As filed with the Securities and Exchange Commission on June 21, 2002
Registration No. 333-______
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CUMULUS MEDIA INC.
(Exact Name of Registrant as Specified in Its Charter)
Illinois 4832 36-4159663
------------------------------- ---------------------------- ----------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
------------------------
3535 Piedmont Road
Building 14, Fourteenth Floor
Atlanta, Georgia 30305
(404) 949-0700
(Address, including zip code, and telephone number,
including
area code, of registrant's principal executive offices)
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Lewis W. Dickey, Jr.
Chairman, President and Chief Executive Officer
Cumulus Media Inc.
3535 Piedmont Road
Building 14, Fourteenth Floor
Atlanta, Georgia 30305
(404) 949-0700
(Name, Address, including zip code, and telephone
number,
including area code, of agent for service)
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Copies to:
Mark L. Hanson, Esq.
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street
Atlanta, Georgia 30308-3242
(404) 521-3939
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Approximate date of commencement of proposed sale to the public: FROM
TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
=================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Unit (1) Offering Price (1) Registration Fee (2)
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Class A Common Stock, par value 10,000,000 $18.59 $185,900,000 $17,103
$.01 per share shares
=================================================================================================================
(1) Estimated solely for purposes of computing the Registration Fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended (the
"Securities Act"), based upon the average of the reported high and low
sales prices of Class A Common Stock of the Company on the Nasdaq
National Market ("Nasdaq") on June 14, 2002.
(2) The registration fee for the securities offered hereby, $17,103, is
calculated pursuant to Rule 457(c) under the Securities Act as follows:
.000092 multiplied by the product of $18.59, the average of the
reported high and low sales prices of the Class A Common Stock on
Nasdaq on June 14, 2002 (a date within 5 business days prior to this
filing), multiplied by 10,000,000, the number of shares to be
registered.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 21, 2002
PROSPECTUS
CUMULUS MEDIA INC.
10,000,000 SHARES
CLASS A COMMON STOCK
PAR VALUE $.01 PER SHARE
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This prospectus relates to up to 10,000,000 shares of Class A Common
Stock of Cumulus Media Inc. that we may issue from time to time in connection
with our acquisition of other businesses, properties or securities in business
combination transactions utilizing a "shelf" registration process. We expect
the terms of acquisitions involving our issuance of Class A Common Stock
covered by this prospectus will be determined by direct negotiations with the
owners or controlling persons of the businesses, properties or securities that
we may acquire. We will value shares of Class A Common Stock issued in exchange
for assets or securities in business combination transactions at prices
reasonably related to market prices of our Class A Common Stock, or the value
of the assets to be received by us, at the time we agree upon the terms of an
acquisition.
We will pay all expenses of this offering. We will not pay any
underwriting discounts or commissions, although we may pay finder's fees from
time to time in connection with specific acquisitions. Any person receiving
such fee may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended, referred to as the Securities Act.
This prospectus may also be used by securityholders who received Class
A Common Stock covered by this prospectus in transactions described above and
who wish to resell shares of Class A Common Stock in transactions registered
under the Securities Act. We will receive no consideration in connection with
sales by those securityholders. Any securityholders who are participating in a
resale of their Class A Common Stock in a transaction covered by this
prospectus, and the terms of the sales of their Class A Common Stock, will be
set forth in a supplement to this prospectus.
Our Class A Common Stock is quoted on the Nasdaq National Market under
the symbol "CMLS." On June 20, 2002, the last reported sale price of the Class
A Common Stock on Nasdaq was $17.75 per share.
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS," BEGINNING ON PAGE 11 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY SUPPLEMENT TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is _______, 2002.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS...............................................................................................1
AVAILABLE INFORMATION...............................................................................................1
INCORPORATION OF DOCUMENTS BY REFERENCE.............................................................................1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS..........................................................3
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA....................................................................4
SUMMARY.............................................................................................................5
Our Business...............................................................................................5
Our Strategy...............................................................................................6
Recent Developments........................................................................................6
SUMMARY CONSOLIDATED FINANCIAL DATA.................................................................................8
RISK FACTORS.......................................................................................................11
USE OF PROCEEDS....................................................................................................17
SECURITIES COVERED BY THIS PROSPECTUS..............................................................................17
VALIDITY OF SECURITIES.............................................................................................18
EXPERTS............................................................................................................18
ABOUT THIS PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT. WE ARE OFFERING TO SELL SECURITIES AND SEEKING OFFERS TO
BUY SECURITIES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT IS ACCURATE ONLY AS OF THE DATE ON THEIR COVERS; REGARDLESS OF THE
TIME OF DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT
OR ANY SALE OF THE SECURITIES. IN THIS PROSPECTUS, THE TERMS "COMPANY",
"CUMULUS", "WE", "US", AND "OUR" REFER TO CUMULUS MEDIA INC. AND ITS
CONSOLIDATED SUBSIDIARIES. THE TERM "CLASS A COMMON STOCK" MEANS OUR CLASS A
COMMON STOCK, PAR VALUE $.01 PER SHARE.
WE HAVE NOT TAKEN ANY ACTION TO PERMIT A PUBLIC OFFERING OF THE SHARES
OF SECURITIES OUTSIDE THE UNITED STATES. PERSONS OUTSIDE THE UNITED STATES WHO
COME INTO POSSESSION OF THIS PROSPECTUS MUST INFORM THEMSELVES ABOUT AND
OBSERVE ANY RESTRICTIONS RELATING TO THE OFFERING OF THE SHARES OF SECURITIES
AND THE DISTRIBUTION OF THIS PROSPECTUS OUTSIDE THE UNITED STATES.
AVAILABLE INFORMATION
We have filed with the SEC under the Securities Act a registration
statement on Form S-4. This prospectus does not contain all of the information
contained in the registration statement, certain portions of which have been
omitted under the rules of the SEC. We also file annual, quarterly and special
reports, proxy statements and other information with the SEC under the
Securities Exchange Act of 1934.
For further information concerning the SEC's public reference rooms,
you may call the SEC at (800) SEC-0330. You may read or obtain copies of this
information by mail from the public reference section of the SEC, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. You may
also access some of this information via the world wide web through the SEC's
Internet address at www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information in, or subsequently
incorporated by reference into, this prospectus. This prospectus incorporates
by reference the documents set forth below that we have previously filed with
the SEC. These documents contain important information about us.
SEC FILINGS PERIOD
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Annual Report on Form 10-K, as amended Fiscal year ended December 31, 2001
Quarterly Report on Form 10-Q Fiscal quarter ended March 31, 2002
Current Report on Form 8-K Filed on February 7, 2002
Current Report on Form 8-K Filed on March 7, 2002
Current Report on Form 8-K Filed on March 28, 2002
Current Report on Form 8-K Filed on May 7, 2002
Current Report on Form 8-K Filed on May 17, 2002
Registration Statement on Form 8-A Filed on June 24, 1998
We are also incorporating by reference additional documents we may
file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 after the date of this prospectus and before all of the shares
covered by this prospectus are sold or deregistered (other than those portions
of such documents described in paragraphs (i), (k) and (l) of Item 402 of
Regulation S-K promulgated by the SEC). This additional information is a part
of this prospectus from the date of filing of those documents.
Any statements made in this prospectus or in a document incorporated
or deemed to be incorporated by reference into this prospectus will be deemed
to be modified or superseded for purposes of this prospectus to the extent
1
that a statement contained in this prospectus or in any other subsequently
filed document which is also incorporated or deemed to be incorporated by
reference into this prospectus modifies or supersedes the statement. Any
statement so modified or superseded will not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
The information relating to us in this prospectus should be read
together with the information in the documents incorporated or deemed to be
incorporated by reference. In addition, some of the information, including
financial information, contained in this prospectus or incorporated or deemed
to be incorporated by reference into this prospectus by reference should be
read in conjunction with documents filed with the SEC by us.
Documents incorporated by reference are available from us without
charge, excluding exhibits unless we have specifically incorporated by
reference an exhibit into this prospectus. To obtain timely delivery of this
information, you should request the information no later than five business
days before you must make your investment decision. Any person to whom a
prospectus is delivered may obtain documents incorporated by reference into
this prospectus at no cost, by requesting them on our website, www.cumulus.com,
in writing, or by telephone from us at the following address:
Cumulus Media Inc.
3535 Piedmont Road
Building 14, Fourteenth Floor
Atlanta, GA 30305
Telephone:(404) 949-0700
Attention: Daniel O'Donnell, Vice President, Finance
2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
In various places in this prospectus and the documents we incorporate
by reference, we use statements that constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements relate to our future plans, objectives, expectations and
intentions. Although we believe that, in making any of these statements, our
expectations are based on reasonable assumptions, these statements may be
influenced by factors that could cause actual outcomes and results to be
materially different from those projected. When used in this document, words
such as "anticipates," "believes," "expects," "intends," and similar
expressions, as they relate to us or our management, are intended to identify
these forward-looking statements. These forward-looking statements are subject
to numerous risks and uncertainties, including those referred to under "Risk
Factors" and as otherwise described in our periodic filings with the SEC.
Important facts that could cause actual results to differ materially
from those in forward-looking statements, certain of which are beyond our
control, include:
- 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;
- the popularity of radio as a broadcasting and advertising
medium;
- our capital expenditure requirements;
- legislative or regulatory requirements;
- risks and uncertainties relating to our leverage;
- interest rates;
- consummation and integration of pending or future
acquisitions;
- access to capital markets; and
- fluctuations in exchange rates and currency values.
Our actual results, performance or achievements could differ
materially from those expressed in, or implied by, the forward-looking
statements. Accordingly, we cannot be certain that any of the events
anticipated by the forward-looking statements will occur or, if any of them do
occur, what impact they will have on us. We assume no obligation to update any
forward-looking statements as a result of new information or future events or
developments, except as required under Federal securities laws. We caution you
not to place undue reliance on any forward-looking statements, which speak only
as of the date of this prospectus or, in any document we incorporate by
reference, the date of that document.
3
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
We use the term local marketing agreement, or LMA, in various places
in this prospectus and in documents incorporated by reference. A typical LMA is
an agreement under which a Federal Communications Commission, or FCC, licensee
of a radio station makes available, for a fee, air time on its station to
another party. The other party provides programming to be broadcast during this
air time and collects revenues from advertising it sells for broadcast during
the programming. In addition to entering into LMAs, from time to time we enter
into management or consulting agreements that provide us with the ability, as
contractually specified, to assist current owners in the management of radio
station assets that we have contractually agreed to purchase, subject to FCC
approval. In those arrangements, we generally receive a contractually specified
management fee or consulting fee in exchange for the services provided.
Unless otherwise indicated:
- we obtained total industry listener and revenue levels from
the Radio Advertising Bureau;
- we derived all audience share data and audience rankings,
including ranking by population, except where otherwise
stated to the contrary, from surveys of people ages 12 and
over, listening Monday through Sunday, 6 a.m. to 12 midnight,
based on the Fall 2001 Arbitron Market Report, pertaining to
each market; and
- we derived 2001 Cumulus market revenue rank from BIAfn's
Media Access Pro (2002) produced by BIA Financial Network,
Inc.
The terms "broadcast cash flow" and "EBITDA" are used in various
places in this prospectus and in documents incorporated by reference.
Broadcast cash flow consists of operating income (loss) before
depreciation, amortization, LMA fees, corporate general and administrative
expenses, non-cash stock compensation expense, and restructuring and impairment
charges.
EBITDA consists of operating income (loss) before depreciation,
amortization, LMA fees, non-cash stock compensation expense, and restructuring
and impairment charges.
Broadcast cash flow and EBITDA, as we define the terms, may not be
comparable to similarly titled measures employed by other companies. Although
broadcast cash flow and EBITDA are not measures of performance calculated in
accordance with accounting principles generally accepted in the United States,
or GAAP, we believe that they are useful to an investor in evaluating an
investment in our common stock because they are measures widely used in the
broadcast industry to evaluate a radio company's operating performance.
However, broadcast cash flow and EBITDA should not be considered in isolation
or as substitutes for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP, or
as measures of liquidity or profitability.
4
SUMMARY
This Summary highlights basic information about Cumulus, but may not
contain all of the information that you should consider before investing in our
Class A Common Stock. You should carefully read the entire prospectus and the
documents that we incorporate by reference before making an investment
decision.
OUR BUSINESS
We own and operate FM and AM radio station clusters serving mid-size
markets throughout the United States. We are the second largest radio
broadcasting company in the United States based on the number of stations owned
or operated. According to the Fall 2001 Arbitron Market Report, we have
assembled market-leading groups or clusters of radio stations which rank first
or second in terms of revenue share or audience share in substantially all of
our markets. As of March 31, 2002, we owned and operated 232 radio stations in
51 mid-sized U.S. media markets. In addition, we owned and operated a
multi-market network of five radio stations in the English-speaking Caribbean.
Under our LMAs, we provided sales and marketing services for 11 radio stations
in four U.S. markets in exchange for a management or consulting fee, pending
FCC approval of our acquisitions of these stations.
Relative to the 50 largest markets in the United States, we believe
that the mid-size markets represent attractive operating environments and
generally are characterized by:
- a greater use of radio advertising, as evidenced by the
greater percentage of total media revenues captured by radio
than the national average;
- rising advertising revenues, as the larger national and
regional retailers expand into these markets;
- small independent operators, many of whom lack the capital to
produce high-quality locally originated programming or to
employ more sophisticated research, marketing, management and
sales techniques; and
- lower overall susceptibility to economic downturns than
larger markets.
We believe that the attractive operating characteristics of mid-size
markets, together with the relaxation of radio station ownership limits under
the Telecom Act and the FCC's rules, create significant opportunities for
growth from the formation of groups of radio stations within these markets. We
believe that mid-size radio markets provide an excellent opportunity to acquire
attractive properties at favorable purchase prices due to the size and
fragmented nature of ownership in these markets and due to the greater
attention historically given to the larger markets by radio station acquirers.
According to the FCC's records, as of September 30, 2001, there were
approximately 8,285 FM and 4,727 AM stations in the United States.
To maximize the advertising revenue and broadcast cash flow of our
stations, we seek to enhance the quality of radio programs for listeners and
the attractiveness of our radio stations to advertisers in a given market. We
also seek to increase the amount of locally originated programming content that
airs on each station. Within each market, our stations are diversified in terms
of format, target audience and geographic location, enabling us to attract
larger and broader listener audiences and thereby a wider range of advertisers.
This diversification, coupled with our competitive advertising pricing, also
has provided us with the ability to compete successfully for advertising
revenue against other radio, print and television media competitors.
We believe that we are in a position to generate revenue growth,
increase audience and revenue shares within these markets and, by capitalizing
on economies of scale and by competing against other media for incremental
advertising revenue, increase our broadcast cash flow growth rates and margins
to those levels found in large markets. Many of our markets are still in the
development stage with the potential for substantial growth as we implement our
operating strategy.
We are an Illinois corporation with our principal executive offices
located at 3535 Piedmont Road, Building 14, Fourteenth Floor, Atlanta, Georgia
30305. Our homepage is located at www.cumulus.com. The information included on
our homepage is not part of this prospectus. Our telephone number is (404)
949-0700.
5
OUR STRATEGY
We are focused on generating internal growth through improvement in
broadcast cash flows for the portfolio of stations we operate, while enhancing
our station portfolio and our business as a whole, through the acquisition of
individual stations or clusters that satisfy our acquisition criteria.
Operating Strategy
Our operating strategy has the following principal components:
- develop each station in our portfolio as a unique enterprise,
marketed as an individual, local brand with its own identity,
programming content, programming personnel, inventory of time
slots and sales force;
- use audience research and music testing to refine each
station's programming content to match the preferences of the
station's target demographic audience, in order to enrich our
listeners' experiences by increasing both the quality and
quantity of local programming;
- position station clusters to compete with print and
television advertising by combining favorable advertising
pricing with diverse station formats within each market to
draw a larger and broader listening audience to attract a
wider range of advertisers;
- achieve cost efficiencies associated with common
infrastructure and personnel and increase revenue by offering
regional coverage of key demographic groups that were
previously unavailable to national and regional advertisers;
and
- employ Internet-based management information systems that
enable us to monitor daily sales performance by station and
by market, compared to their respective budgets, to quickly
identify any under-performing stations, determine the
explanation for the under-performance and take corrective
action quickly.
Acquisition Strategy
Our acquisition strategy has the following principal components:
- assemble leading station clusters in the top 50 to 150 radio
markets by taking advantage of the size and fragmented nature
of ownership in these markets;
- acquire leading stations in terms of signal coverage, revenue
or audience share and acquire under-performing stations where
there is significant potential to apply our management
expertise to improve financial and operating performance; and
- reconfigure our existing stations, or acquire new stations,
located near large markets, that based on an engineering
analysis of signal specifications and the likelihood of
receiving FCC approval, can be redirected, or "moved-in," to
those larger markets.
RECENT DEVELOPMENTS
On May 28, 2002, we announced that we had entered into a definitive
agreement with U.S. Broadcasting Limited Partnership to acquire the
broadcasting and related assets of eight radio stations serving the Macon,
Georgia market (market rank 152), for an aggregate purchase price of
approximately $35.5 million. We expect the closing of this transaction, which
is conditioned on the receipt of all necessary regulatory approvals, to occur
prior to the end of 2002.
6
On May 22, 2002, we announced the completion of an underwritten public
offering of 11,500,000 shares of our Class A Common Stock. Of those shares,
10,549,448 were offered by us and 950,552 were offered by two of our
shareholders. We did not receive any proceeds from the sale of shares by those
shareholders. We raised approximately $199.2 million in aggregate net proceeds,
which we intend to use to fund pending acquisitions and for general corporate
purposes, which may include repayment of indebtedness or to fund potential
future acquisitions.
On May 7, 2002, we announced our operating results for the first
quarter ended March 31, 2002. We had first quarter net revenues of $44.9
million, broadcast cash flow of $11.5 million and EBITDA of $8.0 million. On a
pro forma basis giving effect to all acquisitions and dispositions entered into
or consummated during the quarter, including the acquisitions of Aurora
Communications, LLC and of the broadcasting operations of DBBC, L.L.C.
described below, we had first quarter net revenues of $54.4 million, broadcast
cash flow of $15.3 million and EBITDA of $11.7 million.
On May 7, 2002, we also announced that we had entered into a
definitive agreement with Wilks Broadcasting, LLC and its subsidiary, Wilks
License Co., LLC, to acquire five radio stations serving the Saginaw, Michigan
market (market rank 129), for a purchase price of approximately $55.6 million
in cash. We expect the closing of this transaction, which is conditioned on the
receipt of all necessary regulatory approvals, to occur prior to the end of
2002.
On March 28, 2002, we announced the completion of the acquisitions of
Aurora Communications, LLC and of the broadcasting operations of DBBC, L.L.C.
These properties represented opportunities to acquire premiere portfolios of
radio stations in very attractive mid-size markets. Aurora Communications owned
and operated 18 radio stations in five markets in suburban New York and
Connecticut, including Westchester County, New York (market rank 59),
Bridgeport, Connecticut (market rank 110), Newburgh-Middletown, New York
(market rank 143), Poughkeepsie, New York (market rank 160), and Danbury,
Connecticut (market rank 194). DBBC's broadcasting operations consisted of
three radio stations in Nashville, Tennessee (market rank 44). Based on the
closing sale price of our Class A Common Stock on March 27, 2002 of $18.42, the
transactions were valued at approximately $294 million and $119 million,
respectively.
Concurrently with the completion of the Aurora Communications and DBBC
acquisitions, we entered into a new $400 million credit facility. The new
facility, which replaced our outstanding credit facility, is comprised of an
undrawn $112.5 million revolving commitment, a seven-year, $112.5 million term
loan and an eight-year, $175.0 million term loan. The proceeds of the term
loans, which were funded on March 28, 2002, were primarily used to repay
amounts outstanding under our old credit facility and to fund the cash portions
of the purchase price for the acquisitions of Aurora Communications and of the
broadcasting operations of DBBC.
On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which eliminates the annual amortization of goodwill and
certain intangible assets with indefinite lives, such as FCC broadcast licenses.
SFAS No. 142 also requires us to evaluate for impairment our goodwill and other
intangible assets with indefinite lives. As a result, during the quarter ended
March 31, 2002, we wrote off the recorded amounts of our FCC broadcast licenses
by $41.7 million, net of taxes. Also in connection with the elimination of
amortization of the cost of our broadcast licenses for financial reporting
purposes upon adoption of SFAS No. 142, we determined it was necessary to
establish a valuation allowance against our deferred tax assets and recorded a
$57.9 million non-cash charge to income tax expense during the three months
ended March 31, 2002. We recorded additional deferred tax expense of $4.5
million to establish a valuation allowance against net operating loss
carry-forwards generated during the quarter ended March 31, 2002, resulting from
amortization of goodwill and broadcast licenses that is deductible for tax
purposes but is no longer amortized in the financial statements. Also, as
required by the transition provisions of SFAS No. 142, we are required to assign
goodwill to reporting units and perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. We have up to
six months from January 1, 2002 to determine the fair value of each reporting
unit and compare it to the carrying amount of the reporting unit to evaluate
whether an impairment of goodwill exists. There can be no assurance that there
will not be further adjustments for impairment in future periods.
7
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table is a summary of our consolidated financial data for
the periods presented. You should read the following data in conjunction with
our consolidated financial statements and related notes contained in our Annual
Report on Form 10-K for the year ended December 31, 2001, as well as our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, incorporated
by reference into this prospectus. Historical results are not necessarily
indicative of results to be expected for any future period. The financial data
below does not give effect to the public offering of 11,500,000 shares of Class
A Common Stock that was completed on May 22, 2002, and receipt of our net
proceeds from that offering.
The unaudited pro forma summary consolidated financial data for 2001
below describes the pro forma effects of our acquisitions of Aurora
Communications and the broadcasting operations of DBBC on our balance sheet as
of December 31, 2001 and our statement of operations for the year ended December
31, 2001. The unaudited pro forma summary consolidated financial data reflects
the use of the purchase method of accounting for all acquisitions. The unaudited
pro forma summary consolidated balance sheet information reflects adjustments as
if the Aurora Communications and DBBC acquisitions and the refinancing of our
credit facility had occurred on December 31, 2001. The unaudited pro forma
summary consolidated operating information reflects adjustments as if those
acquisitions had occurred on January 1, 2001, and includes the pro forma effects
of Aurora Communications' acquisition of nine related radio stations in May 2001
as if those acquisitions had occurred on January 1, 2001. We expect to incur
integration expenses as well as potential operating efficiencies as a result of
the acquisitions of Aurora Communications and the broadcasting operations of
DBBC. The unaudited pro forma summary consolidated financial data does not
reflect any of these potential expenses and operating efficiencies that may
occur due to our integration of Aurora Communications and DBBC's operations.
The financial effects of the transactions presented in the unaudited
pro forma summary consolidated financial data are not necessarily indicative of
either the financial position or results of operations that would have been
obtained had the acquisitions actually occurred on the dates set forth above,
nor are they necessarily indicative of the results of future operations.
8
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------- THREE MONTHS
PRO FORMA ENDED
1999 2000 2001 2001 MARCH 31, 2002
--------- --------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Net revenues $ 180,019 $ 225,911 $ 201,328 $ 243,699 $ 44,948
Station operating expenses excluding 133,328 191,336 141,598 164,706 33,439
depreciation, amortization and LMA fees
Depreciation and amortization (1) 32,564 44,003 50,585 57,374 4,173
LMA fees 4,165 4,825 2,815 2,815 85
Corporate general and administrative 8,204 18,232 15,180 20,179 3,548
expenses (excluding non-cash stock
compensation)
Restructuring and impairment charges -- 16,226 6,781 6,781 --
Non-cash stock compensation -- -- -- -- 162
--------- --------- --------- --------- ---------
Operating income (loss) 1,758 (48,711) (15,631) (8,156) 3,541
Net interest expense 22,877 26,055 28,716 36,691 6,775
Loss on early extinguishment
of debt -- -- -- -- (6,291)
Other (expense) income, net 627 73,280 10,300 10,287 (1,194)
Income tax (expense) benefit (2) 6,870 (812) 3,494 3,294 (62,404)
Cumulative effect of a change in
accounting principle, net of tax (3) -- -- -- -- (41,700)
--------- --------- --------- --------- ---------
Net loss $ (13,622) $ (2,298) $ (30,553) $ (31,266) $(114,823)
========= ========= ========= ========= =========
Preferred stock dividends, deemed
dividends, accretion of discount and
redemption premium $ 23,790 $ 14,875 $ 17,743 $ 17,743 $ 4,623
--------- --------- --------- --------- ---------
Net loss attributable to common
stockholders $ (37,412) $ (17,173) $ (48,296) $ (49,009) $(119,446)
========= ========= ========= ========= =========
Basic and diluted loss per common share $ (1.50) $ (0.49) $ (1.37) $ (0.96) $ (3.28)
========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
Broadcast cash flow(4) $ 46,691 $ 34,575 $ 59,730 $ 78,993 $ 11,509
EBITDA(5) 38,487 16,343 44,550 58,814 7,961
Net cash (used in) provided by
operating activities (13,644) (14,565) 11,440 7,153
Net cash used in investing activities (192,105) (190,274) (48,164) (121,136)
Net cash (used in) provided by
financing activities 400,445 (3,763) 31,053 123,999
9
AS OF DECEMBER 31, 2001
------------------------------
ACTUAL PRO FORMA AS OF MARCH 31, 2002
-------- ---------- --------------------
(UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
Total assets $965,317 $1,365,121 $1,299,700
Long-term debt (including current
portion) 320,018 447,705 449,999
Preferred stock subject to mandatory
redemption 134,489 134,489 134,489
Stockholders' equity 423,884 632,970 515,964
---------
(1) Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets. Under the provisions of SFAS No. 142, FCC broadcast
licenses and goodwill are no longer amortized but are reviewed for
impairment annually, or more frequently if impairment indicators arise.
Prior to January 1, 2002, goodwill and broadcast licenses were
amortized using the straight-line method over an estimated life
of 25 years.
(2) In connection with the elimination of amortization of our FCC broadcast
licenses, the reversal of our deferred tax liabilities relating to
those intangible assets is no longer assured within our net operating
loss carry-forward periods. As a result, we determined it was necessary
to establish a valuation allowance against our deferred tax assets upon
adoption of SFAS No. 142. Income tax expense for the three months ended
March 31, 2002 includes a $57.9 million non-cash charge to establish
this valuation allowance on January 1, 2002.
(3) We recorded a $41.7 million impairment write-down, net of taxes, as the
cumulative effect of a change in accounting principle upon adoption of
SFAS No. 142, to reduce the carrying amounts of our FCC broadcast
licenses to fair value.
(4) Broadcast cash flow consists of operating income (loss) before
depreciation, amortization, LMA fees, corporate general and
administrative expenses, non-cash stock compensation expense and
restructuring and impairment charges. Although broadcast cash flow is
not a measure of performance calculated in accordance with GAAP, we
believe that it is useful to an investor in evaluating an investment
in our common stock because it is a measure widely used in the
broadcasting industry to evaluate a radio company's operating
performance. Nevertheless, it should not be considered in isolation or
as a substitute for net income, operating income (loss), cash flows
from operating activities or any other measure for determining our
operating performance or liquidity that is calculated in accordance
with GAAP. Broadcast cash flow, as we define it, may not be comparable
to similarly titled measures employed by other companies.
(5) EBITDA consists of operating income (loss) before depreciation,
amortization, LMA fees, non-cash stock compensation expense and
restructuring and impairment charges. Although EBITDA is not a measure
of performance calculated in accordance with GAAP, we believe that it
is useful to an investor in evaluating an investment in our common
stock because it is a measure widely used in the broadcasting industry
to evaluate a radio company's operating performance. Nevertheless, it
should not be considered in isolation or as a substitute for net
income, operating income (loss), cash flows from operating activities
or any other measure for determining our operating performance or
liquidity that is calculated in accordance with GAAP. As EBITDA is not
a measure calculated in accordance with GAAP, this measure, as we
define it, may not be comparable to similarly titled measures employed
by other companies.
10
RISK FACTORS
Investing in our Class A Common Stock involves a high degree of risk.
You should carefully consider the risks described below, as well as other
information included or incorporated by reference in this prospectus, before
making an investment decision. The risks described below are not the only ones
facing our company. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business operations. Our
business, results of operations or financial condition could be materially and
adversely affected by any of these risks. The trading price of our Class A
Common Stock could decline due to any of these risks, and you may lose all or
part of your investment.
RISKS RELATED TO OUR BUSINESS
WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT.
Radio broadcasting is a highly competitive business. Our stations
compete for listeners and advertising revenues directly with other radio
stations within their respective markets, as well as with other media, such as
newspapers, magazines, cable and broadcast television, outdoor advertising, the
Internet and direct mail. In addition, many of our stations compete with groups
of two or more radio stations operated by a single operator in the same market.
Audience ratings and market shares fluctuate, and any adverse change
in a particular market could have a material adverse effect on the revenue of
stations located in that market. While we already compete with other stations
with comparable programming formats in many of our markets, any one of our
stations could suffer a reduction in ratings or revenue and could require
increased promotion and other expenses, and, consequently, could have a lower
broadcast cash flow, if:
- another radio station in the market were to convert its
programming format to a format similar to our station or
launch aggressive promotional campaigns;
- a new station were to adopt a competitive format; or
- an existing competitor were to strengthen its operations.
The Telecom Act allows for the consolidation of ownership of radio
broadcasting stations in the markets in which we operate or may operate in the
future. Some competing consolidated owners may be larger and have substantially
more financial and other resources than we do. In addition, increased
consolidation in our target markets may result in greater competition for
acquisition properties and a corresponding increase in purchase prices paid for
these properties by us.
WE MUST RESPOND TO THE RAPID CHANGES IN TECHNOLOGY, SERVICES AND STANDARDS THAT
CHARACTERIZE OUR INDUSTRY IN ORDER TO REMAIN COMPETITIVE.
The radio broadcasting industry is subject to rapid technological
change, evolving industry standards and the emergence of competition from new
media technologies and services. We cannot assure you that we will have the
resources to acquire new technologies or to introduce new services that could
compete with these new technologies. Several new media technologies and
services are being developed or introduced, including:
- satellite-delivered digital audio radio service, which has
resulted in the introduction of new subscriber-based
satellite radio services with numerous niche formats;
- audio programming by cable systems, direct-broadcast
satellite systems, personal communications systems, Internet
content providers and other digital audio broadcast formats;
- in-band on-channel digital radio, which provides
multi-channel, multi-format digital radio services in the
same bandwidth currently occupied by traditional AM and FM
radio services; and
- low-power FM radio, which could result in additional FM radio
broadcast outlets.
11
We cannot predict the effect, if any, that competition arising from
new technologies or regulatory change may have on the radio broadcasting
industry or on our financial condition and results of operations.
WE FACE MANY UNPREDICTABLE BUSINESS RISKS THAT COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR FUTURE OPERATIONS.
Our future operations are subject to many business risks, including
certain risks that specifically influence the radio broadcasting industry, that
could have a material adverse effect on our business. These include:
- changing economic conditions, both generally and relative to
the radio broadcasting industry in particular;
- shifts in population, listenership, demographics or audience
tastes;
- the level of competition from existing or future technologies
for advertising revenues, including, but not limited to,
other radio stations, satellite radio, television stations,
newspapers, the Internet, and other entertainment and
communications media; and
- changes in governmental regulations and policies and actions
of federal regulatory bodies, including the U.S. Department
of Justice, the Federal Trade Commission and the FCC.
Given the inherent unpredictability of these variables, we cannot with
any degree of certainty predict what effect, if any, these risks will have on
our future operations.
THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY.
We intend to continue to grow through internal expansion and by
acquiring radio station clusters and individual radio stations primarily in
mid-size markets. We cannot predict whether we will be successful in pursuing
these acquisitions or what the consequences of these acquisitions would be.
Consummation of our pending acquisitions and any acquisitions in the future are
subject to various conditions, such as compliance with FCC and antitrust
regulatory requirements. The FCC requirements include:
- approval of license assignments and transfers;
- limits on the number of stations a broadcaster may own in a
given local market; and
- other rules or policies, such as the ownership attribution
rules, that could limit our ability to acquire stations in
certain markets where one or more of our shareholders has
other media interests.
The antitrust regulatory requirements include:
- filing with the U.S. Department of Justice and the Federal
Trade Commission under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, referred to as the HSR Act, where
applicable;
- expiration or termination of the waiting period under the HSR
Act; and
- possible review by the U.S. Department of Justice or the
Federal Trade Commission of antitrust issues under the HSR
Act or otherwise.
We cannot be certain that any of these conditions will be satisfied.
In addition, the FCC has asserted the authority to review levels of local radio
market concentration as part of its acquisition approval process, even where
proposed assignments would comply with the numerical limits on local radio
station ownership in the FCC's rules and the Communications Act of 1934,
referred to as the Communications Act.
Our acquisition strategy involves numerous other risks, including
risks associated with:
- identifying acquisition candidates and negotiating definitive
purchase agreements on satisfactory terms;
12
- integrating operations and systems and managing a large and
geographically diverse group of stations;
- diverting management's attention from other business
concerns;
- potentially losing key employees at acquired stations; and
- the diminishing number of properties available for sale in
mid-size markets.
We cannot be certain that we will be able to successfully integrate
our acquisitions or manage the resulting business effectively, or that any
acquisition will achieve the benefits that we anticipate. In addition, we are
not certain that we will be able to acquire properties at valuations as
favorable as those of previous acquisitions. Depending upon the nature, size
and timing of potential future acquisitions, we may be required to raise
additional financing in order to consummate additional acquisitions. We cannot
assure you that our debt agreements will permit the necessary additional
financing or that additional financing will be available to us or, if
available, that financing would be on terms acceptable to our management.
BECAUSE A SIGNIFICANT PORTION OF OUR TOTAL ASSETS IS REPRESENTED BY INTANGIBLE
ASSETS AND GOODWILL THAT IS SUBJECT TO MANDATORY, ANNUAL IMPAIRMENT
EVALUATIONS, WE HAVE WRITTEN OFF, AND COULD IN THE FUTURE BE REQUIRED TO WRITE
OFF, A SIGNIFICANT PORTION OF THESE ASSETS, WHICH MAY ADVERSELY AFFECT OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We have acquired businesses that have been accounted for using the
purchase method of accounting. A portion of the purchase prices for these
businesses was allocated to identifiable tangible and intangible assets,
principally FCC broadcast licenses, based on estimated fair values at the dates
of the acquisitions. Any excess purchase price was allocated to goodwill. Prior
to January 1, 2002, the cost of FCC broadcast licenses and goodwill was
amortized using the straight-line method over an estimated useful life of 25
years. Effective January 1, 2002, upon the adoption of SFAS No. 142, Goodwill
and Other Intangible Assets, FCC broadcast licenses and goodwill are no longer
amortized but are reviewed for impairment annually, or more frequently if
impairment indicators arise. At December 31, 2001, we had recorded, as
unamortized values, $632.2 million of FCC broadcast licenses and $156.9 million
of goodwill. As required by the transition provisions of SFAS No. 142, we
compared the estimated fair values of our FCC broadcast licenses to the book
values by market and, as a result of the comparison, have taken a charge in the
first quarter of 2002 of $41.7 million, net of taxes. Also, as required by the
transition provisions of SFAS No. 142, we are required to assign goodwill to
reporting units and perform an assessment of whether there is an indication
that goodwill is impaired as of the date of adoption. We have up to six months
from January 1, 2002 to determine the fair value of each reporting unit and
compare it to the carrying amount of the reporting unit to evaluate whether an
impairment of goodwill exists. There can be no assurance that there will not be
further adjustments for impairment in future periods.
In connection with the elimination of amortization of the cost of our
broadcast licenses for financial reporting purposes upon adoption of SFAS No.
142, the reversal of our deferred tax liabilities relating to those intangible
assets will no longer be assured within our net operating loss carry-forward
period. As a result, we determined it was necessary to establish a valuation
allowance against our deferred tax assets and we recorded a $57.9 million
non-cash charge to income tax expense upon adoption of SFAS No. 142. We expect
to incur deferred tax expense to establish valuation allowances against net
operating losses generated in future periods.
OUR ABILITY TO GENERATE REVENUE COULD BE AFFECTED BY ECONOMIC RECESSION.
We derive substantially all of our revenue from the sale of
advertising time on our radio stations. Generally, advertising tends to decline
during economic recessions or downturns. Furthermore, because a substantial
portion of our revenue is derived from local advertisers, our ability to
generate advertising revenue in specific markets is directly affected by local
or regional economic conditions.
A continued recession, or a downturn in the U.S. economy, or in the
economy of any individual geographic market in which we own or operate
stations, could have a significant effect on our financial condition or results
of operations.
13
WE ARE DEPENDENT ON KEY PERSONNEL.
Our business is managed by a small number of key management and
operating personnel, and our loss of one or more of these individuals could
have a material adverse effect on our business. We believe that our future
success will depend in large part on our ability to attract and retain highly
skilled and qualified personnel and to expand, train and manage our employee
base. We have entered into employment agreements with some of our key
management personnel that include provisions restricting their ability to
compete with us under specified circumstances.
We also employ several on-air personalities with large loyal audiences
in their individual markets. The loss of one of these personalities could
result in a short-term loss of audience share in that particular market.
THE BROADCASTING INDUSTRY IS SUBJECT TO EXTENSIVE AND CHANGING FEDERAL
REGULATION.
The radio broadcasting industry is subject to extensive regulation by
the FCC under the Communications Act. We are required to obtain licenses from
the FCC to operate our stations. Licenses are normally granted for a term of
eight years and are renewable. Although the vast majority of FCC radio station
licenses are routinely renewed, we cannot assure you that the FCC will approve
our future renewal applications or that the renewals will not include
conditions or qualifications. The non-renewal, or renewal with substantial
conditions or modifications, of one or more of our licenses could have a
material adverse effect on us.
We must also comply with the extensive FCC regulations and policies in
the ownership and operation of our radio stations. FCC regulations limit the
number of radio stations that a licensee can own in a market, which could
restrict our ability to consummate future transactions and in certain
circumstances could require us to divest some radio stations. The FCC also
requires radio stations to comply with certain technical requirements to limit
interference between two or more radio stations. If the FCC relaxes these
technical requirements, the signals transmitted by our radio stations could be
impaired by other radio stations, which could have a material adverse effect on
us. Moreover, these FCC regulations and others may change over time and we
cannot assure you that those changes would not have a material adverse effect
on us.
WE ARE REQUIRED TO OBTAIN PRIOR FCC APPROVAL FOR EACH RADIO STATION
ACQUISITION.
The consummation of radio station acquisitions requires prior approval
of the FCC with respect to the transfer of control or assignment of the
broadcast licenses of the acquired stations. The FCC could prohibit or require
the restructuring of our future acquisitions, or could propose changes in its
existing rules that may reduce the number of stations that we would be
permitted to acquire in some markets. In addition, where acquisitions would
result in certain local radio advertising revenue concentration thresholds
being met, the FCC staff has a policy of reviewing applications for proposed
radio station acquisitions with respect to local market concentration concerns,
and specifically invites public comment on these applications. This policy may
help trigger petitions to deny and informal objections against FCC applications
for our pending acquisitions and future acquisitions, as well as FCC staff
requests for additional information. There can be no assurance that the FCC
will approve potential future acquisitions.
RISKS RELATED TO OUR INDEBTEDNESS
WE HAVE SUBSTANTIAL INDEBTEDNESS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON
US.
As of March 31, 2002, after giving effect to the completion of our
recent acquisitions of Aurora Communications and the broadcasting operations of
DBBC, the related refinancings, and to the underwritten public offering of
shares of our Class A Common Stock in May 2002, our long-term debt, including
current portion, was $450.0 million, representing approximately 60.0% of our
stockholders' equity on a pro forma basis. Our debt agreements, and the terms
of our outstanding preferred stock, have interest and principal repayment and
redemption obligations that are substantial in amount and would have a
substantial impact on our shareholders.
The level of our indebtedness could have several important
consequences to you. You should note that:
- a substantial portion of our cash flow is, and will be,
dedicated to debt service and is not, and will not be,
available for other purposes;
- our ability to obtain additional financing for working
capital, capital expenditures, acquisitions and general
corporate or other purposes may be impaired in the future;
14
- certain of our borrowings are, and will be, at variable rates
of interest, which will expose us to the risk of increased
interest rates;
- our leveraged position and the covenants contained in our
debt agreements and the terms of our outstanding preferred
stock could limit our ability to compete, expand or make
capital improvements; and
- our level of indebtedness could make us more vulnerable to
economic downturns, limit our ability to withstand
competitive pressures and reduce our flexibility in
responding to changing business and economic conditions.
OUR ABILITY TO FULFILL OUR DEBT OBLIGATIONS COULD BE ADVERSELY AFFECTED BY MANY
FACTORS.
Our ability to repay our debt obligations will depend upon our future
financial and operating performance, which, in turn, is subject to prevailing
economic conditions and financial, business, competitive, technological,
legislative and regulatory factors, many of which are beyond our control. We
cannot be certain that our operating results, cash flow and capital resources
will be sufficient to repay our debt and other obligations in the future. In
the absence of sufficient operating results and resources, we could face
substantial liquidity problems and may be required to:
- reduce or delay planned acquisitions, expansions and capital
expenditures;
- sell material assets or operations;
- obtain additional equity capital; or
- restructure our debt.
If liquidity problems require us to take any of these actions, we
cannot provide you any assurance as to: (1) the timing of any sales or the
proceeds that we could realize from these sales, (2) our ability to obtain
additional equity capital or successfully complete a restructuring of our debt,
or (3) whether these sales, additional equity capital or restructuring of debt
could be effected on terms satisfactory to us or at all.
OUR DEBT AGREEMENTS AND THE TERMS OF OUR PREFERRED STOCK IMPOSE SIGNIFICANT
RESTRICTIONS ON US.
Our debt agreements, and the terms of our outstanding preferred stock,
restrict, among other things, our ability to:
- incur additional indebtedness;
- pay dividends, make particular types of investments or make
other restricted payments;
- enter into some types of transactions with affiliates;
- merge or consolidate with any other person; or
- sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of our assets.
In addition, our debt agreements also restrict our ability to incur
liens or to sell some assets. Our credit facility also requires us to maintain
specified financial ratios and to satisfy certain financial condition tests.
Our ability to meet those financial ratios and financial condition tests can be
affected by events beyond our control, and we cannot be sure that we will
maintain those ratios or meet those tests. A breach of any of these
restrictions could result in a default under our debt agreements. Our lenders
have taken security interests in substantially all of our consolidated assets,
and we have pledged the stock of our subsidiaries to secure the debt under our
credit facility. If an event of default under our credit facility occurs, our
credit facility lenders could declare all amounts outstanding, including
accrued interest, immediately due and payable. If we could not repay those
amounts, those lenders could proceed against the collateral pledged to them to
secure that indebtedness. If our credit facility indebtedness were accelerated,
our assets may not be sufficient to repay in full that indebtedness and our
other indebtedness. Our ability to comply with the restrictions and covenants
in our debt agreements will depend upon our future performance and various
other factors, such as business, competitive,
15
technological, legislative and regulatory factors, some of which are beyond our
control. If we fail to comply with the restrictions and covenants in our
existing debt agreements, the holders of our debt could declare all amounts
owed to them immediately due and payable.
RISKS RELATED TO OUR CLASS A COMMON STOCK
THE PUBLIC MARKET FOR OUR CLASS A COMMON STOCK MAY BE VOLATILE.
We cannot assure you that the market price of our Class A Common Stock
will not decline, and the market price could be subject to wide fluctuations in
response to such factors as:
- conditions and trends in the radio broadcasting industry;
- actual or anticipated variations in our quarterly operating
results, including audience share ratings and financial
results;
- changes in financial estimates by securities analysts;
- technological innovations;
- competitive developments;
- adoption of new accounting standards affecting companies in
general or affecting companies in the radio broadcasting
industry in particular; and
- general market conditions and other factors.
Further, the stock markets, and in particular the Nasdaq National
Market, on which our Class A Common Stock is listed, have experienced extreme
price and volume fluctuations that have particularly affected the market prices
of equity securities of many technology and media companies and have often been
unrelated or disproportionate to the operating performance of such companies.
In addition, general economic, political and market conditions such as
recessions, interest rate movements or international currency fluctuations, may
adversely affect the market price of our Class A Common Stock.
WE HAVE NEVER PAID AND DO NOT EXPECT TO PAY ANY CASH DIVIDENDS ON OUR CLASS A
COMMON STOCK.
We do not anticipate declaring or paying any dividends, except for the
payment of scheduled mandatory dividends on our Series A Preferred Stock. We
have never declared or paid any cash dividends on our Class A Common Stock and
do not anticipate paying cash dividends in the foreseeable future. In addition,
our credit facility, indenture, certificate of designations governing our
Series A Preferred Stock and, if our Series A Preferred Stock is converted into
exchange debentures, our exchange debenture indenture, restrict our ability to
pay dividends on our Class A Common Stock.
CERTAIN SHAREHOLDERS CONTROL OR HAVE THE ABILITY TO EXERT SIGNIFICANT INFLUENCE
OVER THE VOTING POWER OF OUR CAPITAL STOCK.
As of May 31, 2002, and after giving effect to: (a) the exercise of a
warrant to acquire 250,000 shares of Class A Common Stock and (b) the exercise
of all of their options exercisable within 60 days of May 31, 2002, Lewis W.
Dickey, Jr., our Chairman, President, Chief Executive Officer and a director,
John W. Dickey, our Executive Vice President, together with DBBC and DBBC of
Georgia, L.L.C., two of our shareholders that are principally controlled by
Messrs. L. Dickey, J. Dickey and other members of their family, collectively
own 6,494,219 shares, or 13.2%, of our outstanding Class A Common Stock, and
1,732,732 shares, or 88.5%, of our outstanding Class C Common Stock, which
collectively represent approximately 34.5% of the outstanding voting power of
our common stock. Consequently, they have the ability to exert significant
influence over our policies and management. The interests of these shareholders
may differ from the interests of our other shareholders.
16
As of May 31, 2002, BA Capital Company, L.P., referred to as BA
Capital, and its affiliate, BancAmerica Capital Investors SBIC I, L.P.,
referred to as BACI, together own 840,250 shares, or 1.7% of our Class A Common
Stock and 10,924,335 shares, or 82.5% of our nonvoting Class B Common Stock,
which is convertible into shares of Class A Common Stock. BA Capital also holds
presently exercisable options to purchase 53,438 shares of our Class A Common
Stock, and BACI also holds a warrant to purchase 706,424 shares of our Class A
Common Stock or Class B Common Stock. Assuming that those options were
exercised for shares of Class A Common Stock and the warrant was exercised for
shares of Class A Common Stock, and giving effect to the conversion into shares
of Class A Common Stock of all shares of Class B Common Stock held by BA
Capital and BACI, BA Capital and BACI would hold approximately 18.2% of the
total voting power of our common stock. BA Capital and BACI are both affiliates
of Bank of America Corporation. Robert H. Sheridan, III, one of our directors,
is a senior vice president and managing director with an economic interest in
the general partners of both BA Capital and BACI. BA Capital has the right to
designate one member of our board and Mr. Sheridan currently serves on our
board as BA Capital's designee. As a result, BA Capital, BACI and Mr. Sheridan
have the ability to exert significant influence over our policies and
management, and their interests may differ from the interests of our other
shareholders.
FUTURE SALES OF OUR CLASS A COMMON STOCK IN THE PUBLIC MARKET COULD DEPRESS OUR
STOCK PRICE.
As of May 31, 2002, assuming the exercise of outstanding warrants to
purchase 126,909 shares of Class A Common Stock and assuming the conversion of
all shares of Class B Common Stock (including those shares of Class B Common
Stock issuable upon exercise of the warrant held by BACI) to shares of Class A
Common Stock, we would have outstanding 62,452,883 shares of Class A Common
Stock, and 644,871 shares of Class C Common Stock (which are convertible into
shares of Class A Common Stock on a one-for-one basis). In addition, there
would be outstanding options to purchase 4,635,355 shares of Class A Common
Stock and a warrant to purchase 250,000 shares of Class A Common Stock, and
outstanding options to purchase 2,657,392 shares of Class C Common Stock. Of
those outstanding shares of Class A Common Stock, 57,202,883 shares will be
freely transferable without restriction (subject to any FCC consent that might
be required) under the Securities Act of 1933, as amended, referred to as the
Securities Act, or further registration under the Securities Act, except that
shares held by our "affiliates," as that term is defined in Rule 144
promulgated under the Securities Act, may generally only be sold subject to
certain restrictions as to timing, manner and volume.
The market price of our Class A Common Stock could drop as a result of
sales of a large number of shares of Class A Common Stock in the market, or the
perception that such sales could occur.
USE OF PROCEEDS
All of the Class A Common Stock offered under this prospectus by the
Company may be issued from time to time by the Company in connection with the
Company's acquisition of other businesses, properties or securities in business
combination transactions. See "Securities Covered by This Prospectus."
SECURITIES COVERED BY THIS PROSPECTUS
This prospectus may be used by us for the offer and sale of up to
10,000,000 shares of Common Stock, from time to time in connection with the
acquisition of other businesses, properties or securities in business
combination transactions. The consideration that will be offered by us in these
acquisitions, in addition to any shares of Class A Common Stock offered under
this prospectus, may include cash, debt or other securities, or we may assume
liabilities of the business being acquired, or a combination thereof. The terms
of acquisitions are typically determined by negotiations between us and the
owners of the businesses, properties or securities to be acquired, with our
taking into account the quality of management, the past and potential earning
power and growth of the businesses, properties or securities to be acquired,
and other relevant factors. Shares of Class A Common Stock issued to the owners
of the businesses, properties or securities to be acquired by us will generally
be valued at a price reasonably related to the market value of the Class A
Common Stock or the value of the assets to be received, at the time the terms
of the
17
acquisition are agreed upon. Class A Common Stock issued under this prospectus
will be freely transferable under the Securities Act, except for securities
issued to persons who may be deemed to be an underwriter within the meaning of
Section 2(11) of the Securities Act. Class A Common Stock issued in connection
with these transactions to persons who constitute underwriters within the
meaning of Section 2(11) may not be publicly reoffered or resold by these
persons except pursuant to an effective registration statement under the
Securities Act covering such shares or, in certain circumstances, pursuant to
Rule 145(d) or any other applicable exemption under the Securities Act. If you
receive Class A Common Stock covered by this prospectus, you should seek the
advice of your own legal counsel with respect to the legal requirements of such
resales.
This prospectus has also been prepared for use by persons who may
receive from us shares of Class A Common Stock covered by the registration
statement, of which this prospectus is a part, in acquisitions and who may be
entitled to offer such shares of Class A Common Stock under circumstances
requiring the use of a prospectus (such persons being referred to under this
caption as securityholders). No securityholders will be authorized to use this
prospectus for any offer of Class A Common Stock without first obtaining our
consent. We may consent to the use of this prospectus for a limited period of
time by the securityholders and subject to limitations and conditions that may
be varied by agreement between the Company and the securityholders. Resales of
these shares of Class A Common Stock may be made on the Nasdaq National Market
or any other exchange on which our Class A Common Stock may be listed, in the
over-the-counter market or in private transactions or pursuant to underwriting
agreements. We will not receive any of the proceeds from any such sales.
Agreements with Securityholders permitting use of this prospectus may
provide that any such offering be effected in an orderly manner through
securities dealers, acting as broker or dealer, selected by us; that
securityholders enter into custody agreements with one or more banks with
respect to such shares; and that sales be made only by one or more of the
methods described in this prospectus, as appropriately supplemented or amended
when required. The securityholders may be deemed to be underwriters within the
meaning of the Securities Act.
When resales are to be made through a broker or dealer selected by the
Company, the broker or dealer may act solely as agent or may acquire such Class
A Common Stock as principal. Brokers or dealers participating in such
transactions as agent may be entitled to commissions (including negotiated
commissions to the extent permissible). Any such sales may be by block trade.
Any commission paid or concessions allowed to any broker-dealer, and, if any
broker-dealer purchases such Class A Common Stock as principal, any profits
received on the resale of such Class A Common Stock, may be deemed to be
underwriting discounts and commissions under the Securities Act.
In addition to the shares of Class A Common Stock offered hereby, we
may from time to time issue additional shares of Class A Common Stock through
public offerings or private placements. We may make such future issuances of
Class A Common Stock in connection with our acquisition of other businesses,
properties or securities in business combination transactions or for other
purposes.
VALIDITY OF SECURITIES
Jones, Day, Reavis & Pogue, Atlanta, Georgia will pass upon the
validity of the Class A Common Stock that may be offered by this prospectus.
EXPERTS
Our financial statements as of and for the fiscal years ended December
31, 2001 and 2000, incorporated by reference in this prospectus, have been
audited by KPMG LLP, independent certified public accountants, as indicated in
their report with respect thereto, which is incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing.
Our financial statements for the fiscal year ended December 31, 1999,
incorporated by reference in this prospectus, have been audited by
PricewaterhouseCoopers LLP, independent accountants, as indicated in their
report with respect thereto, and are incorporated by reference in reliance upon
such report given on the authority of said firm as experts in accounting and
auditing.
18
The financial statements of Aurora Communications at December 31, 2001
and 2000 and for the years ended December 31, 2001 and 2000, and for the period
January 20, 1999 (commencement of operations) to December 31, 1999,
incorporated by reference in this prospectus, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report incorporated by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of DBBC as of December 31, 2001 and 2000, and
for each of the three fiscal years in the period ended December 31, 2001,
incorporated by reference in this prospectus, have been audited by Kraft Bros.,
Esstman, Patton & Harrell, PLLC, independent auditors, as indicated in their
report with respect thereto, and are incorporated by reference in reliance upon
the authority of said firm as experts in accounting and auditing.
19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The general effect of the provisions in the Company's Articles of
Incorporation and Illinois law is to provide that the Company may indemnify its
directors and officers against all liabilities and expenses actually and
reasonably incurred in connection with the defense or settlement of any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) in which they have become involved
by reason of their status as corporate directors or officers, if they acted in
good faith and in the reasonable belief that their conduct was neither unlawful
(in the case of criminal proceedings) nor opposed to the best interests of the
Company. With respect to legal proceedings by or in the right of the Company in
which a director or officer is adjudged liable for improper performance of his
duty to the Company or another enterprise which such person served in a similar
capacity at the request of the Company, indemnification is limited by such
provisions of that amount which is permitted by the court.
The Company maintains officers' and directors' liability insurance
that insures against liabilities that officers and directors of the Company may
incur in such capabilities. The Company has entered into indemnification
agreements with each of its directors. Pursuant to such agreements, the Company
has agreed to indemnify each director (the "Indemnitee") to the fullest extent
permitted by Illinois law if the Indemnitee was, is or becomes a party to or
witness or other participant in any threatened, pending or completed action,
suit, proceeding or alternative dispute resolution mechanism resulting from any
event or occurrence relating to the fact that the Indemnitee is a director,
officer, employee or agent or fiduciary of the Company.
ITEM 21. EXHIBITS.
Exhibit
Number Description of Exhibits
------- -----------------------
3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the registrant's
quarterly report on Form 10-Q for the quarter ended September 30, 2001)
3.2 Certificate of Designation with respect to Series A Cumulative Exchangeable Redeemable Preferred Stock due
2009 (incorporated by reference to Exhibit 3.5 of the registrant's Registration Statement on Form S-1,
declared effective on June 26, 1998 (Commission File No. 333-48849))
3.3 Amended and Restated Certificate of Designation with respect to Series B Cumulative Preferred Stock (incorporated
by reference to Exhibit 3.3 of the registrant's quarterly report on Form 10-Q for the quarter ended
September 30, 2001)
3.4 Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.4 of the registrant's quarterly
report on Form 10-Q for the quarter ended September 30, 2001)
4.1 Form of Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the registrant's Registration
Statement on Form S-1, declared effective on June 26, 1998 (Commission File No. 333-48849))
*5.1 Opinion of Jones, Day, Reavis & Pogue regarding validity
*23.1 Consent of KPMG LLP
*23.2 Consent of PricewaterhouseCoopers LLP
*23.3 Consent of Ernst & Young LLP
*23.4 Consent of Kraft Bros., Esstman. Patten & Harrell, PLLC
*23.5 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
*24.1 Power of Attorney (included on signature page to this registration statement)
---------
* Filed with this registration statement.
II-1
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(6) To respond to requests for information that is incorporated
by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(7) To supply by means of a post-effective amendment all
information concerning a transaction, and the Company being acquired involved
therein, that was not the subject of and included in the registration statement
when it became effective.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Atlanta, in the State of Georgia, on June 21,
2002.
Cumulus Media Inc.
By: /s/ LEWIS W. DICKEY, JR.
----------------------------------------
Lewis W. Dickey, Jr.
Chairman, President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Lewis W. Dickey, Jr. and Martin R.
Gausvik, jointly and severally, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments to this registration statement, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that each of said attorneys-in-fact and agents, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ LEWIS W, DICKEY, JR. Chairman, President, Chief June 21, 2002
------------------------------------ Executive Officer and Director
Lewis W. Dickey, Jr. (Principal Executive Officer)
/s/ MARTIN R. GAUSVIK Executive Vice President, Chief June 21, 2002
------------------------------------ Financial Officer and Treasurer
Martin R. Gausvik (Principal Financial and Accounting Officer)
/s/ RALPH B. EVERETT Director June 21, 2002
------------------------------------
Ralph B. Everett
/s/ HOLCOMBE T. GREEN, JR. Director June 21, 2002
------------------------------------
Holcombe T. Green, Jr.
/s/ ERIC P. ROBISON Director June 21, 2002
------------------------------------
Eric P. Robison
/s/ ROBERT H. SHERIDAN, III Director June 21, 2002
------------------------------------
Robert H. Sheridan, III
II-3
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
------- -----------------------
3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the registrant's
quarterly report on Form 10-Q for the quarter ended September 30, 2001)
3.2 Certificate of Designation with respect to Series A Cumulative Exchangeable Redeemable Preferred Stock due
2009 (incorporated by reference to Exhibit 3.5 of the registrant's Registration Statement on Form S-1,
declared effective on June 26, 1998 (Commission File No. 333-48849))
3.3 Amended and Restated Certificate of Designation with respect to Series B Cumulative Preferred Stock (incorporated
by reference to Exhibit 3.3 of the registrant's quarterly report on Form 10-Q for the quarter ended
September 30, 2001)
3.4 Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.4 of the registrant's quarterly
report on Form 10-Q for the quarter ended September 30, 2001)
4.1 Form of Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the registrant's Registration
Statement on Form S-1, declared effective on June 26, 1998 (Commission File No. 333-48849))
*5.1 Form of opinion of Jones, Day, Reavis & Pogue regarding validity
*23.1 Consent of KPMG LLP
*23.2 Consent of PricewaterhouseCoopers LLP
*23.3 Consent of Ernst & Young LLP
*23.4 Consent of Kraft Bros., Esstman. Patten & Harrell, PLLC
*23.5 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
*24.1 Power of Attorney (included on signature page to this registration statement)
---------
* Filed with this registration statement.