10-K 1 g18012e10vk.htm FORM 10-K FORM 10-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form 10-K
 
     
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the fiscal year ended December 31, 2008
     
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the transition period from          to
 
Commission file number 00-24525
 
 
 
 
Cumulus Media Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
     
Delaware   36-4159663
(State of Incorporation)   (I.R.S. Employer Identification No.)
 
3280 Peachtree Road, N.W.
Suite 2300
Atlanta, GA 30305
(404) 949-0700
(Address, including zip code, and telephone number, including area code, of registrant’s principal offices)
 
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o
(Do not check if a smaller reporting company)                      
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 
The aggregate market value of the registrant’s outstanding voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2008, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $172.6 million, based on 43,805,696 shares outstanding and a last reported per share price of Class A Common Stock on the NASDAQ Global Select Market of $3.94 on that date. As of February 28, 2009, the registrant had outstanding 41,296,205 shares of common stock consisting of (i) 34,842,143 shares of Class A Common Stock; (ii) 5,809,191 shares of Class B Common Stock; and (iii) 644,871 shares of Class C Common Stock.
 


 

 
CUMULUS MEDIA INC.
 
ANNUAL REPORT ON FORM 10-K
For the fiscal Year Ended December 31, 2008
 
                 
Item
      Page
Number
      Number
 
        PART I        
 
1
    Business     2  
 
1A.
    Risk Factors     24  
 
1B.
    Unresolved Staff Comments     31  
 
2
    Properties     31  
 
3
    Legal Proceedings     32  
 
4
    Submission of Matters to a Vote of Security Holders     32  
 
PART II
 
5
    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     34  
 
6
    Selected Consolidated Financial Data     38  
 
7
    Management’s Discussion and Analysis of Financial Condition and Results of Operations     38  
 
7A.
    Quantitative and Qualitative Disclosures about Market Risk     54  
 
8
    Financial Statements and Supplementary Data     54  
 
9
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     54  
 
9A.
    Controls and Procedures     55  
 
9B.
    Other Information     56  
 
PART III
 
10
    Directors, Executive Officers and Corporate Governance     57  
 
11
    Executive Compensation     57  
 
12
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     57  
 
13
    Certain Relationships and Related Transactions, and Director Independence     57  
 
14
    Principal Accountant Fees and Services     57  
 
PART IV
 
15
    Exhibits and Financial Statement Schedules     57  
        Signatures     60  
 EX-10.14
 EX-23.1
 EX-23.2
 EX-31.1
 EX-31.2
 EX-32.1


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PART I
 
Item 1.   Business
 
Certain Definitions
 
In this Form 10-K the terms “Company”, “Cumulus”, “we”, “us”, and “our” refer to Cumulus Media Inc. and its consolidated subsidiaries.
 
We use the term “local marketing agreement” (“LMA”) in various places in this report. A typical LMA is an agreement under which a Federal Communications Commission (“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 the airtime and collects revenues from advertising it sells for broadcast during that programming. In addition to entering into LMAs, we will from time to time 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 contracted to purchase, subject to FCC approval. In such arrangements, we generally receive a contractually specified management fee or consulting fee in exchange for the services provided.
 
We also use the term “joint services agreement” (“JSA”) in several places in this report. A typical JSA is an agreement that authorizes one party or station to sell another station’s advertising time and retain the revenue from the sale of that airtime. A JSA typically includes a periodic payment to the station whose airtime is being sold (which may include a share of the revenue being collected from the sale of airtime).
 
Unless otherwise indicated:
 
  •  we obtained total radio industry listener and revenue levels from the Radio Advertising Bureau (the “RAB”);
 
  •  we derived historical market revenue statistics and market revenue share percentages from data published by Miller Kaplan, Arase & Co., LLP (“Miller Kaplan”), a public accounting firm that specializes in serving the broadcasting industry and BIA Financial Network, Inc. (“BIA”), a media and telecommunications advisory services firm;
 
  •  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 (“Adults 12+”), listening Monday through Sunday, 6 a.m. to 12 midnight, and based on the 2008 Arbitron Market Report referred to as Arbitron’s Market Report, pertaining to each market; and
 
  •  all dollar amounts are rounded to the nearest million, unless otherwise indicated.
 
The term “Station Operating Income,” is used in various places in this document. Station Operating income consists of operating income before depreciation and amortization, LMA fees, corporate general and administrative expenses, (including non-cash stock compensation), impairment of goodwill and intangible assets, and costs associated with the terminated transaction. Station operating income is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States (“GAAP”). Station Operating Income isolates the amount of income generated solely by our stations and assists management in evaluating the earnings potential of our station portfolio. In deriving this measure, we exclude depreciation and amortization due to the insignificant investment in tangible assets required to operate our stations and the relatively insignificant amount of intangible assets subject to amortization. We exclude LMA fees from this measure, even though it requires a cash commitment, due to the insignificance and temporary nature of such fees. Corporate expenses, despite representing an additional significant cash commitment, are excluded in an effort to present the operating performance of our stations exclusive of the corporate resources employed. We exclude terminated transaction costs due to the temporary nature of fees. We believe this is important to our investors because it highlights the gross margin generated by our station portfolio. Finally, we exclude non-cash stock compensation and impairment of goodwill and intangible assets from the measure as they do not represent cash payments for activities related to the operation of the stations.
 
We believe that Station Operating Income is the most frequently used financial measure in determining the market value of a radio station or group of stations. Our management has observed that Station Operating Income is


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commonly employed by firms that provide appraisal services to the broadcasting industry in valuing radio stations. Further, in each of the more than 140 radio station acquisitions we have completed since our inception, we have used Station Operating Income as the primary metric to evaluate and negotiate the purchase price to be paid. Given its relevance to the estimated value of a radio station, we believe, and our experience indicates, that investors consider the measure to be extremely useful in order to determine the value of our portfolio of stations. We believe that Station Operating Income is the most commonly used financial measure employed by the investment community to compare the performance of radio station operators. Finally, Station Operating Income is one of the measures that our management uses to evaluate the performance and results of our stations. Management uses the measure to assess the performance of our station managers and our Board uses it to determine the relative performance of our executive management. As a result, in disclosing Station Operating Income, we are providing our investors with an analysis of our performance that is consistent with that which is utilized by our management and Board.
 
Station Operating Income is not a recognized term under GAAP and does not purport to be an alternative to operating income from continuing operations as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, Station Operating Income is not intended to be a measure of free cash flow available for dividends, reinvestment in our business or other management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Station Operating Income should be viewed as a supplement to, and not a substitute for, results of operations presented on the basis of GAAP. Management compensates for the limitations of using station operating income by using it only to supplement our GAAP results to provide a more complete understanding of the factors and trends affecting our business than GAAP results alone. Station Operating Income has its limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
 
Company Overview
 
We own and operate FM and AM radio station clusters serving mid-sized markets throughout the United States. Through our investment in Cumulus Media Partners, LLC (“CMP”), described below, we also operate radio station clusters serving large-sized 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 Arbitron’s Market Report and data published by Miller Kaplan, we have assembled market-leading groups or clusters of radio stations that rank first or second in terms of revenue share or audience share in substantially all of our markets. As of December 31, 2008, we owned and operated 315 radio stations (including LMAs) in 59 mid-sized U.S. media markets and operated the 32 radio stations in 9 markets, including San Francisco, Dallas, Houston and Atlanta that are owned by CMP. Under an LMA, we currently provide sales and marketing services for one radio station in the U.S. in exchange for a management or consulting fee. In summary, we own and operate, directly or through our investment in CMP, a total of 347 stations in 68 U.S. markets.
 
Our Mid-Market Focus . . .
 
Historically, our strategic focus has been on mid-sized markets throughout the United States. Relative to the 50 largest markets in the United States, we believe that mid-sized 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.
 
We believe the attractive operating characteristics of mid-sized markets, together with the relaxation of radio station ownership limits under the Telecommunications Act of 1996 (the “Telecom Act”) and FCC rules, have created significant opportunities for growth from the formation of groups of radio stations within these markets. We have capitalized on these opportunities to acquire attractive properties at favorable purchase prices, taking


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advantage of the size and fragmented nature of ownership in these markets and to the greater attention historically given to the larger markets by radio station acquirers. According to the FCC’s records, as of December 31, 2008 there were 9,467 FM and 4,786 AM stations in the United States.
 
. . . and Our Large-Market Opportunities
 
Although our historical focus has been on mid-sized radio markets in the United States, we recognize that the large-sized radio markets currently provide an attractive combination of scale, stability and opportunity for future growth. According to BIA, these markets typically have per capita and household income, and expected household after-tax effective buying income growth in excess of the national average, which we believe makes radio broadcasters in these markets attractive to a broad base of radio advertisers, and allows a radio broadcaster to reduce its dependence on any one economic sector or specific advertiser. In recognition of this, in October 2005, we announced the formation of CMP, a private partnership created by Cumulus and affiliates of Bain Capital Partners LLC, The Blackstone Group and Thomas H. Lee Partners, L.P., and in May 2006 acquired the radio broadcasting business of Susquehanna Pfaltzgraff Co. (“Susquehanna”) for approximately $1.2 billion. Prior to its acquisition by CMP, Susquehanna was the largest privately owned radio broadcasting company in the United States and the 11th largest radio station operator in terms of revenue. The group of stations CMP acquired consists of 33 radio stations in 8 markets: San Francisco, Dallas, Houston, Atlanta, Cincinnati, Kansas City, Indianapolis and York, Pennsylvania.
 
Highlights during 2008
 
Economic Developments
 
The advertising environment for 2008 lagged behind 2007. The RAB has reported that trends in radio advertising revenue mirrored fluctuations in the current economic environment yielding mixed results over the last three years. In 2008, advertising revenues decreased 9.0% after decreasing 2% in 2007 and increasing only 1.0% in 2006. Additionally our political revenues increased by $5.1 million compared to 2007 due to 2008 being a presidential election year.
 
As the capital and credit market crisis worsened during the fourth quarter of 2008 and into early 2009, and in conjunction with the development of our 2009 business plan, we continue to assess the impact of recent market developments on a variety of areas, including our forecasted advertising revenues and liquidity. For example, in November 2008, Moody’s credit rating agency downgraded our debt rating from B2 to Caa. In response to these conditions, we further refined our 2009 business plan to incorporate a further reduction in our forecasted 2009 revenues and additional cost reductions to mitigate the impact of our anticipated decline in 2009 revenue.
 
While preparing our 2009 business plan, we assessed future covenant compliance under our credit agreement, including consideration of market uncertainties, as well as the incremental cost that would be required to potentially amend the terms of our credit agreement. We believe we will continue to be in compliance with all of our debt covenants through at least December 31, 2009 based upon actions we have already taken, as well as through additional paydowns of debt we will be required to make during 2009 from existing cash balances and cash flow generated from operations. Further discussion of our debt covenant compliance considerations is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
We review the recorded values of our FCC licenses and goodwill for impairment on an annual basis. We recorded total impairment charges of $498.9 million in order to reduce the carrying value of certain broadcast licenses and goodwill. The impairment loss in connection with our review of broadcasting licenses and goodwill during the fourth quarter of 2008 (see Note 7 in the accompanying notes to the financial statements), was primarily due to: (1) an increase in the discount rate used; (2) a decrease in station transaction multiples; and (3) a decrease in advertising revenue growth projections for the broadcasting industry.
 
Termination of Merger Agreement
 
On May 11, 2008, the Company, Cloud Acquisition Corporation, a Delaware corporation (“Parent”), and Cloud Merger Corporation, a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), entered into a Termination Agreement and Release (the “Termination Agreement”) to terminate the Agreement and Plan of


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Merger, dated July 23, 2007, among the Company, Parent and Merger Sub (the “Merger Agreement”), pursuant to which Merger Sub would have been merged with and into the Company, and as a result the Company would have continued as the surviving corporation and a wholly owned subsidiary of Parent.
 
Parent is owned by an investor group consisting of Lewis W. Dickey, Jr., the Company’s Chairman, President and Chief Executive Officer, his brother John W. Dickey, the Company’s Executive Vice President and Co-Chief Operating Officer, other members of their family, and a now defunct private equity fund. The members of the investor group informed the Company that, after exploring possible alternatives, they were unable to agree on terms on which they could proceed with the transaction.
 
As a result of the termination of the Merger Agreement, and in accordance with its terms, in May 2008 the Company received a termination fee in the amount of $15.0 million in cash from the investor group, and the terms of the previously announced amendment to the Company’s existing credit agreement did not take effect. Under the terms of the Termination Agreement, the parties also acknowledged and agreed that all related equity and debt financing commitments, equity rollover commitments and voting agreements shall be terminated, and further agreed to release any and all claims they may have against each other and their respective affiliates.
 
* * *
 
To maximize the advertising revenues and Station Operating Income 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 our markets and, by capitalizing on economies of scale and by competing against other media for incremental advertising revenue, increase our Station Operating Income growth rates and margins. Some of our markets are still in the development stage with the potential for substantial growth as we implement our operating strategy. In our more established markets, we believe we have several significant opportunities for growth within our current business model, including growth through maturation of recently reformatted or rebranded stations, and through investment in signal upgrades, which allow for a larger audience reach, for stations that were already strong performers.
 
We are a Delaware corporation, organized in 2002, and successor by merger to an Illinois corporation with the same name that had been organized in 1997.
 
Strategy
 
We are focused on generating internal growth through improvement in Station Operating Income 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:
 
  •  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;
 
  •  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; and


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  •  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.
 
Acquisition Strategy
 
Our acquisition strategy has the following principal components:
 
  •  assemble leading radio station clusters in mid-sized markets by taking advantage of their size and fragmented nature of ownership;
 
  •  acquire leading stations where we believe we can cost-effectively achieve a leading position 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.
 
Acquisitions and Dispositions
 
Completed Acquisitions
 
We did not complete any acquisitions during 2008.
 
Pending Acquisitions
 
As of December 31, 2008, we had pending a swap transaction pursuant to which we would exchange one of our Fort Walton Beach, Florida radio stations, WYZB-FM, for another owned by Star Broadcasting, Inc., WTKE-FM. Specifically, the purchase agreement provided for the exchange of WYZB-FM plus $1.5 million in cash for WTKE-FM. Following the filing of the assignment applications with the FCC, the applications were challenged by Qantum Communications, who has some radio stations in the market and complained to the FCC that the swap would give us an unfair competitive advantage (because the station we would acquire reaches more people than the station we would be giving up). Qantum also initiated litigation in the United States District Court for the Southern District of Florida against the current owner of WTKE-FM, and secured a court decision that would require the sale of the station to Qantum instead of us. That decision was affirmed on appeal of the United States Court of Appeals for the Eleventh Circuit. Qantum has not yet closed on the transaction, but there appears to be no likelihood that we will be able to consummate the exchange we had proposed with the seller.
 
In addition at December 31, 2008, we had pending a swap transaction pursuant to which we would exchange our Canton, Ohio Station, WRQK-FM, for eight stations owned by Clear Channel Communications, Inc. (“Clear Channel”) in Ann Arbor, Michigan (WTKA-AM, WLBY-AM, WWWW-FM, WQKL-FM) and Battle Creek, Michigan (WBFN-AM, WBCK-FM, WBCK-AM and WBXX-FM). We will dispose of two of the AM stations in Battle Creek, WBCK-AM and WBFN-AM, simultaneously with the closing of the swap transaction to comply with the FCC’s broadcast ownership limits; WBCK-AM will be placed in a trust for the sale of the station to an unrelated third party and WBFN-AM will be transferred to Family Life Broadcasting System.
 
As of December 31, 2008, we were a party to an Asset Exchange Agreement with subsidiaries of Clear Channel that would result in Clear Channel’s acquisition of five Cumulus stations in the Green Bay, Wisconsin, Market (WOGB(FM) in Kaukauna, Wisconsin, WDUZ-FM in Brillion, Wisconsin, WQLJ(FM) in Green Bay, Wisconsin, WDUZ(AM) in Green Bay Wisconsin, and WPCK(FM) in Denmark, Wisconsin) in exchange for our acquisition of two Clear Channel stations in Cincinnati, Ohio (WNNF(FM) and WOFX-FM). The transaction also contemplates that we would enter into a long-term LMA to operate the Green Bay stations after they are acquired by Clear Channel. LMAs are deemed to be “attributable” ownership interests under FCC rules and, to comply with ownership limitations under FCC rules, we will place two stations (WZNN(FM) in Allouez, Wisconsin, and WWWX(FM) in Oshkosh, Wisconsin) in a trust that will be obligated to sell the stations pursuant to parameters established in the trust agreement with us. The transaction documents also include a Put Agreement that entitles


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Clear Channel to require us to purchase the Green Bay stations in 2013 (assuming that acquisition would comply with FCC ownership rules). The requisite assignment applications have been filed with the FCC, and the transaction could close in the first or second quarter of 2009.
 
As of December 31, 2008, we had pending a swap transaction pursuant to which we would exchange WZBN-FM, Camilla, GA, for W250BC, a translator licensed for use in Atlanta, Georgia, owned by Extreme Media Group. The requisite assignment applications have been approved by initial grant by the FCC, and the transaction is expected to close in the first or second quarter of 2009.
 
Completed Dispositions
 
We did not complete any dispositions during 2008.
 
Acquisition Shelf Registration Statement
 
We have registered an aggregate of 20,000,000 shares of our Class A Common Stock, pursuant to registration statements on Form S-4, for issuance from time to time in connection with our acquisition of other businesses, properties or securities in business combination transactions utilizing a “shelf” registration process. As of February 28, 2009, we had issued 5,666,553 of the 20,000,000 shares registered in connection with various acquisitions.
 
Industry Overview
 
The primary source of revenues for radio stations is the sale of advertising time to local, regional and national spot advertisers and national network advertisers. National spot advertisers assist advertisers in placing their advertisements in a specific market. National network advertisers place advertisements on a national network show and such advertisements will air in each market where the network has an affiliate. During the past decade, local advertising revenue as a percentage of total radio advertising revenue in a given market has ranged from approximately 72% to 87% according to the RAB. The trends in radio advertising revenue mirrored fluctuations in the current economic environment, yielding mixed results over the last three years. In 2008, advertising revenues decreased 9.0%, after decreasing 2% in 2007 and increasing 1% in 2006.
 
Generally, radio is considered an efficient, cost-effective means of reaching specifically identified demographic groups. Stations are typically classified by their on-air format, such as country, rock, adult contemporary, oldies and news/talk. A station’s format and style of presentation enables it to target specific segments of listeners sharing certain demographic features. By capturing a specific share of a market’s radio listening audience with particular concentration in a targeted demographic, a station is able to market its broadcasting time to advertisers seeking to reach a specific audience. Advertisers and stations use data published by audience measuring services, such as Nielsen, to estimate how many people within particular geographical markets and demographics listen to specific stations.
 
The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting ratings are limited in part by the format of a particular station and the local competitive environment. Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year.
 
A station’s local sales staff generates the majority of its local and regional advertising sales through direct solicitations of local advertising agencies and businesses. To generate national advertising sales, a station usually will engage a firm that specializes in soliciting radio-advertising sales on a national level. National sales representatives obtain advertising principally from advertising agencies located outside the station’s market and receive commissions based on the revenue from the advertising they obtain.
 
Our stations compete for advertising revenue with other terrestrial-based radio stations in the market (including low power FM radio stations that are required to operate on a noncommercial basis) as well as other media, including newspapers, broadcast television, cable television, magazines, direct mail, coupons and outdoor advertising. In addition, the radio broadcasting industry is subject to competition from services that use new media technologies that are being developed or have already been introduced, such as the Internet and satellite-based digital radio services. Such services reach nationwide and regional audiences with multi-channel, multi-format,


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digital radio services that have a sound quality equivalent to that of compact discs. Competition among terrestrial-based radio stations has also been heightened by the introduction of terrestrial digital audio broadcasting (which is digital audio broadcasting delivered through earth-based equipment rather than satellites). The FCC currently allows terrestrial radio stations like ours to commence the use of digital technology through a “hybrid” antenna that carries both the pre-existing analog signal and the new digital signal. The FCC is conducting a proceeding that could result in a radio station’s use of two antennae: one for the analog signal and one for the digital signal.
 
We cannot predict how existing or new sources of competition will affect the revenues generated by our stations. The radio broadcasting industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, such as television broadcasting, cable television, audio tapes and compact discs. A growing population and greater availability of radios, particularly car and portable radios, have contributed to this growth. There can be no assurance, however, that the development or introduction in the future of any new media technology will not have an adverse effect on the radio broadcasting industry in general or our stations in particular.
 
Advertising Sales
 
Virtually all of our revenue is generated from the sale of local, regional and national advertising for broadcast on our radio stations. In 2008, 2007, and 2006 approximately 90% of our net broadcasting revenue was generated from the sale of local and regional advertising. Additional broadcasting revenue is generated from the sale of national advertising. The major categories of our advertisers include:
 
         
Amusement and recreation   Banking and mortgage   Furniture and home furnishings
Arts and entertainment   Food and beverage services   Healthcare services
Automotive dealers   Food and beverage stores   Telecommunications
 
Each station’s local sales staff solicits advertising either directly from the local advertiser or indirectly through an advertising agency. We employ a tiered commission structure to focus our individual sales staffs on new business development. Consistent with our operating strategy of dedicated sales forces for each of our stations, we have also increased the number of salespeople per station. We believe that we can outperform the traditional growth rates of our markets by (1) expanding our base of advertisers, (2) training newly hired sales people and, (3) providing a higher level of service to our existing customer base. This requires a larger sales staff than most of the stations employed at the time we acquired them. We support our strategy of building local direct accounts by employing personnel in each of our markets to produce custom commercials that respond to the needs of our advertisers. In addition, in-house production provides advertisers greater flexibility in changing their commercial messages with minimal lead-time.
 
Our national sales are made by Katz Communications, Inc., a firm specializing in radio advertising sales on the national level, in exchange for commission that is based on our net revenue from the advertising obtained. Regional sales, which we define as sales in regions surrounding our markets to buyers that advertise in our markets, are generally made by our local sales staff and market managers. Whereas we seek to grow our local sales through larger and more customer-focused sales staffs, we seek to grow our national and regional sales by offering to key national and regional advertisers groups of stations within specific markets and regions that make our stations more attractive. Many of these large accounts have previously been reluctant to advertise in these markets because of the logistics involved in buying advertising from individual stations. Certain of our stations had no national representation before we acquired them.
 
The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting ratings are limited in part by the format of a particular station. The optimal number of advertisements available for sale depends on the programming format of a particular station. Each of our stations has a general target level of on-air inventory available for advertising. This target level of inventory for sale may vary at different times of the day but tends to remain stable over time. Our stations strive to maximize revenue by managing their on-air inventory of advertising time and adjusting prices up or down based on supply and demand. We seek to broaden our base of advertisers in each of our markets by providing a wide array of audience demographic segments across our cluster of stations, thereby providing each of our potential advertisers with an effective means of reaching a targeted demographic group. Our selling and pricing activity is based on demand for our radio stations’ on-air inventory and,


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in general, we respond to this demand by varying prices rather than by varying our target inventory level for a particular station. Most changes in revenue are explained by some combination of demand-driven pricing changes and changes in inventory utilization rather than by changes in the available inventory. Advertising rates charged by radio stations, which are generally highest during morning and afternoon commuting hours, are based primarily on:
 
  •  a station’s share of audiences and on the demographic groups targeted by advertisers (as measured by ratings surveys);
 
  •  the supply and demand for radio advertising time and for time targeted at particular demographic groups; and
 
  •  certain additional qualitative factors.
 
A station’s listenership is reflected in ratings surveys that estimate the number of listeners tuned into the station, and the time they spend listening. Each station’s ratings are used by its advertisers and advertising representatives to consider advertising with the station and are used by Cumulus to chart audience growth, set advertising rates and adjust programming. Currently, we utilize two station ratings services, Arbitron and Nielsen. While Arbitron has traditionally been our primary source of ratings information for its radio markets, we entered into an agreement with Nielsen on November 7, 2008 pursuant to which Nielsen would rate certain of our radio markets as coverages for such markets under the Arbitron agreement expire. Specifically, Nielsen began efforts to roll out its rating service for 50 of our radio markets in January 2009.
 
Competition
 
The radio broadcasting industry is very competitive. The success of each of our stations depends largely upon its audience ratings and its share of the overall advertising revenue within its market. Our audience ratings and advertising revenue are subject to change, and any adverse change in a particular market affecting advertising expenditures or any adverse change in the relative market share of the stations located in a particular market could have a material adverse effect on the revenue of our radio stations located in that market. There can be no assurance that any one or all of our stations will be able to maintain or increase current audience ratings or advertising revenue market share.
 
Our stations compete for listeners and advertising revenues directly with other radio stations within their respective markets, as well as with other advertising media as discussed below. Radio stations compete for listeners primarily on the basis of program content that appeals to a particular demographic group. By building a strong brand identity with a targeted listener base consisting of specific demographic groups in each of our markets, we are able to attract advertisers seeking to reach those listeners. Companies that operate radio stations must be alert to the possibility of another station changing its format to compete directly for listeners and advertisers. Another station’s decision to convert to a format similar to that of one of our radio stations in the same geographic area or to launch an aggressive promotional campaign may result in lower ratings and advertising revenue, increased promotion and other expenses and, consequently, lower our Station Operating Income.
 
Factors that are material to a radio station’s competitive position include station brand identity and loyalty, management experience, the station’s local audience rank in its market, transmitter power and location, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other radio stations and other advertising media in the market area. We attempt to improve our competitive position in each market by extensively researching and improving our stations’ programming, by implementing advertising campaigns aimed at the demographic groups for which our stations program and by managing our sales efforts to attract a larger share of advertising dollars for each station individually. However, we compete with some organizations that have substantially greater financial or other resources than we do.
 
In 1996, changes in federal law and FCC rules dramatically increased the number of radio stations a single party can own and operate in a local market. Our management continues to believe that companies that elect to take advantage of those changes by forming groups of commonly owned stations or joint arrangements such as LMAs in a particular market may, in certain circumstances, have lower operating costs and may be able to offer advertisers in those markets more attractive rates and services. Although we currently operate multiple stations in each of our markets and intend to pursue the creation of additional multiple station groups in particular markets, our


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competitors in certain markets include other parties who own and operate as many or more stations than we do. We may also compete with those other parties or broadcast groups for the purchase of additional stations in those markets or new markets. Some of those other parties and groups are owned or operated by companies that have substantially greater financial or other resources than we do.
 
A radio station’s competitive position can be enhanced by a variety of factors, including changes in the station’s format and an upgrade of the station’s authorized power. However, the competitive position of existing radio stations is protected to some extent by certain regulatory barriers to new entrants. The operation of a radio broadcast station requires an FCC license, and the number of radio stations that an entity can operate in a given market is limited. Under FCC rules that became effective in 2004, the number of radio stations that a party can own in a particular market is dictated largely by whether the station is in a defined “Arbitron Metro” (a designation designed by a private party for use in advertising matters), and, if so, the number of stations included in that Arbitron Metro. In those markets that are not in an Arbitron Metro, the number of stations a party can own in the particular market is dictated by the number of AM and FM signals that together comprise that FCC-defined radio market. For a discussion of FCC regulation (including recent changes), see “- Federal Regulation of Radio Broadcasting”.
 
Our stations also compete for advertising revenue with other media, including low power FM radio stations (that are required to operate on a noncommercial basis), newspapers, broadcast television, cable and satellite television, magazines, direct mail, coupons and outdoor advertising. In addition, the radio broadcasting industry is subject to competition from companies that use new media technologies that are being developed or have already been introduced, such as the Internet and the delivery of digital audio programming by cable television systems, by satellite radio carriers, and by terrestrial-based radio stations that broadcast digital audio signals. The FCC, authorized two companies, who have since merged to provide a digital audio programming service by satellite to nationwide audiences with a multi-channel, multi-format and with sound quality equivalent to that of compact discs. The FCC has also authorized FM terrestrial stations like ours to use two separate antennae to deliver both the current analog radio signal and a new digital signal. The FCC is also exploring the possibility of allowing AM stations to deliver both analog and digital signals.
 
We cannot predict how new sources of competition will affect our performance and income. Historically, the radio broadcasting industry has grown despite the introduction of new technologies for the delivery of entertainment and information, such as television broadcasting, cable television, audio tapes and compact discs. A growing population and greater availability of radios, particularly car and portable radios, have contributed to this growth. There can be no assurance, however, that the development or introduction of any new media technology will not have an adverse effect on the radio broadcasting industry in general or our stations in particular.
 
We cannot predict what other matters might be considered in the future by the FCC or Congress, nor can we assess in advance what impact, if any, the implementation of any of these proposals or changes might have on our business.
 
Employees
 
At December 31, 2008, we employed approximately 2,700 people. None of our employees are covered by collective bargaining agreements, and we consider our relations with our employees to be satisfactory.
 
We employ various on-air personalities with large loyal audiences in their respective markets. On occasion, we enter into employment agreements with these personalities to protect our interests in those relationships that we believe to be valuable. The loss of one or more of these personalities could result in a short-term loss of audience share, but we do not believe that any such loss would have a material adverse effect on our financial condition or results of operations, taken as a whole.
 
We generally employ one market manager for each radio market in which we own or operate stations. Each market manager is responsible for all employees of the market and for managing all aspects of the radio operations. On occasion, we enter into employment agreements with market managers to protect our interests in those relationships that we believe to be valuable. The loss of a market manager could result in a short-term loss of performance in a market, but we do not believe that any such loss would have a material adverse effect on our financial condition or results of operations, taken as a whole.


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Federal Regulation of Radio Broadcasting
 
General.  The ownership, operation and sale of radio broadcast stations, including those licensed to us, are subject to the jurisdiction of the FCC, which acts under authority derived from the Communications Act of 1934, as amended (the “Communications Act”). The Telecom Act amended the Communications Act and directed the FCC to change certain of its broadcast rules. Among its other regulatory responsibilities, the FCC issues permits and licenses to construct and operate radio stations; assigns broadcast frequencies; determines whether to approve changes in ownership or control of station licenses; regulates transmission equipment, operating power, and other technical parameters of stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; regulates the content of some forms of radio broadcast programming; and has the authority under the Communications Act to impose penalties for violations of its rules.
 
The following is a brief summary of certain provisions of the Communications Act, the Telecom Act, and related FCC rules and policies (collectively, the “Communications Laws”). This description does not purport to be comprehensive, and reference should be made to the Communications Laws, public notices, and decisions issued by the FCC for further information concerning the nature and extent of federal regulation of radio broadcast stations. Failure to observe the provisions of the Communications Laws can result in the imposition of various sanctions, including monetary forfeitures and the grant of a “short-term” (less than the maximum term) license renewal. For particularly egregious violations, the FCC may deny a station’s license renewal application, revoke a station’s license, or deny applications in which an applicant seeks to acquire additional broadcast properties.
 
License Grant and Renewal.  Radio broadcast licenses are generally granted and renewed for maximum terms of eight years. Licenses are renewed by filing an application with the FCC. Petitions to deny license renewal applications may be filed by interested parties, including members of the public. We are not currently aware of any facts that would prevent the renewal of our licenses to operate our radio stations, although there can be no assurance that each of our licenses will be renewed for a full term without adverse conditions.
 
Service Areas.  The area served by AM stations is determined by a combination of frequency, transmitter power, antenna orientation, and soil conductivity. To determine the effective service area of an AM station, the station’s power, operating frequency, antenna patterns and its day/night operating modes are required. The area served by an FM station is determined by a combination of transmitter power and antenna height, with stations divided into classes according to these technical parameters.
 
There are eight classes of FM radio stations, with each class having the right to broadcast with a certain amount of power from an antenna located at a certain height. The most powerful FM radio stations are Class C FM stations, which operate with the equivalent of 100 kilowatts of effective radiated power (“ERP”) at an antenna height of up to 1,968 feet above average terrain and which usually provide service to a large area, typically covering one or more counties within a state. There are also Class C0, C1, C2 and C3 FM radio stations which operate with progressively less power and/or antenna height. Class B FM stations operate with the equivalent of 50 kilowatts ERP at an antenna height of up to 492 feet above average terrain. Class B stations typically serve large metropolitan areas as well as their associated suburbs. There are also Class B1 stations that can operate with 25 kilowatts ERP at an antenna height of up to 328 feet above average terrain. Class A FM stations operate with the equivalent of 6 kilowatts ERP at an antenna height of up to 328 feet above average terrain, and generally serve smaller cities and towns or suburbs of larger cities.


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The following table sets forth the market, call letters, FCC license classification, antenna elevation above average terrain (for FM stations only), power and frequency of all owned and/or operated stations as of February 29, 2008, all pending station acquisitions operated under an LMA as of February 28, 2009, and all other announced pending station acquisitions as of February 28, 2009:
 
                                                 
                          Height
             
                          Above
             
                          Average
    Power
 
                  Expiration Date
  FCC
  Terrain
    (in Kilowatts)  
Market
  Stations   City of License   Frequency     of License   Class   (in feet)     Day     Night  
 
Abilene, TX
  KBCY FM   Tye, TX     99.7     August 1, 2013   C1     745       100.0       100.0  
    KCDD FM   Hamlin, TX     103.7     August 1, 2013   C     984       100.0       100.0  
    KHXS FM   Merkel, TX     102.7     August 1, 2013   C1     745       99.2       99.2  
    KTLT FM   Anson, TX     98.1     August 1, 2013   C2     305       50       50  
Albany, GA
  WALG AM   Albany, GA     1590     April 1, 2012   B     N/A       5       1  
    WEGC FM   Sasser, GA     107.7     April 1, 2012   C3     312       11.5       11.5  
    WGPC AM   Albany, GA     1450     April 1, 2012   C     N/A       1       1  
    WJAD FM   Leesburg, GA     103.5     April 1, 2012   C3     463       12.5       12.5  
    WKAK FM   Albany, GA     104.5     April 1, 2012   C1     981       100       100  
    WNUQ FM   Sylvester, GA     102.1     April 1, 2012   A     259       6       6  
    WQVE FM   Albany, GA     101.7     April 1, 2012   A     299       6       6  
    WZBN FM   Camilla, GA     105.5     April 1, 2012   A     276       6       6  
Amarillo, TX
  KARX FM   Claude, TX     95.7     August 1, 2013   C1     390       100       100  
    KPUR AM   Amarillo, TX     1440     August 1, 2013   B     N/A       5       1  
    KPUR FM   Canyon, TX     107.1     August 1, 2013   A     315       6       6  
    KQIZ FM   Amarillo, TX     93.1     August 1, 2013   C1     699       100       100  
    KZRK AM   Canyon, TX     1550     August 1, 2013   B     N/A       1       0.2  
    KZRK FM   Canyon, TX     107.9     August 1, 2013   C1     476       100       100  
Ann Arbor, MI
  WLBY AM   Saline, MI     1290     October 1, 2012   D     N/A       0.5       0.0  
    WQKL FM   Ann Arbor, MI     107.1     October 1, 2012   A     289       3.0       3.0  
    WTKA AM   Ann Arbor, MI     1050     October 1, 2012   B     N/A       10.0       0.5  
    WWWW FM   Ann Arbor, MI     102.9     October 1, 2012   B     499       49.0       42.0  
Appleton, WI
  WNAM AM   Neenah Menasha, WI     1280     December 1, 2012   B     N/A       5       5  
    WOSH AM   Oshkosh, WI     1490     December 1, 2012   C     N/A       1       1  
    WPKR FM   Omro, WI     99.5     December 1, 2012   C2     495       25       25  
    WVBO FM   Winneconne, WI     103.9     December 1, 2012   C3     328       25       25  
    WWWX FM   Oshkosh, WI     96.9     December 1, 2012   A     328       6       6  
Bangor, ME
  WBZN FM   Old Town, ME     107.3     April 1, 2014   C2     436       50       50  
    WDEA AM   Ellsworth, ME     1370     April 1, 2014   B     N/A       5       5  
    WEZQ FM   Bangor, ME     92.9     April 1, 2014   B     787       20       20  
    WQCB FM   Brewer, ME     106.5     April 1, 2014   C     1079       100       100  
    WWMJ FM   Ellsworth, ME     95.7     April 1, 2014   B     1030       11.5       11.5  
Battle Creek, MI
  WBCK FM   Battle Creek, MI     95.3     October 1, 2012   A     269       3.0       3.0  
    WBXX FM   Marshall, MI     104.9     October 1, 2012   A     328       6.0       6.0  
Beaumont, TX
  KAYD FM   Silsbee, TX     101.7     August 1, 2013   C3     503       10.5       10.5  
    KBED AM   Nederland, TX     1510     August 1, 2013   D     N/A       5       0  
    KIKR AM   Beaumont, TX     1450     August 1, 2013   C     N/A       1       1  
    KQXY FM   Beaumont, TX     94.1     August 1, 2013   C1     600       100       100  
    KSTB FM   Crystal Beach, TX     101.5     August 1, 2013   A     184       6       6  
    KTCX FM   Beaumont, TX     102.5     August 1, 2013   C2     492       50       50  
Bismarck, ND
  KACL FM   Bismarck, ND     98.7     April 1, 2013   C1     837       100       100  
    KBYZ FM   Bismarck, ND     96.5     April 1, 2013   C1     963       100       100  
    KKCT FM   Bismarck, ND     97.5     April 1, 2013   C1     837       100       100  
    KLXX AM   Bismarck, ND     1270     April 1, 2013   B     N/A       1       0.3  
    KUSB FM   Hazelton, ND     103.3     April 1, 2013   C1     965       100       100  


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                          Height
             
                          Above
             
                          Average
    Power
 
                  Expiration Date
  FCC
  Terrain
    (in Kilowatts)  
Market
  Stations   City of License   Frequency     of License   Class   (in feet)     Day     Night  
 
Blacksburg, VA
  WBRW FM   Blacksburg, VA     105.3     October 1, 2011   C3     479       12       12  
    WFNR AM   Blacksburg, VA     710     October 1, 2011   D     N/A       10       0  
    WFNR FM   Christiansburg, VA     100.7     October 1, 2011   A     886       0.8       0.8  
    WPSK FM   Pulaski, VA     107.1     October 1, 2011   C3     1207       1.8       1.8  
    WRAD AM   Radford, VA     1460     October 1, 2011   B     N/A       5       0.5  
    WWBU FM   Radford, VA     101.7     October 1, 2011   A     66       5.8       5.8  
Bridgeport, CT
  WEBE FM   Westport, CT     107.9     April 1, 2014   B     384       50       50  
    WICC AM   Bridgeport, CT     600     N/A   B     N/A       1       0.5  
Canton, OH
  WRQK FM   Canton, OH     106.9     October 1, 2012   B     341       27.5       27.5  
Cedar Rapids, IA
  KDAT FM   Cedar Rapids, IA     104.5     February 1, 2013   C1     551       100       100  
    KHAK FM   Cedar Rapids, IA     98.1     February 1, 2013   C1     459       100       100  
    KRNA FM   Iowa City, IA     94.1     February 1, 2013   C1     981       100       100  
    KRQN FM   Vinton, IA     107.1     February 1, 2013   A     371       4.7       4.7  
Cincinnati, OH
  WNNF FM   Cincinnati, OH     94.1     October 1, 2012   B     866       16.0       16.0  
    WOFX FM   Cincinnati, OH     92.5     October 1, 2012   B     866       16.0       16.0  
Columbia, MO
  KBBM FM   Jefferson City, MO     100.1     February 1, 2013   C2     600       33       33  
    KBXR FM   Columbia, MO     102.3     February 1, 2013   C3     856       3.5       3.5  
    KFRU AM   Columbia, MO     1400     February 1, 2013   C     N/A       1       1  
    KJMO FM   Linn, Mo     97.5     February 1, 2013   A     328       6       6  
    KLIK AM   Jefferson City, MO     1240     February 1, 2013   C     N/A       1       1  
    KOQL FM   Ashland, MO     106.1     February 1, 2013   C1     958       69       69  
    KPLA FM   Columbia, MO     101.5     February 1, 2013   C1     1062       41       41  
    KZJF FM   Jefferson City, MO     104.1     April 1, 2013   A     348       5.3       5.3  
Columbus-Starkville, MS
  WJWF AM   Columbus, MS     1400     June 1, 2012   C     N/A       1       1  
    WKOR AM   Starkville, MS     980     June 1, 2012   D     N/A       1       0.1  
    WKOR FM   Columbus, MS     94.9     June 1, 2012   C2     492       50       50  
    WMXU FM   Starkville, MS     106.1     June 1, 2012   C2     502       40       40  
    WNMQ FM   Columbus, MS     103.1     June 1, 2012   C2     755       22       22  
    WSMS FM   Artesia, MS     99.9     June 1, 2012   C2     505       47       47  
    WSSO AM   Starkville, MS     1230     June 1, 2012   C     N/A       1       1  
Danbury, CT
  WDBY FM   Patterson, NY     105.5     June 1, 2014   A     610       0.9       0.9  
    WINE AM   Brookfield, CT     940     April 1, 2014   D     N/A       0.7       0  
    WPUT AM   Brewster, NY     1510     June 1, 2014   D     N/A       1       0  
    WRKI FM   Brookfield, CT     95.1     April 1, 2014   B     636       29.5       29.5  
Dubuque, IA
  KLYV FM   Dubuque, IA     105.3     February 1, 2013   C2     331       50       50  
    KXGE FM   Dubuque, IA     102.3     February 1, 2013   A     308       2       2  
    WDBQ AM   Dubuque, IA     1490     February 1, 2013   C     N/A       1       1  
    WDBQ FM   Galena, IL     107.5     December 1, 2012   A     328       6       6  
    WJOD FM   Asbury, IA     103.3     February 1, 2013   C3     643       6.6       6.6  
Eugene, OR
  KEHK FM   Brownsville, OR     102.3     February 1, 2014   C1     919       100       43  
    KNRQ FM   Eugene, OR     97.9     February 1, 2014   C     1010       100       75  
    KSCR AM   Eugene, OR     1320     February 1, 2014   D     N/A       1       0  
    KUGN AM   Eugene, OR     590     February 1, 2014   B     N/A       5       5  
    KUJZ FM   Creswell, OR     95.3     February 1, 2014   C3     1207       0.6       0.6  
    KZEL FM   Eugene, OR     96.1     February 1, 2014   C     1093       100       43  
Faribault-Owatonna, MN
  KDHL AM   Faribault, MN     920     April 1, 2013   B     N/A       5       5  
    KQCL FM   Faribault, MN     95.9     April 1, 2013   A     328       3       3  
    KRFO AM   Owatonna, MN     1390     April 1, 2013   D     N/A       0.5       0.1  
    KRFO FM   Owatonna, MN     104.9     April 1, 2013   A     174       4.7       4.7  

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                          Height
             
                          Above
             
                          Average
    Power
 
                  Expiration Date
  FCC
  Terrain
    (in Kilowatts)  
Market
  Stations   City of License   Frequency     of License   Class   (in feet)     Day     Night  
 
Fayetteville, AR
  KAMO FM   Rogers, AR     94.3     June 1, 2012   C2     692       25       25  
    KFAY AM   Farmington, AR     1030     June 1, 2012   B     N/A       10       1  
    KKEG FM   Fayetteville, AR     92.1     June 1, 2012   C3     531       7.6       7.6  
    KMCK FM   Siloam Springs, AR     105.7     June 1, 2012   C1     476       100       100  
    KQSM FM   Bentonville, AR     98.3     June 1, 2012   C1     617       100       100  
    KYNF FM   Prairie Grove, AR     94.9     June 1, 2012   C2     761       21       21  
    KYNG AM   Springdale, AR     1590     June 1, 2012   D     N/A       2.5       0.1  
Fayetteville, NC
  WFNC AM   Fayetteville, NC     640     December 1, 2011   B     N/A       10       1  
    WFNC FM   Lumberton, NC     102.3     December 1, 2011   A     269       6       6  
    WFVL FM   Southern Pines, NC     106.9     December 1, 2011   C2     492       50       50  
    WQSM FM   Fayetteville, NC     98.1     December 1, 2011   C1     830       100       100  
    WRCQ FM   Dunn, NC     103.5     December 1, 2011   C2     502       48       48  
Flint, MI
  WDZZ FM   Flint, MI     92.7     October 1, 2012   A     256       3       3  
    WRSR FM   Owosso, MI     103.9     October 1, 2012   A     482       2.9       2.9  
    WWCK AM   Flint, MI     1570     October 1, 2012   D     N/A       1       0.1  
    WWCK FM   Flint, MI     105.5     October 1, 2012   B1     328       25       25  
Florence, SC
  WBZF FM   Hartsville, SC     98.5     December 1, 2011   A     328       6       6  
    WCMG FM   Latta, SC     94.3     December 1, 2011   C3     502       10.5       10.5  
    WHLZ FM   Marion, SC     100.5     December 1, 2011   C3     328       21.5       21.5  
    WHSC AM   Hartsville, SC     1450     December 1, 2011   C     N/A       1       1  
    WMXT FM   Pamplico, SC     102.1     December 1, 2011   C2     479       50       50  
    WWFN FM   Lake City, SC     100.1     December 1, 2011   A     433       3.3       3.3  
    WYMB AM   Manning, SC     920     December 1, 2011   B     N/A       2.3       1  
    WYNN AM   Florence, SC     540     December 1, 2011   D     N/A       0.3       0.2  
    WYNN FM   Florence, SC     106.3     December 1, 2011   A     328       6       6  
Fort Smith, AR
  KBBQ FM   Van Buren, AR     102.7     June 1, 2012   C2     574       17       17  
    KLSZ FM   Fort Smith, AR     100.7     June 1, 2012   C2     459       50       50  
    KOAI AM   Van Buren, AR     1060     June 1, 2012   D     N/A       0.5       0  
    KOMS FM   Poteau, OK     107.3     June 1, 2013   C     1811       100       100  
Fort Walton Beach, FL
  WFTW AM   Ft Walton Beach, FL     1260     February 1, 2012   D     N/A       2.5       0.1  
    WKSM FM   Ft Walton Beach, FL     99.5     February 1, 2012   C2     438       50       50  
    WNCV FM   Niceville, FL     100.3     April 1, 2012   A     440       3.5       3.5  
    WYZB FM   Mary Esther, FL     105.5     February 1, 2012   C3     305       25       25  
    WZNS FM   Ft Walton Beach, FL     96.5     February 1, 2012   C1     438       100       100  
Grand Junction, CO
  KBKL FM   Grand Junction, CO     107.9     April 1, 2013   C     1460       100       100  
    KEKB FM   Fruita, CO     99.9     April 1, 2013   C     1542       79       79  
    KENG FM   Parachute, CO     101.1     April 1, 2014   A     —1397       0.2       0.2  
    KEXO AM   Grand Junction, CO     1230     April 1, 2013   C     N/A       1       1  
    KKNN FM   Delta, CO     95.1     April 1, 2013   C     1424       100       100  
    KMXY FM   Grand Junction, CO     104.3     April 1, 2013   C     1460       100       100  
Green Bay, WI
  WDUZ AM   Green Bay, WI     1400     December 1, 2012   C     N/A       1       1  
    WDUZ FM   Brillion, WI     107.5     December 1, 2012   C3     879       3.6       3.6  
    WOGB FM   Kaukauna, WI     103.1     December 1, 2012   C3     879       3.6       3.6  
    WPCK FM   Denmark, WI     104.9     December 1, 2012   C3     515       10       10  
    WQLH FM   Green Bay, WI     98.5     December 1, 2012   C1     499       100       100  
    WZNN FM   Allouez, WI     106.7     December 1, 2012   C3     328       25       25  
Harrisburg, PA
  WHGB AM   Harrisburg, PA     1400     August 1, 2014   C     N/A       1       1  
    WNNK FM   Harrisburg, PA     104.1     August 1, 2014   B     699       20.5       20.5  
    WTPA FM   Mechanicsburg, PA     93.5     August 1, 2014   A     719       1.3       1.3  
    WWKL FM   Palmyra, PA     92.1     August 1, 2014   A     601       1.5       1.5  

14


Table of Contents

                                                 
                          Height
             
                          Above
             
                          Average
    Power
 
                  Expiration Date
  FCC
  Terrain
    (in Kilowatts)  
Market
  Stations   City of License   Frequency     of License   Class   (in feet)     Day     Night  
 
Huntsville, AL
  WHRP FM   Gurley, AL     94.1     April 1, 2011   A     945       0.7       0.7  
    WUMP AM   Madison, AL     730     April 1, 2012   D     N/A       1       0.1  
    WVNN AM   Athens, AL     770     April 1, 2012   B     N/A       7       0.3  
    WVNN FM   Trinity, AL     92.5     April 1, 2012   A     423       3.1       3.1  
    WWFF FM   New Market, AL     93.3     April 1, 2012   C2     914       14.5       14.5  
    WZYP FM   Athens, AL     104.3     April 1, 2012   C     1,115       100       100  
Kalamazoo, MI
  WKFR FM   Battle Creek, MI     103.3     October 1, 2012   B     482       50       50  
    WKMI AM   Kalamazoo, MI     1360     October 1, 2012   B     N/A       5       1  
    WRKR FM   Portage, MI     107.7     October 1, 2012   B     486       50       50  
Killeen-Temple, TX
  KLTD FM   Temple, TX     101.7     August 1, 2013   C3     410       16.5       16.5  
    KOOC FM   Belton, TX     106.3     August 1, 2013   C3     489       11.5       11.5  
    KSSM FM   Copperas Cove, TX     103.1     August 1, 2012   C3     558       8.6       8.6  
    KTEM AM   Temple, TX     1400     August 1, 2013   C     N/A       1       1  
    KUSJ FM   Harker Heights, TX     105.5     August 1, 2013   C2     600       33       33  
Lake Charles, LA
  KAOK AM   Lake Charles, LA     1400     June, 1 2012   C     N/A       1       1  
    KBIU FM   Lake Charles, LA     103.3     June 1, 2012   C2     479       35       35  
    KKGB FM   Sulphur, LA     101.3     June 1, 2012   C3     479       12       12  
    KQLK FM   DeRidder, LA     97.9     June 1, 2012   C2     492       50       50  
    KXZZ AM   Lake Charles, LA     1580     June 1, 2012   B     N/A       1       1  
    KYKZ FM   Lake Charles, LA     96.1     June 1, 2012   C1     479       100       100  
Lexington, KY
  WCYN-FM   Cynthiana, KY     102.3     August 1, 2012   A     400       3.4       3.4  
    WLTO FM   Nicholasville, KY     102.5     August 1, 2012   A     373       4.6       4.6  
    WLXX FM   Lexington, KY     92.9     August 1, 2012   C1     850       100       100  
    WVLK AM   Lexington, KY     590     August 1, 2012   B     N/A       5       1  
    WVLK FM   Richmond, KY     101.5     August 1, 2012   C3     541       9       9  
    WXZZ FM   Georgetown, KY     103.3     August 1, 2012   A     328       6       6  
Macon, GA
  WAYS AM   Macon, GA     1500     April 1, 2012   D     N/A       1       0  
    WDDO AM   Macon, GA     1240     April 1, 2012   C     N/A       1       1  
    WDEN FM   Macon, GA     99.1     April 1, 2012   C1     581       100       100  
    WIFN FM   Macon, GA     105.5     April 1, 2012   C3     659       6.1       6.1  
    WLZN FM   Macon, GA     92.3     April 1, 2012   A     328       3       3  
    WMAC AM   Macon, GA     940     April 1, 2012   B     N/A       50       10  
    WMGB FM   Montezuma, GA     95.1     April 1, 2012   C2     390       46       46  
    WPEZ FM   Jeffersonville, GA     93.7     April 1, 2012   C1     679       100       100  
Melbourne, FL
  WAOA FM   Melbourne, FL     107.1     February 1, 2012   C1     486       100       100  
    WHKR FM   Rockledge, FL     102.7     February 1, 2012   C2     433       50       50  
    WINT AM   Melbourne, FL     1560     February 1, 2012   D     N/A       5       0  
    WSJZ FM   Sebastian, FL     95.9     February 1, 2012   C3     289       25       25  
Mobile, AL
  WBLX FM   Mobile, AL     92.9     April 1, 2012   C     1708       100       100  
    WDLT FM   Chickasaw, AL     98.3     April 1, 2012   C2     548       40       40  
    WGOK AM   Mobile, AL     900     April 1, 2012   B     N/A       1       0.4  
    WXQW AM   Fairhope, AL     660     April 1, 2012   B     N/A       10       0.9  
    WYOK FM   Atmore, AL     104.1     April 1, 2012   C     1708       100       100  
Monroe, MI
  WTWR FM   Luna Pier, MI     98.3     October 1, 2012   A     443       3.4       3.4  

15


Table of Contents

                                                 
                          Height
             
                          Above
             
                          Average
    Power
 
                  Expiration Date
  FCC
  Terrain
    (in Kilowatts)  
Market
  Stations   City of License   Frequency     of License   Class   (in feet)     Day     Night  
 
Montgomery, AL
  WHHY FM   Montgomery, AL     101.9     April 1, 2012   C0     1096       100       100  
    WLWI AM   Montgomery, AL     1440     April 1, 2012   B     N/A       5       1  
    WLWI FM   Montgomery, AL     92.3     April 1, 2012   C     1096       100       100  
    WMSP AM   Montgomery, AL     740     April 1, 2012   B     N/A       10       0.2  
    WMXS FM   Montgomery, AL     103.3     April 1, 2012   C     1096       100       100  
    WNZZ AM   Montgomery, AL     950     April 1, 2012   D     N/A       1       0  
    WXFX FM   Prattville, AL     95.1     April 1, 2012   C2     476       50       50  
Myrtle Beach, SC
  WDAI FM   Pawley’s Island, SC     98.5     December 1, 2011   C3     666       6.1       6.1  
    WIQB AM   Conway, SC     1050     December 1, 2011   B     N/A       5       0.5  
    WJXY FM   Conway, SC     93.9     December 1, 2011   A     420       3.7       3.7  
    WLFF FM   Georgetown, SC     106.5     December 1, 2011   C2     492       50.0       50.0  
    WSEA FM   Atlantic Beach, SC     100.3     December 1, 2011   C3     476       12       12  
    WSYN FM   Surfside Beach, SC     103.1     December 1, 2011   C3     528       8.0       8.0  
    WXJY FM   Georgetown, SC     93.7     December 1, 2011   A     315       6       6  
Nashville, TN
  WNFN FM   Belle Meade, TN     106.7     August 1, 2012   A     774       1.1       1.1  
    WQQK FM   Hendersonville, TN     92.1     August 1, 2012   A     463       3       3  
    WRQQ FM   Goodlettsville, TN     97.1     August 1, 2012   C2     518       45       45  
    WSM FM   Nashville, TN     95.5     August 1, 2012   C     1280       100       100  
    WWTN FM   Manchester, TN     99.7     August 1, 2012   C0     1,296       100       100  
Odessa-Midland, TX
  KBAT FM   Monahans, TX     99.9     August 1, 2013   C1     574       100       100  
    KGEE FM   Pecos, TX     97.3     August 1, 2014   A     70       0.3       0.3  
    KMND AM   Midland, TX     1510     August 1, 2013   D     N/A       2.4       0  
    KNFM FM   Midland, TX     92.3     August 1, 2013   C     984       100       100  
    KODM FM   Odessa, TX     97.9     August 1, 2013   C1     361       100       100  
    KRIL AM   Odessa, TX     1410     August 1, 2013   B     N/A       1       0.2  
    KZBT FM   Midland, TX     93.3     August 1, 2013   C1     440       100       100  
Oxnard-Ventura, CA
  KBBY FM   Ventura, CA     95.1     December 1, 2013   B     876       12.5       12.5  
    KHAY FM   Ventura, CA     100.7     December 1, 2013   B     1211       39       39  
    KVEN AM   Ventura, CA     1450     December 1, 2013   C     N/A       1       1  
    KVYB FM   Ventura, CA     103.3     December 1, 2013   B     2969       105       105  
Pensacola, FL
  WCOA AM   Pensacola, FL     1370     February 1, 2012   B     N/A       5       5  
    WJLQ FM   Pensacola, FL     100.7     February 1, 2012   C     1708       100       100  
    WRRX FM   Gulf Breeze, FL     106.1     February 1, 2012   A     407       3.9       3.9  
Poughkeepsie, NY
  WALL AM   Middleton, NY     1340     June 1, 2014   C     N/A       1       1  
    WCZX FM   Hyde Park, NY     97.7     June 1, 2014   A     1030       0.3       0.3  
    WEOK AM   Poughkeepsie, NY     1390     June 1, 2014   D     N/A       5       0.1  
    WKNY AM   Kingston, NY     1490     June 1, 2014   C     N/A       1       1  
    WKXP FM   Kingston, NY     94.3     June 1, 2014   A     545       2.3       2.3  
    WPDA FM   Jeffersonville, NY     106.1     June 1, 2014   A     627       1.6       1.6  
    WPDH FM   Poughkeepsie, NY     101.5     June 1, 2014   B     1539       4.4       4.4  
    WRRB FM   Arlington, NY     96.9     June 1, 2014   A     1007       0.3       0.3  
    WRRV FM   Middleton, NY     92.7     June 1, 2014   A     269       6       6  
    WZAD FM   Wurtsboro, NY     97.3     June 1, 2014   A     719       0.6       0.6  
Quad Cities, IA
  KBEA FM   Muscatine, IA     99.7     February 1, 2013   C1     869       100       100  
    KBOB FM   DeWitt, IA     104.9     December 1, 2012   C3     469       12.5       12.5  
    KJOC AM   Davenport, IA     1170     February 1, 2013   B     N/A       1       1  
    KQCS FM   Bettendorf, IA     93.5     February 1, 2013   A     318       6       6  
    WXLP FM   Moline, IL     96.9     December 1, 2012   B     499       50       50  

16


Table of Contents

                                                 
                          Height
             
                          Above
             
                          Average
    Power
 
                  Expiration Date
  FCC
  Terrain
    (in Kilowatts)  
Market
  Stations   City of License   Frequency     of License   Class   (in feet)     Day     Night  
 
Rochester, MN
  KFIL AM   Preston, MN     1060     April 1, 2013   D     N/A       1       0  
    KFIL FM   Preston, MN     103.1     April 1, 2013   C3     528       3.5       3.5  
    KLCX FM   Saint Charles, MN     107.7     April 1, 2013   A     571       2       2  
    KOLM AM   Rochester, MN     1520     April 1, 2013   D     N/A       10       0.8  
    KROC AM   Rochester, MN     1340     April 1, 2013   C     N/A       1       1  
    KROC FM   Rochester, MN     106.9     April 1, 2013   C0     1109       100       100  
    KVGO FM   Spring Valley, MN     104.3     April 1, 2013   C3     512       10       10  
    KWWK FM   Rochester, MN     96.5     April 1, 2013   C2     528       43       43  
    KYBA FM   Stewartville, MN     105.3     April 1, 2013   C2     492       50       50  
Rockford, IL
  WKGL FM   Loves Park, IL     96.7     December 1, 2012   A     551       2.2       2.2  
    WROK AM   Rockford, IL     1440     December 1, 2012   B     N/A       5       0.3  
    WXXQ FM   Freeport, IL     98.5     December 1, 2012   B1     492       11       11  
    WZOK FM   Rockford, IL     97.5     December 1, 2012   B     430       50       50  
Santa Barbara, CA
  KMGQ FM   Goleta, CA     106.3     December 1, 2013   A     827       0.1       0.1  
    KRUZ FM   Santa Barbara, CA     97.5     December 1, 2013   B     2920       17.5       17.5  
Savannah, GA
  WBMQ AM   Savannah, GA     630     April 1, 2012   D     N/A       4.8       0  
    WEAS FM   Springfield, GA     93.1     April 1, 2012   C1     981       100       100  
    WIXV FM   Savannah, GA     95.5     April 1, 2012   C1     988       98       98  
    WJCL FM   Savannah, GA     96.5     April 1, 2012   C     1161       100       100  
    WJLG AM   Savannah, GA     900     April 1, 2012   D     N/A       4.4       0.2  
    WTYB FM   Tybee Island, GA     103.9     April 1, 2012   C2     344       50       50  
    WZAT FM   Savannah, GA     102.1     April 1, 2012   C     1496       100       100  
Shreveport, LA
  KMJJ FM   Shreveport, LA     99.7     June 1, 2012   C2     463       50       50  
    KQHN FM   Magnolia, AR     107.9     June 1, 2012   C1     351       100       100  
    KRMD AM   Shreveport, LA     1340     June 1, 2012   C     N/A       1       1  
    KRMD FM   Oil City, LA     101.1     June 1, 2012   C0     1134       100       100  
    KVMA FM   Shreveport, LA     102.9     June 1, 2012   C2     535       42       42  
Sioux Falls, SD
  KDEZ FM   Brandon, SD     100.1     April 1, 2013   A     170.2       2.2       2.2  
    KIKN FM   Salem, SD     100.5     April 1, 2013   C1     942       100       100  
    KKLS FM   Sioux Falls, SD     104.7     April 1, 2013   C1     981       100       100  
    KMXC FM   Sioux Falls, SD     97.3     April 1, 2013   C1     840       100       100  
    KSOO AM   Sioux Falls, SD     1140     April 1, 2013   B     N/A       10       5  
    KSOO FM   Lennox, SD     99.1     April 1, 2013   N/A     N/A       N/A       N/A  
    KXRB AM   Sioux Falls, SD     1000     April 1, 2013   D     N/A       10       0.1  
    KYBB FM   Canton, SD     102.7     April 1, 2013   C2     486       50       50  
Tallahassee, FL
  WBZE FM   Tallahassee, FL     98.9     February 1, 2012   C1     604       100       100  
    WGLF FM   Tallahassee, FL     104.1     February 1, 2012   C     1394       100       100  
    WHBT AM   Tallahassee, FL     1410     February 1, 2012   D     N/A       5       0  
    WHBX FM   Tallahassee, FL     96.1     February 1, 2012   C2     479       37       37  
    WWLD FM   Cairo, GA     102.3     April 1, 2013   C2     604       27       27  
Toledo, OH
  WKKO FM   Toledo, OH     99.9     October 1, 2012   B     500       50       50  
    WLQR AM   Toledo, OH     1470     October 1, 2012   B     N/A       1       1  
    WRQN FM   Bowling Green, OH     93.5     October 1, 2012   B1     397       7       7  
    WRWK FM   Delta, OH     106.5     October 1, 2012   A     367       4.8       4.8  
    WTOD AM   Toledo, OH     1560     October 1, 2012   D     N/A       5       0  
    WWWM FM   Sylvania, OH     105.5     October 1, 2012   A     390       4.3       4.3  
    WXKR FM   Port Clinton, OH     94.5     October 1, 2012   B     630       30       30  

17


Table of Contents

                                                 
                          Height
             
                          Above
             
                          Average
    Power
 
                  Expiration Date
  FCC
  Terrain
    (in Kilowatts)  
Market
  Stations   City of License   Frequency     of License   Class   (in feet)     Day     Night  
 
Topeka, KS
  KDVB-FM   Effingham, KS     96.9     June 1, 2013   N/A     227       0.1       0.1  
    KDVV FM   Topeka, KS     100.3     June 1, 2013   C     984       100       100  
    KMAJ AM   Topeka, KS     1440     June 1, 2013   B     N/A       5       1  
    KMAJ FM   Topeka, KS     107.7     June 1, 2013   C     1214       100       100  
    KQTP FM   St. Marys, KS     102.9     June 1, 2013   C2     598       30       30  
    KRWP FM   Stockton, MO     107.7     February 1, 2013   C3     479       11.7       11.7  
    KTOP AM   Topeka, KS     1490     June 1, 2013   C     N/A       1       1  
    KWIC FM   Topeka, KS     99.3     June 1, 2013   C3     538       6.8       6.8  
Waterloo, IA
  KCRR FM   Grundy Center, IA     97.7     February 1, 2013   C3     407       16       16  
    KKHQ FM   Oelwein, IA     92.3     February 1, 2013   C     991       100       100  
    KOEL AM   Oelwein, IA     950     February 1, 2013   B     N/A       5       0.5  
    KOEL FM   Cedar Falls, IA     98.5     February 1, 2013   C3     423       15       15  
Westchester, NY
  WFAF FM   Mount Kisco, NY     106.3     June 1, 2014   A     443       1       1  
    WFAS AM   White Plains, NY     1230     June 1, 2014   C     N/A       1       1  
    WFAS FM   White Plains, NY     103.9     June 1, 2014   A     669       0.6       0.6  
Wichita Falls, TX
  KLUR FM   Wichita Falls, TX     99.9     August 1, 2013   C1     808       100       100  
    KOLI FM   Electra, TX     94.9     August 1, 2013   C2     492       50       50  
    KQXC FM   Wichita Falls, TX     103.9     August 1, 2013   A     807       19       19  
    KYYI FM   Burkburnett, TX     104.7     August 1, 2013   C1     285       0.7       0.7  
Wilmington, NC
  WAAV AM   Leland, NC     980     December 1, 2011   B     N/A       5       5  
    WGNI FM   Wilmington, NC     102.7     December 1, 2011   C1     981       100       100  
    WKXS FM   Leland, NC     94.5     December 1, 2011   A     416       3.8       3.8  
    WMNX FM   Wilmington, NC     97.3     December 1, 2011   C1     883       100       100  
    WWQQ FM   Wilmington, NC     101.3     December 1, 2011   C2     545       40       40  
Youngstown, OH
  WBBW AM   Youngstown, OH     1240     October 1, 2012   C     N/A       1       1  
    WHOT FM   Youngstown, OH     101.1     October 1, 2012   B     705       24.5       24.5  
    WLLF FM   Mercer, PA     96.7     August 1, 2014   A     486       1.4       1.4  
    WPIC AM   Sharon, PA     790     August 1, 2014   D     N/A       1       0.1  
    WQXK FM   Salem, OH     105.1     October 1, 2012   B     446       88       88  
    WSOM AM   Salem, OH     600     October 1, 2012   D     N/A       1       0  
    WWIZ FM   Mercer, PA     103.9     August 1, 2014   A     295       6       6  
    WYFM FM   Sharon, PA     102.9     August 1, 2014   B     604       33       33  
 
Regulatory Approvals.  The Communications Laws prohibit the assignment or transfer of control of a broadcast license without the prior approval of the FCC. In determining whether to grant an application for assignment or transfer of control of a broadcast license, the Communications Act requires the FCC to find that the assignment or transfer would serve the public interest. The FCC considers a number of factors in making this determination, including (1) compliance with various rules limiting common ownership of media properties, (2) the financial and “character” qualifications of the assignee or transferee (including those parties holding an “attributable” interest in the assignee or transferee), (3) compliance with the Communications Act’s foreign ownership restrictions, and (4) compliance with other Communications Laws, including those related to programming and filing requirements.

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As discussed in greater detail below, the FCC may also review the effect of proposed assignments and transfers of broadcast licenses on economic competition and diversity. See “— Antitrust and Market Concentration Considerations.”
 
We had two assignment applications, approved by the FCC, that currently are the subject of an application for review filed with the FCC by Qantum Communications. The applications involve the exchange of two of our FM stations in the Fort Walton Beach, Florida market for two other stations in that market. Qantum Communications has some radio stations in the market and has complained to the FCC that the swaps would give us an unfair competitive advantage (because the stations we would acquire reach more people than the station we would be giving up). Despite the pendency of Qantum’s objection, we closed on one of the acquisitions (WPGG-FM). However Qantum initiated litigation in the United States District Court for the Southern District of Florida against the Seller with respect to the other station (WTKE-FM) and secured a court decision that would require the sale of the station to Qantum instead of us. That decision has been upheld on appeal to the United States Court of Appeals for the Eleventh Circuit, and, as a result, it is unlikely that the Company will be able to consummate the exchange it had proposed for WTKE(FM). We do not believe that our inability to make the exchange for WTKE(FM) will have a material adverse impact on our overall operations taken as a whole.
 
Qantum also filed an opposition to the proposal of the former licensee of WPGG-FM to relocate that station from Evergreen, Alabama, to Shalimar, Florida, which is in the Fort Walton Beach, Florida market (where Qantum also has stations). The FCC staff granted the proposal and rejected Qantum’s reconsideration petition (which was filed before the Company acquired WPGG-FM). Qantum filed an appeal asking the full Commission to reverse the FCC staff’s decision. After Qantum filed that appeal, Cumulus acquired WPGG-FM and changed the call sign to WNCV(FM). As the new license of the station, Cumulus filed an opposition to Qantum’s appeal challenging the relocation of the station to Shalimar, Florida. The matter is still pending before the FCC, and we cannot predict the outcome. Final resolution of the case could take years. It is possible that the FCC could ultimately require that the station be relocated back to Evergreen, Alabama. We do not believe that any such decision would have a material adverse impact on our overall operations taken as a whole.
 
Ownership Matters.  The Communications Act restricts us from having more than one-fourth of our capital stock owned or voted by non-U.S. persons, foreign governments or non-U.S. corporations. We are required to take appropriate steps to monitor the citizenship of our stockholders, such as through representative samplings on a periodic basis, to provide a reasonable basis for certifying compliance with the foreign ownership restrictions of the Communications Act.
 
The Communications Laws also generally restrict (1) the number of radio stations one person or entity may own, operate or control in a local market, (2) the common ownership, operation or control of radio broadcast stations and television broadcast stations serving the same local market, and (3) except in the 20 largest Nielsen designated market areas (“DMAs”), the common ownership, operation or control of a radio broadcast station and a daily newspaper serving the same local market.
 
None of these multiple and cross ownership rules requires any change in our current ownership of radio broadcast stations or precludes consummation of our pending acquisitions. The Communications Laws will limit the number of additional stations that we may acquire in the future in our existing markets as well as new markets.
 
Because of these multiple and cross ownership rules, a purchaser of our voting stock who acquires an “attributable” interest in us (as discussed below) may violate the Communications Laws if such purchaser also has an attributable interest in other radio or television stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a purchaser also may be restricted in the companies in which it may invest to the extent that those investments give rise to an attributable interest. If one of our attributable stockholders violates any of these ownership rules, we may be unable to obtain from the FCC one or more authorizations needed to conduct our radio station business and may be unable to obtain FCC consents for certain future acquisitions.
 
The FCC generally applies its television/radio/newspaper cross-ownership rules and its broadcast multiple ownership rules by considering the “attributable” or cognizable, interests held by a person or entity. With some exceptions, a person or entity will be deemed to hold an attributable interest in a radio station, television station or


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daily newspaper if the person or entity serves as an officer, director, partner, stockholder, member, or, in certain cases, a debt holder of a company that owns that station or newspaper. Whether that interest is attributable and thus subject to the FCC’s multiple ownership rules, is determined by the FCC’s attribution rules. If an interest is attributable, the FCC treats the person or entity who holds that interest as the “owner” of the radio station, television station or daily newspaper in question, and that interest thus counts against the person in determining compliance with the FCC’s ownership rules.
 
With respect to a corporation, officers, directors and persons or entities that directly or indirectly hold 5% or more of the corporation’s voting stock (20% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other “passive investors” that hold such stock for investment purposes only) generally are attributed with ownership of the radio stations, television stations and daily newspapers owned by the corporation. As discussed below, participation in an LMA or a JSA also may result in an attributable interest. See “— Local Marketing Agreements” and “— Joint Sales Agreements.”
 
With respect to a partnership (or limited liability company), the interest of a general partner is attributable, as is the interest of any limited partner (or limited liability company member) who is “materially involved” in the media-related activities of the partnership (or limited liability company). The following interests generally are not attributable: (1) debt instruments, non-voting stock, options and warrants for voting stock, partnership interests, or membership interests that have not yet been exercised; (2) limited partnership or limited liability company interests where (a) the limited partner or member is not “materially involved” in the media-related activities of the partnership or limited liability company, and (b) the limited partnership agreement or limited liability company agreement expressly “insulates” the limited partner or member from such material involvement by inclusion of provisions specified by the FCC; and (3) holders of less than 5% of an entity’s voting stock. Non-voting equity and debt interests which, in the aggregate, constitute more than 33% of a station’s “enterprise value,” which consists of the total equity and debt capitalization, are considered attributable in certain circumstances.
 
On June 2, 2003, the FCC adopted new rules and policies (the “New Rules”) which would modify the ownership rules and policies then in effect (the “Current Rules”). Among other changes, the New Rules would (1) change the methodology to determine the boundaries of radio markets, (2) require that JSAs involving radio stations (but not television stations) be deemed to be an attributable ownership interest under certain circumstances, (3) authorize the common ownership of radio stations and daily newspapers under certain specified circumstances, and (4) eliminate the procedural policy of “flagging” assignment or transfer of control applications that raised potential anticompetitive concerns (namely, those applications that would permit the buyer to control 50% or more of the radio advertising dollars in the market, or would permit two entities (including the buyer), collectively, to control 70% or more of the radio advertising dollars in the market). Certain private parties challenged the New Rules in court, and the court issued an order which prevented the New Rules from going into effect until the court issued a decision on the challenges. On June 24, 2004, the court issued a decision which upheld some of the FCC’s New Rules (for the most part, those that relate to radio) and concluded that other New Rules (for the most part, those that relate to television and newspapers) required further explanation or modification. The court left in place, however, the order which precluded all of the New Rules from going into effect. On September 3, 2004, the court issued a further order which granted the FCC’s request to allow certain New Rules relating to radio to go into effect. The New Rules that became effective (1) changed the definition of the “radio market” for those markets that are rated by Arbitron, (2) modified the Current Rules method for defining a radio market in those markets that are not rated by Arbitron, and (3) made JSAs an attributable ownership interest under certain circumstances.
 
On February 4, 2008, the FCC issued a Report and Order on Reconsideration which changed Commission rules to allow common ownership of a radio station or a television station and a daily newspaper in the top 20 DMAs and to consider waivers to allow cross-ownership of a radio or television station with a daily newspaper in other DMAs. The FCC retained all other rules related to radio ownership without change.
 
Programming and Operation.  The Communications Act requires broadcasters to serve the “public interest.” Broadcasters are required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station’s programming may be filed at any time and will be considered by the FCC both at the time they are filed and in connection with a licensee’s renewal application. Stations also must follow various FCC rules that regulate,


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among other things, political advertising, the broadcast of obscene or indecent programming, sponsorship identification, the broadcast of contests and lotteries, and technical operations (including limits on radio frequency radiation). Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of a “short-term” license renewal or, for particularly egregious violations, the denial of a license renewal application or the revocation of a station license.
 
On January 24, 2008, the FCC proposed the adoption of certain rules and other measures to enhance the ability of radio and television stations to provide programming responsive to the needs and interests of their respective communities. The measures proposed include the creation of community advisory boards, requiring a broadcaster to maintain a main studio in the community of license of each station it owns, and the establishment of processing guidelines in FCC rules to evaluate the nature and quantity of non-entertainment programming provided by the broadcaster. Those proposals are subject to public comment. We cannot predict at this time to what extent, if any, the FCC’s proposals will be adopted or the impact which adoption of any one or more of those proposals will have on our Company.
 
Local Marketing Agreements.  A number of radio stations, including certain of our stations, have entered into LMAs. In a typical LMA, the licensee of a station makes available, for a fee, airtime on its station to a party which supplies programming to be broadcast during that airtime, and collects revenues from advertising aired during such programming. LMAs are subject to compliance with the antitrust laws and the Communications Laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances. The FCC has held that such agreements do not violate the Communications Laws as long as the licensee of the station receiving programming from another station maintains ultimate responsibility for, and control over, station operations and otherwise ensures compliance with the Communications Laws.
 
A station that brokers more than 15% of the weekly programming hours on another station in its market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC’s ownership rules. As a result, a radio station may not enter into an LMA that allows it to program more than 15% of the weekly programming hours of another station in the same market that it could not own under the FCC’s multiple ownership rules.
 
Joint Sales Agreements.  From time to time, radio stations, including one of our stations, enter into JSAs. A typical JSA authorizes one station to sell another station’s advertising time and retain the revenue from the sale of that airtime. A JSA typically includes a periodic payment to the station whose airtime is being sold (which may include a share of the revenue being collected from the sale of airtime). Like LMAs, JSAs are subject to compliance with antitrust laws and the Communications Laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances. The FCC has held that such agreements do not violate the Communications Laws as long as the licensee of the station whose time is being sold by another station maintains ultimate responsibility for, and control over, station operations and otherwise ensures compliance with the Communications Laws.
 
Under the FCC’s New Rules, a radio station that sells more than 15% of the weekly advertising time of another radio station in the same market will be attributed with the ownership of that other station. In that situation, a radio station cannot have a JSA with another radio station in the same market if the FCC’s ownership rules would otherwise prohibit that common ownership.
 
New Services.  In 1997, the FCC awarded two licenses to separate entities (XM Satellite Radio Holding Inc. and Sirius Satellite Radio Inc.) that authorized the licensees to provide satellite-delivered digital audio radio services. XM and Sirius launched their respective satellite-delivered digital radio services shortly thereafter and subsequently filed an application in 2007 with the FCC proposing to merge their two operations into a single company. On August 5, 2008, the FCC released an order granting that application. Private parties filed appeals with the United States Court of Appeals, but the two companies nonetheless consummated their merger in the summer of 2008.
 
Digital technology also may be used by terrestrial radio broadcast stations on their existing frequencies. In October 2002, the FCC released a Report and Order in which it selected in-band, on channel (“IBOC”) as the technology that will permit terrestrial radio stations to introduce digital operations. The FCC now will permit


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operating radio stations to commence digital operation immediately on an interim basis using the IBOC systems developed by iBiquity Digital Corporation (“iBiquity”), called HD Radiotm. In March 2004, the FCC (1) approved an FM radio station’s use of two separate antennas (as opposed to a single hybrid antenna) to provide both analog and digital signals of the FM owner secured Special Temporary Authorization (“STA”) from the FCC and (2) released a Public Notice seeking comment on a proposal by the National Association of Broadcasters to allow all AM stations with nighttime service to provide digital service at night. In April 2004, the FCC inaugurated a rule making proceeding to establish technical, service, and licensing rules for digital broadcasting. On May 31, 2007, the FCC released a Second Report and Order which authorized AM stations to use an IBOC system at night, authorized FM radio stations to use separate antennas without the need for an STA, and established certain technical and service rules for digital service. The FCC also released another rulemaking notice to address other related issues. The inauguration of digital broadcasts by FM and perhaps AM stations requires us to make additional expenditures. On December 21, 2004, we entered into an agreement with iBiquity pursuant to which we committed to implement HD Radiotm systems on 240 of our stations by June, 2012. In exchange for reduced license fees and other consideration, we, along with other broadcasters, purchased perpetual licenses to utilize iBiquity’s HD Radiotm technology. On March 5, 2009, we entered into an amendment to our agreement with iBiquity to reduce the number of planned conversion, extend the build-out schedule, and increase the license fees to be paid for each converted station. At this juncture, we cannot predict how successful our implementation of HD Radiotm technology within our platform will be, or how that implementation will affect our competitive position.
 
In January 2000, the FCC released a Report and Order adopting rules for a new low power FM radio service consisting of two classes of stations, one with a maximum power of 100 watts and the other with a maximum power of 10 watts. On December 11, 2007, the FCC released a Report and Order which made changes in the rules and provided further protection for low power FM radio stations and, in certain circumstances, required full power stations (like the ones owned by the Company) to provide assistance to low power FM stations in the event they are subject to interference or required to relocate their facilities to accommodate the inauguration of new or modified service by a full power radio station. The FCC has limited ownership and operation of low power FM stations to persons and entities which do not currently have an attributable interest in any FM station and has required that low power FM stations be operated on a non-commercial educational basis. The FCC has granted numerous construction permits for low power FM stations. We cannot predict what impact low power FM radio will have on our operations. Adverse effects of the new low power FM service on our operations could include interference with our stations and competition by low power stations for listeners and revenues.
 
In addition, from time to time Congress and the FCC have considered, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of our radio stations, result in the loss of audience share and advertising revenues for our radio stations, and affect the ability of Cumulus to acquire additional radio stations or finance such acquisitions.
 
Antitrust and Market Concentration Considerations.  Potential future acquisitions, to the extent they meet specified size thresholds, will be subject to applicable waiting periods and possible review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), by the Department of Justice or the Federal Trade Commission, either of whom can be required to evaluate a transaction to determine whether that transaction should be challenged under the federal antitrust laws. Transactions are subject to the HSR Act only if the acquisition price or fair market value of the stations to be acquired is $65.2 million or more. Most of our acquisitions have not met this threshold. Acquisitions that are not required to be reported under the HSR Act may still be investigated by the Department of Justice or the Federal Trade Commission under the antitrust laws before or after consummation. At any time before or after the consummation of a proposed acquisition, the Department of Justice or the Federal Trade Commission could take such action under the antitrust laws as it deems necessary, including seeking to enjoin the acquisition or seeking divestiture of the business acquired or certain of our other assets. The Department of Justice has reviewed numerous radio station acquisitions where an operator proposes to acquire additional stations in its existing markets or multiple stations in new markets, and has challenged a number of such transactions. Some of these challenges have resulted in consent decrees requiring the sale of certain stations, the termination of LMAs or other relief. In general, the Department of Justice has more closely scrutinized radio mergers and acquisitions resulting in local market shares in excess of 35% of local radio advertising revenues, depending on format, signal strength and


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other factors. There is no precise numerical rule, however, and certain transactions resulting in more than 35% revenue shares have not been challenged, while certain other transactions may be challenged based on other criteria such as audience shares in one or more demographic groups as well as the percentage of revenue share. We estimate that we have more than a 35% share of radio advertising revenues in many of our markets.
 
We are aware that the Department of Justice commenced, and subsequently discontinued, investigations of several of our prior acquisitions. The Department of Justice can be expected to continue to enforce the antitrust laws in this manner, and there can be no assurance that one or more of our pending or future acquisitions are not or will not be the subject of an investigation or enforcement action by the Department of Justice or the Federal Trade Commission. Similarly, there can be no assurance that the Department of Justice, the Federal Trade Commission or the FCC will not prohibit such acquisitions, require that they be restructured, or in appropriate cases, require that we divest stations we already own in a particular market. In addition, private parties may under certain circumstances bring legal action to challenge an acquisition under the antitrust laws.
 
As part of its review of certain radio station acquisitions, the Department of Justice has stated publicly that it believes that commencement of operations under LMAs, JSAs and other similar agreements customarily entered into in connection with radio station ownership assignments and transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act. In connection with acquisitions subject to the waiting period under the HSR Act, we will not commence operation of any affected station to be acquired under an LMA, a JSA, or similar agreement until the waiting period has expired or been terminated.
 
Executive Officers of the Company
 
The following table sets forth certain information with respect to our executive officers as of February 29, 2009:
 
             
Name
 
Age
 
Position(s)
 
Lewis W. Dickey, Jr. 
    47     Chairman, President, and Chief Executive Officer
Martin R. Gausvik
    52     Executive Vice President, Chief Financial Officer, and Treasurer
John G. Pinch
    60     Executive Vice President and Co-Chief Operating Officer
John W. Dickey
    42     Executive Vice President and Co-Chief Operating Officer
 
Lewis W. Dickey, Jr. is our Chairman, President and Chief Executive Officer. Mr. L. Dickey has served as Chairman, President and Chief Executive Officer since December 2000. Mr. Dickey was one of our founders and initial investors, and served as Executive Vice Chairman from March 1998 to December 2000. Mr. L. Dickey is a nationally regarded consultant on radio strategy and the author of The Franchise — Building Radio Brands, published by the National Association of Broadcasters, one of the industry’s leading texts on competition and strategy. Mr. L. Dickey also serves as a member of the National Association of Broadcasters Radio Board of Directors. He holds Bachelor of Arts and Master of Arts degrees from Stanford University and a Master of Business Administration degree from Harvard University. Mr. L. Dickey is the brother of John W. Dickey.
 
Martin R. Gausvik is our Executive Vice President, Treasurer and Chief Financial Officer. Mr. Gausvik has served as Executive Vice President, Chief Financial Officer and Treasurer since May 2000 and is a 20-year veteran of the radio industry, having served as Vice President Finance for Jacor Communications from 1996 until the merger of Jacor’s 250 radio station group with Clear Channel Communications in May 1999. More recently, he was Executive Vice President and Chief Financial Officer of Latin Communications Group, the operator of 17 radio stations serving major markets in the western United States. Prior to joining Jacor, from 1984 to 1996, Mr. Gausvik held various accounting and financial positions with Taft Broadcasting, including Controller of Taft’s successor company, Citicasters.
 
John G. Pinch is our Executive Vice President and Co-Chief Operating Officer. Mr. Pinch has served as Executive Vice President and Co-Chief Operating Officer since May 2007, and prior to that served as our Chief Operating Officer since December 2000, after serving as the President of Clear Channel International Radio (“CCU International”). At CCU International, Mr. Pinch was responsible for the management of all CCU radio operations


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outside of the United States, which included over 300 properties in 9 countries. Mr. Pinch is a 30-year broadcast veteran and has previously served as Owner/President of WTVK-TV Ft. Myers-Naples, Florida, General Manager of WMTX-FM/WHBO-AM Tampa, Florida, General Manager/Owner of WKLH-FM Milwaukee, and General Manager of WXJY Milwaukee.
 
John W. Dickey is our Executive Vice President and Co-Chief Operating Officer. Mr. J. Dickey has served as Executive Vice President since January 2000 and as Co-Chief Operating Officer since May 2007. Mr. J. Dickey joined Cumulus in 1998 and, prior to that, served as the Director of Programming for Midwestern Broadcasting from 1990 to March 1998. Mr. J. Dickey holds a Bachelor of Arts degree from Stanford University. Mr. J. Dickey is the brother of Lewis W. Dickey, Jr.
 
Available Information
 
Our Internet site address is www.cumulus.com. On our site, we have made available, free of charge, our most recent annual report on Form 10-K and our proxy statement. We also provide a link to an independent third-party Internet site, which makes available, free of charge, our other filings with the SEC, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
 
Item 1A.   Risk Factors
 
Many statements contained in this report are forward-looking in nature. These statements are based on our current plans, intentions or expectations, and actual results could differ materially as we cannot guarantee that we will achieve these plans, intentions or expectations. See “Cautionary Statement Regarding Forward-Looking Statements.” Forward-looking statements are subject to numerous risks and uncertainties, including those specifically identified below.
 
Risks Related to Our Business
 
Our results of operations have been, and could continue to be, adversely affected by the downturn in the U.S. economy and in the local economies of the markets in which we operate.
 
Revenue generated by our radio stations depends primarily upon the sale of advertising. Advertising expenditures, which we believe to be largely a discretionary business expense, generally tend to decline during an economic recession or downturn. 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. Consequently, the current recession in the national economy and the economies of several individual geographic markets in which we own or operate stations will likely continue to adversely affect our advertising revenue and, therefore, our results of operations.
 
Even with a recovery from the current recession in the economy, an individual business sector that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector fails to recover on pace with the overall economy. If that sector’s spending represents a significant portion of our advertising revenues, any reduction in its expenditures may affect our revenue.
 
We operate in a very competitive business environment.
 
The radio broadcasting industry is very competitive. Our stations compete for listeners and advertising revenues directly with other radio stations within their respective markets, and some of the owners of those competing stations may have greater financial resources than we do. Our stations also compete with other media, such as newspapers, magazines, cable and broadcast television, outdoor advertising, satellite radio, 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


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reduction in ratings or revenue and could require increased promotion and other expenses, and, consequently, could have a lower Station Operating Income, if:
 
  •  another radio station in the market was 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 was 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 we pay for these properties.
 
A decrease in our market ratings or market share can adversely affect our revenues.
 
The success of each of our radio stations, or station clusters, is primarily dependent upon its share of the overall advertising revenue within its market. Although we believe that each of our stations or clusters can compete effectively in its market, we cannot be sure that any of our stations can maintain or increase its current audience ratings or market share. In addition to competition from other radio stations and other media, shifts in population, demographics, audience tastes and other factors beyond our control could cause us to lose our audience ratings or market share. Our advertising revenue may suffer if any of our stations cannot maintain its audience ratings or market share.
 
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 technological change, evolving industry standards and the emergence of new media technologies and services. In some cases, our ability to compete will be dependent on our acquisition of new technologies and our provision of new services, and we cannot assure you that we will have the resources to acquire those new technologies or provide those new services; in other cases, the introduction of new technologies and services could increase competition and have an adverse effect on our revenue. Recent new media technologies and services include the following:
 
  •  audio programming by cable television systems, direct broadcast satellite systems, Internet content providers (both landline and wireless), Internet-based audio radio services, satellite delivered digital audio radio service and other digital audio broadcast formats;
 
  •  HD Radiotm digital radio, which could provide 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 stations in markets where we have stations.
 
We also cannot assure you that we will continue to have the resources to acquire other new technologies or to introduce new services that could compete with other new technologies. We cannot predict the effect, if any, that competition arising from new technologies may have on the radio broadcasting industry or on our business.
 
We face many unpredictable business risks that could have a material adverse effect on our future operations.
 
Our operations are subject to many business risks, including certain risks that specifically influence the radio broadcasting industry. These include:
 
  •  changing economic conditions, both generally and relative to the radio broadcasting industry in particular;
 
  •  shifts in population, listenership, demographics or audience tastes;


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  •  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 laws as well as 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. Any one or more of these variables may have a material adverse effect 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 will 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 stockholders 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;
 
  •  integrating operations and systems and managing a large and geographically diverse group of stations;
 
  •  diverting our management’s attention from other business concerns;
 
  •  potentially losing key employees at acquired stations; and
 
  •  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.


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We may be restricted in pursuing certain strategic acquisitions because of our agreement with CMP.
 
Under an agreement that we entered into with CMP and the other investors in CMP in connection with the formation of CMP, we have agreed to allow CMP the right to pursue first any business opportunity primarily involving the top-50 radio markets in the United States. We are allowed to pursue such business opportunities only after CMP has declined to pursue them. As a result, we may be limited in our ability to pursue strategic acquisitions or alternatives primarily involving large-sized markets (including opportunities that primarily involve large-sized markets but also involve mid-sized markets) that may present attractive opportunities for us in the future.
 
We have written off, and could in the future be required to write off, a significant portion of the fair market value of our FCC broadcast licenses and goodwill, which may adversely affect our financial condition and results of operations.
 
As of December 31, 2008, our FCC licenses and goodwill comprised 70.7% of our assets. Each year, we are required by SFAS No. 142, Goodwill and Other Intangible Assets, to assess the fair market value of our FCC broadcast licenses and goodwill to determine whether the carrying value of those assets is impaired. In the fourth quarter 2008, 2007, and 2006 we recorded impairment charges of approximately $498.9 million, 230.6 million, and 63.4 million, respectively, in order to reduce the carrying value of certain broadcast licenses and goodwill to their respective fair market values. Our future impairment reviews could result in additional impairment charges. Such additional impairment charges would reduce our reported earnings for the periods in which they are recorded.
 
Disruptions in capital markets could restrict our ability to access further financing.
 
We rely in significant part on the capital markets to meet our financial commitments and short-term liquidity needs if internal funds are not available from operations. Disruptions in the capital and credit markets, as have been experienced during 2008, could adversely affect our ability to draw on our credit facilities. Access to funds under those credit facilities is dependent on the ability of our lenders to meet their funding commitments. Those lenders may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from their borrowers within a short period of time. The disruptions in capital and credit markets have also resulted in increased costs associated with bank credit facilities. Continuation of these disruptions would increase our interest expense and adversely affect our results of operations.
 
Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions, could adversely affect our access to financing. Any such disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding can be arranged. Such measures could include deferring capital expenditures and reducing or eliminating future uses of cash.
 
We are exposed to credit risk on our accounts receivable. This risk is heightened during periods when economic conditions worsen.
 
Our outstanding trade receivables are not covered by collateral or credit insurance. While we have procedures to monitor and limit exposure to credit risk on our trade receivables, there can be no assurance such procedures will effectively limit our credit risk and avoid losses, which could have a material adverse effect on our financial condition and operating results.
 
We are exposed to risk of counterparty performance to derivative transactions.
 
We evaluate the credit quality of potential counterparties to derivative transactions and only enter into agreements with those deemed to have minimal credit risk at the time the agreements are executed. We carefully monitor the amount of exposure we have with any given bank. We also periodically monitor changes to counterparty credit quality as well as its concentration of credit exposure to individual counterparties. We do not hold or issue derivative financial instruments for trading or speculative purposes.


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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. On occasion, we enter into employment agreements with these personalities to protect our interests in those relationships that we believe to be valuable. The loss of one or more 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 grant our existing or future renewal applications or that the renewals will not include conditions out of the ordinary course. The non-renewal or renewal with conditions, 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 acquire radio stations that would be material to our financial performance in a particular market or overall.
 
The FCC also requires radio stations to comply with certain technical requirements to limit interference between two or more radio stations. Despite those limitations, a dispute could arise whether another station is improperly interfering with the operation of one of our stations or another radio licensee could complain to the FCC that one our stations is improperly interfering with that licensee’s station. There can be no assurance as to how the FCC might resolve that dispute. 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.
 
In recent years, the FCC has engaged in more vigorous enforcement of its indecency rules against the broadcast industry, which could have a material adverse effect on our business.
 
FCC regulations prohibit the broadcast of “obscene” material at any time, and “indecent” material between the hours of 6:00 a.m. and 10:00 p.m. The FCC has recently increased its enforcement efforts with respect to these regulations. FCC regulatory oversight was augmented by recent legislation that substantially increased the penalties for broadcasting indecent programming (up to $325,000 for each incident), and subjected broadcasters to license revocation, renewal or qualification proceedings under certain circumstances in the event that they broadcast indecent or obscene material. We may in the future become subject to inquiries or proceedings related to our stations’ broadcast of allegedly indecent or obscene material. To the extent that such an inquiry or proceeding results in the imposition of fines, a settlement with the FCC, revocation of any of our station licenses or denials of license renewal applications, our results of operation and business could be materially adversely affected.
 
We are required to obtain prior FCC approval for each radio station acquisition.
 
The acquisition of a radio station requires the prior approval of the FCC. To obtain that approval, we would have to file a transfer of control or assignment application with the FCC. The Communications Act and FCC rules allow members of the public and other interested parties to file petitions to deny or other objections to the FCC grant of any transfer or assignment application. The FCC could rely on those objections or its own initiative to deny a transfer or assignment application or to require changes in the transaction as a condition to having the application granted. The FCC could also change its existing rules and policies to reduce the number of stations that we would be


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permitted to acquire in some markets. For these and other reasons, there can be no assurance that the FCC will approve potential future acquisitions that we deem material to our business.
 
Risks Related to Our Indebtedness
 
We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness.
 
As of December 31, 2008, our long-term debt, including the current portion, was $696.0 million, representing approximately 280.3% of our stockholders’ equity. Our credit facilities have interest and principal repayment obligations that are substantial in amount.
 
Our substantial indebtedness could have important consequences, including:
 
  •  requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;
 
  •  exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;
 
  •  increasing our vulnerability to general economic downturns and adverse industry conditions;
 
  •  limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;
 
  •  limiting our ability to adjust to changing market conditions and placing us at a disadvantage compared to our competitors who have less debt: and
 
  •  restricting us from making strategic acquisitions or causing us to make non-strategic divestitures.
 
We and our restricted subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions contained in our credit facilities. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.
 
The credit agreement governing our credit facility imposes significant restrictions on us.
 
Our credit agreement limits or restricts, among other things, our ability to:
 
  •  incur additional indebtedness or grant additional liens or security interests in our assets;
 
  •  pay dividends, make payments on certain types of indebtedness or make other restricted payments;
 
  •  make particular types of investments or enter into speculative hedging agreements;
 
  •  enter into some types of transactions with affiliates;
 
  •  merge or consolidate with any other person or make changes to our organizational documents or other material agreement to which we are a party;
 
  •  sell, assign, transfer, lease, convey or otherwise dispose of our assets (except within certain limits) or enter into sale-leaseback transactions; or
 
  •  make capital expenditures.
 
Our credit agreement 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 agreement occurs, our lenders could declare all amounts outstanding, including accrued interest, immediately due and payable. If we could not repay those


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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. Our ability to comply with the covenants in our credit agreement will depend upon our future performance and various other factors, such as business, competitive, technological, legislative and regulatory factors, some of which are beyond our control. If we fail to comply with the covenants in our credit agreement, our lenders 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 Global Select Market, on which our Class A Common Stock is listed, from time to time have experienced extreme price and volume fluctuations that were not necessarily related or proportionate to the operating performance of the affected 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.
 
Certain stockholders control or have the ability to exert significant influence over the voting power of our capital stock.
 
As of February 28, 2009, and after giving effect to the exercise of all of their options exercisable within 60 days of that date, Lewis W. Dickey, Jr., our Chairman, President, Chief Executive Officer and a director, his brother, John W. Dickey, our Executive Vice President, and their father, Lewis W. Dickey, Sr., collectively beneficially own 11,765,146 shares, or approximately 33.8%, of our outstanding Class A Common Stock, and 1,144,871 shares, or 100%, of our outstanding Class C Common Stock, which collectively represents approximately 50% of the outstanding voting power of our common stock. Consequently, they have the ability to exert significant influence over our policies and management, subject to a voting agreement between these stockholders and the Company. The interests of these stockholders may differ from the interests of our other stockholders.
 
As of February 28, 2009, BA Capital Company, L.P., referred to as BA Capital, and its affiliate, Banc of America SBIC, L.P., referred to as BACI, together own 1,681,410 shares, or approximately 4.9%, of our Class A Common Stock and 5,809,191 shares, or 100%, of our Class B Common Stock, which is convertible into shares of Class A Common Stock. BA Capital also holds options exercisable within 60 days of February 28, 2009 to purchase 10,000 shares of our Class A Common Stock. Assuming that those options were exercised for shares of our Class A Common Stock, and giving effect to the conversion into shares of our 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 18.4% of the total voting power of our common stock. BA Capital and BACI are both affiliates of Bank of America Corporation. 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


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significant influence over our policies and management, and their interests may differ from the interests of our other stockholders.
 
Cautionary Statement Regarding Forward-Looking Statements
 
In various places in this annual report on Form 10-K, 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 these 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 above to under “Risk Factors” and as otherwise described in our periodic filings with the SEC from time to time.
 
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;
 
  •  cancellations, disruptions or postponements of advertising schedules in response to national or world events;
 
  •  our capital expenditure requirements;
 
  •  legislative or regulatory requirements;
 
  •  risks and uncertainties relating to our leverage;
 
  •  interest rates;
 
  •  our continued ability to identify suitable acquisition targets;
 
  •  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 annual report on Form 10-K.
 
Item 1B.   Unresolved Staff Comments
 
Not applicable.
 
Item 2.   Properties
 
The types of properties required to support each of our radio stations include offices, studios, transmitter sites and antenna sites. A station’s studios are generally housed with its offices in business districts of the station’s community of license or largest nearby community. The transmitter sites and antenna sites are generally located so as to provide maximum market coverage.


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At December 31, 2008, we owned studio facilities in 9 of our 59 markets and we owned transmitter and antenna sites in 52 of our 59 markets. We lease additional studio and office facilities in 50 markets and additional transmitter and antenna sites in 42 markets. In addition, we lease corporate office space in Atlanta, Georgia. We do not anticipate any difficulties in renewing any facility leases or in leasing alternative or additional space, if required. We own or lease substantially all of our other equipment, consisting principally of transmitting antennae, transmitters, studio equipment and general office equipment.
 
No single property is material to our operations. We believe that our properties are generally in good condition and suitable for our operations; however, we continually look for opportunities to upgrade our properties and intend to upgrade studios, office space and transmission facilities in certain markets.
 
Item 3.   Legal Proceedings
 
We from time to time are involved in various legal proceedings that are handled and defended in the ordinary course of business. While we are unable to predict the outcome of these matters, our management does not believe, based upon currently available facts, that the ultimate resolution of any of such proceedings would have a material adverse effect on our overall financial condition or results of operations.
 
In 2005, we were subpoenaed by the Office of the Attorney General of the State of New York, as were other radio broadcasting companies, in connection with the New York Attorney General’s investigation of promotional practices related to record companies’ dealings with radio stations broadcasting in New York. We cooperated with the Attorney General in this investigation. The investigation is still pending.
 
We are aware of three purported class action lawsuits related to the merger proposed acquisition of us that was announced in July 2007 but terminated in May 2008 (See Note 15 to the accompanying financial statements): Jeff Michelson, on behalf of himself and all others similarly situated v. Cumulus Media Inc., et al. (Case No. 2007CV137612, filed July 27, 2007) was filed in the Superior Court of Fulton County, Georgia against us, Lew Dickey, the other directors and the sponsor; Patricia D. Merna, on behalf of herself and all others similarly situated v. Cumulus Media Inc., et al. (Case No. 3151, filed August 8, 2007) was filed in the Chancery Court for the State of Delaware, New Castle County, against us, Lew Dickey, our directors, the sponsor, Parent and Merger Sub; and Paul Cowles v. Cumulus Media Inc., et al. (Case No. 2007-CV-139323, filed August 31, 2007) was filed in the Superior Court of Fulton County, Georgia against us, Lew Dickey, our directors and the sponsor.
 
On December 18, 2008, the Delaware lawsuit was dismissed without prejudice pursuant to a stipulation by the parties. With respect to the two Georgia lawsuits, defendants removed them to the U.S. District Court for the Northern District of Georgia on July 17, 2008 and filed motions to dismiss both cases on July 24, 2008. On February 6, 2009, the U.S. District Court remanded both actions as well as the pending motion to dismiss, to the Superior Court of Fulton County, Georgia.
 
Item 4.   Submission of Matters To a Vote of Security Holders
 
Our 2008 annual meeting of stockholders was held on November 19, 2008. Lewis W. Dickey, Jr. was re-elected as Class III director of the Company by holders of our Class A Common Stock and Class C Common Stock, voting together as a single class.
 
The results of voting on the proposals submitted for approval were as follows:
 
Proposal No. 1 (Election of Class III director)
 
             
Nominee
  Class   For   Abstain/Withheld
 
 
 
Lewis W. Dickey, Jr. 
  Class III   35,660,656   5,135,888


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Proposal No. 2 (Approve Amendment of the Certificate of Incorporation to Provide for the Annual Election of All Members of the Board of Directors)
 
             
For
  Against   Broker Non-Votes   Abstain/Withheld
 
 
 
40,690,885
  102,575     3,084
 
Proposal No. 3 (Approve 2008 Equity Incentive Plan)
 
             
For
  Against   Broker Non-Votes   Abstain/Withheld
 
 
 
29,609,751
  8,055,133   3,116,544   15,116
 
Proposal No. 4 (Approve the appointment of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm for the Year Ending December 31, 2008)
 
             
For
  Against   Broker Non-Votes   Abstain/Withheld
 
 
 
40,707,474
  69,843     19,227


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PART II
 
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Market Information For Common Stock
 
Shares of our Class A Common Stock, par value $.01 per share have been quoted on the NASDAQ Global Select Market (or its predecessor, the NASDAQ National Market) under the symbol CMLS since the consummation of the initial public offering of our Class A Common Stock on July 1, 1998. There is no established public trading market for our Class B Common Stock or our Class C Common Stock. The following table sets forth, for the calendar quarters indicated, the high and low closing sales prices of the Class A Common Stock on the NASDAQ Global Select Market, as reported in published financial sources.
 
                 
Year
  High     Low  
 
2007
               
First Quarter
  $ 10.66     $ 9.05  
Second Quarter
  $ 10.40     $ 9.03  
Third Quarter
  $ 11.74     $ 8.36  
Fourth Quarter
  $ 10.59     $ 7.09  
2008
               
First Quarter
  $ 7.82     $ 4.90  
Second Quarter
  $ 6.76     $ 3.93  
Third Quarter
  $ 4.85     $ 2.00  
Fourth Quarter
  $ 4.24     $ 0.33  
2009
               
First Quarter (through February 28, 2009)
  $ 2.99     $ 1.50  
 
Holders
 
As of February 28, 2009, there were approximately 1,207 holders of record of our Class A Common Stock, two holders of record of our Class B Common Stock and one holder of record of our Class C Common Stock. The figure for our Class A Common Stock does not include an estimate of the number of beneficial holders whose shares may be held of record by brokerage firms or clearing agencies.
 
Dividends
 
We have not declared or paid any cash dividends on our common stock since our inception and do not currently anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings for use in our business. We are currently subject to restrictions under the terms of the credit agreement governing our credit facility that limit the amount of cash dividends that we may pay on our Class A Common Stock. We may pay cash dividends on our Class A Common Stock in the future only if we meet certain financial tests set forth in the credit agreement.


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Securities Authorized For Issuance Under Equity Incentive Plans
 
The following table sets forth, as of December 31, 2008, the number of securities outstanding under our equity compensation plans, the weighted average exercise price of such securities and the number of securities available for grant under these plans:
 
                         
                (a)(c)
 
                Number of Shares
 
    (a)
    (b)
    Remaining Available for
 
    to be Issued
    Weighted-Average
    Future Issuance Under
 
    Upon Exercise of
    Exercise Price of
    Equity Compensation
 
    Outstanding Options
    Outstanding Options
    Plans (Excluding
 
Plan Category
  Warrants and Rights     Warrants and Rights     Column)(c)  
 
Equity Compensation Plans Approved by Stockholders
    1,971,980     $ 12.48       12,491,086 (1)(2)
Equity Compensation Plans Not Approved by Stockholders
    81,345     $ 17.15       1,890,904  
                         
Total
    2,053,325               14,381,990  
                         
 
 
(1) The Company has previously stated in public filings that it intends to issue future equity compensation only under the 2008 Equity Incentive Plan, pursuant to which 2,753,448 shares remained for issuance as of December 31, 2008.
 
(2) These shares remain available for future issuance as stock options, SARs, restricted stock, RSUs, performance shares and units, and other stock-based awards.
 
The only existing equity compensation plan not approved by our stockholders is the 2002 Stock Incentive Plan. Our Board adopted the 2002 Stock Incentive Plan on March 1, 2002, and stockholder approval of that plan was not required. For a description of all equity compensation plans, please refer to Note 11 in the accompanying notes to the consolidated financial statements.
 
Option Exchange Offer
 
On December 30, 2008, we consummated an exchange offer to our employees and non-employee directors (or a designated affiliate of one of the foregoing) to exchange their outstanding options to purchase our Class A Common Stock that were granted on or after October 2, 2000 (“eligible options”) for a combination of restricted shares of our Class A Common Stock (“restricted shares”) and replacement options to purchase Class A Common Stock (“new options”). Options to purchase 5,647,650 shares of Class A Common Stock, or approximately 95.1% of all eligible options, were tendered for exchange and, in accordance with the terms of the Offer, 289,683 restricted shares and new options to purchase 956,869 shares of Class A Common Stock were issued.
 
The restricted shares and new options were issued under the Company’s 2008 Equity Incentive Plan and have a grant date of December 30, 2008. The exercise prices for the new options were based upon the closing price of the Class A Common Stock on the grant date, which was $2.54. As a result, in general, the first one-third of the new options is exercisable at $2.54 per share, the second one-third at $2.92 per share, and the final one-third at $3.30 per share. In accordance with federal tax law with respect to incentive stock options, the exercise price for the first one-third of the new options granted to Lewis W. Dickey and John W. Dickey was set at $2.79. In accordance with the terms of the Offer, assuming the participants continue to meet the requirements for vesting specified in the award certificates governing the restricted shares and new options, the restricted shares and new options will vest at the rate of (1) 50% on the second anniversary of the date of grant and (2) 25% on each of the two succeeding anniversaries thereafter.
 
Repurchases of Equity Securities
 
In June 2006, as part of a $200.0 million Board-approved recapitalization, we completed a “modified Dutch Auction” tender offer and purchased 11.5 million shares of our outstanding Class A Common Stock at a price per share of $11.50, or approximately $132.3 million. The shares purchased represented approximately 24.1% our outstanding Class A Common Stock at the time. We also purchased 5.0 million shares of Class B Common Stock at


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a purchase price of $11.50 per share or approximately $57.5 million. The shares purchased represented approximately 43.0% of our outstanding Class B Common Stock. These Class B Common shares were subsequently retired. During the three months ended September 30, 2006, we purchased an additional 749,500 shares of our outstanding Class A Common Stock at an average price per share of $9.25, or approximately $6.9 million. Under these programs, we have cumulatively repurchased 14,261,000 shares, at an average price per share of $11.56, which are being held in treasury.
 
During the three months ended December 31, 2006 we purchased 500,000 Class A restricted shares from Lewis Dickey, Jr. per his amended employment agreement dated December 20, 2006. See footnote 11 to financial statements for further discussion.
 
On May 21, 2008, our Board of Directors terminated all their repurchase programs and authorized the purchase, from time to time, of up to $75.0 million of our Class A Common Stock, subject to the terms of the Credit Agreement and compliance with other applicable legal requirements. During the fiscal year ended December 31, 2008 and consistent with the Board-approved repurchase plan, we repurchased approximately 3.0 million shares of our Class A Common Stock for cash in the open market at an average repurchase price per share of $2.20.
 
                                 
                Total Number of Shares
    Minimum Dollar Value of
 
                Purchased as Part of
    Shares that may Yet be
 
    Total Number of
    Average Price Per
    Publicly Announced
    Shares Purchased
 
    Shares Purchased     Share     Program     under the Program  
 
                            $ 75,000,000  
June 1, 2008 — June 30, 2008
    281,928     $ 4.325       281,928       73,780,532  
July 1, 2008 — July 31, 2008
    795,700       2.809       795,700       71,545,471  
August 1, 2008 — August 31, 2008
    515,182       3.043       515,182       69,978,015  
September 1, 2008 — September 30, 2008
                      69,978,015  
October 1, 2008 — October 31, 2008
                      69,978,015  
November 1, 2008 — November 30, 2008
    392,708       0.726       392,708       69,692,343  
December 1, 2008 — December 31, 2008
    982,431     $ 1.277       982,431     $ 68,477,544  
                                 
Total
    2,967,949               2,967,949          
                                 


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Performance Graph
 
The following graph compares the total stockholder return on our Class A Common Stock for the year ended December 31, 2008 with that of (1) the Standard & Poors 500 Stock Index (“S&P 500”): (2) the Nasdaq Stock Market Index the (“Nasdaq Composite”): and (3) an index comprised of radio broadcast and media companies. See note (1) below. The total return calculation set forth below assume $100 invested on December 31, 2004 with reinvestment or dividends into additional shares of the same class of securities at the frequency with which dividends were paid on such securities through December 31, 2008. The stock price performance shown in the graph below should be considered indicative of future stock price performance.
 
(PERFORMANCE GRAPH)
 
CUMULATIVE TOTAL RETURN
 
                                         
   
    12/31/2004     12/31/2005     12/31/2006     12/31/2007     12/31/2008  
Cumulus
    100.00 %     82.29 %     68.90 %     53.32 %     16.51 %
                                         
S & P 500
    100.00 %     103.00 %     117.03 %     121.16 %     73.41 %
                                         
NASDAQ
    100.00 %     101.37 %     111.03 %     121.92 %     72.49 %
                                         
Radio Index(1)
    100.00 %     84.24 %     75.81 %     52.49 %     34.27 %
                                         
 
(1) The Radio Index includes the stockholder returns for the following companies: Saga Communications Inc, Radio One, Inc. Entercom Communications Corp., Emmis Communications Corp., Cox Radio Inc. and Clear Channel Communications.


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Item 6.   Selected Consolidated Financial Data
 
The selected consolidated historical financial data presented below has been derived from our audited consolidated financial statements as of and for the years ended December 31, 2008, 2007, 2006, 2005, and 2004. Our consolidated historical financial data are not comparable from year to year because of our acquisition and disposition of various radio stations during the periods covered. This data should be read in conjunction with our audited consolidated financial statements and the related notes thereto, as set forth in Part II, Item 8 and with “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” set forth in Part II, Item 7 herein (dollars in thousands, except per share data).
 
                                         
    Year Ended December 31,  
    2008     2007     2006(2)     2005(3)     2004  
 
Net revenues
  $ 311,538     $ 328,327     $ 334,321     $ 327,402     $ 320,132  
Station operating expenses excluding depreciation, amortization, and LMA fees
    203,222       210,640       214,089       227,413       202,441  
Depreciation and amortization
    12,512       14,567       17,420       21,223       21,168  
Gain on assets contributed to affiliate
          (5,862 )     (2,548 )            
LMA fees
    631       755       963       981       3,002  
Corporate general and administrative expenses (including non-cash stock compensation)
    19,325       26,057       41,012       19,189       15,260  
Restructuring (credits)
                      (215 )     (108 )
Impairment charge(1)
    498,897       230,609       63,424       264,099        
Costs associated with terminated transaction
    2,041       2,639                    
                                         
Operating (loss) income
    (425,090 )     (151,078 )     (39 )     (205,288 )     (78,369 )
Net interest expense
    (47,262 )     (60,425 )     (42,360 )     (22,715 )     (19,197 )
Terminated transaction fee
    15,000                          
Losses on early extinguishment of debt
          (986 )     (2,284 )     (1,192 )     (2,557 )
Other income (expense), net
    (10 )     117       (98 )     (239 )     (699 )
Income tax benefit (expense)
    117,945       38,000       5,800       17,100       (25,547 )
Equity losses in affiliate
    (22,252 )     (49,432 )     (5,200 )            
                                         
Net (loss) income
    (361,669 )     (223,804 )     (44,181 )     (212,334 )     30,369  
Preferred stock dividends, deemed dividends, accreation of discount and redemption premium
                             
                                         
Net (loss) income attributable to common stockholders
  $ (361,669 )   $ (223,804 )   $ (44,181 )   $ (212,334 )   $ 30,369  
Basic and diluted (loss) income per common share:
                                       
Basic and diluted (loss) income per common share
  $ (8.55 )   $ (5.18 )   $ (0.87 )   $ (3.17 )   $ 0.44  
OTHER FINANCIAL DATA:
                                       
Station Operating Income(2)
  $ 108,316     $ 117,687     $ 120,232     $ 99,989     $ 117,691  
Net cash provided by operating activities
    76,634       46,057       65,322       78,396       75,013  
Net cash used in investing activities
    (6,754 )     (29 )     (19,217 )     (92,763 )     (28,757 )
Net cash used in by financing activities
    (49,183 )     (16,134 )     (48,834 )     (12,472 )     (21,016 )
BALANCE SHEET DATA:
                                       
Total assets
  $ 543,519     $ 1,060,542     $ 1,333,147     $ 1,405,600     $ 1,616,397  
Long-term debt (including current portion)
    696,000       736,300       751,250       569,000       482,102  
Preferred stock subject to mandatory redemption
                             
Total stockholders’ equity
  $ (248,147 )   $ 119,278     $ 337,007     $ 587,043     $ 884,964  
 
 
(1) Impairment charge recorded in connection with our annual impairment testing under SFAS 142. See Footnote 4 for further discussion.
 
(2) See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a quantitative reconcilation of Station Operating Income to its most directly comparable financial measure calculated and presented in accordance with GAAP.
 
(3) We recorded certain immaterial adjustments to the 2006 and 2005 consolidated financial data. See Note 1 to our 2008 Consolidated Financial Statements appearing elsewhere in the document.
 
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following Management’s Discussion and Analysis is intended to provide the reader with an overall understanding of our financial condition, changes in financial condition, results of operations, cash flows, sources


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and uses of cash, contractual obligations and financial position. This section also includes general information about our business and a discussion of our management’s analysis of certain trends, risks and opportunities in our industry. We also provide a discussion of accounting policies that require critical judgments and estimates as well as a description of certain risks and uncertainties that could cause our actual results to differ materially from our historical results. You should read the following information in conjunction with our consolidated financial statements and notes to our consolidated financial statements beginning on page F-1 in this Annual Report on Form 10-K as well as the information set forth in Item 1A. “Risk Factors.”
 
Highlights during 2008 and Overview
 
On May 11, 2008, the Company, Parent and Merger Sub, entered into the Termination Agreement to terminate the Merger Agreement, pursuant to which Merger Sub would have been merged with and into the Company, and as a result the Company would have continued as the surviving corporation and a wholly owned subsidiary of Parent.
 
The advertising environment for 2008 lagged behind 2007. The RAB has reported that trends in radio advertising revenue mirrored fluctuations in the current economic environment yielding mixed results over the last three years. In 2008, advertising revenues decreased 9.0%, after decreasing 2% in 2007 and increasing only 1.0% in 2006. Our political revenues increased by $5.1 million compared to 2007 due to 2008 being a presidential election year.
 
We recorded total impairment charges of $498.9 million in order to reduce the carrying value of certain broadcast licenses and goodwill. The impairment loss in connection with our review of broadcasting licenses and goodwill during the fourth quarter of 2008 (see Note 7 in the accompanying notes to the financial statements), was primarily due to: (1) an increase in the discount rate used; (2) a decrease in station transaction multiples; and (3) a decrease in advertising revenue growth projections for the broadcasting industry.
 
Our management team remains focused on our strategy of pursuing growth through acquisition. However, acquisitions are closely evaluated to ensure that they will generate stockholder value and our management is committed to completing only those acquisitions that we believe will increase our share price. The compression of publicly traded radio broadcast company multiples since 2005, combined with a market for privately held radio stations that did not see a corresponding multiples compression, translated to minimal acquisition activity for us in 2008.
 
In furtherance of this strategy, in 2008, our Board terminated the 2004 and 2005 repurchase programs and authorized a new program to purchase from time to time, up to $75 million of our Class A Common Stock, subject to the terms of our credit agreement and compliance with other applicable legal requirements. Through December 31, 2008 we have purchased 3.0 million shares of our Class A Common Stock in the open market for cash at an average repurchase price per share of $2.20.
 
In June 2007, the Company entered into an amendment to its existing credit agreement, dated June 7, 2006, by and among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto. The credit agreement, as amended, is referred to herein as the “Amended Credit Agreement.” The Amended Credit Agreement provides for a replacement term loan facility in the aggregate principal amount of $750.0 million, which replaces the prior term loan facility that had an outstanding balance of approximately $713.9 million at the time of refinancing, and maintains the pre-existing $100.0 million revolving credit facility.
 
As of December 31, 2008, the effective interest rate on the borrowings pursuant to the credit facility was approximately 3.810%. As of December 31, 2008, our average cost of debt, including the effects of our derivative positions, was 4.885%. We remain committed to maintaining manageable debt levels, which will continue to improve our ability to generate cash flow from operations.
 
Our Business
 
We engage in the acquisition, operation, and development of commercial radio stations in mid-size radio markets in the United States. In addition, we, along with three private equity firms, formed Cumulus Media Partners, LLC (“CMP”), which acquired the radio broadcasting business of Susquehanna Pfaltzgraff Co. (“Susquehanna”) in May 2006. The acquisition included 33 radio stations in 8 markets. As a result of our investment in


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CMP and the acquisition of Susquehanna’s radio operations, we are the second largest radio broadcasting company in the United States based on number of stations and believe we are the third largest radio broadcasting company based on net revenues. As of December 31, 2008, directly and through our investment in CMP, we owned or operated 347 stations in 68 U.S. markets and provided sales and marketing services under local marketing, management and consulting agreements (pending FCC approval of acquisition) to one additional station. The following discussion of our financial condition and results of operations includes the results of acquisitions and local marketing, management and consulting agreements
 
Advertising Revenue and Station Operating Income
 
Our primary source of revenues is the sale of advertising time on our radio stations. Our sales of advertising time are primarily affected by the demand for advertising time from local, regional and national advertisers and the advertising rates charged by our radio stations. Advertising demand and rates are based primarily on a station’s ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by Arbitron on a periodic basis, generally two or four times per year. Because audience ratings in local markets are crucial to a station’s financial success, we endeavor to develop strong listener loyalty. We believe that the diversification of formats on our stations helps to insulate them from the effects of changes in the musical tastes of the public with respect to any particular format.
 
The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting ratings is limited in part by the format of a particular station. Our stations strive to maximize revenue by managing their on-air inventory of advertising time and adjusting prices based upon local market conditions. In the broadcasting industry, radio stations sometimes utilize trade or barter agreements that exchange advertising time for goods or services such as travel or lodging, instead of for cash. Trade revenue totaled $14.8 million in 2008, $17.9 million in 2007, and $19.0 in 2006. Our advertising contracts are generally short-term. We generate most of our revenue from local and regional advertising, which is sold primarily by a station’s sales staff. Local advertising represented approximately 90% of our total revenues in 2008 and 88% of our total revenues in 2007 and 2006.
 
Our revenues vary throughout the year. As is typical in the radio broadcasting industry, we expect our first calendar quarter will produce the lowest revenues for the year, and the second and fourth calendar quarters will generally produce the highest revenues for the year, with the exception of certain of our stations, such as those in Myrtle Beach, South Carolina, where the stations generally earn higher revenues in the second and third quarters of the year because of the higher seasonal population in those communities. Our operating results in any period may be affected by the incurrence of advertising and promotion expenses that typically do not have an effect on revenue generation until future periods, if at all.
 
Our most significant station operating expenses are employee salaries and commissions, programming expenses, advertising and promotional expenditures, technical expenses, and general and administrative expenses. We strive to control these expenses by working closely with local market management. The performance of radio station groups, such as ours, is customarily measured by the ability to generate Station Operating Income. See the quantitative reconciliation of Station Operating Income to the most directly comparable financial measure calculated and presented in accordance with GAAP, that follows in this section.


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Results of Operations:
 
Analysis of Consolidated Statements of Operations.  The following analysis of selected data from our consolidated statements of operations should be referred to while reading the results of operations discussion that follows:
 
                                         
    Year Ended December 31,     Percent Change  
    2008     2007     2006(1)     2008 vs. 2007     2007 vs. 2006  
 
Net revenues
  $ 311,538     $ 328,327     $ 334,321       (5.1 )%     (1.8 )%
Station operating expenses excluding depreciation, amortization, and LMA fees
    203,222       210,640       214,089       (3.5 )%     (1.6 )%
Depreciation and amortization
    12,512       14,567       17,420       (14.1 )%     (16.4 )%
Gain on assets contributed to affiliate
          (5,862 )     (2,548 )     (100.0 )%     130.1 %
LMA fees
    631       755       963       (16.5 )%     (21.6 )%
Corporate general and administrative expenses (includes non-cash stock compensation)
    19,325       26,057       41,012       (25.8 )%     (36.5 )%
Impairment charge
    498,897       230,609       63,424       116.3 %     263.6 %
Costs associated with terminated transaction
    2,041       2,639             (22.7 )%        
                                         
Operating loss
    (425,090 )     (151,078 )     (39 )     181.4 %     **
Net interest expense
    (47,262 )     (60,425 )     (42,360 )     (21.8 )%     42.6 %
Terminated transaction fee
    15,000                   **     **
Losses on early extinguishment of debt
          (986 )     (2,284 )     (100.0 )%     (56.8 )%
Other income (expense), net
    (10 )     117       (98 )     (108.5 )%     (219.4 )%
                                         
Total nonoperating expense, net
    (32,272 )     (61,294 )     (44,742 )     (47.3 )%     37.0 %
Income tax benefit (expense)
    117,945       38,000       5,800       210.4 %     555.2 %
Equity loss in affiliate
    (22,252 )     (49,432 )     (5,200 )     (55.0 )%     850.6 %
                                         
Net loss
    (361,669 )     (223,804 )     (44,181 )     61.6 %     406.6 %
Net loss attributable to common stockholders
  $ (361,669 )   $ (223,804 )   $ (44,181 )     61.6 %     406.6 %
                                         
 
 
** Calculation is not meaningful.
 
(1) We recorded certain immaterial adjustments to the 2006 consolidated financial data. See Note 1 to our 2008 Consolidated Financial Statements appearing elsewhere in the document.
 
Our management’s discussion and analysis of results of operations for the years ended December 31, 2008, 2007 and 2006 have been presented on a historical basis. Additionally, for net revenue, operating expenses, and Station Operating Income, we have included our management’s discussion and analysis of results of operations on a pro forma basis.
 
Year Ended December 31, 2008 versus Year Ended December 31, 2007
 
Net Revenues.  Net revenues for the year ended December 31, 2008 decreased $16.8 million, or 5.1%, to $311.5 million compared to $328.3 million for the year ended December 31, 2007, reflecting a decrease in demand for advertising due to the pressures our client base is facing during the current economic recession partially offset by a $5.1 million increase in political revenue. Management has implemented numerous sales initiatives nationwide in an effort to facilitate growth primarily by targeting new industries and markets for penetration.
 
Station Operating Expenses. excluding Depreciation, Amortization, LMA Fees and Non-cash Contract Termination Costs.  Station operating expenses for the year ended December 31, 2008 decreased $7.4 million, or 3.5%, to $203.2 million compared to $210.6 million for the year ended December 31, 2007, primarily attributable to certain cost containment initiatives across our station platform. Management is focused on preserving our


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operating income and cash flows from operations by reducing our variable cost in an effort to keep pace with the downturn in demand for marketing/advertising from our client base due to the recession.
 
Depreciation and Amortization.  Depreciation and amortization for the year ended December 31, 2008 decreased $2.1 million, or 14.1%, to $12.5 million compared to $14.6 million for the year ended December 31, 2007, primarily attributable to previously recorded assets being fully depreciated.
 
Corporate, General and Administrative Expenses.  Corporate operating expenses for the year ended December 31, 2008 decreased $6.7 million, or 25.8%, to $19.3 million compared to $26.1 million for the year ended December 31, 2007, primarily attributable to a decrease in non-cash stock compensation of $4.6 million in addition to certain cost containment initiatives implemented by management due to contraction within the economy.
 
LMA Fees.  LMA fees totaled $0.6 million and $0.8 million for the years ended December 31, 2008 and 2007, respectively. LMA fees in the current year were comprised primarily of fees associated with LMAs in Cedar Rapids, Iowa, Ann Arbor and Battle Creek, Michigan in 2008. LMAs in Cedar Rapids, Iowa, Muskegon, Michigan, and a station operated under a JSA in Nashville, Tennessee in 2007.
 
Impairment Charge.  SFAS No. 142, Goodwill and Other Intangible Assets, requires us to review the recorded values of our FCC licenses and goodwill for impairment on an annual basis. We recorded total impairment charges of $498.9 million in order to reduce the carrying value of certain broadcast licenses and goodwill. The impairment loss in connection with our review of broadcasting licenses and goodwill during the fourth quarter of 2008 (see Note 7 in the accompanying notes to the financial statements), was primarily due to: (1) an increase in the discount rate used; (2) a decrease in station transaction multiples; and (3) a decrease in advertising revenue growth projections for the broadcasting industry.
 
Other Expense (Income).  Interest expense, net of interest income, for the year ended December 31, 2008 decreased $13.2 million, or 21.8%, to $47.3 million compared to $60.4 million for the year ended year ended December 31, 2007, primarily due to a lower average cost of bank debt and decreased levels of bank debt outstanding during the current year. The following summary details the components of our interest expense, net of interest income (dollars in thousands).
 
                         
    Year Ended
       
    December 31,     Increase/
 
    2008     2007     (Decrease)  
 
Bank Borrowings — term loan and revolving credit facilities
  $ 33,850     $ 54,446     $ (20,596 )
Bank borrowings yield adjustment — interest rate swap
    (190 )     (5,528 )     5,338  
Change in the fair value of interest rate swap and option agreement
    13,640       13,039       601  
Other interest expense
    950       (868 )     1,818  
Interest income
    (988 )     (664 )     (323 )
                         
Interest expense, net
  $ 47,262     $ 60,425     $ (13,162 )
                         
 
Losses on Early Extinguishment of Debt.  Losses on early extinguishments of debt totaled $0.0 million for the year ended December 31, 2008 as compared with $1.0 million for the year ended December 31, 2007. Losses incurred during 2007 were comprised of previously capitalized loan origination expenses.
 
Terminated Transaction Fee.  As a result of the termination of the Merger Agreement, and in accordance with its terms, we received a termination fee in the amount of $15.0 million in cash from the investor group, and the terms of the previously announced amendment to our existing credit agreement did not take effect.
 
Income Tax Expense.  We recorded a tax benefit of $117.9 million as compared with a $38.0 million benefit during the prior year. The income tax benefit in both periods is primarily due to the impairment charge on intangible assets.
 
Equity loss in affiliate.  The equity losses in affiliate were limited to the company’s investment in CMP which totaled $22.3 million. The Company’s equity method investment in affiliate was $0 at December 31, 2008. For the year ended December 31, 2007 the Company recognized $49.4 million of equity losses in CMP.


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Station Operating Income.  As a result of the factors described above, Station Operating Income for the year ended December 31, 2008 decreased $9.4 million, or 8.0%, to $108.3 million compared to $117.7 million for the year ended December 31, 2007.
 
The following table reconciles Station Operating Income to Operating income (loss) as presented in the accompanying consolidated statements of operations (the most directly comparable financial measure calculated and presented in accordance with GAAP) (dollars in thousands):
 
                 
    Year Ended December 31,  
    2008     2007  
 
Operating income (loss)
  $ (425,090 )   $ (151,078 )
Depreciation and amortization
    12,512       14,567  
Gain on assets sold/transferred to affiliate
          (5,862 )
LMA fees
    631       755  
Non cash stock compensation
    4,663       9,212  
Corporate general and administrative
    14,662       16,845  
Impairment charge
    498,897       230,609  
Costs associated with terminated transaction
    2,041       2,639  
                 
Station Operating Income
  $ 108,316     $ 117,687  
                 
 
Intangible Assets.  Intangible assets, net of amortization, were $384.0 million and $881.9 million as of December 31, 2008 and 2007, respectively. These intangible asset balances primarily consist of broadcast licenses and goodwill. Intangible assets, net, decreased from the prior year primarily due to a $498.9 million impairment charge taken for the year ended December 31, 2008, in connection with our annual impairment evaluation of intangible assets.
 
In light of the overall economic environment, we continue to monitor whether any impairment triggers are present and we may be required to record material impairment charges in future periods. The annual impairment tests us to make certain assumptions in determining fair value, including assumptions about the cash flow growth of our businesses. Additionally. the fair values are significantly impacted by macro-economic factors, including market multiples at the time the impairments tests are performed. The current general economic pressures now impacting both the national and a number of our local economies may result in non-cash impairments in future periods. More specifically, the following could adversely impact the current carrying value of our broadcast licenses and goodwill: (a) sustained decline in the price of our common stock, (b) the potential for a decline in our forecasted operating profit margins or expected cash flow growth rates, (c) a decline in our industry forecasted operating profit margins, (d) the potential for a continued decline in advertising market revenues within the markets we operate stations, or (e) the sustained decline in the selling prices of radio stations. We continue to monitor whether any impairment triggers are present and may be required to record material impairment charges in future periods.
 
Year Ended December 31, 2007 versus Year Ended December 31, 2006
 
Net Revenues.  Net revenues for the year ended December 31, 2007 decreased $6.0 million to $328.3 million, a 1.8% decrease from the same period in 2006, primarily as a result of the contribution of our Houston and Kansas City stations to CMP, coupled with a decline in political advertising revenue.
 
In addition, on a same station basis, which excludes the results of the stations contributed to CMP, net revenues for the year ended December 31, 2007 decreased $2.7 million to $328.3 million, a decrease of 0.8% from the same period in 2006. Same station operating income decreased $2.3 million, a decrease of 1.9% from the same period in 2006, primarily due to decreased political revenues.
 
Station Operating Expenses, excluding Depreciation, Amortization, LMA Fees and Non-cash Contract Termination Costs.  Station operating expenses decreased $3.5 million to $210.6 .million, a decrease of 1.6% over the same period in 2006. This decrease is primarily attributable to the contribution of our Houston and Kansas City stations to CMP.


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In addition, on a same station basis, for the 336 stations in 64 markets operated for at least a full year, station operating expenses excluding depreciation, amortization, LMA fees and non-cash contract termination costs decreased $0.4 million, or 0.2%, to $210.6 million for the year ended December 31, 2007 compared to $211.0 million for the year ended December 31, 2006. The decrease in same station operating expenses is primarily attributable to general decreases across our station platform.
 
Corporate, General and Administrative Expenses.  Corporate operating expenses for the year ended December 31, 2007 decreased $15.0 million over the comparative period in 2006 due primarily to a decrease in non-cash stock compensation of $15.2 million.
 
Depreciation and Amortization.  Depreciation and amortization decreased $2.8 million, or 16.4%, to $14.6 million for the year ended December 31, 2007 compared to $17.4 million for the year ended December 31, 2006.
 
LMA Fees.  LMA fees totaled $0.8 million and $1.0 million for the years ended December 31, 2007 and 2006, respectively. LMA fees in the current year were comprised primarily of fees associated with LMAs in Cedar Rapids, Iowa, Muskegon, Michigan, and a station operated under a JSA in Nashville, Tennessee.
 
Impairment Charge.  SFAS No. 142 requires us to review the recorded values of our FCC broadcast licenses and goodwill for impairment on an annual basis. We recorded total impairment charges of $230.6 million in order to reduce the carrying value of certain broadcast licenses and goodwill.
 
Other Expense (Income).  Interest expense, net of interest income, increased by $18.1 million, or 42.6%, to $60.4 million for the year ended December 31, 2007 compared to $42.4 million for the year ended December 31, 2006. This increase was primarily due to a higher average cost of bank debt and increased levels of bank debt outstanding during the current year. The following summary details the components of our interest expense, net of interest (income) (dollars in thousands):
 
                         
    Year Ended
       
    December 31,     Increase/
 
    2007     2006     (Decrease)  
 
Bank Borrowings — term loan and revolving credit facilities
  $ 54,446     $ 47,124     $ 7,322  
Bank borrowings yield adjustment — interest rate swap
    (5,528 )     (5,594 )     66  
Bank Borrowings — Adjustment for amount reclassified from other comprehensive income upon hedge accounting discontinuation
          (407 )     407  
Change in the fair value of interest rate swap and option agreement
    13,039       (1,107 )     14,146  
Other interest expense
    (868 )     3,069       (3,937 )
Interest income
    (664 )     (725 )     61  
                         
Interest expense, net
  $ 60,425     $ 42,360     $ 18,065  
                         
 
Losses on Early Extinguishment of Debt.  Losses on early extinguishments of debt totaled $1.0 million for the year ended December 31, 2007 as compared with $2.3 million for the year ended December 31, 2006. Losses in the current year are comprised of previously capitalized loan origination expenses. In connection with the new credit facility, we capitalized approximately $1.0 million of debt issuance costs, which will be amortized to interest expense over the life of the debt.
 
Income Tax Expense.  We recorded a tax benefit of $38.0 million as compared with a $5.8 million benefit during the prior year. The income tax benefit in both periods is primarily due to the impairment charge on intangible assets.
 
Equity loss in affiliate.  For the year ended December 31, 2007 the Company recognized $49.4 million of equity losses in affiliate as compared to $5.2 million in 2006 reducing the Company’s equity investment in CMP to $22.3 million at December 31, 2007. The change was primarily driven by an impairment charge of $188.0 million for the year ended 2007 as compared to no impairment charge being recorded in 2006 for CMP.


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Station Operating Income.  As a result of the factors described above, Station Operating Income decreased $2.5 million to $117.7 million, a decrease of 2.1% from the same period in 2006.
 
The following table reconciles Station Operating Income to Operating income (loss) as presented in the accompanying consolidated statements of operations (the most directly comparable financial measure calculated and presented in accordance with GAAP) (dollars in thousands):
 
                 
    Year Ended December 31,  
    2007     2006  
 
Operating income (loss)
  $ (151,078 )   $ (39 )
Depreciation and amortization
    14,567       17,420  
Gain on assets sold/transferred to affiliate
    (5,862 )     (2,548 )
LMA fees
    755       963  
Non cash stock compensation
    9,212       24,447  
Corporate general and administrative
    16,845       16,565  
Impairment charge
    230,609       63,424  
Costs associated with terminated transaction
    2,639        
                 
Station Operating Income
  $ 117,687     $ 120,232  
                 
 
Intangible Assets.  Intangible assets, net of amortization, were $881.9 million and $1.1 billion as of December 31, 2007 and 2006, respectively. These intangible asset balances primarily consist of broadcast licenses and goodwill. Intangible assets, net, decreased from the prior year primarily due to a $230.6 million impairment charge taken for the year ended December 31, 2007, in connection with our pending merger and annual impairment evaluation of intangible assets.
 
Pro Forma — Year Ended December 31, 2007 versus Year Ended December 31, 2006
 
The pro forma results for 2007 compared to 2006 presented below exclude the results of the stations contributed to CMP for the period January 1, 2006 through May 4, 2006. (see also the table below for a reconciliation of GAAP results to pro forma results for these periods) (dollars in thousands).
 
Reconciliation Between Historical GAAP Results and Pro Forma Results
 
                                                 
    Year Ended December 31, 2007     Year Ended December 31, 2006  
    Historical
          Pro Forma
    Historical
    Adjustments
    Pro Forma
 
    GAAP     Adjustments     Results     GAAP     (1)(2)     Results  
 
Net revenue
  $ 328,327     $     $ 328,327     $ 334,322     $ (3,628 )   $ 330,694  
Station operating expenses excluding depreciation, amortization, and LMA fees
    210,640             210,640       214,089       (3,314 )     (210,775 )
                                                 
Station Operating Income(3)
  $ 117,687     $     $ 117,687     $ 120,233     $ (314 )   $ 119,919  
                                                 
 
 
(1) Reflects the elimination of revenues from stations contributed to CMP totaling $3,628.
 
(2) Reflects the elimination of operating expenses from stations contributed to CMP totaling $3,314.
 
(3) See the preceding quantitative reconciliation of Station Operating Income to operating income, the most directly comparable financial measure calculated and presented in accordance with GAAP.


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Pro forma net revenues exclude the results of the stations contributed to CMP, for the period January through May, 2006. Pro forma net revenues for the twelve months ended December 31, 2007 decreased by $2.3 million to $326.5 million, a 0.7% decline from the same period in 2006, due to a general decrease in sales across our station platform. Pro forma station operating income decreased 1.8% from the same period in 2006.
 
Seasonality
 
We expect that our operations and revenues will be seasonal in nature, with generally lower revenue generated in the first quarter of the year and generally higher revenue generated in the second and fourth quarters of the year. The seasonality of our business reflects the adult orientation of our formats and relationship between advertising purchases on these formats with the retail cycle. This seasonality causes and will likely continue to cause a variation in our quarterly operating results. Such variations could have an effect on the timing of our cash flows.
 
Liquidity and Capital Resources
 
Historically, our principal need for funds has been to fund the acquisition of radio stations, expenses associated with our station and corporate operations, capital expenditures, repurchases of our Class A Common Stock, and interest and debt service payments.
 
The following table summarizes our historical funding needs for the years ended December 31, 2008, 2007 and 2006:
 
                         
    2008     2007     2006  
 
Acquisitions and purchase of intangible assets
  $ 1,008     $ 975     $ 12,577  
Capital expenditures
    6,069       4,789       9,211  
Repayments of bank borrowings
    115,300       764,950       637,500  
Repurchases of common stock
    6,522       104       224,040  
Interest payments
    33,122       54,887       45,623  
 
In the short term, our principal future need for funds will include the funding of station operating expenses, corporate general and administrative expenses and interest and debt service payments. In addition, in the long term, our funding needs will include future acquisitions and capital expenditures associated with maintaining our station and corporate operations and implementing HD Radiotm technology. In December 2004, we purchased 240 perpetual licenses from iBiquity, which will enable us to convert to and utilize iBiquity’s HD Radiotm technology on up to 240 of our stations. Under the terms of our original agreement with iBiquity, we agreed to convert certain of our stations over a seven-year period. On March 5, 2009, we entered into an amendment to our agreement with iBiquity to reduce the number of planned conversions, extend the build-out schedule, and increase the license fees to be paid for each converted station. We anticipate that the average cost to convert each station will be between $130,000 and $150,000.
 
Our principal sources of funds for these requirements have been cash flow from operating activities. Our cash flow from operations is subject to such factors as shifts in population, station listenership, demographics or, audience tastes, and fluctuations in preferred advertising media. In addition, as discussed further below, borrowings under financing arrangements are subject to financial covenants that can restrict our financial flexibility. In addition, customers may not be able to pay, or may delay payment of, accounts receivable that are owed to us. Management has taken steps to mitigate this risk through heightened collection efforts and enhancing our credit approval process. Further, our ability to obtain additional equity or debt financing is also subject to market conditions and operating performance. During the current recession affecting the global financial markets, some companies have experienced difficulties accessing their cash equivalents, trading investment securities, drawing revolvers, issuing debt and raising capital which has had a material adverse impact on their liquidity. We have assessed the implications of these factors on our current business and determined, based on our financial condition as of December 31, 2008, that cash on hand and cash expected to be generated by financing activities and from operating activities will be sufficient to satisfy our anticipated financing needs for working capital, capital expenditures, interest and debt service payments and potential acquisitions and repurchases of securities and other debt obligations for the next 12 months. However, given the uncertainty of the markets’ cash flows and the impact of the current recession on


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guarantors, there can be no assurance that cash generated from operations will be sufficient, or financing will be available at terms, and on the timetable, that may be necessary to meet our future capital needs.
 
Consideration of recent economic developments and the outlook for 2009
 
As the capital and credit market crisis worsened during the fourth quarter of 2008 and into early 2009, and in conjunction with the development of our 2009 business plan, we continue to assess the impact of recent market developments on a variety of areas, including our forecasted advertising revenues and liquidity. For example, in November 2008, Moody’s credit rating agency downgraded our debt rating from B2 to Caa. In response to these conditions, we refined our 2009 business plan to incorporate a reduction in our forecasted 2009 revenues and cost reductions implemented in fourth quarter 2008 and first quarter 2009 to mitigate the impact of Cumulus’ anticipated decline in 2009 revenue.
 
While preparing our 2009 business plan, we assessed future covenant compliance under our credit agreement, including consideration of market uncertainties, as well as the incremental cost that would be required to potentially amend the terms of our credit agreement. We believe we will continue to be in compliance with all of our debt covenants through at least December 31, 2009 based upon actions we have already taken, as well as through additional paydowns of debt (estimated to be at least $23 million) we will be required to make during 2009 from existing cash balances and cash flow generated from operations. Further discussion of our debt covenant compliance considerations is included below.
 
The current economic crisis has reduced demand for advertising in general, including advertising on our radio stations. If our revenues were to be significantly less than planned due to difficult market conditions or for other reasons, our ability to maintain compliance with the financial covenants in our credit agreements would become increasingly difficult without remedial measures ,such as the implementation of further cost abatement initiatives. If our remedial measures were not successful in maintaining covenant compliance, then we would negotiate with our lenders for relief, which relief could result in higher interest expense. Failure to comply with our financial covenants or other terms of our credit agreements and failure to negotiate relief from our lenders could result in the acceleration of the maturity of all outstanding debt. Under these circumstances, the acceleration of our debt could have a material adverse effect on our business.
 
Cash Flows from Operating Activities
 
                         
    2008     2007     2006  
 
Net cash provided by operating activities
  $ 76,654     $ 46,057     $ 65,322  
 
For the years ended December 31, 2008 and 2007, net cash provided by operating activities increased and decreased $30.6 million and $19.3 million, respectively. Excluding non-cash items, we generated comparable levels of operating income for 2008 and 2007 as compared with the prior years. As a result, the movement in cash flows from operations was primarily attributable to the timing of certain payments.
 
Cash Flows used in Investing Activities
 
                         
    2008     2007     2006  
 
Net cash provided by investing activities
  $ (6,754 )   $ (29 )   $ (19,217 )
 
For the year ended December 31, 2008 net cash used in investing activities decreased $6.8 million, primarily due to a $1.2 million decrease in capital expenditures as well as a decrease of $5.7 million in proceeds from the sales of radio assets year over year. Net cash used in investing activities decreased $19.2 million for the year ended December 31, 2007. The decrease is due to the absence of acquisitions and the purchases of intangible assets, $6.0 million of proceeds from the sale of assets and a $4.4 million reduction of capital expenditures.


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Cash Flows used in Financing Activities
 
                         
    2008     2007     2006  
 
Net cash provided by financing activities
  $ (49,183 )   $ (16,134 )   $ (48,834 )
 
For the year ended December 31, 2008 net cash used in financing activities increased $33.1 million, primarily due to repayment of borrowings under our credit facility. For the year ended December 31, 2007 net cash used in financing activities decreased $32.7 million, due to a decrease in costs associated with share repurchases offset by a decrease in net proceeds from the 2007 refinancing as compared to the 2006 refinancing. During 2006, net cash used in financing activities increased $36.3 million, primarily due to the repurchase of 14,261,000 shares of Class A Common Stock and 5,000,000 shares of Class B Common Stock, offset by an increase in borrowings under a new credit facility primarily used to fund these repurchases.
 
Completed Acquisitions
 
We did not complete any acquisitions during 2008.
 
Pending Acquisitions.
 
As of December 31, 2008, we had pending a swap transaction pursuant to which we would exchange one of our Fort Walton Beach, Florida radio stations, WYZB-FM, for another owned by Star Broadcasting, Inc., WTKE-FM. Specifically, the purchase agreement provided for the exchange of WYZB-FM plus $1.5 million in cash for WTKE-FM. Following the filing of the assignment applications with the FCC, the applications were challenged by Qantum Communications, who has some radio stations in the market and complained to the FCC that the swap would give us an unfair competitive advantage (because the station we would acquire reaches more people than the station we would be giving up). Qantum also initiated litigation in the United States District Court for the Southern District of Florida against the current owner of WTKE-FM, and secured a court decision that would require the sale of the station to Qantum instead of us. That decision was affirmed on appeal of the United States Court of Appeals for the Eleventh Circuit. Qantum has not yet closed on the transaction, but there appears to be no likelihood that we will be able to consummate the exchange we had proposed with the seller.
 
In addition at December 31, 2008, we had pending a swap transaction pursuant to which we would exchange our Canton, Ohio Station, WRQK-FM for eight stations owned by Clear Channel Communications, Inc.(“Clear Channel”) in Ann Arbor, Michigan (WTKA-AM, WLBY-AM, WWWW-FM, WQKL-FM) and Battle Creek, Michigan (WBFN-AM, WBCK-FM, WBCK-AM and WBXX-FM). We will dispose of two of the AM stations in Battle Creek, WBCK-AM and WBFN-AM, simultaneously with the closing of the swap transaction to comply with the FCC’s broadcast ownership limits; WBCK-AM will be placed in a trust for the sale of the station to an unrelated third party and WBFN-AM will be transferred to Family Life Broadcasting System.
 
As of December 31, 2008 we were party to an Asset Exchange Agreement with subsidiaries of Clear Channel that would result in Clear Channel’s acquisition of five Cumulus stations in the Green Bay, Wisconsin, Market (WOGB(FM) in Kaukauna, Wisconsin, WDUZ-FM in Brillion, Wisconsin, WQLJ(FM) in Green Bay, Wisconsin, WDUZ(AM) in Green Bay Wisconsin, and WPCK(FM) in Denmark, Wisconsin) in exchange for our acquisition of two Clear Channel stations in Cincinnati, Ohio (WNNF(FM) and WOFX-FM). The transaction also contemplates that we would enter into a long-term LMA to operate the Green Bay stations after they are acquired by Clear Channel. LMAs are deemed to be “attributable” ownership interests under FCC rules and, to comply with ownership limitations under FCC rules, we will place two stations (WZNN(FM) in Allouez, Wisconsin, and WWWX(FM) in Oshkosh, Wisconsin) in a trust that will be obligated to sell the stations pursuant to parameters established in the trust agreement with us. The transaction documents also include a Put Agreement that entitles Clear Channel to require us to purchase the Green Bay stations in 2013 (assuming that acquisition would comply with FCC ownership rules). The requisite assignment applications have been filed with the FCC, and the transaction could close in the first or second quarter of 2009.
 
As of December 31, 2008, we had pending a swap transaction pursuant to which we would exchange WZBN-FM, Camilla, GA, for W250BC, a translator licensed for use in Atlanta, Georgia, owned by Extreme Media Group. The requisite assignment applications have been approved by initial grant by the FCC, and the transaction is expected to close in the first or second quarter of 2009.


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Completed Dispositions
 
The company did not complete any divestitures during the years ended December 31, 2008.
 
On November 20, 2007, we completed the sale of our Caribbean stations to Gem Radio 5 Limited, which purchased all the operations of our Caribbean stations for $6.0 million. The transaction resulted in the recognition of a gain of approximately $5.9 million. We recorded the gain within continuing operations within our consolidated statement of operations for the year ended December 31, 2007. The below table contains certain operating data related to the stations sold for the periods presented (the total net assets approximated $0.1 million for these stations):
 
                 
    December 31,  
    2007     2006  
 
Net revenue
  $ 1,764     $ 1,918  
Total Expense
    1,338       1,396  
                 
Operating Income
  $ 426     $ 522  
                 
 
Our Amended Credit Agreement
 
On June 11, 2007, we entered into an amendment to our existing credit agreement, dated June 7, 2006, by and among Cumulus, Bank of America, N.A., as administrative agent, and the lenders party thereto. The credit agreement, as amended, is referred to herein as the “Amended Credit Agreement.”
 
The Amended Credit Agreement provides for a replacement term loan facility, in the original aggregate principal amount of $750.0 million, to replace the prior term loan facility, which had an outstanding balance of approximately $713.9 million, and maintains the pre-existing $100.0 million revolving credit facility. The proceeds of the replacement term loan facility, fully funded on June 11, 2007, were used to repay the outstanding balances under the prior term loan facility and under the revolving credit facility.
 
Our obligations under the Amended Credit Agreement are collateralized by substantially all of our assets in which a security interest may lawfully be granted (including FCC licenses held by its subsidiaries), including, without limitation, intellectual property and all of the capital stock of our direct and indirect domestic subsidiaries (except for Broadcast Software International, Inc.). In addition, our obligations under the Amended Credit Agreement are guaranteed by certain of our subsidiaries.
 
The Amended Credit Agreement contains terms and conditions customary for financing arrangements of this nature. The replacement term loan facility will mature on June 11, 2014 and amortized in equal quarterly installments beginning on September 30, 2007, with 0.25% of the initial aggregate advances payable each quarter during the first six years of the term, and 23.5% due in each quarter during the seventh year. The revolving credit facility will mature on June 7, 2012 and, except at our option, the commitment will remain unchanged up to that date.
 
Borrowings under the replacement term loan facility bear interest, at our option, at a rate equal to LIBOR plus 1.75% or the Alternate Base Rate (defined as the higher of the Bank of America Prime Rate and the Federal Funds rate plus 0.50%) plus 0.75%. Borrowings under the revolving credit facility bear interest, at our option, at a rate equal to LIBOR plus a margin ranging between 0.675% and 2.0% or the Alternate Base Rate plus a margin ranging between 0.0% and 1.0% (in either case dependent upon our leverage ratio).
 
In May 2005, we entered into a forward-starting interest rate swap agreement that became effective in March 2006, following the termination of our previous swap agreement. This swap agreement effectively fixes the interest rate, based on LIBOR, on $400.0 million of our floating rate bank borrowings through March 2009. As of December 31, 2008, prior to the effect of the May 2005 Swap, the effective interest rate of the outstanding borrowings pursuant to the credit facility was approximately 3.810%; inclusive of the May 2005 Swap, the effective interest rate was 4.885%. At December 31, 2007, our effective interest rate, including the fixed component of the swap, on loan amounts outstanding under our credit facility was 6.6%.


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Certain mandatory prepayments of the term loan facility will be required upon the occurrence of specified events, including upon the incurrence of certain additional indebtedness (other than under any incremental credit facilities under the Amended Credit Agreement) and upon the sale of certain assets.
 
The representations, covenants and events of default in the Amended Credit Agreement are customary for financing transactions of this nature. Events of default in the Amended Credit Agreement include, among others, (a) the failure to pay when due the obligations owing under the credit facilities; (b) the failure to perform (and not timely remedy, if applicable) certain covenants; (c) cross default and cross acceleration; (d) the occurrence of bankruptcy or insolvency events; (e) certain judgments against the Company or any of its subsidiaries; (f) the loss, revocation or suspension of, or any material impairment in the ability to use any of our material FCC licenses; (g) any representation or warranty made, or report, certificate or financial statement delivered, to the lenders subsequently proven to have been incorrect in any material respect; (h) the occurrence of a Change in Control (as defined in the Amended Credit Agreement); and (i) violation of certain financial covenants. Upon the occurrence of an event of default, the lenders may terminate the loan commitments, accelerate all loans and exercise any of their rights under the Amended Credit Agreement and the ancillary loan documents as a secured party.
 
As discussed above, our covenants contain certain financial covenants including:
 
  •  A maximum leverage ratio;
 
  •  A minimum fixed charges ratio; and
 
  •  A limit on annual capital expenditures.
 
As of December 31, 2008, the Company was in compliance with all financial and non-financial covenants. Our covenant requirements and actual ratios as of December 31, 2008 are as follows:
 
                 
    Covenant
  Actual
    Requirement   ratio
 
Total leverage ratio:
    <8.50       7.40  
Fixed charges ratio:
    >1.1       1.86  
 
The maximum leverage ratio in the Amended Credit Agreement becomes more restrictive over the term of the agreement. The quarterly periods ended December 31, 2008, March 31, 2009 and June 30, 2009, our maximum leverage ratio requirement is 8.50 to 1.00. Beginning with the quarterly period ending September 30, 2009 and through March 31, 2010, the maximum leverage ratio requirement is 8.00 to 1.00. For the quarterly periods ending June 30, 2010 and September 30, 2010, the total leverage ratio is 7.50 to 1.00. We believe we will continue to be in compliance with all of our debt covenants through at least December 31, 2009 based upon actions we have already taken, as well as through additional paydowns of debt we will be required to make during 2009 from existing cash balances and cash flow generated from operations. Based upon the budgeted results our 2009 business plan and our outstanding borrowings as of December 31, 2008, we will be required to make additional paydowns of debt no later than the third quarter of 2009 in order to remain in compliance with our maximum leverage ratio.
 
Total Leverage Trigger Date Occurring in December 2008
 
On December 11, 2008, we borrowed $75 million as a Revolving Loan under its existing Credit Agreement, dated June 7, 2006, as amended. The proceeds of such Revolving Loan have been used to make an investment in equity interests in Cumulus Broadcasting, LLC, a wholly-owned subsidiary of the Company, as permitted under Section 6.04(c) of the Credit Agreement.
 
One of the effects of this borrowing and of such investment is to cause the occurrence of the Total Leverage Trigger Date, as defined under the Credit Agreement. Such a date occurs when there are new borrowings made under the Credit Agreement of at least $75 million, including Revolving Loans, and the Company makes one or more investments permitted under Section 6.04 of the Credit Agreement, and/or Restricted Payments, that total $75 million or more.


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By reason of the occurrence of the Total Leverage Trigger Date on December 11, 2008, the Total Leverage Ratio covenant requirements under the Credit Agreement have been adjusted, effective as of December 11, 2008, to the following ratios through and including the dates indicated below:
 
     
June 30, 2009
  8.50 to 1.00
December 31, 2009
  8.00 to 1.00
June 30, 2010
  7.50 to 1.00
December 31, 2010
  7.00 to 1.00
Thereafter
  6.50 to 1.00
 
Early Extinguishment of Debt 2007
 
In connection with the retirement of our pre-existing credit facilities, we recorded a loss on early extinguishment of debt of $1.0 million in 2007, which was comprised of previously capitalized loan origination expenses. In connection with the new credit facility, we capitalized approximately $1.0 million of debt issuance costs, which will be amortized to interest expense over the life of the debt.
 
Critical Accounting Policies and Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, our management, in consultation with the Audit Committee of our Board, evaluates these estimates, including those related to bad debts, intangible assets, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
 
We recognize revenue from the sale of commercial broadcast time to advertisers when the commercials are broadcast, subject to meeting certain conditions such as persuasive evidence that an arrangement exists and collection is reasonably assured. These criteria are generally met at the time an advertisement is broadcast.
 
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We determine the allowance based on historical write-off experience and trends. We review our allowance for doubtful accounts monthly. Past due balances over 120 days are reviewed individually for collectability. All other balances are reviewed and evaluated on a pooled basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Although our management believes that the allowance for doubtful accounts is our best estimate of the amount of probable credit losses, if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
 
We have significant intangible assets recorded in our accounts. These intangible assets are comprised primarily of broadcast licenses and goodwill acquired through the acquisition of radio stations. SFAS No. 142, Goodwill and other Intangible Assets, requires that the carrying value of our goodwill and certain intangible assets be reviewed at least annually for impairment and charged to results of operations in the periods in which the recorded value of those assets is more than their fair market value. During 2008, 2007, and 2006, we recorded impairment charges of approximately $498.9, $230.6, and $63.4 million, respectively in order to reduce the carrying value of certain broadcast licenses and goodwill to their respective fair market values. As of December 31, 2008, we have $384.0 million in intangible assets and goodwill, which represent approximately 70.7% of our total assets.
 
The fair market value of our broadcast licenses and reporting units, for purposes of our annual impairment tests, by relying on a discounted cash flow approach assuming a start-up scenario in which the only assets held by an investor are broadcasting licenses. The fair value contains assumptions incorporating variables that are based on past experiences and judgments about future performance using industry normalized information for an average station within a market. These variables would include, but not be limited to: (1) the forecast growth rate of each


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radio market, including population, household income, retail sales and other expenditures that would influence advertising expenditures; (2) market share and profit margin of an average station within a market; (3) estimated capital start-up costs and losses incurred during the early years; (4) risk-adjusted discount rate; (5) the likely media competition within the market area; and (6) terminal values. The impairment loss in connection with our review of broadcasting licenses and goodwill during the fourth quarter of 2008 (see Note 7 in the accompanying notes to the financial statements), was primarily due to: (1) an increase in the discount rate used; (2) a decrease in station transaction multiples; and (3) a decrease in advertising revenue growth projections for the broadcasting industry.
 
In connection with the elimination of amortization of broadcast licenses upon the adoption of SFAS No. 142, the reversal of our deferred tax liabilities relating to those intangible assets is no longer assured within our net operating loss carry-forward period. We have established a valuation allowance of approximately $233.1 million as of December 31, 2008 based on our assessment of whether it is more likely than not these deferred tax assets will be realized. Should we determine that we would be able to realize all or part of our net deferred tax assets in the future, reduction of the valuation allowance would be recorded in income in the period such determination was made.
 
Stock-based compensation expense recognized under SFAS No. 123(R), Share-Based Payment, for the years ended December 31, 2008, 2007 and 2006 were $4.7 million, $9.2 million, and $24.4 million, respectively, before income taxes. Upon adopting SFAS No. 123(R), for awards with service conditions, a one-time election was made to recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award. For options with service conditions only, we utilized the Black-Scholes option pricing model to estimate fair value of options issued. For restricted stock awards with service conditions, we utilized the intrinsic value method. For restricted stock awards with performance conditions, we have evaluated the probability of vesting of the awards at each reporting period and have adjusted compensation cost based on this assessment. The fair value is based on the use of certain assumptions regarding a number of highly complex and subjective variables. If other reasonable assumptions were used, the results could differ.
 
Summary Disclosures About Contractual Obligations and Commercial Commitments
 
The following tables reflect a summary of our contractual cash obligations and other commercial commitments as of December 31, 2008 (dollars in thousands):
 
Payments Due By Period
 
                                         
          Less Than
    2 to 3
    4 to 5
    After 5
 
Contractual Cash Obligations
  Total     1 Year     Years     Years     Years  
 
Long-term debt(1)(2)
  $ 696,000     $ 7,400     $ 14,800     $ 14,800     $ 659,000  
Operating leases
    47,993       8,765       13,500       10,288       15,440  
Digital radio capital obligations(3)
    4,200             420       1,120       2,660  
Other operating contracts(4)
    38,386       7,680       15,790       14,916        
                                         
Total Contractual Cash Obligations
    786,579       23,845       44,510       41,124       677,100  
                                         
 
 
(1) Under our credit agreement, the maturity of our outstanding debt could be accelerated if we do not maintain certain restrictive financial and operating covenants.
 
(2) Based on long-term debt amounts outstanding at December 31, 2008, scheduled annual principal amortization and the current effective interest rate on such long-term debt amounts outstanding, we would be obligated to pay approximately $131.1 million of interest on borrowings through June 2014 ($26.3 million due in less than one, year, $51.8 million due in years two and three, $49.1 million due in years four and five, and $3.9 million due after five years.
 
(3) Amount represents the estimated capital requirements to convert 212 of our stations to a digital broadcasting format in future periods.
 
(4) Consists of contractual obligations for goods or services that are enforceable and legally binding obligations that include all significant terms. In addition, amounts include $2.5 million of station acquisitions purchase price that was deferred beyond the closing of the transaction and that is being paid monthly over a 5-year period and also includes employment contract with CEO, Mr. L. Dickey.


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Off-Balance Sheet Arrangements
 
We did not have any off-balance sheet arrangements as of December 31, 2008.
 
Recent Accounting Pronouncements
 
SFAS No. 141(R).  In December 2007, the FASB issued FAS No. 141R, “Business Combinations,” that will significantly change how business combinations are accounted for through the use of fair values in financial reporting and will impact financial statements both on the acquisition date and in subsequent periods. FAS No. 141R is effective for the Company as of January 1, 2009 for all business combinations that will close on or after January 1, 2009.
 
SFAS 157.  In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, provides guidance for measuring fair value and requires additional disclosures. This statement does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. For financial assets and liabilities, SFAS 157 is effective for financial statements issued for fiscal years beginning after December 31, 2007. The Company adopted these provisions of SFAS 157 effective January 1, 2008. The related disclosures are included in Note 7. On February 12, 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157”, which delays the effective date of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of this statement on its consolidated financial statements.
 
SFAS 159.  In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 . SFAS No. 159 permits an entity to elect fair value as the initial and subsequent measurement attribute for many financial assets and liabilities. Entities electing the fair value option would be required to recognize changes in fair value in earnings. Such entities are also required to distinguish, on the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. SFAS No. 159 was effective for the Company as of January 1, 2008. The Company did not elect to adopt SFAS No. 159 on current assets and liabilities, but may elect to do so in the future.
 
SFAS 160.  In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51, which is effective for fiscal years beginning after December 15, 2008. Early adoption is prohibited. SFAS 160 will require Companies to present minority interest separately within the equity section of the balance sheet. The Company will adopt SFAS 160 as of January 1, 2009 is still assessing the impact this pronouncement will have on the Company’s financial statements..
 
SFAS 161.  In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The Statement changes the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 will require entities to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities , and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently assessing the impact this statement has on its consolidated financial statements and will include the relevant disclosures in its financial statements beginning with the first quarter in 2009.
 
FSP No. 142-3.  In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, Determination of the Useful Lives of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of an intangible asset. This interpretation is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. The Company is assessing the potential impact of adoption on its consolidated financial statements.


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FSP FAS 157-3.  The FASB issued this FSP in October 2008 and it is effective upon issuance including prior periods for which financial statements have not been issued. This FSP clarifies the application of SFAS 157 in an inactive market, including; how internal assumptions should be considered when measuring fair value, how observable market information in a market that is not active should be considered and how the use of market quotes should be used when assessing observable and unobservable data. The Company adopted this FSP upon the date of issuance and did not have a material impact on its consolidated financial statements.
 
FSP FAS 140-4 and FIN 46R-8.  The FASB issued this FSP in December 2008 and it is effective for the first reporting period ending after December 15, 2008. This FSP requires additional disclosures related to variable interest entities in accordance with SFAS 140 and FIN 46R. These disclosures include significant judgments and assumptions, restrictions on assets, risks and the affects on financial position, financial performance and cash flows. The Company will adopt this FSP as of January 1, 2009, but does not expect it to have a material impact on our consolidated results of operations, cash flows or financial condition.
 
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk
 
Interest Rate Risk
 
At December 31, 2008, 42.5% of our long-term debt bears interest at variable rates. Accordingly, our earnings and after-tax cash flow are affected by changes in interest rates. Assuming the current level of borrowings at variable rates and assuming a one percentage point change in the 2008 average interest rate under these borrowings, it is estimated that our 2008 interest expense and net income would have changed by $3.0 million. As part of our efforts to mitigate interest rate risk, in May 2005, we entered into a forward-starting (effective March 2006) LIBOR-based interest rate swap agreement that effectively fixed the interest rate, based on LIBOR, on $400.0 million of our current floating rate bank borrowings for a three-year period. This agreement is intended to reduce our exposure to interest rate fluctuations and was not entered into for speculative purposes. Segregating the $296.0 million of borrowings outstanding at December 31, 2008 that are not subject to the interest rate swap and assuming a one percentage point change in the 2008 average interest rate under these borrowings, it is estimated that our 2008 interest expense and net income would have changed by $4.0 million.
 
In the event of an adverse change in interest rates, our management would likely take actions, in addition to the interest rate swap agreement discussed above, to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, additional analysis is not possible at this time. Further, such analysis would not consider the effects of the change in the level of overall economic activity that could exist in such an environment.
 
Foreign Currency Risk
 
None of our operations are measured in foreign currencies. As a result, our financial results are not subject to factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets.
 
Item 8.   Financial Statements and Supplementary Data
 
The information in response to this item is included in our consolidated financial statements, together with the reports thereon of PricewaterhouseCoopers LLP and KPMG LLP, beginning on page F-1 of this Annual Report on Form 10-K, which follows the signature page hereto.
 
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
On June 17, 2008, following an extensive review and request-for-proposal process, the Audit Committee of the Company determined not to renew its engagement of KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm (“auditors”) and dismissed them as the Company’s auditors. The Company appointed PricewaterhouseCoopers LLP as the Company’s auditors for the fiscal year ending December 31, 2008.


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KMPG’s audit reports on the Company’s consolidated financial statements as of and for the years ended December 31, 2007 and 2006 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except as follows:
 
KPMG’s report on the Company’s consolidated financial statements as of and for the year ended December 31, 2006 contained a separate paragraph stating that “As discussed in Note 1 to the consolidated financial statements effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, Share Based Payment.” KPMG’s report on the Company’s consolidated financial statements as of and for the year ended December 31, 2007 contained separate paragraphs stating that “As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, Share Based Payment.” and “As discussed in Note 1 to the consolidated financial statements, effective January 1, 2007, the Company adopted the Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.”
 
KPMG’s reports on management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as of December 31, 2007 and 2006 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that KPMG’s 2006 report indicates that the Company did not maintain effective internal control over financial reporting as of December 31, 2006 because of the effect of a material weakness, as further described below.
 
During the two most recent fiscal years ended December 31, 2007, and through the date hereof, there were no: (1) disagreements with KMPG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference to the subject matter of the disagreement(s) in connection with its reports, or (2) “reportable events” as defined in Regulation S-K, Item 304(a)(1)(v); except that in the Company’s annual report on Form 10-K for the year ended December 31, 2006, management concluded in its report, and KPMG concurred, that the Company’s internal control over financial reporting as of December 31, 2006 was not effective as a result of a material weakness (at that time, management concluded that the Company did not maintain sufficient, adequately trained personnel in its corporate accounting function). The Company authorized KPMG to respond fully to any inquiries from Pricewaterhouse Coopers LLP regarding this matter.
 
Item 9A.   Controls and Procedures
 
(a)  Evaluation of Disclosure Controls and Procedures
 
We maintain a set of disclosure controls and procedures (as defined in 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, “the Exchange Act”) designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Such disclosure controls and procedures are designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chairman, President and Chief Executive Officer (“CEO”) and Executive Vice President, Treasurer and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. At the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded our disclosure controls and procedures were not effective as of December 31, 2008 because of the material weakness described below in Management’s Report on Internal Control Over Financial Reporting.
 
(b)  Management’s Report on Internal Control over Financial Reporting
 
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company’s management assessed the effectiveness of its internal control over financial reporting as of


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December 31, 2008. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework.
 
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
 
Management identified the following material weakness in the Company’s internal control over financial reporting as of December 31, 2008:
 
We did not maintain a sufficient complement of personnel with the level of financial accounting technical expertise necessary to facilitate an effective review of certain corporate accounting transactions. As a result of this deficiency, we did not timely identify a computational error related to the SFAS 157 mark-to-market adjustment on the Company’s interest rate swap instrument. This deficiency resulted in an audit adjustment to the consolidated financial statements as of December 31, 2008 to correct an overstatement of interest expense and accrued liabilities. Additionally, this control deficiency could result in misstatements that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined that this control deficiency constitutes a material weakness.
 
As a result of the material weakness described above, the Company’s management has concluded that, as of December 31, 2008, its internal control over financial reporting was not effective based on criteria in Internal Control — Integrated Framework issued by the COSO.
 
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their report which appears herein.
 
     
Lewis W. Dickey, Jr. 
  Martin R. Gausvik
     
Chairman, President, Chief Executive Officer and Director   Executive Vice President, Treasurer, and Chief Financial Officer
 
(c)  Changes in Internal Control over Financial Reporting
 
As described above, there were changes in our internal control over financial reporting during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Item 9B.   Other Information
 
None.


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PART III
 
Item 10.   Directors and Executive Officers and Corporate Governance
 
The required information with regard to our executive officers is contained in Part I of this report. In accordance with General Instruction G. (3) of Form 10-K, the registrant intends to file the remaining information required by this Item pursuant to an amendment to this annual report on Form 10-K not later than 120 days after the end of the fiscal year covered by this Form 10-K.
 
Item 11.   Executive Compensation
 
In accordance with General Instruction G. (3) of Form 10-K, the registrant intends to file the information required by this Item pursuant to an amendment to this annual report on Form 10-K not later than 120 days after the end of the fiscal year covered by this Form 10-K.
 
Item 12.   Security Ownership of Certain Beneficial Owners & Management and Related Stockholder Matters
 
The required information regarding securities authorized for issuance under our executive compensation plans is contained in Part II of this report. In accordance with General Instruction G. (3) of Form 10-K, the registrant intends to file the remaining information required by this Item pursuant to an amendment to this annual report on Form 10-K not later than 120 days after the end of the fiscal year covered by this Form 10-K.
 
Item 13.   Certain Relationships and Related Transactions, and Director Independence
 
In accordance with General Instruction G. (3) of Form 10-K, the registrant intends to file the information required by this Item pursuant to an amendment to this annual report on Form 10-K not later than 120 days after the end of the fiscal year covered by this Form 10-K.
 
Item 14.   Principal Accountant Fees and Services
 
In accordance with General Instruction G. (3) of Form 10-K, the registrant intends to file the information required by this Item pursuant to an amendment to this annual report on Form 10-K not later than 120 days after the end of the fiscal year covered by this Form 10-K.
 
PART IV
 
Item 15.   Exhibits and Financial Statement Schedules
 
(a) (1)-(2) Financial Statements.  The financial statements and financial statement schedule listed in the Index to Consolidated Financial Statements appearing on page F-1 of this annual report on Form 10-K are filed as a part of this report. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted either because they are not required under the related instructions or because they are not applicable.
 
(a) (3) Exhibits.
 
         
  3 .1   Amended and Restated Certificate of Incorporation of Cumulus Media Inc., as amended (incorporated herein by reference to Exhibit 3.1 to the Company’s Form 8-K, filed on November 26, 2008).
  3 .2   Amended and Restated Bylaws of Cumulus Media Inc. (incorporated herein by reference to Exhibit 3.2 of the Company’s Form 8-K, filed on November 26, 2008).
  4 .1   Form of Class A Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 of our current report on Form 8-K, filed on August 2, 2002).
  4 .2   Voting Agreement, dated as of June 30, 1998, by and between NationsBanc Capital Corp., Cumulus Media Inc. and the stockholders named therein (incorporated herein by reference to Exhibit 4.2 of our quarterly report on Form 10-Q for the period ended September 30, 2001).


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  4 .3   Shareholder Agreement, dated as of the March 28, 2002, by and between BancAmerica Capital Investors SBIC I, L.P. and Cumulus Media Inc. (incorporated herein by reference to Exhibit(d)(3) of our Schedule TO-I, filed on May 17, 2006).
  4 .4   Voting Agreement, dated as of January 6, 2009, by and among Cumulus Media, Inc. and the Dickey stockholders. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on January 6, 2009).
  10 .1   Cumulus Media Inc. 1998 Employee Stock Incentive Plan (incorporated herein by reference to Exhibit 10.9 of our registration statement on Form S-1, filed on June 25, 1998 and declared effective on June 26, 1998 (Commission File No. 333-48849).
  10 .2   Cumulus Media Inc. 1999 Stock Incentive Plan (incorporated herein by reference to Exhibit 4.1 of our registration statement on Form S-8, filed on June 7, 2001 (Commission File No. 333-62542)).
  10 .3   Cumulus Media Inc. 1999 Executive Stock Incentive Plan (incorporated herein by reference to Exhibit 4.2 of our registration statement on Form S-8, filed on June 7, 2001 (Commission File No. 333-62542)).
  10 .4   Cumulus Media Inc. 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 4.1 of our registration statement on Form S-8, filed on June 7, 2001 (Commission File No. 333-62538)).
  10 .5   Cumulus Media Inc. 2002 Stock Incentive Plan (incorporated herein by reference to Exhibit 4.1 of our registration statement on Form S-8, filed on April 15, 2003 (Commission File No. 333-104542)).
  10 .6   Amended and Restated Cumulus Media 2004 Equity Incentive Plan (incorporated herein by reference to Exhibit A of our proxy statement on Schedule 14A, filed on April 13, 2007 (Commission File No. 333-118047)).
  10 .7   Cumulus Media 2008 Equity Incentive Plan (incorporated herein by reference to Exhibit A of our proxy statement on Schedule 14A, filed on October 17, 2008 (Commission File No. 000-24525)).
  10 .8   Form of Restricted Shares Agreement for awards under the Cumulus Media, Inc. 1998 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on May 27, 2008).
  10 .9   Restricted Stock Award, dated April 25, 2005, between Cumulus Media Inc. and Lewis W. Dickey, Jr. (incorporated herein by reference to Exhibit 10.1 of our current report on Form 8-K, filed on April 29, 2005).
  10 .10   Form of Restricted Stock Award (incorporated herein by reference to Exhibit 10.2 of our current report on Form 8-K, filed on April 29, 2005).
  10 .11   Form of Restricted Share Award Certificate (incorporated herein by reference to Exhibit (d)(7) of our Schedule TO-I, filed on December 1, 2008).
  10 .12   Form of New Option Award Certificate (incorporated herein by reference to Exhibit (d)(8) of our Schedule TO-I, filed on December 1, 2008).
  10 .13   Form of 2008 Equity Incentive Plan Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 of our current report on form 8-K, filed on March 4, 2009.).
  10 .14*   Form of 2008 Equity Incentive Plan Stock Option Award Agreement.
  10 .15   Third Amended and Restated Employment Agreement between Cumulus Media Inc. and Lewis W. Dickey, Jr. (incorporated herein by reference to Exhibit 10.1 to our current report on Form 8-K, filed on December 22, 2006).
  10 .16   First Amendment to Employment Agreement, dated as of December 31, 2008, between Cumulus Media, Inc. and Lewis W. Dickey, Jr. (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K, filed on January 6, 2009).
  10 .17   Employment Agreement between Cumulus Media Inc. and John G. Pinch (incorporated herein by reference to Exhibit 10.2 of our quarterly report on Form 10-Q for the period ended September 30, 2001).
  10 .18   First Amendment to Employment Agreement, dated as of December 31, 2008, between Cumulus Media, Inc. and John G. Pinch. (incorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K, filed on January 6, 2009).
  10 .19   Employment Agreement between Cumulus Media Inc. and Martin Gausvik (incorporated herein by reference to Exhibit 10.3 of our quarterly report on Form 10-Q for the period ended September 30, 2001).

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  10 .20   First Amendment to Employment Agreement, dated as of December 31, 2008, between Cumulus Media, Inc. and Martin R. Gausvik. (incorporated herein by reference to Exhibit 10.5 to the Company’s Form 8-K, filed on January 6, 2009).
  10 .21   Employment Agreement between Cumulus Media Inc. and John W. Dickey (incorporated herein by reference to Exhibit 10.4 of our quarterly report on Form 10-Q for the period ended September 30, 2001).
  10 .22   First Amendment to Employment Agreement, dated as of December 31, 2008, between Cumulus Media, Inc. and John W. Dickey. (incorporated herein by reference to Exhibit 10.3 to the Company’s Form 8-K, filed on January 6, 2009).
  10 .23   Registration Rights Agreement, dated as of June 30, 1998, by and among Cumulus Media Inc., NationsBanc Capital Corp., Heller Equity Capital Corporation, The State of Wisconsin Investment Board and The Northwestern Mutual Life Insurance Company (incorporated herein by reference to Exhibit 4.1 of our quarterly report on Form 10-Q for the period ended September 30, 2001).
  10 .24   Amended and Restated Registration Rights Agreement, dated as of January 23, 2002, by and among Cumulus Media Inc., Aurora Communications, LLC and the other parties identified therein (incorporated herein by reference to Exhibit 2.2 of our current report on Form 8-K, filed on February 7, 2002).
  10 .25   Registration Rights Agreement, dated March 28, 2002, between Cumulus Media Inc. and DBBC, L.L.C. (incorporated herein by reference to Exhibit 10.18 of our annual report on Form 10-K for the year ended December 31, 2002).
  10 .26   Credit Agreement, dated as of June 7, 2006, among Cumulus Media Inc., the Lenders party thereto, and Bank of America, N.A., as Administrative Agent (incorporated herein by reference to 10.1 of our current report on Form 8-K, filed on June 8, 2006).
  10 .27   Guarantee and Collateral Agreement, dated as of June 15, 2006, among the Cumulus Media Inc., its Subsidiaries identified therein, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.1 of our quarterly report on Form 10-Q for the quarter ended September 30, 2006.
  10 .28   Amendment No. 1 to Credit Agreement, dated as of June 11, 2007, among Cumulus Media Inc., the Lenders party thereto, and Bank of America, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.1 of our current report on Form 8-K, filed on June 15, 2007).
  10 .29   Termination Agreement and Release, dated as of May 11, 2008, between Cumulus Media, Inc., Cloud Acquisition Corporation and Cloud Merger Corporation. (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on May 12, 2008).
  16 .1   Letter regarding a change in the certifying accountant, dated as of June 23, 2008 from KPMG LLP to the Securities and Exchange Commission. (incorporated herein by reference to Exhibit 16.1 to the Company’s Form 8-K, filed on June 23, 2008).
  21 .1   Subsidiaries of Cumulus Media Inc. (incorporated herein by reference to Exhibit 21.1 to the Company’s Form 10-K, filed on March 16, 2008).
  23 .1*   Consent of PricewaterhouseCoopers LLP.
  23 .2*   Consent of KPMG, LLP
  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.
 
 
Filed herewith
 
(b) Exhibits. See Item 15(a)(3).
 
(c) Financial Statement Schedules.  Schedule II — Valuation and Qualifying Accounts

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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 16th day of March, 2009
 
CUMULUS MEDIA INC.
 
 
  By 
/s/  Martin R. Gausvik
Martin R. Gausvik
Executive Vice President, Treasurer
and Chief Financial Officer
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
             
Signature
 
Title
 
Date
 
         
/s/  Lewis W. Dickey, Jr.

Lewis W. Dickey, Jr.
  Chairman, President,
Chief Executive Officer and Director, (Principal Executive Officer)
  March 16, 2009
         
/s/  Martin R. Gausvik

Martin R. Gausvik
  Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
  March 16, 2009
         
/s/  Ralph B. Everett

Ralph B. Everett
  Director   March 16, 2009
         
/s/  Holcombe T. Green, Jr.

Holcombe T. Green, Jr.
  Director   March 16, 2009
         
/s/  Eric P. Robison

Eric P. Robison
  Director   March 16, 2009
         
/s/  Robert H. Sheridan, III

Robert H. Sheridan, III
  Director   March 16, 2009


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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
The following Consolidated Financial Statements of Cumulus Media Inc. are included in Item 8:
 
         
    Page in
    this
    Report
 
(1)  Financial Statements
       
    F-2  
    F-5  
    F-6  
    F-7  
    F-8  
    F-9  
(2)  Financial Statement Schedule
       
    S-1