Market Overview

Cumulus Reports Third Quarter 2012 Results

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ATLANTA, Nov. 5, 2012 (GLOBE NEWSWIRE) -- Cumulus Media Inc. (Nasdaq: CMLS) (the "Company," "we," "us," or "our") today reported financial results for the three and nine months ended September 30, 2012.

Lew Dickey, Chairman & CEO stated, "This quarter marked the first anniversary of our transformative merger. We are pleased to report that the integration is largely complete, and our identified synergies were materially exceeded six months ahead of schedule. We are making excellent progress in the turnaround of 10 underperforming stations which account for 100% of our revenue decline, and expect them to post positive revenue growth in 2013."

Financial highlights are as follows (in thousands, except per share data and percentages) (footnotes follow):

  Three Months Ended September 30, Nine Months Ended September 30,
  2012 2011   2012 2011  
  Pro Forma (1) Pro Forma (1) % Change Pro Forma (1) Pro Forma (1) % Change
             
 Cash revenues  $ 269,618  $ 279,952 -3.7%  $ 779,442  $ 800,913 -2.7%
 Trade revenues  6,548  9,098 -28.0%  19,239  26,626 -27.7%
Net revenues  $ 276,166  $ 289,050 -4.5%  $ 798,681  $ 827,539 -3.5%
Adjusted EBITDA (2) (3)  $ 106,628  $ 95,121 12.1%  $ 288,024  $ 270,061 6.7%
             
             
  As Reported   As Reported  
             
Net revenues  $ 275,350  $ 124,790 120.7%  $ 792,386  $ 238,697 232.0%
Adjusted EBITDA (2) (3)  $ 107,856  $ 10,732 905.0%  $ 295,891  $ 44,973 557.9%
Free cash flow (2)  $ 53,521  $ (16,075) **  $ 134,391  $ 643 **
Net income  $ 56,045  $ 59,538 -5.9%  $ 52,059  $ 76,998 -32.4%

** Calculation is not meaningful

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011

Net Revenues 

Net revenues for the three months ended September 30, 2012 increased $150.6 million, or 120.7%, to $275.4 million, compared to $124.8 million for the three months ended September 30, 2011. This increase reflects the full period impact of net revenues from the acquisitions of Cumulus Media Partners, LLC ("CMP") in August 2011 (the "CMP Acquisition") and Citadel Broadcasting Corporation ("Citadel") in September 2011 (the "Citadel Acquisition") as well as a $4.6 million increase in political advertising. Revenue growth was partially offset by short term revenue impacts resulting from strategic format changes in some markets, general downward trends in the overall macro economic environment for radio and reduced use of trade advertising on acquired stations.   

Direct Operating Expenses, Excluding Depreciation and Amortization

Direct operating expenses for the three months ended September 30, 2012 increased $88.0 million, or 119.4%, to $161.7 million, compared to $73.7 million for the three months ended September 30, 2011. This increase reflects the full period impact of direct operating expenses of CMP and Citadel, partially offset by a $7.1 million decrease in music licensing fees. Previously announced synergies resulted in reduced compensation costs and discretionary spending related to promotions, as well as enhanced expense controls.  

Corporate General and Administrative Expenses, Including Stock-based Compensation Expense

Corporate general and administrative expenses, including stock-based compensation expense, for the three months ended September 30, 2012 decreased $31.7 million, or 70.9%, to $13.0 million, compared to $44.7 million for the three months ended September 30, 2011. This decrease is primarily comprised of a $35.7 million decrease in acquisition and restructuring costs primarily related to the Citadel and CMP acquisitions completed in 2011, partially offset by a $1.2 million increase in stock-based compensation expense.

Interest Expense, net

Total interest expense, net of interest income, for the three months ended September 30, 2012 increased $30.3 million, or 155.1%, to $49.8 million compared to $19.5 million for the three months ended September 30, 2011. Interest expense associated with outstanding debt increased by $26.9 million to $46.9 million as compared to $20.0 million in the prior year period. Interest expense increased due to a higher average amount of indebtedness outstanding as a result of the CMP and Citadel acquisitions and the Company's related refinancing (the "Refinancing") in the third quarter of 2011.

Capital Expenditures

Capital expenditures for the three months ended September 30, 2012 totaled $2.7 million which represented routine capital expenditures. Capital expenditures during the three months ended September 30, 2011 were $1.4 million.

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

Net Revenues 

Net revenues for the nine months ended September 30, 2012 increased $553.7 million, or 232.0%, to $792.4 million, compared to $238.7 million for the nine months ended September 30, 2011. This increase reflects the impact of net revenues from CMP and Citadel, as well as a $10.6 million increase in political advertising. Revenue growth was partially offset by short term revenue impacts resulting from strategic format changes in some markets, general downward trends in the overall macro economic environment for radio and reduced use of trade advertising on acquired stations.

Direct Operating Expenses, Excluding Depreciation and Amortization

Direct operating expenses for the nine months ended September 30, 2012 increased $341.4 million, or 239.3%, to $484.1 million, compared to $142.7 million for the nine months ended September 30, 2011. This increase reflects the impact of direct operating expenses of CMP and Citadel, partially offset by a $7.1 million decrease in music license fees. Previously announced synergies resulted in reduced compensation costs and discretionary spending related to promotions, as well as enhanced expense controls.

Corporate General and Administrative Expenses, Including Stock-based Compensation Expense

Corporate general and administrative expenses, including stock-based compensation expense, for the nine months ended September 30, 2012 decreased $15.4 million, or 25.0%, to $46.5 million, compared to $61.9 million for the nine months ended September 30, 2011. This decrease is primarily comprised of a $2.6 million reduction of certain contractual obligations assumed in the Citadel Acquisition and a $35.8 million reduction in acquisition costs since the prior year period included costs associated with the CMP and Citadel acquisitions. This was partially offset by  a $12.9 million increase in stock-based compensation expense attributed mainly to the Citadel Acquisition and additional personnel costs of $4.2 million.

Interest Expense, net

Total interest expense, net of interest income, for the nine months ended September 30, 2012 increased $115.2 million, or 329.1%, to $150.2 million compared to $35.0 million for the nine months ended September 30, 2011. Interest expense associated with outstanding debt increased by $107.4 million to $142.1 million as compared to $34.7 million in the prior year period. Interest expense increased due to a higher average amount of indebtedness outstanding as a result of indebtedness incurred to complete the CMP and Citadel Acquisitions and the Refinancing in the third quarter of 2011. 

Capital Expenditures

Capital expenditures for the nine months ended September 30, 2012 totaled $4.7 million, which represented routine capital expenditures. Capital expenditures during the nine months ended September 30, 2011 were $2.9 million.

Earnings (Loss) Per Share

Basic earnings (loss) per share ("EPS") is calculated for the three and nine months ended September 30, 2012 by dividing undistributed net income from continuing operations of $26.8 million and $12.4 million, respectively, adjusted for dividends declared on preferred stock for the three and nine months ended September 30, 2012 of $3.4 million and $11.1 million, respectively, and the accretion of redeemable preferred stock for the three and nine months ended September 30, 2012 of $1.4 million and $6.1 million, respectively, by the weighted average number of shares of common stock outstanding during the applicable period, which was 169,510,007 shares and 158,902,196 shares for the three and nine months ended September 30, 2012, respectively. Diluted EPS for the three months ended September 30, 2012 was calculated in the same manner as basic EPS, after adjusting for the inclusion of 6.8 million potentially dilutive securities represented by shares of common stock underlying certain outstanding warrants. Diluted EPS for the nine months ended September 30, 2012 is equal to basic EPS due to the exclusion of 53.1 million potentially dilutive securities. The potentially dilutive securities consisted of shares of common stock underlying certain outstanding warrants that were excluded because their impact was antidilutive due to the net loss reported for that period. Basic and diluted EPS for discontinued operations is computed in the same matter as EPS for continuing operations, excluding any adjustments for dividends accrued and accreted. Basic and diluted EPS for net income (loss) is computed in the same matter as EPS for continuing operations.

Earnings Call Information

Cumulus Media Inc. will host a teleconference today at 11:00 AM EST to discuss third quarter results. The conference call dial-in number for domestic callers is 877-830-7699. International callers should dial 660-422-3366 for conference call access. Please call five to ten minutes in advance to ensure that you are connected prior to the presentation. The call also may be accessed via webcast at www.cumulus.com.

Following completion of the call, a replay can be accessed until 12:00 AM EST, December 4, 2012. Domestic callers can access the replay by dialing 855-859-2056, replay code 48768157#. International callers should dial 404-537-3406 for conference replay access.

Forward-Looking Statements

Certain statements in this release may constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such statements are statements other than historical fact, and relate to our intent, belief or current expectations primarily with respect to our future operating, financial and strategic performance. Any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties. Actual results may differ from those contained in or implied by the forward-looking statements as a result of various factors, 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, the impact of general economic conditions in the United States or in specific markets in which we currently do business, industry conditions, including existing competition and future competitive technologies and cancellation, disruptions or postponements of advertising schedules in response to national or world events, our ability to generate expected revenues from new sources, including local commerce and technology-based initiatives and other risk factors described from time to time in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2011 (the "2011 Form 10-K") and subsequently filed Forms 10-Q. 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. Cumulus Media Inc. assumes no responsibility to update any forward-looking statement as a result of new information, future events or otherwise.

About Cumulus Media Inc.

Cumulus Media Inc. is the largest pure-play radio broadcaster in the United States based on number of stations, controlling more than 525 radio stations in 110 U.S. media markets. Cumulus' headquarters are in Atlanta, Georgia, and its web site is www.cumulus.com. Cumulus shares are traded on NASDAQ under the symbol CMLS.

The Cumulus Media Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13850

Footnotes to Financial Highlights Table

(1)     References to "pro forma" in this press release reflect to the completion of the CMP and Citadel acquisitions and the Company's sale of 55 stations in eleven non-strategic markets to Townsquare Media LLC ("Townsquare") in exchange for Townsquare's radio stations in Bloomington, IL and Peoria, IL, plus approximately $114.9 million in cash (the "Townsquare Asset Exchange"), and include the results of operations of each of the Company, CMP, Citadel and Townsquare for all periods presented. For additional information about the pro forma financial information presented herein, including the material assumptions related thereto, see "Supplemental Unaudited Pro Forma Financial Information" below.

(2)     Adjusted EBITDA and free cash flow are not financial measures calculated or presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). For additional information, see "Non-GAAP Financial Measures" and "Reconciliation of Non-GAAP Financial Measures to Most Directly Comparable GAAP Measures" below.

(3)     Excludes acquisition-related costs of $59.7 million and $73.9 million for the three and nine month pro forma periods ended September 30, 2011, respectively. Excludes acquisition-related costs for the three and nine months ended September 30, 2012 of $2.7 million and $8.2 million, respectively.

CUMULUS MEDIA INC.
Unaudited Condensed Consolidated Statements of Operations
 (Dollars in thousands, except per share data)
     
  Three Months Ended September 30, Nine Months Ended September 30,
  2012 2011 2012 2011
  As Reported As Reported
         
Net revenues   $ 275,350  $ 124,790  $ 792,386  $ 238,697
         
Operating expenses:        
         
Direct operating expenses (excluding depreciation, amortization and LMA fees)  161,740  73,710  484,106  142,690
Depreciation and amortization   35,239  11,025  106,321  14,702
LMA fees   928  530  2,652  1,670
         
Corporate general and administrative expenses (including stock-based compensation expense of $2,764, $1,601, $15,671 and $2,788, respectively)  12,979  44,654  46,473  61,924
Gain on exchange of assets or stations  --  --  --  (15,278)
Realized (gain) loss on derivative instrument  (129)  1,436  624  2,681
Impairment of intangible assets  --  --  12,435  --
Total operating expenses   210,757  131,355  652,611  208,389
Operating income (loss)  64,593  (6,565)  139,775  30,308
         
Non-operating (expense) income:        
Interest expense, net  (49,757)  (19,503)  (150,179)  (34,999)
Loss on early extinguishment of debt  --  --  --  (4,366)
Other (expense) income, net   (224)  182  (34)  88
Gain on equity investment in Cumulus Media Partners, LLC  --  11,636  --  11,636
Total non-operating expense, net   (49,981)  (7,685)  (150,213)  (27,641)
Income (loss) from continuing operations before income taxes  14,612  (14,250)  (10,438)  2,667
Income tax benefit  12,175  69,206  22,862  65,723
Income from continuing operations  26,787  54,956  12,424  68,390
Income from discontinued operations, net of taxes  29,258  4,582  39,635  8,608
         
Net income  $ 56,045  $ 59,538  $ 52,059  $ 76,998
         
Basic and diluted income (loss) per common share:        

 Basic: Income (loss) from continuing operations per share
 $ 0.10  $ 0.72  $ (0.03)  $ 1.26
 Income from discontinued operations per share  $ 0.14  $ 0.06  $ 0.25  $ 0.16
 Income per share  $ 0.24  $ 0.78  $ 0.22  $ 1.42

 Diluted: Income (loss) from continuing operations per share
 $ 0.10  $ 0.66  $ (0.03)  $ 1.20
 Income from discontinued operations per share  $ 0.14  $ 0.06  $ 0.25  $ 0.15
 Income per share  $ 0.24  $ 0.72  $ 0.22  $ 1.35
Weighted average basic common shares outstanding  169,510,007  60,295,163  158,902,196  47,282,132
Weighted average diluted common shares outstanding  176,352,267  66,740,660  158,902,196  50,016,375

Non-GAAP Financial Measures

We utilize certain financial measures that are not prepared or calculated in accordance with GAAP to assess our financial performance and profitability. The non-GAAP financial measures used in this release are Adjusted EBITDA and free cash flow.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) before any non-operating expenses, including net interest expense, depreciation and amortization, stock-based compensation expense, gain or loss on exchange or sale of assets or stations (if any), any realized gain or loss on derivative instruments, any impairment of intangible assets and goodwill, local marketing agreement ("LMA") fees, acquisition-related costs and franchise taxes.

Adjusted EBITDA is the financial metric utilized by management to analyze the cash flow generated by our business. This measure isolates the amount of income generated by our radio stations after the incurrence of corporate general and administrative expenses. Management also uses this measure to determine the contribution of our radio station portfolio, including the corporate resources employed to manage the portfolio, to the funding of our other operating 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 facility.

In deriving this measure, management excludes depreciation, amortization and stock-based compensation expense from the measure, as these do not represent cash payments for activities related to the operation of the radio stations. In addition, we also exclude LMA fees and franchise taxes from our calculation of Adjusted EBITDA, even though such fees and taxes require a cash settlement, because they are excluded from the definition of Adjusted EBITDA contained in our first lien credit facility. Management excludes any gain or loss on the exchange or sale of radio stations as it does not represent a cash transaction. Management also excludes any realized gain or loss on derivative instruments as it does not represent a cash transaction nor is it associated with radio station operations. Management excludes any impairment of goodwill and intangible assets as it does 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. Given the relevance to our overall value, management believes that investors consider the metric to be extremely useful.

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

A quantitative reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, is provided under "Reconciliation of Non-GAAP Financial Measures to Most Directly Comparable GAAP Measures" below.

Free Cash Flow

Free cash flow is also utilized by management to analyze the cash generated by our business. Free cash flow measures the amount of income generated during the applicable period that could be used to fund acquisitions or other growth opportunities or for reinvestment in the business, after funding station and corporate, general and administrative expenses (excluding transaction costs), debt service, income taxes, and capital expenditures.

We define free cash flow as net income (loss) before any non-operating expenses, including net interest expense, stock-based compensation expense, depreciation and amortization, gain or loss on the exchange or sale of assets or stations (if any), and any realized gain or loss on derivative instruments, any impairment of intangible assets and goodwill, net of interest expense (excluding any non-cash charges or credits for changes in values of swaps and amortization of debt issuance costs), income taxes paid and capital expenditures.

Management excludes depreciation and amortization, any gain or loss on the exchange or sale of assets or stations, any realized gain or loss on derivative instruments or impairment of intangible assets and goodwill and other non-cash expenses, including stock-based compensation, as they do not represent cash transactions. Management deducts payments for debt service, income taxes and capital expenditures since these represent amounts that are consistently necessary for our continuing operations in order to arrive at free cash flow available for growth opportunities or reinvestment in our business.

Management believes that free cash flow, although not a measure that is prepared or calculated in accordance with GAAP, is commonly employed by the investment community to evaluate a company's ability to pay down debt, pay dividends, repurchase stock and/or facilitate the further growth of a company through acquisition or internal development. Management further believes that free cash flow is also utilized by investors as a measure in determining the market value of a radio company.

Free cash flow should not be considered in isolation of or as a substitute for net income, operating income, cash flows from operating activities or any other measure for determining our operating performance or liquidity that is calculated in accordance with GAAP. In addition, because free cash flow is not calculated or presented in accordance with GAAP, it may not be calculated or presented comparably to similarly titled measures used by other companies, and thus comparability may be limited. A quantitative reconciliation of free cash flow to net income (loss) calculated in accordance with GAAP is provided.

Reconciliation of Non-GAAP Financial Measures to Most Directly Comparable GAAP Measures

The following tables reconcile net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA on a pro forma and as reported basis for the three and nine months ended September 30, 2012 and 2011 (dollars in thousands):

  Three Months Ended September 30,
  2012 2012 2011 2011
  As Reported Pro Forma As Reported Pro Forma
         
Net income (loss)  $ 56,045  $ 17,684  $ 59,538  $ (19,122)
         
Income tax (benefit) expense  (12,175)  (261)  (69,206)  17,373
Non-operating expenses, including net interest expense  49,981  49,981  7,685  50,996
LMA fees  928  928  530  618
Depreciation and amortization  35,239  35,386  11,025  33,175
Stock-based compensation expense  2,764  2,764  956  10,251
Loss on exchange of assets or stations  --  --  --  394
Realized (gain) loss on derivative instrument  (129)  (129)  1,436  1,436
Acquisition-related costs  2,728  --  --  --
Franchise taxes  275  275  --  --
         
Discontinued operations:      
Depreciation and amortization  --  --  194  --
Non-operating expense  (63,226)  --  1  --
Income tax expense (benefit)  35,426  --  (1,427)  --
Adjusted EBITDA  $ 107,856  $ 106,628  $ 10,732  $ 95,121
   
  Nine Months Ended September 30,
  2012 2012 2011 2011
  As Reported Pro Forma As Reported Pro Forma
         
Net income (loss)  $ 52,059  $ 13,512  $ 76,998  $ (22,063)
         
Income tax (benefit) expense  (22,862)  (14,676)  (65,723)  9,556
Non-operating expenses, including net interest expense  150,213  150,213  27,641  159,072
LMA fees  2,652  2,652  1,670  1,967
Depreciation and amortization  106,321  106,761  14,702  97,077
Stock-based compensation expense  15,671  15,671  2,143  36,250
Gain on exchange of assets or stations  --  --  (15,278)  (14,479)
Realized loss on derivative instrument  624  624  2,681  2,681
Impairment of intangible assets  12,435  12,435  --  --
Acquisition-related costs  8,194  --  --  --
Franchise taxes  832  832  --  --
         
Discontinued operations:      
Depreciation and amortization  1,160  --  529  --
Non-operating expense  (63,219)  --  1  --
Income tax expense (benefit)  31,811  --  (391)  --
Adjusted EBITDA  $ 295,891  $ 288,024  $ 44,973  $ 270,061

The following tables reconcile net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow on a pro forma and as reported basis for the three and nine months ended September 30, 2012 and 2011 (dollars in thousands):

  Three Months Ended September 30,
  2012 2012 2011 2011
  As Reported Pro Forma As Reported
Pro Forma
         
Net income (loss)  $ 56,045  $ 17,684  $ 59,538  $ (19,122)
Add:        
Income tax (benefit) expense  (12,175)  (261)  (69,206)  17,373
Non-operating expenses, including net interest expense  49,981  49,981  7,685  50,996
Stock-based compensation expense  2,764  2,764  956  10,251
Depreciation and amortization  35,239  35,386  11,025  33,175
Loss on exchange of assets or stations  --  --  --  394
Realized (gain) loss on derivative instrument  (129)  (129)  1,436  1,436
         
Discontinued operations:        
Depreciation and amortization  --  --  194  --
Non-operating (expense) income  (63,226)  --  1  --
Income tax expense (benefit)  35,426  --  (1,427)  --
         
Less:        
Interest expense, net of interest income, excluding non-cash charge/credit for change in value of swap arrangements and amortization of debt issuance costs  (46,621)  (46,621)  (19,900)  (48,174)
Income taxes paid  (1,047)  (1,047)  (4,997)  (4,997)
Capital expenditures  (2,736)  (2,736)  (1,380)  (1,380)
Free cash flow  $ 53,521  $ 55,021  $ (16,075)  $ 39,952
   
  Nine Months Ended September 30,
  2012 2012 2011 2011
  As Reported Pro Forma As Reported
Pro Forma
         
Net income (loss)  $ 52,059  $ 13,512  $ 76,998  $ (22,063)
Add:        
Income tax (benefit) expense  (22,862)  (14,676)  (65,723)  9,556
Non-operating expenses, including net interest expense  150,213  150,213  27,641  159,072
Stock-based compensation expense  15,671  15,671  2,143  36,250
Depreciation and amortization  106,321  106,761  14,702  97,077
Gain on exchange of assets or stations  --  --  (15,278)  (14,479)
Realized loss on derivative instrument  624  624  2,681  2,681
Impairment of intangible assets  12,435  12,435  --  --
       
Discontinued operations:      
Depreciation and amortization  1,160  --  529  --
Non-operating (expense) income  (63,219)  --  1  --
Income tax expense (benefit)  31,811  --  (391)  --
         
Less:        
Interest expense, net of interest income, excluding non-cash charge/credit for change in value of swap arrangements and amortization of debt issuance costs  (141,211)  (141,211)  (34,634)  (144,665)
Income taxes paid  (3,956)  (3,956)  (5,141)  (5,141)
Capital expenditures  (4,655)  (4,655)  (2,885)  (2,885)
Free cash flow  $ 134,391  $ 134,718  $ 643  $ 115,403

Supplemental Unaudited Pro Forma Financial Information

The following supplemental unaudited pro forma financial information assumes the CMP Acquisition and the Citadel Acquisition occurred as of January 1, 2010 and the Townsquare Asset Exchange occurred as of January 1, 2011. This supplemental unaudited pro forma financial information also includes the business combination accounting effects of the CMP Acquisition, the Citadel Acquisition and the Townsquare Asset Exchange, including Cumulus's amortization expense resulting from acquired intangible assets, the elimination of certain intangible asset amortization expense incurred by CMP and Citadel, adjustments to interest expense for certain borrowings, adjustments for transaction-related expenses and the related tax effects. This supplemental unaudited pro forma financial information is presented for illustrative and informational purposes only and 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 either the CMP Acquisition or the Citadel Acquisition actually occurred on January 1, 2010 or the Townsquare Asset Exchange actually occurred on January 1, 2011 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. For additional information, see "Forward-Looking Statements" above, including the risk factors referred to therein.

CUMULUS MEDIA INC.
Pro Forma Condensed Consolidated Statements of Operations
 (Dollars in thousands)
         
  Three Months Ended
September 30,
     
  2012   2011   Change
  Pro Forma   Pro Forma   $ %
             
Net revenues   $ 276,166    $ 289,050  (A)   (12,884) -4.5%
             
Operating expenses:            
Direct operating expenses (excluding depreciation and amortization and LMA fees)  162,326    182,412    (20,086) -11.0%
Depreciation and amortization   35,386  (B)   33,175  (B)   2,211 6.7%
LMA fees   928    618    310 50.2%
Corporate, general and administrative expenses (excluding stock-based compensation expense)  7,487  (C)   11,517  (A) (C)   (4,030) -35.0%
Loss on exchange of assets or stations  --    394    (394) N/A
Realized (gain) loss on derivative instrument  (129)    1,436    (1,565) N/A
Stock-based compensation expense  2,764    10,251    (7,487) -73.0%
Total operating expenses   208,762    239,803    (31,041) -12.9%
Operating income  67,404    49,247    18,157 36.9%
             
Non-operating expense:            
Interest expense, net  (49,757)    (51,205)  (D)   (1,448) -2.8%
Other (expense) income, net   (224)    209    (433) N/A
Total non-operating expense, net   (49,981)    (50,996)    (1,015) -2.0%
Income (loss) before taxes  17,423    (1,749)    19,172 N/A
Income tax benefit (expense)   261  (E)   (17,373)  (E)   17,634 N/A
             
Net income (loss)  $ 17,684    $ (19,122)    36,806 -192.5%
             
  Nine Months Ended
September 30,
     
  2012   2011   Change
  Pro Forma   Pro Forma   $ %
             
Net revenues   $ 798,681    $ 827,539  (A)   (28,858) -3.5%
             
Operating expenses:            
Direct operating expenses (excluding depreciation and and amortization and LMA fees)            
   488,879    524,871    (35,992) -6.9%
Depreciation and amortization   106,761  (B)   97,077  (B)   9,684 10.0%
LMA fees   2,652    1,967    685 34.8%
Corporate, general and administrative expenses (excluding stock-bsed compensation expense)  22,610  (C)   32,613  (A) (C)   (10,003) -30.7%
Gain on exchange of assets or stations  --    (14,479)    14,479 N/A
Realized loss on derivative instrument  624    2,681    (2,057) -76.7%
Stock-based compensation expense  15,671    36,250    (20,579) -56.8%
Other operating income, net  --    (6)    6 N/A
Impairment of intangible assets  12,435    --    12,435 N/A
 Total operating expenses  649,632    680,974    (31,342) -4.6%
 Operating income  149,049    146,565    2,484 1.7%
             
Non-operating expense:            
 Interest expense, net  (150,179)    (153,758)  (D)   3,579 -2.3%
 Loss on early extinguishment of debt  --    (4,366)    4,366 N/A
 Other expense, net  (34)    (948)    914 -96.4%
 Total non-operating expense, net  (150,213)    (159,072)    8,859 -5.6%
Loss before taxes  (1,164)    (12,507)    11,343 -90.7%
Income tax benefit (expense)  14,676  (E)   (9,556)  (E)   24,232 N/A
 Net income (loss)  $ 13,512    $ (22,063)    35,575 N/A

 


  Footnotes to Supplemental Unaudited Pro Forma Financial Information


 

(A)  Adjustment to reflect the termination of the CMP Management Agreement. Prior to the completion of the CMP Acquisition, Cumulus managed CMP's business pursuant to a management agreement (the "CMP Management Agreement"). Under the terms of the CMP Management Agreement, CMP was required to pay to Cumulus the greater of $4.0 million or 4.0% of the Adjusted EBITDA on an annual basis of certain of CMP's subsidiaries. For the three and nine months ended September 30, 2011, $0.3 million and $2.3 million, respectively, was eliminated from net revenues and corporate general and administrative expenses.
       


 
(B)  Adjustment to increase pro forma depreciation and amortization expense to reflect the impact of the increase in the fair value of tangible assets and amortizable intangible assets acquired due to the application of the acquisition method of accounting. Pro forma depreciation and amortization expense has been adjusted to reflect the final valuations of property and equipment and definite-lived intangible assets acquired in the CMP Acquisition and the Citadel Acquisition, and for the preliminary valuation of property and equipment and definitie-lived intangible assets acquired in the Townsquare Asset Exchange.
       
  (C)  Acquisition-related costs. Excludes acquisition-related costs of $59.7 million and $73.9 million for the three and nine month periods ended September 30, 2011, respectively. Excludes acquisition-related costs for the three and nine months ended September 30, 2012 of $2.7 million and $8.2 million, respectively.
       



 
(D)  Adjustment to recognize interest expense incurred pursuant to the Refinancing. As part of the Refinancing, all outstanding indebtedness of each of Cumulus and Citadel was refinanced. This adjustment reflects the increased interest expense assuming the Refinancing was completed effective as of January 1, 2010. As part of the Refinancing, in May 2011, Cumulus issued $610.0 million aggregate principal amount of 7.75% senior notes, the proceeds of which were used to, among other things, repay amounts outstanding under Cumulus' then-existing term loan facility. Also, as part of the Refinancing and in connection with the completion of the Citadel Acquisition, on September 16, 2011, the Company obtained financing, which was used in part for the repayment of certain outstanding indebtedness of each of Cumulus, CMP and Citadel.
       
  (E)  Adjustment to reflect income tax impacts on pro forma adjustments. Adjustment to reflect the income tax impacts resulting from the pro forma adjustments to the accompanying unaudited pro forma condensed consolidated statements of operations were based on an estimated combined federal and state statutory income tax rate of 38.0%.
   
   
CUMULUS MEDIA INC. 
Pro Forma Condensed Consolidated Statements of Operations 
 (Dollars in thousands) 
(Unaudited)
 
  Year Ended December 31, 2011  
   Q1   Q2   Q3   Q4   Full Year   
Broadcast revenues  $ 246,847  $ 291,392  $ 288,925  $ 284,014  $ 1,111,178  
Management fees  125  125  125  --   375 (A)
Net revenues  246,972  291,517  289,050  284,014  1,111,553  
Operating expenses:            
Direct operating expenses (excluding depreciation, amortization and LMA fees)  167,895  174,564  182,412  175,549  700,420  
Depreciation and amortization  32,020  31,882  33,175  30,696  127,773 (B)
LMA fees  680  669  618  855  2,822  
Corporate general and administrative expenses (excluding stock-based compensation expense)  13,470  7,626  11,517  10,614  43,227 (A)( C)(D)
(Gain) loss on exchange of assets or stations  (14,992)  119  394  --   (14,479)  
Realized loss on derivative instrument  40  1,205  1,436  687  3,368  
Stock-based compensation expense  12,939  13,060  10,251  7,956  44,206  
Other operating income, net  (6)  --   --   --   (6)  
Total operating expenses  212,046  229,125  239,803  226,357  907,331  
Operating income  34,926  62,392  49,247  57,657  204,222  
Non-operating (expense) income:            
Interest expense, net  (51,300)  (51,253)  (51,205)  (51,159)  (204,917) (E)
Loss on early extinguishment of debt  --   (4,366)  --   --   (4,366)  
Other (expense) income, net  (3)  (1,154)  209  (117)  (1,065)  
Total non-operating expense, net  (51,303)  (56,773)  (50,996)  (51,276)  (210,348) (F)
(Loss) income before taxes  (16,377)  5,619  (1,749)  6,381  (6,126)  
Income tax benefit (expense)  11,937  (4,120)  (17,373)  (16,806)  (26,362) (G)
 Pro forma adjusted net (loss) income   $ (4,440)  $ 1,499  $ (19,122)  $ (10,425)  $ (32,488) (H)

 

Reconciliation of Pro Forma Non-GAAP Financial Measure to Most Directly Comparable Pro Forma GAAP Measure

The following table reconciles pro forma net (loss) income to pro forma Adjusted EBITDA for each quarter during, and the full year ended, December 31, 2011 (dollars in thousands):

  Year Ended December 31, 2011
  (unaudited)
   Q1   Q2   Q3   Q4   Full Year 
Pro forma net (loss) income   $ (4,440)  $ 1,499  $ (19,122)  $ (10,425)  $ (32,488)
Income tax (benefit) expense  (11,937)  4,120  17,373  16,806  26,362
Non-operating expenses, including interest expense, net  51,303  56,773  50,996  51,276  210,348
LMA fees  680  669  618  855  2,822
Depreciation and amortization  32,020  31,882  33,175  30,696  127,773
Stock-based compensation expense  12,939  13,060  10,251  7,956  44,206
(Gain) loss on exchange of assets or stations  (14,992)  119  394  --   (14,479)
Realized loss on derivative instrument  40  1,205  1,436  687  3,368
Pro forma Adjusted EBITDA  $ 65,613  $ 109,327  $ 95,121  $ 97,851  $ 367,912

Footnotes to Supplemental Unaudited Pro Forma Quarterly Financial Information

(A)    Adjustments to reflect the termination of the CMP Management Agreement. For the quarters ended March 31, 2011, June 30, 2011 and September 30, 2011, $1.0 million, $1.0 million and $0.3 million, respectively, was eliminated from net revenues and corporate general and administrative expenses related to the termination of the CMP Management Agreement.

(B)    Adjustments to increase pro forma depreciation and amortization expense to reflect the impact of the increase in the estimated fair value of tangible assets and amortizable intangible assets due to the application of the acquisition method of accounting. Pro forma depreciation and amortization expense has been adjusted to reflect the final valuations of property and equipment and definite-lived intangible assets acquired in the CMP Acquisition and the Citadel Acquisition, and to reflect the preliminary valuation of property and equipment and definite-lived intangible assets acquired in the Townsquare Asset Exchange.

(C)    Acquisition-related stock-based compensation expense. Reflected in the quarter ended September 30, 2011 is the elimination of stock-based compensation expenses of $20.0 million incurred by Citadel due to the acceleration of vesting of certain outstanding equity awards resulting from the completion of the Citadel Acquisition.

(D)    Acquisition-related costs. Reflects the elimination of $6.5 million, $7.7 million, $59.7 million and $10.3 million of non-recurring transaction-related costs incurred for the quarters ended March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively.

(E)     Adjustments to recognize interest expense incurred pursuant to the Refinancing. This adjustment reflects the increased interest expense associated with the completion of the Refinancing.

(F)     Gain on equity investment. Cumulus Media recognized a gain of $11.6 million, representing the adjustment to fair value of its previously held equity interest in CMP at the time of the CMP Acquisition, and this amount has been excluded from the accompanying pro forma condensed consolidated statement of operations for the quarter ended September 30, 2011.

(G)    Adjustments to reflect income tax impacts on pro forma adjustments. Adjustments to reflect the income tax impacts resulting from the pro forma adjustments to the accompanying unaudited pro forma condensed consolidated statements of operations were based on an estimated combined federal and state statutory income tax rate of 38.0%. Included in the full year ended December 31, 2011 is also an adjustment to income tax expense in the amount of $77.6 million to reverse the effect of releasing the valuation allowance against the Company's deferred tax assets at the time of the Citadel Acquisition.

(H)    The Company has previously prepared and disclosed certain required pro forma financial information under Article 11 of the Securities and Exchange Commission regulations relating to Citadel and CMP. Any significant differences between the pro forma financial information previously disclosed and that presented herein principally relate to the amortization and depreciation of intangible and tangible assets and the related income tax effect thereon, which have been based on preliminary purchase price allocation information, related to the amount of and estimated life of such assets, respectively, available at the time of preparation of such information. The asset allocation valuation and estimated life information is prepared by the Company with the assistance of a third party specialist in purchase price allocation matters. At the time of the filing of the 2011 Form 10-K, such purchase price allocations had been updated by the third party specialist with additional amounts being allocated to amortizable intangible assets than had been disclosed in our earlier pro forma financial information. Any change to these assets would impact our estimates on depreciation and amortization and a related pro forma income tax effect. Also in our earnings release on March 12, 2012, our fourth quarter 2011 pro forma statement of operations included actual amortization and depreciation expense for the three months ended December 31, 2011. The pro forma statement of operations presented herein for the quarter ended December 31, 2011 reflects pro forma amortization and depreciation as if the Citadel and CMP Acquisitions had occurred as of January 1, 2010. The pro forma statements of operations presentation herein for all periods reflects pro forma amortization and depreciation as if the Townsquare Asset Exchange occurred as of January 1, 2011. The difference in actual compared to assumed transaction closing dates (actual closings of each of the Citadel and CMP Acquisitions in the quarter ended September 30, 2011 compared to the pro forma financial information assuming the acquisitions occurred as of January 1, 2010) effects the amortization and depreciation expense and the related tax effect because the Company utilizes an accelerated amortization method for certain amortizable intangible assets as described in our footnotes to our audited financial statements as included in our 2011 Form 10-K.

The following supplemental unaudited pro forma financial information is intended to provide you with information about how the Townsquare Asset Exchange might have affected our historical consolidated quarterly financial statements during each completed quarterly period during 2012 and the nine months ended September 30, 2012 if such asset exchange had closed as of January 1, 2011. No pro forma adjustments have been made to reflect the CMP and Citadel Acquisitions since they have been completed before the earliest date presented.

CUMULUS MEDIA INC.           
Pro Forma Condensed Consolidated Statements of Operations 
 (Dollars in thousands)           
(Unaudited)          
           
  2012  
 


 Q1 



 Q2 
 


Q3 
 Nine Months
Ended
September
30, 2012 
 
Broadcast revenues  $ 238,497  283,692  274,976  $ 797,165  
Management fees  30  296  1,190  1,516  
Net revenues  238,527  283,988  276,166  798,681  
Operating expenses:          
Direct operating expenses (excluding depreciation, amortization and LMA fees)  155,648  170,905  162,326  488,879  
Depreciation and amortization  35,028  36,347  35,386  106,761 (A)
LMA fees  839  885  928  2,652  
           
Corporate general and administrative expenses (excluding stock-based compensation expense)  8,693  6,430  7,487  22,610 (B)
Realized (gain) loss on derivative instrument  (88)  841  (129)  624  
Stock-based compensation expense  6,979  5,928  2,764  15,671  
Impairment of intangible assets  --   12,435  --   12,435  
Total operating expenses  207,099  233,771  208,762  649,632  
Operating income  31,428  50,217  67,404  149,049  
Non-operating (expense) income:          
Interest expense, net  (50,803)  (49,619)  (49,757)  (150,179)  
Other income (expense), net  264  (74)  (224)  (34)  
Total non-operating expense, net  (50,539)  (49,693)  (49,981)  (150,213)  
(Loss) income before taxes  (19,111)  524  17,423  (1,164)  
Income tax benefit  6,357  8,058  261  14,676 (C)
Pro forma adjusted net (loss) income   $ (12,754)  $ 8,582  $ 17,684  $ 13,512  

Reconciliation of Pro forma Non-GAAP Financial Measure to Most Directly Comparable Pro Forma GAAP Measure

The following table reconciles pro forma net (loss) income to pro forma Adjusted EBITDA for each completed quarter during 2012, and for the nine months ended September 30, 2012 (dollars in thousands):

  2012
  (unaudited)
 


 Q1 



 Q2 



 Q3 
 Nine Months
Ended
September
30, 2012 
Pro forma net (loss) income   $ (12,754)  $ 8,582  $ 17,684  $ 13,512
Income tax benefit  (6,357)  (8,058)  (261)  (14,676)
Non-operating expenses, including interest expense, net  50,539  49,693  49,981  150,213
LMA fees  839  885  928  2,652
Depreciation and amortization  35,028  36,347  35,386  106,761
Stock-based compensation expense  6,979  5,928  2,764  15,671
Impairment of intangible assets  --   12,435  --   12,435
Realized (gain) loss on derivative instrument  (88)  841  (129)  624
Franchise taxes  297  260  275  832
Pro forma Adjusted EBITDA  $ 74,483  $ 106,913  $ 106,628  $ 288,024

    

Footnotes to Supplemental Unaudited Pro Forma Quarterly Financial Information

(A)    Adjustments related to pro forma depreciation and amortization expense. Pro forma depreciation and amortization expense has been adjusted to reflect the effects of the preliminary valuation of property and equipment and definite-lived intangible assets acquired in the Townsquare Asset Exchange, net of the elimination of the depreciation and amortization expense related to the property and equipment and definite-lived intangible assets related to the stations disposed of in the Townsquare Asset Exchange. 

(B)    Acquisition-related costs. Reflects the elimination of $1.0 million, $4.4 million and $2.7 million of non-recurring transaction-related costs incurred in the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012, respectively.

(C)    Adjustments to reflect income tax impacts on pro forma adjustments. Adjustments to reflect the income tax impacts resulting from the pro forma adjustments to the accompanying unaudited pro forma condensed consolidated statements of operations were based on an estimated combined federal and state statutory income tax rate of 38.0%.

Supplemental Unaudited Summary of Equity Outstanding at September 30, 2012

The following supplemental unaudited summary provides selected data regarding the Company's equity outstanding at September 30, 2012:


Type of Equity
 Number of
Shares 
   
Common stock:  
Class A common stock  157,908,633
Class B common stock  15,424,944
Class C common stock  644,871
Total common stock, issued and outstanding  173,978,448
   
Warrants:  
Company Warrants  38,041,979
2009 Warrants  1,019,675
Warrant Reserve  2,437,570
Total Warrants  41,499,224
   
Total Common Stock and Warrants  215,477,672

The table above excludes the following securities:  (i) warrants exercisable for 7.8 million shares of the Company's Class A common stock and management stock options to purchase 19.1 million shares of the Company's Class A common stock (of which 5.7 million were vested), all of which had exercise prices in excess of the closing price of the Company's Class A common stock on September 30, 2012 and (ii)  employee stock options to purchase 0.7 million shares of the Company's Class A common stock, substantially all of which had exercise prices in excess of the closing price of the Company's Class A common stock on September 30, 2012.  For a further discussion of the Company's equity securities, refer to the Company's quarterly report on Form 10-Q for the quarterly period ended September 30, 2012.
 

CONTACT: Cumulus Media Inc. J.P. Hannan Senior Vice President, Treasurer & Chief Financial Officer 404-260-6600 jp.hannan@cumulus.com

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