Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies

Cumulus Media Inc. (and its consolidated subsidiaries, except as the context may otherwise require, "CUMULUS MEDIA," "we," "us," "our," or the "Company") is a Delaware corporation, organized in 2018, and successor to a Delaware corporation with the same name that was organized in 2002.

Nature of Business

CUMULUS MEDIA is a leading audio-first media and entertainment company delivering premium content to over a quarter billion people every month - wherever and whenever they want it. CUMULUS MEDIA engages listeners with high-quality local programming through 428 owned and operated stations across 87 markets; delivers nationally-syndicated sports, news, talk, and entertainment programming from iconic brands including the NFL, the NCAA, the Masters, the Olympics, the American Country Music Awards, and many other world-class partners across nearly 8,000 affiliated stations through Westwood One, the largest audio network in America; and inspires listeners through its rapidly growing network of original podcasts that are smart, entertaining and thought-provoking. CUMULUS MEDIA provides advertisers with local impact and national reach through on-air, digital, mobile, and voice-activated media solutions, as well as access to integrated digital marketing services, powerful influencers, and live event experiences.

Basis of Presentation

As previously disclosed, on November 29, 2017 (the "Petition Date"), CM Wind Down Topco Inc. (formerly known as Cumulus Media Inc.), a Delaware corporation ("Old Cumulus") and certain of its direct and indirect subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief (the "Bankruptcy Petitions") under Chapter 11 of Title 11 of the United States ("U.S.") Code (the "Bankruptcy Code") in the U.S. Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The Debtors' chapter 11 cases (the "Chapter 11 Cases") were jointly administered under the caption In re Cumulus Media Inc., et al, Case No. 17-13381. On May 10, 2018, the Bankruptcy Court entered the Findings of Fact, Conclusions of Law and Order Confirming the Debtors' First Amended Joint Chapter 11 Plan of Reorganization [Docket No. 769] (the "Confirmation Order"), which confirmed the First Amended Joint Plan of Reorganization of Cumulus Media Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 446] (the "Plan"), as modified by the Confirmation Order. On June 4, 2018 (the "Effective Date"), Old Cumulus satisfied the conditions to effectiveness set forth in the Confirmation Order and in the Plan, the Plan was substantially consummated, and Old Cumulus and the other Debtors emerged from Chapter 11. On June 29, 2018, the Bankruptcy Court entered an order closing the Chapter 11 Cases of all of the Debtors other than Old Cumulus, whose case will remain open until its estate has been fully administered including resolving outstanding claims and the Bankruptcy Court enters an order closing its case.

In connection with its emergence, Old Cumulus implemented a series of internal reorganization transactions authorized by the Plan pursuant to which it transferred substantially all of its remaining assets to an indirectly wholly owned subsidiary of reorganized Cumulus Media Inc. (formerly known as CM Emergence Newco Inc.), a Delaware corporation ("CUMULUS MEDIA" or the "Company"), prior to winding down its business. References to "Successor" or "Successor Company" relate to the balance sheet and results of operations of CUMULUS MEDIA on and subsequent to June 4, 2018. References to "Predecessor," "Predecessor Company" or "Old Cumulus" refer to the balance sheet and results of operations of Old Cumulus prior to June 4, 2018.

Upon filing for bankruptcy and up through and including the emergence from Chapter 11 on the Effective Date, the Company applied Accounting Standards Codification ("ASC") 852 - Reorganizations ("ASC 852"), in preparing its consolidated financial statements (see Note 2, "Emergence from Chapter 11" and Note 3, "Fresh Start Accounting"). As a result of the application of fresh start accounting and the effects of the implementation of the Plan, a new entity for financial reporting purposes was created, and consequently the consolidated financial statements after June 3, 2018 are not comparable to the consolidated financial statements prior to that date. Refer to Note 3, "Fresh Start Accounting" for additional information.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reportable Segments

The Company historically operated under two reportable segments - Cumulus Radio Station Group and Westwood One. As a result of changes to its organizational structure and approach to operating the business, during the third quarter of 2019, the Company reassessed its reportable segments. Management considered factors including, but not limited to: (i) organizational structure and functional responsibilities of management; (ii) operational aspects including inventory optimization across all sales channels; and (iii) management incentive metrics. These factors impacted how the chief operating decision maker evaluates performance and how operating decisions are made, which are now performed at the consolidated level.

The Company concluded that we have one reportable segment and has presented the comparative periods on a consolidated basis to reflect the one reportable segment.

Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles in the U.S., or GAAP, requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including significant estimates related to revenue recognition, bad debts, intangible assets, income taxes, stock-based compensation, contingencies, litigation, valuation assumptions for impairment analysis, certain expense accruals and, if applicable, purchase price allocations. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts and results may differ materially from these estimates.

Comprehensive Income

Comprehensive income includes net income and certain items that are excluded from net income and recorded as a separate component of stockholders' equity. During the years ended December 31, 2019 and 2018, the Company had no items of other comprehensive income and, therefore, comprehensive income does not differ from reported net income.

Cash and Cash Equivalents

The Company considered all highly liquid investments with original maturities of three months or less to be cash equivalents.

Accounts Receivable, Allowance for Doubtful Accounts and Concentration of Credit Risk

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company determined the allowance based on several factors, including the length of time receivables are past due, trends and current economic factors. All balances are reviewed and evaluated quarterly on a consolidated basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers.

In the opinion of management, credit risk with respect to accounts receivable is limited as a result of the large number of customers and the geographic diversification of the Company's customer base. The Company performs credit evaluations of its customers as needed and believes that adequate allowances for any uncollectible accounts receivable are maintained.

Property and Equipment

Property and equipment are stated at cost. Major additions or improvements are capitalized, including interest expense when material, while repairs and maintenance are charged to expense when incurred. Property and equipment acquired in business combinations accounted for under the acquisition method of accounting are recorded at their estimated fair values on the date of acquisition. Equipment held under financing leases is stated at the present value of minimum future lease payments. Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is recognized in the statement of operations.

Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Equipment held under financing leases and leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the remaining term of the lease. Depreciation of construction in progress is not recorded until the assets are placed into service.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Intangible Assets

As of December 31, 2019, the Company's intangible assets were comprised of Federal Communications Commission ("FCC") licenses and certain other intangible assets. Intangible assets acquired in a business combination which are determined to have an indefinite useful life, including the Company's FCC licenses, are not amortized, but instead tested for impairment at least annually, or if a triggering event occurs. Intangible assets with definite useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

In determining that the Company's FCC licenses qualified as indefinite lived intangibles, management considered a variety of factors including the FCC's historical record of renewing broadcasting licenses, the cost to the Company of renewing such licenses, the relative stability and predictability of the radio industry and the relatively low level of capital investment required to maintain the physical plant of a radio station. The Company's evaluation of the recoverability of its indefinite-lived assets, which include FCC licenses is based on certain judgments and estimates. Future events may impact these judgments and estimates. If events or changes in circumstances were to indicate that an asset's carrying amount is not recoverable, a write-down of the asset would be recorded through a charge to operations.

Revenue Recognition

Revenue is derived primarily from the sale of commercial airtime to local and national advertisers. Revenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those good or services.

Broadcast advertising revenue is recognized as commercials are broadcast. In those instances in which the Company functions as the principal in the transaction, the revenue and associated operating costs are presented on a gross basis. In those instances where the Company functions as an agent or sales representative, the effective commission is presented as revenue on a net basis with no corresponding operating expenses.

Advertising Costs

Advertising costs are expensed as incurred. For the Successor Company year ended December 31, 2019, the Successor Company period June 4, 2018 through December 31, 2018, and the Predecessor Company period January 1, 2018 through June 3, 2018, advertising costs incurred were $6.0 million, $4.6 million and $2.6 million, respectively

Local Marketing Agreements

A number of radio stations, including certain of our stations, have entered into Local Marketing Agreements ("LMAs"). In a typical LMA, the licensee of a station makes available, for a fee and reimbursement of its expenses, airtime on its station to a party which supplies programming to be broadcast during that airtime, and collects revenues from advertising aired during such programming. LMAs are subject to compliance with the antitrust laws and the Communications Laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances.

As of December 31, 2019 and 2018, the Company operated two radio stations under LMAs. For the Successor Company year ended December 31, 2019, the Successor Company period June 4, 2018 through December 31, 2018 and the Predecessor Company period January 1, 2018 through June 3, 2018, the stations operated under LMAs contributed $3.5 million, $3.5 million, and $2.6 million, respectively, to the consolidated net revenue of the Company.

Stock-based Compensation Expense

Stock-based compensation expense recognized for the Successor Company year ended December 31, 2019, the Successor Company period June 4, 2018 through December 31, 2018 and the Predecessor Company period January 1, 2018 through June 3, 2018, was $5.3 million, $3.4 million and $0.2 million, respectively. For awards with service conditions, stock-based compensation expense is recognized on a straight-line basis over the requisite service period for the entire award. In addition, the Company made an accounting policy election to recognize forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. For stock options with service conditions only, the Company utilizes the Black-Scholes option pricing model to estimate the fair value of options issued. The fair value of stock options is determined by the Company's stock price, historical stock price volatility, the expected term of the award, risk-free interest rates and expected dividends. For restricted stock awards with service conditions only, the Company utilizes the intrinsic value method to determine the fair value of the restricted stock issued. For restricted stock awards with performance conditions, the Company evaluates the probability of vesting of the awards in each reporting period and calculates stock-based compensation expense based on this assessment.

Trade and Barter Transactions

The Company provides commercial advertising inventory in exchange for goods and services used principally for promotional, sales, programming and other business activities. Programming barter revenue is derived from an exchange of programming content, to be broadcast on the Company's airwaves, for commercial advertising inventory, usually in the form of commercial placements inside the show exchanged. Trade and barter value is based upon management's estimate of the fair value of the products, supplies and services received. Trade and barter revenue is recorded when commercial spots are aired, in the same pattern as the Company's normal cash spot revenue is recognized. Trade and barter expense is recorded when goods or services are consumed. For the Successor Company year ended December 31, 2019, the Successor Company period June 4, 2018 through December 31, 2018, and the Predecessor Company period January 1, 2018 through June 3, 2018, amounts reflected under trade and barter transactions were: (1) trade and barter revenues of $45.3 million, $26.5 million and $19.0 million, respectively; and (2) trade and barter expenses of $44.4 million, $27.1 million, and $18.0 million, respectively.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates the Company expects will be applicable when those tax assets and liabilities are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded against a deferred tax asset to measure its net realizable value when it is not more likely than not that the benefits of its recovery will be recognized. The Company continually reviews the adequacy of our valuation allowance, if any, on our deferred tax assets and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC Topic 740, Income Taxes ("ASC 740").

The Company recognizes a tax position as a benefit only if it is more-likely-than-not that the position would be sustained in an examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a greater than 50% likelihood of being realized on examination. For tax positions not meeting the more-likely-than-not test, no tax benefit is recorded.

Earnings Per Share

Basic income per share is computed on the basis of the weighted average number of common shares outstanding. The Company allocates undistributed net income from continuing operations between each class of common stock on an equal basis after any allocations for preferred stock dividends in accordance with the terms of the Company's third amended and restated certificate of incorporation, as amended (the "Charter").

Non-vested restricted shares of Class A common stock and Company Warrants (defined below) are considered participating securities for purposes of calculating basic weighted average common shares outstanding in periods in which the Company recorded net income. Diluted earnings per share is computed in the same manner as basic earnings per share after assuming the issuance of common stock for all potentially dilutive equivalent shares, which includes stock options and outstanding 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 share equally, after deducting dividends declared or accreted on preferred stock.

Fair Values of Financial Instruments

The carrying amounts of cash equivalents, restricted cash, accounts receivables, accounts payable, trade payables and receivables and accrued expenses approximate fair value because of the short term to maturity of these instruments (See Note 11, "Fair Value Measurements").

Accounting for National Advertising Agency Contract

The Company has engaged Katz Media Group, Inc. ("Katz") as its national advertising sales agent. The Company's contract with Katz has several economic elements that principally reduce the overall expected commission rate below the stated base rate. The Company estimates the overall expected commission rate over the entire contract period and applies that rate to commissionable revenue throughout the contract period with the goal of estimating and recording a stable commission rate over the life of the contract.

The Company's accounting for and calculation of commission expense to be recognized over the life of the Katz contract requires management to make estimates and judgments that affect reported amounts of commission expense in each period. Actual results may differ from management's estimates.

Supplemental Cash Flow Information

The following summarizes supplemental cash flow information to be read in conjunction with the Consolidated Statements of Cash Flows for the Successor Company year ended December 31, 2019, the Successor Company period from June 4, 2018 through December 31, 2018 and the Predecessor Company period from January 1, 2018 through June 3, 2018 (dollars in thousands):



	Successor Company				Predecessor Company
	Year Ended December 31,		Period from June 4, 2018 through December 31,		Period from January 1, 2018 through June 3,
	2019		2018		2018
Supplemental disclosures of cash flow information:
Interest paid	$	76,846	$	49,785	$	—
Adequate protection payments on the Predecessor Term Loan	—		—		37,802
Income taxes paid	18,590		7,266		1,992

Supplemental disclosures of non-cash flow information:
Trade revenue	$	45,308	$	26,516	$	18,973
Trade expense	44,378		27,098		17,964
Transfer of deposit from escrow - WKQX acquisition	—		4,750		—

Supplemental disclosures of non-cash reorganization items impact on changes in assets and liabilities:
Accounts receivable	$	—	$	—	$	(11	)
Prepaid expenses and other current assets	—		—		21,077
Property and equipment	—		—		(121,732		)
Other intangible assets, goodwill and other assets	—		—		283,217
Accounts payable, accrued expenses and other liabilities	—		—		(36,415		)
Cancellation of 7.75% Senior Notes	—		—		(610,000		)
Cancellation of Predecessor Company Term Loan	—		—		(1,684,407		)
Issuance of Successor Company Term Loan	—		—		1,300,000
Cancellation of Predecessor Company stockholders' equity	—		—		649,620
Issuance of Successor Company stockholders' equity	—		—		(325,000		)

Reconciliation of cash and cash equivalents and restricted cash to the Consolidated Balance Sheet:
Cash and cash equivalents	$	15,142	$	27,584	$	50,046
Restricted cash	1,865		2,454		38,305
Total cash and cash equivalents and restricted cash	$	17,007	$	30,038	$	88,351

Adoption of New Accounting Standards

ASU 2016-02 - Leases (Topic 842) ("ASU 2016-02"). In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, which provides updated guidance for the accounting for leases. This update requires lessees to recognize assets and liabilities for the rights and obligations created by leases with a term longer than one year. Leases will be classified as either financing or operating, thereby impacting the pattern of expense recognition in the statement of operations. In July 2018, the FASB issued ASU 2018-10 - Codification Improvements to Topic 842, Leases ("ASU 2018-10") and ASU 2018-11 - Targeted Improvements ("ASU 2018-11"), which provide technical corrections and clarification to ASU 2016-02. ASU 2016-02 and amendments ASU 2018-10 and ASU 2018-11 were effective for fiscal years beginning after December 15, 2018, and interim periods thereafter. The Company adopted the new lease standard, or "ASC 842", on January 1, 2019 and elected the "package of practical expedients" and as a result did not recast existing leases prior to January 1, 2019. The new lease standard also provides as a practical expedient and an accounting policy election, the option to not separate non-lease components from the associated lease components and instead account for each separate lease component and its associated non-lease components as a single lease component. The Company elected this option both for leases under which it is the lessor and for leases under which it is the lessee. In adopting the new standard, the Company aggregated and evaluated lease arrangements, implemented new controls and processes, and installed a lease accounting system. Adoption of the new standard resulted in recording operating lease right-of-use assets and operating lease liabilities of approximately $156.1 million and $154.5 million on January 1, 2019. See Note 16, "Leases" for further information.

Recent Accounting Standards Updates

ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"). In June 2016, the FASB issued ASU 2016-13 which requires entities to estimate loss of financial assets measured at amortized cost, including trade receivables, debt securities and loans, using an expected credit loss model. The expected credit loss differs from the previous incurred losses model primarily in that the loss recognition threshold of "probable" has been eliminated and that expected loss should consider reasonable and supportable forecasts in addition to the previously considered past events and current conditions. Additionally, the guidance requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by year of the asset's origination for as many as five years. Entities must apply the standard provision as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for public business entities, excluding Smaller Reporting Companies ("SRC"), for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The standard is effective for SRCs for fiscal years beginning after December 15, 2022. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-13 on its Consolidated Financial Statements.

ASU 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). In August 2018, the FASB issued ASU 2018-13, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods therein, but entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. Adoption of this guidance is not expected to have a material impact on the Company's Consolidated Financial Statements.