Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31,June 30, 2013

OR

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

For the transition period from                      to                     

Commission file number 000-24525

CUMULUS MEDIA INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware 36-4159663

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

3280 Peachtree Road, NW Suite 2300,

Atlanta, GA

 30305
(Address of Principal Executive Offices) (ZIP Code)

(404) 949-0700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  xý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  xý    No  ¨

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

Large accelerated filer ¨  Accelerated filer  xý
Non-accelerated filer 
¨ (Do not check if a smaller reporting company)
  Smaller reporting company  ¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No xý

As of April 30,July 23, 2013, the registrant had 175,963,810178,396,041 outstanding shares of common stock consisting of (i) 159,893,995162,326,226 shares of Class A common stock; (ii) 15,424,944 shares of Class B common stock; and (iii) 644,871 shares of Class C common stock.



Table of Contents

CUMULUS MEDIA INC.

INDEX

 

31
37
37
 
37
38
38 
Item 6. Exhibits38
39


2


PART I. FINANCIAL INFORMATION


Item 1.Financial Statements


CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for per share data)

(Unaudited)

   March 31,
2013
  December 31,
2012
 

Assets

   

Current assets:

   

Cash and cash equivalents

  $82,806   $88,050  

Restricted cash

   6,096    5,921  

Accounts receivable, less allowance for doubtful accounts of $3,882 and $4,131 at March 31, 2013 and December 31, 2012, respectively

   164,099    207,563  

Trade receivable

   5,926    6,104  

Prepaid expenses and other current assets

   47,299    45,481  
  

 

 

  

 

 

 

Total current assets

   306,226    353,119  

Property and equipment, net

   251,459    255,903  

Broadcast licenses

   1,642,044    1,602,373  

Other intangible assets, net

   236,850    258,761  

Goodwill

   1,205,166    1,195,594  

Other assets

   75,985    77,825  
  

 

 

  

 

 

 

Total assets

  $3,717,730   $3,743,575  
  

 

 

  

 

 

 

Liabilities, Redeemable Preferred Stock and Stockholders’ Equity

   

Current liabilities:

   

Accounts payable and accrued expenses

  $100,651   $102,586  

Trade payable

   4,754    4,803  

Current portion of long-term debt

   48,868    76,468  

Other current liabilities

   10,648    11,386  
  

 

 

  

 

 

 

Total current liabilities

   164,921    195,243  

Long-term debt, excluding 7.75% senior notes

   2,039,647    2,014,599  

7.75% senior notes

   610,000    610,000  

Other liabilities

   43,884    45,313  

Deferred income taxes

   550,346    559,918  
  

 

 

  

 

 

 

Total liabilities

   3,408,798    3,425,073  
  

 

 

  

 

 

 

Redeemable preferred stock:

   

Series A cumulative redeemable preferred stock, par value $0.01 per share; stated value of $1,000 per share; 100,000,000 shares authorized; 75,767 shares issued and outstanding at both March 31, 2013 and December 2012

   72,368    71,869  
  

 

 

  

 

 

 

Total redeemable preferred stock

   72,368    71,869  
  

 

 

  

 

 

 

Stockholders’ equity:

   

Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 183,772,345 and 182,682,073 shares issued, and 159,505,841 and 158,519,394 shares outstanding, at March 31, 2013 and December 31, 2012, respectively

   1,838    1,827  

Class B common stock, par value $0.01 per share; 600,000,000 shares authorized; 15,424,944 shares issued and outstanding at both March 31, 2013 and December 31, 2012

   154    154  

Class C common stock, par value $0.01 per share; 644,871 shares authorized, issued and outstanding at both March 31, 2013 and December 31, 2012

   6    6  

Treasury stock, at cost, 24,266,504 and 24,162,676 shares at March 31, 2013 and December 31, 2012, respectively

   (252,341  (252,001

Additional paid-in-capital

   1,514,098    1,514,849  

Accumulated deficit

   (1,027,191  (1,018,202
  

 

 

  

 

 

 

Total stockholders’ equity

   236,564    246,633  
  

 

 

  

 

 

 

Total liabilities, redeemable preferred stock and stockholders’ equity

  $3,717,730   $3,743,575  
  

 

 

  

 

 

 

 
June 30,
2013

 
December 31,
2012

Assets   
Current assets:   
Cash and cash equivalents$46,216
 $88,050
Restricted cash3,729
 5,921
Accounts receivable, less allowance for doubtful accounts of $3,779 and $4,131 at June 30, 2013 and December 31, 2012, respectively203,469
 207,563
Trade receivable7,344
 6,104
Deferred income taxes29,658

25,145
Prepaid expenses and other current assets21,952
 20,336
Total current assets312,368
 353,119
Property and equipment, net246,528
 255,903
Broadcast licenses1,640,882
 1,602,373
Other intangible assets, net215,386
 258,761
Goodwill1,204,953
 1,195,594
Other assets70,067
 77,825
Total assets$3,690,184
 $3,743,575
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity   
Current liabilities:   
Accounts payable and accrued expenses$75,872
 $102,586
Trade payable6,620
 4,803
Current portion of long-term debt13,250
 76,468
Other current liabilities8,542
 11,386
Total current liabilities104,284
 195,243
Long-term debt, excluding 7.75% senior notes2,040,359
 2,014,599
7.75% senior notes610,000
 610,000
Other liabilities41,122
 45,313
Deferred income taxes558,621
 559,918
Total liabilities3,354,386
 3,425,073
Redeemable preferred stock:   
Series A cumulative redeemable preferred stock, par value $0.01 per share; stated value of $1,000 per share; 100,000,000 shares authorized; 75,767 shares issued and outstanding at both June 30, 2013 and December 31, 201272,871
 71,869
Total redeemable preferred stock72,871
 71,869
Stockholders’ equity:   
Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 186,456,601 and 182,682,073 shares issued, and 162,326,226 and 158,519,394 shares outstanding, at June 30, 2013 and December 31, 2012, respectively1,864
 1,827
Class B common stock, par value $0.01 per share; 600,000,000 shares authorized; 15,424,944 shares issued and outstanding at both June 30, 2013 and December 31, 2012154
 154
Class C common stock, par value $0.01 per share; 644,871 shares authorized, issued and outstanding at both June 30, 2013 and December 31, 20126
 6
Treasury stock, at cost, 24,130,375 and 24,162,676 shares at June 30, 2013 and December 31, 2012, respectively(250,697) (252,001)
Additional paid-in-capital1,511,689
 1,514,849
Accumulated deficit(1,000,089) (1,018,202)
Total stockholders’ equity262,927
 246,633
Total liabilities, redeemable preferred stock and stockholders’ equity$3,690,184
 $3,743,575
See accompanying notes to the unaudited condensed consolidated financial statements.


3


CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

   Three Months Ended
March 31,
 
   2013  2012 

Broadcast revenues

  $232,872   $235,965  

Management fees

   —      30  
  

 

 

  

 

 

 

Net revenues

   232,872    235,995  

Operating expenses:

   

Direct operating expenses (excluding depreciation, amortization and LMA fees)

   164,172    153,627  

Depreciation and amortization

   28,930    34,882  

LMA fees

   969    839  

Corporate general and administrative expenses (including stock-based compensation expense of $2,663 and $6,978 in 2013 and 2012, respectively)

   13,866    16,692  

Loss on station sale

   1,309    —    

Gain on derivative instrument

   (738  (88
  

 

 

  

 

 

 

Total operating expenses

   208,508    205,952  
  

 

 

  

 

 

 

Operating income

   24,364    30,043  
  

 

 

  

 

 

 

Non-operating (expense) income:

   

Interest expense, net

   (44,252  (50,803

Other income, net

   133    262  
  

 

 

  

 

 

 

Total non-operating expense, net

   (44,119  (50,541
  

 

 

  

 

 

 

Loss from continuing operations before income taxes

   (19,755  (20,498

Income tax benefit

   10,767    7,892  
  

 

 

  

 

 

 

Loss from continuing operations

   (8,988  (12,606

Income from discontinued operations, net of taxes

   —      476  
  

 

 

  

 

 

 

Net loss

   (8,988  (12,130

Less: dividends declared and accretion of redeemable preferred stock

   3,152    5,700  
  

 

 

  

 

 

 

Loss attributable to common shareholders

  $(12,140 $(17,830
  

 

 

  

 

 

 

Basic and diluted loss per common share (see Note 12, “Earnings Per Share”):

   

Basic: Loss from continuing operations per share

  $(0.07 $(0.13
  

 

 

  

 

 

 

Income from discontinued operations per share

  $—     $0.01  
  

 

 

  

 

 

 

Loss per share

  $(0.07 $(0.12
  

 

 

  

 

 

 

Diluted: Loss from continuing operations per share

  $(0.07 $(0.13
  

 

 

  

 

 

 

Income from discontinued operations per share

  $—     $0.01  
  

 

 

  

 

 

 

Loss per share

  $(0.07 $(0.12
  

 

 

  

 

 

 

Weighted average basic common shares outstanding

   174,748,001    149,369,152  
  

 

 

  

 

 

 

Weighted average diluted common shares outstanding

   174,748,001    149,369,152  
  

 

 

  

 

 

 

 Three Months Ended June 30, Six Months Ended June 30,
 2013 2012 2013 2012
Broadcast revenues$289,676

$280,745

522,548

$516,710
Management fees

296



326
Net revenues289,676

281,041

522,548

517,036
Operating expenses:       
Direct operating expenses (excluding depreciation, amortization and LMA fees)171,762

168,746

335,934

322,442
Depreciation and amortization28,935

36,200

57,866

71,007
LMA fees759

885

1,728

1,724
Corporate, general and administrative expenses (including stock-based compensation expense of $2,470, $5,928, $5,134 and $12,906, respectively)7,760

16,802

21,626

33,494
Loss on sale of stations91



1,400


(Gain) loss on derivative instrument(2,106)
841

(2,844)
753
Impairment of intangible assets

12,435



12,435
Total operating expenses207,201

235,909

415,710

441,855
Operating income82,475

45,132

106,838

75,181
Non-operating (expense) income:       
Interest expense, net(43,833)
(49,619)
(88,085)
(100,422)
Loss on early extinguishment of debt(4,539) 
 (4,539) 
Other (expense) income, net(511)
(74)
(378)
190
Total non-operating expense, net(48,883)
(49,693)
(93,002)
(100,232)
Income (loss) from continuing operations before income taxes33,592

(4,561)
13,836

(25,051)
Income tax (expense) benefit(6,491)
2,798

4,276

10,689
Income (loss) from continuing operations27,101

(1,763)
18,112

(14,362)
Income from discontinued operations, net of taxes

9,906



10,375
Net income (loss)27,101

8,143

18,112

(3,987)
Less: dividends declared and accretion of redeemable preferred stock3,155

6,791

6,307

12,491
Income (loss) attributable to common shareholders$23,946

$1,352

$11,805

$(16,478)
Basic and diluted income (loss) per common share (see Note 12, “Earnings Per Share”): 


 

Basic: Income (loss) from continuing operations per share$0.11

$(0.05)
$0.05

$(0.17)
Income from discontinued operations per share$

$0.06

$

$0.07
Income (loss) per share$0.11

$0.01

$0.05

$(0.11)
Diluted: Income (loss) from continuing operations per share$0.11

$(0.05)
$0.05

$(0.17)
Income from discontinued operations per share$

$0.06

$

$0.07
Income (loss) per share$0.11

$0.01

$0.05

$(0.11)
Weighted average basic common shares outstanding176,481,592

157,710,861

175,619,586

153,540,006
Weighted average diluted common shares outstanding179,553,341

157,710,861

178,678,090

153,540,006
See accompanying notes to the unaudited condensed consolidated financial statements.


4


CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

   Three Months Ended March 31, 
         2013              2012       

Cash flows from operating activities:

   

Net loss

  $(8,988 $(12,130

Adjustments to reconcile net loss to net cash provided by operating activities:

   

Depreciation and amortization

   28,930    35,678  

Amortization of debt issuance costs/discounts

   2,624    2,974  

Provision for doubtful accounts

   529    3,361  

Loss (gain) on sale of assets or stations

   1,309    (262

Fair value adjustment of derivative instruments

   (733  (3

Deferred income taxes

   (9,573  (5,980

Stock-based compensation expense

   2,663    6,978  

Changes in assets and liabilities:

   

Accounts receivable

   42,933    42,186  

Trade receivable

   178    (28

Prepaid expenses and other current assets

   (1,864  (611

Other assets

   252    (124

Accounts payable and accrued expenses

   (1,945  (9,425

Trade payable

   (49  (325

Other liabilities

   (1,460  (2,011
  

 

 

  

 

 

 

Net cash provided by operating activities

   54,806    60,278  

Cash flows from investing activities:

   

Proceeds from sale of assets or stations

   467    322  

Acquisitions less cash acquired

   (52,066  —    

Restricted cash

   (175  —    

Capital expenditures

   (1,986  (1,122
  

 

 

  

 

 

 

Net cash used in investing activities

   (53,760  (800

Cash flows from financing activities:

   

Repayment of borrowings under term loans and revolving credit facilities

   (3,313  (54,000

Tax withholding payments on behalf of employees for stock based compensation

   (337  (1,346

Preferred stock dividends

   (2,652  (3,125

Proceeds from exercise of warrants

   12    34  
  

 

 

  

 

 

 

Net cash used in financing activities

   (6,290  (58,437

(Decrease) increase in cash and cash equivalents

   (5,244  1,041  

Cash and cash equivalents at beginning of period

   88,050    30,592  
  

 

 

  

 

 

 

Cash and cash equivalents at end of period

  $82,806   $31,633  
  

 

 

  

 

 

 

Supplemental disclosures of cash flow information:

   

Interest paid

  $28,692   $37,037  

Income taxes paid (refunds)

   (270  107  

Supplemental disclosures of non-cash flow information:

   

Compensation held in trust

   —      24,807  

Trade revenue

   4,915    6,832  

Trade expense

   4,771    6,432  

 Six Months Ended June 30,
 2013 2012
Cash flows from operating activities:   
Net income (loss)$18,112

$(3,987)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization57,866

72,242
Amortization of debt issuance costs/discounts5,164

5,061
Provision for doubtful accounts1,046

1,598
Loss (gain) on sale of assets or stations1,537

(183)
Impairment of intangible assets

12,435
Loss on early extinguishment of debt4,539


Fair value adjustment of derivative instruments(2,871)
1,003
Deferred income taxes(5,809)
(14,302)
Stock-based compensation expense5,134

12,906
Changes in assets and liabilities:   
Accounts receivable3,045

4,789
Trade receivable(1,240)
(1,211)
Prepaid expenses and other current assets(1,664)
(1,217)
Other assets1,044

(715)
Accounts payable and accrued expenses(26,724)
(31,407)
Trade payable1,817

393
Other liabilities(4,222)
(2,215)
Net cash provided by operating activities56,774
 55,190
Cash flows from investing activities:   
Proceeds from sale of assets or stations692

426
Acquisitions less cash acquired(52,066)

Restricted cash2,192


Capital expenditures(4,830)
(1,919)
Net cash used in investing activities(54,012) (1,493)
Cash flows from financing activities:   
Repayment of borrowings under term loans and revolving credit facilities(38,931)
(57,000)
Tax withholding payments on behalf of employees for stock based compensation(337)
(1,909)
Preferred stock dividends(5,304)
(6,458)
Proceeds from exercise of warrants34

161
Deferred financing costs(58)

Net cash used in financing activities(44,596) (65,206)
Decrease in cash and cash equivalents(41,834)
(11,509)
Cash and cash equivalents at beginning of period88,050

30,592
Cash and cash equivalents at end of period$46,216
 $19,083
Supplemental disclosures of cash flow information:   
Interest paid$82,208

$97,441
Income taxes paid$1,561

$2,909
Supplemental disclosures of non-cash flow information:   
Compensation held in trust$

$24,807
Trade revenue$12,458

$13,642
Trade expense$12,577

$12,705
See accompanying notes to the unaudited condensed consolidated financial statements.


5



1. Description of Business, Interim Financial Data and Basis of Presentation:

Description of Business

Cumulus Media Inc. (and its consolidated subsidiaries, except as the context may otherwise require, “Cumulus,” “Cumulus Media,” “we,” “us,” “our,” or the “Company”) is a Delaware corporation, organized in 2002, and successor by merger to an Illinois corporation with the same name that had been organized in 1997.

Nature of Business

Cumulus Media believes it is the largest pure-play radio broadcaster in the United States based on number of stations. At March 31,June 30, 2013, Cumulus Media owned or operated approximately 520 radio stations (including under local marketing agreements, or “LMAs”) in 108 United States media markets and a nationwide radio network serving over 5,000 stations.

Interim Financial Data

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company and the notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The accompanying unaudited interim condensed consolidated financial statements include the condensed consolidated accounts of Cumulus and its wholly-owned subsidiaries, with all significant intercompany balances and transactions eliminated in consolidation. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of results of operations for, and financial condition as of the end of, the interim periods have been made. The results of operations for the three months and six months ended March 31,June 30, 2013, the cash flows for the threesix months ended March 31,June 30, 2013 and the Company’s financial condition as of March 31,June 30, 2013, are not necessarily indicative of the results of operations or cash flows that can be expected for, or the Company’s financial condition as of, any other interim period or for the fiscal year ending December 31, 2013.

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to bad debts, intangible assets, derivative financial instruments, income taxes, stock-based compensation, contingencies, litigation and purchase price allocations. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts and results may differ materially from these estimates under different assumptions or conditions.

Revisionsestimates.

Reclassifications
Certain 2012 balances were reclassified to Prior Period Financial Statements

In connectionconform with the preparation of the accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2013, the Company identified an errorclassifications currently in the Quarterly Results (Unaudited) footnote included in the Company’s 2012 Annual Report on Form 10-K. Upon completion of the Company’s evaluation of the error, it was determined that “Income from discontinued operations, net of tax” as presented for the fourth quarter of 2012 improperly excluded the effect of taxes while “Income from discontinued operations, net of tax” as presented for the first quarter of 2012 improperly included the effect of taxes related to the fourth quarter of 2012. The errors had no impact on net income of the consolidated financial statements for the year ended December 31, 2012 or on any other periods or disclosures previously presented.

In accordance with accounting guidance found inASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), the Company assessed the materiality of the errors and concluded that the errors were not material to any of the Company’s previously issued financial statements. As permitted by the accounting guidance found inASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Company elected to present herein the revised financial information for the three months ended March 31, 2012 and December 31, 2012.

The following tables present the effect of this revision on all disclosures and periods affected.

   First
Quarter
  First
Quarter
  First
Quarter
 
   As Previously
Reported
  Adjustment  As Revised 

FOR THE YEAR ENDED DECEMBER 31, 2012

    

Income from discontinued operations, net of taxes

  $20,552   $(20,076 $476  

Income from discontinuing operations per share

  $0.14   $(0.13 $0.01  
   Fourth
Quarter
  Fourth
Quarter
  Fourth
Quarter
 
   As Previously
Reported
  Adjustment  As Revised 

FOR THE YEAR ENDED DECEMBER 31, 2012

    

(Loss) income from discontinued operations, net of taxes

  $(268 $20,076   $19,808  

Income from discontinuing operations per share

  $—     $0.11   $0.11  

The error had no impact on net income for the year ended December 31, 2012 or on any other periods or disclosures previously presented.

use.

Recent Accounting Pronouncements

ASU 2012-02. In July 2012, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2012-02. The amendments in this ASU give companies the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired rather than calculating the fair value of the indefinite-lived intangible asset. It is effective prospectively for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company adopted this guidance effective January 1, 2013. The adoption of this guidance did not have an impact on the Company’s interim financial statements.

ASU 2013-01. In January 2013, the FASB issued ASU 2013-01 which provides scope clarification related to the previously issued ASU 2011-11. The amendments in this ASU require companies to disclose information about offsetting and related arrangements to enable users of their financial statements to understand the effect of those arrangements on the Company’s financial position. The ASU is required to be applied retrospectively for all prior periods presented and is effective for annual periods for fiscal years beginning on or after January 1, 2013. The Company adopted this guidance effective January 1, 2013. The adoption of this guidance did not have an impact on the Company’s interim financial statements.

ASU 2013-02. In February 2013, the FASB issued ASU 2013-02 which amends existing guidance by requiring that additional information be disclosed about items reclassified (“reclassification adjustments”) out of accumulated other comprehensive income. The additional information includes separately stating the total change for each component of other comprehensive income (for example unrealized gains or losses on available-for-sale securities or foreign currency items) and separately disclosing both current-period other comprehensive income and reclassification adjustments. Entities are also required to present, either on the face of the income statement or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income as separate line items of net income but only if the entire amount reclassified must be reclassified to net income in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity must cross-reference to other disclosures that provide additional detail about those amounts The ASU is required to be applied prospectively for all prior periods presented and is effective for annual periods for fiscal years beginning on or after January 1, 2013. The Company adopted this guidance effective January 1, 2013. The adoption of this guidance did not have an impact on the Company’s interim financial statements.

ASU 2013-04. In February 2013, the FASB issued ASU 2013-04 which provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements where the total obligation is fixed at the reporting date, and for which no specific guidance currently exists. This ASU is effective for annual reporting periods beginning on or after December 15, 2013 and subsequent interim periods. The Company is currently assessing the expected impact, if any, on the consolidated financial statements.




6


2. Acquisitions and Dispositions

2013 Acquisitions

WFME Asset Exchange

On January 8, 2013 the Company completed its previously announced asset exchange (the “WFME Asset Exchange”) with Family Stations, Inc., pursuant to which it exchanged its WDVY station in New York plus $40.0$40.0 million in cash for Family Stations’ WFME station in Newark, New Jersey. The total purchase price is subject to additional contingent cash considerationincrease of $10up to $10 million payable to the sellers if certain future conditions are met as detailed in the purchase agreement. We haveThe Company has estimated the fair value of the contingent consideration to be less than $0.1$0.1 million as of March 31,June 30, 2013. Any future change in the estimated fair value of the contingent consideration during the contingency period, will be recorded in the Company’s results of operations in the period of such change. This acquisition provided Cumulus with a radio station in the United States’ largest media market, for the national NASH entertainment brand based on the country music lifestyle.

The table below summarizes the preliminary purchase price allocation among the tangible and intangible assets acquired and liabilities assumed in the WFME Asset Exchange (dollars in thousands):

AllocationAmount
Other assets$1,460
Goodwill11,461
Broadcast licenses27,100
Plant, property, and equipment, net62
Total purchase price40,083
Less: Cash consideration(40,000)
Less: Carrying value of station transferred(52)
Less: Contingent consideration(31)
  Gain on asset exchange$

The material assumptions utilized in the valuation of intangible assets included overall future market revenue growth rates for the residual year of approximately 2.0% and a weighted average cost of capital of 10.0%. Goodwill was equal to the difference between the purchase price and the value assigned to tangible and intangible assets acquired and liabilities. $11.4 millionAll of the acquired goodwill is deductible for tax purposes. The indefinite-lived intangible assets acquired in the WFME Asset Exchange consists of broadcast licenses and goodwill.

Pamal Broadcasting Asset Purchase

On January 17, 2013, the Company completed the Pamal Broadcasting Asset Purchase, acquiringacquisition of WMEZ-FM and WXBM-FM from Pamal Broadcasting Ltd. for a purchase price of $6.5 million.

$6.5 million (the "Pamal Broadcasting Asset Purchase"). The transaction was part of the Company’s ongoing efforts to focus on radio stations in larger markets and geographically strategic regional clusters.

Revenues of $0.4$0.5 million and $0.9 million attributable to the Pamal Broadcasting Asset Purchase were included in the Company’s condensed consolidated statement of operations for the three and six months ended March 31,June 30, 2013,

respectively.

The table below summarizes the preliminary purchase price allocation among the tangible and intangible assets acquired in the Pamal Broadcasting Asset Purchase (dollars in thousands):

AllocationAmount
Plant, property, and equipment, net$783
Broadcast licenses5,700
Total purchase price$6,483

2012 Acquisitions

On July 31, 2012, the Company completed its sale of 55 stations in eleven non-strategic markets to Townsquare Media, LLC (“Townsquare Asset Exchange”) in exchange for ten of Townsquare’sTownsquare's radio stations in Bloomington, IL and Peoria, IL, plus approximately $114.9$114.9 million in cash. The transaction was part of the Company’sCompany's ongoing efforts to focus on radio stations in larger markets and geographically strategic regional clusters. The stations sold by the Company operated in the following markets: Augusta, ME; Bangor, ME; Binghamton, NY; Bismarck, ND; Grand Junction, CO; Killeen-Temple, TX; New Bedford, MA; Odessa-Midland, TX; Presque Isle, ME; Sioux Falls, SD and Tuscaloosa, AL.

In conjunction with this Asset Exchange, the Company recorded a gain


7


The table below summarizes the final purchase price allocation for the Townsquare Asset Exchange (dollars in thousands):

AllocationAmount
Current assets$149
Property and equipment4,690
Broadcast licenses11,900
Goodwill3,014
Other intangibles200
Current liabilities(207)
Total purchase price19,746
Less: Carrying value of stations transferred(71,697)
Add: Cash received114,918
  Gain on asset exchange$62,967

The material assumptions utilized in the valuation of intangible assets acquired and liabilities assumed included overall future market revenue growth rates for the residual year of approximately 2.0% and a weighted average cost of capital of 10%. Goodwill was equal to the difference between the purchase price and the value assigned to the tangible and intangible assets acquired and liabilities. Noneliabilities assumed. $1.1 million of the acquired goodwill balance is non deductible for tax purposes.

The indefinite-lived intangible assets acquired in the Townsquare Asset Exchange consist of broadcast licenses and goodwill.

The definite-lived intangible assets acquired in the Townsquare Asset Exchange are being amortized in relation to the expected economic benefits of such assets over their estimated useful lives and consist of the following (dollars in thousands):

Description
Estimated Useful
Life in Years
 Fair Value
Advertising relationships6 $200

The use of different assumptions could result in materially different amounts.

AR Broadcasting Asset Purchase

On September 25, 2012, the Company, through its subsidiaries, entered into an asset purchase agreement with AR Broadcasting, LLC, AR Licensing, LLC, CMP KC Corp. and CMP Houston-KC, LLC to acquire the KCHZ-FM and KMJK-FM radio stations operated in the Kansas City market for an aggregate purchase price of $18.1 million.

$18.1 million (the "AR Broadcasting Asset Purchase"). The transaction was part of the Company’s ongoing efforts to focus on radio stations in larger markets and geographically strategic regional clusters.

On December 6, 2012, the Company completed the acquisition of KCHZ-FM (“KCHZ Acquisition”), a radio station operated in the Kansas City market, for a purchase price of $11.2 million.$11.2 million. The Company paid $10.0$10.0 million in cash at closing with the remaining $1.2$1.2 million paid in January 2013 withupon the closing of the acquisition of KMJK-FM.

On January 28, 2013, the Company completed the AR Broadcasting Asset Purchase, acquiring KMJK-FM for a purchase price of $6.9 million.

$6.9 million.

Revenues of $0.5$1.5 million and $2.6 million attributable to the AR Broadcasting Asset Purchase were included in the Company’s condensed consolidated statement of operations for the three and six months ended March 31, 2013.

June 30, 2013, respectively.

The table below summarizes the preliminary purchase price allocation among the tangible and intangible assets acquired and liabilities assumed in the AR Broadcasting Asset Purchase (dollars in thousands):

AllocationAmount
Current assets$93
Plant, property, and equipment, net1,256
Other assets23
Broadcast licenses16,850
Current liabilities(152)
Total purchase price$18,070

The indefinite lived intangible assets acquired in the acquisition consist


8


The following pro forma information assumes the Townsquare Asset Exchange occurred as of January 1, 2012.2011. This pro forma financial information has been prepared based on estimates and assumptions, which management believes are reasonable, and is not necessarily indicative of the consolidated financial position or results of operations that Cumulus would have achieved had the Townsquare Asset Exchange actually occurred on January 1, 20122011 or on any other historical dates, nor is it reflective of the Company’s expected actual financial position or results of operations for any future period (dollars in thousands):

   Unaudited
Supplemental
Pro Forma Data
 
   Three Months Ended
March 31,
 

Description

          2012         

Net revenue

  $238,527  

Net loss

   (12,754

 
Unaudited
Supplemental
Pro Forma Data
 
Three Months Ended
June 30,
Six Months Ended
June 30,
Description20122012
Net revenue$283,988
$522,515
Net income (loss)8,582
(4,172)
The pro forma financial information set forth above for the three and six months ended March 31,June 30, 2012 includes adjustments to reflect: (i) depreciation and amortization expense based on the fair value of long-lived assets acquired in the Townsquare Asset Exchange; (ii) certain other pro forma adjustments that would be required to be made to prepare pro forma financial information under ASC Topic 805,Business Combinations.

Pro forma financial information for the WFME Asset Exchange, AR Broadcasting Asset Purchase and the Pamal Broadcasting Purchase is not required, as such information is not material to the Company's financial statements.
Completed Dispositions

The companyCompany did not complete any material dispositions during the three or six months ended March 31,June 30, 2013 or 2012.


3. Discontinued Operations

On July 31, 2012, the Company completed the Townsquare Asset Exchange. The transaction is part of the Company’s ongoing efforts to focus on radio stations in larger markets and geographically strategic regional clusters. The results of operations associated with thesethe stations werehave been or are separately reported within discontinued operations, net of the related tax impact, for all periods presented in the accompanying condensed consolidated statements of operations.

operations for the three and six months ended June 30, 2012.

Components of Results of Discontinued Operations

For the three and six months ended March 31, 2013 andJune 30, 2012, income from discontinued operations was as follows (dollars in thousands):

   Three Months Ended
March 31,
 
       2013           2012     

Discontinued operations:

    

Net revenue

  $—      $9,321  

Operating income

   —       2,392  
  

 

 

   

 

 

 

Income from discontinued operations before taxes

   —       2,392  

Income tax expense

   —       (1,916
  

 

 

   

 

 

 

Income from discontinued operations

  $—      $476  
  

 

 

   

 

 

 

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 2012 2012
Discontinued operations:   
Net revenue$11,000
 $20,321
Operating income4,382
 6,769
Non-operating expenses(5) (7)
Income from discontinued operations before taxes4,377
 6,762
Income tax benefit5,529
 3,613
Income from discontinued operations$9,906
 $10,375
During the three and six months ended June 30, 2012 the Company recognized a $7.2 million deferred tax benefit related to settlement of deferred tax liabilities associated with the sale of indefinite lived intangibles. The deferred tax benefit is reflected in income tax expense for discontinued operations for those periods.

4. Restricted Cash

As of March 31,June 30, 2013 and December 31, 2012, the Company’s balance sheet included approximately $6.1$3.7 million and $5.9$5.9 million in restricted cash, of which $2.3$2.3 million related to a cash reserve from the Company’s previously completed acquisition

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of Citadel Broadcasting Company (“Citadel”) (the “Citadel Merger”). The reserve is expected to be used to satisfy the remaining allowed, disputed or not reconciled unsecured claims related to Citadel’s prior bankruptcy proceedings. For both periods, at March 31,At June 30, 2013 and December 31, 2012, $0.6$0.6 million of the restricted cash balance relates to securing the maximum exposure generated by automated clearing house transactions in the Company’s operating bank accounts and as dictated by the Company’s bank’s internal policies with respect to cash. At March 31,June 30, 2013 and December 31, 2012, $3.2$0.8 million and $0.7 million, respectively, of the restricted cash balance relates to collateral on the Company’s letters of credit. At December 31, 2012, amountsthe Company held$2.3 million in escrow related to pending acquisitions were $2.3 million.

acquisitions.


5. Intangible Assets and Goodwill

The following table presents the changes in intangible assets, other than goodwill, and goodwill respectively during the periods from January 1, 2012 to December 31, 2012 and January 1, 2013 to March 31,June 30, 2013, and balances as of such dates (dollars in thousands):

   Indefinite-Lived  Definite-Lived  Total 

Intangible Assets:

    

Balance as of January 1, 2012

  $1,625,415   $390,509   $2,015,924  

Purchase price allocation adjustments

   —      (1,027  (1,027

Acquisition

   22,253    376    22,629  

Impairment

   (14,706  (12,435  (27,141

Disposition

   (30,589  (6,880  (37,469

Amortization

   —      (112,240  (112,240
  

 

 

  

 

 

  

 

 

 

Balance as of December 31, 2012

   1,602,373    258,303    1,860,676  

Acquisition

   41,195    —      41,195  

Disposition

   (1,524  —      (1,524

Amortization

   —      (21,453  (21,453
  

 

 

  

 

 

  

 

 

 

Balance as of March 31, 2013

  $1,642,044   $236,850   $1,878,894  
  

 

 

  

 

 

  

 

 

 

 Indefinite-Lived Definite-Lived Total
Intangible Assets:     
Balance as of January 1, 2012$1,625,415
 $390,509
 $2,015,924
Purchase price allocation adjustments
 (1,027) (1,027)
Acquisition22,253
 376
 22,629
Impairment(14,706) (12,435) (27,141)
Disposition(30,589) (6,880) (37,469)
Amortization
 (112,240) (112,240)
Balance as of December 31, 20121,602,373
 258,303
 1,860,676
      
Acquisition44,038
 
 44,038
Disposition(5,529) 
 (5,529)
Amortization
 (42,917) (42,917)
Balance as of June 30, 2013$1,640,882
 $215,386
 $1,856,268
The following table presents the changes in goodwill and accumulated impairment losses during the periods from January 1, 2013 to March 31,June 30, 2013 and January 1, 2012 to March 31,June 30, 2012, and balances as of such dates (dollars in thousands):

   2013  2012 

Goodwill:

   

Balance as of January 1:

  $1,525,335   $1,564,253  

Accumulated impairment losses

   (329,741  (229,741
  

 

 

  

 

 

 

Subtotal

   1,195,594    1,334,512  

Acquisition

   11,461    —    

Purchase price allocation adjustments

    784  

Finalization of purchase accounting for fourth quarter 2012 acquisitions

   (1,889  —    

Disposition

   —      (105

Balance as of March 31:

   

Goodwill

   1,534,907    1,564,932  

Accumulated impairment losses

   (329,741  (229,741
  

 

 

  

 

 

 

Total

  $1,205,166   $1,335,191  
  

 

 

  

 

 

 

Goodwill:2013 2012
Balance as of January 1:   
       Goodwill$1,525,335
 $1,564,253
Accumulated impairment losses(329,741) (229,741)
Subtotal1,195,594
 1,334,512
Acquisition11,461
 
Current assets held for sale
 (32,132)
Purchase price allocation adjustments
 (9,550)
Finalization of purchase accounting for fourth quarter 2012 acquisitions(1,889) 
Disposition(213) (105)
Balance as of June 30:   
Goodwill1,534,694
 1,522,466
Accumulated impairment losses(329,741) (229,741)
Total$1,204,953
 $1,292,725
The Company has significant intangible assets recorded and these intangible assets are comprised primarily of broadcast licenses and goodwill acquired through the acquisition of radio stations. The Company reviews the carrying value of its indefinite lived intangible assets and goodwill at least annually for impairment. If the carrying value exceeds the estimate of fair value, the Company calculates impairment as the excess of the carrying value of goodwill over its estimated fair value and charges the impairment to results of operations.operations in the period in which the impairment occurred. The Company reviews the carrying value of its definite-lived intangible assets for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.


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In connection with each of the WFME Asset Exchange, the Pamal Broadcasting Asset Purchase, and the AR Broadcasting Asset Purchase, the Company made certain allocations of the purchase price paid therein among each of the tangible and intangible assets and liabilities acquired,assumed, including goodwill. Such purchase price allocations are preliminary and subject to change during the respective measurement periods. Any such changes could be material and could result in significantly different allocations from those contained in the tables above.


6. Derivative Financial Instruments

The Company’s derivative financial instruments consist of the following:

Interest Rate Cap

On December 8, 2011, the Company entered into an interest rate cap agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”), to limit the Company’s exposure to interest rate risk. The interest rate cap has an aggregate notional amount of $71.3 million.$71.3 million. The agreement caps the LIBOR-based variable interest rate component of the Company’s long-term debt at a maximum of 3.0% on an equivalent amount of the Company’s term loans. The unaudited condensed consolidated balance sheets as of March 31,June 30, 2013 and December 31, 2012 include long term-assets of less than one hundred thousand$0.1 million dollars attributable to the fair value of the interest rate cap. The Company reported interest expenseincome of $0.0less than $0.1 million and $0.1 million during each of the three months and six months ended March 31,June 30, 2013, and March 31,interest expense of $0.2 million and $0.3 million for the three and six months ended June 30, 2012, respectively, attributed to the change in fair value adjustment. The interest rate cap matures on December 8, 2015.

2015.

The Company does not utilize financial instruments for trading or other speculative purposes.

Green Bay Option

On April 10, 2009, Clear Channel and the Company entered into an LMA whereby the Company is responsible for operating (i.e., programming, advertising, etc.) five radio stations in Green Bay, Wisconsin and must pay Clear Channel a monthly fee of approximately $0.2$0.2 million over a five year term (expiring December 31, 2013), in exchange for the Company retaining the operating profits from managing the radio stations. Clear Channel also has a put option (the “Green Bay Option”) that allows it to require the Company to purchase the five Green Bay radio stations at any time during the two-month period commencing July 1, 2013 (or earlier if the LMA is terminated before this date) for $17.6$17.6 million (the fair value of the radio stations as of April 10, 2009)., as discussed further below. The Company accounts for the Green Bay Option as a derivative contract. Accordingly, the fair value of the Green Bay Option wasis recorded as a liability with subsequent changes in the fair value recorded through earnings. 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 amount that the Company would pay if the option was transferred to another party as of the date of the valuation.

On July 19, 2013, the Company received notice from Clear Channel that it was exercising The Green Bay Option. Completion of the transaction contemplated by the Green Bay Option is subject to FCC approval and other customary conditions. The Company currently expects that the transactions contemplated by the exercise of the Green Bay Option will be completed by early 2014, although no assurances can be provided.  This transaction is pending customary regulatory approvals. 
The unaudited condensed consolidated balance sheets as of March 31,June 30, 2013 and December 31, 2012 reflect other current liabilities of $10.6$8.5 million and $11.4$11.4 million to include the fair value of the Green Bay Option. The Company recorded $0.7$2.1 million and $0.1$2.8 million in gainsgain on derivative instrumentsinstrument associated with marking to market the Green Bay Option to reflect the fair value of the option during each of the three and six months ended March 31, 2013 and 2012, respectively.

June 30, 2013.

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

Information on the Location and Amounts of Derivatives Fair Values in the

Consolidated Balance Sheetstable (dollars in thousands)

      Fair Value 
Derivative Instruments  

Balance Sheet Location

  March 31,
2013
  December 31,
2012
 

Derivatives not designated as hedging instruments:

     

Interest rate cap

  

Other long-term assets

  $40   $44  

Green Bay Option

  

Other current liabilities

   (10,648  (11,386
    

 

 

  

 

 

 
  

    Total

  $(10,608 $(11,342
    

 

 

  

 

 

 

:


   Fair Value
Derivative InstrumentsBalance Sheet Location 
June 30,
2013
 
December 31,
2012
Derivatives not designated as hedging instruments:     
Interest rate capOther long-term assets $72
 $44
Green Bay OptionOther current liabilities (8,542) (11,386)
 Total $(8,470) $(11,342)

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The location and effect of derivatives in the unaudited condensed consolidated statements of operations are shown in the following table (dollars in thousands):

      Recognized on Derivatives 
      For the Three Months Ended
March 31,
 
Derivative Instruments  

Statement of Operations Location

  2013  2012 

Interest rate cap

  

Interest expense

  $5   $85  

Green Bay Option

  

Gain on derivative instrument

   (738  (88
    

 

 

  

 

 

 
  

    Total

  $(733 $(3
    

 

 

  

 

 

 

   Recognized on Derivatives
   
For the Three Months Ended
June 30,
 
For the Six Months Ended
June 30,
Derivative InstrumentsStatement of Operations Location 2013 2012 2013 2012
Interest rate capInterest (income) expense $(32) $165
 $(27) $250
Green Bay Option(Gain) loss on derivative instrument (2,106) 841
 (2,844) 753
 Total $(2,138) $1,006
 $(2,871) $1,003

7. Long-Term Debt

The Company’s long-term debt consisted of the following as of March 31,June 30, 2013 and December 31, 2012 (dollars in thousands):

   March 31, 2013  December 31, 2012 

Term loan and revolving credit facilities:

   

First Lien Term Loan

  $1,318,375   $1,321,687  

Second Lien Term Loan

   790,000    790,000  

Revolving Credit Facility

   —      —    

Less: Term loan discount

   (19,860  (20,620
  

 

 

  

 

 

 

Total term loan and revolving credit facilities

   2,088,515    2,091,067  

7.75% Senior Notes

   610,000    610,000  

Less: Current portion of long-term debt

   (48,868  (76,468
  

 

 

  

 

 

 

Long-term debt, net

  $2,649,647   $2,624,599  
  

 

 

  

 

 

 

 June 30,
2013
 December 31,
2012
Term Loan and Revolving Credit Facilities:   
First Lien Term Loan$1,287,260
 $1,321,687
Second Lien Term Loan785,496
 790,000
Revolving Credit Facility
 
Less: Term Loan discount(19,147) (20,620)
Total Term Loan and Revolving Credit Facilities2,053,609
 2,091,067
7.75% Senior Notes610,000
 610,000
Less: Current portion of long-term debt(13,250) (76,468)
Long-term debt, net$2,650,359
 $2,624,599
    
First Lien and Second Lien Credit Facilities

On September 16, 2011, the Company entered into a (i) First Lien Credit Agreement (as amended and restated the “First Lien Facility”), among the Company, Cumulus Holdings, as Borrower, certain lenders, JPMorgan as Administrative Agent, UBS, Macquarie, Royal Bank of Canada and ING Capital LLC, as Co-Syndication Agents, and U.S. Bank National Association and Fifth Third Bank, as Co-Documentation Agents; and (ii) Second Lien Credit Agreement (the “Second Lien Facility” and, together with the First Lien Facility, the “2011 Credit Facilities”), among the Company, Cumulus Holdings, as Borrower, certain lenders, JPMorgan, as Administrative Agent, and UBS, Macquarie, Royal Bank of Canada and ING Capital LLC, as Co-Syndication Agents.

The First Lien Facility (as amended to date) consists of a $1.325$1.325 billion first lien term loan facility, net of an original issue discount of $13.5$13.5 million, maturing in September 2018 (the “First Lien Term Loan”), and a $300.0$150.0 million revolving credit facility, maturing in September 2016 (the “Revolving Credit Facility”). Under the Revolving Credit Facility, up to $30.0$15.0 million of availability may be drawn in the form of letters of credit and up to $30.0$15.0 million is available for swingline borrowings. The Second Lien Facility consists of a $790.0$790.0 million second lien term loan facility, net of an original issue discount of $12.0$12.0 million, maturing in September 2019 (the “Second Lien Term Loan”).

Proceeds from borrowings under the First Lien Facility and Second Lien Facility were used, together with certain other funds, to (i) fund the cash portion of the purchase price paid in the Citadel Merger; (ii) repay in full amounts outstanding under the revolving credit facility under the Company’s pre-existing credit agreement (the “Terminated Credit Agreement”); (iii) repay all amounts outstanding under the credit facilities of CMP Susquehanna Corporation (“CMPSC”), an indirect wholly-owned subsidiary of CMP; (iv) redeem CMPSC’s outstanding 9.875% senior subordinated notes due 2014 and variable rate senior secured notes due 2014; (v) redeem in accordance with their terms all outstanding shares of preferred stock of Radio Holdings and the direct parent of CMPSC; and (vi) repay all amounts outstanding, including any accrued interest and the premiums thereon, under Citadel’s pre-existing credit agreement and to redeem its 7.75% Senior Notes.


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On May 31, 2013, the Company entered into an amendment (the “Amendment”) to its First Lien Facility. Pursuant to the Amendment, the consolidated total net leverage ratio covenant contained in the First Lien Facility with which the Company is required to comply in the event amounts were outstanding under the Revolving Credit Facility was replaced with a consolidated first lien net leverage ratio covenant, and the total commitments under the Revolving Credit Facility were reduced from $300.0 million to $150.0 million.
The Amendment constituted an extinguishment of debt for accounting purposes. As a result, the Company wrote off $4.5 million of deferred financing costs related to the Revolving Credit Facility which has been included in “Loss on early extinguishment of debt” of the unaudited condensed consolidated statement of operations for the three and six months ended June 30, 2013.
On December 20, 2012, the Company entered into an amendment and restatement (the “Amendment and Restatement”) of its First Lien Facility. Pursuant to the Amendment and Restatement, the terms and conditions contained in the First Lien Facility remained substantially unchanged, except as follows: (i) the amount outstanding thereunder was increased to $1.325 billion;$1.325 billion; (ii) the margin for LIBOR (as defined below) based borrowings was reduced from 4.5% to 3.5% and for Base Rate (as defined below) -based- based borrowings was reduced from 3.5% to 2.5%; and (iii) the LIBOR floor for LIBOR-based borrowings was reduced from 1.25% to 1.0%.

The Amendment and Restatement hadresulted in both a debt modification and extinguishment for accounting purposes. As a result, the Company wrote off $2.4$2.4 million of deferred financing costs related to the First Lien Facility which has been included in the “Loss on early extinguishment of debt” caption of the consolidated statement of operations for the year ended December 31, 2012. The Company also capitalized $0.8$0.8 million of deferred financing costs related to the Amendment and Restatement.

Borrowings under the First Lien Facility bear interest, at the option of Cumulus Holdings, based on the Base Rate (as defined below) or the London Interbank Offered Rate (“LIBOR”), in each case plus 3.5% on LIBOR-based borrowings and 2.5% on Base Rate-based borrowings. LIBOR-based borrowings are subject to a LIBOR floor of 1.0% for the First Lien Term Loan and 1.0% for the Revolving Credit Facility. Base Rate-based borrowings are subject to a Base Rate Floor of 2.25% for the First Lien Term Loan and 2.0% for the Revolving Credit Facility. Base Rate is defined, for any day, as the fluctuating rate per annum equal to the highest of (i) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 1/2 of 1.0%, (ii) the prime commercial lending rate of JPMorgan, as established from time to time, and (iii) 30 day LIBOR plus 1.0%. The First Lien Term Loan amortizes at a per annum rate of 1.0% of the original principal amount of the First Lien Term Loan, payable quarterly, which commenced on March 31, 2012, with the balance payable on the maturity date. Amounts outstanding under the Revolving Credit Facility are due and payable on the maturity date.

Borrowings under the Second Lien Facility bear interest, at the option of Cumulus Holdings, at either the Base Rate plus 5.0%, subject to a Base Rate floor of 2.5%, or LIBOR plus 6.0%, subject to a LIBOR floor of 1.5%. The Second Lien Term Loan original principal amount is due on the maturity date, September 16, 2019.

2019.

Interest on Base Rate-based borrowings is due on the last day of each calendar quarter, except with respect to swingline loans, for which interest is due on the day that such swingline loan is required to be repaid. Interest payments on loans whose interest rate is based upon LIBOR are due at maturity if the term is three months or less or every three months and at maturity if the term exceeds three months.

At March 31,June 30, 2013, borrowings under the First Lien Term Loan bore interest at 4.5% per annum and borrowings under the Second Lien Term Loan bore interest at 7.5% per annum. Effective December 8, 2011, the Company entered into the Interest Rate Cap with an aggregate notional amount of $71.3$71.3 million, which agreement caps the interest rate on an equivalent amount of the Company’s LIBOR based term loans at a maximum of 3.0% per annum. The Interest Rate Cap matures on December 8, 2015. See Note 5,6, “Derivative Financial Instruments” for additional information.

The representations, covenants and events of default in the 2011 Credit Facilities and financial covenants in the First Lien Facility are customary for financing transactions of this nature. Events of default in the 2011 Credit Facilities include, among others: (a) the failure to pay when due the obligations owing under the credit facilities; (b) the failure to comply with (and not timely remedy, if applicable) certain financial covenants (as required by the First Lien Facility); (c) certain cross defaults and cross accelerations; (d) the occurrence of bankruptcy or insolvency events; (e) certain judgments against the Company or any of its restricted subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use one or more of, any material FCC licenses; (g) any representation or warranty made, or report, certificate or financial statement delivered, to the lenders subsequently proven to have been incorrect in any material respect; and (h) the occurrence of a Change in Control (as defined in the First Lien Facility and the Second Lien Facility, as applicable). 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 First Lien Facility and the Second Lien Facility, as applicable, and the ancillary loan documents as a secured party.


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In the event amounts are outstanding under the Revolving Credit Facility, the First Lien Facility requires compliance with a consolidated totalfirst lien net leverage ratio.ratio covenant. At March 31,June 30, 2013, this ratio would have been 6.54.5 to 1.0.1.0. Such ratio will be reduced in future periods if amounts are outstanding under the Revolving Credit Facility at an applicable date. At June 30, 2013, the Company would have been in compliance with the covenant if the Company had amounts outstanding under the Revolving Credit Facility. The Second Lien Facility does not contain any financial covenants. At March 31, 2013, if we were subject to compliance with this ratio, we would not have been in compliance therewith. As a result borrowings under the revolving credit facility were not available at that date.

The First Lien Facility also requires our compliance with customary restrictive non-financial covenants, which, among other things, and with certain exceptions, limit the Company’s ability to incur or guarantee additional indebtedness; consummate asset sales, acquisitions or mergers; make investments; enter into transactions with affiliates; and pay dividends or repurchase stock.

Certain mandatory prepayments on the First Lien Term Loan and the Second Lien Term Loan are required upon the occurrence of specified events, including upon the incurrence of certain additional indebtedness, upon the sale of certain assets and upon the occurrence of certain condemnation or casualty events, and from excess cash flow.

Based upon the calculation of excess cash flow at December 31, 2012, the Company was required to make a mandatory prepayment on the First Lien Term Loan. Due to certain rights retained by the lenders to decline proportionate shares of such prepayments, the final prepayment amount was reduced from $63.2$63.2 million to $35.6$35.6 million of which a portion was applied to the Second Lien Term Loan. The prepayment was made on April 1, 2013 and has been classified in the current portion of long-term debt caption of the condensed consolidated balance sheet.

2013.

The Company’s, Cumulus Holdings’ and their respective restricted subsidiaries’ obligations under the First Lien Facility and the Second Lien Facility are collateralized by a first priority lien and second priority lien, respectively, on substantially all of the Company’s, Cumulus Holdings’ and their respective restricted subsidiaries’ assets in which a security interest may lawfully be granted, including, without limitation, intellectual property and substantially all of the capital stock of the Company’s direct and indirect domestic subsidiaries and 66.0% of the capital stock of any future first-tier foreign subsidiaries. In addition, Cumulus Holdings’ obligations under the First Lien Facility and the Second Lien Facility are guaranteed by the Company and substantially all of its restricted subsidiaries, other than Cumulus Holdings.

7.75% Senior Notes

On May 13, 2011, the Company issued $610.0$610.0 million aggregate principal amount of the 7.75% Senior Notes. Proceeds from the sale of the 7.75% Senior Notes were used to, among other things, repay the $575.8$575.8 million outstanding under the term loan facility under the Terminated Credit Agreement.


On September 16, 2011, the Company and Cumulus Holdings entered into a supplemental indenture with the trustee under the indenture governing the 7.75% Senior Notes which provided for, among other things, the (i) assumption by Cumulus Holdings of all obligations of the Company; (ii) substitution of Cumulus Holdings for the Company as issuer; (iii) release of the Company from all obligations as original issuer; and (iv) Company’s guarantee of all of Cumulus Holdings’ obligations, in each case under the indenture and the 7.75% Senior Notes.

Interest on the 7.75% Senior Notes is payable on each May 1 and November 1 of each year. The 7.75% Senior Notes mature on May 1, 2019.

2019.

Cumulus Holdings, as issuer of the 7.75% Senior Notes, may redeem all or part of the 7.75% Senior Notes at any time on or after May 1, 2015. At any time prior to May 1, 2014, Cumulus Holdings may also redeem up to 35.0% of the 7.75% Senior Notes using the proceeds from certain equity offerings. At any time prior to May 1, 2015, Cumulus Holdings may redeem some or all of the 7.75% Senior Notes at a price equal to 100% of the principal amount, plus a “make-whole” premium. If Cumulus Holdings sells certain assets or experiences specific kinds of changes in control, it will be required to make an offer to purchase the 7.75% Senior Notes.

In connection with the substitution of Cumulus Holdings as the issuer of the 7.75% Senior Notes, the Company has also guaranteed the 7.75% Senior Notes. In addition, each existing and future domestic restricted subsidiary that guarantees the Company’s indebtedness, Cumulus Holdings’ indebtedness or indebtedness of the Company’s subsidiary guarantors (other than the Company’s subsidiaries that hold the licenses for the Company’s radio stations) guarantees, and will guarantee, the 7.75% Senior Notes. The 7.75% Senior Notes are senior unsecured obligations of Cumulus Holdings and rank equally in right of payment to all existing and future senior unsecured debt of Cumulus Holdings and senior in right of payment to all future subordinated debt of Cumulus Holdings. The 7.75% Senior Notes guarantees are the Company’s and the other guarantors’ senior unsecured obligations and rank equally in right of payment to all of the Company’s and the other guarantors’ existing and future senior debt and senior in right of payment to all of the Company’s and the other guarantors’ future subordinated debt. The 7.75% Senior Notes and the guarantees are effectively subordinated to any of Cumulus Holdings’, the Company’s or the

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guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt. In addition, the 7.75% Senior Notes and the guarantees are structurally subordinated to all indebtedness and other liabilities, including preferred stock, of the Company’s non-guarantor subsidiaries, including all of the liabilities of the Company’s and the guarantors’ foreign subsidiaries and the Company’s subsidiaries that hold the licenses for the Company’s radio stations.

For the three and six months ended March 31,June 30, 2013, and 2012 the Company recorded an aggregate of $2.6$2.5 million and $3.0$5.1 million, respectively, of amortization of debt discount and debt issuance costs related to its First Lien and Second Lien Credit Facilities and 7.75% Senior Notes.


8. Fair Value Measurements

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

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

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

Level 3 — Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial assets and liabilities are measured at fair value on a recurring basis and non-financial assets and liabilities are measured at fair value on a non-recurring basis. Fair values as of March 31,June 30, 2013 and December 31, 2012 were as follows (dollars in thousands):

      Fair Value Measurements at March 31, 2013 Date  Using 
   Total Fair
Value
  Quoted
Prices in
Active
Markets
(Level 1)
   Significant
Other
Observable
Inputs

(Level 2)
   Significant
Unobservable
Inputs

(Level 3)
 

Financial assets:

       

Interest rate cap (1)

  $40   $—      $40    $—    
  

 

 

  

 

 

   

 

 

   

 

 

 

Total assets

  $40   $—      $40    $—    
  

 

 

  

 

 

   

 

 

   

 

 

 

Financial liabilities:

       

Other current liabilities

       

Green Bay Option (4)

  $(10,648 $—      $—      $(10,648

Contingent consideration (5)

   (31      (31
  

 

 

  

 

 

   

 

 

   

 

 

 

Total liabilities

  $(10,679 $—      $—      $(10,679
  

 

 

  

 

 

   

 

 

   

 

 

 

      Fair Value Measurements at December 31, 2012 Using 
   Total Fair
Value
  Quoted
Prices in
Active
Markets
(Level 1)
   Significant
Other
Observable
Inputs

(Level 2)
   Significant
Unobservable
Inputs

(Level 3)
 

Financial assets:

       

Interest rate cap (1)

  $44   $—      $44    $—    

Non-financial assets:

       

Goodwill (2)

  $131,997       $131,997  

Broadcast licenses (3)

  $384,350       $384,350  
  

 

 

  

 

 

   

 

 

   

 

 

 

Total assets

  $516,391   $—      $44    $516,347  
  

 

 

  

 

 

   

 

 

   

 

 

 

Financial liabilities:

       

Other current liabilities

       

Green Bay Option (4)

  $(11,386 $—      $—      $(11,386
  

 

 

  

 

 

   

 

 

   

 

 

 

Total liabilities

  $(11,386 $—      $—      $(11,386
  

 

 

  

 

 

   

 

 

   

 

 

 

   Fair Value Measurements at June 30, 2013 Using
 
Total Fair
Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Financial assets:       
Interest Rate Cap (1)$72

$

$72

$
Total assets$72
 $
 $72
 $
Financial liabilities:       
Other current liabilities       
Green Bay Option (2)$(8,542) $

$

$(8,542)
Contingent consideration (3)(31) 



(31)
Total liabilities$(8,573) $
 $
 $(8,573)
   Fair Value Measurements at December 31, 2012 Using
 
Total Fair
Value
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Financial assets:       
Interest Rate Cap (1)$44
 $
 $44
 $
Total assets$44
 $
 $44
 $
Financial liabilities:       
Other current liabilities       
Green Bay Option (2)$(11,386) $
 $
 $(11,386)
Total liabilities$(11,386) $
 $
 $(11,386)

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(1)The Company’s only derivative financial instrument is
On the Interest Rate Cap pursuant to which the Company pays a fixed interest rate on a $71.3$71.3 million notional amount of its term loans. The fair value of the Interest Rate Cap is determined based on discounted cash flow analysis on the expected future cash flows using observable inputs, including interest rates and yield curves. Derivative valuations incorporate adjustments that are necessary to reflect the credit risk.
(2)In accordance with the provisions of ASC 350, goodwill with a carrying amount of $232.0 million was written down to its implied fair value of $132.0 million, resulting in an impairment charge of $100.0 million, which was included in earnings for the year ended December 31, 2012.
(3)In accordance with the provisions of ASC 350, FCC licenses with a carrying amount of $399.1 million was written down to its fair value of $384.4 million, resulting in an impairment charge of $14.7 million, which has been included in earnings for the year ended December 31, 2012.
(4)(2)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.
(5)
(3)The fair value of the contingent consideration was determined using inputs that are supported by little or no market activity (a Level 3 measurement). Contingent consideration represents the fair value of the additional cash consideration to be paid to the sellers of the assets purchased as part of the WFME Asset Exchange if certain future conditions are met as detailed in the purchase agreement. See Note 2 “Acquisitions and Dispositions”.

The assets associated with the Company’s interest rate capInterest Rate Cap are measured within Level 2 on the fair value hierarchy. To estimate the fair value of the interest rate cap,Interest Rate Cap, the Company used an industry standard cash valuation model, which utilizes a discounted cash flow approach, with all significant inputs derived from or corroborated by observable market data. See Note 5,6, “Derivative Financial Instruments.”

The reconciliation below contains the components of the change in fair value associated with the Green Bay Option from January 1, 2013 to March 31,June 30, 2013 (dollars in thousands):

Description

  Green Bay Option 

Fair value balance at January 1, 2013

  $(11,386

Add: Mark to market fair value adjustment

   738  
  

 

 

 

Fair value balance at March 31, 2013

  $(10,648
  

 

 

 

DescriptionGreen Bay Option
Fair value balance at January 1, 2013$(11,386)
Add: Mark to market fair value adjustment2,844
Fair value balance at June 30, 2013$(8,542)

The reconciliation below contains the components of the change in continuing contingency associated with the contingent consideration from January 1, 2013 to June 30, 2013 (dollars in thousands):

DescriptionContingent Consideration
Fair value balance at January 1, 2013$
Add: Acquisition of WFME(31)
Fair value balance at June 30, 2013$(31)
Quantitative information regarding the significant unobservable inputs related to the Green Bay Option as of March 31,June 30, 2013 was as follows (dollars in thousands):

Fair Value

  

Valuation Technique

  

Unobservable Inputs

   
$    (10,648)  

Black-Scholes Model

  

Risk adjusted discount rate

  6.4%
    

Total term

  less than 1 year
    

Volatility rate

  30.0%
    

Annual dividend rate

  0.0%
    

Bond equivalent yield discount rate

  0.1%

Fair Value Valuation Technique  Unobservable Inputs 
$(8,542) Black-Scholes Model  Risk adjusted discount rate6.6%
     Total termless than 1 year
     Volatility rate25%
     Annual dividend rate%
     Bond equivalent yield discount rate%
Significant increases (decreases) in any of the inputs in isolation would result in a lower (higher) fair value measurement. For example, a decrease in the risk adjusted discount rate would result in a higher liability.

Quantitative information regarding the significant unobservable inputs related to the contingent consideration as of March 31,June 30, 2013 was as follows:

Fair Value

Valuation Technique

Unobservable Inputs

$    31,000

Income Approach

Total term

5 years

Conditions

3

Bond equivalent yield discount rate

0.1%

follows (dollars in thousands):


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Fair Value  Valuation Technique  Unobservable Inputs 
$31
  Income Approach  Total term5 years
      Conditions3
      Bond equivalent yield discount rate0.1%
Significant increases (decreases) in any of the inputs in isolation would result in a lower (higher) fair value measurement.

The following table shows the gross amount and fair value of the Company’s term loans and 7.75% Senior Notes (dollars in thousands):

   March 31,
2013
   December 31,
2012
 

First Lien Term Loan:

    

Carrying value

  $1,318,375    $1,321,687  

Fair value - Level 2

   1,331,559     1,331,600  

Second Lien Term Loan:

    

Carrying value

  $790,000    $790,000  

Fair value - Level 2

   821,600     811,725  

7.75% Senior Notes:

    

Carrying value

  $610,000    $610,000  

Fair value - Level 2

   625,250     599,325  

 
June 30,
2013
 
December 31,
2012
First Lien Term Loan:   
Carrying value$1,287,260

$1,321,687
Fair value - Level 21,287,260

1,331,600
Second Lien Term Loan:   
Carrying value$785,497

$790,000
Fair value - Level 2801,207

811,725
7.75% Senior Notes:   
Carrying value$610,000

$610,000
Fair value - Level 2596,275

599,325
As of March 31,June 30, 2013, the Company used the trading prices of 101.0%100.0% and 104.0%102.0% to calculate the fair value of the First Lien Term Loan and Second Lien Term Loan, respectively, and 102.5%97.75% to calculate the fair value of the 7.75% Senior Notes.

As of December 31, 2012, the Company used the trading prices of 100.75% and 102.75% to calculate the fair value of the First Lien Term Loan and Second Lien Term Loan, respectively, and 98.3% to calculate the fair value of the 7.75% Senior Notes.



9. Redeemable Preferred Stock

In connection with the Citadel Merger on September 15, 2011, the

The Company has designated 2,000,000 shares of its authorized preferred stock as Series A, par value $0.01$0.01 per share, with a liquidation preference of $1,000$1,000 per share (“Series A Preferred Stock”). As a part of the financing transactions entered into in connection therewith (the “Equity Investment”) the Company, and has issued 125,000 shares of Series A Preferred Stock for an aggregate amount of $125.0 million. Net proceeds to the Company were $110.7$125.0 million after deducting $14.3 million in fees.. No other shares of Series A Preferred Stock are issuable in the future, except for such shares as may be issued as dividends in lieu of any cash dividends in accordance with the terms thereof, and the Series A Preferred Stock ranks senior to all common stock and each series of stock the Company may subsequently designate with respect to dividends, redemption and distributions upon liquidation, winding-up and dissolution of the Company.

The Series A Preferred Stock has a perpetual term, a liquidation value equal to the amount invested therein plus any accrued but unpaid dividends, and dividend rights as described below. The Series A Preferred Stock generally does not have voting rights, except with respect to any amendment to the Company’s certificate of incorporation that would adversely affect the rights, privileges or preferences of the Series A Preferred Stock. Although the shares of Series A Preferred Stock include a mandatory redemption feature, there is no stated or probable date of redemption.

Holders of Series A Preferred Stock are entitled to receive mandatory and cumulative dividends in an amount per annum equal to the dividend rate (described below) multiplied by the liquidation value, calculated on the basis of a 360-day year, from the date of issuance, whether or not declared and whether or not the Company reports net income. Dividends are payable in arrears in cash, except that, at the option of the Company, up to 50.0% of the dividends for any period may be paid through the issuance of additional shares of Series A Preferred Stock. Payment of dividends on the Series A Preferred Stock is in preference and prior to any dividends payable on any class of the Company’s common stock.

Dividends on the Series A Preferred Stock accrued at an annual rate of 10.0% from the date of issuance of the Series A Preferred Stock through March 15, 2012. After such date, dividends accrue at an annual rate as follows:

14.0% through September 15, 2013;


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17.0% plus the increase in the 90-day LIBOR from September 16, 2011 to September 16, 2013 for the period commencing on September 16, 2013 and ending on September 15, 2015; and

20.0% plus the increase in the 90-day LIBOR from September 16, 2011 to September 16, 2015 for all periods commencing on or after September 16, 2015, with an adjustment to the rate every two years thereafter.

In the event of the liquidation, dissolution or winding-up of the affairs of the Company, whether voluntary or involuntary, the holders of Series A preferred stock at the time shall be entitled to receive liquidating distributions with respect to each share of Series A Preferred Stock in an amount equal to the amount invested therein plus any accrued but unpaid dividends, and dividend rights to the fullest extent permitted by law, before any distribution of assets is made to the holders of our common stock.

Additionally, upon receipt by the Company of net cash proceeds from (i) the issuance by the Company or any of its subsidiaries of debt for borrowed money or (ii) the issuance by the Company or any of its subsidiaries of equity, the Company shall redeem, for cash, to the fullest extent permitted by law, that number of shares of Series A preferred stock with an aggregate redemption price equal to the lesser of (1) an amount equal to 100% of such net cash proceeds and (2) the $125.0$125.0 million aggregate par value of the Series A Preferred Stock plus any accrued but unpaid dividends.

In conjunction with the CMP Acquisition, the Company assumed preferred stock of CMP with a fair value of $41.1 million as of August 1, 2011, which consisted of the par value of $32.7 million plus cumulative undeclared dividends of $8.3 million as of the acquisition date. The Company recorded $0.5 million in dividends for the period from the date of the CMP Acquisition, August 1, 2011, to September 16, 2011. This preferred stock was redeemed on September 16, 2011 for $41.6 million.

Total dividends accrued on the Series A Preferred Stock during the three and six months ended March 31,June 30, 2013 were $2.7 millionand $5.4 million, respectively. Total dividends accrued on the Series A Preferred Stock during the three and six months ended June 30, 2012 were $4.4 millionand were $2.7$7.7 million and $3.3 million,, respectively. Total dividends paid on the Series A Preferred Stock during the three and six months ended March 31,June 30, 2013 were $2.7 millionand $5.4 million, respectively. Total dividends paid on the Series A Preferred Stock during the three and six months ended June 30, 2012 were $3.3 millionand were $2.7$6.5 million and $3.1 million,, respectively. During the three and six months ended March 31,June 30, 2013, the Company accreted $0.5 millionand$1.0 million, respectively, on the Series A Preferred Stock. During the three and six months ended June 30, 2012, the Company accreted $0.5$2.4 million and $2.4$4.8 million, respectively, on the Series A Preferred Stock. At MarchJune 30, 2013 and December 31, 2013, 2012, 75,767 shares of Series A Preferred Stock remainremained outstanding. The accretion of Series A Preferred Stock resulted in an equivalent reduction in additional paid-in capital on the consolidated balance sheet at March 31,June 30, 2013 and MarchDecember 31, 2012. The Company paid approximately $2.7 million in cash dividends in April 2013, in accordance with the terms described above.


10. Stockholders’ Equity

The Company is authorized to issue an aggregate of 1,450,644,871 shares of stock divided into four classes consisting of: (i) 750,000,000 shares designated as Class A common stock, (ii) 600,000,000 shares designated as Class B common stock, (iii) 644,871 shares designated as Class C common stock and (iv) 100,000,000 shares of preferred stock, each with a par value of $0.01$0.01 per share (see Note 9, “Redeemable Preferred Stock”). Effective September 16, 2011, upon the filing of the Third Amended and Restated Charter, each then-outstanding share of Class D common stock was converted to one share of Class B common stock.

In connection with the August 1, 2011 CMP Acquisition, the Company issued approximately 3.3 million shares of Class A common stock and 6.6 million shares of Class B common stock to affiliates of the three private equity firms that had collectively owned the 75.0% of CMP not then-owned by the Company. Also in connection with the CMP Acquisition, the 3.7 million outstanding CMP Restated Warrants were amended to become exercisable for up to 8.3 million shares of Class B common stock.

In connection with the Citadel Merger, and in addition to the shares of common stock issued therein the Company issued warrants to purchase 47.6 million shares of Class A common stock (the “Citadel Warrants”) to holders of Citadel’s common stock and warrants. Additionally, 2.4 million warrants to purchase shares of the Company’s common stock related to the pending final settlement of certain outstanding unsecured claims arising from Citadel’s emergence from bankruptcy in June 2010 are held in reserve for potential future issuance by the Company, as described below.

Also on September 16, 2011, and pursuant to the Equity Investment, the Company issued and sold (i) 51.8 million shares of Class A common stock and warrants to purchase 7.8 million shares of Class A common stock with an exercise price of $4.34 per share (the “Crestview Warrants”) to an affiliate of Crestview; (ii) 125,000 shares of Series A Preferred Stock to an affiliate of Macquarie (see Note 9, “Redeemable Preferred Stock”); and (iii) 4.7 million shares of Class A common stock and warrants to purchase 24.1 million shares of Class A common stock (the “UBS Warrants,” and, together with the Citadel Warrants, the “Company Warrants”) to UBS and certain other investors to whom UBS syndicated a portion of its investment commitment.

Common Stock

Except with regard to voting and conversion rights, shares of Class A, Class B and Class C common stock are identical in all respects. The preferences, qualifications, limitations, restrictions, and the special or relative rights in respect of the common stock and the various classes of common stock are as follows:

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

Conversion. Each holder of Class B common stock and Class C common stock is entitled to convert at any time all or any part of such holder’s shares into an equal number of shares of Class A common stock; provided, however, that to the extent that such conversion would result in the holder holding more than 4.99% of the Class A common stock following such conversion, the holder will first be required to deliver to the Company an ownership certification to enable the Company to (a) to determine that such holder does not have an attributable interest in another entity that would cause the Company to violate applicable FCC rules and regulations and (b) obtain any necessary approvals from the FCC or the Department of Justice.


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

Conversion. Each holder of Class B common stock and Class C common stock is entitled to convert at any time all or any part of such holder’s shares into an equal number of shares of Class A common stock; provided, however, that to the extent that such conversion would result in the holder holding more than 4.99% of the Class A common stock following such conversion, the holder will first be required to deliver to the Company an ownership certification to enable the Company to (a) to determine that such holder does not have an attributable interest in another entity that would cause the Company to violate applicable FCC rules and regulations and (b) obtain any necessary approvals from the FCC or the Department of Justice.
After payment of dividends to the holders of Series A Preferred Stock, the holders of all classes of common stock share ratably in any dividends that may be declared by the board of directors of the Company.


18


2009 Warrants

In June 2009, in connection with the execution of an amendment to the Terminated Credit Agreement, the Company issued immediately exercisable warrants to the lenders under the Terminated Credit Agreement that allow them to acquire up to 1.3 million shares of Class A common stock at an exercise price of $1.17$1.17 per share (the “2009 Warrants”). The 2009 Warrants expire on June 29, 2019. The number of shares of Class A common stock issuable upon exercise of the 2009 Warrants is subject to adjustment in certain circumstances, including upon the payment of a dividend in shares of Class A common stock. At March 31,June 30, 2013, 1.00.9 million 2009 Warrants remained outstanding.

CMP Restated Warrants

As described above and in

In connection with the completion of the CMP Acquisition, Radio Holdingsa subsidiary of the Company, entered into an amended and restated warrant agreement, dated as of August 1, 2011 (the “Restated Warrant Agreement”). Pursuant to the Restated Warrant Agreement, and subject to the terms and conditions thereof, the previously outstanding 3.7 million Radio Holdings warrants to acquire shares of this subsidiary were amended and restated to no longer be exercisable for shares of common stock of Radio Holdingsthis subsidiary but instead be exercisable, commencing on May 2, 2012 (the “Exercise Date”) at an exercise price of $0.01 per share, for an aggregate of approximately 8.3 million shares of Class B common stock (the “CMP Restated Warrants”). The CMP Restated Warrants expired by their terms on July 31, 2012. Prior to the termination thereof, approximately 3.7 million CMP Restated Warrants were converted into approximately 8.2 million shares of Class B common stock.

Equity Held in Reserve

Citadel emerged from bankruptcy effective June 3, 2010 and, as of September 16, 2011, certain bankruptcy-related claims against Citadel remained open for final resolution.

As part of the Citadel Merger and as of March 31,June 30, 2013, warrants to purchase 2.4 million shares of the Company’s common stock were reserved for potential future issuance in connection with the settlement of thesecertain remaining allowed, disputed or not reconciled unsecured claims.claims related to Citadel's bankruptcy. If excess shares remain in reserve after resolution of all remaining allowed, disputed or not reconciled unsecured claims, such shares will be distributed to the claimants with allowed unsecured claims pro-rata, based on the number of shares they received pursuant to the plan under which Citadel emerged from bankruptcy. This equity held in reserve is included in additional paid-in-capital on the accompanying unaudited condensed consolidated balance sheets at March 31,June 30, 2013 and December 31, 2012.

Company Warrants

At the effective time

As a component of the Citadel Merger, and the related financing transactions, the Company issued the Company Warrants. The Company Warrants were issued under a warrant agreement (the “Warrant Agreement”), dated September 16, 2011, and the Company Warrants entitle the holders thereofwarrants to purchase an equivalent numberaggregate of71.7 million shares of Class A common stock.stock (the "Company Warrants") under a warrant agreement dated September 16, 2011 (the "Warrant Agreement"). The Company Warrants are exercisable at any time prior to June 3, 2030 at an exercise price of $0.01$0.01 per share. The exercise price of the Company Warrants is not subject to any anti-

dilutionanti-dilution protection, other than standard adjustments in the case of stock splits, dividends and the like. Pursuant to the terms and conditions of the Warrant Agreement, upon the request of a holder, the Company has the discretion to issue, upon exercise of the Company Warrants, shares of Class B common stock in lieu of an equal number of shares of Class A common stock and, upon request of a holder and at the Company’s discretion, the Company has the right to exchange such warrants to purchase an equivalent number of shares of Class B common stock for outstanding warrants to purchase shares of Class A common stock.

Conversion of the Company Warrants is subject to compliance with applicable FCC regulations, and the Company Warrants are exercisable provided that ownership of the Company’s securities by the holder does not cause the Company to violate applicable FCC rules and regulations relating to foreign ownership of broadcasting licenses.

Holders of Company Warrants are entitled to participate ratably in any distributions on the Company’s common stock on an as-exercised basis. No distribution shall be made to holders of Company Warrants or common stock if (i) an FCC ruling, regulation or policy prohibits such distribution to holders of Company Warrants or (ii) the Company’s FCC counsel opines that such distribution is reasonably likely to cause (a) the Company to violate any applicable FCC rules or regulations or (b) any holder of Company Warrants to be deemed to hold an attributable interest in the Company.

During the three and six months ended March 31,June 30, 2013, approximately 1.12.6 million and 3.7 million, respectively, Company Warrants were converted into shares of Class A common stock with an aggregate total of 35.337.9 million having been converted since issuance through March 31,June 30, 2013. At March 31,June 30, 2013, 36.333.8 million Company Warrants remained outstanding.

Crestview Warrants

Pursuant to the Equity Investment

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

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issuable upon exercise of the Crestview Warrants, and the exercise price of the Crestview Warrants, are subject to adjustment in the case of stock splits, dividends and the like. As of March 31,June 30, 2013, all 7.8 million Crestview Warrants remained outstanding.


11. Stock-Based Compensation Expense

On February 16, 2012, the Company granted 161,724 shares of time-vesting restricted Class A common stock, with an aggregate grant date fair value of $0.6$0.6 million, to the non-employee directors of the Company with a cliff vesting term of one year. In addition, on February 16, 2012, the Company granted time-vesting stock options to purchase 1,357,500 shares of Class A common stock to certain Company employees under the Cumulus Media Inc. 2011 Equity Incentive Plan, with an aggregate grant date fair value of $3.3 million.$3.3 million. The options have an exercise price of $4.34$4.34 per share, with 30% of the awards having vested on each of September 16, 2012 and February 16, 2013, and with 20% vesting on each of February 16, 2014 and 2015.

On May 9, 2013, the Company granted 168,540 shares of time-vesting restricted Class A common stock, with an aggregate grant fair value of $0.6 million, to the non-employee directors of the Company with a cliff vesting term of one year.
For the three and six months ended June 30, 2013 and 2012, the Company recognized approximately $2.5 million, $5.1 million, $3.2 million and $6.0 million, respectively, in stock-based compensation expense related to equity awards.  The Company haspreviously had certain liability-basedliability classified awards related to the cash consideration portion of the Citadel Merger (“Liability Awards”).  These Liability Awards were fully expensed during the second of quarter of 2012 and as such, the Company had no stock based compensation expense related to the Liability Awards in any period in 2013. For the three and six months ended March 31, 2013 andJune 30, 2012, the Company recognized $2.7approximately $2.7 million and $2.8$6.9 million, respectively, in stock-based compensation expense related to equity awards. For the three months ended March 31, 2012, the Company recognized $4.2 million in stock-based compensation expense related to Liability Awards.

As of March 31,June 30, 2013, unrecognized stock-based compensation expense of approximately $16.5$14.6 million related to equity awards is expected to be recognized over a weighted average remaining life of 2.52.2 years. There is no unrecognizedUnrecognized stock-based compensation expense related to Liability Awards as of March 31, 2013. Unrecognized stock-based compensation expensefor the equity awards will be adjusted for future changes in estimated forfeitures.

The total fair value of restricted stock awards that vested during the threesix months ended March 31,June 30, 2013 was $1.5 million.$1.6 million. The total fair value of restricted stock awards that vested during the threesix months ended March 31,June 30, 2012 was $5.7$19.1 million, of which $1.5$13.2 million related to the Liability Awards and was paid in cash. No options were exercised during either of the threesix months ended March 31,June 30, 2012 or 2013.


12. Earnings Per Share (“EPS”)

For all periods presented, the Company has disclosed basic and diluted earnings per common share utilizing the two-class method. Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. The Company allocates undistributed net income (loss) from continuing operations after any allocation for preferred stock dividends between each class of common stock on an equal basis as the Third Amendment and Restated charterCompany's certificate of incorporation provides that the holders of each class of common stock have equal rights and privileges, except with respect to voting on certain matters.

Non-vested restricted shares of Class A common stock and the Company Warrants, are, and the CMP Restated Warrants prior to their expiration were considered participating securities for purposes of calculating basic weighted average common shares outstanding in periods in which the Company records net income. Diluted earnings per share is computed in the same manner as basic earnings per share after assuming issuance of common stock for all potentially dilutive equivalent shares, which includes stock options and certain other warrants to purchase common stock. Antidilutive instruments are not considered in this calculation. Under the two-class method, net income 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. Earnings are allocated to each participating security and common shares equally, after deducting dividends declared or accretion on preferred stock. The following table sets forth the computation of basic and diluted earnings per common share for the three and six months ended March 31,June 30, 2013 and 2012 (amounts in thousands, except per share data):

   Three Months Ended
March 31,
 
   2013  2012 

Basic Loss Per Share

   

Numerator:

   

Undistributed net loss from continuing operations

  $(8,988 $(12,606

Less:

   

Dividends declared on redeemable preferred stock

   2,652    3,333  

Accretion of redeemable preferred stock

   982    2,767  

Participation rights of Company Warrants in undistributed earnings

   —      —    

Participation rights of unvested restricted stock in undistributed earnings

   —      —    

Basic undistributed net loss from continuing operations

   
  

 

 

  

 

 

 

Attributable to common shares

  $(12,622 $(18,706
  

 

 

  

 

 

 

Denominator:

   

Basic weighted average shares outstanding

   174,748    149,369  
  

 

 

  

 

 

 

Basic Loss from continuing operations per share—attributable to common shares

  $(0.07 $(0.13
  

 

 

  

 

 

 

Diluted Loss Per Share:

   

Numerator:

   

Undistributed net loss from continuing operations

  $(8,988 $(12,606

Less:

   

Dividends declared on redeemable preferred stock

   2,652    3,333  

Accretion of redeemable preferred stock

   982    2,767  

Participation rights of the Company Warrants in undistributed net income

   —      —    

Participation rights of unvested restricted stock in undistributed earnings

   —      —    

Basic undistributed net loss from continuing operations

   
  

 

 

  

 

 

 

Attributable to common shares

  $(12,622 $(18,706
  

 

 

  

 

 

 

Denominator:

   

Basic weighted average shares outstanding

   174,748    149,369  

Effect of dilutive options and warrants

   —      —    
  

 

 

  

 

 

 

Diluted weighted average shares outstanding

   174,748    149,369  
  

 

 

  

 

 

 

Diluted undistributed net loss from continuing operations attributable to common shares

  $(0.07 $(0.13
  

 

 

  

 

 

 

Potentially dilutive equivalent shares outstanding for


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Three Months Ended
June 30,
 
Six Months Ended
June 30,
 2013 2012 2013 2012
Basic Income (Loss) Per Share       
Numerator:       
Undistributed net income (loss) from continuing operations$27,101

$(1,763)
$18,112

$(14,362)
Less:






Dividends declared on redeemable preferred stock2,652

4,375

5,304

7,708
Accretion of redeemable preferred stock1,007

1,852

1,989

4,620
Participation rights of the Company Warrants in undistributed earnings3,890



1,833


Participation rights of unvested restricted stock in undistributed earnings39



23


Basic undistributed net income (loss) from continuing operations attributable to common shares$19,513

$(7,990)
$8,963

$(26,690)
Denominator:       
Basic weighted average shares outstanding176,482

157,711

175,620

153,540
Basic undistributed net income (loss) from continuing operations per share--attributable to common shares$0.11

$(0.05)
$0.05

$(0.17)
Diluted Income (Loss) Per Share:       
Numerator:       
Undistributed net income (loss) from continuing operations$27,101

$(1,763)
$18,112

$(14,362)
Less:






Dividends declared on redeemable preferred stock2,652

4,375

5,304

7,708
Accretion of redeemable preferred stock1,007

1,852

1,989

4,620
Participation rights of the Company Warrants in undistributed net income3,834



1,807


Participation rights of unvested restricted stock in undistributed earnings38



23


Basic undistributed net income (loss) from continuing operations attributable to common shares$19,570

$(7,990)
$8,989

$(26,690)
Denominator:       
Basic weighted average shares outstanding176,482

157,711

175,620

153,540
Effect of dilutive options and warrants3,072



3,059


Diluted weighted average shares outstanding179,554

157,711

178,679

153,540
Diluted undistributed net income (loss) from continuing operations attributable to common shares$0.11

$(0.05)
$0.05

$(0.17)

For each of the three and six months ended March 31,June 30, 2013, the Company had 20.0 million stock options and 7.8 million warrants that were antidilutive, respectively, due to having higher exercise prices than the Company's average stock price during the period.

For each of the three and six months ended June 30, 2012, the Company had 19.9 million stock options and 58.1 warrants which were potentially dilutive and therefore excluded from the computation of diluted loss per share, consisted of approximately 39.8 million and 64.3 million, respectively, additional shares of common stock to underlying outstanding warrants.

EPS calculation.


13. Income Taxes

The Company accounts for income taxes in accordance with authoritative accounting guidance which establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are

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to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.

The provision for income taxes reflects the Company’s estimate of the effective tax rate expected to be applicable for the full current year. To the extent that actual pre-tax results for the year differ from the forecasted estimates applied at the end of the most recent interim period, the actual tax rate recognized during 2013 could be different from the forecasted rate.

The difference between the effective tax rate for each period and the federal statutory rate of 35.0% primarily relates to state and local income taxes, and the tax amortization of broadcast licenses and goodwill;goodwill, and assets classified as having an indefinite life for book purposes.

changes in the valuation allowance on net deferred tax assets.

As of March 31,June 30, 2013, the Company continues to maintain a full valuation allowance on its net deferred tax assets excluding deferred tax liabilities associated with the Company’s indefinite lived intangible assets and deferred cancellation of debt income for which no estimated amount of deferred tax assets are available to satisfy. The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company’s financial statements or tax returns as well as future profitability. TheIn accordance with ASC Topic 740, Accounting for Income Taxes, the Company continually reviews the adequacy of the valuation allowance and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC Topic 740,Accounting for Income Taxes. As of March 31,June 30, 2013, the Company does not believe it is more likely than not that the remaining net deferred tax assets will be recognized. Should the Company’s assessment change in a future period it may release all or a portion of the valuation allowance at such time, which would result in a deferred tax benefit in the period of adjustment.


14. Commitments and Contingencies

Future Commitments

Effective December 31, 2009, the Company’s radio music license agreements with the two largest performance rights organizations, The American Society of Composers, Authors and Publishers (“ASCAP”) and Broadcast Music, Inc. (“BMI”), expired. In January 2010, the Radio Music License Committee (the “RMLC”), which negotiates music licensing fees for most of the radio industry with ASCAP and BMI, filed motions in the New York courts against these organizations on behalf of the radio industry, seeking interim fees and a determination of fair and reasonable industry-wide license fees. During 2010, the courts approved reduced interim fees for ASCAP and BMI. On January 27, 2012, the Federal District Court for the Southern District of New York approved a settlement between the RMLC and ASCAP concerning the fees payable covering the period January 1, 2010 through December 31, 2016. Included in the agreement is a $75.0$75.0 million industry fee credit against fees previously paid in 2010 and 2011, with such fees to be credited over the remaining period of the contract. The Company began recognizing the ASCAP credits as a reduction in direct operating expenses on January 1, 2012. On August 28, 2012, the Federal District Court for the Southern District of New York approved a settlement between the RMLC and BMI concerning the fees payable covering the period January 1, 2010 through December 31, 2016. Included in the agreement is a $70.5$70.5 million industry fee credit against fees previously paid in 2010 and 2011, with such fees immediately available to the industry.

The radio broadcast industry’s principal ratings service is Arbitron, which publishes surveys for domestic radio markets. Certain of the Company’s subsidiaries have agreements with Arbitron under which they receive programming ratings materials in a majority of their respective markets. The remaining aggregate obligation under the agreements with Arbitron is approximately $187.0$177.1 million and is expected to be paid in accordance with the agreements through December 2017.

The Company engages Katz Media Group, Inc. (“Katz”) as its national advertising sales agent. The national advertising agency contract with Katz contains termination provisions that, if exercised by the Company during the term of the contract, would obligate the Company to pay a termination fee to Katz, calculated based upon a formula set forth in the contract.

The 2011 Credit Facilities contain provisions requiring the Company to use the proceeds from the disposition of assets of the Company to prepay amounts outstanding under the First Lien Facility and the Second Lien Facility (to the extent proceeds remain after the required prepayment of all amounts outstanding under the First Lien Facility), subject to the right of the Company to use such proceeds to acquire, improve or repair assets useful in its business, all within one year from the date of receipt of such proceeds. As of March 31,June 30, 2013, we have complied with these provisions and reinvested the proceeds from the Townsquare Asset Exchange; as such, we will not be required to prepay principal outstanding under the 2012 Credit Facilities.

The Company from time to time enters into radio network contractual obligations to guarantee a minimum amount of revenue share to contractual counterparties on certain programming in future years. Generally, these guarantees are subject to decreases dependent on clearance targets achieved. As of March 31,June 30, 2013, the Company believes that it will meet such minimum obligations.


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Table of Contents

As described in Note 2, “Acquisitions and Dispositions” the Company is subjectmay be required to an increase in purchase pricepay additional cash consideration for the acquisition of WFME Station in New York.

As described in Note 6, "Derivative Financial Instruments", on July 16, 2013 Clear Channel notified the Company that it was exercising the Green Bay Option which, upon the closing thereof, will require the Company to pay $17.6 million for the stations related thereto.
Legal Proceedings

The Company is currently, and expects that from time to time in the future it will be, party to, or a defendant in, various claims or lawsuits that are generally incidental to its business. The Company expects that it will vigorously contest any such claims or lawsuits and believes that the ultimate resolution of any known claim or lawsuit will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.



15. Supplemental Condensed Consolidating Financial Information

At March 31,June 30, 2013, Cumulus and certain of its 100% owned subsidiaries (such subsidiaries, the “Subsidiary Guarantors”) provided guarantees of the obligations of Cumulus Holdings under the 7.75% Senior Notes. These guarantees are full and unconditional (subject to customary release provisions) as well as joint and several. Certain of the Subsidiary Guarantors may be subject to restrictions on their respective ability to distribute earnings to Cumulus Holdings or Cumulus Media Inc. (the “Parent Guarantor”). Not all of the subsidiaries of Cumulus and Cumulus Holdings guarantee the 7.75% Senior Notes (such non-guaranteeing subsidiaries, collectively, the “Subsidiary Non-guarantors”).

The following tables present (i) unaudited condensed consolidating statements of operations for the three and six months ended March 31,June 30, 2013 and 2012, (ii) unaudited condensed consolidating balance sheets as of March 31,June 30, 2013 and December 31, 2012, and (iii) unaudited condensed consolidating statements of cash flows for the threesix months ended March 31,June 30, 2013 and 2012, of each of the Parent Guarantor, Cumulus Holdings, the Subsidiary Guarantors, and the Subsidiary Non-guarantors.

Investments in consolidated subsidiaries are held primarily by the Parent Guarantor in the net assets of its subsidiaries and have been presented using the equity method of accounting. The “Eliminations” entries in the following tables primarily eliminate investments in subsidiaries and intercompany balances and transactions. The columnar presentations in the following tables are not consistent with the Company’s business groups; accordingly, this basis of presentation is not intended to present the Company’s financial condition, results of operations or cash flows on a consolidated basis.

Effective January 1, 2013, the Company completed an internal restructuring where all of the operations, with the exception of any equity-related transactions, of the Parent Guarantor were legally transferred to the Subsidiary Issuer. These changes have been reflected in the unaudited condensed consolidating statements as of March 31,June 30, 2013 and for the three and six months ended March 31,June 30, 2013.

Revision to Prior Period Financial Statements

During the third quarter of 2012, Cumulus Media Inc. determined that it did not properly classify its preferred stock in its supplemental condensed consolidating financial information footnote in previous 2012 interim periods or at December 31, 2011.periods. The Company should have presented the preferred stock balance and related accrued dividends in the Cumulus Media Inc. (Parent Guarantor) column and was inappropriately classified in the Cumulus Media Holdings Inc. (Subsidiary Issuer) column. There was no impact on the consolidated balance sheet, statement of income or statement of cash flows.

During the fourth quarter of 2012, Cumulus Media Inc. determined that it did not properly classify certain intercompany transactions in its supplemental condensed consolidating financial information footnote in previous 2012 interim periods or at December 31, 2011.periods. The Company should have presented the intercompany transactions within financing activities as these transactions had been previously presented in the operating cash flows section of the statement of cash flows. In addition, Cumulus determined that certain intercompany transactions were classified within investment in subsidiaries or additional paid-in capital and have classified such balances as intercompany transactions as either intercompany receivables or intercompany payables depending on the nature of the balance. In the following disclosure, a separate line item entitled “Intercompany transactions, net” is presented on the condensed consolidating balance sheets and statements of cash flows. There was no impact on the consolidated balance sheet, statement of income or statement of cash flows.

In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99,Materiality), the Company assessed the materiality of the errors and concluded that the errors were not material to any of the Company’s previously

issued financial statements. As permitted by the accounting guidance found in ASC 250-10 (SEC Staff Accounting


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Bulletin No. 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Company has presented revised financial information as of December 31, 2011 andfor the three and six months ended March 31,June 30, 2012 and will revise the interim condensed consolidating information in future quarterly filings.


24



CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,June 30, 2013

(Dollars in thousands)

(Unaudited)

   Cumulus
Media Inc.
(Parent Guarantor)
  Cumulus
Media
Holdings Inc.
(Subsidiary Issuer)
  Subsidiary
Guarantors
  Subsidiary
Non-guarantors
  Eliminations  Total
Consolidated
 

Broadcast revenues

  $—     $—     $232,872   $—     $—     $232,872  

Management fees

   —      —      —      —      —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net revenues

   —      —      232,872    —      —      232,872  

Operating expenses:

       

Direct operating expenses (excluding depreciation, amortization and LMA fees)

   —      —      163,683    489    —      164,172  

Depreciation and amortization

   —      497    28,433    —      —      28,930  

LMA fees

   —      —      969    —      —      969  

Corporate general and administrative expenses (including stock-based compensation expense of
$2,663)

   —      13,866    —      —      —      13,866  

Loss on station sale

   —      —      1,309    —      —      1,309  

Gain on derivative instrument

   —      —      (738  —      —      (738
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

   —      14,363    193,656    489    —      208,508  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating (loss) income

   —      (14,363  39,216    (489  —      24,364  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non-operating (expense) income:

       

Interest (expense) income, net

   (2,142  (42,112  2    —      —      (44,252

Other expense, net

   —      —      133    —      —      133  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total non-operating expense, net

   (2,142  (42,112  135    —      —      (44,119
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) income before income taxes

   (2,142  (56,475  39,351    (489  —      (19,755

Income tax benefit

   —      —      1,195    9,572    —      10,767  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) income from continuing operations

   (2,142  (56,475  40,546    9,083    —      (8,988

Income from discontinued operations, net of taxes

   —      —      —      —      —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) earnings from consolidated subsidiaries

   (6,846  49,629    9,083    —      (51,866  —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

  $(8,988 $(6,846 $49,629   $9,083   $(51,866 $(8,988
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 
Cumulus
Media Inc.
(Parent 
Guarantor)
 
Cumulus
Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 Eliminations 
Total
Consolidated
Broadcast revenues$

$

$289,676

$

$

$289,676
Management fees










Net revenues
 
 289,676
 
 
 289,676
Operating expenses:           
Direct operating expenses (excluding depreciation, amortization and LMA fees)



171,143

619


 171,762
Depreciation and amortization

484

28,451




 28,935
LMA fees



759




 759
Corporate general and administrative expenses (including stock-based compensation expense of $2,470)

7,760







7,760
Loss on sale of stations



91




 91
Gain on derivative instrument



(2,106)



 (2,106)
Total operating expenses
 8,244
 198,338
 619
 
 207,201
Operating (loss) income
 (8,244) 91,338
 (619) 
 82,475
Non-operating (expense) income:           
Interest expense, net(2,378)
(41,532)
77




 (43,833)
Loss on early extinguishment of debt

(4,539)





 (4,539)
Other expense, net



(511)



 (511)
Total non-operating expense, net(2,378) (46,071) (434) 
 
 (48,883)
(Loss) income before income taxes(2,378)
(54,315)
90,904

(619)

 33,592
Income tax benefit (expense)



11,520

(18,011)

 (6,491)
Earnings (loss) from consolidated subsidiaries29,479

83,794

(18,630)


(94,643) 
Net income (loss)$27,101
 $29,479
 $83,794
 $(18,630) $(94,643) $27,101

25


CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months Ended June 30, 2013
(Dollars in thousands)
(Unaudited)
 
Cumulus
Media Inc.
(Parent 
Guarantor)
 
Cumulus
Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 Eliminations 
Total
Consolidated
Broadcast revenues$

$

$522,548

$

$


$522,548
Management fees











Net revenues
 
 522,548
 
 
 522,548
Operating expenses:           
Direct operating expenses (excluding depreciation, amortization and LMA fees)



334,825

1,109


 335,934
Depreciation and amortization

981

56,885




 57,866
LMA fees



1,728




 1,728
Corporate general and administrative expenses (including stock-based compensation expense of $5,134)

21,626






 21,626
Loss on sale of stations



1,400





1,400
Gain on derivative instrument



(2,844)



 (2,844)
Total operating expenses
 22,607
 391,994
 1,109
 
 415,710
Operating (loss) income
 (22,607) 130,554
 (1,109) 
 106,838
Non-operating (expense) income:           
Interest (expense) income, net(4,689)
(83,474)
78




 (88,085)
Loss on early extinguishment of debt

(4,539)





 (4,539)
Other expense, net



(378)



 (378)
Total non-operating expense, net(4,689) (88,013) (300) 
 
 (93,002)
(Loss) income before income taxes(4,689)
(110,620)
130,254

(1,109)

 13,836
Income tax benefit (expense)



12,715

(8,439)

 4,276
Earnings (loss) from consolidated subsidiaries22,801

133,421

(9,548)


(146,674) 
Net income (loss)$18,112
 $22,801
 $133,421
 $(9,548) $(146,674) $18,112










26




CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,June 30, 2012

(Dollars in thousands)

(Unaudited)

   Cumulus
Media Inc.
(Parent Guarantor)
  Cumulus
Media
Holdings  Inc.
(Subsidiary Issuer)
  Subsidiary
Guarantors
  Subsidiary
Non-guarantors
  Eliminations  Total
Consolidated
 

Broadcast revenues

  $—     $—     $235,965   $—     $—     $235,965  

Management fees

   30    —      —      —      —      30  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net revenues

   30    —      235,965    —      —      235,995  

Operating expenses:

       

Direct operating expenses (excluding depreciation, amortization and LMA fees)

   —      —      153,098    529    —      153,627  

Depreciation and amortization

   221    —      34,661    —      —      34,882  

LMA fees

   —      —      839    —      —      839  

Corporate general and administrative expenses (including stock-based compensation expense of $6,978)

   15,606    —      1,086    —      —      16,692  

Gain on derivative instrument

   —      —      (88  —      —      (88
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

   15,827    —      189,596    529    —      205,952  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating (loss) income

   (15,797  —      46,369    (529  —      30,043  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non-operating (expense) income:

       

Interest (expense) income, net

   (95  (51,004  296    —      —      (50,803

Other expense, net

   —      —      262    —      —      262  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total non-operating (expense) income, net

   (95  (51,004  558    —      —      (50,541
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) income before income taxes

   (15,892  (51,004  46,927    (529  —      (20,498

Income tax benefit

   —      —      926    6,966    —      7,892  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) income from continuing operations

   (15,892  (51,004  47,853    6,437    —      (12,606

Income (loss) from discontinued operations, net of taxes

   —      —      2,156    (1,680  —      476  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings from consolidated subsidiaries

   3,762    54,766    4,757    —      (63,285  —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

  $(12,130 $3,762   $54,766   $4,757   $(63,285 $(12,130
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 


 
Cumulus
Media Inc.
(Parent 
Guarantor)
 
Cumulus
Media
Holdings  Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 Eliminations 
Total
Consolidated
Broadcast revenues$

$

$280,745

$

$
 $280,745
Management fees296








 296
Net revenues296
 
 280,745
 
 
 281,041
Operating expenses:           
Direct operating expenses (excluding depreciation, amortization and LMA fees)



168,222

524


 168,746
Depreciation and amortization345



35,855




 36,200
LMA fees



885




 885
Corporate general and administrative expenses (including stock-based compensation expense of $5,928)16,802








 16,802
Loss on derivative instrument



841




 841
Impairment of intangible assets



12,435




 12,435
Total operating expenses17,147
 
 218,238
 524
 
 235,909
Operating (loss) income(16,851) 
 62,507
 (524) 
 45,132
Non-operating (expense) income:           
Interest (expense) income, net(227)
(49,694)
302




 (49,619)
Other expense, net



(74)



 (74)
Total non-operating (expense) income, net(227) (49,694) 228
 
 
 (49,693)
(Loss) income before income taxes(17,078)
(49,694)
62,735

(524)

 (4,561)
Income tax benefit



340

2,458


 2,798
(Loss) income from continuing operations(17,078) (49,694) 63,075
 1,934
 
 (1,763)
Income (loss) from discontinued operations, net of taxes



11,341

(1,435)

 9,906
Earnings (loss) from consolidated subsidiaries25,221

74,915

499



(100,635) 
Net income (loss)$8,143
 $25,221
 $74,915
 $499
 $(100,635) 8,143







27




CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2012
(Dollars in thousands)
(Unaudited)

 
Cumulus
Media Inc.
(Parent 
Guarantor)
 
Cumulus
Media
Holdings  Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 Eliminations 
Total
Consolidated
Broadcast revenues$

$

$516,710

$

$
 $516,710
Management fees326








 326
Net revenues326
 
 516,710
 
 
 517,036
Operating expenses:           
Direct operating expenses (excluding depreciation, amortization and LMA fees)



321,396

1,046


 322,442
Depreciation and amortization566



70,441




 71,007
LMA fees



1,724




 1,724
Corporate general and administrative expenses (including stock-based compensation expense of $12,906)33,494








 33,494
Realized loss on derivative instrument



753




 753
Impairment of intangible assets



12,435




 12,435
Total operating expenses34,060
 
 406,749
 1,046
 
 441,855
Operating (loss) income(33,734) 
 109,961
 (1,046) 
 75,181
Non-operating (expense) income:           
Interest (expense) income, net(322)
(100,698)
598




 (100,422)
Other income, net



190




 190
Total non-operating (expense) income, net(322) (100,698) 788
 
 
 (100,232)
(Loss) income before income taxes(34,056)
(100,698)
110,749

(1,046)

 (25,051)
Income tax benefit



1,268

9,421


 10,689
(Loss) income from continuing operations(34,056) (100,698) 112,017
 8,375
 
 (14,362)
Income (loss) from discontinued operations, net of taxes



13,490

(3,115)

 10,375
Earnings (loss) from consolidated subsidiaries30,069

130,767

5,260



(166,096) 
Net (loss) income$(3,987) $30,069
 $130,767
 $5,260
 $(166,096) $(3,987)







28



CUMULUS MEDIA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

March 31,

June 30, 2013

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

(Unaudited)

   Cumulus
Media Inc.
(Parent
Guarantor)
  Cumulus
Media
Holdings  Inc.
(Subsidiary Issuer)
   Subsidiary
Guarantors
  Subsidiary
Non-guarantors
  Eliminations  Total
Consolidated
 

Assets

        

Current assets:

        

Cash and cash equivalents

  $—     $80,659    $2,147   $—     $—     $82,806  

Restricted cash

   —      6,096     —      —      —      6,096  

Accounts receivable, less allowance for doubtful accounts of $3,882

   —      —       164,099    —      —      164,099  

Trade receivable

   —      —       5,926    —      —      5,926  

Prepaid expenses and other current assets

   —      17,696     29,603    —      —      47,299  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total current assets

   —      104,451     201,775    —      —      306,226  

Property and equipment, net

   —      4,280     247,179    —      —      251,459  

Broadcast licenses

   —      —       —      1,642,044    —      1,642,044  

Other intangible assets, net

   —      —       236,850    —      —      236,850  

Goodwill

   —      —       1,205,166    —      —      1,205,166  

Investment in consolidated subsidiaries

   381,568    3,407,209     1,176,378    —      (4,965,155  —    

Intercompany receivables

   —      72,636     527,054    —      (599,690  —    

Other assets

   —      57,532     18,453    —      —      75,985  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

  $381,568   $3,646,108    $3,612,855   $1,642,044   $(5,564,845 $3,717,730  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Liabilities, Redeemable Preferred Stock and Stockholders’ Equity (Deficit)

        

Current liabilities:

        

Accounts payable and accrued expenses

  $—     $35,005    $65,646   $—     $—     $100,651  

Trade payable

   —      —       4,754    —      —      4,754  

Current portion of long-term debt

   —      48,868     —      —      —      48,868  

Other current liabilities

   —      —       10,648    —      —      10,648  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total current liabilities

   —      83,873     81,048    —      —      164,921  

Long-term debt, excluding 7.75% Senior Notes

   —      2,039,647     —      —      —      2,039,647  

7.75% Senior Notes

   —      610,000     —      —      —      610,000  

Other liabilities

   —      3,966     39,918    —      —      43,884  

Intercompany payables

   72,636    527,054     —      —      (599,690  —    

Deferred income taxes

   —      —       84,680    465,666    —      550,346  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities

   72,636    3,264,540     205,646    465,666    (599,690  3,408,798  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Redeemable preferred stock:

        

Series A cumulative redeemable preferred stock, par value $0.01 per share; stated value of $1,000 per share; 100,000,000 shares authorized; 75,767 shares issued and outstanding

   72,368    —       —      —      —      72,368  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total redeemable preferred stock

   72,368    —       —      —      —      72,368  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Stockholders’ equity (deficit):

        

Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 183,772,345 shares issued and 159,505,841 shares outstanding

   1,838    —       —      —      —      1,838  

Class B common stock, par value $0.01 per share; 600,000,000 shares authorized; 15,424,944 shares issued and outstanding

   154    —       —      —      —      154  

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

   6    —       —      —      —      6  

Treasury stock, at cost, 24,266,504 shares

   (252,341  —       —      —      —      (252,341

Additional paid-in-capital

   1,514,098    205,805     3,855,690    2,139,674    (6,201,169  1,514,098  

Accumulated (deficit) equity

   (1,027,191  175,763     (448,481  (963,296  1,236,014    (1,027,191
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total stockholders’ equity (deficit)

   236,564    381,568     3,407,209    1,176,378    (4,965,155  236,564  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities, redeemable preferred stock and stockholders’ equity (deficit)

  $381,568   $3,646,108    $3,612,855   $1,642,044   $(5,564,845 $3,717,730  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

 
Cumulus
Media Inc.
(Parent
Guarantor)
 
Cumulus
Media
Holdings  Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 Eliminations 
Total
Consolidated
Assets           
Current assets:           
Cash and cash equivalents$

$45,724

$492

$

$
 $46,216
Restricted cash

3,729






 3,729
Accounts receivable, less allowance for doubtful accounts of $3,779



203,469




 203,469
Trade receivable



7,344




 7,344
Deferred income taxes



29,658





 29,658
Prepaid expenses and other current assets

2,036

19,916




 21,952
Total current assets
 51,489
 260,879
 
 
 312,368
Property and equipment, net

3,821

242,707




 246,528
Broadcast licenses





1,640,882


 1,640,882
Other intangible assets, net



215,386




 215,386
Goodwill



1,204,953




 1,204,953
Investment in consolidated subsidiaries413,711

3,536,643

1,157,165



(5,107,519) 
Intercompany receivables

77,913

617,941



(695,854) 
Other assets

52,349

17,718




 70,067
Total assets$413,711
 $3,722,215
 $3,716,749
 $1,640,882
 $(5,803,373) $3,690,184
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity (Deficit)           
Current liabilities:           
Accounts payable and accrued expenses$

$22,988

$52,884

$

$
 $75,872
Trade payable



6,620




 6,620
Current portion of long-term debt

13,250






 13,250
Other current liabilities



8,542




 8,542
Total current liabilities
 36,238
 68,046
 
 
 104,284
Long-term debt, excluding 7.75% Senior Notes

2,040,359






 2,040,359
7.75% Senior Notes

610,000






 610,000
Other liabilities

3,966

37,156




 41,122
Intercompany payables77,913

617,941






(695,854) 
Deferred income taxes



74,904

483,717


 558,621
Total liabilities77,913
 3,308,504
 180,106
 483,717
 (695,854) 3,354,386
Redeemable preferred stock:           
Series A cumulative redeemable preferred stock, par value $0.01 per share; stated value of $1,000 per share; 100,000,000 shares authorized; 75,767 shares issued and outstanding72,871








 72,871
Total redeemable preferred stock72,871
 
 
 
 
 72,871
Stockholders’ equity (deficit):           
Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 186,456,601 and 182,682,073 shares issued, and 162,326,226 and 158,519,394 shares outstanding, at June 30, 2013 and December 31, 2012, respectively1,864








 1,864

29


Class B common stock, par value $0.01 per share; 600,000,000 shares authorized; 15,424,944 shares issued and outstanding at both June 30, 2013 and December 31, 2012154








 154
Class C common stock, par value $0.01 per share; 644,871 shares authorized, issued and outstanding at both June 30, 2013 and December 31, 20126








 6
Treasury stock, at cost, 24,130,375 and 24,162,676 shares at June 30, 2013 and December 31, 2012, respectively(250,697)







 (250,697)
Additional paid-in-capital1,511,689

208,301

3,901,332

2,139,092

(6,248,725) 1,511,689
Accumulated (deficit) equity(1,000,089)
205,410

(364,689)
(981,927)
1,141,206
 (1,000,089)
Total stockholders’ equity (deficit)262,927
 413,711
 3,536,643
 1,157,165
 (5,107,519) 262,927
Total liabilities, redeemable preferred stock and stockholders’ equity (deficit)$413,711
 $3,722,215
 $3,716,749
 $1,640,882
 $(5,803,373) $3,690,184

30



CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2012

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

(Unaudited)

   Cumulus
Media Inc.
(Parent
Guarantor)
  Cumulus
Media
Holdings Inc.
(Subsidiary Issuer)
   Subsidiary
Guarantors
  Subsidiary
Non-guarantors
  Eliminations  Total
Consolidated
 

Assets

        

Current assets:

        

Cash and cash equivalents

  $81,599   $—      $6,451   $—     $—     $88,050  

Restricted cash

   5,921    —       —      —      —      5,921  

Accounts receivable, less allowance for doubtful accounts of $4,131

   —      —       207,563    —      —      207,563  

Trade receivable

   —      —       6,104    —      —      6,104  

Prepaid expenses and other current assets

   6,928    —       38,553    —      —      45,481  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total current assets

   94,448    —       258,671    —      —      353,119  

Property and equipment, net

   4,690    —       251,213    —      —      255,903  

Broadcast licenses

   —      —       —      1,602,373    —      1,602,373  

Other intangible assets, net

   —      —       258,761    —      —      258,761  

Goodwill

   —      —       1,195,594    —      —      1,195,594  

Investment in consolidated subsidiaries

   415,573    3,354,891     1,127,135    —      (4,897,599  —    

Intercompany receivables

   —        471,329     (471,329  —    

Other assets

   11,605    47,818     18,402    —      —      77,825  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

  $526,316   $3,402,709    $3,581,105   $1,602,373   $(5,368,928 $3,743,575  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Liabilities, Redeemable Preferred Stock and Stockholders’ Equity (Deficit)

        

Current liabilities:

        

Accounts payable and accrued expenses

  $10,690   $8,213    $83,683   $—     $—     $102,586  

Trade payable

   —      —       4,803    —      —      4,803  

Current Portion of long-term debt

   —      76,468     —      —      —      76,468  

Other current liabilities

      11,386      11,386  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total Current Liabilities

   10,690    84,681     99,872    —      —      195,243  

Long-term debt, excluding 7.75% Senior Notes

   —      2,014,599     —      —      —      2,014,599  

7.75% Senior Notes

   —      610,000     —      —      —      610,000  

Other liabilities

   3,651    —       41,662    —      —      45,313  

Intercompany payables

   193,473    277,856       (471,329  —    

Deferred income taxes

   —      —       84,680    475,238    —      559,918  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities

   207,814    2,987,136     226,214    475,238    (471,329  3,425,073  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Redeemable preferred stock:

        

Series A cumulative redeemable preferred stock, par value $0.01 per share; stated value of $1,000 per share; 100,000,000 shares authorized; 75,767 shares issued and outstanding

   71,869    —       —      —      —      71,869  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total redeemable preferred stock

   71,869    —       —      —      —      71,869  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Stockholders’ equity (deficit):

        

Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 182,682,073 shares issued and 158,519,394 shares outstanding

   1,827    —       —      —      —      1,827  

Class B common stock, par value $0.01 per share; 600,000,000 shares authorized; 15,424,944 shares issued and outstanding

   154    —       —      —      —      154  

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

   6    —       —      —      —      6  

Treasury stock, at cost, 24,162,676 shares

   (252,001  —       —      —      —      (252,001

Additional paid-in-capital

   1,514,849    232,964     3,853,001    2,099,514    (6,185,479  1,514,849  

Accumulated (deficit) equity

   (1,018,202  182,609     (498,110  (972,379  1,287,880    (1,018,202
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total stockholders’ equity (deficit)

   246,633    415,573     3,354,891    1,127,135    (4,897,599  246,633  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities, redeemable preferred stock and stockholders’ equity (deficit)

  $526,316   $3,402,709    $3,581,105   $1,602,373   $(5,368,928 $3,743,575  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

 
Cumulus
Media Inc.
(Parent
Guarantor)
 
Cumulus
Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 Eliminations 
Total
Consolidated
Assets           
Current assets:           
Cash and cash equivalents$81,599
 $
 $6,451
 $
 $
 $88,050
Restricted cash5,921
 
 
 
 
 5,921
Accounts receivable, less allowance for doubtful accounts of $4,131
 
 207,563
 
 
 207,563
Trade receivable
 
 6,104
 
 
 6,104
Deferred income Tax
 
 25,145
 
 
 25,145
Prepaid expenses and other current assets6,928
 
 13,408
 
 
 20,336
Total current assets94,448
 
 258,671
 
 
 353,119
Property and equipment, net4,690
 
 251,213
 
 
 255,903
Broadcast licenses
 
 
 1,602,373
 
 1,602,373
Other intangible assets, net
 
 258,761
 
 
 258,761
Goodwill
 
 1,195,594
 
 
 1,195,594
Investment in consolidated subsidiaries415,573
 3,354,891
 1,127,135
 
 (4,897,599) 
Intercompany receivables
 
 471,329
 
 (471,329) 
Other assets11,605
 47,818
 18,402
 
 
 77,825
Total assets$526,316
 $3,402,709
 $3,581,105
 $1,602,373
 $(5,368,928) $3,743,575
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity (Deficit)           
Current liabilities:           
Accounts payable and accrued expenses$10,690
 $8,213
 $83,683
 $
 $
 $102,586
Trade payable
 
 4,803
 
 
 4,803
Current portion of long-term debt
 76,468
 
 
 
 76,468
Other current liabilities
 
 11,386
 
 
 11,386
Total current liabilities10,690
 84,681
 99,872
 
 
 195,243
Long-term debt, excluding 7.75% Senior Notes
 2,014,599
 
 
 
 2,014,599
7.75% Senior Notes
 610,000
 
 
 
 610,000
Other liabilities3,651
 
 41,662
 
 
 45,313
Intercompany payables193,473
 277,856
 
 
 (471,329) 
Deferred income taxes
 
 84,680
 475,238
 
 559,918
Total liabilities207,814
 2,987,136
 226,214
 475,238
 (471,329) 3,425,073
Redeemable preferred stock:           
Series A cumulative redeemable preferred stock, par value $0.01 per share; stated value of $1,000 per share; 100,000,000 shares authorized; 75,767 shares issued and outstanding71,869
 
 
 
 
 71,869
Total redeemable preferred stock71,869
 
 
 
 
 71,869
Stockholders’ equity (deficit):           

31


Class A common stock, par value $0.01 per share; 750,000,000 shares authorized; 186,456,601 and 182,682,073 shares issued, and 162,326,226 and 158,519,394 shares outstanding, at June 30, 2013 and December 31, 2012, respectively1,827
 
 
 
 
 1,827
Class B common stock, par value $0.01 per share; 600,000,000 shares authorized; 15,424,944 shares issued and outstanding at both June 30, 2013 and December 31, 2012154
 
 
 
 
 154
Class C common stock, par value $0.01 per share; 644,871 shares authorized, issued and outstanding at both June 30, 2013 and December 31, 20126
 
 
 
 
 6
Treasury stock, at cost, 24,130,375 and 24,162,676 shares at June 30, 2013 and December 31, 2012, respectively(252,001) 
 
 
 
 (252,001)
Additional paid-in-capital1,514,849
 232,964
 3,853,001
 2,099,514
 (6,185,479) 1,514,849
Accumulated (deficit) equity(1,018,202) 182,609
 (498,110) (972,379) 1,287,880
 (1,018,202)
Total stockholders’ equity (deficit)246,633
 415,573
 3,354,891
 1,127,135
 (4,897,599) 246,633
Total liabilities, redeemable preferred stock and stockholders’ equity (deficit)$526,316
 $3,402,709
 $3,581,105
 $1,602,373
 $(5,368,928) $3,743,575

32



CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three

Six Months Ended March 31,June 30, 2013

(Dollars in thousands)

(Unaudited)

  Cumulus
Media Inc.
(Parent Guarantor)
  Cumulus Media
Holdings Inc.
(Subsidiary Issuer)
  Subsidiary
Guarantors
  Subsidiary
Non-guarantors
  Eliminations  Total
Consolidated
 

Cash flows from operating activities:

      

Net (loss) income

 $(8,988 $(6,846 $49,629   $9,083   $(51,866 $(8,988

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

      

Depreciation and amortization

  —      497    28,433    —      —      28,930  

Amortization of debt issuance costs/discounts

  —      2,624    —      —      —      2,624  

Provision for doubtful accounts

  —      —      529    —      —      529  

Loss on station sale

  —      —      1,309    —      —      1,309  

Fair value adjustment of derivative instruments

  —      5    (738  —      —      (733

Deferred income taxes

  —      —      —      (9,573  —      (9,573

Stock-based compensation expense

  —      2,663    —      —      —      2,663  

Earnings from consolidated subsidiaries

  6,846    (49,629  (9,083  —      51,866    —    

Changes in assets and liabilities

  44,020    (41,305  34,840    490    —      38,045  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) operating activities

  41,878    (91,991  104,919    —      —      54,806  

Cash flows from investing activities

      

Proceeds from sale of assets or stations

  —      —      467    —      —      467  

Acquisitions less cash required

  —      —      (52,066  —      —      (52,066

Restricted cash

  —      (175  —      —      —      (175

Capital expenditures

  —      (87  (1,899  —      —      (1,986
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

  —      (262  (53,498  —      —      (53,760

Cash flows from financing activities:

      

Intercompany transactions, net

  (120,837  176,562    (55,725  —      —      —    

Repayments of borrowings under term loans and revolving credit facilities

  —      (3,313  —      —      —      (3,313

Tax withholding payments on behalf of employees for stock-based compensation

  —      (337  —      —      —      (337

Preferred stock dividends

  (2,652  —      —      —      —      (2,652

Proceeds exercise of warrants

  12    —      —      —      —      12  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash (used in) provided by financing activities

  (123,477  172,912    (55,725  —      —      (6,290

(Decrease) Increase in cash and cash equivalents

  (81,599  80,659    (4,304  —      —      (5,244

Cash and cash equivalents at beginning of period

  81,599    —      6,451    —      —      88,050  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of period

 $—     $80,659   $2,147   $—     $—     $82,806  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 
Cumulus
Media Inc.
(Parent 
Guarantor)
 
Cumulus Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 Eliminations 
Total
Consolidated
Cash flows from operating activities:           
Net income (loss)$18,112

$22,801

$133,421

$(9,548)
$(146,674) $18,112
Adjustments to reconcile net income (loss) to net cash provided by operating activities:           
Depreciation and amortization

981

56,885




 57,866
Amortization of debt issuance costs/discounts

5,164






 5,164
Provision for doubtful accounts



1,046




 1,046
Loss on sale of assets or stations



1,537




 1,537
Loss on early extinguishment of debt

4,539






 4,539
Fair value adjustment of derivative instruments

(27)
(2,844)



 (2,871)
Deferred income taxes



(14,248)
8,439


 (5,809)
Stock-based compensation expense

5,134






 5,134
(Loss) earnings from consolidated subsidiaries(22,801)
(133,421)
9,548



146,674
 
         Changes in assets and liabilities(81,633)
41,180

11,400

1,109


 (27,944)
Net cash (used in) provided by operating activities(86,322) (53,649) 196,745
 
 
 56,774
Cash flows from investing activities           
Proceeds from sale of assets or stations



692




 692
Restricted cash

2,192






 2,192
Acquisition less cash required



(52,066)



 (52,066)
Capital expenditures

(112)
(4,718)



 (4,830)
Net cash provided by (used in) investing activities
 2,080
 (56,092) 
 
 (54,012)
Cash flows from financing activities:           
Intercompany transactions, net9,993

136,619

(146,612)



 
Repayments of borrowings under term loans and revolving credit facilities

(38,931)





 (38,931)
Tax withholding payments on behalf of employees for stock-based compensation

(337)





 (337)
Preferred stock dividends(5,304)







 (5,304)
Proceeds from exercise of warrants34








 34
Deferred financing costs

(58)





 (58)
Net cash provided by (used in) financing activities4,723
 97,293
 (146,612) 
 
 (44,596)
(Decrease) increase in cash and cash equivalents(81,599) 45,724
 (5,959) 
 
 (41,834)
Cash and cash equivalents at beginning of period81,599



6,451




 88,050
Cash and cash equivalents at end of period$
 $45,724
 $492
 $
 $
 $46,216

33



CUMULUS MEDIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three

Six Months Ended March 31,June 30, 2012

(Dollars in thousands)

(Unaudited)

  Cumulus Media
Inc.
(Parent Guarantor)
  Cumulus Media
Holdings Inc.
(Subsidiary Issuer)
  Subsidiary
Guarantors
  Subsidiary
Non-guarantors
  Eliminations  Total
Consolidated
 

Cash flows from operating activities:

      

Net (loss) income

 $(12,130 $3,762   $54,766   $4,757   $(63,285 $(12,130

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

      

Depreciation and amortization

  221    —      35,457    —      —      35,678  

Amortization of debt issuance costs/discount

  —      2,974    —      —      —      2,974  

Provision for doubtful accounts

  —      —      3,361    —      —      3,361  

Loss on sale of assets or stations

  —      —      (262  —      —      (262

Fair value adjustment of derivative instruments

  85    —      (88  —      —      (3

Deferred income taxes

  —      —      (694  (5,286  —      (5,980

Stock-based compensation expense

  6,978    —      —      —      —      6,978  

Earnings from consolidated subsidiaries

  (3,762  (54,766  (4,757  —      63,285    —    

Changes in assets and liabilities:

  1,421    54,246    (26,534  529    —      29,662  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash (used in) provided by operating activities

  (7,187  6,217    61,249    —      —      60,278  

Cash flows from investing activities:

      

Proceeds from sale of assets or stations

  322    —      —      —      —      322  

Capital expenditures

  (400  —      (722  —      —      (1,122
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

  (78  —      (722  —      —      (800

Cash flows from financing activities:

      

Intercompany transactions, net

  18,826    47,784    (66,610  —      —      —    

Repayments of borrowings under term loans and revolving credit facilities

  —      (54,000  —      —      —      (54,000

Tax withholding payments on behalf of employees for stock-based compensation

  (1,346  —      —      —      —      (1,346

Preferred stock dividends

  (3,125  —      —      —      —      (3,125

Exercise of warrants

  34    —      —      —      —      34  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) financing activities

  14,389    (6,217  (66,610  —      —      (58,437

Increase in cash and cash equivalents

  7,124    —      (6,083  —      —      1,041  

Cash and cash equivalents at beginning of period

  11,714    —      18,878    —      —      30,592  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of period

 $18,838   $—     $12,795   $—     $—     $31,633  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 
Cumulus Media
Inc.
(Parent 
Guarantor)
 
Cumulus Media
Holdings Inc.
(Subsidiary 
Issuer)
 
Subsidiary
Guarantors
 
Subsidiary
Non-guarantors
 Eliminations 
Total
Consolidated
Cash flows from operating activities:           
Net (loss) income$(3,987)
$30,069

$130,767

$5,260

$(166,096) $(3,987)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:           
Depreciation and amortization566



71,676




 72,242
Amortization of debt issuance costs/discount

5,061






 5,061
Provision for doubtful accounts



1,598




 1,598
Gain on sale of assets or stations



(183)



 (183)
Impairment of intangible assets




12,435






 12,435
Fair value adjustment of derivative instruments250



753




 1,003
Deferred income taxes



(7,991)
(6,311)

 (14,302)
Stock-based compensation expense12,906








 12,906
Earnings from consolidated subsidiaries30,069

130,767

5,260



(166,096) 
       Changes in assets and liabilities(68,243)
(266,595)
(29,988)
1,051

332,192
 (31,583)
Net cash (used in) provided by operating activities(28,439) (100,698) 184,327
 
 
 55,190
Cash flows from investing activities:           
Proceeds from sale of assets or stations426








 426
Capital expenditures(676)


(1,243)



 (1,919)
Net cash used in investing activities(250) 
 (1,243) 
 
 (1,493)
Cash flows from financing activities:           
Intercompany transactions, net40,274

157,698

(197,972)



 
Repayments of borrowings under term loans and revolving credit facilities

(57,000)





 (57,000)
Tax withholding payments on behalf of employees for stock-based compensation(1,909)







 (1,909)
Preferred stock dividends(6,458)







 (6,458)
Proceeds from exercise of warrants161








 161
Net cash provided by (used in) financing activities32,068

100,698

(197,972)



 (65,206)
Increase (decrease) in cash and cash equivalents3,379
 
 (14,888) 
 
 (11,509)
Cash and cash equivalents at beginning of period11,714



18,878




 30,592
Cash and cash equivalents at end of period$15,093
 $
 $3,990
 $
 $
 $19,083


34


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 unaudited condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report. This discussion, as well as various other sections of this quarterly report, contains and refers to statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such statements relate to our intent, belief or current expectations primarily with respect to our future operating, financial and strategic performance. Any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties. Actual results may differ from those contained in or implied by the forward-looking statements as a result of various factors, including, but not limited to, risks and uncertainties relating to the need for additional funds to execute our business strategy, our inability to renew one or more of our broadcast licenses, changes in interest rates, the timing, costs and synergies resulting from the integration of any completed acquisitions, our ability to eliminate certain costs, our ability to manage rapid growth, the popularity of radio as a broadcasting and advertising medium, changing consumer tastes, any material changes from the preliminary to final purchase price allocations in completed acquisitions, the impact of general economic conditions in the United States or in specific markets in which we currently do business, industry conditions, including existing competition and future competitive technologies, cancellation, disruptions or postponements of advertising schedules in response to national or world events, and our ability to generate revenue from new sources, including technology-based initiatives. Many of these risks and uncertainties are beyond our control, and the unexpected occurrence or failure to occur of any such events or matters could significantly alter our actual results of operations or financial condition.

For additional information about certain of the matters discussed and described in the following Management’s Discussion and Analysis of Financial Condition and Results of Operations, including certain defined terms used herein, see the notes to the accompanying unaudited condensed consolidated financial statements included elsewhere in this quarterly report.

Our Business

We own and operate commercial radio station clusters throughout the United States. We believe we are the largest pure-play radio broadcaster in the United States based on number of stations owned and operated. At March 31,June 30, 2013, we owned or operated

approximately 520 radio stations (including under LMAs) in 108 United States media markets and operated nationwide radio networks serving over 5,000 affiliates. At March 31,June 30, 2013, under LMAs, we provided sales and marketing services for 14 radio stations in the United States.

Operating Overview

We believe that following the completion of the CMP Acquisition and the Citadel Merger, which included the acquisition of our radio networks, consisting of 5,000 station affiliates and 9,000 program affiliates, in 2011 we have created a leading radio broadcasting company with a true national platform withand an opportunity to further leverage and expand upon our strengths, market presence and programming. Specifically with the completion of these acquisitions, we now have an extensive radio station portfolio consisting of approximately 520 radio stations, including a presence in eight of the top 10 markets, and broad diversity in format, listener base, geography, advertiser base and revenue stream, all of which are designed to reduce our dependence on any single demographic, region or industry. Our increased scale has allowedallows larger, more significant investments in the local digital media marketplace allowingenabling us to apply our local digital platforms and strategies, including our social commerce initiatives to be applied across significant additional markets. We believe our onesingle national platform will allow us to optimize our available advertising inventory while providing holistic and comprehensive solutions for our customers.

Cumulus believes that our capital structure provides for adequate liquidity and scale for Cumulus to pursue and finance potential strategic acquisitions in the future.

Liquidity Considerations

Historically, our principal needs for funds have been for acquisitions of radio stations, expenses associated with our station and corporate operations, capital expenditures, and interest and debt service payments. We believe that our funding needs in the future will be for substantially similar matters.

Our principal sources of funds historically have been cash flow from operations and borrowings under 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. In addition, we believe the acquisition of thethat our broad diversity in format, listener base, geography, advertiser base and revenue stream that accompanied the CMP Acquisition and the Citadel Merger will helphelps us to reduce our dependence on any single demographic, region or industry.


35


At March 31,June 30, 2013, we had $1.318$1.287 billion outstanding under the First Lien Facility, $790.0$785.5 million outstanding under the Second Lien Facility and no amounts outstanding under the Revolving Credit Facility.

We also had outstanding $610.0 million of 7.75% Senior Notes due 2019.

On December 20, 2012,May 31, 2013, we entered into an amendment and restatement (the “Amendment and Restatement”“Amendment”) of ourto the First Lien Facility Credit Agreement, dated as of September 16, 2011, among the Company, Cumulus Media Holdings, Inc., as borrower (the “Borrower”), and the lenders and the agents thereto (the “Original Agreement”).Facility. Pursuant to the Amendment, and Restatement, the terms and conditionsconsolidated total net leverage ratio covenant contained in the Original Agreement remained substantially unchanged, except as follows: (i)First Lien Facility, with which the amount outstanding thereunderCompany was increasedrequired to $1.325 billion; (ii) the margin for LIBOR (as defined below) -based borrowings was reduced from 4.5% to 3.5% and for Base Rate (as defined below) -based borrowings was reduced from 3.5% to 2.5%; and (iii) the LIBOR floor for LIBOR-based borrowings was reduced from 1.25% to 1.0%.

Incomply in the event amounts arewere outstanding under the Revolving Credit Facility the First Lien Facility requires compliancehas been replaced with a consolidated totalfirst lien net leverage ratio. At March 31, 2013, this ratio would have been 6.5 to 1.0. Such ratio will be reduced in future periods if amounts are outstandingcovenant, and the total commitments under the Revolving Credit Facility at an applicable date. At March 31, 2013 we would not have been in compliance with this ratio. As a result, borrowings under the revolving credit facility were not available at that date. The Second Lien Facility does not contain any financial covenants. At March 31, 2013 our long-term debt consisted of $2.1 billion in total term loans and $610.0 million in 7.75% Senior Notes.

Based upon the calculation of excess cash flow at December 31, 2012, the Company was required to make a mandatory prepayment on the First Lien Term Loan. Due to certain rights retained by the lenders to decline proportionate shares of such prepayments, the final prepayment amount was reduced from 63.2$300.0 million to $35.6 million of which a portion was applied to the Second Lien Term Loan. The prepayment was made on April 1, 2013 and has been classified in the current portion of long-term debt caption of the condensed consolidated balance sheet

The 2011 Credit Facilities contain provisions requiring the Company to use the proceeds from the disposition of assets of the Company to prepay amounts outstanding under the First Lien Facility and the Second Lien Facility (to the extent proceeds remain after the required prepayment of all amounts outstanding under the First Lien Facility), subject to the right of the Company to use such proceeds to acquire, improve or repair assets useful in its business, all within one year from the date of receipt of such proceeds. As of March 31, 2013, we have complied with these provisions and reinvested the proceeds from the Townsquare Asset Exchange as such, we will not be required to prepay principal outstanding under the 2012 Credit Facilities.

$150.0 million.

We have assessed the current and expected conditions of our business climate, our current and expected needs for funds and our current and expected sources of funds and determined, based on our financial condition as of March 31,June 30, 2013, that cash on hand and cash expected to be generated from operating activities will be sufficient to satisfy our anticipated financing needs for working capital, capital expenditures, interest and debt service payments, and any repurchases of securities and other debt obligations through at least March 31,June 30, 2014.

Advertising Revenue and Adjusted EBITDA

Our primary source of revenues is the sale of advertising time on our radio stations and networks.time. Our sales of advertising time are primarily affected by the demand for advertising time from local, regional and national advertisers, andwhich impacts the advertising rates charged by us. 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. We endeavor to develop strong listener loyalty and we believe that the diversification of formats and programs helps to insulate us from the effects of changes in the musical tastes of the public with respect to any particular format.format as a substantial portion of our revenue comes from non-music formats and proprietary content. In addition, we believe that the portfolio that we own and operate, which has increased diversity in terms of format, listener base, geography, advertiser base and revenue stream as a result of our recent acquisitions and the development of our strategy to focus on radio stations in larger markets and geographically strategic regional clusters, will further reduce our revenue dependence on any single demographic, region or industry.

We strive to maximize revenue by managing our on-air inventory of advertising time and adjusting prices up or down based on supply and demand. The optimal number of advertisements available for sale depends on the programming format of a particular station or program network.radio program. Each sales vehicle has a general target level of on-air inventory available for advertising. This target level of advertising inventory may vary at different times of the day but tends to remain stable over time. We seek to broaden our base of advertisers in each of our markets by providing a wide array of audience demographic segments across each cluster of stations, thereby providing each of our potential advertisers with an effective means of reaching a targeted demographic group. In the broadcasting industry, we sometimes utilize trade or barter agreements that exchange advertising time for goods or services such as travel or lodging, instead of for cash. Trade revenue totaled $4.9$12.5 million and $6.8$13.6 million infor the threesix months ended March 31,June 30, 2013 and 2012, 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 71.9%67.6% and 72.7%67.3% of our total revenues during the three and six months ended March 31, 2013 and 2012, respectively.

June 30, 2013.

In addition to local advertising revenues, we monetize our available inventory in both national spot and network sales market placesmarketplaces using our national platform. To effectively deliver our network advertising for our customers, we distribute content and programming through third party affiliates in order to achieve a broader national audience. Typically, in exchange for the right to broadcast radio network programming, third party affiliates remit a portion of their advertising time, which is then aggregated into packages focused on specific demographic groups and sold by us to our advertiser clients that want to reach the listeners who comprise those demographic groups on a national basis. Revenues derived from third party affiliates represented less than 10% of consolidated revenues.

revenues in all periods presented.

Our advertising revenues vary by quarter throughout the year. As is typical in the radio broadcasting industry, our first calendar quarter typically produces the lowest revenues of a last twelve month period, as advertising generally declines following the winter holidays. The second and fourth calendar quarters typically produce the highest revenues for the year. Our operating results in any period may be affected by the incurrence of advertising and promotion expenses that typically do not have an effect on revenue generation until future periods, if at all. We continually evaluate opportunities to increase revenues through new platforms, including technology-based initiatives.

Adjusted EBITDA is the financial metric utilized by management to analyze the cash flow generated by the Company’s business. This measure isolates the amount of income generated by the Company’s radio stations apart from the incurrence of non-cash and non-operating expenses. Management also uses this measure to determine the contribution of the Company’s radio station portfolio, including the corporate resources employed to manage the portfolio, to the funding of its other operating

36


expenses and to the funding of debt service and acquisitions. In addition, Adjusted EBITDA is a key metric for purposes of calculating and determining our compliance with certain covenants contained in our First Lien Credit Agreement, as amended and restated, (the “First Lien Facility”).

Facility.

In deriving this measure, management excludes depreciation, amortization and stock-based compensation expense, as these do not represent cash payments for activities directly related to the operation of the radio stations. In addition, we exclude LMA fees from our calculation of Adjusted EBITDA, even though such fees require a cash settlement, because they are excluded from the definition of Adjusted EBITDA contained in our First Lien Facility. Management excludes any gain or loss on the exchange of assets or stations as they do not represent a cash transaction. Management also excludes any realized gain or loss on derivative instruments as they do

not represent a cash transaction nor are they associated with radio station operations. Interest expense, net of interest income, discontinued operations, income tax (benefit) expense including franchise taxes, and expenses relating to acquisitions are also excluded from the calculation of Adjusted EBITDA as they are not directly related to the operation of radio stations. Management excludes any impairment of goodwill and intangible assets as they do not require a cash outlay. Management believes that Adjusted EBITDA, although not a measure that is calculated in accordance with GAAP, nevertheless is commonly employed by the investment community as a measure for determining the market value of a radio company. Management has also observed that Adjusted EBITDA is routinely employed to evaluate and negotiate the potential purchase price for radio broadcasting companies, and is a key metric for purposes of calculating and determining compliance with certain covenants in our First Lien Facility. Given the relevance to the overall value of the Company, management believes that investors consider the metric to be extremely useful.

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating activities or any other measure for determining the Company’s operating performance or liquidity that is calculated in accordance with GAAP.

A quantitative reconciliation of Adjusted EBITDA to net loss,income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, follows in this section.


Results of Operations

Analysis of the Unaudited Condensed Consolidated Results 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):

   Three Months Ended
March 31,
  2013 vs 2012
$ Change
  % Change
Three Months

Ended
 
   2013  2012   

STATEMENT OF OPERATIONS DATA:

     

Net revenues

  $232,872   $235,995   $(3,123  -1.3

Direct operating expenses (excluding depreciation, amortization and LMA fees)

   164,172    153,627    10,545    6.9

Depreciation and amortization

   28,930    34,882    (5,952  -17.1

LMA fees

   969    839    130    15.5

Corporate, general and administrative expenses (including stock-based compensation expense)

   13,866    16,692    (2,826  -16.9

Loss on station sale

   1,309    —      1,309    *

Gain on derivative instrument

   (738  (88  (650  *
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

   24,364    30,043    (5,679  -18.9

Interest expense, net

   (44,252  (50,803  6,551    -12.9

Other income, net

   133    262    (129  -49.2

Loss from continuing operations before income taxes

   (19,755  (20,498  743    -3.6

Income tax benefit

   10,767    7,892    2,875    36.4
  

 

 

  

 

 

  

 

 

  

 

 

 

Income from continuing operations

   (8,988  (12,606  

Income from discontinued operations, net of taxes

   —      476    (476  *
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  $(8,988 $(12,130 $3,142    25.9
  

 

 

  

 

 

  

 

 

  

 

 

 

OTHER DATA:

     

Adjusted EBITDA

  $59,888   $76,865   $(16,977  -22.1

**Calculation is not meaningful.


37


 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
% Change
Three Months
Ended
 
% Change
Six Months
Ended
 2013 2012 2013 2012 
STATEMENT OF OPERATIONS DATA:           
Net revenues$289,676

$281,041
 $522,548

$517,036
 3.1 %
1.1 %
Direct operating expenses (excluding depreciation, amortization and LMA fees)171,762

168,746
 335,934

322,442
 1.8 %
4.2 %
Depreciation and amortization28,935

36,200
 57,866

71,007
 (20.2)%
(18.5)%
LMA fees759

885
 1,728

1,724
 (14.2)%
0.2 %
Corporate, general and administrative expenses (including stock-based compensation expense)7,760

16,802
 21,626

33,494
 (53.8)%
(35.5)%
Loss on sale of stations91


 1,400


 **

**
(Gain) loss on derivative instrument(2,106)

841
 (2,844)
753
 **

**
Impairment of intangible assets

12,435
 

12,435
 **

**
Operating income82,475 45,132 106,838

75,181
 82.7 %
42.1 %
Interest expense, net(43,833)
(49,619) (88,085)
(100,422) (11.7)%
(12.3)%
Loss on early extinguishment of debt(4,539)

 (4,539)

 **

**
Other (loss) income, net(511)
(74) (378)
190
 590.5 %
(298.9)%
Income (loss) from continuing operations before income taxes33,592 (4,561)
 13,836

(25,051) **

**
Income tax (expense) benefit(6,491)
2,798
 4,276

10,689
 **

**
Income (loss) from continuing operations27,101
 (1,763)
 18,112

(14,362) **

**
Income from discontinued operations, net of taxes

9,906
 

10,375
 **

**
Net income (loss)$27,101

$8,143
 $18,112

$(3,987) **

**
OTHER DATA:


 


 




Adjusted EBITDA$112,800

$106,129
 $172,688

$179,736
 6.3 %
(3.9)%
** Calculation is not meaningful.

Three Months Ended March 31,June 30, 2013 Compared to the Three Months Ended March 31,June 30, 2012

Net Revenues.Net revenues for the three months ended March 31,June 30, 2013 decreased $3.1increased $8.7 million, or 1.3%3.1%, to $232.9$289.7 million, compared to $236.0$281.0 million for the three months ended March 31,June 30, 2012. This decreaseincrease was attributable to lowera $4.3 million increase in local advertising revenue, a $3.9 million increase in revenue related to digital initiatives and a $2.8 million increase in revenue due to the addition of stations in the Bloomington and Peoria markets we acquired from Townsquare Media in July 2012. These increases were partially offset by a decrease of $2.3 million in cyclical political revenues and general lower advertising spending in some of our markets.revenue.

Direct Operating Expenses, Excluding Depreciation and Amortization.Direct operating expenses for the three months ended March 31,June 30, 2013 increased $10.6$3.1 million, or 6.9%1.8%, to $164.2$171.8 million, compared to $153.6$168.7 million for the three months ended March 31,June 30, 2012. The increase was primarily attributable to a $1.0$4.6 million increase in our strategic content initiatives, a $4.1 million increase related to ongoing investments in our sales salaries,infrastructure and a $1.6$1.9 million increase in Arbitron feesexpenses due to the addition of stations in the Bloomington and Peoria markets we acquired from Townsquare Media in July 2012. These increases were partially offset by a $4.9$7.5 million increasedecrease in expense at our network division as we invest in various content initiatives.music royalties.

Depreciation and Amortization.Depreciation and amortization for the three months ended March 31,June 30, 2013 decreased $6.0$7.3 million, or 17.1%20.2%, to $28.9 million, compared to $34.9$36.2 million for the three months ended March 31,June 30, 2012. This decrease was primarily due to a $7.0$6.6 million decrease in amortization expense on the Company’sour definite lived intangibles offset byintangible assets, which results from the accelerated amortization methodology we have applied since acquisition of the assets based on the expected pattern in which the underlying assets' economic benefits are consumed.  There was also a $1.0$0.7 million increasedecrease in depreciation expense.

Corporate, General and Administrative Expenses, Including Stock-based CompensationExpense. Corporate general and administrative expenses, including stock-based compensation expense, for the three months ended March 31,June 30, 2013 decreased $2.8$9.0 million, or 16.9%53.8%, to $13.9$7.8 million, compared to $16.7$16.8 million for the three months ended March 31,June 30, 2012. TheThis decrease is

38


primarily due to a decrease of $4.4 million mostly associated with the closure of the legacy Citadel corporate offices, a $3.5 million decrease in stock basedstock-based compensation expense of $4.3and a $1.1 million partially offset by a $1.2 million increasedecrease in acquisition relatedother overhead costs. Acquisition related costs for the three months ended March 31, 2013 included exit costs associated with a lease for vacated Citadel office space.

Realized Losses(Gain) loss on Derivative Instrument.For the three months ended March 31,June 30, 2013, we recorded a $0.7$2.1 million gain related to the fair value adjustment of the put option on five Green Bay stations we operate under an LMA, compared to a $0.1$0.8 million gain loss recorded for the three months ended March 31,June 30, 2012.

Impairment of Intangible Assets. For the three months ended June 30, 2012, we recorded a definite-lived intangible asset impairment of $12.4 million related to the cancellation of a contract. There was no similar impairment for the three months ended June 30, 2013.
Interest Expense, net.Total interest expense, net of interest income, for the three months ended March 31,June 30, 2013 decreased $6.5$5.8 million, or 12.9%11.7%, to $44.3$43.8 million compared to $50.8$49.6 million for the three months ended March 31,June 30, 2012. Interest expense associated with outstanding debt decreased by $6.5$6.3 million to $41.5$41.4 million as compared to $48.0$47.7 million in the prior year period. Interest expense decreasedThis decrease was due to a lower average amount of indebtedness outstanding as a resultresulting from principal repayments and a lower weighted average cost of debt due to the December 2012 Amendment and Restatement.amendment to our First Lien Facility. The following summary details the components of our interest expense, net of interest income (dollars in thousands):

   Three Months Ended
March 31,
  2013 vs 2012 
   2013  2012  $ Change  % Change 

7.75% Senior Notes

  $11,819   $11,819   $—      *

Bank borrowings – term loans and revolving credit facilities

   29,680    36,219    (6,539  -18.1

Other interest expense

   3,018    2,897    121    4.2

Change in fair value of interest rate cap and swap

   5    84    (79  *

Interest income

   (270  (216  (54  25.0
  

 

 

  

 

 

  

 

 

  

 

 

 

Interest expense, net

  $44,252   $50,803   $(6,551  -12.9
  

 

 

  

 

 

  

 

 

  

 

 

 

**Calculation is not meaningful.

 
Three Months Ended
June 30,
 2013 vs 2012
 2013 2012 $ Change % Change
7.75% Senior Notes$11,819

$11,819

$

 %
Bank borrowings – term loans and revolving credit facilities29,534

35,848

(6,314)
(17.6)%
Other interest expense2,876

2,089

787

37.7 %
Change in fair value of interest rate cap and swap(32)
165

(197)
(119.4)%
Interest income(364)
(302)
(62)
20.5 %
Interest expense, net$43,833

$49,619

$(5,786)
(11.7)%
Income Taxes. For the three months ended March 31,June 30, 2013, the Company recorded income tax benefitsexpense of $10.8$6.5 million, on a pre-tax lossincome from continuing operations of $19.8$33.6 million, resulting in an effective tax rate for the three months ended March 31,June 30, 2013 of approximately 54.5%19.3%. For the three months ended March 31,June 30, 2012, the Company recorded an income tax benefit of $7.9$2.8 million, on pre-tax loss from continuing operations of $20.5$4.6 million, resulting in an effective tax rate for the three months ended March 31,June 30, 2012 of approximately 38.5%60.9%.

The difference between the effective tax rate for each period and the federal statutory rate of 35.0% primarily relates to state and local income taxes and the tax amortization of broadcast licenses and goodwill;goodwill and changes in the valuation allowance on net deferred tax assets.
In accordance with ASC 740, Accounting for Income Taxes, each quarter we assesses the likelihood that the Company will be able to recover its deferred tax assets classified as having an indefinite life for book purposes.

with respect to the amount of its federal and state net operating loss carryovers available to satisfy the settlement of its deferred tax liability related to the prior elections made by certain of its acquired subsidiaries to defer the recognition of cancellation of debt income (“CODI”).  As a result of this quarter's assessment, the Company estimates that more of its net operating loss carryovers will become available to settle the deferred tax liabilities associated with the deferred CODI resulting in a $14.1 million release of its valuation allowance during the three months ended June 30, 2013.

Adjusted EBITDA. As a result of the factors described above, Adjusted EBITDA for the three months ended March 31,June 30, 2013 decreased $17.0increased $6.7 million to $59.9$112.8 million from $76.9$106.1 million for the three months ended March 31,June 30, 2012.

Reconciliation of Non-GAAP Financial Measure. The following table reconciles Adjusted EBITDA to net lossincome (loss) (the most directly comparable financial measure calculated and presented in accordance with GAAP) as presented in the accompanying consolidated statements of operations (dollars in thousands):

   Three Months Ended
March 31,
  % Change
Three Months

Ended
 
   2013  2012  

Net loss

  $(8,988 $(12,130  25.9

Income tax benefit

   (10,767  (7,892  36.4

Non-operating expenses, including net interest expense

   44,119    50,541    -12.7

LMA fees

   969    839    15.5

Depreciation and amortization

   28,930    34,882    -17.1

Stock-based compensation expense

   2,663    6,978    -61.8

Loss on station sale

   1,309    —      *

Gain on derivative instrument

   (738  (88  *

Acquisition-related costs

   2,214    1,023    116.4

Franchise taxes

   177    —      *

Discontinued operations:

    

Depreciation and amortization

   —      796    *

Income tax expense

   —      1,916    *
  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

  $59,888   $76,865    -22.1
  

 

 

  

 

 

  

 

 

 

**Calculation is not meaningful.


39

Table of Contents

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
% Change
Three Months
Ended
 
% Change
Six Months
Ended
 2013 2012 2013 2012  
Net income (loss)$27,101

$8,143
 $18,112

$(3,987) **
 **
Income tax expense (benefit)6,491

(2,798) (4,276)
(10,689) **
 **
Non-operating expenses, including net interest expense48,883

49,693
 93,002

100,232
 (1.6)% (7.2)%
LMA fees759

885
 1,728

1,724
 (14.2)% 0.2 %
Depreciation and amortization28,935

36,200
 57,866

71,007
 (20.1)% (18.5)%
Stock-based compensation expense2,470

5,928
 5,134

12,906
 (58.3)% (60.2)%
Loss on sale of stations91


 1,400


 **
 **
(Gain) loss on derivative instrument(2,106)
841
 (2,844)
753
 **
 **
Impairment of intangible assets

12,435
 

12,435
 **
 **
Acquisition-related costs

4,443
 2,214

5,465
 **
 (59.5)%
Franchise taxes176

265
 352

265
 (33.6)% 32.8 %
Discontinued operations

(9,906)


(10,375) **
 **
Adjusted EBITDA$112,800

$106,129
 $172,688

$179,736
 6.3 % (3.9)%
** Calculation is not meaningful.
Six Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012
Net Revenues. Net revenues for the six months ended June 30, 2013 increased $5.5 million, or 1.1%, to $522.5 million, compared to $517.0 million for the six months ended June 30, 2012. This increase was attributable to a $1.5 million increase in local advertising revenue, a $3.0 million increase in revenue related to digital initiatives and a $5.0 increase in revenue due to the addition of stations in the Bloomington and Peoria markets we acquired from Townsquare Media in July 2012. These increases were partially offset by a decrease of $4.0 million in cyclical political revenue.
Direct Operating Expenses, Excluding Depreciation and Amortization. Direct operating expenses for the six months ended June 30, 2013 increased $13.5 million, or 4.2%, to $335.9 million, compared to $322.4 million for the six months ended June 30, 2012. The increase was primarily attributable to an $18.7 million increase in our strategic content initiatives as well as ongoing investments in our sales infrastructure and a $3.5 million increase in expenses due to the addition of stations in the Bloomington and Peoria markets we acquired from Townsquare Media in July 2012. These increases were partially offset by an $8.7 million decrease in music royalties.
Depreciation and Amortization. Depreciation and amortization for the six months ended June 30, 2013 decreased $13.1 million to $57.9 million, compared to $71.0 million for the six months ended June 30, 2012. This decrease was primarily due to a $13.7 million decrease in amortization expense on our definite lived intangible assets, which results from the accelerated amortization methodology we have applied since acquisition of the assets based on the expected pattern in which the underlying assets' economic benefits are consumed.  There was also a $0.6 million increase in depreciation expense.
Corporate, General and Administrative Expenses, Including Stock-based CompensationExpense. Corporate general and administrative expenses, including stock-based compensation expense, for the six months ended June 30, 2013 decreased $11.9 million, or 35.5%, to $21.6 million, compared to $33.5 million for the six months ended June 30, 2012. The decrease is primarily due to a decrease in acquisition related costs of $3.3 million mostly associated with the closure of the legacy Citadel corporate offices, a $7.8 million decrease in stock-based compensation expense and a $0.8 million decrease in other overhead costs.
(Gain) loss on Derivative Instrument. For the six months ended June 30, 2013, we recorded a $2.8 million gain related to the fair value adjustment of the put option on five Green Bay stations we operate under an LMA, compared to a $0.8 million loss recorded for the six months ended June 30, 2012.
Impairment of Intangible Assets. For the six months ended June 30, 2012, we recorded a definite-lived intangible asset impairment of $12.4 million related to the cancellation of a contract. There was no similar impairment for the six months ended June 30, 2013.
Interest Expense, net. Total interest expense, net of interest income, for the six months ended June 30, 2013 decreased $12.3 million, or 12.3%, to $88.1 million compared to $100.4 million for the six months ended June 30, 2012. Interest expense associated with outstanding debt decreased by $12.8 million to $82.9 million as compared to $95.7 million in the prior year period. This decrease was due to lower average indebtedness outstanding resulting from principal repayments and a lower

40

Table of Contents

weighted average cost of debt due to the December 2012 amendment to our First Lien Facility. The following summary details the components of our interest expense, net of interest income (dollars in thousands):
 
Six Months Ended
June 30,
 2013 vs 2012
 2013 2012 $ Change % Change
7.75% Senior Notes$23,638

$23,638

$

 %
Bank borrowings – term loans and revolving credit facilities59,214

72,067

(12,853)
(17.8)%
Other interest expense5,894

5,065

829

16.4 %
Change in fair value of interest rate cap and swap(27)
250

(277)
(110.8)%
Interest income(634)
(598)
(36)
6.0 %
Interest expense, net$88,085

$100,422

$(12,337)
(12.3)%
Income Taxes. For the six months ended June 30, 2013, the Company recorded an income tax benefit of $4.3 million on pre-tax income from continuing operations of $13.8 million, resulting in an effective tax rate of approximately (31.2%). For the six months ended June 30, 2012, the Company recorded income tax benefit of $10.7 million on pre-tax loss from continuing operations of $25.1 million, resulting in an effective tax rate of 42.6%.
The difference between the effective tax rate for each period and the federal statutory rate of 35.0% primarily relates to state and local income taxes and the tax amortization of broadcast licenses and goodwill and changes in the valuation allowance on net deferred tax assets.
In accordance with ASC 740, Accounting for Income Taxes, each quarter we assesses the likelihood that the Company will be able to recover its deferred tax assets with respect to the amount of its federal and state net operating loss carryovers available to satisfy the settlement of its deferred tax liability related to the prior elections made by certain of its acquired subsidiaries to defer the recognition of cancellation of debt income (“CODI”).  As a result of this quarter's assessment, the Company estimates that more of its net operating loss carryovers will become available to settle the deferred tax liabilities associated with the deferred CODI resulting in a $14.1 million release of its valuation allowance during the six months ended June 30, 2013.
Adjusted EBITDA. As a result of the factors described above, Adjusted EBITDA for the six months ended June 30, 2013 decreased $7.0 million to $172.7 million from $179.7 million for the six months ended June 30, 2012.

Liquidity and Capital Resources


Cash Flows provided by Operating Activities

   Three Months Ended
March 31,
 
   2013   2012 
(Dollars in thousands)        

Net cash provided by operating activities

  $54,806    $60,278  

 
Six Months Ended
June 30,
 2013 2012
(Dollars in thousands)   
Net cash provided by operating activities56,774

$55,190
For the threesix months ended March 31,June 30, 2013 compared to the threesix months ended March 31,June 30, 2012, net cash provided by operating activities decreased $5.5increased $1.6 million as compared to the threesix months ended March 31,June 30, 2012. The decreaseincrease was primarily due to a decrease in net revenues of $12.4 million, partially offset by an aggregate increase in cash providedworking capital driven by operating assetsslightly better collections and liabilitiestiming of $8.4 million.

payments.

Cash Flows used in Investing Activities

   Three Months Ended
March 31,
 
(Dollars in thousands)  2013  2012 

Net cash used in investing activities

  $(53,760 $(800

 
Six Months Ended
June 30,
(Dollars in thousands)2013 2012
Net cash used in investing activities(54,012) $(1,493)
For the threesix months ended March 31,June 30, 2013 compared to the threesix months ended March 31,June 30, 2012, net cash used in investing activities increased $53.0$52.5 million, primarily due to completing $52.1 million in acquisitions during the threesix months ended March 31,June 30, 2013.


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Cash Flows used in Financing Activities

   Three Months Ended
March 31,
 
(Dollars in thousands)  2013  2012 

Net cash used in financing activities

  $(6,290 $(58,437

 
Six Months Ended
June 30,
(Dollars in thousands)2013 2012
Net cash used in financing activities(44,596) $(65,206)
For the threesix months ended March 31,June 30, 2013 compared to the threesix months ended March 31,June 30, 2012, net cash used in financing activities decreased $52.1$20.6 million, primarily attributable to repaying $50.7$18.1 million less of borrowings under the Company’s term loans.

For additional detail regarding the Company’s material liquidity considerations, see “Liquidity Considerations” above.

2013 and 2012 Acquisitions and Dispositions

For a detailed discussion on our 2013 and 2012 acquisitions, see Note 2, “Acquisitions and Dispositions” in the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.




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Item 3.Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to our market risks from those disclosed in Part II, Item 7A of our 2012 Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Annual Report”).


Item 4.Controls and Procedures

We maintain a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, the “Exchange Act”) designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Such disclosure controls and procedures are designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our 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. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and, while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.

At the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were effective asat the reasonable assurance level as of March 31,June 30, 2013.

There were no changes to our internal control over financial reporting during the fiscal quarter ended March 31,June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II. OTHER INFORMATION


Item 1.Legal Proceedings

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


Item 1A.Risk Factors

Please refer to Part I, Item 1A, “Risk Factors,” in our 2012 Annual Report for information regarding known material risks that could affect our results of operations, financial condition and liquidity.

In addition to these risks, other risks that we presently do not consider material, or other unknown risks, could materially adversely impact our business, financial condition and results of operations in a future period.


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

On May 21, 2008, our Board of Directors authorized the purchase, from time to time, of up to $75.0 million of our Class A Common Stock, subject to the terms and limitations obtained in any applicable agreements and compliance with other applicable legal requirements. During the three months ended March 31,June 30, 2013, we did not purchase any shares of our Class A Common Stock. As



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Item 6.Exhibits

10.1 —Amendment, dated May 31, 2013, to the First Lien Credit Agreement, dated as of September 16, 2011, as amended and restated as of December 20, 2012, among the Company, Cumulus Media Holdings, Inc., as borrower, and the agents and lenders thereto.
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 ExecutiveFinancial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 —Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
101 —The following materials from Cumulus Media Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31,June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations for the three months and six months ended March 31,June 30, 2013 and 2012, (ii) Condensed Consolidated Balance Sheets as of March 31,June 30, 2013 and December 31, 2012, (iii) Condensed Consolidated Statement of Cash Flows for the threesix months ended March 31,June 30, 2013 and 2012, and (iv) Notes to Condensed Consolidated Financial Statements***.

***Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files submitted as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CUMULUS MEDIA INC.
Date: May 7, 2013CUMULUS MEDIA INC.
 
Date: July 30, 2013By: 

/s/ Joseph P. Hannan

 Joseph P. Hannan
 

Senior Vice President, Treasurer and Chief

Financial Officer


EXHIBIT INDEX

10.1 —Amendment, dated May 31, 2013, to the First Lien Credit Agreement, dated as of September 16, 2011, as amended and restated as of December 20, 2012, among the Company, Cumulus Media Holdings, Inc., as borrower, and the agents and lenders thereto.
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 ExecutiveFinancial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 —

Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-

OxleySarbanes-Oxley Act of 2002.

101 —The following materials from Cumulus Media Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31,June 30, 2013, formatted in XBRL (eXtensible(extensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations for the three months and six months ended March 31,June 30, 2013 and 2012, (ii) Condensed Consolidated Balance Sheets as of March 31,June 30, 2013 and December 31, 2012, (iii) Condensed Consolidated Statement of Cash Flows for the threesix months ended March 31,June 30, 2013 and 2012, and (iv) Notes to Condensed Consolidated Financial Statements***.

***Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files submitted as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

40


45


Exhibit 10.1


Execution Version
AMENDMENT, dated as of May 31, 2013 (this “Amendment”), to the First Lien Credit Agreement, dated as of September 16, 2011, as amended and restated as of December 20, 2012 (as amended, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”), among CUMULUS MEDIA INC. (“Holdings”), CUMULUS MEDIA HOLDINGS INC. (the “Borrower”), the several banks and other financial institutions or entities from time to time parties thereto (the “Lenders”), JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”), and the other agents from time to time parties thereto.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans and other extensions of credit to the Borrower;
WHEREAS, pursuant to Section 11.1 of the Credit Agreement, the amendment of any provision of Section 8.1 and the definitions referenced therein requires only the consent of the Majority Revolving Lenders;
WHEREAS, the Borrower has requested that the Majority Revolving Lenders agree to amend certain provisions of Section 8.1 of the Credit Agreement; and
WHEREAS, the Majority Revolving Lenders are willing to agree to such amendments on the terms and conditions contained herein;
NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, the undersigned hereby agree as follows:
I.Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
II.Reduction of Revolving Commitments. Pursuant to Section 4.4(a) of the Credit Agreement, the Borrower hereby irrevocably notifies the Administrative Agent that it is permanently reducing the Revolving Credit Commitments from $300,000,000 to $150,000,000 on a pro rata basis among the Revolving Lenders, which reduction shall be effective as of the date hereof. The Administrative Agent and the Majority Revolving Lenders hereby waive the three (3) Business Days' notice requirement set forth in Section 4.4(a) of the Credit Agreement.
III.Termination of Cash Collateral Agreement. Effective on the Amendment Effective Date (as defined below), that certain Cash Collateral Agreement, dated as of March 27, 2013 (the “Cash Collateral Agreement”), between the Borrower and the Administrative Agent shall be terminated. Notwithstanding any previous instructions to you, as of the Amendment Effective Date, (i) you are hereby instructed to accept all future directions with respect to the Cash Collateral Account (as defined in the Cash Collateral Agreement) from the Borrower and (ii) this notice terminates any obligations you may have to the undersigned with respect to the Cash Collateral Account; however, nothing contained in this notice shall alter any obligations which you may otherwise owe to the Borrower pursuant to any other agreement. Any provisions of the Cash Collateral Agreement which by their terms are intended to survive termination shall survive termination of the Cash Collateral Agreement.
IV.Amendments to Section 1.1 (Defined Terms). Section 1.1 of the Credit Agreement is hereby amended as follows:
(a) The following definitions are hereby inserted in appropriate alphabetical order:
Consolidated First Lien Debt”: at any date, Consolidated Total Indebtedness that is secured by a first priority Lien on any of the assets of the Borrower or any of its Restricted Subsidiaries.
Consolidated First Lien Net Leverage Ratio”: as of any date of determination, the ratio of (a)

46


Consolidated First Lien Debt (provided that Indebtedness under clause (b) of the definition of Indebtedness shall only be included to the extent of any unreimbursed drawings under any letter of credit) less the aggregate amount of unrestricted cash and Cash Equivalents of the Borrower and the Subsidiary Guarantors up to a maximum amount of $100,000,000, in each case as of such date, to (b) Consolidated EBITDA for the Test Period most recently ended prior to such date for which financial statements have been delivered.
V.Amendments to Section 8.1 (Financial Condition Covenants). Section 8.1 of the Credit Agreement is hereby amended as follows:
(a) by deleting each occurrence of the term “Consolidated Total Net Leverage Ratio” therein and substituting in lieu thereof the phrase “Consolidated First Lien Net Leverage Ratio”; and
(b) by deleting the table appearing at the end of the first sentence, after “such date below:” and before “Solely for purposes” and substituting in lieu thereof the following:
PeriodConsolidated First Lien Net Leverage Ratio
June 30, 20134.50 to 1.00
September 30, 20134.50 to 1.00
December 31, 20134.25 to 1.00
March 31, 20144.25 to 1.00
June 30, 20144.00 to 1.00
September 30, 20144.00 to 1.00
December 31, 2014 and thereafter3.75 to 1.00

VI.Effectiveness of Amendment. This Amendment shall become effective on the date (the “Amendment Effective Date”) on which the following conditions precedent shall have been satisfied:
A. Amendment. The Administrative Agent shall have received this Amendment, executed and delivered by a duly authorized officer of each of Holdings, the Borrower and the Majority Revolving Lenders.
B. No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on the Amendment Effective Date or after giving effect to the Loan to be made or the Letter of Credit to be issued on such Borrowing Date.
C. Representations and Warranties. Each of the representations and warranties made in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of the Amendment Effective Date (unless stated to relate to a specific earlier date, in which case, such representations and warranties shall be true and correct in all material respects as of such earlier date).

47


VII.Continuing Effect; No Other Amendments. This Amendment shall not constitute an amendment or consent to any provision of the Credit Agreement and the other Loan Documents not expressly referred to herein and shall not be construed as an amendment or consent to any action on the part of the Borrower that would require an amendment or consent of the Administrative Agent or the Lenders except as expressly stated herein. Except as expressly amended hereby, the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with their terms.
VIII.Governing Law. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.
IX.Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment may be delivered by facsimile transmission of the relevant signature pages hereof.
[signature pages follow]
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed and delivered by their duly authorized officers as of the date first above written.
CUMULUS MEDIA INC.

By:
Name:
Title:

CUMULUS MEDIA HOLDINGS INC.

By:
Name:
Title:











48




Exhibit 31.1
Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Lewis W. Dickey, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cumulus Media Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: July 30, 2013By:
/s/ Lewis W. Dickey, Jr.
Lewis W. Dickey, Jr.
Chairman, President and Chief Executive Officer

49




Exhibit 31.2
Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Joseph P. Hannan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cumulus Media Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: July 30, 2013By:
/s/ Joseph P. Hannan
Joseph P. Hannan
Senior Vice President, Treasurer and Chief Financial Officer

50



Exhibit 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the quarterly report on Form 10-Q of Cumulus Media Inc. (the “Company”) for the three month period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, that, to such officer's knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
/s/ Lewis W. Dickey, Jr.
Name:Lewis W. Dickey, Jr.
Title:Chairman, President and
   Chief Executive Officer
/s/ Joseph P. Hannan
Name:Joseph P. Hannan
Title:Senior Vice President, Treasurer and Chief
   Financial Officer
Date: July 30, 2013
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


51