-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, INDEv8BLJsIONXzcnKwaYF+4ECW4gj+BYxa5Fq5Rpdh/ybDBSYfDUa8wRTVo+9y8 Cpc8kFOMzPt8GSFYsV9+5Q== 0000950124-00-007576.txt : 20001221 0000950124-00-007576.hdr.sgml : 20001221 ACCESSION NUMBER: 0000950124-00-007576 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001218 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CUMULUS MEDIA INC CENTRAL INDEX KEY: 0001058623 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 364159663 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-24525 FILM NUMBER: 792429 BUSINESS ADDRESS: STREET 1: 111 KILBOURNE AVE STREET 2: SUITE 2700 CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4146152800 MAIL ADDRESS: STREET 1: 111 EAST KILBOURN AVE STREET 2: SUITE 2700 CITY: MILWAUKEE STATE: WI ZIP: 53202 8-K/A 1 c59166e8-ka.txt AMENDMENT TO FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 18, 2000 ----------------------- CUMULUS MEDIA INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as specified in its character)
ILLINOIS 000-24525 36-4159663 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.)
3535 Piedmont Road, Building 14, 14th Floor, Atlanta, GA 30305 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (404) 949-0700 --------------------- NONE - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets As previously reported on a Current Report on Form 8-K filed on October 17, 2000, on November 29, 1999, Cumulus Broadcasting, Inc. ("Cumulus Broadcasting"), a wholly owned subsidiary of Cumulus Media Inc. (the "Company"), entered into an Asset Purchase Agreement (the "Connoisseur Asset Purchase Agreement") with Connoisseur Communications Partners, L.P., Continuity Partners, L.P., Connoisseur Communications of Flint, L.P., Connoisseur Communications of Mercer County, L.P., Connoisseur Communications of Muskegon, L.P., Connoisseur Communications of Quad Cities, L.P., Connoisseur Communications of Rockford, L.P., Connoisseur Communications of Evansville, L.P., Connoisseur Communications of Canton, L.P., Connoisseur Communications of Saginaw, L.P., Connoisseur Communications of Waterloo, L.P., Connoisseur Communications of Youngstown, L.P. and Abry Broadcast Partners III, L.P. (collectively, the "Connoisseur Sellers"). Pursuant to the terms of the Asset Purchase Agreement, Cumulus Broadcasting was to acquire 35 stations (the "Acquired Stations") in 9 Midwestern markets. The markets and stations acquired are as follows: YOUNGSTOWN-WARREN, OHIO (Market Rank # 97 of 276) - WHOT-FM, WYFM-FM, WPIC-AM, and WSOM-AM. Also, in adjacent Western Pennsylvania, WWIZ-FM and WLLF-AM. FLINT, MICHIGAN (Market Rank # 119) - WDZZ-FM, WRSR-FM, WWCK-FM, and WFDF-AM. CANTON, OHIO (Market Rank # 123) - WQXK-FM and WRQK-FM. SAGINAW-BAY CITY-MIDLAND, MICHIGAN (Market Rank # 125) - WTLZ-FM. QUAD CITIES, ILLINOIS-IOWA (Market Rank # 133) - KBOB-FM, KORB-FM, KQLI-FM, WXLP-FM, and KJOC-AM. ROCKFORD, ILLINOIS (Market Rank # 148) - WLUV-FM, WXXQ-FM, WZOK-FM, and WROK-AM. 2 EVANSVILLE, INDIANA (Market Rank # 152) - WGBF-FM, WTRI-FM, and WYNG-FM, and WGBF-AM. MUSKEGON, MICHIGAN (Market Rank # 217) - WMRR-FM, WMUS-FM, WSHZ-FM, WMHG-AM, and WMUS-AM. WATERLOO-CEDAR FALLS, IOWA (Market Rank # 233) - KCRR-FM, KKCV-FM, KOEL-FM, and KOEL-AM. On October 2, 2000 the Company completed the acquisition of the Acquired Stations for a total purchase price of $253.0 million in cash. Prior to this transaction, no material relationship existed between the Company and the Connoisseur Sellers. The completion of the Connoisseur Asset Purchase Agreements described herein requires the filing, pursuant to Article 11 of Regulation S-X, of the pro forma financial statements included herein and, pursuant to Section 3-05 of Regulation S-X, the filing of the historical financial statements included herein. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Connoisseur Communications Partners, L.P. Index to Financial Statements attached hereto: Report of Independent Accountants Financial Statements: Consolidated Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 Consolidated Statements of Operations for nine months ended September 30, 2000 (unaudited) and 1999 (unaudited) and for the year ended December 31, 1999 Consolidated Statements of Partners' Capital for the nine months ended September 30, 2000 (unaudited) and for the year December 31, 1999 Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 (unaudited) and 1999 (unaudited) and for the year ended December 31, 1999 Notes to Consolidated Financial Statements (b) Pro Forma Financial Information. Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the Year Ended December 31, 1999. Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the Nine Months Ended September 30, 2000. Cumulus Media Inc. Unaudited Pro Forma Balance Sheet as of September 30, 2000. 3 (c) Exhibits: 2.1 Asset Purchase Agreement, dated as of November 29, 1999, by and among Cumulus Broadcasting and the Connoisseur Sellers.** 23.1 Consent of Ernst & Young LLP.* * Filed herewith. ** Incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K filed on December 2, 1999. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be singed on its behalf by the undersigned hereunto duly authorized. CUMULUS MEDIA By: /s/ Martin R. Gausvik ---------------------- Martin R. Gausvik Executive Vice President Chief Financial Officer and Treasurer Date: December 18, 2000 EXHIBIT INDEX
SEQUENTIALLY NUMBERED EXHIBIT NO. DESCRIPTION PAGE ----------- ----------- ------------ 2.1 Asset Purchase Agreement, dated as of November 29, 1999, by and among Cumulus Broadcasting and the Connoisseur Sellers.** 23.1 Consent of Ernst & Young LLP.*
* Filed herewith. ** Incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K filed on December 2, 1999. 4 INDEX TO FINANCIAL STATEMENTS Connoisseur Communications Partners L.P. Report of Independent Auditors...................................................... Consolidated Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 ............................................................................... Consolidated Statements of Operations for the nine months ended September 30, 2000 (unaudited) and 1999 (unaudited) and for the year ended December 31, 1999 ..... Consolidated Statements of Partners' Capital for the nine months ended September 30, 2000 (unaudited) and for the year ended December 31, 1999 ............ Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 (unaudited) and 1999 (unaudited) and for the year ended December 31, 1999 ..... Notes to Consolidated Financial Statements .........................................
5 Report of Independent Auditors Partners Connoisseur Communications Partners, L.P.: We have audited the accompanying consolidated balance sheet of Connoisseur Communications Partners, L.P. at December 31, 1999, and the related consolidated statements of operations, partners' capital, and cash flows for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Connoisseur Communications Partners, L.P. at December 31, 1999, and the consolidated results of its operations and its cash flows for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. February 8, 2000 New York, New York /s/ Ernst & Young LLP 6 Connoisseur Communications Partners, L.P. Consolidated Balance Sheets
September 30, December 31, 2000 1999 ------------- ------------ (unaudited) Assets Current assets: Cash $ 1,502,109 $ 1,072,104 Accounts receivable (net of allowance for doubtful accounts of $649,351 and $541,916 in 2000 and 1999, respectively) 7,359,551 6,830,361 Prepaid expenses 258,665 320,977 Other current assets 40,405 182,341 ------------ ------------ Total current assets 9,160,730 8,405,783 Property, building and equipment (net of accumulated depreciation of $6,795,571 and $5,379,941 in 2000 and 1999, respectively) 17,603,348 18,659,364 Intangible assets (net of accumulated amortization of $11,755,641 and $9,248,466 in 2000 and 1999, respectively) 75,203,260 72,923,021 Other assets 374,603 561,412 ------------ ------------ Total assets $102,341,941 $100,549,580 ============ ============ Liabilities and partners' capital Current liabilities: Current portion of long-term debt $ 10,862 $ 2,789,753 Accounts payable 865,115 1,303,443 Accrued expenses 2,376,977 2,089,170 Accrued interest 79,317 107,477 Broker fee due Cumulus 2,226,254 1,041,459 ------------ ------------ Total current liabilities 5,558,525 7,331,302 Deposits from Cumulus 37,837,958 7,869,267 Long-term debt 12,345,800 40,744,515 Deferred compensation 859,120 842,028 Other liabilities - 6,338 Minority interest 486,341 451,828 Partners' capital: Partners' investment 52,868,302 52,684,352 Accumulated deficit (7,614,105) (9,380,050) ------------ ------------ Total partners' capital 45,254,197 43,304,302 ------------ ------------ Total liabilities and partners' capital $102,341,941 $100,549,580 ============ ============
See accompanying notes. 7 Connoisseur Communications Partners, L.P. Consolidated Statements of Operations
Nine Months Ended September 30, -------------------------------- December 31, 2000 1999 1999 ----------- ----------- --------------- (unaudited) Broadcast revenues: Broadcasting $33,111,347 $30,238,160 $40,769,887 Barter 2,022,013 1,701,994 2,440,482 Less agency commissions and adjustments (3,658,750) (3,473,263) (4,630,079) ----------- ----------- ----------- Net broadcast revenues 31,474,610 28,466,891 38,580,290 LMA fee income 10,281,309 -- 730,733 Rental income and other 332,467 542,655 727,038 ----------- ----------- ----------- Net revenue 42,088,386 29,009,546 40,038,061 Station operating expenses: Selling 6,680,311 5,742,785 7,716,553 Programming 5,376,754 5,230,639 7,005,356 Promotions 1,303,755 974,203 1,396,705 Technical 931,111 822,184 1,109,912 General and administrative 5,121,730 4,835,364 6,350,700 Barter 1,957,682 1,711,997 2,438,731 Depreciation 1,415,630 1,324,802 1,797,599 Amortization 2,567,682 2,565,789 3,422,473 TBA and SRA expense 295,524 322,405 420,911 Broker fee 9,967,763 -- 1,041,459 ----------- ----------- ----------- Total station operating expenses 35,617,942 23,530,168 32,700,399 ----------- ----------- ----------- Other operating expenses: Corporate and other expenses 1,897,043 2,426,471 2,960,808 Partners' fees and expenses 2,893 42,906 45,378 General partner management fee -- 112,994 146,228 Consulting expense -- 11,250 11,250 Non-cash compensation 201,042 706,625 797,853 Write-down on assets held for sale and loss on sale of stations -- 5,916 8,144 ----------- ----------- ----------- Total other operating expenses 2,100,978 3,306,162 3,969,661 ----------- ----------- ----------- Total operating expenses 37,718,920 26,836,330 36,670,060 Operating income 4,369,466 2,173,216 3,368,001 Interest expense 1,905,841 3,219,594 4,296,518 Other expenses 697,680 70,549 687,861 Interest income from partners' loans -- (269,369) (348,300) Interest income -- (14) (40) ----------- ----------- ----------- Net income (loss) $ 1,765,945 $(847,544) $(1,268,038) =========== =========== ===========
See accompanying notes. 8 Connoisseur Communications Partners, L.P. Consolidated Statements of Partners' Capital
General Limited Partner Partners Total --------- ----------- ----------- Balance at December 31, 1998 $754,786 $49,400,260 $50,155,046 Non-cash compensation - 417,098 417,098 Distributions (7,177) (5,992,627) (5,999,804) Net (loss) (12,681) (1,255,357) (1,268,038) --------- ------------ ----------- Balance at December 31, 1999 734,928 42,569,374 43,304,302 Non-cash compensation (unaudited) - 183,950 183,950 Net income (unaudited) 17,659 1,748,286 1,765,945 --------- ------------ ----------- Balance at September 30, 2000 (unaudited) $752,587 $44,501,610 $45,254,197 ========= ============ ===========
See accompanying notes. 9 Connoisseur Communications Partners, L.P. Consolidated Statement of Cash Flows
Nine Months Ended September 30, ------------------------------- December 31, 2000 1999 1999 ------------ ----------- ------------ (Unaudited) Cash flows from operating activities: Net income (loss) $ 1,765,945 $ (847,544) $ (1,268,038) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 1,415,630 1,324,802 1,797,599 Amortization 2,567,682 2,565,789 3,422,473 Bad debt expense 503,436 368,409 477,538 LMA fee income (10,281,309) - (730,733) Non-cash compensation expense 201,042 706,624 797,853 Other 60,036 26,532 34,945 Changes in assets and liabilities, net of amounts acquired: Increase in accounts receivable (1,032,626) (402,940) (480,255) Decrease (increase) in prepaid expenses and other current assets 204,248 (29,720) 149,970 Decrease (increase) in interest receivable - (84,821) 94,143 Increase (decrease) in accounts payable (438,328) (292,921) 19,355 Increase in accrued expenses 1,444,442 185,111 907,816 Increase in deposits from Cumulus 4,600,000 - 8,600,000 Decrease in fees due to related parties - (40,625) (40,625) Decrease in due to general partner - (57,100) (134,785) ------------ ----------- ------------ Net cash provided by operating activities 1,010,198 3,421,596 13,647,256 Cash flows from investing activities: Deposits from Cumulus 35,650,000 - - Acquisition of radio stations (4,747,785) (4,665,407) (4,689,413) Capital expenditures (289,074) (1,520,437) (2,119,237) Proceeds from sale of stations - 140,000 140,000 Repayment of loans to related parties - - 5,620,413 Other assets - (108,158) 45,642 ------------ ----------- ------------ Net cash provided by (used in) investing activities 30,613,141 (6,154,002) (1,002,595) Cash flows from financing activities: Proceeds from bank loan 9,100,000 4,925,000 7,035,800 Payments on loans, including loan termination fee (40,286,996) (1,527,887) (13,250,926) Other liabilities (6,338) (14,322) (19,205) Distributions paid - (226,291) (5,999,804) ------------ ----------- ----------- Net cash (used in) provided by financing activities (31,193,334) 3,156,500 (12,234,135) ------------ ----------- ----------- Net increase (decrease) in cash 430,005 424,094 410,526 Cash at beginning of year 1,072,104 661,578 661,578 ------------ ----------- ----------- Cash at end of year $ 1,502,109 $ 1,085,672 $ 1,072,104 ============ =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest $ 2,160,688 $ 3,488,253 $ 4,952,439 ============ =========== ===========
See accompanying notes. 10 1. Formation and Business Activity Connoisseur Communications Partners, L.P. (the "Partnership"), a Delaware limited partnership, was organized in August 1993 for the purpose of acquiring, owning and operating radio stations in small and medium-sized markets. The Partnership owns a 99% limited partnership interest in ten limited partnerships: Connoisseur Communications of Flint, L.P. ("Flint"), Connoisseur Communications of Quad Cities, L.P. ("Quad Cities"), Connoisseur Communications of Youngstown, L.P. ("Youngstown"), Connoisseur Communications of Rockford, L.P. ("Rockford"), Connoisseur Communications of Waterloo, L.P. ("Waterloo"), Connoisseur Communications of Evansville, L.P. ("Evansville"), Connoisseur Communications of Canton, L.P. ("Canton"), Connoisseur Communications of Muskegon, L.P. ("Muskegon"), Connoisseur Communications of Saginaw, L.P. ("Saginaw") and Connoisseur Communications of Mercer County, L.P. ("Western PA"). Continuity Partners, L.P. ("Continuity") is the 1% general partner in the Partnership. In addition, Continuity is the 1% general partner in Flint, Quad Cities, Youngstown, Rockford, Waterloo, Evansville, Canton, Muskegon, Saginaw and Western PA, which is shown as minority interest for financial statement purposes. In November 1999, Connoisseur ("CCP") entered into an agreement of sale to sell its ownership interest in all of its radio stations to Cumulus Broadcasting, Inc. ("Cumulus"), a subsidiary of Cumulus Media, Inc., in an asset sale for approximately $242,000,000 subject to certain adjustments (the "Agreement of Sale"). The sale closed on October 2, 2000. In December 1999, Cumulus paid Connoisseur a deposit of $8,600,000 and deposited a letter of credit in escrow of $11,350,000. During the nine months ended September 30, 2000, Cumulus paid Connoisseur additional deposits of $40,250,000 under the terms of the Agreement of Sale and additional amendments made thereto. In connection with the Agreement of Sale, the Partnership also entered into a Local Marketing Agreement ("LMA") with Cumulus. Commencing with December 1999 and through closing of the sale, Connoisseur will pay Cumulus the monthly station operating income, as adjusted per the terms of the LMA, in exchange for providing programming and management services. The broker fee, based on broadcast cash flow, amounted to $1,041,459 in 1999 and $9,967,763 for the nine months ended September 30, 2000 (unaudited), which was recorded to broker fee expense. Connoisseur continues to record all revenues and expense of operations. The Partnership amortizes a portion of the deposit over the expected term of the LMA agreement, recorded as LMA fee income. The amortization of the deposits for the month of December 1999 was $730,733, and $10,281,309 for the nine months ended September 30, 2000 (unaudited). 11 1. Formation and Business Activity (continued) Information with respect to the nine month periods ended September 30, 2000 and 1999 is unaudited. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("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 footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim consolidated financial statements contain all adjustments considered necessary for a fair presentation. Operating results for the nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000, or for any other interim period. 2. Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts of the Partnership and Flint, Quad Cities, Youngstown, Rockford, Waterloo, Evansville, Canton, Muskegon, Saginaw and Western PA. All significant intercompany accounts and transactions have been eliminated. In this report, actions of the Partnership and its 99% owned subsidiary partnerships are referred to collectively or individually as actions of the Partnership. Barter Transactions: Barter transactions represent the exchange of commercial airtime for programming, merchandise, or services. The transactions are recorded at the fair market value of the asset or service received. Revenue is recognized when the advertisements are broadcast; expenses are recorded when the asset or service received is utilized. Intangibles: Intangibles include goodwill, broadcast licenses, covenants not-to-compete and deferred financing costs. Goodwill represents the excess of cost over the fair values of the identifiable tangible net assets acquired. Goodwill and broadcast licenses are amortized on a straight-line basis over 40 years. Covenants not-to-compete are amortized on a straight-line basis over the term of the agreements. Deferred financing costs are amortized over the term of the related debt agreement on a straight-line basis. 12 2. Significant Accounting Policies (continued) The carrying values of goodwill and broadcast licenses are reviewed periodically to determine whether they may have become impaired. If this review indicates that goodwill and broadcast licenses will not be recoverable, as determined based on the undiscounted cash flows of the entity acquired over the remaining amortization period, the Partnership's carrying value of the goodwill and broadcast licenses would be reduced by the difference between the carrying amount and the estimated fair value and would be recognized as a charge to income. Property, Building and Equipment: Property, building and equipment are stated at cost. Depreciation of property, building and equipment is calculated using the straight-line method over their estimated useful lives as follows: Building and improvements 30 to 40 years Transmitters, towers and antennas 7 to 15 years Broadcast and related equipment 3 to 10 years Furniture and office equipment 3 to 7 years
Income Taxes: The Partnership is not subject to federal, state, or local income taxes and, accordingly, makes no provision for income taxes in its financial statements. The partners are responsible for reporting their respective share of the Partnership's taxable income or loss. Revenue Recognition: The Partnership's primary source of revenue is the sale of airtime to local, regional and national advertisers. Revenue is recorded when advertisements are broadcast. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Time Brokerage Agreements ("TBAs")/Sales Representation Agreements ("SRAs"): From time to time, the Partnership enters into TBAs and SRAs with respect to radio stations owned by third parties, including radio stations which it intends to acquire. Terms of the agreements generally require the Partnership to pay a monthly fee in exchange for the right to provide station programming and sell related advertising time in the case of a TBA or sell advertising 13 2. Significant Accounting Policies (continued) on behalf of the station in the case of a SRA. In instances in which the stations are acquired, the agreements terminate upon the acquisition of the stations. The fees are expensed as incurred and are classified as an operating expense. Interest Rate Swap Agreements: The Partnership has entered into interest rate swap agreements to effectively convert a portion of its variable-rate borrowings into fixed-rate obligations. The differential to be paid or received as interest rates change is accounted for on the accrual method of accounting. The related amount payable to or receivable from counterparties is included as an adjustment to accrued interest in accrued liabilities. Advertising: Advertising costs are expensed as incurred. Advertising expense totaled $565,144 in 1999. Reclassifications: Certain 1999 amounts have been reclassified to conform to the 2000 presentation. 3. Acquisitions and Dispositions The following tables summarizes the acquisition activity of the Partnership for year ended December 31, 1999:
Acquisitions - ----------------------------------------------------------------------------------------- Date Market Station Purchase Price - --------------- ---------------- ----------------- ---------------------- January 1999 Saginaw, MI WTLZ-FM $1,800,000 September 1999 Muskegon, MI WMHG-AM,WMRR-FM, WSHZ-FM 2,700,000
The Partnership's consolidated results of operations reflect the results of these radio stations from the respective dates the Partnership entered into a TBA or SRA. The acquisitions were financed by capital contributions and bank debt. 14 3. Acquisitions and Dispositions (continued) For financial statement purposes, both of the acquisitions described above were accounted for using the purchase method, with the aggregate purchase price allocated to the tangible and identifiable intangible assets based upon current estimated fair market values. Certain of the recent transactions are based on preliminary estimates of the fair value of the net assets acquired and subject to final adjustment. The assets and liabilities of these acquisitions and the results of their operations for the period from the date of acquisition have been included in the accompanying consolidated financial statements. The following tables summarizes the disposition activity of the Partnership for the year ended December 31, 1999:
Dispositions - ------------------------------------------------------------------------------------------------------------- Sales Holding Period Date Market Station Proceeds Gain or (Loss) Income - -------------- ------------- ---------------- ------------ ----------------- ------------------ March 1999 Flint, MI WOAP-AM $140,000 $(322,944) $ --
At December 31, 1998, included in current assets was the estimated net realizable value of the assets of radio station WOAP-AM of $110,000. 4. Property, Building and Equipment Property, building and equipment, at cost, consist of the following:
December 31 1999 ------------- Land $ 1,397,185 Building and improvements 5,906,580 Transmitters, towers and antennas 8,555,098 Broadcast and related equipment 5,118,781 Furniture and office equipment 3,061,661 ----------- 24,039,305 Less accumulated depreciation (5,379,941) ----------- $18,659,364 ===========
15 5. Intangible Assets Intangible assets consist of the following:
December 31 1999 ------------- Broadcast licenses $43,911,359 Goodwill 32,296,371 Covenants not-to-compete 4,838,000 Deferred financing costs 1,125,757 ----------- 82,171,487 Less accumulated amortization (9,248,466) ----------- $72,923,021 ===========
6. Long-Term Debt Long-term debt consists of the following:
September 30 December 31 2000 1999 ------------- ----------- (Unaudited) Term loan $ -- $20,578,400 Revolving credit facility 12,345,800 22,945,800 Other debt 10,862 10,068 ----------- ----------- 12,356,662 43,534,268 Less current portion (10,862) (2,789,753) ----------- ----------- $12,345,800 $40,744,515 =========== ===========
In August 1997, the Partnership entered into a Credit Agreement (the "Credit Agreement") consisting of a Term Loan of $25,000,000, borrowing under a revolving credit facility (the "Revolving Credit Facility") of up to $35,000,000, and additional revolving credit loans pursuant to one or more acquisition facilities ("Acquisition Credit Facility") of up to $50,000,000. Commencing September 30, 1999, the amount available under the Revolving Credit Facility is reduced by $1,750,000 quarterly. Commencing January 1, 2001, the amount available under the Acquisition Credit Facility is reduced by $10,000,000 annually. 16 6. Long-Term Debt (continued) In February 2000, through an amendment to the Credit Agreement, the Partnership arranged for $10,000,000 of availability under the Acquisition Credit Facility for the purpose of providing a source of funding, if needed, for the acquisition of radio station WKMQ-FM (formerly WLUV-FM). The amount available under the Acquisition Credit Facility will be reduced by $500,000 per quarter commencing March 31, 2001. Under the Credit Agreement, outstanding principal balances bear interest at a floating rate based on an increment over either (a) the base rate or (b) the Eurodollar rate (the "Eurodollar Rate"), at the choice of the Partnership. The increment to the base rate is from 0.000% to 1.625% and the increment to the Eurodollar Rate is from 1.000% to 2.625%. The increment is subject to change based upon changes in the ratio of outstanding indebtedness to operating cash flows, as defined in the Credit Agreement (the "Leverage Ratio"), on a quarterly basis. The weighted average interest rate at December 31, 1999 was 8.08%. The Partnership is required to pay fees based on the unused commitment under the Revolving Credit Facility of 0.500% or 0.375% per year depending upon the Leverage Ratio, on a quarterly basis. At December 31, 1999, the rate was 0.500%. The Partnership will be required to pay a commitment fee on the unused portion available under the Acquisition Credit Facility at such time that borrowings are made, at a rate to be determined. The Credit Agreement is collateralized by a security interest in substantially all of the assets of the radio stations, in addition to the Partnership's interest in the radio stations. The Credit Agreement requires the Partnership to maintain compliance with certain financial ratios, principally with respect to maintaining levels of operating cash flow and debt service ratios, along with other covenants, including limitations on certain distributions to the partners. The Credit Agreement has been amended from time to time to accommodate certain transactions of the Partnership. The fair value of the amounts outstanding approximates its recorded value. 17 6. Long-Term Debt (continued) Principal payments on the currently outstanding long-term debt are due as follows: Years ending December 31: 2000 $ 2,789,753 2001 9,220,115 2002 10,770,000 2003 11,593,600 2004 9,160,800 ----------- $43,534,268 ===========
7. Interest Rate Swap In 1998, the Partnership entered into an interest rate swap agreement that was to expire in 2001 (extendable by the counterparty for another two years) to manage its exposure to interest rate movements by effectively converting a portion of its debt from variable to fixed rate. The swap agreement exchanged 5.6% fixed-rate payments for LIBOR-based interest payments on a notional amount of $50 million. On January 10, 2000, in consideration of a receipt of $300,000, the Partnership agreed to terminate the swap agreement. The termination of the swap agreement resulted in a gain of approximately $230,000 which was recorded as a reduction of interest expense. In connection with the termination of the swap agreement above, the Partnership entered a new swap agreement. The new agreement, which terminated in July 2000, exchanged 6.22% fixed-rate payments for LIBOR-based interest payments on a notional amount of $30 million. The notional amounts do not represent amounts exchanged with the counterparty, and thus are not a measure of exposure of the Partnership. The market risk associated with the agreements is mitigated because increased interest payments under the agreements resulting from a decrease in LIBOR are effectively offset by decreased payments under the debt obligations. The Partnership is exposed to credit losses for the periodic settlements of amounts due under the agreements. However, the Partnership does not anticipate nonperformance by the counterparty, which is also a counterparty to the Credit Agreement. 18 8. Partners' Capital The limited partners of the Partnership are ABRY (43%), Tinicum (32%), Putnam L. Crafts, Jr. (10%), Jeffrey D. Warshaw (8%), and other individuals (6%). Continuity, the 1% general partner, is owned and controlled by ABRY (35%), Tinicum D.C.R., Inc. (35%), and Connoisseur, Inc. (30%), which is wholly-owned by Jeffrey D. Warshaw. 9. Related Party Transactions The Partnership was charged certain costs by partners totaling $45,378 in 1999. These charges primarily represent managerial services provided to the Partnership by employees of these partners. On March 26, 1997, the Partnership loaned $20,000,000 to the limited partners (the "Partner Loans"), excluding Jeffrey D. Warshaw and ABRY. The loans were to mature on March 26, 2005, but principal may be prepaid at any time. Interest, at the rate of 6.32% per annum, was due semi-annually. On December 20, 1999, the principal balance outstanding on the loans and the accrued interest receivable was fully repaid. On March 26, 1997, the Partnership entered into a management agreement (the "Management Agreement") with Continuity, whereby Continuity provides certain services to the Partnership. As defined in the Management Agreement, the fee (the "Management Fee") is payable semiannually. Included in other operating expenses was the Management Fee of $146,893 for the year ended December 31, 1999. 10. Commitments Future minimum lease payments under noncancellable operating leases are payable as follows: Years ending December 31: 2000 $ 496,574 2001 391,089 2002 303,448 2003 162,174 2004 117,077 Thereafter 898,222 ---------- $2,368,584 ==========
The operating leases may be subject to Consumer Price Index adjustments. The Partnership leases office space, antenna sites, vehicles and office equipment. For the year ended December 31, 1999 rental expense amounted to $476,804. At December 31, 1999, the Partnership had outstanding under the Revolving Credit Facility a letter of credit in the amount of $1,000,000 for the purchase of WLUV-FM in Rockford, Illinois (Note 14). The Partnership and certain investors have guaranteed, up to a maximum of $7,000,000, debt of Jeffrey D. Warshaw for investments in the Partnership. The amount of the underlying debt outstanding at December 31,1999 is $6,451,869. 19 11. 401(k) Plan The Partnership sponsors a savings plan for all eligible employees, which is a qualified plan under Sections 401(a) and 401(k) of the Internal Revenue Code. Pursuant to the plan, eligible participants may elect to contribute up to 15% of their annual compensation up to the statutory maximum. Beginning in 1997, the Partnership matches 25% of the participants' contribution up to a maximum of 3% of the participants' compensation. For the year ended December 31, 1999, the Partnership has recognized expense of $47,423, included in station operating expenses. 12. Non-cash Compensation The Partnership has issued certain appreciation rights ("Appreciation Rights") to the general managers of its radio stations to attract more talented individuals and to further motivate these managers. The Appreciation Rights allow the individuals to share in the increase in the value of an assumed investment in the Partnership and are subject to vesting provisions. The Partnership has included a charge for the Appreciation Rights over the vesting period as non-cash compensation in other operating expenses. 20 12. Non-cash Compensation (continued) In 1997, as part of an amendment to the partnership agreement, a Class B limited partnership interest was created to allow certain members of management, including Jeffrey D. Warshaw, to share in future profits of the Partnership. These interests were granted in fixed percentages to management subject to certain repurchase rights of the Partnership which expire over time. The Class B partnership interests entitle the holders to approximately 5% to 15% of future profits depending on the level of profits achieved. The Partnership has recorded a charge for these interests as non-cash compensation in other operating expenses. Also in 1997, as part of an amendment to Continuity's partnership agreement, certain limited partners of Continuity who were members of management had their previously existing partnership interests converted into a fixed value of new limited partnership interests. Such value can be reduced by losses of Continuity, but may not be increased. These interests are subject to a five year vesting period. The Partnership has included a charge for the value of these limited partnership interests as non-cash compensation in other operating expenses. In accordance with the limited partnership agreement, the sale of the Partnership would constitute a trigger event whereby the limited partnership interests issued become fully vested. 13. Contingencies In October 1999, a judgment was issued against one of the Partnerships in a case involving a former employee. The Partnership has accrued $535,000 and $371,653 in 1999 and 2000 (unaudited), respectively, representing management's best estimate of the ultimate liability under this litigation, which has been included in other operating expenses. 14. Subsequent Events (Unaudited) In May 1999, the Partnership entered into a Purchase Agreement to buy radio station WKMQ-FM (formerly WLUV-FM) in Rockford, Illinois for $4,700,000. In January 2000, under terms of the purchase agreement, the Partnership advanced $1,000,000 to the seller and returned the letter of credit, cancelled (Note 10). This acquisition was completed in June 2000 and was financed by cash on hand and through borrowings of facilities available under the Credit Agreement. This acquisition was included in the Agreement of Sale, but the transfer of the license to Cumulus is still pending FCC approval. After October 2, 2000 until FCC approval is granted, Cumulus is operating the station under a TBA. In May, June and July 2000, Cumulus paid Connoisseur additional deposits of $40,250,000 under the Agreement of Sale and amendments made thereto. The proceeds of these deposits were used primarily to reduce senior debt. 21 14. Subsequent Events (Unaudited) (continued) The sale to Cumulus closed on October 2, 2000. The asset purchase price was approximately $253,000,000 of which $730,733 and $10,281,309 at December 31, 1999 and September 30, 2000 (unaudited), respectively, have already been recorded in net income (loss) as LMA fee income. The amount paid by Cumulus to Connoisseur at closing was reduced by the deposits of $48,850,000 previously advanced to Connoisseur. In addition, Cumulus paid Connoisseur approximately $4,900,000 in connection with certain closing adjustments in accordance with the Agreement of Sale. At closing, senior debt was retired. In addition, the debt of Jeffrey D. Warshaw (Note 10), which the Partnership and certain investors have guaranteed, was retired. The Partnership recorded approximately $985,000 of non-cash compensation for the full vesting of the Appreciation Rights and Class B partnership interests upon the change of control from the sale to Cumulus. 22 UNAUDITED PRO FORMA FINANCIAL STATEMENTS On October 2, 2000, Cumulus Media, Inc. (the "Company") completed the acquisition of 35 stations (the "acquired stations") in 9 markets from Connoisseur Communications Partners, LP ("Connoisseur") for a total purchase price of $253.0 million in cash. This transaction will be accounted for under the purchase method of accounting. The purchase price of the Connoisseur acquisition was funded from (i) cash on hand, (ii) escrow deposits previously made to Connoisseur in accordance with the related acquisition agreements, and (iii) initial proceeds from a series of asset exchanges and sales to Clear Channel Communications ("Clear Channel"). To facilitate closing of the Connoisseur acquisition, the Company entered into a series of asset exchange and sales agreements with Clear Channel, to be consummated in three phases. The Company completed the first phase of the asset exchange and sales transaction with Clear Channel on August 25, 2000, whereby the Company transferred 25 stations in 5 markets to Clear Channel in exchange for 7 stations in 3 markets plus $91.5 million of cash proceeds. The Company consummated the second phase of the asset exchange and sales transaction with Clear Channel on October 2, 2000, whereby the Company would sell 30 stations in 5 markets for $68.9 million of initial cash proceeds. Upon receipt of regulatory approval for 8 of the stations being sold, the Company will receive an additional $8.0 million of cash proceeds. On October 2, 2000, initial proceeds of $15.0 million were funded to the Company in connection with the third phase of the asset exchange and sales transaction with Clear Channel. Upon closing of this final phase, the Company will transfer 45 stations in 8 markets to Clear Channel in exchange for 4 stations and approximately $37.0 million of additional cash proceeds. The following unaudited pro forma financial statements are based on the respective historical financial statements of the Company, giving effect to: (i) the Company's acquisition of stations from Connoisseur, and (ii) the Company's asset exchange and sale transactions with Clear Channel, using the assumptions and adjustments described in the accompanying notes to the unaudited pro forma financial statements. The unaudited pro forma financial statements reflect the use of the purchase method of accounting for all acquisitions. The unaudited pro forma statements of operations for the 9 months ended September 30, 2000 and the year ended December 31, 1999 reflect adjustments as if the Connoisseur acquisition and the Clear Channel asset exchange and sale transactions had occurred on January 1, 1999. The unaudited pro forma balance sheet as of September 30, 2000 gives effect to the Connoisseur acquisition and the Clear Channel asset exchange and sale transactions as if they had occurred on September 30, 2000. The information set forth under the heading "Company Historical" in the pro forma statements of operations includes results relating to local marketing agreements ("LMAs") with certain of the acquired stations. The financial effects of the transactions presented in the unaudited pro forma financial statements are not necessarily indicative of either the financial position or results of operations that would have been obtained had the acquisition actually occurred on the dates set forth above, nor are they necessarily indicative of the results of future operations. All pro forma financial information should be read in conjunction with our consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 1999, as amended, and our Quarterly Reports on Form 10-Q and the other information that we filed with the Securities and Exchange Commission from time to time. 23 CUMULUS MEDIA INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(E) (A)+(B)+(C)+ (B) (C) (D) PRO FORMA (D)+(E)=(F) PRO FORMA PRO FORMA PRO FORMA ADJUSTMENTS FOR THE PRO FORMA AS (A) ADJUSTMENTS FOR ADJUSTMENTS FOR ADJUSTMENTS FOR CUMULUS HISTORICAL, ADJUSTED FOR THE COMPANY CLEAR CHANNEL CLEAR CHANNEL CONNOISSEUR THE DIVESTITURES AND THE DIVESTITURES AND HISTORICAL ACQUISITIONS (1)DIVESTITURES (2) ACQUISITIONS (3) THE ACQUISITIONS THE ACQUISITIONS -------------- --------------- ---------------- ---------------- -------------------- -------------------- STATEMENT OF OPERATIONS DATA: Revenues $194,940 $13,017 $(43,153) $44,668 $ (1,041) (4) $208,431 Less: agency commissions (14,921) (1,154) 3,473 (4,630) -- (17,232) -------- ------- -------- ------- -------- -------- Net revenues 180,019 11,863 (39,680) 40,038 (1,041) 191,199 Operating expenses: Station operating expenses excluding depreciation, amortization and LMA fees 133,328 8,281 (27,921) 27,060 (1,041) (4) 139,707 Depreciation and amortization 32,564 1,147 (7,056) 5,220 11,602 (5) 43,477 LMA Fees 4,165 -- (555) 420 -- 4,030 Corporate general and administrative expenses 8,204 -- -- 3,172 -- 11,376 Non-cash stock compensation expense -- -- -- 798 -- 798 -------- ------- -------- ------- -------- -------- Operating Expenses 178,261 9,428 (35,532) 36,670 10,561 199,388 -------- ------- -------- ------- -------- -------- Operating income (loss) 1,758 2,435 (4,148) 3,368 (11,602) (8,189) -------- ------- -------- ------- -------- -------- Nonoperating income (expense): Interest expense (27,041) -- 24 (4,297) -- (31,314) Interest income 4,164 -- -- -- (3,864) (6) 300 Gain (loss) on sale of asset -- -- -- -- -- -- Other Income (expense) 627 192 (1) (340) -- 478 -------- ------- -------- ------- -------- -------- Nonoperating expenses, net (22,250) 192 23 (4,637) (3,864) (30,536) Income (loss) before income taxes (20,492) 2,627 (4,125) (1,269) (15,466) (38,725) Income tax (expense) benefit 6,870 (1,051) (7) 1,650 (7) 508 (7) 6,186 (7) 14,163 -------- ------- -------- ------- -------- -------- Net income (loss) (13,622) 1,576 (2,475) (761) (9,279) (24,562) Preferred stock dividends (23,790) -- -- -- -- (23,790) -------- ------- -------- ------- -------- -------- Net income (loss) attributable to common stockholders $(37,412) $ 1,576 $ (2,475) $ (761) $ (9,279) $(48,352) ======== ======= ======== ======= ======== ======== Basic and diluted income (loss) per share ($1.50) ($1.94) Weighted average common shares outstanding 24,938 24,938
See accompanying notes to Unaudited Pro Forma Consolidated Statement of Operations 24 NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS) The pro forma financial results exclude the effects of estimated cost savings which management believes will result from the integration of our completed acquisitions. (1) Reflects historical revenues and expenses of stations acquired by us from Clear Channel Communications on August 25, 2000 for the period from January 1, 1999 through December 31, 1999. (2) Reflects the historical revenues and expenses of stations divested by us to Clear Channel Communications on August 25th, 2000 and October 2nd, 2000 for the period from January 1, 1999 through December 31, 1999. (3) Reflects the historical revenues and expenses of stations acquired by us on October 2, 2000 from Connoisseur Communications Partners, L.P. for the period from January 1, 1999 through December 31, 1999. (4) To eliminate $1,041 in management agreement revenue recorded by Cumulus in the 1999 Company historical and the offsetting broker fee expense recorded by Connoisseur Communications Partners, L.P. in their Consolidated Statement of Operations for the year ending December 31, 1999. (5) Reflects (i) the change in depreciation and amortization expense resulting from conforming the estimated useful lives of our divested and acquired assets to our policies and (ii) the additional depreciation and amortization expense resulting from the allocation of the purchase price to the estimated fair market value of the assets acquired net of assets divested. On a pro forma basis, depreciation expense is $13,588 and amortization expense is $29,889 after giving effect to the completed divestitures and acquisitions. Depreciation expense has been calculated on a straight line basis using a weighted average life of seven years for property and equipment. Goodwill and other intangible assets' amortization has been calculated on a straight line basis over 25 years. Non-compete agreements are being amortized over the lives of the agreements which range from one to three years. We allocate the purchase prices of the acquired stations based on evaluations of the assets acquired and the liabilities assumed. We believe that the excess of cost over the fair value of tangible net assets of an acquired radio station almost exclusively relates to the value of the FCC broadcasting license and goodwill. We believe that the purchase price allocation method described above is consistent with general practice in the radio broadcasting industry. 25 (6) Adjustment to reduce historical interest income to reflect the effects of net cash used in our completed acquisitions for the year ended December 31, 1999. (7) Adjustment to reflect the application of the Company's estimated effective tax rate of 40% to the combined pre-tax income (loss) of the entities divested and entities acquired on a pro forma basis for the period from January 1, 1999 through December 31, 1999. 26 CUMULUS MEDIA INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (Dollars in thousands, except per share data)
(A)+(B)+(C)+ (E) (D)+(E)=(F) PRO FORMA PRO FORMA AS (B) (C) (D) ADJUSTMENTS FOR ADJUSTED FOR PRO FORMA PRO FORMA PRO FORMA THE COMPANY THE 2000 (A) ADJUSTMENTS FOR ADJUSTMENTS FOR ADJUSTMENTS FOR HISTORICAL, THE COMPLETED THE COMPANY THE CLEAR CHANNEL CLEAR CHANNEL CONNOISSEUR DIVESTITURES AND DIVESTITURES AND HISTORICAL ACQUISITIONS (1) DIVESTITURES (2) ACQUISITIONS(3) THE ACQUISITIONS ACQUISITIONS -------------- ----------------- ----------------- --------------- ----------------- ---------------- STATEMENT OF OPERATIONS DATA: Revenues $ 183,257 $ 8,032 $ (30,134) $ 45,747 $ (9,968)(4)$ 196,934 Less: agency commissions (14,787) (750) 2,570 (3,659) -- (16,626) -------------- ----------------- ---------------- -------------- ----------------- -------------- Net revenues 168,470 7,282 (27,564) 42,088 (9,968) 180,308 Operating Expenses: Station operating expenses excluding depreciation, amortization and LMA Fees 151,137 4,635 (21,962) 31,338 (9,968)(4) 155,180 Depreciation and amortization 30,477 3,246 (6,246) 3,984 1,146 (5) 32,607 LMA Fees 3,739 -- (7) 296 -- 4,028 Corporate general and administrative expenses 12,460 -- -- 1,900 -- 14,360 Restructuring and other charges 9,296 -- -- -- -- 9,296 Non-cash stock compensation expense -- -- -- 201 -- 201 -------------- ----------------- ---------------- -------------- ----------------- -------------- Operating Expenses 207,109 7,881 (28,215) 37,719 (8,822) 215,672 Operating income (loss) (38,639) (599) 651 4,369 (1,146) (35,364) -------------- ----------------- ---------------- -------------- ----------------- -------------- Nonoperating income (expense): Interest expense (24,071) (2) 21 (1,906) -- (25,958) Interest income 6,094 (1) -- -- (5,793)(6) 300 Gain (loss) on sale of asset -- 8,632 -- -- (8,632)(7) -- Other income (expense) 68,073 10 (1) (697) -- 67,385 -------------- ----------------- ---------------- -------------- ----------------- -------------- Nonoperating income (expense), net 50,096 8,639 20 (2,603) (14,425) 41,727 Income (loss) before income taxes 11,457 8,040 671 1,766 (15,571) 6,363 Income tax benefit (expense) (6,361) (3,216)(8) (297)(8) (706)(8) 6,228 (8) (4,352) -------------- ----------------- ---------------- -------------- ----------------- -------------- Net income (loss) 5,096 4,824 374 1,060 (9,343) 2,011 Preferred stock dividends and accretion of discount (10,982) -- -- -- -- (10,982) -------------- ----------------- ---------------- -------------- ----------------- -------------- Net income (loss) attributable to common stockholders (5,886) 4,824 374 1,060 (9,343) (8,971) ============== ================= ================= ============== ================= ============== Basic and diluted income (loss) per share ($0.17) ($0.26) Weighted average common shares outstanding 35,130 35,130
See accompanying notes to Unaudited Pro Forma Consolidated Statement of Operations 27 NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (IN THOUSANDS) The pro forma financial results exclude the effects of estimated cost savings which management believes will result from the integration of our completed and pending acquisitions. (1) Reflects historical revenues and expenses of stations acquired by us from Clear Channel Communications on August 25, 2000 for the period from January 1, 2000 through the date the stations were acquired by us. (2) Reflects the historical revenues and expenses of stations divested by us to Clear Channel Communications on or before October 2nd, 2000 for the period from January 1, 2000 through the earlier of the date of divestiture or September 30, 2000. (3) Reflects the historical revenues and expenses of stations acquired by us from Connoisseur Communications Partners, L.P. on October 2, 2000 for the period from January 1, 2000 through September 30, 2000. (4) To eliminate $9,968 in management agreement revenues recorded by Cumulus in the September 30, 2000 Company historical and the offsetting broker fee expense recorded by Connoisseur Communications Partners, L.P. in their Consolidated Statement of Operations for the nine months ending September 30, 2000. (5) Reflects (i) the change in depreciation and amortization expense resulting from conforming the estimated useful lives of our divested and acquired assets, to our policies and (ii) the additional depreciation and amortization expense resulting from the allocation of the purchase price to the estimated fair market value of the assets acquired, net of assets divested. On a pro forma basis, depreciation expense is $10,191 and amortization expense is $22,416 after giving effect to the completed acquisitions and divestitures. Depreciation expense has been calculated on a straight-line basis using a weighted average life of seven years for property and equipment. Goodwill and other intangible assets' amortization has been calculated on a straight-line basis over 25 years. Non-compete agreements are being amortized over the lives of the agreements which range from one to three years. We allocate the purchase prices of the acquired stations based on evaluations of the assets acquired and the liabilities assumed. We believe that the excess of cost over the fair value of tangible net assets of an acquired radio station almost exclusively relates to the value of the FCC broadcasting license and goodwill. We believe that the purchase price allocation method described above is consistent with general practice in the radio broadcasting industry. 28 (6) Adjustments to reduce historical interest income to reflect the effects of net cash used in our completed acquisitions for the nine months ended September, 2000. (7) Adjustment recorded to eliminate the non-recurring gain on sale of assets recorded by Clear Channel Communications on the 2000 sale of radio stations in Cedar Rapids, IA and Shreveport, LA to Cumulus. (8) Adjustment to reflect the application of the Company's estimated effective tax rate of 40% to the combined pre-tax income (loss) of the entities divested and entities acquired on a pro forma basis for the period from January 1, 2000 through September 30, 2000. 29 CUMULUS MEDIA INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 (Dollars in thousands)
(B) PRO FORMA (C) ADJUSTMENTS PRO FORMA (A) FOR THE CLEAR ADJUSTMENTS FOR (A) + (B) + (C)=(D) THE COMPANY CHANNEL COMPLETED THE CONNOISSEUR PRO FORMA HISTORICAL DIVESTITURES(1) ACQUISITIONS(3) COMBINED -------------- ----------------- ---------------- ------------------- ASSETS: Current assets: Cash and cash equivalents $ 42,167 $ 76,956 $ (112,643) $ 21,780 $ 15,000(2) Restricted Cash $ 91,467 $ -- $ (91,467) $ -- Accounts receivable, less allowance for doubtful accounts 40,159 -- -- 40,159 Prepaid expenses and other current assets 9,672 -- -- 9,672 -------------- ----------------- ---------------- ------------------- Total current assets 183,765 91,956 (204,110) 71,611 Property and equipment, net 76,535 (6,712) 25,296 95,119 Intangible assets, net 569,360 (49,821) 227,666 747,205 Other assets 93,714 -- (48,852) 44,862 -------------- ----------------- ---------------- ------------------- TOTAL ASSETS $ 923,374 $ 35,423 $ -- $ 958,797 ============== ================= ================ =================== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and accrued expenses $ 25,496 $ -- $ -- $ 25,496 Current portion of long-term debt 20 -- -- 20 Other current liabilities 848 15,000(2) -- 15,848 Total current liabilities 26,364 15,000 -- 41,364 Long-term debt 285,211 -- -- 285,211 Other liabilities 1,635 (47) -- 1,588 Deferred income taxes 11,810 7,875 -- 19,685 TOTAL LIABILITIES 325,020 22,828 -- 347,848 Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009, stated value $1,000 per share, 109,874 shares issued and outstanding 113,714 -- -- 113,714 Stockholders' equity: Class A Common Stock, par value $.01 per share, 50,000,000 shares authorized: 28,378,975 shares issued and outstanding 284 -- -- 284 Class B Common Stock, par value $.01 per share, 20,000,000 shares authorized: 4,479,343 shares issued and outstanding 45 -- -- 45 Class A Common Stock par value $.01 per share, 30,000,000 shares authorized: 2,307,277 shares issued and outstanding 23 -- -- 23 Additional paid-in-capital 518,257 -- -- 518,257 Loans to Officers (10,583) -- -- (10,583) Retained earnings (Accumulated deficit) (23,386) 12,595 -- (10,791) -------------- ----------------- ---------------- ------------------- Total stockholders' equity 484,640 12,595 -- 497,235 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 923,374 $ 35,423 $ -- $ 958,797 ============== ================= ================ ===================
See accompanying notes to the unaudited consolidated pro forma balance sheet 30 NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 (IN THOUSANDS) (1) To record the completion of the second phase of the Clear Channel asset exchange and sale in which Cumulus sold 30 stations in five markets for $76.9 million, $68.9 of which was received on October 2, 2000. The first phase of the Clear Channel transaction was completed on August 25, 2000 and is reflected in the Company's balance sheet at September 30, 2000. (2) To record the receipt of initial proceeds of $15.0 million paid to the Company as an advance on third phase of the asset exchange and sales transaction with Clear Channel. The third phase of the transaction with Clear Channel is expected to close in the first quarter of 2000. (3) To record the allocation of the $253.0 million in purchase price paid for the Connoisseur Communications Partners, L.P. acquisition consummated on October 2, 2000. The pro forma allocation of the purchase price is as follows: Property and equipment............................................. $ 25,296 Intangible assets, principally broadcast licenses.................. 227,666 -------- $252,962 ========
EX-23.1 2 c59166ex23-1.txt CONSENT OF INDEPENDENT COUSNEL 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-94323) and in the Registration Statements on Form S-8 (No. 333-68487 and No. 333-58969) of Cumulus Media Inc. of our report dated February 8, 2000, with respect to the consolidated financial statements of Connoisseur Communications Partners, L.P. which appear in the Current Report on Form 8-K/A filed December 19, 2000. December 18, 2000 New York, New York /s/ Ernst & Young LLP -----END PRIVACY-ENHANCED MESSAGE-----