<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 June 30, 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 August 10, 1998, there were 40,000 shares of common stock, $.001
par value per share, outstanding.
<PAGE> 2
Citadel Broadcasting Company
Form 10-Q
June 30, 1998
Index
<TABLE>
<CAPTION>
Part I Page
<S> <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. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
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CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,684,991 $ 4,211,115
Cash held in escrow 718,561 --
Accounts receivable, less allowance for doubtful
accounts of $808,942 in 1997 and $1,126,545 in 1998 25,744,137 30,564,759
Notes receivable from related parties 246,455 268,153
Prepaid expenses 1,532,227 2,627,645
------------- -------------
Total current assets 35,926,371 37,671,672
Property and equipment, net 35,242,284 36,683,624
Intangible assets, net 268,689,516 294,452,076
Deposits for pending acquisitions 650,000 --
Other assets 3,664,123 3,972,287
------------- -------------
$ 344,172,294 $ 372,779,659
============= =============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 4,001,194 $ 4,758,918
Accrued liabilities 9,060,129 9,980,946
Current maturities of other long-term obligations 271,352 343,938
------------- -------------
Total current liabilities 13,332,675 15,083,802
Notes payable, less current maturities 90,084,059 121,084,058
Senior subordinated notes payable 98,331,117 98,416,476
Other long-term obligations, less current maturities 1,012,649 1,094,325
Deferred tax liability 23,270,338 25,764,245
Exchangeable preferred stock 102,009,531 109,155,664
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 35,172,995
Accumulated deficit (26,164,431) (32,991,946)
------------- -------------
Total shareholder's equity 16,131,925 2,181,089
------------- -------------
$ 344,172,294 $ 372,779,659
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------- --------------------------------
1997 1998 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gross broadcasting revenue $ 19,937,042 $ 38,618,642 $ 36,008,264 $ 69,689,238
Less agency commissions (2,032,128) (3,834,197) (3,597,754) (6,765,589)
------------ ------------ ------------ ------------
Net broadcasting revenue 17,904,914 34,784,445 32,410,510 62,923,649
Operating expenses:
Station operating expenses 12,998,804 23,542,162 24,275,526 45,439,629
Depreciation and amortization 2,434,359 7,016,620 4,958,789 12,962,958
Corporate general and
administrative 844,397 1,150,917 1,594,843 2,268,650
------------ ------------ ------------ ------------
Operating expenses 16,277,560 31,709,699 30,829,158 60,671,237
Operating income (loss) 1,627,354 3,074,746 1,581,352 2,252,412
Nonoperating expenses (income):
Interest expense 2,211,193 5,282,955 4,164,969 10,042,263
Other income, net (80,543) (42,017) (91,492) (79,375)
------------ ------------ ------------ ------------
Nonoperating expenses, net 2,130,650 5,240,938 4,073,477 9,962,888
Loss before income taxes (503,296) (2,166,192) (2,492,125) (7,710,476)
Deferred income tax (benefit) (35,056) (453,555) (70,112) (882,961)
------------ ------------ ------------ ------------
Net loss (468,240) (1,712,637) (2,422,013) (6,827,515)
Dividend requirement for
exchangeable preferred stock -- (3,572,347) -- (7,144,694)
------------ ------------ ------------ ------------
Net loss applicable to common
shares $ (468,240) $ (5,284,984) $ (2,422,013) $(13,972,209)
============ ============ ============ ============
Basic and diluted net loss per
common share $ (11.71) $ (132.12) $ (60.55) $ (349.31)
============ ============ ============ ============
Weighted average common shares
outstanding 40,000 40,000 40,000 40,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------
1997 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,422,013) $ (6,827,515)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 4,958,789 12,962,958
Amortization of debt issuance costs and debt discounts 38,031 247,802
Bad debt expense 318,247 597,807
Deferred tax benefit (70,112) (882,961)
Changes in assets and liabilities, net of acquisitions:
Increase in accounts receivable and notes receivable from
related parties (1,971,862) (5,440,127)
Increase in prepaid expenses (428) (1,092,166)
(Increase) decrease in other assets (236,728) 875,674
Increase in accounts payable 1,121,256 757,724
(Decrease) increase in accrued liabilities (382,684) 772,127
------------ ------------
Net cash provided by operating activities 1,352,496 1,971,323
Cash flows from investing activities:
Capital expenditures (1,217,586) (641,727)
Capitalized acquisition costs (1,486,838) (1,682,685)
Cash paid to acquire stations (11,726,151) (34,530,411)
Deposits for pending acquisitions (550,000) 650,000
------------ ------------
Net cash used in investing activities (14,980,575) (36,204,823)
Cash flows from financing activities:
Capital contribution from parent company -- 40,656
Proceeds from notes payable 13,000,000 30,999,999
Principal payments on other obligations (371,223) (193,667)
Payments to parent company (312,381) --
Payment of debt issuance costs -- (87,364)
------------ ------------
Net cash provided by financing activities 12,316,396 30,759,624
Net decrease in cash and cash equivalents (1,311,683) (3,473,876)
Cash and cash equivalents, beginning of period 1,588,366 7,684,991
------------ ------------
Cash and cash equivalents, end of period $ 276,683 $ 4,211,115
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
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 six months ended June 30, 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) 1998 Acquisitions
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
approximately $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.
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 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, June 30,
1997 1998
------------ ------------
(unaudited)
<S> <C> <C>
Balance Sheets:
Intangible assets, net (broadcast licenses) $137,073,551 $157,556,696
Other assets 2,048 680
------------ ------------
Total assets $137,075,599 $157,557,376
============ ============
Shareholder's equity 137,075,599 157,557,376
------------ ------------
Total liabilities and shareholder's equity $137,075,599 $157,557,376
============ ============
</TABLE>
6
<PAGE> 7
Six Months Ended June 30,
---------------------------
1997 1998
---------- ----------
(unaudited) (unaudited)
Statements of Operations:
Amortization expense $4,546,682 $5,515,331
---------- ----------
Net loss $4,546,682 $5,515,331
========== ==========
At present, Citadel License is the only subsidiary of the Company.
(4) Subsequent Events
On July 7, 1998, the Company's parent, Citadel Communications Corporation
("CCC"), consummated the initial public offering (the "IPO") of 6,880,796 shares
of its common stock at an initial public offering price of $16.00 per share. Of
such shares, 6,250,000 shares were sold by CCC and 630,796 shares were sold by
certain stockholders of CCC. On July 14, 1998, CCC sold an additional 1,032,119
shares of its common stock at the initial public offering price pursuant to the
exercise of the underwriters' over-allotment option. Total proceeds of the IPO,
including the shares issued under the over-allotment option, were $126,606,640,
of which total proceeds to CCC were $108,357,931, total proceeds to the selling
stockholders were $9,386,244 and total underwriting discounts and commissions
were $8,862,465.
On July 15, 1998, the Company announced an agreement to purchase KAAY-FM in
Little Rock, Arkansas for an aggregate purchase price of $5,000,000. If
consummated, the acquisition will be accounted for using the purchase method of
accounting.
On July 27, 1998, the Company exercised its option to purchase WBHT-FM in
Wilkes-Barre, Pennsylvania, and, on August 13, 1998, the Company entered into a
definitive purchase agreement to purchase WBHT for an approximate purchase price
of $1,200,000. The Company has operated WBHT under a local marketing agreement
since July 3, 1997. The acquisition will be accounted for using the purchase
method of accounting.
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. For
further discussion of these and other factors, refer to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. 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 and second quarters 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 and Second Quarter Acquisitions: On January 1, 1997, the
Company's parent company, Citadel Communications Corporation ("CCC"), acquired
Deschutes River Broadcasting, Inc. ("Deschutes"). On June 20, 1997, Deschutes
was merged with and into the Company. The results of operations for the six
months ended June 30, 1997 reflect six months of operations of Deschutes.
KENZ-FM in Salt Lake City, Utah was acquired on February 14, 1997. KBER-FM in
Salt Lake City, Utah was acquired on April 10, 1997.
1998 First and Second 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. KIZN-FM and KZMG-FM in Boise, Idaho were acquired on April 21,
1998.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net Broadcasting Revenue. Net broadcasting revenue increased $16.9
million or 94.3% to $34.8 million for the three months ended June 30, 1998 from
$17.9 million for the three months ended June 30, 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 $14.3 million of the increase. For
stations owned and operated over the comparable period in 1997 and 1998, net
broadcasting revenue improved $2.6 million or 15.0% to $20.0 million in 1998
from $17.4 million in 1997, primarily due to increased ratings and improved
selling efforts.
8
<PAGE> 9
Station Operating Expenses. Station operating expenses increased $10.5
million or 81.1% to $23.5 million for the three months ended June 30, 1998 from
$13.0 million for the three months ended June 30, 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 $6.3 million or 129.1% to $11.2 million for the
three months ended June 30, 1998 from $4.9 million for the three months ended
June 30, 1997. As a percentage of net broadcasting revenue, broadcast cash flow
improved to 32.3% for the three months ended June 30, 1998 compared to 27.4% for
the three months ended June 30, 1997.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.3 million or 36.3% to $1.1 million for the
three months ended June 30, 1998 from $0.8 million for the three months ended
June 30, 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
$6.0 million or 148.5% to $10.1 million for the three months ended June 30, 1998
from $4.1 million for the three months ended June 30, 1997.
Depreciation and Amortization. Depreciation and amortization expense
increased $4.6 million or 188.2% to $7.0 million for the three months ended June
30, 1998 from $2.4 million for the three months ended June 30, 1997, primarily
due to radio station acquisitions consummated during 1997 and 1998.
Interest Expense. Interest expense increased approximately $3.1 million
or 138.9% to $5.3 million for the three months ended June 30, 1998 from $2.2
million for the three months ended June 30, 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 $1.2 million or 265.8% to $1.7 million for the three months ended June
30, 1998 from $0.5 million for the three months ended June 30, 1997.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net Broadcasting Revenue. Net broadcasting revenue increased $30.5
million or 94.1% to $62.9 million for the six months ended June 30, 1998 from
$32.4 million for the six months ended June 30, 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 $26.8 million of the increase. For
stations owned and operated over the comparable period in 1997 and 1998, net
broadcasting revenue improved $3.7 million or 11.8% to $34.6 million in 1998
from $30.9 million in 1997, primarily due to increased ratings and improved
selling efforts.
Station Operating Expenses. Station operating expenses increased $21.2
million or 87.2% to $45.4 million for the six months ended June 30, 1998 from
$24.3 million for the six months ended June 30, 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 $9.4 million or 114.9% to $17.5 million for the
six months ended June 30, 1998 from $8.1 million for the six months ended June
30, 1997. As a percentage of net broadcasting revenue, broadcast cash flow
improved to 27.8% for the six months ended June 30, 1998 compared to 25.1% for
the six months ended June 30, 1997.
9
<PAGE> 10
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.7 million or 42.2% to $2.3 million for the
six months ended June 30, 1998 from $1.6 million for the six months ended June
30, 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
$8.7 million or 132.6% to $15.2 million for the six months ended June 30, 1998
from $6.5 million for the six months ended June 30, 1997.
Depreciation and Amortization. Depreciation and amortization expense
increased $8.0 million or 161.4% to $13.0 million for the six months ended June
30, 1998 from $5.0 million for the six months ended June 30, 1997, primarily due
to radio station acquisitions consummated during 1997 and 1998.
Interest Expense. Interest expense increased approximately $5.9 million
or 141.1% to $10.0 million for the six months ended June 30, 1998 from $4.1
million for the six months ended June 30, 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 $4.4 million or 181.9% to $6.8 million for the six months ended June
30, 1998 from $2.4 million for the six months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1998, net cash provided by operations
increased to $2.0 million from $1.4 million for the comparable 1997 period
primarily due to a decrease in other assets and an increase in accrued
liabilities offset by increases in accounts receivable and prepaid expenses.
For the six months ended June 30, 1998, net cash used in investing
activities, primarily for station acquisitions, increased to $36.2 million from
$15.0 million in the comparable 1997 period.
For the six months ended June 30, 1998, net cash provided by financing
activities was $30.8 million compared to $12.3 million in the comparable 1997
period. This increase is the result of increased borrowings in the 1998 period
for station acquisitions.
CCC used the net proceeds from its initial public offering of shares of
its common stock in July 1998 to repay indebtedness under the Company's Credit
Facility. Immediately following this repayment, the Company had approximately
$130.3 million available under the Credit Facility.
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.
YEAR 2000 MATTERS
Many existing computer programs use only two digits to identify a year
(for example, "98" is used to represent "1998"). Such programs may read "00" as
the year 1900, thus incorrectly recognizing dates beginning with the year 2000,
or may otherwise produce erroneous results or cease processing when dates after
1999 are encountered. Such failures could cause disruptions in normal business
operations.
10
<PAGE> 11
In each of its markets, the Company employs centralized accounting and
traffic (advertising scheduling) systems for all of its stations in the market.
Although not directly related to the year 2000 problem, the Company has
undertaken to replace its accounting and traffic software in each market. The
Company expects that this program will minimize or eliminate year 2000 problems
associated with the software for such systems. This software upgrade is expected
to be completed by the end of the third quarter of 1998 at a cost of
approximately $0.3 million in 1998, which consists primarily of the annual lease
rental payment of $0.2 million for software and $0.1 million in related one-time
costs. The operating lease for the computer software is anticipated to be for a
period of five years. In connection with this software upgrade, the Company
expects that its accounting and traffic hardware systems will be assessed by the
software vendor for both compatibility with the new software and year 2000
compliance, and that the Company may also engage outside consultants, as
necessary and as available, for such purpose. Much of the total cost of the
hardware upgrade will be subject to trade agreements and, as such, will be
expensed in accordance with the Company's policy of accounting for barter
transactions.
The Company has assembled a task force consisting of the Company's
three regional Presidents, Chief Financial Officer, regional engineers and two
internal information systems employees to inventory and assess the Company's
other internal information and operating systems, including its broadcast and
related support systems which may contain embedded microprocessors, in order to
develop a strategy to address the computer software and hardware changes and
facility upgrades that may be required to remedy the year 2000-related
deficiencies of those systems. The Company recognizes that it must also conduct
an assessment of year 2000-related problems originating with third parties
outside of the Company's control, including vendors of programming software and
providers of satellite programming.
Until the task force makes substantial progress in identifying problem
areas, it is not possible to estimate the extent of year 2000 deficiencies in
the Company's systems, the costs to the Company of correcting such deficiencies
and the time frame in which any required corrections will be made. In addition,
numerous uncertainties relating to such matters exist, including the ability to
locate, test and correct or replace relevant computer codes in software and
embedded microprocessors, the availability and cost of personnel trained in this
area, if required, and the extent to which third parties will be able to timely
correct year 2000 problems which may originate with such third parties, but
which impact the Company's operations. Given such uncertainties and the
preliminary nature of the Company's investigations to date, there can be no
assurances that year 2000-related deficiencies and required corrective measures
will not have a material adverse effect on the Company's business, financial
condition and results of operations.
11
<PAGE> 12
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 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.
The second CID was issued on October 9, 1996 and concerned the
Company's Joint Sales Agreement (the "JSA") 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 JSA constituted a de facto merger or
amounted to a combination or contract in restraint of trade. The Company
responded to the CID, and has met with the DOJ concerning this matter. If the
DOJ were to proceed with and successfully challenge the JSA, the Company may be
required to terminate the JSA.
A third CID was received on June 29, 1998 and concerned the proposed
sale by the Company of stations WQWK, WRSC, WBLF and WIKN in State College,
Pennsylvania to Talleyrand Broadcasting. The Company is currently preparing its
response to the CID. If the DOJ were to successfully challenge the transaction
prior to its closing, the parties may be required to abandon the proposed sale.
Additionally, there are other delays in connection with this transaction
unrelated to the DOJ.
At this time, the Company cannot predict the impact on the Company, if
any, of these proceedings or any future DOJ demands.
ITEM 5. OTHER INFORMATION
On July 7, 1998, CCC consummated the initial public offering (the
"IPO") of 6,880,796 shares of its common stock at an initial public offering
price of $16.00 per share. Of such shares, 6,250,000 shares were sold by CCC and
630,796 shares were sold by certain stockholders of CCC. On July 14, 1998, CCC
sold an additional 1,032,119 shares of its common stock at the initial public
offering price pursuant to the exercise of the underwriters' over-allotment
option. Total proceeds of the IPO, including the shares issued under the
over-allotment option, were $126,606,640, of which total proceeds to CCC were
$108,357,931, total proceeds to the selling stockholders were $9,386,244 and
total underwriting discounts and commissions were $8,862,465.
12
<PAGE> 13
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
On July 9, 1998, the Company filed a report on Form 8-K, the
purpose of which was to report, under Item 5 Other Events, the
consummation of an initial public offering of common shares by
Citadel Communications Corporation, the Company's parent.
13
<PAGE> 14
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: August 14, 1998 By: /s/ Lawrence R. Wilson
----------------- -------------------------------------------
Lawrence R. Wilson
Chairman of the Board
Chief Executive Officer and President
(Principal Executive Officer)
Date: August 14, 1998 By: /s/ Donna L. Heffner
----------------- -------------------------------------------
Donna L. Heffner
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
<PAGE> 15
EXHIBIT INDEX
Exhibit Number Description of Exhibit
27 Financial Data Schedule
<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 SIX MONTHS ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 4,211,115
<SECURITIES> 0
<RECEIVABLES> 31,691,304
<ALLOWANCES> 1,126,545
<INVENTORY> 0
<CURRENT-ASSETS> 37,671,672
<PP&E> 48,055,452
<DEPRECIATION> (11,371,828)
<TOTAL-ASSETS> 372,779,659
<CURRENT-LIABILITIES> 15,083,802
<BONDS> 227,718,180
109,155,664
0
<COMMON> 40
<OTHER-SE> 2,181,049
<TOTAL-LIABILITY-AND-EQUITY> 372,779,659
<SALES> 0
<TOTAL-REVENUES> 62,923,649<F1>
<CGS> 0
<TOTAL-COSTS> 47,110,472
<OTHER-EXPENSES> 12,962,958
<LOSS-PROVISION> 597,807
<INTEREST-EXPENSE> 10,042,263
<INCOME-PRETAX> (7,710,476)
<INCOME-TAX> (882,961)
<INCOME-CONTINUING> (6,827,515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,827,515)
<EPS-PRIMARY> (349.31)
<EPS-DILUTED> (349.31)
<FN>
<F1>Comprised of net revenues (gross revenues net of agency commissions).
</FN>
</TABLE>
