##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For or the transition period from  to
 Commission file number 000-24525
 CUMULUS MEDIA INC.
  Delaware(State or Other Jurisdiction of 
Incorporation or Organization)
    
    36-4159663(I.R.S. Employer
Identification No.)3280 Peachtree Road, NW Suite 2300, Atlanta, GA(Address of Principal Executive Offices)
    
    30305(ZIP Code)
 (404) 949-0700
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



CUMULUS MEDIA INC.
 INDEX
 PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements (Unaudited)
    
    
    3Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2010 and September 30, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
2010 and September 30, 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    34PART II. OTHER INFORMATION
    
    
    34Item 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults Upon Senior Securities
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    35Signatures
    
    
    36Exhibit Index
    
    
    37EX-10.1EX-31.1EX-31.2EX-32.1
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CUMULUS MEDIA INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for share data)
(Unaudited)
 September 30,
    
    
    December 31,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    12,565
    
    
    $
    16,224Restricted cash
    
    
    604
    
    
    
    789Accounts receivable, less allowance for doubtful accounts
of $1,132 and $1,166, in 2010 and 2009, respectively
    
    
    38,065
    
    
    
    37,504Trade receivable
    
    
    4,012
    
    
    
    5,488Prepaid expenses and other current assets
    
    
    5,612
    
    
    
    4,709Total current assets
    
    
    60,858
    
    
    
    64,714Property and equipment, net
    
    
    41,730
    
    
    
    46,981Intangible assets, net
    
    
    161,623
    
    
    
    161,380Goodwill
    
    
    56,121
    
    
    
    56,121Other assets
    
    
    3,735
    
    
    
    4,868Total assets
    
    $
    324,067
    
    
    $
    334,064Liabilities and Stockholders DeficitCurrent liabilities:Accounts payable and accrued expenses
    
    $
    16,696
    
    
    $
    13,635Trade payable
    
    
    3,971
    
    
    
    5,534Current portion of derivative instrument
    
    
    7,294
    
    
    
    Current portion of long-term debt
    
    
    35,404
    
    
    
    49,026Total current liabilities
    
    
    63,365
    
    
    
    68,195Long-term debt
    
    
    568,153
    
    
    
    584,482Other liabilities
    
    
    18,011
    
    
    
    32,598Deferred income taxes
    
    
    23,789
    
    
    
    21,301Total liabilities
    
    
    673,318
    
    
    
    706,576Stockholders Deficit:Preferred stock, 20,262,000 shares authorized, par value $0.01 per share, including:250,000 shares designated as 13 3/4% Series A Cumulative
Exchangeable Redeemable
Preferred Stock due 2009, shares designated at stated value
$1,000 per share; 0 shares
issued and outstanding in both 2010 and 2009 and 12,000 12%
Series B Cumulative
Preferred Stock, stated value $10,000 per share; 0 shares
issued and outstanding in
both 2010 and 2009
    
    
    
    
    
    
    Class A common stock, par value $0.01 per share; 200,000,000 shares authorized;
59,572,592 shares issued, 35,576,293 and 35,162,511 shares
outstanding in 2010 and
2009, respectively
    
    
    596
    
    
    
    596Class B common stock, par value $0.01 per share; 20,000,000 shares authorized;
5,809,191 shares issued and outstanding in both 2010 and 2009
    
    
    58
    
    
    
    58Class C common stock, par value $0.01 per share; 30,000,000 shares authorized;
644,871 shares issued and outstanding in both 2010 and 2009
    
    
    6
    
    
    
    6Treasury stock, at cost, 24,027,620 and 24,410,081 shares in 2010 and 2009, respectively
    
    
    (256,632
    )
    
    
    (261,382
    )Additional paid-in-capital
    
    
    963,565
    
    
    
    966,945Accumulated deficit
    
    
    (1,056,844
    )
    
    
    (1,078,735
    )Total stockholders deficit
    
    
    (349,251
    )
    
    
    (372,512
    )Total liabilities and stockholders deficit
    
    $
    324,067
    
    
    $
    334,064
 See accompanying notes to unaudited condensed consolidated financial statements.
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CUMULUS MEDIA INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except for share and per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Broadcast revenues
    
    $
    66,434
    
    
    $
    64,127
    
    
    $
    190,531
    
    
    $
    183,443Management fee from affiliate
    
    
    1,021
    
    
    
    1,000
    
    
    
    3,021
    
    
    
    3,000Net revenues
    
    
    67,455
    
    
    
    65,127
    
    
    
    193,552
    
    
    
    186,443Operating expenses:Station operating expenses (excluding depreciation, amortization
and LMA fees)
    
    
    40,486
    
    
    
    40,159
    
    
    
    120,829
    
    
    
    121,690Depreciation and amortization
    
    
    2,222
    
    
    
    2,650
    
    
    
    7,130
    
    
    
    8,365LMA fees
    
    
    607
    
    
    
    595
    
    
    
    1,500
    
    
    
    1,792Corporate general and administrative (including non-cash stock
compensation of $556, $850, $1,015, and $2,053 respectively)
    
    
    4,680
    
    
    
    5,676
    
    
    
    13,824
    
    
    
    15,741Gain on exchange of assets or stations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,204
    )Realized loss on derivative instrument
    
    
    746
    
    
    
    3,016
    
    
    
    1,810
    
    
    
    3,016Impairment of goodwill and intangible assets
    
    
    
    
    
    
    173,085
    
    
    
    
    
    
    
    173,085Total operating expenses
    
    
    48,741
    
    
    
    225,181
    
    
    
    145,093
    
    
    
    316,485Operating income (loss)
    
    
    18,714
    
    
    
    (160,054
    )
    
    
    48,459
    
    
    
    (130,042
    )Non-operating income (loss):Interest expense
    
    
    (7,588
    )
    
    
    (11,052
    )
    
    
    (23,734
    )
    
    
    (25,048
    )Interest income
    
    
    2
    
    
    
    3
    
    
    
    6
    
    
    
    58Other expense, net
    
    
    (6
    )
    
    
    (121
    )
    
    
    (87
    )
    
    
    (156
    )Total non-operating expense, net
    
    
    (7,592
    )
    
    
    (11,170
    )
    
    
    (23,815
    )
    
    
    (25,146
    )Income (loss) before income taxes
    
    
    11,122
    
    
    
    (171,224
    )
    
    
    24,644
    
    
    
    (155,188
    )Income tax (expense) benefit
    
    
    (1,391
    )
    
    
    27,233
    
    
    
    (2,753
    )
    
    
    21,976Net income (loss)
    
    $
    9,731
    
    
    $
    (143,991
    )
    
    $
    21,891
    
    
    $
    (133,212
    )Basic and diluted income per common share:Basic income (loss) per common share (See Note 8, Earnings Per Share)
    
    $
    0.23
    
    
    $
    (3.56
    )
    
    $
    0.52
    
    
    $
    (3.29
    )Diluted income (loss) per common share (See Note 8, Earnings Per Share)
    
    $
    0.23
    
    
    $
    (3.56
    )
    
    $
    0.51
    
    
    $
    (3.29
    )Weighted average basic common shares outstanding
(See Note 8, Earnings Per Share)
    
    
    40,371,659
    
    
    
    40,405,969
    
    
    
    40,322,079
    
    
    
    40,431,849Weighted average diluted common shares outstanding
(See Note 8, Earnings Per Share)
    
    
    41,466,480
    
    
    
    40,405,969
    
    
    
    41,241,895
    
    
    
    40,431,849
 See accompanying notes to unaudited condensed consolidated financial statements.
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CUMULUS MEDIA INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 Nine Months Ended September2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    21,891
    
    
    $
    (133,212
    )Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization
    
    
    7,130
    
    
    
    8,365Amortization of debt issuance costs/discounts
    
    
    919
    
    
    
    775Amortization of derivative gain
    
    
    
    
    
    
    (828
    )Provision for doubtful accounts
    
    
    922
    
    
    
    1,856Loss on sale of assets or stations
    
    
    82
    
    
    
    (29
    )Gain on exchange of assets or stations
    
    
    
    
    
    
    (7,204
    )Fair value adjustment of derivative instruments
    
    
    (6,536
    )
    
    
    2,151Impairment of goodwill and intangible assets
    
    
    
    
    
    
    173,085Deferred income taxes
    
    
    2,488
    
    
    
    (22,351
    )Non-cash stock compensation
    
    
    1,016
    
    
    
    2,053Changes in assets and liabilities:Restricted cash
    
    
    185
    
    
    
    (789
    )Accounts receivable
    
    
    (1,449
    )
    
    
    2,650Trade receivable
    
    
    1,442
    
    
    
    187Prepaid expenses and other current assets
    
    
    (903
    )
    
    
    (3,038
    )Accounts payable and accrued expenses
    
    
    3,023
    
    
    
    (1,595
    )Trade payable
    
    
    (1,528
    )
    
    
    (8
    )Other assets
    
    
    818
    
    
    
    84Other liabilities
    
    
    (216
    )
    
    
    (938
    )Net cash provided by operating activities
    
    
    29,284
    
    
    
    21,214Cash flows from investing activities:Proceeds from sale of assets or radio stations
    
    
    196
    
    
    
    91Purchase of intangible assets
    
    
    (230
    )
    
    
    Capital expenditures
    
    
    (2,127
    )
    
    
    (1,872
    )Net cash used in investing activities
    
    
    (2,161
    )
    
    
    (1,781
    )Cash flows from financing activities:Repayments of borrowings from bank credit facility
    
    
    (30,353
    )
    
    
    (49,956
    )Tax withholding paid on behalf of employees
    
    
    (184
    )
    
    
    (95
    )Payments made to creditors pursuant to debt amendment
    
    
    (245
    )
    
    
    (3,000
    )Payments for repurchase of common stock
    
    
    
    
    
    
    (193
    )Net cash used in financing activities
    
    
    (30,782
    )
    
    
    (53,244
    )Decrease in cash and cash equivalents
    
    
    (3,659
    )
    
    
    (33,811
    )Cash and cash equivalents at beginning of period
    
    
    16,224
    
    
    
    53,003Cash and cash equivalents at end of period
    
    $
    12,565
    
    
    $
    19,192Supplemental disclosures of cash flow information:Interest paid
    
    $
    20,420
    
    
    $
    17,577Income taxes paid
    
    
    259
    
    
    
    340Trade revenue
    
    
    12,435
    
    
    
    8,676Trade expense
    
    
    12,259
    
    
    
    8,627
 See accompanying notes to unaudited condensed consolidated financial statements.
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##### Table of Contents



CUMULUS MEDIA INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Interim Financial Data and Basis of Presentation
 Interim Financial Data
   Recent Accounting Pronouncements
 ASU 2009-17. Consolidations (Topic 810)  Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities
 ASU 2010-06.
 2. Acquisitions and Dispositions
 2010 Acquisitions
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##### Table of Contents



2009 Acquisitions
 Green Bay and Cincinnati Asset Exchange
     Allocation
    
    AmountFixed assets
    
    $
    458Broadcast licenses
    
    
    15,353Goodwill
    
    
    874Other intangibles
    
    
    951Total purchase price
    
    $
    17,636Less: Carrying value of Green Bay stations
    
    
    (7,999
    )Gain on asset exchange
    
    $
    9,637Less: Fair value of Green Bay Option  April 10, 2009
    
    
    (2,433
    )Net gain
    
    $
    7,204
 3. Derivative Financial Instruments
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##### Table of Contents



May 2005 Swap
    May 2005 Option
     Green Bay Option
  8




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##### Table of Contents



Information on the Location and Amounts of Derivatives Fair Values in the
Unaudited Consolidated Balance Sheets (dollars in thousands)
 Balance Sheet
    
    Fair ValueLocation
    
    September 30, 2010
    
    
    December 31, 2009Derivative not designated as hedging instruments:Green Bay Option
    
    Other long-term liabilities
    
    $
    7,883
    
    
    $
    6,073Interest rate swap  option
    
    Other current liabilities
    
    
    7,294
    
    
    
    Interest rate swap  option
    
    Other long-term liabilities
    
    
    
    
    
    
    15,639Total
    
    $
    15,177
    
    
    $
    21,712
  Amount of Income (Expense)Recognized on DerivativesDerivative
    
    Statement of Operations
    
    For the Three Months
    
    
    For the Nine MonthsInstruments
    
    Location
    
    Ended September 30, 2010
    
    
    Ended September 30, 2010Green Bay Option
    
    Realized loss on derivative instrument
    
    $
    (746
    )
    
    $
    (1,810
    )Interest rate swap  option
    
    Interest income
    
    
    2,979
    
    
    
    8,346Total
    
    $
    2,233
    
    
    $
    6,536
 4.
    
    Fair Value MeasurementsThe three levels of the fair value hierarchy to be applied to financial instruments when
determining fair value are described below:Level 1  Valuations based on quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access;Level 2  Valuations based on quoted prices for similar assets or liabilities, quoted prices in
markets that are not active, or other inputs that are observable or can be corroborated by
observable data for substantially the full term of the assets or liabilities; andLevel 3  Valuations based on inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.
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##### Table of Contents



Fair Value Measurements at Reporting Date UsingQuoted
    
    
    SignificantPrices in
    
    
    Other
    
    
    SignificantActive
    
    
    Observable
    
    
    UnobservableTotal Fair
    
    
    Markets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Financial Liabilities:Other current liabilitiesInterest rate swap (1)
    
    $
    7,294
    
    
    $
    
    
    
    $
    7,294
    
    
    $
    Other long-term liabilitiesGreen Bay option (2)
    
    
    7,883
    
    
    
    
    
    
    
    
    
    
    
    7,883Total liabilities
    
    $
    15,177
    
    
    $
    
    
    
    $
    7,294
    
    
    $
    7,883
 
 (1)
    
    The Companys derivative financial instruments consist solely of an interest rate swap in
which the Company pays a fixed rate and receives a variable interest rate. The fair value of
the Companys interest rate swap is determined based on the present value of future cash flows
using observable inputs, including interest rates and yield curves. Derivative valuations
incorporate adjustments that are necessary to reflect the Companys own credit risk.(2)
    
    The fair value of the Green Bay Option was determined using inputs that are supported by
little or no market activity (a Level 3 measurement). The fair value represents an estimate of
the net amount that the Company would pay if the option was transferred to another party as of
the date of the valuation. The option valuation incorporates a credit risk adjustment to
reflect the probability of default by the Company.  Fixed
    
    
    
    Floating
    
    discount cash flow range of 0.99% - 1.00%;
    
    
    
    discount cash flow range of 0.99% - 1.00%;
    
    interest rate of 3.93%; and
    
    
    
    interest rate range of 0.26% - 0.32%; and
    
    credit spread of 4.85%.
    
    
    
    credit spread of 4.85%.
   Description
    
    Green Bay OptionFair value balance at December 31, 2009
    
    $
    6,073Add: Mark to market fair value adjustment
    
    
    1,810Fair value balance at September 30, 2010
    
    $
    7,883
  
    
    total term of 2.92 years;
    
    volatility rate of 32.0%;
    
    dividend annual rate of 0.0%;
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
    
    discount rate of 0.65%; and
    
    market value of Green Bay of $8.5 million.
   September 30, 2010
    
    
    December 31, 2009Carrying value of term loan
    
    $
    606,537
    
    
    $
    636,890Fair value of term loan
    
    $
    548,420
    
    
    $
    538,604
  
    
    discount cash flow rate of 7.76%;
    
    interest rate of 0.26%; and
    
    credit spread of 4.85%.
 5. Investment in Affiliate
  Nine Months Ended September 30,2010
    
    
    2009Income Statement Data:Revenues
    
    $
    140,028
    
    
    $
    129,223Operating expenses
    
    
    91,994
    
    
    
    296,665Net income (loss)
    
    
    20,442
    
    
    
    (83,693
    )Balance Sheet Data:Assets
    
    
    469,916
    
    
    
    487,047Liabilities
    
    
    885,800
    
    
    
    958,026Shareholders deficit
    
    
    (415,884
    )
    
    
    (470,979
    )
   11




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##### Table of Contents



6. Long-Term Debt
  September 30,
    
    
    December 31,2010
    
    
    2009Term loan
    
    $
    606,537
    
    
    $
    637,321Less: Debt discount
    
    
    (2,980
    )
    
    
    (3,813
    )Less: Current portion of long-term debt
    
    
    (35,404
    )
    
    
    (49,026
    )$
    568,153
    
    
    $
    584,482
 Senior Secured Credit Facilities
 June 2009 Amendment
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##### Table of Contents



Covenants
  
    
    the total leverage ratio and fixed charge coverage ratio covenants for the fiscal
quarters ending June 30, 2009 through and including December 31, 2010 (the Covenant
Suspension Period), were suspended;
    
    during the Covenant Suspension Period, the Company must: (1) maintain minimum trailing
twelve month consolidated EBITDA (as defined in the Credit Agreement) of $60.0 million for
fiscal quarters through March 31, 2010, increasing incrementally to $66.0 million for the
fiscal quarter ended December 31, 2010, subject to certain adjustments; and (2) maintain
minimum cash on hand (defined as unencumbered consolidated cash and cash equivalents) of at
least $7.5 million;
    
    the Company is restricted from incurring additional intercompany debt or making any
intercompany investments other than to the parties to the Credit Agreement;
    
    the Company may not incur additional indebtedness or liens, or make permitted
acquisitions or restricted payments (except under certain circumstances, pursuant to the
July 2010 amendment to the Credit Agreement, as described below), during the Covenant
Suspension Period (after the Covenant Suspension Period, the Credit Agreement will permit
indebtedness, liens, permitted acquisitions and restricted payments, subject to certain
leverage ratio and liquidity measurements); and
    
    the Company must provide monthly unaudited financial statements to the lenders within 30
days after each calendar-month end.
   
    
    a minimum trailing twelve month consolidated EBITDA of $64.0 million;
    
    a $7.5 million minimum cash on hand; and
    
    a limit on annual capital expenditures of $15.0 million annually.
   
    
    a maximum total leverage ratio of 6.50:1; and
    
    a minimum fixed charge coverage ratio of 1.20:1.
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July 2010 Amendment
    Warrants
  Accounting for the Modification of the Credit Agreement
   7. Stock Based Compensation
    14




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##### Table of Contents



8. Earnings per Share (EPS)
   15




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic Earnings Per ShareNumerator:Undistributed net income (loss)
    
    $
    9,731
    
    
    $
    (143,991
    )
    
    $
    21,891
    
    
    $
    (133,212
    )Participation rights of unvested restricted stock in
undistributed earnings
    
    
    385
    
    
    
    
    
    
    
    822
    
    
    
    Basic undistributed net income (loss) 
attributable to
common shares
    
    $
    9,346
    
    
    $
    (143,991
    )
    
    $
    21,069
    
    
    $
    (133,212
    )Denominator:Denominator for basic income (loss) per common
share:Basic weighted average common shares outstanding
    
    
    40,372
    
    
    
    40,406
    
    
    
    40,322
    
    
    
    40,432Basic EPS  attributable to common shares
    
    $
    0.23
    
    
    $
    (3.56
    )
    
    $
    0.52
    
    
    $
    (3.29
    )Diluted Earnings Per Share:Numerator:Undistributed net income (loss)
    
    $
    9,731
    
    
    $
    (143,991
    )
    
    $
    21,891
    
    
    $
    (133,212
    )Participation rights of unvested restricted stock in
undistributed earnings
    
    
    378
    
    
    
    
    
    
    
    806
    
    
    
    Basic undistributed net income (loss) 
attributable to
common shares
    
    $
    9,353
    
    
    $
    (143,991
    )
    
    $
    21,085
    
    
    $
    (133,212
    )Denominator:Basic weighted average shares outstanding
    
    
    40,372
    
    
    
    40,406
    
    
    
    40,322
    
    
    
    40,432Effect of dilutive options and warrants (1)
    
    
    658
    
    
    
    
    
    
    
    824
    
    
    
    Diluted weighted average shares outstanding
    
    
    41,030
    
    
    
    40,406
    
    
    
    41,146
    
    
    
    40,432Diluted EPS  attributable to common shares
    
    $
    0.23
    
    
    $
    (3.56
    )
    
    $
    0.51
    
    
    $
    (3.29
    )
 
 (1)
    
    For the three and nine months ended September 30, 2009, options to purchase 925,504 shares of
common stock were outstanding but excluded from the EPS calculation because their effect would
have been antidilutive. Additionally, for the three and nine months ended September 30, 2009,
the Company excluded warrants from the EPS calculations because including the warrants would
be antidilutive.  September 30, 2010Restricted shares of Class A Common Stock
    
    
    1,650,833Options to purchase Class A Common Stock
    
    
    860,152
 9. Commitments and Contingencies
   16




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17




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##### Table of Contents



10. Restricted Cash
  11. Variable Interest Entities
   12. Intangible Assets and Goodwill
  Indefinite Lived
    
    
    Definite Lived
    
    
    TotalIntangible Assets:Balance as of December 31, 2008
    
    $
    325,131
    
    
    $
    3
    
    
    $
    325,134Acquisition
    
    
    15,353
    
    
    
    841
    
    
    
    16,194Disposition
    
    
    (7,471
    )
    
    
    
    
    
    
    (7,471
    )Amortization
    
    
    
    
    
    
    (265
    )
    
    
    (265
    )Impairment
    
    
    (172,212
    )
    
    
    
    
    
    
    (172,212
    )Balance as of December 31, 2009
    
    $
    160,801
    
    
    $
    579
    
    
    $
    161,380Acquisition
    
    
    230
    
    
    
    
    
    
    
    230Amortization
    
    
    
    
    
    
    (124
    )
    
    
    (124
    )Reclassifications
    
    
    137
    
    
    
    
    
    
    
    137Balance as of September 30, 2010
    
    $
    161,168
    
    
    $
    455
    
    
    $
    161,623
 2010
    
    
    2009Balance as of January 1:Goodwill
    
    $
    285,820
    
    
    $
    287,609Accumulated impairment losses
    
    
    (229,699
    )
    
    
    (228,719
    )Subtotal
    
    
    56,121
    
    
    
    58,890Goodwill acquired during the year
    
    
    
    
    
    
    1,600Goodwill related to sale of business unit
    
    
    
    
    
    
    (906
    )Impairment losses
    
    
    
    
    
    
    (1,757
    )Balance as of September 30:Goodwill
    
    
    285,820
    
    
    
    288,303Accumulated impairment losses
    
    
    (229,699
    )
    
    
    (230,476
    )Total
    
    $
    56,121
    
    
    $
    57,827
 18




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##### Table of Contents



Goodwill
 2009 Impairment Testing
    Step 1 Goodwill Test
    Step 2 Goodwill Test
  Reporting Unit
    
    
    Implied Goodwill
    
    
    August 31, 2009Market ID
    
    Fair Value
    
    
    Value
    
    
    Carrying Value
    
    
    ImpairmentMarket 37
    
    $
    15,006
    
    
    $
    9,754
    
    
    $
    11,511
    
    
    $
    1,757
 19




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##### Table of Contents




    
    conducted an overall reasonableness check of the Companys fair value calculations
by comparing the aggregate, calculated fair value of the Companys markets to its
market capitalization as of August 31, 2009;
    
    prepared a market fair value calculation using a multiple of Adjusted EBITDA as a
comparative data point to validate the fair values calculated using the discounted
cash-flow approach;
    
    reviewed the historical operating performance of each market with impairment;
    
    reviewed the facts surrounding the acquisition of the impaired market, including
original, implied acquisition Station Operating Income multiple; and
    
    performed a sensitivity analysis on the overall fair value and impairment evaluation.
 i.e.
    
    
    shares outstanding as of August 31, 2009: 41.6 million;
    
    average closing price of the Companys Class A Common Stock over 30 days: $1.40 per share; and
    
    debt discounted by 26% (gross $647.9 million, net $479.4 million).
   Indefinite Lived Intangibles (FCC Licenses)
 2009 Impairment Testing
   20




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##### Table of Contents




    
    In each market, the broadcast licenses were purchased to be used as one combined asset.
    
    The combined group of licenses in a market represents the highest and best use of the assets.
    
    Each markets strategy provides evidence that the licenses are complementary.
  i.e.
  i.e.
      21




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##### Table of Contents




    
    the stations gross revenues through 2017;
    
    the projected operating expenses and profits over the same
period of time (the Company considered operating expenses,
except for sales expenses, to be fixed, and assumed sales
expenses to be a fixed percentage of revenues);
    
    calculations of yearly net free cash flows to invested capital;
    
    depreciation on start-up construction costs and capital
expenditures (the Company calculated depreciation using
accelerated double declining balance guidelines over five
years for the value of the tangible assets necessary for a
radio station to go on-the-air); and
    
    amortization of the intangible assetthe FCC License (the
Company calculated amortization on a straight line basis over
15 years).
 Impact of Economic Environment on the 2009 Impairment Analysis
  13. Related Party
  22




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
  Overview
  Liquidity Considerations
   Advertising Revenue and Station Operating Income
  23




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##### Table of Contents



Cumulus Radio Investors, L.P. (CRI)
   24




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##### Table of Contents



Results of Operations
 Analysis of the Condensed Consolidated Statements of Operations.
 For the Three MonthsEnded September 30,
    
    
    2010 vs 20092010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeSTATEMENT OF OPERATIONS DATA:Net revenues
    
    $
    67,455
    
    
    $
    65,127
    
    
    $
    2,328
    
    
    
    3.6
    %Station operating expenses (excluding depreciation,
amortization and LMA fees)
    
    
    40,486
    
    
    
    40,159
    
    
    
    327
    
    
    
    0.8
    %Depreciation and amortization
    
    
    2,222
    
    
    
    2,650
    
    
    
    (428
    )
    
    
    -16.2
    %LMA fees
    
    
    607
    
    
    
    595
    
    
    
    12
    
    
    
    2.0
    %Corporate general and administrative (including
non-cash stock compensation expense)
    
    
    4,680
    
    
    
    5,676
    
    
    
    (996
    )
    
    
    -17.5
    %Realized loss on derivative instrument
    
    
    746
    
    
    
    3,016
    
    
    
    (2,270
    )
    
    
    -75.3
    %Impairment of goodwill and intangible assets
    
    
    
    
    
    
    173,085
    
    
    
    (173,085
    )
    
    
    -100.0
    %Operating income (loss)
    
    
    18,714
    
    
    
    (160,054
    )
    
    
    178,768
    
    
    
    -111.7
    %Interest expense, net
    
    
    (7,586
    )
    
    
    (11,049
    )
    
    
    3,463
    
    
    
    -31.3
    %Other expense, net
    
    
    (6
    )
    
    
    (121
    )
    
    
    115
    
    
    
    -95.0
    %Income tax (expense) benefit
    
    
    (1,391
    )
    
    
    27,233
    
    
    
    (28,624
    )
    
    
    -105.1
    %Net income (loss)
    
    $
    9,731
    
    
    $
    (143,991
    )
    
    $
    153,722
    
    
    
    -106.8
    %OTHER DATA:Station operating income (1)
    
    $
    26,969
    
    
    $
    24,968
    
    
    $
    2,001
    
    
    
    8.0
    %Station operating income margin (2)
    
    
    40.0
    %
    
    
    38.3
    %
    
    
    *
    *
    
    
    *
    *
 For the Nine MonthsEnded September 30,
    
    
    2010 vs 20092010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeSTATEMENT OF OPERATIONS DATA:Net revenues
    
    $
    193,552
    
    
    $
    186,443
    
    
    $
    7,109
    
    
    
    3.8
    %Station operating expenses (excluding depreciation,
amortization and LMA fees)
    
    
    120,829
    
    
    
    121,690
    
    
    
    (861
    )
    
    
    -0.7
    %Depreciation and amortization
    
    
    7,130
    
    
    
    8,365
    
    
    
    (1,235
    )
    
    
    -14.8
    %LMA fees
    
    
    1,500
    
    
    
    1,792
    
    
    
    (292
    )
    
    
    -16.3
    %Corporate general and administrative (including
non-cash stock compensation expense)
    
    
    13,824
    
    
    
    15,741
    
    
    
    (1,917
    )
    
    
    -12.2
    %Gain on exchange of assets or stations
    
    
    
    
    
    
    (7,204
    )
    
    
    7,204
    
    
    
    -100.0
    %Realized loss on derivative instrument
    
    
    1,810
    
    
    
    3,016
    
    
    
    (1,206
    )
    
    
    -40.0
    %Impairment of goodwill and intangible assets
    
    
    
    
    
    
    173,085
    
    
    
    (173,085
    )
    
    
    -100.0
    %Operating income (loss)
    
    
    48,459
    
    
    
    (130,042
    )
    
    
    178,501
    
    
    
    -137.3
    %Interest expense, net
    
    
    (23,728
    )
    
    
    (24,990
    )
    
    
    1,262
    
    
    
    -5.1
    %Other expense, net
    
    
    (87
    )
    
    
    (156
    )
    
    
    69
    
    
    
    -44.2
    %Income tax (expense) benefit
    
    
    (2,753
    )
    
    
    21,976
    
    
    
    (24,729
    )
    
    
    -112.5
    %Net income (loss)
    
    $
    21,891
    
    
    $
    (133,212
    )
    
    $
    155,103
    
    
    
    -116.4
    %OTHER DATA:Station operating income (1)
    
    $
    72,723
    
    
    $
    64,753
    
    
    $
    7,970
    
    
    
    12.3
    %Station operating income margin (2)
    
    
    37.6
    %
    
    
    34.7
    %
    
    
    *
    *
    
    
    *
    *Cash flows related to:Operating activities
    
    $
    29,284
    
    
    $
    21,214
    
    
    $
    8,070
    
    
    
    38.0
    %Investing activities
    
    
    (2,161
    )
    
    
    (1,781
    )
    
    
    (380
    )
    
    
    21.3
    %Financing activities
    
    
    (30,782
    )
    
    
    (53,244
    )
    
    
    22,462
    
    
    
    -42.2
    %Capital expenditures
    
    
    (2,127
    )
    
    
    (1,872
    )
    
    
    (255
    )
    
    
    13.6
    %
 
 **
    
    Calculation is not meaningful. 25




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##### Table of Contents



(1)
    
    Station Operating Income consists of operating income before depreciation and
amortization, LMA fees, non-cash stock compensation corporate general and administrative
expenses, gain on exchange of assets or stations, realized loss on derivative instruments and
impairment of goodwill and intangible assets. Station Operating Income is not a measure of
performance calculated in accordance with GAAP. Station Operating Income should not be
considered in isolation or as a substitute for net income, 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. See managements explanation of this
measure and the reasons for its use and presentation, along with a quantitative reconciliation
of Station Operating Income to its most directly comparable financial measure calculated and
presented in accordance with GAAP, below under Station Operating Income.(2)
    
    Station Operating Income margin is defined as Station Operating Income as a percentage of net
revenues. Three Months Ended September 30, 2010 versus the Three Months Ended September 30, 2009
 Net Revenues.
 Station Operating Expenses, Excluding Depreciation, Amortization and LMA Fees.
 Depreciation and Amortization.
 LMA Fees.
 Corporate, General and Administrative Expenses Including Non-cash Stock Compensation.
 Realized Loss on Derivative Instrument.
 Impairment of Goodwill and Intangible Assets.
 Interest Expense, net.
 For the Three MonthsEnded September 30,
    
    
    2010 vs 20092010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeBank Borrowings  term loan and revolving credit facilities
    
    $
    6,433
    
    
    $
    7,088
    
    
    $
    (655
    )
    
    
    -9.2
    %Bank Borrowings yield adjustment  interest rate swap
    
    
    3,647
    
    
    
    3,675
    
    
    
    (28
    )
    
    
    -0.8
    %Change in fair value of interest rate option agreement
    
    
    (2,979
    )
    
    
    (30
    )
    
    
    (2,949
    )
    
    
    9830.0
    %Other interest expense
    
    
    487
    
    
    
    319
    
    
    
    168
    
    
    
    52.7
    %Interest income
    
    
    (2
    )
    
    
    (3
    )
    
    
    1
    
    
    
    -33.3
    %Interest expense, net
    
    $
    7,586
    
    
    $
    11,049
    
    
    $
    (3,463
    )
    
    
    -31.3
    %
 26




---



##### Table of Contents



Income Taxes.
 Station Operating Income.
    27




---



##### Table of Contents



Reconciliation of Non-GAAP Financial Measure.
 For the Three MonthsEnded September 30, 2010
    
    
    2010 vs 20092010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeOperating income (loss)
    
    $
    18,714
    
    
    $
    (160,054
    )
    
    $
    178,768
    
    
    
    -111.7
    %Depreciation and amortization
    
    
    2,222
    
    
    
    2,650
    
    
    
    (428
    )
    
    
    -16.2
    %LMA fees
    
    
    607
    
    
    
    595
    
    
    
    12
    
    
    
    2.0
    %Non-cash stock compensation
    
    
    556
    
    
    
    611
    
    
    
    (55
    )
    
    
    -9.0
    %Corporate general and
administrative
    
    
    4,124
    
    
    
    5,065
    
    
    
    (941
    )
    
    
    -18.6
    %Realized loss on derivative
instrument
    
    
    746
    
    
    
    3,016
    
    
    
    (2,270
    )
    
    
    -75.3
    %Impairment of goodwill and
intangible assets
    
    
    
    
    
    
    173,085
    
    
    
    (173,085
    )
    
    
    -100.0
    %Station Operating Income
    
    $
    26,969
    
    
    $
    24,968
    
    
    $
    2,001
    
    
    
    8.0
    %
 Nine Months Ended September 30, 2010 versus the Nine Months Ended September 30, 2009
 Net Revenues.
 Station Operating Expenses, Excluding Depreciation, Amortization and LMA Fees.
 Depreciation and Amortization.
 LMA Fees.
 Corporate, General and Administrative Expenses Including Non-cash Stock Compensation.
 Gain on Exchange of Assets or Stations.
 Realized Loss on Derivative Instrument.
 28




---



##### Table of Contents



Impairment of Goodwill and Intangible Assets.
 Interest Expense, net.
 For the Nine MonthsEnded September 30,
    
    
    2010 vs 20092010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeBank Borrowings  term loan and revolving credit facilities
    
    $
    19,866
    
    
    $
    15,008
    
    
    $
    4,858
    
    
    
    32.4
    %Bank Borrowings yield adjustment  interest rate swap
    
    
    11,081
    
    
    
    9,667
    
    
    
    1,414
    
    
    
    14.6
    %Change in fair value of interest rate swap agreement
    
    
    
    
    
    
    (3,043
    )
    
    
    3,043
    
    
    
    -100.0
    %Change in fair value of interest rate option agreement
    
    
    (8,346
    )
    
    
    2,178
    
    
    
    (10,524
    )
    
    
    -483.2
    %Other interest expense
    
    
    1,133
    
    
    
    1,238
    
    
    
    (105
    )
    
    
    -8.5
    %Interest income
    
    
    (6
    )
    
    
    (58
    )
    
    
    52
    
    
    
    -89.7
    %Interest expense, net
    
    $
    23,728
    
    
    $
    24,990
    
    
    $
    (1,262
    )
    
    
    -5.1
    %
 Income Taxes.
 Station Operating Income.
 Reconciliation of Non-GAAP Financial Measure.
 For the Nine MonthsEnded September 30,
    
    
    2010 vs 20092010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeOperating income (loss)
    
    $
    48,459
    
    
    $
    (130,042
    )
    
    
    178,501
    
    
    
    -137.3
    %Depreciation and amortization
    
    
    7,130
    
    
    
    8,365
    
    
    
    (1,235
    )
    
    
    -14.8
    %LMA fees
    
    
    1,500
    
    
    
    1,792
    
    
    
    (292
    )
    
    
    -16.3
    %Non-cash stock compensation
    
    
    1,015
    
    
    
    2,053
    
    
    
    (1,038
    )
    
    
    -50.6
    %Corporate general and
administrative
    
    
    12,809
    
    
    
    13,688
    
    
    
    (879
    )
    
    
    -6.4
    %Gain on exchange of assets
or stations
    
    
    
    
    
    
    (7,204
    )
    
    
    7,204
    
    
    
    -100.0
    %Realized loss on derivative
instrument
    
    
    1,810
    
    
    
    3,016
    
    
    
    (1,206
    )
    
    
    -40.0
    %Impairment of goodwill and
intangible assets
    
    
    
    
    
    
    173,085
    
    
    
    (173,085
    )
    
    
    -100.0
    %Station Operating Income
    
    $
    72,723
    
    
    $
    64,753
    
    
    $
    7,970
    
    
    
    12.3
    %
 29




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##### Table of Contents



Liquidity and Capital Resources
 Liquidity Considerations
   tm tm
  30




---



##### Table of Contents



Cash Flows provided by Operating Activities
  Cash Flows used in Investing Activities
  Cash Flows used in Financing Activities
  Credit Agreement and the June 2009 Amendment
      31




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##### Table of Contents



Covenants
  
    
    the total leverage ratio and fixed charge coverage ratio covenants for the fiscal
quarters ending June 30, 2009 through and including December 31, 2010 (the Covenant
Suspension Period) have been suspended;
    
    during the Covenant Suspension Period, we must: (1) maintain minimum trailing twelve
month consolidated EBITDA (as defined in the Credit Agreement) of $60.0 million for fiscal
quarters through March 31, 2010, increasing incrementally to $66.0 million for fiscal
quarter ended December 31, 2010, subject to certain adjustments; and (2) maintain minimum
cash on hand (defined as unencumbered consolidated cash and cash equivalents) of at least
$7.5 million;
    
    we are restricted from incurring additional intercompany debt or making any intercompany
investments other than to the parties to the Credit Agreement;
    
    we may not incur additional indebtedness or liens, or make permitted acquisitions or
restricted payments (except under certain circumstances, pursuant to the July 2010 amendment
to the Credit Agreement, described under the caption July 2010 Amendment), during the
Covenant Suspension Period (after the Covenant Suspension Period, the Credit Agreement will
permit indebtedness, liens, permitted acquisitions and restricted payments, subject to
certain leverage ratio and liquidity measurements); and
    
    we must provide monthly unaudited financial statements to the lenders within 30 days
after each calendar-month end.
   
    
    a minimum trailing twelve month consolidated EBITDA of $64.0 million;
    
    a $7.5 million minimum cash on hand; and
    
    a limit on annual capital expenditures of $15.0 million annually.
   
    
    a maximum total leverage ratio of 6.5:1; and
    
    a minimum fixed charge coverage ratio of 1.20:1.
 32




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##### Table of Contents



July 2010 Amendment
    Warrants
  Accounting for the Modification of the Credit Agreement
  33




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  34




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 5. Other Information
  
 Item 6. Exhibits
 10.1
    
    
    
    Amendment No. 4 to Credit Agreement, dated as of July 23, 2010, among the Company, Bank
of America, N.A., as the existing administrative agent, General Electric Capital Corporation,
as administrative agent, and the other Lenders signature thereto.31.1
    
    
    
    Certification of the Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    
    Certification of the Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    
    Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 35




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##### Table of Contents



SIGNATURES
  CUMULUS MEDIA INC.Date: November 1, 2010
    By:
    /s/ Joseph P. HannanJoseph P. HannanSenior Vice President, Treasurer and
Chief Financial Officer 36




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##### Table of Contents



EXHIBIT INDEX
 10.1
    
    
    
    Amendment No. 4 to Credit Agreement, dated as of July 23, 2010, among the Company, Bank
of America, N.A., as the existing administrative agent, General Electric Capital Corporation,
as administrative agent, and the other Lenders signature thereto.31.1
    
    
    
    Certification of the Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    
    Certification of the Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    
    Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 37