<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] 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: 333-36771
CITADEL BROADCASTING COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 86-0703641
- ---------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
140 South Ash Avenue, Tempe, Arizona 85281
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 731-5222
--------------------------
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 X No
----- -----
As of April 24, 1998, there were 40,000 shares of common stock, $.001 par
value per share, outstanding.
<PAGE> 2
Citadel Broadcasting Company
Form 10-Q
March 31, 1998
Index
<TABLE>
<CAPTION>
Part I Page
----
<S> <C> <C>
Item 1 - Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . 8
Part II
Item 1 - Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2 - Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . 10
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6 - Exhibits and Reports on Form 8-K ........ . . . . . . . . . . . . . . 11
</TABLE>
2
<PAGE> 3
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,684,991 $ 2,792,033
Cash held in escrow 718,561 --
Accounts receivable, less allowance for doubtful
accounts of $808,942 in 1997 and $1,001,643 in 1998 25,744,137 24,317,915
Notes receivable from related parties 246,455 269,608
Prepaid expenses 1,532,227 2,271,302
------------- -------------
Total current assets 35,926,371 29,650,858
Property and equipment, net 35,242,284 37,103,472
Intangible assets, net 268,689,516 286,005,832
Deposits for pending acquisitions 650,000 --
Other assets 3,664,123 3,633,078
------------- -------------
$ 344,172,294 $ 356,393,240
============= =============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 4,001,194 $ 2,185,289
Accrued liabilities 9,060,129 8,215,588
Current maturities of other long-term obligations 271,352 304,009
------------- -------------
Total current liabilities 13,332,675 10,704,886
Notes payable, less current maturities 90,084,059 107,084,058
Senior subordinated notes payable 98,331,117 98,373,254
Other long-term obligations, less current maturities 1,012,649 894,629
Deferred tax liability 23,270,338 26,283,502
Exchangeable preferred stock 102,009,531 105,581,675
Shareholder's equity:
Common stock, $.001 par value; authorized 136,300
shares, issued and outstanding 40,000 shares 40 40
Additional paid-in capital 42,296,316 38,750,505
Accumulated deficit (26,164,431) (31,279,309)
------------- -------------
Total shareholder's equity 16,131,925 7,471,236
------------- -------------
$ 344,172,294 $ 356,393,240
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
CITADEL BROADCASTING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1998
------------ ------------
<S> <C> <C>
Gross broadcasting revenue $ 16,071,222 $ 31,070,596
Less agency commissions (1,565,626) (2,931,392)
------------ ------------
Net broadcasting revenue 14,505,596 28,139,204
Operating expenses:
Station operating expenses 11,276,722 21,897,467
Depreciation and amortization 2,524,430 5,946,338
Corporate general and administrative 750,446 1,117,733
------------ ------------
Operating expenses 14,551,598 28,961,538
Operating loss (46,002) (822,334)
Nonoperating expenses (income):
Interest expense 1,953,776 4,759,308
Other (income) expense, net (10,949) (37,358)
------------ ------------
Nonoperating expenses, net 1,942,827 4,721,950
Loss before income taxes (1,988,829) (5,544,284)
Deferred income tax (benefit) (35,056) (429,406)
------------ ------------
Net loss (1,953,773) (5,114,878)
Dividend requirement for exchangeable preferred stock -- 3,572,347
------------ ------------
Net loss applicable to common shares $ (1,953,773) $ (8,687,225)
============ ============
Basic and diluted net loss per common share $ (48.84) (217.18)
============ ============
Weighted average common shares outstanding
40,000 40,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,953,773) $ (5,114,878)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,524,430 5,946,338
Amortization of debt issuance costs and debt discounts 10,740 96,088
Bad debt expense 157,244 258,305
Deferred tax benefit (35,056) (429,406)
Changes in assets and liabilities, net of acquisitions:
Decrease in accounts receivable and notes receivable from
related parties 614,427 1,144,764
Increase in prepaid expenses (35,298) (735,823)
(Increase) decrease in other assets (113,254) 664,325
Increase (decrease) in accounts payable 168,039 (1,815,905)
Decrease in accrued liabilities (253,860) (992,541)
------------ ------------
Net cash provided by (used in) operating activities: 1,083,639 (978,733)
Cash flows from investing activities:
Capital expenditures (800,328) (185,616)
Capitalized acquisition/IPO costs (306,731) (857,920)
Cash paid to acquire stations (12,000,451) (20,431,101)
Deposits for pending acquisitions (500,000) 650,000
------------ ------------
Net cash used in investing activities (13,607,510) (20,824,637)
Cash flows from financing activities:
Capital contribution from parent company 7,311,373 40,656
Proceeds from notes payable 6,000,000 17,000,000
Principal payments on other obligations (328,862) (54,796)
Payment of debt issuance costs -- (75,448)
------------ ------------
Net cash provided by financing activities 12,982,511 16,910,412
Net increase (decrease) in cash and cash equivalents 458,640 (4,892,958)
Cash and cash equivalents, beginning of period 1,588,366 7,684,991
------------ ------------
Cash and cash equivalents, end of period $ 2,047,006 $ 2,792,033
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
CITADEL BROADCASTING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and notes thereto included in Citadel Broadcasting
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
(2) Recent Transactions
On January 2, 1998, the Company acquired radio stations WEMR-AM and WEMR-FM in
Wilkes-Barre/Scranton, Pennsylvania for a purchase price of $815,000. The
acquisition was accounted for using the purchase method of accounting.
On February 12, 1998, the Company acquired radio stations KQFC-FM, KKGL-FM and
KBOI-AM and a parcel of land in Boise, Idaho for an aggregate purchase price of
$14,400,000. The acquisition was accounted for using the purchase method of
accounting.
On March 26, 1998, the Company acquired radio stations WSGD-FM, WDLS-FM and
WCDL-AM in Wilkes-Barre/Scranton, Pennsylvania for a purchase price of
$6,000,000. The acquisition was accounted for using the purchase method of
accounting.
(3) Citadel License, Inc. Financial Data
The operations of Citadel License, Inc. ("Citadel License"), a wholly owned
subsidiary of the Company, include holding FCC licenses for all stations owned
by the Company and the amortization of these licenses. Citadel License has
guaranteed the Senior Subordinated Notes of the Company. The guarantee is full,
unconditional and joint and several. The separate financial statements of
Citadel License have not been presented because management of the Company has
determined they would not be material to investors. There are no costs or
expenses of Citadel License that are borne by Citadel Broadcasting Company.
The following is summary financial data for Citadel License:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
------------ ------------
(unaudited)
<S> <C> <C>
Balance Sheets:
Intangible assets, net (broadcast licenses) $137,073,551 $157,626,020
Other assets 2,048 1,364
------------ ------------
Total assets $137,075,599 $157,627,384
============ ============
Shareholder's equity 137,075,599 157,627,384
------------ ------------
Total liabilities and shareholder's equity $137,075,599 $157,627,384
============ ============
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1997 1998
-------- ----------
(unaudited)
<S> <C> <C>
Statements of Operations:
Amortization expense $394,650 $1,661,932
-------- ----------
Net loss $394,650 $1,661,932
======== ==========
</TABLE>
At present, Citadel License is the only subsidiary of the Company.
(4) Subsequent Events
On April 21, 1998, the Company acquired radio stations KIZN-FM and KZMG-FM in
Boise, Idaho for an aggregate purchase price of $14,600,000. The acquisition
will be accounted for using the purchase method of accounting. In conjunction
with the acquisition, the Company borrowed an additional $14,000,000 under its
senior credit facility.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BASIS OF PRESENTATION
Certain items in this Form 10-Q constitute "forward-looking statements"
within the meaning of the Federal Private Securities Litigation Reform Act of
1995. Forward-looking statements are typically identified by the words
"believe," "expect," "anticipate," "intend," "estimate," and similar
expressions. Readers are cautioned that any such forward-looking statements are
not guarantees of future performance and that matters referred to in such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, but are not limited to, risks and uncertainties relating to
leverage, the need for additional funds, consummation of the pending
acquisitions, integration of the recently completed acquisitions, the ability of
the Company to achieve certain cost savings, the management of growth, the
introduction of new technology, changes in the regulatory environment, the
popularity of radio as a broadcasting medium and changing consumer tastes. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
RESULTS OF OPERATIONS
The Company's unaudited consolidated financial statements tend not to
be directly comparable from period to period due to acquisition activity. The
major acquisitions in the first quarter of 1997 and 1998, all of which have been
accounted for using the purchase method of accounting and the results of
operations of which have been included since the date of acquisition, were as
follows:
1997 First Quarter Acquisitions: On January 1, 1997, the Company's
parent company, Citadel Communications Corporation, acquired Deschutes River
Broadcasting, Inc. ("Deschutes"). On June 20, 1997, Deschutes was merged with
and into the Company. The results of operations for the three months ended March
31, 1997 reflect three months of operations of Deschutes. KENZ-FM in Salt Lake
City, Utah was acquired on February 14, 1997.
1998 First Quarter Acquisitions: WEMR-AM and WEMR-FM in
Wilkes-Barre/Scranton, Pennsylvania were acquired on January 2, 1998. KQFC-FM,
KKGL-FM and KBOI-AM in Boise, Idaho were acquired on February 12, 1998. WSGD-FM,
WDLS-FM and WCDL-AM in Wilkes-Barre/Scranton, Pennsylvania were acquired on
March 26, 1998.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Net Broadcasting Revenue. Net broadcasting revenue increased $13.6
million or 94.0% to $28.1 million in the period ended March 31, 1998 from $14.5
million in the period ended March 31, 1997. The inclusion of revenue from the
acquisitions of radio stations and revenue generated from LMAs and JSAs entered
into during 1997 and 1998 provided $12.4 million of the increase. For stations
owned and operated over the comparable period in 1997 and 1998, net broadcasting
revenue improved $1.2 million or 8.7% to $15.5 million in 1998 from $14.3
million in 1997, primarily due to increased ratings and improved selling
efforts.
Station Operating Expenses. Station operating expenses increased $10.6
million or 94.2% to $21.9 million in the period ended March 31, 1998 from $11.3
million in the period ended March 31, 1997. The increase was primarily
attributable to the inclusion of station operating expenses of the radio station
acquisitions and the LMAs and JSAs entered into during 1997 and 1998.
Broadcast Cash Flow. As a result of the factors described above,
broadcast cash flow increased $3.0 million or 93.3% to $6.2 million in the
period ended March 31, 1998 from $3.2 million in the period
8
<PAGE> 9
ended March 31, 1997. As a percentage of net broadcasting revenue, broadcast
cash flow remained approximately even, 22.2% in the period ended March 31, 1998
compared to 22.3% in the period ended March 31, 1997.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.4 million or 48.9% to $1.1 million in the
period ended March 31, 1998 from $0.7 million in the period ended March 31,
1997. The increase was due primarily to an increase in staffing levels needed to
support the Company's growth.
EBITDA. As a result of the factors described above, EBITDA increased
$2.6 million or 106.7% to $5.1 million in the period ended March 31, 1998 from
$2.5 million in the period ended March 31, 1997.
Depreciation and Amortization. Depreciation and amortization expense
increased $3.4 million or 135.6% to $5.9 million in the period ended March 31,
1998 from $2.5 million in the period ended March 31, 1997, primarily due to
radio station acquisitions consummated during 1997 and 1998.
Interest Expense. Interest expense increased approximately $2.8 million
or 143.6% to $4.8 million in the period ended March 31, 1998 from $2.0 million
in the period ended March 31, 1997, primarily due to interest expense associated
with additional borrowings to fund acquisitions consummated in 1997 and 1998.
Net Loss. As a result of the factors described above, net loss
increased $3.1 million or 161.8% to $5.1 million in the period ended March 31,
1998 from $2.0 million in the period ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1998, net cash used in operations
decreased to $1.0 million from net cash provided from operations of $1.1 million
for the comparable 1997 period primarily due to decreases in accounts payable.
For the three months ended March 31, 1998, net cash used in investing
activities, primarily for station acquisitions, increased to $20.8 million from
$13.6 million in the comparable 1997 period.
For the three months ended March 31, 1998, net cash provided by
financing activities was $16.9 million compared to $13.0 million in the
comparable 1997 period. This increase is the result of increased borrowings in
the 1998 period for station acquisitions offset by a decrease in capital
contributions from the parent company.
In addition to acquisitions and debt service, the Company's principal
liquidity requirements will be for working capital and general corporate
purposes, including capital expenditures, which are not expected to be material
in amount. Management believes that cash from operating activities and revolving
loans under the Company's credit facility should be sufficient to permit the
Company to meet its financial obligations and to fund its operations for at
least the next 12 months, although additional capital resources may be required
in connection with the further implementation of the Company's acquisition
strategy.
The Company has not received, nor does it anticipate receiving, from
Citadel License, Inc., its wholly owned subsidiary, any dividends or other
payments. The Company is not dependent in any material respect on the receipt of
dividends or other payments from Citadel License, Inc.
9
<PAGE> 10
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not a party to any
lawsuit or proceeding which, in the opinion of the Company, is likely to have a
material adverse effect on the Company.
The Company has received two civil investigative demands ("CIDs") from
the Department of Justice ("DOJ") pursuant to which the DOJ has requested
information from the Company to determine whether the Company has violated
certain antitrust laws. The first CID was issued on September 27, 1996 and
concerns the Company's acquisition of all of the assets of KRST-FM in
Albuquerque, New Mexico on October 9, 1996 (the "KRST Acquisition"). The CID
requested written answers to interrogatories and the production of certain
documents concerning the radio station market in Albuquerque, in general, and
the KRST Acquisition, in particular, to enable the DOJ to determine, among other
things, whether the KRST Acquisition would result in excessive concentration in
the market. The Company has responded to the CID. The DOJ requested supplemental
information on January 27, 1997, to which the Company also responded. There have
been no communications since that time and, at present, the Company has been
given no indication from the DOJ regarding its intended future actions. If the
DOJ were to proceed with and successfully challenge the KRST Acquisition, the
Company may be required to divest one or more radio stations in Albuquerque
and/or it may be subject to the payment of fines.
The second CID was issued on October 9, 1996 and concerned the
Company's Joint Sales Agreements (the "JSAs") relating to a total of eight radio
stations in Spokane, Washington and Colorado Springs, Colorado and which became
effective in January 1996. Pursuant to such CID, the DOJ has requested
information to determine whether the JSAs constituted a de facto merger,
resulting in a combination or contract in restraint of trade. The Company
responded to the CID, and has recently met with the DOJ concerning this matter.
If the DOJ were to proceed with and successfully challenge the JSAs, the Company
may be required to terminate the JSAs and/or it may be subject to the payment of
fines.
At this time, the Company cannot predict the impact on the Company, if
any, of these proceedings or any future DOJ demands.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 1, 1998, the Company issued 65,514 shares of its 13 1/4%
Series A Exchangeable Preferred Stock to the holders of the 13 1/4% Series A
Exchangeable Preferred Stock in lieu of payment of cash dividends. As no public
offering was involved, the issuance of such shares was exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended.
ITEM 5. OTHER INFORMATION
On April 24, 1998, the Company's parent, Citadel Communications
Corporation, filed a registration statement on Form S-1 with the Securities and
Exchange Commission relating to a proposed public offering of shares of its
common stock. The number of shares, price per share and proceeds from this
proposed offering have not yet been determined. There can be no assurance that
the offering will be consummated.
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements 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.
CITADEL BROADCASTING COMPANY
Date: April 24, 1998 By: /s/ Lawrence R. Wilson
---------------- -------------------------------------------
Lawrence R. Wilson
Chairman of the Board
Chief Executive Officer and President
(Principal Executive Officer)
Date: April 24, 1998 By: /s/ Donna L. Heffner
---------------- -------------------------------------------
Donna L. Heffner
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS IN CITADEL BROADCASTING COMPANY'S FORM 10-Q FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 2,792,033
<SECURITIES> 0
<RECEIVABLES> 25,319,558
<ALLOWANCES> (1,001,643)
<INVENTORY> 0
<CURRENT-ASSETS> 29,650,858
<PP&E> 47,367,337
<DEPRECIATION> (10,263,865)
<TOTAL-ASSETS> 356,393,240
<CURRENT-LIABILITIES> 10,704,886
<BONDS> 206,351,941
105,581,675
0
<COMMON> 40
<OTHER-SE> 7,471,196
<TOTAL-LIABILITY-AND-EQUITY> 356,393,240
<SALES> 0
<TOTAL-REVENUES> 28,139,204<F1>
<CGS> 0
<TOTAL-COSTS> 22,756,895
<OTHER-EXPENSES> 5,946,338
<LOSS-PROVISION> 258,305
<INTEREST-EXPENSE> 4,759,308
<INCOME-PRETAX> (5,544,284)
<INCOME-TAX> (429,406)
<INCOME-CONTINUING> (5,114,878)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,114,878)
<EPS-PRIMARY> (217.18)
<EPS-DILUTED> (217.18)
<FN>
<F1>COMPRISED OF NET REVENUES (GROSS REVENUES NET OF AGENCY COMMISSIONS)
</FN>
</TABLE>
