UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, ~~2010.~~2011.


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.


		For or the transition period fromto

Commission file number 000-24525

CUMULUS MEDIA INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)		36-4159663 (I.R.S. Employer Identification No.)

3280 Peachtree Road, NW Suite 2300, Atlanta, GA (Address of Principal Executive Offices)		30305 (ZIP Code)

(404) 949-0700
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange ~~Act. (Check one):~~Act:


Large accelerated filero	Accelerated filero	Non-accelerated filero	~~Smaller reporting company~~þ
		(Do not check if a smaller reporting company)	Smaller reporting companyþ

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

As of April ~~27, 2010,~~28, 2011, the registrant had ~~42,011,608~~42,522,379 outstanding shares of common stock consisting of (i) ~~35,557,546~~36,068,317 shares of Class A ~~Common Stock;~~common stock; (ii) 5,809,191 shares of Class B ~~Common Stock;~~common stock; and (iii) 644,871 shares of Class C ~~Common Stock.~~common stock.

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for share and per share data)

(Unaudited)


	March 31,			December 31,			March 31,			December 31,
	2010			2009			2011			2010

Assets
Current assets:
Cash and cash equivalents	$	14,950		$	16,224		$	2,435		$	12,814
Restricted cash		629			789			604			604
Accounts receivable, less allowance for doubtful accounts of $1,097 and $1,166, in 2010 and 2009, respectively		31,538			37,504
Accounts receivable, less allowance for doubtful accounts of $1,052 and $1,115 in 2011 and 2010, respectively								33,377			38,267
Trade receivable		4,970			5,488			2,977			3,605
Prepaid expenses and other current assets		5,100			4,709			4,996			4,403

Total current assets		57,187			64,714			44,389			59,693
Property and equipment, net		44,655			46,981			38,927			39,684
Intangible assets, net		161,723			161,380			171,214			160,970
Goodwill		56,121			56,121			60,422			56,079
Other assets		3,397			4,868			3,924			3,210

Total assets	$	323,083		$	334,064		$	318,876		$	319,636

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued expenses	$	16,722		$	13,635		$	22,929		$	20,365
Trade payable		4,952			5,534			3,094			3,569
Derivative instrument		13,726			—			—			3,683
Current portion of long-term debt		54,196			49,026			5,982			15,165

Total current liabilities		89,596			68,195			32,005			42,782
Long-term debt		566,725			584,482			567,287			575,843
Other liabilities		17,804			32,598			17,223			17,590
Deferred income taxes		21,287			21,301			26,764			24,730

Total liabilities		695,412			706,576			643,279			660,945

Stockholders’ Deficit:
Preferred stock, 20,262,000 shares authorized, par value $0.01 per share, including: 250,000 shares designated as 13 3/4% Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009, shares designated at stated value $1,000 per share; 0 shares issued and outstanding in both 2010 and 2009 and 12,000 12% Series B Cumulative Preferred Stock, stated value $10,000 per share; 0 shares issued and outstanding in both 2010 and 2009		—			—
Class A common stock, par value $0.01 per share; 200,000,000 shares authorized; 59,572,592 shares issued, 35,557,546 and 35,162,511 shares outstanding in 2010 and 2009, respectively		596			596
Class B common stock, par value $.01 per share; 20,000,000 shares authorized; 5,809,191 shares issued and outstanding in both 2009 and 2008		58			58
Class C common stock, par value $.01 per share; 30,000,000 shares authorized; 644,871 shares issued and outstanding in both 2009 and 2008		6			6
Treasury stock, at cost, 24,015,046 and 24,410,081 shares in 2009 and 2008, respectively		(256,639	)		(261,382	)
Preferred stock, 20,262,000 shares authorized, par value $0.01 per share, including: 250,000 shares designated as 13 3/4% Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009, stated value $1,000 per share; 0 shares issued and outstanding in both 2011 and 2010; and 12,000 shares designated as 12% Series B Cumulative Preferred Stock, stated value $10,000 per share; 0 shares issued and outstanding in both 2011 and 2010								—			—
Class A common stock, par value $0.01 per share; 200,000,000 shares authorized; 59,572,592 and 59,599,857 shares issued, and 36,068,317 and 35,538,530 shares outstanding, in 2011 and 2010, respectively								596			596
Class B common stock, par value $0.01 per share; 20,000,000 shares authorized; 5,809,191 shares issued and outstanding in both 2011 and 2010								58			58
Class C common stock, par value $0.01 per share; 30,000,000 shares authorized; 644,871 shares issued and outstanding in both 2011 and 2010								6			6
Treasury stock, at cost, 23,531,540 and 24,061,327 shares in 2011 and 2010, respectively								(251,360	)		(256,792	)
Additional paid-in-capital		962,529			966,945			959,512			964,156
Accumulated deficit		(1,078,879	)		(1,078,735	)		(1,033,215	)		(1,049,333	)

Total stockholders’ deficit		(372,329	)		(372,512	)		(324,403	)		(341,309	)

Total liabilities and stockholders’ deficit	$	323,083		$	334,064		$	318,876		$	319,636

CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except for share and per share data)

(Unaudited)

Three Months Ended March 31,
2010 2009

Broadcast revenues $ 55,358 $ 54,353
Management fee from affiliate 1,000 1,000

Net revenues 56,358 55,353
Operating expenses:
Station operating expenses (excluding depreciation, amortization, and LMA fees) 39,926 42,298
Depreciation and amortization 2,517 2,898
LMA fees 529 469
Corporate general and administrative (including non-cash stock compensation of $(101) and $592, in 2010 and 2009, respectively) 4,066 6,108
Realized loss on derivative instrument 584 —

Total operating expenses 47,622 51,773

Operating income 8,736 3,580

Non-operating income (expense):
Interest expense (8,831 ) (7,783 )
Interest income 2 46
Other (expense) income, net (53 ) 3

Total non-operating expense, net (8,882 ) (7,734 )

Loss before income taxes (146 ) (4,154 )
Income tax benefit 2 858

Net loss $ (144 ) $ (3,296 )

Basic and diluted loss per common share:

Basic loss per common share (See Note 8, “Earnings Per Share) $ (0.01 ) $ (0.08 )

Diluted loss per common share (See Note 8, “Earnings Per Share) $ (0.01 ) $ (0.08 )

Weighted average basic common shares outstanding (See Note 8, “Earnings Per Share”) 40,455,933 40,420,814

Weighted average diluted common shares outstanding (See Note 8, “Earnings Per Share”) 40,455,933 40,420,814


	Three Months Ended
	March 31,
	2011			2010

Broadcast revenues	$	56,733		$	55,358
Management fees		1,125			1,000

Net revenues		57,858			56,358
Operating expenses:
Station operating expenses (excluding depreciation, amortization and LMA fees)		37,555			39,926
Depreciation and amortization		2,123			2,517
LMA fees		581			529
Corporate general and administrative expenses (including non-cash stock compensation of $589 and $(101) in 2011 and 2010, respectively)		8,129			4,066
Gain on exchange of assets or stations		(15,158	)		—
Realized loss on derivative instrument		40			584

Total operating expenses		33,270			47,622

Operating income		24,588			8,736

Non-operating (expense) income:
Interest expense		(6,320	)		(8,831	)
Interest income		2			2
Other expense, net		(2	)		(53	)

Total non-operating expense, net		(6,320	)		(8,882	)

Income (loss) before income taxes		18,268			(146	)
Income tax (expense) benefit		(2,149	)		2

Net income (loss)	$	16,119		$	(144	)

Basic and diluted income (loss) per common share (see Note 8, “Earnings Per Share”):
Basic income (loss) per common share	$	0.38		$	(0.01	)

Diluted income (loss) per common share	$	0.37		$	(0.01	)

Weighted average basic common shares outstanding		40,572,264			40,455,933

Weighted average diluted common shares outstanding		41,679,773			40,455,933

See accompanying notes to unaudited condensed consolidated financial statements.

CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2010			2009			2011			2010

Cash flows from operating activities:
Net loss	$	(144	)	$	(3,296	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net income (loss)							$	16,119		$	(144	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		2,517			2,898			2,123			2,517
Amortization of debt issuance costs/discounts		305			109			337			305
Amortization of derivative gain		—			(828	)
Provision for doubtful accounts		364			657			223			364
Loss (gain) on sale of assets or stations		53			(3	)
Loss on sale of assets or stations								2			53
Gain on exchange of assets or stations								(15,158	)		—
Fair value adjustment of derivative instruments		(1,329	)		1,001			(3,643	)		(1,329	)
Deferred income taxes		(14	)		(852	)		2,034			(14	)
Non-cash stock compensation		(101	)		592			589			(101	)
Changes in assets and liabilities:
Restricted cash		160			(189	)		—			160
Accounts receivable		8,192			13,805			4,667			8,192
Trade receivable		(2,072	)		(3,916	)		628			(2,072	)
Prepaid expenses and other current assets		(391	)		(406	)		(593	)		(391	)
Other assets								184			1,246
Accounts payable and accrued expenses		498			(6,043	)		3,396			498
Trade payable		2,008			3,458			(475	)		2,008
Other assets		1,246			(307	)
Other liabilities		803			(48	)		(407	)		803

Net cash provided by operating activities		12,095			6,632			10,026			12,095
Cash flows from investing activities:
Proceeds from sale of assets or radio stations		196			6
Capital expenditures								(502	)		(431	)
Purchase of intangible assets		(216	)		(38	)		(309	)		(216	)
Capital expenditures		(431	)		(777	)
Acquisition costs								(975	)		—
Proceeds from sale of assets or stations								—			196

Net cash used in investing activities		(451	)		(809	)		(1,786	)		(451	)
Cash flows from financing activities:
Repayments of borrowings from bank credit facility		(12,804	)		(13,756	)		(17,986	)		(12,804	)
Tax withholding paid on behalf of employees		(114	)		—			(633	)		(144	)
Payments for repurchase of common stock		—			(193	)

Net cash used in financing activities		(12,918	)		(13,949	)		(18,619	)		(12,918	)
Decrease in cash and cash equivalents		(1,274	)		(8,126	)		(10,379	)		(1,274	)
Cash and cash equivalents at beginning of period		16,224			53,003			12,814			16,224

Cash and cash equivalents at end of period	$	14,950		$	44,877		$	2,435		$	14,950

Supplemental disclosures of cash flow information:
Interest paid	$	6,767		$	6,958		$	9,798		$	10,527
Income taxes paid		213			—			—			213
Trade revenue		3,813			2,306			3,373			3,813
Trade expense		3,741			2,302			3,421			3,741

CUMULUS MEDIA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Interim Financial Data, ~~and~~ Basis of ~~Presentation~~Presentation:

Interim Financial Data

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of Cumulus Media Inc. ~~(“Company”~~(the “Company”) and the notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2009.~~2010. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments necessary for a fair statement of results of the interim periods have been made and such adjustments were of a normal and recurring nature. The results of operations and cash flows for the three months ended March 31, ~~2010~~2011 are not necessarily indicative of the results of operations or cash flows that can be expected for any other interim period or for the ~~entire~~ fiscal year ending December 31, ~~2010.~~2011.

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 disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to bad debts, intangible assets, derivative financial instruments, income taxes, stock-based compensation, ~~and~~ contingencies and litigation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

~~Liquidity Considerations~~

On June 29, 2009, the Company entered into an amendment to the credit agreement governing its senior secured credit facility. The credit agreement, as amended, is referred to herein as the “Credit Agreement”. The Credit Agreement maintained the preexisting term loan facility of $750.0 million, which, as of March 31, 2010, had an outstanding balance of approximately $624.1 million, and reduced the preexisting revolving credit facility from $100.0 million to $20.0 million. Additional facilities are no longer permitted under the Credit Agreement. See Note 6, “Long-Term Debt” for further discussion of the Credit Agreement.

Management believes that the Company will continue to be in compliance with all of its debt covenants through at least March 31, 2011, based upon actions the Company has already taken, which include: (i) the amendment to the Credit Agreement, the purpose of which was to provide certain covenant relief in 2009 and 2010 (see Note 6, “Long-Term Debt”), (ii) employee reductions of 16.5% in 2009, (iii) the sales initiative implemented during the first quarter of 2009, which management believes has contributed to increased advertising revenues by virtue of re-engineering the Company’s sales techniques through enhanced training of its sales force, and (iv) continued scrutiny of all operating expenses. However, the Company will continue to monitor its revenues and cost structure closely and if revenues do not meet or exceed expected growth or if the Company exceeds planned spending, the Company may take further actions as needed in an attempt to maintain compliance with its debt covenants under the Credit Agreement. The actions may include the implementation of additional operational efficiencies, additional cost reductions, renegotiation of major vendor contracts, deferral of capital expenditures, and sales of non-strategic assets.

Pursuant to the amended Credit Agreement, the Company’s total leverage ratio and fixed charge coverage ratio covenants for the fiscal quarters ending June 30, 2009 through and including December 31, 2010 (the “Covenant Suspension Period”) have been suspended. During the Covenant Suspension Period, the Company’s loan covenants require the Company to: (1) maintain a minimum trailing twelve month consolidated EBITDA (as defined in the Credit Agreement) of $60.0 million for fiscal quarters through March 31, 2010, increasing incrementally to $66.0 million for fiscal quarter ended December 31, 2010, subject to certain adjustments; and (2)

maintain minimum cash on hand (defined as unencumbered consolidated cash and cash equivalents) of at least $7.5 million. For the fiscal quarter ending March 31, 2011 (the first quarter after the Covenant Suspension Period), the total leverage ratio covenant will be 6.50:1 and the fixed charge coverage ratio covenant will be 1.20:1. At March 31, 2010, the Company’s total leverage ratio was 8.00:1 and the fixed charge coverage ratio was 1.63:1. In order to comply with the leverage ratio covenant at March 31, 2011, the Company estimates that it will be required to reduce a significant amount of debt by March 31, 2011. See Note 6, “Long-Term Debt” for further discussion. The Company plans to fund these debt payments from cash flows generated from operations.

If the Company is unable to comply with its debt covenants, the Company would need to obtain a waiver or amendment to the Credit Agreement and no assurances can be given that the Company will be able to do so. If the Company were unable to obtain a waiver or an amendment to the Credit Agreement in the event of a debt covenant violation, the Company would be in default under the Credit Agreement, which could have a material adverse impact on the Company’s financial position.

If the Company were unable to repay its debts when due, the lenders under the credit facilities could proceed against the collateral granted to them to secure that indebtedness. The Company has pledged substantially all of its assets as collateral under the Credit Agreement. If the lenders accelerate the maturity of outstanding debt, the Company may be forced to liquidate certain assets to repay all or part of the senior secured credit facilities, and the Company cannot be assured that sufficient assets will remain after it has paid all of its debt. The ability to liquidate assets is affected by the regulatory restrictions associated with radio stations, including FCC licensing, which may make the market for these assets less liquid and increase the chances that these assets will be liquidated at a significant loss.

Recent Accounting Pronouncements

ASU 2010-28.In December ~~2009,~~2010, the Financial Accounting Standards Board (“FASB”) ~~issued~~ provided additional guidance for performing Step 1 of the test for goodwill impairment when an entity has reporting units with zero or negative carrying values. This Accounting Standards Update (“ASU”) updates Accounting Standards Codification (“ASC”) 350,Intangibles — Goodwill and Other, to amend the criteria for performing Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires performing Step 2 if qualitative factors indicate that it is more likely than not that a goodwill impairment exists. The Company adopted this guidance effective on January 1, 2011. The update did not have a material impact on the Company’s consolidated financial statements.

ASU ~~No. 2009-17,~~~~Consolidations (Topic 810) — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities~~2010-29.~~(“ASU No. 2009-17”) which amends~~In December 2010, the FASB ~~ASC for the issuance of FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R),~~ issued by the FASB in June 2009. The amendments in this ASU replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity (“VIE”) with an approach primarily focused on identifying which reporting entity has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (1) the obligation to absorb the lossesclarification of the ~~entity or (2)~~accounting guidance related to disclosure of pro forma information for business combinations that occur in the ~~right~~current reporting period. The guidance requires companies to ~~receive~~present pro forma information in their comparative financial statements as if the ~~benefits from~~acquisition date for any business combinations taking place in the ~~entity. ASU No. 2009-17 also requires additional disclosure about a~~current reporting ~~entity’s involvement in a VIE, as well as any significant changes in risk exposure due to that involvement. ASU No. 2009-17 is~~period had occurred at the beginning of the prior year reporting period. The Company adopted this guidance effective ~~for annual and interim periods beginning after November 15, 2009.~~January 1, 2011. The ~~adoption of ASU No. 2009-07 required the Company to make additional disclosures but~~guidance did not have a material impact on the Company’s financial ~~position, results of operations and cash flows. See Note 11, “Variable Interest Entities”, for further discussion.~~

~~ASU 2010-06.~~The FASB issued ASU No. 2010-06 which provides improvements to disclosure requirements related to fair value measurements. New disclosures are required for significant transfers in and out of Level 1 and Level 2 fair value measurements, disaggregation regarding classes of assets and liabilities, valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3. These disclosures are effective for the interim and annual reporting periods beginning after December 15, 2009. Additional new disclosures regarding the purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements are effective for fiscal years beginning after December 15, 2010 beginning with the first interim period. The Company adopted the portions of this update which became effective January 1, 2010, for our financial statements as of that date. See Note 4, “Fair Value Measurements”.

~~ASU 2010-09.~~The FASB issued ASU No. 2010-09 which provides amendments to certain recognition and disclosure requirements. Previous guidance required that an entity that is an SEC filer be required to disclose the date through which subsequent events have been evaluated. This update amends the requirement of the date disclosure to alleviate potential conflicts between ASC 855-10 and the SEC’s requirements.statements.

2. Acquisitions and Dispositions

2011 Acquisitions

Ann Arbor, Battle Creek and Canton Asset Exchange

On February 18, 2011, the Company completed an asset exchange with Clear Channel Communications, Inc. (“Clear Channel”). As part of the asset exchange, the Company acquired eight of Clear Channel’s radio stations located in Ann Arbor and Battle Creek, Michigan in exchange for the Company’s radio station in Canton, Ohio. The Company disposed of two of the Battle Creek stations simultaneously with the closing of the transaction to comply with the Federal Communications Commission’s (“FCC”) broadcast ownership limits; WBCK-AM was placed in a trust for the sale of the station to an unrelated third party and WBFN-AM was donated to Family Life Broadcasting System. The transaction was accounted for as a business combination in accordance with FASB’s guidance. The fair value of the assets acquired in the exchange was $17.4 million (refer to the table below for the preliminary purchase price allocation). The Company incurred approximately $0.2 million in acquisition costs related to this transaction and expensed them

as incurred through earnings within corporate general and administrative expense. The $4.3 million of goodwill identified in the preliminary purchase price allocation below is deductible for tax purposes. The results of operations for the Ann Arbor and Battle Creek stations acquired, which were not material, have been included in the Company’s statements of operations since 2007 when the Company entered into an LMA with Clear Channel to manage the stations. Prior to the asset exchange, the Company did not have any preexisting relationship with Clear Channel with regard to the Canton market.

In conjunction with the transactions, the Company recorded a net gain of $15.2 million, which is included in gain on exchange of assets or stations in the accompanying statements of operations.

The table below summarizes the preliminary purchase price allocation (dollars in thousands):

Allocation Amount

Fixed assets $ 1,790
Broadcast licenses 11,190
Goodwill 4,342
Other intangibles 72

Total purchase price $ 17,394
Less: Carrying value of Canton station (2,236 )

Gain on asset exchange $ 15,158

The preliminary allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). Any such changes may be material. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible and intangible assets, including goodwill. The Company expects to continue to obtain information to assist it in finalizing these preliminary valuations during the measurement period.

Pending Acquisitions

On January 31, 2011, the Company entered into a definitive agreement (the “CMP Acquisition Agreement”) to acquire the remaining 75.0% of the equity interests of Cumulus Media Partners, LLC (“CMP”) that it does not currently own.

In connection with the CMP Acquisition, the Company expects to issue 9,945,714 shares of its common stock to affiliates of Bain Capital Partners LLC (“Bain”), the Blackstone Group L.P. (“Blackstone”) and Thomas H. Lee Partners (“THLee”, and together with Bain and Blackstone, the “CMP Sellers”). In exchange for all of the equity interests in CMP owned by the CMP Sellers, Blackstone will receive approximately 3.3 million shares of the Company’s Class A common stock and, in order to ensure compliance with FCC broadcast ownership rules, Bain and THLee each will receive approximately 3.3 million shares of a new class of the Company’s non-voting common stock. In connection with the CMP Acquisition, it is expected that all of the outstanding warrants to purchase shares of common stock of Radio Holdings will be converted into warrants to acquire 8,267,968 shares of the Company’s non-voting common stock. Stockholders holding shares representing approximately 54.0% of the Company’s outstanding voting power have agreed to vote in favor of the transactions necessary to complete the CMP Acquisition, making the requisite stockholder approval assured.

In addition, on March 9, 2011, the Company entered into an Agreement and Plan of Merger (the “Citadel Merger Agreement”) with Citadel Broadcasting Corporation (“Citadel”), Cumulus Media Holdings Inc., a direct wholly owned subsidiary of the Company (“Holdco”), and Cadet Merger Corporation, an indirect, wholly owned subsidiary of the Company (“Merger Sub”).

common stock will become exercisable for the Citadel Acquisition Consideration, subject to any applicable FCC limitations. Holders of unvested restricted shares of Citadel common stock will be eligible to receive the Citadel Acquisition Consideration for their shares pursuant to the original vesting schedule for such shares. Elections by Citadel stockholders are subject to adjustment such that the maximum number of shares of the Company’s common stock that may be issued in the Citadel Acquisition is 151,485,282 and the maximum amount of cash payable by the Company in the Citadel Acquisition is $1,408,728,600.

Consummation of each of these pending acquisitions is subject to various customary closing conditions. These include, but are not limited to, (i) regulatory approval by the FCC (ii) requisite stockholder approvals, (iii) solely with respect to the completion of the Citadel Acquisition, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and (iv) the absence of any material adverse effect on CMP or Citadel, as the case may be, or the Company. The Company currently anticipates that the CMP Acquisition will be completed in mid-2011 and the Citadel Acquisition will be completed prior to the end of 2011.

The actual timing of each of these pending transactions will depend upon a number of factors, including the various conditions set forth in the respective transaction agreements. There can be no assurance that any of such pending or proposed transactions will be consummated or that, if any of such transactions is consummated, the timing or terms thereof will be as described herein and as presently contemplated.

2010 Acquisitions

The Company did not complete any material acquisitions or dispositions during the ~~quarter~~three months ended March 31, 2010.

During the quarter ended March 31, 2009, the Company completed a swap transaction pursuant to which it exchanged WZBN-FM, Camilla, Georgia, for W250BC, a translator licensed for use in Atlanta, Georgia, owned by Extreme Media Group. The fair value of the assets acquired in exchange for the assets disposed, was accounted for under ASC 805. This transaction was not material to the results of the Company.

3. Derivative Financial Instruments

The ~~Company recognizes all derivatives on the balance sheet at fair value. Changes in fair value~~Company’s derivative financial instruments are ~~recorded in income for any contracts not classified~~ as qualifying hedging instruments. For derivatives qualifying as cash flow hedge instruments, the effective portion of the change in fair value must be recorded through other comprehensive income, a component of stockholders’ equity (deficit).

~~May 2005 Swap~~follows:

In May 2005, the Company entered into a forward-starting LIBOR-based interest rate swap arrangement (the “May 2005 Swap”) to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR. The May 2005 Swap became effective as of March 13, 2006, the end of the term of the Company’s prior swap. The May 2005 Swap expired on March 13, 2009, in accordance with the terms of the original agreement.

The May 2005 Swap changed the variable-rate cash flow exposure on $400.0 million of the Company’s long-term bank borrowings to fixed-rate cash flows. Under the May 2005 Swap the Company received LIBOR-based variable interest rate payments and made fixed interest rate payments, thereby creating fixed-rate long-term debt. The May 2005 Swap was previously accounted for as a qualifying cash flow hedge of the future variable rate interest payments. Starting in June 2006, the May 2005 Swap no longer qualified as a cash flow hedging instrument. Accordingly, the changes in its fair value have since been reflected in the statement of operations instead of accumulated other comprehensive income (“AOCI”). Interest expense for the three months ended March 31, 2010 and 2009 includes income of $0.0 million and $3.0 million, respectively.

The fair value of the May 2005 Swap was determined using observable market based inputs (a “Level 2” measurement). The fair value represents an estimate of the net amount that the Company would pay if the agreement was transferred to another party or cancelled as of the date of the valuation. The May 2005 Swap matured in March of 2009.

May 2005 Option

In May 2005, the Company ~~also~~ entered into an interest rate option agreement (the “May 2005 Option”), that provided Bank of America, N.A. the right to enter into an underlying swap agreement with the Company, ~~on terms substantially identical to the May 2005 Swap,~~ for two years, from March 13, 2009 ~~(the end of the term of the May 2005 Swap)~~ through March 13, 2011.

The May 2005 Option was exercised on March 11, 2009. This instrument has not been highly effective in mitigating the risks in the Company’s cash flows, and therefore the Company has deemed it speculative, and has accounted for changes in the May 2005 Option’s value as a current element of interest expense. The May 2005 Option expired on March 13, 2011 in accordance with the terms of the original agreement. The balance sheets as of March 31, ~~2010~~2011 and December 31, ~~2009~~2010 reflect ~~other short-term~~current liabilities of ~~$13.7~~$0.0 million and ~~other long-term liabilities $15.6~~$3.7 million, respectively, to include the fair value of the May 2005 Option. The Company reported interest income of ~~$1.9~~$3.7 million and ~~interest expense of $4.0~~$1.9 million, inclusive of the fair value adjustment during the three months ended March 31, ~~2010~~2011 and ~~2009,~~2010, respectively.

In the event of a default under the Credit Agreement, or a default under any derivative contract, the derivative counterparties would have the right, although not the obligation, to require immediate settlement of some or all open derivative contracts at their then-current fair value. The Company does not utilize financial instruments for trading or other speculative purposes.

The Company’s financial instrument counterparties are high-quality investments or commercial banks with significant experience with such instruments. The Company manages exposure to counterparty credit risk by requiring specific minimum credit standards and diversification of counterparties. The Company has procedures to monitor the credit exposure amounts. The maximum credit exposure at March 31, 2010 was not significant to the Company.

Green Bay Option

On April 10, 2009 (the “Acquisition Date”), Clear Channel and the Company entered into ~~a local marketing agreement (“LMA”)~~an LMA whereby the Company is responsible for operating (i.e., programming, advertising, etc.) five Green Bay radio stations and must pay Clear Channel a monthly fee of approximately $0.2 million over a five year term (expiring December 31, 2013), in exchange for the Company retaining the operating profits ~~for~~from managing the radio stations. Clear Channel also has a put option (the “Green Bay Option”) that ~~allows them~~would allow it to require the Company to ~~repurchase~~purchase the five Green Bay radio stations at any time during the two-month period commencing July 1,

The ~~balance sheet as of March 31, 2010 includes other long-term liabilities of $6.7 million to reflect~~following table sets forth the location and fair value amounts of derivatives in the ~~Green Bay Option. The fair value~~unaudited condensed consolidated balance sheets:

Information on the Location and Amounts of ~~the Green Bay Option at March 31, 2010 and December 31, 2009, was $6.7 million and $6.1 million, respectively. Accordingly, the Company recorded $0.6 million of expense~~Derivatives Fair Values in ~~realized loss on derivative instruments associated with marking to market~~ the ~~Green Bay Option to reflect the fair value of the option during the three months ended March 31, 2010.~~
Unaudited Condensed Consolidated Balance Sheets (dollars in thousands)

Fair Value
Balance Sheet Location March 31, 2011 December 31, 2010

Derivatives not designated as hedging instruments:
Green Bay Option Other long-term liabilities $ 8,070 $ 8,030
May 2005 Option Other current liabilities — 3,683

Total $ 8,070 $ 11,713

The location and fair value amounts of derivatives in the unaudited condensed consolidated ~~balance sheets~~statements of operations are shown in the following table:

Information on the Location and Amounts of Derivatives Fair Values in the
Unaudited Condensed Consolidated ~~Balance Sheets~~Statements of Operations (dollars in thousands)

Liability Derivatives
Balance Sheet Fair Value
Location March 31, 2010 December 31, 2009

Derivative not designated as hedging instruments:
Green Bay Option Other long-term liabilities $ 6,657 $ 6,073
Interest rate swap — option Other short-term liabilities 13,726 —
Interest rate swap — option Other long-term liabilities — 15,639

Total
$ 20,383 $ 21,712

~~The location and fair value amounts of derivatives in the Unaudited Condensed Consolidated Statement of Operations are shown in the following table:~~

Liability Derivatives
Amount of Income (Expense)
Recognized in Income on Derivatives
Derivative Financial Statement for the Three Months Ended
Instruments Location March 31, 2010 March 31, 2009

Green Bay Option Realized loss on derivative instrument $ (584 ) $ —
Interest rate swap — option Interest income/(expense) 1,913 (4,045 )
Interest rate swap Interest income/(expense) — 3,043

Total
$ 1,329 $ (1,002 )

Amount of Income
(Expense)
Recognized on
Derivatives
for the Three Months
Derivative Instruments Statement of OperationsLocation Ended March 31, 2011

Green Bay Option Realized loss on derivative instrument $ (40 )
May 2005 Option Interest income 3,683

Total
$ 3,643

4. Fair Value Measurements

The three levels of the fair value hierarchy to be applied to financial instruments when determining fair value are described below:

		~~Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access;~~

		Level 2 — Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and

		Level 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.


(1)		~~This balance is invested in an institutional money market fund. The Company’s Level 1 cash equivalents are valued using quoted prices in active markets for identical investments.~~

~~(2)~~		The Company’s derivative financial instruments consist solely of an interest rate cash flow hedge in which the Company pays a fixed rate and receives a variable interest rate. The fair value of the Company’s interest rate swap is determined based on the present value of future cash flows using observable inputs, including interest rates and yield curves. Derivative valuations incorporate adjustments that are necessary to reflect the Company’s own credit risk.

~~(3)~~		The fair value of the Green Bay Option was determined using inputs that are supported by little or no market activity (a Level 3 measurement). The fair value represents an estimate of the net amount that the Company would pay if the option was transferred to another party as of the date of the valuation. The option valuation incorporates a credit risk adjustment to reflect the probability of default by the Company.

To estimate the fair value of the Interest rate swap, the Company used an industry standard cash valuation model, which utilizes a discounted cash flow approach. The significant inputs for the valuation model include the following:


	~~Fixed~~		~~Floating~~
•	~~discount cash flow range of 0.995% – 0.999%;~~	•	~~discount cash flow range of 0.995% – 0.999%;~~

•	~~interest rate of 3.930%; and~~	•	~~interest rate range of 0.23% – 0.85%; and~~

•	~~credit spread of 4.28%.~~	•	~~credit spread of 4.28%.~~

The Company reported ~~$0.6~~$0.0 million for the three months ended March 31, 2011, in realized loss on derivative instruments within the income statement related to the fair value adjustment, representing the change in the fair value of the Green Bay Option.

The reconciliation below contains the components of the change in fair value associated with the Green Bay Option as of March 31, ~~2010~~2011 (dollars in thousands):

The Existing Credit Agreement contains terms and conditions customary for financing arrangements of this nature. The term loan facility will mature on June 11, 2014. The revolving credit facility will mature on June 7, 2012.

~~Borrowings under~~As of March 31, 2011, the ~~term loan facility and revolving credit facility will bear~~ interest ~~at the Company’s option, at a~~ rate equal to LIBOR plus 4.0% or the Alternate Base Rate (defined as the higher of the Bank of America, N.A. Prime Rate and the Federal Funds rate plus 0.50%) plus 3.0%. Once the Company reduces the term loan facility by $25.0 million through mandatory prepayments of Excess Cash Flow (as defined in the Credit Agreement), as described below, the Company will bear interest, at the Company’s option, at a rate equal to LIBOR plus 3.75% or the Alternate Base Rate plus 2.75%. Once the Company reduces the term loan facility by $50.0 million through mandatory prepayments of Excess Cash Flow, as described below, the Company will bear interest, at the Company’s option, at a rate equal to LIBOR plus 3.25% or the Alternate Base Rate plus 2.25%.

In connection with the closing of the Credit Agreement, the Company made a voluntary prepayment in the amount of $32.5 million. The Company also is required to make quarterly mandatory prepayments of 100% of Excess Cash Flow through December 31, 2010 (while maintaining a minimum balance of $7.5 million of cash on hand), before reverting to annual prepayments of a percentage of Excess Cash Flow, depending on the Company’s leverage, beginning in 2011. The Company has included approximately $47.8 million, a component of long term debt, as current, which represents the estimated Excess Cash Flow payments over the next 12 months in accordance with the terms of the Credit Agreement. Certain other mandatory prepayments of the term loan facility will be required upon the occurrence of specified events, including upon the incurrence of certain additional indebtedness and upon the sale of certain assets.

~~Covenants~~

~~The representations, covenants and events of default in the~~outstanding borrowings pursuant to its Existing Credit Agreement ~~are customary for financing transactions of this nature and are substantially the same as those in existence prior to the amendment, except as follows:~~

	•		the total leverage ratio and fixed charge coverage ratio covenants for the fiscal quarters ending June 30, 2009 through and including December 31, 2010 (the “Covenant Suspension Period”) have been suspended;

	•		during the Covenant Suspension Period, the Company must: (1) maintain minimum trailing twelve month consolidated EBITDA (as defined in the Credit Agreement) of $60.0 million for fiscal quarters through March 31, 2010, increasing

			incrementally to $66.0 million for fiscal quarter ended December 31, 2010, subject to certain adjustments; and (2) maintain minimum cash on hand (defined as unencumbered consolidated cash and cash equivalents) of at least $7.5 million;

	•		~~the Company is restricted from incurring additional intercompany debt or making any intercompany investments other than to the parties to the Credit Agreement;~~

	•		the Company may not incur additional indebtedness or liens, or make permitted acquisitions or restricted payments, during the Covenant Suspension Period (after the Covenant Suspension Period, the Credit Agreement will permit indebtedness, liens, permitted acquisitions and restricted payments, subject to certain leverage ratio and liquidity measurements); and

	•		~~the Company must provide monthly unaudited financial statements to the lenders within 30 days after each calendar-month end.~~

was approximately 3.5%.

Events of default in the Existing Credit Agreement include, among others, (a) the failure to pay when due the obligations owing under the credit facilities; (b) the failure to perform (and not timely remedy, if applicable) certain covenants; (c) ~~cross default~~cross-default and ~~cross acceleration;~~cross-acceleration; (d) the occurrence of bankruptcy or insolvency events; (e) certain judgments against the Company or any of the Company’s subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use of or more of, any of the Company’s 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~~change in ~~Control~~control (as defined in the Existing 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 Existing Credit Agreement and the ancillary loan documents as a secured ~~property.~~party.

~~As discussed above,~~For the ~~Company’s covenants for the fiscal~~ quarter ended March 31, ~~2010 were as follows:~~

	•		~~a minimum trailing twelve month consolidated EBITDA of $60.0 million;~~

	•		~~a $7.5 million minimum cash on hand; and~~

	•		~~a limit on annual capital expenditures of $15.0 million annually.~~

~~The trailing twelve month consolidated EBITDA and cash on hand at March 31, 2010 were $78.1 million and $15.0 million, respectively.~~

~~If the Company had been unable to secure the June 2009 amendments to the Credit Agreement, so that~~2011, the total leverage ratio ~~and the fixed charge coverage ratio covenants were still operative, those covenants for the fiscal quarter ended March 31, 2010 would have been as follows:~~

	•		~~a maximum total leverage ratio of 6.50:1; and~~

	•		~~a minimum fixed charge coverage ratio of 1.20:1.~~

~~At March 31, 2010, the total leverage ratio~~covenant requirement was ~~8.00:~~6.5:1 and the fixed charge coverage ratio requirement was ~~1.63:~~1.1:1. For the fiscal quarter ending March 31, 2011 (the first quarter after the Covenant Suspension Period), the total leverage ratio covenant will be 6.50:1 and the fixed charge coverage ratio covenant will be 1.20:1.

~~Warrants~~

Additionally, the Company issued warrants to the lenders with the execution of the amended Credit Agreement that allow them to acquire up to 1.25 million shares of the Company’s Class A Common Stock. Each warrant is immediately exercisable to purchase the Company’s underlying Class A Common Stock at an exercise price of $1.17 per share and has an expiration date of June 29, 2019.

~~Accounting for the Modification of the Credit Agreement~~

The amendment to the Credit Agreement was accounted for as a loan modification and accordingly, the Company did not record a gain or a loss on the transaction. For the revolving credit facility, the Company wrote off approximately $0.2 million of unamortized

deferred financing costs, based on the reduction of capacity. With respect to both debt instruments, the Company recorded $3.0 million of fees paid directly to the creditors as a debt discount which are amortized as an adjustment to interest expense over the remaining term of the debt.

The Company classified the warrants as equity at $0.8 million at fair value at inception. The fair value of the warrants was recorded as a debt discount and is amortized as an adjustment to interest expense over the remaining term of the debt using the effective interest method.

As of March 31, ~~2010, prior~~2011, the Company was in compliance with all of its required covenants.

During the quarter ended March 31, 2011, the Company made an Excess Cash Flow Payment (as defined in the Existing Credit Agreement) under the Existing Credit Agreement in an amount equal to $9.3 million and a principal payment in the amount equal to $7.2 million.

As a part of its refinancing transactions in connection with its pending acquisitions of CMP and Citadel and subsequent to March 31, 2011, the Company entered into Amendment No. 5 to the ~~effect~~Existing Credit Agreement (the “Fifth Amendment”) and completed its offering of $610.0 million aggregate principal amount of 7.75% senior notes due 2019 (the “Notes”) on May 13, 2011. Proceeds from the sale of the ~~May 2005 Swap,~~Notes were used among other things, to repay the ~~effective interest rate of~~$575.8 million outstanding under the ~~outstanding borrowings pursuant to~~term loan facility under the ~~senior secured credit facilities was approximately 4.25%. As of March 31, 2010, the effective interest rate inclusive of the May 2005 Swap was approximately 6.65%~~Existing Credit Agreement (see Note 14, “Subsequent Events”).

7. Stock Based Compensation

During the three months ended March 31, ~~2010,~~2011, the Company ~~awarded~~granted Mr. L. Dickey 160,000 shares of performance vested restricted ~~performance based shares~~Class A common stock and 160,000 shares of time-vested restricted ~~time vested shares.~~Class A common stock. The fair value on the date of grant ~~for~~of both of these awards was ~~$1.0 million.~~$1.6 million, or $4.87 per share. In addition, also during the three months ended March 31, ~~2010~~2011, the Company ~~awarded 120,000 time vested restricted~~granted 170,000 shares of time-vested Class A common stock, with aan aggregate fair value on the date of grant of ~~$0.4~~$0.8 million, or ~~$3.15~~$4.87 per share, to certain officers (other than Mr. L. Dickey) of the Company.

In March 2010, the Compensation Committee of the Board of Directors reviewed the three-year performance criteria established in March 2007 for the 160,000 performance-based shares of restricted stock awarded to Mr. L. Dickey on March 1, 2007. The vesting conditions for those restricted shares required that the Company achieve specified financial performance targets for the three-year period ending December 31, 2009. The specified threshold was not achieved, however, the Compensation Committee determined that in light of the unprecedented adverse developments in the economy in general, and the radio industry in particular, it would be appropriate to modify the performance requirements and extend the vesting period so that Mr. L. Dickey would retain the ability to achieve vesting on those shares of restricted stock if the revised performance criteria is achieved. Effective as of March 1, 2010, the terms of Mr. L. Dickey’s 2007 performance-based restricted stock award of 160,000 shares were amended to provide that those shares would vest in full on March 31, 2013 if the Company achieves specified financial performance targets for the three year period ending December 31, 2012.

For the three months ended March 31, ~~2010,~~2011, the Company ~~recorded a credit to~~recognized approximately $0.6 million in non-cash stock compensation of approximately $0.1 million, of which $0.3 million of the credit is related to the March 2010 modification of the vesting period associated with the performance based restricted share award that was issued in March 2007 to the Company’s Chief Executive Officer, Mr. L. Dickey. In connection with evaluating the accounting treatment for the modification of the restricted shares, the Company identified and recorded an additional $0.3 million credit to stock based compensation expense in the first quarter of 2010 to correct errors occurring in 2008 and 2009. The Company determined that this out-of-period adjustment is not material to the condensed consolidated financial statements for the three month period ended March 31, 2010, forecasted annual results for fiscal 2010 or any prior period financial statements.expense.

8. Earnings per Share (“EPS”)

For all periods presented, the Company has disclosed basic and diluted earnings (loss) per common share utilizing the two-class method. Basic earnings (loss) per common share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. The Company determined that it is appropriate to allocate undistributed net income (loss) between Class A, Class B and Class C ~~Common Stock~~common stock on an equal basis as the Company’s charter provides that the holders of Class A, Class B and Class C ~~Common Stock~~common stock have equal rights and privileges except with respect to voting on certain matters.

Non-vested restricted shares of Class A common stock awarded contain non-forfeitable dividend rights and are therefore considered a participating ~~security.~~security for purposes of calculating earnings (loss) per share. The two-class method of computing earnings (loss) per share is required for companies with participating securities. Under this method, net income (loss) is allocated to common stock and participating securities to the extent that each security may share in earnings, as if all of the earnings for the period had been distributed. The Company has accounted for non-vested restricted stock as a participating security and used the two-class method of computing earnings per share as of January 1, 2009, with retroactive application to all prior periods presented. For the three months ended March 31, 2010 and 2009, the Company was in a net loss position and therefore did not allocate any loss to participating securities. Because the Company does not pay dividends, earnings

Three Months Ended March 31,
2010 2009

Basic Earning Per Share

Numerator:

Undistributed net loss $ (144 ) $ (3,296 )
Participation rights of unvested restricted stock in undistributed earnings (1) — —

Basic undistributed net loss — attributable to common shares $ (144 ) $ (3,296 )

Denominator:

Denominator for basic loss per common share:
Basic weighted average common shares outstanding 40,456 40,421

Basic EPS — attributable to common shares $ (0.01 ) $ (0.08 )

Diluted Earnings Per Share:

Numerator:

Undistributed net loss $ (144 ) $ (3,296 )
Participation rights of unvested restricted stock in undistributed earnings (1) — —

Basic undistributed net loss — attributable to common shares $ (144 ) $ (3,296 )

Denominator:

Basic weighted average shares outstanding 40,456 40,421
Effect of dilutive options (2) — —

Diluted weighted average shares outstanding 40,456 40,421

Diluted EPS — attributable to common shares $ (0.01 ) $ (0.08 )

Three Months Ended March 31,
2011 2010

Basic Earnings (Loss) Per Share

Numerator:

Undistributed net income (loss) $ 16,119 $ (144 )
Participation rights of unvested restricted stock in undistributed earnings 623 —

Basic undistributed net income (loss) — attributable to common shares $ 15,496 $ (144 )

Denominator:

Denominator for basic income (loss) per common share:
Basic weighted average common shares outstanding 40,572 40,456

Basic Earnings (Loss) Per Share — attributable to common shares $ 0.38 $ (0.01 )

Diluted Earnings (Loss) Per Share:

Numerator:

Undistributed net income (loss) $ 16,119 $ (144 )
Participation rights of unvested restricted stock in undistributed earnings 607 —

Basic undistributed net income (loss) — attributable to common shares $ 15,512 $ (144 )

Denominator:

Basic weighted average shares outstanding 40,572 40,456
Effect of dilutive options and warrants (1) 1,108 —

Diluted weighted average shares outstanding 41,680 40,456

Diluted Earnings (Loss) Per Share — attributable to common shares $ 0.37 $ (0.01 )

(1) ~~Unvested restricted~~For the three months ended March 31, 2011, options to purchase 85,092 shares of common stock ~~has no contractual obligation to absorb losses~~were outstanding but excluded from the EPS calculation because the exercise prices of the ~~Company. Therefore,~~options were equal to or exceeded the average share price for the period and, as a result, the inclusion of such options would have been antidilutive. For the three months ended March 31, 2010, options to purchase 873,119 shares of common stock were outstanding but excluded from the EPS calculation because the inclusion of such options would have been antidilutive due to the net loss position. Additionally, for the three months ended March 31, 2010, ~~and 2009, 1,710,099 shares and 1,532,910 shares of restricted stock, respectively, were outstanding but~~the Company excluded from the EPS ~~calculations.~~
~~(2)~~ For the three months ended March 31, 2010 and 2009, options to purchase 925,290 shares and 2,274,895 shares of common stock, respectively, were outstanding but excluded from the EPS calculations because their effect would have been antidilutive. Additionally, the Company excludedcalculation certain warrants ~~from the EPS calculations~~ because including the warrants would ~~be antidilutive.~~have been antidilutive due to the net loss position.
     The Company has issued to key executives and employees shares of restricted stock and options to purchase shares of common stock as part of the Company’s stock incentive plans. At March 31, ~~2010,~~2011, the following restricted stock and stock options to purchase the following classes of common stock were issued and outstanding:

March 31, ~~2010~~2011
Restricted shares of Class A Common Stock ~~1,710,099~~1,789,881
Options to purchase Class A Common Stock ~~925,290~~784,217
9. Commitments and Contingencies
     There are two radio station rating services available to the radio broadcast industry. Traditionally, the Company has utilized Arbitron as its primary source of ratings information for its radio markets, and had a five-year agreement with Arbitron under which it received programming rating materials in a majority of its markets. On November 7, 2008, however, the Company entered into an agreement with Nielsen pursuant to which Nielsen would rate certain of the Company’s radio markets as coverages for such markets until the Arbitron agreement expired in April 2009. The Company forfeited its obligation under the agreement with Arbitron as of December 31, 2008, and Arbitron was paid in accordance with the agreement through April 2009. Nielsen began efforts to roll out its rating service for 51 of the Company’s radio markets in January 2009, and such rollout was completed in 2009.
     The Company engages Katz Media Group, Inc. (“Katz”) as its national advertising sales agent. The national advertising agency contract with Katz contains termination provisions that, if exercised by the Company during the term of the contract, would obligate the Company to pay a termination fee to Katz, calculated based upon a formula set forth in the contract.
16

companies’ dealings with radio stations broadcasting in New York. The Company is cooperating with the Attorney General in this investigation.

In May 2007, the Company received a request for information and documents from the FCC related to the Company’s sponsorship of identification policies and sponsorship identification practices at certain of its radio stations as requested by the FCC. The Company is cooperating with the FCC in this investigation and is in the process of producing documents and other information requested by the FCC. The Company has not yet determined what effect the inquiry will have, if any, on its financial position, results of operations or cash flows.

On December 11, 2008, Qantum Communications (“Qantum”) filed a counterclaim in a foreclosure action the Company initiated in the Okaloosa County, Florida Circuit Court. The Company’s action was designed to collect a debt owed to the Company by Star Broadcasting, Inc. (“Star”), which then owned radio station WTKE-FM in Holt, Florida. In its counterclaim, Qantum alleged that the Company tortiously interfered with Qantum’s contract to acquire radio station WTKE from Star by entering into an agreement to buy WTKE after Star had represented to the Company that its contract with Qantum had been terminated (and that Star was therefore free to enter into the new agreement with the Company). ~~The counterclaim did not specify the damages Qantum was seeking. The Company did not and does not believe that the counterclaim has merit, and, because there was no specification of damages,~~On February 27, 2011, the Company ~~did not believe at~~entered into a settlement agreement with Star. In connection with the ~~time that~~settlement regarding the ~~counterclaim would have~~since-terminated attempt to purchase WTKE, the Company recorded $7.8 million in costs associated with a ~~material adverse effect on~~terminated transaction in the ~~Company’s overall financial condition or results~~consolidated statement of operations ~~even if~~for the ~~court were to determine~~year ended December 31, 2010, that the claim did have merit. In June 2009, the court authorized Qantum to seek punitive damages because it had satisfied the minimal threshold for asserting such a claim. In August 2009, Qantum provided the Company with an expert’s report that estimated that Qantum had allegedly incurred approximately $8.7 millionare payable in ~~compensatory damages. The Company’s liability would be increased if Qantum is able to secure punitive damages as well.~~

The Company continues to believe that Quantum’s counterclaim against the Company has no merit; the Company has denied the allegations and is vigorously defending against the counterclaim. However, if the court were to find that the Company did tortiously interfere with Qantum’s contract and that Quantum is entitled to the compensatory damages estimated by its expert as well as punitive damages, the result could have a material adverse effect on the Company’s overall financial condition or results of operations.2011.

In ~~April 2009,~~March 2011, the Company was named in a patent infringement suit brought against ~~the Company~~it as well as ~~twelve~~ other radio companies, including ~~Clear Channel, Citadel Broadcasting,~~Beasley Broadcast Group, Inc., CBS Radio, Inc., Entercom Communications, ~~Saga Communications, Cox Radio, Univision Communications, Regent Communications, Gap Broadcasting,~~Greater Media, Inc. and ~~Radio One.~~Townsquare Media, LLC. The case, ~~captioned Aldav, LLC~~Mission Abstract Data L.L.C, d/b/a Digimedia v. ~~Clear Channel Communications,~~Beasley Broadcast Group, Inc., ~~et al,~~et. al., Civil Action ~~No. 6:09-cv-170,~~Case No: 1:99-mc-09999, U.S. District Court for the ~~Eastern~~ District of ~~Texas, Tyler Division~~Delaware (filed ~~April 16, 2009)~~March 1, 2011), ~~alleged~~alleges that the defendants are infringing or have infringed plaintiff’s patents entitled “Selection and ~~continue to infringe plaintiff’s patented content replacement technology in the context~~Retrieval of ~~radio station streaming over the Internet, and sought~~Music from a ~~permanent injunction~~Digital Database.” Plaintiff is seeking injunctive relief and unspecified damages. The Company ~~settled~~intends to vigorously defend this ~~suit~~lawsuit and due to the fact that this case is still in ~~March 2010.~~the preliminary stages, has not yet determined what effect the lawsuit will have, if any, on its financial position, results of operations or cash flows.

On ~~January 21, 2010, Brian Mas,~~March 14, 2011, a ~~former employee of Susquehanna Radio Corp., filed a purported~~putative shareholder class action ~~lawsuit~~complaint was filed against Citadel, its board of directors (the “Citadel Board”), and the Company in the District Court of Clark County, Nevada, generally alleging that the Citadel Board breached its fiduciary duties to Citadel stockholders in connection with its approval of the Citadel Acquisition and breached its duty of disclosure to Citadel stockholders by allegedly withholding material information relating to the Citadel Acquisition, and also alleged that Citadel and the Company each aided and abetted the Citadel Board in its alleged breach of its fiduciary duties. The complaint seeks, among other things, an injunction against the consummation of the Citadel Acquisition or rescission of the Citadel Acquisition in the event it is consummated. The Company ~~claiming~~intends to vigorously defend itself against the allegations in the complaint.

On March 23, 2011, a second putative class action complaint was filed in the District Court of Clark County, Nevada, against Citadel, the Citadel Board, the Company, Cumulus Media Holdings Inc., and Merger Sub (Cumulus Media Holdings Inc. and Merger Sub together, the “Merger Entities”). The complaint generally alleges that the Citadel Board breached its fiduciary duties to Citadel shareholders in connection with its approval of the Citadel Acquisition and that Citadel, the Company and the Merger Entities aided and abetted the Citadel Board’s alleged breach of its fiduciary duties. The complaint seeks, among other things, an injunction against the consummation of the Citadel Acquisition, rescission of the Citadel Acquisition in the event it is consummated, and any damages arising from the defendants’ alleged breaches. The Company and the Merger Entities intend to vigorously defend themselves against the allegations in the complaint.

On May 6, 2011, a third putative class action complaint was filed in the Chancery Court of Delaware against Citadel, the Citadel Board, the Company and the Merger Entities. The complaint alleges, among other things, that the members of the Citadel Board breached their fiduciary duties to the Citadel shareholders by their approval of the Citadel Acquisition. The complaint further alleges that the Company and the Merger Entities knowingly aided and abetted the Citadel Board’s breach of fiduciary duties. The complaint seeks, among other things: (i) ~~unlawful failure~~the court’s declaration that the lawsuit is properly maintainable as a class action; (ii) an injunction against the consummation of the Citadel Acquisition; (iii) rescission of the Citadel Acquisition, to ~~pay required overtime wages, (ii) late pay and waiting time penalties, (iii) failure~~the extent certain terms have already been implemented; (iv) that the Citadel Board account to ~~provide accurate itemized wage statements, (iv) failure to indemnity~~the plaintiffs for ~~necessary expenses and losses,~~all damages suffered as a result of the Citadel Board’s alleged wrongdoing; and (v) unfair trade practices under California’s Unfair Competition Act. The plaintiff is requesting restitution, penalties and injunctive relief, and seeks to represent other California employees fulfilling the ~~same job during the immediately preceding four year period.~~award of reasonable attorneys’ fees. The Company isand the Merger Entities intend to vigorously ~~defending~~defend themselves against the allegations in this ~~lawsuit.~~complaint.

The Company is also a defendant from time to time in various other lawsuits, which are generally incidental to its business. The Company is vigorously contesting all such ~~matters~~known lawsuits and believes that their ultimate resolution will not have a material adverse effect on

pursuant to a management agreement, one of the other equity holders has the unilateral right to remove the Company as manager of CMP with 30 ~~days~~days’ notice. ~~As such, the~~The Company concluded that this ability to unilaterally terminate CMP’s management agreement with the Company resulted in a substantive “kick out” right, thereby precluding the Company from being designated as the primary beneficiary with respect to its ~~variable~~ interest in CMP.

As of March 31, ~~2010,~~2011, the Company’s proportionate share of its affiliate losses exceeded the value of its investment in ~~CMP, therefore~~CMP. In addition, the Company has no ~~exposure to loss as a result of its involvement with CMP as its investment has been written down to zero, nor is it under any~~ contractual obligation to fund the losses of CMP. As a result, the Company had no exposure to loss from its investment in CMP. The Company has not provided and does not intend to provide any financial support, guarantees or commitments for or on behalf of CMP. Additionally, the Company’s balance sheet atas of March 31, ~~2010~~2011 does not include any assets or liabilities related to its ~~variable~~ interest in ~~CMP. See~~CMP (see Note 5, “Investment in Affiliate” ~~for further discussion.~~).

On January 31, 2011, the Company entered into the CMP Acquisition Agreement. The Company expects this acquisition to be consummated by the end of the second quarter of 2011 (see Note 2, “Acquisitions and Dispositions”).

12. ~~Subsequent Event~~Intangible Assets and Goodwill

~~On April 7,~~The following tables present the changes in intangible assets and goodwill during the periods ended December 31, 2010 and March 31, 2011 and balances as of such dates (dollars in thousands):

Indefinite Lived Definite Lived Total

Intangible Assets:

Balance as of December 31, 2009 $ 160,801 $ 579 $ 161,380

Acquisition 230 — 230
Amortization — (201 ) (201 )
Impairment (629 ) — (629 )
Reclassifications 16 174 190

Balance as of December 31, 2010 $ 160,418 $ 552 $ 160,970

Acquisition 11,498 72 11,570
Disposition (1,303 ) (14 ) (1,317 )
Amortization — (9 ) (9 )

Balance as of March 31, 2011 $ 170,613 $ 601 $ 171,214

2011 2010

Balance as of January 1:
Goodwill $ 285,820 $ 285,820
Accumulated impairment losses (229,741 ) (229,699 )

Subtotal 56,079 56,121
Goodwill acquired during the year 4,343 —
Balance as of March 31:
Goodwill 290,163 285,820
Accumulated impairment losses (229,741 ) (229,699 )

Total $ 60,422 $ 56,121

The Company has significant intangible assets recorded comprised primarily of broadcast licenses and goodwill acquired through the acquisition of radio stations. Applicable accounting guidance related to goodwill and other intangible assets requires that the carrying value of the Company’s goodwill and certain intangible assets be reviewed at least annually, and more often if certain circumstances are present, for impairment, with any changes charged to results of operations in the periods in which the recorded value of those assets is more than their respective fair market value.

13. Related Party

During the third quarter of 2010, the Company entered into a management agreement with DM Luxury, LLC (“DM Luxury”). DM Luxury is 50.0% owned by Dickey Publishing, Inc. and ~~Crestview Partners, a $4.0 billion private equity firm~~Dickey Media Investments, LLC, each of which is partially owned by Mr. L.

Dickey. Pursuant to the agreement with ~~a strong media focus, announced~~DM Luxury, the ~~formation~~Company provides back office shared services, such as finance, accounting, treasury, internal audit, use of ~~a strategic investment partnership that will seek~~corporate headquarters, legal, human resources, risk management and information technology for an annual management fee equal to ~~invest in radio broadcasting companies that present attractive opportunities for significant long-term capital appreciation.~~the greater of $0.5 million and 5.0% of DM Luxury’s adjusted EBITDA on an annual basis. The Company recorded $0.1 million and $0.0 million of revenues from this agreement during the three months ended March 31, 2011 and 2010, respectively.

14. Subsequent Events

~~Under the terms~~As a part of the ~~partnership, Crestview~~refinancing transactions in connection with the pending acquisitions of CMP and Citadel, on May 13, 2011, the Company completed its offering of $610.0 million of Notes. Proceeds from the sale of the Notes were used, among other things, to repay the $575.8 million outstanding under the term loan facility under the Existing Credit Agreement.

Interest accrues on the Notes at a rate of 7.75% per annum from May 13, 2011, and interest is payable semiannually on each May 1 and November 1, commencing November 1, 2011. Notwithstanding the foregoing, if the Citadel Merger Agreement is terminated without consummation of the Citadel Acquisition or if the Company and Citadel both publicly announce their determination not to proceed with the Citadel Acquisition, then interest on the Notes will ~~lead an investor group that would invest~~accrue at a rate of 8.25% per annum from and after the effective date of such termination or announcement. The Notes mature on May 1, 2019.

The Company may redeem all or part of the Notes at any time on or after May 1, 2015. At any time prior to May 1, 2014, the Company may also redeem up to ~~$500.0 million in~~35.0% of the Notes using the proceeds from certain equity inofferings. At any time prior to May 1, 2015, the ~~partnership,~~Company may redeem some or all of the Notes at a price equal to ~~be called Cumulus Radio Investors, L.P. (“CRI”). Together with debt financing expected to be available through~~100% of the ~~capital markets, CRI could target acquisitions totaling in excess~~principal amount, plus a “make-whole” premium. Further, if the Citadel Merger Agreement is terminated without consummation of ~~$1 billion. The Company would provide all management, financial, operational~~the Citadel Acquisition and ~~corporate services~~neither CMP nor any of its subsidiaries has become a restricted subsidiary under the indenture governing the Notes, during each 12-month period commencing on the date of such termination to the ~~partnership and~~third anniversary thereof, or such earlier time as CMP or any of its ~~operations pursuant~~subsidiaries becomes a restricted subsidiary under such indenture, the Company may redeem up to 10.0% of the original aggregate principal amount of the Notes at a ~~management services agreement. The~~redemption price of 103.0%. If the Company sells certain assets or experiences specific kinds of changes in control, the Company will be ~~compensated through management fees as well as incentive compensation based on investment returns. This had no impact~~required to make an offer to purchase the Notes.

Each of the Company’s existing and future domestic restricted subsidiaries that guarantees the Company’s 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 Notes. Under certain circumstances, the Notes may be assumed by a direct wholly-owned subsidiary of the Company’s, in which case the Company will guarantee the Notes. The Notes are the Company’s senior unsecured obligations and rank equally in right of payment to all of the Company’s existing and future senior unsecured debt and senior in right of payment to all of the Company’s future subordinated debt. The Notes guarantees are the Company’s guarantors’ senior unsecured obligations and rank equally in right of payment to all of the Company’s guarantors’ existing and future senior debt and senior in right of payment to all of the Company’s guarantors’ future subordinated debt. The Notes and the guarantees are effectively subordinated to any of the Company’s or the guarantors’ existing and future secured debt to the ~~quarter ended March 31, 2010.~~extent of the value of the assets securing such debt. In addition, the Notes and the guarantees are structurally subordinated to all indebtedness and other liabilities, including preferred stock, of the Company’s non-guarantor subsidiaries, including all of the liabilities of the Company’s and the guarantors’ foreign subsidiaries and the Company’s subsidiaries that hold the licenses for the Company’s radio stations.

In connection with the completion of the offering of Notes, the Company entered into the Fifth Amendment to the Existing Credit Agreement. The Fifth Amendment, dated as of April 29, 2011 and effective as of May 13, 2011, provided the Company the ability to complete the offering of Notes, provided that proceeds therefrom were used to repay in full the term loans outstanding under the Existing Credit Agreement. In addition, the Fifth Amendment, among other things, provides for an incremental term loan facility of up to $200.0 million, which may only be accessed to repurchase Notes under certain circumstances, (i) replaced the total leverage ratio in the Existing Credit Agreement with a secured leverage ratio and (ii) amended certain definitions in the Existing Credit Agreement to facilitate the Company’s ability to complete the offering of Notes.

1816

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

General

The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report. This discussion, as well as various other sections of this quarterly report, contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of ~~1995.~~1995 and other federal securities laws. Such statements relate to ~~the~~our intent, belief or current expectations ~~of our officers~~ primarily with respect to our future operating, financial or strategic performance. Any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties. Actual results may differ from those contained in or implied by the forward-looking statements as a result of various factors, including, but not limited to, risks and uncertainties relating to the need for additional funds, ~~FCC~~Federal Communications Commission (“FCC”) and ~~government approval~~other regulatory approvals of pending acquisitions, our inability to renew one or more of our broadcast licenses, changes in interest rates, consummation of our pending acquisitions, integration of acquisitions, our ability to eliminate certain costs, the management of rapid growth, the popularity of radio as a broadcasting and advertising medium, changing consumer tastes, the impact of general economic conditions in the United States or in specific markets in which we currently do business, industry conditions, including existing competition and future competitive technologies and cancellation, disruptions or postponements of advertising schedules in response to national or world events. Many of these risks and uncertainties are beyond our ~~control. This discussion identifies important factors that could cause such differences. The~~control, and the unexpected occurrence or failure to occur of any such ~~factors~~events or matters would significantly alter ~~the~~our actual results ~~set forth in these statements.~~of operations or financial condition.

Operating Overview

We engage in the acquisition, operation, and development of commercial radio stations in mid-size radio markets in the United States. In addition, we, along with three private equity firms, formed CMP, which acquired the radio broadcasting business of Susquehanna in May 2006. As a result of our investment in CMP and the acquisition of Susquehanna’s radio operations, we are currently the second largest radio broadcasting company in the United States based on the number of stations ~~and believe we are the fourth largest radio broadcasting company based on net revenues.~~owned or managed. As of March 31, ~~2010,~~2011, we owned or managed 312 radio stations (including under LMAs) in 60 mid-sized United States media markets and operated 34 radio stations in eight markets, including San Francisco, Dallas, Houston and Atlanta that are owned by Cumulus Media Partners, LLC (“CMP”). We also provide sales and marketing services to 9 radio stations in the United States under LMAs. We own and manage, directly ~~and~~or through our investment in CMP, ~~we owned or operated 345~~a total of 346 FM and AM radio stations in 6768 mid- and large-sized markets throughout the United States markets and provided sales and marketing services under local marketing, management and consulting agreements to twelve additional stations. The following discussion of our financial condition and results of operations includes the results of acquisitions and local marketing, management, and consulting agreements.States.

Liquidity Considerations

Historically, our principal needs for funds have been to fund the acquisition of radio stations, expenses associated with our station and corporate operations, capital expenditures, repurchases of our Class A common stock, and interest and debt service payments. We believe that our funding needs in the future will be for substantially similar requirements, including, but not limited to, completing our pending acquisition of the 75.0% of the equity interests of CMP that we do not currently own, and our pending acquisition of Citadel Broadcasting Corporation (“Citadel”), as well as capital expenditures relating to our business operations.

Our principal sources of funds historically have been cash flow from our operations and borrowings under our credit facilities in existence from time to time. Our cash flow from operations is subject to such factors as shifts in population, station listenership, demographics, or audience tastes, and fluctuations in preferred advertising media. In addition, customers may not be able to pay, or may delay payment of, accounts receivable that are owed to us, which risks may be exacerbated in challenging economic periods. In recent periods, management has taken steps to mitigate this risk through heightened collection efforts and enhancements to our credit approval process, although no assurances as to the longer-term success of these efforts can be provided.

We believe the remainder of 2011 will ~~continue~~exhibit a pattern fairly consistent with that of the prior year, and we anticipate modest growth for the radio industry overall. However, unlike 2010, where growth was driven primarily by increases in automotive and political advertising, we anticipate that 2011 growth will be driven by more broad-based increases across all key advertising categories, as overall local advertising continues to beshow strength. In addition, we believe that certain non-core operating factors will impact our liquidity. For example, the expiration of the interest rate option agreement (the “May 2005 Option”) that provided Bank of America, N.A. the right to enter into an underlying swap agreement with us, for two years, from March 13, 2009 through March 13, 2011 should provide us with an additional $10.0 million to $12.0 million in ~~compliance~~cash flow during the last three quarters of 2011 compared to the same prior year period. Additionally, in accordance with ~~all~~the terms of our ~~debt covenants through at least~~credit agreement, dated as of June 7, 2006 (the “Existing Credit Agreement”), during the quarter ended March 31, 2011, ~~based upon actions~~we made an Excess Cash Flow payment in the amount of $9.3 million which reduced the interest rate on borrowings under the Existing Credit Agreement by an additional 50 basis points to 325 basis points effective March 31, 2011.

In connection with our pending acquisitions of each of CMP and Citadel, we have ~~already taken,~~obtained commitments for up to $500.0 million in equity financing and commitments for up to $2.525 billion in senior secured credit facilities, which ~~included: (i)~~are expected to be used to pay the cash portion of the purchase price in the Citadel Acquisition, and effect a refinancing of the then-outstanding indebtedness of each of the Company, CMP and Citadel. As a part of the overall refinancing transactions being undertaken, and expected to be undertaken, in connection with these pending acquisitions, on May 13, 2011 we completed the issuance of $610.0 million of 7.75% senior notes due 2019 (the “Notes”). We used proceeds from the issuance of Notes to repay in full the $575.8 million outstanding under the term loan facility under the Existing Credit Agreement.

In connection with the completion of the offering of the Notes, we entered into the fifth amendment, dated as of April 29, 2011 and effective as of May 13, 2011, to the Existing Credit Agreement (the “Fifth Amendment”). The Fifth Amendment provided us with the ~~purpose~~ability to complete the offering of Notes, provided that proceeds therefrom were used to repay in full the term loans outstanding under the Existing Credit Agreement. In addition, the Fifth Amendment, among other things, provides for an incremental term loan facility of up to $200.0 million, which ~~was~~may only be accessed to ~~provide~~repurchase Notes under certain ~~covenant relief~~circumstances, (i) replaced the total leverage ratio in ~~2009~~the credit agreement with a secured leverage ratio and ~~2010,~~ (ii) ~~employee reductions~~amended certain definitions in the credit agreement to facilitate our ability to complete the offering of ~~16.5%~~Notes. Under the Existing Credit Agreement, as amended by the Fifth Amendment, we continue to have up to $20.0 million in ~~2009, (iii)~~revolving loan availability thereunder, subject to the ~~sales initiative implemented during~~terms and conditions under that agreement. We expect to enter into a new senior secured credit agreement, providing for a term loan and a revolving credit facility, in connection with the ~~first quarter~~completion of ~~2009, which we believe has contributed~~the Citadel Acquisition and to ~~increased advertising revenues by virtue of re-engineering our sales techniques through enhanced training~~terminate the Existing Credit Agreement.

We have assessed the current and expected implications of our ~~sales force,~~business climate, our current and ~~(iv) continued scrutiny~~expected needs for funds and our current and expected sources of ~~all operating expenses. We will continue to monitor~~funds and determined, based on our ~~revenues and cost structure closely and if revenues do not exceed forecasted growth or if we exceed our planned spending, we may take further actions~~financial condition as needed in an attempt to maintain compliance with our debt covenants under the Credit Agreement. The actions may include the implementation of additional operational efficiencies, further renegotiation of major vendor contracts, deferral of capital expenditures, and sales of non-strategic assets.

As of March 31, ~~2010,~~2011, that cash on hand, cash expected to be generated from operating activities, borrowing availability under the ~~effective~~Existing Credit Agreement and, in connection with the Citadel Acquisition, availability under replacement credit facilities and from related equity financing commitments, as well as, if necessary, any further financing activities, will be sufficient to satisfy our anticipated financing needs for working capital, capital expenditures, interest ~~rate on~~and debt service payments and completion of pending and other potential acquisitions and other debt obligations through March 31, 2012. However, given the ~~borrowings pursuant~~variables and uncertainties that can affect our business, including cash flows, in our markets, the quality of accounts receivable, pending litigation, the timing of the completion of each of the CMP and Citadel acquisitions and the need to execute definitive documentation with respect to the ~~credit facility was approximately 4.25%. As~~debt commitments entered into in connection with the Agreement and Plan of March 31, 2010, our average cost of debt, including the effects of our derivative positions, was 6.65%. We remain committed to maintaining manageable debt levels, which will continue to improve our ability to generate cash flow from operations.Merger (the “Citadel Merger Agreement”) entered into with Citadel, no assurances can be provided in this regard.

Advertising Revenue and Station Operating Income

Our primary source of revenues is the sale of advertising time on our radio stations. Our sales of advertising time are primarily affected by the demand for advertising time from local, regional and national advertisers and the advertising rates charged by our radio stations. Advertising demand and rates are based primarily on a station’s ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by various ratings agencies on a periodic ~~basis, generally two or four times per year. Because audience ratings in local markets are crucial to a station’s financial success, we~~basis. We endeavor to develop strong listener ~~loyalty. We~~loyalty and we believe that the diversification of formats on our stations helps to insulate them from the effects of changes in the musical tastes of the public with respect to any particular format.

~~The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting ratings is limited in part by the format of a particular station.~~ Our stations strive to maximize revenue by managing their on-air inventory of advertising time and adjusting prices up or down based ~~upon local market conditions.~~on supply and demand. The optimal number of advertisements available for sale depends on the programming format of a particular station. Each of our stations has a general target level of on-air inventory available for advertising. This target level of inventory for sale 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 our cluster of stations, thereby providing each of our potential advertisers with an effective means of reaching a targeted demographic group. Our selling and pricing activity is based on demand for our radio stations’ on-air inventory and, in general, we respond to this demand by varying prices rather than by varying our target inventory level for a particular station. In the broadcasting industry, radio stations sometimes utilize trade or barter agreements that exchange advertising time for goods or services such as travel or lodging, instead of for cash. InTrade revenue totaled $3.4 million and $3.8 million in the three months ended March 31, ~~2010~~2011 and ~~2009, trade revenue totaled $3.8 million and $2.3 million,~~2010, respectively. Our advertising contracts are generally short-term. We generate most of our revenue from local and regional advertising, which is sold primarily by a station’s sales staff. Local advertising represented approximately ~~90.9%~~79.9% and ~~89.6%~~89.8% of our total revenues during the three months ended March 31, 2011 and 2010, ~~and 2009.~~respectively.

~~Our revenues~~ vary by quarter throughout the year. As is typical in the radio broadcasting industry, ~~we expect~~ our first calendar quarter ~~will produce~~produced the lowest revenues ~~for~~during the ~~year~~last twelve month period as advertising generally declines following the winter ~~holidays, and the~~holidays. The second and fourth

ability to generate Station Operating Income. See the quantitative reconciliation of Station Operating Income to the most directly comparable financial measure calculated and presented in accordance with GAAP, which follows in this section.

Results of Operations

Analysis of ~~Unaudited~~the Condensed Consolidated Statements of Operations.The following analysis of selected data from our unaudited condensed consolidated statements of operations and other supplementary data should be referred to while reading the results of operations discussion that follows (dollars in thousands):


	For the Three Months												For the Three Months
	Ended March 31,						2010 vs 2009						Ended March 31,						2011 vs 2010
	2010			2009			$ Change			% Change			2011			2010			$ Change			% Change

STATEMENT OF OPERATIONS DATA:
Net revenues	$	56,358		$	55,353		$	1,005			1.8	%	$	57,858		$	56,358		$	1,500			2.7	%
Station operating expenses (excluding depreciation, amortization and LMA fees)		39,926			42,298			(2,372	)		-5.6	%		37,555			39,926			(2,371	)		-5.9	%
Depreciation and amortization		2,517			2,898			(381	)		-13.1	%		2,123			2,517			(394	)		-15.7	%
LMA fees		529			469			60			12.8	%		581			529			52			9.8	%
Corporate general and administrative (including non-cash stock compensation expense)		4,066			6,108			(2,042	)		-33.4	%
Corporate general and administrative expenses (including non-cash stock compensation expense)														8,129			4,066			4,063			99.9	%
Gain on exchange of assets or stations														(15,158	)		—			(15,158	)		*	*
Realized loss on derivative instrument		584			—			584			*	*		40			584			(544	)		-93.2	%

Operating income		8,736			3,580			5,156			144.0	%		24,588			8,736			15,852			181.5	%
Interest expense, net		(8,829	)		(7,737	)		(1,092	)		14.1	%		(6,318	)		(8,829	)		2,511			-28.4	%
Other (expense) income, net		(53	)		3			(56	)		-1866.7	%
Income tax benefit		2			858			(856	)		-99.8	%
Other expense, net														(2	)		(53	)		51			-96.2	%
Income tax (expense) benefit														(2,149	)		2			(2,151	)		*	*

Net loss	$	(144	)	$	(3,296	)	$	3,152			-95.6	%
Net income (loss)													$	16,119		$	(144	)	$	16,263			-11293.8	%

OTHER DATA:
Station Operating Income (1)	$	16,432		$	13,055		$	3,377			25.9	%	$	20,303		$	16,432		$	3,871			23.6	%
Station Operating Income margin (2)		29.2	%		23.6	%		*	*		*	*		35.1	%		29.2	%		*	*		5.9	%
Cash flows related to:
Operating activities	$	12,095		$	6,632		$	5,463			82.4	%
Investing activities		(451	)		(809	)		358			-44.3	%
Financing activities		(12,918	)		(13,949	)		1,031			-7.4	%
Capital expenditures		(431	)		(777	)		346			-44.5	%

Depreciation and Amortization.Depreciation and amortization for the three months ended March 31, ~~2010~~2011 decreased $0.4 million, or ~~13.1%~~15.7%, to ~~$2.5~~$2.1 million, compared to ~~$2.9~~$2.5 million for the three months ended March 31, ~~2009,~~2010, resulting from a decrease in our asset base due to assets becoming fully ~~depreciated coupled with a decrease in capital expenditures.~~depreciated.

LMA Fees.LMA fees totaled $0.6 million and $0.5 million for ~~both~~ the three months ended March 31, 2011 and 2010, ~~and 2009.~~respectively. LMA fees in the current year were comprised primarily of fees associated with stations operated under LMAs in Cedar Rapids, Iowa, Ann Arbor, Michigan, Green Bay, Wisconsin, and Battle Creek, Michigan. Effective February 18, 2011, as a result of the asset exchange with Clear Channel, we no longer operate the Ann Arbor and Battle Creek, Michigan stations under LMAs.

Corporate, General and Administrative Expenses Including Non-cash Stock Compensation. Corporate, general and administrative expenses, including non-cash stock compensation expense for the ~~first quarter of 2010 decreased $2.0~~three months ended March 31, 2011, increased $4.0 million, or ~~33.4%~~99.9%, to $8.1 million compared to $4.1 million ~~compared to $6.1 million in 2009,~~for the three months ended March 31, 2010, primarily due to ~~a decrease~~an increase of $1.9 million in ~~corporate expenses~~costs associated with ~~our cost containment initiatives including a reduction in salary expense, as well as a decrease~~the pending acquisitions of CMP and Citadel, an increase of $1.0 million in professional fees, ~~associated~~an increase of $0.4 million in salaries and related expenses, and an increase of $0.7 million in non-cash stock compensation expense.

Gain on Exchange of Assets or Stations.During the three months ended March 31, 2011, we completed an exchange transaction with Clear Channel to swap our ~~defense~~Canton, Ohio radio station for eight of ~~certain lawsuits that were subsequently settled~~Clear Channel’s radio stations in ~~2009.~~the Ann Arbor and Battle Creek, Michigan markets. In connection with this transaction, we recorded a gain of approximately $15.2 million. We did not complete any such transactions in 2010.

Realized Loss on Derivative Instrument.During the three months ended March 31, 2011 and 2010, we recorded a charge of $0.0 million and $0.6 million, respectively, related to our recording of the fair market value of the Green Bay Option. We entered into the Green Bay Option in conjunction with an asset exchange in the second quarter of 2009; therefore, there is no amount related to the Green Bay Option recorded in the accompanying statements of operations for the three months ended March 31, 2009. The Green Bay Option liability increased primarily due to the continued decline in associated market operating results.

Interest Expense, net.Interest expense, net of interest income, for the three months ended March 31, ~~2010 increased $1.1~~2011 decreased $2.5 million, or ~~14.1%~~28.4%, to ~~$8.8~~$6.3 million compared to ~~$7.7~~$8.8 million for the three months ended March 31, ~~2009.~~2010. Interest expense associated with outstanding debt ~~increased~~decreased by ~~$2.6~~$0.7 million to ~~$6.7~~$6.0 million as compared to ~~$4.1~~$6.7 million in the prior year’s ~~period,~~period. This decrease is primarily ~~due~~attributable to ~~an increase in interest rates, partially offset by~~ a decrease in the borrowing base due to the ~~repayment~~pay-down of approximately ~~$58.2~~$48.3 million of outstanding debt compared to the ~~same period in~~prior year. Additionally, interest expense decreased by $1.8 million related to the ~~prior year.~~fair value of the May 2005 Option. The following summary details the components of our interest expense, net of interest income (dollars in thousands):


	For the Three Months Ended												For the Three Months
	March 31,						2010 vs 2009						Ended March 31,						2011 vs 2010
	2010			2009			$ Change			% Change			2011			2010			$ Change			% Change

Bank Borrowings — term loan and revolving credit facilities	$	6,678		$	4,115		$	2,563			62.3	%	$	5,955		$	6,678		$	(723	)		-10.8	%
Bank Borrowings yield adjustment — interest rate swap		3,739			2,363			1,376			58.2	%		3,708			3,739			(31	)		-0.8	%
Change in fair value of interest rate swap agreement		(1,913	)		(3,043	)		1,130			-37.1	%
Change in fair value of interest rate option agreement		—			4,045			(4,045	)		-100.0	%		(3,680	)		(1,913	)		(1,767	)		92.4	%
Other interest expense		327			303			24			7.9	%		337			327			10			3.1	%
Interest income		(2	)		(46	)		44			-95.7	%		(2	)		(2	)		—			0.0	%

Interest expense, net	$	8,829		$	7,737		$	1,092			14.1	%	$	6,318		$	8,829		$	(2,511	)		-28.4	%

Income ~~Tax Benefit.~~Taxes.We recorded aincome tax expense of $2.1 million for the three months ended March 31, 2011, compared to an income tax benefit of $0.0 million for the three months ended March 31, ~~2010, compared to $0.9 million for the three months ended March 31, 2009.~~2010. The ~~income tax benefit in the current period~~change is primarily due to the ~~amortization~~increase in pre-tax income of ~~certain intangible assets for tax purposes, which are not amortized for book purposes.~~$18.4 million as compared to the period ended March 31, 2010.

Station Operating Income.As a result of the factors described above, Station Operating Income for the three months ended March 31, ~~2010~~2011 increased ~~$3.3~~$3.9 million, or ~~25.9%~~23.6%, to ~~$16.4~~$20.3 million compared to ~~$13.1~~$16.4 million for the three months ended March 31, ~~2009.~~2010.

Station Operating Income consists of operating income before depreciation and amortization, LMA fees, non-cash stock compensation expense, corporate general and administrative expenses, ~~including~~ the ~~Green Bay Option mark to market,~~gain on exchange of assets or stations and ~~non-cash stock compensation.~~the realized loss on derivative instrument. Station Operating Income should not be considered in isolation or as a substitute for net income, operating income, ~~(loss),~~ cash flows from operating activities or any other measure for determining our operating performance or liquidity that is calculated in accordance with GAAP. We exclude depreciation and amortization due to the insignificant investment in tangible assets required to operate our stations and the relatively insignificant amount of intangible assets subject to amortization. We exclude LMA fees from this measure, even though ~~it requires~~they require a cash commitment, due to the insignificance and temporary nature of such fees. Corporate expenses, despite representing an additional significant cash commitment, are excluded in an effort to present the operating

performance of our stations exclusive of the corporate resources employed. ~~We believe this is important to our investors because it highlights the gross margin generated by our station portfolio.~~ Finally, we exclude ~~the Green Bay Option mark to market and~~ non-cash stock compensation, the gain on exchange of assets or stations and the realized loss on derivative instrument from the measure as they do not represent cash payments for activities related to the operation of the stations. We believe this is important to investors because it highlights the gross margin generated by our station portfolio.

We believe that Station Operating Income is the most frequently used financial measure in determining the market value of a radio station or group of ~~stations.~~stations and to compare the performance of radio station operators. We have observed that Station Operating Income is commonly employed by firms that provide appraisal services to the broadcasting industry in valuing radio stations. Further, in ~~each of the more than 140 radio station~~connection with our acquisitions, ~~we have completed since our inception,~~ we have used Station Operating Income as our primary metric to evaluate and negotiate the purchase price to be paid. Given its relevance to the estimated value of a radio station, we believe, and our experience indicates, that investors consider the measure to be useful in order to determine the value of our portfolio of stations. ~~We believe that Station Operating Income is the most commonly used financial measure employed by the investment community to compare the performance of radio station operators. Finally,~~Additionally, Station Operating Income is one of the measures that our management uses to evaluate the performance and results of our stations. Our management uses the measure to assess the performance of our station managers, and our Board of Directors uses it as part of its assessment of the relative performance of our executive management. As a result, in disclosing Station Operating Income, we are providing ~~our~~ investors with an analysis of our performance that is consistent with that which is utilized by our management and our ~~Board.~~Board of Directors.

Station Operating Income is not a recognized term under GAAP and does not purport to be an alternative to operating income from continuing operations as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, Station Operating Income is not intended to be a measure of ~~free~~ cash flow available for dividends, reinvestment in our business or other ~~Company~~ discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Station Operating Income should be viewed as a supplement to, and not a substitute for, results of operations presented on the basis of GAAP. We compensate for the limitations of using Station Operating Income by using it only to supplement our GAAP results to provide a more complete understanding of the factors and trends affecting our business than GAAP results alone. Station Operating Income has its limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Moreover, because not all companies use identical calculations, these presentations of Station Operating Income may not be comparable to other similarly titled measures of other companies.

Reconciliation of Non-GAAP Financial Measure.The following table reconciles Station Operating Income to operating income as presented in the accompanying condensed consolidated statements of operations (the most directly comparable financial measure calculated and presented in accordance with GAAP, dollars in thousands):

For the Three Months
Ended March 31, 2011 vs 2010
2011 2010 $ Change % Change

Operating income $ 24,588 $ 8,736 $ 15,852 181.5 %
Depreciation and amortization 2,123 2,517 (394 ) -15.7 %
LMA fees 581 529 52 9.8 %
Non-cash stock compensation 589 (101 ) 690 -683.2 %
Corporate general and administrative 7,540 4,167 3,373 80.9 %
Gain on exchange of assets or stations (15,158 ) — (15,158 ) * *
Realized loss on derivative instrument 40 584 (544 ) -93.2 %

Station Operating Income $ 20,303 $ 16,432 $ 3,871 23.6 %

For the Three Months
Ended March 31, 2010 vs 2009
2010 2009 $ Change % Change

Operating income $ 8,736 $ 3,580 $ 5,156 144.0 %
Depreciation and amortization 2,517 2,898 (381 ) -13.1 %
LMA fees 529 469 60 12.8 %
Non-cash stock compensation (101 ) 592 (693 ) -117.1 %
Corporate general and administrative 4,167 5,516 (1,349 ) -24.5 %
Realized loss on derivative instrument 584 — 584 * *

Station Operating Income $ 16,432 $ 13,055 $ 3,377 25.9 %


**		Calculation is not meaningful.

Liquidity and Capital Resources

Historically, our principal need for funds has been to fund the acquisition of radio stations, expenses associated with our station and corporate operations, capital expenditures, repurchases of our Class A Common Stock, and interest and debt service payments.

~~Funding needs on a long-term basis will include capital expenditures associated with maintaining our station and corporate operations, implementing HD Radio~~^tm ~~technology and potential future acquisitions. In December 2004, we purchased 240 perpetual licenses from iBiquity, which will enable us to convert to and utilize iBiquity’s HD Radio~~^tm technology on up to 240 of our stations. Under the terms of our original agreement with iBiquity, we agreed to convert certain of our stations over a seven-year period. On March 5, 2009, we entered into an amendment to our agreement with iBiquity to reduce the number of planned conversions, extend the build-out schedule, and increase the license fees to be paid for each converted station. We anticipate that the average cost to convert each station will be between $0.08 million and $0.15 million.

Our principal sources of funds for these requirements have been cash flow from operations and borrowings under our senior secured credit facilities. Our cash flow from operations is subject to such factors as shifts in population, station listenership, demographics or, audience tastes, and fluctuations in preferred advertising media. In addition, customers may not be able to pay, or may delay payment of accounts receivable that are owed to us. Management has taken steps to mitigate this risk through heightened collection efforts and enhancements to our credit approval process. As discussed further below, borrowings under our senior secured credit facilities are subject to financial covenants that can restrict our financial flexibility. Further, our ability to obtain additional equity or debt financing is also subject to market conditions and operating performance. In addition, pursuant to the June 2009 amendment to the Credit Agreement, we are required to repay 100% of Excess Cash Flow (as defined in the Credit Agreement) on a quarterly basis beginning September 30, 2009 through December 31, 2010, while maintaining a minimum balance of $7.5 million of cash on hand. We have assessed the implications of these factors on our current business and determined, based on our financial condition as of March 31, 2010, that cash on hand and cash expected to be generated from operating activities and, if necessary, further financing activities, will be sufficient to satisfy our anticipated financing needs for working capital, capital expenditures, interest and debt service payments and potential acquisitions and repurchases of securities and other debt obligations through March 31, 2011. However, given the uncertainty of our markets’ cash flows, pending litigation and the impact of the current economic environment, there can be no assurance that cash generated from operations will be sufficient or financing will be available at terms, and on the timetable, that may be necessary to meet our future capital needs.

~~Consideration of Recent Economic Developments~~Liquidity Considerations

The economic crisis in 2009 has reduced demand for advertising in general, including advertising on our radio stations. In consideration of current and projected market conditions, we expect that overall advertising revenues will have modest growth in certain categories throughoutWe believe the remainder of ~~2010. Therefore, in conjunction~~2011 will exhibit a pattern fairly consistent with ~~the development~~that of the prior year, and we anticipate modest growth for the radio industry overall. However, unlike 2010, ~~business plan,~~where growth was driven primarily by increases in automotive and political advertising, we ~~assessed~~anticipate that 2011 growth will be driven by more broad-based increases across all key advertising categories, as overall local advertising continues to show strength. In addition, we believe that certain non-core operating factors will impact our liquidity. For example, the ~~impact~~expiration of the ~~current year market developments in a variety~~interest rate option agreement (the “May 2005 Option”) that provided Bank of ~~areas, including our forecasted advertising revenues and liquidity. In response~~America, N.A. the right to ~~these conditions, we have forecasted maintaining cost reductions achieved in~~enter into an underlying swap agreement with us, for two years, from March 13, 2009 ~~with no significant increases in 2010.~~

While preparing our 2010 business plan, we assessed future covenant compliance under the Credit Agreement, including consideration of market uncertainties, as well as the incremental cost that would be required to potentially amend the terms of the Credit Agreement. We believe we will continue to be in compliance with all of our debt covenants through ~~at least~~ March ~~31, 2011 based upon actions we have already taken, as well as through additional paydowns of debt we will be required to make during 2010~~13,

2321

~~from existing cash balances and~~2011 should provide us with an additional $10.0 million to $12.0 million in free cash flow ~~generated from operations. Further discussion~~during the last three quarters of ~~our debt covenant compliance considerations is included below.~~

~~If our revenues were to be significantly less than planned due to difficult market conditions or for other reasons, our ability to maintain compliance~~2011 over the same prior year period. Additionally, in accordance with the financial covenants in our credit agreements would become increasingly difficult without remedial measures, such as the implementation of further cost abatement initiatives. If our remedial measures were not successful in maintaining covenant compliance, then we would need to negotiate with our lenders for relief, which relief could result in higher interest expense or other fees or costs. Failure to comply with our financial covenants or other terms of our credit ~~agreements and failure to negotiate relief from our lenders could result~~agreement, dated as of June 7, 2006 (the “Existing Credit Agreement”), during the quarter ended March 31, 2011, we made an Excess Cash Flow payment in the ~~acceleration~~amount of $9.3 million which reduced the ~~maturity of all outstanding debt. Under these circumstances,~~interest rate on borrowings under the ~~acceleration of our debt could~~Existing Credit Agreement by an additional 50 basis points to 325 basis points effective March 31, 2011. We currently have ~~a material adverse effect on our business.~~up to $20.0 million in revolving loan availability under the Existing Credit Agreement, subject to any limitations imposed by required compliance with the covenants thereof (see “—Liquidity Considerations” for further discussion).

Cash Flows ~~from~~provided by Operating Activities

For the three months ended March 31, ~~2010,~~2011, net cash provided by operating activities ~~increased $5.5~~decreased $2.1 million as compared to ~~$12.1 million from net cash provided by operating activities of $6.6 million for~~ the three months ended March 31, ~~2009.~~2010. The ~~increase is~~decrease was primarily ~~attributable~~due to a ~~$6.5~~$3.8 million increase in accounts receivable and prepaid expenses offset by a decrease of $1.7 million in accounts payable and ~~accrued expenses related~~other liabilities due to the timing of certain payments. For the three months ended March 31, 2010 and 2009, our working capital was $(32.4) million and $56.9 million, respectively. We have assessed the implications of the working capital deficiency on our current business and determined, based on our financial condition as of March 31, 2010, that cash on hand and cash expected to be generated from operating activities and, if necessary, further financing activities, will be sufficient to satisfy our anticipated working capital needs including short-term debt service payments.

Cash Flows used in Investing Activities

For the three months ended March 31, ~~2010,~~2011, net cash used in investing activities ~~decreased $0.3~~increased $1.3 million, ~~to $0.5 million from net cash used in investing activities of $0.8 million for the three months ended March 31, 2009. The decrease is~~ primarily due to a ~~$0.3~~$1.0 million ~~decrease~~increase in costs associated with the pending acquisitions of CMP and Citadel, an increase in capital ~~expenditures.~~expenditures and intangibles of $0.1 million and a decrease of $0.2 million in proceeds received from the sale of assets or stations.

Cash Flows used in Financing Activities

For the three months ended March 31, ~~2010,~~2011, net cash used in financing activities ~~decreased $1.0~~increased $5.7 million, primarily due to ~~$12.9 million~~the increased levels of repayment of debt in 2011 as compared to the same period in 2010.

2011 Acquisitions

Ann Arbor, Battle Creek and Canton Asset Exchange

On February 18, 2011, we completed an asset exchange with Clear Channel Communications, Inc. (“Clear Channel”). As part of the asset exchange, we acquired eight of Clear Channel’s radio stations located in Ann Arbor and Battle Creek, Michigan in exchange for our radio station in Canton, Ohio. We disposed of two of the Battle Creek stations simultaneously with the closing of the transaction to comply with the Federal Communications Commission’s (“FCC”) broadcast ownership limits; WBCK-AM was placed in a trust for the sale of the station to an unrelated third party and WBFN-AM was donated to Family Life Broadcasting System. The transaction was accounted for as a business combination in accordance with FASB’s guidance. The fair value of the assets acquired in the exchange was $17.4 million (refer to the table below for the preliminary purchase price allocation). We incurred approximately $0.2 million in acquisition costs related to this transaction and expensed them as incurred through earnings within corporate general and administrative expense. The $4.3 million of goodwill identified in the preliminary purchase price allocation below is deductible for tax purposes. The results of operations for the Ann Arbor and Battle Creek stations acquired, which were not material, have been included in our statements of operations since 2007 when we entered into an LMA with Clear Channel to manage the stations. Prior to the asset exchange, we did not have any preexisting relationship with Clear Channel with regard to the Canton market.

In conjunction with the transactions, we recorded a net gain of $15.2 million, which is included in gain on exchange of assets or stations in the accompanying statements of operations.

The table below summarizes the preliminary purchase price allocation (dollars in thousands):

The preliminary allocation of the purchase price was based upon a preliminary valuation, and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). Any such changes may be material. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible and intangible assets, including goodwill. We expect to continue to obtain information to assist it in finalizing these preliminary valuations during the measurement period.

Pending Acquisitions

On January 31, 2011, we entered into a definitive agreement (the “CMP Acquisition Agreement”) to acquire the remaining 75.0% of the equity interests of CMP that we do not currently own.

In connection with the CMP Acquisition, we expect to issue 9,945,714 shares of our common stock to affiliates of Bain Capital Partners LLC (“Bain”), the Blackstone Group L.P. (“Blackstone”) and Thomas H. Lee Partners (“THLee”, and together with Bain and Blackstone, the “CMP Sellers”). In exchange for all of the equity interests in CMP owned by the CMP Sellers, Blackstone will receive approximately 3.3 million shares of our Class A common stock and, in order to ensure compliance with FCC broadcast ownership rules, Bain and THLee each will receive approximately 3.3 million shares of a new class of our non-voting common stock. In connection with the CMP Acquisition, it is expected that all of the outstanding warrants to purchase shares of common stock of an indirect wholly-owned subsidiary of CMP, referred to as “Radio Holdings”, will be converted into warrants to acquire 8,267,968 shares of our non-voting common stock. Stockholders holding shares representing approximately 54.0% of our outstanding voting power have agreed to vote in favor of the transactions necessary to complete the CMP Acquisition, making the requisite stockholder approval assured.

In addition, on March 9, 2011, we entered into the Citadel Merger Agreement with Citadel, Cumulus Media Holdings Inc., a direct wholly owned subsidiary of us (“Holdco”), and Cadet Merger Corporation, an indirect, wholly owned subsidiary of us (“Merger Sub”).

Pursuant to the Citadel Merger Agreement, at the closing, Merger Sub will merge with and into Citadel, with Citadel surviving the merger as an indirect, wholly owned subsidiary of us (the “Citadel Acquisition”). At the effective time of the Citadel Acquisition, each outstanding share of common stock of Citadel will be converted automatically into the right to receive, at the election of the holder (subject to certain limitations set forth in the Citadel Merger Agreement), (i) $37.00 in cash, ~~used~~(ii) 8.525 shares of our common stock, or (iii) a combination thereof (the “Citadel Acquisition Consideration”). Additionally, in ~~financing activities~~connection with and prior to the closing of ~~$13.9 million~~the Citadel Acquisition, (i) each outstanding unvested option to acquire shares of Citadel common stock issued under Citadel’s equity incentive plan will automatically vest, and all outstanding options at the effective time of this Citadel Acquisition will be deemed exercised pursuant to a cashless exercise, with the resulting net number of Citadel shares to be converted into the right to receive the Citadel Acquisition Consideration, and (ii) each outstanding warrant to purchase Citadel common stock will become exercisable for the Citadel Acquisition Consideration, subject to any applicable FCC limitations. Holders of unvested restricted shares of Citadel common stock will be eligible to receive the Citadel Acquisition Consideration for their shares pursuant to the original vesting schedule for such shares. Elections by Citadel stockholders are subject to adjustment such that the maximum number of shares of our common stock that may be issued in the Citadel Acquisition is 151,485,282 and the maximum amount of cash payable by us in the Citadel Acquisition is $1,408,728,600.

Consummation of each of these pending acquisitions is subject to various customary closing conditions. These include, but are not limited to, (i) regulatory approval by the FCC (ii) requisite stockholder approvals, (iii) solely with respect to the completion of the Citadel Acquisition, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and (iv) the absence of any material adverse effect on CMP or Citadel, as the case may be, or us. We currently anticipate that the CMP Acquisition will be completed in mid-2011 and the Citadel Acquisition will be completed prior to the end of 2011.

The actual timing for completion of each of these pending transactions will depend upon a number of factors, including the various conditions set forth in the respective transaction agreements. There can be no assurance that any of such pending or proposed transactions will be consummated or that, if any of such transactions is consummated, the timing or terms thereof will be as described herein and as presently contemplated.

2010 Acquisitions

We did not complete any material acquisitions or dispositions during the three months ended March 31, ~~2009. The decrease is primarily due to repayments of borrowings outstanding under our credit facilities.~~2010.

~~Amended~~Existing Credit Agreement

~~2009 Amendment~~

~~We experienced revenue declines in late 2008 and throughout 2009 in line with macro industry trends and consistent with~~ As of March 31, 2011, our radio peer group, particularly when compared to groups with similar market sizes and portfolio composition. In anticipation of significant revenue declines and in an attempt to mitigate the effect of these declines on profitability, in early 2009 we engaged in an aggressive cost cutting campaign across all of our stations and at corporate headquarters as well. However, even with these cost containment initiatives in place, our rapidly deteriorating revenue outlook left uncertainty as to whether we would be able to maintain compliance with the covenants in the then-existing Credit Agreement. As an additional measure, in June 2009 we obtained an amendment to theExisting Credit Agreement ~~that, among other things, temporarily suspended certain financial covenants, as further described below.~~

~~The Credit Agreement maintains the preexisting~~provided for a term loan facility of $750.0 million, which had an outstanding balance of approximately ~~$647.9~~$575.8 million ~~immediately after closing the amendment,~~as of March 31, 2011, and ~~reduced the preexisting~~a revolving credit facility ~~from $100.0~~of $20.0 million, ~~to $20.0 million. Incremental facilities are~~of which no ~~longer permitted~~amounts were outstanding as of ~~June 30, 2009 under the Credit Agreement.~~March 31, 2011.

Our obligations under the Existing Credit Agreement are collateralized by substantially all of our assets in which a security interest may lawfully be granted (including FCC licenses held by its subsidiaries), including, without limitation, intellectual property and all of the capital stock of our direct and indirect ~~subsidiaries, including Broadcast Software International, Inc., which prior to the amendment, was an excluded subsidiary.~~subsidiaries. Our obligations under the Existing Credit Agreement ~~continue to be~~are guaranteed by all of our subsidiaries.

The Existing Credit Agreement contains terms and conditions customary for financing arrangements of this nature. The term loan facility ~~will mature on~~thereunder had a maturity date of June 11, 2014. The revolving credit facility ~~will mature~~matures on June 7, 2012.

~~Borrowings under~~As of March 31, 2011, the ~~term loan facility and revolving credit facility will bear~~ interest ~~at our option, at a~~ rate equal to LIBOR plus 4.00% or the Alternate Base Rate (defined as the higher of the Bank of America, N.A. Prime Rate and the Federal Funds rate plus 0.50%) plus 3.00%. Once we reduce the term loan facility by $25.0 million through mandatory prepayments of Excess Cash Flow (as defined in the Credit Agreement), as described below, borrowings will bear interest, at the our option, at a rate equal to LIBOR plus 3.75% or the Alternate Base Rate plus 2.75%. Once we reduce the term loan facility by $50.0 million through mandatory prepayments of Excess Cash Flow, as described below, borrowings will bear interest, at our option, at a rate equal to LIBOR plus 3.25% or the Alternate Base Rate plus 2.25%.

In connection with the closing of the Credit Agreement, we made a voluntary prepayment in the amount of $32.5 million. We also are required to make quarterly mandatory prepayments of 100% of Excess Cash Flow through December 31, 2010, before reverting to annual prepayments of a percentage of Excess Cash Flow, depending on our leverage, beginning in 2011. Certain other mandatory prepayments of the term loan facility will be required upon the occurrence of specified events, including upon the incurrence of certain additional indebtedness and upon the sale of certain assets.

~~Covenants~~

~~The representations, covenants and events of default in the Credit Agreement are customary for financing transactions of this nature and are substantially the same as those in existence prior~~outstanding borrowings pursuant to the ~~amendment, except as follows:~~

the total leverage ratio and fixed charge coverage ratio covenants for the fiscal quarters ending June 30, 2009 through and including December 31, 2010 (the “Covenant Suspension Period”) have been suspended;

during the Covenant Suspension Period, we must: (1) maintain minimum trailing twelve month consolidated EBITDA (as defined in the Credit Agreement) of $60.0 million for fiscal quarters through March 31, 2010, increasing incrementally to $66.0 million for fiscal quarter ended December 31, 2010, subject to certain adjustments; and (2) maintain minimum cash on hand (defined as unencumbered consolidated cash and cash equivalents) of at least $7.5 million;

~~we are restricted from incurring additional intercompany debt or making any intercompany investments other than to the parties to the Credit Agreement;~~

we may not incur additional indebtedness or liens, or make permitted acquisitions or restricted payments, during the Covenant Suspension Period (after the Covenant Suspension Period, the Credit Agreement will permit indebtedness, liens, permitted acquisitions and restricted payments, subject to certain leverage ratio and liquidity measurements); and

~~we must provide monthly unaudited financial statements to the lenders within 30 days after each calendar-month end.~~

senior secured credit facilities was approximately 3.5%.

Events of default in the Existing Credit Agreement include, among others, (a) the failure to pay when due the obligations owing under the credit facilities; (b) the failure to perform (and not timely remedy, if applicable) certain covenants; (c) ~~cross default~~cross-default and ~~cross acceleration;~~cross-acceleration; (d) the occurrence of bankruptcy or insolvency events; (e) certain judgments against us or any of our subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use of or more of, any of our 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~~change in ~~Control~~control (as defined in the Existing 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 Existing Credit Agreement and the ancillary loan documents as a secured party.

~~As discussed above, our covenants for~~For the ~~fiscal~~ quarter ended March 31, ~~2010, were as follows:~~

~~a minimum trailing twelve month consolidated EBITDA of $60.0 million;~~

~~a $7.5 million minimum cash on hand; and~~

~~a limit on annual capital expenditures of $15.0 million annually.~~

~~The trailing twelve month consolidated EBITDA and cash on hand for the fiscal quarter ended March 31, 2010, were $78.1 million and $15.0 million, respectively.~~

If we had been unable to obtain the June 2009 amendments to the Credit Agreement, such that the original total leverage ratio and the fixed charge coverage ratio covenants were still operative, those covenants at March 31, 2010, would have been as follows:

~~a maximum total leverage ratio of 6.5:1; and~~

~~a minimum fixed charge coverage ratio of 1.20:1.~~

~~At March 31, 2010,~~2011, the total leverage ratio covenant requirement was ~~8.00:~~6.5:1 and the fixed charge coverage ratio requirement was ~~1.63:~~1.1:1. ~~For the fiscal quarter ending~~As of March 31, 2011, ~~(the first~~the Company was in compliance with all of its required covenants.

During the quarter ~~after~~ended March 31, 2011, we made an Excess Cash Flow Payment (as defined in the ~~Covenant Suspension Period),~~Existing Credit Agreement) under the ~~total leverage ratio covenant will be 6.50:1 and the fixed charge coverage ratio covenant will be 1.20:1.~~

If we are unable to comply with our debt covenants, we would need to seek a waiver or amendment to the Credit Agreement and no assurances can be given that we will be able to do so. If we were unable to obtain a waiver or an amendment to theExisting Credit Agreement in an amount equal to $9.3 million and a principal payment in the ~~event~~amount equal to $7.2 million.

As a part of ~~a debt covenant violation,~~our refinancing transactions in connection with our pending acquisitions of CMP and Citadel, on May 13, 2011, and in accordance with the Fifth Amendment we ~~would be in default~~completed our offering of $610.0 million of Notes. Proceeds from the sale of the Notes were used, among other things, to repay the $575.8 million outstanding under the ~~Credit Agreement, which could have a material adverse impact on our financial position.~~

~~If we were unable to repay our debts when due, the lenders~~term loan facility under the ~~credit facilities could~~Existing Credit Agreement.

Interest accrues on the Notes at a rate of 7.75% per annum from May 13, 2011, and interest is payable semiannually on each May 1 and November 1, commencing November 1, 2011. Notwithstanding the foregoing, if Citadel Merger Agreement is terminated without consummation of the Citadel Acquisition or if we and Citadel both publicly announce our determination not to proceed ~~against~~with the ~~collateral granted to them to secure that indebtedness.~~Citadel Acquisition, then interest on the Notes will accrue at a rate of 8.25% per annum from and after the effective date of such termination or announcement. The Notes mature on May 1, 2019.

We ~~have pledged substantially all of our assets as collateral under the Credit Agreement. If the lenders accelerate the maturity of outstanding debt, we~~ may ~~be forced to liquidate certain assets to repay~~redeem all or part of the ~~senior secured credit facilities, and~~Notes at any time on or after May 1, 2015. At any time prior to May 1, 2014, we ~~cannot be assured that sufficient assets will remain after~~may also redeem up to 35% of the Notes using the proceeds from certain equity offerings. At any time prior to May 1, 2015, we ~~have paid~~may redeem some or all of the Notes at a price equal to 100% of the principal amount, plus a “make-whole” premium. Further, if the Citadel Merger Agreement is terminated without consummation of the Citadel Acquisition and neither CMP nor any of its subsidiaries has become a restricted subsidiary under the indenture governing the Notes, during each 12-month period commencing on the date of such termination to the third anniversary thereof, or such earlier time as CMP or any of its subsidiaries becomes a restricted subsidiary under such indenture, we may redeem up to 10.0% of the original aggregate principal amount of the Notes at a redemption price of 103.0%. If we sell certain assets or experience specific kinds of changes in control, we will be required to make an offer to purchase the Notes.

Each of our existing and future domestic restricted subsidiaries that guarantees our indebtedness or indebtedness of our subsidiary guarantors (other than our subsidiaries that hold the licenses for our radio stations) guarantees, and will guarantee, the Notes. Under certain circumstances, the Notes may be assumed by a direct wholly-owned subsidiary of ours, in which case we will guarantee the Notes. The Notes are our senior unsecured obligations and rank equally in right of payment to all of our existing and future senior unsecured debt and senior in right

of payment to all of our future subordinated debt. The ~~ability~~Note guarantees are our guarantors’ senior unsecured obligations and rank equally in right of payment to ~~liquidate assets is affected by~~all of our guarantors’ existing and future senior debt and senior in right of payment to all of our guarantors’ future subordinated debt. The Notes and the ~~regulatory restrictions associated with radio stations, including FCC licensing, which may make~~guarantees are effectively subordinated to any of our or the ~~market for these assets less liquid~~guarantors’ existing and ~~increase the chances that these assets will be liquidated at a significant loss.~~

~~Warrants~~

~~We issued warrants~~future secured debt to the ~~lenders in~~extent of the value of the assets securing such debt. In addition, the Notes and the guarantees are structurally subordinated to all indebtedness and other liabilities, including preferred stock, of our non-guarantor subsidiaries, including all of the liabilities of our and the guarantors’ foreign subsidiaries and our subsidiaries that hold the licenses for our radio stations.

In connection with the ~~execution~~completion of the ~~amendment~~offering of Notes, we entered into the Fifth Amendment, which took effect on May 13, 2011. The Fifth Amendment provided us the ability to complete the offering of Notes, provided that proceeds therefrom were used to repay in full the term loans outstanding under the Existing Credit Agreement. In addition, the Fifth Amendment, among other things, provides for an incremental term loan facility of up to $200.0 million, which may only be accessed to repurchase Notes under certain circumstances, (i) replaced the total leverage ratio in the Existing Credit Agreement ~~which allow~~with a secured leverage ratio and (ii) amended certain definitions in the holders to acquire up to 1.25 million shares of our Class A Common Stock. Each warrant is immediately exercisable to purchase our underlying Class A Common Stock at an exercise price of $1.17 per share and has an expiration date of June 29, 2019.

~~Accounting for the Modification of the Credit Agreement~~

~~The amendment to the~~Existing Credit Agreement ~~was accounted for as a loan modification and accordingly, we did not record a gain or a loss on~~to facilitate our ability to complete the ~~transaction. For the revolving credit facility, we wrote off approximately $0.2 million~~offering of unamortized deferred financing costs, based on the reduction of capacity. With respect to both debt instruments, we recorded $3.0 million of fees paid directly to the lenders as a debt discount which are amortized as an adjustment to interest expense over the remaining term of the debt.

We classified the warrants as equity at $0.8 million at fair value at inception. The fair value of the warrants was recorded as a debt discount and is amortized as an adjustment to interest expense over the remaining term of the debt using the effective interest method.

As of March 31, 2010, prior to the effect of the forward-starting LIBOR based interest rate swap arrangement entered into in May 2005 (“May 2005 Swap”), the effective interest rate of the outstanding borrowings pursuant to the senior secured credit facilities was approximately 4.25%. As of March 31, 2010, the effective interest rate inclusive of the May 2005 Swap was approximately 6.65%.Notes.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

At March 31, ~~2010, 35.9%~~2011, 100% of our long-term debt ~~bears~~bore interest at variable rates. Accordingly, as of such date our earnings and after-tax cash flow ~~are~~were affected by changes in interest rates. Assuming the ~~current~~then-current level of borrowings at variable rates and assuming a one percentage point change in the average interest rate under these borrowings, it is estimated that our interest expense and net income would have changed by ~~$1.6~~$1.4 million for the three months ended March 31, ~~2010.~~2011. As part of our efforts to mitigate interest rate risk, in May 2005, we entered into a forward-starting (effective March 2006) LIBOR-based interest rate swap agreement that effectively fixed the interest rate, based on LIBOR, on $400.0 million of our current floating rate bank borrowings for a three-year period. In May 2005, we also entered into ~~an interest rate option agreement (the “May 2005 Option”) that provided Bank of America, N.A. the right to enter into an underlying swap agreement with us, on terms substantially identical to~~ the May 2005 ~~Swap, for two years, from March 13, 2009 (the end of the term of the May 2005 Swap) through March 13, 2011. The May 2005~~ Option, ~~was~~ exercised on March 11, ~~2009.~~2009 and expired on March 13, 2011, in accordance with the terms of the original agreement. This instrument iswas intended to reduce our exposure to interest rate fluctuations and was not entered into for speculative purposes. ~~Segregating the $224.1 million of borrowings outstanding at March 31, 2010 that are not subject to the interest rate swap and~~

~~assuming~~Assuming a one percentage point change in the average interest rate under these borrowings, it is estimated that our interest expense and net income would have changed by ~~$0.6~~$1.4 million for the three months ended March 31, ~~2010.~~2011.

~~In the event~~Subsequent to March 31, 2011, we repaid all of ~~an adverse change in interest rates,~~ our ~~management would likely take actions, in addition to the~~variable interest rate ~~swap agreement discussed above, to mitigate our exposure. However, due to~~debt through the ~~uncertainty~~issuance of the ~~actions that would be taken and their possible effects, additional analysis is not possible~~Notes, which bear interest at ~~this time. Further, such analysis would not consider the effects of the change in the level of overall economic activity that could exist in such an environment.~~a fixed interest rate.

Item 4.Controls and Procedures

We maintain a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended, the “Exchange Act”) designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Such disclosure controls and procedures are designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chairman, President and Chief Executive Officer (“CEO”) and Senior Vice President and Chief Financial Officer (“CFO”), 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 that evaluation, the CEO and CFO have concluded our disclosure controls and procedures were effective as of March 31, ~~2010.~~2011.

There were no changes to our internal control over financial reporting during the fiscal quarter ended March 31, ~~2010~~2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

~~As previously disclosed,~~On March 14, 2011, a putative shareholder class action complaint was filed against Citadel, its board of directors (the “Citadel Board”), and us in ~~August 2005, we were subpoenaed by~~ the ~~Office~~District Court of Clark County, Nevada, generally alleging that the ~~Attorney General of the State of New York, as were other radio broadcasting companies,~~Citadel Board breached its fiduciary duties to Citadel stockholders in connection with its approval of the ~~New York Attorney General’s investigation~~Citadel Acquisition and breached its duty of ~~promotional practices related~~disclosure to ~~record companies’ dealings~~Citadel stockholders by allegedly withholding material information relating to the Citadel Acquisition, and also alleged that Citadel and us each aided and abetted the Citadel Board in its alleged breach of its fiduciary duties. The complaint seeks, among other things, an injunction against the consummation of the Citadel Acquisition or rescission of the Citadel Acquisition in the event it is consummated. We intend to vigorously defend our self against the allegations in the complaint.

On March 23, 2011, a second putative class action complaint was filed in the District Court of Clark County, Nevada, against Citadel, the Citadel Board, us, Holdco and Merger Sub (Holdco and Merger Sub, collectively, the “Merger Entities”). The complaint generally alleges that the Citadel Board breached its fiduciary duties to Citadel shareholders in connection with ~~radio stations broadcasting~~its approval of the Citadel Acquisition and that Citadel, us and the Merger Entities aided and abetted the Citadel Board’s alleged breach of its fiduciary duties. The complaint seeks, among other things, an injunction against the consummation of the Citadel Acquisition, rescission of the Citadel Acquisition in ~~New York.~~the event it is consummated, and any damages arising from the defendants’ alleged breaches. We and the Merger Entities intend to vigorously defend ourselves against the allegations in the complaint.

On May 6, 2011, a third putative class action complaint was filed in the Chancery Court of Delaware against Citadel, the Citadel Board, Cumulus and the Merger Entities. The complaint alleges, among other things, that the members of the Citadel Board breached their fiduciary duties to the Citadel shareholders by their approval of the Citadel Acquisition. The complaint further alleges that we and the Merger Entities knowingly aided and abetted the Citadel Board’s breach of fiduciary duties. The complaint seeks, among other things: (i) the court’s declaration that the lawsuit is properly maintainable as a class action; (ii) an injunction against the consummation of the Citadel Acquisition; (iii) rescission of the Citadel Acquisition, to the extent certain terms have ~~cooperated with~~already been implemented; (iv) that the ~~Attorney General~~Citadel Board account to the plaintiffs for all damages suffered as a result of the Citadel Board’s alleged wrongdoing; and (v) the award of reasonable attorneys’ fees. We and the Merger Entities intend to vigorously defend themselves against the allegations in this ~~investigation.~~complaint.

~~Also~~Cumulus was previously a party to a lawsuit, filed on January 21, 2010, by Brian Mas, a former employee of a subsidiary of CMP. Pursuant to a stipulation and order filed on March 4, 2011, Cumulus was dismissed as ~~previously disclosed,~~a defendant in ~~May 2007, we received a request for information~~that suit, and ~~documents from~~CMP was substituted in lieu of Cumulus as the FCC related to our sponsorship of identification policies and sponsorship identification practices at certain of our radio stations as requested by the FCC. We are cooperating with the FCC in this investigation and are in the process of producing documents and other information requested by the FCC.named defendant.

In April 2009, the Company was named in a patent infringement suit brought against the Company as well as twelve other radio companies, including Clear Channel, Citadel Broadcasting, CBS Radio, Entercom Communications, Saga Communications, Cox Radio, Univision Communications, Regent Communications, Gap Broadcasting, and Radio One. The case, captioned Aldav, LLC v. Clear Channel Communications, Inc., et al, Civil Action No. 6:09-cv-170, U.S. District Court for the Eastern District of Texas, Tyler Division (filed April 16, 2009), alleged that the defendants have infringed and continue to infringe plaintiff’s patented content replacement technology in the context of radio station streaming over the Internet, and sought a permanent injunction and unspecified damages. The parties settled this suit in March 2010.

~~In addition to the above proceedings and those previously disclosed in our annual report on Form 10-K for the year ended December 31, 2009, from~~From time to time we are involved in various ~~other~~ legal proceedings that are handled and defended in the ordinary course of business. While we are unable to predict the outcome of these matters, our management does not believe, based upon currently available facts, that the ultimate resolution of any such known proceedings would have a material adverse effect on our overall financial condition or results of operations.

Item 1A.Risk Factors

Please refer to Part I, Item 1A, “Risk Factors,” in our annual report on Form 10-K for the year ended December 31, ~~2009,~~2010, and the information contained under the heading “Risk Factors” in Exhibit 99.1 to our current report on Form 8-K, filed with the SEC on April 25, 2011, for information regarding factors that could affect our results of operations, financial condition and liquidity.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

On May 21, 2008, our Board of Directors authorized the purchase, from time to time, of up to $75.0 million of our Class A Common Stock, subject to the terms of the Credit Agreement and compliance with other applicable legal requirements. During the three months ended March 31, ~~2010,~~2011, we did not purchase any shares of our Class A Common Stock. As of March 31, ~~2010,~~2011, we had authority to repurchase an additional $68.3 million of our Class A Common Stock.

Item 3.~~Defaults upon Senior Securities~~

~~Not applicable.~~

~~Item 5.~~~~Other Information~~

~~Not applicable.~~

~~Item~~ 6.Exhibits


2.1	—	Exchange Agreement, dated as of January 31, 2011, by and among the Company, Bain Capital Partners, LLC, The Blackstone Group L.P. and Thomas H. Lee Partners.

2.2	—	Agreement and Plan of Merger, dated as of March 9, 2011, by and among Citadel Broadcasting Corporation, Cumulus Media Inc., Cumulus Media Holdings Inc. and Cadet Merger Corporation (incorporated herein by reference to Exhibit 2.1 to our current report on Form 8-K, filed on March 10, 2011).

10.1	—	Investment Agreement, dated as of March 9, 2011, by and among Cumulus Media Inc. and the Investors party thereto (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed on March 10, 2011).

10.2	—	Amended and Restated Investment Agreement, dated as of April 22, 2011, by and among Cumulus Media Inc. and the Investors party thereto (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed on April 25, 2011).

10.3	—	Employment Agreement between Cumulus Media Inc. and Richard S. Denning, dated as of December 22, 2001.

10.4	—	First Amendment to Employment Agreement, dated as of December 31, 2008, between Cumulus Media Inc. and Richard S. Denning.

31.1	—	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


31.2		—		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32.1		—		Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

2826


PART I. FINANCIAL INFORMATION			3
Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets as of March 31, ~~2010~~2011 and December 31, ~~2009~~2010			3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, ~~2010~~2011 and March 31, ~~2009~~2010			4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2010~~2011 and March 31, ~~2009~~2010			5
Notes to Unaudited Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1917
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2625
Item 4. Controls and Procedures			2725
PART II. OTHER INFORMATION			2726
Item 1. Legal Proceedings			2726
Item 1A. Risk Factors			2726
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
~~Item 3. Defaults Upon Senior Securities~~			28
~~Item 4. Submission of Matters to a Vote of Security Holders~~
~~Item 5. Other Information~~			2826
Item 6. Exhibits			2826
Signatures			2927
Exhibit Index			3028
EX-2.1
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32.1


				Fair Value Measurements at Reporting Date Using
				Quoted		Significant
				Prices in		Other			Significant
				Active		Observable			Unobservable
	Total Fair			Markets		Inputs			Inputs
	Value			(Level 1)		(Level 2)			(Level 3)

Financial assets:
Cash equivalents:
Money market funds (1)	$	4,382		$	4,382	$	—		$	—

Total assets	$	4,382		$	4,382	$	—		$	—


Financial Liabilities:
Other short-term liabilities
Interest rate swap (2)	$	(13,726	)	$	—	$	(13,726	)	$	—
Other long-term liabilities
Green Bay option (3)		(6,657	)		—		—			(6,657	)

Total liabilities	$	(20,383	)	$	—	$	(13,726	)	$	(6,657	)


			Fair Value Measurements at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
	Total Fair		Markets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

Financial Liabilities:
Other current liabilities
Green Bay Option (1)	$	8,070	$	—	$	—	$	8,070

Total liabilities	$	8,070	$	—	$	—	$	8,070


			Fair Value Measurements at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
	Total Fair		Markets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

Non-financial assets:
Goodwill	$	56,121	$	—	$	—	$	56,121
Other intangible assets		161,031		—		—		161,031

Total	$	217,152	$	—	$	—	$	217,152


	March 31, 2010		December 31, 2009		March 31, 2011		December 31, 2010

Carrying value of term loan	$	624,087	$	636,890	$	575,769	$	593,755
Fair value of term loan	$	570,340	$	538,604	$	570,778	$	547,850


Allocation	Amount

Fixed assets	$	1,790
Broadcast licenses		11,190
Goodwill		4,342
Other intangibles		72

Total purchase price	$	17,394
Less: Carrying value of Canton station		(2,236	)

Gain on asset exchange	$	15,158


		Fair Value
	Balance Sheet Location	March 31, 2011		December 31, 2010

Derivatives not designated as hedging instruments:
Green Bay Option	Other long-term liabilities	$	8,070	$	8,030
May 2005 Option	Other current liabilities		—		3,683

	Total	$	8,070	$	11,713


Liability Derivatives
	Balance Sheet	Fair Value
	Location	March 31, 2010		December 31, 2009

Derivative not designated as hedging instruments:
Green Bay Option	Other long-term liabilities	$	6,657	$	6,073
Interest rate swap — option	Other short-term liabilities		13,726		—
Interest rate swap — option	Other long-term liabilities		—		15,639

	Total	$	20,383	$	21,712


Liability Derivatives
		Amount of Income (Expense)
		Recognized in Income on Derivatives
Derivative	Financial Statement	for the Three Months Ended
Instruments	Location	March 31, 2010			March 31, 2009

Green Bay Option	Realized loss on derivative instrument	$	(584	)	$	—
Interest rate swap — option	Interest income/(expense)		1,913			(4,045	)
Interest rate swap	Interest income/(expense)		—			3,043

	Total	$	1,329		$	(1,002	)


		Amount of Income
		(Expense)
		Recognized on
		Derivatives
		for the Three Months
Derivative Instruments	Statement of OperationsLocation	Ended March 31, 2011

Green Bay Option	Realized loss on derivative instrument	$	(40	)
May 2005 Option	Interest income		3,683

	Total	$	3,643


Description	Green Bay Option		Green Bay Option

Fair value balance at December 31, 2009	$	6,073
Fair value balance at December 31, 2010			$	8,030

Add: Mark to market fair value adjustment		584		40


Fair value balance at March 31, 2010	$	6,657
Fair value balance at March 31, 2011			$	8,070

	•		total term of ~~3.5~~2.4 years;

	•		volatility rate of ~~37.1%~~41.0%;

	•		annual dividend ~~annual~~ rate of 0.0%;

	•		discount rate of ~~1.6%~~1.0%; and

	•		market value of Green Bay station of ~~$10.1~~$8.8 million.

	•		discount cash flow rate of ~~6.25%~~4.6%;

	•		interest rate of ~~0. 25%~~0.2%; and

	•		credit spread of 4.4%.


(1)		~~Unvested restricted~~For the three months ended March 31, 2011, options to purchase 85,092 shares of common stock ~~has no contractual obligation to absorb losses~~were outstanding but excluded from the EPS calculation because the exercise prices of the ~~Company. Therefore,~~options were equal to or exceeded the average share price for the period and, as a result, the inclusion of such options would have been antidilutive. For the three months ended March 31, 2010, options to purchase 873,119 shares of common stock were outstanding but excluded from the EPS calculation because the inclusion of such options would have been antidilutive due to the net loss position. Additionally, for the three months ended March 31, 2010, ~~and 2009, 1,710,099 shares and 1,532,910 shares of restricted stock, respectively, were outstanding but~~the Company excluded from the EPS ~~calculations.~~

~~(2)~~		For the three months ended March 31, 2010 and 2009, options to purchase 925,290 shares and 2,274,895 shares of common stock, respectively, were outstanding but excluded from the EPS calculations because their effect would have been antidilutive. Additionally, the Company excludedcalculation certain warrants ~~from the EPS calculations~~ because including the warrants would ~~be antidilutive.~~have been antidilutive due to the net loss position.


	March 31, ~~2010~~2011
Restricted shares of Class A Common Stock		~~1,710,099~~1,789,881
Options to purchase Class A Common Stock		~~925,290~~784,217


	Three Months Ended March 31,						Three Months Ended March 31,
	2010			2009			2011			2010

Income Statement Data:
Revenues	$	37,917		$	35,837		$	39,143		$	37,917
Operating expenses		27,304			26,308			23,801			27,304
Net income		1,413			50,402			2,096			1,413
Balance Sheet Data:
Assets		489,625			717,183			407,833			489,625
Liabilities		924,538			1,050,504			822,778			924,538
Shareholders’ deficit		(434,913	)		(333,321	)		(414,945	)		(434,913	)


	Indefinite Lived			Definite Lived			Total

Intangible Assets:
Balance as of December 31, 2009	$	160,801		$	579		$	161,380

Acquisition		230			—			230
Amortization		—			(201	)		(201	)
Impairment		(629	)		—			(629	)
Reclassifications		16			174			190

Balance as of December 31, 2010	$	160,418		$	552		$	160,970

Acquisition		11,498			72			11,570
Disposition		(1,303	)		(14	)		(1,317	)
Amortization		—			(9	)		(9	)

Balance as of March 31, 2011	$	170,613		$	601		$	171,214


	2011			2010

Balance as of January 1:
Goodwill	$	285,820		$	285,820
Accumulated impairment losses		(229,741	)		(229,699	)

Subtotal		56,079			56,121
Goodwill acquired during the year		4,343			—
Balance as of March 31:
Goodwill		290,163			285,820
Accumulated impairment losses		(229,741	)		(229,699	)

Total	$	60,422		$	56,121


**		Calculation is not meaningful.

(1)		Station Operating Income consists of operating income before depreciation and amortization, LMA fees, non-cash stock compensation expense, corporate general and administrative expenses, the ~~mark to market fair value adjustment~~gain on exchange of assets or stations, and the ~~Green Bay Option, and non-cash stock compensation.~~realized loss on derivative instruments. Station Operating Income is not a measure of performance calculated in accordance with GAAP. Station Operating Income should not be considered in isolation or as a substitute for net income (loss), operating income, ~~(loss),~~ cash flows from operating activities or any other measure for determining our operating performance or liquidity that is calculated in accordance with GAAP. See management’s explanation of this measure and the reasons for its use and presentation, along with a quantitative reconciliation of Station Operating Income to its most directly comparable financial measure calculated and presented in accordance with GAAP, below under “"Station Operating ~~Income”~~Income.”

(2)		Station Operating Income margin is defined as Station Operating Income as a percentage of net revenues.


	CUMULUS MEDIA INC.
Date: ~~April 30, 2010~~May 16, 2011	By:	/s/ Joseph P. Hannan
		Joseph P. Hannan
		Senior Vice President, Treasurer and Chief Financial Officer