by a decrease in amortization expense oncertain definite-lived intangibles that were fully amortized during the second quarter of 2023.
Corporate Expenses
Corporate expenses consist primarily of compensation and related costs for our definite-lived intangible assets, which resulted from the accelerated amortization methodology we have applied since acquisitionexecutive, accounting, finance, human resources, information technology and legal personnel, and fees for professional services. Professional services are principally comprised of these assets that is based on the expected pattern in which the underlying assets' economic benefits are being consumed.
Local Marketing Agreement Fees
Local marketing agreement feesaudit, consulting and outside legal services. Corporate expenses also include restructuring expenses and stock-based compensation expense. Corporate expenses for the year ended December 31, 2017 decreased $1.9 million, or 15.1%, to $10.9 million2023 compared to $12.8 millionCorporate expenses for the year ended December 31, 2016. This decrease was related to2022 increased $7.5 million or 12.1%. Corporate expenses increased primarily as a result of higher restructuring charges driven by an expense for the termination$11.4 million impairment of a LMA incertain lease which is expected to be sublet at an amount less than the San Francisco market in 2016.current contractual agreement and increased employee benefit costs mostly driven by higher health insurance claims. These increases were partially offset by lower incentive compensation resulting from Company performance.
Corporate Expenses, Including Stock-based Compensation Expense and Acquisition-related and Restructuring CostsGain on Sale or Disposal of Assets or Stations
Corporate expenses, including stock-based compensation expense and acquisition-related and restructuring costs,The gain on sale or disposal of assets or stations for the year ended December 31, 2017 increased $18.92023 of $16.1 million was primarily related to the sales of WDRQ-FM and WFAS-FM.
The gain on sale or 47.1%, to $59.1 million compared to $40.1 milliondisposal of assets or stations for the year ended December 31, 2016. This increase2022 of $1.5 million was primarily driven by insurance proceeds received from hurricane damage and the resultsale of expenses related to professional fees related to the Company's debt restructuring efforts,certain assets and stations which were partially offset by decreases in professional servicesfixed asset dispositions and stock-based compensation expenses.the surrender of a broadcast license.
Impairment of Intangible Assets and Goodwill
DuringThe $65.3 million impairment of intangible assets for the year ended December 31, 2017,2023 resulted from the annual impairment tests of our FCC licenses and trademarks. For the year-ended December 31, 2022, we recorded a $15.5 million impairment charges related to our FCC license intangible assets of $335.9 million. Duringlicenses. See Note 5, "Intangible Assets" in the year ended December 31, 2016, we recorded impairment charges relatednotes to goodwill and intangible assets, including FCC licenses, of $568.1 million and $36.9 million, respectively. For additional information on these charges, see Note 4, Intangible Assets and Goodwill in the accompanying audited consolidated financial statements included elsewhere in thisthe Form 10-K.
Gain on Sale of Assets or Stations
During the year ended December 31, 2017, we recorded a gain on sale of assets or stations of $2.5 million primarily related to the sale of land in Salt Lake City, Utah. During the year ended December 31, 2016, we recorded a gain on sale of assets or stations of $95.7 million, primarily related to the sale of real property in Los Angeles, California.
Reorganization Items, Net
During the year ended December 31, 2017 , we recorded costs related to our chapter 11 cases of $31.6 million. See Note 9 Reorganization Items, net,10-K for a listing of those items.
further discussion.
Interest Expense
InterestTotal interest expense for the year ended December 31, 2017 decreased $11.72023 increased $6.4 million to $127.0 millionor 9.8% as compared to $138.6 milliontotal interest expense for the year ended December 31, 2016. 2022. The below table details the components of our interest expense by debt instrument (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2023 | | Year Ended December 31, 2022 | | |
$ Change | | |
| Term Loan due 2026 | $ | 30,491 | | | $ | 19,488 | | | | $ | 11,003 | | | |
| 6.75% Senior Notes | 24,227 | | | 28,336 | | | | (4,109) | | | |
| | | | | | | | |
| Financing liabilities | 14,311 | | | 14,711 | | | | (400) | | | |
| Other, including debt issue cost amortization and write-off | 2,240 | | | 2,355 | | | | (115) | | | |
| Interest expense | $ | 71,269 | | | $ | 64,890 | | | | $ | 6,379 | | | |
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | 2017 vs 2016 |
| | 2017 | | 2016 | | $ Change | | % Change |
| 7.75% Senior Notes | $ | 43,335 |
| | $ | 47,275 |
| | $ | (3,940 | ) | | (8.3 | )% |
| Bank borrowings – term loans and revolving credit facilities | 72,362 |
| | 79,451 |
| | (7,089 | ) | | (8.9 | )% |
| Other, including debt issue cost amortization | 11,255 |
| | 11,908 |
| | (653 | ) | | (5.5 | )% |
| Interest expense | $ | 126,952 |
| | $ | 138,634 |
| | $ | (11,682 | ) | | (8.4 | )% |
Total interest income for the year ended December 31, 2023 increased $2.0 million or 593.8% as compared to total interest income for the year ended December 31, 2022. Interest income increased as a result of higher interest rates in 2023.
Gain on Early Extinguishment of Debt
The gain on early extinguishment of debt for the year ended December 31, 2023 of $9.8 million was driven by the Company's repurchases of $34.7 million and $8.9 million principal amount of the 6.75% Senior Secured First-Lien Notes due 2026 (the "6.75% Senior Notes") and senior secured Term Loan (the "Term Loan due 2026"), respectively. See Note 7, "Long Term Debt" in the notes to the accompanying audited consolidated financial statements included elsewhere in the Form 10-K for further discussion of the debt repurchases.
The gain on early extinguishment of debt for the year ended December 31, 2022 of $4.5 million was driven by the Company's repurchases of the 6.75% Senior Notes and Term Loan due 2026. Repurchases of $68.8 million principal amount of the 6.75% Senior Notes resulted in a gain on extinguishment of debt of $4.2 million. Repurchases of $5.3 million principal amount of the Term Loan due 2026 resulted in a gain on extinguishment of debt of $0.3 million. See Note 7, "Long Term Debt" in the notes to the accompanying audited consolidated financial statements included elsewhere in the Form 10-K for further discussion of the debt repurchases.
Income Tax BenefitExpense
WeFor the year ended December 31, 2023, the Company recorded an income tax benefit from operationsexpense of $163.7$17.2 million in 2017 as compared to anon pre-tax book loss of $100.7 million. The income tax benefit of $26.2 million duringexpense recorded for the prior year. The tax benefits recorded in both periods wereyear ended December 31, 2023 was primarily the result of the pre-tax losses on operations netvaluation allowance recognized during the year, state and local income taxes, the effects of the amount of intangible assets impairment and, in 2017, the effect of tax reformcertain statutory non-deductible expenses including disallowed executive compensation, and the establishmentrelease of a valuation allowance related to our net operating loss deferreduncertain tax assets. The Tax Cuts and Jobs Act (“positions.
For the Act”) was enacted on December 22, 2017. The Act, among other changes, reduces the US federal corporate tax rate from 35% to 21% for tax years after 2017. Atyear ended December 31, 2017,2022, the Company has not completed its accountingrecorded an income tax expense of $3.4 million on pre-tax book income of $19.6 million. The income tax expense recorded for the year ended December 31, 2022 was primarily the result of state and local income taxes, the release of uncertain tax positions, and the effects of enactment of the Act; however, in certain cases, as described more fully in Note 12 “Income Taxes”, it has made a reasonable estimate of the effects on its existing deferred tax balances.statutory non-deductible expenses including disallowed executive compensation.
Adjusted EBITDA
As a result of the factors described above, Adjusted EBITDA for the year ended December 31, 2017 increased $11.9 million, or 5.8%, to $217.8 million compared to $205.9of $90.7 million for the year ended December 31, 2016.2023 compared to Adjusted EBITDA of $166.0 million for the year ended December 31, 2022 decreased approximately $75.3 million.
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):
|
| | | | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | % Change |
| GAAP net loss | $ | (206,565 | ) | | $ | (510,720 | ) | | 59.6 | % |
| Income tax benefit | (163,726 | ) | | (26,154 | ) | | ** |
| Non-operating expenses, including net interest expense | 127,179 |
| | 136,102 |
| | (6.6 | )% |
| Local marketing agreement fees | 10,884 |
| | 12,824 |
| | (15.1 | )% |
| Depreciation and amortization | 62,239 |
| | 87,267 |
| | (28.7 | )% |
| Stock-based compensation expense | 1,614 |
| | 2,948 |
| | (45.3 | )% |
| Gain on sale of assets or stations | (2,499 | ) | | (95,695 | ) | | (97.4 | )% |
| Impairment of intangible assets and goodwill | 335,909 |
| | 604,965 |
| | ** |
| Reorganization items, net | 31,603 |
| | — |
| | ** |
| Acquisition-related and restructuring costs | 19,492 |
| | 1,817 |
| | ** |
| Franchise and state taxes | 558 |
| | 530 |
| | 5.3 | % |
| Loss (gain) on early extinguishment of debt | 1,063 |
| | (8,017 | ) | | ** |
| Adjusted EBITDA | $ | 217,751 |
| | $ | 205,867 |
| | 5.8 | % |
| | | | | | |
| ** Calculation is not meaningful | | | | | |
Intangible Assets (including Goodwill), net. Intangible assets, net of amortization, were $1,422 million and $1,791.9 million as of December 31, 2017 and 2016, respectively. These intangible asset balances primarily consist of broadcast licenses and goodwill. Intangible assets, net, decreased from the prior year because of the impairment charge described above related to FCC licenses and amortization recognized on definite-lived intangible assets.
Year Ended December 31, 2016 compared to Year Ended December 31, 2015
Net Revenue
Net revenue for the year ended December 31, 2016 decreased $27.3 million, or 2.3%, to $1,141.4 million compared to$1,168.7 million for the year ended December 31, 2015. The decrease resulted from decreases of $27.1 million, $13.7 million and $0.1 million, in broadcast advertising, license fees and other revenue, and digital advertising, respectively, partially offset by an increase of $13.6 million political advertising. For a discussion of net revenue by segment and changes therein from the year ended December 31, 2015 to the year ended December 31, 2016, see the discussion under "Segment Results of Operations."
Content Costs
Content costs for the year ended December 31, 2016 increased $31.4 million, or 7.9%, to $427.8 million compared to$396.4 million for the year ended December 31, 2015. The increase was primarily driven by an expense of $14.4 million at Westwood One related to payments to CBS to resolve previously disputed syndicated programming and network inventory expenses, as well as increases in the Radio Station Group in music license fees and sports broadcasting rights of $14.9 million,$3.2 million of which was a one-time correction for expenses that occurred in prior periods. The remainder of the increase was attributed to other programming related expense increases of $2.3 million.
Selling, General & Administrative Expenses
Selling, general & administrative expenses for the year ended December 31, 2016 decreased $4.4 million, or 0.9%, to $472.9 million compared to $477.3 million for the year ended December 31, 2015. The decrease was primarily driven by a decrease in selling expenses at the Radio Station Group.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2016 decreased $14.8 million, or 14.5%, to $87.3 million compared to $102.1 million for the year ended December 31, 2015. This decrease was primarily caused by 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 being consumed.
Local Marketing Agreement Fees
Local marketing agreement fees for the year ended December 31, 2016 increased $2.7 million, or 26.6%, to $12.8 million compared to $10.1 million for the year ended December 31, 2015. This increase was related to an expense of $2.7 million for a termination of a LMA in the San Francisco market in 2016.
Corporate Expenses, Including Stock-based Compensation Expense and Acquisition-related and Restructuring Costs
Corporate expenses, including stock-based compensation expense for the year ended December 31, 2016, decreased $33.3 million or 45.3%, to $40.1 million compared to $73.4 million for the year ended December 31, 2015. This decrease was primarily because of one-time compensation expenses incurred during the year ended December 31, 2015 associated with the departure of certain of our executives.
Impairment of Intangible Assets and Goodwill
During the year ended December 31, 2016, we recorded impairment charges related to goodwill and intangible assets, including FCC licenses, of $568.1 million and $36.9 million, respectively. During the year ended December 31, 2015 we recorded impairment charges related to goodwill and FCC licenses of $549.7 million and $15.9 million, respectively. For additional information on these charges, see Note 4, Intangible Assets and Goodwill in the consolidated financial statements included elsewhere in this Form 10-K.
(Gain) Loss on Sale of Assets or Stations
During the year ended December 31, 2016, we recorded a gain on sale of assets or stations of $95.7 million primarily related to the completed sale of certain land and buildings for $110.6 million in cash. In conjunction with this sale we recorded a one-time net gain of $94.0 million during the period. During the year ended December 31, 2015, we recorded a loss on sale of assets or stations of $2.9 million, related to our sales of individual stations and assets.
Interest Expense
Interest expense for the year ended December 31, 2016 decreased $3.0 million to $138.6 million compared to $141.7 million for the year ended December 31, 2015. Interest expense associated with outstanding debt under the Credit Agreement decreased by $2.6 million to $79.5 million as compared to $82.0 million in the prior year as a result of a lower average amount of indebtedness outstanding in 2016. The following summary details the components of our interest expense (dollars in thousands):
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, | | 2016 vs 2015 |
| | 2016 | | 2015 | | $ Change | | % Change |
| 7.75% Senior Notes | $ | 47,275 |
| | $ | 47,275 |
| | $ | — |
| | — | % |
| Bank borrowings — term loans and revolving credit facilities | 79,451 |
| | 82,031 |
| | (2,580 | ) | | (3.1 | )% |
| Other, including debt issue cost amortization | 11,908 |
| | 12,373 |
| | (465 | ) | | (3.8 | )% |
| Interest expense | $ | 138,634 |
| | $ | 141,679 |
| | $ | (3,045 | ) | | (2.1 | )% |
| ** Calculation is not meaningful | | | | | | | |
Income Tax Benefit (Expense)
We recorded an income tax benefit on continuing operations of $26.2 million in 2016 as compared to a $45.8 million benefit during the prior year. The tax benefits recorded in both periods were primarily the result of the pre-tax losses on continuing operations net of the amount of goodwill impairment with no related deferred tax liability.
Adjusted EBITDA
As a result of the factors described above, Adjusted EBITDA for the year ended December 31, 2016 decreased $53.3 million, or 20.6%, to $205.9 million compared to $259.1 million for the year ended December 31, 2015.
Reconciliation of Non-GAAP Financial Measure
The following table reconciles Adjusted EBITDA to net(loss) income (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):
| | | | | | | | | | | | | | |
| Year Ended December 31, 2023 | | Year Ended December 31, 2022 | | | |
| GAAP net (loss) income | $ | (117,879) | | | $ | 16,235 | | | | |
| Income tax expense | 17,183 | | | 3,370 | | | | |
| Non-operating expenses, including net interest expense | 69,267 | | | 64,680 | | | | |
| | | | | | |
| Depreciation and amortization | 58,176 | | | 56,386 | | | | |
| Stock-based compensation expense | 5,270 | | | 6,229 | | | | |
| Gain on sale of assets or stations | (16,064) | | | (1,537) | | | | |
| | | | | | |
| Impairment of intangibles | 65,312 | | | 15,544 | | | | |
| Restructuring costs | 17,684 | | | 8,218 | | | | |
| Non-routine legal expenses | 898 | | | 544 | | | | |
| Gain on early extinguishment of debt | (9,849) | | | (4,496) | | | | |
| Franchise taxes | 730 | | | 809 | | | | |
| Adjusted EBITDA | $ | 90,728 | | | $ | 165,982 | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | | | | | |
| | Year Ended December 31, |
| | 2016 | | 2015 | | % Change |
| GAAP net loss | $ | (510,720 | ) | | $ | (546,494 | ) | | (6.5 | )% |
| Income tax benefit | (26,154 | ) | | (45,840 | ) | | (42.9 | )% |
| Non-operating expenses, including net interest expense | 136,102 |
| | 127,041 |
| | 7.1 | % |
| Local marketing agreement fees | 12,824 |
| | 10,129 |
| | 26.6 | % |
| Depreciation and amortization | 87,267 |
| | 102,105 |
| | (14.5 | )% |
| Stock-based compensation expense | 2,948 |
| | 21,033 |
| | (86.0 | )% |
| (Gain) loss on sale of assets or stations | (95,695 | ) | | 2,856 |
| | ** |
| Impairment of intangible assets and goodwill | 604,965 |
| | 565,584 |
| | 7.0 | % |
| Impairment charges -- equity interest in Pulser Media Inc | — |
| | 19,364 |
| | ** |
| Acquisition-related and restructuring costs | 1,817 |
| | 16,640 |
| | (89.1 | )% |
| Franchise and state taxes | 530 |
| | (51 | ) | | ** |
| Gain on early extinguishment of debt | (8,017 | ) | | (13,222 | ) | | (39.4 | )% |
| Adjusted EBITDA | $ | 205,867 |
| | $ | 259,145 |
| | (20.6 | )% |
| | | | | | |
| ** Calculation is not meaningful | | | | | |
Intangible Assets (including Goodwill), net. Intangible assets, net of amortization, were $1,791.9 million and $2,456.0 million as of December 31, 2016 and 2015, respectively. These intangible asset balances primarily consist of broadcast licenses and goodwill. Intangible assets, net, decreased from the prior year primarily as a result of impairment charges related to goodwill and indefinite-lived intangible assets and amortization recognized on definite-lived intangible assets.
Segment Results of Operations
The Company operates in twohas one reportable segments, for which there is discrete financial information availablesegment and whose operating results are reviewed bypresents the chief operating decision maker,comparative periods on a consolidated basis to reflect the Radio Station Group and Westwood One. Radio Station Group revenue is derived primarily from the sale of broadcasting time to local, regional, and national advertisers. Westwood One revenue is generated primarily through network advertising. Corporate and Other includes overall executive, administrative and support functions for both of ourone reportable segments, including programming, finance, legal, human resources and information technology functions.
As described above, Adjusted EBITDA is a non-GAAP financial metric utilized by management, along with the most closely comparable GAAP measure, to analyze the performance of each of our reportable segments. The reconciliation of segment Adjusted EBITDA to net loss is presented in Note 19, "Segment Data" of the notes to the consolidated financial statements.
The Company’s financial data by segment is presented in the tables below:
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2017 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Net revenue | | $ | 786,963 |
| | $ | 346,165 |
| | $ | 2,534 |
| | $ | 1,135,662 |
|
| % of total revenue | | 69.3 | % | | 30.5 | % | | 0.2 | % | | 100.0 | % |
| $ change from year ended December 31, 2016 | | $ | (15,433 | ) | | $ | 9,555 |
| | $ | 140 |
| | $ | (5,738 | ) |
| % change from year ended December 31, 2016 | | (1.9 | )% | | 2.8 | % | | 5.8 | % | | (0.5 | )% |
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2016 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Net revenue | | $ | 802,396 |
| | $ | 336,610 |
| | $ | 2,394 |
| | $ | 1,141,400 |
|
| % of total revenue | | 70.3 | % | | 29.5 | % | | 0.2 | % | | 100.0 | % |
Net revenue for the year ended December 31, 2017 decreased $5.7 million, or 0.5%, to $1,135.7 million, compared to $1,141.4 million for the year ended December 31, 2016. The decrease resulted from a decrease of $15.4 million in the Radio Station Group, partially offset by increases of $9.6 million and $0.1 million in Westwood One and Corporate and Other revenue, respectively. The decrease in revenue at the Radio Station Group was primarily driven by decreases local advertising revenue and political advertising revenue. The increase in revenue at Westwood One was primarily driven by increases in broadcast revenue.
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2017 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Adjusted EBITDA | | $ | 204,588 |
| | $ | 51,034 |
| | $ | (37,871 | ) | | $ | 217,751 |
|
| $ change from year ended December 31, 2016 | | $ | (13,604 | ) | | $ | 28,050 |
| | $ | (2,562 | ) | | $ | 11,884 |
|
| % change from year ended December 31, 2016 | | (6.2 | )% | | 122.0 | % | | (7.3 | )% | | 5.8 | % |
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2016 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Adjusted EBITDA | | $ | 218,192 |
| | $ | 22,984 |
| | $ | (35,309 | ) | | $ | 205,867 |
|
Adjusted EBITDA for the year ended December 31, 2017 increased $11.9 million, or 5.8%, to $217.8 million from $205.9 million for the year ended December 31, 2016. The increase resulted from an Adjusted EBITDA increase of $28.1 million in Westwood One partially offset by decreases of $13.6 million and $2.6 million in the Radio Station Group and Corporate and Other, respectively. Adjusted EBITDA at Westwood One increased as a result of $9.6 million of increased revenues and a $14.4 million decrease in expenses at Westwood One related to payments to CBS during 2016, to resolve previously disputed syndicated programming and network inventory expenses, partially offset by increases in expenses related to the higher revenue. Adjusted EBITDA at Radio Station Group decreased as a result of a $15.4 million decline in revenue which was partially offset by lower expenses, which included a $3.2 million expense in 2016 related to a one-time correction to music licensing fees and a decrease in content and personnel expenses.
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2016 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Net revenue | | $ | 802,396 |
| | $336,610 | | $ | 2,394 |
| | $ | 1,141,400 |
|
| % of total revenue | | 70.3 | % | | 29.5 | % | | 0.2 | % | | 100.0 | % |
| $ Change from year ended December 31, 2015 | | $ | 6,013 |
| | $ | (32,358 | ) | | $ | (934 | ) | | $ | (27,279 | ) |
| % Change from year ended December 31, 2015 | | 0.8 | % | | (8.8 | )% | | (28.1 | )% | | (2.3 | )% |
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2015 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Net revenue | | $ | 796,383 |
| | $ | 368,968 |
| | $ | 3,328 |
| | $ | 1,168,679 |
|
| % of total revenue | | 68.1 | % | | 31.6 | % | | 0.3 | % | | 100.0 | % |
Net revenue for the year ended December 31, 2016 decreased $27.3 million, or 2.3%, to $1,141.4 million, compared to$1,168.7 million for the year ended December 31, 2015. The decrease resulted from decreases of $32.4 million and $0.9 million in the Westwood One and Corporate and Other revenue, respectively, partially offset by an increase of $6.0 million in the Radio Station Group. The decrease in revenue at Westwood One was primarily driven by industry-wide weakness, lower trade revenue, and the shutdown of the print version of NASH Country Weekly. The increase in revenue at the Radio Station Group was primarily driven by political advertising, digital and national spot revenue, partially offset by declines in local advertising.
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2016 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Adjusted EBITDA | | $ | 218,192 |
| | $ | 22,984 |
| | $ | (35,309 | ) | | $ | 205,867 |
|
| $ change from year ended December 31, 2015 | | $ | (23,481 | ) | | $ | (29,974 | ) | | $ | 177 |
| | $ | (53,278 | ) |
| % change from year ended December 31, 2015 | | (9.7 | )% | | (56.6 | )% | | 0.5 | % | | (20.6 | )% |
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2015 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Adjusted EBITDA | | $ | 241,673 |
| | $ | 52,958 |
| | $ | (35,486 | ) | | $ | 259,145 |
|
Adjusted EBITDA for the year ended December 31, 2016 decreased $53.3 million, or 20.6%, to $205.9 million from $259.1 million for the year ended December 31, 2015. The decrease resulted from Adjusted EBITDA decreases of $23.5 million, $30.0 million and $0.2 million in the Radio Station Group, Westwood One and Corporate and Other, respectively. The decreases in Adjusted EBITDA in the Radio Station Group and Westwood One were caused by decreases in revenue and increases in operating expenses. Refer to the discussions under the heading "Content Costs" above for an explanation of the increase in operating costs for each segment.
The following tables reconcile segment net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to segment Adjusted EBITDA for the years ended December 31, 2017, 2016, and 2015 (dollars in thousands):
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2017 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| GAAP net (loss) income | | $ | (178,410 | ) | | $ | 25,635 |
| | $ | (53,790 | ) | | $ | (206,565 | ) |
| Income tax benefit | | — |
| | — |
| | (163,726 | ) | | (163,726 | ) |
| Non-operating (income) expense, including net interest expense | | (6 | ) | | 537 |
| | 126,648 |
| | 127,179 |
|
| Local marketing agreement fees | | 10,884 |
| | — |
| | — |
| | 10,884 |
|
| Depreciation and amortization | | 38,734 |
| | 21,836 |
| | 1,669 |
| | 62,239 |
|
| Stock-based compensation expense | | — |
| | — |
| | 1,614 |
| | 1,614 |
|
| (Gain) loss on sale of assets or stations | | (2,523 | ) | | — |
| | 24 |
| | (2,499 | ) |
| Reorganization items, net | | — |
| | — |
| | 31,603 |
| | 31,603 |
|
| Impairment of intangible assets | | 335,909 |
| | — |
| | — |
| | 335,909 |
|
| Loss on early extinguishment of debt | | — |
| | — |
| | 1,063 |
| | 1,063 |
|
| Acquisition-related and restructuring costs | | — |
| | 3,026 |
| | 16,466 |
| | 19,492 |
|
| Franchise and state taxes | | — |
| | — |
| | 558 |
| | 558 |
|
| Adjusted EBITDA | | $ | 204,588 |
| | $ | 51,034 |
| | $ | (37,871 | ) | | $ | 217,751 |
|
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2016 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| GAAP net loss | | $ | (356,198 | ) | | $ | (11,071 | ) | | $ | (143,451 | ) | | $ | (510,720 | ) |
| Income tax benefit | | — |
| | — |
| | (26,154 | ) | | (26,154 | ) |
| Non-operating expense, including net interest expense | | 13 |
| | 122 |
| | 135,967 |
| | 136,102 |
|
| Local marketing agreement fees | | 12,824 |
| | — |
| | — |
| | 12,824 |
|
| Depreciation and amortization | | 54,071 |
| | 31,178 |
| | 2,018 |
| | 87,267 |
|
| Stock-based compensation expense | | — |
| | — |
| | 2,948 |
| | 2,948 |
|
| Gain on sale of assets or stations | | (95,667 | ) | | — |
| | (28 | ) | | (95,695 | ) |
| Impairment of intangible assets and goodwill | | 603,149 |
| | 1,816 |
| | — |
| | 604,965 |
|
| Acquisition-related and restructuring costs | | — |
| | 939 |
| | 878 |
| | 1,817 |
|
| Franchise and state taxes | | — |
| | — |
| | 530 |
| | 530 |
|
| Gain on early extinguishment of debt | | — |
| | — |
| | (8,017 | ) | | (8,017 | ) |
| Adjusted EBITDA | | $ | 218,192 |
| | $ | 22,984 |
| | $ | (35,309 | ) | | $ | 205,867 |
|
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2015 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| GAAP net loss | | $ | (265,263 | ) | | $ | (141,179 | ) | | $ | (140,052 | ) | | $ | (546,494 | ) |
| Income tax benefit | | — |
| | — |
| | (45,840 | ) | | (45,840 | ) |
| Non-operating (income) expense, including net interest expense | | (6 | ) | | 1,247 |
| | 125,800 |
| | 127,041 |
|
| Local marketing agreement fees | | 10,127 |
| | — |
| | 2 |
| | 10,129 |
|
| Depreciation and amortization | | 63,342 |
| | 36,538 |
| | 2,225 |
| | 102,105 |
|
| Stock-based compensation expense | | — |
| | — |
| | 21,035 |
| | 21,035 |
|
| Loss on sale of assets or stations | | 668 |
| | 2,081 |
| | 107 |
| | 2,856 |
|
| Impairment of intangible assets | | 432,805 |
| | 132,671 |
| | 104 |
| | 565,580 |
|
| Impairment charges -- equity interest in Pulser Media Inc. | | — |
| | 19,364 |
| | — |
| | 19,364 |
|
| Acquisition-related and restructuring costs | | — |
| | 2,236 |
| | 14,405 |
| | 16,641 |
|
| Franchise and state taxes | | — |
| | — |
| | (50 | ) | | (50 | ) |
| Gain on early extinguishment of debt | | — |
| | — |
| | (13,222 | ) | | (13,222 | ) |
| Adjusted EBITDA | | $ | 241,673 |
| | $ | 52,958 |
| | $ | (35,486 | ) | | $ | 259,145 |
|
Seasonality and Cyclicality
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 any quarter during the year, as advertising generally declines following the winter holidays. The second and fourth calendar quarters typically produce the highest revenues for the year. In addition, our revenues tend to fluctuate between years, consistent with, among other things, increased advertising expenditures in even-numbered years by political candidates, political parties and special interest groups. This political spending typically is heaviest during the fourth quarter.
Liquidity and Capital Resources
Liquidity ConsiderationsAs of December 31, 2023 and 2022, we had $80.7 million and $107.4 million, respectively, of cash and cash equivalents. We generated cash from operating activities of $31.7 million and $78.5 million, respectively, for the years ended December 31, 2023 and 2022.
Historically, our principal sources of funds have been cash flow from operations and borrowings under credit facilities in existence from time to time. Our cash flow from operations remains subject to factors such as fluctuations in advertising media preferences and changes in demand caused by shifts in population, station listenership, demographics and audience tastes. In addition, our cash flows may be affected if customers are not able to pay, or delay payment of, accounts receivable that are owed to us, which risks may also be exacerbated in challenging or otherwise uncertain economic periods. In certain periods, the Company has experienced reductions in revenue and profitability from prior historical periods because of market revenue pressures and cost escalations built into certain contracts. Notwithstanding this, we believe that our national platform and extensive station portfolio representing a broad diversity in format, listener base, geography, and advertiser base help us maintain a more stable revenue stream by reducing our dependence on any single demographic, region or industry. However, future reductions in revenue or profitability are possible and could have a material adverse effect on the Company’s business, results of operations, financial condition or liquidity.
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of December 31, 2023, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, commitments under non-cancelable operating lease agreements, and employment and talent contracts. In addition to our contractual obligations, we expect that our primary anticipated uses of liquidity in 2023 will be to fund our working capital, make interest and tax payments, fund capital expenditures, execute our strategic plan and maintain operations.
Assuming the level of borrowings and interest rates at December 31, 2023, we anticipate that we will have approximately $64.0 million of cash interest payments in 2024 compared to $63.4 million of cash interest payments in 2023, primarily related to the increase in interest rates. Future increases in interest rates could have a significant impact on our cash
interest payments. For a description of the Company's future maturities of long-term debt, see Note 7, "Long-Term Debt", and for a description of the Company's non-cancelable operating lease agreements, see Note 13, "Leases".
Although there remains uncertainty related to the current macroeconomic conditions on the Company's future results, we believe our business model, our current cash reserves and borrowings from time to time under the Revolving Credit Agreement (or any such other credit facility as may be in place at the appropriate time) will help us manage our business and anticipated liquidity needs for at least the next twelve months and the foreseeable future thereafter.
We continually monitor our capital structure, and from time to time, we have evaluated, and expect that we will continue to evaluate, opportunities to obtain additional capital from the divestiture of radio stations or other assets, when we determine that it would further our strategic and financial objectives, as well as from the issuance of equity and/or debt securities, in each case, subject to market and other conditions in existence at that time. There can be no assurance that any such financing would be available on commercially acceptable terms, or at all. Future volatility in the capital and credit markets, caused by the current macroeconomic conditions or otherwise, may increase costs associated with issuing debt instruments or affect our ability to access those markets. In addition, it is possible that our ability to access the capital and credit markets could be limited at a time when we would like, or need, to do so, which could have an adverse impact on our ability to refinance maturing debt on terms or at times acceptable to us, or at all, and/or react to changing economic and business conditions.
Refinanced Credit Agreement (Term Loan due 2026)
On September 26, 2019, the Company entered into a new credit agreement by and among Cumulus Media New Holdings Inc., a Delaware corporation and an indirectly wholly-owned subsidiary of the Company ("Holdings"), certain other subsidiaries of the Company, Bank of America, N.A., as Administrative Agent, and the other banks and financial institutions party thereto as Lenders (the "Refinanced Credit Agreement"). Pursuant to the Refinanced Credit Agreement, the lenders party thereto provided Holdings and its subsidiaries that are party thereto as co-borrowers with a $525.0 million senior secured Term Loan, which was used to refinance the remaining balance of the then outstanding term loan (the "Term Loan due 2022"). On June 9, 2023, Holdings Cumulus Media Intermediate, Inc. ("Intermediate"), a direct wholly-owned subsidiary of the Company, and certain of the Company's other subsidiaries (collectively, with Holdings and Intermediate, the ("Credit Parties") entered into a second amendment ("Amendment No. 2") to the Refinanced Credit Agreement. Amendment No. 2, among other things, modifies certain terms of the Term Loan due 2026 to replace the relevant benchmark provisions from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"). Except as modified by Amendment No. 2, the existing terms of the Refinanced Credit Agreement remained in effect.
Prior to the execution of Amendment No. 2, amounts outstanding under the Refinanced Credit Agreement bore interest at a per annum rate equal to (i) LIBOR plus an applicable margin of 3.75%, subject to a LIBOR floor of 1.00%, or (ii) the Alternative Base Rate (as defined below) plus an applicable margin of 2.75%, subject to an Alternative Base Rate floor of 2.00%. The Alternative Base Rate is defined, for any day, as the per annum rate equal to the highest of (i) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 1/2 of 1.0%, (ii) the rate identified by Bank of America, N.A. as its "Prime Rate" and (iii) one-month LIBOR plus 1.0%. Subsequent to the execution of Amendment No. 2, amounts outstanding under the Refinanced Credit Agreement bore interest at a per annum rate equal to (i) SOFR plus a SOFR Adjustment, subject to a SOFR floor of 1.00%, and an applicable margin of 3.75%, or (ii) the Alternative Base Rate as defined above. As of December 31, 2023, the Term Loan due 2026 bore interest at a rate of 9.40% per annum.
Amounts outstanding under the Term Loan due 2026 amortize in equal quarterly installments of 0.25% of the original principal amount of the Term Loan due 2026 with the balance payable on the maturity date. As a result of the mandatory prepayments discussed below, the Company is no longer required to make such quarterly installments. The maturity date of the Term Loan due 2026 is March 26, 2026.
The Refinanced Credit Agreement contains representations, covenants and events of default that are customary for financing transactions of this nature. Events of default in the Refinanced 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 Holdings or any of its subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use, any 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 Refinanced Credit Agreement). Upon the occurrence of an event of default, the Administrative Agent (as defined in the Refinanced Credit Agreement) may, with the consent of, or upon the request of, the required lenders, accelerate the Term Loan due 2026 and exercise any of its rights as a
secured party under the Refinanced Credit Agreement and the ancillary loan documents provided, that in the case of certain bankruptcy or insolvency events with respect to a borrower, the Term Loan due 2026 will automatically accelerate.
The Refinanced Credit Agreement does not contain any financial maintenance covenants. The Refinanced Credit Agreement provides that Holdings will be permitted to enter into either a revolving credit facility or receivables facility, subject to certain conditions (see below).
The Borrowers (as defined below) may elect, at their option, to prepay amounts outstanding under the Refinanced Credit Agreement without premium or penalty. The borrowers may be required to make mandatory prepayments of the Term Loan due 2026 upon the occurrence of specified events as set forth in the Refinanced Credit Agreement, including upon the sale of certain assets and from Excess Cash Flow (as defined in the Refinanced Credit Agreement).
Amounts outstanding under the Refinanced Credit Agreement are guaranteed by Cumulus Media Intermediate Holdings, Inc., a Delaware corporation and a direct wholly-owned subsidiary of the Company ("Intermediate Holdings"), and the present and future wholly-owned restricted subsidiaries of Holdings that are not borrowers thereunder, subject to certain exceptions as set forth in the Refinanced Credit Agreement (the "Guarantors") and secured by a security interest in substantially all of the assets of Holdings, the subsidiaries of Holdings party to the Refinanced Credit Agreement as borrowers, and the Guarantors.
The issuance of the Term Loan due 2026 and repayment of the Term Loan due 2022 were evaluated in accordance with ASC 470-50-40 - Debt-Modifications and Extinguishments-Derecognition ("ASC 470-50-40"), to determine whether the refinancing transaction should be accounted for as a debt modification or extinguishment of the Term Loan due 2022. Each lender involved in the refinancing transaction was analyzed to determine if its participation was a debt modification or an extinguishment. Debt issuance costs for exiting lenders who chose not to participate in the Term Loan due 2026 were accounted for as extinguishments. Debt discounts and issuance costs of $5.1 million were capitalized and amortized over the term of the Term Loan due 2026.
During the year ended December 31, 2023, the Company repaid $8.9 million principal amount of the Term Loan due 2026. These repayments resulted in a gain on extinguishment of debt of $1.0 million. The Term Loan due 2026 was repurchased with cash on hand. The Company wrote-off debt issuance costs as a result of the repurchase, which were not material.
During the year ended December 31, 2022, the Company repaid $5.3 million principal amount of the Term Loan due 2026. These repayments resulted in a gain on extinguishment of debt of $0.3 million. The Term Loan due 2026 was repurchased with cash on hand. The Company wrote-off debt issuance costs as a result of the repurchase, which were not material.
In March 2022, the Company was required by the Excess Cash Flow provisions of the Term Loan due 2026 to make a prepayment of $12.5 million. In connection with the prepayment, the Company wrote-off $0.1 million of debt issuance costs.
As of December 31, 2023, $328.3 million remained outstanding under the Term Loan due 2026, net of debt issuance costs of $1.2 million, and we were in compliance with all required covenants under the Refinanced Credit Agreement.
2020 Revolving Credit Agreement
On March 6, 2020, Holdings and certain of the Company’s other subsidiaries, as borrowers (the “Borrowers”), and Intermediate Holdings entered into a $100.0 million revolving credit facility (the “2020 Revolving Credit Facility") pursuant to a Credit Agreement (the "2020 Revolving Credit Agreement"), dated as of March 6, 2020, with Fifth Third Bank, as a lender and Administrative Agent and certain other lenders from time to time party thereto. On June 3, 2022, Holdings, the Borrowers and Intermediate entered into a fifth amendment (the "Amendment") to the 2020 Revolving Credit Agreement. The Amendment, among other things, (i) extended the maturity date of all borrowings under the 2020 Revolving Credit Facility to June 3, 2027, provided, that if any of the Company’s indebtedness with an aggregate principal amount in excess of $35.0 million is outstanding on the date that is 90 days prior to the stated maturity of such indebtedness (each such date, a "Springing Maturity Date"), then the maturity date of all borrowings under the 2020 Revolving Credit Facility will instead be such Springing Maturity Date, and (ii) modified certain terms of the 2020 Revolving Credit Facility to replace the relevant benchmark provisions from the London Interbank Offered Rate to the Secured Overnight Financing Rate ("SOFR"). Except as modified by the Amendment, the existing terms of the 2020 Revolving Credit Agreement remained in effect.
Availability under the 2020 Revolving Credit Facility is tied to a borrowing base equal to 85% of the accounts receivable of the Borrowers, subject to customary reserves and eligibility criteria and reduced by outstanding letters of credit.
Under the 2020 Revolving Credit Facility, up to $10.0 million of availability may be drawn in the form of letters of credit and up to $10.0 million of availability may be drawn in the form of swing line loans.
Borrowings under the 2020 Revolving Credit Facility bear interest, at the option of Holdings, based on SOFR plus (i) 0.10% and (ii) a percentage spread of 1.00% or the Alternative Base Rate. The Alternative Base Rate is defined, for any day, as the per annum rate equal to the rate identified as the "Prime Rate" by Fifth Third Bank. In addition, the unused portion of the 2020 Revolving Credit Facility will be subject to a commitment fee of 0.25%.
The 2020 Revolving Credit Agreement contains representations, covenants and events of default that are customary for financing transactions of this nature. Events of default in the 2020 Revolving Credit Agreement include, among others: (a) the failure to pay when due the obligations owing thereunder; (b) the failure to perform (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 Intermediate Holdings or any of its subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use, any 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 2020 Revolving 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 2020 Revolving Credit Agreement and the ancillary loan documents as a secured party.
The 2020 Revolving Credit Agreement does not contain any financial maintenance covenants with which the Company must comply. However, if average excess availability under the 2020 Revolving Credit Facility is less than the greater of (a) 12.5% of the total commitments thereunder or (b) $10.0 million, the Company must comply with a fixed charge coverage ratio of not less than 1.0:1.0.
Amounts outstanding under the 2020 Revolving Credit Agreement are guaranteed by Intermediate Holdings and the present and future wholly-owned restricted subsidiaries of Intermediate Holdings that are not borrowers thereunder, subject to certain exceptions as set forth in the 2020 Revolving Credit Agreement (the “2020 Revolver Guarantors”) and secured by a security interest in substantially all of the assets of Holdings, the subsidiaries of Holdings party to the 2020 Revolving Credit Agreement as borrowers, and the 2020 Revolver Guarantors.
As of December 31, 2023, $4.4 million was outstanding under the 2020 Revolving Credit Facility, representing letters of credit. As of December 31, 2023, the Company was in compliance with all required covenants under the 2020 Revolving Credit Agreement.
6.75% Senior Notes
On June 26, 2019, Holdings and certain of the Company's other subsidiaries, entered into an indenture, dated as of June 26, 2019 (the "Indenture") with U.S. Bank National Association, as trustee, governing the terms of the Issuer's $500,000,000 aggregate principal amount of 6.75% Senior Notes. The 6.75% Senior Notes were issued on June 26, 2019. The net proceeds from the issuance of the 6.75% Senior Notes were applied to partially repay existing indebtedness under the Term Loan due 2022 (see above). In conjunction with the issuance of the 6.75% Senior Notes, debt issuance costs of $7.3 million were capitalized and are being amortized over the term of the 6.75% Senior Notes.
Interest on the 6.75% Senior Notes is payable on January 1 and July 1 of each year, commencing on January 1, 2020. The 6.75% Senior Notes mature on July 1, 2026.
Holdings may redeem some or all of the 6.75% Senior Notes at any time, or from time to time, at the following prices:
| | | | | | | | |
| Year | | Price |
| 2022 | | 103.3750 | % |
| 2023 | | 101.6875 | % |
| 2024 and thereafter | | 100.0000 | % |
The 6.75% Senior Notes are fully and unconditionally guaranteed by Intermediate Holdings and the present and future wholly-owned restricted subsidiaries of Holdings (the "Senior Notes Guarantors"), subject to the terms of the Indenture. Other than certain assets secured on a first priority basis under the 2020 Revolving Credit Facility (as to which the 6.75% Senior Notes are secured on a second-priority basis), the 6.75% Senior Notes and related guarantees are secured on a first-priority
basis pari passu with the Term Loan due 2026 (subject to certain exceptions) by liens on substantially all of the assets of the Issuer and the Senior Notes Guarantors.
The Indenture contains representations, covenants and events of default customary for financing transactions of this nature. A default under the 6.75% Senior Notes could cause a default under the Refinanced Credit Agreement.
The 6.75% Senior Notes have not been and will not be registered under the federal securities laws or the securities laws of any state or any other jurisdiction. The Company is not required to register the 6.75% Senior Notes for resale under the Securities Act, or the securities laws of any other jurisdiction and is not required to exchange the 6.75% Senior Notes for notes registered under the Securities Act or the securities laws of any other jurisdiction and has no present intention to do so. As a result, Rule 3-10 of Regulation S-X promulgated by the SEC is not applicable and no separate financial statements are required for the guarantor subsidiaries.
During the year ended December 31, 2023, the Company repaid $34.7 million principal amount of the 6.75% Senior Notes. The repurchase resulted in a gain on extinguishment of debt of $8.8 million. The 6.75% Senior Notes were repurchased with cash on hand. As a result of the repurchases, the Company wrote-off $0.3 million of debt issuance costs.
During the year ended December 31, 2022, the Company repurchased $68.8 million principal amount of the 6.75% Senior Notes. The repurchase resulted in a gain on extinguishment of debt of $4.2 million. The 6.75% Senior Notes were repurchased with cash on hand. As a result of the repurchases, the Company wrote-off $0.6 million of debt issuance costs.
As of December 31, 2023, $344.1 million remained outstanding under the 6.75% Senior Notes, net of debt issuance costs of $2.1 million, and the Issuer was in compliance with all required covenants under the Indenture.
Share Repurchase Program
On May 3, 2022, the Board of Directors authorized a share repurchase program (the "prior share repurchase authorization") for up to $50.0 million of outstanding Class A common stock. The prior share repurchase authorization expired on November 3, 2023. On October 26, 2023, the Board of Directors authorized a new share repurchase program (the "current share repurchase authorization") for up to $25.0 million of outstanding Class A common stock. The current share repurchase authorization superseded and replaced our prior share repurchase authorization and expires on May 15, 2025. Purchases made pursuant to the program may be made from time to time, at the Company’s discretion, in the open market, through privately negotiated transactions or through other manners as permitted by federal securities laws including, but not limited to, 10b5-1 trading plans, accelerated stock repurchase programs and tender offers. The extent that the Company repurchases its shares, the number of shares and the timing of any repurchases will depend on general economic and market conditions, regulatory and legal requirements, alternative investment opportunities and other considerations. The repurchase program does not require the company to repurchase a minimum number of shares, and it may be modified, suspended or terminated at any time without prior notice.
Under the prior share repurchase authorization, the Company commenced modified Dutch tender offers on May 12, 2023, and May 6, 2022, to purchase up to $10.0 million and $25.0 million shares of its Class A common stock, respectively. Through the 2023 offer, which expired on June 9, 2023, the Company accepted for payment a total of 1,745,005 shares of the Company's Class A Common stock at a purchase price of $3.25 per share, for an aggregate cost of approximately $5.7 million, excluding fees and expenses. Through the 2022 offer, which expired on June 3, 2022, the Company accepted for payment a total of 1,724,137 shares of the Company's Class A Common stock at a purchase price of $14.50 per share, for an aggregate cost of approximately $25.0 million, excluding fees and expenses.
During the year ended December 31, 2023, the Company repurchased 323,285 shares of its outstanding Class A common stock in the open market at an average purchase price of $4.65 per share for an aggregate cost of approximately $1.5 million, excluding fees and expenses. During the year ended December 31, 2022, the Company repurchased 816,642 shares of our outstanding Class A common stock in the open market at an average purchase price of $8.38 per share for an aggregate cost of approximately $6.8 million, excluding fees and expenses. Shares repurchased were accounted for as treasury stock and the total cost of shares repurchased was recorded as a reduction of stockholder's equity in the Consolidated Balance Sheet.
The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. Excise tax is owed on the fair market value of stock repurchases reduced by the fair market value of stock issued and a $1,000,000 de minimis exception. Excise tax owed on shares repurchased during the year ended December 31, 2023, was not material.
As of December 31, 2023, $25.0 million of the Company's outstanding Class A common stock remained available for
repurchase under the share repurchase program.
Significant Cash Payments
The following table summarizes our significant non-operating cash payments made infor the years ended December 31, 2017, 20162023 and 20152022, respectively (dollars in thousands):
| | Year Ended December 31, 2023 | |
| Year Ended December 31, 2023 | |
| Year Ended December 31, 2023 | | | | Year Ended December 31, 2022 |
| | | 2017 | | 2016 | | 2015 |
| Repayments of borrowings under term loans and revolving credit facilities | $ | 81,652 |
| | $ | 20,000 |
| | $ | 50,000 |
|
| Repayments of borrowings under Term Loan due 2026 | |
| Repayments of borrowings under Term Loan due 2026 | |
| Repayments of borrowings under Term Loan due 2026 | |
| Repayments of borrowings under 6.75% Senior Notes | |
| Interest payments | 96,225 |
| | $ | 126,515 |
| | $ | 129,314 |
|
| Capital expenditures | 31,932 |
| | $ | 23,037 |
| | $ | 19,236 |
|
|
Net Cash Provided by Operating Activities
| | | | | | | | | | | |
| (Dollars in thousands) | Year Ended December 31, 2023 | | Year Ended December 31, 2022 |
| Net cash provided by operating activities | $ | 31,661 | | | $ | 78,480 | |
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Net cash provided by operating activities | $ | 86,596 |
| | $ | 35,745 |
| | $ | 82,432 |
|
Net Cash Used in Investing Activities
| | | | | | | | | | | |
| (Dollars in thousands) | Year Ended December 31, 2023 | | Year Ended December 31, 2022 |
| Net cash used in investing activities | $ | (6,821) | | | $ | (26,236) | |
For the year ended December 31, 2017,2023, net cash provided by operatingused in investing activities increased by $50.9 million over the prior year. The increase was becauseconsists primarily of an increase in operating cash flows primarily as a result of changes in accounts payable and prepaid expenses and increases in net income and non cash reorganization charges, partiallycapital expenditures which were mostly offset by a decrease in deferred income taxes. proceeds from the sales of WDRQ-FM and WFAS-FM.
For the year ended December 31, 2016,2022, net cash provided by operatingused in investing activities decreased by $46.7 million over the prior year. The decrease was becauseconsists primarily of an increase primarily as a result of cash collections and payments of accounts payable and prepaid expenses,capital expenditures partially offset by decreases in net income and adjustments for depreciation and amortization of intangibles and debt issuance costs/discounts, gain (loss) on sale of assets or stations, impairment charges, deferred income taxes and stock-based compensation expense of $53.1 million, primarily the result of the non-cash gain on the August 2016 sale of certain assets in our Los Angeles market.
Net Cash (Used in) Provided by Investing Activities
|
| | | | | | | | | | |
| | 2017 |
| 2016 |
| 2015 |
| Net cash (used in) provided by investing activities | (26,816 | ) | | $ | 83,854 |
| | $ | (7,961 | ) |
For the year ended December 31, 2017, net cash provided by investing activities decreased$110.7 million. For the year ended December 31, 2017 capital expenditures totaled $31.9 million primarily related to expenditures on equipment for transmission, facilities, studios, vehicles and other routine expenditures, which amounts were offset partially by approximately $6.1 million of proceeds from the sale of land in Salt Lake City, Utah. For the year ended December 31, 2016, net cash provided by investing activities increased$91.8 million as compared to the prior year, primarily because of the $104.6 million incertain assets and stations and insurance proceeds received from our sale of certain land and buildings in Los Angeles.hurricane damage.
Net Cash Used in Financing Activities
|
| | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Net cash used in financing activities | (88,148 | ) | | $ | (19,997 | ) | | $ | (50,085 | ) |
| | | | | | | | | | | |
| (Dollars in thousands) | Year Ended December 31, 2023 | | Year Ended December 31, 2022 |
| Net cash used in financing activities | $ | (51,613) | | | $ | (121,839) | |
For the year ended December 31, 2017,2023, net cash used in financing activities increased $68.2 million as comparedprimarily relates to the year ended December 31, 2016. The decrease was primarilyrepurchase of $34.7 million principal amount of the result6.75% Senior Notes for $25.9 million, the repurchase of a $61.7$8.9 million increase in net repayments on borrowings on ourprincipal amount of Term Loan. Loan due 2026 for $7.9 million, and the purchase of $7.8 million of treasury stock.
For the year ended December 31, 2016,2022, net cash used in financing activities increased $30.1primarily relates to the repurchase of $68.8 million principal amount of 6.75% Senior Notes for $64.6 million, the purchase of $31.9 million of treasury stock, a $12.5 million required Excess Cash Flow payment (as defined in the Term Loan due 2026) and the repurchase of $5.3 million principal amount of the Term Loan due 2026 for $5.0 million. The increase was primarily the result of a $30.0 million decrease in net repayments on borrowings on our Term Loan.
For additional detail regarding the Company’s material liquidity considerations, see “Current Bankruptcy Proceedings; Liquidity Considerations” above.
Critical Accounting Policies
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 significant estimates related to revenue recognition, bad debts, intangible assets, income taxes, stock-based compensation, contingencies, litigation, valuation assumptions for impairment analysis, certain expense accruals, leases and, if applicable, purchase price allocation.allocations. The Company bases its
estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, and 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.
Revenue Recognition
We recognizeRevenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Broadcast radio revenue from the sale of commercial broadcast time to advertisersis recognized as commercials are broadcast. Digital podcasting and streaming revenues are recognized when the commercialsadvertisements are broadcast, subject to meeting certain conditions suchdelivered. Revenues for digital marketing services are recognized over time as persuasive evidence that an arrangement existsthe services are provided depending on the terms of the contract. Remote and collection is reasonably assured. These criteriaevent revenues are generally metrecognized at the time services, for example hosting an advertisementevent, are delivered.
Revenues are recorded on a net basis, after the deduction of advertising agency fees. In those instances, in which the Company functions as the principal in the transaction, the revenue and associated operating costs are presented on a gross basis. In those instances where the Company functions as an agent or sales representative, the effective commission is broadcast.presented as revenue on a net basis with no corresponding operating expenses.
The Company’s payment terms vary by the type and location of customer and the products or services offered. The term between invoicing and when payment is due is generally not significant. There are no further obligations for returns, refunds or similar obligations related to the contracts. The Company records deferred revenues when cash payments including amounts which are refundable are received in advance of performance.
Accounts Receivable, Allowance for Doubtful Accounts and Concentration of Credit Risk
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’sCompany's best estimate of the amount of probable credit losses in the Company’sCompany's existing accounts receivable. The Company determined the allowance based on several factors, including the length of time receivables are past due, trends and current economic factors. All balances are reviewed and evaluated quarterly on a consolidated basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheetoff-balance sheet credit exposure related to its customers.
In the opinion of management, credit risk with respect to accounts receivable is limited as a result of the large number of customers and the geographic diversification of the Company’s customer base. The Company performs credit evaluations of its customers as needed and believes that adequate allowances for any uncollectible accounts receivable are maintained.
the large number of its customers.
Intangible Assets
We have significantAs of December 31, 2023, we had $837.6 million of indefinite-lived and definite-lived intangible assets, recorded inwhich represented 58.2% of our accounts. Thesetotal assets. The Company's indefinite-lived intangible assets are comprised primarily of FCC licenses and goodwill acquired through the acquisition of radio network businesses.licenses. We are required to review the carrying value of certain intangible assets and our goodwill annually for impairment, and more frequently if circumstances warrant, and record any impairment to results of operations in the periods in which the recorded value of those assets is more than their fair value. As of December 31, 2017, we had approximately $1.422 billion in intangible assets and goodwill, which represented approximately 70.1% of our total assets.
We perform our annual impairment tests for FCC licenses and goodwill as of December 31, 2017. The impairment tests require us to make certain assumptions in determining fair value, including assumptions about the cash flow growth rates of our businesses. Additionally, the fair values are significantly impacted by macroeconomic factors outside of our control. More specifically, the following could adversely impact the current carrying value of our FCC licenses and goodwill: (a) a decline in our forecasted operating profit margins or expected cash flow growth rates, (b) a decline in our forecasted industry operating profit margins, (c) a continued decline in advertising market revenues within the markets where we operate stations, or (d) the sustained decline in the selling prices of radio stations, which is generally determined as a multiple of EBITDA. The calculation of the fair value is prepared using an income approach and discounted cash flow methodology.
Annual Impairment Test - Goodwill
We assess the recoverability of our goodwill annually, or more frequently whenever events or substantive changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value. We test goodwill for impairment at the reporting unit level. All of our radio markets comprise one reporting unit ("Reporting Unit 1" or the "Radio Station Group") in which as of December 31, 2016 there was no longer any goodwill, Westwood One comprises the second reporting unit ("Reporting Unit 2" or "Westwood One") and the third reporting unit, in which there is also no goodwill, continues to consist of all of our non-radio lines of business ("Reporting Unit 3").
For our annual goodwill impairment test, we performed the Step 1 goodwill test (the “Step 1 test”) and compared the fair value of each reporting unit to the carrying value of its netindefinite-lived intangible assets as of December 31 2017 as follows:
Step 1 Goodwill Test
In performing our annual impairment testing of goodwill, fair value was calculated using a discounted cash flow analysis, which is an income approach. The discounted cash flow analysis requires the projection of future cash flows and the discounting of these cash flows to their present value equivalent via a discount rate. We used a five-year projection period for our operating cash flow projections. We made certain assumptions regarding future revenue growth based on industry market data and historical and expected performance. We then projected future operating expenses based primarily on historical financial performance in order to derive operating profits, which we combined with expected working capital changes and capital expenditures to determine operating cash flows. Our projections were based on then-current market and economic conditions and our historical knowledge of each of the relevant reporting units.
During the 2017 year, based on interim financial performance, we determined that no indicators were present which would suggest the fair value of the reporting units may have declined below the carrying value.
The material assumptions utilized in these analyses, for the reporting unit that has goodwill, included overall future market revenue growth rates for the residual years after the projection period of (1.0%) and a weighted average cost of capital of 9.3%. The residual year growth rate was estimated based on a perpetual nominal growth rate, which was based on long-term industry projections obtained from third party sources. The weighted-average cost of capital was determined based on (i) the cost of equity, which included estimates of the risk-free return, stock risk premiums and industry beta; (ii) the cost of debt, which included estimates for corporate borrowing rates and (iii) estimated average percentages of equity and debt in capital structures.
The table below presents the percentages by which the fair value was above the carrying value of the Company's Westwood One reporting unit, which contains goodwill, under the Step 1 test as of December 31, 2017 (dollars in thousands).
|
| | | |
| | Reporting Unit 2 |
| Goodwill balance | $ | 135,214 |
|
| Carrying value (including goodwill) | $ | 313,572 |
|
| Percentage fair value above carrying value | 36.9 | % |
We did not incur any impairment charges related to goodwill during the year ended December 31, 2017. In performing the Company's 2016 annual impairment testing of goodwill, the Company recorded a non-cash impairment charge of $568.1 million, reducing the goodwill in Reporting Unit 1 to $0.0 million at December 31, 2016.
If actual results or the underlying material assumptions are less favorable than those projected by us or if a triggering event occurs or circumstances change that would more likely than not reduce the fair value of our goodwill in Reporting Unit 2 below the amounts reflected in the Consolidated Balance Sheet, we may be required to recognize impairment charges in future periods.
Annual Impairment Test - FCC Licenses
As part of the annual impairment testing of indefinite-lived intangibles, in addition to testing goodwill for impairment, the Company also tests its FCC licenses for impairment during the fourth quarter of each year and on an interim basis if events or circumstances indicate that the assetindefinite-lived intangible assets may be impaired. As part ofImpairment exists when the overall planning associated withasset carrying amounts exceed their respective fair values and the test, theexcess is then recorded as an impairment charge to operations.
The Company determined that its geographic markets are the appropriate unit of accounting for FCC license impairment testing and therefore the Company has combined its FCC licenses within each geographic market cluster into a single unit of accounting for impairment testing purposes.
For In order to determine the impairment test, we utilizedfair value of its FCC licenses, the Company engaged a third-party valuation firm to assist with the development of assumptions and preparation of a valuation utilizing the income approach, specifically the Greenfield Method. This approachmethod values a license by calculating the value of a hypothetical start-up company that initially has no assets except the asset to be valued (the license). The value of the asset under consideration (the license) can be considered as equal to the value of this hypothetical start-up company. In completing the appraisals, we conducted a thorough review of all aspects of the assets being valued.
The estimated fair values of ourthe FCC licenses represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the Company and willing market participants at the measurement date. The estimated fair value also assumes the highest and best use of the asset by a market participants, considering aparticipant, and that the use of the asset that is physically possible, legally permissible and financially feasible.
A basic assumptionProjections used in our valuation of thesethe Greenfield Method for FCC broadcast licenses was that these radioinclude significant judgments and assumptions relating to the mature operating profit margin for average stations were new radio stations, signing onin the air as ofmarkets where the date ofCompany operates, long-term revenue growth rate, and the valuation. We assumed the competitive situation that existed in those markets as of that date, except that these stations were just beginning operations.
discount rate. In estimating the value of the licenses, we began with market revenue projections.projections based on third-party radio industry data are obtained. Next, we estimated the percentage of the market’smarket's total revenue, or market share, that market participants could reasonably expect an average start-up station to attain, as well as the duration (in years) required to reach the
average market share.share are estimated. The estimated average market share was computed based on market share data, by station type (i.e., AM and FM). and signal strength.
After marketBelow are the key assumptions used in our annual impairment assessment:
| | | | | | | | |
| | December 31, 2023 |
| Discount rate | | 9.5 | % |
| Long-term revenue growth rate | | (0.75) | % |
| Mature operating profit margin for average stations in the markets where the Company operates | | 26% – 27% |
While we believe we have made reasonable estimates and market shares have been estimated, operating expenses, including depreciation based on assumed investments in fixed assets and future capital expenditures of a start-up station or operation are similarly estimated based on industry-average cost data. Appropriate estimated income taxes are then subtracted, estimated depreciation added back, estimated capital expenditures subtracted, and estimated working capital adjustments are madeutilized appropriate assumptions to calculate estimated free cash flow during the build-up period until a steady state or mature “normalized” operation is achieved.
The analysis included overall future market revenue growth rates for the residual years after the projection period of (1.0%) and a weighted average cost of capital of 9.3%. The residual year growth rate was estimated based on a perpetual nominal growth rate, which was based on long-term industry projections obtained from third party sources. The weighted average cost of capital was based on (i) the cost of equity, which included estimates of the risk-free return, stock risk premiums and industry beta; (ii) the cost of debt, which included estimates for corporate borrowing rates; and (iii) estimated average percentages of equity and debt in other radio broadcasters' capital structures.
In order to estimate what listening audience share could be expected to be achieved for each station by market, we analyzed the average local commercial share garnered by similar AM and FM stations competing in those radio markets. We may make adjustments to the listening share and revenue share based on a station's signal coverage within the market and the surrounding area population as compared to the other stations in the market. Based on our knowledge of the industry and familiarity with similar markets, we determined that approximately three years would be required for the stations to reach maturity. We also incorporated the following additional assumptions into the discounted cash flow valuation model:
projected operating revenues and expenses over a five-year period;
the estimation of initial and on-going capital expenditures (based on market size);
depreciation on initial and on-going capital expenditures (we calculated depreciation using accelerated double declining balance guidelines over five years for the value of the tangible assets necessary for a radio station to go on the air);
the estimation of working capital requirements (based on working capital requirements for comparable companies); and
amortization of the intangible asset — the FCC license.
During the first three quarters of 2017, based on the Company's review of the radio industry's financial performance, it determined that no indicators were present which would suggest the fair value of its FCC licenses may have declined below the carrying value. However, as part of the Company's test of its FCC licenses for impairment during the fourth quarter of 2017, the Company determined as part of its review of the assumptions utilized in the Greenfield Method that the radio industry's decreasing market share of total advertising revenues had an adverse impact on its future market revenue growth rate assumption, whichour indefinite-lived intangible assets, it is now negative, as disclosed above.
Aspossible a result of the impairment test of our FCC licenses, conducted as of December 31, 2017, we recorded a non-cash impairment charge of $335.9 million. Sensitivity tests show that if the discount rate had been 100 basis points lower than management estimates, we would have recognized a $129.1 million less impairment charge. Had the discount rate been 100 basis points higher than management estimates, we would have recognized an additional $126.6 million impairment charge.
As of December 31, 2017, the FCC license fair value of one of the Company's 90 geographical markets exceeded carrying values by less than 10 percent. The aggregated carrying value of the licenses relating to this market was $24.8 million.
As of December 31, 2017, the carrying value of our FCC licenses was $1,203.8 million.
As a result of the impairment test of our FCC licenses conducted as of December 31, 2016, we recorded a non-cash impairment charge of $35.0 million in 2016. Sensitivity tests show that if the discount rate had been 100 basis points lower than management estimates, there would have been no impact to the carrying value of our FCC licenses. Had the discount rate been 100 basis points higher than management estimates, we would have recognized an additional $90.6 million impairment charge.
As of December 31, 2016, the FCC license fair value of 11 of the Company's 90 geographical markets exceeded carrying values by less than 10 percent. The aggregated carrying value of these markets was $264.7 million.
material change could occur. If the macroeconomic conditions of the radio industry or the underlying material assumptions are less favorable than those projected by the Company or if a triggering event occurs or circumstancecircumstances change that would more likely than not reduce the fair value of FCC licenses below the amounts reflected in the Consolidated Balance Sheet,Sheets, the Company may be required to recognize additional impairment charges in future periods. The following table shows the decrease in the fair value of our FCC broadcast licenses that would result from a 100 basis point increase in our discount rate or a 100 basis point decline in our long-term revenue growth rate or mature operating profit margin for average stations in the markets where the Company operates (dollars in thousands):
| | | | | | | | |
| Sensitivity (100 bps change) | | Change in Fair Value (in thousands) |
| Discount rate | | $ | 41,386 | |
| Long-term revenue growth rate | | $ | 27,341 | |
| Mature operating profit margin for average stations in the markets where the Company operates | | $ | 16,134 | |
The Company determines the fair value of the indefinite-lived trademarks utilizing the relief-from-royalty method of the income approach. See Note 5, "Intangible Assets," in the notes to the accompanying audited consolidated financial statements included elsewhere in the Form 10-K for further discussion of the annual impairment tests performed of our indefinite-lived intangible assets.
The Company's definite-lived intangible assets consist primarily of affiliate and producer relationships, which are amortized over the period of time the intangible assets are expected to contribute directly or indirectly to the Company's future cash flows. The Company reviews the carrying amount of its definite-lived intangible assets, primarily broadcast advertising and affiliate relationships, for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Stock-based Compensation Expense
Stock-based compensation expense recognized under ASC Topic 718, Compensation — Share-Based Payment (“ASC 718”), for the years ended December 31, 2017, 20162023 and 2015,2022, was $1.6 million, $2.9$5.3 million and $21.0$6.2 million, respectively. Upon adopting ASC 718 forFor awards with service conditions, an election was made to recognize stock-based compensation expense is recognized on a straight-line basis over the requisite service period for the entire award. In addition, the Company elected to recognize forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. For stock options with service conditions only, we utilizethe Company utilizes the Black-Scholes option pricing model to estimate the fair value of options issued. The fair value of stock options is determined by the Company’sCompany's stock price, historical stock price volatility, over the expected term of the awards, risk-free interest rates and expected dividends. If other assumptions are used, the results could differ. ForThe fair value of time-based and performance-based restricted stock awards with service conditions only, we utilizeis the intrinsicquoted market value method.of our stock on the grant date. For performance-based restricted stock awards, with performance conditions, we evaluatethe Company evaluates the probability of vesting of the awards in each reporting period. In the event the Company determines it is no longer probable that the minimum performance criteria specified in the award will be achieved, all previously recognized compensation expense will be reversed in the period and adjust compensation cost based on this assessment.
such a determination is made.
Income Taxes
We useThe Company accounts for income taxes using the asset and liability method. Under this method, of accounting for deferred income taxes. Except for goodwill, deferred income taxestax assets and liabilities are recognized for all temporarythe future tax consequences attributable to differences between the tax and financial reporting basesstatement carrying amounts of ourexisting assets and liabilities based onand their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax lawsrates the Company expects will be applicable when those tax assets and statutoryliabilities are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates applicable tois recognized in income in the periods in whichperiod that includes the differences are expected to affect taxable income. The Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act, among other changes, reduces the US federal corporate tax rate from 35% to 21% for tax years after 2017. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Act; however, in certain cases, as described more fully in Note 12 “Income Taxes”, it has made a reasonable estimate of the effects on its existing deferred tax balances. date.
A valuation allowance is recorded against aprovided for deferred tax asset to measure its net realizable valueassets when it is not more likely than not that the benefits of its recoveryasset will not be recognized.realized. We continually review the adequacy of our valuation allowance, if any, on our deferred tax assets and recognize 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 ASC Topic 740, Income Taxes ("("ASC 740").
The Company records valuation allowances to reduce its deferred tax assets to amounts that are more likely than not to be realized. In assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses. This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the following:
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| | | | |
l | Nature, frequency, and severity of current and cumulative financial reporting losses. A pattern of objectively-measured recent financial reporting losses is heavily weighted as a source of negative evidence. Three year cumulative pre-tax losses generally are considered to be significant negative evidence regarding future profitability. Also, the strength and trend of the Company's earnings, as well as other relevant factors, are considered. In certain circumstances, historical information may not be as relevant because of changes in the business operations; | | | |
l | Sources of future taxable income. Future reversals of existing temporary differences are heavily-weighted sources of objectively verifiable positive evidence. Projections of future taxable income exclusive of reversing temporary differences and carryforwards are a source of positive evidence only when the projections are combined with a history of recent profits and can be reasonably estimated. Otherwise, these projections are considered inherently subjective and generally will not be sufficient to overcome negative evidence that includes relevant cumulative losses in recent years, particularly if the projected future taxable income is dependent on an anticipated turnaround to profitability that has not yet been achieved. In such cases, we generally give these projections of future taxable income limited weight for the purposes of our valuation allowance assessment pursuant to GAAP; | | | |
l | Taxable income in prior carryback year(s), if carryback is permitted under the tax law, would be considered significant positive evidence, depending on availability, when evaluating current period losses; and | | | |
l | Tax planning strategies. If necessary and available, tax planning strategies would be implemented to accelerate taxable amounts to utilize expiring carry forwards. These strategies would be a source of additional positive evidence and, depending on their nature, could be heavily weighted. | | | |
If the Company were to determine that it would be able to realize deferred tax assets in the future in excess of the Company's net recorded amount, an adjustment to the net deferred tax asset would increase income in the period that such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the net deferred tax asset would decrease income in the period such determination was made.
The Company regularly evaluates the need for valuation allowances against its deferredrecognizes a tax assets.
Following the Company’s Bankruptcy Petition and resulting uncertainty regarding recoverability of our federal and state net operating loss carryforwards, we have recordedposition as a valuation allowance on all of the Company’s net operating loss carryforwards and certain tax credit carryforwards as of December 31, 2017 which we do not believe will be able to meet the more likely than not recognition standard for recovery.
Should our judgment about the future profitability of the Company change where we believebenefit only if it is more likely than notmore-likely-than-not that certain net operating loss carryforwards willthe position would be realized, we will recordsustained in an examination, with a deferredtax examination being presumed to occur. The amount recognized is the largest amount of tax benefit inthat has a greater than 50% likelihood of being realized on examination. For tax positions not meeting the period of such change in judgment. Conversely, should our judgment about the future profitability of the Company change where we believe itmore-likely-than-not test, no tax benefit is not more likely than not that one or all of our deferred tax assets will be recovered, we will record deferred tax expense in the period of such change in judgment.
recorded.
Legal Proceedings
We are currentlyhave been, and expect from time to time in the future to be, a party to various legal proceedings, investigations or claims. In accordance with applicable accounting guidance, we record accruals for certain of our outstanding legal proceedings when it is probable that a liability will be party to,incurred and the amount of loss can be reasonably estimated. We evaluate, at least on a quarterly basis, developments in our legal proceedings or a defendant in, variousother claims or lawsuits that are generally incidental to our business. We expect that we will vigorously contest any such claims or lawsuits and believe thatcould affect the ultimate resolutionamount of any known claim or lawsuit will notaccrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable. Resolution of any legal proceedings in a manner inconsistent with management’s expectations could have a material adverse effectimpact on our consolidatedthe Company’s financial position, results of operations or cash flows.condition and operating results. For more information, see "Item 3. Legal Proceedings" containedNote 14, "Commitments and Contingencies," in the accompanying audited consolidated financial statements included elsewhere in this Form 10-K.
Trade and Barter Transactions
We provideThe Company provides commercial airtimeadvertising inventory in exchange for goods and services used principally for promotional, sales, programming and other business activities. An asset and liability is recorded at the fair value of the goods or services received. TradeProgramming barter revenue is recordedderived from an exchange of programming content, to be broadcast on the Company's airwaves, for commercial advertising inventory, usually in the form of commercial placements inside the show exchanged. Trade and the liability is relieved when commercials are broadcast and trade expense is recorded and the asset relieved when goods or services are consumed. Trade valuationbarter value is based upon management’smanagement's estimate of the fair value of the products, supplies and services received. Trade and barter revenue is recorded when commercial spots are aired, in the same pattern as the Company's normal cash spot revenue is recognized. Trade and barter expense is recorded when goods or services are consumed. For the years ended December 31, 2017, 20162023 and 2015,2022, amounts reflected under trade and barter transactions were: (1) trade and barter revenues of $40.1 million, $37.7$57.6 million and $39.2$49.5 million, respectively; and (2) trade and barter expenses of $38.6 million, $36.2$57.6 million and $40.4$48.7 million, respectively.
Summary Disclosures about Contractual Obligations and Commercial Commitments
The following tables reflect a summary of our contractual cash obligations and other commercial commitments as of December 31, 2017 (dollars in thousands):
Payments Due By Period
|
| | | | | | | | | | | | | | | | | | | |
| Contractual Cash Obligations | Total | | Less Than 1 Year | | 1 to 3 Years | | 3 to 5 years | | After 5 Years |
| Long-term debt (1) | $ | 2,597,786 |
| | $ | 730,741 |
| | $ | 1,867,045 |
| | $ | — |
| | $ | — |
|
| Operating leases (2) | 110,805 |
| | 22,740 |
| | 34,913 |
| | 22,841 |
| | 30,311 |
|
| Other contractual obligations (3) | 371,288 |
| | 96,079 |
| | 133,567 |
| | 115,842 |
| | 25,800 |
|
| Total contractual cash obligations | $ | 3,079,879 |
| | $ | 849,560 |
| | $ | 2,035,525 |
| | $ | 138,683 |
| | $ | 56,111 |
|
| |
(1) | Based on amounts outstanding, interest rates and required repayments as of December 31, 2017. Assumes that outstanding indebtedness will not be refinanced prior to scheduled maturity. |
| |
(2) | Net of future minimum sublease income. |
| |
(3) | Consists of contractual obligations for goods or services including broadcast rights that are enforceable and legally binding obligations that include all significant terms. |
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2017.2023.
New Accounting Standards
Refer to Note 1, "Description"Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies" in the notes to ourthe accompanying audited consolidated financial statements included elsewhere in this Annual Report onthe Form 10-K.
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| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Interest Rate Risk
AsWe are a smaller reporting company as defined by Rule 12b-2 of December 31, 2017, 73.8%the Securities Exchange Act of our long-term debt, or $1.722 billion, bore interest at variable rates. Accordingly, our earnings1934 and after-tax cash flow are subject to change based on changes in interest rates and could be materially affected, depending on the timing thereof and the amount of variable interest rate debt we have outstanding. Assuming the level of variable interest rate, borrowings we had outstanding at December 31, 2017, and assuming a one percentage point change in the 2017 average interest rate payable on these borrowings, we estimate that our 2017 interest expense and net income would have changed by $17.2 million.
From time to time in the past we have managed, and may in the future seek to manage, our interest rate risk on a portion of our variable rate debt by entering into interest rate swap agreements in which we receive payments based on variable interest rates and made payments based on a fixed interest rate. We were not party to any such swap agreements on December 31, 2017.
Foreign Currency Risk
None of our operations are measured in foreign currencies. As a result, our financial results are not subjectrequired to factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets.
provide the information under this item.
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| Item 8. | Financial Statements and Supplementary Data |
The information in response to this item is included in our consolidated financial statements, together with the report thereon of PricewaterhouseCoopers LLP, beginning on page F-2 of this Annual Report on Form 10-K, which follows the signature page hereto.
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| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Not applicable.
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| Item 9A. | Controls and Procedures |
(a) Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, the “Exchange Act”)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”)CEO and Executive Vice President and Chief Financial Officer (“CFO”)CFO, the principal executive and principal financial officers, respectively, as appropriate, to allow timely decisions regarding required disclosure. 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 December 31, 2017.
2023.
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’smanagement's control objectives. The Company’sCompany's management, including the CEO and the 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 misstatements as a result of error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. Judgments in decision-making can be faulty and 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 because of possible errors or fraud may occur and not be detected.
(b) Management’sManagement's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) underof the Exchange Act). The Company’sCompany's management assessed the effectiveness of its internal control over financial reporting as of December 31, 2017.2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)(COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management has concluded that, as of December 31, 2017,2023, the Company’sCompany's internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 20172023 has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their report which appears herein.
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| /s/ Mary G. Berner | /s/ John AbbotFrancisco J. Lopez-Balboa |
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| President, Chief Executive Officer and Director | Executive Vice President, Treasurer and Chief Financial Officer |
(c) Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting during the fourth quarter of 20172023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B. | Other Information |
None.
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| Item 9B. | Other Information |
None.
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| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspection |
Not applicable.
PART III
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| Item 10. | Directors and Executive Officers and Corporate Governance |
In accordance with General Instruction G.(3) to Form 10-K, the Company intends to file with the Securities and Exchange Commission the information required by this Item notitem with respect to our directors, is incorporated by reference to the information to be set forth in our definitive proxy statement for the 2024 Annual Meeting of Stockholders expected to be filed no later than 120 days after the end of the fiscal year covered by this Form 10-K.10-K ("2024 Proxy Statement").
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| Item 11. | Executive Compensation |
In accordance with General Instruction G.(3) to Form 10-K, the Company intends to file with the Securities and Exchange Commission the information required by this Item not later than 120 days afteritem is incorporated by reference to the end ofinformation to be set forth under the fiscal year covered by this Form 10-K.caption "Executive Compensation" in our 2024 Proxy Statement.
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
In accordance with General Instruction G.(3) to Form 10-K, the Company intends to file with the Securities and Exchange Commission the information required by this Item not later than 120 days afteritem with respect to the endsecurity ownership of our management and certain beneficial owners is incorporated by reference to the fiscal year covered by this Form 10-K.information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in our 2024 Proxy Statement.
Securities Authorized Forfor Issuance Under Equity Incentive Plans
The following table sets forth, as of December 31, 2017,2023, the number of securities outstanding under our equity compensation plans, the weighted average exercise price of such securities, if applicable, and the number of securities available for grant under these plans:
| | | | | | | | | | | | | | | | | |
| Plan Category | To be Issued
Upon Exercise of
Outstanding Options
Warrants and Rights (a) | | Weighted-Average
Exercise Price of
Outstanding Options
Warrants and Rights | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) |
| Equity Compensation Plans Approved by Stockholders | 313,500 | | | $ | 12.70 | | | 1,657,506 | |
| Equity Compensation Plans Not Approved by Stockholders | — | | | — | | | — | |
| Total | 313,500 | | | $ | 12.70 | | | 1,657,506 | |
|
| | | | | | | | | |
| Plan Category | To be Issued Upon Exercise of Outstanding Options Warrants and Rights (a) | | Weighted-Average Exercise Price of Outstanding Options Warrants and Rights | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) |
| Equity Compensation Plans Approved by Stockholders | 2,509,129 |
| | $ | 36.04 |
| | 1,445,225 |
|
| Equity Compensation Plans Not Approved by Stockholders | — |
| | — |
| | — |
|
| Total | 2,509,129 |
| | $ | 36.04 |
| | 1,445,225 |
|
Pursuant to the Plan and Disclosure Statement filed on February 12, 2018, if the Plan is confirmed by the Bankruptcy Court all of the equity interests in the Company (including securities outstanding under our equity compensation plans) are expected to be cancelled or extinguished on the date that the Company emerges from bankruptcy.
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
In accordance with General Instruction G.(3) to Form 10-K, the Company intends to file with the Securities and Exchange Commission the information required by this Item not later than 120 days afteritem with respect to our directors, is incorporated by reference to the endinformation to be set forth under the captions "Certain Relationships and Related Transactions" and "Information about the Board of the fiscal year covered by this Form 10-K.
Directors" in our 2024 Proxy Statement.
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| Item 14. | Principal Accountant Fees and Services |
In accordance with General Instruction G.(3) to Form 10-K, the Company intends to file with the Securities and Exchange Commission the information required by this Item not later than 120 days afteritem, is incorporated by reference to the endinformation to be set forth under the caption "Proposal No. 3: Ratification of the fiscal year covered by this Form 10-K.
Appointment of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm" in our 2024 Proxy Statement.
PART IV
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| Item 15. | Exhibits, Financial Statement Schedules |
(a) (1)-(2) Financial Statements. The financial statements and financial statement schedule listed in the Index to Consolidated Financial Statements appearing on page F-1 of this Annual Report on Form 10-K are filed as a part of this report. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted either because they are not required under the related instructions or because they are not applicable.
(3) Exhibits
EXHIBIT INDEX
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| | First Amended Joint Plan of Reorganization of Cumulus Media Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 2.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on June 4, 2018) |
| | |
| | |
| | Third Amended and Restated Certificate of Incorporation of Cumulus Media Inc., as amended effective as of October 12, 2016 (incorporated by reference to Exhibit 3.1 to Cumulus Media Inc.’s Annual Report on Form 10-K, File No. 000-24525, filed on March 16, 2017). |
| |
| | Second Amended and Restated By-laws of Cumulus Media Inc. (incorporated by reference to Exhibit 3.1 to Cumulus Media Inc.’s's Current Report on Form 8-K File No. 000-24525, filed with the SEC on June 2, 2017).4, 2018) |
| | |
| | Certificate of Designations of Series R Preferred StockSecond Amended and Restated Bylaws of Cumulus Media Inc., as filed with the Secretary of State of the State of Delaware on June 5, 2017 (incorporated by reference to Exhibit 3.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on June 5, 2017) |
| | |
| | Form of Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on August 2, 2002). |
| |
| | Form of Class B Common Stock Certificate (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to Cumulus Media Inc.’s Registration Statement on Form S-3/A, File No. 333-176294, filed on September 22, 2011). |
| |
| | Warrant Agreement, dated as of June 29, 2009, among Cumulus Media Inc., the Consenting Lenders signatory thereto and Lewis W. Dickey, Sr., Lewis W. Dickey, Jr., John W. Dickey, Michael W. Dickey, David W. Dickey, Lewis W. Dickey, Sr. Revocable Trust and DBBC, LLC (incorporated by reference to Exhibit 10.2 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on June 30, 2009). |
| |
| | Form of Warrant Certificate (incorporated by reference to Exhibit 4.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on June 30, 2009). |
| |
| | Warrant Agreement, dated as of September 16, 2011, between Cumulus Media Inc., Computershare Inc. and Computershare Trust Company, N.A., as Warrant Agent (incorporated by reference to Exhibit 4.2 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
| | Form of Warrant Statement (included as Exhibit A-1 in Exhibit 4.5) (incorporated by reference to Exhibit 4.3 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
| | Form of Global Warrant Certificate (included as Exhibit A-2 in Exhibit 4.5) (incorporated by reference to Exhibit 4.4 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
| | Warrant, dated as of September 16, 2011, issued to Crestview Radio Investors, LLC (incorporated herein by reference to Exhibit 4.5 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
| | Registration Rights Agreement, effective as of August 1, 2011, by and among Cumulus Media Inc. and the stockholders (as defined therein) that are parties thereto (incorporated herein by reference to Exhibit 4.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on August 4, 2011). |
| |
| | Registration Rights Agreement, effective as of September 16, 2011, by and among Cumulus Media Inc., Crestview Radio Investors, LLC, UBS Securities LLC and other investors signatory thereto (incorporated herein by reference to Exhibit 10.5 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
|
| | |
| | Stockholders’ Agreement, dated as of September 16, 2011, among Cumulus Media Inc., BA Capital Company, L.P. and Banc of America Capital Investors SBIC, L.P., Blackstone FC Communications Partners L.P., Lewis W. Dickey, Jr., John W. Dickey, David W. Dickey, Michael W. Dickey, Lewis W. Dickey, Sr. and DBBC, L.L.C., Crestview Radio Investors, LLC, MIHI LLC, UBS Securities LLC and any other person who becomes a party thereto (incorporated herein by reference to Exhibit 10.6 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
| | Indenture, dated as of May 13, 2011, among Cumulus Media Inc., the Guarantors named therein and U.S. Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to Cumulus Media Inc.’s Current Report on Form 8- K, File No. 000-24525, filed on May 16, 2011). |
| |
| | Form of 7.75% Senior Notes due 2019 (included as Exhibits A and B in Exhibit 4.15) (incorporated herein by reference to Exhibit 4.3 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on May 16, 2011). |
| |
| | First Supplemental Indenture, dated as of September 16, 2011, by and among Cumulus Media Holdings Inc., Cumulus Media Inc., the other parties signatory thereto and U.S. Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
| | Second Supplemental Indenture, dated as of October 16, 2011, by and among Cumulus Media Holdings Inc., each of the subsidiaries of Cumulus Media Holdings Inc. signatory thereto and U.S. Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.12 to Cumulus Media Inc.’s's Quarterly Report on Form 10-Q, File No. 000-24525, filed on November 14, 2011). |
| |
| | Third Supplemental Indenture, effective October 17, 2011, by and among Cumulus Media Holdings Inc., each of the subsidiaries of Cumulus Media Holdings Inc. signatory thereto and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.5 to Cumulus Media Inc. Registration Statement on Form S-4/A, File No. 333-178647, filed on March 5, 2012). |
| |
| | Fourth Supplemental Indenture, dated as of December 23, 2013, by and among Cumulus Media Holdings Inc., each of the subsidiaries of Cumulus Media Holdings Inc. signatory thereto and U.S. Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.17 to Cumulus Media Inc.'s Annual Report on Form 10-K, File No. 000-24525, filed on March 17, 2014). |
| | |
| | First Amendment to Stockholders' Agreement, dated April 27, 2015 (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.'s Current Report on Form 8-K, File No. 000-24525, filed with the SEC on April 29, 2015). |
| | |
| | Rights Agreement, dated as of June 5, 2017, between Cumulus Media Inc. and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on June 5, 2017). |
| | |
| | Form of Employment Agreement, dated September 29, 2015, by and between the Company and Mary G. Berner (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on September 30, 2015).November 3, 2021) |
| | |
| | Form of Amendment to Stock Option AwardGlobal Warrant Certificate dated September 29, 2015, by and between Lewis W. Dickey, Jr. and the Company (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on September 30, 2015). |
| | |
| | Form of Non Qualified Stock Option Agreement as of October 13, 2015, by and between the Company and Mary G. Berner (incorporated by reference to Exhibit A to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on September 30, 2015) |
| | |
| | Form of Stock Option Award Certificate (incorporated herein by reference to Exhibit (d)(8) to Cumulus Media Inc.’s Schedule TO-I, File No. 005-54277, filed on December 1, 2008). |
| |
|
| | |
| | Form of 2008 Equity Incentive Plan Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on March 4, 2009). |
| |
| | Form of 2008 Equity Incentive Plan Stock Option Award Agreement (incorporated by reference to Exhibit 10.14 to Cumulus Media Inc.’s Annual Report on Form 10-K, File No. 000-24525, filed on March 16, 2009). |
| |
| | Cumulus Media Inc. 2011 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
| | Form of Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.8 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on September 22, 2011). |
| |
| | Form of Non-employee Director Restricted Stock Agreement under the Cumulus Media Inc. 2011 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to Cumulus Media Inc.’s Quarterly Report on Form 10-Q, File No. 000- 24525, filed on May 7, 2012). |
| |
| | Form of Employment Agreement with certain executive officers, dated as of November 29, 2011 (incorporated herein by reference to Exhibit 10.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24525, filed on December 2, 2011). |
| |
| | Description of 2017 Non-Equity Incentive Plans |
| |
| | Description of 2018 Non-Equity Incentive Plans |
| |
| | Amended and Restated Credit Agreement, dated as of December 23, 2013, among Cumulus Media Inc., Cumulus Media Holdings Inc., as Borrower, certain lenders, JPMorgan Chase Bank, N.A., as lender and Administrative Agent, Royal Bank of Canada and Macquarie Capital (USA) Inc., as co-syndication agents, and Credit Suisse AG, Cayman Islands Branch, Fifth Third Bank, Goldman Sachs Bank USA and ING Capital LLC, as co-documentation agents (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.’s Current Report on Form 8-K, File No. 000-24545, filed on December 23, 2013). |
| | |
| | First Lien Guarantee and Collateral Agreement, dated as of September 16, 2011, made by Cumulus Media Inc., Cumulus Media Holdings Inc. and certain subsidiaries of Cumulus Media Inc. in favor of JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.3 to Cumulus Media Inc.’s Current Report on Form 8- K, File No. 000-24525, filed on September 22, 2011). |
| | |
| | First Amendment to Employment Agreement, dated April 18, 2015, between Lewis W. Dickey, Jr. and Cumulus Media Inc. (incorporated by reference to Exhibit 10.2 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on April 28, 2015).June 4, 2018) |
| | |
| | Form of Class A common stock certificate (incorporated by reference to Exhibit 4.3 to Cumulus Media Inc.'s Registration Statement on Form S-8 filed with the SEC on June 4, 2018) |
| | |
| | Indenture, dated as of June 26, 2019, by and among Cumulus Media New Holdings Inc., the guarantors party thereto, and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on June 26, 2019) |
| | |
| | Form of 6.75% Senior Secured First Lien Note due 2026 (included in Exhibit 4.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on June 26, 2019) |
| | |
| | Stockholder Rights Agreement, dated as of February 21, 2024, by and between Cumulus Media Inc. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to Cumulus Media Inc.’s Current Report on Form 8-K filed with the SEC on February 22, 2024) |
| | |
| | Description of Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 |
| | |
| | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.3 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on June 4, 2018) |
| | |
| | Cumulus Media Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on June 4, 2018) |
| |
| | Cumulus Media Inc. 2020 Equity and Incentive Compensation Plan (as amended and restated as of April 26, 2023) (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on April 27, 2023) |
| | |
| | Description of 2022 Quarterly Incentive Plan (incorporated by reference to Exhibit 10.6 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | | | | | | | |
| | Description of 2023 Quarterly Incentive Plan |
| | |
| | Form of Restricted Stock Unit Agreement (Non-Senior Executive) (incorporated by reference to Exhibit 10.7 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| |
| | Form of Restricted Stock Unit Agreement (Senior Executive) (incorporated by reference to Exhibit 10.8 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| |
| | Form of Stock Option Agreement (incorporated by reference to Exhibit 10.9 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Form of Restricted Stock Unit Agreement (Director) (incorporated by reference to Exhibit 10.10 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| |
| | Form of Stock Option Agreement (Director) (incorporated by reference to Exhibit 10.11 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| |
| | Form of Cash Based Performance Unit Agreement (Non-Senior Executive) (incorporated by reference to Exhibit 10.12 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Form of Cash Based Performance Unit Agreement (Senior Executive) (incorporated by reference to Exhibit 10.13 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Employment Agreement, dated November 29, 2011, by and between Cumulus Media Inc. and Richard S. Denning |
| | |
| | First Amendment to Employment Agreement, dated March 30, 2016, by and between Cumulus Media Inc. and Richard S. Denning (incorporated by reference to Exhibit 10.2 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on March 31, 2016). |
| | |
| | Second Amendment to Employment Agreement, dated August 26, 2016, by and between Cumulus Media Inc. and Richard S. Denning (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.'s Quarterly Report on Form 10-Q filed with the SEC on March 31,November 8, 2016). |
| | |
| | Third Amendment to Employment Agreement, dated October 25, 2017, by and between Cumulus Media Inc. and Richard S. Denning. |
| | |
| | Employment Agreement, dated July 1, 2016, by and between Cumulus Media Inc. and John AbbotDenning (incorporated by reference to Exhibit 10.18 to Cumulus Media Inc.’s's Annual Report on Form 10-K File No. 000-24525, filed on March 16, 2017). |
| | |
|
| | |
| | Amended and Restated Employment Agreement, dated October 25, 2017, by and between Cumulus Media Inc. and John Abbot. |
| | |
| | Employment Agreement, dated as of December 13, 2015, by and between Cumulus Media Inc. and Suzanne Grimes (incorporated by reference to Exhibit 10.3 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on March 31, 2016).29, 2018) |
| | |
| | First Amendment toForm of Executive Vice President and Chief Financial Officer Employment Agreement dated March 30, 2016, by and between Cumulus Media Inc. and Suzanne Grimes (incorporated by reference to Exhibit 10.4 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on March 31, 2016). |
| | |
| | Second Amendment to Employment Agreement, dated January 26, 2018, by and between Cumulus Media Inc. and Suzanne Grimes (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on February 1, 2018).March 19, 2020) |
| | |
| | First Amendment toForm of President and Chief Executive Officer Employment Agreement dated March 30, 2016, by and between Cumulus Media Inc. and Mary G. Berner (incorporated by reference to Exhibit 10.510.2 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on March 31, 2016).19, 2020) |
| | |
| | Employment Agreement, dated as of January 1, 2015, by and between Cumulus Media Inc. and Robert J. Walker (incorporated by reference to Exhibit 10.20 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | First Amendment to Employment Agreement, dated February 19, 2016, by and between Cumulus Media Inc. and Robert J. Walker (incorporated by reference to Exhibit 10.21 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Second Amendment to Employment Agreement, dated OctoberAugust 26, 2016, by and between Cumulus Media Inc. and Robert J. Walker (incorporated by reference to Exhibit 10.22 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | | | | | | | |
| | Third Amendment to Employment Agreement, dated September 26, 2017, by and between Cumulus Media Inc. and Mary Berner. |
| | |
| | Form of Indemnification Agreement with directors and certain executive officersRobert J. Walker (incorporated by reference to Exhibit 10.23 to Cumulus Media Inc.’s's Annual Report on Form 10-K File No. 000-24525, filed with the SEC on March 16, 2017).February 23, 2023) |
| | |
| | Fourth Amendment to Employment Agreement, dated July 1, 2021, by and between Cumulus Media Inc. and Robert J. Walker (incorporated by reference to Exhibit 10.24 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Amended and Restated Receivables Funding and AdministrationEmployment Agreement, dated as of March 15, 2017July 21, 2014, by and between Cumulus Media Inc. and Dave Milner (incorporated by reference to Exhibit 10.25 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | First Amendment to Employment Agreement, dated as of November 13, 2015, by and between Cumulus Media Inc. and Dave Milner |
| | |
| | Second Amendment to Employment Agreement, dated as of February 19, 2016, by and between Cumulus Media Inc. and Dave Milner |
| | |
| | Third Amendment to Employment Agreement, dated August 12, 2016, by and between Cumulus Media Inc. and Dave Milner (incorporated by reference to Exhibit 10.26 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Fourth Amendment to Employment Agreement, dated September 17, 2016, by and between Cumulus Media Inc. and Dave Milner (incorporated by reference to Exhibit 10.27 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Fifth Amendment to Employment Agreement, dated December 10, 2018, by and between Cumulus Media Inc. and Dave Milner (incorporated by reference to Exhibit 10.28 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Sixth Amendment to Employment Agreement, dated July 1, 2021, by and between Cumulus Media Inc. and Dave Milner (incorporated by reference to Exhibit 10.29 to Cumulus Media Inc.'s Annual Report on Form 10-K filed with the SEC on February 23, 2023) |
| | |
| | Employment Agreement, dated November 29, 2023, by and between Cumulus Media New Holdings Inc. and Collin R. Jones |
| | |
| | Credit Agreement, dated as of September 26, 2019, among Cumulus Media New Holdings Inc., certain of Cumulus Media New Holding, Inc.'s other subsidiaries, certain lenders, Bank of America, N.A as administrative agent, and Bank of America, N.A., Credit Suisse Loan Funding LLC, Deutsche Bank Securities Inc., Morgan Stanley Senior Funding, Inc., JPMorgan Chase Bank, N.A. and Fifth Third Bank as joint lead arrangers and bookrunners (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on October 1, 2019) |
| | |
| | Second Amendment to the Credit Agreement, dated as of June 9, 2023, entered into by and among Cumulus Media Intermediate Inc., Cumulus Media New Holdings Inc. ("Holdings"), each of the restricted subsidiaries of Holdings signatory thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on June 13, 2023) |
| | |
| | ABL Credit Agreement, dated as of March 6, 2020, among Cumulus Media Intermediate, Inc., Cumulus Media New Holdings Inc., certain of Cumulus Media New Holding, Inc.’s other subsidiaries, Fifth Third Bank National Association as a lender and Administrative Agent and certain other lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on March 12, 2020) |
| | |
| | | | | | | | |
| | Fifth Amendment to the ABL Credit Agreement, dated as of June 3, 2022, entered into by and among Cumulus Media Intermediate Inc., Cumulus Media New Holdings Inc., each of the restricted subsidiaries of Cumulus Media New Holdings Inc. signatory thereto, Fifth Third Bank, National Association, as the administrative agent for the lenders and collateral agent for the secured parties, and the other lenders from time to time party thereto (incorporated by reference to Exhibit 10.1 to Cumulus Media Inc.'s Current Report on Form 8-K filed with the SEC on June 8, 2022) |
| | |
| | Master Agreement, dated August 7, 2020, between Vertical Bridge REIT, LLC, VB NIMBUS, LLC, and Cumulus Media New Holdings Inc. (incorporated by reference to Exhibit 10.2 to Cumulus Media Inc.'s
Quarterly Report on Form 10-Q File No. 000-24525, filed with the SEC on May 15, 2017).November 5, 2020) |
| | |
| | Subsidiaries |
| | Computation of Ratio of Earnings to Fixed Charges. |
| |
| | Subsidiaries. |
| |
| | Consent of PricewaterhouseCoopers LLP.LLP |
| |
| | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002 |
| |
| | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002 |
| |
| | Officer Certification pursuantPursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Of 2002 |
| | |
| | Compensation Clawback Policy |
| |
| 101.INS | | INSInline XBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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| 101.SCH | | SCHInline XBRL Taxonomy Extension Schema Document.Document |
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| 101.CAL | | CALInline XBRL Taxonomy Extension Calculation Linkbase Document.Document |
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| 101.DEF | | DEFInline XBRL Taxonomy Extension Definition Linkbase Document.Document |
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| 101.LAB | | LABInline XBRL Taxonomy Extension Labels Linkbase Document.Document |
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| 101.PRE | | PREInline XBRL Taxonomy Extension Presentation Linkbase Document. |
| Document |
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| 104 | | Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101) |
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| * | | Management contract or compensatory plan or arrangement. |
| arrangement |
| ** | |
** | Filed or furnished herewith.herewith |
| | | | | |
| (b) | |
(b) | Exhibits. See Exhibits above. |
| | | | | |
| (c) | |
(c) | Financial Statement Schedules. Schedule II – Valuation and Qualifying Accounts. |
| | | | | |
| |
| Item 16. | Form 10-K Summary |
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on the 2827th day of March 2018.
| | | | | | | | | | | |
| Cumulus Media Inc. |
| | |
| By | | | /s/ Francisco J. Lopez-Balboa |
| | CUMULUS MEDIA INC.
| | |
| By | | /s/ John Abbot |
| | | John AbbotFrancisco J. Lopez-Balboa
Executive Vice President, Treasurer and Chief Financial Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
Signature | | Title | | Date |
| | | | |
| /s/ Mary G. Berner | | President, Chief Executive Officer (Principal Executive Officer) and Director | | March 28, 2018February 27, 2024 |
| Mary G. Berner | | | Director | |
| | | | |
/s/ John AbbotFrancisco J. Lopez-Balboa | | Executive Vice President, Treasurer and | | March 28, 2018 |
John Abbot | | Chief Financial Officer (Principal (Principal Accounting and Financial and Accounting Officer)
| | February 27, 2024 |
| Francisco J. Lopez-Balboa | | | | |
| | | | |
| /s/ Andrew W. Hobson | | Director | | February 27, 2024 |
| Andy W. Hobson | | | | |
| | | | |
/s/ Jeffrey MarcusMatthew C. Blank | | Director | | Director | March 28, 2018February 27, 2024 |
Jeffrey MarcusMatthew C. Blank | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| /s/ Thomas H. Castro | | Director | | February 27, 2024 |
| Thomas H. Castro | | | | |
| | | | |
| /s/ Deborah Farrington | | Director | | February 27, 2024 |
| Deborah A. Farrington | | | | |
| | | | |
/s/ Jan BakerJoan Hogan Gillman | | Director | | Director | March 28, 2018February 27, 2024 |
Jan BakerJoan Hogan Gillman | | | | |
| | | | |
| /s/ Brian G. Kushner | | Director | | February 27, 2024 |
| Brian G. Kushner | | | | |
/s/ Jill Bright | | Director | | March 28, 2018 |
Jill Bright | | | | |
| | | | |
/s/ Ralph B. Everett | | Director | | March 28, 2018 |
Ralph B. Everett | | | | |
| | | | |
/s/ Ross Oliver | | Director | | March 28, 2018 |
Ross Oliver | | | | |
| | | | |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Cumulus Media Inc. are included in Item 8:
| | | | | | | | |
| | Page |
| (1) | Financial Statements | |
| | Page |
(1) | Financial Statements | |
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| (2) | Financial Statement Schedule | |
| | |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Cumulus Media Inc.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Cumulus Media Inc. and its subsidiaries(Debtor-In-Possession) (the "Company") as of December 31, 20172023 and 2016,2022, and the related consolidated statements of operations, of stockholders’ (deficit) equity and of cash flows for each of the three years in the periodthen ended, December 31, 2017, including the related notes andfinancial statement schedule for each of the three years in the period ended December 31, 2017 listed in the accompanying index (collectively referred to as the “consolidated"consolidated financial statements”statements").We also have audited the Company's internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016, 2022, and the results of its operations and its cash flows for each of the three years in the periodthen ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, on November 29, 2017, the Company and certain of its direct and indirect subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. The Company’s debt obligations and uncertainties related to the bankruptcy process raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management'sManagement’s Report on Internal Control over Financial Reportingappearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
FCC Broadcast Licenses Impairment Assessments
As described in Notes 1 and 5 to the consolidated financial statements, the Company’s indefinite- lived intangible assets include Federal Communications Commission ("FCC") broadcast licenses of $741.7 million as of December 31, 2023. Management performs annual impairment testing as of December 31 of each year and on an interim basis if events or circumstances indicate that the indefinite-lived intangible assets may be impaired. Management determined that the geographic markets are the appropriate unit of accounting for FCC license impairment testing and therefore management has combined the FCC licenses within each geographic market cluster into a single unit of accounting for impairment testing purposes. In order to determine the fair value of the FCC licenses, management utilized the income approach, specifically the Greenfield Method. This method values a license by calculating the value of a hypothetical start-up company that initially has no assets except the asset to be valued (the license). Management’s projections used in the Greenfield Method for its FCC broadcast licenses included significant judgments and assumptions relating to the mature operating profit margin for average stations in the markets where the Company operates, long-term revenue growth rate, and the discount rate.
The principal considerations for our determination that performing procedures relating to FCC broadcast licenses impairment assessments is a critical audit matter are the significant judgment by management when developing the fair value measurement of the FCC broadcast licenses. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the mature operating profit margin for average stations in the markets where the Company operates, the long-term revenue growth rate, and the discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible asset impairment assessment, including controls over the valuation of the Company’s FCC broadcast licenses. These procedures also included, among others, (i) testing management’s process for developing the fair value estimates; (ii) evaluating the appropriateness of the projections used in the Greenfield Method; (iii) testing the completeness, accuracy, and relevance of underlying data used in the method; and (iv) evaluating the significant assumptions used by management related to the mature operating profit margin for average stations in the markets where the Company operates, the long-term revenue growth rate, and the discount rate. Evaluating management’s assumptions relating to the mature operating profit margin for average stations in the markets where the Company operates and long-term revenue growth rate involved evaluating whether the assumptions used by management were reasonable considering (i) the consistency with external market and industry data, and (ii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the discount rate assumption.
/s/PricewaterhouseCoopers LLP
Atlanta, Georgia
March 28, 2018
February 27, 2024
We have served as the Company’s auditor since 2008.
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONSOLIDATED BALANCE SHEETS
December 31, 2017 and 2016
(Dollars in thousands, except for share data)
|
| | | | | | | |
| | 2017 | | 2016 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 102,891 |
| | $ | 131,259 |
|
| Restricted cash | 8,999 |
| | 8,025 |
|
| Accounts receivable, less allowance for doubtful accounts of $4,322 and $4,691 in 2017 and 2016, respectively | 235,247 |
| | 231,585 |
|
| Trade receivable | 4,224 |
| | 4,985 |
|
| Assets held for sale | — |
| | 30,150 |
|
| Prepaid expenses and other current assets | 42,259 |
| | 33,923 |
|
| Total current assets | 393,620 |
| | 439,927 |
|
| Property and equipment, net | 191,604 |
| | 162,063 |
|
| Broadcast licenses | 1,203,809 |
| | 1,540,183 |
|
| Other intangible assets, net | 82,994 |
| | 116,499 |
|
| Goodwill | 135,214 |
| | 135,214 |
|
| Other assets | 20,078 |
| | 18,805 |
|
| Total assets | $ | 2,027,319 |
| | $ | 2,412,691 |
|
| Liabilities and Stockholders’ Deficit | | | |
| Current liabilities: | | | |
| Accounts payable and accrued expenses | $ | 36,157 |
| | $ | 96,241 |
|
| Trade payable | — |
| | 4,550 |
|
| Total current liabilities not subject to compromise | 36,157 |
| | 100,791 |
|
| Term loan, net of debt issuance costs/discounts of $29,909 at December 31, 2016 | — |
| | 1,780,357 |
|
| 7.75% senior notes, net of debt issuance costs of $6,200 at December 31, 2016 | — |
| | 603,800 |
|
| Other liabilities | 54 |
| | 31,431 |
|
| Deferred income taxes | — |
| | 388,050 |
|
| Total liabilities not subject to compromise | 36,211 |
| | 2,904,429 |
|
| Liabilities subject to compromise | 2,687,223 |
| | — |
|
| Total liabilities | 2,723,434 |
| | 2,904,429 |
|
| Commitments and Contingencies (Note 15) |
| |
|
| Stockholders’ deficit: | | | |
| Class A common stock, par value $0.01 per share; 93,750,000 shares authorized; 32,031,054 shares issued, and 29,225765 shares outstanding, at both 2017 and 2016 | 320 |
| | 320 |
|
| Class C common stock, par value $0.01 per share; 80,609 shares authorized, issued and outstanding at both 2017 and 2016 | 1 |
| | 1 |
|
| Treasury stock, at cost, 2,806,187 shares at both 2017 and 2016 | (229,310 | ) | | (229,310 | ) |
| Additional paid-in-capital | 1,626,428 |
| | 1,624,815 |
|
| Accumulated deficit | (2,093,554 | ) | | (1,887,564 | ) |
| Total stockholders’ deficit | (696,115 | ) | | (491,738 | ) |
| Total liabilities and stockholders’ deficit | $ | 2,027,319 |
| | $ | 2,412,691 |
|
| | | | | | | | | | | | |
| |
| December 31, 2023 | | | December 31, 2022 |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | $ | 80,660 | | | | $ | 107,433 | |
| | | | |
| Accounts receivable, less allowance for doubtful accounts of $5,983 and $5,936 at December 31, 2023 and 2022, respectively | 180,706 | | | | 210,254 | |
| Trade receivable | 1,495 | | | | 2,044 | |
| | | | |
| Prepaid expenses and other current assets | 24,036 | | | | 25,540 | |
| Total current assets | 286,897 | | | | 345,271 | |
| Property and equipment, net | 180,596 | | | | 190,107 | |
| Operating lease right-of-use assets | 118,646 | | | | 135,236 | |
| Broadcast licenses | 741,716 | | | | 807,544 | |
| Other intangible assets, net | 95,913 | | | | 115,751 | |
| | | | |
| Deferred income tax assets | — | | | | 5,972 | |
| Other assets | 16,533 | | | | 9,150 | |
| Total assets | $ | 1,440,301 | | | | $ | 1,609,031 | |
| Liabilities and Stockholders' Equity | | | | |
| | | | |
| Current liabilities: | | | | |
| Accounts payable and accrued expenses | $ | 114,072 | | | | $ | 114,826 | |
| Current portion of operating lease liabilities | 27,515 | | | | 27,970 | |
| | | | |
| Trade payable | 2,152 | | | | 2,812 | |
| | | | |
| | | | |
| Total current liabilities | 143,739 | | | | 145,608 | |
| | | | |
| Term loan due 2026, net of debt issuance costs of $1,223 and $1,785 at December 31, 2023 and 2022, respectively | 328,287 | | | | 336,667 | |
| 6.75% senior notes, net of debt issuance costs of $2,108 and $3,138 at December 31, 2023 and 2022, respectively | 344,137 | | | | 377,789 | |
| Operating lease liabilities | 113,141 | | | | 119,925 | |
| Financing liabilities, net | 205,890 | | | | 212,993 | |
| Other liabilities | 6,200 | | | | 6,991 | |
| Deferred income tax liabilities | 12,325 | | | | 653 | |
| Total liabilities | 1,153,719 | | | | 1,200,626 | |
| Commitments and contingencies (Note 14) | | | | |
| | | | |
| | | | |
| | | | |
| Stockholders' equity: | | | | |
| Class A common stock, par value $0.0000001 per share; 100,000,000 shares authorized; 21,456,675 and 20,852,749 shares issued; 16,237,939 and 17,925,010 shares outstanding at December 31, 2023 and 2022, respectively | — | | | | — | |
| Convertible Class B common stock, par value $0.0000001 per share; 100,000,000 shares authorized; 312,041 shares issued and outstanding at December 31, 2023 and 2022 | — | | | | — | |
| Treasury stock, at cost, 5,218,736 and 2,927,739 shares at December 31, 2023 and 2022, respectively | (45,747) | | | | (36,533) | |
| Additional paid-in-capital | 353,732 | | | | 348,462 | |
| (Accumulated deficit) retained earnings | (21,403) | | | | 96,476 | |
| Total stockholders' equity | 286,582 | | | | 408,405 | |
| Total liabilities and stockholders' equity | $ | 1,440,301 | | | | $ | 1,609,031 | |
See accompanying notes to the consolidated financial statements.
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2017, 2016 and 2015
(Dollars in thousands, except for share and per share data)
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Net revenue | $ | 1,135,662 |
|
| $ | 1,141,400 |
| | $ | 1,168,679 |
|
| Operating expenses: |
|
|
| | |
| Content costs | 402,978 |
|
| 427,780 |
| | 396,426 |
|
| Selling, general & administrative expenses | 477,535 |
|
| 472,900 |
| | 477,327 |
|
| Depreciation and amortization | 62,239 |
|
| 87,267 |
| | 102,105 |
|
| LMA fees | 10,884 |
|
| 12,824 |
| | 10,129 |
|
| Corporate expenses (including stock-based compensation expense of $1,614, $2,948, and $21,033, respectively) | 59,062 |
|
| 40,148 |
| | 73,403 |
|
| (Gain) loss on sale of assets or stations | (2,499 | ) |
| (95,695 | ) | | 2,856 |
|
| Impairment of intangible assets and goodwill | 335,909 |
|
| 604,965 |
| | 565,584 |
|
| Impairment charges - equity interest in Pulser Media Inc. | — |
| | — |
| | 19,364 |
|
| Total operating expenses | 1,346,108 |
|
| 1,550,189 |
| | 1,647,194 |
|
| Operating loss | (210,446 | ) |
| (408,789 | ) | | (478,515 | ) |
| Non-operating expense: |
|
|
| | |
| Reorganization items, net | (31,603 | ) | | — |
| | — |
|
| Interest expense | (126,952 | ) |
| (138,634 | ) | | (141,679 | ) |
| Interest income | 136 |
|
| 493 |
| | 433 |
|
| (Loss) gain on early extinguishment of debt | (1,063 | ) |
| 8,017 |
| | 13,222 |
|
| Other (expense) income, net | (363 | ) |
| 2,039 |
| | 14,205 |
|
| Total non-operating expense, net | (159,845 | ) |
| (128,085 | ) | | (113,819 | ) |
| Loss before income taxes | (370,291 | ) |
| (536,874 | ) | | (592,334 | ) |
| Income tax benefit | 163,726 |
|
| 26,154 |
| | 45,840 |
|
| Net loss | $ | (206,565 | ) |
| $ | (510,720 | ) | | $ | (546,494 | ) |
Basic and diluted loss per common share (see Note 13, “Loss Per Share”): |
|
|
| | |
| Basic: Loss per share | $ | (7.05 | ) |
| $ | (17.45 | ) | | $ | (18.72 | ) |
| Diluted: Loss per share | $ | (7.05 | ) |
| $ | (17.45 | ) | | $ | (18.72 | ) |
| Weighted average basic common shares outstanding | 29,306,374 |
|
| 29,270,455 |
| | 29,176,930 |
|
| Weighted average diluted common shares outstanding | 29,306,374 |
|
| 29,270,455 |
| | 29,176,930 |
|
| | | | | | | | | | | | |
| Year Ended |
| December 31, 2023 | | | December 31, 2022 |
| Net revenue | $ | 844,548 | | | | $ | 953,506 | |
| Operating expenses: | | | | |
| Content costs | 331,359 | | | | 357,478 | |
| Selling, general & administrative expenses | 377,032 | | | | 383,375 | |
| Depreciation and amortization | 58,176 | | | | 56,386 | |
| | | | |
| Corporate expenses | 70,011 | | | | 62,471 | |
| Gain on sale or disposal of assets or stations | (16,064) | | | | (1,537) | |
| | | | |
| | | | |
| Impairment of intangible assets | 65,312 | | | | 15,544 | |
| Total operating expenses | 885,826 | | | | 873,717 | |
| Operating (loss) income | (41,278) | | | | 79,789 | |
| Non-operating expense: | | | | |
| Interest expense | (71,269) | | | | (64,890) | |
| Interest income | 2,359 | | | | 340 | |
| Gain on early extinguishment of debt | 9,849 | | | | 4,496 | |
| Other expense, net | (357) | | | | (130) | |
| Total non-operating expense, net | (59,418) | | | | (60,184) | |
| (Loss) income before income taxes | (100,696) | | | | 19,605 | |
| Income tax expense | (17,183) | | | | (3,370) | |
| Net (loss) income | $ | (117,879) | | | | $ | 16,235 | |
| Basic and diluted (loss) earnings per common share (see Note 12, "(Loss) Earnings Per Share"): | | | | |
| Basic: (Loss) Earnings per share | $ | (6.83) | | | | $ | 0.83 | |
| Diluted: (Loss) Earnings per share | $ | (6.83) | | | | $ | 0.81 | |
| Weighted average basic common shares outstanding | 17,269,001 | | | | 19,560,257 | |
| Weighted average diluted common shares outstanding | 17,269,001 | | | | 20,023,291 | |
See accompanying notes to the consolidated financial statements.
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)STOCKHOLDERS' EQUITY
Years EndedFor the years ended December 31, 2017, 20162023 and 20152022
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A
Common Stock | | | | Class B Common Stock | | | Treasury
Stock | | | | | | |
| | Number of
Shares | | Par
Value | | | | | | Number of
Shares | | Par
Value | | | Number of
Shares | | Value | | Additional
Paid-In
Capital | | Retained Earnings (Accumulated Deficit) | | Total |
| Balance at December 31, 2021 | 18,558,719 | | | $ | — | | | | | | | 1,964,764 | | | $ | — | | | | 230,310 | | | $ | (2,977) | | | $ | 342,233 | | | $ | 80,241 | | | $ | 419,497 | |
| Net income | — | | | — | | | | | | | — | | | — | | | | — | | | — | | | — | | | 16,235 | | | 16,235 | |
| Shares returned in lieu of tax payments | — | | | — | | | | | | | — | | | — | | | | 156,650 | | | (1,700) | | | — | | | — | | | (1,700) | |
| Conversion of Class B common stock | 1,652,723 | | | — | | | | | | | (1,652,723) | | | — | | | | — | | | — | | | — | | | — | | | — | |
| Issuance of common stock | 254,347 | | | — | | | | | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | |
| Stock-based compensation expense | — | | | — | | | | | | | — | | | — | | | | — | | | — | | | 6,229 | | | — | | | 6,229 | |
| Treasury stock purchased under share repurchase program | (2,540,779) | | | $ | — | | | | | | | — | | | | | | 2,540,779 | | | $ | (31,856) | | | $ | — | | | $ | — | | | $ | (31,856) | |
| Balance at December 31, 2022 | 17,925,010 | | | $ | — | | | | | | | 312,041 | | | $ | — | | | | 2,927,739 | | | $ | (36,533) | | | $ | 348,462 | | | $ | 96,476 | | | $ | 408,405 | |
| Net loss | — | | | — | | | | | | | — | | | — | | | | — | | | — | | | — | | | (117,879) | | | (117,879) | |
| Shares returned in lieu of tax payments | — | | | — | | | | | | | — | | | — | | | | 222,707 | | | (1,426) | | | — | | | — | | | (1,426) | |
| | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock | 381,219 | | | — | | | | | | | — | | | — | | | | — | | | — | | | — | | | — | | | — | |
| Stock-based compensation expense | — | | | — | | | | | | | — | | | — | | | | — | | | — | | | 5,270 | | | — | | | 5,270 | |
| Treasury stock purchased under share repurchase program | (2,068,290) | | | — | | | | | | | — | | | — | | | | 2,068,290 | | | (7,788) | | | — | | | — | | | (7,788) | |
| Balance at December 31, 2023 | 16,237,939 | | | $ | — | | | | | | | 312,041 | | | $ | — | | | | 5,218,736 | | | $ | (45,747) | | | $ | 353,732 | | | $ | (21,403) | | | $ | 286,582 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A Common Stock |
| Class C Common Stock |
| Treasury Stock |
|
|
|
|
|
|
| | Number of Shares | | Par Value |
| Number of Shares |
| Par Value |
| Number of Shares |
| Value |
| Additional
Paid-In
Capital |
| Accumulated
Deficit |
| Total |
| Balance at December 31, 2014 | 31,874,741 |
| | $ | 319 |
| | 80,609 |
| | $ | 1 |
| | 2,827,444 |
| | $ | (231,588 | ) | | $ | 1,603,198 |
| | $ | (830,350 | ) | | $ | 541,580 |
|
| Net loss |
| |
| |
| |
| |
| |
| |
| | (546,494 | ) | | (546,494 | ) |
| Conversion of equity upon exercise of warrants | 113,121 |
| | 1 |
| | — |
| | — |
| | 6,288 |
| | (115 | ) | | 120 |
| | — |
| | 6 |
|
| Shares returned in lieu of tax payments | — |
| | — |
| | — |
| | — |
| | — |
| | (93 | ) | | — |
| | — |
| | (93 | ) |
| Restricted shares issued from treasury | — |
| | — |
| | — |
| | — |
| | (27,989 | ) | | 2,486 |
| | (2,486 | ) | | — |
| | — |
|
| Stock conversion | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 21,033 |
| | — |
| | 21,033 |
|
| Balance at December 31, 2015 | 31,987,862 |
| | $ | 320 |
| | 80,609 |
| | $ | 1 |
| | 2,805,743 |
| | $ | (229,310 | ) | | $ | 1,621,865 |
| | $ | (1,376,844 | ) | | $ | 16,032 |
|
| Net loss |
| |
| |
| |
| |
| |
| |
| | (510,720 | ) | | (510,720 | ) |
| Conversion of equity upon exercise of warrants | 43,192 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
|
Stock based compensation expense
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,948 |
| | — |
| | 2,948 |
|
| Other | — |
| | — |
| | — |
| | — |
| | 444 |
| | — |
| | — |
| | — |
| | — |
|
| Balance at December 31, 2016 | 32,031,054 |
| | $ | 320 |
| | 80,609 |
| | $ | 1 |
| | 2,806,187 |
| | $ | (229,310 | ) | | $ | 1,624,815 |
| | $ | (1,887,564 | ) | | $ | (491,738 | ) |
| Net loss |
| |
| |
| |
| |
| |
| |
| | (206,565 | ) | | (206,565 | ) |
| Stock based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,614 |
| | — |
| | 1,614 |
|
| Other | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | 575 |
| | 574 |
|
| Balance at December 31, 2017 | 32,031,054 |
| | $ | 320 |
| | 80,609 |
| | $ | 1 |
| | 2,806,187 |
| | $ | (229,310 | ) | | $ | 1,626,428 |
| | $ | (2,093,554 | ) | | $ | (696,115 | ) |
See accompanying notes to the consolidated financial statements.
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2017, 2016 and 2015
(Dollars in thousands)
| | | | | | | | | | | | | | |
| Year Ended December 31, 2023 | | | Year Ended December 31, 2022 | | |
| Cash flows from operating activities: | | | | | | |
| Net (loss) income | $ | (117,879) | | | | $ | 16,235 | | | |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization | 58,176 | | | | 56,386 | | | |
| | | | | | |
| Amortization and write-off of debt issuance costs | 2,039 | | | | 2,565 | | | |
| Provision for doubtful accounts | 3,164 | | | | 3,411 | | | |
| Gain on sale of assets or stations | (16,064) | | | | (1,537) | | | |
| | | | | | |
| Impairment of right-of-use assets | 11,404 | | | | — | | | |
| Change in fair value of contingent consideration | (2,000) | | | | — | | | |
| Impairment of intangible assets | 65,312 | | | | 15,544 | | | |
| | | | | | |
| Deferred income taxes | 17,644 | | | | 1,037 | | | |
| Stock-based compensation expense | 5,270 | | | | 6,229 | | | |
| Gain on early extinguishment of debt | (9,849) | | | | (4,496) | | | |
| Non-cash interest expense on financing liabilities | 3,918 | | | | 3,721 | | | |
| Non-cash imputed rental income | (4,782) | | | | (4,643) | | | |
| | | | | | |
| Changes in assets and liabilities (excluding acquisitions and dispositions): | | | | | | |
| Accounts receivable | 26,384 | | | | (16,731) | | | |
| Trade receivable | 549 | | | | (146) | | | |
| Prepaid expenses and other current assets | 1,560 | | | | 5,320 | | | |
| Operating leases | (2,054) | | | | 1,565 | | | |
| | | | | | |
| Other assets | (8,640) | | | | (2,081) | | | |
| Accounts payable and accrued expenses | (2,515) | | | | (285) | | | |
| Trade payable | (660) | | | | 1,062 | | | |
| Other liabilities | 684 | | | | (4,676) | | | |
| Net cash provided by operating activities | 31,661 | | | | 78,480 | | | |
| Cash flows from investing activities: | | | | | | |
| Proceeds from sale of assets or stations | 17,814 | | | | 2,011 | | | |
| Asset acquisition | — | | | | (135) | | | |
| Proceeds from insurance reimbursement | 179 | | | | 2,950 | | | |
| Capital expenditures | (24,814) | | | | (31,062) | | | |
| Net cash used in investing activities | (6,821) | | | | (26,236) | | | |
| Cash flows from financing activities: | | | | | | |
| Repayment of borrowings under term loan due 2026 | (7,900) | | | | (17,471) | | | |
| Repayment of borrowings under 6.75% senior notes | (25,861) | | | | (64,589) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Treasury stock purchases | (7,788) | | | | (31,856) | | | |
| Payment of contingent consideration | (2,000) | | | | (1,000) | | | |
| | | | | | |
| Shares returned in lieu of tax payments | (1,426) | | | | (1,700) | | | |
| | | | | | |
| | | | | | |
| Repayments of financing liabilities | (5,801) | | | | (4,936) | | | |
| Repayments of finance lease obligations | (837) | | | | (287) | | | |
| Net cash used in financing activities | (51,613) | | | | (121,839) | | | |
| Decrease in cash and cash equivalents | (26,773) | | | | (69,595) | | | |
| Cash and cash equivalents at beginning of period | 107,433 | | | | 177,028 | | | |
| Cash and cash equivalents at end of period | $ | 80,660 | | | | $ | 107,433 | | | |
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Cash flows from operating activities: | | | | | |
| Net loss | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 62,239 |
| | 87,267 |
| | 102,105 |
|
| Amortization of debt issuance costs/discounts | 9,394 |
| | 9,961 |
| | 9,541 |
|
| Provision for doubtful accounts | 5,807 |
| | 1,103 |
| | 4,501 |
|
| (Gain) loss on sale of assets or stations | (2,499 | ) | | (95,695 | ) | | 2,856 |
|
| Non-cash reorganization items, net | 25,921 |
| | — |
| | — |
|
| Impairment of intangible assets and goodwill | 335,909 |
| | 604,965 |
| | 565,584 |
|
| Impairment charges - equity interest in Pulser Media Inc. | — |
| | — |
| | 19,364 |
|
| Deferred income taxes | (168,226 | ) | | (27,831 | ) | | (48,262 | ) |
| Stock-based compensation expense | 1,614 |
| | 2,948 |
| | 21,033 |
|
| Loss (gain) on early extinguishment of debt | 1,063 |
| | (8,017 | ) | | (13,222 | ) |
| Changes in assets and liabilities (excluding acquisitions and dispositions): | | | | | |
| Accounts receivable | (9,469 | ) | | 10,740 |
| | 371 |
|
| Trade receivable | 761 |
| | (839 | ) | | (1,691 | ) |
| Prepaid expenses and other current assets | (7,655 | ) | | (7,017 | ) | | 16,983 |
|
| Other assets | (1,451 | ) | | (1,106 | ) | | (6,208 | ) |
| Accounts payable and accrued expenses | 46,587 |
| | (16,816 | ) | | (34,122 | ) |
| Trade payable | (1,486 | ) | | 176 |
| | 410 |
|
| Other liabilities | (5,348 | ) | | (13,374 | ) | | (10,317 | ) |
| Net cash provided by operating activities | 86,596 |
| | 35,745 |
| | 82,432 |
|
| Cash flows from investing activities: | | | | | |
| Proceeds from sale of assets or stations | 6,090 |
| | 106,935 |
| | 9,201 |
|
| Restricted cash | (974 | ) | | (44 | ) | | 2,074 |
|
| Capital expenditures | (31,932 | ) | | (23,037 | ) | | (19,236 | ) |
| Net cash used in investing activities | (26,816 | ) | | 83,854 |
| | (7,961 | ) |
| Cash flows from financing activities: | | | | | |
| Repayment of borrowings under term loan and revolving credit facilities | (81,652 | ) | | (20,000 | ) | | (50,000 | ) |
| Adequate protection payments on term loan | (6,405 | ) | | — |
| | — |
|
| Tax withholding payments on behalf of employees | — |
| | — |
| | (93 | ) |
| Proceeds from exercise of warrants | — |
| | 3 |
| | 8 |
|
| Deferred financing costs | (91 | ) | | — |
| | — |
|
| Net cash (used in) provided by financing activities | (88,148 | ) | | (19,997 | ) | | (50,085 | ) |
| (Decrease) increase in cash and cash equivalents | (28,368 | ) | | 99,602 |
| | 24,386 |
|
| Cash and cash equivalents at beginning of period | 131,259 |
| | 31,657 |
| | 7,271 |
|
| Cash and cash equivalents at end of period | $ | 102,891 |
| | $ | 131,259 |
| | $ | 31,657 |
|
| Supplemental disclosures of cash flow information: | | | | | |
| Interest paid | $ | 96,225 |
| | $ | 126,515 |
| | $ | 129,314 |
|
| Income taxes paid | $ | 3,781 |
| | $ | 4,451 |
| | $ | 2,620 |
|
| Supplemental disclosures of non-cash flow information: | | | | | |
| Trade revenue | $ | 40,080 |
| | $ | 37,691 |
| | $ | 39,237 |
|
| Trade expense | $ | 38,633 |
| | $ | 36,158 |
| | $ | 40,427 |
|
| Transfer of property and equipment from assets held for sale | $ | 30,150 |
| | $ | — |
| | $ | — |
|
| Equity interest in Pulser Media, Inc. | $ | — |
| | $ | — |
| | $ | 2,025 |
|
| Transfer of deposit from escrow - Los Angeles land and building sale | $ | — |
| | $ | 6,000 |
| | $ | — |
|
See accompanying notes to the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DescriptionNature of Business, Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Cumulus Media Inc. (and its consolidated subsidiaries, except as the context may otherwise require, “Cumulus,” “Cumulus Media,” “we,” “us,” “our,”"we," "us," "our," or the “Company”"Company") is a Delaware corporation, organized in 2002,2018, and successor by merger to an Illinoisa Delaware corporation with the same name that had beenwas organized in 1997.2002.
Nature of Business
Cumulus Media is an audio-first media company delivering premium content to over a quarter billion people every month — wherever and whenever they want it. Cumulus Media engages listeners with high-quality local programming through 403 owned-and-operated radio stations across 85 markets; delivers nationally-syndicated sports, news, talk, and entertainment programming from iconic brands including the NFL, the NCAA, the Masters, CNN, AP News, the Academy of Country Music Awards, and many other world-class partners across more than 9,800 affiliated stations through Westwood One, the largest audio network in America; and inspires listeners through the Cumulus Podcast Network, its rapidly growing network of original podcasts that are smart, entertaining and thought-provoking. Cumulus Media provides advertisers with personal connections, local impact and national reach through broadcast and on-demand digital, mobile, social, and voice-activated platforms, as well as integrated digital marketing services, powerful influencers, full-service audio solutions, industry-leading research and insights, and live event experiences. Cumulus Media is the only audio media company to provide marketers with local and national advertising performance guarantees. For more information visit www.cumulusmedia.com.
Basis of Presentation
TheOur consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States ("GAAP") and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Current Bankruptcy Proceedings
On November 29, 2017 (the "Petition Date"), the Company and certain of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (the “Bankruptcy Petitions”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”. The Debtors' chapter 11 cases are being jointly administered under the caption In re Cumulus Media Inc., et al, Case No. 17-13381.
Immediately prior to the commencement of the case the Debtors entered into a Restructuring Support Agreement (the “Restructuring Support Agreement”) with certain creditors (the “Consenting Creditors”) under that certain Amended and Restated Credit Agreement, dated as of December 23, 2013 (the “Credit Agreement”), by and among the Company, Cumulus Media Holdings Inc., as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto from time to time, and Crestview Radio Investors, LLC and certain of its affiliates (the “Consenting Equityholders”). The Restructuring Support Agreement contemplates the implementation of a financial restructuring of the Debtors (as described below) through a conversion of more than $1.0 billion of the Company’s funded debt into equity (collectively, the “Restructuring”). The Restructuring will be effectuated by a joint plan of reorganization (the “Plan”) under chapter 11 of the Bankruptcy Code if confirmed by the Bankruptcy Court.
On December 1, 2017, the Bankruptcy Court approved certain motions and applications the Debtors filed on the Petition Date (the “First Day Motions”), certain of which were approved on an interim basis. On December 21, 2017, the Bankruptcy Court approved all of the Company’s First Day Motions on a final basis. Pursuant to the First Day Motions, and subject to certain terms and dollar limits included therein, the Company was authorized to continue to use its unrestricted cash on hand, as well as all cash generated from daily operations, which is being used to continue the Company’s operations without interruption during the course of its restructuring. Also pursuant to the First Day Motions, the Company received Bankruptcy Court authorization to, among other things and subject to the terms and conditions set forth in the applicable orders, pay certain pre-petition employee wages, salaries, health benefits and other employee obligations during its restructuring, pay certain claims relating to on-air talent and taxes, continue its cash management programs and insurance policies, as well as continue to honor its current customer programs. The Company is authorized under the Bankruptcy Code to pay post-petition expenses incurred in the ordinary course of business without seeking Bankruptcy Court approval. Until a plan of reorganization is approved and effective, the Debtors will continue to manage their properties and operate their businesses as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.
On December 9, 2017, the Debtors filed the Plan with the Bankruptcy Court and a related disclosure statement (the "Disclosure Statement") pursuant to chapter 11 of the Bankruptcy Code. On January 18, 2018, the Debtors filed with the Bankruptcy Court a first modified joint plan of reorganization and the related first modified disclosure statement for the Plan pursuant to chapter 11 of the Bankruptcy Code. The Plan and Disclosure Statement were further modified on January 31, 2018, February 2, 2018, February 12, 2018, and March 16, 2018. On February 2, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement and authorizing the solicitation of votes on the Plan.
Pursuant to the Plan, holders of claims with respect to the Term Loans (“Term Loan Claims”) would receive their pro rata share of approximately $1.3 billion in principal amount of new first lien term loans maturing in 2022 (the “New First Lien Debt”) and 83.5% of the issued and outstanding amount of common stock (the “Reorganized Common Equity”) to be issued by the reorganized Company (“Reorganized Cumulus”), subject to dilution by any Reorganized Common Equity issued pursuant to a post-emergence equity management incentive compensation plan (the “MIP”). Holders of unsecured claims against the Company, including claims arising from the Company’s 7.75% Senior Notes due 2019 (the “Notes”), would receive, in the aggregate, 16.5% of the Reorganized Common Equity, subject to dilution by the MIP. The New First Lien Debt would accrue interest at the London Inter-bank Offered Rate ("LIBOR") plus 4.50% per annum, subject to a LIBOR floor of 1.00% or, at Reorganized Cumulus’s option, an alternate base rate plus 3.50% per annum, subject to an alternate base rate floor of 2.00%. Reorganized Cumulus would be permitted to enter into a revolving credit facility or receivables facility providing commitments of up to $50 million. The New First Lien Debt would amortize in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount of the New First Lien Debt with the balance payable on the maturity date. Reorganized Cumulus would be able to voluntarily prepay the New First Lien Debt in whole or in part without premium or penalty, except that any prepayment during the period of six months following the issuance of the New First Lien Debt would require a premium equal to 1% of the prepaid principal amount. Certain mandatory prepayments on the New First Lien Debt would be required upon the occurrence of specified events as set forth in the Credit Agreement, including upon the sale of certain assets and from excess cash flow as defined. The New First Lien Debt would not have any financial maintenance covenants. The other terms and conditions of the New First Lien Debt would generally be similar to those set forth in the Credit Agreement, except as set forth in the term sheet attached to the Restructuring Support Agreement (the "Term Sheet"). The New First Lien Debt would be secured by first priority security interests in substantially all the assets of Reorganized Cumulus and the Guarantors (as defined below) in a manner substantially consistent with the Credit Agreement, subject to the terms of the term sheet. In addition, the direct parent of Reorganized Cumulus (the “Parent”) and all present and future wholly-owned subsidiaries of the Parent, subject to exceptions that are substantially consistent with those set forth in the Credit Agreement, would guarantee the New First Lien Debt (the "Guarantors"). The Plan contemplates that the Board of Directors of Reorganized Cumulus would consist of the President and Chief Executive Officer of the Company and six directors chosen by the Consenting Creditors. Even if the requisite acceptances of the Plan are received, the Bankruptcy Court is not obligated to confirm the Plan as proposed.
The Company has applied Accounting Standards Codification (“ASC”) 852 “Reorganizations” in preparingone reportable segment and presents the comparative periods on a consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent to the Bankruptcy Petitions filings, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain revenues and expenses incurred during the bankruptcy proceedings, including unamortized deferred financing costs and discounts associated with debt classified as liabilities subject to compromise, are recorded as reorganization items. In addition, pre-petition obligations that may be impacted by the chapter 11 process have been classified on the Consolidated Balance Sheet at December 31, 2017 as liabilities subject to compromise. These liabilities are reported at the amounts the Company anticipates will be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts. See below for more information regarding reorganization items.
Accounting principles generally accepted in the United States of America requires certain additional reporting for financial statements prepared between the Petition Date and the date that the Company emerges from bankruptcy, including:
|
| | | | |
l | Reclassification of pre-petition liabilities that are unsecured, under-secured or where it cannot be determined that the liabilities are fully secured to a separate line item in the Consolidated Balance Sheet called Liabilities Subject to Compromise; and | | | |
l | Segregation of reorganization items as a separate line in the Consolidated Statement of Operations outside of income from continuing operations.
| | | |
Debtor-In-Possession. The Debtors are currently operating as debtors in possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court has approved motions filed by the Debtors that were designed primarily to mitigate the impact of the chapter 11 proceedings on the Company’s operations, customers and employees. As a result, the Company is able to conduct normal business activities and pay all associated obligations for the period following its bankruptcy filing in the ordinary course of business and is authorized to pay and has paid certain pre-petition obligations, including, among other things, for employee wages and benefits, goods and services provided by certain on-air talent. During the chapter 11 cases, all transactions outside the ordinary course of business require the prior approval of the Bankruptcy Court.
Automatic Stay. Subject to certain specific exceptions under the Bankruptcy Code, the Bankruptcy Petitions automatically stayed most judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code. (See Note 18 “Condensed Combined Debtor-In-Possession Financial Information”).
Executory Contracts. Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign, or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtors in this document, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease of the Debtors, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code.
Potential Claims. The Debtors have filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of each of the Debtors, subject to the assumptions filed in connection therewith. These schedules and statements may be subject to further amendment or modification after filing. Certain holders of pre-petition claims that are not governmental units were required to file proofs of claim by the deadline for general claims of March 7, 2018 (the “Bar Date”).
The Debtors' have received approximately 1,300 proofs of claim, primarily representing general unsecured claims, for an amount of approximately $2.6 billion. These claims will be reconciled to amounts recorded in liabilities subject to compromise in the Consolidated Balance Sheet. Differences in amounts recorded and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. The Company may ask the Bankruptcy Court to disallow claims that the Company believes are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. In addition, as a result of this process, the Company may identify additional liabilities that will need to be recorded or reclassified to liabilities subject to compromise. In light of the substantial number of claims filed, and expected to be filed, the claims resolution process may take considerable time to complete and likely will continue after the Debtors emerge from bankruptcy.
Reorganization Items. The Debtors, have incurred and will continue to incur significant costs associated with the reorganization, primarily legal and professional fees. The amount of these costs, which since the Petition Date, are being expensed as incurred, are expected to significantly affect the Company’s results of operations. In accordance with applicable guidance, costs associated with the bankruptcy proceedings have been recorded as reorganization items within the Company's accompanying Consolidated Statements of Operations for the year ended December 31, 2017. (See Note 9, "Reorganization Items").
Financial Statement Classification of Liabilities Subject to Compromise. The accompanying Consolidated Balance Sheet as of December 31, 2017, includes amounts classified as liabilities subject to compromise, which represent liabilities the Company anticipates will be allowed as claims in the chapter 11 cases. These amounts represent the Debtors’ current estimate of known or potential obligations to be resolved in connection with the chapter 11 cases, and may differ from actual future settlement amounts paid. Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process. The Company will continue to evaluate these liabilities throughout the chapter 11 process and adjust amounts as necessary. Such adjustments may be material. (See Note 8, "Liabilities Subject to Compromise").
Reverse Stock Split
On October 12, 2016, the Company effected a one-for-eight (1:8) reverse stock split (the "Reverse Stock Split"). As a result of the Reverse Stock Split, every eight shares of each class of the Company's outstanding common stock were combined into one share of the same class of common stock and the authorized shares of each class of the Company's common stock were reduced by the same ratio. No fractional shares were issued in connection with the Reverse Stock Split. The number and exercise price of the Company's outstanding stock options and warrants were adjusted proportionally, as appropriate. The par value of the Company's common stock was not adjusted as a result of the Reverse Stock Split. All authorized, issued and outstanding stock and per share amounts contained within the accompanying consolidated financial statements and these footnotes have been adjustedbasis to reflect this Reverse Stock Split for all periods presented.
Out of Period Adjustments
In connection with the preparation of certain prior period consolidated financial statements, the Company recorded the below out of period adjustments:
The Company made a correction of an immaterial misstatement that occurred in periods prior thereto, which resulted in an increase in content costs of $3.6 million in the second quarter of 2016. The correction related to the Radio Station Group segment only and was not material to the prior year quarterly or annual results.
The Company made a correction of an immaterial Balance Sheet misclassification that occurred in periods prior thereto, which resulted in an increase in cash and accrued liabilities of approximately $2.6 million as of December 31, 2017. The correction was not material to the prior year quarterly or annual results.
Reportable Segments
The Company operates in twoone reportable segments, for which there is discrete financial information available and whose operating results are reviewed by the chief operating decision maker, the Radio Station Group and Westwood One.segment.
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 significant estimates related to revenue recognition, bad debts, intangible assets, income taxes, stock-based compensation, contingencies, litigation, valuation assumptions for impairment analysis, certain expense accruals, leases and, if applicable, purchase price allocation.allocations. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, and 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.
Comprehensive (Loss) Income (Loss)
Comprehensive (loss) income (loss) includes net (loss) income (loss) and certain items that are excluded from net (loss) income (loss) and recorded as a separate component of stockholders' equity (deficit).equity. During the years ended December 31, 20172023 and 2016,2022, the Company had no items of other comprehensive (loss) income (loss) and, therefore, comprehensive (loss) income (loss) does not differ from reported net income (loss). income.
Liquidity and Going Concern Considerations
In accordance with the requirements of Accounting Standards Update (“ASU”), 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40), or Accounting Standards Codification ("ASC") 205-40, the Company has the responsibility to evaluate at each reporting period, including interim periods, whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations. In its evaluation for this report, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s conditional and unconditional obligations due for 12 months following the date of issuance of this Annual Report on Form 10-K.
As of December 31, 2017, the Company had $102.9 million of unrestricted cash and cash equivalents. The Company has generated positive cash flows from operating activities of $86.6 million and $35.7 million for the years ended December 31, 2017 and 2016, respectively.
As of December 31, 2017, the Company had a $1.722 billion Term Loan outstanding, as described in Note 6, "Long-Term Debt", under its Credit Agreement (defined below) and $610.0 million of 7.75% Senior Notes (defined below) outstanding. Amounts outstanding under the Term Loan are scheduled to mature on December 23, 2020 and the 7.75% Senior Notes mature on May 1, 2019. Notwithstanding these maturity dates, and as disclosed further in Note 6, the Credit Agreement
includes a springing maturity provision that provides that if on January 30, 2019 the aggregate principal amount of 7.75% Senior Notes outstanding exceeds $200.0 million, the maturity date of the Term Loan will be accelerated to January 30, 2019. If the Company's plan of reorganization is not approved prior thereto, or the Company is unable to take other steps to create additional liquidity or otherwise avoid the occurrence of the springing maturity, forecasted cash flows would not be sufficient for the Company to meet its obligations as of January 30, 2019.
On October 30, 2017, the Restructuring Committee of the Board of Directors authorized the Company to forgo the November 1, 2017, scheduled interest payment of $23.6 million on the Company's 7.75% Senior Notes. The Company will continue to forgo interest payments, on the Company's 7.75% Senior Notes, while under bankruptcy protection.
Based on the Company's substantial level of indebtedness and, as described above, the Company's filing for relief under chapter 11 of the Bankruptcy Code as well as the uncertainty surrounding such filings, the Company determined that there is substantial doubt as to the Company’s ability to continue as a going concern for a period of 12 months following the date of issuance of this Form 10-K.
Notwithstanding the aforementioned, the accompanying consolidated financial statements of the Company have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the ability to continue as a going concern. The consolidated financial statements do not reflect or include any future consequences related to chapter 11 relief or emergence from chapter 11 relief.
Cash and Cash Equivalents
The Company considered all highly liquid investments with original maturities of three months or less to be cash equivalents.
Accounts Receivable, Allowance for Doubtful Accounts and Concentration of Credit Risk
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’sCompany's best estimate of the amount of probable credit losses in the Company’sCompany's existing accounts receivable. The Company determined the allowance based on several factors, including the length of time receivables are past due, trends and current economic factors. All balances are reviewed and evaluated quarterly on a consolidated basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheetoff-balance sheet credit exposure related to its customers.
In the opinion of management, credit risk with respect to accounts receivable is limited as a result of the large number of customers and the geographic diversification of the Company’s customer base. The Company performs
credit evaluations of its customers as needed and believes that adequate allowances for any uncollectible accounts receivable are maintained.
Assets Held for Sale
During The Company believes its concentration of credit risk is limited due to the year ended December 31, 2015, the Company entered into an agreement to sell certain land in the Company's Washington, DC market to a third party. The closing of the transaction is subject to various conditions and approvals, which remain pending. The identified asset was classified as held for sale in the accompanying Consolidated Balance Sheet at December 31, 2016. The estimated fair value of the land to be disposed of is in excesslarge number of its carrying value. Under the Bankruptcy Code, the final disposition of assets via a sales agreement cannot occur without Bankruptcy Court approval. As a result, as of December 31, 2017, the asset no longer met the definition of held for sale under Accounting Standards Codification ("ASC") Topic 360, Property and equipment and as of December 31, 2017, the asset was reclassified on the Consolidated Balance Sheet as Property and Equipment.
Dispositions
On August 30, 2016, the Company completed the sale of certain land and buildings in Los Angeles for $110.6 million in cash. In conjunction with this sale, the Company recorded a net gain of $94.0 million, which is included in (gain) loss on sale of assets or stations in the accompanying Consolidated Statement of Operations for the year-ended December 31, 2016.
Insurance Recoveries
The Company recorded $12.4 million in other income (expense), net in the Consolidated Statement of Operations for the year ended December 31, 2015. This was primarily related to the receipt of $14.6 million of insurance proceeds from a business interruption claim arising from Hurricane Katrina in 2005.customers.
Property and Equipment
Property and equipment are stated at cost. Major additions or improvements are capitalized, including interest expense when material, while repairs and maintenance are charged to expense when incurred. Property and equipment acquired in business combinations accounted for under the purchaseacquisition method of accounting are recorded at their estimated fair values on the date of acquisition. Equipment held under capitalfinance leases is stated at the present value of minimum future lease payments. Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is recognized in the statement of operations.
Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Equipment held under capitalfinance leases and leasehold improvements are amortizeddepreciated using the straight-line method over the shorter of the estimated useful life of the asset or the remaining term of the lease. Depreciation of construction in progress is not recorded until the assets are placed into service.
Assets Held for Sale
Long-lived assets to be sold are classified as held for sale in the period in which they meet all the criteria for the disposal of long-lived assets. The Company measures assets held for sale at the lower of their carrying amount or fair value less cost to sell. As of December 31, 2023 and 2022, assets held for sale were not material.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets of an asset group may not be recoverable. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other groups of assets. Recoverability of assetsan asset group to be held and used is measured by a comparison of the carrying amount of anthe asset group to estimated undiscounted future cash flows expected to be generated by the asset.asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.asset group.
Intangible Assets and Goodwill
The Company’sAs of December 31, 2023, the Company's intangible assets arewere comprised of broadcastFederal Communications Commission ("FCC") licenses and certain other intangible assets and goodwill. Goodwill is equal to the difference between the purchase price and the value assigned to the tangible and intangible assets acquired and liabilities assumed in a business combination.assets. Intangible assets and goodwill acquired in a business combination andwhich are determined to have an indefinite useful life, which includeincluding the Company’s broadcastCompany's FCC licenses, are not amortized, but instead tested for impairment at least annually, or if a triggering event occurs. Intangible assets with definite useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
In determining that the Company’s broadcastCompany's FCC licenses qualified as indefinite lived intangibles, management considered a variety of factors including the Federal Communications Commission’s (“FCC”)FCC's historical record of renewing broadcastbroadcasting licenses, the cost to the Company of renewing such licenses, the relative stability and predictability of the radio industry and the relatively low level of capital investment required to maintain the physical plant of a radio station. The Company's evaluation of the recoverability of its indefinite-lived assets, which include FCC licenses, and goodwill, is based on certain judgments and estimates. Future events may impact these judgments and estimates. If events or changes in circumstances were to indicate that an asset’sasset's carrying valueamount is not recoverable, a write-down of the asset would be recorded through a charge to operations.
InvestmentsRevenue Recognition
TheRevenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration to which the Company follows Accounting Standards Codification (“ASC”) Topic 325-20, Cost Method Investments (“ASC 325-20”) to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not requiredexpects to be accountedentitled in exchange for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. During the year ended December 31, 2015, the Company recognized an impairment charge of $19.4 million related to the decline in the fair value of a cost-method investment. As of December 31, 2017 and 2016, there were no cost-method investments in the Consolidated Balance Sheets.
Debt Issuance Costs
The costs related to the issuance of debt are capitalized and amortized to interest expense over the life of the related debt using the effective interest method. In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03. The amendments in ASU 2015-03 require that debt issuance costs be presented in the Consolidated Balance Sheet as a direct deduction from the carrying amount of long-term debt, consistent with debt discountsthose goods or
premiums. However, as a result of the Company’s chapter 11 cases, the Company expensed the entire balance of $25.9 million of deferred financing costs and debt discount during the fourth quarter of 2017 to reorganization items, net, in the Consolidated Statement of Operations for the year ended December 31, 2017.
Revenue Recognition
Revenue is derived primarily from the sale of commercial airtime to local and national advertisers. Revenue services. Broadcast radio revenue is recognized as commercials are broadcast. Digital podcasting and streaming revenues are recognized when the advertisements are delivered. Revenues presented infor digital marketing services are recognized over time as the financial statementsservices are reflectedprovided depending on the terms of the contract. Remote and event revenues are recognized at the time services, for example hosting an event, are delivered.
Revenues are recorded on a net basis, after the deduction of advertising agency fees by the advertising agencies, usually at a rate of 15.0%, which is the industry standard.
fees. In those instances, in which the Company functions as the principal in the transaction, the revenue and associated operating costs are presented on a gross basis.
In those instances where the Company functions as an agent or sales representative, the effective commission is presented as revenue on a net basis with no corresponding operating expenses.
The Company’s payment terms vary by the type and location of customer and the products or services offered. The term between invoicing and when payment is due is generally not significant. There are no further obligations for returns, refunds or similar obligations related to the contracts. The Company records deferred revenues when cash payments including amounts which are refundable are received in advance of performance.
Trade and Barter Transactions
The Company provides commercial advertising inventory in exchange for goods and services used principally for promotional, sales, programming and other business activities. Programming barter revenue is derived from an exchange of programming content, to be broadcast on the Company's airwaves, for commercial advertising inventory, usually in the form of commercial placements inside the show exchanged. Trade and barter value is based upon management's estimate of the fair value of the products, supplies and services received. Trade and barter revenue is recorded when commercial spots are aired, in the same pattern as the Company's normal cash spot revenue is recognized. Trade and barter expense is recorded when goods or services are consumed. For the years ended December 31, 2023 and 2022, amounts reflected under trade and barter transactions were: (1) trade and barter revenues of $57.6 million and $49.5 million, respectively; and (2) trade and barter expenses of $57.6 million and $48.7 million, respectively.
Advertising Costs
Advertising costs are expensed as incurred. For the years ended December 31, 2017, 2016,2023 and 2015,2022, the advertising costs incurred were$5.1 million, $4.9 $5.5 million and $3.9$4.5 million, respectively.
Local Marketing Agreements
A number of radio stations, including certain of our stations, have entered into LMAs. In a typical LMA, the licensee of a station makes available, for a fee and reimbursement of its expenses, airtime on its station to a party which supplies programming to be broadcast during that airtime, and collects revenues from advertising aired during such programming. LMAs are subject to compliance with the antitrust laws and the Communications Laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances.
As of December 31, 2017 and 2016, the Company operated four and five radio stations under an LMA, respectively. The stations operated under an LMA contributed $23.9 million, $23.2 million, and $24.5 million in 2017, 2016, and 2015, respectively, to the consolidated net revenue of the Company.
Stock-based Compensation Expense
Stock-based compensation expense recognized under ASC Topic 718, Compensation — Share-Based Payment (“ASC 718”), for the years ended December 31, 2017, 20162023 and 2015,2022, was $1.6 million, $2.9$5.3 million and $21.0$6.2 million, respectively. Upon adopting ASC 718 forFor awards with service conditions, an election was made to recognize stock-based compensation expense is recognized on a straight-line basis over the requisite service period for the entire award. In addition, the Company elected to recognize forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. For stock options with service conditions only, the Company utilizes the Black-Scholes option pricing model to estimate the fair value of options issued. The fair value of stock options is determined by the Company’sCompany's stock price, historical stock price volatility, over the expected term of the awards,award, risk-free interest rates and expected dividends. If other assumptions are used, the results could differ. ForThe fair value of time-based and performance-based restricted stock awards with service conditions only,is the Company utilizesquoted market value of our stock on the intrinsic value method.grant date. For performance-based restricted stock awards, with performance conditions, the Company evaluates the probability of vesting of the awards in each reporting period. In the event the Company determines it is no longer probable that the minimum performance criteria specified in the award will be achieved, all previously recognized compensation expense will be reversed in the period and adjusts compensation cost based on this assessment.such a determination is made.
Trade TransactionsIncome Taxes
The Company provides commercial airtime in exchangeaccounts for goods and services used principally for promotional, sales, programming and other business activities. Anincome taxes using the asset and liability is recorded at the fair value of the goods or services received. Trade revenue is recordedmethod. Under this method, deferred tax assets and the liability is relieved when commercials are broadcast and trade expense is recorded and the asset relieved when goods or services are consumed. Trade valuation is based upon management’s estimate of the fair value of the products, supplies and services received. For the years ended December 31, 2017, 2016, and 2015, amounts reflected under trade transactions were: (1) trade revenues of $40.1 million, $37.7 million and $39.2 million, respectively; and (2) trade expenses of $38.6 million, $36.2 million and $40.4 million, respectively.
Income Taxes
The Company uses the liability method of accounting for deferred income taxes. Except for goodwill, deferred income taxesliabilities are recognized for all temporarythe future tax consequences attributable to differences between the tax and financial reporting basesstatement carrying amounts of ourexisting assets and liabilities based onand their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax lawsrates the Company expects will be applicable when those tax assets and statutoryliabilities are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates applicable tois recognized in income in the periods in whichperiod that includes the differences are expected to affect taxable income. The Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act, among other changes, reduces the US federal corporate tax rate from 35% to 21% for tax years after 2017. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Act; however, in certain cases, as described more fully in Note 12 “Income Taxes”, it has made a reasonable estimate of the effects on its existing deferred tax balances.date. A valuation allowance is recorded against aprovided for deferred tax asset to measure its net realizable valueassets when it is not more likely than not that the benefits of its recoveryasset will be recognized.realized. The Company continually reviews the adequacy of our valuation allowance, if any, on our deferred tax assets 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 recognizedrealized in accordance with ASC Topic 740, Income Taxes ("ASC 740"). Any adjustment to the deferred
The Company recognizes a tax asset valuation allowanceposition as a benefit only if it is recorded in the Consolidated Statement of Operations of the periodmore-likely-than-not that the adjustmentposition would be sustained in an examination, with a tax examination being presumed to occur. The amount recognized is determined to be required. See Note 12, “Income Taxes” for further discussion.the largest amount of tax benefit that has a greater than 50% likelihood of being realized on examination. For tax positions not meeting the more-likely-than-not test, no tax benefit is recorded.
(Loss) Earnings perPer Share
Basic income (loss) earnings per share is computed on the basis of the weighted average number of common shares outstanding.outstanding, including warrants. The Company allocates undistributed net (loss) income (loss) from continuing operations between each class of common stock on an equal basis after any allocations for preferred stock dividends in accordance with the terms of the Company’sCompany's third amended and restated certificate of incorporation, as amended (the “Third Amended and Restated Charter”"Charter").
Non-vested restricted shares of Class A common stock and Company Warrants (defined below) are considered participating securities for purposes of calculating basic weighted average common shares outstanding in periods in which the Company recorded net income. Diluted earnings per share is computed in the same manner as basic (loss) earnings per share after assuming the issuance of common stock for all potentially dilutive equivalent shares, which includes stock options and certain other outstanding warrants to purchase common stock. Antidilutive instrumentsPotentially dilutive shares are not considered in this calculation.excluded from the computations of diluted earnings per share if their effect would be anti-dilutive. Under the two-class method, net (loss) income is allocated to common stock and participating securities to the extent that each security may share in earnings, as if all of the (loss) earnings for the period had been distributed. Earnings are allocated to each participating security and common share equally, after deducting dividends declared or accreted on preferred stock.
Fair Values of Financial Instruments
The carrying valuesamounts of cash equivalents, restricted cash, accounts receivables, accounts payable, trade payables and receivables and accrued expenses approximate fair value because of the short term to maturity of these instruments (See Note 7, "Fair Value Measurements").instruments.
Accounting for National Advertising Agency ContractSupplemental Cash Flow Information
The Company has engaged Katz Media Group, Inc. (“Katz”) as its national advertising sales agent. The Company’s contract with Katz has several economic elements that principally reduce the overall expected commission rate below the stated base rate. The Company estimates the overall expected commission rate over the entire contract period and applies that ratefollowing summarizes supplemental cash flow information to commissionable revenue throughout the contract periodbe read in conjunction with the goalConsolidated Statements of estimatingCash Flows for the years ended December 31, 2023 and recording a stable commission rate over the life of the contract.2022 (dollars in thousands):
The potential commission adjustments are estimated and combined in the Consolidated Balance Sheets with the contractual termination liability. That liability is accreted to commission expense to effectuate the stable commission rate over the term of the contract. Over the term of the contract with Katz, management updates its assessment of the effective commission expense attributable to national sales in an effort to record a consistent commission rate in each period. | | | | | | | | | | | | |
| | Year Ended December 31, 2023 | | Year Ended December 31, 2022 | |
| Supplemental disclosures of cash flow information: | | | | |
| Interest paid | $ | 63,365 | | | $ | 47,127 | | |
| Income taxes paid | 484 | | | 7,363 | | |
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| Supplemental disclosures of non-cash flow information: | | | | |
| Trade revenue | $ | 57,615 | | | $ | 49,543 | | |
| Trade expense | 57,619 | | | 48,694 | | |
| Non-cash principal change in financing liabilities | (536) | | | (542) | | |
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The Company’s accounting for and calculation of commission expense to be realized over the life of the Katz contract requires management to make estimates and judgments that affect reported amounts of commission expense in each period. Actual results may differ from management’s estimates.
Variable Interest Entities
The Company accounted for entities qualifying as variable interest entities (“VIEs”) in accordance with ASC Topic 810, Consolidation (“ASC 810”). VIEs are required to be consolidated by the primary beneficiary. The primary beneficiary is the entity that holds the majority of the beneficial interests in the VIE. A VIE is an entity for which the primary beneficiary’s interest in the entity can change with changes in factors other than the amount of investment in the entity. From time to time,
the Company enters into an LMA in connection with pending acquisitions or dispositions of radio stations and the requirements of ASC 810 may apply, depending on the facts and circumstances related to each transaction.
Adoption of New Accounting StandardsPronouncements
ASU 2016-092023-07 - Compensation - Stock Compensation ("Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2016-09"). In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, which provides guidance for employee stock-based payments. This update removes the requirement that reporting entities present tax benefits as excess cash flows from financing activities and cash flows from operating activities. As a result of this amendment, cash flows related to excess tax benefits will be classified only in operating activities. The Company adopted ASU 2016-09 effective January 1, 2017. As a result of adoption, in the first quarter of 2017, the Company recorded an adjustment to accumulated deficit of approximately $0.6 million to recognize net operating loss carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized in additional paid in capital. The Company is continuing its practice of estimating forfeitures and recording cash paid for withholding taxes as a financing activity.
ASU 2017-04 - Intangibles - Goodwill and Other ("ASU 2017-04"2023-07"). In January 2017,November 2023, the FASB issued ASU 2017-042023-07, which is intended to simplifyimprove reportable segment disclosure requirements, primarily through additional disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the accountingfinancial statements. The Company is currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
ASU 2023-09 - Improvements to Income Tax Disclosures ("ASU 2023-09"). In December 2023, the FASB issued ASU 2023-09, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for goodwill impairment. The update eliminates the requirement to perform Step 2components of the goodwill impairment test,effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for early adoption. The Company is currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
Accounting Guidance Adopted in 2023
ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"). In June 2016, the FASB issued ASU 2016-13 which requires entities to estimate loss of financial assets measured at amortized cost, including trade receivables, debt securities and loans, using an expected credit loss model. The expected credit loss differs from the previous incurred losses model primarily in that the loss recognition threshold of "probable" has been eliminated and that expected loss should consider reasonable and supportable forecasts in addition to the previously considered past events and current
conditions. Additionally, the guidance requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by year of the asset's origination for as many as five years.
Entities must apply the standard provision as a hypothetical purchase price allocation. Upon effectivenesscumulative-effect adjustment to retained earnings as of this update, a goodwill impairmentthe beginning of the first reporting period in which the guidance is the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amounteffective. The standard was effective for Smaller Reporting Companies for fiscal years beginning after December 15, 2022. The adoption of goodwill. All other goodwill impairment guidance remains substantially unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The Company early adopted ASU 2017-04 effective2016-13 on January 1, 2017. There was no2023, did not have a significant impact on the Company's Consolidated Financial Statements.
2. Acquisitions and Dispositions
WDRQ Sale
On July 31, 2023, the Company completed the sale of WDRQ-FM, in Detroit, MI (the "WDRQ Sale") for $10.0 million in cash. The Company recorded a gain on the WDRQ Sale of $8.6 million which was included in the Gain on sale or disposal of assets or stations financial statements as a resultstatement line item of the adoptionCompany's Consolidated Statements of this standard.Operations for the year ended December 31, 2023.
RecentWFAS Sale
On February 6, 2023, the Company completed the sale of WFAS-FM, in Bronxville, NY (the "WFAS Sale") for $7.3 million in cash. The Company recorded a gain on the WFAS Sale of $7.1 million which was included in the Gain on sale or disposal of assets or stations financial statement line item of the Company's Consolidated Statements of Operations for the year ended December 31, 2023.
Asset Acquisition
On July 30, 2021, the Company purchased affiliate advertising relationships from a producer of radio station advertising for total consideration of $15.0 million. The consideration included a $7.0 million upfront cash payment and contingent consideration owed of up to $8.0 million to be paid over approximately three years. The Company recorded a liability for the contingent consideration on the acquisition date in accordance with Accounting Standards Updates
ASU 2014-09Codification Topic 450, Contingencies, as payment was both probable and related updates - Revenue from Contracts with Customers ("ASU 2014-09"). In May 2014,estimable. To date, the FASB issued ASU 2014-09 which outlines a single comprehensive revenue model for entities to use in accounting for revenue arising from contracts with customers.Company has paid $6.0 million of contingent consideration. The guidance supersedes most current revenue recognition guidance, including industry-specific guidance. The core principlelevel 3 fair value of the single comprehensive revenue modelremaining contingent consideration is that “an entity recognizes revenue to depictreassessed quarterly. As payment was no longer deemed probable, the transferCompany reduced the remaining contingent consideration by $2.0 million during the year ended 2023, which is included in the Content costs financial statement line item of the Company's Consolidated Statements of Operations for the year ended December 31, 2023.
3. Revenues
Revenue Recognition
Revenues are recognized when control of the promised goods or services are transferred to customersthe customer, in an amount that reflects the consideration to which the entityCompany expects to be entitled in exchange for those goods or services.”
The following tables present revenues disaggregated by revenue source (dollars in thousands):
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| Broadcast radio revenue: | | | | | | | | | | | | | |
| Spot | $ | 412,047 | | | | | | | | | | | $ | 479,834 | | | |
| Network | 182,503 | | | | | | | | | | | 229,772 | | | |
| Total broadcast radio revenue | 594,550 | | | | | | | | | | | 709,606 | | | |
| Digital | 146,425 | | | | | | | | | | | 142,312 | | | |
| Other | 103,573 | | | | | | | | | | | 101,588 | | | |
| Net revenue | $ | 844,548 | | | | | | | | | | | $ | 953,506 | | | |
Broadcast Radio Revenue
Most of our revenue is generated through the sale of terrestrial, broadcast radio spot advertising time to local, regional, and national clients. In August 2015, addition to local, regional and national spot advertising revenues, we monetize our available inventory in
the FASB issued ASU 2015-14 - Deferralnetwork sales marketplace. To effectively deliver network advertising for our customers, we distribute content and programming through third party affiliates to reach a broader national audience.
Digital Revenue
We generate digital advertising revenue from the sale of advertising and promotional opportunities across our podcasting network, streaming audio network, websites, mobile applications and digital marketing services. We sell premium advertising adjacent to, or embedded in, podcasts through our network of owned and distributed podcasts. We also operate streaming audio advertising networks in the Effective Date ("ASU 2015-14")U.S., including owned and operated internet radio simulcasted stations with either digital ad-inserted or simulcasted ads. We sell display ads across local radio station websites, mobile applications, and ancillary custom client microsites. In addition, we sell an array of local digital marketing services to new and existing advertisers such as, email marketing, geo-targeted display, video solutions and search engine marketing within our Cumulus C-suite portfolio, and website and microsite building and hosting, social media management, reputation management, listing management, and search engine optimization within our Boost product suite.
Other Revenue
Other revenue includes trade and barter transactions, remote and event revenues, and non-advertising revenue. Non-advertising revenue represents fees received for licensing content, imputed tower rental income, satellite rental income, and proprietary software licensing.
Customer Options that Provide a Material Right
ASC 606 requires the allocation of a portion of a transaction price of a contract to additional goods or services transferred to a customer that are considered to be a separate performance obligation and provide a material right to the customer.
To satisfy the requirement of accounting for the material right, the Company considers both the transaction price associated with each advertising spot as well as the timing of revenue recognition for the spots. Customers are often provided bonus spots, which delayedare radio advertising spots, free of charge, explicitly within the effective datecontract terms or implicitly agreed upon with the customer consistent with industry standard practices. The Company typically runs these bonus spots concurrent with paid spots. As the delivery and revenue recognition for both paid and bonus spots generally occur within the same period, the difference between the time of ASU 2014-09 by one year. ASU 2014-09, as amended,delivery and recognition of revenue is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-08 - insignificant.
Principal versus Agent Considerations ("ASU 2016-08")
In those instances in which clarifies the implementation guidance onCompany functions as the principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10 - Identifying Performance Obligations and Licensing ("ASU 2016-10") which amendsin a transaction, the revenue recognition guidanceand associated operating costs are presented on accounting for licenses of intellectual property and identifying performance obligations as well as clarifies when a promised good or service is separately identifiable.gross basis. In May 2016,those instances where the FASB issued ASU 2016-12 - Narrow-Scope Improvements and Practical Expedients ("ASU 2016-12") which provides clarifying guidance in certain narrow areas suchCompany functions solely as an assessmentagent or sales representative, the Company's effective commission is presented as revenue on a net basis with no corresponding operating expenses.
The Company maintains revenue sharing agreements with various content providers and inventory representation agreements with various radio companies. For all revenue sharing and inventory representation agreements, the Company performs an analysis in accordance with ASC 606 to determine if the amounts should be recorded on a gross or net basis. The majority of collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition as well as adds certain practical expedients. In December 2016, the FASB issued ASU 2016-20 - Technical Corrections and Improvements ("ASU 2016-20") which provides technical corrections and improvements to Topic 606. In March 2017, the FASB issued ASU 2017-05 - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets ("ASU 2017-05") which clarifies the scope of Subtopic 610-20 and adds guidance for partial sales of non-financial assets, including partial sales of real estate. In May 2017, the FASB issued ASU 2017-10 - Determining the Customer of the Operation Services ("ASU 2017-10") which clarifies the diversity in practice in how an operating entity determines the customer of the operation services for transactions within the scope of ASC 853, Service Concession Arrangements, by clarifying that the grantor is the customer of the operation services in all cases for those arrangements. The amendments also allow forour revenue sharing agreements are recorded on a more consistent application of other aspects of the revenue guidance, which are affected by this customer determination. The amendments in ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-05 and ASU 2017-10 may be applied either retrospectively to each prior period presented or retrospectivelygross basis with the cumulative effectshared revenue amount recorded within Content costs in the Consolidated Statements of initially applying such updates atOperations. Inventory representation agreements are also generally recorded on a gross basis with the datefees paid to inventory providers recorded within Content costs in the Consolidated Statements of initial application.Operations.
Capitalized Costs of Obtaining a Contract
The Company created a revenue recognition implementation teamcapitalizes certain incremental costs of obtaining contracts with customers which has overseen the planning, testing and implementation of ASC 606. The responsibilities of this team include developing an appropriate testing methodology, performing the testing ofit expects to recover. For new local direct contracts and evaluating the impact ofwhere the new revenue recognition standard onand renewal commission rates are not commensurate, management capitalizes commissions and amortizes the Company's financial statements.
The Company will adoptcapitalized commissions over the new standard using a modified retrospective approach effective January 1, 2018. The most significant impact of adopting the new standard on the Company's financial statements will primarily relate to a change in the recognition of costs incurred to obtain a contract. Beginning on January 1, 2018, sales commissions directly related to obtaining new customers will be capitalized at the onset of a contract and amortized over an estimatedaverage customer life. Under the Company's accounting policy, prior to January 1, 2018, all suchThese costs were expensed when the relevant advertisements are aired. The changerecorded within selling, general and administrative expenses in timingour Consolidated Statements of the recognition of sales commission costs is not expected to have a material impact on the consolidated financial statements, including retained earnings or disclosures. Also, the accounting for the estimate of variable consideration is not materially different compared to the Company's current practice. The new standard is expected to impact the Company's internal control environment, including the Company's financial statement disclosure controls, business process controls, new systems and processes, and enhancements to existing systems and processes.
ASU 2016-01 - Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). In January 2016, the FASB issued ASU 2016-01 which enhances the reporting model for financial instruments including aspects of recognition, measurement, presentation and disclosure. The new guidance revises the accounting requirements related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The update also changes certain disclosure requirements associated with the fair value of financial instruments. These changes will require an entity to measure, at fair value, investments in equity securities and other ownership interests in an entity - including investments in partnerships, unincorporated joint ventures and limited liability companies that do not result in consolidation and are not accounted for under the equity method - and recognize the changes in fair value within net income. ASU 2016-01 will be effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. In February 2018, the FASB issued ASU 2018-03 - Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2018-03") which provides an option for a company to "un-elect" the measurement alternative and elect to account for the investment at fair value through current earnings. However, once a company makes this election for a particular investment, it must apply the fair value through current earnings model to all identical investments and/or similar investments from the same issuer. Further, a company cannot elect the measurement alternative for future purchases of identical or similar investments of the same issuer. Early adoption of ASU 2016-01 is not permitted, except for certain amendments within the ASU. The Company does not expect adoption of this guidance to have a material impact on its financial condition, results of operations or disclosures.
ASU 2016-02 - Leases ("ASU 2016-02"). In February 2016, the FASB issued ASU 2016-02 which provides updated guidance for the accounting for leases. This update requires lessees to recognize assets and liabilities for the rights and obligations created by leases with a term longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, and interim periods thereafter. A modified retrospective transition method is required, with the option to elect certain practical expedients. Early adoption is permitted. The Company is currently assessing the impact that ASU 2016-02 will have on its consolidated financial statements and plans to adopt the new standard effective January 1, 2019.
ASU 2016-15 - Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). In August 2016, the FASB issued ASU 2016-15 which provides guidance for several new and/or revised disclosures pertaining to the classification of certain cash receipts and cash payments on the statement of cash flows, including contingent consideration payments made after a business acquisition. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. Early adoption is permitted. The Company plans to adopt this standard effective January 1, 2018 and does not expect adoption of this guidance to have a material impact on its financial condition, results of operations or disclosures.
ASU 2016-16. - Intra-Entity Transfers of Assets Other than Inventory ("ASU 2016-16").In October 2016, the FASB issued ASU 2016-16. The amendments in the ASU provide guidance for the accounting for the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs between entities in different tax jurisdictions. This ASU will be effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. Early adoption is permitted. The Company does not expect adoption of this guidance to have a material impact on its financial condition, results of operation or disclosures.
ASU 2016-18 - Restricted Cash ("ASU 2016-18"). In November 2016, the FASB issued ASU 2016-18 which provides guidance for the accounting for the disclosure of restricted cash on the statement of cash flows. ASU 2016-18 will be effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. Early adoption is permitted. The Company does not expect adoption of this guidance to have a material impact on its financial condition, results of operations or disclosures.Operations. As of December 31, 20172023 and 2022, the Company recorded an asset of $6.5 million and $7.2 million, respectively, related to the unamortized portion of commission expense on new local direct revenue.
Amortization for the years ended December 31, 2016, the Company had approximately $9.02023 and 2022, was $7.1 million and $8.0$6.9 million, in restricted cash, respectively, on its Consolidated Balance Sheets. Upon adoption of ASU 2016-18, restricted cash balances will be included along with cash and cash equivalents as of the end of the period and beginning of the period, respectively,respectively. No impairment losses have been recognized in the Company's Consolidated Balance Sheets for all periods presented; additionally, separate line items showing changes in restricted cash balances will be eliminated from its Consolidated Statement of Cash Flows. The Company plans to adopt this standard effective January 1, 2018 and does not expect adoption of this guidance to have a material impact on its financial condition, results of operations or disclosures.
ASU 2017-01 - Clarifying the Definition of a Business ("ASU 2017-01"). In January 2017, the FASB issued guidance that clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The new standard is effective for fiscal years and interim periods within fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company plans to adopt this standard effective January 1, 2018 and does not expect adoption of this guidance to have a material impact on its financial condition, results of operations or disclosures.
ASU 2017-09 - Scope of Modification Accounting ("ASU 2017-09"). In May 2017, the FASB issued an update to guidance on Topic 718, Compensation—Stock Compensation that clarifies when changes to the terms or conditions of a share-based award must be accounted for as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 will be effective for all entities for annual periods, and interim periods within annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company plans to adopt this standard effective January 1, 2018 and does not expect the adoption of this guidance to have a material impact on its financial condition, results of operations or disclosures.
2. Restricted Cash
As ofended December 31, 20172023 and 2016, the Company’s Consolidated Balance Sheets included approximately $9.0 million and $8.0 million, respectively, in restricted cash. Restricted cash is used primarily to collateralize standby letters2022.
3.4. Property and Equipment
Property and equipment consisted of the following as of December 31, 2017 and 2016 (dollars in thousands):
| | | | Estimated Useful Life | | 2017 | | 2016 |
| Estimated Useful Life | | | Estimated Useful Life | | December 31, 2023 | | December 31, 2022 |
| Land | | $ | 90,482 |
| | $ | 63,484 |
|
| Broadcasting and other equipment | 3 to 30 years | | 240,740 |
| | 234,760 |
|
| Computer and capitalized software costs | 1 to 3 years | | 29,793 |
| | 29,591 |
|
| Furniture and fixtures | 5 years | | 15,278 |
| | 14,899 |
|
| Leasehold improvements | 5 years | | 42,504 |
| | 40,242 |
|
| Buildings | 9 to 20 years | | 47,375 |
| | 46,351 |
|
| Buildings and towers | |
| Construction in progress | | 32,463 |
| | 14,036 |
|
| | | 498,635 |
| | 443,363 |
|
| Property and equipment, gross | |
| Less: accumulated depreciation | | (307,031 | ) | | (281,300 | ) |
| | | $ | 191,604 |
| | $ | 162,063 |
|
| Property and equipment, net | |
Depreciation expense for the years ended December 31, 2017, 20162023 and 20152022, was $28.7 million, $31.1$38.1 million and $33.0$33.1 million, respectively.
4. Intangible Assets and Goodwill
The following tables present goodwill balances and accumulatedan asset may not be recoverable There was no impairment losses on a segment and consolidated basis as of December 31, 2016 and December 31, 2017 (dollars in thousands):
Radio Station Group
|
| | | |
| Goodwill: | |
| Balance as of December 31, 2016: | |
| Goodwill | $ | 1,278,526 |
|
| Accumulated impairment losses | (1,278,526 | ) |
| Total | $ | — |
|
| Balance as of December 31, 2017: | |
| Goodwill | 1,278,526 |
|
| Accumulated impairment losses | (1,278,526 | ) |
| Total | $ | — |
|
Westwood One
|
| | | |
| Goodwill: | |
| Balance as of December 31, 2016: | |
| Goodwill | $ | 304,280 |
|
| Accumulated impairment losses | (169,066 | ) |
| Total | $ | 135,214 |
|
| Balance as of December 31, 2017: | |
| Goodwill | 304,280 |
|
| Accumulated impairment losses | (169,066 | ) |
| Total | $ | 135,214 |
|
Consolidated
|
| | | |
| Goodwill: | |
| Balance as of December 31, 2016: | |
| Goodwill | $ | 1,582,806 |
|
| Accumulated impairment losses | (1,447,592 | ) |
| Total | $ | 135,214 |
|
| Balance as of December 31, 2017: | |
| Goodwill | 1,582,806 |
|
| Accumulated impairment losses | (1,447,592 | ) |
| Total | $ | 135,214 |
|
The following table presents intangible asset balances, changes therein and dispositions and amortization thereof duringcapitalized internally developed software costs for the years ended December 31, 20162023 and 2022.
5. Intangible Assets
The gross carrying amount and accumulated amortization of the Company’s intangible assets as of December 31, 2017.2023 and 2022 are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Indefinite-Lived | | Definite-Lived | | Total |
| Gross Carrying Amount | |
FCC licenses | | Trademarks | | Affiliate and producer relationships | | Broadcast advertising | | Tower income contracts | | Other | | |
| Balance as of December 31, 2021 | | $ | 823,905 | | | $ | 19,749 | | | $ | 145,000 | | | $ | 32,000 | | | $ | 13,580 | | | $ | 11,053 | | | $ | 1,045,287 | |
| Assets held for sale | | (49) | | | (32) | | | — | | | — | | | (32) | | | — | | | (113) | |
| Acquisition | | — | | | 135 | | | — | | | — | | | — | | | — | | | 135 | |
| Dispositions | | (768) | | | — | | | — | | | — | | | — | | | — | | | (768) | |
| Impairment charges | | (15,544) | | | — | | | — | | | — | | | — | | | — | | | (15,544) | |
Other (a) | | — | | | — | | | — | | | — | | | — | | | (11,053) | | | (11,053) | |
| Balance as of December 31, 2022 | | $ | 807,544 | | | $ | 19,852 | | | $ | 145,000 | | | $ | 32,000 | | | $ | 13,548 | | | $ | — | | | $ | 1,017,944 | |
| | | | | | | | | | | | | | |
| Accumulated Amortization | | | | | | | | | | | | | | |
| Balance as of December 31, 2021 | | $ | — | | | $ | — | | | $ | (43,598) | | | $ | (22,933) | | | $ | (5,408) | | | $ | (11,053) | | | $ | (82,992) | |
| Amortization Expense | | — | | | — | | | (14,819) | | | (6,400) | | | (1,507) | | | — | | | (22,726) | |
| Assets held for sale | | — | | | — | | | — | | | — | | | 16 | | | — | | | 16 | |
Other (a) | | — | | | — | | | — | | | — | | | — | | | 11,053 | | | 11,053 | |
| Balance as of December 31, 2022 | | $ | — | | | $ | — | | | $ | (58,417) | | | $ | (29,333) | | | $ | (6,899) | | | $ | — | | | $ | (94,649) | |
| Net Book Value as of December 31, 2022 | | $ | 807,544 | | | $ | 19,852 | | | $ | 86,583 | | | $ | 2,667 | | | $ | 6,649 | | | $ | — | | | $ | 923,295 | |
| | | | | | | | | | | | | | |
| | Indefinite-Lived | | Definite-Lived | | Total |
| Gross Carrying Amount | | FCC licenses | | Trademarks | | Affiliate and producer relationships | | Broadcast advertising | | Tower income contracts | | Other | | |
| Balance as of December 31, 2022 | | $ | 807,544 | | | $ | 19,852 | | | $ | 145,000 | | | $ | 32,000 | | | $ | 13,548 | | | $ | — | | | $ | 1,017,944 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Dispositions | | (1,307) | | | (41) | | | — | | | — | | | (41) | | | — | | | (1,389) | |
| Impairment charges | | (64,521) | | | (791) | | | — | | | — | | | — | | | — | | | (65,312) | |
Other (a) | | — | | | — | | | — | | | (32,000) | | | — | | | — | | | (32,000) | |
| Balance as of December 31, 2023 | | $ | 741,716 | | | $ | 19,020 | | | $ | 145,000 | | | $ | — | | | $ | 13,507 | | | $ | — | | | $ | 919,243 | |
| | | | | | | | | | | | | | |
| Accumulated Amortization | | | | | | | | | | | | | | |
| Balance as of December 31, 2022 | | $ | — | | | $ | — | | | $ | (58,417) | | | $ | (29,333) | | | $ | (6,899) | | | $ | — | | | $ | (94,649) | |
| Amortization Expense | | — | | | — | | | (14,818) | | | (2,667) | | | (1,503) | | | — | | | (18,988) | |
| | | | | | | | | | | | | | |
| Dispositions | | — | | | — | | | — | | | — | | | 23 | | | — | | | 23 | |
Other (a) | | — | | | — | | | — | | | 32,000 | | | — | | | — | | | 32,000 | |
| Balance as of December 31, 2023 | | $ | — | | | $ | — | | | $ | (73,235) | | | $ | — | | | $ | (8,379) | | | $ | — | | | $ | (81,614) | |
| Net Book Value as of December 31, 2023 | | $ | 741,716 | | | $ | 19,020 | | | $ | 71,765 | | | $ | — | | | $ | 5,128 | | | $ | — | | | $ | 837,629 | |
(a) Removed gross carrying amount and accumulated amortization of fully amortized intangible assets.
|
| | | | | | | | | | | |
| | FCC Licenses | | Definite-Lived | | Total |
| Intangible Assets: | | | | | |
| Balance as of January 1, 2016 | $ | 1,578,066 |
| | $ | 174,530 |
| | $ | 1,752,596 |
|
| Impairment | (35,000 | ) | | (1,816 | ) | | (36,816 | ) |
| Disposition | (2,883 | ) | | — |
| | (2,883 | ) |
| Amortization | — |
| | (56,215 | ) | | (56,215 | ) |
| Balance as of December 31, 2016 | $ | 1,540,183 |
| | $ | 116,499 |
| | $ | 1,656,682 |
|
| Balance as of January 1, 2017 | $ | 1,540,183 |
| | $ | 116,499 |
| | $ | 1,656,682 |
|
| Impairment | (335,909 | ) | | — |
| | (335,909 | ) |
| Disposition | (465 | ) | | — |
| | (465 | ) |
| Amortization | — |
| | (33,505 | ) | | (33,505 | ) |
| Balance as of December 31, 2017 | $ | 1,203,809 |
| | $ | 82,994 |
| | $ | 1,286,803 |
|
The Company's definite-lived intangible assets primarily consist of broadcast advertising and affiliate relationships. Total amortization expense related to the Company’sCompany's definite-lived intangible assets was $33.5 million, $56.2$19.0 million and $69.1$22.7 million, for the years ended December 31, 2017, 2016,2023 and 2015,2022, respectively.
As of December 31, 2017, estimated2023, future amortization expense related to the Company's definite-lived intangible assets was estimated as follows (dollars in thousands):
| | | | | |
| 2024 | $ | 16,319 | |
| 2025 | 16,319 | |
| 2026 | 15,069 | |
| 2027 | 12,444 | |
| 2028 | 11,818 | |
| Thereafter | 4,924 | |
| Total definite-lived intangibles, net | $ | 76,893 | |
|
| | | |
| 2018 | $ | 18,201 |
|
| 2019 | 17,257 |
|
| 2020 | 17,197 |
|
| 2021 | 17,114 |
|
| 2022 | 12,843 |
|
| Thereafter | 382 |
|
| Total other intangibles, net | $ | 82,994 |
|
The Company's indefinite-lived intangible assets consist of FCC licenses and trademarks. The Company performs annual impairment testing of its Federal Communications Commission ("FCC") licenses and goodwillindefinite-lived intangible assets as of December 31 of each year and on an interim basis if events or circumstances indicate that FCC licenses or goodwillits indefinite-lived intangible assets may be impaired. At the time of each impairment test, if the fair value of the indefinite-lived intangible is less than its carrying amount, an impairment charge is recorded.
The Company reviews the carrying valueamount of its definite-lived intangible assets, primarily broadcast advertising and affiliate relationships, for recoverability prior to its annual impairment test of goodwill and whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Impairment Test - Definite-Lived Intangibles
The Company tests definite-lived intangible assets for recoverability by comparingconsidered the carrying valuecurrent and expected future economic and market conditions and other potential indicators of an asset groupimpairment. No impairment indicators were identified related to its undiscounted cash flows. As of December 31, 2017, the Company considered its November 29, 2017 chapter 11 cases as an indicator of impairment for its definite-lived intangible assets. Based on the results of the recoverability test, however, the Company determined that the future undiscounted cash flows expected to result from the continued use of the assets and their eventual disposition continued to exceed the carrying value of the applicable asset groups and were therefore recoverable. The Company did not recognize any impairment charges for its definite-lived intangible assets in 2017 as a result of this analysis.
During the second quarter of 2016, the Company recorded an impairment charge to its definite-lived intangible assets of $1.8 million at the Westwood One segment for all customer lists and trademark definite-lived intangible assets related to the print publication of NASH Country Weekly as the Company re-positioned the print publication to a digital only medium. There were no similar impairments in 2017.FCC Licenses
Annual Impairment Test - Goodwill
The Company assess the recoverability of our goodwill annually, or more frequently whenever events or substantive changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value. We test goodwill for impairment at the reporting unit level. All of our radio markets comprise one reporting unit ("Reporting Unit 1" or the "Radio Station Group") in whichA valuation analysis is conducted each year as of December 31 2016 there was no longer any goodwill, Westwood One comprisesto test the second reporting unit ("Reporting Unit 2" or "Westwood One") and the third reporting unit, in which there is also no goodwill, continues to consist of all of our non-radio lines of business ("Reporting Unit 3").
For our annual goodwill impairment test, we performed the Step 1 goodwill test (the “Step 1 test”) and compared the fair value of each reporting unit to the carrying value of its net assets as of December 31, 2017 as follows:
Step 1 Goodwill Test
In performing our annual impairment testing of goodwill, fair value was calculated using a discounted cash flow analysis, which is an income approach. The discounted cash flow analysis requires the projection of future cash flows and the discounting of these cash flows to their present value equivalent via a discount rate. We used a five-year projection period for our operating cash flow projections. We made certain assumptions regarding future revenue growth based on industry market data and historical and expected performance. We then projected future operating expenses based primarily on historical financial performance in order to derive operating profits, which we combined with expected working capital changes and capital expenditures to determine operating cash flows. Our projections were based on then-current market and economic conditions and our historical knowledge of each of the relevant reporting units.
During the 2017 year, based on interim financial performance, we determined that no indicators were present which would suggest the fair value of the reporting units may have declined below the carrying value.
The material assumptions utilized in these analyses, for the reporting unit that has goodwill, included overall future market revenue growth rates for the residual years after the projection period of (1.0)% and a weighted average cost of capital of 9.3%. The residual year growth rate was estimated based on a perpetual nominal growth rate, which was based on long-term industry projections obtained from third party sources. The weighted-average cost of capital was determined based on (i) the cost of equity, which included estimates of the risk-free return, stock risk premiums and industry beta; (ii) the cost of debt, which included estimates for corporate borrowing rates and (iii) estimated average percentages of equity and debt in capital structures.
The table below presents the percentages by which the fair value was above the carrying value of the Company's Westwood One reporting unit, which contains goodwill, under the Step 1 test as of December 31, 2017 (dollars in thousands).
|
| | | |
| | Reporting Unit 2 |
| Goodwill balance | $ | 135,214 |
|
| Carrying value (including goodwill) | $ | 313,572 |
|
| Percentage fair value above carrying value | 36.9 | % |
The Company did not incur any impairment charges related to goodwill during the year ended December 31, 2017. In performing the Company's 2016 annual impairment testing of goodwill, the Company recorded a non-cash impairment charge of $568.1 million, reducing the goodwill in Reporting Unit 1 to $0.0 million at December 31, 2016.
If actual results or the underlying material assumptions are less favorable than those projected by the Company or if a triggering event occurs or circumstance change that would more likely than not reduce the fair value of our goodwill below the amounts reflected in the Consolidated Balance Sheet, we may be required to recognize impairment charges in future periods.
Annual Impairment Test - FCC Licenses
As part of the annual impairment testing of indefinite-lived intangibles, in addition to testing goodwill for impairment, the Company also tests its FCC licenses for impairment during the fourth quarter of each year and on an interim basis if events or circumstances indicate that the asset may be impaired. As part of the overall planning associated with the test, theimpairment. The Company determined that its geographic markets are the appropriate unit of accounting for FCC license impairment testing and therefore the Company has combined its FCC licenses within each geographic market cluster into a single unit of accounting for impairment testing purposes.
Forassist with the impairment test, we utilizeddevelopment of assumptions and preparation of a valuation utilizing the income approach, specifically the Greenfield Method. This approachmethod values a license by calculating the value of a hypothetical start-up company that initially has no assets except the asset to be valued (the license). The value of the asset under consideration (the license) can be considered as equal to the value of this hypothetical start-up company. In completing the appraisals, we conducted a thorough review of all aspects of the assets being valued.
The estimated fair values of ourthe FCC licenses represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the Company and willing market participants at the measurement date. The estimated fair value also assumes the highest and best use of the asset by a market participants, considering aparticipant, and that the use of the asset that is physically possible, legally permissible and financially feasible.
A basic assumptionProjections used in our valuation of thesethe Greenfield Method for FCC broadcast licenses was that these radioinclude significant judgments and assumptions relating to the mature operating profit margin for average stations were new radio stations, signing onin the air as ofmarkets where the date ofCompany operates, long-term revenue growth rate, and the valuation. We assumed the competitive situation that existed in those markets as of that date, except that these stations were just beginning operations.
discount rate. In estimating the value of the licenses, we began with market revenue projections.projections based on third-party radio industry data are obtained. Next, we estimated the percentage of the market’smarket's total revenue, or market share, that market participants could reasonably expect an average start-up station to attain, as well as the duration (in years) required to reach the average market share.share are estimated. The estimated average market share was computed based on market share data, by station type (i.e., AM and FM). and signal strength.
After market revenue and market shares have been estimated, operating expenses, including depreciation based on assumed investmentsBelow are the key assumptions used in fixed assets and future capital expendituresour annual impairment assessments:
| | | | | | | | | | | | | | |
| | December 31, 2023 | | December 31, 2022 |
| Discount rate | | 9.5 | % | | 8.9 | % |
| Long-term revenue growth rate | | (0.75) | % | | (0.75) | % |
| Mature operating profit margin for average stations in the markets where the Company operates | | 26% – 27% | | 20% – 30% |
The analysis included overall future market revenue growth rates for the residual years after the projection period of (1.0)% and a weighted average cost of capital of 9.3%. The residual year growth rate was estimated based on a perpetual nominal growth rate, which was based on long-term industry projections obtained from third party sources. The weighted average cost of capital was based on (i) the cost of equity, which included estimates of the risk-free return, stock risk premiums and industry beta; (ii) the cost of debt, which included estimates for corporate borrowing rates; and (iii) estimated average percentages of equity and debt in other radio broadcasters capital structures.
In order to estimate what listening audience share could be expected to be achieved for each station by market, we analyzed the average local commercial share garnered by similar AM and FM stations competing in those radio markets. We may make adjustments to the listening share and revenue share based on a station's signal coverage within the market and the surrounding area population as compared to the other stations in the market. Based on our knowledge of the industry and familiarity with similar markets, we determined that approximately three years would be required for the stations to reach maturity. We also incorporated the following additional assumptions into the discounted cash flow valuation model:
projected operating revenues and expenses over a five-year period;
the estimation of initial and on-going capital expenditures (based on market size);
depreciation on initial and on-going capital expenditures (the Company calculated depreciation using accelerated double declining balance guidelines over five years for the value of the tangible assets necessary for a radio station to go on the air);
the estimation of working capital requirements (based on working capital requirements for comparable companies); and
amortization of the intangible asset — the FCC license.
During the first three quarters of 2017, based on the Company's review of the radio industry's financial performance, it determined that no indicators were present which would suggest the fair value of its FCC licenses may have declined below the carrying value. However, as part of the Company's test of its FCC licenses for impairment during the fourth quarter of 2017, the Company determined as part of its review of the assumptions utilized in the Greenfield Method that the radio industry's decreasing market share of total advertising revenues had an adverse impact on its future market revenue growth rate assumption, which is now negative, as disclosed above.
As a result of the annual impairment test of our FCC licenses, conducted as of December 31, 2017, the Company2023, we recorded a non-cash$64.5 million impairment charge. The impairment charge was primarily driven by an increase in the discount rate, reductions in forecasted revenues in our served markets, and changes in mature operating profit margin assumptions. The reduction in forecasted revenues was largely attributable to uncertainty surrounding current macroeconomic conditions, including an environment of $335.9 million.rising interest rates. As a result of the annual impairment test of its FCC licenses conducted as of December 31, 2016,2022, the Company recorded a non-cash$15.5 million impairment charge which also resulted from an increase in the discount rate and slowed broadcast revenue growth. The impairment charges are recorded within Impairment of $35.0Intangible Assets on the Consolidated Statements of Operations.
As of December 31, 2023, the FCC license fair value of nine of the Company's geographical markets exceeded the respective carrying amount by less than 10%. The aggregate carrying amount of the licenses relating to these markets was $97.9 million.
If the macroeconomic conditions of the radio industry or the underlying material assumptions are less favorable than those projected by the Company or if a triggering event occurs or circumstancecircumstances change that would more likely than not reduce the fair value of FCC licenses below the amounts reflected in the Consolidated Balance Sheet,Sheets, the Company may be required to recognize additional impairment charges in future periods.
Trademarks
The Company determined the fair value of the trademarks utilizing the relief-from-royalty method of the income approach. As a result of the annual trademark impairment test as of December 31, 2023, we recorded an $0.8 million impairment charge, which was driven by the same factors as discussed above related to the FCC impairment. The impairment charge is recorded within Impairment of Intangible Assets on the Consolidated Statements of Operations. As a result of the annual trademark impairment test as of December 31, 2022, there was no impairment. 5.Triggering Events
The Company will continue to monitor changes in economic and market conditions and, if any events or circumstances indicate a triggering event has occurred, the Company will perform an interim impairment test of intangible assets at the appropriate time.
6. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following as of December 31, 2017 and 2016 (dollars in thousands):
| | | | | | | | | | | | |
| December 31, 2023 | | | December 31, 2022 |
| Accrued employee costs | $ | 20,376 | | | | $ | 26,023 | |
| Accrued third party content costs | 18,304 | | | | 21,557 | |
| | | | |
| Accounts payable | 13,739 | | | | 8,151 | |
| Financing liability | 8,401 | | | | 7,242 | |
| Accrued interest | 14,439 | | | | 13,009 | |
| Accrued other | 38,813 | | | | 38,844 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Total accounts payable and accrued expenses | $ | 114,072 | | | | $ | 114,826 | |
|
| | | | | | | |
| | December 31, 2017 | | December 31, 2016 |
| Accrued employee costs | $ | 9,528 |
| | $ | 30,887 |
|
| Accrued third party content costs | 5,205 |
| | 29,285 |
|
| Accrued interest | — |
| | 8,334 |
|
| Accounts payable | 1,928 |
| | 12,739 |
|
| Accrued other | 19,496 |
| | 14,996 |
|
| Total accounts payable and accrued expenses | $ | 36,157 |
| | $ | 96,241 |
|
Subsequent to the balance sheet date, as permitted under the Bankruptcy Code, the Company has rejected certain of its pre-petition contracts and is calculating its estimated liability to the affected unsecured creditors. As a result, additional amounts may be included in liabilities subject to compromise in future periods and reduce the Company's accounts payable and accrued expenses.
6.7. Long-Term Debt
The Company’sCompany's long-term debt consisted of the following at December 31, 2017 and 2016 (dollars in thousands):
|
| | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Term Loan | $ | 1,722,209 |
|
| $ | 1,810,266 |
|
| Less: unamortized term loan discount and debt issuance costs | — |
|
| (29,909 | ) |
| Total term loan | 1,722,209 |
|
| 1,780,357 |
|
| 7.75% Senior Notes | 610,000 |
|
| 610,000 |
|
| Less: unamortized debt issuance costs | — |
| | (6,200 | ) |
| Total 7.75% Senior Notes | 610,000 |
| | 603,800 |
|
| Less: Current portion of long-term debt | — |
|
| — |
|
| Long-term debt, net subject to compromise | $ | 2,332,209 |
|
| $ | 2,384,157 |
|
| Less: Amounts reclassified to liabilities subject to compromise | (2,332,209 | ) | | — |
|
| Long-term debt, net | $ | — |
| | $ | 2,384,157 |
|
| | | | | | | | | | | | |
| December 31, 2023 | | | December 31, 2022 |
| Term Loan due 2026 | $ | 329,510 | | | | $ | 338,452 | |
| | | | |
| 6.75% Senior Notes | 346,245 | | | | 380,927 | |
| | | | |
| Less: Total unamortized debt issuance costs | (3,331) | | | | (4,923) | |
| Total long-term debt, net, excluding current maturities | $ | 672,424 | | | | $ | 714,456 | |
Future maturities of long-term debtthe Term Loan due 2026 and 6.75% Senior Notes are as follows (dollars in thousands):
| | | | | |
| 2024 | $ | — | |
| 2025 | — | |
| 2026 | 675,755 | |
| 2027 | — | |
| 2028 | — | |
| Thereafter | — | |
| Total | $ | 675,755 | |
|
| | | |
| | |
| 2018 | $ | — |
|
| 2019 | 610,000 |
|
| 2020 | 1,722,209 |
|
| | $ | 2,332,209 |
|
In connectionOn September 26, 2019, the Company entered into a new credit agreement by and among Cumulus Media New Holdings Inc., a Delaware corporation and an indirectly wholly-owned subsidiary of the Company ("Holdings"), certain other subsidiaries of the Company, Bank of America, N.A., as Administrative Agent, and the other banks and financial institutions party thereto as Lenders (the "Refinanced Credit Agreement"). Pursuant to the Refinanced Credit Agreement, the lenders party thereto provided Holdings and its subsidiaries that are party thereto as co-borrowers with the Company’s voluntary petitions for reorganization, the $1.722 billion outstanding under thea $525.0 million senior secured Term Loan, which was used to refinance the remaining balance of the then outstanding term loan (the "Term Loan due 2022"). On June 9, 2023, Holdings Cumulus Media Intermediate, Inc. ("Intermediate"), a direct wholly-owned subsidiary of the Company, and the $610.0 million outstanding in 7.75% Senior Notes has been reclassified to liabilities subject to compromise incertain of the Company's Consolidated Balance Sheet as of December 31, 2017. Asother subsidiaries (collectively, with Holdings and Intermediate, the ("Credit Parties") entered into a result ofsecond amendment ("Amendment No. 2") to the Company’s chapter 11 cases, the Company expensed the entire balance of $25.9 million of deferred financing costs and debt discount during the fourth quarter of 2017 to reorganization items, net, in the Consolidated Statement of Operations for the year ended December 31, 2017.
For additional information, see the Current Bankruptcy Proceedings section of Note 1 "Description of Business, Basis of Presentation and Summary of Significant Accounting Policies."
Refinanced Credit Agreement
The Company's Credit Agreement consists of a Term Loan (the “Term Loan”) with a stated maturity date in December 2020 and a $200.0 million revolving credit facility, with a $30.0 million sublimit for letters of credit (the “Revolving Credit Facility”) with a stated maturity date in December 2018. Notwithstanding the stated maturity dateAgreement. Amendment No. 2, among other things, modifies certain terms of the Term Loan if on January 30, 2019,due 2026 to replace the aggregate principal amount of 7.75% Senior Notes outstanding exceeds $200.0 million, the Term Loan maturity date will be accelerated to January 30, 2019.
At December 31, 2017, the Company had $1.722 billion outstanding under the Term Loan. No amounts were outstanding under the Revolving Credit Facility at either December 31, 2017 or 2016. On August 29, 2017, the Company used proceedsrelevant benchmark provisions from sale of certain land and buildings to repay approximately $81.7 million of the Term Loan borrowings. At December 31, 2016, $1.810 billion was outstanding under the Term Loan.
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. Borrowings under the Term Loan and Revolving Credit Facility, if available, bear interest, at the option of Cumulus Holdings, based on the Base Rate (as defined below) or the London Interbank Offered Rate (“LIBOR”("LIBOR"), to the Secured Overnight Financing Rate ("SOFR"). Except as modified by Amendment No. 2, the existing terms of the Refinanced Credit Agreement remained in effect.
Prior to the execution of Amendment No. 2, amounts outstanding under the Refinanced Credit Agreement bore interest at a per annum rate equal to (i) LIBOR plus 3.25% on LIBOR-based borrowings and 2.25% on Base Rate-based borrowings. LIBOR-based borrowings arean applicable margin of 3.75%, subject to a LIBOR floor of 1.0% under1.00%, or (ii) the Term Loan and Revolving Credit Facility.Alternative Base Rate-based borrowings areRate (as defined below) plus an applicable margin of 2.75%, subject to aan Alternative Base Rate floor of 2.0% under the Term Loan and Revolving Credit Facility.2.00%. The Alternative Base Rate is defined, for any day, as the rate per annum rate equal to the highest of (i) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.5%1/2 of 1.0%, (ii) the prime commercial lending rate identified by Bank of JPMorgan Chase Bank,America, N.A., as established from time to time,its "Prime Rate" and (iii) 30 dayone-month LIBOR plus 1.0%. AtSubsequent to the execution of Amendment No. 2, amounts
outstanding under the Refinanced Credit Agreement bore interest at a per annum rate equal to (i) SOFR plus a SOFR Adjustment, subject to a SOFR floor of 1.00%, and an applicable margin of 3.75%, or (ii) the Alternative Base Rate as defined above. As of December 31, 2017,2023, the Term Loan due 2026 bore interest at 4.82%a rate of 9.40% per annum.
In connectionAmounts outstanding under the Term Loan due 2026 amortize in equal quarterly installments of 0.25% of the original principal amount of the Term Loan due 2026 with the Company's chapter 11 cases,balance payable on the maturity date. As a result of the mandatory prepayments discussed below, the Company is no longer required to make adequate protection payments on the Term Loan.such quarterly installments. The amounts of these payments are calculated under the same terms as the interest and at the rates described above. During the pendency of the Bankruptcy Petitions, ASC 852 requires the Company to recognize the adequate protection payments as a reduction to the principal balancematurity date of the Term Loan.Loan due 2026 is March 26, 2026.
Under the terms of theThe Refinanced Credit Agreement a commitment fee in the amount of 0.50% per year, payable monthly, is payable on the unused portion of the commitments.
Thecontains representations, covenants and events of default in the Credit Agreementthat are customary for financing transactions of this nature. Events of default in the Refinanced Credit Agreement include, among others: (a) the failure to pay when due the obligations when due;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 CompanyHoldings or any of its restricted subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use, any one or more of, any material FCC licenses; (g) any representation ofor 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 Refinanced Credit Agreement). Upon the occurrence of an event of default, the Administrative Agent (as defined in the Refinanced Credit Agreement) may, with the consent of, or upon the request of the required lenders, accelerate the Term Loan due 2026 and exercise any of its rights as a secured party under the Refinanced Credit Agreement and the ancillary loan documents provided, that in the case of certain bankruptcy or insolvency events with respect to a borrower, the Term Loan due 2026 will automatically accelerate.
The Refinanced Credit Agreement does not contain any financial maintenance covenants. The Refinanced Credit Agreement provides that Holdings will be permitted to enter into either a revolving credit facility or receivables facility, subject to certain conditions (see below).
The Borrowers (as defined below) may elect, at their option, to prepay amounts outstanding under the Refinanced Credit Agreement without premium or penalty. The Borrowers may be required to make mandatory prepayments of the Term Loan due 2026 upon the occurrence of specified events as set forth in the Refinanced Credit Agreement, including upon the sale of certain assets and from Excess Cash Flow (as defined in the Refinanced Credit Agreement).
Amounts outstanding under the Refinanced Credit Agreement are guaranteed by Cumulus Media Intermediate Holdings, Inc., a Delaware corporation and a direct wholly-owned subsidiary of the Company ("Intermediate Holdings"), and the present and future wholly-owned restricted subsidiaries of Holdings that are not borrowers thereunder, subject to certain exceptions as set forth in the Refinanced Credit Agreement (the "Guarantors") and secured by a security interest in substantially all of the assets of Holdings, the subsidiaries of Holdings party to the Refinanced Credit Agreement as borrowers, and the Guarantors.
The issuance of the Term Loan due 2026 and repayment of the Term Loan due 2022 were evaluated in accordance with ASC 470-50-40 - Debt-Modifications and Extinguishments-Derecognition ("ASC 470-50-40"), to determine whether the refinancing transaction should be accounted for as a debt modification or extinguishment of the Term Loan due 2022. Each lender involved in the refinancing transaction was analyzed to determine if its participation was a debt modification or an extinguishment. Debt issuance costs for exiting lenders who chose not to participate in the Term Loan due 2026 were accounted for as extinguishments. Debt discounts and issuance costs of $5.1 million were capitalized and amortized over the term of the Term Loan due 2026.
During the year ended December 31, 2023, the Company repaid $8.9 million principal amount of the Term Loan due 2026. These repayments resulted in a gain on extinguishment of debt of $1.0 million. The Term Loan due 2026 was repurchased with cash on hand. The Company wrote-off debt issuance costs as a result of the repurchase, which were not material.
During the year ended December 31, 2022, the Company repaid $5.3 million principal amount of the Term Loan due 2026. These repayments resulted in a gain on extinguishment of debt of $0.3 million. The Term Loan due 2026 was repurchased with cash on hand. The Company wrote-off debt issuance costs as a result of the repurchase, which were not material.
In March 2022, the Company was required by the Excess Cash Flow provisions of the Term Loan due 2026 to make a prepayment of $12.5 million. In connection with the prepayment, the Company wrote-off $0.1 million of debt issuance costs.
As of December 31, 2023, $328.3 million remained outstanding under the Term Loan due 2026, net of debt issuance costs of $1.2 million, and we were in compliance with all required covenants under the Refinanced Credit Agreement.
2020 Revolving Credit Agreement
On March 6, 2020, Holdings and certain of the Company’s other subsidiaries, as borrowers (the “Borrowers”), and Intermediate Holdings entered into a $100.0 million revolving credit facility (the “2020 Revolving Credit Facility") pursuant to a Credit Agreement (the "2020 Revolving Credit Agreement"), dated as of March 6, 2020, with Fifth Third Bank, as a lender and Administrative Agent and certain other lenders from time to time party thereto. On June 3, 2022, Holdings, the Borrowers and Intermediate entered into a fifth amendment (the "Amendment") to the 2020 Revolving Credit Agreement. The Amendment, among other things, (i) extended the maturity date of all borrowings under the 2020 Revolving Credit Facility to June 3, 2027, provided, that if any of the Company’s indebtedness with an aggregate principal amount in excess of $35.0 million is outstanding on the date that is 90 days prior to the stated maturity of such indebtedness (each such date, a "Springing Maturity Date"), then the maturity date of all borrowings under the 2020 Revolving Credit Facility will instead be such Springing Maturity Date, and (ii) modified certain terms of the 2020 Revolving Credit Facility to replace the relevant benchmark provisions from the London Interbank Offered Rate to the Secured Overnight Financing Rate ("SOFR"). Except as modified by the Amendment, the existing terms of the 2020 Revolving Credit Agreement remained in effect.
Availability under the 2020 Revolving Credit Facility is tied to a borrowing base equal to 85% of the accounts receivable of the Borrowers, subject to customary reserves and eligibility criteria and reduced by outstanding letters of credit. Under the 2020 Revolving Credit Facility, up to $10.0 million of availability may be drawn in the form of letters of credit and up to $10.0 million of availability may be drawn in the form of swing line loans.
Borrowings under the 2020 Revolving Credit Facility bear interest, at the option of Holdings, based on SOFR plus (i) 0.10% and (ii) a percentage spread of 1.00% or the Alternative Base Rate. The Alternative Base Rate is defined, for any day, as the per annum rate equal to the rate identified as the "Prime Rate" by Fifth Third Bank. In addition, the unused portion of the 2020 Revolving Credit Facility will be subject to a commitment fee of 0.25%.
The 2020 Revolving Credit Agreement contains representations, covenants and events of default that are customary for financing transactions of this nature. Events of default in the 2020 Revolving Credit Agreement include, among others: (a) the failure to pay when due the obligations owing thereunder; (b) the failure to perform (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 Intermediate Holdings or any of its subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use, any 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 2020 Revolving 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 2020 Revolving Credit Agreement and the ancillary loan documents as a secured party. Any efforts
The 2020 Revolving Credit Agreement does not contain any financial maintenance covenants with which the Company must comply. However, if average excess availability under the 2020 Revolving Credit Facility is less than the greater of (a) 12.5% of the total commitments thereunder or (b) $10.0 million, the Company must comply with a fixed charge coverage ratio of not less than 1.0:1.0.
Amounts outstanding under the 2020 Revolving Credit Agreement are guaranteed by Intermediate Holdings and the present and future wholly-owned restricted subsidiaries of Intermediate Holdings that are not borrowers thereunder, subject to enforce such obligations uponcertain exceptions as set forth in the occurrence2020 Revolving Credit Agreement (the "2020 Revolver Guarantors") and secured by a security interest in substantially all of an eventthe assets of default have been automatically stayedHoldings, the subsidiaries of Holdings party to the 2020 Revolving Credit Agreement as a resultborrowers, and the 2020 Revolver Guarantors.
As of December 31, 2023, $4.4 million was outstanding under the 2020 Revolving Credit Facility, representing letters of credit. As of December 31, 2023, the Company was in compliance with all required covenants under the 2020 Revolving Credit Agreement.
6.75% Senior Notes
On June 26, 2019, Holdings and certain of the Company's Bankruptcy Petition andother subsidiaries, entered into an indenture, dated as of June 26, 2019 (the "Indenture") with U.S. Bank National Association, as trustee, governing the terms of the Issuer's $500,000,000 aggregate principal amount of 6.75% Senior Secured First-Lien Notes due 2026 (the "6.75% Senior Notes"). The
6.75% Senior Notes were issued on June 26, 2019. The net proceeds from the issuance of the 6.75% Senior Notes were applied to partially repay existing indebtedness under the Term Loan holders' rightsdue 2022 (see above). In conjunction with the issuance of enforcement in respectthe 6.75% Senior Notes, debt issuance costs of these obligations$7.3 million were capitalized and are being amortized over the term of the 6.75% Senior Notes.
Interest on the 6.75% Senior Notes is payable on January 1 and July 1 of each year, commencing on January 1, 2020. The 6.75% Senior Notes mature on July 1, 2026.
Holdings may redeem some or all of the 6.75% Senior Notes at any time, or from time to time, at the following prices:
| | | | | | | | |
| Year | | Price |
| 2022 | | 103.3750 | % |
| 2023 | | 101.6875 | % |
| 2024 and thereafter | | 100.0000 | % |
The 6.75% Senior Notes are fully and unconditionally guaranteed by Intermediate Holdings and the present and future wholly-owned restricted subsidiaries of Holdings (the "Senior Notes Guarantors"), subject to the applicable provisionsterms of the Bankruptcy Code.
InIndenture. Other than certain assets secured on a first priority basis under the event amounts were outstanding under the2020 Revolving Credit Facility or any letters of credit were outstanding that had not been collateralized by cash as of(as to which the end of each quarter,6.75% Senior Notes are secured on a second-priority basis), the Credit Agreement required compliance6.75% Senior Notes and related guarantees are secured on a first-priority basis pari passu with a consolidated first lien leverage ratio covenant. The required ratio at December 31, 2017 and 2016 was 4.25 to 1 and 5.00 to 1, respectively. The ratio was to decrease to 4.0 to 1 at March 31, 2018. At December 31, 2017, the Company's actual leverage ratio would have been in excess of the required ratio. As a result of the Company's Bankruptcy Petitions, the Revolving Credit Facility was terminated, as such, at December 31, 2017 the Company had no borrowings outstanding under the Revolving Credit Facility.
Certain mandatory prepayments on the Term Loan are required upon the occurrence of specified events, including upon the incurrence ofdue 2026 (subject to 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 collateralizedexceptions) by a first priority lienliens on substantially all of the Company’s, Cumulus Holdings’ and their respective restricted subsidiaries’ assets in which a security interest may lawfully be granted, including, without limitation, intellectual property and substantially all of the capital stock ofIssuer and 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.
7.75% Senior Notes
On May 13, 2011, the Company issued $610.0 million aggregate principal amount of 7.75% Senior Notes due 2019 (the “7.75% Senior Notes”).
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 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 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.
In connection with the substitution of Cumulus Holdings as the issuer of the 7.75% Senior Notes, the Company 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 of the liabilities of the Company and its subsidiaries.Guarantors.
The indenture governing the 7.75% Senior NotesIndenture contains representations, covenants and events of default customary for financing transactions of this nature. Any effortsA default under the 6.75% Senior Notes could cause a default under the Refinanced Credit Agreement.
The 6.75% Senior Notes have not been and will not be registered under the federal securities laws or the securities laws of any state or any other jurisdiction. The Company is not required to enforce obligations uponregister the occurrence6.75% Senior Notes for resale under the U.S. Securities Act of an event1933, as amended (the "Securities Act"), or the securities laws of default have been automatically stayed asany other jurisdiction and is not required to exchange the 6.75% Senior Notes for notes registered under the Securities Act or the securities laws of any other jurisdiction and has no present intention to do so. As a result, Rule 3-10 of Regulation S-X promulgated by the SEC is not applicable and no separate financial statements are required for the guarantor subsidiaries.
During the year ended December 31, 2023, the Company repaid $34.7 million principal amount of the 6.75% Senior Notes. The repurchase resulted in a gain on extinguishment of debt of $8.8 million. The 6.75% Senior Notes were repurchased with cash on hand. As a result of the Company's Chapter 11 Filing and the holders of the 7.75% Senior Notes rights of enforcement in respect to any obligations are subject to the applicable provisions of the Bankruptcy Code.
As described in more detail in Note 1, "Description of Business, Basis of Presentation and Summary of Significant Accounting Policies", on October 30, 2017, the Restructuring Committee of the Board of Directors authorizedrepurchases, the Company to forgo the November 1, 2017 scheduled interest paymentwrote-off $0.3 million of $23.6 million on the 7.75% Senior Notes. The Company will continue to forgo interest payments on the 7.75% Senior Notes while under bankruptcy protection. As a result, the Company's interest expense fordebt issuance costs.
During the year ended December 31, 2017 was approximately $3.92022, the Company repurchased $68.8 million lower than it would have been absent the filingprincipal amount of the voluntary petitions for reorganization.
Accounts Receivable Securitization Facility
On December 6, 2013, the Company entered into6.75% Senior Notes. The repurchase resulted in a 5-year, $50.0 million Securitization Facility with Wells Fargo (as successor to General Electric Capital Corporation), 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”) were able to sell and/or contribute their accounts receivable (representing up to all of the Company’s accounts receivable) to a special purpose entity and wholly-owned subsidiary of the Company (the “SPV”). The SPV could thereafter make borrowings from the Lenders, which borrowings were secured by those receivables, pursuant to an Amended and Restated Receivables Funding and Administration Agreement, dated as of March 15, 2017 (the “Funding Agreement”). Cumulus Holdings serviced the accounts receivablegain on behalf of the SPV.
On November 28, 2017, the Company terminated the Securitization Facility. No borrowings were outstanding under the Securitization Facility as of the termination date or December 31, 2016.
Amortization of Debt Discount and Debt Issuance Costs
For each of the years ended December 31, 2017, 2016, and 2015 the Company amortized $9.4 million, $10.0 million, and $9.5 million respectively,extinguishment of debt discount and debt issuance costs related to its Term Loan and 7.75%of $4.2 million. The 6.75% Senior Notes.Notes were repurchased with cash on hand. As a result of the Company’s chapter 11 cases,repurchases, the Company expensed the entire remaining balancewrote-off $0.6 million of $25.9 milliondebt issuance costs.
As of deferred financing costs and debt discount during the fourth quarter of 2017. This amount is included in reorganization items, net in the Consolidated Statement of Operations for the year ended December 31, 2017.2023, $344.1 million remained outstanding under the 6.75% Senior Notes, net of debt issuance costs of $2.1 million, and the Issuer was in compliance with all required covenants under the Indenture.
7.8. Fair Value Measurements
The three levels of the fair value hierarchy to be applied when determining fair value of financial instruments 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.
The following table shows the gross amount and fair value of the Company’s Term Loan due 2026 and 7.75%the 6.75% Senior Notes (dollars in thousands):
|
| | | | | | |
| | December 31, 2017 | | December 31, 2016 |
| Term Loan: | | | |
| Carrying value | 1,722,209 |
| | $ | 1,810,266 |
|
| Fair value — Level 2 | 1,481,100 |
| | 1,226,455 |
|
| 7.75% Senior Notes: |
| | |
| Carrying value | 610,000 |
| | $ | 610,000 |
|
| Fair value — Level 2 | 105,988 |
| | 249,673 |
|
| | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Term Loan due 2026: | | | |
| Gross value | $ | 329,510 | | | $ | 338,452 | |
| Fair value - Level 2 | 250,428 | | | 314,760 | |
| 6.75% Senior Notes: | | | |
| Gross value | $ | 346,245 | | | $ | 380,927 | |
| Fair value - Level 2 | 231,119 | | | 321,833 | |
As of December 31, 2017,2023, the Company used the closing trading prices from a third party of the last trade transaction of 86.0%76.00% and 66.75% to calculate the fair value of the Term Loan 2026 and 17.4% to calculate the fair value of the 7.75%6.75% Senior Notes.Notes, respectively.
As of December 31, 2016,2022, the Company used the closing trading prices from a third party of the last trade transaction of 67.8%93.00% and 84.50% to calculate the fair value of the Term Loan 2026 and 40.9% to calculate the fair value of the 7.75%6.75% Senior Notes.Notes, respectively.
8. Liabilities Subject to Compromise
As discussedThe Company invests in Note 1, "Description of Business, Basis of Presentation and Summary of Significant Accounting Policies" beginning on the Petition Date, the Company has been operating as debtor in possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. On the accompanying Consolidated Balance Sheets, the caption “Liabilities Subject to Compromise” reflects the expected allowed amount of the prepetition claims that are not fully secured andgovernmental money market funds that have at least a possibilitymaturity of not being repaidthree months or less at the full claim amount. Liabilities Subject to Compromise at December 31, 2017 consisteddate of the following (in thousands):
|
| | | |
| | December 31, 2017 |
| Deferred income taxes | $ | 219,250 |
|
| Accrued liabilities and other liabilities | 89,897 |
|
| Accounts payable | 18,290 |
|
| Accounts payable, accrued and other liabilities | 327,437 |
|
| Term Loan | 1,722,209 |
|
| 7.75% Senior Notes | 610,000 |
|
| Accrued interest | 27,577 |
|
| Long-Term Debt and accrued interest | 2,359,786 |
|
| Total liabilities subject to compromise | $ | 2,687,223 |
|
Subsequentpurchase which are classified as cash equivalents. Due to the Balance Sheet date, as permitted under the Bankruptcy Code, the Company has rejected certain of its pre-petition contracts and is calculating its estimated liability to the affected unsecured creditors. As a result, additional amounts may be included in liabilities subject to compromise in future periods.
Determination of the value at which liabilities will ultimately be settled cannot be made until the Bankruptcy Court approves the Plan. The Company will continue to evaluate the amount and classification of its pre-petition liabilities. Any additional liabilities that are subject to compromise will be recognized accordingly, and the aggregate amount of liabilities subject to compromise may change.
9. Reorganization Items, net
Reorganization items incurred as a result of the chapter 11 cases are presented separately in the accompanying statements of operations for the year ended December 31, 2017 and were as follows (in thousands):
|
| | | |
| | 2017 |
| Deferred financing costs and term loan discount | $ | 25,921 |
|
| Professional fees | 5,682 |
|
| Reorganization items, net | $ | 31,603 |
|
Professional fees included in reorganization items, net represent professional fees for post-petition expenses. Deferred financing costs and term loan discount are included in reorganization items, net asshort maturity, the Company believes the underlying debt instruments will be impacted bycarrying amount of the chapter 11 cases.
Ascash equivalents approximates fair value. The following table details the fair value measurements of the Company's investments as of December 31, 2017, $4.0 million of professional fees were unpaid2023 and accruedDecember 31, 2022 (dollars in Accounts Payablethousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 |
| | December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | | | December 31, 2022 |
| Cash equivalents | | $ | 49,092 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | $ | — | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Certain nonfinancial assets and Accrued Expenses in the accompanying Consolidated Balance Sheet.
10. Stockholders’ Equity
As discussed in Note 1, "Description of Business, Basis of Presentation and Summary of Significant Accounting Policies" beginningliabilities are measured at fair value on the Petition Date, the Company has been operating as debtor in possession under the jurisdiction of the Bankruptcy Court anda nonrecurring basis in accordance with provisionsapplicable authoritative guidance. This includes items such as nonfinancial assets and liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods) and nonfinancial long-lived asset groups measured at fair value for an impairment assessment. In general, nonfinancial assets including intangible assets and property and equipment are measured at fair value when there is an indication of the Bankruptcy Code. Pursuant to the Planimpairment and Disclosure Statement filed on February 12, 2018, if the Planare recorded at fair value only when any impairment is confirmed, all of the equity interests in the Company are expected to be canceled or extinguished on the date that the Company emerges from bankruptcy.recognized.
939. Stockholders' Equity
For information on the Company's October 12, 2016 Reverse Stock Split and the resulting adjustments to authorized, issued and outstanding common stock, warrants and options, see Note 1, "Description of Business, Interim Financial Data and Basis of Presentation: Reverse Stock Split."
The Company is authorized to issue an aggregate of 268,830,609 shares of stock divided into four classes consisting of:
(i) 93,750,000 shares designated as Class A common stock;
(ii) 75,000,000 shares designated as Class B common stock;
(iii) 80,609 shares designated as Class C common stock, and
(iv) 100,000,000 shares of preferred stock.
On June 5, 2017, the Company’s Board of Directors adopted a stockholder rights plan, which is scheduled to expire in June 2018. Pursuant to the rights plan, the Company declared a dividend of one right for each outstanding share of Class A common stock of the Company, payable to holders of record on June 15, 2017. The rights initially trade with the Company’s Class A common stock and will generally become exercisable only if any person (or any persons acting in concert or as a group) acquires a voting or economic position in 4.99% or more of the Company’s outstanding Class A common stock. If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of Class A common stock at a 50% discount or the Company may exchange each right held by such holders for one share of Class A common stock. Under the rights plan, any person that owned more than 4.99% of the Company’s outstanding Class A common stock may continue to own its shares of Class A common stock but may not acquire a voting or economic interest in any additional shares of Class A common stock without triggering the rights plan.
Common Stock
SharesPursuant to the Company’s Charter, the Company is authorized to issue an aggregate of 300,000,000 shares of stock divided into three classes consisting of: (i) 100,000,000 shares of new Class A common stock; (ii) 100,000,000 shares of new Class B common stock; and (iii) 100,000,000 shares of preferred stock.
Each share of new Class CA common stock are identical in all respects, except with regardis entitled to voting and conversion rights. The preferences, qualifications, limitations, restrictions, and the special or relative rights in respectone vote per share on each matter submitted to a vote of the Company's stockholders. Except as provided below and as otherwise required by the Charter, the Company's bylaws or by applicable law, the holders of new Class A common stock and the various classesshall vote together as one class on all matters submitted to a vote of common stock are as follows:
Voting Rights. Thestockholders generally (or if any holders of shares of preferred stock are entitled to vote together with the holders of common stock, as a single class with such holders of shares of preferred stock).
Holders of new Class AB common stock are generally not entitled to vote such shares on matters submitted to a vote of the Company's stockholders. Notwithstanding the foregoing, holders of new Class B 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 ofnew 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 tovoting as a separate class, vote on any proposed amendment or modification of any specific rights or obligations of thethat affect holders of new Class B common stock or Class C common stock, respectively,and that doesdo not similarly affect the rights or obligations of the holders of new Class A common stock. In addition, holders of new Class B common stock are entitled to one vote per share of new Class B common stock, voting together with the holders of new Class A common stock, on each of the following matters, if and only if any such matter is submitted to a vote of the stockholders (provided that the Company may take action on any of the following without a vote of the stockholders to the extent permitted by law):
a.the retention or dismissal of outside auditors by the Company;
b.any dividends or distributions to the stockholders of the Company;
c.any material sale of assets, recapitalization, merger, business combination, consolidation, exchange of stock or other similar reorganization involving the Company or any of its subsidiaries;
d.the adoption of any new or amended charter;
e.other than in connection with any management equity or similar plan adopted by the Board, any authorization or issuance of equity interests, or any security or instrument convertible into or exchangeable for equity interests, in the Company or any of its subsidiaries; and
f.the liquidation of the Company or any of its subsidiaries.
The Charter and bylaws do not provide for cumulative voting. The holders of a plurality of the shares of new common stock entitled to vote and present in person or represented by proxy at any meeting at which a quorum is present and which is called for the purpose of electing directors will be entitled to elect the directors of the Company. The holders of a majority of the shares of new common stock issued and outstanding and entitled to vote, and present in person or represented by proxy, will constitute a quorum for the transaction of business at all meetings of the stockholders.
Subject to the preferences applicable to any preferred stock outstanding at any time, if any, the holders of shares of new common stock shall be entitled to receive such dividends and other distributions in cash, property or shares of stock as may be declared thereon by the Board from time to time out of the assets or funds legally available; except that in the case of dividends or other distributions payable on the new Class A common stock or new Class B common stock in shares of such stock, including distributions pursuant to stock splits or dividends, only new Class A common stock will be distributed with respect to new Class A common stock and only new Class B common stock will be distributed with respect to new Class B common stock. In no event will any of the new Class A common stock or new Class B common stock be split, divided or combined unless each other class is proportionately split, divided or combined.
As of the date hereof, no shares of preferred stock are outstanding. The Charter provides that the Board may, by resolution, establish one or more classes or series of preferred stock having the number of shares and relative voting rights, designations and other rights, preferences, and limitations as may be fixed by them without further stockholder approval. The holders of any such preferred stock may be entitled to preferences over holders of common stock with respect to dividends, or upon a liquidation, dissolution, or the Company's winding up, in such amounts as are established by the resolutions of the Board approving the issuance of such shares.
The new Class B common stock is convertible at any time, or from time to time, at the option of the holders (provided that the prior consent of any governmental authority required to make such conversion lawful shall have been obtained and a determination by the Company has been made that the applicable holder does not have an attributable interest in another entity that would cause the Company to violate applicable law) into new Class A common stock on a share-for-share basis.
No holder of new common stock has any preemptive right to subscribe for any shares of the Company's capital stock issuable in the future.
If the Company is liquidated (either partially or completely), dissolved or wound up, whether voluntarily or involuntarily, the holders of new common stock shall be entitled to share ratably in the Company's net assets remaining after payment of all liquidation preferences, if any, applicable to any outstanding preferred stock.
As of December 31, 2023, the Company had 21,768,716 aggregate issued shares of common stock, and 16,549,980 outstanding shares consisting of: (i) 21,456,675 issued shares and 16,237,939 outstanding shares designated as Class A common stock; and (ii) 312,041 issued and outstanding shares designated as Class B common stock.
Share Repurchase Program
On May 4, 2022, the Board of Directors authorized a share repurchase program (the "prior share repurchase authorization") for up to $50.0 million of outstanding Class A common stock. The holdersprior share repurchase authorization expired on November 3, 2023. On October 27, 2023, the Company announced that the Board of Directors authorized a new share repurchase program (the "current share repurchase authorization") for up to $25.0 million of outstanding Class A common stock. The current share repurchase authorization superseded and replaced our prior share repurchase authorization and expires on May 15, 2025. Purchases made pursuant to the program may be made from time to time, at the Company’s discretion, in the open market, through privately negotiated transactions or through other manners as permitted by federal securities laws including, but not limited to, 10b5-1 trading plans, accelerated stock repurchase programs and tender offers. The extent that the Company repurchases its shares, the number of shares and the timing of any repurchases will depend on general economic and market conditions, regulatory and legal requirements, alternative investment opportunities and other considerations. The repurchase program does not require the company to repurchase a minimum number of shares, and it may be modified, suspended or terminated at any time without prior notice.
Under the prior share repurchase authorization, the Company commenced modified Dutch tender offers on May 12, 2023, and May 6, 2022, to purchase up to $10.0 million and $25.0 million shares of its Class A common stock, andrespectively. Through the 2023 offer, which expired on June 9, 2023, the Company accepted for payment a total of Class C common stock vote together, as a single class, on all matters submitted to a vote to the stockholders1,745,005 shares of the Company.
Conversion. Each holderCompany's Class A Common stock at a purchase price of Class B common stock$3.25 per share, for an aggregate cost of approximately $5.7 million, excluding fees and Class C common stock is entitled to convert at any time all or any partexpenses. Through the 2022 offer, which expired on June 3, 2022, the Company accepted for payment a total of such holder’s shares into an equal number of1,724,137 shares of the Company's Class A common stock; provided, however, that toCommon stock at a purchase price of $14.50 per share, for an aggregate cost of approximately $25.0 million, excluding fees and expenses.
During the extent that such conversion would result inyear ended December 31, 2023, the holder holding more than 4.99%Company repurchased 323,285 shares of theits outstanding Class A common stock following such conversion,in the holder will first be required to deliver toopen market at an average purchase price of $4.65 per share for an aggregate cost of approximately $1.5 million, excluding fees and expenses. During the year ended December 31, 2022, the Company an ownership certification to enable the Company to (a) determine that such ownership does not violate applicable FCC rules and regulations and (b) obtain any necessary approvals from the FCC or the Department of Justice. There were norepurchased 816,642 shares of Class B common stock issued orour outstanding as of December 31, 2017 or 2016.
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.
As of December 31, 2017 and 2016 there were no preferred shares outstanding.
2009 Warrants
In June 2009, in connection with the execution of an amendment to the Company's then-existing credit agreement, the Company issued warrants to the lenders thereunder that allow them to acquire up to 156,250 shares of Class A common stock in the open market at an exerciseaverage purchase price of $1.17$8.38 per share (the “2009 Warrants”). The 2009 Warrants expire on June 29, 2019. The numberfor an aggregate cost of approximately $6.8 million, excluding fees and expenses. Shares repurchased were accounted for as treasury stock and the total cost of shares repurchased was recorded as a reduction of Class A commonstockholder's equity in the Consolidated Balance Sheet.
The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock issuable upon exerciserepurchases made after December 31, 2022. Excise tax is owed on the fair market value of stock repurchases reduced by the 2009 Warrants is subject to adjustment in certain circumstances, including upon the paymentfair market value of stock issued and a dividend in$1,000,000 de minimis exception. Excise tax owed on shares of Class A common stock. None of the 2009 warrants were convertedrepurchased during the year ended December 31, 2017 and 2016, and as2023, was not material.
As of such date there were, 40,057 of the 2009 Warrants outstanding.
Equity Held in Reserve
Pursuant to the agreement governing the Company's acquisition of Citadel Broadcasting Company ("Citadel") on September 16, 2011 (the "Citadel Merger"), warrants to purchase 300,000 shares of the Company’s common stock were reserved for potential future issuance in connection with the settlement of certain remaining allowed, disputed or not reconciled claims related to Citadel's bankruptcy. As part of the June 2014 completion of proceedings related to Citadel's bankruptcy, the 300,000 shares were issued from treasury stock for $25.0 million. The equity held in reserve was included in additional paid-in-capital on the accompanying consolidated statement of stockholders' equity at December 31, 2015.
Company Warrants
As a component2023, $25.0 million 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 9.0 million shares ofoutstanding Class A common stock remained available for repurchase under the share repurchase program.
Stock Purchase Warrants
On June 4, 2018 (the "Company Warrants""Effective Date") under, the Company entered into a warrant agreement dated September 16, 2011 (the "Warrant Agreement"). The with Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary, Computershare Trust Company, Warrants are exercisable at any time priorN.A., a federally chartered trust company, as warrant agent. In accordance with the Plan and pursuant to June 3, 2030 at an exercise price of $0.01 per share with each Company Warrant providing the right to purchase one share. The number of shares for which the Company Warrants are exercisable is not subject to any anti-dilution protection, other than standard adjustments in the case of stock splits, dividends and certain other similar events. Pursuant to the terms and conditions of the Warrant Agreement, uponon the request of a holder,Effective Date, 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(i) issued 3,016,853 Series 1 warrants to purchase shares of new Class A common stock.
Exercise 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’sstock or new Class B common stock, on a one-for-one basis with an as-exercised basis. No distributionexercise price of $0.0000001 per share, to certain claimants with claims against our predecessor Company, CM Wind Down Topco, Inc. (formerly known as Cumulus Media, Inc.), and (ii) issued or will be madeissue 712,736 Series 2 warrants to holderspurchase shares of Company Warrants ornew Class A common stock if (i)or new Class B common stock on a one-for-one basis with an FCC ruling, regulation or policy prohibits such distributionexercise price of $0.0000001 per share, to holders of Company Warrants or (ii)other claimants. Pursuant to an exchange process under 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.
No Company WarrantsWarrant Agreement, on June 22, 2020, all outstanding warrants were exercised during the year ended December 31, 2017. During the year ended December 31, 2016, Company Warrants were exercised to purchase 43,192converted into shares of Class A or Class B common stock. Asstock, and 22,154 remaining Series 2 warrants authorized for issuance were converted into Series 1 warrants, of which none remained outstanding as of December 31, 20172023.
10. Stock-Based Compensation Expense
Share-Based Compensation
On April 26, 2023, the Company's stockholders approved an amendment and 2016, 31,955 Company Warrants remained outstanding.
Crestview Warrants
Also on September 16, 2011, but pursuant to a separate warrant agreement, the Company issued warrants to purchase 1.0 million shares of Class A common stock with an exercise price, as adjusted to date, of $34.56 per sharerestatement (the "Crestview Warrants"“Amendment”). 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,Cumulus Media Inc. 2020 Equity and Incentive Plan (as amended, the “2020 Plan”). Pursuant to the Amendment, the number of shares of Class A common stock issuable upon exercisereserved for issuance under the Plan was increased by 700,000 shares for an aggregate number of 2,800,000 shares of Class A common stock. Such shares may be shares of original issuance or treasury shares or a combination of the Crestview Warrants,foregoing. Awards can be made under the 2020 Plan for a period of ten years from April 26, 2023, subject to the right of the stockholders and the exercise priceBoard to terminate the 2020 Plan at any time. The purpose of the Crestview Warrants, are subject2020 Plan is intended to, adjustmentamong other things, help attract, motivate and retain key employees and directors and to reward them for making major contributions to the success of the Company. The 2020 Plan permits awards to be made to employees, directors, or consultants of the Company or an affiliate of the Company.
Unless otherwise determined by the Board, the Board's compensation committee will administer the 2020 Plan. The 2020 Plan generally provides for the following types of awards:
•stock options (including incentive options and nonstatutory options);
•restricted stock;
•stock appreciation rights;
•dividend equivalents;
•other stock-based awards;
•performance awards; and
•cash awards.
If an employee's employment is terminated by the Company or its subsidiaries without cause, by the employee for good reason (each, as defined in the caseaward agreement) or by reason of stock splits, dividendsdeath or disability (as defined in the award agreement), such employee will become vested in an additional tranche of the unvested awards as if the employee's employment continued for one additional year following the qualifying termination date; provided, that with respect to the Chief Executive Officer and certain other similar events. AsChief Financial Officer, (i) an amount equal to 50% of December 31, 2017, all 1.0 million Crestview Warrants remained outstanding.
11. Stock-Based Compensation Expense
The Company uses the Black-Scholes option pricing model to estimateunvested components of the fair value onawards will accelerate and vest and (ii) vested Options will remain outstanding until the expiration date of grantsuch Option. If an employee's employment is terminated by the Company or its subsidiaries without cause or by the employee for good reason, in either instance at any time within the three month period immediately preceding, or the twelve month period immediately following, a change in control (as defined in the award agreement), such employee will become vested in all unvested awards. We expect to issue common shares held as either treasury stock or issue new shares upon the exercise of stock options issued. The fair value of stock options is determined by the Company’s stock price, historical stock price volatility over the expected term of the awards, risk-free interest rates and expected dividends. With respector once shares vest pursuant to restricted stock awards, the Company recognizes compensation expense over the vesting period equalunits.
Stock Options
The Options granted to the grant date fair value of the shares awarded in accordance with ASC 718 - Compensation - Stock Compensation. To the extent non-vested restricted stock awards include performance or market vesting conditions, management uses the requisite service period to recognize the cost associated with the award.
Generally, the Company’s grants of stock optionsManagement during fiscal year 2020 have a five year contractual term and will vest ratably over four years and have a maximum contractual term of ten years. The Company estimates the volatility of its common stock by using a weighted average of historical stock price volatility over the expected term of the options. The Company bases the risk-free interest rate that it used in its option pricing model on United States Treasury issues with terms similar to the expected term of the options. The Company does not anticipate paying any cash dividends on the class of stock subject to granted stock options in the foreseeable future and therefore used an expected dividend yield of zero in the option pricing model. The Company is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from estimates. Stock-based compensation expense is recorded only for those awards that are expected to vest. All stock-based payment awards are amortized on a straight-line basis over the requisite service periods of the awards.
During 2015, the Company granted 30,365 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.
During 2016, the Company granted 0.4 million stock options with an aggregate grant date fair value of $0.6 million. The options range in exercise price from $1.34 to $34.72 per share, and provide for vesting on each of the first four anniversariesanniversary of the date of grant, withgrant. The Options granted to Management on or about the Effective Date will vest 30% of each award vesting on or about each of the first two anniversaries thereof,of the issuance date, and 20% of each award vestingwill vest on or about each of the next twothird and fourth anniversaries thereof.
During 2017,of the Company granted 0.1 million stock options with an aggregate grant date fair valueissuance date. The vesting of $0.1 million. The options range in exercise price from $0.41 to $1.03 per share, and provide for vesting on each of the firstawards to Management is also subject to, among other things, each employee's continued employment with the Company.
The Options granted to each non-employee director, which have a five year contractual term, vest in four anniversariesequal installments on the last day of each calendar quarter, commencing in the quarter in which the award is granted. The vesting of each of the non-employee director awards are also subject to, among other things, each non-employee director's continued role as a director with the Company. Upon a change in control, all unvested non-employee director awards will fully vest.
The following table summarizes changes in outstanding stock options during the twelve months ended December 31, 2023 and 2022, as well as stock options that are vested and expected to vest and stock options exercisable as of December 31, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Options Outstanding |
| | Outstanding Stock Options | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term (in years) | | Aggregate Intrinsic Value (in thousands) (1) |
| Outstanding as of December 31, 2021 | | 735,895 | | | $ | 19.91 | | | 2.3 | | $ | 405 | |
| Granted | | — | | | — | | | | | — | |
| Exercised | | — | | | — | | | | | — | |
| Forfeited and canceled | | (19,640) | | | $ | 22.88 | | | | | — | |
| | | | | | | | |
| Outstanding as of December 31, 2022 | | 716,255 | | | $ | 19.83 | | | 1.2 | | $ | 103 | |
| Exercisable as of December 31, 2022 | | 559,505 | | | $ | 21.82 | | | 0.9 | | $ | 51 | |
| | | | | | | | |
| | | | | | | | |
| Outstanding as of December 31, 2022 | | 716,255 | | | $ | 19.83 | | | 1.2 | | $ | 103 | |
| Granted | | — | | | — | | | | | — | |
| Exercised | | — | | | — | | | | | — | |
| Forfeited and canceled | | (402,755) | | | $ | 25.37 | | | | | — | |
| | | | | | | | |
| Outstanding as of December 31, 2023 | | 313,500 | | | $ | 12.70 | | | 1.1 | | $ | 49 | |
| Exercisable as of December 31, 2023 | | 235,125 | | | $ | 12.70 | | | 1.1 | | $ | 37 | |
| | | | | | | | |
| | | | | | | | |
(1) Amounts represent the difference between the exercise price and the fair value of common stock at each year end for all the "in-the-money" options outstanding based on the fair value per share of common stock as of each respective fiscal year end. |
Unrecognized compensation cost related to unvested stock options is not material as of December 31, 2023. There was $0.4 million of unrecognized compensation cost related to unvested stock options as of December 31, 2022. The weighted-average recognition period is 0.1 years and 0.6 years for each period, respectively.
RSUs
Time-based RSUs granted to Management typically vest ratably over four years on the anniversary of the date of grant, with 30%grant. Time-based RSUs granted to non-employee directors typically vest in four equal installments on the last day of each calendar quarter, commencing in the quarter in which the award is granted. Performance-based RSUs vest equally over a four-year period based upon annual EBITDA performance goals, which are established by the Board of Directors at the beginning of each year. Performance-based RSUs vesting on eachin any year may be earned in a range of 0% to 100% of the first two anniversaries thereof, and 20% of each award vesting on each of the next two anniversaries thereof.initial shares awarded.
The total fair value of time-based and performance-based restricted stock awards is the quoted market value of our stock on the grant date. For performance-based restricted stock awards, the Company evaluates the probability of vesting of the awards in each reporting period. In the event the Company determines it is no longer probable that vested duringthe minimum performance criteria specified in the award will be achieved, all previously recognized compensation expense will be reversed in the period such a determination is made.
The following table summarizes the activities for our RSUs for the years ended December 31, 20172023 and 20162022 and the related weighted-average grant date fair value:
| | | | | | | | | | | | | | |
| | Number of RSUs | | Weighted-Average Grant Date Fair Value |
| Nonvested as of December 31, 2021 | | 829,521 | | | $ | 10.59 | |
| Granted | | 624,553 | | | 10.30 | |
| Vested | | (390,108) | | | 10.91 | |
| Forfeited | | (11,187) | | | 11.29 | |
| Nonvested as of December 31, 2022 | | 1,052,779 | | | $ | 10.29 | |
| Granted | | 971,362 | | | 4.89 | |
| Vested | | (603,926) | | | 9.12 | |
| Forfeited | | (62,953) | | | 5.49 | |
| Nonvested as of December 31, 2023 | | 1,357,262 | | | $ | 7.17 | |
| | | | |
As of December 31, 2023 and 2022, there was $0.0$5.9 million and $0.03$6.3 million, respectively.respectively, of unrecognized compensation cost related to unvested RSUs with a weighted-average recognition period of 1.2 years for each period.
In connection with certain 2015 employee departures, the Company recorded accelerated stockStock-based compensation costs of $8.7 million for the year ended December 31, 2015. These costs areexpense
The total stock-based compensation expense included in corporate expenses and additional paid-in capital"Corporate expenses" in the accompanying consolidated financial statements.Consolidated Statements of Operations was as follows (dollars in thousands):
For the years ended December 31, 2017, 2016 and 2015, the Company recognized approximately $1.6 million, $2.9 million and $21.0 million in non-cash stock-based compensation expense, respectively, related to equity awards. | | | | | | | | | | | |
| Year Ended December 31, 2023 | | Year Ended December 31, 2022 |
| Stock option grants | $ | 375 | | | $ | 623 | |
| Restricted stock unit grants | 4,895 | | | 5,606 | |
| Total expense | $ | 5,270 | | | $ | 6,229 | |
The associated tax benefits related to these non-cash stock-based compensation awards for the years ended December 31, 2017, 20162023 and 2015 were $0.0 million, $0.22022, was $1.4 million and $8.4$1.6 million, respectively.
AsThe Company elected to recognize forfeitures of December 31, 2017, unrecognized stock-based compensation expenseshare-based awards as they occur in the period of approximately $0.5 million related to equityforfeiture rather than estimating the number of awards is expected to be recognized over a weighted-average remaining life of 0.79 years. As of December 31, 2016, unrecognized stock-based compensation expense of approximately $2.8 million related to equityforfeited at the grant date and subsequently adjusting the estimate when awards was expected to be recognized over a weighted average remaining life of 1.40 years. Unrecognized stock-based compensation expense for equity awards will continue to be adjusted for future changes in estimated forfeitures.
As of December 31, 2017, the total number of shares of common stock that remain authorized, reserved and available for issuance under any of the Company’s equity incentive plans was approximately 1.4 million, not including shares underlying outstanding awards. The Company is only authorized to make additional award grants under the 2011 Equity Incentive Plan.
are actually forfeited.
11. Income Taxes
There were no stock options exercised duringIncome tax expense for the Company years ended December 31, 2017 or December 31, 2016.
On May 18, 2017 the Company adopted the 2017 Supplemental Incentive Plan (the "2017 SIP"), which provides participating executives of the Company with the opportunity to earn cash payments in ratable installments over the last three quarters of 2017, based on the Company's year-to-date performance at the end of each respective period, commencing with the second quarter of 2017. In order to be eligible to participate in the 2017 SIP, each participant therein had to agree to the cancellation of all of such participant's respective outstanding equity incentive awards. During the year ended December 31, 2017, the participants forfeited an aggregate of 963,493 options.
The following tables summarize the Company’s equity award activity for the year ended December 31, 2017: |
| | | | | | | | | | | | |
| | Options | | Weighted- Average Exercise Price | | Weighted- Average Remaining Contractual Term (in years) | | Aggregate Intrinsic Value (in thousands) |
| Options to Purchase Class A Common Stock | | | | | | | |
| Outstanding at January 1, 2017 | 3,472,455 |
| | $ | 31.46 |
| | | | |
| Granted | 76,250 |
| | 0.98 |
| | | | |
| Exercised | — |
| | — |
| | | | |
| Forfeited/Canceled | (1,039,576 | ) | | 18.16 |
| | | | |
| Expired | — |
| | — |
| | | | |
| Outstanding at December 31, 2017 | 2,509,129 |
| | $ | 36.04 |
| | 4.68 | | $ | 584 |
|
| Vested or expected to vest at December 31, 2017 | 2,509,129 |
| | $ | 36.04 |
| | 4.68 | | $ | 8,258 |
|
| Exercisable at December 31, 2017 | 2,356,173 |
| | $ | 37.78 |
| | 4.44 | | $ | 666 |
|
2011 Equity Incentive Plan
The Board adopted the 2011 Equity Incentive Plan on July 8, 2011. Also, on July 8, 2011, stockholders holding a majority of the outstanding voting power of the Company, upon the recommendation of the Board, approved the 2011 Equity Incentive Plan.
The 2011 Equity Incentive Plan authorizes the grant of equity-based compensation in the form of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance shares, performance units,2023 and other awards for the purpose of providing Cumulus Media’s non-employee directors, consultants, officers and other employees incentives and rewards that are aligned with the economic interests of the Company's shareholders.
The 2011 Equity Incentive Plan is administered by the Compensation Committee. The Compensation Committee may delegate its authority under the 2011 Equity Incentive Plan.
Total awards under the 2011 Equity Incentive Plan are limited to 4,375,000 shares (the “Authorized Plan Aggregate”) of Class A common stock. The 2011 Equity Incentive Plan also provides that: (i) the aggregate number of shares of Class A common stock actually issued or transferred upon the exercise of incentive stock options (“ISOs”) will not exceed 2,187,500 shares; (ii) the number of shares of Class A common stock issued as restricted stock, RSUs, performance shares, performance units and other awards (after taking into account any forfeitures and cancellations) will not, during the term of the 2011 Equity Incentive Plan, in the aggregate exceed 1,500,000 shares of Class A common stock; (iii) no participant will be granted stock options or SARs, in the aggregate, for more than 1,437,500 shares of Class A common stock during any calendar year; (iv) no participant will be granted awards of restricted stock, RSUs, performance shares or other awards that are intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), in the aggregate, for more than 375,000 shares of Class A common stock during any calendar year; and (v) no participant during any calendar year will be granted awards of performance units that are intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code, in the aggregate, for more than a maximum value of $5,000,000 as of their respective dates of grant.
The 2011 Equity Incentive Plan provides that only shares with respect to awards that expire or are forfeited or canceled, or shares that were covered by an award the benefit of which is paid in cash instead of shares, will again be available for issuance under the 2011 Equity Incentive Plan. The following shares are not added back to the Authorized Plan Aggregate: (i) shares tendered in payment of a stock option exercise price; (ii) shares withheld by the Company to satisfy tax withholding obligations; and (iii) shares repurchased by the Company with stock option proceeds. Further, all shares covered by a SAR that is exercised and settled in shares, and whether or not all shares are actually issued to the participant upon exercise of the right, will be considered issued or transferred pursuant to the 2011 Equity Incentive Plan.
The 2011 Equity Incentive Plan provides that generally: (i) stock options and SARs may not become exercisable by the passage of time sooner than one-third per year over three years except in the event of retirement, death or disability of a participant or in the event of a change in control (described below); (ii) stock options and SARs that become exercisable upon the achievement of Management Objectives (as defined below) cannot become exercisable sooner than one year from the date of grant except in the event of retirement, death or disability of a participant or in the event of a change in control; (iii) restricted stock and RSUs may not become unrestricted by the passage of time sooner than one-third per year over three years unless restrictions lapse sooner by virtue of retirement, death or disability of a participant or in the event of a change in control; (iv) the period of time within which Management Objectives relating to performance shares and performance units must be achieved will be a minimum of one year, subject to earlier lapse or modification by virtue of retirement, death or disability of a participant or in the event of a change in control; (v) restricted stock and RSUs that vest upon the achievement of Management Objectives cannot vest sooner than one year from the date of grant, but may be subject to earlier lapse or modification by virtue of retirement, death or disability of a participant or in the event of a change in control; and, (vi) as described below, a limited number of awards, however, including restricted stock and RSUs granted to non-employee directors, may be granted without regard to the above minimum vesting periods. Repricing of options and SARs is prohibited without stockholder approval under the 2011 Equity Incentive Plan.
In general, a change in control will be deemed to have occurred if: (i) there is a consummation of a sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries taken as a whole to any person or group; (ii) a plan relating to the liquidation or dissolution of the Company is adopted; (iii) there is a consummation of any transaction (including, without limitation, any purchase, sale, acquisition, disposition, merger or consolidation) the result of which is that any person or group becomes the beneficial owner (excluding any options to purchase equity securities of the Company held by such person or group) of more than 50% of the aggregate voting power of all classes of capital stock of the Company having the right to elect directors under ordinary circumstances; or (iv) a majority of the members of the Board are not Continuing Directors. For purposes of this definition, a “Continuing Director” is, as of any date of determination, any member of the Board who (1) was a member of the Board on July 8, 2011 or (2) was nominated for election or elected to the Board with the approval of either two-thirds of the Continuing Directors who were members of the Board at the time of such nomination or election or two-thirds of those Company directors who were previously approved by Continuing Directors.
The 2011 Equity Incentive Plan provides that dividends or other distributions on performance shares, restricted stock or RSUs that are earned or that have restrictions that lapse as a result of the achievement of Management Objectives will be deferred until and paid contingent upon the achievement of the applicable Management Objectives. The 2011 Equity Incentive Plan also provides that dividends and dividend equivalents will not be paid on stock options or SARs.
The 2011 Equity Incentive Plan provides that no stock options or SARs will be granted with an exercise or base price less than the fair market value of the Class A common stock on the date of grant. The 2011 Equity Incentive Plan was designed to allow awards to qualify as qualified performance-based compensation under Section 162(m) of the Code to the extent applicable.
The following performance metrics may be used as “Management Objectives”: profits, cash flow, returns, working capital, profit margins, liquidity measures, sales growth, gross margin growth, cost initiative and stock price metrics, and strategic initiative key deliverable metrics.
As of December 31, 2017, there were outstanding options to purchase 2,461,753 shares of Class A common stock at exercise prices ranging from $0.41 to $51.68 per share under the 2011 Equity Incentive Plan, of which 152,956 options were unvested and 2,308,797 options were vested.
2008 Equity Incentive Plan
As of December 31, 2017, there were outstanding vested options to purchase 47,376 shares of Class A common stock at exercise prices ranging from $20.32 to $26.40 per share under the 2008 Equity Incentive Plan. The Company is not authorized to issue additional grants under this plan.
12. Income Taxes
Income tax for the years ended December 31, 2017, 2016 and 20152022, consisted of the following (dollars in thousands):
| | | | | 2017 | | 2016 | | 2015 |
| Year Ended December 31, 2023 | |
| Year Ended December 31, 2023 | |
| Year Ended December 31, 2023 | |
| Current income tax expense | | | | | | |
| State and local | | $ | 4,504 |
| | $ | 1,678 |
| | $ | 2,422 |
|
| Total current income tax | | $ | 4,504 |
| | $ | 1,678 |
| | $ | 2,422 |
|
| | | | | | | |
| Deferred tax benefit | | | | | | |
| Current income tax expense | |
| Current income tax expense | |
| Federal | |
| Federal | |
| Federal | | $ | (157,277 | ) | | $ | (19,496 | ) | | $ | (48,123 | ) |
| State and local | | (10,953 | ) | | (8,336 | ) | | (139 | ) |
| Total deferred tax | | (168,230 | ) | | (27,832 | ) | | (48,262 | ) |
| Total income tax benefit | | $ | (163,726 | ) | | $ | (26,154 | ) | | $ | (45,840 | ) |
| State and local | |
| State and local | |
| Total current income tax expense | |
| Total current income tax expense | |
| Total current income tax expense | |
| | Deferred income tax expense | |
| | Deferred income tax expense | |
| | Deferred income tax expense | |
| Federal | |
| Federal | |
| Federal | |
| State and local | |
| State and local | |
| State and local | |
| Total deferred tax expense | |
| Total deferred tax expense | |
| Total deferred tax expense | |
| Total income tax expense | |
| Total income tax expense | |
| Total income tax expense | |
Total income tax expense differed from the amount computed by applying the federal statutory tax rate of 35.0%21.0% for the years ended December 31, 2017, 20162023 and 20152022, as a result of the following (dollars in thousands):
| | | | | | | | | | | | | | |
| Year Ended
December 31, 2023 | | Year Ended December 31, 2022 | | |
| Computed income tax expense at federal statutory rate on pre-tax income | $ | (21,146) | | | $ | 4,117 | | | | |
| State income tax expense, net of federal tax expense | (3,390) | | | 1,542 | | | | |
| Bankruptcy costs | 8 | | | 153 | | | | |
| | | | | | |
| Section 162(m) disallowance | 1,106 | | | 1,510 | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Valuation allowance | 40,946 | | | — | | | | |
| Provision to return | (281) | | | 22 | | | | |
| Uncertain tax positions | (428) | | | (5,397) | | | | |
| Allowance for state tax receivables | — | | | 943 | | | | |
| Tax credits | (240) | | | (242) | | | | |
| Other adjustments | 608 | | | 722 | | | | |
| Net income tax expense | $ | 17,183 | | | $ | 3,370 | | | | |
|
| | | | | | | | | | | | |
|
| 2017 | | 2016 | | 2015 |
| Pretax loss at federal statutory rate |
| $ | (129,602 | ) |
| $ | (187,906 | ) |
| $ | (207,317 | ) |
| State income tax, net federal |
| (11,729 | ) |
| (1,812 | ) |
| (1,385 | ) |
| Meals and entertainment | | 350 |
| | 429 |
| | 380 |
|
| Bankruptcy costs | | 5,478 |
| | — |
| | — |
|
| Change in state tax rates |
| 255 |
|
| (1,618 | ) |
| 1,605 |
|
| Section 162 disallowance |
| 1,867 |
|
| 538 |
|
| 110 |
|
| Change in federal tax rate | | (91,384 | ) | | — |
| | — |
|
| Impairment charges on goodwill with no tax basis |
| — |
|
| 163,630 |
|
| 153,371 |
|
| Increase in valuation allowance |
| 58,254 |
|
| 32 |
|
| 190 |
|
| Other |
| 2,785 |
| | 553 |
| | 7,206 |
|
| Net income tax benefit |
| $ | (163,726 | ) |
| $ | (26,154 | ) |
| $ | (45,840 | ) |
The Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act, among other changes, reduces the US federal corporate tax rate from 35% to 21% for tax years after 2017. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, it has made a reasonable estimate of the effects on its existing deferred tax balances.
The Company remeasured certain deferred tax assets and liabilities based on the federal rate at which they are expected to reverse in the future, which is generally 21%. However, the Company is still analyzing certain aspects of the Act, including full expensing of certain capital expenditures, the impact of executive compensation tax changes, and analysis of state tax implications and corresponding impact to changes in state valuation allowances. Additional guidance and clarification from regulatory authorities could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of the Company’s deferred tax balance was a tax benefit of approximately $91.4 million, which is included as a component of income tax benefit from continuing operations. Given the substantial changes with the Act, the estimated financial impacts are provisional and subject to further interpretation and clarification of the Act during 2018. In accordance with Staff Accounting Bulletin 118 (“SAB 118”), changes to these provisional amounts will be finalized within the next 12 months and will be recorded in the period in which the analysis is complete. As of December 31, 2017 the Company has recorded no estimate under SAB 118 for the state tax implications and corresponding state tax valuation allowance impact while the Company continues to refine its analysis of state tax conformity with various provisions of the Act.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2017 and 2016 are presented below (dollars in thousands):
| | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Deferred income tax assets: | | | |
| Accounts receivable | $ | 1,517 | | | $ | 1,507 | |
| Leases | 40,952 | | | 42,912 | |
| Other liabilities and assets | 4,358 | | | 5,229 | |
| Debt costs | 617 | | | 840 | |
| Interest limitation | 24,473 | | | 12,152 | |
| Financing liabilities | 50,119 | | | 51,725 | |
| Net operating loss | 7,669 | | | 305 | |
| Total deferred income tax assets before valuation allowance | 129,705 | | | 114,670 | |
| Less: valuation allowance | (40,946) | | | — | |
| Total deferred tax assets | $ | 88,759 | | | $ | 114,670 | |
| Deferred income tax liabilities: | | | |
| Intangible assets | $ | 43,563 | | | $ | 46,709 | |
| Property and equipment | 26,568 | | | 25,821 | |
| Leases | 30,953 | | | 35,141 | |
| Other | — | | | 1,680 | |
| Total deferred income tax liabilities | $ | 101,084 | | | $ | 109,351 | |
| Total net deferred income tax (liabilities)/assets | $ | (12,325) | | | $ | 5,319 | |
| | | |
|
| | | | | | | |
| | 2017 | | 2016 |
| Noncurrent deferred tax assets: |
| | |
| Accounts receivable | $ | 948 |
| | $ | 1,422 |
|
| Advertising relationships | 954 |
| | 2,548 |
|
| Other liabilities | 20,486 |
| | 27,014 |
|
| Debt costs | 6,987 |
| | — |
|
| Tax credits | 2,249 |
| | 2,042 |
|
| Net operating loss | 75,832 |
| | 111,778 |
|
| Noncurrent deferred tax assets | 107,456 |
| | 144,804 |
|
| Less: valuation allowance | (75,460 | ) | | (17,205 | ) |
| Net noncurrent deferred tax assets | 31,996 |
| | 127,599 |
|
| Noncurrent deferred tax liabilities: |
| | |
| Intangible assets | 242,822 |
| | 482,620 |
|
| Property and equipment | 8,417 |
| | 20,485 |
|
| Cancellation of debt income | — |
| | 12,544 |
|
| Other | 7 |
| | — |
|
| Noncurrent deferred tax liabilities | 251,246 |
| | 515,649 |
|
| Net noncurrent deferred tax liabilities | 219,250 |
| | 388,050 |
|
| Net deferred tax liabilities | $ | 219,250 |
| | $ | 388,050 |
|
Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences between the tax and financial reporting bases of our assets and liabilities and other tax attributes, such as net operating loss carryforwards.attributes. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.
As of December 31, 2017,2023, the Company recorded a valuation allowance increased by $58.3of $40.9 million on the deferred tax assets related to $75.5 million. The increasea portion of disallowed interest expense carryforwards and other attributes because it is more likely than not that some of the tax benefits will not be realized in the future, primarily from recent losses driven by the impairment of our FCC broadcast licenses.
As of December 31, 2022, the Company did not record a valuation allowance relates to the impactbecause all of the Company's Bankruptcy Petition and corresponding changes in judgment regarding the Company's ability to recover its federal and state net operating loss carryforwards and certain otherdeferred tax attributes. Approximately $43.9 million of the increase in valuation allowance relates to the establishment of a full valuation on federal loss carryforwards and approximately $14.4 million relates to certain state net operating loss carryforwards which the Company does not believe areassets were more likely than not to be realized as a resultbased on the future reversal of the expected expirationexisting deferred tax liabilities and projections of these attributes prior to utilization. future taxable income.
As of December 31, 2016,2023, the Company maintained a valuation allowance of $17.2 million. The changes in the valuation allowance for 2016 consisted of a decrease of approximately $0.2 million related to state rate changes, an increase of $0.8 million related to the Company's estimates of its inability to recover certain state net operating losses and a decrease of $0.6 million related to the expected expiration of certain state net operating losses.
At December 31, 2017, Company has federalhad Federal net operating loss carryforwards which are available to offset future taxable income of approximately $232.0$27.6 million, and which will expire in thecan be carried forward to future years 2030 through 2032. At December 31, 2017 theindefinitely. The Company hashad state net operating loss carryforwards available to offset future income of approximately $1.1 billion$44.0 million which, if not utilized, will expire 20182028 through 2037. During the first quarter 20172043. As of December 31, 2023, the Company adopted ASU 2016-09 and recorded an additionalhad deferred tax asset for approximately $1.5 million of net operating loss carryforwards that were previously unrecognized,assets related to windfallfederal and state interest expense disallowance carryforwards of $24.5 million, which are available to offset future taxable income and have an indefinite carryforward period.
The Company recorded reductions to uncertain tax benefits associated withpositions of $0.4 million and relevant interest and penalties of $0.1 million as a result of the Company's stock based compensation plan. The recognitionexpiration of this deferred tax assetthe applicable statute of approximately $0.6 million was recorded through accumulated deficit.
December 31, 2023. The Company records interest and penalties related to unrecognizeduncertain tax benefitspositions in income tax expense. For interest and penalties, the Company recorded income tax benefitexpense amounts recorded were not material in the years ended December 31, 2023 and 2022. No interest and penalties were accrued as of $1.8December 31, 2023. As of December 31, 2022, the total interest and penalties accrued was $0.1 million.
As of December 31, 2023, the Company had no uncertain tax positions. As of December 31, 2022, the total uncertain tax positions and accrued interest and penalties were $0.5 million.
All federal income tax returns are closed for tax years through 2019. For the majority of state and local tax jurisdictions in which the Company is subject to income tax audits, tax years through 2019 have been closed.
The following table reconciles uncertain tax positions (dollars in thousands):
| | | | | | | | | | | |
| Year Ended December 31, 2023 | | Year Ended December 31, 2022 |
| Balance at beginning of period | $ | 385 | | | $ | 5,570 | |
| | | |
| | | |
| Decreases relating to expiration of the statute of limitations | (385) | | | (5,185) | |
| | | |
| Balance at end of period | $ | — | | | $ | 385 | |
| | | |
12. (Loss) Earnings Per Share
The Company calculates basic (loss) earnings per share by dividing net (loss) income by the weighted average number of common shares outstanding, including warrants. The Company calculates diluted (loss) earnings per share by dividing net (loss) income by the weighted average number of common shares outstanding plus the dilutive effect of all outstanding share-based awards, including stock options and restricted stock awards. Warrants generally are included in basic and diluted shares outstanding because there is little or no consideration paid upon exercise of the warrants.
For the twelve months ended December 31, 2023, given the net loss attributable to the Company's common stockholders, potential common shares that would have caused dilution, such as employee stock options, restricted shares and other stock awards, were excluded from the diluted share count because their effect would have been anti-dilutive. For the twelve months ended December 31, 2022, potential common shares related to certain of the Company's stock options were excluded from the diluted share count as the exercise price of the options was greater than the average market price of the common shares and, as such, their effect would have been anti-dilutive. The Company applies the two-class method to calculate (loss) earnings per share. Because both classes share the same rights in dividends and (losses) earnings, (loss) earnings per share (basic and diluted) are the same for both classes.
The following table presents the reconciliation of basic to diluted weighted average common shares (dollars and shares in thousands, except per share data):
| | | | | | | | | | | |
| Year Ended December 31, 2023 | | Year Ended December 31, 2022 |
| Basic (Loss) Earnings Per Share | | | |
| Numerator: | | | |
| Undistributed net (loss) income from operations | $ | (117,879) | | | $ | 16,235 | |
| Basic net (loss) income attributable to common shares | $ | (117,879) | | | $ | 16,235 | |
| Denominator: | | | |
| Basic weighted average shares outstanding | 17,269 | | | 19,560 | |
| Basic undistributed net (loss) income per share attributable to common shares | $ | (6.83) | | | $ | 0.83 | |
| | | |
| Diluted (Loss) Earnings Per Share | | | |
| Numerator: | | | |
| Undistributed net (loss) income from operations | $ | (117,879) | | | $ | 16,235 | |
| Diluted net (loss) income attributable to common shares | $ | (117,879) | | | $ | 16,235 | |
| Denominator: | | | |
| Basic weighted average shares outstanding | 17,269 | | | 19,560 | |
| Effect of dilutive options and restricted stock units | — | | | 463 |
| Diluted weighted average shares outstanding | 17,269 | | | 20,023 | |
| Diluted undistributed net (loss) income per share attributable to common shares | $ | (6.83) | | | $ | 0.81 | |
13. Leases
The Company has entered into various lease agreements both as the lessor and lessee. We determine if an arrangement is or contains a lease at contract inception and determine its classification as an operating or finance lease at lease commencement. The leases have been classified as either operating or finance leases in accordance with ASU 2016-02, Leases (Topic 842) and its related amendments (collectively, known as "ASC 842") and primarily consist of leases for land, tower space, office space, certain office equipment and vehicles. The Company also has sublease arrangements that provide a nominal amount of income. A right-of-use asset and lease liability have been recorded on the balance sheet for all leases except those with an original lease term of twelve months or less. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. As a lessor, we reserve the rights to the underlying assets in our agreements and do not expect to derive any amounts at the end of the lease terms. We have elected the practical expedient under ASC 842 to not separate lease and nonlease components for all classes of underlying assets.
The Company's leases typically have lease terms between five to ten years. Most of these leases include one or more renewal options for periods ranging from one to ten years. At lease commencement, the Company assesses whether it is reasonably certain to exercise a renewal option. Options that are reasonably certain of being exercised are factored into the determination of the lease term, and related payments are included in the calculation of the right-of-use asset and lease liability. The Company assumes that tower and land leases will be renewed for one additional term.
The Company uses its incremental borrowing rate to calculate the present value of lease payments. The incremental borrowing rate is based on the interest rate defined within with our Refinanced Credit Agreement.
During 2023 and 2022, the Company continued to evaluate its real estate footprint. For leases which were abandoned, the remaining lease costs were accelerated between the decision date and cease use date. In 2023, the Company also recorded an $11.4 million impairment charge related a certain lease which is expected to be sublet for an amount less than the current contractual agreement. The impairment charge is included within Corporate expenses on the Company's Consolidated Statements of Operations.
The following table presents the Company's total right-of-use assets and lease liabilities as of December 31, 2023 and 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Balance Sheet Location | | December 31, 2023 | | December 31, 2022 |
| Right-of-Use Assets | | | | | | |
| Operating | | Operating lease right-of-use assets | | $ | 118,646 | | | $ | 135,236 | |
| Finance, net of accumulated amortization of $1,327 and $544 at December 31, 2023 and 2022, respectively | | Other assets | | 3,330 | | | 2,494 | |
| Total Assets | | | | $ | 121,976 | | | $ | 137,730 | |
| | | | | | |
| Lease Liabilities | | | | | | |
| Current | | | | | | |
| Operating | | Current portion of operating lease liabilities | | $ | 27,515 | | | $ | 27,970 | |
| Finance | | Accounts payable and accrued expenses | | 1,259 | | | 791 | |
| Noncurrent | | | | | | |
| Operating | | Operating lease liabilities | | 113,141 | | | 119,925 | |
| Finance | | Other liabilities | | 2,168 | | | 1,719 | |
| Total Liabilities | | | | $ | 144,083 | | | $ | 150,405 | |
The following table presents the total lease cost for the years ended December 31, 2023 and 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | Statement of Operations Location | | December 31, 2023 | | December 31, 2022 | |
| Operating Lease Cost | | Selling, general and administrative expenses; Corporate expenses | | $ | 25,508 | | | $ | 29,083 | | |
| Finance Lease Cost | | | | | | | |
| Amortization of right-of-use assets | | Depreciation and amortization | | 940 | | | 289 | | |
| Interest on lease liabilities | | Interest expense | | 214 | | | 33 | | |
| | | | | | | |
| Total Lease Cost | | | | $ | 26,662 | | | $ | 29,405 | | |
Total lease income related to our lessor arrangements was $0.3 million and $2.9$0.2 million for the years ended December 31, 20172023 and 2016,2022, respectively. The total interest and penalty accrued was $0.3 million and $2.1 million as of December 31, 2017 and 2016, respectively. The $1.8 million overall decrease in accrued interest and penalties during the year ended December 31, 2017 is a result of increases in accruals for interest and penalties on prior year positions of $0.3 million and reductions to interest and penalty accruals of $2.1 million related to the reversal of positions associated with the expiration of certain statutes of limitations and liabilities no longer deemed payable.
The total unrecognized tax benefits and accrued interest and penalties at December 31, 2017 was $8.9 million. Of this total, $8.1 million represents the unrecognized tax benefits and accrued interest and penalties that, if recognized, would favorably affect the effective income tax rate in future periods. Of the $8.9 million total unrecognized tax benefits and accrued interest and penalties, $0.4 million relates to items which are expected to change significantly within the next 12 months. Substantially all federal, state, and local income tax returns have been closed for the tax years through 2013; however, the various tax jurisdictions may adjust the Company's net operating loss carryforwards.Other Supplementary Data
The following table reconciles unrecognized tax benefits during the relevant years (in thousands):
|
| | | | |
| Balance at January 1, 2016 | | $ | 12,629 |
|
| Increase for prior year positions | | 275 |
|
| Lapse of statute of limitations | | (1,014 | ) |
| Balance at December 31, 2016 | | $ | 11,890 |
|
| Increase for prior year positions | | 447 |
|
| Decrease for prior year positions | | (3,316 | ) |
| Lapse of statute of limitations | | (434 | ) |
| Balance at December 31, 2017 | | $ | 8,587 |
|
13. Loss Per Share
For all periods presented, the Company has disclosed basic and diluted loss per common share utilizing the two-class method. In accordance with ASC Topic 260, "Earnings per Share," the presentation of basic and diluted EPS is required only for common stock and not for participating securities.
Non-vested restricted shares of Class A common stock are considered participating securities for purposes of calculating basic weighted-average common shares outstanding in all periods. In addition, Company Warrants are accounted for as participating securities, as holders of such Warrants, in accordance with and subject to the terms and conditions of the Warrant Agreement, are entitled to receive ratable distributions of the Company's earnings concurrently with such distributions made to the holders of Class A common stock.
Basic loss per common share is calculated by dividing net 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 loss, after any allocation for preferred stock dividends, between each class of common stock on an equal basis per share. In accordance with the two-class method, the non-vested restricted shares of Class A common stock and Company Warrants are excluded from the computation of basic EPS.
Diluted loss per share is computed in the same manner as basic loss per share after assuming issuance of common stock for all potentially dilutive equivalent shares, which includes stock options and certain warrants to purchase common stock. Antidilutive instruments are not considered in this calculation. Under the two-class method, net loss is allocated to common stock to the extent that each security may share in earnings, as if all of the loss for the period had been distributed. Loss is allocated to each class of common stock equally per share.
The following table sets forth the computation of basic and diluted loss per common sharetables present other supplementary information for the years ended December 31, 2017, 20162023 and 2015 (amounts2022, respectively (dollars in thousands, except per share data)thousands):
| | | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 | |
| Cash paid for amounts included in the measurement of lease liabilities | | | | |
| Operating cash flows from operating leases | $ | 28,127 | | | $ | 25,584 | | |
| Operating cash flows from finance leases | 202 | | | 28 | | |
| Financing cash flows from finance leases | 837 | | | 287 | | |
| | | | |
| | | | |
| Right-of-use assets obtained in exchange for lease obligations: | | | | |
| Operating leases | $ | 12,592 | | | $ | 13,405 | | |
| | | | |
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Basic Loss Per Share | | | | | |
| Numerator: | | | | | |
| Undistributed net loss from operations | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) |
| Basic undistributed net loss from operations — attributable to common shares | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) |
| Denominator: | | | | | |
| Basic weighted average common shares outstanding | 29,306 |
| | 29,270 |
| | 29,177 |
|
| Basic loss from operations per share — attributable to common shares | $ | (7.05 | ) | | $ | (17.45 | ) | | $ | (18.72 | ) |
| Diluted Loss Per Share | | | | | |
| Numerator: | | | | | |
| Undistributed net loss from operations | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) |
| Basic undistributed net loss from operations — attributable to common shares | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) |
| Denominator: | | | | | |
| Basic weighted average shares outstanding | 29,306 |
| | 29,270 |
| | 29,177 |
|
| Effect of dilutive options and warrants | — |
| | — |
| | — |
|
| Diluted weighted average shares outstanding | 29,306 |
| | 29,270 |
| | 29,177 |
|
| Diluted loss from operations per share — attributable to common shares | $ | (7.05 | ) | | $ | (17.45 | ) | | $ | (18.72 | ) |
| | | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 | |
| Weighted Average Remaining Lease Term (in years) | | | | |
| Operating leases | 7.96 | | 8.39 | |
| Finance leases | 3.00 | | 3.75 | |
| Weighted Average Discount Rate | | | | |
| Operating leases | 7.20 | % | | 6.20 | % | |
| Finance leases | 6.55 | % | | 6.44 | % | |
14. Leases
The Company has non-cancelable operating leases, primarilyAs of December 31, 2023, future minimum lease payments, as defined under ASC 842, for land, tower space, office-space, certain office equipment and vehicles. The operating leases generally contain renewal options for periods ranging from one to tenthe following five fiscal years and require the Company to pay all executory costs suchthereafter were as maintenance and insurance. Rental expense for operating leases was approximately $23.6 million, $25.2 million, and $27.9 million for the years ended December 31, 2017, 2016 and 2015, respectively.follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
| | Operating Leases | | Finance Leases | | | | Total |
| 2024 | | $ | 27,278 | | | $ | 1,302 | | | | | $ | 28,580 | |
| 2025 | | 24,839 | | | 1,237 | | | | | 26,076 | |
| 2026 | | 22,998 | | | 1,115 | | | | | 24,113 | |
| 2027 | | 22,022 | | | 121 | | | | | 22,143 | |
| 2028 | | 20,253 | | | 13 | | | | | 20,266 | |
| Thereafter | | 63,044 | | | — | | | | | 63,044 | |
| Total lease payments | | $ | 180,434 | | | $ | 3,788 | | | | | $ | 184,222 | |
| Less: imputed interest | | (39,778) | | | (361) | | | | | (40,139) | |
| Total | | $ | 140,656 | | | $ | 3,427 | | | | | $ | 144,083 | |
Future minimum payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year), future minimum sublease incomerelated to be received and a lease commitment under a sale leaseback agreementthe Company's failed sale-leasebacks as of December 31, 2017 are2023 were as follows (in(dollars in thousands):
| | | | | | | | | | | | | | | | | |
| Tower Sale | | Other | | Total |
| 2024 | $ | 14,602 | | | $ | 1,751 | | | $ | 16,353 | |
| 2025 | 15,040 | | | 301 | | | 15,341 | |
| 2026 | 15,491 | | | — | | | 15,491 | |
| 2027 | 15,956 | | | — | | | 15,956 | |
| 2028 | 16,435 | | | — | | | 16,435 | |
| Thereafter | 124,759 | | | — | | | 124,759 | |
| $ | 202,283 | | | $ | 2,052 | | | $ | 204,335 | |
Future minimum payments to be received under the Company's lessor arrangements as of December 31, 2023 were as follows (dollars in thousands):
| | | | | | | | | | | | | |
| | Operating Leases | | | | | |
| 2024 | | $ | 397 | | | | | | |
| 2025 | | 264 | | | | | | |
| 2026 | | 131 | | | | | | |
| 2027 | | 115 | | | | | | |
| 2028 | | 104 | | | | | | |
| Thereafter | | 1,193 | | | | | | |
| Total lease receivables | | $ | 2,204 | | | | | | |
|
| | | | | | | | | | | | | | | | |
| Year Ending December 31: | | Future Minimum Rent Under Operating Leases | | Future Minimum Sublease Income | | Future Minimum Commitments Under Sale Leaseback Agreement | | Net Commitments |
| 2018 | | $ | 23,768 |
| | $ | (1,028 | ) | | $ | 1,153 |
| | $ | 23,893 |
|
| 2019 | | 20,596 |
| | (1,028 | ) | | 1,193 |
| | 20,761 |
|
| 2020 | | 16,373 |
| | (1,028 | ) | |
|
| | 15,345 |
|
| 2021 | | 13,028 |
| | (1,028 | ) | |
|
| | 12,000 |
|
| 2022 | | 11,869 |
| | (1,028 | ) | |
|
| | 10,841 |
|
| Thereafter | | 31,596 |
| | (1,285 | ) | |
|
| | 30,311 |
|
| | | $ | 117,230 |
| | $ | (6,425 | ) | | $ | 2,346 |
| | $ | 113,151 |
|
15.14. Commitments and Contingencies
Future Commitments
The radio broadcast industry’sindustry's principal ratings service is Nielsen Audio ("Nielsen"), which publishes listener surveys for domestic radio markets. Certain of the Company’sCompany's subsidiaries have agreements with Nielsen under which they receive programming ratings information. The remaining aggregate obligation under the agreements with Nielsen as of December 31, 2017 was approximately $200.3 million and is expected to be paid in accordance with the agreements through December 2021.
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, based upon a formula set forth in the contract.
The Company is committed under various contractual agreements to pay for broadcast rights that include sports and news services and to pay for(including sports), talent, executives,music licensing, research, weather information 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.
On January 3, 2014 (the "Commencement Date”), Merlin Media, LLC (“Merlin”) and the Company entered into an agreement (the "LMA Agreement") under which the Company was responsible for programming 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.
The Company and Merlin entered into a separate agreement (the "Put and Call Agreement") pursuant to which the Company had the right to purchase these two FM radio stations until October 5, 2017 for a specified amount of 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. Conversely, Merlin had the right to require the Company to purchase these two FM radio stations at any time during a ten business day period commencing October 6, 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 January 3, 2018. On February 1, 2018, the Company and Merlin agreed to terminate the Put and Call Agreement and amended the LMA Agreement. The Company continues to operate one of the FM stations under the amended LMA Agreement.
The Company determined through its review of the requirements of ASC Topic 810, Consolidation ("ASC 810") that the stations are a variable interest entity (“VIE”) for which it is not the primary beneficiary, therefore consolidation is not required.
On April 1, 2014, the Company initiated an exit plan for an office lease as part of a restructuring in connection with the acquisition of Westwood One (the "Exit Plan"), which included charges related to terminated contract costs. As of December 31, 2017, liabilities related to2023, the Exit PlanCompany's future minimum payments under non-cancelable contracts in excess of $1.2 million are includedone year consist of the following (dollars in Liabilities Subject to Compromise in the Consolidated Balance Sheet. The Company does not anticipate any additional meaningful future charges in connection with the Exit Plan other than those for whichthousands):
| | | | | | | | | | | | | |
| | Non-Cancelable Contracts | | | | | |
| 2024 | | $ | 124,040 | | | | | | |
| 2025 | | 106,119 | | | | | | |
| 2026 | | 45,794 | | | | | | |
| 2027 | | 10,736 | | | | | | |
| 2028 | | 245 | | | | | | |
| Thereafter | | — | | | | | | |
| Total | | $ | 286,934 | | | | | | |
As of December 31, 2023, the Company has already accrued.
believes that it will meet all such minimum obligations.
Legal Proceedings
On March 1, 2011,We have been, and expect in the Company andfuture to be, a party to various legal proceedings, investigations or claims. In accordance with applicable accounting guidance, we record accruals for certain of our subsidiaries were namedoutstanding legal proceedings when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. We evaluate, at least on a quarterly basis, developments in our legal proceedings or other claims that could affect the amount of any accrual, as defendants along with other radio companies, including Beasley Broadcast Group, Inc., CBS Radio, Inc., Entercom Communications, Greater Media, Inc. and Townsquare Media, LLCwell as any developments that would result in a patent infringement suit. The case, Mission Abstract Data L.L.C., d/b/loss contingency to become both probable and reasonably estimable. When a Digimedia ("Plaintiff") v. Beasley Broadcast Group, Inc., et. al., Civil Action Case No: 1:11-mc-00176-LPS, U.S. District Court forloss contingency is not both probable and reasonably estimable, we do not record a loss accrual.
If the Districtloss (or an additional loss in excess of Delaware, alleged that the defendants have infringed on two of plaintiff’s patents entitled “Selectionany prior accrual) is reasonably possible and Retrieval of Music from a Digital Database.” The Complaint sought unspecified damages. The Court stayed the case on November 14, 2011 pending reexaminationmaterial, we disclose an estimate of the patents-in-suit beforepossible loss or range of loss, if such estimate can be made. The assessment of whether a loss is probable or reasonably possible and whether the U.S. Patent Office. On June 6, 2012, Plaintiff filedloss or a motionrange of loss is estimable, involves a series of judgments about future events, which are often complex. Even if a loss is reasonably possible, we may not be able to liftestimate a range of possible loss, particularly where (i) the stay. On March 25, 2013,damages sought are substantial or indeterminate, (ii) the Court entered an order denying Plaintiff’s motionproceedings are in the early stages, (iii) the matters involve novel or unsettled legal theories or a large number of parties, or (iv) various factors outside of our control could lead to liftvastly different outcomes. In such cases, there is considerable uncertainty regarding the stay. However,ultimate resolution of such matters, including the Court ordered that “the stay shall be lifted upon the issuanceamount of the Notice of Intent to Issue Reexamination Certifications (‘NIRC’)” for the two patents-in-suit. By operation of the Court’s Order, the stay was lifted on July 8, 2013, when the final NIRC was issued for the two patents-in-suit. Notwithstanding the foregoing, on November 27, 2017, the Plaintiff and defendants filed a stipulation of dismissal of the action and the action was dismissed with prejudice by court order in early December, 2017, thereby concluding the case.
any possible loss.
In August 2015, the Company was named as a defendant in two separate putative class action lawsuits relating to its use and public performance of certain sound recordings fixed prior to February 15, 1972 (the "Pre-1972 Recordings"). The first suit, ABS Entertainment, Inc., et. al. v,v. Cumulus Media Inc., was filed in the United StatesU.S. District Court for the Central District of California and alleged, among other things, copyright infringement under California state law, common law conversion, misappropriation and unfair business practices. On December 11, 2015, this suit was dismissed without prejudice. The second suit, ABS Entertainment, Inc., v. Cumulus Media Inc., was filed in the United StatesU.S. District Court for the Southern District of New York and claimed, among other things, common law copyright infringement and unfair competition. The New York lawsuit was stayed pending an appeal before the Second Circuit involving unrelated third parties over whether the owner of a Pre-1972 Recording holds an exclusive right to publicly perform that recording under New York common law. On December 20, 2016, the New York Court of Appeals held that New York common law does not recognize a right of public performance for owners
of pre-1972 Recordings. As a result of that case (to which Cumulus Media Inc., was not a party) the New York case against Cumulus Media Inc., was voluntarily dismissed by the plaintiffs on April 3, 2017. On October 11, 2018, President Trump signed the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (the "Music Modernization Act") into law, which, among other things, provides new federal rights going forward for owners of pre-1972 Recordings. The question of whether public performance rights existexisted for Pre-1972 recordings under state laws islaw prior to the enactment of the new Music Modernization Act was, until recently, still being litigated by other parties in California. On August 23, 2021, the Ninth Circuit held in the Ninthmatter of Flo & Eddie, Inc. v. Sirius XM Radio Inc., Case No. 17-55844, that no such public performance right exists under California law. But those plaintiffs continue to litigate a separate case, Flo & Eddie, Inc. v. Pandora Media, LLC, which is pending in the Central District of California (2:14-cv-07648-PSG-GJS). Pandora attempted to dismiss the lawsuit under California’s anti-SLAPP statute, claiming that its broadcast of Pre-1972 recordings constituted speech on an issue of public interest and Eleventh Circuits as a result of cases filed in California and Florida. Cumulus isthat Flo & Eddie’s claims have no merit. The district court denied the motion on the ground that the anti-SLAPP statute did not a party to those cases,cover Pandora’s conduct, and the CompanyNinth Circuit affirmed the denial (No. 20-56134). Following the Ninth Circuit’s direction to consider expedited motion practice on the legal validity of Flo & Eddie’s claims given the Ninth Circuit’s decision in the Sirius XM Radio case, the district court set a schedule for Pandora to file a motion for summary judgment, which was subsequently filed and briefed. The motion was granted on July 25, 2023 in Pandora's favor. The district court found that there is not yet ablean absence of a public performance right owned by plaintiff. A notice of appeal was filed by plaintiff on August 25, 2023, and subsequently dismissed by the court on September 19, 2023 in response to determine what effect those proceedings will have, ifthe filing by plaintiff of a motion for voluntary dismissal. Based on the final determination of the dispute in Pandora's favor, the proceeding is unlikely to pose any on itsmaterial risk to the Company's financial position, results of operations or cash flows.
In the first quarter of 2016, CBS Radio Inc. ("CBS")On February 24, 2020, two individual plaintiffs filed a demandputative class action lawsuit against the Company in the U.S. District Court for arbitration against certainthe Northern District of Georgia (the “District Court”) alleging claims regarding the Cumulus Media Inc. 401(k) Plan (the "Plan"). The case alleges that the Company breached its fiduciary duties under the Employee Retirement Income Security Act of 1974 in the oversight of the Company's subsidiaries. This action allegedPlan, principally by selecting and retaining certain investment options despite their higher fees and costs than other available investment options, causing participants in the Plan to pay excessive recordkeeping fees, and by failing to monitor other fiduciaries. The plaintiffs seek unspecified damages on behalf of a class of Plan participants from February 24, 2014 through the date of any judgment (the "Class Period"). On May 28, 2020, the Company filed a motion to dismiss the complaint. On December 17, 2020, the District Court entered an order dismissing one of the individual plaintiffs and all claims against the Company except those that certainarose on or after February 24, 2019 (i.e., one year prior to the filing of the Complaint). On March 24, 2021, the Company filed a motion seeking dismissal of all remaining claims. On October 15, 2021, the District Court entered an order granting the Company’s motion and dismissing all remaining claims. On November 12, 2021, one of the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Eleventh Circuit. While the appeal was pending, the parties agreed to a settlement, that if granted final approval, will resolve all of the claims against the Company on a class-wide basis for the entire Class Period, and will provide the Company a general release. On February 16, 2023, the District Court granted preliminary approval to the settlement. On July 10, 2023, the Court held a fairness hearing and on July 11, 2023, the Court issued an order granting final approval to the settlement. All applicable appeal deadlines have expired and the Court's order approving the settlement is now final. The Company has made a settlement payment for which the Company was indemnified by one of its subsidiaries breachedinsurance carriers. The proceeds of the termssettlement are being distributed according to a plan of one or more contracts with CBS relating to sports network radio programming and content. As previously disclosed, inallocation by the third quarter of 2016, the Company settled these claims in exchange for a one-time payment of $13.3 million. This payment was classified as a content cost in the accompanying Consolidated Statement of Operations for the year ended December 31, 2016.
District Court.
The Company currently is, and expects that from time to time in the future it will be, party to, or a defendant in, various other claims or lawsuits that are generally incidental to its business. The Company expects that it will vigorously contest any such claims or lawsuits and believes that the ultimate resolution of any such known claim or lawsuit will not have a material adverse effect on the Company's consolidatedCompany’s financial position, results of operations or cash flows.
15. Subsequent Events
16. Quarterly Results (Unaudited)Proceeds from BMI Sale
We received $14.8 million in cash proceeds related to the February 2024 sale of Broadcast Music, Inc. ("BMI") to a shareholder group led by New Mountain Capital, LLC. The following table presentsCompany's equity ownership in BMI began decades ago and changed through acquisitions and divestitures of other broadcast stations and companies over the years. We intend to use the proceeds for general corporate purposes, which may include the repayment of debt.
Rights Plan
On February 21, 2024, the Board adopted a rights plan and declared a dividend of (a) one Class A right (a "Class A Right") in respect of each share of Class A common stock and (b) one Class B right (a "Class B Right") in respect of each share of Class B common stock. The dividend is payable on March 4, 2024 to the Company’s selected unaudited quarterly results for eachstockholders of record on that date. The terms of the quarters during 2017Rights and 2016 (dollarsthe rights plan are set forth in thousands, except per share data):a Stockholder Rights Agreement, dated as of February 21, 2024 (the "Rights Agreement"), by and between the Company and Continental Stock Transfer & Trust Company, as rights agent (or any successor rights agent), as it may be amended from time to time. If the Rights become exercisable, (a) each Class A Right would allow its holder to purchase from the Company one ten-thousandth of a Class A Common Share for a purchase price of $25.00 and (b) each Class B Right would allow its holder to purchase from the Company one ten-thousandth of a Class B Common Share for a purchase price of $25.00. Unless earlier redeemed or exchanged, the Rights will expire on February 20, 2025.
Generally, the Rights Agreement imposes a significant penalty upon any person or group (other than the Company or certain related persons) that is or becomes the beneficial owner of 15% or more of the Company’s outstanding Class A common stock without the prior approval of the Board. In the case of a person or group that beneficially owns more than the applicable threshold of the Company’s outstanding Class A common stock on the date the plan is adopted, the Rights will not be triggered unless and until such person or group becomes the beneficial owner of any additional shares of the Company’s outstanding Class A common stock. A person or group that acquires beneficial ownership of a percentage of the Company’s Class A common stock in excess of the applicable threshold is called an "Acquiring Person." Any Rights held by an Acquiring Person will be null and void and may not be exercised. The term "beneficial ownership" is defined in the Rights Agreement and includes, among other things, shares of Class A common stock into which Class B common stock, other securities that may be exercised or converted and certain derivative arrangements.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended |
| | March 31 | | June 30 | | September 30 | | December 31 |
| FOR THE YEAR ENDED DECEMBER 31, 2017 | | | | | | | |
| Net revenue | $ | 264,030 |
| | $ | 290,531 |
| | $ | 287,240 |
| | $ | 293,861 |
|
| Operating income (loss) | $ | 20,522 |
| | $ | 47,326 |
| | $ | 42,931 |
| | $ | (321,225 | ) |
| (Loss) income before income taxes | $ | (13,421 | ) | | $ | 12,906 |
| | $ | 6,531 |
| | $ | (376,307 | ) |
| Net (loss) income | $ | (7,395 | ) | | $ | 5,672 |
| | $ | 1,274 |
| | $ | (206,116 | ) |
| Basic: | | | | | | | |
| (Loss) income per share | $ | (0.25 | ) | | $ | 0.19 |
| | $ | 0.04 |
| | $ | (7.03 | ) |
| Diluted: | | | | | | | |
| (Loss) income per share | $ | (0.25 | ) | | $ | 0.19 |
| | $ | 0.04 |
| | $ | (7.03 | ) |
| FOR THE YEAR ENDED DECEMBER 31, 2016 | | | | | | | |
| Net revenue | $ | 268,530 |
| | $ | 287,193 |
| | $ | 286,136 |
| | $ | 299,541 |
|
| Operating income (loss) | $ | 10,114 |
| | $ | 36,665 |
| | $ | 113,017 |
| | $ | (568,585 | ) |
| (Loss) income before income taxes | $ | (23,562 | ) | | $ | 2,315 |
| | $ | 79,109 |
| | $ | (594,736 | ) |
| Net (loss) income | $ | (14,429 | ) | | $ | 1,066 |
| | $ | 46,321 |
| | $ | (543,677 | ) |
| Basic: | | | | | | | |
| (Loss) income per share | $ | (0.49 | ) | | $ | 0.04 |
| | $ | 1.58 |
| | $ | (18.57 | ) |
| Diluted: | | | | | | | |
| (Loss) income per share | $ | (0.49 | ) | | $ | 0.04 |
| | $ | 1.58 |
| | $ | (18.57 | ) |
17. Supplemental Condensed Consolidating Financial Information
At December 31, 2017, 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”).
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.
Revision to Prior Period Financial Statements
During the first quarter of 2017, the Company determined that it did not properly classify the investment in consolidated subsidiaries balance residing at the Parent Guarantor as a liability at December 31, 2016. The Company should have presented the investment in consolidated subsidiary balance as a liability as the balance was negative at December 31, 2016. In the following disclosure, a separate line item entitled “Accumulated losses in consolidated subsidiaries” is presented in the Consolidated Balance Sheet to correct this misclassification. This presentation misclassification was not material to the previously issued financial statements.
In accordance with ASC 250-10, SEC Staff Accounting Bulletin No. 99, Materiality, the Company assessed the materiality of the errors and concluded that the errors were not material to any of the Company’s previously issued financial statements. As permitted byASC 250-10, SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company has presented revised financial information as of December 31, 2016.
The following tables present (i) Condensed Consolidating Statements of Operations for the years ended December 31, 2017, 2016 and 2015, (ii) Condensed Consolidating Balance Sheets as of December 31, 2017 and 2016, and (iii) Condensed Consolidating Statements of Cash Flows for the years ended December 31, 2017, 2016, and 2015 of each of the Parent Guarantor, Cumulus Holdings, the Subsidiary Guarantors, and the Subsidiary Non-guarantors.
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 2017
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Cumulus Media Inc. (Parent Guarantor) | | Cumulus Media Holdings Inc. (Subsidiary Issuer) | | Subsidiary Guarantors | | Subsidiary Non- guarantors | | Eliminations | | Total Consolidated |
| Net revenue | $ | — |
| | $ | — |
| | $ | 1,135,662 |
| | $ | — |
| | $ | — |
| | $ | 1,135,662 |
|
| Operating expenses: | | | | | | | | | | | |
| Content costs | — |
| | — |
| | 402,978 |
| | — |
| | — |
| | 402,978 |
|
| Selling, general & administrative expenses | — |
| | — |
| | 475,116 |
| | 2,419 |
| | — |
| | 477,535 |
|
| Depreciation and amortization | — |
| | 1,193 |
| | 61,046 |
| | — |
| | — |
| | 62,239 |
|
| LMA fees | — |
| | — |
| | 10,884 |
| | — |
| | — |
| | 10,884 |
|
| Corporate expenses (including stock-based compensation expense of $1,614) | — |
| | 59,062 |
| | — |
| | — |
| | — |
| | 59,062 |
|
| Gain on sale of assets or stations | — |
| | — |
| | (2,499 | ) | | — |
| | — |
| | (2,499 | ) |
| Impairment of intangible assets and goodwill | — |
| | — |
| | — |
| | 335,909 |
| | — |
| | 335,909 |
|
| Total operating expenses | — |
| | 60,255 |
| | 947,525 |
| | 338,328 |
| | — |
| | 1,346,108 |
|
| Operating loss | — |
| | (60,255 | ) | | 188,137 |
| | (338,328 | ) | | — |
| | (210,446 | ) |
| Non-operating (expense) income: | | | | | | | | | | |
|
| Reorganization items, net | — |
| | (31,603 | ) | | — |
| | — |
| | — |
| | (31,603 | ) |
| Interest (expense) income | (8,735 | ) | | (118,217 | ) | | 136 |
| | — |
| | — |
| | (126,816 | ) |
| Loss on early extinguishment of debt | — |
| | (1,063 | ) | | — |
| | — |
| | — |
| | (1,063 | ) |
| Other loss, net | — |
| | — |
| | (363 | ) | | — |
| | — |
| | (363 | ) |
| Total non-operating expense, net | (8,735 | ) | | (150,883 | ) | | (227 | ) | | — |
| | — |
| | (159,845 | ) |
| (Loss) income before income taxes | (8,735 | ) | | (211,138 | ) | | 187,910 |
| | (338,328 | ) | | — |
| | (370,291 | ) |
| Income tax benefit | 2,516 |
| | 60,808 |
| | 2,964 |
| | 97,438 |
| | — |
| | 163,726 |
|
| (Loss) earnings from consolidated subsidiaries | (200,346 | ) | | (50,016 | ) | | (240,890 | ) | | — |
| | 491,252 |
| | — |
|
| Net (loss) income | $ | (206,565 | ) | | $ | (200,346 | ) | | $ | (50,016 | ) | | $ | (240,890 | ) | | $ | 491,252 |
| | $ | (206,565 | ) |
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 2016
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Cumulus Media Inc. (Parent Guarantor) | | Cumulus Media Holdings Inc. (Subsidiary Issuer) | | Subsidiary Guarantors | | Subsidiary Non- guarantors | | Eliminations | | Total Consolidated |
| Net revenue | $ | — |
| | $ | 165 |
| | $ | 1,141,235 |
| | $ | — |
| | $ | — |
| | $ | 1,141,400 |
|
| Operating expenses: | | | | | | | | | | | |
| Content costs | — |
| | — |
| | 427,780 |
| | — |
| | — |
| | 427,780 |
|
| Selling, general & administrative expenses | — |
| | — |
| | 470,546 |
| | 2,354 |
| | — |
| | 472,900 |
|
| Depreciation and amortization | — |
| | 1,530 |
| | 85,737 |
| | — |
| | — |
| | 87,267 |
|
| LMA fees | — |
| | — |
| | 12,824 |
| | — |
| | — |
| | 12,824 |
|
| Corporate expenses (including stock-based compensation expense of $2,948) | — |
| | 40,148 |
| | — |
| | — |
| | — |
| | 40,148 |
|
| Gain on sale of assets or stations | — |
| | — |
| | (95,695 | ) | | — |
| | — |
| | (95,695 | ) |
| Impairment of intangible assets and goodwill | — |
| | — |
| | 604,965 |
| | — |
| | — |
| | 604,965 |
|
| Total operating expenses | — |
| | 41,678 |
| | 1,506,157 |
| | 2,354 |
| | — |
| | 1,550,189 |
|
| Operating loss | — |
| | (41,513 | ) | | (364,922 | ) | | (2,354 | ) | | — |
| | (408,789 | ) |
| Non-operating (expense) income: | | | | | | | | | | | |
| Interest (expense) income, net | (8,711 | ) | | (129,733 | ) | | 493 |
| | (190 | ) | | — |
| | (138,141 | ) |
| Gain on early extinguishment of debt | — |
| | 8,017 |
| | — |
| | — |
| | — |
| | 8,017 |
|
| Other income, net | — |
| | — |
| | 2,039 |
| | — |
| | — |
| | 2,039 |
|
| Total non-operating (expense) income, net | (8,711 | ) | | (121,716 | ) | | 2,532 |
| | (190 | ) | | — |
| | (128,085 | ) |
| Loss before income taxes | (8,711 | ) | | (163,229 | ) | | (362,390 | ) | | (2,544 | ) | | — |
| | (536,874 | ) |
| Income tax benefit (expense) | 3,484 |
| | 65,292 |
| | (43,640 | ) | | 1,018 |
| | — |
| | 26,154 |
|
| Loss from continuing operations | (5,227 | ) | | (97,937 | ) | | (406,030 | ) | | (1,526 | ) | | — |
| | (510,720 | ) |
| (Loss) earnings from consolidated subsidiaries | (505,493 | ) | | (407,556 | ) | | (1,526 | ) | | — |
| | 914,575 |
| | — |
|
| Net (loss) income | $ | (510,720 | ) | | $ | (505,493 | ) | | $ | (407,556 | ) | | $ | (1,526 | ) | | $ | 914,575 |
| | $ | (510,720 | ) |
CUMULUS MEDIA INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Debtor-In-Possession)
Year Ended December 31, 2015
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Cumulus Media Inc. (Parent Guarantor) | | Cumulus Media Holdings Inc. (Subsidiary Issuer) | | Subsidiary Guarantors | | Subsidiary Non-guarantors | | Eliminations | | Total Consolidated |
| Net revenue | $ | — |
| | $ | 500 |
| | $ | 1,168,179 |
| | $ | — |
| | $ | — |
| | $ | 1,168,679 |
|
| Operating expenses: | | | | | | | | | | | |
| Content costs | — |
| | — |
| | 396,426 |
| | — |
| | — |
| | 396,426 |
|
| Selling, general & administrative expenses | — |
| | — |
| | 475,268 |
| | 2,059 |
| | — |
| | 477,327 |
|
| Depreciation and amortization | — |
| | 1,525 |
| | 100,580 |
| | — |
| | — |
| | 102,105 |
|
| LMA fees | — |
| | — |
| | 10,129 |
| | — |
| | — |
| | 10,129 |
|
| Corporate expenses (including stock-based compensation expense of $21,033) | — |
| | 73,403 |
| | — |
| | — |
| | — |
| | 73,403 |
|
| Loss on sale of assets or stations | — |
| | — |
| | 2,856 |
| | — |
| | — |
| | 2,856 |
|
| Impairment of intangible assets and goodwill | — |
| | — |
| | 565,584 |
| | — |
| | — |
| | 565,584 |
|
| Impairment charges - equity interest Pulser Media Inc. | | | | | 19,364 |
| | | | | | 19,364 |
|
| Total operating expenses | — |
| | 74,928 |
| | 1,570,207 |
| | 2,059 |
| | — |
| | 1,647,194 |
|
| Operating loss | — |
| | (74,428 | ) | | (402,028 | ) | | (2,059 | ) | | — |
| | (478,515 | ) |
| Non-operating (expense) income: | | | | | | | | | | | |
| Interest (expense) income, net | (8,735 | ) | | (132,754 | ) | | 433 |
| | (190 | ) | | — |
| | (141,246 | ) |
| Gain on early extinguishment of debt | — |
| | 13,222 |
| | — |
| | — |
| | — |
| | 13,222 |
|
| Other income, net | — |
| | — |
| | 14,205 |
| | — |
| | — |
| | 14,205 |
|
| Total non-operating (expense) income, net | (8,735 | ) | | (119,532 | ) | | 14,638 |
| | (190 | ) | | — |
| | (113,819 | ) |
| Loss from continuing operations before income taxes | (8,735 | ) | | (193,960 | ) | | (387,390 | ) | | (2,249 | ) | | — |
| | (592,334 | ) |
| Income tax benefit (expense) | 3,494 |
| | 77,584 |
| | (36,138 | ) | | 900 |
| | — |
| | 45,840 |
|
| Loss from continuing operations | (5,241 | ) | | (116,376 | ) | | (423,528 | ) | | (1,349 | ) | | — |
| | (546,494 | ) |
| (Loss) earnings from consolidated subsidiaries | (541,253 | ) | | (424,877 | ) | | (1,349 | ) | | — |
| | 967,479 |
| | — |
|
| Net (loss) income | $ | (546,494 | ) | | $ | (541,253 | ) | | $ | (424,877 | ) | | $ | (1,349 | ) | | $ | 967,479 |
| | $ | (546,494 | ) |
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2017
(Dollars in thousands, except for share and per share data) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | $ | — |
| | $ | 102,891 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 102,891 |
|
| Restricted cash | — |
| | 8,999 |
| | — |
| | — |
| | — |
| | 8,999 |
|
| Accounts receivable, less allowance for doubtful accounts of $4,322 | — |
| | — |
| | 235,247 |
| | — |
| | — |
| | 235,247 |
|
| Trade receivable | — |
| | — |
| | 4,224 |
| | — |
| | — |
| | 4,224 |
|
| Prepaid expenses and other current assets | — |
| | 25,393 |
| | 16,866 |
| | — |
| | — |
| | 42,259 |
|
| Total current assets | — |
| | 137,283 |
| | 256,337 |
| | — |
| | — |
| | 393,620 |
|
| Property and equipment, net | — |
| | 14,404 |
| | 177,200 |
| | — |
| | — |
| | 191,604 |
|
| Broadcast licenses | — |
| | — |
| | — |
| | 1,203,809 |
| | — |
| | 1,203,809 |
|
| Other intangible assets, net | — |
| | — |
| | 82,994 |
| | — |
| | — |
| | 82,994 |
|
| Goodwill | — |
| | — |
| | 135,214 |
| | — |
| | — |
| | 135,214 |
|
| Investment in consolidated subsidiaries | — |
| | 3,323,713 |
| | 984,559 |
| | — |
| | (4,308,272 | ) | | — |
|
| Intercompany receivables | — |
| | 111,964 |
| | 1,800,539 |
| | — |
| | (1,912,503 | ) | | — |
|
| Other assets | — |
| | 6,507 |
| | 13,571 |
| | — |
| | — |
| | 20,078 |
|
| Total assets | $ | — |
| | $ | 3,593,871 |
| | $ | 3,450,414 |
| | $ | 1,203,809 |
| | $ | (6,220,775 | ) | | $ | 2,027,319 |
|
| Liabilities and Stockholders’ Equity (Deficit) | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | |
| Accounts payable and accrued expenses | $ | — |
| | $ | 8,653 |
| | $ | 27,504 |
| | $ | — |
| | $ | — |
| | $ | 36,157 |
|
| Total current liabilities | — |
| | 8,653 |
| | 27,504 |
| | — |
| | — |
| | 36,157 |
|
| Other liabilities | — |
| | 53 |
| | 1 |
| | — |
| | — |
| | 54 |
|
| Intercompany payables | 111,964 |
| | 1,800,539 |
| | — |
| | — |
| | (1,912,503 | ) | | — |
|
| Estimated losses on investment | 584,151 |
| | — |
| | — |
| | — |
| | (584,151 | ) | | — |
|
| Total liabilities not subject to compromise | 696,115 |
| | 1,809,245 |
| | 27,505 |
| | — |
| | (2,496,654 | ) | | 36,211 |
|
| Liabilities subject to compromise | — |
| | 2,368,777 |
| | 99,196 |
| | 219,250 |
| | — |
| | 2,687,223 |
|
| Total liabilities | 696,115 |
| | 4,178,022 |
| | 126,701 |
| | 219,250 |
| | (2,496,654 | ) | | 2,723,434 |
|
| Stockholders’ equity (deficit): | | | | | | | | | | | |
| Class A common stock, par value $0.01 per share; 93,750,000 shares authorized; 32,031,054 shares issued and 29,225,765 shares outstanding | 320 |
| | — |
| | — |
| | — |
| | — |
| | 320 |
|
| Class C common stock, par value $0.01 per share; 80,609 shares authorized, issued and outstanding | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
|
| Treasury stock, at cost, 2,806,187 shares | (229,310 | ) | | — |
| | — |
| | — |
| | — |
| | (229,310 | ) |
| Additional paid-in-capital | 1,626,428 |
| | 279,811 |
| | 4,215,794 |
| | 2,203,511 |
| | (6,699,116 | ) | | 1,626,428 |
|
| Accumulated (deficit) equity | (2,093,554 | ) | | (863,962 | ) | | (892,081 | ) | | (1,218,952 | ) | | 2,974,995 |
| | (2,093,554 | ) |
| Total stockholders’ (deficit) equity | (696,115 | ) | | (584,151 | ) | | 3,323,713 |
| | 984,559 |
| | (3,724,121 | ) | | (696,115 | ) |
| Total liabilities and stockholders’ equity (deficit) | $ | — |
| | $ | 3,593,871 |
| | $ | 3,450,414 |
| | $ | 1,203,809 |
| | $ | (6,220,775 | ) | | $ | 2,027,319 |
|
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2016
(Dollars in thousands, except for share and per share data)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | $ | — |
| | $ | 131,259 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 131,259 |
|
| Restricted cash | — |
| | 8,025 |
| | — |
| | — |
| | — |
| | 8,025 |
|
| Accounts receivable, less allowance for doubtful accounts of $4,691 | — |
| | — |
| | — |
| | 231,585 |
| | — |
| | 231,585 |
|
| Trade receivable | — |
| | — |
| | 4,985 |
| | — |
| | — |
| | 4,985 |
|
| Asset held for sale | — |
| | — |
| | 30,150 |
| | — |
| | — |
| | 30,150 |
|
| Prepaid expenses and other current assets | — |
| | 17,321 |
| | 16,602 |
| | — |
| | — |
| | 33,923 |
|
| Total current assets | — |
| | 156,605 |
| | 51,737 |
| | 231,585 |
| | — |
| | 439,927 |
|
| Property and equipment, net | — |
| | 4,431 |
| | 157,632 |
| | — |
| | — |
| | 162,063 |
|
| Broadcast licenses | — |
| | — |
| | — |
| | 1,540,183 |
| | — |
| | 1,540,183 |
|
| Other intangible assets, net | — |
| | — |
| | 116,499 |
| | — |
| | — |
| | 116,499 |
|
| Goodwill | — |
| | — |
| | 135,214 |
| | — |
| | — |
| | 135,214 |
|
| Investment in consolidated subsidiaries | — |
| | 3,348,992 |
| | 1,012,947 |
| | — |
| | (4,361,939 | ) | | — |
|
| Intercompany receivables | — |
| | 103,593 |
| | 1,848,263 |
| | — |
| | (1,951,856 | ) | | — |
|
| Other assets | — |
| | 21,631 |
| | 135,996 |
| | 364 |
| | (139,186 | ) | | 18,805 |
|
| Total assets | $ | — |
| | $ | 3,635,252 |
| | $ | 3,458,288 |
| | $ | 1,772,132 |
| | $ | (6,452,981 | ) | | $ | 2,412,691 |
|
| Liabilities and Stockholders’ (Deficit) Equity | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | |
| Accounts payable and accrued expenses | $ | — |
| | $ | 19,994 |
| | $ | 76,247 |
| | $ | — |
| | $ | — |
| | $ | 96,241 |
|
| Trade payable | — |
| | — |
| | 4,550 |
| | — |
| | — |
| | 4,550 |
|
| Total current liabilities | — |
| | 19,994 |
| | 80,797 |
| | — |
| | — |
| | 100,791 |
|
| Term loan, net of debt issuance costs/discounts of $29,909 | — |
| | 1,780,357 |
| | — |
| | — |
| | — |
| | 1,780,357 |
|
| 7.75% senior notes, net of debt issuance costs of $6,200 | — |
| | 603,800 |
| | — |
| | — |
| | — |
| | 603,800 |
|
| Other liabilities | — |
| | 2,932 |
| | 28,499 |
| | — |
| | — |
| | 31,431 |
|
| Intercompany payables | 103,229 |
| | 1,616,678 |
| | — |
| | 231,949 |
| | (1,951,856 | ) | | — |
|
| Accumulated losses in consolidated subsidiaries | 388,509 |
| | — |
| | — |
| | — |
| | (388,509 | ) | | — |
|
| Deferred income taxes | — |
| | — |
| | — |
| | 527,236 |
| | (139,186 | ) | | 388,050 |
|
| Total liabilities | 491,738 |
| | 4,023,761 |
| | 109,296 |
| | 759,185 |
| | (2,479,551 | ) | | 2,904,429 |
|
| Stockholders’ equity (deficit): | | | | | | | | | | | |
| Class A common stock, par value $0.01 per share; 93,750,000 shares authorized; 32,031,054 shares issued and 29,225,765 shares outstanding | 320 |
| | — |
| | — |
| | — |
| | — |
| | 320 |
|
| Class C common stock, par value $0.01 per share; 80,609 shares authorized, issued and outstanding | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
|
| Treasury stock, at cost, 2,806,187 shares | (229,310 | ) | | — |
| | — |
| | — |
| | — |
| | (229,310 | ) |
| Additional paid-in-capital | 1,624,815 |
| | 275,107 |
| | 4,191,057 |
| | 1,991,009 |
| | (6,457,173 | ) | | 1,624,815 |
|
| Accumulated (deficit) equity | (1,887,564 | ) | | (663,616 | ) | | (842,065 | ) | | (978,062 | ) | | 2,483,743 |
| | (1,887,564 | ) |
| Total stockholders’ (deficit) equity | (491,738 | ) | | (388,509 | ) | | 3,348,992 |
| | 1,012,947 |
| | (3,973,430 | ) | | (491,738 | ) |
| Total liabilities and stockholders’ (deficit) equity | $ | — |
| | $ | 3,635,252 |
| | $ | 3,458,288 |
| | $ | 1,772,132 |
| | $ | (6,452,981 | ) | | $ | 2,412,691 |
|
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2017
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | $ | (206,565 | ) | | $ | (200,346 | ) | | $ | (50,016 | ) | | $ | (240,890 | ) | | $ | 491,252 |
| | $ | (206,565 | ) |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | | | | | | | | | | | |
| Depreciation and amortization | — |
| | 1,193 |
| | 61,046 |
| | — |
| | — |
| | 62,239 |
|
| Amortization of debt issuance costs/discounts | — |
| | 9,394 |
| | — |
| | — |
| | — |
| | 9,394 |
|
| Provision for doubtful accounts | — |
| | — |
| | 5,807 |
| | — |
| | — |
| | 5,807 |
|
| Gain on sale of assets or stations | — |
| | — |
| | (2,499 | ) | | — |
| | — |
| | (2,499 | ) |
| Non cash reorganization | — |
| | 25,921 |
| | — |
| | — |
| | — |
| | 25,921 |
|
| Impairment of intangible assets and goodwill | — |
| | — |
| | — |
| | 335,909 |
| | — |
| | 335,909 |
|
| Deferred income taxes | (2,516 | ) | | (60,808 | ) | | (7,464 | ) | | (97,438 | ) | | — |
| | (168,226 | ) |
| Stock-based compensation expense | — |
| | 1,614 |
| | — |
| | — |
| | — |
| | 1,614 |
|
| Loss on early extinguishment of debt | — |
| | 1,063 |
| | — |
| | — |
| | — |
| | 1,063 |
|
| Earnings (loss) from consolidated subsidiaries | 200,346 |
| | 50,016 |
| | 240,890 |
| | — |
| | (491,252 | ) | | — |
|
| Changes in assets and liabilities | 4,355 |
| | 291,517 |
| | (282,757 | ) | | 8,824 |
| | — |
| | 21,939 |
|
| Net cash (used in) provided by operating activities | (4,380 | ) | | 119,564 |
| | (34,993 | ) | | 6,405 |
| | — |
| | 86,596 |
|
| Cash flows from investing activities: | | | | | | | | | | | |
| Proceeds from sale of assets or stations | — |
| | — |
| | 6,090 |
| | — |
| | — |
| | 6,090 |
|
| Restricted cash | — |
| | (974 | ) | | — |
| | — |
| | — |
| | (974 | ) |
| Capital expenditures | — |
| | (11,166 | ) | | (20,766 | ) | | — |
| | — |
| | (31,932 | ) |
| Net cash used in investing activities | — |
| | (12,140 | ) | | (14,676 | ) | | — |
| | — |
| | (26,816 | ) |
| Cash flows from financing activities: | | | | | | | | | | | |
| Intercompany transactions, net | 4,380 |
| | (54,049 | ) | | 49,669 |
| | — |
| | — |
| | — |
|
| Repayments of borrowings under term loan and revolving credit facilities | — |
| | (81,652 | ) | | — |
| | — |
| | — |
| | (81,652 | ) |
Adequate protection payments on term loan | — |
| | — |
| | — |
| | (6,405 | ) | | — |
| | (6,405 | ) |
| Deferred financing costs | — |
| | (91 | ) | | — |
| | — |
| | — |
| | (91 | ) |
| Net cash provided by (used in) financing activities | 4,380 |
| | (135,792 | ) | | 49,669 |
| | (6,405 | ) | | — |
| | (88,148 | ) |
| Decrease in cash and cash equivalents | — |
| | (28,368 | ) | | — |
| | — |
| | — |
| | (28,368 | ) |
| Cash and cash equivalents at beginning of period | — |
| | 131,259 |
| | — |
| | — |
| | — |
| | 131,259 |
|
| Cash and cash equivalents at end of period | $ | — |
| | $ | 102,891 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 102,891 |
|
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2016
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | $ | (510,720 | ) | | $ | (505,493 | ) | | $ | (407,556 | ) | | $ | (1,526 | ) | | $ | 914,575 |
| | $ | (510,720 | ) |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | | | | | | | | | | | |
| Depreciation and amortization | — |
| | 1,530 |
| | 85,737 |
| | — |
| | — |
| | 87,267 |
|
| Amortization of debt issuance costs/discount | — |
| | 9,771 |
| | — |
| | 190 |
| | — |
| | 9,961 |
|
| Provision for doubtful accounts | — |
| | — |
| | 1,103 |
| | — |
| | — |
| | 1,103 |
|
| Gain on sale of assets or stations | — |
| | — |
| | (95,695 | ) | | — |
| | — |
| | (95,695 | ) |
| Impairment of intangible assets and goodwill | — |
| | — |
| | 604,965 |
| | — |
| | — |
| | 604,965 |
|
| Deferred income taxes | (3,484 | ) | | (65,292 | ) | | 41,963 |
| | (1,018 | ) | | — |
| | (27,831 | ) |
| Stock-based compensation expense | — |
| | 2,948 |
| | — |
| | — |
| | — |
| | 2,948 |
|
| Gain on early extinguishment of debt | — |
| | (8,017 | ) | | — |
| | — |
| | — |
| | (8,017 | ) |
| Earnings (loss) from consolidated subsidiaries | 505,493 |
| | 407,556 |
| | 1,526 |
| | — |
| | (914,575 | ) | | — |
|
| Changes in assets and liabilities | — |
| | 361,825 |
| | (392,415 | ) | | 2,354 |
| | — |
| | (28,236 | ) |
| Net cash (used in) provided by operating activities | (8,711 | ) | | 204,828 |
| | (160,372 | ) | | — |
| | — |
| | 35,745 |
|
| Cash flows from investing activities: | | | | | | | | | | | |
| Proceeds from sale of assets or stations | — |
| | — |
| | 106,935 |
| | — |
| | — |
| | 106,935 |
|
| Restricted cash | — |
| | (44 | ) | | — |
| | — |
| | — |
| | (44 | ) |
| Capital expenditures | — |
| | (2,276 | ) | | (20,761 | ) | | — |
| | — |
| | (23,037 | ) |
| Net cash (used in) provided by investing activities | — |
| | (2,320 | ) | | 86,174 |
| | — |
| | — |
| | 83,854 |
|
| Cash flows from financing activities: | | | | | | | | | | | |
| Intercompany transactions, net | 8,708 |
| | (82,906 | ) | | 74,198 |
| | — |
| | — |
| | — |
|
| Repayments of borrowings under revolving credit facilities | — |
| | (20,000 | ) | | — |
| | — |
| | — |
| | (20,000 | ) |
| Proceeds from exercise of warrants | 3 |
| | — |
| | — |
| | — |
| | — |
| | 3 |
|
| Net cash provided by (used in) financing activities | 8,711 |
| | (102,906 | ) | | 74,198 |
| | — |
| | — |
| | (19,997 | ) |
| Increase in cash and cash equivalents | — |
| | 99,602 |
| |
|
| | — |
| | — |
| | 99,602 |
|
| Cash and cash equivalents at beginning of period | — |
| | 31,657 |
| | — |
| | — |
| | — |
| | 31,657 |
|
| Cash and cash equivalents at end of period | $ | — |
| | $ | 131,259 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 131,259 |
|
CUMULUS MEDIA INC.
(Debtor-In-Possession)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 31, 2015
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | $ | (546,494 | ) | | $ | (541,253 | ) | | $ | (424,877 | ) | | $ | (1,349 | ) | | $ | 967,479 |
| | $ | (546,494 | ) |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | | | | | | | | | | | |
| Depreciation and amortization | — |
| | 1,525 |
| | 100,580 |
| | — |
| | — |
| | 102,105 |
|
| Amortization of debt issuance costs/discounts | — |
| | 9,351 |
| | — |
| | 190 |
| | — |
| | 9,541 |
|
| Provision for doubtful accounts | — |
| | — |
| | 4,501 |
| | — |
| | — |
| | 4,501 |
|
| Gain on sale of assets or stations | — |
| | — |
| | 2,856 |
| | — |
| | — |
| | 2,856 |
|
| Impairment of intangible assets and goodwill | — |
| | — |
| | 565,584 |
| | — |
| | — |
| | 565,584 |
|
| Impairment charges - equity interest in Pulser Media Inc. | — |
| | — |
| | 19,364 |
| | — |
| | — |
| | 19,364 |
|
| Deferred income taxes | (3,494 | ) | | (77,584 | ) | | 33,716 |
| | (900 | ) | | — |
| | (48,262 | ) |
| Stock-based compensation expense | — |
| | 21,033 |
| | — |
| | — |
| | — |
| | 21,033 |
|
| Gain on early extinguishment of debt | — |
| | (13,222 | ) | | — |
| | — |
| | — |
| | (13,222 | ) |
| Earnings from consolidated subsidiaries | 541,253 |
| | 424,877 |
| | 1,349 |
| | — |
| | (967,479 | ) | | — |
|
| Changes in assets and liabilities | — |
| | 306,482 |
| | (343,115 | ) | | 2,059 |
| | — |
| | (34,574 | ) |
| Net cash (used in) provided by operating activities | (8,735 | ) | | 131,209 |
| | (40,042 | ) | | — |
| | — |
| | 82,432 |
|
| Cash flows from investing activities: | | | | | | | | | | |
|
|
| Restricted cash | — |
| | 2,074 |
| | — |
| | — |
| | — |
| | 2,074 |
|
| Capital expenditures | — |
| | (2,557 | ) | | (16,679 | ) | | — |
| | — |
| | (19,236 | ) |
| Proceeds from exchange of assets or stations | — |
| | — |
| | 9,201 |
| | — |
| | — |
| | 9,201 |
|
| Net cash used in investing activities | — |
| | (483 | ) | | (7,478 | ) | | — |
| | — |
| | (7,961 | ) |
| Cash flows from financing activities: | | | | | | | | | | |
|
|
| Intercompany transactions, net | 8,727 |
| | (56,244 | ) | | 47,517 |
| | — |
| | — |
| | — |
|
| Repayment of borrowings under term loans and revolving credit facilities | — |
| | (50,000 | ) | | — |
| | — |
| | — |
| | (50,000 | ) |
| Tax withholding payments on behalf of employees | — |
| | (93 | ) | | — |
| | — |
| | — |
| | (93 | ) |
| Proceeds from exercise of warrants | 8 |
| | — |
| | — |
| | — |
| | — |
| | 8 |
|
| Net cash provided by (used in) financing activities | 8,735 |
| | (106,337 | ) | | 47,517 |
| | — |
| | — |
| | (50,085 | ) |
| Increase (decrease) in cash and cash equivalents | — |
| | 24,389 |
| | (3 | ) | | — |
| | — |
| | 24,386 |
|
| Cash and cash equivalents at beginning of period | — |
| | 7,268 |
| | 3 |
| | — |
| | — |
| | 7,271 |
|
| Cash and cash equivalents at end of period | $ | — |
| | $ | 31,657 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 31,657 |
|
18. Condensed Combined Debtor-In-Possession Financial Information
The financial statements below represent the condensed combined financial statements of the Debtors. Effective January 1, 2017, the Company’s Non-Filing Entities, which are comprised of the Company's FCC license holding entities, are accounted for as non-consolidated subsidiaries in these financial statements and, as such, their net loss is included as “Equity in earnings of non-filing entities, net of tax” in the Debtors’ Statement of Operations and their net assets are included as “Investment in non-filing entities” in the Debtors’ Statement of Financial Position.
Intercompany transactions among the Debtors have been eliminated in the financial statements contained herein. Intercompany transactions among the Debtors and the Non-Filing Entities have not been eliminated in the Debtors’ financial statements.
Debtors' Balance Sheet
(Dollars in thousands, expect for share data)
|
| | | |
| | As of December 31, 2017 |
| Assets | |
| Current assets: | |
| Cash and cash equivalents | $ | 102,891 |
|
| Restricted cash | 8,999 |
| Accounts receivable, less allowance for doubtful accounts of $4,322 | 235,247 |
| Trade receivable | 4,224 |
| Prepaid expenses and other current assets | 42,259 |
| Total current assets | 393,620 |
|
| Property and equipment, net | 191,604 |
| Other intangible assets, net | 82,994 |
| Goodwill | 135,214 |
| Investment in non-filing entities | 1,203,809 |
| Other assets | 20,078 |
| Total assets | $ | 2,027,319 |
|
| Liabilities and Stockholders’ Deficit | |
| Current liabilities: | |
| Accounts payable and accrued expenses | $ | 36,157 |
|
| Total current liabilities not subject to compromise | 36,157 |
|
| Other liabilities | 54 |
| Total liabilities not subject to compromise | 36,211 |
|
| Liabilities subject to compromise | 2,687,223 |
| Total liabilities | 2,723,434 |
|
| Stockholders’ deficit: | |
| Class A common stock, par value $0.01 per share; 93,750,000 shares authorized; 32,031,952 shares issued, and 29,225,765 shares outstanding | 320 |
| Class C common stock, par value $0.01 per share; 80,609 shares authorized, issued and outstanding | 1 |
| Treasury stock, at cost, 2,806,187 shares | (229,310) |
| Additional paid-in-capital | 1,626,428 |
| Accumulated deficit | (2,093,554) |
| Total stockholders’ deficit | (696,115 | ) |
| Total liabilities and stockholders’ deficit | $ | 2,027,319 |
|
Debtors' Statement of Operations
(Dollars in thousands)
|
| | | |
| | Twelve Months Ended December 31, 2017 |
| Net revenue | $ | 1,135,662 |
|
| Operating expenses: | |
| Content costs | 402,978 |
| Selling, general & administrative expenses | 475,116 |
| Depreciation and amortization | 62,239 |
| LMA fees | 10,884 |
| Corporate expenses (including stock-based compensation expense of $1,614) | 59,062 |
| Gain on sale of assets or stations | (2,499) |
| Total operating expenses | 1,007,780 |
|
| Operating income | 127,882 |
|
| Non-operating expense: | |
| Reorganization items, net | (31,603) |
| Interest expense | (126,816) |
| Loss on early extinguishment of debt | (1,063) |
| Other expense, net | (363) |
| Total non-operating expense, net | (159,845 | ) |
| Loss before income taxes | (31,963) |
|
| Income tax benefit | 66,288 |
| Equity in earnings of non-filing entities | (240,890) |
| Net income | $ | (206,565 | ) |
Debtors' Statement of Cash Flows
(Dollars in thousands)
|
| | | |
| | Twelve Months Ended December 31, 2017 |
| Cash flows from operating activities: | |
| Net loss | $ | (206,565 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | |
| Depreciation and amortization | 62,239 |
| Amortization of debt issuance costs/discounts | 9,394 |
| Provision for doubtful accounts | 5,807 |
| Gain on sale of assets or stations | (2,499) |
| Non-cash reorganization items | 25,921 |
| Deferred income taxes | (70,788) |
| Stock-based compensation expense | 1,614 |
| Loss on early extinguishment of debt | 1,063 |
| Equity in earnings of non-filing entities | 240,890 |
| Changes in assets and liabilities (excluding acquisitions and dispositions): | 19,520 |
| Net cash provided by operating activities | 86,596 |
|
| Cash flows from investing activities: | |
| Proceeds from sale of assets or stations | 6,090 |
| Restricted cash | (974) |
| Capital expenditures | (31,932) |
| Net cash used in investing activities | (26,816 | ) |
| Cash flows from financing activities: | |
| Repayment of borrowings under term loans and revolving credit facilities | (81,652) |
| Adequate protection payments on term loan | (6,405) |
| Deferred financing costs | (91) |
| Net cash used in financing activities | (88,148 | ) |
| Decrease in cash and cash equivalents | (28,368) |
| Cash and cash equivalents at beginning of period | 131,259 |
| Cash and cash equivalents at end of period | $ | 102,891 |
|
19. Segment Data
The Company operates in two reportable segments, for which there is discrete financial information available and whose operating results are reviewed by the chief operating decision maker, the Radio Station Group and Westwood One. Radio Station Group revenue is derived primarily from the sale of broadcasting time to local, regional, and national advertisers. Westwood One revenue is generated primarily through network advertising. Corporate includes overall executive, administrative and support functions for both of the Company's reportable segments, including programming, finance, legal, human resources and information technology functions.
The Company presents segment adjusted EBITDA ("Adjusted EBITDA") as this is the financial metric by which management and the chief operating decision maker allocate resources of the Company and analyze the performance of the Company’s reportable segments. Management also uses this measure to determine the contribution of the Company's core operations to the funding of its corporate resources utilized to manage operations and non-operating expenses including debt service and acquisitions. In addition, Adjusted EBITDA, excluding the impact of local marketing agreement fees, is a key metric for purposes of calculating and determining compliance with certain covenants contained in the Company's Credit Agreement.
The Company excludes from Adjusted EBITDA items not related to core operations and those that are non-cash including: depreciation, amortization, stock-based compensation expense, gain or loss on the exchange or sale of any assets or stations, early extinguishment of debt, local marketing agreement fees, expenses relating to acquisitions, restructuring costs, reorganization items and non-cash impairments of assets.
Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss), 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. In addition, Adjusted EBITDA may be defined or calculated differently by other companies, and comparability may be limited.
The Company’s financial data by segment is presented in the tables below:
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2017 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Net revenue | | $ | 786,963 |
| | $ | 346,165 |
| | $ | 2,534 |
| | $ | 1,135,662 |
|
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2016 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Net revenue | | $ | 802,396 |
| | $ | 336,610 |
| | $ | 2,394 |
| | $ | 1,141,400 |
|
|
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2015 |
| | | Radio Station Group | | Westwood One | | Corporate and Other | | Consolidated |
| Net revenue | | $ | 796,383 |
| | $ | 368,968 |
| | $ | 3,328 |
| | $ | 1,168,679 |
|
|
| | | | | | | | | | | |
| | Year Ended
December 31, |
| | 2017 | | 2016 | | 2015 |
| Adjusted EBITDA by segment | | | | | |
| Radio Station Group | $ | 204,588 |
| | $ | 218,192 |
| | $ | 241,673 |
|
| Westwood One | 51,034 |
| | 22,984 |
| | $ | 52,958 |
|
| Segment Adjusted EBITDA | 255,622 |
| | 241,176 |
| | 294,631 |
|
| Adjustments | | | | | |
| Corporate and other | (37,871 | ) | | (35,309 | ) | | $ | (35,486 | ) |
| Income tax benefit | 163,726 |
| | 26,154 |
| | 45,840 |
|
| Non-operating expense, including net interest expense | (127,179 | ) | | (136,102 | ) | | (127,041 | ) |
| LMA fees | (10,884 | ) | | (12,824 | ) | | (10,129 | ) |
| Depreciation and amortization | (62,239 | ) | | (87,267 | ) | | (102,105 | ) |
| Stock-based compensation expense | (1,614 | ) | | (2,948 | ) | | (21,035 | ) |
| Gain (loss) on sale of assets or stations | 2,499 |
| | 95,695 |
| | (2,856 | ) |
| Reorganization items, net | (31,603 | ) | | — |
| | — |
|
| Impairment of intangible assets | (335,909 | ) | | (604,965 | ) | | (565,580 | ) |
| Impairment charges - equity interest in Pulser Media, Inc. | — |
| | — |
| | (19,364 | ) |
| Acquisition-related and restructuring costs | (19,492 | ) | | (1,817 | ) | | (16,641 | ) |
| Franchise and state taxes | (558 | ) | | (530 | ) | | 50 |
|
| (Loss) gain on early extinguishment of debt | (1,063 | ) | | 8,017 |
| | 13,222 |
|
| Consolidated net loss | $ | (206,565 | ) | | $ | (510,720 | ) | | $ | (546,494 | ) |
SCHEDULE II
CUMULUS MEDIA INC.
FINANCIAL STATEMENT SCHEDULE
VALUATION AND QUALIFYING ACCOUNTS
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Fiscal Year
(Dollars in thousands) | | Balance at
Beginning
of Period | | Charged to Costs and Expenses | | Additions/(Deductions) | | Balance
at End
of Period |
| Allowance for doubtful accounts | | | | | | | | |
| December 31, 2023 | | $ | 5,936 | | | $ | 3,164 | | | $ | (3,117) | | | $ | 5,983 | |
| December 31, 2022 | | $ | 5,816 | | | $ | 3,411 | | | $ | (3,291) | | | $ | 5,936 | |
| Valuation allowance on deferred taxes | | | | | | | | |
| December 31, 2023 | | $ | — | | | $ | 40,946 | | | $ | — | | | $ | 40,946 | |
| December 31, 2022 | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
|
| | | | | | | | | | | | | | | | |
| Fiscal Year | | Balance at Beginning of Year | | Charged to Costs and Expenses | | Deductions | | Balance at End of Year |
| Allowance for doubtful accounts | | | | | | | | |
| 2017 | | $ | 4,691 |
| | $ | 5,808 |
| | $ | (6,177 | ) | | $ | 4,322 |
|
| 2016 | | $ | 4,923 |
| | $ | 1,103 |
| | $ | (1,335 | ) | | $ | 4,691 |
|
| 2015 | | $ | 6,004 |
| | $ | 4,501 |
| | $ | (5,582 | ) | | $ | 4,923 |
|
| Valuation allowance on deferred taxes | | | | | | | | |
| 2017 | | $ | 17,205 |
| | $ | 58,255 |
| | $ | — |
| | $ | 75,460 |
|
| 2016 | | $ | 17,173 |
| | $ | 32 |
| | $ | — |
| | $ | 17,205 |
|
| 2015 | | $ | 18,991 |
| | $ | 517 |
| | $ | (2,335 | ) | | $ | 17,173 |
|
