<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1999
REGISTRATION NO. 333-69009
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CITADEL BROADCASTING COMPANY
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEVADA 4832 86-0703641
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CITADEL LICENSE, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEVADA 4832 86-0837753
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------
City Center West
Suite 400
7201 West Lake Mead Blvd.
Las Vegas, NV 89128
(702) 341-5284
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Lawrence R. Wilson
Chief Executive Officer
Citadel Broadcasting Company
City Center West
Suite 400
7201 West Lake Mead Blvd.
Las Vegas, NV 89128
(702) 341-5284
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
Bryan D. Rosenberger, Esq.
Eckert Seamans Cherin & Mellott, LLC
44th Floor, 600 Grant Street
Pittsburgh, PA 15219
(412) 566-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED JANUARY 8, 1999
PROSPECTUS
- --------------------------------------------------------------------------------
CITADEL LOGO
CITADEL BROADCASTING COMPANY
EXCHANGE OFFER
FOR $115,000,000
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
- --------------------------------------------------------------------------------
Material Terms of the Exchange Offer:
- We are offering to exchange the notes we sold in a private
offering for new registered notes.
- The exchange offer expires at 5:00 p.m., New York City time,
on , 1999, unless extended,
- The terms of the notes to be issued are substantially
identical to the outstanding notes, except for the transfer
restrictions and registration rights relating to the
outstanding notes,
- Tenders of outstanding notes may be withdrawn any time prior
to 5:00 p.m., New York City time, on the expiration date of
the exchange offer, and
- We will exchange all outstanding notes that are properly
tendered and not validly withdrawn.
CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 10 OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
No public market exists for the outstanding notes or the new notes. We do
not intend to list the new notes on any securities exchange or to seek approval
for quotation through any automated quotation system.
This prospectus is dated , 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 10
Use of Proceeds............................................. 18
Capitalization.............................................. 19
Information About Station and Market Data................... 20
Pro Forma Financial Information............................. 21
Selected Historical Financial Data.......................... 34
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 36
Business.................................................... 45
The Pending Transactions.................................... 74
Management.................................................. 77
Certain Transactions........................................ 86
Principal Stockholders...................................... 90
Description of Indebtedness................................. 92
The Exchange Offer.......................................... 100
Description of the Notes.................................... 111
Certain U.S. Federal Income Tax Consequences................ 143
Plan of Distribution........................................ 147
Legal Matters............................................... 147
Independent Auditors........................................ 147
Available Information....................................... 148
</TABLE>
<PAGE> 4
PROSPECTUS SUMMARY
In this prospectus, unless the context otherwise requires, the terms "we,"
"our," "us" and "Company" refer to Citadel Broadcasting Company and Citadel
Broadcasting Company's subsidiary, Citadel License, Inc. The following summary
contains a general discussion of our business, the offering and summary
financial information. We encourage you to read this entire prospectus for a
more complete understanding of Citadel Broadcasting Company and the exchange
offer.
THE COMPANY
We are a radio broadcasting company that focuses on acquiring, developing
and operating radio stations in mid-sized markets. After we complete our pending
transactions, we will own or operate 92 FM and 43 AM radio stations in 26
markets, including clusters of four or more stations in 19 markets. We also will
have the right to construct one additional FM station. Our stations comprise the
first or second ranked radio station group in terms of revenue share in 19 of
our markets for which such information is available.
Our principal executive offices are located at City Center West, Suite 400,
7201 West Lake Mead Blvd., Las Vegas, Nevada, 89128, and our telephone number is
(702) 341-5284.
RISK FACTORS
You should consider all of the information in this prospectus before
tendering your outstanding notes in the exchange offer. The risks of an
investment in Citadel Broadcasting Company include our substantial indebtedness,
our history of net losses, competitive conditions and certain limitations on our
acquisition strategy. See the "Risk Factors" section of this prospectus for a
discussion of these and other risks involved in an investment in Citadel
Broadcasting Company.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
On November 19, 1998, we completed the private offering of $115.0 million
principal amount of our 9 1/4% Subordinated Notes due 2008. In connection with
that offering, we agreed, among other things, to deliver to you this prospectus
and to use our best efforts to consummate the exchange offer by June 17, 1999.
THE EXCHANGE OFFER
We are offering to exchange an equal principal amount of our 9 1/4% Senior
Subordinated Notes due 2008 which have been registered under the Securities Act
of 1933, as amended, for each such principal amount of our outstanding 9 1/4%
Senior Subordinated Notes due 2008. In order to be exchanged, an outstanding
note must be properly tendered and accepted. You may tender outstanding notes
only in integral multiples of $1,000.
As of this date, there is $115.0 million principal amount of notes
outstanding. The exchange offer is not conditioned on any minimum aggregate
principal amount of outstanding notes being tendered for exchange.
1
<PAGE> 5
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time,
, 1999, unless we decide to extend the expiration date.
ACCRUED INTEREST ON THE NEW NOTES
If you exchange your outstanding notes for new notes in the exchange offer,
you will receive the same interest payment on the next interest payment date
following the expiration date that you would have received had you not accepted
the exchange offer. The next interest payment date following the expiration date
is expected to be May 15, 1999.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
If you wish to tender your outstanding notes for exchange, you must
transmit on or prior to the expiration date a properly completed and duly
executed letter of transmittal delivered with this prospectus, or a facsimile of
the letter of transmittal, including all other documents required by the letter
of transmittal, to The Bank of New York, as exchange agent; and either:
-- a timely confirmation of book-entry transfer of your outstanding notes
pursuant to the procedure for book-entry transfers described in this
prospectus in "The Exchange Offer" section under the heading
"Procedures for Tendering," or
-- certificates for your outstanding notes.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your outstanding notes and, prior to the expiration
date of the exchange offer,
-- your outstanding notes are not immediately available,
-- you cannot deliver your outstanding notes, the letter of transmittal
or any other required documents to the exchange agent, or
-- you cannot complete the procedures for book-entry transfer,
you may tender your outstanding notes by following the guaranteed delivery
procedures described in "The Exchange Offer" section under the heading
"Guaranteed Delivery Procedures."
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS
If your outstanding notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, and you wish to tender your
outstanding notes in the exchange offer, you should promptly instruct such
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing the procedures described above under the
heading "Procedures for Tendering Outstanding Notes," either make arrangements
to register ownership of the outstanding notes in your name or obtain a properly
completed bond power from the registered holder.
2
<PAGE> 6
WITHDRAWAL RIGHTS
You may withdraw the tender of your notes at any time prior to the close of
business, New York City time, on the expiration date.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The exchange of new notes for outstanding notes pursuant to the exchange
offer will generally not be a taxable event for United States federal income tax
purposes.
CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING NOTES
If you do not exchange your outstanding notes for new notes, you will no
longer be able to require us to register the outstanding notes under the
Securities Act. In addition, you will not be able to offer or sell the
outstanding notes unless:
-- they are registered under the Securities Act,
-- you offer or sell them under an exemption from the requirements of the
Securities Act, or
-- you offer or sell them in a transaction not subject to the Securities
Act.
USE OF PROCEEDS
We will not receive any proceeds from the issuance of new notes pursuant to
the exchange offer.
SUMMARY OF ABILITY TO RESELL THE NEW NOTES
We believe that the new notes issued in the exchange offer may be offered
for resale, resold or otherwise transferred by you without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that:
-- you acquire the new notes in the ordinary course of business,
-- you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate in a
distribution of the new notes, and
-- you are not an "affiliate" of ours.
By executing and delivering the letter of transmittal, you will represent
to us that the foregoing are true.
If our belief is inaccurate, or if any of the foregoing are not true, and
you transfer any new note issued to you in the exchange offer without delivering
a prospectus meeting the requirements of the Securities Act or without an
exemption from the registration requirements of the Securities Act, you may
incur liability under the Securities Act. We do not assume or indemnify you
against such liability.
Each broker-dealer that is issued new notes in the exchange offer for its
own account in exchange for outstanding notes which were acquired by the
broker-dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of the new notes issued in the
exchange offer. A broker-dealer may use this prospectus, as it may be amended or
supplemented from time to time, for an offer to resell, resale or other transfer
of the new notes issued to it in the exchange offer.
3
<PAGE> 7
Holders who use the exchange offer to participate in a distribution of new
notes, including broker-dealers that acquired outstanding notes directly from
us, but not as a result of market-making or other trading activities, cannot
rely on the foregoing. Such broker-dealers must comply with the registration and
prospectus delivery requirements of the Securities Act in the absence of an
exemption from such requirements. Failure to comply with such requirements may
result in such holders incurring liabilities under the Securities Act for which
we will not indemnify them.
SUMMARY DESCRIPTION OF THE NEW NOTES
NOTES OFFERED
We are offering $115,000,000 aggregate principal amount of 9 1/4% Senior
Subordinated Notes due 2008. The form and terms of the new notes will be the
same as the form and terms of the outstanding notes except that:
-- the new notes will bear a different CUSIP number from the outstanding
notes,
-- the new notes will have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer, and
-- you will not be entitled to any exchange or registration rights with
respect to the new notes.
The new notes will evidence the same debt as the outstanding notes, will be
entitled to the benefits of the indenture governing the outstanding notes and
will be treated under the indenture as a single class with the outstanding
notes.
ISSUER
Citadel Broadcasting Company
MATURITY
November 15, 2008.
INTEREST PAYMENT DATES
We will pay interest on the notes on May 15 and November 15 of each year,
beginning May 15, 1999.
SUBSIDIARY GUARANTEES
If we cannot make payments on the new notes, Citadel License, Inc., which
is our only subsidiary, must make them instead. Future subsidiaries may also be
required to guarantee the notes.
RANKING
The notes will be subordinated to all our debt and the subsidiary
guarantees will be subordinated to all debt of our subsidiaries which guarantee
the notes, except for any debt that expressly provides that it is not senior to
other debt. The notes will rank equally with our outstanding 10 1/4% Senior
Subordinated Notes due 2007.
On a pro forma basis, after giving effect to the transactions described
under the caption "Pro Forma Financial Information," on September 30, 1998, the
notes:
4
<PAGE> 8
-- would have been subordinate to $62.8 million of senior debt and
-- would have ranked equally with $101.0 million principal amount of our
10 1/4% Senior Subordinated Notes due 2007.
OPTIONAL REDEMPTION
We may redeem any of the notes on or after November 15, 2003 at the
redemption prices set forth in the "Description of the Notes" section under the
heading "Optional Redemption."
Prior to November 15, 2001, we may redeem up to 25% of the aggregate
principal amount of the then outstanding notes with the net proceeds of one or
more public equity offerings at 109.25% of their principal amount, plus accrued
interest.
CHANGE OF CONTROL
If we experience specific kinds of changes in control, we must offer to
repurchase any then issued notes at 101% of their principal amount, plus accrued
and unpaid interest, if any, to the repurchase date.
CERTAIN COVENANTS
The indenture governing the notes contains covenants that, among other
things, limit our ability and the ability of any of our subsidiaries that have
been designated as a restricted subsidiary under the indenture to:
-- incur debt,
-- pay cash dividends, purchase our capital stock or make certain
investments or other payments,
-- swap or sell assets,
-- engage in transactions with affiliates,
-- in the case of any restricted subsidiary, agree to dividend and other
payment restrictions,
-- issue or sell capital stock of any restricted subsidiary,
-- create liens on non-senior debt,
-- create subordinated debt that is senior to the notes, and
-- merge, consolidate or sell all or substantially all of our assets.
5
<PAGE> 9
SUMMARY HISTORICAL FINANCIAL DATA
Our summary historical financial data presented below as of and for each of
the years ended December 31, 1993, 1994, 1995, 1996 and 1997 are derived from
our consolidated financial statements. These consolidated financial statements
have been audited by KPMG LLP, independent certified public accountants. Our
summary historical financial data presented below as of September 30, 1998 and
for the nine months ended September 30, 1997 and 1998 are derived from our
unaudited consolidated financial statements. In our opinion, these unaudited
consolidated financial statements contain all necessary adjustments of a normal
recurring nature to present the financial statements in conformity with
generally accepted accounting principles. Our consolidated financial statements
as of December 31, 1996 and 1997 and for each of the years in the three-year
period ended December 31, 1997 and the independent auditors' report thereon, as
well as our unaudited consolidated financial statements as of September 30, 1998
and for the nine months ended September 30, 1997 and 1998, are included in this
prospectus beginning on page F-4. Our financial results are not comparable from
year to year because we acquired and disposed of various radio stations.
As you review the information contained in the following table, you should
note the following:
-- Interest Expense. Interest expense includes debt issuance costs and
debt discount amortization of $139,000, $287,000, $132,000, $163,000
and $441,000 for the years ended December 31, 1993, 1994, 1995, 1996
and 1997, respectively, and $156,000 and $401,000 for the nine months
ended September 30, 1997 and 1998, respectively.
-- Extraordinary Loss. On October 9, 1996, we extinguished our long-term
debt of $31.3 million, payable to a financial institution, and our
note payable to a related party of $7.0 million. The early retirement
of the long-term debt resulted in a $1.8 million extraordinary loss
due to prepayment premiums and the write-off of debt issuance costs.
-- Cash Dividends. We have never declared cash dividends on our common
stock.
-- Net Loss Per Common Share. Basic and diluted net loss per common share
are the same for all periods presented due to our net losses.
-- Broadcast Cash Flow and EBITDA. "Broadcast cash flow" consists of
operating income (loss) before depreciation, amortization and
corporate general and administrative expenses. "EBITDA" consists of
operating income (loss) before depreciation and amortization. Although
broadcast cash flow and EBITDA are not measures of performance
calculated in accordance with generally accepted accounting
principles, we believe that they are useful to an investor in
evaluating our Company because they are measures widely used in the
broadcasting industry to evaluate a radio company's operating
performance. However, you should not consider broadcast cash flow and
EBITDA in isolation or as substitutes for net income, cash flows from
operating activities and other income or cash flow statement data
prepared in accordance with generally accepted accounting principles
as a measure of liquidity or profitability.
-- Deficiency of Earnings to Fixed Charges. Fixed charges include
interest expense on debt, amortization of financing costs,
amortization of debt discount, 33% of rent expense, and dividend
requirements with respect to our 13 1/4% Exchangeable Preferred Stock.
You should also read the summary historical financial data below together
with, and it is qualified by reference to, our Consolidated Financial Statements
and related notes and the
6
<PAGE> 10
information contained in the "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections included elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue................. $ 21,376 $ 32,998 $ 34,112 $ 45,413 $ 89,803 $ 60,025 $ 98,821
Station operating
expenses.................. 17,081 24,331 26,832 33,232 65,245 43,306 69,412
Depreciation and
amortization.............. 5,245 7,435 4,891 5,158 14,636 9,563 20,005
Corporate general and
administrative............ 961 2,504 2,274 3,248 3,530 2,562 3,351
-------- -------- -------- -------- --------- --------- --------
Operating income (loss)..... (1,911) (1,272) 115 3,775 6,392 4,594 6,053
Interest expense............ 2,637 4,866 5,242 6,155 12,304 8,214 13,590
Other income, net........... 149 657 781 414 451 401 94
-------- -------- -------- -------- --------- --------- --------
Income (loss) before income
taxes and extraordinary
item...................... (4,399) (5,481) (4,346) (1,966) (5,461) (3,219) (7,443)
Income tax benefit.......... -- -- -- -- (770) (105) (1,163)
-------- -------- -------- -------- --------- --------- --------
Income (loss) before
extraordinary item........ (4,399) (5,481) (4,346) (1,966) (4,691) (3,114) (6,280)
Extraordinary loss.......... -- -- -- (1,769) -- -- --
-------- -------- -------- -------- --------- --------- --------
Net income (loss)........... $ (4,399) $ (5,481) $ (4,346) $ (3,735) $ (4,691) $ (3,114) $ (6,280)
Dividend requirement for
exchangeable preferred
stock..................... -- -- -- -- 6,633 3,276 10,822
-------- -------- -------- -------- --------- --------- --------
Net loss applicable to
common shares............. $ (4,399) $ (5,481) $ (4,346) $ (3,735) $ (11,324) $ (6,390) $(17,102)
======== ======== ======== ======== ========= ========= ========
Net loss per common share... $ (110) $ (137) $ (109) $ (93) $ (283) $ (160) $ (428)
Shares used in per share
calculation............... 40,000 40,000 40,000 40,000 40,000 40,000 40,000
OTHER DATA:
Broadcast cash flow......... $ 4,295 $ 8,667 $ 7,280 $ 12,181 $ 24,558 $ 16,719 $ 29,409
EBITDA...................... 3,334 6,163 5,006 8,933 21,028 14,157 26,058
Net cash provided by (used
in) operating
activities................ 361 324 (434) (1,394) 5,543 4,137 3,946
Net cash provided by (used
in) investing
activities................ (10,818) (14,037) 4,810 (61,168) (211,622) (133,350) (39,350)
Net cash provided by (used
in) financing
activities................ 10,070 14,393 (4,908) 63,145 212,176 154,324 35,127
Capital expenditures........ 679 2,857 1,691 2,038 2,070 1,478 1,747
Deficiency of earnings to
fixed charges............. 4,399 5,481 4,346 1,966 12,094 6,495 18,265
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- -------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 857 $ 1,538 $ 1,005 $ 1,588 $ 7,685 $ 7,407
Working capital (deficiency)..... 1,701 3,382 2,928 (4,195) 22,593 31,057
Intangible assets, net........... 17,454 20,080 15,093 51,802 268,690 290,405
Total assets..................... 36,120 46,397 37,372 102,244 344,172 373,353
Long-term debt (including current
portion)....................... 30,468 47,805 43,046 91,072 189,699 118,480
Exchangeable preferred stock..... -- -- -- -- 102,010 112,965
Shareholder's equity (deficit)... 3,492 (4,782) (9,249) 5,999 16,132 105,204
</TABLE>
7
<PAGE> 11
SUMMARY PRO FORMA FINANCIAL DATA
The following tables present our summary unaudited pro forma financial data
as of and for the periods indicated. The summary pro forma operating data
reflect adjustments to our summary historical operating data to give effect to
the following transactions as if such transactions had occurred on January 1,
1997:
-- all radio station acquisitions and dispositions that we completed
since January 1, 1997,
-- the July 1997 offerings of $101.0 million principal amount of our
10 1/4% Senior Subordinated Notes due 2007 and 1.0 million shares of
our 13 1/4% Exchangeable Preferred Stock and the use of the net
proceeds from such offerings,
-- the repayment of outstanding borrowings under our credit facility with
the proceeds from Citadel Communications Corporation's initial public
offering,
-- the pending acquisitions of radio stations and related assets in Baton
Rouge and Lafayette, Saginaw/Bay City, Harrisburg/Carlisle and
Charleston, Binghamton, Muncie and Kokomo, and
-- the November 1998 offering of $115.0 million principal amount of the
outstanding 9 1/4% Senior Subordinated Notes due 2008 and the use of
the net proceeds from such offering.
The summary pro forma balance sheet data as of September 30, 1998 give
effect to the following transactions as if such transactions had occurred on
September 30, 1998:
-- the pending acquisitions described above,
-- the October 1998 sale of our radio stations in Quincy, Illinois,
-- the November 1998 acquisition of one AM radio station and the
disposition of one AM radio station in Little Rock, and
-- the November 1998 offering of $115.0 million principal amount of the
outstanding 9 1/4% Senior Subordinated Notes due 2008 and the use of
net proceeds from such offering.
The summary pro forma financial data do not necessarily indicate either
future results of operations or the results that would have occurred if those
transactions had been consummated on the indicated dates. You should read the
following financial information together with our historical consolidated
financial statements and related notes, and the information contained in the
"Pro Forma Financial Information," "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections included elsewhere in this prospectus.
8
<PAGE> 12
SUMMARY PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
CITADEL BROADCASTING COMPANY PRO FORMA AS ADJUSTED
-----------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, TWELVE MONTHS ENDED
DECEMBER 31, -------------------- SEPTEMBER 30,
1997 1997 1998 1998
------------ -------- -------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING DATA:
Net broadcasting revenue....... $149,334 $110,171 $122,236 $161,399
Station operating expenses..... 104,120 77,763 83,585 109,942
Depreciation and
amortization................. 37,629 28,535 29,050 38,144
Corporate general and
administrative............... 4,796 3,428 3,951 5,319
-------- -------- -------- --------
Operating expenses......... 146,545 109,726 116,586 153,405
-------- -------- -------- --------
Operating income............... 2,789 445 5,650 7,994
Interest expense............... 25,758 19,115 20,565 27,208
Other income, net.............. (451) (401) (94) (144)
-------- -------- -------- --------
Income (loss) before income
taxes........................ (22,518) (18,269) (14,821) (19,070)
Income taxes (benefit)......... (2,281) (971) (1,510) (2,820)
Dividend requirement for
exchangeable preferred
stock........................ (13,858) (10,501) (10,822) (14,179)
-------- -------- -------- --------
Income (loss) from continuing
operations applicable to
common shares................ $(34,095) $(27,799) $(24,133) $(30,429)
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED
SEPTEMBER 30, 1998
---------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7,272
Working capital............................................. 32,241
Intangible assets, net...................................... 436,387
Total assets................................................ 538,875
Long-term debt (including current portion).................. 276,254
Exchangeable preferred stock................................ 112,965
Shareholder's equity........................................ 105,991
</TABLE>
9
<PAGE> 13
RISK FACTORS
This prospectus includes forward-looking statements, principally in this
"Risk Factors" section and in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" sections. We based
these forward-looking statements largely on our current expectations and
projections about future events and financial trends affecting our business. The
words "believes," "may," "will," "estimates," "continues," "anticipates,"
"intends," "expects" and similar words are intended to identify forward-looking
statements. We undertake no obligation to publicly update or revise any forward-
looking statements because of new information, future events or otherwise. In
light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus might not transpire. Our
forward-looking statements are subject to risks, uncertainties and assumptions
including, among other things:
-- general economic and business conditions, both nationally and in our
markets,
-- our expectations and estimates concerning future financial
performance, financing plans and the impact of competition,
-- anticipated trends in our industry, and
-- other risk factors discussed below.
You should carefully consider the following factors and other information
in this prospectus before deciding to exchange outstanding notes for new notes.
Any of the following risks could have a material adverse effect on our business,
financial condition or results of operations or on the value of the notes.
SUBSTANTIAL INDEBTEDNESS AND ABILITY TO SERVICE DEBT--OUR SUBSTANTIAL
INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM
FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We have a significant amount of indebtedness. As of September 30, 1998, on
a pro forma basis after giving effect to the transactions described in the "Pro
Forma Financial Information" section, we would have had outstanding total debt
of $278.8 million (excluding the discount on our 10 1/4% notes), preferred stock
with an aggregate liquidation preference of $113.0 million and shareholder's
equity of $106.0 million.
Our large amount of debt could significantly impact you because, among
other things:
-- It limits our ability to obtain additional financing, if we need it,
for working capital, capital expenditures, acquisitions, debt service
requirements or other purposes,
-- We need to dedicate a substantial portion of our operating cash flow
to fund interest expense, which reduces funds available for
operations, future business opportunities and other purposes,
-- It limits our ability to compete with competitors who are less
leveraged than we are, and
-- It limits our ability to react to changing market conditions, changes
in our industry and economic downturns.
Our ability to pay interest on the notes and to satisfy our other debt
obligations will depend upon our future operating performance. Prevailing
economic conditions and financial, business and other factors, many of which are
beyond our control, will affect our ability to
10
<PAGE> 14
make these payments. If in the future we cannot generate sufficient cash flow
from operations to make scheduled payments on the notes or to meet our other
obligations, we will need to refinance our debt, obtain additional financing,
delay planned acquisitions and capital expenditures or sell assets. We cannot
assure you that our business will generate cash flow, or that we will be able to
obtain funding sufficient to satisfy our debt service requirements.
HISTORY OF NET LOSSES--WE HAVE A HISTORY OF NET LOSSES WHICH WE EXPECT TO
CONTINUE THROUGH AT LEAST 1999.
We had net losses of $4.7 million for the year ended December 31, 1997 and
$6.3 million for the nine months ended September 30, 1998. We would have had net
losses from continuing operations on a pro forma basis of $20.2 million for the
year ended December 31, 1997 and $13.3 million for the nine months ended
September 30, 1998 after giving effect to the transactions described in the "Pro
Forma Financial Information" section as if they had occurred on January 1, 1997.
The primary reasons for these losses are significant charges for
depreciation and amortization relating to the acquisition of radio stations and
interest charges on our outstanding debt. If we acquire additional stations,
these charges will probably increase. We expect to continue to experience net
losses through at least 1999.
NO PRIOR MARKET--AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE NOTES.
There has not been any public market for the outstanding notes. The new
notes will constitute a new issue of securities with no established trading
market. We do not intend to list the new notes on any securities exchange or to
seek their admission to trading in any automated quotation system. The initial
purchasers have advised us that they currently intend to make a market in the
new notes, but they are not obligated to do so and may discontinue such
market-making at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended, and may be limited during the
exchange offer and at other times. Accordingly, we cannot assure you that an
active public or other market will develop for the new notes or, if one does
develop, whether it will be liquid. If a trading market does not develop or is
not maintained, holders of the new notes may experience difficulty in reselling
the new notes or may be unable to sell them at all. If a market develops, any
such market may be discontinued at any time.
If a public trading market develops for the new notes, future trading
prices of the new notes will depend on many factors, including, among other
things, prevailing interest rates, our operating results and the market for
similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including our financial condition, the new
notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES AND CONSEQUENCES OF FAILURE TO
EXCHANGE--YOU MAY BE ADVERSELY AFFECTED IF YOU FAIL TO EXCHANGE YOUR OUTSTANDING
NOTES FOR NEW NOTES IN THE EXCHANGE OFFER.
Outstanding notes that are not tendered or are tendered but not accepted
will, following the consummation of the exchange offer, continue to be subject
to the existing restrictions upon transfer thereof. In addition, upon
consummation of the exchange offer, certain
11
<PAGE> 15
registration rights under the registration rights agreement entered into in
connection with the offering of the outstanding notes will terminate.
To the extent that outstanding notes are tendered and accepted in the
exchange offer, the trading market, if any, for untendered or tendered but
unaccepted outstanding notes could be adversely affected.
COMPETITIVE CONDITIONS--BECAUSE THE RADIO BROADCASTING INDUSTRY IS HIGHLY
COMPETITIVE, WE MAY EXPERIENCE DOWNTURNS IN OUR FINANCIAL CONDITION.
The radio broadcasting industry is very competitive. Our radio stations
compete with other radio stations in each market for audience share and
advertising revenue. A decrease in either audience share or advertising revenue
could adversely affect our financial condition. We also compete with other media
such as television, newspapers, direct mail and outdoor advertising.
The radio broadcasting industry is also facing competition from new media
technologies that are being developed such as the following:
-- Audio programming by cable television systems, direct broadcasting
satellite systems and other digital audio broadcasting formats,
-- Satellite-delivered Digital Audio Radio Service, which could result in
the introduction of several new satellite radio services with sound
quality equivalent to that of compact discs, and
-- In Band On Channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same band width currently
occupied by traditional AM and FM radio services.
LIMITATIONS ON ACQUISITION STRATEGY--OUR STRATEGY TO EXPAND OUR BUSINESS AND
INCREASE REVENUE THROUGH ACQUISITIONS COULD BE LIMITED BY VARIOUS INTERNAL AND
EXTERNAL FACTORS.
We intend to grow by acquiring radio stations in mid-sized markets. We
cannot predict whether we will be successful in pursuing our acquisition
strategy because that strategy is subject to a number of risks, including:
-- Our acquisition strategy may not increase our broadcast cash flow or
yield other anticipated benefits,
-- Because radio station acquisitions are subject to regulatory approval,
we may encounter unanticipated delays in completing acquisitions,
-- We may have difficulty integrating the operations, systems and
management of our acquired stations,
-- Our acquisition strategy may divert management's attention from other
business concerns,
-- We may lose key employees of acquired stations,
-- We may be required to raise additional financing and our ability to do
so is limited by the terms of our debt instruments, and
12
<PAGE> 16
-- Competition for acquisition opportunities has increased and, as a
result, prices for radio stations have risen and may continue to rise.
POTENTIAL DELAY IN COMPLETING PENDING TRANSACTIONS DUE TO ANTITRUST
REVIEW--ANTITRUST LAW CONSIDERATIONS COULD LIMIT OUR STRATEGY TO EXPAND OUR
BUSINESS AND INCREASE REVENUE.
The completion of some of our pending transactions is, and future
transactions we may consider will likely be, subject to the notification filing
requirements, applicable waiting periods and possible review by the United
States Department of Justice or the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Review by the
Department of Justice or the Federal Trade Commission may cause delays in
completing transactions and, in some cases, result in attempts by these agencies
to enjoin transactions or negotiate modifications to the proposed terms. Such
delays, injunctions or modifications could adversely affect the terms of a
proposed transaction or could require us to abandon an otherwise attractive
opportunity.
We received a civil investigative demand from the Department of Justice
regarding our acquisition of KRST-FM in Albuquerque. We have provided all the
information that the Department of Justice requested. If the Department of
Justice were to proceed with an investigation and successfully challenge our
acquisition of KRST-FM, we may be required to divest one or more stations in
Albuquerque. The Department of Justice is proceeding with an investigation
regarding our joint sales agreement relating to stations in Spokane, Washington,
and Colorado Springs, Colorado. If the Department of Justice were to
successfully challenge us in this matter, we may be required to terminate the
Spokane/Colorado Springs joint sales agreement. Although we do not believe that
our acquisition strategy as a whole will be negatively affected in any material
way by antitrust review or by additional divestitures, we cannot assure you that
this will be the case.
IMPORTANCE OF CERTAIN MARKETS--A DOWNTURN IN CERTAIN OF OUR SIGNIFICANT MARKETS
COULD ADVERSELY AFFECT OUR FINANCIAL POSITION.
A significant decline in net broadcasting revenue from our stations in
certain of our markets could have a material adverse effect on our financial
position and results of operations. For example, on a pro forma basis, after
giving effect to the transactions described in the "Pro Forma Financial
Information" section, our radio stations in Albuquerque, Providence, Salt Lake
City and Modesto would have generated the following percentages of our total net
broadcasting revenue and broadcast cash flow in 1997:
<TABLE>
<CAPTION>
MARKET % OF NET BROADCASTING REVENUE % OF BROADCAST CASH FLOW
------ ------------------------------ -------------------------
<S> <C> <C>
Albuquerque.......... 12.3% 15.6%
Salt Lake City....... 8.3 6.4
Modesto.............. 5.6 8.0
Providence........... 4.6 5.3
</TABLE>
LICENSING AND OWNERSHIP ISSUES--REGULATION OF THE RADIO BROADCASTING INDUSTRY BY
THE FEDERAL COMMUNICATIONS COMMISSION COULD ADVERSELY AFFECT OUR BUSINESS.
Licenses. The radio broadcasting industry is subject to extensive
regulation by the Federal Communications Commission under the Communications Act
of 1934, as amended.
13
<PAGE> 17
Issuance, renewal or transfer of radio broadcast station operating licenses
requires FCC approval. We cannot operate our radio stations without FCC
licenses. The failure to renew our licenses on their expiration dates or the
inclusion of conditions or qualifications in our licenses could have a negative
impact on our business.
A third party filed a petition with the FCC requesting denial of renewal of
the licenses for four of our Salt Lake City stations. The complaint alleges that
these stations failed to comply with FCC equal opportunity employment rules. The
license renewals have been delayed due to the FCC's processing of that petition.
Ownership. The Communications Act of 1934 and the FCC rules impose specific
limits on the number of stations an entity can own in a single market. These
ownership rules will affect our acquisition strategy because they may prevent us
from acquiring additional stations in a particular market. We may also be
prevented from engaging in a swap transaction if the swap would cause the other
company to violate these rules.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. The
interests of our and Citadel Communications Corporation's officers, directors
and stockholders are generally attributable to us. Certain of our officers,
directors and stockholders may acquire attributable broadcast interests, which
will limit the number of radio stations that we may acquire in any market in
which such officers, directors or stockholders hold or acquire attributable
broadcast interests.
In addition, the number of radio stations we may acquire in any market may
vary depending upon whether the interests in other radio stations or certain
other media properties of certain individuals affiliated with us are
attributable to those individuals under FCC rules. Moreover, under the FCC's
cross-interest policy, the FCC in certain instances may prohibit one party from
acquiring an attributable interest in one media outlet and a substantial non-
attributable economic interest in another media outlet in the same market. The
FCC is considering proposals to change its rules so that certain cross-interests
arising from non-voting stock ownership would be counted as attributable
ownership interests. Certain interests of ABRY Broadcast Partners II, L.P., a
significant stockholder of Citadel Communications Corporation, and its
affiliates could be attributed to us if this rule is adopted, possibly
precluding us from acquiring stations in markets where any of such entities
already has attributable broadcast interests.
The FCC has also been more aggressive in examining issues of market revenue
share concentration when considering radio station acquisitions. The FCC has
delayed its approval of several pending radio station purchases by various
parties because of market concentration concerns. Moreover, in recent months the
FCC has followed an informal policy of giving specific public notice of its
intention to conduct additional ownership concentration analyses and soliciting
public comment on the issue of concentration and its effect on competition and
diversity in connection with certain applications for consent to radio station
acquisitions. We cannot determine at this time the impact that this policy may
have on our business and our operating and acquisition strategies.
14
<PAGE> 18
SUBORDINATION OF NOTES AND ASSET ENCUMBRANCES--YOUR RIGHT TO RECEIVE PAYMENTS ON
THE NOTES IS JUNIOR TO OUR EXISTING SENIOR INDEBTEDNESS AND POSSIBLY ALL OF OUR
FUTURE BORROWINGS. ADDITIONALLY, THE GUARANTEE OF THE NOTES IS JUNIOR TO OUR
GUARANTOR'S EXISTING INDEBTEDNESS AND POSSIBLY ALL OF ITS FUTURE BORROWINGS.
The new notes will be subordinated to all of our senior debt, and the
guarantee by Citadel License, Inc. will be subordinated to all of its senior
debt. Any guarantee by a future subsidiary would also be subordinate to all of
its senior debt. The notes will not be secured by any of our assets. Our
obligations and the obligations of Citadel License, Inc. under our credit
facility are secured by substantially all of our assets and its assets.
If we become insolvent or are liquidated, or if payments under our credit
facility are accelerated, our assets will be available to pay obligations under
the notes and our 10 1/4% notes only after all payments have been made on our
secured and other senior debt. Similarly, if Citadel License, Inc. becomes
insolvent or is liquidated, its assets will be available to pay obligations on
the notes and the 10 1/4% notes only after all payments have been made on its
secured and senior debt. We cannot assure you that sufficient assets will remain
to make full payment on the notes and our 10 1/4% notes.
SUBSIDIARY GUARANTEES MAY BE UNENFORCEABLE DUE TO FRAUDULENT CONVEYANCE
STATUTES--FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES,
TO VOID GUARANTEES AND REQUIRE NOTE HOLDERS TO RETURN PAYMENTS RECEIVED FROM
GUARANTORS.
All of our licenses are held by our subsidiary, Citadel License, Inc. For
this reason, the ability of the note holders to enforce Citadel License, Inc.'s
guarantee of the notes may be important to the amount they are able to recover
on their investment in the notes.
Subsidiary guarantees may be subject to review under federal or state
fraudulent conveyance laws in the event of the bankruptcy or other financial
difficulty of the subsidiary guarantor. Although laws differ among various
jurisdictions, in general under fraudulent conveyance laws a court could
subordinate or avoid a guarantee if it finds that:
-- the debt under such guarantee was incurred with actual intent to
hinder, delay or defraud creditors or the subsidiary guarantor did not
receive fair consideration or reasonably equivalent value for its
guarantee and
-- the subsidiary guarantor was:
-- insolvent or rendered insolvent because of its guarantee,
-- engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital, or
-- intended to incur, or believed that it would incur, debts beyond
its ability to pay upon maturity.
A court is likely to find that a subsidiary guarantor did not receive fair
consideration or reasonably equivalent value for its guarantee to the extent
that its liability under the guarantee is greater than the direct benefit it
received from the issuance of notes. By its terms, the guarantee will limit the
liability of the subsidiary guarantor to the maximum amount that it can pay
without the guarantee being deemed a fraudulent transfer. A court may not give
effect to this limitation on liability. In this event, a court may find that the
issuance of the guarantee rendered the subsidiary guarantor insolvent. If a
court avoids the guarantee or holds
15
<PAGE> 19
it unenforceable, you will no longer have a claim against the subsidiary
guarantor and will be solely a creditor of Citadel Broadcasting Company. If a
court gives effect to this limit on liability, the amount that the subsidiary
guarantor is found to have guaranteed might be so low that there will not be
sufficient funds to pay the notes in full.
RESTRICTIONS IMPOSED ON US BY OUR DEBT INSTRUMENTS--OUR EXISTING DEBT
INSTRUMENTS SIGNIFICANTLY RESTRICT OUR ABILITY TO ENGAGE IN CERTAIN
TRANSACTIONS. IN ADDITION, FAILURE BY US TO COMPLY WITH CERTAIN COVENANTS IN OUR
CREDIT FACILITY WOULD SIGNIFICANTLY IMPACT OUR ABILITY TO REPAY THE NOTES.
Our credit facility and the agreements governing our other outstanding debt
and our preferred stock contain certain covenants that restrict, among other
things, our ability to incur additional debt, pay cash dividends, purchase our
capital stock, make certain investments or other restricted payments, swap or
sell assets, engage in transactions with affiliates, create liens on non-senior
debt or merge, consolidate or sell all or substantially all of our assets.
Our credit facility also requires us to obtain our banks' consent before we
make acquisitions or capital expenditures. This restriction may make it more
difficult to pursue our acquisition strategy. Our credit facility also requires
us to maintain specific financial ratios and to satisfy certain financial
condition tests. Events beyond our control could affect our ability to meet
those financial ratios and condition tests, and we cannot assure you that we
will meet them.
A breach of any of the covenants contained in our credit facility could
result in an event of default under our credit facility, which would allow our
lenders to declare all amounts outstanding under the credit facility to be
immediately due and payable. In addition, our lenders could proceed against the
collateral granted to them to secure that indebtedness. If the amounts
outstanding under the credit facility are accelerated, we cannot assure you that
our assets will be sufficient to repay in full the money owed to the banks or to
our other debt holders.
YEAR 2000--THE YEAR 2000 COMPUTER PROBLEM COULD SIGNIFICANTLY IMPACT OUR
BUSINESS.
We are in the process of assessing and remediating potential risks to our
business related to the Year 2000 problem. Although we believe that, as a result
of these efforts, our critical systems are or will be substantially Year 2000
ready, we cannot assure you that this will be the case. We believe that our
greatest potential Year 2000 risk is that third parties with whom we deal will
fail to be Year 2000 ready. For example, our business may be adversely affected
if our programming suppliers or key advertisers experience significant
disruptions in their businesses because of the Year 2000 problem. For more
information concerning the Year 2000 problem and its potential impact on our
business, see the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section under the heading "Liquidity and Capital
Resources."
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<PAGE> 20
DIFFICULTY OF SATISFYING PAYMENT OBLIGATIONS UPON A CHANGE OF CONTROL--WE MAY
NOT BE ABLE TO FULFILL OUR OBLIGATIONS UNDER OUR CREDIT FACILITY OR THE NOTES
FOLLOWING CERTAIN CHANGES OF CONTROL.
If a change of control under the indenture governing the notes occurs, we
may be required to make an offer to purchase all of the notes then outstanding
at a purchase price of 101% of their principal amount, plus accrued interest. A
change of control or ownership also will result in an event of default under our
credit facility. If a change of control occurs, we cannot assure you that we
will have enough money to repay our bank lenders and to pay for the notes and
the 10 1/4% notes we may be required to buy. Our failure to make or consummate
an offer to repurchase the notes or to pay the change of control purchase price
when due would give the Trustee under the indenture the rights described in the
"Description of the Notes" section under the heading "Events of Default."
17
<PAGE> 21
USE OF PROCEEDS
The exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement entered into in connection with the November
1998 offering of $115.0 million aggregate principal amount of our outstanding
9 1/4% Senior Subordinated Notes due 2008 (the "Original Offering"). We will not
receive any cash proceeds from the issuance of the new notes in the exchange
offer.
The net proceeds of the Original Offering were approximately $111.0
million, after deducting the initial purchasers' discount and offering expenses.
We used approximately $16.7 million of these net proceeds to repay outstanding
indebtedness under the loan agreement with our senior lenders (the "Credit
Facility") and approximately $5.1 million to fund the purchase price of one AM
radio station in Little Rock, Arkansas. The balance of the net proceeds will be
used for other pending acquisitions, working capital and general corporate
purposes. Pending our use of these remaining funds, we have invested the net
proceeds in short-term, investment grade, interest-bearing securities.
The following table shows the use of proceeds of the Original Offering.
<TABLE>
<CAPTION>
AMOUNT
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
*Repayment of borrowings under the Credit Facility(1)....... $ 16,726
Saginaw/Bay City acquisition............................... 35,000
Baton Rouge/Lafayette acquisition(2)....................... 33,000
*Little Rock acquisition.................................... 5,100
Carlisle acquisition....................................... 4,500
*Working capital and general corporate purposes............. 16,674
*Initial purchasers' discount and expenses of the Original
Offering.................................................. 4,000
--------
Total uses of proceeds............................ $115,000
========
</TABLE>
- ---------------
* Applied or partially applied as of this date
(1) As of September 30, 1998, $18.7 million was outstanding under the Credit
Facility. For the nine months ended September 30, 1998, the weighted average
interest rate under the Credit Facility was approximately 8.44%. Subject to
certain mandatory prepayments of amounts outstanding under the Credit
Facility, the balance of any amounts outstanding would have been due on
September 30, 2003. We used amounts borrowed under the Credit Facility for
acquisitions and working capital purposes. Because of our application of the
proceeds of the Original Offering, $137.5 million is currently available for
borrowing under the Credit Facility.
(2) The $33.0 million is net of $1.0 million in positive working capital that
the acquired company is required to have at closing of the acquisition. Does
not include $1.5 million related to noncompetition agreements to be entered
into in connection with the acquisition.
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<PAGE> 22
CAPITALIZATION
The following table sets forth our unaudited capitalization as of September
30, 1998 on an actual basis and as adjusted to give effect to the transactions
described in the "Pro Forma Financial Information" section. You should read this
table in conjunction with our Consolidated Financial Statements and related
notes, the information contained in the "Pro Forma Financial Information"
section and other information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion:
Credit Facility........................................... $ 18,726 $ 60,000
Other obligations......................................... 1,293 2,793
10 1/4% Notes............................................. 101,000 101,000
9 1/4% Notes.............................................. -- 115,000
-------- --------
Total long-term debt................................. 121,019 278,793
13 1/4% Exchangeable preferred stock........................ 112,965 112,965
Shareholder's equity........................................ 105,203 105,991
-------- --------
Total capitalization................................. $339,187 $497,749
======== ========
</TABLE>
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<PAGE> 23
INFORMATION ABOUT STATION AND MARKET DATA
Unless otherwise indicated in this prospectus:
-- We obtained all metropolitan statistical area ("MSA") rank
information, information concerning the number of stations in a
market, market revenue information and station group market share and
rank information from Investing in Radio 1998 Market Report (3rd ed.)
published by BIA Publications, Inc. ("BIA").
-- We give all audience share and primary demographic share and rank
information for 1998 and obtained this information from the Spring
1998 Radio Market Report published by The Arbitron Company
("Arbitron").
-- We obtained information concerning the number of viable stations in a
market from Duncan's Radio Market Guide (1997 ed.) compiled by
Duncan's American Radio, Inc. This guide defines "viable stations" as
stations which are active and viable competitors for advertising
dollars in the market. If the total number of viable AM or viable FM
stations within a market was not a whole number, we rounded that
number up to the nearest whole number. We counted a viable AM/FM
combination as one viable FM station.
Unless the context otherwise requires, the term "operate," as used in
connection with our radio station activities, includes providing programming and
selling advertising pursuant to local marketing agreements ("LMAs") or selling
advertising pursuant to joint sales agreements ("JSAs").
A radio station's designated market may be different from its community of
license. If a radio station's call letters have changed during the time we have
owned or operated the station, we describe the station by its call letters
currently in use, unless otherwise indicated.
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<PAGE> 24
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements reflect the results of operations and balance sheet of Citadel
Broadcasting Company after giving effect to:
(1) the following transactions, which are collectively referred to in this
prospectus as the "Completed Transactions":
-- all radio station acquisitions and dispositions completed after
January 1, 1997,
-- the July 1997 offerings of $101.0 million principal amount of our
10 1/4% Senior Subordinated Notes due 2007 and 1.0 million shares
of our 13 1/4% Exchangeable Preferred Stock and the use of the
net proceeds from such offerings (the "1997 Offerings"),
-- the repayment of outstanding borrowings under the Credit Facility
with the proceeds from Citadel Communications Corporation's
("Citadel Communications") initial public offering in July 1998,
and
-- the Original Offering and the use of the net proceeds from the
Original Offering, and
(2) the pending acquisitions of radio stations and related assets in Baton
Rouge and Lafayette, Saginaw/Bay City, Harrisburg/Carlisle and Charleston,
Binghamton, Muncie and Kokomo (collectively, the "Pending Acquisitions").
The unaudited pro forma condensed consolidated financial statements are
based on our historical consolidated financial statements and the financial
statements of those entities acquired, or from which assets were acquired, in
connection with the Completed Transactions, and should be read in conjunction
with the financial statements of the following entities and the notes thereto,
which are included elsewhere in this prospectus:
(1) Citadel Broadcasting Company,
(2) Tele-Media Broadcasting Company and its Partnership Interests,
(3) Deschutes River Broadcasting, Inc.,
(4) Snider Corporation,
(5) Snider Broadcasting Corporation and Subsidiary and CDB
Broadcasting Corporation,
(6) Maranatha Broadcasting Company, Inc.'s Radio Broadcasting
Division,
(7) Pacific Northwest Broadcasting Corporation and Affiliates, and
(8) Wicks Radio Group (a division of the Wicks Broadcast Group Limited
Partnership).
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. For pro forma purposes, our
consolidated statements of operations for the year ended December 31, 1997 and
the nine months ended September 30, 1997 and 1998 have been adjusted to give
effect to the Completed Transactions and the Pending Acquisitions as if each
occurred on January 1, 1997. The interest rate applied to borrowings under, and
repayments of, the Credit Facility in the pro forma consolidated statements of
operations was 8.4375%, which represents the interest rate in effect under the
Credit Facility as of January 1, 1997. For pro forma purposes, our balance sheet
as of September 30, 1998 has been adjusted to give effect to the October 1998
sale of our radio stations in Quincy, Illinois (the "Quincy Sale"),
21
<PAGE> 25
the November 1998 acquisition of KAAY-AM and the disposition of KRNN-AM in
Little Rock, the Original Offering and the use of the net proceeds from the
Original Offering and the Pending Acquisitions as if each had occurred on
September 30, 1998.
The unaudited pro forma information is presented for illustrative purposes
only and does not indicate the operating results or financial position that
would have occurred if the Completed Transactions and the Pending Acquisitions
had been consummated on the dates indicated, nor is it indicative of future
operating results or financial position if the aforementioned transactions are
completed. We cannot predict whether the consummation of the Pending
Acquisitions will conform to the assumptions used in the preparation of the
unaudited pro forma condensed consolidated financial statements.
22
<PAGE> 26
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR
ACTUAL COMPLETED COMPLETED THE PENDING PRO FORMA
THE COMPANY TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) THE COMPANY
----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue................... $ 98,821 $ (310) $ 98,511 $23,725 $122,236
Station operating
expenses.................... 69,412 (1,401) 68,011 15,574 83,585
Depreciation and
amortization................ 20,005 519 20,524 8,526 29,050
Corporate general and
administrative.............. 3,351 -- 3,351 600 3,951
-------- ------- -------- ------- --------
Operating expenses.......... 92,768 (882) 91,886 24,700 116,586
-------- ------- -------- ------- --------
Operating income (loss)....... 6,053 572 6,625 (975) 5,650
Interest expense.............. 13,590 (1,410) 12,180 8,385 20,565
Other (income) expense, net... (94) -- (94) -- (94)
-------- ------- -------- ------- --------
Income (loss) before income
taxes....................... (7,443) 1,982 (5,461) (9,360) (14,821)
Income taxes (benefit)........ (1,163) -- (1,163) (347) (1,510)
Dividend requirement for
exchangeable preferred
stock..................... (10,822) -- (10,822) -- (10,822)
-------- ------- -------- ------- --------
Income (loss) from continuing
operations applicable to
common shares............... $(17,102) $ 1,982 $(15,120) $(9,013) $(24,133)
======== ======= ======== ======= ========
</TABLE>
23
<PAGE> 27
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) the disposition of WEST-AM in
Allentown/Bethlehem, (b) the acquisitions of WEMR-AM, WEMR-FM, WSGD-FM,
WDLS-FM and WCDL-FM in Wilkes-Barre/Scranton (the "Wilkes-Barre/Scranton
Acquisitions"), (c) the acquisitions of KQFC-FM, KKGL-FM, KBOI-FM, KIZN-FM
and KZMG-FM in Boise (the "Boise Acquisition"), (d) the Quincy Sale, (e) the
acquisition of KAAY-AM and the disposition of KRNN-AM in Little Rock, (f)
the repayment of outstanding borrowings under the Credit Facility with the
proceeds from Citadel Communications' initial public offering and (g) the
consummation of the Original Offering and the use of the net proceeds from
the Original Offering as if each transaction had taken place on January 1,
1997 (does not reflect radio station acquisitions completed in 1997 or the
1997 Offerings). Depreciation and amortization for such acquisitions are
based upon preliminary allocations of the purchase price to property and
equipment and intangible assets which will be amortized over periods of 1-25
years. Actual depreciation and amortization may differ depending on the
final allocation of the purchase price; however, management does not believe
these differences will be material. Prior to the acquisition dates, we
operated many of the acquired stations under a JSA or LMA. We receive fees
for such services. Includes net revenue and station operating expenses for
stations operated under JSAs to reflect ownership of the stations as of
January 1, 1997. Net revenue and station expenses for stations operated
under LMAs are included in our historical consolidated financial statements.
For those stations operated under JSAs or LMAs and subsequently acquired,
associated fees and redundant expenses were eliminated and estimated
occupancy costs were included to adjust the results of operations to reflect
ownership of the stations as of January 1, 1997. Dollars in the table below
are shown in thousands.
<TABLE>
<CAPTION>
Other Repayment of The Original The Completed
Acquisitions(a) Credit Facility(b) Offering(c) Transactions
----------------- ------------------- ------------ -------------
<S> <C> <C> <C> <C>
Net revenue............................... $ (310) $ -- $ -- $ (310)
Station operating expenses................ (1,401) -- -- (1,401)
Depreciation and amortization............. 519 -- -- 519
------- ------- ------- -------
Operating expenses...................... (882) -- -- (882)
------- ------- ------- -------
Operating income.......................... 572 -- -- 572
Interest expense.......................... 445 (4,487) 2,632 (1,410)
------- ------- ------- -------
Income before income taxes................ 127 4,487 (2,632) 1,982
Income taxes (benefit).................... -- -- -- --
------- ------- ------- -------
Income from continuing operations......... $ 127 $ 4,487 $(2,632) $ 1,982
======= ======= ======= =======
</TABLE>
- ---------------
(a) Represents the net effect of the Boise Acquisition, the
Wilkes-Barre/Scranton Acquisitions, the disposition of WEST-AM in
Allentown/Bethlehem, the Quincy Sale and the acquisition of KAAY-AM and
the disposition of KRNN-AM in Little Rock.
(b) Represents the repayment of outstanding borrowings under the Credit
Facility with the proceeds from Citadel Communications' initial public
offering.
(c) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $4.0 million related to the
notes.
(2) Represents the net effect of (a) the acquisition of KQXL-FM, WXOK-AM,
WEMX-FM, WKJN-FM, WIBR-AM in Baton Rouge and KFXZ-FM, KRRQ-FM, KNEK-AM and
KNEK-FM in Lafayette (the "Baton Rouge/Lafayette Acquisition"), (b) the
acquisition of WKQZ-FM, WMJK-FM, WIOG-FM, WMJA-FM, WGER-FM and WSGW-AM in
Saginaw/Bay City (the "Saginaw/Bay City Acquisition"), (c) the acquisition
of WHYL-AM and WHYL-FM in Harrisburg/Carlisle (the "Carlisle Acquisition")
and (d) the acquisition of WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM, WNKT-FM,
WTMA-AM, WTMZ-AM and WXTC-AM in Charleston, WHWK-FM, WYOS-FM, WAAL-FM,
WNBF-AM and WKOP-AM in Binghamton, WMDH-FM and WMDH-AM in Muncie and WWKI-FM
in Kokomo (the "Charleston/Binghamton/Muncie/Kokomo Acquisition") as if each
transaction had taken place on January 1, 1997. Depreciation and
amortization for such acquisitions are based upon preliminary allocations of
the purchase price to property and equipment and intangible assets which
will be amortized over periods of 1-25 years. Actual depreciation and
amortization may
24
<PAGE> 28
differ depending on the final allocation of the purchase price; however,
management does not believe these differences will be material. Dollars in
the table below are shown in thousands.
<TABLE>
<CAPTION>
CHARLESTON/
BINGHAMTON/
MUNCIE/
BATON ROUGE/LAFAYETTE SAGINAW/BAY CITY CARLISLE Kokomo Pending
ACQUISITION ACQUISITION ACQUISITION ACQUISITION Adjustments(a) Acquisitions
--------------------- ---------------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue.......... $ 4,947 $ 5,192 $ 636 $12,950 $ -- $23,725
Station operating
expenses........... 3,447 3,384 414 8,669 (340) 15,574
Depreciation and
amortization....... 2,380 1,898 223 4,025 -- 8,526
Corporate general and
administrative..... -- -- -- -- 600 600
------- ------- ------ ------- ----- -------
Operating
expenses......... 5,827 5,282 637 12,694 260 24,700
Operating income
(loss)............. (880) (90) (1) 256 (260) (975)
Interest expense..... 2,088 2,215 285 3,797 -- 8,385
------- ------- ------ ------- ----- -------
Income (loss) before
income taxes....... (2,968) (2,305) (286) (3,541) (260) (9,360)
Income taxes
(benefit).......... (347) -- -- -- -- (347)
------- ------- ------ ------- ----- -------
Income (loss) from
continuing
operations......... $(2,621) $(2,305) $ (286) $(3,541) $(260) $(9,013)
======= ======= ====== ======= ===== =======
</TABLE>
- ---------------
(a) Includes the elimination of $208,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by us to a national
representative for national advertising and the elimination of $132,000
of station management expenses, and additional corporate overhead of
$600,000 to reflect increase in costs to administer the additional
stations.
25
<PAGE> 29
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR
ACTUAL COMPLETED COMPLETED THE PENDING PRO FORMA
THE COMPANY TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) THE COMPANY
----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue.................... $60,025 $29,122 $ 89,147 $ 21,024 $110,171
Station operating expenses..... 43,306 19,598 62,904 14,859 77,763
Depreciation and
amortization................. 9,563 10,446 20,009 8,526 28,535
Corporate general and
administrative............... 2,562 (334) 2,228 1,200 3,428
------- ------- -------- -------- --------
Operating expenses........... 55,431 29,710 85,141 24,585 109,726
------- ------- -------- -------- --------
Operating income (loss)........ 4,594 (588) 4,006 (3,561) 445
Interest expense............... 8,214 2,516 10,730 8,385 19,115
Other (income) expense, net.... (401) -- (401) -- (401)
------- ------- -------- -------- --------
Income (loss) before
income taxes................. (3,219) (3,104) (6,323) (11,946) (18,269)
Income taxes (benefit)......... (105) (519) (624) (347) (971)
Dividend requirement for
exchangeable preferred
stock........................ (3,276) (7,225) (10,501) -- (10,501)
------- ------- -------- -------- --------
Income (loss) from continuing
operations applicable to
common shares................ $(6,390) $(9,810) $(16,200) $(11,599) $(27,799)
======= ======= ======== ======== ========
</TABLE>
26
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) our acquisition of Tele-Media Broadcasting
Company (the "Tele-Media Acquisition"), (b) the acquisitions of KENZ-FM,
KBER-FM, KBEE-FM and KFNZ-AM in Salt Lake City, (c) the acquisition of
KNHK-FM in Reno, (d) the acquisition of KTHK-FM in Tri-Cities, (e) the
acquisitions of WXEX-FM and WHKK-FM in Providence, (f) our 1997 acquisition
of various stations in Little Rock (the "Little Rock Acquisitions"), (g) the
acquisition of WLEV-FM in Allentown/Bethlehem, (h) the disposition of
WEST-AM in Allentown/Bethlehem, (i) the Wilkes-Barre/Scranton Acquisitions,
(j) the Boise Acquisition, (k) the Quincy Sale, (l) the acquisition of
KAAY-AM and the disposition of KRNN-AM in Little Rock, (m) the consummation
of the 1997 Offerings, (n) the repayment of outstanding borrowings under the
Credit Facility with the proceeds from Citadel Communications' initial
public offering and (o) the consummation of the Original Offering and the
use of the net proceeds from the Original Offering as if each transaction
had taken place on January 1, 1997. Depreciation and amortization for such
acquisitions are based upon preliminary allocations of the purchase price to
property and equipment and intangible assets which will be amortized over
periods of 1-25 years. Actual depreciation and amortization may differ
depending on the final allocation of the purchase price; however, management
does not believe these differences will be material. Prior to the
acquisition dates, we operated many of the acquired stations under a JSA or
LMA. We receive fees for such services. Includes net revenue and station
operating expenses for stations operated under JSAs to reflect ownership of
the stations as of January 1, 1997. Net revenue and station expenses for
stations operated under LMAs are included in our historical consolidated
financial statements. For those stations operated under JSAs or LMAs and
subsequently acquired, associated fees and redundant expenses were
eliminated and estimated occupancy costs were included to adjust the results
of operations to reflect ownership of the stations as of January 1, 1997.
Dollars in the table below are shown in thousands.
<TABLE>
<CAPTION>
Pro Forma
Adjustments
for The Repayment of
Actual Tele-Media Little Rock Other 1997 the Credit
Tele-Media(a) Acquisition Acquisitions Transactions(f) Offerings Facility(i)
------------- ----------- --------------- --------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue.......... $16,241 $ -- $5,293 $ 7,588 $ -- $ --
Station operating
expenses........... 12,679 (573)(b) 2,710 4,782 -- --
Depreciation and
amortization....... 2,208 2,278(c) 2,037 3,923 -- --
Corporate general and
administrative..... 454 (788)(d) -- -- -- --
------- ------- ------ ------- ------- -------
Operating
expenses......... 15,341 917 4,747 8,705 -- --
------- ------- ------ ------- ------- -------
Operating income
(loss)............. 900 (917) 546 (1,117) -- --
Interest expense..... 10,375 (708)(e) 591 3,654 (7,298)(g) (6,730)
------- ------- ------ ------- ------- -------
Income (loss) before
income taxes....... (9,475) (209) (45) (4,771) 7,298 6,730
Income taxes
(benefit).......... -- (519) -- -- -- --
Dividend requirement
for exchangeable
preferred stock.... -- -- -- -- (7,225)(h) --
------- ------- ------ ------- ------- -------
Income (loss) from
continuing
operations......... $(9,475) $ 310 $ (45) $(4,771) $ 73 $ 6,730
======= ======= ====== ======= ======= =======
<CAPTION>
The The
Original Completed
Offering(j) Transactions
----------- ------------
<S> <C> <C>
Net revenue.......... $ -- $ 29,122
Station operating
expenses........... -- 19,598
Depreciation and
amortization....... -- 10,446
Corporate general and
administrative..... -- (334)
------- --------
Operating
expenses......... -- 29,710
------- --------
Operating income
(loss)............. -- (588)
Interest expense..... 2,632 2,516
------- --------
Income (loss) before
income taxes....... (2,632) (3,104)
Income taxes
(benefit).......... -- (519)
Dividend requirement
for exchangeable
preferred stock.... -- (7,225)
------- --------
Income (loss) from
continuing
operations......... $(2,632) $ (9,810)
======= ========
</TABLE>
- ---------------
(a) Represents the unaudited historical results of Tele-Media for the period
January 1, 1997 through July 3, 1997, including the historical operating
results of Wilkes-Barre/Scranton stations acquired by Tele-Media in
February and April 1997 which had been operated under LMA/JSA agreements
since August and December 1996. The operating results of Tele-Media are
included in our results of operations beginning July 4, 1997, the date of
acquisition.
27
<PAGE> 31
(b) Includes the elimination of $115,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by us to a national
representative for national advertising and the elimination of $211,000
of LMA/JSA fees related to the Wilkes-Barre/Scranton stations and
$247,000 of expenses associated with the litigation between the Company
and Tele-Media. Had the Tele-Media Acquisition occurred on January 1,
1997, these expenses would not have been incurred.
(c) Reflects increased depreciation and amortization resulting from the
purchase price allocation.
(d) Reflects the elimination of the management fees paid to affiliates by
Tele-Media of $454,000 and the recording of corporate overhead of
$200,000 which represents our estimate of the incremental expense
necessary to oversee the Tele-Media stations and the elimination of
$534,000 of expenses associated with the litigation between the Company
and Tele-Media. Had the 1997 Offerings and the Tele-Media Acquisition
occurred on January 1, 1997, these expenses would not have been incurred.
(e) Reflects the elimination of Tele-Media interest expense of $5.5 million
and the recording of interest expense of $4.8 million that would have
been incurred if the acquisition of Tele-Media had occurred on January
1, 1997.
(f) Gives effect to the acquisitions of KENZ-FM, KBER-FM, KBEE-FM and
KFNZ-AM in Salt Lake City, KNHK-FM in Reno, KTHK-FM in Tri-Cities,
WXEX-FM and WHKK-FM in Providence, WLEV-FM in Allentown/Bethlehem, the
Boise Acquisition, the Wilkes-Barre/Scranton Acquisitions, the
disposition of WEST-AM in Allentown/Bethlehem, the Quincy Sale and the
acquisition of KAAY-AM and the disposition of KRNN-AM in Little Rock as
if each transaction had taken place on January 1, 1997.
(g) Reflects the reduction of our pro forma interest expense, the recording
of interest expense related to the 10 1/4% Senior Subordinated Notes due
2007 (the "1997 Notes") and recording of the amortization of deferred
financing costs of $3.3 million related to the 1997 Notes.
(h) Reflects the recording of the dividends related to the 13 1/4%
Exchangeable Preferred Stock (the "Exchangeable Preferred Stock") as if
the 1997 Offerings had taken place on January 1, 1997.
(i) Reflects the repayment of outstanding borrowings under the Credit
Facility with the proceeds from Citadel Communications' initial public
offering.
(j) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $4.0 million related to the
notes.
(2) Represents the net effect of (a) the Baton Rouge/Lafayette Acquisition, (b)
the Saginaw/Bay City Acquisition, (c) the Carlisle acquisition and (d) the
Charleston/Binghamton/Muncie/Kokomo Acquisition as if each such transaction
had taken place on January 1, 1997. Depreciation and amortization for such
acquisitions are based upon preliminary allocations of the purchase price to
property and equipment and intangible assets which will be amortized over
periods of 1-25 years. Actual depreciation and amortization may differ
depending on the final allocation of the purchase price; however, management
does not believe these differences will be material. Dollars in the table
below are shown in thousands.
<TABLE>
<CAPTION>
CHARLESTON/
BATON ROUGE/ SAGINAW/ BINGHAMTON/
LAFAYETTE BAY CITY CARLISLE MUNCIE/KOKOMO PENDING
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ADJUSTMENTS ACQUISITIONS
------------ ----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue....................... $ 4,368 $ 4,934 $ 670 $11,052 $ -- $ 21,024
Station operating
expenses........................ 3,323 3,322 392 8,156 (334)(a) 14,859
Depreciation and amortization..... 2,380 1,898 223 4,025 -- 8,526
Corporate general and
administrative.................. -- -- -- -- 1,200(b) 1,200
------- ------- ------ ------- ----- --------
Operating expenses.............. 5,703 5,220 615 12,181 866 24,585
Operating income (loss)........... (1,335) (286) 55 (1,129) (866) (3,561)
Interest expense.................. 2,088 2,215 285 3,797 -- 8,385
------- ------- ------ ------- ----- --------
Income (loss) before income
taxes........................... (3,423) (2,501) (230) (4,926) (866) (11,946)
Income taxes (benefit)............ (347) -- -- -- -- (347)
------- ------- ------ ------- ----- --------
Income (loss) from continuing
operations...................... $(3,076) $(2,501) $ (230) $(4,926) $(866) $(11,599)
======= ======= ====== ======= ===== ========
</TABLE>
- ---------------
(a) Includes the elimination of $202,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by the Company to a
national representative for national advertising and the elimination of
$132,000 of station management expenses.
(b) Reflects increased corporate overhead to administer additional stations.
28
<PAGE> 32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR
ACTUAL COMPLETED COMPLETED THE PENDING PRO FORMA
THE COMPANY TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) THE COMPANY
----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue................. $ 89,803 $ 29,950 $119,753 $ 29,581 $149,334
Station operating
expenses.................. 65,245 18,783 84,028 20,092 104,120
Depreciation and
amortization.............. 14,636 11,626 26,262 11,367 37,629
Corporate general and
administrative............ 3,530 (334) 3,196 1,600 4,796
-------- -------- -------- -------- --------
Operating
expenses.............. 83,411 30,075 113,486 33,059 146,545
-------- -------- -------- -------- --------
Operating income
(loss).................... 6,392 (125) 6,267 (3,478) 2,789
Interest expense............ 12,304 2,274 14,578 11,180 25,758
Other (income) expense,
net....................... (451) -- (451) -- (451)
-------- -------- -------- -------- --------
Income (loss) before income
taxes..................... (5,461) (2,399) (7,860) (14,658) (22,518)
Income taxes (benefit)...... (770) (1,048) (1,818) (463) (2,281)
Dividend requirement for
exchangeable preferred
stock..................... (6,633) (7,225) (13,858) -- (13,858)
-------- -------- -------- -------- --------
Income (loss) from
continuing operations
applicable to common
shares.................... $(11,324) $ (8,576) $(19,900) $(14,195) $(34,095)
======== ======== ======== ======== ========
</TABLE>
29
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) the Tele-Media Acquisition, (b) the
acquisitions of KENZ-FM, KBER-FM, KBEE-FM and KFNZ-AM in Salt Lake City, (c)
the acquisition of KNHK-FM in Reno, (d) the acquisition of KTHK-FM in
Tri-Cities, (e) the acquisitions of WXEX-FM and WHKK-FM in Providence, (f)
Wilkes-Barre/ Scranton Acquisitions, (g) the Little Rock Acquisitions, (h)
the Boise Acquisition, (i) the acquisition of WLEV-FM in
Allentown/Bethlehem, (j) the sale of WEST-AM in Allentown/Bethlehem, (k) the
Quincy Sale, (l) the acquisition of KAAY-AM and the disposition of KRNN-AM
in Little Rock, (m) the consummation of the 1997 Offerings, (n) repayment of
outstanding borrowings under the Credit Facility with the proceeds from
Citadel Communications' initial public offering and (o) the consummation of
the Original Offering and the use of the net proceeds from the Original
Offering as if each transaction had taken place on January 1, 1997. Net
revenue and station expenses for stations operated under LMAs are included
in our historical consolidated financial statements. For those stations
operated under JSAs or LMAs and subsequently acquired, associated fees and
redundant expenses were eliminated and estimated occupancy costs were
included to adjust the results of operations to reflect ownership of the
stations as of January 1, 1997. Dollars in the table below are shown in
thousands.
<TABLE>
<CAPTION>
Adjustments Repayment
for of the The
Actual Tele-Media Little Rock Other The 1997 Credit Original
Tele-Media(a) Acquisition Acquisitions Acquisitions(f) Offerings Facility Offering(j)
-------------- ----------- ------------ ---------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue.......... $16,241 $ -- $5,596 $ 8,113 $ -- $ -- $ --
Station operating
expenses............ 12,679 (573)(b) 2,835 3,842 -- -- --
Depreciation and
amortization........ 2,208 2,278(c) 2,358 4,782 -- -- --
Corporate general and
administrative...... 454 (788)(d) -- -- -- -- --
------- ------ ------ ------- ------- ------- -------
Operating
expenses.......... 15,341 917 5,193 8,624 -- -- --
------- ------ ------ ------- ------- ------- -------
Operating income
(loss).............. 900 (917) 403 (511) -- -- --
Interest expense..... 10,375 (708)(e) 591 4,779 (7,298)(g) (8,974)(i) 3,509
------- ------ ------ ------- ------- ------- -------
Income (loss) before
income taxes........ (9,475) (209) (188) (5,290) 7,298 8,974 (3,509)
Income taxes
(benefit)........... -- (519) (225) (304) -- -- --
Dividend requirement
for exchangeable
preferred stock..... -- -- -- -- (7,225)(h) -- --
------- ------ ------ ------- ------- ------- -------
Income (loss) from
continuing
operations.......... $(9,475) $ 310 $ 37 $(4,986) $ 73 $ 8,974 $(3,509)
======= ====== ====== ======= ======= ======= =======
<CAPTION>
The
Completed
Transactions
------------
<S> <C>
Net revenue.......... $29,950
Station operating
expenses............ 18,783
Depreciation and
amortization........ 11,626
Corporate general and
administrative...... (334)
-------
Operating
expenses.......... 30,075
-------
Operating income
(loss).............. (125)
Interest expense..... 2,274
-------
Income (loss) before
income taxes........ (2,399)
Income taxes
(benefit)........... (1,048)
Dividend requirement
for exchangeable
preferred stock..... (7,225)
-------
Income (loss) from
continuing
operations.......... $(8,576)
=======
</TABLE>
- ---------------
(a) Represents the unaudited historical results of Tele-Media for the period
January 1, 1997 through July 3, 1997, including the historical operating
results of Wilkes-Barre/Scranton stations acquired by Tele-Media in
February and April 1997 which had been operated under LMA/JSA agreements
since August and December 1996. The operating results of Tele-Media are
included in our results of operations beginning July 3, 1997, the date of
acquisition.
(b) Includes the elimination of $115,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by us to a national
representative for national advertising, the elimination of $211,000 of
LMA/JSA fees related to the Wilkes-Barre/Scranton stations and the
elimination of $247,000 of expenses associated with the litigation
between the Company and Tele-Media. Had the Tele-Media Acquisition
occurred on January 1, 1997, these expenses would not have been incurred.
(c) Reflects increased depreciation and amortization resulting from the
purchase price allocation.
(d) Reflects the elimination of the management fees paid to affiliates by
Tele-Media of $454,000 and the recording of corporate overhead of
$200,000 which represents our estimate of the incremental expense
necessary to oversee the Tele-Media stations and the elimination of
$534,000 of expenses associated with the litigation between the Company
and Tele-Media. Had the 1997 Offerings and the Tele-Media Acquisition
occurred on January 1, 1997, these expenses would not have been incurred.
30
<PAGE> 34
(e) Reflects the elimination of Tele-Media interest expense of $5.5 million
and the recording of interest expense of $4.8 million that would have
been incurred if the acquisition of Tele-Media had occurred on January 1,
1997.
(f) Gives effect to (i) the acquisitions of WLEV-FM in Allentown/Bethlehem;
KBOI-AM, KQFC-FM and KKGL-FM in Boise; KENZ-FM, KBER-FM, KBEE-FM and
KFNZ-AM in Salt Lake City, KNHK-FM in Reno, KTHK-FM in Tri-Cities;
WXEX-FM and WHKK-FM in Providence; WEMR-AM/FM, WCTP-FM, WCTD-FM and
WCDL-AM in Wilkes-Barre/Scranton, KIZN-FM and KZMG-FM in Boise and
KAAY-AM in Little Rock, (ii) the sale of WEST-AM in Allentown/Bethlehem
and KRNN-AM in Little Rock and (iii) the Quincy Sale as if such
transactions had taken place on January 1, 1997.
(g) Reflects the reduction of our pro forma interest expense, the recording
of interest expense related to the 1997 Notes and the amortization of
deferred financings costs of $3.3 million related to the 1997 Notes.
(h) Reflects the recording of the dividends on the Exchangeable Preferred
Stock as if the 1997 Offerings had taken place on January 1, 1997.
(i) Reflects the reduction of interest expense due to the pay down of the
Credit Facility with the proceeds received from Citadel Communications'
initial public offering.
(j) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $4.0 million related to the
notes.
(2) Represents the net effect of (a) the Baton Rouge/Lafayette Acquisition, (b)
the Saginaw/Bay City Acquisition, (c) the Carlisle Acquisition, and (d) the
Charleston/Binghamton/Muncie/Kokomo Acquisition, as if each transaction had
taken place on January 1, 1997. Depreciation and amortization for such
acquisitions are based upon preliminary allocations of the purchase price to
property and equipment and intangible assets which will be amortized over
periods of 1-25 years. Actual depreciation and amortization may differ
depending on the final allocation of the purchase price; however, management
does not believe these differences will be material. Dollars in the table
below are shown in thousands.
<TABLE>
<CAPTION>
CHARLESTON/
BINGHAMTON/
BATON ROUGE/LAFAYETTE SAGINAW/BAY CITY CARLISLE MUNCIE/KOKOMO PENDING
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ADJUSTMENTS ACQUISITIONS
--------------------- ---------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue.......... $ 6,064 $ 6,616 $ 899 $16,002 $ -- $ 29,581
Station operating
expenses........... 4,649 4,445 528 10,917 (447)(a) 20,092
Depreciation and
amortization....... 3,173 2,530 297 5,367 -- 11,367
Corporate general and
administrative..... -- -- -- -- 1,600(b) 1,600
------- ------- ------ ------- ------- --------
Operating
expenses......... 7,822 6,975 825 16,284 1,153 33,059
Operating income
(loss)............. (1,758) (359) 74 (282) (1,153) (3,478)
Interest expense..... 2,784 2,953 380 5,063 -- 11,180
------- ------- ------ ------- ------- --------
Income (loss) before
income taxes....... (4,542) (3,312) (306) (5,345) (1,153) (14,658)
Income taxes
(benefit).......... (463) -- -- -- -- (463)
------- ------- ------ ------- ------- --------
Income (loss) from
continuing
operations......... $(4,079) $(3,312) $ (306) $(5,345) $(1,153) $(14,195)
======= ======= ====== ======= ======= ========
</TABLE>
- ---------------
(a) Includes the elimination of $271,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by us to a national
representative for national advertising and the elimination of $176,000
of station management expenses.
(b) Reflects increased corporate overhead to administer additional stations.
31
<PAGE> 35
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION OF ADJUSTMENTS
ADJUSTMENTS KAAY-AM AND ADJUSTMENTS FOR FOR THE
ACTUAL FOR THE DISPOSITION OF THE PENDING ORIGINAL PRO FORMA
THE COMPANY QUINCY SALE KRNN-AM ACQUISITIONS(1) OFFERING(2) THE COMPANY
----------- ----------- -------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents........... $ 7,407 $ -- $ (4,909) $(17,000) $ 21,774 $ 7,272
Accounts and notes
receivable, net....... 32,044 250 80 1,000 -- 33,374
Prepaid expenses........ 3,287 -- -- -- -- 3,287
-------- ------- -------- -------- -------- --------
Total current assets.... 42,738 250 (4,829) (16,000) 21,774 43,933
Property and equipment,
net................... 36,834 (375) 220 14,500 -- 51,179
Intangible assets,
net................... 290,405 (1,087) 4,620 142,449 -- 436,387
Other assets............ 3,376 -- -- -- 4,000(3) 7,376
-------- ------- -------- -------- -------- --------
$373,353 $(1,212) $ 11 $140,949 $ 25,774 $538,875
======== ======= ======== ======== ======== ========
LIABILITIES AND
SHAREHOLDER'S EQUITY
Accounts payable and
accrued liabilities... $ 11,399 $ -- $ 11 $ -- $ -- $ 11,410
Current maturities of
other long-term
obligations........... 282 -- -- -- -- 282
-------- ------- -------- -------- -------- --------
Total current
liabilities........... 11,681 -- 11 -- -- 11,692
-------- ------- -------- -------- -------- --------
Notes payable, less
current maturities.... 18,726 (2,000) -- 132,500 (89,226)(4) 60,000
10 1/4% Notes........... 98,461 -- -- -- -- 98,461
9 1/4% Notes............ -- -- -- -- 115,000 115,000
Other long-term
obligations, less
current maturities.... 1,011 -- -- 1,500 -- 2,511
Deferred tax
liability............. 25,306 -- -- 6,949 -- 32,255
Exchangeable preferred
stock................. 112,965 -- -- -- -- 112,965
Shareholder's equity:
Common stock and
additional paid-in
capital............. 137,648 -- -- -- -- 137,648
Accumulated deficit... (32,445) 788 -- -- -- (31,657)
-------- ------- -------- -------- -------- --------
$373,353 $(1,212) $ 11 $140,949 $ 25,774 $538,875
======== ======= ======== ======== ======== ========
</TABLE>
32
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(1) Represents the net effect of (a) the Baton Rouge/Lafayette Acquisition, (b)
the Saginaw/Bay City Acquisition, (c) the Carlisle Acquisition, and (d) the
Charleston/Binghamton/Muncie/Kokomo Acquisition.
(2) Represents the issuance of the outstanding notes and the application of the
net proceeds from the Original Offering.
(3) Reflects the initial purchasers' discount and the expenses of the Original
Offering.
(4) Reflects the repayment of borrowings under the Credit Facility.
33
<PAGE> 37
SELECTED HISTORICAL FINANCIAL DATA
Our selected historical financial data presented below as of and for each
of the years in the five-year period ended December 31, 1997 are derived from
our consolidated financial statements, which consolidated financial statements
have been audited by KPMG LLP, independent certified public accountants. Our
selected historical financial data presented below as of September 30, 1998 and
for the nine months ended September 30, 1997 and 1998 are derived from our
unaudited consolidated financial statements which, in the opinion of management,
contain all necessary adjustments of a normal recurring nature to present the
financial statements in conformity with generally accepted accounting principles
("GAAP"). Our consolidated financial statements as of December 31, 1996 and 1997
and for each of the years in the three-year period ended December 31, 1997 and
the independent auditors' report thereon, as well as our unaudited consolidated
financial statements as of September 30, 1998 and for the nine months ended
September 30, 1997 and 1998, are included elsewhere in this prospectus. Our
financial results are not comparable from year to year because we acquired and
disposed of various radio stations. The selected historical financial data below
should be read in conjunction with, and is qualified by reference to, our
Consolidated Financial Statements and related notes and the information
contained in the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section included elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue....................... $ 21,376 $ 32,998 $ 34,112 $ 45,413 $ 89,803 $ 60,025 $ 98,821
Station operating expenses........ 17,081 24,331 26,832 33,232 65,245 43,306 69,412
Depreciation and amortization..... 5,245 7,435 4,891 5,158 14,636 9,563 20,005
Corporate general and
administrative.................. 961 2,504 2,274 3,248 3,530 2,562 3,351
-------- -------- -------- -------- --------- --------- --------
Operating income (loss)........... (1,911) (1,272) 115 3,775 6,392 4,594 6,053
Interest expense(1)............... 2,637 4,866 5,242 6,155 12,304 8,214 13,590
Other income, net................. 149 657 781 414 451 401 94
-------- -------- -------- -------- --------- --------- --------
Income (loss) before income taxes
and extraordinary item.......... (4,399) (5,481) (4,346) (1,966) (5,461) (3,219) (7,443)
Income tax benefit................ -- -- -- -- (770) (105) (1,163)
-------- -------- -------- -------- --------- --------- --------
Income (loss) before extraordinary
item............................ (4,399) (5,481) (4,346) (1,966) (4,691) (3,114) (6,280)
Extraordinary loss(2)............. -- -- -- (1,769) -- -- --
-------- -------- -------- -------- --------- --------- --------
Net income (loss)................. $ (4,399) $ (5,481) $ (4,346) $ (3,735) $ (4,691) $ (3,114) $ (6,280)
Dividend requirement for
exchangeable preferred stock.... -- -- -- -- 6,633 3,276 10,822
-------- -------- -------- -------- --------- --------- --------
Net loss applicable to common
shares(3)....................... $ (4,399) $ (5,481) $ (4,346) $ (3,735) $ (11,324) $ (6,390) $(17,102)
======== ======== ======== ======== ========= ========= ========
Net loss per common share(4)...... $ (110) $ (137) $ (109) $ (93) $ (283) $ (160) $ (428)
Shares used in per share
calculation..................... 40,000 40,000 40,000 40,000 40,000 40,000 40,000
OTHER DATA:
Broadcast cash flow(5)............ $ 4,295 $ 8,667 $ 7,280 $ 12,181 $ 24,558 $ 16,719 $ 29,409
EBITDA(5)......................... 3,334 6,163 5,006 8,933 21,028 14,157 26,058
Net cash provided by (used in)
operating activities............ 361 324 (434) (1,394) 5,543 4,137 3,946
Net cash provided by (used in)
investing activities............ (10,818) (14,037) 4,810 (61,168) (211,622) (133,350) (39,350)
Net cash provided by (used in)
financing activities............ 10,070 14,393 (4,908) 63,145 212,176 154,324 35,127
Capital expenditures.............. 679 2,857 1,691 2,038 2,070 1,478 1,747
Deficiency of earnings to fixed
charges(6)...................... 4,399 5,481 4,346 1,966 12,094 6,495 18,265
</TABLE>
34
<PAGE> 38
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 857 $ 1,538 $ 1,005 $ 1,588 $ 7,685 $ 7,407
Working capital (deficiency)............ 1,701 3,382 2,928 (4,195) 22,593 31,057
Intangible assets, net.................. 17,454 20,080 15,093 51,802 268,690 290,405
Total assets............................ 36,120 46,397 37,372 102,244 344,172 373,353
Long-term debt (including current
portion)(1)........................... 30,468 47,805 43,046 91,072 189,699 118,480
Exchangeable preferred stock............ -- -- -- -- 102,010 112,965
Shareholder's equity (deficit).......... 3,492 (4,782) (9,249) 5,999 16,132 105,204
</TABLE>
- ---------------
(1) Includes debt issuance costs and debt discount amortization of $139,000,
$287,000, $132,000, $163,000 and $441,000 for the years ended December 31,
1993, 1994, 1995, 1996 and 1997, respectively, and $156,000 and $401,000 for
the nine months ended September 30, 1997 and 1998, respectively.
(2) On October 9, 1996, we extinguished our long-term debt of $31.3 million,
payable to a financial institution, and our note payable to a related party
of $7.0 million. The early retirement of the long-term debt resulted in a
$1.8 million extraordinary loss due to prepayment premiums and the write-off
of debt issuance costs.
(3) We have never declared cash dividends on our common stock.
(4) Basic and diluted net loss per common share are the same for all periods
presented due to our net losses.
(5) "Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate general and administrative
expenses. "EBITDA" consists of operating income (loss) before depreciation
and amortization. Although broadcast cash flow and EBITDA are not measures
of performance calculated in accordance with GAAP, management believes that
they are useful to an investor in evaluating the Company because they are
measures widely used in the broadcasting industry to evaluate a radio
company's operating performance. However, broadcast cash flow and EBITDA
should not be considered in isolation or as substitutes for net income, cash
flows from operating activities and other income or cash flow statement data
prepared in accordance with GAAP as a measure of liquidity or profitability.
(6) Fixed charges include interest expense on debt, amortization of financing
costs, amortization of debt discount, 33% of rent expense, and dividend
requirements with respect to the Exchangeable Preferred Stock.
35
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with
the information contained in the "Selected Historical Financial Data" section
and the Company's Consolidated Financial Statements and related notes included
elsewhere in this prospectus. Except for the historical information contained in
this prospectus, the discussions in this prospectus contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed in this prospectus. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and in the section entitled "Risk Factors," as well as
those discussed elsewhere in this prospectus.
The principal source of the Company's revenue is the sale of broadcasting
time on its radio stations for advertising. As a result, the Company's revenue
is affected primarily by the advertising rates its radio stations charge.
Correspondingly, the rates are based upon a station's ability to attract
audiences in the demographic groups targeted by its advertisers, as measured
principally by periodic Arbitron Radio Market Reports. 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.
Each of the Company's stations has a general pre-determined level of on-air
inventory that it makes available for advertising, which may be different at
different times of the day and tends to remain stable over time. Much of the
Company's selling activity is based on demand for its radio stations' on-air
inventory and, in general, the Company responds to this demand by varying prices
rather than by changing the available inventory.
In the broadcasting industry, radio stations often utilize trade (or
barter) agreements to exchange advertising time for goods or services (such as
other media advertising, travel or lodging), in lieu of cash. In order to
preserve most of its on-air inventory for cash advertising, the Company
generally enters into trade agreements only if the goods or services bartered to
the Company will be used in the Company's business. The Company has minimized
its use of trade agreements and has generally sold over 90% of its advertising
time for cash. In addition, it is the Company's general policy not to preempt
advertising spots paid for in cash with advertising spots paid for in trade.
In 1997, the Company's radio stations derived approximately 84.7% of their
net broadcasting revenue from local and regional advertising in the markets in
which they operate, and the remainder resulted principally from the sale of
national advertising. Local and regional advertising is sold primarily by each
station's sales staff. To generate national advertising sales, the Company
engages a national advertising representative firm. The Company believes that
the volume of national advertising revenue tends to adjust to shifts in a
station's audience share position more rapidly than does the volume of local and
regional advertising revenue. Therefore, the Company focuses on sales of local
and regional advertising. During the year ended December 31, 1997 and the nine
months ended September 30, 1998, no single advertiser accounted for more than
9.2% of the net revenue of any of the Company's station groups or more than 1.4%
of total net revenue of the Company.
The Company's quarterly revenue varies throughout the year, as is typical
in the radio broadcasting industry. The Company's first calendar quarter
typically produces the lowest
36
<PAGE> 40
revenue for the year, and the second and fourth calendar quarters generally
produce the highest revenue for the year. The advertising revenue of the Company
is typically collected within 120 days of the date on which the related
advertising is aired and its corresponding revenue is recognized. Most accrued
expenses, however, are paid within 45 to 60 days. As a result of this time lag,
working capital requirements have increased as the Company has grown and will
likely increase further in the future.
The primary operating expenses incurred in the ownership and operation of
radio stations include employee salaries and commissions, programming expenses
and advertising and promotion expenses. The Company also incurs and will
continue to incur significant depreciation, amortization and interest expense as
a result of completed and future acquisitions of stations and existing and
future borrowings. The Company's consolidated financial statements tend not to
be directly comparable from period to period due to the Company's acquisition
activity.
Historically and on a pro forma basis, the Company has generated net losses
primarily as a result of significant charges for depreciation and amortization
relating to the acquisition of radio stations and interest charges on
outstanding debt. The Company amortizes FCC licenses and goodwill attributable
to the acquisition of radio stations over a fifteen-year period. Based upon the
large number of acquisitions that were consummated within the last two years,
the Company anticipates that depreciation and amortization charges will continue
to be significant for several years. To the extent that the Company consummates
additional acquisitions, its depreciation and amortization charges are likely to
increase. The Company expects that it will continue to incur net losses through
at least 1999.
The Company's financial results are dependent on a number of factors,
including the general strength of the local and national economies, population
growth, ability to provide popular programming, local market and regional
competition, relative efficiency of radio broadcasting compared to other
advertising media, signal strength and government regulation and policies.
The Company consolidates the operations of stations operated under LMAs.
The Emerging Issues Task Force, a division of the Financial Accounting Standards
Board ("EITF"), is reviewing the accounting method for contractual management
arrangements and may determine that consolidation is appropriate only if certain
requirements for controlling financial interest are met. The provisions of the
Company's existing LMAs do not meet the proposed control requirements, thus if
the EITF proposal is approved as drafted, consolidation of stations operated
under LMAs may no longer be appropriate.
"Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate expenses. "EBITDA" consists of
operating income (loss) before depreciation and amortization. Although broadcast
cash flow and EBITDA are not measures of performance calculated in accordance
with GAAP, management believes that they are useful to an investor in evaluating
the Company because they are measures widely used in the broadcasting industry
to evaluate a radio company's operating performance. However, broadcast cash
flow and EBITDA should not be considered in isolation or as substitutes for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP as a measure of liquidity or
profitability.
37
<PAGE> 41
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
Net Broadcasting Revenue. Net broadcasting revenue increased $38.8 million
or 64.7% to $98.8 million for the nine months ended September 30, 1998 from
$60.0 million for the nine months ended September 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 $32.6 million of the
increase. For stations owned and operated over the comparable period in 1997 and
1998, net broadcasting revenue improved $6.2 million or 12.7% to $54.9 million
in 1998 from $48.7 million in 1997, primarily due to increased ratings and
improved selling efforts.
Station Operating Expenses. Station operating expenses increased $26.1
million or 60.3% to $69.4 million for the nine months ended September 30, 1998
from $43.3 million for the nine months ended September 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 $12.7 million or 76.0% to $29.4 million for the nine months
ended September 30, 1998 from $16.7 million for the nine months ended September
30, 1997. As a percentage of net broadcasting revenue, broadcast cash flow
improved to 29.8% for the nine months ended September 30, 1998 compared to 27.8%
for the nine months ended September 30, 1997.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.8 million or 30.8% to $3.4 million for the
nine months ended September 30, 1998 from $2.6 million for the nine months ended
September 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 $11.9
million or 83.8% to $26.1 million for the nine months ended September 30, 1998
from $14.2 million for the nine months ended September 30, 1997.
Depreciation and Amortization. Depreciation and amortization expense
increased $10.4 million or 108.3% to $20.0 million for the nine months ended
September 30, 1998 from $9.6 million for the nine months ended September 30,
1997, primarily due to radio station acquisitions consummated during 1997 and
1998.
Interest Expense. Interest expense increased approximately $5.4 million or
65.9% to $13.6 million for the nine months ended September 30, 1998 from $8.2
million for the nine months ended September 30, 1997, primarily due to interest
expense associated with additional borrowings to fund acquisitions consummated
in 1997 and 1998, offset by a repayment of the borrowings in the third quarter
of 1998 from the proceeds of Citadel Communications' initial public offering.
Net Loss. As a result of the factors described above, net loss increased
$3.2 million or 103.2% to $6.3 million for the nine months ended September 30,
1998 from $3.1 million for the nine months ended September 30, 1997.
38
<PAGE> 42
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Broadcasting Revenue. Net broadcasting revenue increased $44.3 million
or 97.7% to $89.8 million in 1997 from $45.4 million in 1996. The inclusion of
net revenue from the acquisitions of radio stations and net revenue generated
from LMAs and JSAs entered into during 1997 provided $41.8 million of the
increase. For stations owned and operated over the comparable period in 1997 and
1996, net broadcasting revenue improved approximately $2.5 million or 6.7% to
$40.7 million in 1997 from $38.2 million in 1996 primarily due to increased
ratings and improved selling efforts.
Station Operating Expenses. Station operating expenses increased $32.0
million or 96.3% to $65.2 million in 1997 from $33.2 million in 1996. 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.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $12.4 million or 101.6% to $24.6 million in 1997 from $12.2
million in 1996. As a percentage of net broadcasting revenue, broadcast cash
flow increased to 27.3% in 1997 from 26.8% in 1996.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.3 million or 8.7% to $3.5 million in 1997
from $3.2 million in 1996. The increase is due primarily to an increase in
staffing levels required to support the Company's growth through acquisitions.
EBITDA. As a result of the factors described above, EBITDA increased $12.1
million or 135.4% to $21.0 million in 1997 from $8.9 million in 1996.
Depreciation and Amortization. Depreciation and amortization expense
increased $9.5 million or 183.8% to $14.6 million in 1997 from $5.2 million in
1996, primarily due to radio station acquisitions consummated during 1997.
Interest Expense. Interest expense increased $6.1 million or 99.9% to $12.3
million in 1997 from $6.2 million in 1996, primarily due to interest expense
associated with additional borrowings to fund acquisitions consummated during
1997.
Net Loss. As a result of the factors described above, net loss increased
$1.0 million or 25.6% to $4.7 million in 1997 from $3.7 million in 1996.
Included in the net loss for 1996 is a $1.8 million extraordinary loss related
to the repayment of long-term debt.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Broadcasting Revenue. Net broadcasting revenue increased $11.3 million
or 33.1% to $45.4 million in 1996 from $34.1 million in 1995. The inclusion of
revenue from the acquisitions of radio stations and revenue generated from LMAs
and JSAs entered into during 1996 provided $7.8 million of the increase. For
stations owned and operated over the comparable period in 1995 and 1996, net
broadcasting revenue improved $3.5 million or 11.4% to $34.2 million in 1996
from $30.6 million in 1995 primarily due to increased ratings and improved
selling efforts.
Station Operating Expenses. Station operating expenses increased $6.4
million or 23.9% to $33.2 million in 1996 from $26.8 million in 1995. 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 1996.
39
<PAGE> 43
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $4.9 million or 67.1% to $12.2 million in 1996 from $7.3
million in 1995. As a percentage of net broadcasting revenue, broadcast cash
flow increased to 26.8% in 1996 from 21.4% in 1995.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.9 million or 39.1% to $3.2 million in 1996
from $2.3 million in 1995. Substantially all of the increase was due to
professional expenses incurred in 1996 related to the Company's capital raising
activities and a lawsuit between the Company and Tele-Media Broadcasting Company
("Tele-Media") and certain of its shareholders and officers which arose in
connection with Tele-Media's decision not to consummate a sale of its radio
stations to the Company pursuant to a 1995 agreement. In connection with the
Company's acquisition of Tele-Media, the litigation was settled.
EBITDA. As a result of the factors described above, EBITDA increased $3.9
million or 78.0% to $8.9 million in 1996 from $5.0 million in 1995.
Depreciation and Amortization. Depreciation and amortization expense
increased $0.3 million or 6.1% to $5.2 million in 1996 from $4.9 million in
1995, primarily due to radio station acquisitions consummated during 1996.
Interest Expense. Interest expense increased $1.0 million or 19.2% to $6.2
million in 1996 from $5.2 million in 1995, primarily due to interest expense
associated with additional borrowings to fund acquisitions consummated during
1996.
Net Loss. As a result of the factors described above, net loss decreased
$0.6 million or 14.1% to $3.7 million in 1996 from $4.3 million in 1995.
Included in the net loss for 1996 is $0.4 million of interest earned on loans
advanced by the Company to Deschutes River Broadcasting, Inc. ("Deschutes")
prior to the acquisition of Deschutes by the Company and a $1.8 million
extraordinary loss related to the repayment of long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided By Operations. For the nine months ended September 30,
1998, net cash provided by operations decreased to $3.9 million from $4.1
million for the comparable 1997 period primarily due to increases in accounts
receivable, prepaid expenses and accounts payable, offset by decreases in other
assets and accrued liabilities. Net cash provided by operations increased to
$5.5 million in 1997 from $1.4 million in 1996. The increase was primarily due
to an increase in amortization and depreciation as a result of acquisitions.
Net Cash Used in Investing Activities. For the nine months ended September
30, 1998, net cash used in investing activities decreased to $39.4 million from
$133.3 million in the comparable 1997 period. Net cash used in investing
activities in 1997 was $211.6 million, compared to $61.2 million in 1996. Net
cash used in investing activities was used primarily to acquire stations.
Net Cash Provided By Financing Activities. For the nine months ended
September 30, 1998, net cash provided by financing activities was $35.1 million
compared to $154.3 million in the comparable 1997 period. This decrease is the
result of the use of proceeds from Citadel Communications' initial public
offering to repay indebtedness in 1998 while the proceeds from the 1997
Offerings were used for acquisitions and operations, as well as for the
repayment of indebtedness. The decrease was offset by increased borrowings in
the 1998 period. Net cash provided by financing activities in 1997 was $212.2
million, primarily from the proceeds of the 1997 Offerings, compared to $63.1
million in 1996.
40
<PAGE> 44
Principal Liquidity Requirements. The Company's principal liquidity
requirements are for acquisition financing, debt service, working capital and
general corporate purposes, including capital expenditures. The Company's
acquisition strategy has required, and will continue in the foreseeable future
to require, a significant portion of the Company's capital resources. The
Company expects that its debt service and capital expenditure obligations within
the next twelve months will include approximately $10.6 million for interest on
the notes, approximately $10.4 million for interest on the 10 1/4% Senior
Subordinated Notes (the "1997 Notes") and approximately $3.5 million for capital
expenditures. The Exchangeable Preferred Stock does not require cash dividends
through July 1, 2002. The Company expects the funds for debt service obligations
and capital expenditures to be provided from operations.
The Company and Citadel Communications have financed the Company's past
acquisitions through bank borrowings, sales of equity and debt securities,
internally generated funds and proceeds from asset sales. The Company used $5.1
million of the net proceeds of the Original Offering to pay the purchase price
of the Company's acquisition of KAAY-AM in Little Rock and to repay outstanding
indebtedness, and it intends to use a portion of the remaining net proceeds of
the Original Offering to pay the purchase price of certain of the Pending
Acquisitions. The Company expects that financing for other future acquisitions
will be provided through bank borrowings, the sale of debt and equity securities
and internally generated funds.
Credit Facility. At September 30, 1998, the Company had $18.7 million
outstanding under the Credit Facility. The Company used a portion of the net
proceeds of the Original Offering to repay all outstanding borrowings under the
Credit Facility. The Credit Facility provides for revolving borrowings of up to
$137.5 million.
The Credit Facility restricts the ability of the Company's wholly owned
subsidiary Citadel License, Inc. ("Citadel License") to pay cash dividends or
make other distributions in respect of its capital stock. The Company is not
dependent in any material respect on the receipt of dividends or other payments
from Citadel License. The Credit Facility also contains other customary
restrictive covenants, which, among other things, and with certain exceptions,
limit the ability of the Company and Citadel License (the "Borrowers") to incur
additional indebtedness and liens in connection therewith, enter into certain
transactions with affiliates, consolidate, merge or effect certain asset sales,
issue additional stock, make certain capital or overhead expenditures, make
certain investments, loans or prepayments or change the nature of their
business. The Borrowers are also required to satisfy certain financial
covenants, which require the Borrowers to maintain specified financial ratios
and to comply with certain financial tests, such as ratios for maximum leverage,
senior debt leverage, minimum interest coverage and minimum fixed charges.
-- Maximum Leverage Test. The maximum leverage test requires that the
Borrowers not permit the ratio of Total Debt (as defined in the
Credit Facility) as of the last day of any month to the Adjusted
Operating Cash Flow (as defined in the Credit Facility) for the
twelve-month period ending as of the last day of such month to be
greater than the Applicable Ratio on such date. The Applicable
Ratio through May 1999 is 6.00. For each six-month period
thereafter through maturity, the Applicable Ratio shall decrease by
0.25.
-- Senior Debt Leverage Test. The senior debt leverage test requires
that the Borrowers not permit the ratio of the unpaid principal
balance of the Credit Facility or any specified portion thereof
outstanding from time to time as of the
41
<PAGE> 45
last day of any month to the Adjusted Operating Cash Flow for the twelve-month
period ending on such date to be greater than 4.50 for the period through May
1999. For each six-month period thereafter through maturity, such maximum ratio
shall decrease by 0.25.
-- Minimum Interest Coverage Test. The minimum interest coverage test
requires that the Borrowers not permit the ratio of their
consolidated Operating Cash Flow (as defined in the Credit
Facility) for a specified four-quarter period to Interest Expense
(as defined in the Credit Facility) and cash dividends on the
Company's 13 1/4% Exchangeable Preferred Stock (the "Exchangeable
Preferred Stock") for the same four-quarter period to be less than
2.0 for the quarter ending December 1998. The minimum ratio shall
be 2.25 for each quarter ending thereafter through maturity.
-- Minimum Fixed Charges Test. The minimum fixed charges test requires
that the Borrowers not permit the ratio of their consolidated
Operating Cash Flow for any specified four-quarter period to Fixed
Charges (as defined in the Credit Facility) for the same
four-quarter period to be less than 1.1 to 1.0.
The Borrowers are in compliance with the financial ratios and financial
condition tests in their its debt obligations.
Other Indebtedness and Exchangeable Preferred Stock. The documents
governing the Company's other indebtedness and the terms of the Exchangeable
Preferred Stock also contain certain covenants that restrict the Company from
taking various actions, including, subject to specified exceptions, the
incurrence of additional indebtedness, the granting of additional liens, the
making of investments, the payment of dividends and other restricted payments,
mergers, acquisitions and other fundamental corporate changes, capital
expenditures and transactions with affiliates.
Additional Capital Resources. Management believes that cash from operating
activities, borrowings under the Credit Facility and the remaining net proceeds
of the Original Offering should be sufficient to permit the Company to meet its
financial obligations and to fund its operations for at least the next twelve
months. However, the Company may require additional capital resources in
connection with the further implementation of its acquisition strategy.
Year 2000 Matters. The Year 2000 computer issue primarily results from the
fact that information technology hardware and software systems and other
non-information technology products containing embedded microchip processors
were originally programmed using a two digit format, as opposed to four digits,
to indicate the year. Such programming will be unable to interpret dates beyond
the year 1999, which could cause system and product failure, other computer
errors and a disruption in the operation of such systems and products.
The Company's project team has identified its accounting and traffic
systems, satellite delivered programming, digital automation systems and
internet service provider systems as the mission critical systems to evaluate
for Year 2000 compliance. In addition, while there are several software programs
currently used throughout the Company which are not Year 2000 compliant, the
vendors of this software have committed to provide Year 2000 compliant updates
to the Company. The Company expects to have all such updates tested and
operational by June 1999.
The Company has identified five phases for the project team to address for
each of the Company's risk areas. These phases are:
(1) an inventory of the Company's systems described above,
42
<PAGE> 46
(2) assessment of the systems to determine the risk and apparent extent of
Year 2000 problems,
(3) remediation of identified problems,
(4) testing of systems for Year 2000 readiness, and
(5) contingency planning for the worst-case scenarios.
Inventories have been completed for all mission critical Company software
applications and hardware systems, and the Company expects to complete an
inventory of at-risk non-information technology systems in the first quarter of
1999. The project team is currently assessing compliance issues related to the
Company's information hardware and software, and expects to complete such
assessment in the first quarter of 1999. The Company expects that some amount of
the testing will be performed during this assessment phase.
In each of its markets, the Company employs centralized accounting and
traffic (advertising scheduling) systems for all of its stations in the market.
In September 1998, the Company completed the replacement and upgrading of
software certified as Year 2000 compliant by the software vendor. The Company
intends to complete Year 2000 testing of this software in the first quarter of
1999. The total cost of the software upgrade was $0.3 million. In connection
with the software upgrade, much of the accounting and traffic hardware systems
were also upgraded or replaced. The total cost of the hardware upgrade was $0.1
million. The Company anticipates that evaluation for Year 2000 compliance of the
hardware and the new software used in its accounting and traffic systems for the
stations currently owned by the Company will be completed during the first
quarter of 1999. The Company expects that the accounting and traffic systems for
stations that may be acquired by the Company will be converted to the software
used for the Company's other stations. The cost of any necessary hardware
upgrades for these systems for stations acquired cannot be quantified at this
time.
Satellite delivered programs, which are delivered to the Company's radio
stations from outside sources, represent a third party risk to the Company
arising from the Year 2000 issue. The Company sent questionnaires to a majority
of the vendors of these programs during the fourth quarter of 1998 asking them
to update the Company on the status of their Year 2000 compliance. The Company
anticipates that it will send such questionnaires to the significant vendors of
satellite delivered programs to stations the Company acquires. Until those
questionnaires are returned and reviewed, the Company is unable to determine the
potential for disruption in its programming arising from this third party risk.
If the Company does not receive reasonable assurances regarding Year 2000
compliance from any vendor of these programs, the Company would then develop
contingency plans for alternative programming.
The Company is currently reviewing a proposal to update and expand the
digital automation systems used in the Company. Although not directly related to
the Year 2000 problem, the Company believes the expansion and replacement of
these systems, which the Company anticipates would be completed by the end of
June 1999, would minimize or eliminate Year 2000 problems associated with these
systems. If the Company elects not to pursue such expansion, it anticipates that
the total cost of replacing the non-compliant digital components in its current
digital automation systems would be approximately $0.5 million and that the
replacement would be completed by the end of June 1999. The cost of replacing
non-compliant digital components at stations that may be acquired by the Company
cannot be quantified at this time.
43
<PAGE> 47
The Company recently completed an expansion of its internet service
provider division. All mission critical elements of such division are certified
Year 2000 compliant by the software and hardware vendors. The Company expects to
conduct testing of such software and hardware during the first quarter of 1999.
No material expansion is scheduled for this division prior to the year 2000.
In addition to identification of these mission critical systems, the
Company has identified the top 10 advertisers on each of its current radio
stations. Questionnaires were sent to each of these advertisers during the
fourth quarter of 1998 asking them to update the Company on the status of their
Year 2000 compliance. The Company intends to send such questionnaires to the top
10 advertisers on each of the radio stations it acquires. In addition,
questionnaires are also being sent to various equipment vendors, banks and other
lending institutions that provide substantial products and services to the
Company. Until the questionnaires are returned and reviewed, the Company is
unable to determine the effect of these third party risks on the Company's
operations. There can be no assurance that the Company will be successful in
finding alternative Year 2000 compliant advertisers, suppliers and service
providers, if required.
The Company also intends to solicit information regarding its critical
internal non-information technology systems such as telephones and HVAC prior to
March 31, 1999. Any required remediation and testing of the Company's
non-information technology systems at its current stations is expected to be
completed by June 1999. The Company intends to promptly extend this inquiry to
stations it acquires.
The Company is in the process of determining its contingency plans, which
are expected to include the identification of the Company's most reasonably
likely worst-case scenarios. Preliminary contingency plans are expected to be
completed during the first quarter of 1999 and comprehensive plans are expected
to be completed by the second or third quarter of 1999. At this time, the
Company does not have sufficient information to assess the likelihood of such
worst-case scenarios. Currently, the Company believes that the most reasonably
likely sources of risk to the Company include (1) disruptions in the supply of
satellite delivered programs and (2) diminished demand for advertising time
arising from Year 2000 problems both specific to the Company's advertisers or
more generally related to the potential for economic disruptions related to the
Year 2000 issues.
Based on its current assessment efforts, the Company does not believe that
Year 2000 issues related to its internal systems will have a material adverse
effect on the Company's financial condition or results of operations. However,
as described above, the failure by third parties to be Year 2000 ready could
have a material adverse effect on the Company.
44
<PAGE> 48
BUSINESS
GENERAL
The Company is a radio broadcasting company that focuses on acquiring,
developing and operating radio stations in mid-sized markets. Upon completion of
the transactions described in the "The Pending Transactions" section (the
"Pending Transactions"), the Company will own or operate 92 FM and 43 AM radio
stations in 26 markets, including clusters of four or more stations in 19
markets, and will have the right to construct one additional FM station. The
Company's stations comprise the first or second ranked radio station group in
terms of revenue share in 19 of its markets for which such information is
available.
The Company's primary strategy is to secure and maintain a leadership
position in the markets it serves and to expand into additional mid-sized
markets where it believes a leadership position can be obtained. Upon entering a
market, the Company seeks to acquire stations which, when integrated with its
existing operations, allow it to reach a wider range of demographic groups that
appeal to advertisers, increase revenue and achieve substantial cost savings.
The Company believes that mid-sized markets represent attractive
opportunities because, as compared to the 50 largest markets in the United
States, they are generally characterized by:
-- lower radio station purchase prices as a multiple of broadcast cash
flow,
-- fewer sophisticated and well-capitalized competitors, including both
radio and competing advertising media such as newspapers and
television, and
-- less direct format competition due to the smaller number of stations
in any given market.
The Company believes that the attractive operating characteristics of
mid-sized markets coupled with the opportunity to establish or expand in-market
radio station groups create the potential for substantial revenue growth and
cost efficiencies. As a result, management seeks to achieve broadcast cash flow
margins that are comparable to the higher margins that historically were
generally achievable only in the 50 largest markets.
The Company's portfolio of stations is diversified in terms of format,
target demographics and geographic location. Because of the size of its
portfolio and its individual radio station groups, the Company believes it is
not unduly reliant upon the performance of any single station. The Company also
believes that the diversity of its portfolio of radio stations helps insulate
the Company from downturns in specific markets and changes in format
preferences.
CORPORATE HISTORY AND RECENTLY COMPLETED TRANSACTIONS
The Company was incorporated in Nevada in 1991, and in 1992 it acquired all
of the radio stations then owned or operated by Citadel Associates Limited
Partnership and Citadel Associates Montana Limited Partnership (collectively,
"Predecessor") and certain other radio stations. Lawrence R. Wilson, Chief
Executive Officer of the Company, was a co-founder and one of the two general
partners of Predecessor. In 1993, Citadel Communications was incorporated and
the Company was reorganized as a wholly owned subsidiary of Citadel
Communications. Citadel Communications currently owns all of the issued and
outstanding common stock of the Company. The Company acquired ownership of
additional radio
45
<PAGE> 49
stations in each of 1993, 1994, 1996, 1997, 1998 and 1999. Citadel License holds
the Company's radio broadcast licenses and does not conduct any independent
business operations.
As of January 1, 1997, Citadel Communications acquired Deschutes which
owned 18 radio stations in Montana, Oregon and Washington. The total
consideration paid was approximately $26.0 million. Following the acquisition,
Deschutes was operated as a sister company to the Company until June 20, 1997
when Deschutes was merged with and into the Company.
On July 3, 1997, the Company purchased all of the outstanding capital stock
of Tele-Media which owned or operated 16 FM and ten AM radio stations in
Pennsylvania, Rhode Island and Illinois. The purchase price for the Tele-Media
acquisition, following post-closing adjustments, was approximately $115.8
million, which included the repayment of certain indebtedness of Tele-Media and
the redemption of certain corporate bonds and warrants of Tele-Media. Upon
consummation of the Tele-Media acquisition, Tele-Media was merged with and into
the Company.
In various other transactions consummated since January 1, 1997, the
Company has acquired ownership of, or the right to operate, in eight markets an
aggregate of 31 stations (including ownership of one station the Company
operated under an LMA following the Tele-Media acquisition), the right to
construct an additional station and certain related assets, including various
Internet access service providers, for an aggregate purchase price of $132.3
million. The Company has sold in three markets an aggregate of six stations for
an aggregate sale price of $3.0 million.
On July 3, 1997, the Company sold $101.0 million principal amount of the
1997 Notes and 1.0 million shares of Exchangeable Preferred Stock which, subject
to certain conditions, at the option of the Company, are exchangeable into the
Company's 13 1/4% Subordinated Exchange Debentures due 2009 (the "Exchange
Debentures").
On July 7, 1998, Citadel Communications completed an initial public
offering of 6,880,796 shares of its common stock (the "Common Stock"), at $16.00
per share. Of such shares, Citadel Communications sold 6,250,000 shares and
certain stockholders of Citadel Communications sold 630,796 shares. On July 14,
1998, Citadel Communications sold 1,032,119 additional shares when the
underwriters exercised their over-allotment option. The aggregate net proceeds
to Citadel Communications were approximately $106.9 million, which were used to
repay a portion of the outstanding indebtedness under the Company's Credit
Facility. Citadel Communications did not receive any of the proceeds from the
sale of shares by the selling stockholders.
On November 19, 1998, the Company sold $115.0 million principal amount of
the outstanding 9 1/4% Senior Subordinated Notes due 2008 in order to finance
certain acquisitions, repay certain indebtedness and provide cash for working
capital purposes.
OPERATING STRATEGY
In order to maximize its radio stations' appeal to advertisers, and thus
its revenue and cash flow, the Company has implemented the strategies described
below. The Company intends to continue to expand its existing strategies and to
develop new methods to enhance revenue and reduce costs.
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<PAGE> 50
Ownership of Strong Station Groups. The Company seeks to secure and
maintain a leadership position in the markets it serves by owning multiple
stations in those markets. By strategically coordinating programming,
promotional and selling strategies among a group of local stations, the Company
attempts to capture a wide range of demographic listener groups which appeal to
advertisers. The Company believes that the diversification of its programming
formats and its collective inventory of available advertising time strengthen
relationships with advertisers and increase the Company's ability to maximize
the value of its inventory. The Company believes that having multiple stations
in a market also enhances its ability to market the advantages of radio
advertising versus other advertising media, such as newspapers and television,
thus potentially increasing radio's share of the total advertising dollars spent
in a given market.
The Company believes that its ability to leverage the existing programming
and sales resources of its station groups enables it to enhance the growth
potential of both new and underperforming stations while reducing the risks
associated with undertaking means of improving station performance, including
launching new formats. The Company also believes that operating leading station
groups allows it to attract and retain talented local management teams, on-air
personalities and sales personnel, which it believes are essential to operating
success. Furthermore, the Company seeks to achieve substantial cost savings
through the consolidation in each of its markets of facilities, management,
sales and administrative personnel and operating resources (such as on-air
talent, programming and music research) and through the reduction of other
redundant expenses.
Aggressive Sales and Marketing. The Company seeks to maximize its share of
local advertising revenue in each of its markets through various sales and
marketing initiatives. The Company provides extensive training for its sales
personnel through in-house sales and time management programs, and it retains
various independent consultants who hold frequent seminars for, and are
available for consultation with, the Company's sales personnel. The Company also
emphasizes regular, informal exchanges of ideas among its management and sales
personnel across its various markets. Because advertising time is perishable,
the Company seeks to maximize its revenue by utilizing sophisticated inventory
management techniques that allow it to provide its sales personnel with frequent
price adjustments based on regional and local market conditions. To further
strengthen its relationship with advertisers, the Company also offers and
markets its ability to create customer traffic through on-site events staged at,
and broadcast from, the advertisers' business locations. The Company believes
that, prior to their acquisition by the Company, many of its acquired stations
had underperformed in sales, due primarily to undersized sales staffs
responsible for selling inventory on multiple stations. Accordingly, the Company
has significantly expanded the sales forces of many of its acquired stations.
Targeted Programming. To maintain or improve its position in each market,
the Company conducts extensive market research and competitive analyses in order
to identify significant and sustainable target audiences. The Company then
tailors the programming, marketing and promotion of each station to maximize its
appeal to its target audience. Within each market, the Company attempts to build
strong franchises by:
-- creating distinct, highly visible profiles for its on-air
personalities, particularly those broadcasting during morning
"drive time" traditionally between 6:00 a.m. and 10:00 a.m.,
-- formulating recognizable "brand names" for select stations such as
the "Bull" and "Cat Country," and
47
<PAGE> 51
-- actively participating in community events and charities.
Decentralized Operations. The Company believes that radio is primarily a
local business and that much of its success is the result of the efforts of
regional and local management and staff. Accordingly, the Company decentralizes
much of its operations to these levels. Each of the Company's regional and local
station groups is managed by a team of experienced broadcasters who understand
the musical tastes, demographics and competitive opportunities of the particular
market. Regional and local managers are responsible for preparing annual
operating budgets and a portion of their compensation is linked to meeting or
surpassing their operating targets. Corporate management approves each station
group's annual operating budget and imposes strict financial reporting
requirements to track station performance. Corporate management is responsible
for long range planning, establishing Company policies and serving as a resource
to local management. The Company has implemented local sales reporting systems
at each station to provide local and corporate management with daily sales
information.
ACQUISITION STRATEGY
In February 1996, as a result of the passage of the Telecommunications Act
of 1996 (the "Telecommunications Act"), radio broadcasting companies were
permitted to increase their ownership of stations within a single market from
four to a maximum of between five and eight stations, depending on market size.
The Telecommunications Act also eliminated the national ownership restriction
that generally had limited companies to the ownership of no more than 40
stations (20 AM and 20 FM) throughout the United States.
The Company's acquisition strategy is focused on acquiring additional radio
stations in both the Company's existing markets and in new markets in which the
Company believes it can effectively use its operating strategies. The Company
anticipates that it will continue to focus on mid-sized markets rather than
attempt to expand into larger markets. Although competition among potential
purchasers for suitable radio station acquisitions is intense throughout the
United States, the Company believes that less competition exists, particularly
from the larger radio operators, in mid-sized markets. This affords the Company
relatively more attractive acquisition opportunities in these markets. There can
be no assurance, however, that the Company will be able to identify suitable and
available acquisition opportunities or that it will be able to consummate any
such acquisition opportunities. Additional risks and uncertainties related to
the Company's acquisition strategy are discussed under "Risk
Factors--Limitations on Acquisition Strategy" and "Risk Factors--Potential Delay
in Completing Pending Transactions Due to Antitrust Review."
In evaluating acquisition opportunities in new markets, the Company
assesses its potential to build leading radio station groups in those markets
over time. The Company believes that the creation of strong station groups in
local markets is essential to its operating success and generally will not
consider entering a new market unless it believes it can acquire multiple
stations in the market. The Company also analyzes a number of additional factors
which it believes are important to its success, including the number and quality
of commercial radio signals broadcasting in the market, the nature of the
competition in the market, the Company's ability to improve the operating
performance of the radio station or stations under consideration and the general
economic conditions of the market.
The Company believes that its acquisition strategy, if properly
implemented, could have a number of benefits, including:
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<PAGE> 52
-- diversified revenue and broadcast cash flow across a greater number
of stations and markets,
-- improved broadcast cash flow margins through the consolidation of
facilities and the elimination of redundant expenses,
-- broadened range of advertising packages to offer advertisers,
-- improved leverage in various key vendor negotiations,
-- enhanced appeal to top industry management talent, and
-- increased overall scale which should facilitate the Company's
capital raising activities.
RADIO INDUSTRY OVERVIEW
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. From 1987
to 1996, local advertising revenue as a percentage of total radio advertising
revenue has ranged from approximately 74% to 78%, as reported in Veronis Suhler
Industry Forecasts (11th ed.). The growth in total radio advertising revenue
tends to be fairly stable. Total radio advertising revenue in 1997 of $13.6
billion represented a 9.7% increase over 1996, as reported by the Radio
Advertising Bureau ("RAB").
Radio is considered an efficient means of reaching specifically identified
demographic groups. Stations are typically classified by their on-air format,
such as country, adult contemporary, oldies or news/talk. A station's format and
style of presentation enable it to target certain demographic and psychographic
groups. By capturing a specific listening audience share of a market's radio
audience, with particular concentration in a targeted demographic group, a
station is able to market its broadcasting time to advertisers seeking to reach
a specific audience. Advertisers and stations utilize data published by audience
measuring services, such as Arbitron, to estimate how many people within
particular geographical markets and demographic groups listen to specific
stations.
Stations determine the number of advertisements broadcast hourly that will
maximize available revenue dollars without jeopardizing listening levels.
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 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 obtained.
STATION PORTFOLIO
Upon completion of the Pending Transactions, the Company will own 86 FM and
38 AM radio stations in 26 mid-sized markets, operate 6 additional FM and 5
additional AM radio stations in its markets pursuant to LMAs or JSAs and have
the right to construct one additional FM radio station.
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<PAGE> 53
The following table sets forth certain information about stations owned or
operated by the Company after giving effect to the Pending Transactions. The
year acquired shown in the table below includes acquisitions made by the
Company's Predecessor. See "--Corporate History and Recently Completed
Transactions."
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- ---------------------------- ---- ----------------------- -------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PROVIDENCE, RI.............. 31 33.7%
Owned
WPRO-AM.................... News/Talk 1997 A 25-54 11 2.9%
WPRO-FM.................... Contemporary Hits 1997 A 18-49 2 9.4
WWLI-FM.................... Adult Contemporary 1997 W 25-54 2 9.9
WSKO-AM.................... Sports 1997 M 25-54 15 1.6
WXEX-FM.................... Rock 1997 M 18-34 5t 6.1
WHKK-FM.................... Rock Oldies 1997/1997 A 25-54 9 3.2
SALT LAKE CITY, UT.......... 35 18.1%
Owned
KUBL-FM.................... Country 1988 A 25-54 4t 5.4%
KCNR-AM.................... Children's 1988 C 4-11 -- --
KFNZ-AM.................... Sports 1997/1992 M 25-54 1 10.1
KBEE-FM.................... Adult Contemporary 1997/1992 W 18-49 5 6.0
KBER-FM.................... Album Oriented Rock 1997/1996 A 18-34 2 7.0
KENZ-FM.................... Rock Alternative 1997/1996(JSA) A 18-34 1 8.0
WILKES-BARRE/SCRANTON, PA... 63 29.0%
Owned
WMGS-FM.................... Adult Contemporary 1997 W 25-54 2 15.2%
WARM-AM.................... News/Talk 1997 A 35-64 13t 1.4
WZMT-FM.................... Album Oriented Rock 1997 M 18-34 3 8.0
WAZL-AM.................... Nostalgia 1997 A 35-64 33t 0.4
WEMR-FM.................... Contemporary Hits 1998/1997 W 18-34 -- --
WCTP-FM/WCTD-FM(4)......... Country 1998/1997 A 35-64 6 3.4
WCDL-AM.................... Country 1998/1997 A 35-64 -- --
WBHT-FM.................... Country 1999/1997(LMA) A 35-64 10 2.3
WEMR-AM.................... Simulcast with WBHT-FM 1998/1997 A 35-64 -- --
Operated
WKQV-AM(5)................. Sports 1997(JSA) M 25-54 -- --
WKQV-FM(5)................. Simulcast with WZMT-FM 1997(LMA) M 18-34 6 5.1
ALLENTOWN/BETHLEHEM, PA..... 66 26.5%
Owned
WCTO-FM.................... Country 1997 A 25-54 2 13.5%
WLEV-FM.................... Adult Contemporary 1997/1997 W 25-54 3 11.7
ALBUQUERQUE, NM............. 70 55.9%
Owned
KKOB-AM.................... News/Talk 1994 A 25-54 6 5.8%
KKOB-FM.................... Adult Contemporary 1994 W 25-54 2 8.6
KMGA-FM.................... Adult Contemporary 1994 W 25-54 4t 5.5
KHTL-AM.................... News/Talk 1994 A 35-64 25t 0.7
KTBL-FM.................... Country 1996/1995(JSA) A 25-54 7 5.0
KHFM-FM.................... Classical 1996 A 25-54 12t 3.3
KNML-AM.................... Sports 1996 M 25-54 18t 1.8
KRST-FM.................... Country 1996/1996 A 25-54 1 10.6
HARRISBURG/CARLISLE, PA..... 73 17.8%
Owned
WRKZ-FM.................... Country 1997 A 25-54 7 5.3%
*WHYL-FM(6)................ Simulcast with WRKZ-FM pending/1998(LMA) A 25-54 14 1.7
*WHYL-AM(6)................ Nostalgia pending/1998(LMA) A 35-64 12 2.0
BATON ROUGE, LA............. 81 27.4%
Owned
*KQXL-FM................... Urban Adult pending A 25-54 4 6.3%
Contemporary
*WXOK-AM................... Gospel pending A 35-64 3 6.9
*WEMX-FM................... Urban pending A 18-34 1t 10.1
*WKJN-FM................... Country pending A 25-54 12 3.1
*WIBR-AM................... Sports pending M 25-54 11t 2.4
<CAPTION>
RADIO
GROUP
RANK IN
RADIO GROUP/ MARKET
STATION CALL LETTERS REVENUE(3)
- ---------------------------- ----------
<S> <C>
PROVIDENCE, RI.............. 1
Owned
WPRO-AM....................
WPRO-FM....................
WWLI-FM....................
WSKO-AM....................
WXEX-FM....................
WHKK-FM....................
SALT LAKE CITY, UT.......... 3
Owned
KUBL-FM....................
KCNR-AM....................
KFNZ-AM....................
KBEE-FM....................
KBER-FM....................
KENZ-FM....................
WILKES-BARRE/SCRANTON, PA... 2
Owned
WMGS-FM....................
WARM-AM....................
WZMT-FM....................
WAZL-AM....................
WEMR-FM....................
WCTP-FM/ WCTD-FM(4)........
WCDL-AM....................
WBHT-FM....................
WEMR-AM....................
Operated
WKQV-AM(5).................
WKQV-FM(5).................
ALLENTOWN/BETHLEHEM, PA..... 2
Owned
WCTO-FM....................
WLEV-FM....................
ALBUQUERQUE, NM............. 1
Owned
KKOB-AM....................
KKOB-FM....................
KMGA-FM....................
KHTL-AM....................
KTBL-FM....................
KHFM-FM....................
KNML-AM....................
KRST-FM....................
HARRISBURG/CARLISLE, PA..... 3
Owned
WRKZ-FM....................
*WHYL-FM(6)................
*WHYL-AM(6)................
BATON ROUGE, LA............. 2
Owned
*KQXL-FM...................
*WXOK-AM...................
*WEMX-FM...................
*WKJN-FM...................
*WIBR-AM...................
</TABLE>
50
<PAGE> 54
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- ---------------------------- ---- ----------------------- -------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
LITTLE ROCK, AR(7).......... 82 40.3%
Owned
KARN-AM/KARN-FM/KKRN-FM.... News/Talk/Sports 1997/1997 A 25-54 8 4.9%
KIPR-FM.................... Urban 1997/1997 A 18-49 5 7.4
KOKY-FM.................... Urban Adult 1997/1997 A 25-54 11t 3.9
Contemporary
KLAL-FM.................... Modern Adult 1997 A 18-49 6 6.9
Contemporary
KAFN-FM(8)................. NA 1997 NA NA NA
KLIH-AM.................... Gospel 1997 A 25-54 19t 0.8
KURB-FM.................... Adult Contemporary 1997 A 25-54 4 7.5
KVLO-FM.................... Soft Adult Contemporary 1997 W 25-54 4t 7.4
KAAY-AM.................... Religious 1998 A 25-54 22t 0.5
SPOKANE, WA................. 86 43.9%
Owned
KGA-AM..................... News/Talk 1992 A 25-54 9 4.7%
KDRK-FM.................... Country 1992 A 25-54 3t 8.8
KAEP-FM.................... Rock Alternative 1993 A 18-34 3 10.5
KJRB-AM.................... Talk/Sports 1993/1993 A 35-64 14t 1.6
Operated
KKZX-FM(8)................. Classic Rock 1996(JSA) M 25-54 1 22.8
KEYF-AM/FM(4)(8)........... Oldies 1996(JSA) A 25-54 5 7.2
KUDY-AM(8)................. Talk/Religion 1996(JSA) A 25-54 -- --
COLORADO SPRINGS, CO 93 60.9%
Owned
KKFM-FM.................... Classic Rock 1986 M 25-54 1 14.1%
KKMG-FM.................... Contemporary Hits 1994/1990 W 18-34 1 19.8
KKLI-FM.................... Soft Adult Contemporary 1996 W 25-54 5 7.4
Operated
KVUU-FM(8)................. Adult Contemporary 1996(JSA) W 18-49 3 8.6
KSPZ-FM(8)................. Oldies 1996(JSA) A 25-54 3t 7.8
KVOR-AM(8)................. News/Talk 1996(JSA) A 35-64 5 6.4
KTWK-AM(8)................. Nostalgia 1996(JSA) A 35-64 15 1.3
CHARLESTON, SC.............. 96 47.8%
Owned
*WSSX-FM................... Hot Adult Contemporary pending A 25-54 8 5.9%
*WWWZ-FM................... Urban pending A 18-34 1 15.8
*WMGL-FM................... Urban Adult pending A 25-54 3t 7.2
Contemporary
*WSUY-FM................... Soft Adult Contemporary pending W 25-54 1 11.9
*WNKT-FM................... Country pending A 25-54 14 2.1
*WTMA-AM................... News/Talk pending A 25-54 13 2.4
*WTMZ-AM................... News pending A 25-54 22t 0.3
*WXTC-AM................... Urban Gospel pending A 25-54 5t 7.0
LAFAYETTE, LA............... 97 14.2%
Owned
*KFXZ-FM................... Gospel pending A 35-64 18 2.0%
*KNEK-FM................... Urban Adult pending A 25-54 9 3.8
Contemporary
*KNEK-AM................... Urban Adult pending A 25-54 -- --
Contemporary
*KRRQ-FM................... Urban pending A 18-34 1 12.4
YORK, PA.................... 102 10.2%
Owned
WQXA-FM.................... Rock 1997 M 18-34 1 24.0%
WQXA-AM.................... Nostalgia 1997 A 35-64 22t 0.9
MODESTO, CA(9).............. 120 52.4%
Owned
KATM-FM.................... Country 1992 A 25-54 1 12.9%
KANM-AM.................... Sports 1992 M 25-54 -- --
KHKK-FM/KDJK-FM(4)......... Rock Oldies 1993/1993(KHKK) A 25-54 2 9.8
KHOP-FM.................... Album Oriented Rock 1996 A 18-34 2 11.0
SAGINAW/BAY CITY, MI........ 123 41.7%
Owned
*WKQZ-FM................... Rock pending M 18-49 1 20.9%
*WMJK-FM/*WMJA-FM.......... Classic Rock pending M 25-54 4t 7.9
*WIOG-FM................... Hot Adult Contemporary pending A 25-54 1t 12.0
*WGER-FM................... Soft Adult Contemporary pending W 25-54 5 8.6
*WSGW-AM................... News/Talk pending A 25-54 8 4.7
<CAPTION>
RADIO
GROUP
RANK IN
RADIO GROUP/ MARKET
STATION CALL LETTERS REVENUE(3)
- ---------------------------- ----------
<S> <C>
LITTLE ROCK, AR(7).......... 2
Owned
KARN-AM/KARN-FM/KKRN-FM....
KIPR-FM....................
KOKY-FM....................
KLAL-FM....................
KAFN-FM(8).................
KLIH-AM....................
KURB-FM....................
KVLO-FM....................
KAAY-AM....................
SPOKANE, WA................. 1
Owned
KGA-AM.....................
KDRK-FM....................
KAEP-FM....................
KJRB-AM....................
Operated
KKZX-FM(8).................
KEYF-AM/FM(4)(8)...........
KUDY-AM(8).................
COLORADO SPRINGS, CO 1
Owned
KKFM-FM....................
KKMG-FM....................
KKLI-FM....................
Operated
KVUU-FM(8).................
KSPZ-FM(8).................
KVOR-AM(8).................
KTWK-AM(8).................
CHARLESTON, SC.............. 1
Owned
*WSSX-FM...................
*WWWZ-FM...................
*WMGL-FM...................
*WSUY-FM...................
*WNKT-FM...................
*WTMA-AM...................
*WTMZ-AM...................
*WXTC-AM...................
LAFAYETTE, LA............... 4
Owned
*KFXZ-FM...................
*KNEK-FM...................
*KNEK-AM...................
*KRRQ-FM...................
YORK, PA.................... 4
Owned
WQXA-FM....................
WQXA-AM....................
MODESTO, CA(9).............. 1
Owned
KATM-FM....................
KANM-AM....................
KHKK-FM/KDJK-FM(4).........
KHOP-FM....................
SAGINAW/BAY CITY, MI........ 1
Owned
*WKQZ-FM...................
*WMJK-FM/*WMJA-FM..........
*WIOG-FM...................
*WGER-FM...................
*WSGW-AM...................
</TABLE>
51
<PAGE> 55
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- ---------------------------- ---- ----------------------- -------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BOISE, ID................... 125 42.0%
Owned
KIZN-FM.................... Country 1998/1997 A 25-54 5t 6.5%
KZMG-FM.................... Contemporary Hits 1998/1997 W 18-34 1 22.1
KKGL-FM.................... Classic Rock 1998/1997 M 25-54 15t 2.1
KQFC-FM.................... Country 1998/1997 A 25-54 3 8.0
KBOI-AM.................... News/Talk 1998/1997 A 35-64 5 6.7
RENO, NV.................... 129 36.3%
Owned
KBUL-FM.................... Country 1992 A 25-54 1 12.2%
KKOH-AM.................... News/Talk 1992 A 25-54 6 6.7
KNEV-FM.................... Adult Contemporary 1993/1993 W 18-49 1t 12.1
KNHK-FM.................... Rock Oldies 1997/1997 A 25-54 7 6.4
Operated
KXXL-FM.................... Country 1998(LMA) A 25-54 -- --
EUGENE, OR.................. 143 28.6%
Owned
KUGN-AM.................... News/Talk 1997 A 35-64 7 4.9%
KKTT-FM.................... Country 1997 A 25-54 9t 4.0
KEHK-FM.................... Rock Oldies 1997 A 25-54 4 7.1
BINGHAMTON, NY.............. 164 63.0%
Owned
*WHWK-FM................... Country pending A 25-54 3 13.1%
*WYOS-FM................... Oldies pending A 25-54 6 5.7
*WAAL-FM................... Album Oriented Rock pending M 25-54 1 17.2
*WNBF-AM................... News/Talk pending A 25-54 8 4.5
*WKOP-AM................... Nostalgia pending A 35-64 9t 2.0
JOHNSTOWN, PA............... 168 19.5%
Owned
WQKK-FM.................... Rock 1997 A 18-34 2t 15.1%
WGLU-FM.................... Contemporary Hits 1997 A 18-34 4 9.7
TRI-CITIES, WA.............. 202 42.2%
Owned
KEYW-FM.................... Adult Contemporary 1997 A 25-54 4 7.6%
KFLD-AM.................... Sports 1997 M 25-54 5t 6.6
KORD-FM.................... Country 1997 A 25-54 9 4.9
KXRX-FM.................... Album Oriented Rock 1997 M 18-34 1 27.0
KTHK-FM.................... Rock Oldies 1997/1997 A 25-54 12t 2.8
MEDFORD, OR................. 204 40.8%
Owned
KAKT-FM.................... Country 1997 A 25-54 3t 8.0%
KBOY-FM.................... Classic Rock 1997 M 25-54 2 10.6
KCMX-AM.................... News/Talk 1997 A 35-64 3t 6.7
KCMX-FM.................... Adult Contemporary 1997 W 25-54 2 13.6
KTMT-AM.................... Sports 1997 M 25-54 11t 1.5
KTMT-FM.................... Contemporary Hits 1997 W 18-34 2t 14.8
STATE COLLEGE, PA........... 235 30.8%
Owned
WRSC-AM/WBLF-AM(4)......... News/Talk 1997 A 25-54 6t 3.4%
WQWK-FM.................... Rock 1997 A 25-54 4 9.1
WIKN-FM.................... Adult Contemporary 1997 W 18-49 -- --
BILLINGS, MT................ 242 50.5%
Owned
KCTR-FM/KBUL-AM(4)......... Country 1997 A 25-54 2 17.0%
KKBR-FM.................... Oldies 1997 A 25-54 4 9.0
KBBB-FM.................... Adult Contemporary 1997 W 25-54 6 8.0
KMHK-FM.................... Rock Oldies 1997 A 25-54 7t 5.0
MUNCIE, IN.................. NA NA
Owned
*WMDH-FM................... Country pending A 25-54 NA NA
*WMDH-AM................... News/Talk pending A 25-54 NA NA
KOKOMO, IN.................. NA NA
Owned
*WWKI-FM................... Country pending A 25-54 NA NA
<CAPTION>
RADIO
GROUP
RANK IN
RADIO GROUP/ MARKET
STATION CALL LETTERS REVENUE(3)
- ---------------------------- ----------
<S> <C>
BOISE, ID................... 2
Owned
KIZN-FM....................
KZMG-FM....................
KKGL-FM....................
KQFC-FM....................
KBOI-AM....................
RENO, NV.................... 1
Owned
KBUL-FM....................
KKOH-AM....................
KNEV-FM....................
KNHK-FM....................
Operated
KXXL-FM....................
EUGENE, OR.................. 1
Owned
KUGN-AM....................
KKTT-FM....................
KEHK-FM....................
BINGHAMTON, NY.............. 1
Owned
*WHWK-FM...................
*WYOS-FM...................
*WAAL-FM...................
*WNBF-AM...................
*WKOP-AM...................
JOHNSTOWN, PA............... 3
Owned
WQKK-FM....................
WGLU-FM....................
TRI-CITIES, WA.............. 1
Owned
KEYW-FM....................
KFLD-AM....................
KORD-FM....................
KXRX-FM....................
KTHK-FM....................
MEDFORD, OR................. 2
Owned
KAKT-FM....................
KBOY-FM....................
KCMX-AM....................
KCMX-FM....................
KTMT-AM....................
KTMT-FM....................
STATE COLLEGE, PA........... 1
Owned
WRSC-AM/WBLF-AM(4).........
WQWK-FM....................
WIKN-FM....................
BILLINGS, MT................ 1
Owned
KCTR-FM/KBUL-AM(4).........
KKBR-FM....................
KBBB-FM....................
KMHK-FM....................
MUNCIE, IN.................. NA
Owned
*WMDH-FM...................
*WMDH-AM...................
KOKOMO, IN.................. NA
Owned
*WWKI-FM...................
</TABLE>
- ---------------
* Indicates a station which is the subject of a Pending Transaction. The
consummation of each of the Pending Transaction is subject to certain
conditions. Although the Company believes these conditions are customary for
transactions of this
52
<PAGE> 56
type and will be satisfied, there can be no assurance that such closing
conditions will be satisfied. See "The Pending Transactions."
"t" denotes tied with one or more other radio stations.
"NA" denotes information that is not available.
"--" denotes information that is not meaningful.
(1) The letter "A" designates adults, the letter "W" designates women, the
letter "M" designates men and the letter "C" designates children. The
numbers following each letter designate the range of ages included within
the demographic group.
(2) The generally accepted method of measuring the relative size of a radio
station's audience is by reference to total persons, within specific
demographic groups, Monday--Sunday, 6:00 a.m.--12:00 midnight Average
Quarter Hour ("AQH") shares, as published by Arbitron. Arbitron
periodically samples radio listeners in defined market areas, principally
through the use of diaries returned by selected listeners. A station's AQH
share is a percentage computed by dividing the average number of persons
listening to a particular station for at least five minutes during an
average quarter hour in a given time period by the average number of such
persons for all stations in the market area. Station Rank in Primary
Demographic Target is the ranking of a station among all stations in its
target demographic group based upon the station's AQH shares. Arbitron
compiles ratings data for various demographic groups. All information
concerning ratings and audience listening information used in this
prospectus is given pursuant to the method described above and derived from
the Arbitron Reports.
(3) Radio Group Market Revenue Share was derived for each radio group by
summing the market share of revenue of each station included within the
group. Radio Group Rank in Market Revenue is the ranking, by radio group
market revenue, of each of the Company's radio groups in its market among
all other radio groups in such market.
(4) Combined stations are simulcast. Rank and audience share information is
given on a combined basis.
(5) WKQV-FM and WKQV-AM in Wilkes-Barre/Scranton are operated pursuant to an
LMA and a JSA, respectively, and the Company has the option to purchase
these stations.
(6) Pending their acquisition by the Company, the Company operates WHYL-AM and
WHYL-FM pursuant to an LMA. See "The Pending Transactions."
(7) KAFN-FM is not yet operational. Two of the stations serve the surrounding
communities outside of Little Rock.
(8) The Company sells advertising on behalf of the listed stations under a JSA.
(9) KATM-FM, KHKK-FM/KDJK-FM and KHOP-FM also broadcast in the adjacent
Stockton, California market where, in the Spring 1998 Arbitron Report, they
ranked 1, 2 and 2 in their primary demographic targets, respectively.
The following is a description of the markets served by the Company's radio
stations and those stations which are the subject of the Pending Transactions.
Providence, Rhode Island. The Company owns four FM and two AM radio
stations in Providence. Providence has an MSA rank of 31, and had market revenue
of approximately $39.5 million in 1997, an approximate 2.1% increase over 1996.
There are 37 stations in the Providence market, including ten viable FM and
three viable AM stations. The six stations owned by the Company rank first in
the market in terms of their combined gross revenue, with approximately 33.7% of
the market revenue in 1997.
Salt Lake City, Utah. The Company owns four FM and two AM radio stations in
Salt Lake City. Salt Lake City has an MSA rank of 35, and had market revenue of
approximately $62.4 million in 1997, an approximate 8.1% increase over 1996.
There are 43 stations in the Salt Lake City market, including 16 viable FM and
four viable AM stations. The six stations owned by the Company rank third in the
market in terms of their combined gross revenue, with approximately 18.1% of the
market revenue in 1997.
Wilkes-Barre/Scranton, Pennsylvania. The Company owns six FM and four AM
radio stations and operates two FM radio stations and one AM radio station under
an LMA and a JSA, respectively, in Wilkes-Barre/Scranton. Wilkes-Barre/Scranton
has an MSA rank of 63, and had market revenue of approximately $25.6 million in
1997, an approximate 8.0% increase over 1996. There are 40 stations in the
Wilkes-Barre/Scranton market, including ten viable FM and four viable AM
stations. The twelve stations owned or operated by the
53
<PAGE> 57
Company rank second in the market in terms of their combined gross revenue, with
approximately 29.0% of market revenue in 1997.
Allentown/Bethlehem, Pennsylvania. The Company owns two FM radio stations
in Allentown/Bethlehem. Allentown/Bethlehem has an MSA rank of 66, and had
market revenue of approximately $24.3 million in 1997, an approximate 7.5%
increase over 1996. There are 19 stations in the Allentown market, including six
viable FM and three viable AM stations. The two stations owned by the Company
rank second in the market in terms of their combined gross revenue, with
approximately 26.5% of market revenue in 1997.
Albuquerque, New Mexico. The Company owns five FM and three AM radio
stations in Albuquerque. Albuquerque has an MSA rank of 70, and had market
revenue of approximately $34.6 million in 1997, an approximate 5.8% increase
over 1996. There are 37 stations in the Albuquerque market, including 17 viable
FM and three viable AM stations. The eight stations owned by the Company rank
first in the market in terms of their combined gross revenue, with approximately
55.9% of the market revenue in 1997.
Harrisburg/Carlisle, Pennsylvania and York, Pennsylvania. The Company owns
one FM radio station in Harrisburg and one FM radio station and one AM radio
station in York and has entered into an agreement to purchase one FM radio
station and one AM radio station in Carlisle which stations it currently
operates under an LMA. See "The Pending Transactions." Harrisburg/Carlisle and
York are adjacent markets with numerous overlapping radio signals. The Company
expects to continue operating these stations as a single station group.
Harrisburg/Carlisle has an MSA rank of 73, and had market revenue of
approximately $24.4 million in 1997, an approximate 0.4% decrease from 1996.
There are 23 stations in the Harrisburg/Carlisle market, including eight viable
FM and three viable AM stations. The station owned by the Company together with
the two stations it has entered into an agreement to acquire rank third in the
market in terms of gross revenue, with approximately 17.8% of the market revenue
in 1997.
York has an MSA rank of 102, and had market revenue of approximately $16.6
million in 1997, an approximate 7.8% increase over 1996. There are 16 stations
in the York market, including seven viable FM stations and one viable AM
station. The two stations owned by the Company rank fourth in the market in
terms of their combined gross revenue, with approximately 10.2% of the market
revenue in 1997.
Baton Rouge, Louisiana. The Company has entered into an agreement to
purchase three FM and two AM radio stations in Baton Rouge. Baton Rouge has an
MSA rank of 81, and had market revenue of approximately $22.6 million in 1997,
an approximate 7.1% increase over 1996. There are 21 stations in the Baton Rouge
market, including nine viable FM and two viable AM stations. The five stations
to be acquired by the Company rank second in the market in terms of their
combined gross revenue, with approximately 27.4% of the market revenue in 1997.
See "The Pending Transactions."
Little Rock, Arkansas. The Company owns seven FM and three AM radio
stations and has the right to construct and operate one additional FM radio
station in Little Rock. Little Rock has an MSA rank of 82, and had market
revenue of approximately $21.1 million in 1997, an approximate 7.1% increase
over 1996. There are 33 stations in the Little Rock market, including 13 viable
FM stations and one viable AM station. The nine operating stations owned by the
Company (not including the station to be sold) together with the
54
<PAGE> 58
station it has entered into an agreement to acquire rank second in the market in
terms of their combined gross revenue, with approximately 40.3% of market
revenue in 1997.
The Company also owns the Arkansas Radio Network, which was established in
1968 and is a state-wide news network with affiliates in nearly every county in
Arkansas. The Arkansas Radio Network feeds hourly newscasts in addition to
agricultural programs, market reports, weather and special events.
Spokane, Washington. The Company owns two FM and two AM radio stations and
sells advertising on behalf of two FM and two AM radio stations under a JSA in
Spokane. Spokane has an MSA rank of 86, and had market revenue of approximately
$16.5 million in 1997, an approximate 7.8% increase over 1996. There are 28
stations in the Spokane market, including 12 viable FM and four viable AM
stations. The four stations owned by the Company plus the four stations marketed
under a JSA rank first in the market in terms of their combined gross revenue,
with approximately 43.9% of the market revenue in 1997.
Colorado Springs, Colorado. The Company owns three FM radio stations and
sells advertising on behalf of two FM and two AM radio stations under a JSA in
Colorado Springs. Colorado Springs has an MSA rank of 93, and had market revenue
of approximately $15.4 million in 1997, an approximate 6.9% increase over 1996.
There are 21 stations in the Colorado Springs market, including 11 viable FM and
two viable AM stations. The three stations owned by the Company plus the four
stations marketed under a JSA rank first in the market in terms of their
combined gross revenue, with approximately 60.9% of the market revenue in 1997.
Charleston, South Carolina. The Company has entered into an agreement to
purchase five FM and three AM radio stations in Charleston. Charleston has an
MSA rank of 96 and had market revenue of approximately $18.0 million in 1997, an
approximate 5.9% increase over 1996. There are 27 stations in the Charleston
Market, including 12 viable FM stations and one viable AM station. The eight
stations to be acquired by the Company rank first in the market in terms of
their combined gross revenue, with approximately 47.8% of the market revenue in
1997. See "The Pending Transactions."
Lafayette, Louisiana. The Company has entered into an agreement to
purchase three FM radio stations and one AM radio station in Lafayette.
Lafayette has an MSA rank of 97, and had market revenue of approximately $11.5
million in 1997, an approximate 7.5% increase over 1996. There are 33 stations
in the Lafayette market, including 12 viable FM stations and one viable AM
station. The four stations to be acquired by the Company rank fourth in the
market in terms of their combined gross revenue, with approximately 14.2% of the
market revenue in 1997. See "The Pending Transactions."
Modesto, California. The Company owns four FM radio stations and one AM
radio station in Modesto. Modesto has an MSA rank of 120, and had market revenue
of approximately $16.6 million in 1997, an approximate 6.4% increase over 1996.
There are 22 stations in the Modesto market, including nine viable FM and two
viable AM stations. The five stations owned by the Company rank first in the
market in terms of their combined gross revenue, with approximately 52.4% of the
market revenue in 1997.
Saginaw/Bay City, Michigan. The Company has entered into an agreement to
purchase five FM radio stations and one AM radio station in Saginaw/Bay City.
Saginaw/Bay City has an MSA rank of 123, and had market revenue of approximately
$18.7 million in 1997, an approximate 1.6% increase over 1996. There are 20
stations in the Saginaw/Bay City market,
55
<PAGE> 59
including ten viable FM and three viable AM stations. The six stations to be
acquired by the Company rank first in the market in terms of their combined
gross revenue, with approximately 41.7% of the market revenue in 1997. See "The
Pending Transactions."
Boise, Idaho. The Company owns four FM radio stations and one AM radio
station in Boise. Boise has an MSA rank of 125, and had market revenue of
approximately $15.7 million in 1997, an approximate 5.4% increase over 1996.
There are 26 stations in the Boise market, including 11 viable FM and three
viable AM stations. The five stations owned by the Company rank second in the
market in terms of their combined gross revenue, with approximately 42.0% of
market revenue in 1997.
Reno, Nevada. The Company owns three FM radio stations and one AM radio
station in Reno. The Company also operates an additional FM radio station in
Reno pursuant to an LMA. Reno has an MSA rank of 129, and had market revenue of
approximately $15.1 million in 1997, an approximate 3.4% increase over 1996.
There are 25 stations in the Reno market, including 13 viable FM and two viable
AM stations. The four stations owned by the Company together with the station it
operates rank first in the market in terms of their combined gross revenue, with
approximately 36.3% of the market revenue in 1997.
Eugene, Oregon. The Company owns two FM radio stations and one AM radio
station in Eugene. Eugene has an MSA rank of 143, and had market revenue of
approximately $10.5 million in 1997, an approximate 1.9% decrease from 1996.
There are 19 stations in the Eugene market, including eight viable FM and three
viable AM stations. The three stations owned by the Company rank first in the
market in terms of their combined gross revenue, with approximately 28.6% of the
market revenue in 1997.
Binghamton, New York. The Company has entered into an agreement to
purchase three FM and two AM radio stations in Binghamton. Binghamton has an MSA
rank of 164, and had market revenue of approximately $8.8 million in 1997, an
approximate increase of 4.8% over 1996. There are 16 stations in the Binghamton
market, including seven viable FM stations and three viable AM stations. The
five stations to be acquired by the Company rank first in the market in terms of
their combined gross revenue, with approximately 63.0% of the market revenue in
1997. See "The Pending Transactions."
Johnstown, Pennsylvania. The Company owns two FM radio stations in
Johnstown, Pennsylvania. Johnstown has an MSA rank of 168, and had market
revenue of approximately $6.4 million in 1997, an approximate 6.7% increase over
1996. There are 21 stations in the Johnstown market, including six viable FM and
two viable AM stations. The two stations owned by the Company rank third in the
market in terms of their combined gross revenue, with approximately 19.5% of the
market revenue in 1997.
Tri-Cities, Washington. The Company owns four FM radio stations and one AM
radio station in Tri-Cities. Tri-Cities (includes the communities of Richland,
Kennewick and Pasco, Washington) has an MSA rank of 202, and had market revenue
of approximately $5.8 million in 1997, an approximate 5.5% increase over 1996.
There are 19 stations in the Tri-Cities market, including, according to BIA's
Investing in Radio 1998 Market Report (3rd ed.), nine viable FM stations. The
five stations owned by the Company rank first in the market in terms of their
combined gross revenue, with approximately 42.2% of the market revenue in 1997.
Medford, Oregon. The Company owns four FM and two AM radio stations in
Medford. Medford has an MSA rank of 204, and had market revenue of approximately
$6.0 million in 1997, an approximate 9.1% increase over 1996. There are 17
stations in the
56
<PAGE> 60
Medford market, including, according to BIA's Investing in Radio 1998 Market
Report (3rd ed.), nine viable FM stations. The six stations owned by the Company
rank second in the market in terms of their combined gross revenue, with
approximately 40.8% of the market revenue in 1997.
State College, Pennsylvania. The Company owns two FM and two AM radio
stations in State College, Pennsylvania. State College has an MSA rank of 235,
and had market revenue of approximately $4.9 million in 1997, an approximate
4.3% increase over 1996. There are 13 stations in the State College market. The
four stations owned by the Company rank first in the market in terms of their
combined gross revenue, with approximately 30.8% of the market revenue in 1997.
Billings, Montana. The Company owns four FM radio stations and one AM
radio station in Billings. Billings has an MSA rank of 242, and had market
revenue of approximately $6.0 million in 1997, an approximate 5.3% increase over
1996. There are 14 stations in the Billings market, including seven viable FM
and three viable AM stations. The five stations owned by the Company rank first
in the market in terms of their combined gross revenue, with approximately 50.5%
of the market revenue in 1997.
Muncie, Indiana. The Company has entered into an agreement to purchase one
FM and one AM radio station in Muncie. MSA rank, market revenue, station
ownership and viable station data are not available for the Muncie market. See
"The Pending Transactions."
Kokomo, Indiana. The Company has entered into an agreement to purchase one
FM radio station in Kokomo. MSA rank, market revenue, Station ownership and
viable station data are not available for the Kokomo market. See "The Pending
Transactions."
ADVERTISING SALES
Virtually all of the Company's revenue is generated from the sale of local,
regional and national advertising for broadcast on its radio stations. In 1997,
approximately 84.7% of the Company's net broadcasting revenue was generated from
the sale of local and regional advertising. Additional broadcasting revenue is
generated from the sale of national advertising, network compensation payments
and other miscellaneous transactions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--General." The major categories
of the Company's advertisers include telephone companies, restaurants, fast
food, automotive and grocery. Each station's local sales staff solicits
advertising either directly from the local advertiser or indirectly through an
advertising agency. The Company pays a higher commission rate to the sales staff
for generating direct sales because the Company believes that through direct
advertiser relationships it can better understand the advertiser's business
needs and more effectively design an advertising campaign to help the advertiser
sell its product. The Company employs personnel in each of its markets to
produce commercials for the advertisers. National sales are made by a firm
specializing in radio advertising sales on the national level in exchange for a
commission from the Company that is based on the Company's gross revenue from
the advertising obtained. Regional sales, which the Company defines as sales in
regions surrounding the Company's markets to companies that advertise in the
Company's markets, are generally made by the Company's local sales staff.
Depending on the programming format of a particular station, the Company
estimates the optimum number of advertisements available for sale. The number of
advertisements that can be broadcast without jeopardizing listening levels (and
the resulting ratings) is limited in
57
<PAGE> 61
part by the format of a particular station. The Company's stations strive to
maximize revenue by managing their on-air inventory of advertising time and
adjusting prices based on local market conditions and on the Company's ability,
through its marketing efforts, to provide advertisers with an effective means of
reaching a targeted demographic group. Each of the Company's stations has a
general target level of on-air inventory that it makes available for
advertising. This target level of inventory for sale may be different at
different times of the day but tends to remain stable over time. Much of the
Company's selling activity is based on demand for its radio stations' on-air
inventory and, in general, the Company responds to this demand by varying prices
rather than by varying its target inventory level for a particular station.
Therefore, most changes in revenue are explained by demand-driven pricing
changes rather than by changes in the available inventory.
The Company believes that radio is one of the most efficient and
cost-effective means for advertisers to reach specific demographic groups.
Advertising rates charged by radio stations are based primarily on:
-- a station's share of audiences in the demographic groups targeted
by advertisers (as measured by ratings surveys estimating the
number of listeners tuned to the station at various times),
-- the number of stations in the market competing for the same
demographic groups,
-- the supply of and demand for radio advertising time, and
-- certain qualitative factors. Rates are generally highest during
morning and afternoon commuting hours.
A station's listenership is reflected in ratings surveys that estimate the
number of listeners tuned to 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 the Company to chart
audience growth, set advertising rates and adjust programming. The radio
broadcast industry's principal ratings service is Arbitron, which publishes
periodic ratings surveys for significant domestic radio markets. These surveys
are the Company's primary source of ratings data.
COMPETITION
The radio broadcasting industry is highly competitive. The success of each
of the Company's stations depends largely upon its audience ratings and its
share of the overall advertising revenue within its market. The Company's
audience ratings and advertising revenue are subject to change, and any adverse
change in a particular market affecting advertising expenditures or an adverse
change in the relative market positions of the stations located in a particular
market could have a material adverse effect on the revenue of the Company's
radio stations located in that market. There can be no assurance that any one of
the Company's radio stations will be able to maintain or increase its current
audience ratings or advertising revenue market share.
The Company's stations compete for listeners and advertising revenue
directly with other radio stations within their respective markets. Radio
stations compete for listeners primarily on the basis of program content that
appeals to a particular demographic group. By building a strong listener base
consisting of a specific demographic group in each of its markets, the Company
is able to attract advertisers seeking to reach those listeners. Companies that
58
<PAGE> 62
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 the
Company's radio stations in the same geographic area may result in lower ratings
and advertising revenue, increased promotion and other expenses and,
consequently, lower broadcast cash flow for the Company.
Factors that are material to a radio station's competitive position include
management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. The Company attempts to improve its competitive position in each
market by extensively researching its stations' programming, by implementing
advertising campaigns aimed at the demographic groups for which its stations
program and by managing its sales efforts to attract a larger share of
advertising dollars. However, the Company competes with some organizations that
have greater financial resources than the Company.
Recent changes in FCC policies and rules permit increased ownership and
operation of multiple local radio stations. Management believes that radio
stations that elect to take advantage of joint arrangements such as LMAs or JSAs
may in certain circumstances have lower operating costs and may be able to offer
advertisers more attractive rates and services. Although the Company currently
operates multiple stations in each of its markets and intends to pursue the
creation of additional multiple station groups, the Company's competitors in
certain markets include operators of multiple stations or operators who already
have entered into LMAs or JSAs. The Company also competes with other radio
station groups to purchase additional stations. Some of these groups are owned
or operated by companies that have substantially greater financial and other
resources than the Company.
Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC, and the number of radio stations that can operate in a
given market is limited by the availability of FM and AM radio frequencies
allotted by the FCC to communities in that market, as well as by the FCC's
multiple ownership rules regulating the number of stations that may be owned and
controlled by a single entity. The FCC's multiple ownership rules have changed
significantly as a result of the Telecommunications Act. For a discussion of FCC
regulation and the provisions of the Telecommunications Act, see "--Federal
Regulation of Radio Broadcasting."
The Company's stations also compete for advertising revenue with 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 new media technologies that
are being developed or introduced, such as the delivery of audio programming by
cable television systems, by satellite and by digital audio broadcasting
("DAB"). DAB may deliver by satellite to nationwide and regional audiences,
multi-channel, multi-format, digital radio services with sound quality
equivalent to compact discs. The delivery of information through the Internet
also could create a new form of competition. The radio broadcasting industry
historically has grown despite the introduction of new technologies for the
delivery of entertainment and information. 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.
59
<PAGE> 63
The FCC has recently authorized spectrum for the use of a new technology,
satellite digital audio radio services ("DARS"), to deliver audio programming.
DARS may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences. It is
not known at this time whether this digital technology also may be used in the
future by existing radio broadcast stations either on existing or alternate
broadcasting frequencies. There are proposals before the FCC to permit a new
"low power" radio service which could open up opportunities for low cost
neighborhood service on frequencies which would not interfere with existing
stations. No FCC action has been taken on this proposal to date.
The Company cannot predict what other matters might be considered in the
future by the FCC, nor can it assess in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
See "--Federal Regulation of Radio Broadcasting."
FEDERAL REGULATION OF RADIO BROADCASTING
Introduction. The ownership, operation and sale of broadcast stations,
including those licensed to the Company, 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 Communications Act was amended in 1996
by the Telecommunications Act to make changes in several broadcast laws. Among
other things, the FCC assigns frequency bands for broadcasting; determines
whether to approve changes in ownership or control of station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation and
employment practices of stations; and has the power to impose penalties for
violations of its rules under the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Failure to
observe these or other rules and policies can result in the imposition of
various sanctions, including fines, the grant of "short" (less than the maximum)
license renewal terms or, for particularly egregious violations, the denial of a
license renewal application, the revocation of a license or the denial of FCC
consent to acquire additional broadcast properties. Reference should be made to
the Communications Act, FCC rules and the public notices and rulings of the FCC
for further information concerning the nature and extent of federal regulation
of broadcast stations.
License Grant and Renewal. Until recently, radio broadcast licenses were
granted for maximum terms of seven years, but acting under the authority of the
Telecommunications Act, the FCC recently revised its rules to extend the maximum
term for future renewals to eight years. Licenses may be renewed through an
application to the FCC. Prior to the Telecommunications Act, during certain
periods when a renewal application was pending, competing applicants could file
for the radio frequency being used by the renewal applicant. The
Telecommunications Act prohibits the FCC from considering such competing
applications if the FCC finds that the station has served the public interest,
convenience and necessity, that there have been no serious violations by the
licensee of the Communications Act or the rules and regulations of the FCC, and
that there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC that, when taken together, would
constitute a pattern of abuse.
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<PAGE> 64
Petitions to deny license renewals can be filed by interested parties,
including members of the public. Such petitions may raise various issues before
the FCC. The FCC is required to hold hearings on renewal applications if the FCC
is unable to determine that renewal of a license would serve the public
interest, convenience and necessity, or if a petition to deny raises a
"substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license is
restricted. A petition to deny renewal has been filed against four of the
Company's Salt Lake City stations, alleging that they failed to comply with FCC
equal opportunity employment rules, and FCC processing of that petition has
delayed action on those license renewals. Except for that case, the Company is
not currently aware of any facts that would prevent the timely renewal of its
licenses to operate its radio stations, although there can be no assurance that
the Company's licenses will be renewed. See "Risk Factors--Licensing and
Ownership Issues."
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designated to render primary and secondary service over an
extended area; Class B stations, which operate on an unlimited time basis and
are designed to render service only over a primary service area; or Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
The following table sets forth the market, call letters, FCC license
classification, antenna height above average terrain (HAAT), power and frequency
of each of the stations owned or operated by the Company, assuming the
consummation of the Pending Transactions, and the date on which each station's
FCC license expires.
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
--------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Providence, RI................ WPRO-AM B NA 5.0 630 kHz 04-01-06
WPRO-FM B 168 39.0 92.3 MHz 04-01-06
WSKO-AM B NA 5.0 790 kHz 04-01-06
WWLI-FM B 152 50.0 105.1 MHz 04-01-06
WXEX-FM A 163 2.3 99.7 MHz 04-01-06
WHKK-FM A 90 4.2 100.3 MHz 04-01-06
</TABLE>
61
<PAGE> 65
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
--------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Salt Lake City, UT............ KCNR-AM B NA 10.0/0.195 860 kHz 10-01-97(3)
KUBL-FM C 1140 26.0 93.3 MHz 10-01-97(3)
KENZ-FM C 869 45.0 107.5 MHz 10-01-97(3)
KBER-FM C 1140 25.0 101.1 MHz 10-01-97(3)
KFNZ-AM B NA 5.0 1320 kHz 10-01-05
KBEE-FM C 894 40.0 98.7 MHz 10-01-05
Wilkes-Barre/Scranton, PA..... WAZL-AM C NA 1.0 1490 kHz 08-01-98(3)
WZMT-FM B 222 19.5 97.9 MHz 08-01-06
WARM-AM B NA 5.0 590 kHz 08-01-06
WMGS-FM B 422 5.3 92.9 MHz 08-01-98(3)
WBHT-FM A 336 0.50 97.1 MHz 08-01-06
WKQV-AM(4) B NA 10.0/0.5 1550 kHz 08-01-06
WKQV-FM(4) A 308 0.30 95.7 kHz 08-01-06
WCTP-FM A 235 0.52 94.3 MHz 08-01-98(3)
WCTD-FM A 207 1.45 93.7 MHz 08-01-06
WCDL-AM B NA 5.0/.037 1440 kHz 08-01-98(3)
WEMR-AM B NA 5.0/1.0 1460 kHz 08-01-06
WEMR-FM A 354 0.24 107.7 MHz 08-01-06
Allentown/Bethlehem, PA....... WCTO-FM B 152 50.0 96.1 MHz 08-01-06
WLEV-FM B 327 10.9 100.7 MHz 08-01-06
Albuquerque, NM............... KKOB-AM B NA 50.0 770 kHz 10-01-05
KKOB-FM C 1265 20.2 93.3 MHz 10-01-97(3)
KHTL-AM B NA 1.0/0.5 920 kHz 10-01-05
KMGA-FM C 1259 22.5 99.5 MHz 10-01-97(3)
KTBL-FM C 1276 20.4 103.3 MHz 10-01-97(3)
KHFM-FM C 1260 20.0 96.3 MHz 10-01-97(3)
KRST-FM C 1268 22.0 92.3 MHz 10-01-97(3)
KNML-AM B NA 1.0/0.5 1050 kHz 10-01-05
Harrisburg/Carlisle and York,
PA.......................... WRKZ-FM B 283 14.1 106.7 MHz 08-01-06
WHYL-FM(4)(5) A 100 H3.0/V2.75 102.3 MHz 08-01-06
WHYL-AM(4)(5) B NA 5.0 960 kHz 08-01-06
WQXA-AM B NA 1.0 1250 kHz 08-01-98(3)
WQXA-FM B 215 25.1 105.7 MHz 08-01-98(3)
Baton Rouge, LA............... KQXL-FM(5) C2 148 50.0 106.5 MHz 06-01-04
WXOK-AM(5) B NA 5.0/1.0 1460 kHz 06-01-04
WEMX-FM(5) C1 299 100.0 94.1 MHz 06-01-04
WKJN-FM(5) C 306 100.0 103.3 MHz 06-01-04
WIBR-AM(5) B NA 5.0/1.0 1300 kHz 06-01-04
Little Rock, AR............... KARN-FM A 100 3.0 102.5 MHz 06-01-04
KARN-AM B NA 5.0 920 kHz 06-01-04
KKRN-FM A 100 6.0 101.7 MHz 06-01-04
KIPR-FM C1 286 100.0 92.3 MHz 06-01-04
KOKY-FM A 118 4.10 102.1 MHz 06-01-04
KLAL-FM C2 95 50.0 107.7 MHz 06-01-04
KAFN-FM(6) A 100 6.0 102.5 MHz 06-01-04
KLIH-AM B NA 2.0/1.2 1250 kHz 06-01-04
KURB-FM C 392 100.0 98.5 MHz 06-01-04
KVLO-FM C2 150 50.0 102.9 MHz 06-01-04
KAAY-AM A NA 50.0 1090 kHz 06-01-04
Spokane, WA................... KGA-AM A NA 50.0 1510 kHz 02-01-06
KDRK-FM C 725 56.0 93.7 MHz 02-01-06
KJRB-AM B NA 5.0 790 kHz 02-01-06
KAEP-FM C 582 100.0 105.7 MHz 02-01-06
KKZX-FM(4) C 492 100.0 98.9 MHz 02-01-98(3)
KEYF-AM(4) B NA 5.0 1050 kHz 02-01-06
KEYF-FM(4) C 490 100.0 101.1 MHz 02-01-98(3)
KUDY-AM(4) B NA 5.0 1280 kHz 02-01-06
</TABLE>
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<PAGE> 66
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
--------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Colorado Springs, CO.......... KKFM-FM C 698 71.0 98.1 MHz 04-01-05
KKMG-FM C 695 57.0 98.9 MHz 04-01-05
KKLI-FM C2 678 1.6 106.3 MHz 04-01-05
KVUU-FM(4) C 610 68.0 99.9 MHz 04-01-05
KSPZ-FM(4) C 649 72.0 92.9 MHz 04-01-05
KVOR-AM(4) B NA 5.0/1.0 1300 kHz 04-01-05
KTWK-AM(4) B NA 3.3/1.5 740 kHz 04-01-05
Charleston, SC................ WSSX-FM(5) C 317 100.0 95.1 MHz 12-01-03
WWWZ-FM(5) C2 150 50.0 93.3 MHz 12-01-03
WMGL-FM(5) C3 128.9 6.5 101.7 MHz 12-01-03
WSUY-FM(5) C 539.5 100.0 96.9 MHz 12-01-03
WNKT-FM(5) C 299.9 100.0 107.5 MHz 12-01-03
WTMA-AM(5) B NA 5.0/1.0 1250 kHz 12-01-03
WTMZ-AM(5) B NA 0.50 910 kHz 12-01-03
WXTC-AM(5) B NA 5.0 1390 kHz 12-01-03
Lafayette, LA................. KFXZ-FM(5) A 151 2.6 106.3 MHz 06-01-04
KNEK-FM(5) C3 100 25.0 104.7 MHz 06-01-04
KNEK-AM(5) B NA 0.25 1190 kHz 06-01-04
KRRQ-FM(5) C2 135 50.0 95.5 MHz 06-01-04
Modesto, CA................... KANM-AM B NA 1.0 970 kHz 12-01-05
KATM-FM B 152 50.0 103.3 MHz 12-01-05
KHKK-FM B 152 50.0 104.1 MHz 12-01-05
KDJK-FM A 624 0.071 103.9 MHz 12-01-05
KHOP-FM B 193 29.5 95.1 MHz 12-01-05
Saginaw/Bay City, MI.......... WKQZ-FM(5) C2 169 39.2 93.3 MHz 10-01-04
WMJK-FM(5) A 151 2.6 100.9 MHz 10-01-04
WIOG-FM(5) B 244 86 102.5 MHz 10-01-04
WMJA-FM(5) A 126 2.9 104.5 MHz 10-01-04
WGER-FM(5) A 116 2.05 106.3 MHz 10-01-04
WSGW-AM(5) B NA 5.0/1.0 790 kHz 10-01-04
Boise, ID..................... KIZN-FM C 762 44.0 92.3 MHz 10-01-05
KZMG-FM C 802 50.0 93.1 MHz 10-01-05
KKGL-FM C 768 44.0 96.9 MHz 10-01-05
KQFC-FM C 762 47.0 97.9 MHz 10-01-05
KBOI-AM B NA 50.0 960 kHz 10-01-05
Reno, NV...................... KKOH-AM B NA 50.0 780 kHz 10-01-05
KNEV-FM C 695 60.0 95.5 MHz 10-01-05
KBUL-FM C 699 72.0 98.1 MHz 10-01-05
KNHK-FM C 809 44.7 92.9 MHz 10-01-05
KXXL-FM(4) A 129 3.6 93.7 MHz 10-01-05
Eugene, OR.................... KUGN-AM B NA 5.0/1.0 590 kHz 02-01-06
KKTT-FM C 308 100.0 97.9 MHz 02-01-06
KEHK-FM C1 301 95.0 102.3 MHz 02-01-06
Binghamton, NY................ WHWK-FM(5) B 292.6 10.0 98.1 MHz 06-01-06
WYOS-FM(5) A 254 0.93 104.1 MHz 11-26-96(7)
WAAL-FM(5) B 332 7.1 99.1 MHz 06-01-06
WNBF-AM(5) B NA 5.0 1290 kHz 06-01-06
WKOP-AM(5) B NA 5.0/0.5 1360 kHz 06-01-06
Johnstown, PA................. WQKK-FM B 152 50.0 99.1 MHz 08-01-06
WGLU-FM A 318 0.58 92.1 MHz 08-01-06
Tri-Cities, WA................ KFLD-AM B NA 10.0/0.25 870 kHz 02-01-06
KEYW-FM A 59 3.0 98.3 MHz 02-01-06
KORD-FM C 335 100.0 102.7 MHz 02-01-06
KXRX-FM C 408 50.0 97.1 MHz 02-01-06
KTHK-FM C2 339 8.0 97.9 MHz 02-01-06
Medford, OR................... KTMT-AM B NA 1.0 880 kHz 02-01-06
KTMT-FM C 994 31.0 93.7 MHz 02-01-06
KBOY-FM C1 299 60.0 95.7 MHz 02-01-06
KCMX-AM B NA 1.0 580 kHz 02-01-06
KCMX-FM C1 435 31.6 101.9 MHz 02-01-06
KAKT-FM C1 166 51.7 105.1 MHz 02-01-98(3)
</TABLE>
63
<PAGE> 67
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
--------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
State College, PA............. WRSC-AM B NA 2.0/1.0 1390 kHz 08-01-06
WQWK-FM A 123 2.0 97.1 MHz 08-01-06
WBLF-AM B NA 1.0 970 kHz 08-01-06
WIKN-FM A 100 3.0 107.9 MHz 08-01-06
Billings, MT.................. KBUL-AM B NA 5.0 970 kHz 04-01-05
KCTR-FM C1 152 100.0 102.9 MHz 04-01-05
KKBR-FM C2 122 28.0 97.1 MHz 04-01-05
KBBB-FM C1 146 100.0 103.7 MHz 04-01-05
KMHK-FM C 300 100.0 95.5 MHz 04-01-05
Muncie, IN.................... WMDH-FM(5) B 152.4 50.0 102.5 MHz 08-01-04
WMDH-AM(5) B NA 0.25 1550 kHz 08-01-04
Kokomo, IN.................... WWKI-AM(5) B 143.3 50.0 100.5 MHz 08-01-04
</TABLE>
- ---------------
(1) Actual city of license may be different from the metropolitan market served.
(2) Pursuant to FCC rules and regulations, many AM radio stations are licensed
to operate at a reduced power during nighttime broadcasting hours, which
results in reducing the radio station's coverage during those hours of
operation. Both power ratings are shown, where applicable.
(3) License renewal applications have been filed for the listed stations showing
a license expiration date of October 1, 1997, February 1, 1998 or August 1,
1998, and the expiration of the licenses is stayed during the pendency of
such renewal proceedings. A petition to deny the renewal applications for
four of the Company's Salt Lake City stations has been filed with the FCC,
citing alleged violations of the FCC's policies concerning equal employment
opportunities ("EEO"). In September 1998, the U.S. Court of Appeals for the
District of Columbia Circuit, in Lutheran Church-Missouri Synod v. FCC, held
most aspects of the FCC's EEO rules to be unconstitutional, thus
invalidating them. The status of pending petitions to deny license renewals
based on alleged EEO violations was rendered uncertain by the Court's
decision. The FCC is currently considering how to deal with such petitions,
and has proposed adoption of new EEO rules that address the Court's
concerns. Should the FCC find that these Company Salt Lake City stations
lacked EEO policies and procedures that were effective, the FCC could
penalize the stations in the form of fines (generally $10,000 - $15,000),
reporting conditions (the stations would be required to file with the FCC
periodic EEO documentation), and/or short-term renewal (renewal of license
for less than the standard 8-year period). In rare cases, the FCC may order
hearings on EEO violations.
(4) The Company provides certain sales and marketing services to stations
KVUU-FM, KSPZ-FM, KVOR-AM and KTWK-AM in Colorado Springs, Colorado,
stations KKZX-FM, KEYF-AM, KEYF-FM and KUDY-AM in Spokane, Washington and
station WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania, pursuant to JSAs.
The Company provides certain sales, programming and marketing services to
stations WBHT-FM and WKQV-FM in Wilkes-Barre/Scranton, Pennsylvania and
station KXXL-FM in Reno, Nevada.
(5) Indicates a station which is the subject of a Pending Transaction. The
consummation of each of the Pending Transactions is subject to certain
conditions. Although the Company believes these conditions are customary for
transactions of this type and will be satisfied, there can be no assurance
that such closing conditions will be satisfied.
(6) KAFN-FM is under construction and has not yet commenced operations.
(7) WYOS-FM operates pursuant to a construction permit. An application for a
license to cover the construction permit has been filed with the FCC.
Expiration of the construction permit is stayed during the pendency of that
application.
Ownership Matters. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast license without the
prior approval of the FCC. In determining whether to assign, transfer, grant or
renew a broadcast license, the FCC considers a number of factors pertaining to
the licensee, including compliance with various rules limiting common ownership
of media properties, the "character" of the licensee and those persons holding
"attributable" interests therein, and compliance with the Communications Act's
limitation on alien ownership, as well as compliance with other FCC policies,
including equal employment opportunity requirements.
Once a station purchase agreement has been signed, an application for FCC
consent to assignment of license or transfer of control (depending upon whether
the underlying transaction is an asset purchase or stock acquisition) is filed
with the FCC. Approximately 10 to 15 days after this filing, the FCC normally
publishes a notice assigning a file number to the application and advising that
the application has been "accepted for filing." This notice
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begins a 30-day statutory waiting period, which provides the opportunity for
third parties to file formal petitions to deny the transaction; informal
objections may be filed any time prior to grant of an application. The FCC staff
will normally review the application in this period and seek further information
and amendments to the application if it has questions.
Once the 30-day public notice period ends, the staff will complete its
processing, assuming that no petitions or informal objections were received and
that the application is otherwise consistent with FCC rules and policies. The
staff often grants the application by delegated authority approximately 10 to 20
days after the public notice period ends. At this point, the parties are legally
authorized to close the purchase, although the FCC action is not legally a
"final order." If there is a backlog of applications, the processing period can
extend to 30 days or more.
Public notice of the FCC staff grant is usually issued about a week after
the grant is made, stating that the grant was effective when the staff made the
grant. On the date of this notice, another 30-day period begins, within which
time interested parties can file petitions seeking either staff reconsideration
or full FCC review of the staff action. During this time the grant can still be
modified, set aside or stayed, and is not a "final order." In the absence of a
stay, however, the seller and buyer are not prevented from closing despite the
absence of a final order. Also, within 40 days after the public notice of the
grant, the full FCC can review and reconsider the staff's grant on its own
motion. Thus, during the additional 10 days beyond the 30-day period available
to third parties, the grant is still not "final." In the event that review by
the full FCC is requested and the FCC subsequently affirms the staff's grant of
the application, interested parties may thereafter seek judicial review in the
United States Court of Appeals for the District of Columbia Circuit within
thirty days of public notice of the full FCC's action. In the event the Court
affirms the FCC's action, further judicial review may be sought by seeking
rehearing en banc from the Court of Appeals or by certiorari from the United
States Supreme Court.
In the absence of the submission of a timely request for reconsideration,
administrative review or judicial review, the FCC staff's grant of an
application becomes final by operation of law. Upon the occurrence of that
event, counsel is able to deliver an opinion that the FCC's grant is no longer
subject to administrative or judicial review, although such action can
nevertheless be set aside in rare circumstances, such as fraud on the agency by
a party to the application.
The pendency of a license renewal application can alter the aforementioned
timetables because the FCC normally will not issue an unconditional assignment
grant if the station's license renewal is pending.
Under the Communications Act, a broadcast license may not be granted to or
held by a corporation that has more than one-fifth of its capital stock owned or
voted by aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations. Under the Communications Act, a
broadcast license also may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation more than
one-fourth of whose capital stock is owned or voted by aliens or their
representatives, by foreign governments or their representatives, or by non-U.S.
corporations. These restrictions apply in modified form to other forms of
business organizations, including partnerships. Each of the Company and Citadel
Communications therefore may be restricted from having more than one-fourth of
its stock owned or voted by aliens, foreign governments or non-U.S.
corporations. The Certificate of Incorporation of the Company and the
Certificate of
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Incorporation of Citadel Communications contain provisions which permit the
Company and Citadel Communications to prohibit alien ownership and control
consistent with the prohibitions contained in the Communications Act.
The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
absent waivers, neither the Company nor Citadel Communications would be
permitted to acquire any daily newspaper or television broadcast station (other
than low power television) in a local market where it then owned any radio
broadcast station. The FCC's rules provide for the liberal grant of a waiver of
the rule prohibiting common ownership of radio and television stations in the
same geographic market in the top 25 television markets if certain conditions
are satisfied. The Telecommunications Act extends this waiver policy to stations
in the top 50 television markets, although the FCC has not yet implemented this
change.
In response to the Telecommunications Act, the FCC amended its multiple
ownership rules to eliminate the national limits on ownership of AM and FM
stations. The FCC's broadcast multiple ownership rules restrict the number of
radio stations one person or entity may own, operate or control on a local
level. These limits are:
(1) in a market with 45 or more commercial radio stations, an entity may
own up to eight commercial radio stations, not more than five of which are in
the same service (FM or AM);
(2) in a market with between 30 and 44 (inclusive) commercial radio
stations, an entity may own up to seven commercial radio stations, not more than
four of which are in the same service;
(3) in a market with between 15 and 29 (inclusive) commercial radio
stations, an entity may own up to six commercial radio stations, not more than
four of which are in the same service;
(4) in a market with 14 or fewer commercial radio stations, an entity may
own up to five commercial radio stations, not more than three of which are in
the same service, except that an entity may not own more than 50% of the
stations in such market.
None of these multiple ownership rules requires any change in the Company's
current ownership of radio broadcast stations. However, these rules will limit
the number of additional stations which the Company may acquire in the future in
certain of its markets.
Because of these multiple and cross-ownership rules, a purchaser of voting
stock of either the Company or Citadel Communications which acquires an
"attributable" interest in the Company or Citadel Communications may violate the
FCC's rule if it also has an attributable interest in other television or radio
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 these
investments give rise to an attributable interest. If an attributable
shareholder of the Company or Citadel Communications violates any of these
ownership rules, the Company or Citadel Communications may be unable to obtain
from the FCC one or more authorizations needed to conduct its radio station
business and may be unable to obtain FCC consents for certain future
acquisitions.
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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. A person or
entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner or shareholder of a company
that owns that station or newspaper. Whether that interest is cognizable under
the FCC's 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 therefore subject to the FCC's ownership rules.
With respect to a corporation, officers and directors and persons or
entities that directly or indirectly can vote 5% or more of the corporation's
stock (10% 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 whatever radio stations, television stations and daily newspapers
the corporation owns.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
nonvoting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership, and
minority (under 5%) voting stock, generally do not subject their holders to
attribution. However, the FCC is currently reviewing its rules on attribution of
broadcast interests, and it may adopt stricter criteria. See "--Proposed
Changes" below.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock and
limited partnership interests) and significant employment positions. This policy
may limit the permissible investments a purchaser of the Company's or Citadel
Communications' voting stock may make or hold.
The FCC has also been more aggressive in examining issues of market revenue
share concentration when considering radio station acquisitions. The FCC has
delayed its approval of several pending radio station purchases by various
parties because of market concentration concerns. Moreover, in recent months the
FCC has followed an informal policy of giving specific public notice of its
intention to conduct additional ownership concentration analyses and soliciting
public comment on the issue of concentration and its effect on competition and
diversity in connection with certain applications for consent to radio station
acquisitions.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." Since 1981, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it developed to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. However, licensees continue to be 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 will be considered by the FCC
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when it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time.
Stations also must pay regulatory and application fees and follow various
FCC rules that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, sponsorship identification and
technical operations (including limits on radio frequency radiation). In
addition, licensees must develop and implement programs designed to promote
equal employment opportunities and must submit reports to the FCC on these
matters annually and in connection with a renewal application. The broadcast of
contests and lotteries also is regulated by FCC rules.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short" (less than the maximum) renewal terms or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
In 1985, the FCC adopted rules regarding human exposures to levels of radio
frequency ("RF") radiation. These rules require applicants for new broadcast
stations, renewals of broadcast licenses or modifications of existing licenses
to inform the FCC at the time of filing such applications whether a new or
existing broadcast facility would expose people to RF radiation in excess of
certain guidelines. In August 1996, the FCC adopted more restrictive radiation
limits. These limits became effective on September 1, 1997 and govern
applications filed after that date. The Company anticipates that such
regulations will not have a material effect on its business.
Local Marketing Agreements. Over the past five years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "local marketing agreements" (LMAs) or "time
brokerage agreements." These agreements take various forms. Separately-owned and
licensed stations may agree to function cooperatively in terms of programming,
advertising sales and other matters, subject to compliance with the antitrust
laws and the FCC's rules and policies, including the requirement that the
licensee of each station maintains independent control over the programming and
other operations of its own station. The FCC has held that such agreements do
not violate the Communications Act as long as the licensee of the station that
is being substantially programmed by another entity maintains complete
responsibility for, and control over, operations of its broadcast stations and
otherwise ensures compliance with applicable FCC rules and policies.
A station that brokers substantial time on another station in its market or
engages in an LMA with a station in the same market will be considered to have
an attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into an LMA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit the broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns one and programs the other through an LMA arrangement.
Another example of a cooperative agreement between differently owned radio
stations in the same market is a joint sales agreement (JSA), whereby one
station sells advertising time in combination, both on itself and on a station
under separate ownership. In the past, the
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FCC has determined that issues of joint advertising sales should be left to
antitrust enforcement. The Company has entered into several JSAs whereby it
sells time on behalf of other local stations. Currently, JSAs are not deemed by
the FCC to be attributable. However, the FCC has outstanding a notice of
proposed rulemaking, which, if adopted, would require the Company to terminate
any JSA it might have with a radio station with which the Company could not have
an LMA. Currently, the only Company groups that would be so affected would be
its groups in Spokane and Colorado Springs. See "--General" and "--Station
Portfolio."
Proposed Changes. In December, 1994, the FCC initiated a proceeding to
solicit comment on whether it should revise its radio and television ownership
"attribution" rules by, among other proposals:
-- raising the basic benchmark for attributing ownership in a
corporate licensee from 5% to 10% of the licensee's voting stock,
-- increasing from 10% to 20% of the licensee's voting stock the
attribution benchmark for "passive investors" in corporate
licensees,
-- restricting the availability of the attribution exemption when a
single party controls more than 50% of the voting stock, and
-- considering LMAs, JSAs, debt and non-voting stock interests to be
attributable under certain circumstances. No decision has been made
by the FCC in these matters. At this time, no determination can be
made as to what effect, if any, this proposed rulemaking will have
on the Company.
The Congress and the FCC from time to time have under consideration, 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 the Company's radio stations,
result in the loss of audience share and advertising revenues for the Company's
radio stations, and affect the ability of the Company to acquire additional
radio stations or finance such acquisitions. Such matters include: proposals to
impose spectrum use or other fees on FCC licensees; the FCC's equal employment
opportunity rules and matters relating to political broadcasting; technical and
frequency allocation matters; proposals to restrict or prohibit the advertising
of beer, wine and other alcoholic beverages on radio; changes in the FCC's
cross-interest, multiple ownership and cross-ownership policies; changes to
broadcast technical requirements; proposals to allow telephone or cable
television companies to deliver audio and video programming to the home through
existing phone or other communication lines; proposals to limit the tax
deductibility of advertising expenses by advertisers; and proposals to auction
the right to use the radio broadcast spectrum to the highest bidder, instead of
granting FCC licenses and subsequent license renewals without such bidding.
The FCC, on April 2, 1997, awarded two licenses for the provision of
satellite digital audio radio services ("DARS"). Under rules adopted for this
service, licensees must begin construction of their space stations within one
year, begin operating within four years, and be operating their entire system
within six years. The Company cannot predict whether the service will be
subscription or advertiser supported. Digital technology also may be used in the
future by terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital sound
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth
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for the AM band and on March 17, 1997, adopted an allotment plan for the
expanded band which identified the 88 AM radio stations selected to move into
the band. At the end of a five-year transition period, those licensees will be
required to return to the FCC either the license for their existing AM band
station or the license for the expanded AM band station.
The Company cannot predict whether any proposed changes will be adopted or
what other matters might be considered in the future, nor can it judge in
advance what impact, if any, the implementation of any of these proposals or
changes might have on its business.
The foregoing is a brief summary of certain provisions of the
Communications Act and of specific FCC rules and policies. This description does
not purport to be comprehensive and reference should be made to the
Communications Act, the FCC's rules and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
Federal Antitrust Considerations. The Company is aware that the Federal
Trade Commission ("FTC") and the United States Department of Justice ("DOJ"),
which evaluate transactions to determine whether those transactions should be
challenged under the federal antitrust laws, have been increasingly active
recently in their review of radio station acquisitions, particularly where an
operator proposes to acquire additional stations in its existing markets.
For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the rules
promulgated thereunder require the parties to file Notification and Report Forms
with the FTC and the DOJ and to observe specified waiting period requirements
before consummating the acquisition. During the initial 30-day period after the
filing, the agencies decide which of them will investigate the transaction. If
the investigating agency determines that the transaction does not raise
significant antitrust issues, then it will either terminate the waiting period
or allow it to expire after the initial 30 days. On the other hand, if the
agency determines that the transaction requires a more detailed investigation,
then, at the conclusion of the initial 30-day period, it will issue a formal
request for additional information (a "Second Request"). The issuance of a
Second Request extends the waiting period until the twentieth calendar day after
the date of substantial compliance by all parties to the acquisition.
Thereafter, such waiting period may only be extended by court order or with the
consent of the parties. In practice, complying with a Second Request can take a
significant amount of time. In addition, if the investigating agency raises
substantive issues in connection with a proposed transaction, then the parties
frequently engage in lengthy discussions or negotiations with the investigating
agency concerning possible means of addressing those issues, including but not
limited to persuading the agency that the proposed acquisition would not violate
the antitrust laws, restructuring the proposed acquisition, divestiture of other
assets of one or more parties, or abandonment of the transaction. Such
discussions and negotiations can be time consuming, and the parties may agree to
delay consummation of the acquisition during their pendency.
At any time before or after the consummation of a proposed acquisition, the
FTC or the DOJ could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition or seeking divestiture of the business acquired or other assets of
the Company. Acquisitions that are not required to be reported under the HSR Act
may be investigated by the FTC or the DOJ under the antitrust
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laws before or after consummation. In addition, private parties may under
certain circumstances bring legal action to challenge an acquisition under the
antitrust laws.
The Company has received early termination of the applicable waiting period
under the HSR Act in regard to the pending acquisitions of stations in
Saginaw/Bay City, Michigan and in Charleston, South Carolina, Binghamton, New
York and Muncie and Kokomo, Indiana. No other Pending Acquisition is subject to
the HSR Act.
As part of its increased scrutiny of radio station acquisitions, the DOJ
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 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, the Company will not commence operation of
any affected station to be acquired under an LMA or similar agreement until the
waiting period has expired or been terminated.
The Company has received civil investigative demands ("CID") from the
Antitrust Division of the DOJ. One CID addresses the Company's acquisition of
KRST-FM in Albuquerque, New Mexico, and the second investigation addresses the
Company's JSA relating to stations in Spokane, Washington and Colorado Springs,
Colorado. See "--Legal Proceedings."
SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are primarily the result of fluctuations in advertising expenditures by
retailers. The Company's revenue is typically lowest in the first quarter and
highest in the second and fourth quarters. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation--General."
TRADEMARKS
The Company owns a number of trademarks and service marks, including the
federally registered marks "Cat Country," "Supertalk" and the Cat Country logo.
The Company also owns a number of marks registered in various states. The
Company considers such trademarks and service marks to be important to its
business. See "--Operating Strategy--Targeted Programming."
EMPLOYEES
At December 1, 1998, the Company employed approximately 1,640 persons. None
of such employees are covered by collective bargaining agreements, and the
Company considers its relations with its employees to be good.
The Company employs several on-air personalities with large loyal audiences
in their respective markets. The Company generally enters into employment
agreements with these personalities to protect its interests in those
relationships that it believes to be valuable. The loss of one of these
personalities could result in a short-term loss of audience share, but the
Company does not believe that any such loss would have a material adverse effect
on the Company's financial condition or results of operations.
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PROPERTIES AND FACILITIES
The types of properties required to support each of the Company's radio
stations include offices, studios, transmitter sites and antenna sites. A
station's studios are generally housed with its offices in business districts.
The transmitter sites and antenna sites are generally located so as to provide
maximum market coverage.
The Company currently owns certain studio facilities in Spokane,
Washington; Billings, Montana; Tri-Cities, Washington; East Providence, Rhode
Island; Little Rock, Arkansas; Boise, Idaho; and Patton Township (State
College), Lower Yoder Township (Johnstown), Williams Township (Allentown) and
Tunkhannock (Wilkes-Barre/Scranton), Pennsylvania, and it owns certain
transmitter and antenna sites in Reno, Nevada; Salt Lake City, Utah; Spokane and
Tri-Cities, Washington; Tracy (Modesto), California; Billings, Montana; Santa Fe
and Albuquerque, New Mexico; Medford, Oregon; East Providence and Johnston,
Rhode Island; Little Rock, Arkansas; and Patton Township (State College), Croyle
Township (Johnstown), Mt. Joy Township (Harrisburg/York), Williams Township and
Salisbury Township (Allentown) and Hanover Township, Plymouth Township,
Carbondale and Tunkhannock (Wilkes-Barre/ Scranton), Pennsylvania. The Company
will acquire additional real estate in connection with certain of the Pending
Acquisitions. The Company leases its remaining studio and office facilities,
including office space in Tempe, Arizona and Las Vegas, Nevada which is not
related to the operations of a particular station, and it leases its remaining
transmitter and antenna sites. The Company does not anticipate any difficulties
in renewing any facility leases or in leasing alternative or additional space,
if required. The Company owns substantially all of its other equipment,
consisting principally of transmitting antennae, transmitters, studio equipment
and general office equipment.
No one property is material to the Company's operations. The Company
believes that its properties are generally in good condition and suitable for
its operations; however, the Company continually looks for opportunities to
upgrade its properties and intends to upgrade studios, office space and
transmission facilities in certain markets.
Substantially all of the Company's properties and equipment serve as
collateral for the Company's obligations under the Credit Facility. See
"Description of Indebtedness--Existing Loan Agreement."
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 CIDs from the 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
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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 investigation was initiated on October 9, 1996 and concerned the
Company's 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 the investigation, 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 has provided the requested
information 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. At this time, the Company cannot predict the impact on the
Company, if any, of these proceedings or any future DOJ demands. See "Risk
Factors--Limitations on Acquisition Strategy" and "Risk Factors--Potential Delay
in Completing Pending Transactions Due to Antitrust Review."
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THE PENDING TRANSACTIONS
There are several transactions currently pending which, if consummated,
would result in the Company purchasing 22 FM and 11 AM radio stations.
THE SAGINAW/BAY CITY ACQUISITION
WGER-FM, WMJA-FM, WKQZ-FM, WMJK-FM, WIOG-FM and WSGW-AM, Saginaw/ Bay City,
Michigan. On October 9, 1998, the Company entered into an Asset Purchase
Agreement with 62nd Street Broadcasting of Saginaw, L.L.C. and 62nd Street
Broadcasting of Saginaw License, L.L.C. pursuant to which the Company has agreed
to acquire substantially all of the assets of WGER-FM, WMJA-FM and WSGW-AM
licensed to Saginaw, Michigan, WKQZ-FM licensed to Midland, Michigan, WMJK-FM
licensed to Pinconning, Michigan and WIOG-FM licensed to Bay City, Michigan for
an aggregate purchase price of approximately $35.0 million in cash. The Company
has delivered an irrevocable letter of credit in favor of the sellers, issued by
BankBoston, N.A. in the amount of $2.0 million to secure the Company's
obligations under the asset purchase agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and consummation of the acquisition of the stations
is subject to certain conditions including (1) the receipt of FCC consent to the
assignment of the station licenses to the Company and (2) the receipt of
consents to the assignment to the Company of certain material contracts relating
to the stations. An application seeking FCC approval was filed with the FCC on
October 16, 1998, and a grant of such application was received on December 22,
1998. The Company received early termination of the applicable HSR waiting
period on November 20, 1998. The Company anticipates that the acquisition of
these stations will close in February 1999. The Company does not own any other
radio stations in Saginaw/ Bay City.
THE HARRISBURG/CARLISLE ACQUISITION
WHYL-FM and WHYL-AM, Carlisle, Pennsylvania. On October 29, 1998, the
Company and Citadel License entered into an Asset Purchase Agreement with Zeve
Broadcasting Company ("Zeve Broadcasting") and H. Lincoln Zeve pursuant to which
the Company has agreed to purchase from Zeve Broadcasting substantially all of
the assets of radio stations WHYL-FM and WHYL-AM serving the Harrisburg/Carlisle
market for an aggregate purchase price of approximately $4.25 million in cash.
The Company has delivered to Zeve Broadcasting an irrevocable letter of credit
in favor of Zeve Broadcasting, issued by BankBoston, N.A., in the amount of
$250,000 to secure the Company's obligations under the asset purchase agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and consummation of the transaction is subject to
certain conditions including (1) the receipt of FCC consent to the transfer of
the licenses for WHYL-FM and WHYL-AM to the Company and (2) the receipt of
consents to the assignment to the Company of certain contracts relating to
WHYL-FM and WHYL-AM. An application seeking FCC approval was filed with the FCC
on November 9, 1998, and a grant of such application was received on December
30, 1998. The Company has also entered into an LMA with Zeve Broadcasting
pursuant to which the Company markets commercial advertising time and provides
programming for WHYL-FM and WHYL-AM pending their acquisition by the Company.
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On October 29, 1998, the Company entered into an Agreement of Sale with H.
Lincoln Zeve to purchase real estate used by Zeve Broadcasting in the operation
of WHYL-FM and WHYL-AM for a purchase price of approximately $250,000 in cash.
The Company anticipates that the acquisition of WHYL-FM and WHYL-AM and the
real estate used by Zeve Broadcasting in the operation of the stations will
close in February 1999. At the closing, the Company expects to enter into a
one-year employment agreement with Mr. Zeve. Upon consummation of this
transaction, the Company will own two FM radio stations and one AM radio station
in the Harrisburg/Carlisle market, and it will own one FM radio station and one
AM radio station in the adjacent York, Pennsylvania market.
THE BATON ROUGE AND LAFAYETTE ACQUISITION
KQXL-FM, WEMX-FM, WKJN-FM, WXOK-AM and WIBR-AM Baton Rouge, Louisiana and
KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM Lafayette, Louisiana. On November 5, 1998,
the Company entered into a Purchase Agreement with Citywide Communications, Inc.
("Citywide"), P M Investments, Ltd., Providence Investment, Ltd., Peter
Moncrieffe, Donald R. Nelson, Willie E. Tucker, Jr., FINOVA Capital Corporation
and certain warrantholders of Citywide pursuant to which the Company has agreed
to purchase all of the issued and outstanding shares of capital stock of
Citywide and all of the outstanding warrants to acquire shares of capital stock
of Citywide. The aggregate purchase price is approximately $34.5 million. This
amount includes the repayment of outstanding debt of Citywide and $1.5 million
in payments related to noncompetition agreements to be entered into in
connection with the acquisition, but it is net of the $1.0 million in positive
working capital that Citywide is required to have at closing of the acquisition.
The Company has caused to be delivered to Citywide an irrevocable letter of
credit in favor of Citywide, issued by BankBoston, N.A., in the amount of $1.0
million to secure the Company's obligations under the purchase agreement.
Citywide currently, directly or through its wholly-owned subsidiaries, is the
licensee of and owns and operates KQXL-FM, WEMX-FM, WKJN-FM, WXOK-AM, WIBR-AM,
KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM serving the Baton Rouge and Lafayette,
Louisiana markets.
The purchase agreement contains customary representations and warranties of
the parties, and consummation of the transaction is subject to certain
conditions including (1) the receipt of FCC consent to the transfer of control
of the station licenses to the Company, (2) the receipt of consents to the
change of control under certain contracts to which Citywide or its wholly-owned
subsidiaries are a party and (3) the existence at closing of a minimum of $1.0
million in positive working capital. An application seeking FCC approval was
filed with the FCC on November 18, 1998. The Company anticipates that the
acquisition of Citywide will close in the first quarter of 1999. At the closing,
the Company expects to enter into a three-year employment agreement with one of
the principals of Citywide. Immediately after closing, Citywide and its
wholly-owned subsidiaries will be merged into the Company. The Company does not
own any other radio stations in either Baton Rouge or Lafayette.
THE CHARLESTON/BINGHAMTON/MUNCIE/KOKOMO ACQUISITION
WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM, WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM,
Charleston, South Carolina, WHWK-FM, WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM,
Binghamton, New York, WMDH-FM and WMDH-AM, Muncie, Indiana and WWKI-FM, Kokomo,
Indiana. On November 23, 1998, the Company entered into an Asset Purchase
Agreement with Wicks Broadcast Group Limited Partnership and certain related
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<PAGE> 79
entities (collectively, "Wicks") to acquire substantially all of the assets of
WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM, WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM,
Charleston, South Carolina, WHWK-FM, WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM,
Binghamton, New York, WMDH-FM and WMDH-AM, Muncie, Indiana and WWKI-FM, Kokomo,
Indiana, for an aggregate purchase price of approximately $77.0 million in cash.
The Company has delivered an irrevocable letter of credit in favor of Wicks,
issued by BankBoston, N.A., in the amount of $5.0 million to secure the
Company's obligations under the asset purchase agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and consummation of the acquisition of the stations
is subject to certain conditions including (1) the receipt of FCC consent to the
assignment of the station license to the Company, (2) the expiration or
termination of the applicable waiting periods under the HSR Act and (3) the
receipt of consents to the assignment to the Company of certain contracts
relating to the stations. An application seeking FCC approval was filed with the
FCC on December 2, 1998. The Company received early termination of the
applicable HSR Act waiting period on December 18, 1998. The Company anticipates
that the acquisition of these stations will close in the second quarter of 1999.
The Company does not own any other radio stations in these markets.
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<PAGE> 80
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lawrence R. Wilson............ 53 Chief Executive Officer and Chairman
Donna L. Heffner.............. 39 Vice President, Chief Financial Officer,
Treasurer and Secretary
D. Robert Proffitt............ 45 President and Chief Operating Officer
Stuart R. Stanek.............. 42 Vice President; President--East Region
Peter J. Benedetti............ 35 Vice President; President--Central Region
Edward T. Hardy............... 50 Vice President; President--West Region
Patricia Diaz Dennis.......... 52 Director
Scott E. Smith................ 43 Director
Ted L. Snider, Sr............. 70 Director
John E. von Schlegell......... 44 Director
</TABLE>
Lawrence R. Wilson co-founded and was a general partner of Predecessor from
1984 to July 1992 and has been the Chief Executive Officer and Chairman of the
Board of the Company since it was incorporated in August 1991 and Chief
Executive Officer, President and Chairman of Citadel Communications since it was
incorporated in May 1993. Mr. Wilson also served as President of the Company
from 1991 to October 1998. From 1974 to 1979, Mr. Wilson was Executive Vice
President and General Counsel of Combined Communications Corporation, a national
media company, where he handled all acquisitions and mergers and oversaw the
broadcast, newspaper and outdoor billboard divisions as a part of a five person
management committee. From 1979 to 1986, he was engaged in the private practice
of law.
Donna L. Heffner joined Predecessor in 1988 as its Controller. Ms. Heffner
has served as Treasurer and Secretary of the Company since it was incorporated
in August 1991 and of Citadel Communications since it was incorporated in May
1993. She has served as Chief Financial Officer of the Company and Citadel
Communications since July 1992 and May 1993, respectively. In January 1997, Ms.
Heffner became Vice President of the Company and Citadel Communications. Ms.
Heffner also served as a director of the Company from 1992 to 1993 and as a
director of Citadel Communications for several months in 1993. From 1982 to 1985
and in 1987, she was employed by Price Waterhouse, and in 1986, she was employed
by Lowrimore, Warwick & Company as an accountant.
D. Robert Proffitt joined Predecessor in 1988 as Vice President--General
Manager of KKFM-FM in Colorado Springs. In 1991, he was appointed Vice President
of the Company, and in 1993, he was appointed Vice President of Citadel
Communications, Mr. Proffitt took over as General Manager of the Company's
Albuquerque operations in 1994. Mr. Proffitt served as President of Central
Region for the Company from June 1997 to October 1998, and he became President
and Chief Operating Officer of the Company in October 1998.
Stuart R. Stanek joined Predecessor in 1986 as a General Manager of KKFM-FM
in Colorado Springs. In 1988, he became General Manager of KCNR-AM/KUBL-FM in
Salt Lake City, in 1991, he was appointed Vice President of the Company, in 1992
he was elected
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<PAGE> 81
to the Board of Directors of the Company and in 1993, he was appointed Vice
President and elected to the Board of Directors of Citadel Communications. He
served as a Director of the Company and Citadel Communications until August
1996. Mr. Stanek became President of East Region for the Company in June 1997.
Peter J. Benedetti joined the Company in April 1995 as Sales Manager for
KMGA-FM in Albuquerque and also became Sales Manager for KHFM-FM in Albuquerque
upon the Company's acquisition of that station in June 1996. From January 1997
to July 1997, Mr. Benedetti was Director of Sales of the Company's Salt Lake
City radio station group, and from July 1997 to October 1998, he served as Vice
President and General Manager of that radio station group. In October 1998 Mr.
Benedetti became Vice President and President of the Central Region for the
Company. Prior to joining the Company, he served as an account executive for
Jacor Communications' KBPI-FM in Denver, Colorado. Mr. Benedetti currently
serves on the Board of Directors of the Utah Broadcasters Association and the
Salt Lake City Radio Broadcasters Association.
Edward T. Hardy founded and was elected President and Chief Executive
Officer of Deschutes in 1994. Mr. Hardy joined Citadel Communications in January
1997 as President of Deschutes following Citadel Communications' acquisition of
Deschutes. Mr. Hardy became President of West Region for the Company and Vice
President of the Company and Citadel Communications in June 1997. From 1984 to
1993, Mr. Hardy was Vice President--General Manager of KUPL AM/FM in Portland.
Patricia Diaz Dennis became a director of the Company and Citadel
Communications in November 1997. Since September 1995, Ms. Dennis has served as
Senior Vice President and Assistant General Counsel for regulation and public
policy of SBC Communications Inc., a company which provides telecommunications
products and services. From March 1993 until joining SBC Communications Inc.,
Ms. Dennis served as special counsel for communications matters for the law firm
of Sullivan & Cromwell. Ms. Dennis served as a commissioner of the FCC from June
1986 to September 1989 and as Assistant Secretary of State for Human Rights and
Humanitarian Affairs in the United States Department of State from August 1992
to January 1993. Ms. Dennis also serves as director for various entities,
including Massachusetts Mutual Life Insurance Company and National Public Radio.
Scott E. Smith has served as a member of the Board of Directors of the
Company since 1992 and of Citadel Communications since 1993. He is an Executive
Vice President of Baker, Fentress & Company ("Baker Fentress"). Since 1989, Mr.
Smith has managed the private placement portfolio of Baker Fentress.
Ted L. Snider, Sr. became a director of the Company and Citadel
Communications in November 1997 following the Company's October 1997 acquisition
of Snider Corporation. Mr. Snider had been Chairman of Snider Corporation since
its incorporation in 1971. Snider Corporation owned two FM and two AM radio
stations, the right to construct an additional FM radio station and the Arkansas
Radio Network.
John E. von Schlegell has served as a member of the Board of Directors of
the Company and Citadel Communications since January 1997. He co-founded and,
since 1991, has managed, Endeavour Capital Fund Limited Partnership ("Endeavour
Capital"), a firm that invests equity capital in privately held businesses
throughout the northwest. Prior to 1991, Mr. von Schlegell was a general partner
at Golder, Thoma & Cressey, a private equity firm based in Chicago.
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<PAGE> 82
BOARD COMPOSITION
The five persons presently constituting the Board of Directors of the
Company were elected pursuant to the terms of a Fourth Amended and Restated
Voting Agreement dated as of October 15, 1997 (the "Voting Agreement"), by and
among Citadel Communications, the Voting Trustee under the Voting Trust
Agreement (as defined) and certain other stockholders of Citadel Communications.
In connection with Citadel Communications' initial public offering, the Voting
Agreement and a related Stockholders Agreement among Citadel Communications and
certain of its stockholders (the "Stockholders Agreement") were terminated. The
Voting Trust Agreement will continue in effect until terminated in accordance
with its terms.
Each director of the Company holds office until the next annual meeting of
stockholders and until his or her successor has been elected and qualified.
Officers are elected by the Board of Directors and serve at its discretion.
In the event that, after July 1, 2002, two or more semi-annual dividends
payable on the Exchangeable Preferred Stock are in arrears and unpaid, or upon
the occurrence of certain other events (including failure to comply with certain
covenants and failure to pay the mandatory redemption price when due), then the
holders of a majority of the then outstanding shares of Exchangeable Preferred
Stock, voting separately as a class, will be entitled to elect two additional
directors of the Company, who shall serve until such time as all dividends in
arrears or any other failure, breach or default giving rise to such voting
rights is remedied or waived.
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<PAGE> 83
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid to the Company's Chief Executive Officer and each of the other four most
highly compensated executive officers of the Company during 1998 (collectively,
the "Named Executives"). Information with respect to 1996 compensation is not
given for Mr. Proffitt as he did not begin service as an executive officer of
the Company until 1997. Information with respect to 1996 and 1997 compensation
is not given for Mr. Benedetti as he did not begin service as an executive
officer of the Company until 1998.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
- ------------------ ---- -------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence R. Wilson........ 1998 $358,319 $214,370(2) 3,021 60,000 $3,046(3)
Chairman and Chief 1997 341,256 120,000(4) -0 - -0 - 3,278(3)
Executive Officer 1996 325,000 81,250(5) $412,041(6) 450,000 2,786(3)
Donna L. Heffner.......... 1998 $175,000 $ 80,000(2) 4,418 12,000 $4,537(7)
Vice President and 1997 140,535 50,000(4) -0 - -0 - 3,086(7)
Chief Financial Officer 1996 120,000 20,000(5) -0 - 66,000 2,505(7)
D. Robert Proffitt........ 1998 $200,000 $ 40,000(2) 1,117 12,000 $3,161(8)
President and 1997 192,211 15,000(4) -0 - -0 - 2,541(8)
Chief Operating Officer
Stuart R. Stanek.......... 1998 $210,000 $ 50,000(2) 786 12,000 $2,635(9)
Vice President and 1997 190,007 30,000(4) -0 - -0 - 2,529(9)
President of the East 1996 165,000 35,000(5) -0 - 72,000 2,553(9)
Region
Peter J. Benedetti........ 1998 $150,000 $ 2,510 21,005 $2,093(10)
Vice President and
President of the Central
Region
</TABLE>
- ---------------
(1) In accordance with applicable regulations, the amounts set forth in this
column do not include perquisites and other personal benefits received by
the Named Executives unless the aggregate value of such perquisites and
other benefits exceeded the lesser of $50,000 or 10% of the total salary
and bonus reported for the Named Executive.
(2) Bonuses were earned in 1998 and paid in 1998 or will be paid in 1999. Does
not reflect bonuses earned in 1997 but paid in 1998.
(3) Represents the Company's contribution of $2,986, $3,200 and $2,708 in 1998,
1997 and 1996, respectively, to the Company's 401(k) Plan, which
contributions vest over five years, and the Company's payment of $60 in
1998 and $78 in each of 1997 and 1996 of premiums for term life insurance.
(4) Bonuses were earned in 1997 and paid in 1997 and 1998. Does not reflect
bonuses earned in 1996 but paid in 1997.
(5) Bonuses were earned in 1996, but paid in 1997. Does not reflect bonuses
earned in 1995 but paid in 1996.
(6) Represents $3,404 for personal use of Company-provided vehicle and for
goods and services received through the Company's trade agreements, and the
forgiveness of $408,637 of indebtedness in 1996. See "Certain
Transactions."
(7) Represents the Company's contribution of $4,477, $3,008 and $2,427 in 1998,
1997 and 1996, respectively, to the Company's 401(k) Plan, which
contributions vest over five years, and the Company's payment of $60 in
1998 and $78 in each of 1997 and 1996 of premiums for term life insurance.
(8) Represents the Company's contribution of $3,101 and $2,463 in 1998 and
1997, respectively, to the Company's 401(k) Plan, which contribution vests
over five years, and the Company's payment of $60 in 1998 and $78 in 1997
of premiums for term life insurance.
(9) Represents the Company's contribution of $2,575, $2,451 and $2,475 in 1998,
1997 and 1996, respectively, to the Company's 401(k) Plan, which
contributions vest over five years, and the Company's payment of $60 in
1998 and $78 in each of 1997 and 1996 of premiums for term life insurance.
(10) Represents the Company's contribution of $2,033 to the Company's 401(k)
Plan, which contribution vests over five years, and the Company's payment
of $60 of premiums for term life insurance.
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Stock Options.
The following table summarizes individual grants of options to purchase
shares of Common Stock of Citadel Communications to the Named Executives during
the year ended December 31, 1998:
OPTIONS GRANTED IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
PERCENT ANNUAL RATES
NUMBER OF OF TOTAL EXERCISE MARKET OF STOCK PRICE
SECURITIES OPTIONS OR PRICE APPRECIATION FOR
UNDERLYING GRANTED TO BASE ON DATE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE OF GRANT EXPIRATION ----------------------------------
NAME GRANTED IN 1998 ($/SH) ($/SH)(1) DATE 0%($) 5%($) 10%($)
---- ---------- ---------- -------- --------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence R. Wilson(3) 60,000 29.4% $16.00 $25.813 9/09/08 $588,780 $1,562,820 $3,057,120
Donna L. Heffner(3) 12,000 5.9 16.00 25.813 9/09/08 117,756 312,564 611,424
D. Robert Proffitt(3) 12,000 5.9 16.00 25.813 9/09/08 117,756 312,564 611,424
Stuart R. Stanek(3) 12,000 5.9 16.00 25.813 9/09/08 117,756 312,564 611,424
Peter J. Benedetti(3) 16,005 7.8 16.00 16.000 6/30/08 -0- 161,042 408,128
5,000 2.5 16.00 25.813 9/09/08 49,065 130,235 254,760
</TABLE>
- ---------------
(1) For options granted on September 9, 1998, the indicated market price on the
date of the grant was the closing market price of the Common Stock. For the
option granted on June 30, 1998, the indicated market price on the date of
the grant was the initial public offering price in Citadel Communications'
initial public offering.
(2) The potential realizable value is based on the term of the option at the
time of grant, which is ten years for each of the options set forth in the
table. An assumed stock price appreciation of 0%, 5% and 10% is used
pursuant to rules promulgated by the SEC. The potential realizable value is
calculated by assuming that the market price on the date of grant
appreciates at the indicated rate, compounded annually, for the entire term
of the option and that the option is exercised and sold on the last day of
its term at this appreciated stock price. The Potential Realizable Value is
not intended to forecast the future appreciation of the Common Stock.
(3) Options vest 20% on each of the first through fifth anniversaries of the
date of grant. Vesting accelerates in the event of a change in control of
Citadel Communications (as provided for in the relevant option agreements).
The following table shows the number and value of unexercised stock options
to purchase shares of Common Stock of Citadel Communications (rounded to the
nearest whole share) held by the Named Executives as of December 31, 1998. No
options were exercised by the Named Executives in 1998:
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS(1)
------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C>
Lawrence R. Wilson(2)........ 479,636/322,312 $ 10,982,914/5,878,524
Donna L. Heffner............. 139,243/79,811 3,283,559/1,604,401
D. Robert Proffitt........... 106,420/77,606 2,469,932/1,532,262
Stuart R. Stanek............. 140,827/83,207 3,315,737/1,678,070
Peter J. Benedetti........... 1,800/28,205 28,575/321,724
</TABLE>
- ---------------
(1) These values have been calculated on the basis of the December 31, 1998
closing price per share of $25.875, less the applicable exercise price.
(2) Includes options held by Rio Bravo Enterprise Associates, L.P. ("Rio
Bravo"). Mr. Wilson owns all of the capital stock of Rio Bravo, Inc., the
sole general partner of Rio Bravo.
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<PAGE> 85
EMPLOYMENT AGREEMENT
In June 1996, the Company entered into an employment agreement with
Lawrence R. Wilson which has an initial term ending in June 2001. Mr. Wilson's
current annual base salary under the agreement is $376,234 which is to be
increased by 5% in January of each year during the term of the agreement. The
agreement also provides for an annual bonus calculated as a percentage of Mr.
Wilson's base salary in effect at the end of the year and based on certain
annual performance criteria of the Company.
Mr. Wilson's employment with the Company will terminate upon Mr. Wilson's
becoming permanently disabled or upon (1) a liquidation or dissolution of
Citadel Communications, (2) a sale, transfer or other disposition of all of the
assets of the Company on a consolidated basis or (3) any transaction or series
of transactions whereby any person or entity other than ABRY Broadcast Partners
II, L.P. ("ABRY II") or its affiliates or affiliates of the Company, becomes the
direct or indirect beneficial owner of securities of the Company or Citadel
Communications representing 50% or more of the combined voting power of the
Company's or Citadel Communications' then outstanding securities. In such event,
Mr. Wilson or his beneficiary will be entitled to receive Mr. Wilson's then base
salary through the end of the month in which the termination occurs. In
addition, upon the affirmative vote or written consent of not less than 66 2/3%
of the members of the Citadel Communications Board of Directors, Mr. Wilson's
employment may be terminated with or without cause. If any such termination is
without cause, Mr. Wilson will be entitled to receive his then current base
salary through the end of the then current term of the employment agreement.
1996 EQUITY INCENTIVE PLAN
Citadel Communications has adopted the 1996 Equity Incentive Plan (the
"Plan") pursuant to which all employees of the Company are eligible to receive
awards in the form of non-qualified options and incentive options to purchase
Common Stock, stock appreciation rights, restricted securities and other
stock-based awards as determined by the Board of Directors. The Plan is
administered by the Board of Directors of Citadel Communications, which
determines the price and type of awards granted and the key managerial employees
eligible to receive awards and the terms thereof, including vesting, all in a
manner consistent with the Plan. The Citadel Communications Board may delegate
responsibility for administration of the Plan to a committee of the Citadel
Communications Board. The total number of shares of Common Stock of Citadel
Communications that remain reserved and available for issuance under the Plan
(or which may be used to provide a basis of measurement for an award) is
1,568,215 shares. Shares subject to any option which terminates or expires
unexercised will be available for subsequent grants. The exercise price of
incentive stock options granted under the Plan is to be at least 100% of the
fair market value of the Common Stock on the date of grant (110% of the fair
market value of the Common Stock in the case of an incentive stock option to an
individual who at the time of the grant owns more than 10% of the combined
voting power of the Company's capital stock). The Citadel Communications Board
may provide that an optionee may pay for shares upon exercise of an option in
cash or by check or by such other medium or by any combination of media as
authorized by the Citadel Communications Board. The grant of an option may be
accompanied by a reload option, which gives an optionee who pays the exercise
price of an option with shares of Common Stock an additional option to acquire
the same number of shares that was used to pay for the original option at an
exercise price of
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<PAGE> 86
not less than the fair market value of Common Stock as of the reload option
grant date. An unexercised option normally expires upon termination of
employment, provided that the Citadel Communications Board may permit the holder
of the option to exercise it during the 90 days following termination. Under
certain circumstances, including termination of employment upon retirement,
disability or death, the option may be exercised during an extended period. In
the event of termination of employment under certain circumstances following
certain change in control events, an option generally may be exercised in full
during the 90 days following termination. The Plan also provides for the grant
of performance units and shares of restricted stock, none of which have been
granted.
401(k) Plan
Effective in 1993, the Company adopted a 401(k) Savings Plan (the
"Retirement Plan") for the purpose of providing, at the option of the employee,
retirement benefits to full-time employees of the Company and its subsidiaries
who have been employed for a period of one year or longer. Contributions to the
Retirement Plan are made by the employee and, on a voluntary basis, by the
Company. The Company currently matches 100% of that part of the employee's
deferred compensation which does not exceed 2% of such employee's salary.
A contribution to the Retirement Plan of $0.4 million was made by the
Company during the year ended December 31, 1998.
DIRECTOR COMPENSATION
Ms. Dennis receives an annual fee of $20,000 for her services as a director
of the Company and Citadel Communications and the other non-employee directors
of the Company and Citadel Communications receive an annual fee of $12,000 for
their services as directors of the Company and Citadel Communications. Directors
who are also employees of the Company will not receive additional consideration
for serving as directors, except that all directors will be reimbursed for
travel and out-of-pocket expenses in connection with their attendance at Board
and committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, Scott E. Smith, John E. von Schlegell and Patricia Diaz Dennis
were members of the Compensation Committee of the Citadel Communications Board
of Directors, which determines compensation matters for the Company. Such
persons are also directors of the Company.
Repayment of Certain Indebtedness. In October 1996, the Company repaid its
indebtedness to Baker Fentress, which consisted of $7.0 million in principal
amount and $20,534 in accrued and unpaid interest. The Company also paid Baker
Fentress a $420,000 prepayment penalty. Baker Fentress beneficially owns more
than five percent of the outstanding Common Stock of Citadel Communications.
Scott E. Smith, a director of the Company, is an Executive Vice President of
Baker Fentress. See "Principal Stockholders."
Registration Rights Agreement. Citadel Communications is a party to a
Registration Rights Agreement, dated June 28, 1996, as amended (the "Citadel
Communications Registration Rights Agreement"), with Lawrence R. Wilson, Rio
Bravo, ABRY II, ABRY Citadel Investment Partners, L.P. ("ABRY/CIP"), Baker
Fentress, Bank of America National Trust and Savings Association ("Bank of
America") (and certain of its employees and its affiliates), Oppenheimer, Edward
T. Hardy, Endeavour Capital, Ted L. Snider, Sr. and others,
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<PAGE> 87
which requires Citadel Communications to register their shares of its Common
Stock under the Securities Act for offer and sale to the public (including by
way of an underwritten public offering), upon a one-time demand by such
stockholders, and which entitles such parties to join in any registration of
equity securities of the Company. Royce Yudkoff, a former director of the
Company and Citadel Communications, is President of ABRY Holdings, Inc., the
general partner of ABRY Capital, L.P., the general partner of ABRY II, a
significant stockholder of Citadel Communications, and ABRY/CIP, formerly a
significant stockholder of Citadel Communications. See "Principal Stockholders."
Mr. Wilson owns all of the capital stock of Rio Bravo, Inc., the sole general
partner of Rio Bravo.
Securities Purchase and Exchange Agreement. Pursuant to a Securities
Purchase and Exchange Agreement, dated June 28, 1996, as amended (the
"Securities Purchase and Exchange Agreement"), among the Company, Citadel
Communications, ABRY II, ABRY/ CIP, Baker Fentress, Oppenheimer, Endeavour
Capital, Edward T. Hardy, Bank of America, Ted L. Snider, Sr. and certain other
parties, Citadel Communications redeemed outstanding preferred stock held by
Bank of America and certain other parties, repaid the $2.0 million principal
balance and the $17,500 in accrued interest on Citadel Communications' Junior
Subordinated Convertible Note Due 1996 dated May 24, 1996 issued to ABRY II,
financed four radio station acquisitions, and paid certain working capital
requirements. The transactions were financed by Citadel Communications' issuance
of shares of preferred stock to ABRY II and to ABRY/CIP for a total
consideration of approximately $49.5 million, and through borrowings under a
$20.0 million revolving line of credit with ABRY II and ABRY/ CIP.
Simultaneously, four then existing series of capital stock of Citadel
Communications held by Baker Fentress, Oppenheimer, Bank of America and certain
other parties were reclassified.
Deschutes Transactions. In connection with the acquisition of Deschutes,
(1) Edward T. Hardy, an officer, director and shareholder of Deschutes prior to
its acquisition by Citadel Communications and currently an executive officer of
the Company, and (2) Endeavour Capital, a shareholder of Deschutes prior to its
acquisition by Citadel Communications and currently a stockholder of Citadel
Communications, each received merger consideration consisting of shares of
capital stock of Citadel Communications valued at approximately $206,500 and
approximately $7.2 million, respectively. John E. von Schlegell, a director of
the Company and Citadel Communications, is President and a shareholder of the
general partner of Endeavour Capital. Mr. Hardy also received immediately
exercisable options to purchase 68,754 shares of Common Stock at an exercise
price of $1.64 per share and 24,135 shares of Common Stock at an exercise price
of $5.72 per share in exchange for options to acquire shares of Deschutes
capital stock. Following the Deschutes merger, he was granted options to
purchase an aggregate of 111,000 shares of Common Stock at an exercise price of
$5.72 per share, which options vest 20% per year beginning with the first
anniversary of the date of the grant. In contemplation of the proposed
acquisition of Deschutes, during 1996, the Company made advances to Deschutes to
enable Deschutes to acquire various radio stations and pay-off existing debt. At
December 31, 1996, an aggregate of approximately $18.3 million was due under
these advances, which was credited against the cash portion of the purchase
price for Deschutes.
In connection with the acquisition of Deschutes, Citadel Communications
entered into an Agreement Not to Compete with DVS Management, Inc. ("DVS"), the
general partner of Endeavour Capital, a shareholder of Deschutes prior to its
acquisition by Citadel Communications, pursuant to which DVS has agreed not to
compete in radio broadcasting in
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<PAGE> 88
any geographic area or market served or competed in by one or more of the
Company's stations. In consideration for such agreement not to compete with the
Company's stations, the Company paid DVS $100,000 in each of 1997 and 1998. John
E. von Schlegell, a director of the Company, is President and a shareholder of
DVS.
In February 1995, the Company sold the assets of six radio stations located
in Montana to Deschutes for the aggregate purchase price of $5.4 million. At the
time of the transaction, Mr. Hardy was a director, executive officer and
shareholder of Deschutes and Endeavour Capital was a shareholder of Deschutes.
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CERTAIN TRANSACTIONS
CERTAIN LOAN TRANSACTIONS
Lawrence R. Wilson, an executive officer and director of the Company, was
indebted to the Company in the amount of $394,297 (including accrued interest of
$46,440) as of December 31, 1995 (the "Principal Shareholder Loan").
Approximately $70,000 of the principal amount of the Principal Shareholder Loan
was advanced by Predecessor to Mr. Wilson in June 1992 for personal purposes,
approximately $27,860 of the Principal Shareholder Loan was advanced by
Predecessor to Mr. Wilson in April 1993 to finance Mr. Wilson's purchase of
capital stock of the Company from a former stockholder and approximately
$250,000 was advanced by the Company to Mr. Wilson in 1994 for personal
purposes. The Principal Shareholder Loan, which bore interest at the rate of
8.5% per annum, was forgiven in June 1996, at which time an aggregate of
$408,637 principal and accrued interest was outstanding. Mr. Wilson's
indebtedness under the Principal Shareholder Loan was secured by certain shares
of capital stock of the Company owned by Mr. Wilson.
In 1995, Mr. Wilson made a short-term unsecured loan of $365,000 to the
Company at an annual interest rate of 10%. The Company repaid such loan in full
in 1996.
SALE AND LEASEBACK OF AIRPLANE
In December 1995, the Company sold to Wilson Aviation, L.L.C., a company
owned by Mr. Wilson and his spouse, an airplane formerly owned by the Company,
for a cash purchase price of approximately $1.3 million. Contemporaneously with
the sale of the airplane, the Company entered into an agreement to lease the
airplane from Wilson Aviation, L.L.C. from December 29, 1995 to December 31,
2001. The parties subsequently amended the lease to extend through December 31,
2003. Under the terms of the lease, as amended, the Company paid monthly rent in
the amount of $17,250 through December 31, 1998 and is required to pay monthly
rent in the amount of $21,000 thereafter. In addition, the Company bears all of
the costs of the maintenance, repair and operation of the airplane during the
term of the lease. The sale and leaseback were not independently established in
an arm's length transaction; however, the original transaction was reviewed and
approved by the Company's senior lender and the Company believes, based upon
such review, that the terms of the transaction are reasonable and at least as
favorable to the Company as could be obtained generally from unaffiliated
parties.
REAL ESTATE PURCHASE IN CONNECTION WITH ACQUISITION
In order to facilitate the Company's acquisition of KKLI-FM from Tippie
Communications, Inc. ("Tippie") in 1996, Mr. Wilson purchased from a shareholder
of Tippie certain associated real estate located in Colorado Springs, Colorado,
which the Company did not desire to acquire. The purchase price for the real
estate was $350,000. The purchase price and terms of the transaction were
negotiated between Mr. Wilson and the seller of the real estate, and neither the
Company nor Mr. Wilson obtained an independent appraisal of such real estate. In
acquiring the real estate involved, Mr. Wilson did not obtain funds directly or
indirectly from the Company to purchase such property. The Company believes that
its acquisition of KKLI-FM, in the context of the acquisition of the real estate
by Mr. Wilson, was fair to the Company.
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<PAGE> 90
LITTLE ROCK AND PROVIDENCE ACQUISITIONS
Ted L. Snider, Sr., who became a director of the Company in November 1997,
and his spouse were the shareholders of Snider Corporation and, in connection
with the Company's acquisition of Snider Corporation and certain other assets
from Mr. Snider and his spouse in October 1997, Mr. Snider and his spouse
received approximately $7.4 million in cash and approximately $4.5 million in
shares of a newly created series of preferred stock of Citadel Communications
which have been converted into shares of Common Stock. Mr. Snider's son, Ted
Snider, Jr., and nephew, Calvin Arnold, were principal shareholders of Snider
Broadcasting Corporation ("Snider Broadcasting") and of CDB Broadcasting
Corporation ("CDB") and, in connection with the Company's acquisition of Snider
Broadcasting and certain assets from CDB in October 1997, they received
approximately $5.5 million in shares of a newly created series of preferred
stock of Citadel Communications which have been converted into shares of Common
Stock. In addition, the Company repaid approximately $2.6 million of
indebtedness of Snider Broadcasting and CDB received approximately $4.9 million
in cash. Mr. Arnold is employed by the Company as General Manager of the
Company's radio stations in the Little Rock area.
Prior to its acquisition by the Company, Snider Corporation transferred to
Mr. Snider and his spouse its rights to operate under an LMA an FM radio station
under construction. Accordingly, the cash portion of the purchase price for
Snider Corporation was reduced by $100,000. Because a designated third party did
not take an assignment and assume the Sniders' rights under the LMA, the Company
accepted an assignment of the LMA and paid the Sniders $100,000. The Company
subsequently assigned its right to operate this station to an unrelated party.
Effective June 2, 1997, the Company began operating the radio stations
formerly owned by Snider Corporation, Snider Broadcasting and CDB under LMAs
under which an aggregate of approximately $823,000 was paid by the Company to
such entities. The Company believes that the terms of the foregoing transactions
were at least as favorable to the Company as could have been obtained generally
from unaffiliated parties. In May 1998, the Company entered into an agreement
pursuant to which an entity controlled by Ted Snider, Jr. will provide to the
Company telephone access services and other related services. The term of the
agreement is five years and, unless terminated, the agreement will automatically
renew for additional five-year terms. The Company believes that the terms of
this agreement reflect arm's-length negotiations and are at least as favorable
to the Company as could be obtained generally from unaffiliated providers of
similar services.
In connection with the Company's September 1997 acquisition of WXEX-FM and
related assets in Providence, Rhode Island, each of Philip Urso and Phillip
Norton acquired ownership of more than five percent of the then outstanding
shares of a newly created series of preferred stock of Citadel Communications,
shares of which series have been converted into shares of Common Stock. Mr. Urso
and Mr. Norton are employed by the Company. Mr. Urso and certain of his family
members were shareholders of Bear Broadcasting Company ("Bear"), which sold
WHKK-FM to the Company in November 1997 for approximately $4.0 million in cash.
From September 15, 1997 until the acquisition of WHKK-FM, the Company operated
WHKK-FM under an LMA pursuant to which the Company reimbursed Bear an aggregate
of approximately $17,000 for certain costs and expenses of station operation.
The Company believes that the terms of the foregoing transactions were at least
as favorable to the Company as could have been obtained generally from
unaffiliated parties.
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CONSULTING ARRANGEMENT
During the fiscal year ended December 31, 1996, Michael J. Ahearn, a
director of the Company from 1996 to November 1997, provided financial
consulting services to the Company for which he was paid $83,520. On June 28,
1996, Mr. Ahearn was also granted an option to purchase 12,000 shares of Common
Stock at an exercise price of $5.72 per share. Such option is fully vested. The
Company believes that such services were provided to the Company on terms at
least as favorable to the Company as could have been obtained generally from
unaffiliated parties.
LEGAL SERVICES
During the fiscal year ended December 31, 1996, the Company retained the
law firm of Gallagher & Kennedy, P.A. to represent the Company on various
matters. Michael J. Ahearn was a shareholder of such firm and a director of the
Company in 1996.
INVESTMENT BANKING RELATIONSHIPS
Mark A. Leavitt, a director of the Company from 1992 to November 1997, is a
Managing Director of Prudential Securities Incorporated. Prudential Securities
has provided investment banking services to the Company since 1996 and may
provide such services in the future. Such services have been provided on terms
customary in the industry. Prudential Securities acted as an initial purchaser
in the Original Offering and was an initial purchaser in the 1997 Offerings and
an underwriter of Citadel Communications' initial public offering. In 1996,
Oppenheimer & Co., Inc. ("Oppenheimer") provided investment banking services to
the Company. Mr. Leavitt was a Managing Director of Oppenheimer during 1996.
Oppenheimer provided services to the Company on terms customary in the industry.
Oppenheimer was also a party to the Voting Agreement and the Stockholders
Agreement and is a party to the Citadel Communications Registration Rights
Agreement and the Securities Purchase and Exchange Agreement.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
The Securities Purchase and Exchange Agreement established a commitment
(the "Facility A Commitment") by ABRY II and ABRY/CIP in favor of Citadel
Communications for a revolving line of credit in the aggregate principal amount
of $20.0 million and against which ABRY II and ABRY/CIP made pro rata advances
(the "Facility A Advances"). At June 30, 1997, there were four Facility A
Advances outstanding, the aggregate principal balance of which was approximately
$12.8 million. The Company used a portion of the proceeds from the 1997
Offerings to repay advances made to the Company by Citadel Communications with
the proceeds of the Facility A Advances. Citadel Communications repaid the
Facility A Advances concurrently with the 1997 Offerings. Thereafter, the
Facility A Commitment terminated and ABRY II and ABRY/CIP have no further
obligation to make Facility A Advances.
VOTING TRUST AGREEMENT
In 1997, Citadel Communications paid ABRY II (for the account of ABRY II
and ABRY/CIP) $75,000 to defray the fees and expenses associated with the Voting
Trust, including any fees payable to the Voting Trustee and the Back-Up
Trustees. Each of Christopher P. Hall, J. Walter Corcoran and Harlan A. Levy,
directors of the Company and
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Citadel Communications for a portion of 1997, served as either the Voting
Trustee or a Back-Up Trustee in 1997. Mr. Levy currently serves as the Voting
Trustee. For additional information concerning the Voting Trust Agreement, see
"Management--Board Composition" and "Principal Stockholders."
MANAGEMENT AND CONSULTING SERVICES AGREEMENT
In June 1996, the Company entered into a Management Services and Consulting
Agreement with ABRY Partners, Inc. (the "Management and Consulting Services
Agreement") which was terminated in March 1997. Pursuant to the agreement, ABRY
Partners, Inc. provided consultation to the Company's Board of Directors and
management on business and financial matters. The Company paid $37,500 and
$62,500 to ABRY Partners, Inc. under this agreement in 1996 and 1997,
respectively, and reimbursed ABRY Partners, Inc. for reasonable out-of-pocket
costs and expenses. ABRY Partners, Inc. is an affiliate of ABRY II and ABRY/CIP.
PREPAYMENT AND REDEMPTION OF CERTAIN SECURITIES
On June 28, 1996, pursuant to the Securities Purchase and Exchange
Agreement, the Company prepaid certain Senior Subordinated Notes in the
principal amount of $4.0 million, and funded Citadel Communications' redemption
of a portion of the stock purchase warrants, issued under a Senior Subordinated
Note and Warrant Purchase Agreement dated as of October 1, 1993. These Senior
Subordinated Notes and warrants were held, in part, by Bank of America. As of
June 28, 1996 (after giving effect to the redemption), Bank of America held a
warrant to purchase 138,101 shares of nonvoting common stock of Citadel
Communications which was convertible into voting common stock upon the
occurrence of certain events, and such conversion would have resulted in Bank of
America owning in excess of five percent of the then outstanding shares of
voting common stock. The warrant was subsequently converted into a warrant to
purchase 414,303 shares of Common Stock. Immediately thereafter, the warrant was
transferred to, and exercised for a nominal exercise price by, BankAmerica
Investment Corporation, and the 414,303 shares of Common Stock were sold in
Citadel Communications' initial public offering.
STOCK REPURCHASE
In June 1996, the Company repurchased shares of capital stock of the
Company then held by Mesirow Capital Partners VI ("Mesirow VI") for an aggregate
of approximately $10.7 million. Mesirow VI had acquired such shares in 1993.
William P. Sutter, Jr., a former director of the Company, was an officer of the
general partner of Mesirow VI. Mesirow VI had been a party to the Citadel
Communications Registration Rights Agreement, the Voting Agreement and the
Stockholders Agreement.
See also "Management--Compensation Committee Interlocks and Insider
Participation" for a description of certain other transactions involving the
directors, executive officers and certain stockholders of the Company and
Citadel Communications.
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<PAGE> 93
PRINCIPAL STOCKHOLDERS
Citadel Communications owns all of the currently issued and outstanding
common stock of the Company and has pledged such common stock to secure its
guaranty of indebtedness under the Credit Facility. See "Description of
Indebtedness--Existing Loan Agreement." The only other outstanding capital stock
of the Company is its Exchangeable Preferred Stock.
The only outstanding capital stock of Citadel Communications is its Common
Stock. The following table sets forth certain information with respect to the
beneficial ownership of Citadel Communications' Common Stock as of January 5,
1999 by (1) each person, entity or group known to the Company to beneficially
own more than five percent of the Common Stock, (2) each director of the
Company, (3) each Named Executive and (4) all directors and executive officers
of the Company as a group.
Except as indicated below, the persons named have sole voting and
investment power with respect to the shares shown as beneficially owned by them.
The percentages are rounded to the nearest tenth of a percent. Holders of the
Common Stock are entitled to one vote per share on all matters submitted to a
vote of stockholders generally.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP OF
COMMON STOCK(1)
---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ---------- -------
<S> <C> <C>
Lawrence R. Wilson(2)....................................... 2,748,401 10.5%
City Center West
Suite 400
1201 West Lake Mead Boulevard
Las Vegas, NV 89128
Donna L. Heffner(3)......................................... 187,643 *
D. Robert Proffitt(4)....................................... 187,185 *
Stuart R. Stanek(5)......................................... 219,180 *
Peter J. Benedetti.......................................... 7,427 *
Edward T. Hardy............................................. 174,467 *
Patricia Diaz Dennis........................................ 7,500 *
Scott E. Smith(6)........................................... 2,239,236 8.7
John E. von Schlegell(7).................................... 1,095,836 4.3
Ted L. Snider, Sr.(8)....................................... 342,504 1.3
Rio Bravo Enterprise Associates, L.P.(2).................... 2,709,869 10.4
1256 E. Dines Point Road
Greenbank, WA 98253
Baker, Fentress & Company................................... 2,239,236 8.7
200 West Madison
Suite 3510
Chicago, IL 60602
ABRY Broadcast Partners II, L.P.(9)......................... 8,460,839 32.9
18 Newbury Street
Boston, MA 02116
Harlan A. Levy(10).......................................... 8,460,839 32.9
1585 Broadway
19th Floor
New York, NY 10036
</TABLE>
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<PAGE> 94
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP OF
COMMON STOCK(1)
---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ---------- -------
<S> <C> <C>
ABRY Capital, L.P.(11)...................................... 8,468,436 32.9
18 Newbury Street
Boston, MA 02116
Putnam Investments, Inc.(12)................................ 2,021,284 7.9
One Post Office Square
Boston, MA 02109
All directors and executive officers as a group (10
persons)(13).............................................. 7,209,379 26.9
</TABLE>
- ---------------
* Less than 1%
(1) The number of shares and percentages are calculated in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on a stockholder by stockholder basis, assuming that each
stockholder converted all securities owned by such stockholder that are
convertible into Common Stock at the option of the holder within 60 days of
January 5, 1999, and that no other stockholder so converts. The numbers and
percentages of shares owned assume that outstanding options have been
exercised by such respective stockholders as follows: Lawrence R.
Wilson--479,636 shares (including options held by Rio Bravo); D. Robert
Proffitt--115,300 shares; Donna L. Heffner--149,527 shares; Stuart R.
Stanek--152,107 shares; Peter J. Benedetti--1,800 shares; Edward T.
Hardy--137,289 shares; Patricia Diaz Dennis--7,500 shares; Rio
Bravo--441,194 shares; and all directors and executive officers as a
group--1,043,159 shares.
(2) Includes 2,268,675 shares of outstanding Common Stock and 441,194 shares of
Common Stock which may be acquired upon exercise of options that are
currently exercisable or that are exercisable within 60 days of January 5,
1999, which shares and options are owned by Rio Bravo. Mr. Wilson owns all
of the capital stock of Rio Bravo, Inc., the sole general partner of Rio
Bravo.
(3) Ms. Heffner's shares are jointly owned by Ms. Heffner and her spouse.
(4) Mr. Proffitt's shares are jointly owned by Mr. Proffitt and his spouse.
(5) Mr. Stanek's shares are jointly owned by Mr. Stanek and his spouse.
(6) Represents shares held by Baker Fentress, as described in the table. Mr.
Smith is an Executive Vice President of Baker Fentress and, since 1989, has
managed its private placement portfolio.
(7) Represents shares held by Endeavour Capital, as described in the table. Mr.
von Schlegell, a director of the Company, is the Managing Partner of
Endeavour Capital and the President and a shareholder of the General
Partner of Endeavour Capital.
(8) Does not include 121,713 shares owned by Mr. Snider's spouse.
(9) These shares are held pursuant to the Voting Trust Agreement. By its terms,
the Voting Trust Agreement shall continue in effect until terminated upon
the written agreement of the Company and the holders of voting trust
certificates which represent a majority of the shares held in the voting
trust as determined in accordance with the Voting Trust Agreement. The
Voting Trust also terminates with respect to any shares upon transfer of
such shares to a person who is not an affiliate of ABRY II or ABRY/CIP or
upon a distribution of shares by ABRY II or ABRY/ CIP to its partners.
ABRY/CIP has sold or has distributed all of its shares to its partners.
During the term of the Voting Trust Agreement, the Voting Trustee has the
right to vote the shares of stock subject to that Agreement (the "Voting
Trust Shares") and to take part in any shareholders' meetings, including
the right to vote the Voting Trust Shares for the election of directors of
the Company. The Voting Trustee may assign his rights and delegate his
obligations to a successor Voting Trustee, who shall be a Back-Up Trustee
or other person appointed in the manner provided under the terms of the
Voting Trust Agreement. Dispositive power with respect to these shares is
held by Royce Yudkoff, the President of ABRY Holdings, Inc., the general
partner of ABRY Capital, L. P., the general partner of ABRY II.
(10) Represents shares held by Mr. Levy as Voting Trustee under the Voting Trust
Agreement. See footnote (9).
(11) Includes 8,460,839 shares beneficially owned by ABRY II and held by Harlan
A. Levy as Voting Trustee under the Voting Trust Agreement. See footnotes
(9) and (10).
(12) As reported on Schedule 13G filed with the SEC on October 9, 1998 by Putnam
Investments, Inc. ("PII") on behalf of itself and Marsh & McLennan
Companies, Inc. ("MMC"), Putnam Investment Management, Inc. ("PIM") and
Putnam Advisory Company, Inc. ("PAC"), the shares indicated are under
shared voting and dispositive power among PII, PIM and PAC. PIM and PAC are
subsidiaries of PII, and PII is a subsidiary of MMC. The number of shares
shown assume that there has been no change in the number of shares
beneficially owned since the filing of the Schedule 13G. Pursuant to Rule
13d-4 under the Exchange Act, MMC and PII declared that their filing of the
Schedule 13G shall not be deemed to be an admission of beneficial ownership
of the shares reported.
(13) Includes shares discussed in footnotes (2), (6) and (7).
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<PAGE> 95
DESCRIPTION OF INDEBTEDNESS
EXISTING LOAN AGREEMENT
On October 9, 1996, the Company, Deschutes, formerly known as Deschutes
Acquisition Corporation (now merged into the Company), Citadel License and
Deschutes License, Inc. (now merged into Citadel License) (collectively, the
"Borrowers") entered into the Credit Facility with FINOVA Capital Corporation,
as administrative agent (the "Agent"), and other lending institutions party
thereto (the "Lenders").
On July 3, 1997, the Borrowers, the Agent and the Lenders entered into
amendments to the Credit Facility which permitted the issuance of the 1997 Notes
and the Exchangeable Preferred Stock subject to certain limitations and
restrictions regarding, among other things, redemption of or payment prior to
maturity of principal on the 1997 Notes or the Exchange Debentures, if issued,
the redemption of or exchange of the Exchangeable Preferred Stock and the
payment of cash dividends on the Exchangeable Preferred Stock. The amendments to
the Credit Facility provided for a revolving loan (the "Revolving Loan"),
initially in the principal amount of $150.0 million, which includes a $5.0
million letter of credit facility (the "L/C Facility"). A subsequent amendment
increased the L/C Facility to $10.0 million. A portion of the proceeds of the
1997 Offerings was used to repay a portion of Borrowers' indebtedness under the
Credit Facility.
Concurrently with the consummation of the Original Offering, the Borrowers,
the Agent and the Lenders entered into amendments to the Credit Facility which
permitted the issuance of the outstanding notes subject to certain limitations
and restrictions regarding, among other things, redemption of or payment prior
to maturity of principal on the notes. See "Description of the Notes." As of
January 1, 1999, the Credit Facility allowed for borrowings of up to $137.5
million.
Revolving Loan
As of January 1, 1999, no amounts were outstanding under the Revolving Loan
under the Credit Facility. The Revolving Loan will be due on September 30, 2003
(the "Maturity Date") and it may be drawn upon, subject to certain conditions,
for certain acquisitions, working capital and other permitted uses. On the last
business day of each quarter, the Revolving Loan commitment is to be reduced by
an amount increasing from $2.5 million at December 31, 1997 to approximately
$8.1 million at June 30, 2003. The Credit Facility also provides for certain
additional mandatory reductions in the Revolving Loan commitment. The Borrowers
will be required to pay any amount by which the outstanding principal balance
exceeds the Revolving Loan commitment, as adjusted. The remaining principal
balance of the Revolving Loan shall be due and payable on the Maturity Date. At
the Borrowers' election (a) any portion of the Revolving Loan which has been
prepaid or repaid may be reborrowed and (b) the maximum amount of the Revolving
Loan commitment may be permanently reduced.
The Lenders' obligation to make additional loans under the Credit Facility
or issue letters of credit under the L/C Facility is subject to certain
conditions, including, without limitation, that the Adjusted Total Leverage
Ratio not exceed the Applicable Ratio as calculated on the last day of the most
recent month preceding the applicable date for funding or letter of credit
issuance. The Adjusted Total Leverage Ratio is the ratio as of the end of any
month of the Adjusted Total Debt (as defined in the Credit Facility) as of such
date to the Adjusted Operating Cash Flow (as defined in the Credit Facility) for
the twelve-month
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<PAGE> 96
period ending on such date. The Applicable Ratio through May 1999 is 6.00. For
each six-month period thereafter through maturity, the Applicable Ratio shall
decrease by 0.25.
L/C Facility
The L/C Facility provides for, subject to certain limitations, the issuance
of letters of credit to be used by the Borrowers as security for the obligations
of the Borrowers under agreements entered into in connection with certain radio
station acquisitions and for such other purposes as may be approved by the Agent
("Permitted Letters of Credit"). The Borrowers will be required to pay a
quarterly fee equal to 1.25% of the amount of each Permitted Letter of Credit
from time to time outstanding. As of the date of this prospectus, letters of
credit in the aggregate amount of $8.25 million are issued and outstanding in
connection with certain of the Pending Transactions.
Prepayments
Voluntary prepayments of the amended Credit Facility are permitted without
premium or penalty. Mandatory prepayment of the amended Credit Facility will be
required if the Total Leverage Ratio (as defined in the Credit Facility) as of
the end of each year is 4.5 or greater. The amount of the mandatory prepayment
shall be the lesser of (a)(1) 66 2/3% of the Excess Cash Flow (as defined in the
Credit Facility) if the Total Leverage Ratio as of the end of such year exceeds
5.5 and (2) 50% of the Excess Cash Flow if the Total Leverage Ratio as of the
end of each such year is 4.5 to 5.5, inclusive, or (b) an amount by which Cash
Equivalents (as defined in the Credit Facility), as of the last day of March in
which the Borrowers are required to deliver financial statements, exceeds $5.0
million. Notwithstanding the foregoing, upon retirement of the Credit Facility,
the Company will be required to pay a fee in the maximum amount of $0.7 million
as of January 1, 1999, which amount will decline quarterly based on the amount
of outstanding borrowings under the amended Credit Facility.
Interest Rates
The Credit Facility bears interest at a rate equal to the applicable Base
Rate (as defined in the Credit Facility) in effect from time to time plus the
Applicable Margin (as defined in the Credit Facility) or, at the written
election of the Borrowers, at a rate equal to the applicable LIBOR Rate (as
defined in the amended Credit Facility) in effect from time to time as
determined by the Agent for the respective Interest Period (as defined in the
Credit Facility), plus the Applicable Margin. The Borrowers' right to elect a
LIBOR Rate will be subject to certain limitations. The Applicable Margins for
the Credit Facility are expected to range between 0.50% and 1.75% for the Base
Rate and 1.50% and 2.75% for the LIBOR Rate, depending on the Total Leverage
Ratio from time to time. Except as otherwise provided with respect to voluntary
and mandatory prepayments, interest on the Credit Facility is payable quarterly
in arrears on the last business day of each quarter. At January 1, 1999, the
interest rate under the Credit Facility was 6.78%.
Other Fees
The Borrowers are required to pay to the Agent an unused commitment fee on
the last business day of each quarter, which equals the product of the Maximum
Revolving Loan Commitment (as defined in the Credit Facility) for the preceding
quarter minus the average outstanding principal balance of the Revolving Loan
during such preceding quarter,
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multiplied by 0.125%. This multiplier will be reduced to 0.09375% if the Total
Leverage Ratio calculated as of the last day of the quarter preceding such
quarter was less than 4.5. The Borrowers are required to pay an annual agency
fee of $50,000 in October of each year.
Security and Guarantee
Subject to certain permitted liens, the Credit Facility is secured by:
(a) a first priority pledge on all of the Borrowers' capital stock other
than the Exchangeable Preferred Stock,
(b) a first priority security interest in all the existing and after
acquired property of the Borrowers, including, without limitation, accounts,
machinery, equipment, inventory, general intangibles, investment property and
insurance on the life of Lawrence R. Wilson, and
(c) all proceeds of the foregoing.
The Credit Facility is also guaranteed by Citadel Communications pursuant
to a guaranty (the "Guaranty").
Change of Control
The Credit Facility provides that a change in control or ownership will be
an Event of Default. A change in control or ownership shall occur if:
(a) Citadel Communications shall cease to own all of the capital stock of
the Company (other than the Exchangeable Preferred Stock),
(b) the Company shall cease to own or control all of the capital stock of
its subsidiaries,
(c) any person (including entities) or affiliates of such person, except
Mr. Wilson or ABRY II or their respective affiliates, own capital stock
possessing more than 35.0% of the voting power of all voting stock of Citadel
Communications, or
(d) Mr. Wilson shall die, become permanently disabled or cease, for a
period in excess of 60 days, to devote his full business time to the operation
of the Borrowers' broadcasting business, unless Mr. Wilson is replaced by a
person reasonably acceptable to certain Lenders within 90 days after the
occurrence of any such event.
Covenants
The Credit Facility contains customary restrictive covenants, which, among
other things, and with certain exceptions, will limit the ability of the
Borrowers to incur additional indebtedness and liens in connection therewith,
enter into certain transactions with affiliates, pay dividends, consolidate,
merge or affect certain asset sales, issue additional stock, make certain
capital or overhead expenditures, make certain investments, loans or prepayments
and change the nature of their business. The Borrowers are also required to
satisfy certain financial covenants, which will require the Borrowers to
maintain specified financial ratios and to comply with certain financial tests,
such as ratios for maximum leverage, senior debt leverage, minimum interest
coverage and minimum fixed charges.
Events of Default
The Credit Facility contains customary Events of Default, including without
limitation:
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<PAGE> 98
(a) failure of Borrowers to pay all or any portion of the principal balance
of the amended Credit Facility when due or to pay any other of the Borrowers'
Obligations (as defined in the amended Credit Facility) within five days after
becoming due and payable,
(b) failure of Borrowers to observe or perform certain affirmative
covenants or agreements, specifically those pertaining to legal existence, good
standing, insurance, environmental matters, the interest hedge contract and all
negative covenants,
(c) failure of Borrowers or Citadel Communications to observe or perform
any other covenant or agreement contained in the amended Credit Facility or
related documents which is not remedied within 30 days of written notice,
(d) breach of warranty or representation and/or false or misleading
statements by Borrowers or Citadel Communications made in connection with the
amended Credit Facility or related documents,
(e) certain defaults, including payment defaults, by Borrowers, under other
agreements relating to indebtedness,
(f) failure of Borrowers or Citadel Communications to generally pay debts
as they become due or to be adjudicated insolvent,
(g) Borrowers' or Citadel Communications' filing, or consent to the filing
against it, of a petition for relief or reorganization or arrangement or any
other petition in bankruptcy or insolvency under the law of any jurisdiction or
making of an assignment for the benefit of creditors, or the appointment of a
custodian, receiver or trustee for the Borrowers or Citadel Communications under
certain circumstances,
(h) failure of the Borrowers or Citadel Communications to discharge certain
judgments and awards against any of them,
(i) revocation, termination, suspension or adverse modification of any
license which is material to the continuation of the Borrowers' broadcasting
business,
(j) seizure or failure to maintain any item of collateral provided as
security under the amended Credit Facility,
(k) complete interruption of on-air broadcast operations in two or more
markets at any time for more than 72 hours during any consecutive ten-day
period,
(l) existence of certain conditions which result in actual or potential
liability to Borrower or any ERISA affiliate for its pension plan which creates
a material adverse effect in the opinion of certain Lenders,
(m) a change of ownership or control,
(n) failure of the Guaranty to remain in full force and effect, and
(o) Citadel Communications's denial or disaffirmance of obligations under
the Guaranty or its failure to make payment when due.
Upon the occurrence of an Event of Default, with certain limitations, the
Borrowers' obligations under the Credit Facility which are at that time
outstanding may become automatically accelerated.
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1997 NOTES
On July 3, 1997, the Company offered and sold $101.0 million aggregate
principal amount of 10 1/4% Senior Subordinated Notes due 2007. The 1997 Notes
were issued pursuant to an Indenture dated as of July 1, 1997 among the Company,
Citadel License and The Bank of New York, as trustee (the "1997 Notes
Indenture"). Interest on the 1997 Notes is payable semi-annually at a rate of
10 1/4% per annum, and the 1997 Notes mature on July 1, 2007.
The 1997 Notes are unconditionally guaranteed on a senior subordinated
basis by Citadel License, and will be similarly guaranteed by future Restricted
Subsidiaries (as defined in the 1997 Notes Indenture). The 1997 Notes are
unsecured senior subordinated obligations of the Company and are subordinated to
all Senior Debt (as defined in the 1997 Notes Indenture) of the Company,
including indebtedness under the Credit Facility.
The Company may redeem the 1997 Notes, in whole or in part, at the option
of the Company, at any time on or after July 1, 2002, at the redemption prices
set forth in the 1997 Notes Indenture (ranging from 105.125% to 101.025%), plus
accrued and unpaid interest, if any, to the date of redemption. In addition, at
any time prior to July 1, 2000, the Company may, at its option, redeem a portion
of the 1997 Notes with the net proceeds of one or more Public Equity Offerings
(as defined in the 1997 Notes Indenture), at a redemption price equal to 110.25%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of redemption; provided, however, that after any such redemption there
is outstanding at least $75.0 million aggregate principal amount of the 1997
Notes. Upon the occurrence of certain changes of control of the Company, the
Company must make an offer to purchase all of the then outstanding 1997 Notes at
a price equal to 101.0% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the repurchase date.
The Company also must offer to repurchase 1997 Notes at 100.0% of their
principal amount plus accrued and unpaid interest to the date of redemption in
the event that the net proceeds of certain asset sales of the Company or its
Restricted Subsidiaries are not used within 12 months after the occurrence of
such sales to permanently reduce Senior Debt of the Company and/or to make an
investment in or acquire replacement assets or assets that will be used in the
broadcast business or businesses reasonably related thereto.
The 1997 Notes Indenture contains certain covenants which, among other
things, restrict the ability of the Company and its subsidiaries with respect
to:
-- the incurrence of additional debt,
-- restricted payments,
-- dividend and other payment restrictions affecting certain
subsidiaries,
-- asset dispositions,
-- certain asset swaps,
-- transactions with affiliates,
-- issuances and sales of stock of certain subsidiaries,
-- liens, and
-- consolidations, mergers or sales of assets.
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<PAGE> 100
Events of default under the 1997 Notes Indenture include, among other
things, payment defaults, covenant defaults, cross-defaults to certain other
indebtedness, judgment defaults and certain events of bankruptcy and insolvency.
EXCHANGEABLE PREFERRED STOCK
On July 3, 1997, the Company also offered and sold 1.0 million shares of
13 1/4% Series A Exchangeable Preferred Stock, no par value. The Exchangeable
Preferred Stock was sold for, and has a liquidation preference of, $100.0 per
share. Dividends on the Exchangeable Preferred Stock accumulate from the date of
issuance and are payable semi-annually at a rate of 13 1/4% of the liquidation
preference per share. Dividends on the Exchangeable Preferred Stock are payable
in cash or, at the option of the Company, on or prior to July 1, 2002, in
additional shares of Exchangeable Preferred Stock. On January 1, 1998, July 1,
1998 and January 1, 1999, the Company issued an additional 65,514, shares,
70,590 and 75,267 shares, respectively, of Exchangeable Preferred Stock in
payment of dividends on the then outstanding shares of Exchangeable Preferred
Stock.
The Company may redeem the Exchangeable Preferred Stock, in whole or in
part, at the option of the Company, at any time on or after July 1, 2002, at the
redemption prices set forth in the Certificate of Designation governing the
Exchangeable Preferred Stock (the "Certificate of Designation") (ranging from
107.729% to 101.104%), plus accumulated and unpaid dividends, if any, to the
date of redemption. In addition, at any time prior to July 1, 2000, the Company
may, at its option, redeem up to an aggregate of 35% of the shares of
Exchangeable Preferred Stock with the net proceeds of one or more Public Equity
Offerings (as defined in the Certificate of Designation), at a redemption price
equal to 113.25% of the liquidation preference thereof, plus accumulated and
unpaid dividends, if any, to the date of redemption; provided, however, that
after any such redemption there is outstanding at least $75.0 million aggregate
liquidation preference of the Exchangeable Preferred Stock. The Company is
required, subject to certain conditions, to redeem all of the Exchangeable
Preferred Stock outstanding on July 1, 2009, at a redemption price equal to 100%
of the liquidation preference thereof, plus accumulated and unpaid dividends, if
any, to the date of redemption. Upon the occurrence of certain changes of
control of the Company, the Company is required to make an offer to purchase all
of the then outstanding shares of Exchangeable Preferred Stock at a price equal
to 101.0% of the liquidation preference thereof, plus accumulated and unpaid
dividends, if any, to the repurchase date.
Subject to certain conditions, the Exchangeable Preferred Stock is
exchangeable in whole, but not in part, at the option of the Company, on any
dividend payment date, for the Company's 13 1/4% Subordinated Exchange
Debentures due 2009. See "--Exchange Debentures."
The Certificate of Designation contains certain covenants which, among
other things, restrict the ability of the Company and its subsidiaries with
respect to:
-- the incurrence of additional debt,
-- restricted payments,
-- issuances and sales of stock of certain subsidiaries, and
-- consolidations, mergers or sales of assets.
In the event that, after July 1, 2002, two or more semi-annual dividends
payable on the Exchangeable Preferred Stock are in arrears and unpaid, or upon
the occurrence of certain other events (including failure to comply with certain
covenants and failure to pay the
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<PAGE> 101
mandatory redemption price when due), then the holders of a majority of the then
outstanding shares of Exchangeable Preferred Stock, voting separately as a
class, will be entitled to elect two additional directors of the Company, who
shall serve until such time as all dividends in arrears or any other failure,
breach or default giving rise to such voting rights is remedied or waived.
EXCHANGE DEBENTURES
Subject to certain conditions, the Company may exchange the outstanding
Exchangeable Preferred Stock in whole, but not in part, at the option of the
Company, on any dividend payment date, for Exchange Debentures in an aggregate
principal amount equal to the then effective liquidation preference of the
Exchangeable Preferred Stock, plus accumulated and unpaid dividends, if any, to
the date fixed for exchange. If such exchange occurs, the Exchange Debentures
will be issued pursuant to an Indenture dated as of July 1, 1997 among the
Company, Citadel License and The Bank of New York, as trustee (the "Exchange
Indenture"). Interest on the Exchange Debentures will be payable semi-annually
at a rate of 13 1/4% per annum, and the Exchange Debentures will mature on July
1, 2009. Interest on the Exchange Debentures will be payable in cash or, at the
option of the Company, on or prior to July 1, 2002, in additional Exchange
Debentures.
The Exchange Debentures will be unconditionally guaranteed on a senior
subordinated basis by Citadel License, and will be similarly guaranteed by
future Restricted Subsidiaries (as defined in the Exchange Indenture). The
Exchange Debentures will be unsecured subordinated obligations of the Company
and will be subordinated to all existing and future Senior Debt and Senior
Subordinated Debt (each as defined in the Exchange Indenture) of the Company,
including the 1997 Notes.
The Company may redeem the Exchange Debentures, in whole or in part, at the
option of the Company, at any time on or after July 1, 2002, at the redemption
prices set forth in the Exchange Indenture, plus accrued and unpaid interest, if
any, to the date of redemption. In addition, at any time prior to July 1, 2000,
the Company may, at its option, redeem Exchange Debentures having an aggregate
principal amount of up to 35.0% of the aggregate principal amount of Exchange
Debentures issued upon exchange of the Exchangeable Preferred Stock or in
payment of interest on the Exchange Debentures, with the net proceeds of one or
more Public Equity Offerings (as defined in the Exchange Indenture), at a
redemption price equal to 113.25% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of redemption; provided, however, that
after any such redemption there is outstanding at least $75.0 million aggregate
principal amount of the Exchange Debentures. Upon the occurrence of certain
changes of control of the Company, the Company will be required to make an offer
to purchase all of the then outstanding Exchange Debentures at a price equal to
101.0% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the repurchase date.
The Company also must offer to repurchase Exchange Debentures at 100.0% of
their principal amount plus accrued and unpaid interest to the date of
redemption in the event that the net proceeds of certain asset sales of the
Company or its Restricted Subsidiaries are not used within 12 months after the
occurrence of such sales to permanently reduce Senior Debt or Senior
Subordinated Debt of the Company and/or to make an investment in or acquire
replacement assets or assets that will be used in the broadcast business or
businesses reasonably related thereto.
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<PAGE> 102
The Exchange Indenture contains certain covenants which, among other
things, restricts the ability of the Company and its subsidiaries with respect
to:
-- the incurrence of additional debt,
-- restricted payments,
-- dividend and other payment restrictions affecting certain
subsidiaries,
-- asset dispositions,
-- certain asset swaps,
-- transactions with affiliates,
-- issuances and sales of stock of certain subsidiaries,
-- liens, and
-- consolidations, mergers or sales of assets.
Events of default under the Exchange Indenture include, among other things,
payment defaults, covenant defaults, cross-defaults to certain other
indebtedness, judgment defaults and certain events of bankruptcy and insolvency.
OTHER INDEBTEDNESS
In connection with its acquisition of Tele-Media, the Company incurred a
$1.0 million contingent payment obligation which accrues interest at 5.0% per
year. The Company will be obligated to make such payment to the former holders
of certain corporate bonds and warrants of Tele-Media only if a particular $2.0
million payment relating to the Company's Providence, Rhode Island operations is
received from a third party.
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THE EXCHANGE OFFER
BACKGROUND
The Company originally sold the outstanding 9 1/4% Senior Subordinated
Notes due 2008 on November 19, 1998 in a transaction exempt from the
registration requirements of the Securities Act. Prudential Securities
Incorporated and BT Alex. Brown Incorporated (the "Initial Purchasers")
subsequently resold such notes to qualified institutional buyers in reliance on
Rule 144A and pursuant to Regulation S under the Securities Act. As of the date
of this prospectus, $115,000,000 aggregate principal amount of unregistered
notes are outstanding.
The Company, Citadel License and the Initial Purchasers entered into a
registration rights agreement pursuant to which the Company agreed, for the
benefit of the holders, that it would, at its own cost,
-- file, within 90 days after November 19, 1998, the original issue date
of the outstanding notes, a registration statement with the SEC with
respect to the Exchange Offer,
-- use its best efforts to cause the exchange offer registration
statement to be declared effective under the Securities Act within 180
days after November 19, 1998, and
-- use its best efforts to consummate the Exchange Offer within 210 days
after November 19, 1998.
The summary herein of certain provisions of the registration rights
agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the registration rights agreement, a copy
of which is filed as an exhibit to the registration statement of which this
prospectus is a part.
RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the SEC to third parties,
the Company believes that a holder of outstanding notes (unless such holder is
an "affiliate" of the Company within the meaning of Rule 405 of the Securities
Act) who exchanges its notes for new notes pursuant to the Exchange Offer
generally may offer the new notes for resale, sell the new notes and otherwise
transfer the new notes without further registration under the Securities Act and
without delivery of a prospectus that satisfies the requirements of Section 10
of the Securities Act. However, the Company believes that a holder may so offer,
sell or transfer the new notes only if such holder acquires the new notes in the
ordinary course of its business and is not participating, does not intend to
participate and has no arrangement or understanding with any person to
participate in a distribution of the new notes.
Any holder of outstanding notes using the Exchange Offer to participate in
a distribution of new notes (including a broker-dealer that acquired outstanding
notes directly from the Company, but not as a result of market-making activities
or other trading activities) cannot rely on such no-action letters.
Consequently, such a holder must comply with the registration and prospectus
delivery requirements of the Securities Act in the absence of an exemption from
such requirements.
Each broker-dealer that receives new notes for its own account in exchange
for outstanding notes, where such outstanding notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities ("Participating Broker-Dealer")
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may be a statutory underwriter and must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with the
resale of new notes received in exchange for outstanding notes. The letter of
transmittal which accompanies this prospectus (the "Letter of Transmittal")
states that by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. A Participating Broker-Dealer may use this
prospectus, as it may be amended from time to time, in connection with resales
of new notes it receives in exchange for outstanding notes pursuant to the
Exchange Offer. The Company will make this prospectus available to any
Participating Broker-Dealer in connection with any such resale for a period of
120 days after the Expiration Date. See "Plan of Distribution".
Each holder of the outstanding notes who wishes to exchange its notes for
new notes in the Exchange Offer will be required to represent and acknowledge,
for itself and for each beneficial owner of such outstanding notes, whether or
not such beneficial owner is the holder ("Beneficial Owner"), in the Letter of
Transmittal that:
-- the new notes to be acquired by the holder and each Beneficial Owner,
if any, are being acquired in the ordinary course of business,
-- neither the holder nor any Beneficial Owner is an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or any of
its subsidiaries,
-- any person participating in the Exchange Offer with the intention or
purpose of distributing new notes received in exchange for outstanding
notes (including a broker-dealer that acquired outstanding notes
directly from the Company, but not as a result of market-making
activities or other trading activities) cannot rely on the no-action
letters referenced above and must comply with the registration and
prospectus delivery requirements of the Securities Act, in connection
with a secondary resale of the new notes acquired by such person,
-- if the holder is not a broker-dealer, the holder and each Beneficial
Owner, if any, are not participating, do not intend to participate and
have no arrangement or understanding with any person to participate in
any distribution of the new notes received in exchange for outstanding
notes, and
-- if the holder is a broker-dealer that will receive new notes for its
own account in exchange for outstanding notes, the outstanding notes
to be so exchanged were acquired by it as a result of market-making or
other trading activities and it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of
such new notes pursuant to the Exchange Offer. However, by so
representing and acknowledging and by delivering a prospectus, the
holder will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
Under the registration rights agreement, the Company is required to allow
Participating Broker-Dealers to use this prospectus in connection with the
resale of such new notes. See "Plan of Distribution."
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SHELF REGISTRATION STATEMENT
In the event that:
(1) applicable law or interpretations of the staff of the SEC do not permit
the Company to effect the Exchange Offer,
(2) the Exchange Offer is not consummated within 210 days after November
19, 1998,
(3) any holder of outstanding notes (other than an Initial Purchaser) is
not eligible to participate in the Exchange Offer, or
(4) any Initial Purchaser so requests (with respect to any outstanding
notes which it acquired directly from the Company) following the consummation of
the Exchange Offer provided certain circumstances are met,
the Company will, at its cost:
-- file, as promptly as practicable and, in any event, within 90
days after such obligation arises, a shelf registration
statement covering resales of the outstanding notes,
-- use its best efforts to cause the shelf registration statement
to be declared effective under the Securities Act within 45
days after the filing occurs, and
-- use its best efforts to keep effective the shelf registration
statement until the earlier of two years after its effective
date, such time as all of the applicable outstanding notes
have been sold thereunder and such time as all of the
applicable outstanding notes become eligible for resale
pursuant to Rule 144 under the Securities Act without volume
restrictions.
The Company will, in the event of the filing of the shelf registration
statement, provide to each holder of the outstanding notes copies of the
prospectus which is a part of the shelf registration statement, notify each such
holder when the shelf registration statement has become effective and take
certain other actions as are required to permit unrestricted resales of the
outstanding notes. A holder that sells its outstanding notes pursuant to the
shelf registration statement generally will be required to be named as a selling
security-holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each holder
of outstanding notes will be required to deliver certain information to be used
in connection with the shelf registration statement in order to have its
outstanding notes included in the shelf registration statement.
INCREASE IN INTEREST RATE
In the event that (1) the Exchange Offer is not consummated or a shelf
registration statement is not declared effective on or prior to the 210th
calendar day following November 19, 1998 or (2) either (a) the exchange offer
registration statement ceases to be effective at any time prior to the time that
the Exchange Offer is consummated or (b) if applicable, the shelf registration
statement has been declared effective and such shelf registration statement
ceases to be effective at any time prior to the second anniversary of its
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effective date, the interest rate borne by the outstanding notes will be
increased in accordance with the following table:
<TABLE>
<CAPTION>
INITIAL INCREASE SUBSEQUENT INCREASES
EVENT IN INTEREST RATE IN INTEREST RATE
- -------------------------- -------------------------- --------------------------
<S> <C> <C>
1. Exchange Offer not 0.25% per annum following Additional 0.25% per annum
consummated or shelf such 210-day period for each 90-day period
registration statement that additional interest
not declared effective continues to accrue
on or prior to 210th day
following November 19,
1998
2. Exchange offer 0.25% per annum Additional 0.25% per annum
registration statement immediately after such an for each 90-day period
ceases to be effective occurrence that additional interest
prior to consummation of continues to accrue
Exchange Offer or shelf
registration statement
ceases to be effective
at any time prior to the
second anniversary of
its effective date
</TABLE>
However, in no event will the interest rate borne by the outstanding notes
be increased by an aggregate of more than one and one-half percent (1.5%).
Upon the consummation of the Exchange Offer or the effectiveness of a shelf
registration statement, as the case may be, after the 210-day period described
in clause (1) in the prior paragraph, or the effectiveness of the registration
statement or the shelf registration statement following an event described in
clause (2) in the prior paragraph, the interest rate borne by the outstanding
notes from the date of such consummation or effectiveness, as the case may be,
will be reduced to the original interest rate if the Company is otherwise in
compliance with the above. However, if after any such reduction in interest
rate, a different event specified in clause (1) or (2) in the prior paragraph
occurs, the interest rate may again be increased pursuant to the foregoing
provisions.
If applicable, in the event that the shelf registration statement ceases to
be usable for a period in excess of 30 days, whether or not consecutive, in any
given year, then the interest rate borne by the outstanding notes will be
increased by one-quarter of one percent (0.25%) per annum on the 31st day in the
applicable year such shelf registration statement ceases to be usable. Such
interest rate will increase by an additional one-quarter of one percent (0.25%)
per annum for each additional 90 days that such shelf registration statement is
not usable, subject to the same aggregate maximum increase in the interest rate
of one and one-half percent (1.5%) per annum referred to above. Upon the Company
declaring that the shelf registration statement is usable after the interest
rate has been so increased, the interest rate borne by the outstanding notes
will be reduced to the original interest rate if the Company is otherwise in
compliance with the above. However, if after any such reduction in interest
rate, the shelf registration statement again ceases to be usable beyond the
period permitted above, the interest rate may again be increased and thereafter
reduced pursuant to the foregoing provisions.
Any amounts of additional interest due as described above will be payable
in cash on the same interest payments dates as the outstanding notes.
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TERMS OF THE EXCHANGE OFFER
Upon the exchange offer registration statement being declared effective,
the Company will offer the new notes in exchange for surrender of the
outstanding notes. The Company will keep the Exchange Offer open for not less
than 30 days and not more than 45 days (or longer if required by applicable law)
after the date notice of the Exchange Offer is mailed to the holders of the
outstanding notes.
Upon the terms and subject to the conditions set forth in this prospectus
and in the Letter of Transmittal, the Company will accept any and all
outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date (as defined in "--Expiration Date;
Extensions; Amendments"). The Company will issue an equal principal amount of
new notes in exchange for such principal amount of outstanding notes accepted in
the Exchange Offer. Holders may tender some or all of their outstanding notes
pursuant to the Exchange Offer. Outstanding notes may be tendered only in
integral multiples of $1,000.
The form and terms of the new notes will be the same as the form and terms
of the outstanding notes except that:
(1) the new notes will bear a different CUSIP number from the outstanding
notes,
(2) the new notes will have been registered under the Securities Act and
hence will not bear legends restricting the transfer thereof, and
(3) the holders of the new notes will not be entitled to certain rights
under the registration rights agreement, which rights will terminate when the
Exchange Offer is consummated.
The new notes will evidence the same debt as the outstanding notes and will be
entitled to the benefits of the indenture governing such outstanding notes.
In connection with the Exchange Offer, holders of outstanding notes do not
have any appraisal or dissenters' rights under the indenture governing such
outstanding notes or the General Corporation Law of Nevada. The Company intends
to conduct the Exchange Offer in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the SEC thereunder.
The Company shall be deemed to have accepted validly tendered outstanding
notes when, as and if the Company has given oral or written notice thereof to
The Bank of New York, exchange agent for the Exchange Offer (the "Exchange
Agent"). The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the new notes from the Company.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted outstanding notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender outstanding notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
outstanding notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "--Fees and Expenses."
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
As used in this prospectus, the term "Expiration Date" shall mean 5:00
p.m., New York City time, on , 1999, unless the Company, in its sole
discretion, extends the Exchange Offer, in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by written notice and will mail to the registered holders
an announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (1) to delay
accepting any outstanding notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving written notice of such delay, extension
or termination to the Exchange Agent or (2) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by written notice thereof
to the registered holders.
INTEREST ON THE NEW NOTES
Interest on the new notes will accrue from and including their issuance
date. Additionally, interest on the new notes will accrue from the last interest
payment date on which interest was paid on the outstanding notes surrendered in
exchange therefor. Alternatively, if no interest has been paid on the
outstanding notes, interest on the new notes will accrue from November 19, 1998,
the date of original issuance of the outstanding notes to but not including the
issuance date of the new notes. Holders whose outstanding notes are accepted for
exchange will be deemed to have waived the right to receive interest accrued on
such outstanding notes. Accordingly, holders who exchange their outstanding
notes will receive the same interest payment on the next interest payment date
following the Expiration Date that they would have received had they not
accepted the Exchange Offer. Interest on the new notes is payable semi-annually
on each May 15 and November 15 commencing on May 15, 1999.
PROCEDURES FOR TENDERING
Only a holder of outstanding notes may tender such outstanding notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must do the following:
-- complete, sign and date the Letter of Transmittal, or a facsimile
thereof,
-- have the signatures thereon guaranteed if required by the Letter of
Transmittal, and
-- except as discussed in "--Guaranteed Delivery Procedures," mail or
otherwise deliver the Letter of Transmittal, or facsimile, together
with the outstanding notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
To be tendered effectively, the outstanding notes, Letter of Transmittal
and other required documents must be completed and received by the Exchange
Agent at the address set forth below under "--Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date. Delivery of the outstanding
notes may be made by book-entry transfer in
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<PAGE> 109
accordance with the procedures described below. Confirmation of such book-entry
transfer must be received by the Exchange Agent prior to the Expiration Date.
By executing a Letter of Transmittal, each holder will make to the Company
the representations set forth above in the fourth paragraph under the heading
"--Resale of the New Notes."
The tender by a holder and the acceptance thereof by the Company will
constitute the agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRES DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH
TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD
ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO
THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any Beneficial Owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct it to
tender on such Beneficial Owner's behalf. See "Instructions to Registered Holder
and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included
with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the outstanding notes tendered pursuant thereto are tendered (1) by a
registered holder who has not completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (2) for the account of an Eligible
Institution (as defined). In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a recognized Medallion
Program approved by the Securities Transfer Association Inc. (an "Eligible
Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any outstanding notes listed therein, such outstanding notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such outstanding
notes with the signature thereon guaranteed by an Eligible Institution.
If a Letter of Transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Company of their authority to so act must be submitted with
the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this prospectus to establish accounts with respect to
the outstanding notes at the book-entry transfer facility, The Depository Trust
Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of outstanding notes by causing such Book-Entry
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<PAGE> 110
Transfer Facility to transfer such outstanding notes into the Exchange Agent's
account with respect to the outstanding notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the
outstanding notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered outstanding notes and withdrawal of tendered
outstanding notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all outstanding notes not properly tendered or any
outstanding notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right in its
sole discretion to waive any defects, irregularities or conditions of tender as
to particular outstanding notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of outstanding notes must
be cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of outstanding notes, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of outstanding notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any outstanding notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
A holder who wishes to tender its outstanding notes and:
(1) whose outstanding notes are not immediately available,
(2) who cannot deliver such holder's outstanding notes, the Letter of
Transmittal or any other required documents to the Exchange Agent, or
(3) who cannot complete the procedures for book-entry transfer, prior to
the Expiration Date,
may effect a tender if:
-- the tender is made through an Eligible Institution,
-- prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate
number(s) of such outstanding notes and the principal amount of
outstanding notes tendered, stating that the tender is being made
thereby
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<PAGE> 111
and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or
facsimiles thereof) together with the certificate(s) representing the
outstanding notes (or a confirmation of book-entry transfer of such
outstanding notes into the Exchange Agent's account at the Book-Entry
Transfer Facility), and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and
-- the Exchange Agent receives, within five New York Stock Exchange
trading days after the Expiration Date, a properly completed and
executed Letter of Transmittal (or facsimile thereof), as well as the
certificate(s) representing all tendered outstanding notes in proper
form for transfer (or a confirmation of book-entry transfer of such
outstanding notes into the Exchange Agent's account at the Book-Entry
Transfer Facility), and all other documents required by the Letter of
Transmittal.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of outstanding notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of outstanding notes in the Exchange Offer, a letter
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must:
-- specify the name of the person having deposited the
outstanding notes to be withdrawn (the "Depositor"),
-- identify the outstanding notes to be withdrawn (including the
certificate number(s) and principal amount of such outstanding
notes or, in the case of outstanding notes transferred by
book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited),
-- be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such
outstanding notes were tendered (including any required
signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee register the transfer
of such outstanding notes into the name of the person
withdrawing the tender, and
-- specify the name in which any such outstanding notes are to be
registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any outstanding notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer, and no new notes will be issued with respect thereto unless the
outstanding notes so withdrawn are validly retendered. Any outstanding notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal,
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rejection of tender or termination of the Exchange Offer. Properly withdrawn
outstanding notes may be retendered by following one of the procedures described
above under "--Procedures for Tendering" at any time prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange new notes for, any outstanding
notes and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such outstanding notes, if the Exchange Offer, or the making
of any exchange by a holder of outstanding notes, violates applicable law or any
applicable interpretation of the staff of the SEC.
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
For Information by Telephone:
(212)
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery Service:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
(7 East) Corporate Trust Services Window
New York, New York 10286 Ground Level
Attention: Reorganization Section New York, New York 10286
Attention: Reorganization Section, 7 East
</TABLE>
By Facsimile Transmission:
(212)
(Facsimile Confirmation)
(212)
Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.
Delivery to an address or transmission of instructions via facsimile other than
as set forth above will not constitute a valid delivery.
The Bank of New York also acts as Trustee under the indenture governing the
notes.
FEES AND EXPENSES
The Company will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail. However, additional solicitation may be made
by telegraph, telecopy, telephone or in person by officers and regular employees
of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and
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customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses includes fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the
outstanding notes as reflected in the Company's accounting records on the date
of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be amortized
over the term of the notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding notes who are eligible to participate in the
Exchange Offer but who do not tender their outstanding notes will not have any
further registration rights, and such outstanding notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for such outstanding notes could be adversely affected.
The outstanding notes that are not exchanged for new notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such outstanding
notes may be resold only:
-- to the Company (upon redemption thereof or otherwise),
-- so long as the outstanding notes are eligible for resale pursuant to
Rule 144A under the Securities Act, to a person inside the United
States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A,
-- in accordance with Rule 144 under the Securities Act, or pursuant to
another exemption from the registration requirements of the Securities
Act (and based upon an opinion of counsel reasonably acceptable to the
Company),
-- outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act, or
-- pursuant to an effective registration statement under the Securities
Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
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DESCRIPTION OF THE NOTES
The outstanding notes were, and the new notes (collectively, the "Notes")
will be, issued under an indenture dated as of November 19, 1998 (the
"Indenture") between the Company, Citadel License (the initial Subsidiary Notes
Guarantor referred to below) and The Bank of New York, as trustee (the
"Trustee"), a copy of which is available from the Company. Upon the
effectiveness of the exchange offer registration statement, the Indenture will
be subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). As used in this "Description of the Notes" section, the
term "Company" refers to Citadel Broadcasting Company, but not any current or
future subsidiary (unless the context otherwise requires). The following summary
of the material provisions of the Indenture does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the provisions of
the Indenture, including the definitions of certain terms contained therein and
those terms made part of the Indenture by reference to the Trust Indenture Act.
For definitions of certain capitalized terms used in the following summary, see
"--Certain Definitions" below.
GENERAL
The Notes will mature on November 15, 2008, will be initially limited to
$115,000,000 aggregate principal amount and will be subordinate and junior in
right of payment to all existing and future Senior Debt of the Company. Each
Note will bear interest at the rate of 9 1/4% per annum. Interest on the new
notes will accrue from and including their issuance date.
Additionally, interest on the new notes will accrue from the last interest
payment date on which interest was paid on the outstanding notes surrendered in
exchange therefor. Alternatively, if no interest has been paid on the
outstanding notes, interest on the new notes will accrue from November 19, 1998,
the date of original issuance of the outstanding notes, to but not including the
issuance date of the new notes. Holders whose outstanding notes are accepted for
exchange will be deemed to have waived the right to receive interest accrued on
such outstanding notes. Accordingly, holders who exchange their outstanding
notes will receive the same interest payment on the next interest payment date
following the Expiration Date that they would have received had they not
accepted the Exchange Offer.
Interest is payable semi-annually on May 15 and November 15 of each year,
commencing May 15, 1999, until the principal thereof is paid or duly provided
for, to the person in whose name the Note (or any predecessor Note) is
registered at the close of business on the May 1 or November 1 next preceding
such interest payment date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The principal of and premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable, at the office or
agency of the Company in the City of New York maintained for such purposes
(which initially will be the office of the Trustee located at 101 Barclay
Street, New York, New York 10286); provided, however, that, at the option of the
Company, interest may be paid by check mailed to the address of the person
entitled thereto as such address appears in the security register for the Notes.
The new notes will be issued only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof. No service charge will
be made for any registration of transfer or exchange or redemption of Notes, but
the Company may require payment in
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certain circumstances of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
Subject to the covenants described below under "Certain Covenants" and
applicable laws, the Company may, from time to time, issue additional Senior
Subordinated Notes (the "Additional Notes") under the Indenture. The Notes and
any Additional Notes would be treated as a single class for all purposes under
the Indenture.
As of the date hereof, the Company's only Subsidiary is a Restricted
Subsidiary and a Subsidiary Notes Guarantor. However, under certain
circumstances, the Company will be able to designate future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to any
of the restrictive covenants set forth in the Indenture. The circumstances in
which the Company may designate a Subsidiary as an Unrestricted Subsidiary are
described below under the "Unrestricted Subsidiaries" covenant.
Any outstanding notes that remain outstanding after consummation of the
Exchange Offer and new notes issued in connection with the Exchange Offer will
be treated as a single class of securities under the Indenture.
The Notes will not be entitled to the benefit of any sinking fund.
GUARANTEES
Payment of the principal of (and premium, if any, on) and interest on the
Notes, when and as the same become due and payable, is unconditionally
guaranteed, jointly and severally, on a senior subordinated basis by the
Subsidiary Notes Guarantors. The obligations of each Subsidiary Notes Guarantor
under its Subsidiary Notes Guarantee are limited so as not to constitute a
fraudulent conveyance under applicable law. See "Risk Factors--Subsidiary
Guarantees May Be Unenforceable Due to Fraudulent Conveyance Statutes."
The Indenture requires that each Wholly Owned Restricted Subsidiary be a
Subsidiary Notes Guarantor, as well as each other Restricted Subsidiary that
guarantees any other Debt of the Company.
The Indenture provides that no Subsidiary Notes Guarantor may consolidate
with or merge with or into any other person (other than the Company or another
Subsidiary Notes Guarantor) or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets in one or more
related transactions to another person unless: (a) subject to the provisions of
the following paragraph, the person formed by or surviving such consolidation or
merger or to which all or substantially all of such assets are disposed (if
other than the Company or a Subsidiary Notes Guarantor) assumes all of the
obligations of such Subsidiary Notes Guarantor under the Indenture and its
Subsidiary Notes Guarantee, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee and (b) immediately after
giving effect to such transaction, no Default or Event of Default has occurred
and is continuing.
The Indenture provides that, in the event of
(a) a sale, transfer or other disposition of all of the Capital Stock of a
Subsidiary Notes Guarantor to a person that is not an Affiliate of the Company,
(b) a sale, transfer or other disposition of all or substantially all of
the assets of a Subsidiary Notes Guarantor to a person that is not an Affiliate
of the Company, or
(c) the designation of such Subsidiary Notes Guarantor as an Unrestricted
Subsidiary,
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<PAGE> 116
in any such case in compliance with the terms of the Indenture, then such
Subsidiary Notes Guarantor will be deemed automatically and unconditionally
released and discharged from all of its obligations under the Indenture and its
Subsidiary Notes Guarantee without any further action on the part of the Trustee
or any holder of the Notes; provided that the Net Cash Proceeds of any such
sale, transfer or other disposition are applied in accordance with the
"Limitation on Certain Asset Sales" covenant.
SUBORDINATION
The Notes are, to the extent set forth in the Indenture, subordinate in
right of payment to the prior payment in full of all Senior Debt. Upon any
payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of the Company (except in connection with the consolidation or
merger of the Company or its liquidation or dissolution following the
conveyance, transfer or lease of its properties and assets substantially as an
entirety, upon the terms and conditions described under "Consolidation, Merger
and Sale of Assets"), the holders of Senior Debt will first be entitled to
receive payment in full, in cash or cash equivalents, of all amounts due or to
become due on or in respect of such Senior Debt before the holders of Notes are
entitled to receive any payment of principal of (or premium, if any) or interest
on the Notes or on account of the purchase or redemption or other acquisition of
Notes by the Company or any Subsidiary of the Company. In the event that,
notwithstanding the foregoing, the Trustee or the holder of any Note receives
any payment or distribution of assets of the Company of any kind or character
(excluding equity or subordinated securities of the Company provided for in a
plan of reorganization or readjustment that, in the case of subordinated
securities, are subordinated in right of payment to all Senior Debt to at least
the same extent as the Notes are so subordinated), before all the Senior Debt is
paid in full, then such payment or distribution will be held in trust for the
holders of Senior Debt and will be required to be paid over or delivered
forthwith to the trustee in bankruptcy or other person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay the Senior Debt in
full.
The Company may not make any payments on account of the Notes or on account
of the purchase or redemption or other acquisition of Notes if a default in the
payment when due of principal of (or premium, if any) or interest on Specified
Senior Debt has occurred and is continuing or a default in the payment when due
of commitment, facility or other fees, letter of credit fees or agency fees
under the Credit Facility, or a default in payments when due with respect to
letter of credit reimbursement arrangements with the Credit Facility Agent has
occurred and is continuing (a "Senior Payment Default"). In addition, if any
default (other than a Senior Payment Default) with respect to any Specified
Senior Debt permitting the holders thereof (or a trustee or agent on behalf
thereof) to accelerate the maturity thereof (a "Senior Nonmonetary Default") has
occurred and is continuing and the Company and the Trustee have received written
notice thereof from the Credit Facility Agent or from an authorized person on
behalf of any holder of Specified Senior Debt, then the Company may not make any
payments on account of the Notes or on account of the purchase or redemption or
other acquisition of Notes for a period (a "blockage period") commencing on the
date the Company and the Trustee receive such written notice (a "Blockage
Notice") and ending on the earliest of
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(a) 179 days after such date (the "Initial Period"),
(b) the date, if any, on which the Specified Senior Debt to which such
default relates is discharged or such default is waived or otherwise cured, and
(c) the date, if any, on which such blockage period has been terminated by
written notice to the Company or the Trustee from the Credit Facility Agent or
from the person who gave the Blockage Notice.
Any number of additional payment blockage periods may be commenced during
the Initial Period; provided, however, that no such additional payment blockage
periods shall extend beyond the Initial Period. After the expiration of the
Initial Period, no payment blockage period may be commenced until at least 181
consecutive days shall have elapsed from the last day of the Initial Period. No
Senior Nonmonetary Default that existed or was continuing on the date of the
commencement of any blockage period with respect to the Specified Senior Debt
initiating such blockage period will be, or can be, made the basis for the
commencement of a subsequent blockage period, unless such default has been cured
or waived for a period of not less than 90 consecutive days. In the event that,
notwithstanding the foregoing, the Company makes any payment to the Trustee or
the holder of any Note prohibited by these blockage provisions, then such
payment will be held in trust for the holders of Senior Debt and will be
required to be paid over and delivered forthwith to the holders of the Senior
Debt remaining unpaid, to the extent necessary to pay in full all the Senior
Debt.
The Subsidiary Notes Guarantees are, to the extent set forth in the
Indenture, subordinated in right of payment to the prior payment in full of all
senior debt of the Subsidiary Notes Guarantors, upon terms substantially
comparable to the subordination of the Notes to all Senior Debt.
By reason of such subordination, in the event of insolvency, creditors of
the Company or a Subsidiary Notes Guarantor who are not holders of Senior Debt
or the Notes may recover less, ratably, than holders of Senior Debt and may
recover more, ratably, than the holders of the Notes.
The subordination provisions described above will cease to be applicable to
the Notes and the Subsidiary Notes Guarantees upon any defeasance or covenant
defeasance of the Notes as described under "--Defeasance or Covenant Defeasance
of Indenture."
As used herein, the term "Specified Senior Debt" means (a) all Senior Debt
under the Credit Facility and (b) any other issue of Senior Debt having a
principal amount of at least $10,000,000.
At September 30, 1998, on a pro forma basis, after giving effect to the
transactions described in the "Pro Forma Financial Information" section, the
Notes:
-- would have been subordinate to $62.8 million of senior debt, and
-- would have ranked equally with the $101.0 million principal amount of
the 1997 Notes.
The Company may from time to time hereafter incur additional Debt
constituting Senior Debt under the Credit Facility or otherwise, subject to the
"Limitation on Debt" covenant described below.
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OPTIONAL REDEMPTION
The Company may, at its election, redeem the Notes (subject to contractual
and other restrictions with respect thereto and to the legal availability of
funds therefore), as a whole or from time to time in part, at any time on or
after November 15, 2003 on not less than 30 nor more than 60 days' prior notice,
at the redemption prices (expressed as percentages of the principal amount
thereof) set forth below, together with accrued and unpaid interest, if any, to
the redemption date, if redeemed during the 12-month period beginning on
November 15 of the years indicated below (subject to the right of holders of
record on the relevant record date to receive interest due on an interest
payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- -----------
<S> <C>
2003................................... 104.625%
2004................................... 103.083
2005................................... 101.541
2006................................... 100.000
</TABLE>
In addition, at any time and from time to time prior to November 15, 2001,
the Company may at its option redeem Notes with the net proceeds of one or more
Public Equity Offerings at a redemption price equal to 109.25% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on an interest payment date); provided that,
immediately after giving effect to any such redemption, at least 75% of the
aggregate principal amount of the Notes remains outstanding. The Company must
make any such redemption within 90 days of the related Public Equity Offering.
If less than all the Notes are to be redeemed, the Trustee shall select the
particular Notes to be redeemed not more than 60 days prior to the redemption
date by such method as the Trustee deems fair and appropriate.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the full definition of all such terms as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means Debt of a person (a) existing at the time such person
is merged with or into the Company or becomes a Subsidiary, (b) assumed in
connection with the acquisition of assets from such person or (c) secured by a
Lien encumbering assets acquired from such person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control," when used with respect to any specified person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer") by the Company or a
Restricted Subsidiary, directly
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or indirectly, in one or a series of related transactions, to any person other
than the Company or a Restricted Subsidiary of:
(a) any Capital Stock of any of its Restricted Subsidiaries,
(b) all or substantially all of the properties and assets of the Company
and its Restricted Subsidiaries representing a division or line of business, or
(c) any other properties or assets of the Company or any of its Restricted
Subsidiaries, other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" does not include
any transfer of properties or assets:
(a) that is governed by the provisions of the Indenture described under (1)
"Consolidation, Merger and Sale of Assets" or (2) "Limitation on Asset Swaps,"
(b) between or among the Company and any of its Restricted Subsidiaries
pursuant to transactions that do not violate any other provision of the
Indenture,
(c) to an Unrestricted Subsidiary, if permitted under the "Limitation on
Restricted Payments" covenant,
(d) representing obsolete or permanently retired equipment,
(e) the gross proceeds of which (exclusive of indemnities) do not exceed
$100,000 for any particular item or $500,000 in the aggregate for any fiscal
year, or
(f) having a value of up to $500,000, including cash, to a joint venture in
which the Company or a Restricted Subsidiary has an equity interest, which joint
venture is engaged in the Internet service provider business.
"Asset Swap" means the execution of one or more definitive agreements,
subject only to FCC approval, if applicable, and other customary closing
conditions, which the Company in good faith believes will be satisfied, for a
substantially concurrent purchase and sale, or exchange, or "deferred exchange"
(for no more than 180 days) under section 1031(a)(3) of the Internal Revenue
Code of 1986, as amended (the "Code"), of assets used in the broadcast or
related businesses between the Company or any of its Restricted Subsidiaries and
one or more other persons or groups of affiliated persons; provided that any
amendment to or waiver of any closing conditions that individually or in the
aggregate are material to the Asset Swap will be deemed to be a new Asset Swap.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Credit Facility.
"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such person's equity (however designated).
"Capitalized Lease Obligation" means, with respect to any person, an
obligation incurred or assumed under or in connection with any capital lease of
real or personal property that, in accordance with GAAP, has been recorded as a
capitalized lease on the balance sheet of such person.
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"Change of Control" means the occurrence of any of the following events:
(a) Any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than Lawrence R. Wilson, Scott E. Smith, John
E. von Schlegell, Baker, Fentress & Company, ABRY Broadcast Partners II, L.P.,
ABRY/Citadel Investment Partners, L.P., The Endeavour Capital Fund Limited
Partnership and any trustee, in its capacity as trustee under the Voting Trust
Agreement ("Permitted Holders") or Citadel Communications, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person will be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than a majority of the voting power of all classes of Voting
Stock of the Company;
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors, or
whose nomination for election by the stockholders of the Company, was approved
by a vote of at least 66 2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or
(c) The Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution.
"Closing Date" means November 19, 1998, the date on which the outstanding
notes were originally issued under the Indenture.
"Consolidated Adjusted Net Income" means, for any period, the net income
(or net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any of its
Restricted Subsidiaries has an ownership interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or any
of its Restricted Subsidiaries in cash during such period, (d) the net income
(or loss) of any person combined with the Company or any of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, and (e) the net income (but not the net loss) of any
Restricted Subsidiary to the extent that the declaration or payment of dividends
or similar distributions by such Restricted Subsidiary is at the date of
determination restricted, directly or indirectly, except to the extent that such
net income could be paid to the Company or a Restricted Subsidiary thereof;
provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated Adjusted Net Income will be reduced (to the extent not
otherwise reduced in accordance with GAAP) by an amount equal to:
(A) the amount of the Consolidated Adjusted Net Income otherwise
attributable to such Restricted Subsidiary, multiplied by
(B) the quotient of:
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(1) the number of shares of outstanding common stock of such
Restricted Subsidiary not owned on the last day of such period by the
Company or any of its Restricted Subsidiaries, divided by
(2) the total number of shares of outstanding common stock of such
Restricted Subsidiary on the last day of such period.
"Consolidated Cash Flow" means, for any period, the sum of, without
duplication, Consolidated Adjusted Net Income for such period, plus (or, in the
case of clause (d) below, plus or minus) the following items to the extent
included in computing Consolidated Adjusted Net Income for such period:
(a) the aggregate interest expense and preferred stock dividends of the
Company and its Restricted Subsidiaries for such period, plus
(b) the provision for federal, state, local and foreign income taxes of the
Company and its Restricted Subsidiaries for such period, plus
(c) the aggregate depreciation and amortization expense of the Company and
any of its Restricted Subsidiaries for such period, plus
(d) any other non-cash charges for such period, and minus non-cash credits
for such period, other than non-cash charges or credits resulting from changes
in prepaid assets or accrued liabilities in the ordinary course of business;
provided that income tax expense, interest expense and preferred stock
dividends, depreciation and amortization expense, and non-cash charges and
credits of a Restricted Subsidiary will be included in Consolidated Cash Flow
only to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Adjusted Net
Income for such period. Solely for purposes of determining whether the Company
could incur Debt pursuant to the first paragraph of the "Limitation on Debt"
covenant, if the Company is permitted to give pro forma effect to an In-Market
Acquisition of a radio station pursuant to clause (iii) of the second paragraph
of such covenant, such calculation may also give pro forma effect to projected
quantifiable improvements in operating results of such radio station due to cost
reductions calculated in good faith by the Company and certified by an officers'
certificate filed with the Trustee. As used in the preceding sentence, the term
"In-Market Acquisition" means the acquisition of a radio station or group of
radio stations serving an MSA in which the Company or its Subsidiaries has
owned, or has operated under a LMA, one or more radio stations for at least the
preceding six months.
"Consolidated Cash Flow Ratio" means, at any date, the ratio of (a) the
aggregate amount of Debt of the Company and its Restricted Subsidiaries on a
consolidated basis as of the end of the immediately preceding four fiscal
quarters for which internal financial statements of the Company are available
(the "Reference Period") to (b) the aggregate amount of Consolidated Cash Flow
for such Reference Period.
"Consolidated Fixed Charges" means, for any period, without duplication,
the sum of:
(a) the amount which, in conformity with GAAP, would be set forth opposite
the caption "interest expense" (or any like caption) on a consolidated statement
of operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation:
(1) amortization of debt discount,
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(2) the net cost of interest rate contracts (including amortization of
discounts),
(3) the interest portion of any deferred payment obligation,
(4) amortization of debt issuance costs,
(5) the interest component of Capitalized Lease Obligations of the
Company and any of its Restricted Subsidiaries, and
(6) the portion of any rental obligation of the Company and any of its
Restricted Subsidiaries in respect of any sale and leaseback transaction
allocable during such period to interest expense (determined as if it were
treated as a Capitalized Lease Obligation), plus
(b) all interest on any Debt of any other person guaranteed by the Company
or any of its Restricted Subsidiaries;
provided, however, that Consolidated Fixed Charges will not include any gain or
loss from extinguishment of debt, including any write-off of debt issuance
costs.
"Credit Facility" means the loan agreement dated October 9, 1996, among the
Company, the Banks and the Credit Facility Agent, as amended, and as such
agreement may be amended, restated, supplemented, replaced or refinanced or
otherwise modified from time to time.
"Credit Facility Agent" means the then acting Agent as defined in and under
the Credit Facility or any successor thereto.
"Debt" means (without duplication), with respect to any person, whether
recourse is to all or a portion of the assets of such person and whether or not
contingent:
(a) every obligation of such person for money borrowed,
(b) every obligation of such person evidenced by bonds, debentures, notes
or other similar instruments,
(c) every reimbursement obligation of such person with respect to letters
of credit, bankers' acceptances or similar facilities issued for the account of
such person,
(d) every obligation of such person issued or assumed as the deferred
purchase price of property or services,
(e) every Capitalized Lease Obligation of such person,
(f) all Disqualified Stock of such person valued at its maximum fixed
repurchase price, plus accumulated and unpaid dividends,
(g) all Hedging Obligations of such person, and
(h) every obligation of the types referred to in clauses (a) through (g) of
another person and all dividends of another person (1) the payment of which, in
either case, such person has guaranteed or (2) which is secured by any Lien on
any property or asset of such person, the amount of such Debt being deemed to be
the lesser of the actual amount of the guarantee or the value of such property
or asset subject to such Lien, as the case may be, and the amount of the Debt so
guaranteed or secured, as the case may be. For purposes of this definition, the
"maximum fixed repurchase price" of any Disqualified Stock that does not have a
fixed repurchase price will be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were repurchased on any date on
which Debt is required to be
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determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Stock, such fair market
value will be determined reasonably and in good faith by the board of directors
of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade
accounts payable and accrued liabilities arising in the ordinary course of
business, any liability for federal, state or local taxes or other taxes owed by
such person and the Exchangeable Preferred Stock will not be considered Debt for
purposes of this definition. The amount outstanding at any time of any Debt
issued with original issue discount is the aggregate principal amount at
maturity of such Debt, less the remaining unamortized portion of the original
issue discount of such Debt at such time, as determined in accordance with GAAP.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors, to make a finding or otherwise
take action under the Indenture, a member of the Board of Directors who does not
have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms or by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise:
(a) is, or upon the happening of an event or passage of time would be,
required to be redeemed prior to one year after the final Stated Maturity of the
Notes,
(b) is redeemable at the option of the holder thereof at any time prior to
one year after such final Stated Maturity, or
(c) at the option of the holder thereof, is convertible into or
exchangeable for debt securities at any time prior to one year after such final
Stated Maturity;
provided that any Capital Stock that would not constitute Disqualified Stock but
for provisions thereof giving holders thereof the right to cause the issuer
thereof to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to one year after the Stated
Maturity of the Notes will not constitute Disqualified Stock if the "asset sale"
or "change of control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions contained in
the "Limitation on Certain Asset Sales" and "Purchase of Notes upon a Change of
Control" covenants described below and such Capital Stock specifically provides
that the issuer will not repurchase or redeem any such Capital Stock pursuant to
such provision prior to the Company's repurchase of such Notes as are required
to be repurchased pursuant to the "Limitation on Certain Asset Sales" and
"Purchase of Notes upon a Change of Control" covenants described below.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
were in effect on the Closing Date.
"Guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business),
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direct or indirect, in any manner, of any part or all of such obligation and (b)
an agreement, direct or indirect, contingent or otherwise, the practical effect
of which is to assure in any way the payment or performance (or payment of
damages in the event of non-performance) of all or any part of such obligation,
including, without limitation, the payment of amounts drawn down under letters
of credit.
"Hedging Obligations" means the obligations of any person under (a)
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and (b) other agreements or arrangements designed to protect
such person against fluctuations in interest rates or the value of foreign
currencies.
"Investment" (in any person) means:
(a) directly or indirectly, any advance, loan or other extension of credit
(including, without limitation, by way of guarantee or similar arrangement) or
capital contribution to any person, the purchase or other acquisition of any
stock, bonds, notes, debentures or other securities issued by such person or the
acquisition (by purchase or otherwise) of all or substantially all of the
business or assets of such person or the making of any investment in such
person,
(b) the designation of any Restricted Subsidiary as an Unrestricted
Subsidiary, and
(c) the transfer of any assets or properties from the Company or a
Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of
assets or properties made in the ordinary course of business.
Investments will exclude extensions of trade credit on commercially reasonable
terms in accordance with normal trade practices.
"License Subsidiary" means Citadel License, Inc.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim,
preference, priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A person will be deemed to own subject to a Lien any property that
such person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations when received in the form of, or stock or other
assets when disposed of for, cash or cash equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any of its
Restricted Subsidiaries), net of:
(a) brokerage commissions and other fees and expenses (including fees and
expenses of legal counsel and investment banks) related to such Asset Sale,
(b) provisions for all taxes payable as a result of such Asset Sale,
(c) payments made to retire Debt where payment of such Debt is secured by
the assets that are the subject of such Asset Sale,
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(d) amounts required to be paid to any person (other than the Company or
any of its Restricted Subsidiaries) owning a beneficial interest in the assets
that are subject to the Asset Sale, and
(e) appropriate amounts to be provided by the Company or any of its
Restricted Subsidiaries, as the case may be, as a reserve required in accordance
with GAAP against any liabilities associated with such Asset Sale and retained
by the seller after such Asset Sale, including pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"Pari Passu Debt" means Debt of the Company that ranks pari passu in right
of payment with the Notes.
"Permitted Investments" means any of the following:
(a) Investments in:
(1) securities with a maturity of one year or less issued or directly
and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof),
(2) certificates of deposit, time deposits, overnight bank deposits or
bankers' acceptances with a maturity of 270 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus of not less than $500,000,000, and
(3) commercial paper with a maturity of 270 days or less issued by a
corporation that is not an Affiliate of the Company and is organized under
the laws of any state of the United States or the District of Columbia and
having the highest rating obtainable from Moody's Investors Service, Inc.
or Standard & Poor's Ratings Services.
(b) Investments by the Company or any of its Restricted Subsidiaries in
another person, if as a result of such Investment (1) such other person becomes
a Restricted Subsidiary that is a Subsidiary Notes Guarantor or (2) such other
person is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Restricted Subsidiary that
is a Subsidiary Notes Guarantor.
(c) Investments by the Company or any of its Restricted Subsidiaries in a
Subsidiary Notes Guarantor and Investments by any Restricted Subsidiary in the
Company.
(d) Investments in assets owned or used in the ordinary course of business.
(e) Investments in existence on the Closing Date.
(f) Promissory notes received as a result of Asset Sales permitted under
the "Limitation on Certain Asset Sales" covenant.
(g) Direct or indirect loans to employees, or to a trustee for the benefit
of such employees, of the Company or any of its Restricted Subsidiaries in an
aggregate amount outstanding at any time not exceeding $1,000,000.
(h) Investments by the Company or any of its Restricted Subsidiaries in a
joint venture that is engaged in the internet service provider business in an
aggregate amount outstanding at any time not exceeding $500,000.
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(i) Other Investments that do not exceed $2,000,000 at any one time
outstanding.
"Public Equity Offering" means an underwritten public offering of Qualified
Equity Interests of either (a) the Company or (b) Citadel Communications the net
proceeds from which (after deducting any underwriting discounts and commissions)
are used by Citadel Communications to purchase Qualified Equity Interests of the
Company; provided that, in either case, such net proceeds exceed $10,000,000.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital Stock of such
person, other than Disqualified Stock.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Senior Debt" means the principal of and premium, if any, and interest on
(including interest accruing after the filing of a petition initiating any
proceeding pursuant to any bankruptcy law, whether or not allowed) and other
amounts due on or in connection with any Debt of the Company (other than the
Notes or Pari Passu Debt), whether outstanding on the Closing Date or thereafter
incurred, unless, in the case of any particular Debt, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Debt will be subordinate in right of payment to any Debt or
other general unsecured obligations of the Company. Without limiting the
generality of the foregoing, "Senior Debt" includes the principal of and
premium, if any, fees and interest (including interest accruing after the
occurrence of an event of default or after the filing of a petition initiating
any proceeding pursuant to any bankruptcy law, whether or not allowed) on all
obligations of every nature of the Company from time to time owed to the Banks
under the Credit Facility. Notwithstanding the foregoing, "Senior Debt" will not
include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade
payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the
Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt
that, at the time of the incurrence, is incurred by the Company in violation of
the Indenture other than any Debt incurred under the Credit Facility not in
excess of $150,000,000 (less any amounts applied to the permanent reduction of
such Debt pursuant to the "Limitation on Certain Asset Sales" covenant under the
Indenture) if the Company has certified to the Credit Facility Agent, at the
time such Debt is incurred, that the Company is permitted to incur such Debt
under the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that, together with its Subsidiaries:
(a) for the most recent fiscal year of the Company, accounted for more than
10% of the consolidated net sales of the Company and its Restricted
Subsidiaries,
(b) as of the end of such fiscal year, was the owner of more than 10% of
the consolidated assets of the Company and its Restricted Subsidiaries, in the
case of either (a) or (b), as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year,
(c) was organized or acquired after the beginning of such fiscal year and
would have been a Significant Subsidiary if it had been owned during the entire
fiscal year, or
(d) holds one or more licenses material to the Company's business.
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"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Debt, means the date
specified in the instrument governing such Debt as the fixed date on which the
principal of such Debt or any installment of interest thereon is due and
payable.
"Subordinated Debt" means Debt of the Company that is subordinated in right
of payment to the Notes.
"Subsidiary" means any person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.
"Subsidiary Notes Guarantee" means a guarantee of the Notes by a Restricted
Subsidiary in accordance with the provisions of the Indenture.
"Subsidiary Notes Guarantor" means the License Subsidiary and each other
Restricted Subsidiary that issues a Subsidiary Notes Guarantee as described
under the "Subsidiary Notes Guarantees" covenant.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors of the Company as an Unrestricted Subsidiary in
accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary
of an Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life" means, as of the date of determination with respect
to any Debt or Disqualified Stock, the quotient obtained by dividing (a) the sum
of the products of (1) the number of years from the date of determination to the
date or dates of each successive scheduled principal or liquidation value
payment of such Debt or Disqualified Stock, respectively, multiplied by (2) the
amount of each such principal or liquidation value payment by (b) the sum of all
such principal or liquidation value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares or
an immaterial number of shares required to be owned by other persons pursuant to
applicable law) of which are owned, directly or indirectly, by the Company.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON DEBT. (a) The Company will not, and will not permit any of
its Restricted Subsidiaries to, create, issue, assume, guarantee or in any
manner become directly or indirectly liable for the payment of, or otherwise
incur (collectively, "incur"), any Debt (including Acquired Debt and the
issuance of Disqualified Stock), except that the Company or a Subsidiary Notes
Guarantor may incur Debt or issue Disqualified Stock if, at the time of such
event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0.
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In making the foregoing calculation, pro forma effect will be given to:
(1) the incurrence of such Debt and (if applicable) the application of the
net proceeds therefrom, including to refinance other Debt, as if such Debt had
been incurred and the application of proceeds therefrom occurred on the first
day of the four-fiscal quarter period used to calculate the Consolidated Cash
Flow Ratio,
(2) the incurrence, repayment or retirement of any other Debt by the
Company or any of its Restricted Subsidiaries since the first day of such
four-quarter period as if such Debt was incurred, repaid or retired at the
beginning of such four-quarter period, and
(3) the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business acquired or disposed of by the Company or any of its Restricted
Subsidiaries, as the case may be, since the first day of such four-quarter
period, as if such acquisition or disposition occurred at the beginning of such
four-quarter period.
In making a computation under the foregoing clause (1) or (2), the amount of
Debt under a revolving credit facility will be computed based upon the average
daily balance of such Debt during such four-quarter period.
(b) Notwithstanding the foregoing, the Company may, and may, to the extent
expressly permitted below, permit any of its Restricted Subsidiaries to, incur
any of the following Debt ("Permitted Debt"):
(1) Debt of the Company or any Subsidiary Notes Guarantor under the Credit
Facility (including guarantees thereof by the Subsidiaries) in an aggregate
principal amount at any one time outstanding not to exceed $110,000,000 less any
amounts applied to the permanent reduction of such Debt pursuant to the
"Limitation on Certain Asset Sales" covenant.
(2) Debt of the Company or any of its Restricted Subsidiaries outstanding
on the Closing Date, other than Debt described under clause (1) above.
(3) Debt owed by the Company to any of its Restricted Subsidiaries or owed
by any Subsidiary to the Company or a Restricted Subsidiary (provided that such
Debt is Subordinated Debt and is held by the Company or such Restricted
Subsidiary) or owed to the Company or a Subsidiary Notes Guarantor by a
Restricted Subsidiary that is not a Subsidiary Notes Guarantor, provided the
incurrence of such Debt did not violate the "Limitation on Restricted Payments"
covenant.
(4) Debt represented by the Notes (other than any Additional Notes) and the
Subsidiary Notes Guarantees.
(5) Hedging Obligations of the Company or any of its Restricted
Subsidiaries incurred in the ordinary course of business.
(6) Capitalized Lease Obligations of the Company or any of its Restricted
Subsidiaries in an aggregate amount not exceeding $3,000,000 at any one time
outstanding.
(7) Debt under purchase money mortgages or secured by purchase money
security interests so long as (x) such Debt is not secured by any property or
assets of the Company or any of its Restricted Subsidiaries other than the
property or assets so acquired and (y) such Debt is created within 60 days of
the acquisition of the related property; provided that the aggregate principal
amount of Debt under this clause (7) does not exceed $2,000,000 at any one time
outstanding.
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(8) Debt of the Company or any Subsidiary Notes Guarantor, not permitted by
any other clause of this definition, in an aggregate principal amount not to
exceed $5,000,000 at any one time outstanding.
(9) Debt of the Company or any of its Restricted Subsidiaries consisting of
guarantees, indemnities or obligations in respect of purchase price adjustments
in connection with the acquisition or disposition of assets, including, without
limitation, shares of Capital Stock.
(10) Acquired Debt of a person, other than Debt incurred in connection
with, or in contemplation of, such person becoming a Restricted Subsidiary or
the acquisition of assets from such person, as the case may be, provided that
the Company on a pro forma basis could incur $1.00 of additional Debt (other
than Permitted Debt) pursuant to the first paragraph of this covenant.
(11) Any renewals, extensions, substitutions, refinancings or replacements
(each, for purposes of this clause, a "refinancing") by the Company or any
Restricted Subsidiary of any outstanding Debt of the Company or such Restricted
Subsidiary, other than Debt incurred pursuant to clause (1), (5), (6), (7), (8)
or (9) of this definition, including any successive refinancings thereof, so
long as:
(A) any such new Debt is in a principal amount that does not exceed
the principal amount so refinanced, plus the amount of any premium required
to be paid in connection with such refinancing pursuant to the terms of the
Debt refinanced or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing, plus the amount of
expenses of the Company incurred in connection with such refinancing,
(B) in the case of any refinancing of Subordinated Debt, such new Debt
is made subordinate to the Notes at least to the same extent as the Debt
being refinanced,
(C) in the case of any refinancing of the Notes or any Pari Passu
Debt, such Debt is Pari Passu Debt or Subordinated Debt, and
(D) such refinancing Debt does not have a Weighted Average Life less
than the Weighted Average Life of the Debt being refinanced and does not
have a final scheduled maturity earlier than the final scheduled maturity,
or permit redemption at the option of the holder earlier than the earliest
date of redemption at the option of the holder, of the Debt being
refinanced.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, take any
of the following actions:
(a) declare or pay any dividend on, or make any distribution to holders of,
any shares of the Capital Stock of the Company or any of its Restricted
Subsidiaries, other than:
(1) dividends or distributions payable solely in Qualified Equity
Interests of the issuer of such shares of Capital Stock,
(2) dividends or distributions by a Restricted Subsidiary payable to
the Company or another Restricted Subsidiary, or
(3) pro rata dividends or distributions on common stock of a
Restricted Subsidiary held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro
rata share of such Restricted Subsidiary's net
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income from the first day of the Company's fiscal quarter during which the
Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value, directly or
indirectly, any shares of Capital Stock (or any options, warrants or other
rights to acquire shares of Capital Stock) of (1) the Company or any of its
Unrestricted Subsidiaries or (2) any Restricted Subsidiary that are held by any
Affiliate of the Company (other than, in either case, any such Capital Stock
owned by the Company or any of its Restricted Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal payment,
sinking fund payment or maturity, any Subordinated Debt; and
(d) make any Investment (other than a Permitted Investment) in any person
(such payments or other actions described in (but not excluded from)
clauses (a) through (d) being referred to as "Restricted Payments"), unless at
the time of, and immediately after giving effect to, the proposed Restricted
Payment:
(1) no Default or Event of Default has occurred and is continuing,
(2) the Company could incur at least $1.00 of additional Debt (other
than Permitted Debt) pursuant to the first paragraph of the "Limitation on
Debt" covenant, and
(3) the aggregate amount of all Restricted Payments declared or made
after the Closing Date does not exceed the sum of:
(A) the remainder of (x) 100% of the aggregate Consolidated
Cash Flow for the period beginning on the first day of the
Company's fiscal quarter during which the Closing Date occurred and
ending on the last day of the Company's most recent fiscal quarter
for which internal financial statements are available ending prior
to the date of such proposed Restricted Payment (the "Computation
Period") minus (y) the product of 1.4 times the sum of (1)
Consolidated Fixed Charges for the Computation Period and (2) all
dividends or other distributions paid in cash by the Company or any
of its Restricted Subsidiaries on any Disqualified Stock of the
Company or any of its Restricted Subsidiaries for the Computation
Period; plus
(B) the aggregate net proceeds received by the Company after
the Closing Date (including the fair market value of property other
than cash as determined by the Company's Board of Directors, whose
good faith determination will be conclusive) from the issuance or
sale (other than to a Subsidiary) of Qualified Equity Interests of
the Company (excluding from this computation any net proceeds of a
Public Equity Offering received by the Company that are used by it
to redeem the Notes, as discussed above); plus
(C) the aggregate net proceeds received by the Company after
the Closing Date (including the fair market value of property other
than cash as determined by the Company's Board of Directors, whose
good faith determination will be conclusive) from the issuance or
sale (other than to a Subsidiary) of debt securities or
Disqualified Stock that have been converted into or exchanged for
Qualified Stock of the Company, together with the aggregate net
cash proceeds received by the Company at the time of such
conversion or exchange; plus
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(D) without duplication, the Net Cash Proceeds received by the
Company or a Wholly Owned Restricted Subsidiary upon the sale of
any of its Unrestricted Subsidiaries; plus
(E) $5,000,000.
Notwithstanding the foregoing, the Company and any of its Restricted
Subsidiaries may take any of the following actions, so long as (with respect to
clauses (f) and (g) below) no Default or Event of Default has occurred and is
continuing or would occur:
(a) The payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have been
prohibited by the foregoing provision.
(b) The repurchase, redemption or other acquisition or retirement for value
of any shares of Capital Stock of the Company, in exchange for, or out of the
net cash proceeds of a substantially concurrent issuance and sale (other than to
a Subsidiary) of, Qualified Equity Interests of the Company.
(c) The purchase, redemption, defeasance or other acquisition or retirement
for value of Subordinated Debt in exchange for, or out of the net cash proceeds
of a substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of shares of, Qualified Stock of the Company.
(d) The purchase, redemption, defeasance or other acquisition or retirement
for value of Subordinated Debt in exchange for, or out of the net cash proceeds
of a substantially concurrent issuance or sale (other than to a Subsidiary) of,
Subordinated Debt, so long as the Company or a Restricted Subsidiary would be
permitted to refinance such original Subordinated Debt with such new
Subordinated Debt pursuant to clause (11) of the definition of Permitted Debt.
(e) The repurchase of any Subordinated Debt at a purchase price not greater
than 101% of the principal amount of such Subordinated Debt in the event of a
"change of control" in accordance with provisions similar to the "Purchase of
Notes upon a Change of Control" covenant; provided that, prior to such
repurchase, the Company has made the Change of Control Offer as provided in such
covenant with respect to the Notes and has repurchased all Notes validly
tendered for payment in connection with such Change of Control Offer.
(f) The payment by the Company to Citadel Communications for the purpose of
the purchase, redemption, acquisition, cancellation or other retirement for
value of shares of Capital Stock of Citadel Communications, options on any such
shares or related stock appreciation rights or similar securities held by
officers or employees or former officers or employees (or their estates or
beneficiaries under their estates) or by any employee benefit plan, upon death,
disability, retirement or termination of employment or pursuant to the terms of
any employee benefit plan or any other agreement under which such shares of
stock or related rights were issued; provided that the aggregate cash
consideration paid for such purchase, redemption, acquisition, cancellation or
other retirement of such shares of Capital Stock after the date of the Closing
Date does not exceed $1,000,000 in any fiscal year.
(g) Loans or advances to officers, directors and employees of Citadel
Communications, the Company or any of its Restricted Subsidiaries made in the
ordinary course of business after the Closing Date in an aggregate principal
amount not to exceed $1,000,000 at any one time outstanding.
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(h) Payments to or on behalf of Citadel Communications to pay its operating
and administrative expenses attributable to the Company including, without
limitation, legal and audit expenses, directors' fees, fees payable in respect
of the trustee and back-up trustees under the Voting Trust Agreement, and
Commission compliance expenses, in an amount not to exceed the greater of
$1,000,000 per fiscal year and 1% of the net revenues of the Company for the
preceding fiscal year.
The payments described in clauses (b), (c), (e), (f) and (g) of this paragraph
will be Restricted Payments that will be permitted to be taken in accordance
with this paragraph but will reduce the amount that would otherwise be available
for Restricted Payments under the foregoing clause (3), and the payments
described in clauses (a), (d) and (h) of this paragraph will be Restricted
Payments that will be permitted to be taken in accordance with this paragraph
and will not reduce the amount that would otherwise be available for Restricted
Payments under the foregoing clause (3).
For the purpose of making any calculations under the Indenture:
(1) if a Restricted Subsidiary is designated an Unrestricted Subsidiary,
the Company will be deemed to have made an Investment in an amount equal to the
fair market value of the net assets of such Restricted Subsidiary at the time of
such designation as determined by the Board of Directors of the Company, whose
good faith determination will be conclusive,
(2) any property transferred to or from an Unrestricted Subsidiary will be
valued at fair market value at the time of such transfer, as determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive, and
(3) subject to the foregoing, the amount of any Restricted Payment, if
other than cash, will be determined by the Board of Directors of the Company,
whose good faith determination will be conclusive.
If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, such Investment
will no longer be counted as a Restricted Payment for purposes of calculating
the aggregate amount of Restricted Payments.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in
Consolidated Adjusted Net Income; provided that the total amount by which the
aggregate amount of all Restricted Payments may be reduced may not exceed the
lesser of (x) the cash proceeds received by the Company and any of its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing Consolidated Adjusted Net Income for purposes of the foregoing
clause (3)(A), (1) the Company may use audited financial statements for the
portions of the relevant period for which audited financial statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Company for
the remaining portion of such period and (2) the Company will be permitted to
rely in good faith on the financial statements and other financial data derived
from the books and records of the Company that are available on the date of
determination. If the Company makes a Restricted Payment that, at the time of
the making of such Restricted Payment, would in the good faith determination of
the Company
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be permitted under the requirements of the Indenture, such Restricted Payment
will be deemed to have been made in compliance with the Indenture
notwithstanding any subsequent adjustments made in good faith to the Company's
financial statements affecting Consolidated Adjusted Net Income of the Company
for any period.
PURCHASE OF NOTES UPON A CHANGE OF CONTROL. If a Change of Control occurs
at any time, then each holder of Notes will have the right to require that the
Company purchase such holder's Notes, in whole or in part in integral multiples
of $1,000, at a purchase price in cash equal to 101% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of purchase,
pursuant to the offer described below (the "Change of Control Offer") and the
other procedures set forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes by first-class mail, postage prepaid, at its address appearing in the
security register, stating, among other things:
(1) the purchase price and the purchase date, which will be a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed or such later date as is necessary to comply with requirements under the
Exchange Act,
(2) that any Notes not tendered will continue to accrue interest,
(3) that, unless the Company defaults in the payment of the purchase price,
any Notes accepted for payment pursuant to the Change of Control Offer will
cease to accrue interest after the Change of Control purchase date, and
(4) certain other procedures that a holder of Notes must follow to accept a
Change of Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of the Notes seeking to accept
the Change of Control Offer. The Credit Facility prohibits the purchase of Notes
by the Company prior to full repayment of indebtedness under the Credit Facility
and, upon a Change of Control, all amounts outstanding under the Credit Facility
become due and payable. There can be no assurance that in the event of a Change
of Control the Company will be able to obtain the necessary consents from the
lenders under the Credit Facility to consummate a Change of Control Offer. The
failure of the Company to make or consummate the Change of Control Offer or pay
the applicable Change of Control purchase price when due would result in an
Event of Default and would give the Trustee and the holders of the Notes the
rights described under "Events of Default."
In addition to the obligations of the Company under the Indenture with
respect to the Notes in the event of a Change of Control, the Credit Facility
contains a provision designating a change of control as described therein as an
event of default, which would obligate the Company to repay amounts outstanding
under the Credit Facility upon an acceleration of the indebtedness outstanding
thereunder.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change of Control.
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The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to repurchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "Certain Definitions" above for the definition of
"Change of Control." A transaction involving the Company's management or its
affiliates, or a transaction involving a recapitalization of the Company, would
result in a Change of Control if it is the type of transaction specified in such
definition.
The Company will comply with the applicable tender offer rules including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create any restriction (other than restrictions existing under
Debt as in effect on the Closing Date or in refinancings or replacements of such
Debt) that would materially impair the ability of the Company to make a Change
of Control Offer to purchase the Notes or, if such Change of Control Offer is
made, to pay for the Notes tendered for purchase.
LIMITATION ON CERTAIN ASSET SALES. (a) The Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in any Asset Sale unless
(1) the consideration received by the Company or such Restricted Subsidiary for
such Asset Sale is not less than the fair market value of the assets sold (as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive) and (2) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 80% (A) cash or cash equivalents and/or (B) the assumption
by the transferee of Debt of the Company or a Restricted Subsidiary ranked
senior to or pari passu with the Notes and release of the Company or such
Restricted Subsidiary from all liability on such Debt.
(b) If the Company or any of its Restricted Subsidiaries engages in an
Asset Sale, the Company may, at its option, within 12 months after such Asset
Sale, (1) apply all or a portion of such Net Cash Proceeds to the permanent
reduction of amounts outstanding under the Credit Facility or to the repayment
of other Senior Debt of the Company or a Subsidiary Notes Guarantor or (2)
invest (or enter into one or more legally binding agreements to invest) all or a
portion of such Net Cash Proceeds in properties and assets to replace the
properties and assets that were the subject of the Asset Sale or in properties
and assets that will be used in the broadcast business or businesses reasonably
related thereto. If any such legally binding agreement to invest such Net Cash
Proceeds is terminated, the Company may, within 90 days of such termination or
within 12 months of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (1) or (2) (without regard to the parenthetical
contained in such clause (2)) above. The amount of such Net Cash Proceeds not so
used as set forth above in this paragraph (b) constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the
Company will, within 30 days thereafter, make an offer to purchase from all
holders of Notes, on a pro rata basis, in accordance with the procedures set
forth in the Indenture, the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased with
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the Excess Proceeds, at a purchase price in cash equal to 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date such offer
to purchase is consummated. To the extent that the aggregate principal amount of
the Notes tendered pursuant to such offer to purchase is less than the Excess
Proceeds, the Company may use such deficiency for general corporate purposes. If
the aggregate principal amount of the Notes validly tendered and not withdrawn
by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will
be selected on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds will be reset to zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act to the extent applicable in connection with the repurchase of Notes
pursuant to an offer to purchase Notes.
LIMITATION ON ASSET SWAPS. The Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in any Asset Swap, unless:
(a) at the time of entering into the Asset Swap and immediately after
giving effect to the proposed Asset Swap, no Default or Event of Default has
occurred and is continuing or would occur as a consequence thereof,
(b) the Company would, at the time of entering into the Asset Swap and
after giving pro forma effect to the proposed Asset Swap, as if such Asset Swap
had occurred at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Debt (other than Permitted Debt)
pursuant to the first paragraph of the "Limitation on Debt" covenant,
(c) the respective aggregate fair market values of the assets being
purchased and sold by the Company or any of its Restricted Subsidiaries are
substantially the same at the time of entering into the Asset Swap (or any
difference in such aggregate fair market values is substantially compensated for
by an equalizing (1) payment of cash, (2) assumption of liabilities or (3)
taking of assets subject to liabilities), and
(d) at the time of the consummation of the first to occur of the
relinquishment or the replacement of assets constituting part of the proposed
Asset Swap, the percentage of any decline in the fair market value of the asset
or assets being acquired by the Company and its Restricted Subsidiaries shall
not be significantly greater than the percentage of any decline in the fair
market value of the assets being disposed of by the Company, calculated from the
time the last agreement constituting part of the Asset Swap was entered into.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or suffer to exist any transaction with, or for the benefit of, any
Affiliate of the Company unless (a) such transaction is on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could have been obtained in an arm's length transaction with
third parties who are not Affiliates and (b) either (1) with respect to any
transaction or series of transactions involving aggregate payments in excess of
$1,000,000, but less than $5,000,000, the Company delivers an officers'
certificate to the Trustee certifying that such transaction or transactions
comply with clause (a) above or (2) with respect to a transaction or series of
transactions involving aggregate payments equal to or greater than $5,000,000,
such transaction or transactions have been approved by the Board of Directors
(including a majority of the Disinterested Directors) of the Company or the
Company has obtained a written opinion from a nationally recognized investment
banking
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firm to the effect that such transaction or transactions are fair to the Company
or such Restricted Subsidiary from a financial point of view.
The foregoing covenant does not restrict any of the following:
(A) Transactions among the Company and/or any of its Restricted
Subsidiaries.
(B) The Company from paying reasonable and customary regular compensation,
fees, indemnification and similar arrangements and payments thereunder to
directors of the Company or any of its Restricted Subsidiaries who are not
employees of the Company or any of its Restricted Subsidiaries.
(C) Employment agreements or compensation or employee benefits arrangements
with any officer, director or employee of the Company or its Restricted
Subsidiaries entered into in the ordinary course of business (including
customary benefits thereunder) (it being understood that benefits of the nature
in place as of the Closing Date shall be deemed permissible hereunder).
(D) The performance of the Company's obligations under (a) that certain
lease agreement effective December 29, 1995 with Wilson Aviation, L.L.C.
relating to the lease of an airplane, (b) that certain agreement not to compete
dated December 31, 1996 with DVS Management, Inc. and (c) that certain Voting
Trust Agreement dated March 17, 1997 among Citadel Communications, ABRY II,
ABRY/CIP and others and the related letter agreement dated March 17, 1997 among
Citadel Communications, ABRY II, ABRY/CIP and others (the "Affiliate
Agreements"); provided that any amendments or modifications to the terms of the
Affiliate Agreements (1) are no less favorable to the Company than those that
could have been obtained in an arm's length transaction with third parties who
are not Affiliates and (2) are approved by the Board of Directors (including a
majority of the Disinterested Directors) of the Company.
(E) The Company from making payments to Citadel Communications to pay its
operating and administrative expenses attributable to the Company including,
without limitation, legal and audit expenses, directors' fees and Commission
compliance expenses, in an amount not to exceed the greater of $1,000,000
million per fiscal year and 1% of the net revenues of the Company for the
preceding fiscal year.
(F) The Company or a Restricted Subsidiary from transferring up to $500,000
of properties and assets, including cash, to a joint venture in which the
Company or a Restricted Subsidiary has an equity interest and in which one or
more directors or officers of the Company or Citadel Communications has an
equity interest, which joint venture is engaged in the internet service provider
business.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any of its Restricted Subsidiaries to:
(a) pay dividends, in cash or otherwise, or make any other distributions on
or in respect of its Capital Stock,
(b) pay any Debt owed to the Company or any other Restricted Subsidiary,
(c) make loans or advances to the Company or any other Restricted
Subsidiary, or
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(d) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary,
except for such encumbrances or restrictions existing under or by reason of any
of the following:
(1) The Credit Facility and any agreement in effect on the Closing Date and
listed on a schedule attached to the Indenture.
(2) Customary non-assignment provisions of any lease governing a leasehold
interest of the Company or any of its Restricted Subsidiaries.
(3) The refinancing or successive refinancings of Debt referred to in
clause (1) or (4), so long as such encumbrances or restrictions are no less
favorable to the Company or any of its Restricted Subsidiaries than those
contained in such original agreement.
(4) Any agreement or other instrument of a person acquired by the Company
or any of its Restricted Subsidiaries in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of any
person, other than the person, or the property or assets of the person, so
acquired.
(5) Any agreement providing for the incurrence of Debt by a Restricted
Subsidiary pursuant to paragraph (b) of the "Limitation on Debt" covenant,
provided that such Restricted Subsidiary becomes a Subsidiary Notes Guarantor.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company will not sell, and will not permit any of its
Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants, or other
rights to purchase shares of such Capital Stock) except:
(1) to the Company or a Wholly Owned Restricted Subsidiary,
(2) issuances or sales to foreign nationals of shares of Capital Stock of
foreign Restricted Subsidiaries, to the extent required by applicable law, or
issuances or sales to directors of directors' qualifying shares,
(3) if, immediately after giving effect to such issuance or sale, neither
the Company nor any Subsidiary owns any shares of Capital Stock of such
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock), or
(4) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such person remaining after giving effect to such issuance or sale
would have been permitted to be made under the "Limitation on Restricted
Payments" covenant if made on the date of such issuance or sale.
In addition, the Company will not, and will not permit any of its
Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its
properties or assets to an Unrestricted Subsidiary other than in the ordinary
course of business.
UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as
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(1) neither the Company nor any of its Restricted Subsidiaries is directly
or indirectly liable for any Debt of such Subsidiary,
(2) no default with respect to any Debt of such Subsidiary would permit
(upon notice, lapse of time or otherwise) any holder of any other Debt of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Debt or cause the payment thereof to be accelerated or payable prior to its
stated maturity,
(3) any Investment in such Subsidiary made as a result of designating such
Subsidiary an Unrestricted Subsidiary will not violate the provisions of the
"Limitation on Restricted Payments" covenant,
(4) neither the Company nor any of its Restricted Subsidiaries has a
contract, agreement, arrangement, understanding or obligation of any kind,
whether written or oral, with such Subsidiary other than those that might be
obtained at the time from persons who are not Affiliates of the Company, and
(5) neither the Company nor any of its Restricted Subsidiaries has any
obligation to subscribe for additional shares of Capital Stock or other equity
interest in such Subsidiary, or to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results.
Notwithstanding the foregoing, the Company may not designate the License
Subsidiary, or any Subsidiary to which any properties or assets (other than
current assets) owned by the Company or the License Subsidiary on the Closing
Date have been transferred, as an Unrestricted Subsidiary.
(b) The Board of Directors of the Company may designate any of its
Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such
designation will be deemed to be an incurrence of Debt by a Restricted
Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such
designation will only be permitted if (1) such Debt is permitted under the
"Limitation on Debt" covenant and (2) no Default or Event of Default will have
occurred and be continuing following such designation.
LIMITATION ON OTHER SENIOR SUBORDINATED DEBT. The Company and each
Subsidiary Notes Guarantor will not, directly or indirectly, incur or otherwise
permit to exist any Debt that is subordinate in right of payment to any Debt of
the Company or such Subsidiary Notes Guarantor, as the case may be, unless such
Debt is also pari passu with the Notes or the Subsidiary Notes Guarantee of the
Notes by such Subsidiary Notes Guarantor, as the case may be, or subordinate in
right of payment to the Notes or such Subsidiary Notes Guarantee of the Notes,
as the case may be, to at least the same extent as the Notes or such Subsidiary
Notes Guarantee are subordinate in right of payment to Senior Debt or all senior
debt of the Subsidiary Notes Guarantors, as the case may be, as set forth in the
Indenture.
SUBSIDIARY NOTES GUARANTEES. The Subsidiary Notes Guarantors will, jointly
and severally, unconditionally guarantee the due and punctual payment of the
principal of, premium, if any, and interest on the Notes on a senior
subordinated basis pursuant to the Subsidiary Notes Guarantees as described
under "--Subordination." The Subsidiary Notes Guarantors may be released from
their obligations under the Subsidiary Notes Guarantees as described under
"--Defeasance and Covenant Defeasance of the Indenture" and a Subsidiary Notes
Guarantor may be released from its obligations under its Subsidiary Notes
Guarantee as described under "Guarantees."
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The Company will (a) cause each person that, after the Closing Date,
becomes a Wholly Owned Restricted Subsidiary of the Company, as well as each
other Restricted Subsidiary that guarantees any other Debt of the Company, to
execute and deliver a supplemental indenture and thereby become a Subsidiary
Notes Guarantor bound by the Subsidiary Notes Guarantee of the Notes in the form
set forth in the Indenture (without such Subsidiary Notes Guarantor being
required to execute and deliver its Subsidiary Notes Guarantee endorsed on the
Notes) and (b) deliver to the Trustee an opinion of counsel, in form and
substance reasonably satisfactory to the Trustee, that the Subsidiary Notes
Guarantee of such Subsidiary Notes Guarantor is a valid and legally binding
obligation of such Subsidiary Notes Guarantor.
GUARANTEES OF DEBT BY RESTRICTED SUBSIDIARIES. The Company will not permit
any of its Restricted Subsidiaries that is not a Subsidiary Notes Guarantor,
directly or indirectly, to guarantee, assume or in any other manner become
liable for the payment of any Debt of the Company or any Debt of any other
Restricted Subsidiary, unless (a) such Restricted Subsidiary simultaneously
executes and delivers a Subsidiary Notes Guarantee and (b) with respect to any
guarantee of Subordinated Debt by a Restricted Subsidiary, any such guarantee is
subordinated to such Restricted Subsidiary's Subsidiary Notes Guarantee at least
to the same extent as such Subordinated Debt is subordinated to the Notes,
provided that the foregoing provision will not be applicable to any guarantee by
any such Restricted Subsidiary that existed at the time such person became a
Restricted Subsidiary and was not incurred in connection with, or in
contemplation of, such person becoming a Restricted Subsidiary.
LIMITATION ON LIENS. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, affirm or suffer to exist any Lien of
any kind securing any Pari Passu Debt or Subordinated Debt (including any
assumption, guarantee or other liability with respect thereto by any Restricted
Subsidiary) upon any property or assets (including any intercompany notes) of
the Company or any of its Restricted Subsidiaries now owned or acquired after
the Closing Date, or any income or profits therefrom, unless the Notes are
directly secured equally and ratably with (or prior to in the case of
Subordinated Debt) the obligation or liability secured by such Lien; provided
that the foregoing will not apply to Liens securing Debt of a person acquired by
the Company or any of its Restricted Subsidiaries in existence at the time of
such acquisition (but not created in contemplation thereof), which Lien is not
applicable to any person, or the properties or assets of any person, other than
the person, or the property or assets of the person, so acquired.
REPORTS. At all times from and after the earlier of (a) the date of the
commencement of the Exchange Offer or the effectiveness of a shelf registration
statement relating to the Notes (the "Registration") and (b) the date 180 days
after the Closing Date, in either case, whether or not the Company is then
required to file reports with the SEC, the Company will file with the SEC all
such reports and other information as it would be required to file with the SEC
by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto.
The Company will supply the Trustee and each holder, or will supply to the
Trustee for forwarding to each such holder, without cost to such holder, copies
of such reports and other information. In addition, at all times prior to the
earlier of the date of the Registration and the date 180 days after the Closing
Date, the Company will, at its cost, deliver to each holder of the Notes
quarterly and annual reports substantially equivalent to those that would be
required by the Exchange Act. In addition, at all times prior to the
Registration, upon the request of any holder or any prospective purchaser of the
Notes designated by a holder, the Company will supply to such holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with or merge with or into any other
person or, directly or indirectly, convey, transfer or lease its properties and
assets substantially as an entirety to any person or persons, unless:
(a) Either (1) the Company is the surviving corporation or (2) the person
(if other than the Company) formed by such consolidation or into which the
Company is merged or the person that acquires by sale, assignment, transfer,
lease or other disposition the properties and assets of the Company
substantially as an entirety (the "Surviving Entity") (A) is a corporation,
partnership or trust organized and validly existing under the laws of the United
States, any state thereof or the District of Columbia and (B) expressly assumes,
by a supplemental indenture in form satisfactory to the Trustee, all of the
Company's obligations under the Indenture and the Notes.
(b) Immediately after giving effect to such transaction and treating any
obligation of the Company or a Restricted Subsidiary in connection with or as a
result of such transaction as having been incurred at the time of such
transaction, no Default or Event of Default has occurred and is continuing.
(c) Immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred at the beginning of the
most recently ended four full fiscal quarter period for which internal financial
statements are available), the Company (or the Surviving Entity if the Company
is not the continuing obligor under the Indenture) could incur at least $1.00 of
additional Debt (other than Permitted Debt) pursuant to the first paragraph of
the "Limitation on Debt" covenant.
(d) If the Company is not the continuing obligor under the Indenture, each
Subsidiary Notes Guarantor, unless it is the other party to the transaction
described above, has by supplemental indenture confirmed that its Subsidiary
Notes Guarantee applies to the Surviving Entity's obligations under the
Indenture and the Notes.
(e) If any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of the "Limitation on Liens" covenant are complied with.
(f) The Company delivers, or causes to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and Notes.
EVENTS OF DEFAULT
Each of the following will be "Events of Default" under the Indenture:
(a) Default in the payment of any interest on any Note when it becomes due
and payable, and continuance of such default for a period of 30 days.
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(b) Default in the payment of the principal of (or premium, if any, on) any
Note when due.
(c) Failure to perform or comply with the Indenture provisions described
under "Consolidation, Merger and Sale of Assets."
(d) Default in the performance, or breach, of any covenant or agreement of
the Company or any Subsidiary Notes Guarantor contained in the Indenture or any
Subsidiary Notes Guarantee (other than a default in the performance, or breach,
of a covenant or agreement that is specifically dealt with elsewhere herein),
and continuance of such default or breach for a period of 60 days after written
notice has been given to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 25% in aggregate principal amount of the
Notes then outstanding.
(e) (1) An event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of Debt of the
Company or any Significant Subsidiary, which issue has an aggregate outstanding
principal amount of not less than $5,000,000, and such default has resulted in
such Debt becoming, whether by declaration or otherwise, due and payable prior
to the date on which it would otherwise become due and payable or (2) a default
in any payment when due at final maturity of any such Debt.
(f) Failure by the Company or any of its Restricted Subsidiaries to pay one
or more final judgments the uninsured portion of which exceeds in the aggregate
$5,000,000, which judgment or judgments are not paid, discharged or stayed for a
period of 60 days.
(g) Any Subsidiary Notes Guarantee ceases to be in full force and effect or
is declared null and void or any Subsidiary Notes Guarantor denies that it has
any further liability under any Subsidiary Notes Guarantee, or gives notice to
such effect (other than by reason of the termination of the Indenture or the
release of any Subsidiary Notes Guarantee in accordance with the Indenture), and
such condition has continued for a period of 30 days after written notice of
such failure requiring the Subsidiary Notes Guarantor and the Company to remedy
the same has been given (1) to the Company by the Trustee or (2) to the Company
and the Trustee by the holders of 25% in the aggregate principal amount of the
Notes then outstanding.
(h) The occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders shall, declare the principal of all of the outstanding
Notes immediately due and payable, by a notice in writing to the Company (and to
the Trustee if given by the Holders) and, if the Credit Facility is in effect,
to the Credit Facility Agent, and, upon any such declaration, such principal
will become due and payable immediately. If an Event of Default specified in
clause (h) above occurs and is continuing, then such principal will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder of Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if:
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(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay:
(A) all overdue interest on all Notes,
(B) all unpaid principal of (and premium, if any, on) any outstanding
Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes,
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest and overdue principal amount at the rate borne by the
Notes, and
(D) all sums paid or advanced by the Trustee under the Indenture and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and
(2) all Events of Default, other than the non-payment of principal of (or
premium, if any, on) or interest on the Notes that have become due solely by
such declaration of acceleration, have been cured or waived.
No such rescission will affect any subsequent default or impair any right
consequent thereon.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the holders of all of the Notes, waive
any past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within 90 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of (and
premium, if any, on) or interest on any Notes, the Trustee may withhold the
notice to the holders of the Notes if a committee of its trust officers in good
faith determines that withholding such notice is in the interests of the holders
of the Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Notes Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within five days
of any officer of the Company having knowledge of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company and any Subsidiary Notes Guarantors with respect to the
outstanding Notes ("defeasance"). Such defeasance means that the Company will be
deemed to have paid and discharged the entire Debt represented by the
outstanding Notes, except for
(a) the rights of holders of outstanding Notes to receive payments in
respect of the principal of (and premium, if any, on) and interest on such Notes
when such payments are due,
(b) the Company's obligations to issue temporary Notes, register the
transfer or exchange of any Notes, replace mutilated, destroyed, lost or stolen
Notes, maintain an office
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or agency for payments in respect of the Notes and segregate and hold such
payments in trust,
(c) the rights, powers, trusts, duties and immunities of the Trustee, and
(d) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to
terminate the obligations of the Company and any Subsidiary Notes Guarantor with
respect to certain covenants set forth in the Indenture and described under
"Certain Covenants" above, and any omission to comply with such obligations
would not constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance").
In order to exercise either defeasance or covenant defeasance,
(a) the Company must irrevocably deposit or cause to be deposited with the
Trustee, as trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the holders of the Notes, money in an
amount, or U.S. government securities that through the scheduled payment of
principal and interest thereon will provide money in an amount, or a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal or installment of interest,
(b) no Default or Event of Default has occurred and is continuing on the
date of such deposit or, insofar as an event of bankruptcy under clause (h) of
"Events of Default" above is concerned, at any time during the period ending on
the 91st day after the date of such deposit,
(c) such defeasance or covenant defeasance must not result in a breach or
violation of, or constitute a default under, the Indenture or any material
agreement or instrument to which the Company or any Subsidiary Notes Guarantor
is a party or by which it is bound or cause the Trustee or the trust so created
to be subject to the Investment Company Act of 1940, as amended,
(d) in the case of defeasance, the Company must deliver to the Trustee an
opinion of counsel stating that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date hereof,
there has been a change in applicable federal income tax law, to the effect, and
based thereon such opinion must confirm that, the holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred,
(e) in the case of covenant defeasance, the Company must have delivered to
the Trustee an opinion of counsel to the effect that the holders of the Notes
outstanding will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred, and
(f) the Company must have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent provided
for relating to either the defeasance or the covenant defeasance, as the case
may be, have been complied with.
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SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) and, upon the request of the Company, the
Trustee, at the expense of the Company, will execute proper instruments
acknowledging satisfaction and discharge of the Indenture when (a) either (1)
all the Notes theretofore authenticated and delivered (other than destroyed,
lost or stolen Notes that have been replaced or paid and Notes that have been
subject to defeasance as described under "Defeasance or Covenant Defeasance of
Indenture") have been delivered to the Trustee for cancellation or (2) all Notes
not theretofore delivered to the Trustee for cancellation (A) have become due
and payable, (B) will become due and payable at Stated Maturity within one year,
or (C) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in trust
for the purpose in an amount sufficient to pay and discharge the entire Debt on
such Notes not theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any, on) and interest to the date of such deposit (in
the case of Notes that have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be; (b) the Company has paid or caused to be
paid all sums payable under the Indenture by the Company; and (c) the Company
has delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided in the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture and any Subsidiary Notes
Guarantee may be made by the Company, any affected Subsidiary Notes Guarantor
and the Trustee with the consent of the holders of a majority in aggregate
outstanding principal amount of the Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby,
(a) change the Stated Maturity of the principal of, or any installment of
interest on, any Note, or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption thereof, or change
the place of payment where or change the coin or currency in which, any Note or
any premium or interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date),
(b) reduce the percentage in principal amount of outstanding Notes, the
consent of whose holders is required for any such amendment or for any waiver of
compliance with certain provisions of, or certain defaults and their
consequences provided for under, the Indenture,
(c) modify any of the provisions of the Indenture relating to the
subordination of the Notes or the Subsidiary Notes Guarantees in a manner
materially adverse to the holders, or
(d) waive a default in the payment of principal of, or premium, if any, or
interest on the Notes or reduce the percentage or aggregate principal amount of
outstanding Notes the consent of whose holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
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Without the consent of any holders, the Company and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
to the Indenture for any of the following purposes:
(a) to evidence the succession of another person to the Company and the
assumption by any such successor of the covenants of the Company in the
Indenture and in the Notes, or
(b) to add to the covenants of the Company for the benefit of the holders,
or to surrender any right or power herein conferred upon the Company, or
(c) to add additional Events of Default, or
(d) to provide for uncertificated Notes in addition to or in place of the
certificated Notes, or
(e) to evidence and provide for the acceptance of appointment under the
Indenture by a successor Trustee; or
(f) to secure the Notes; or
(g) to cure any ambiguity, to correct or supplement any provision in the
Indenture that may be defective or inconsistent with any other provision in the
Indenture, or to make any other provisions with respect to matters or questions
arising under the Indenture, provided that such actions pursuant to this clause
do not adversely affect the interests of the holders in any material respect; or
(h) to comply with any requirements of the Commission in order to effect
and maintain the qualification of the Indenture under the Trust Indenture Act.
THE TRUSTEE
The Bank of New York, the Trustee under the Indenture, is the initial
paying agent and registrar for the Notes. The Bank of New York is a lender under
the Credit Facility.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. Under the Indenture, the holders of a majority in outstanding
principal amount of the Notes will have the right to direct the time, method and
place of conducting any proceeding or exercising any remedy available to the
Trustee, subject to certain exceptions. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein, contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that, if it acquires any conflicting
interest (as defined), it must eliminate such conflict or else resign.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Notes Guarantees are governed
by, and construed in accordance with, the laws of the State of New York.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax consequences
associated with the acquisition, ownership and disposition of the Notes by
holders who hold such Notes as capital assets. The following summary does not
discuss all of the aspects of federal income taxation that may be relevant to a
holder of the Notes in light of his or her particular circumstances, or to
certain types of holders (including dealers in securities, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, S
corporations, and except as discussed below, foreign corporations, persons who
are not citizens or residents of the United States and persons who hold the
Notes as part of a hedge, straddle, "synthetic security" or other integrated
investment) which are subject to special treatment under the federal income tax
laws. This discussion also does not address the tax consequences to nonresident
aliens or foreign corporations that are subject to United States federal income
tax on a net basis on income with respect to a Note because such income is
effectively connected with the conduct of a U.S. trade or business. Such holders
generally are taxed in a similar manner to U.S. Holders (as defined below);
however, certain special rules may apply. In addition, this discussion is
limited to holders who hold the Notes as capital assets within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This
summary also does not describe any tax consequences under state, local or
foreign tax laws.
The discussion is based upon the Code, Treasury Regulations, IRS rulings
and pronouncements and judicial decisions all in effect as of the date hereof,
all of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the Notes. The Company has not sought
and will not seek any rulings or opinions from the IRS or counsel with respect
to the matters discussed below. There can be no assurance that the IRS will not
take positions concerning the tax consequences of the purchase, ownership or
disposition of the Notes that are different from those discussed herein.
HOLDERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY APPLY TO THEM, AS WELL AS THE
APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
THE EXCHANGE OFFER
The exchange of the new notes for outstanding notes pursuant to the
Exchange Offer will not be treated as an "exchange" for U.S. federal income tax
purposes because the new notes will not be considered to differ materially in
kind or extent from the outstanding notes. Rather, the new notes received by a
holder will be treated as a continuation of the outstanding notes in the hands
of such holder. Therefore, the same U.S. federal income tax consequences apply
to the new notes as are applicable to the outstanding notes; and a holder should
have the same adjusted tax basis and holding period in the new notes as the
holder had in the outstanding notes immediately before the exchange.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
A U.S. Holder is any holder who or which is (1) a citizen or individual
resident of the United States for U.S. federal income tax purposes; (2) a
corporation, partnership or other business entity created or organized under the
laws of the United States or of any political subdivision thereof; (3) an estate
other than a "foreign estate" as defined in Section 7701(a)(31) of the Code; or
(4) a trust if a court within the United States is able to
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exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust.
Taxation of Stated Interest. In general, U.S. Holders of the Notes will be
required to include interest received thereon in taxable income as ordinary
income at the time it accrues or is received, in accordance with the holder's
regular method of accounting for U.S. federal income tax purposes.
Effect of Optional Redemption, Repurchase and Registration Rights. Under
certain circumstances the Company may be entitled to redeem a portion of the
Notes. In addition, under certain circumstances, each holder of Notes may
require the Company to repurchase all or any part of such holder's Notes.
Further, the outstanding notes provide for additional interest if the Company
fails to comply with certain obligations under the registration rights agreement
entered into in connection with the Original Offering. Treasury Regulations
contain special rules for determining the yield to maturity and maturity on a
debt instrument in the event the debt instrument provides for a contingency that
could result in the acceleration or deferral of one or more payments or in
additional interest. The Company does not believe that these rules are likely to
apply to either the Company's rights to redeem the Notes or to the holders'
rights to require the Company to repurchase the Notes or to the provision for
additional interest upon such failure. Therefore, the Company does not intend to
treat such provisions of the Notes as affecting the computation of the yield to
maturity or maturity date of the Notes.
Sale or other Taxable Disposition of the Notes. The sale, exchange (other
than pursuant to the Exchange Offer), redemption, retirement or other taxable
disposition of a Note will result in the recognition of gain or loss to a U.S.
Holder in an amount equal to the difference between (a) the amount of cash and
fair market value of property received in exchange therefor (except to the
extent attributable to the payment of accrued but unpaid stated interest not
previously included in income) and (b) the holder's adjusted tax basis in such
Note.
A holder's initial tax basis in a Note purchased by such holder will be
equal to the price paid for the Note.
Any gain or loss on the sale or other taxable disposition of a Note
generally will be capital gain or loss. Payments on such disposition for accrued
interest not previously included in income will be treated as ordinary interest
income.
Backup Withholding. The backup withholding rules require a payor to deduct
and withhold a tax if:
(1) the payee fails to furnish a taxpayer identification number ("TIN") in
the prescribed manner,
(2) the IRS notifies the payor that the TIN furnished by the payee is
incorrect,
(3) the payee has failed to report properly the receipt of "reportable
payments" and the IRS has notified the payor that withholding is required, or
(4) the payee fails to certify under the penalty of perjury that such payee
is not subject to backup withholding.
If any one of the events discussed above occurs with respect to a holder of
Notes, the Company, its paying agent or other withholding agent will be required
to withhold a tax equal to 31% of any "reportable payment" made in connection
with the Notes of such
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holder. A "reportable payment" includes, among other things, amounts paid in
respect of interest on a Note. Any amounts withheld from a payment to a holder
under the backup withholding rules will be allowed as a refund or credit against
such holder's federal income tax, provided that the required information is
furnished to the IRS. Certain holders (including, among others, corporations and
certain tax-exempt organizations) are not subject to backup withholding.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
This section discusses rules applicable to a Non-U.S. Holder (as defined
below) of Notes. This summary does not address the tax consequences to
stockholders, partners or beneficiaries in a Non-U.S. Holder. For purposes
hereof, a "Non-U.S. Holder" is any person who is not a U.S. Holder and is not
subject to U.S. federal income tax on a net basis on income with respect to a
Note because such income is effectively connected with the conduct of a U.S.
trade or business.
Interest. Payments of interest to a Non-U.S. Holder that do not qualify for
the portfolio interest exception discussed below will be subject to withholding
of U.S. federal income tax at a rate of 30% unless a U.S. income tax treaty
applies to reduce, or eliminate, the rate of withholding. To claim a treaty
reduced rate, the Non-U.S. Holder must provide a properly executed IRS Form 1001
or applicable successor form.
Subject to the discussion below concerning backup withholding, interest
that is paid to a Non-U.S. Holder on a Note will not be subject to U.S. income
or withholding tax if the interest qualifies as "portfolio interest." Generally,
interest on the Notes that is paid by the Company will qualify as a portfolio
interest if:
(1) the Non-U.S. Holder does not own, actually or constructively, 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote,
(2) the Non-U.S. Holder is not a controlled foreign corporation that is
related to the Company actually or constructively through stock ownership for
U.S. federal income tax purposes,
(3) the Non-U.S. Holder is not a bank receiving interest on a loan entered
into in the ordinary course of business, and
(4) either (a) the beneficial owner of the Note provides the Company or its
paying agent with a properly executed certification on IRS Form W-8 (or a
suitable substitute form), signed under penalties of perjury, that the
beneficial owner is not a "U.S. person" for U.S. federal income tax purposes and
that provides the beneficial owner's name and address, or (b) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its business holds the Note and certifies
to the Company or its agent under penalties of perjury that the IRS Form W-8 (or
a suitable substitute) has been received by it from the beneficial owner of the
Note or a qualifying intermediary and furnishes the payor a copy thereof.
Treasury regulations that will be effective with respect to payments made
after December 31, 1999 (the "Withholding Regulations") provide alternative
methods for satisfying the certification requirements described in clause (4)
above. The Withholding Regulations also will require, in the case of Notes held
by a foreign partnership, that (a) the certification described in clause (4)
above be provided by each partner and (b) the partnership
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provide certain information, including its taxpayer identification number. A
look-through rule will apply in the case of tiered partnerships.
Sale, Exchange or Retirement of Notes. Any gain realized by a Non-U.S.
Holder on the sale, exchange or retirement of the Notes, will generally not be
subject to U.S. federal income tax or withholding unless (1) the Non-U.S. Holder
is an individual who was present in the U.S. for 183 days or more in the taxable
year of the disposition and meets certain other requirements; or (2) the
Non-U.S. Holder is subject to tax pursuant to certain provisions of the Code
applicable to certain individuals who renounce their U.S. citizenship or
terminate long-term U.S. residency. If a Non-U.S. Holder falls under (2) above,
the holder will be taxed on the net gain derived from the sale under the
graduated U.S. federal income tax rates that are applicable to U.S. citizens and
resident aliens, and may be subject to withholding under certain circumstances.
If a Non-U.S. Holder falls under (1) above, the holder generally will be subject
to U.S. federal income tax at a rate of 30% (or reduced treaty rate) on the gain
derived from the sale and may be subject to withholding in certain
circumstances.
U.S. Information Reporting and Backup Withholding Tax. Back-up withholding
generally will not apply to payments on a Note issued in registered form that is
beneficially owned by a Non-U.S. Holder if the certification of Non-U.S. Holder
status is provided to the Company or its agent as described above in "Certain
U.S. Federal Income Tax Consequences for Non-U.S. Holders--Interest," provided
that the payor does not have actual knowledge that the holder is a U.S. person.
The Company may be required to report annually to the IRS and to each Non-U.S.
Holder the amount of interest paid to, and the tax withheld, if any, with
respect to each Non-U.S. Holder.
If payments of principal and interest are made to the beneficial owner of a
Note by or through the foreign office of a custodian, nominee or other agent of
such beneficial owner, or if the proceeds of the sale, exchange or other
disposition of a Note are paid to the beneficial owner of a Note through a
foreign office of a "broker" (as defined in the pertinent Regulations), the
proceeds will not be subject to backup withholding (absent actual knowledge that
the payee is a U.S. person). Information reporting (but not backup withholding)
will apply, however, to a payment by a foreign office of a custodian, nominee,
agent or broker that is (1) a U.S. person, (2) a controlled foreign corporation
for U.S. federal income tax purposes, or (3) a foreign person that derives 50%
or more of its gross income from the conduct of a U.S. trade or business for a
specified three-year period or (effective for payments after December 31, 1999)
by a foreign partnership with certain U.S. connections, unless the broker has in
its records documentary evidence that the holder is a Non-U.S. Holder and
certain conditions are met (including that the broker has no actual knowledge
that the holder is a U.S. person) or the holder otherwise establishes an
exemption. Payment through the U.S. office of a custodian, nominee, agent or
broker is subject to both backup withholding at a rate of 31% and information
reporting, unless the holder certifies that it is a Non-U.S. Holder under
penalties of perjury or otherwise establishes an exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such holder's
U.S. federal income tax liability, provided that certain information is provided
by the holder to the IRS.
146
<PAGE> 150
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives new notes for its own
account pursuant to the Exchange Offer must deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of new notes received in exchange for outstanding notes
where such outstanding notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 120 days after the date of this prospectus, it will make this
prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, for a
period of 90 days after the date of this prospectus, all dealers effecting
transactions in the new notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of new notes by
Participating Broker-Dealers. New notes received by Participating Broker-Dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the new notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such Participating Broker-Dealer and/or the purchasers of any such new
notes. Any Participating Broker-Dealer that resells the new notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such new notes may be deemed to
be an "underwriter" within the meaning of the Securities Act, and any profit on
any such resale of new notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 120 days after the Expiration Date, the Company will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
LEGAL MATTERS
Certain legal matters with respect to the new notes, including federal
income tax consequences, will be passed upon for the Company by Eckert Seamans
Cherin & Mellott, LLC, Pittsburgh, Pennsylvania.
INDEPENDENT AUDITORS
The consolidated financial statements of Citadel Broadcasting Company as of
December 31, 1996 and 1997, and for each of the years in the three-year period
ended December 31, 1997, have been included in this prospectus in reliance upon
the report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of Deschutes River Broadcasting, Inc.
and Subsidiaries as of December 31, 1995 and 1996, and for each of the years in
the two-year
147
<PAGE> 151
period ended December 31, 1996, have been included in this prospectus in
reliance upon the report of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Maranatha Broadcasting Company,
Inc.'s Radio Broadcasting Division, as of December 31, 1996, and for the year
then ended, have been included in this prospectus in reliance upon the report of
KPMG LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Tele-Media Broadcasting Company
and its partnership interests as of December 31, 1995 and 1996 and for each of
the years in the three-year period ended December 31, 1996 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and have been included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Snider Corporation and Snider Broadcasting
Corporation and Subsidiary and CDB Broadcasting Corporation as of December 31,
1995 and 1996 and for each of the years in the two-year period ended December
31, 1996 have been included in this prospectus in reliance upon the reports of
Erwin & Company, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
The combined financial statements of Pacific Northwest Broadcasting
Corporation and Affiliates as of December 31, 1996 and for the year ended
December 31, 1996 have been included in this prospectus in reliance upon the
report of Balukoff, Lindstrom & Co., P.A., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
The financial statements of Wicks Radio Group (a division of Wicks
Broadcast Group Limited Partnership) as of December 31, 1997 and for the year
then ended have been included in this prospectus in reliance upon the report of
KPMG LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement on Form S-4
(together with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act with respect to the new notes offered
hereby. This prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC, and to which reference is hereby made.
Statements contained in this prospectus as to the contents of any contract,
agreement or any other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to such exhibit to the
Registration Statement for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
The Company also files annual, quarterly and special reports and other
information with the SEC.
148
<PAGE> 152
The Registration Statement and any document the Company files with the SEC
can be read and copied at the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of the Registration Statement and
any document the Company files with the SEC can be obtained from the Public
Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20459, at prescribed rates. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The Company files its reports and has filed the Registration Statement with
the SEC electronically. The SEC maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. The address of that web site is
http://www.sec.gov.
The Company intends, and is required by the terms of the indenture
governing the notes, to furnish the holders of the new notes with annual reports
containing consolidated financial statements audited by its independent
certified public accountants and with quarterly reports containing unaudited
condensed consolidated financial statements for each of the first three quarters
of each fiscal year.
149
<PAGE> 153
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
Independent Auditors' Report................................ F-4
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-5
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997.......................... F-6
Consolidated Statements of Shareholder's Equity for the
years ended
December 31, 1995, 1996 and 1997.......................... F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997.......................... F-8
Notes to Consolidated Financial Statements.................. F-10
Consolidated Balance Sheets as of December 31, 1997 and
September 30, 1998 (unaudited)............................ F-25
Consolidated Statements of Operations for the nine months
ended September 30, 1997 and 1998 (unaudited)............. F-26
Consolidated Statements of Comprehensive Income for the nine
months ended September 30, 1997 and 1998 (unaudited)...... F-27
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and 1998 (unaudited)............. F-28
Notes to Unaudited Consolidated Financial Statements........ F-29
DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES
Independent Auditors' Report................................ F-32
Consolidated Balance Sheets as of December 31, 1995 and
1996...................................................... F-33
Consolidated Statements of Operations for the years ended
December 31, 1995 and 1996................................ F-34
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995 and 1996.................... F-35
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1996................................ F-36
Notes to Consolidated Financial Statements.................. F-37
TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP
INTERESTS
Independent Auditors' Report................................ F-45
Consolidated Balance Sheets as of December 31, 1995 and
1996...................................................... F-46
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996.......................... F-47
Consolidated Statements of Deficiency in Net Assets for the
years ended December 31, 1994,
1995 and 1996............................................. F-48
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996.......................... F-49
Notes to Consolidated Financial Statements.................. F-50
Condensed Consolidated Balance Sheet as of June 30, 1997
(unaudited)............................................... F-57
Condensed Consolidated Statements of Operations and Changes
in Deficit for the six months ended June 30, 1996 and 1997
(unaudited)............................................... F-58
Condensed Consolidated Statements of Cash Flows for the six
months ended
June 30, 1996 and 1997 (unaudited)........................ F-59
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-60
SNIDER CORPORATION
Independent Auditors' Report................................ F-61
Balance Sheets as of December 31, 1995 and 1996............. F-62
Statements of Income for the years ended December 31, 1995
and 1996.................................................. F-63
Statements of Stockholders' Equity for the years ended
December 31, 1995 and 1996................................ F-64
Statements of Cash Flows for the years ended December 31,
1995 and 1996............................................. F-65
Notes to Financial Statements............................... F-66
</TABLE>
F-1
<PAGE> 154
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Schedule of Combining Operating Income, Excluding
Depreciation and Amortization for Broadcasting Units for
the year ended December 31, 1996.......................... F-69
Balance Sheet as of May 31, 1997 (unaudited)................ F-70
Statement of Income for the five months ended May 31, 1997
(unaudited)............................................... F-71
Statement of Stockholders' Equity for the five months ended
May 31, 1997 (unaudited).................................. F-72
Statement of Cash Flows for the five months ended May 31,
1997 (unaudited).......................................... F-73
Note to Financial Statements (unaudited).................... F-74
Balance Sheet as of June 30, 1996 (unaudited)............... F-75
Statement of Income for the six months ended June 30, 1996
(unaudited)............................................... F-76
Statement of Stockholders' Equity for the six months ended
June 30, 1996 (unaudited)................................. F-77
Statement of Cash Flows for the six months ended June 30,
1996 (unaudited).......................................... F-78
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY AND
CDB BROADCASTING CORPORATION
Independent Auditors' Report................................ F-79
Combined Balance Sheets as of December 31, 1995 and 1996.... F-80
Combined Statements of Operations for the years ended
December 31, 1995 and 1996................................ F-81
Combined Statements of Stockholders' Deficit for the years
ended
December 31, 1995 and 1996................................ F-82
Combined Statements of Cash Flows for the years ended
December 31, 1995 and 1996................................ F-83
Notes to Combined Financial Statements...................... F-84
Combined Balance Sheet as of May 31, 1997 (unaudited)....... F-89
Combined Statement of Operations for the five months ended
May 31, 1997 (unaudited).................................. F-90
Combined Statement of Stockholders' Deficit for the five
months ended May 31, 1997 (unaudited)..................... F-91
Combined Statement of Cash Flows for the five months ended
May 31, 1997 (unaudited).................................. F-92
Note to Combined Financial Statements (unaudited)........... F-93
Combined Balance Sheet as of June 30, 1996 (unaudited)...... F-94
Combined Statement of Operations for the six months ended
June 30, 1996 (unaudited)................................. F-95
Combined Statement of Stockholders' Deficit for the six
months ended June 30, 1996 (unaudited).................... F-96
Combined Statement of Cash Flows for the six months ended
June 30, 1996 (unaudited)................................. F-97
MARANATHA BROADCASTING COMPANY, INC.'S RADIO BROADCASTING
DIVISION
Independent Auditors' Report................................ F-98
Balance Sheet as of December 31, 1996 and September 15, 1997
(unaudited)............................................... F-99
Statement of Operations and Division Equity for the year
ended December 31, 1996 and the eight and one-half-month
period ended September 15, 1997 (unaudited)............... F-100
Statement of Cash Flows for the year ended December 31, 1996
and the eight and one-half-month period ended September
15, 1997 (unaudited)...................................... F-101
Notes to Financial Statements............................... F-102
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
Independent Auditors' Report................................ F-105
Combined Balance Sheet as of December 31, 1996.............. F-106
Combined Statement of Operations for the year ended December
31, 1996.................................................. F-107
Combined Statement of Changes in Owners' Equity for the year
ended
December 31, 1996......................................... F-108
Combined Statement of Cash Flows for the year ended December
31, 1996.................................................. F-109
Notes to Combined Financial Statements...................... F-110
</TABLE>
F-2
<PAGE> 155
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Unaudited Combined Balance Sheet as of October 31, 1997..... F-117
Unaudited Combined Statement of Operations for the ten
months ended October 31, 1997............................. F-118
Unaudited Combined Statement of Changes in Owners' Equity
for the ten months ended October 31, 1997................. F-119
Unaudited Combined Statement of Cash Flows for the ten
months ended October 31, 1997............................. F-120
Notes to Unaudited Combined Financial Statements............ F-121
WICKS RADIO GROUP (A DIVISION OF WICKS BROADCAST GROUP
LIMITED PARTNERSHIP)
Independent Auditors' Report................................ F-122
Balance Sheets as of December 31, 1997 and September 30,
1998 (unaudited).......................................... F-123
Statements of Operations and Changes in Division Equity for
the year ended December 31, 1997 and the nine months ended
September 30, 1998 (unaudited)............................ F-124
Statements of Cash Flows for the year ended December 31,
1997 and for the nine months ended September 30, 1998
(unaudited)............................................... F-125
Notes to Financial Statements............................... F-126
</TABLE>
F-3
<PAGE> 156
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
Citadel Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Citadel
Broadcasting Company (a wholly-owned subsidiary of Citadel Communications
Corporation) and subsidiary as of December 31, 1996 and 1997 and the related
consolidated statements of operations, shareholder's equity and cash flows for
each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Citadel
Broadcasting Company and subsidiary as of December 31, 1996 and 1997 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
March 26, 1998
F-4
<PAGE> 157
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 1,588,366 $ 7,684,991
Cash held in escrow.................................. -- 718,561
Accounts receivable, less allowance for doubtful
accounts of $621,054 in 1996, and $808,942 in
1997.............................................. 12,199,973 25,744,137
Notes receivable from related parties................ 118,646 246,455
Prepaid expenses..................................... 595,755 1,532,227
------------ ------------
Total current assets.............................. 14,502,740 35,926,371
Property and equipment, net............................ 15,208,569 35,242,284
Note receivable........................................ 18,251,402 --
Intangible assets, net................................. 51,801,835 268,689,516
Deposits for pending acquisitions...................... 300,000 650,000
Other assets........................................... 2,179,039 3,664,123
------------ ------------
$102,243,585 $344,172,294
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable..................................... $ 1,286,019 $ 4,001,194
Accrued liabilities.................................. 2,301,716 9,060,129
Current maturities of notes payable.................. 2,500,000 --
Note payable to parent company....................... 12,174,416 --
Current maturities of other long-term obligations.... 435,791 271,352
------------ ------------
Total current liabilities......................... 18,697,942 13,332,675
Notes payable, less current maturities................. 75,084,060 90,084,059
Senior subordinated notes payable...................... -- 98,331,117
Other long-term obligations, less current maturities... 877,600 1,012,649
Deferred tax liability................................. 1,585,333 23,270,338
Exchangeable preferred stock........................... -- 102,009,531
Commitments and contingencies
Shareholder's equity:
Common stock, $.001 par value; authorized 136,300
shares, issued and outstanding 40,000 shares...... 40 40
Additional paid-in capital........................... 27,472,380 42,296,316
Accumulated deficit.................................. (21,473,770) (26,164,431)
------------ ------------
Total shareholder's equity........................ 5,998,650 16,131,925
------------ ------------
$102,243,585 $344,172,294
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 158
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Gross broadcasting revenue.................. $38,047,879 $50,824,384 $ 99,469,550
Less agency commissions................... 3,936,169 5,411,578 9,666,280
----------- ----------- ------------
Net broadcasting revenue............... 34,111,710 45,412,806 89,803,270
----------- ----------- ------------
Operating expenses:
Station operating expenses................ 26,832,123 33,232,485 65,245,095
Depreciation and amortization............. 4,890,517 5,158,206 14,635,534
Corporate general and administrative...... 2,273,744 3,247,579 3,530,067
----------- ----------- ------------
Operating expenses..................... 33,996,384 41,638,270 83,410,696
----------- ----------- ------------
Operating income............................ 115,326 3,774,536 6,392,574
----------- ----------- ------------
Nonoperating expenses (income):
Interest expense.......................... 5,241,760 6,155,472 12,303,981
Interest income........................... (70,503) (407,581) (439,229)
Loss (gain) on sale of property and
equipment.............................. (707,286) 1,749 --
Other (income) expense, net............... (3,221) (8,124) (11,944)
----------- ----------- ------------
Nonoperating expenses, net............. 4,460,750 5,741,516 11,852,808
----------- ----------- ------------
Loss before income taxes and extraordinary
item...................................... (4,345,424) (1,966,980) (5,460,234)
Deferred income tax (benefit)............... -- -- (769,573)
----------- ----------- ------------
Loss before extraordinary item.............. (4,345,424) (1,966,980) (4,690,661)
Extraordinary loss on extinguishment of
debt...................................... -- (1,769,000) --
----------- ----------- ------------
Net loss.................................... (4,345,424) (3,735,980) (4,690,661)
Dividend requirement for exchangeable
preferred stock........................... -- -- 6,632,939
----------- ----------- ------------
Net loss applicable to common shares........ $(4,345,424) $(3,735,980) $(11,323,600)
=========== =========== ============
Basic and diluted net loss per common
share..................................... $ (109) $ (93) $ (283)
=========== =========== ============
Weighted average common shares
outstanding............................... 40,000 40,000 40,000
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 159
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED SHAREHOLDER'S
STOCK CAPITAL DEFICIT EQUITY
------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Balances, December 31, 1994....... $40 $ 8,569,684 $(13,392,366) $ (4,822,642)
Net loss.......................... -- -- (4,345,424) (4,345,424)
Capital contribution to parent
(1)............................. -- (81,127) -- (81,127)
--- ----------- ------------ ------------
Balances, December 31, 1995....... 40 8,488,557 (17,737,790) (9,249,193)
Net loss.......................... -- -- (3,735,980) (3,735,980)
Capital contribution from parent
(2)............................. -- 18,983,823 -- 18,983,823
--- ----------- ------------ ------------
Balances, December 31, 1996....... 40 27,472,380 (21,473,770) 5,998,650
Net loss.......................... -- -- (4,690,661) (4,690,661)
Exchangeable preferred stock
dividend
requirement..................... -- (6,632,939) -- (6,632,939)
Capital contribution from parent
(3)............................. -- 21,456,875 -- 21,456,875
--- ----------- ------------ ------------
Balances, December 31, 1997....... $40 $42,296,316 $(26,164,431) $ 16,131,925
=== =========== ============ ============
</TABLE>
- ---------------
(1) Represents the payment of preferred stock dividends on behalf of the parent
company.
(2) Represents the net capital contribution from the parent company for the
issuance and redemption of preferred stock, the redemption of warrants, the
cost of the equity issuance, as well as the payment of preferred stock
dividends.
(3) Represents the net capital contribution from the parent company for the
issuance of preferred stock and the exercise of common stock options.
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 160
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
----------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................. $(4,345,424) $ (3,735,980) $ (4,690,661)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Extraordinary loss.................... -- 1,769,000 --
Depreciation and amortization......... 4,890,517 5,158,206 14,635,534
Deferred tax benefit.................. -- -- (769,573)
Amortization of debt issuance costs
and debt discounts.................. 131,752 370,652 441,334
Bad debt expense...................... 484,702 421,378 1,016,375
Loss/(gain) on sale of property and
equipment........................... (707,286) 1,749 --
Changes in assets and liabilities, net of
acquisitions:
Increase in accounts receivable and
notes receivable from related
parties............................. (1,069,681) (5,257,849) (10,214,907)
(Increase) decrease in prepaid
expenses............................ 55,531 (175,058) (230,070)
(Increase) decrease in other assets... 75,432 41,303 (676,946)
Increase in accounts payable.......... 651,247 94,017 707,945
Increase (decrease) in accrued
liabilities......................... (600,847) (81,801) 5,323,678
----------- ------------ -------------
Net cash provided by (used in)
operating activities............. (434,057) (1,394,383) 5,542,709
Cash flows from investing activities:
Capital expenditures..................... (1,690,950) (2,037,840) (2,070,223)
Capitalized acquisition costs............ (33,480) (1,144,699) (2,928,956)
Cash paid to acquire stations............ -- (38,805,036) (205,973,171)
Deposits for pending acquisitions........ (150,000) (930,000) (650,000)
Increase in note receivable.............. -- (18,251,402) --
Proceeds from sales of property and
equipment............................. 6,684,479 1,115 --
----------- ------------ -------------
Net cash provided by (used in)
investing activities............. $ 4,810,049 $(61,167,862) $(211,622,350)
----------- ------------ -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 161
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Principal payments on notes payable....... $(6,866,198) $(50,970,385) $(39,000,000)
Proceeds from notes payable............... 2,400,000 86,244,059 52,499,999
Proceeds from senior subordinated notes
payable................................ -- -- 97,250,000
Proceeds from issuance of exchangeable
preferred stock........................ -- -- 95,376,592
Payment of debt issuance costs............ (30,000) (2,283,124) (1,855,123)
Principal payments on other long-term
obligations............................ (412,066) (776,107) (735,077)
Prepayment premium........................ -- (420,000) --
Advances from (payments to) parent
company................................ -- 12,367,070 (12,817,000)
Capital contribution from parent
company................................ -- 18,983,823 21,456,875
----------- ------------ ------------
Net cash provided by (used in)
financing activities................. (4,908,264) 63,145,336 212,176,266
----------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents............................... (532,272) 583,091 6,096,625
Cash and cash equivalents, beginning of
year...................................... 1,537,547 1,005,275 1,588,366
----------- ------------ ------------
Cash and cash equivalents, end of year...... $ 1,005,275 $ 1,588,366 $ 7,684,991
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 162
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description Of Business
Citadel Broadcasting Company was formed August 21, 1991 as a Nevada
corporation and is a wholly-owned subsidiary of Citadel Communications
Corporation ("Citadel Communications"). Citadel License Inc. ("Citadel License")
is a wholly-owned subsidiary of Citadel Broadcasting Company. Citadel
Broadcasting Company and its subsidiary own and operate radio stations and hold
Federal Communications Commission ("FCC") licenses in Arkansas, California,
Colorado, Illinois, Montana, Nevada, New Mexico, Oregon, Pennsylvania, Rhode
Island, Utah and Washington.
Principles of Consolidation And Presentation
The accompanying consolidated financial statements include Citadel
Broadcasting Company and its wholly-owned subsidiary ("Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
Derivative Financial Instruments
The Company uses an interest rate swap agreement to hedge the effects of
fluctuations in interest rates. Amounts receivable or payable under the interest
rate swap agreement are recognized as interest expense or income.
Property and Equipment
Assets acquired in business combinations accounted for using the purchase
method of accounting are recorded at their estimated fair value upon acquisition
as determined by management or by independent appraisal. Property and equipment
additions are recorded at cost. Depreciation of property and equipment is
determined using the straight-line method over the estimated useful lives of the
related assets.
Intangible Assets
Intangible assets with determinable lives have been allocated among various
categories of customer-based or market-based intangibles at their estimated fair
value upon acquisition as determined by management or by independent appraisal.
Goodwill represents the excess of cost over the fair value of tangible assets
and intangible assets with determinable lives. Amortization is provided on the
straight-line method over the estimated useful lives of the related assets (see
note 5). The Company's policy is to write-off intangible assets once they have
become fully amortized. The useful lives and recoverability of intangible assets
are evaluated at least annually. This evaluation encompasses the undiscounted
historical broadcast cash flow of each station and existing broadcast cash flow
multiples for sales of similar radio properties to estimate the potential
selling price for the station and, therefore, recoverability of the assets.
F-10
<PAGE> 163
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Barter Transactions
Barter contracts are agreements entered into under which the Company
provides commercial air time in exchange for goods and services used principally
for promotional, sales and other business activities. An asset and liability are
recorded at the fair market value of the goods or services received. Revenue is
recorded and the liability is relieved when commercials are broadcast and
expense is recorded and the asset is relieved when goods or services are used.
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes as if it were a separate taxpayer. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. The Company is included in the
consolidated tax returns of its parent company, Citadel Communications.
Income (Loss) Per Share of Common Stock
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share" ("SFAS No. 128"). This statement establishes
standards for computing and presenting earnings per share ("EPS"), and
supersedes APB Opinion No. 15. The Statement replaces primary EPS with basic EPS
and requires dual presentation of basic and diluted EPS. All prior period EPS
data has been restated to conform to SFAS No. 128. The basic and diluted per
share effect of the extraordinary loss on extinguishment of debt in 1996 was
$(44) and $(44), respectively.
Revenue Recognition
Revenue is recognized as commercials are broadcast.
Local Marketing Agreements
Fees earned or incurred pursuant to various local marketing agreements
("LMA") are recognized as gross broadcasting revenue or station operating
expenses, respectively, in the period that the services performed or received
occur. The Company's consolidated financial statements include broadcasting
revenues and station operating expenses of stations marketed under LMA's.
Joint Sales Agreements
Fees earned or incurred pursuant to various joint sales agreements ("JSA")
are recognized pursuant to the terms in the various agreements under one of two
methods: (a) the JSA fee is recognized as a reduction to sales expense (included
in station operating expenses in the Company's consolidated statement of
operations), or (b) the Company is allocated a percentage of the JSA stations'
net revenue and operating expenses and these amounts are recognized as
broadcasting revenue and station operating expenses, respectively, in the period
earned or incurred.
Business and Credit Concentrations
In the opinion of management, credit risk with respect to receivables is
limited due to the large number of customers and the geographic diversification
of the Company's customer base. The Company performs credit evaluations of its
customers and believes that adequate allowances for any uncollectible
receivables are maintained. At December 31, 1996 and 1997, no receivable from
any customer exceeded five percent of gross
F-11
<PAGE> 164
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
accounts receivable nor did any customer's account exceed more than ten percent
of net broadcasting revenue for any of the periods presented.
Long-Lived Assets
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No.
121"), which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
the first quarter of the year ended December 31, 1996 and this adoption did not
have a material impact on the consolidated financial statements.
Reclassifications
Certain 1995 and 1996 balances have been reclassified to conform to the
1997 presentation.
(2) ACQUISITIONS AND DISPOSITIONS
1995 Dispositions
On February 15, 1995, the Company sold the assets of KBOZ-AM, KBOZ-FM and
KATH-FM, and KCTR-FM, KDWG-AM, and KKBR-FM in Bozeman and Billings, Montana,
respectively, for $5,400,000. A gain of approximately $800,000 was recognized on
the sale.
1996 Acquisitions
During 1996, the Company acquired the assets of five FM and one AM radio
stations from various parties as follows:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- --------------------------------- --------------- --------------------- -----------
<S> <C> <C> <C>
June 28, 1996.................... KHFM-FM/KHFN-AM Albuquerque, NM $ 5,500,000
June 28, 1996.................... KASY-FM Albuquerque, NM 5,000,000
June 28, 1996.................... KDJK-FM Modesto, CA 5,010,000
October 1, 1996.................. KKLI-FM Colorado Springs, CO 3,450,000
October 9, 1996.................. KRST-FM Albuquerque, NM 20,000,000
</TABLE>
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to current assets as well as
noncurrent tangible and intangible assets based on their fair values as
determined by management or by independent appraisal. The acquisitions were
funded with the proceeds from new notes payable and a securities purchase and
exchange agreement. The purchase price, including acquisition costs of $782,881,
was allocated as follows:
<TABLE>
<S> <C>
Property and equipment...................................... $ 2,446,594
Intangible assets........................................... 37,135,955
Accounts receivable......................................... 160,332
-----------
$39,742,881
===========
</TABLE>
F-12
<PAGE> 165
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1997 Acquisitions and Pending Dispositions
Acquisitions
During 1997, the Company acquired the assets of 44 FM and 17 AM radio
stations from various parties as follows:
<TABLE>
<CAPTION>
MARKET PURCHASE
ACQUISITION DATE STATION SERVED PRICE
- ------------------------------- ---------------- --------------------- ------------
<S> <C> <C> <C>
January 1, 1997................ KCTR-FM/KDWG-AM/ Billings, MT $ 26,008,357
KKBR-FM/KBBB-FM/
KMHK-FM
KUGN-AM/KUGN-FM/ Eugene, OR
KEHK-FM
KAKT-FM/KBOY-FM/ Medford, OR
KCMX-AM/KCMX-FM/
KTMT-AM/KTMT-FM
KEYW-FM/KFLD-AM/ Tri-Cities, WA
KORD-FM/KXRX-FM
February 14, 1997.............. KENZ-FM Salt Lake City, UT 5,590,119
April 10, 1997................. KBER-FM Salt Lake City, UT 7,760,000
July 3, 1997................... WPRO-AM/WPRO-FM/ Providence, RI 115,795,216
WSKO-AM/WWLI-FM
WQCY-FM/WMOS-FM/ Quincy, IL
WTAD-AM/WBRJ-FM
WQWK-FM/WIKN-FM/ State College, PA
WRSC-AM/WBLF-AM
WGLU-FM/WQKK-FM Johnstown, PA
WRKZ-FM Harrisburg, PA
WQXA-AM/WQXA-FM York, PA
WCTO-FM/WEST-AM Allentown, PA
WMGS-FM/WARM-AM/ Wilkes-Barre, PA
WZMT-FM/WAZL-AM
July 17, 1997.................. KNHK-FM Reno, NV 1,300,000
September 25, 1997............. KTHK-FM Tri-Cities, WA 600,500
September 29, 1997............. WXEX-FM, Edgenet Providence, RI 4,250,000
October 15, 1997............... KARN-AM/KARN-FM/ Little Rock, AR 9,000,000
KKRN-FM/KRNN-AM/
KAFN-FM
October 15, 1997............... KIPR-FM Little Rock, AR 5,544,506
October 15, 1997............... Land and Little Rock, AR 3,001,537
Buildings
October 15, 1997............... KOKY-FM Little Rock, AR 7,354,860
October 21, 1997............... WLEV-FM Allentown, PA 23,000,000
October 24, 1997............... KBEE-FM/KFNZ-AM Salt Lake City, UT 2,867,092
November 4, 1997............... KLAL-FM Little Rock, AR 1,500,000
November 4, 1997............... KURB-FM/KVLO-FM/ Little Rock, AR 12,000,000
KLIH-FM
November 18, 1997.............. WHKK-FM Providence, RI 3,999,310
</TABLE>
F-13
<PAGE> 166
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to current assets as well as
noncurrent tangible and intangible assets based on their fair values as
determined by management or by independent appraisal. The acquisitions were
funded with the proceeds from new notes payable and a securities purchase and
exchange agreement. The purchase price, including acquisition costs of
$2,928,956, was allocated as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 877,693
Accounts receivable......................................... 4,473,441
Prepaid expenses............................................ 706,402
Property and equipment...................................... 21,203,071
Intangible assets........................................... 208,964,226
Other assets................................................ 10,100
Accounts payable and accrued liabilities.................... (3,084,549)
Current maturities of other long-term obligations........... (649,931)
------------
$232,500,453
============
</TABLE>
Pro Forma
The following summary, prepared on a pro forma basis, presents the results
of operations as if all the above noted radio stations had been acquired as of
January 1, 1996, after including the impact of the amortization of intangible
assets, depreciation of fixed assets and increased interest expense on the
acquisition debt since the date of acquisition.
<TABLE>
<CAPTION>
UNAUDITED
---------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Net broadcasting revenue......................... $106,683,000 $117,154,000
Operating income................................. 2,212,000 6,988,000
Net loss......................................... (17,395,000) (12,990,000)
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the radio stations had been owned for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
Pending Dispositions
On September 29, 1997, the Company entered into an asset purchase agreement
to sell substantially all of the assets of radio stations WQKK-FM and WGLU-FM in
Johnstown, Pennsylvania and radio stations WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM
in State College, Pennsylvania. The disposition is pending approval by the
Federal Communications Commission.
(3) NOTE RECEIVABLE
During 1996 the Company made various advances to Deschutes, a non-related
party, to allow Deschutes to acquire various radio stations and payoff existing
debt, in conjunction with the acquisition of Deschutes by Citadel
Communications. These advances were funded through borrowings the Company made
on the Senior Credit Facility and advances from its parent company. As of
December 31, 1996, $18,251,402 was due under these advances; of this amount,
approximately $8,600,000 was included in note payable to parent company.
F-14
<PAGE> 167
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
During 1997 the Company acquired Deschutes in a stock-based acquisition.
The note receivable at December 31, 1996 was included in the purchase price
allocation during 1997, resulting in the elimination of the note receivable in
1997.
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
ESTIMATED
1996 1997 USEFUL LIFE
----------- ----------- -----------
<S> <C> <C> <C>
Land.................................................. $ 569,638 $ 3,269,025 --
Buildings and improvements............................ 1,217,287 5,726,701 5-30 years
Transmitters, towers and equipment.................... 15,509,084 29,053,049 5-15 years
Office furniture and equipment........................ 3,268,426 5,615,833 3-5 years
Construction in progress.............................. 577,289 736,620 --
----------- -----------
21,141,724 44,401,228
Less accumulated depreciation and amortization........ (5,933,155) (9,158,944)
----------- -----------
$15,208,569 $35,242,284
=========== ===========
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets at December 31, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
1996 1997 USEFUL LIFE
------------ ------------ ----------------
<S> <C> <C> <C>
Goodwill.......................................... $ 28,925,936 $119,226,136 15 years
Broadcast licenses................................ 26,262,983 162,626,295 15 years
Noncompetition agreements......................... 5,168,854 1,858,593 3-5 years
Local marketing agreements........................ 1,909,998 -- 5 years
Presold commercials............................... 496,380 -- less than 1 year
Premium lease space............................... 161,787 161,787 1-13 years
On-air talent contracts........................... 1,383,323 -- 1-3 years
Subcarrier antenna income......................... 219,162 100,878 1-4 years
Programming contracts............................. 503,000 3,000 3 years
------------ ------------
65,031,423 283,976,689
Less accumulated amortization..................... (13,229,588) (15,287,173)
------------ ------------
$ 51,801,835 $268,689,516
============ ============
</TABLE>
(6) ACCRUED LIABILITIES
Accrued liabilities at December 31, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Interest.................................................... $ -- $5,118,735
Music license fees.......................................... 245,715 209,734
Compensation and commissions................................ 1,237,392 2,082,492
Other....................................................... 818,609 1,649,168
---------- ----------
$2,301,716 $9,060,129
========== ==========
</TABLE>
F-15
<PAGE> 168
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(7) NOTES PAYABLE
Notes payable at December 31, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Note payable to financial institution (Senior Credit
Facility), interest payable at the LIBOR rate (5.78% at
December 31, 1996 and 5.72% at December 31, 1997) plus
2.75%, principal due only when required by the loan
agreement, in quarterly amounts through September 30,
2003, at which time all outstanding amounts are due in
full, subject to optional prepayments.................... $77,584,060 $90,084,059
Less current maturities.................................... 2,500,000 --
----------- -----------
Long-term portion.......................................... $75,084,060 $90,084,059
=========== ===========
</TABLE>
On July 3, 1997, the Company entered into a revised financing agreement
(the "Senior Credit Facility") which allows for revolving loan borrowings up to
a maximum of $150,000,000. Per the agreement, this amount is subject to
reduction starting December 31, 1997 and continuing quarterly thereafter. The
maximum available loan commitment at December 31, 1997 was $147,500,000. The
Company must pay, on a quarterly basis, an unused commitment fee equal to the
maximum revolving loan commitment less the average of the outstanding principal
balance for the preceding quarter, multiplied by .125% or if the total leverage
ratio (as defined in the agreement) calculated as of the last day of the
preceding quarter was less than 4.5, the commitment fee is .09375%. Commitment
fees paid in 1996 and 1997 were $74,931 and $380,295, respectively. The
agreement requires that the Company enter into an interest rate swap agreement
for a period of at least two years. See note 21 for information on the interest
rate swap agreement. Principal payments are not scheduled to commence until the
outstanding principal balance exceeds the maximum loan commitment adjusted by
quarterly mandatory commitment reductions (as defined in the agreement).
The Senior Credit Facility is secured by a pledge of property and equipment
and the common stock of the Company. Various debt covenants place restrictions
on, among other things, indebtedness, acquisitions, dividends, capital
expenditures and the sale or transfer of assets and provide for certain minimum
operating cash flows for the Company. The debt covenant provisions also include
certain financial ratio covenants, the most restrictive in nature being; initial
total debt to adjusted operating cash flow (less than) 6.75 times, initial total
senior debt to adjusted operating cash flow (less than) 6.75 times and
consolidated operating cash flow to interest expense and cash dividends on the
Exchangeable Preferred Stock (greater than) 1.75 times. At December 31, 1997,
the Company was in compliance with all debt covenant provisions.
The required aggregate principal payments as of December 31, 1997,
excluding the consideration of any payments required based upon annual excess
cash flow (as defined), are as follows:
<TABLE>
<S> <C>
2001................................................... $23,209,059
2002................................................... 30,500,000
Thereafter............................................. 36,375,000
-----------
$90,084,059
===========
</TABLE>
(8) SENIOR SUBORDINATED NOTES PAYABLE
On July 3, 1997, the Company completed the issuance of $101 million of
10 1/4% Senior Subordinated Notes ("Notes") due 2007. Interest is payable
semi-annually. The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 1, 2002. In addition, at any time
prior to July 1, 2000, subject to certain conditions, the Company may, at its
option, redeem a portion of the Notes with the
F-16
<PAGE> 169
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
net proceeds of one or more Public Equity Offerings (as defined in the indenture
governing the Notes), at a redemption price equal to 110.25% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption. The Notes are shown net of unamortized discount of $2,668,883 at
December 31, 1997.
The indenture governing the Notes contains certain restrictive covenants,
including limitations which restrict the ability of the Company to incur
additional debt, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets. At December 31, 1997, the Company was in compliance with all debt
covenants.
(9) OTHER LONG-TERM OBLIGATIONS
Other long-term obligations at December 31, 1996 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Various noncompetition and consulting agreements with the
sellers of radio stations acquired, due at various dates
through July 2003, face amount of $486,113 and $437,503 at
December 31, 1996 and 1997, respectively, non-interest
bearing with interest imputed at 8.5% to 9.0%, net of
discount of $54,540 and $29,640 in 1996 and 1997,
respectively.............................................. $ 431,573 $ 407,863
Prepayment premium on extinguishment of debt (a)............ 881,818 770,779
Capital leases.............................................. -- 105,359
---------- ----------
1,313,391 1,284,001
Less current maturities..................................... 435,791 271,352
---------- ----------
Long-term portion........................................... $ 877,600 $1,012,649
========== ==========
</TABLE>
The required aggregate principal payments as of December 31, 1997,
excluding the amortization of debt discount are as follows:
<TABLE>
<S> <C>
1998.................................................... $ 271,352
1999.................................................... 321,843
2000.................................................... 138,648
2001.................................................... 132,363
2002.................................................... 127,694
Thereafter.............................................. 292,101
----------
$1,284,001
==========
</TABLE>
- ---------------
(a) On October 9, 1996, the Company extinguished its long-term debt of
$31,310,385, payable to a financial institution, and its note payable to a
related party of $7,000,000. The early retirement of the long-term debt
resulted in a $1,769,000 extraordinary loss due to prepayment premiums and
the write-off of debt issuance costs. The prepayment premium can be reduced
on a quarterly basis depending on the outstanding balance of the Senior
Credit Facility. The balance of the prepayment premium is due upon the
repayment of the Senior Credit Facility.
F-17
<PAGE> 170
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(10) LEASE COMMITMENTS
The Company leases certain tower sites, transmitters and equipment,
automobiles, office equipment and an airplane. The following is a schedule by
year of future minimum rental payments required under operating leases that have
an initial or remaining noncancelable lease term in excess of one year as of
December 31, 1997:
<TABLE>
<S> <C>
1998................................................... $ 2,030,301
1999................................................... 1,939,314
2000................................................... 1,874,159
2001................................................... 1,859,330
2002................................................... 1,457,545
Thereafter............................................. 5,357,157
-----------
$14,517,806
===========
</TABLE>
Total rental expense was $744,395, $1,101,237 and $1,971,774 for the years
ended December 31, 1995, 1996 and 1997, respectively.
(11) INCOME TAXES
The Company is included in the consolidated tax returns of Citadel
Communications and calculates its tax provision or benefit as though it filed a
separate return. For the years ended December 31, 1995, 1996 and 1997, the
Company generated a net loss for both financial reporting and income tax
purposes; therefore, no current tax provision has been recorded. The deferred
income tax benefit in 1997 represents the reversal of deferred tax liabilities
established at the date of acquisition due to differences in the tax basis and
the financial statement carrying amounts of intangibles and fixed assets
acquired in stock-based acquisitions. At December 31, 1997, Citadel
Communications has net operating loss carryforwards for federal income tax
purposes of approximately $18,800,000 which begin to expire in 2007.
On June 28, 1996, Citadel Communications underwent an ownership change in
accordance with Section 382 of the Internal Revenue Code. Due to this change,
the net operating losses of Citadel Communications are subject to limitation in
future years. The approximate amount of the net operating loss which may be used
in any one year is $4,400,000.
The reconciliation of the expected income tax benefit calculated at the
U.S. federal statutory rate to the actual income tax benefit per the financial
statements for the years ended December 31, 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----------- --------- -----------
<S> <C> <C> <C>
U.S. federal statutory rate applied to the loss before
income taxes and extraordinary item.................... $(1,487,717) $(679,046) $(1,856,480)
Amortization of goodwill................................. 16,563 186,844 425,344
Nondeductible meals and entertainment.................... 19,786 31,601 51,495
Net operating losses providing no current benefit for
federal income tax purposes............................ 1,467,025 458,101 680,040
Other.................................................... (15,657) 2,500 (69,972)
----------- --------- -----------
Deferred income tax benefit.............................. $ -- $ -- $ (769,573)
=========== ========= ===========
</TABLE>
F-18
<PAGE> 171
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets, liabilities and the valuation allowance are
as follows:
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Deferred tax assets:
Receivables, principally due to valuation allowances...... $ 248,422 $ 323,577
Net operating loss carryforwards.......................... 6,720,659 7,520,705
Accrued liabilities not deductible........................ 18,465 193,423
----------- ------------
Total deferred tax assets.............................. 6,987,546 8,037,705
Valuation allowance....................................... (4,270,206) (5,109,187)
----------- ------------
Net deferred tax assets................................ 2,717,340 2,928,518
----------- ------------
Deferred tax liabilities:
Property and equipment, principally due to accelerated
depreciation........................................... (1,883,269) (2,928,218)
Intangible assets; differences in book and tax
amortization........................................... (834,071) (300)
Differences between the tax basis and fair value of
intangibles and fixed assets acquired.................. (1,585,333) (23,270,338)
----------- ------------
Total deferred tax liabilities......................... (4,302,673) (26,198,856)
----------- ------------
Net deferred tax liability.................................. $(1,585,333) $(23,270,338)
=========== ============
</TABLE>
The valuation allowance was decreased by $2,320,699 in 1996 and increased
by $838,981 in 1997. The Company has established a valuation allowance for the
amount of the net deferred tax asset which management has determined that it is
more likely than not will not be realized.
(12) EXCHANGEABLE PREFERRED STOCK
On July 3, 1997, the Company completed the sale of 1,000,000 shares of
Series A Exchangeable Preferred Stock (Exchangeable Preferred Stock) for $100
million. The Exchangeable Preferred Stock has a liquidation preference of $100
per share, plus accumulated and unpaid dividends. Dividends on the Exchangeable
Preferred Stock accrue at the rate of 13 1/4% per annum. All dividends will be
payable semi-annually on January 1 and July 1 of each year, commencing January
1, 1998. On or prior to July 1, 2002, dividends are payable in additional shares
of Exchangeable Preferred Stock having an aggregate liquidation preference equal
to the amount of such dividends, or, at the option of the Company, in cash.
Thereafter, all dividends will be payable only in cash. The Company will be
required to redeem the Exchangeable Preferred Stock on July 1, 2009 (subject to
the legal availability of funds therefor) at a redemption price equal to the
liquidation preference thereof, plus accumulated and unpaid dividends, if any,
to the date of redemption.
The Exchangeable Preferred Stock is presented net of unamortized issuance
costs of $4,541,858, and includes accrued dividends at December 31, 1997 of
$6,551,389, which were paid in 65,513.89 additional shares of exchangeable
preferred stock on January 1, 1998.
The Certificate of Designation for the Exchangeable Preferred Stock
contains certain covenants, which, among other things, restrict the ability of
the Company with respect to: (i) the incurrence of additional debt; (ii)
restricted payments; (iii) issuances and sales of stock of certain subsidiaries;
and (iv) consolidations, mergers or sales of assets. The Company was in
compliance with these covenants at December 31, 1997.
(13) CITADEL COMMUNICATIONS FINANCIAL DATA
The operations of Citadel Communications (the parent company) include the
issuance of convertible preferred stock and obtaining a credit facility
including a revolving line of credit of $20 million, the proceeds
F-19
<PAGE> 172
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
of which were advanced to the Company. Interest was charged on these advances in
an amount equal to the interest costs of Citadel Communications. In conjunction
with the Company's refinancing of Notes, the revolving line of credit was
terminated in 1997. There are no other costs or expenses of Citadel
Communications.
Advances from Citadel Communications, other than those representing draws
on the revolving line of credit of Citadel Communications, are recorded as
capital contributions from the parent company and are presented as additional
paid-in capital in the consolidated balance sheets.
On January 1, 1997, in a non-cash transaction, the Company transferred
$9,123,310 of debt under the Senior Credit Facility to Deschutes which reduced
the corresponding note receivable. In addition, on June 20, 1997, Citadel
Communications transferred the ownership of Deschutes to the Company. Interest
paid to Citadel Communications by the Company for the year ended December 31,
1997 amounted to $568,534.
The following is summary consolidated financial data for Citadel
Communications and its subsidiaries, including the Company:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
------------ ------------
<S> <C> <C>
Consolidated Balance Sheets:
Current assets............................................ $ 14,502,740 $ 35,926,371
Property and equipment, net............................... 15,208,569 35,242,284
Note receivable........................................... 18,251,402 --
Intangible assets, net.................................... 51,801,835 268,689,516
Other assets.............................................. 2,550,778 4,314,123
------------ ------------
Total assets........................................... $102,315,324 $344,172,294
============ ============
Notes payable to related parties.......................... $ 11,817,000 $ --
Other current liabilities................................. 6,880,942 13,332,675
------------ ------------
Total current liabilities.............................. 18,697,942 13,332,675
Notes payable, less current maturities.................... 75,084,060 90,084,059
Senior subordinated notes payable......................... -- 98,331,117
Other liabilities......................................... 2,462,933 24,282,987
Exchangeable preferred stock.............................. -- 102,009,531
Shareholders' equity...................................... 6,070,389 16,131,925
------------ ------------
Total liabilities and shareholders' equity............. $102,315,324 $344,172,294
============ ============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Consolidated Statements of Operations:
Net broadcasting revenue.................................. $45,412,806 $89,803,270
Operating income.......................................... $ 3,744,323 $ 6,367,016
Interest expense.......................................... 6,155,472 12,872,515
Other (income) expense, net............................... (413,955) (451,173)
----------- -----------
Loss before income taxes and extraordinary item........... (1,997,194) (6,054,326)
Deferred income tax (benefit)............................. -- (769,573)
Extraordinary loss on extinguishment of debt.............. (1,769,000) --
----------- -----------
Net loss.................................................... $(3,766,194) $(5,284,753)
=========== ===========
Dividend requirement for exchangeable preferred stock....... $ -- $ 6,632,939
=========== ===========
</TABLE>
F-20
<PAGE> 173
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(14) CITADEL LICENSE FINANCIAL DATA
The operations of 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 (see note 8). 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,
--------------------------
1996 1997
----------- ------------
<S> <C> <C>
Balance Sheets:
Intangible assets, net (broadcast licenses)............... $24,035,920 $137,073,551
Other assets.............................................. 5,147 2,048
----------- ------------
Total assets........................................... $24,041,067 $137,075,599
=========== ============
Shareholder's equity...................................... 24,041,067 137,075,599
----------- ------------
Total liabilities and shareholder's equity............. $24,041,067 $137,075,599
=========== ============
Statements of Operations:
Amortization expense...................................... 991,901 5,267,872
----------- ------------
Net loss............................................... $ (991,901) $ (5,267,872)
=========== ============
</TABLE>
At present, Citadel License is the only subsidiary of the Company.
(15) DEFINED CONTRIBUTION PLAN
The Company has a defined contribution 401(k) plan for all employees who
are at least 21 years of age and have worked at least 1,000 hours in the year.
Under the 401(k) plan, employees can contribute up to 20% of their compensation,
subject to the maximum contribution allowed by the Internal Revenue Code.
Participants vest immediately in their contributions. The Company may make
discretionary contributions as approved by the Board of Directors. Participants'
rights to amounts contributed by the Company vest on a graded schedule over a
five-year period. During 1995, 1996, and 1997 the Company contributed $133,215,
$143,192 and $298,623, respectively, which represented a two percent matching of
employee contributions to the 401(k) plan.
(16) TRANSACTIONS WITH RELATED PARTIES
SALE--LEASEBACK
On December 29, 1995, the Company entered into a sale-leaseback transaction
with the principal shareholder of Citadel Communications. The Company sold an
airplane for its fair value of $1,275,000 to the shareholder resulting in a loss
of $74,327. The operating lease commenced on December 29, 1995 with monthly
payments of $17,250 due through December 31, 2001.
CONSULTING ARRANGEMENT
During the fiscal year ended December 31, 1996, a director of the Company
from 1996 to November 1997, provided financial consulting services to the
Company for which he was paid $83,520. On June 28, 1996, he was also granted an
option to purchase 12,000 shares of Common Stock at an exercise price of $5.72
per share. Such option is fully vested. The Company believes that such services
were provided
F-21
<PAGE> 174
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
to the Company on terms at least as favorable to the Company as could have been
obtained generally from unaffiliated parties.
LEGAL SERVICES
During each of the fiscal years ended December 31, 1995 and 1996, the
Company retained a law firm to represent the Company on various matters. A
shareholder of such firm was also a director of the Company in such years.
CITADEL COMMUNICATIONS STOCK OPTION PLAN
On June 28, 1996, Citadel Communications adopted the 1996 Equity Incentive
Plan ("Plan") pursuant to which the Board of Directors may grant stock options
to officers, employees and related parties. The Plan, which was subsequently
amended, as of March 31, 1998, authorizes grants of options to purchase up to
1,577,646 shares of authorized but unissued common stock which excludes those
options granted prior to the adoption of the Plan. Stock options are granted
with an exercise price equal to the common stock's fair market value at the date
of grant or such other exercise price as determined by the Board of Directors.
Stock options granted generally vest ratably over a five-year period, commencing
one year after the date of grant and expire on the earlier of ten years from the
date granted or termination of employment, or they will vest immediately, as
determined by the Board of Directors at the date of grant.
(17) LOCAL MARKETING AGREEMENTS
At December 31, 1997, the Company has local marketing agreements to market
stations WBHT-FM, WKQV-FM, WEMR-AM, WEMR-FM, WSGD-FM, WDLS-FM and WCDL-AM in
Wilkes-Barre/Scranton, Pennsylvania and stations KIZN-FM, KZMG-FM, KKGL-FM,
KQFC-FM and KBOI-AM in Boise, Idaho. The agreements principally provide for the
Company to supply specified programming to the brokered stations and enable the
sales staff of the Company to sell advertising time on the stations for fixed
fees to be paid by the Company. The agreements also provide the Company with the
option to purchase the stations. The Company's financial statements include the
broadcasting revenue and station operating expenses of the brokered stations.
The local marketing agreements enable the Company to extend or terminate
the agreements at the Company's option through August 1, 2002. The fees paid
under the local marketing agreements amounted to $350,000, $1,414,527 and
$1,936,139 for the years ended December 31, 1995, 1996 and 1997, respectively.
(18) JOINT SALES AGREEMENTS
On January 15, 1996, the Company entered into a joint sales agreement (JSA)
to sell advertising for radio stations KEYF-AM/FM, KUDY-AM and KKZX-FM in
Spokane, Washington and radio stations KVOR-AM, KSPZ-FM, KTWK-AM, and KVUU-FM in
Colorado Springs, Colorado. As stated in the JSA agreement, JSA revenue is
calculated as 60% of the broadcast cash flows of these radio stations and all
Company owned radio stations in these markets, with the exception of KKLI in
Colorado Springs which is not included in the JSA calculation.
On April 22, 1996, the Company entered into a JSA for radio station KENZ-FM
in Salt Lake City, Utah. The Company's financial statements include all sales
expenses for the station as well as revenue for the JSA fee calculated at 30% of
net revenue of the station. On February 14, 1997 the Company acquired KENZ-FM.
On July 3, 1997, the Company acquired all of the issued and outstanding
capital stock of Tele-Media Broadcasting Company ("Tele-Media"). As a result of
this acquisition, the Company assumed a Tele-Media
F-22
<PAGE> 175
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
JSA for radio station WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania. As stated
in the JSA agreement, JSA revenue is calculated as the sum of (i) a base monthly
payment of $5,000, and (ii) an additional monthly fee ranging from 5% to 8% of
revenues (as defined in the JSA agreement) based on monthly revenues of WKQV-AM
and of its simulcast station, WARM-AM.
(19) SUPPLEMENTAL FINANCIAL INFORMATION
The Company paid cash of $5,237,240, $7,065,546 and $6,703,052 for interest
for the years ended December 31, 1995, 1996 and 1997, respectively.
Barter revenue included in gross broadcasting revenue and barter expenses
included in station operating expenses amounted to $3,087,871, $3,335,024 and
$7,388,471, and $3,214,284, $3,029,665 and $7,062,822, for the years ended
December 31, 1995, 1996 and 1997, respectively.
A summary of additions and deductions related to the allowance for doubtful
accounts receivable for the years ended December 31, 1995, 1996 and 1997
follows:
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BALANCE AT
PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
------------ --------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1995............ $380,531 484,702 (350,700) 514,533
Year ended December 31, 1996............ 514,533 421,378 (314,857) 621,054
Year ended December 31, 1997............ 621,054 1,016,375 (828,487) 808,942
</TABLE>
(20) LITIGATION
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. Management believes that such litigation and claims
will be resolved without a material effect on the Company's financial position.
The Company has received two civil investigative demands ("CIDs") from the
Antitrust Division of the U.S. Department of Justice. One CID addresses the
Company's acquisition of station KRST in Albuquerque, New Mexico and the second
CID addresses the joint sales agreement for stations in Spokane, Washington and
Colorado Springs, Colorado. The Company has provided the requested information
in response to each CID, and at present has been given no indication from the
Department of Justice regarding its intended future actions.
(21) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. The following summary
presents a description of the methodologies and assumptions used to determine
such amounts.
Limitations
Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument; they
are subjective in nature and involve uncertainties, matters of judgment and,
therefore, cannot be determined with precision. These estimates do not reflect
any premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular instrument. Changes in assumptions
could significantly affect these estimates.
Since the fair value is estimated as of December 31, 1996 and 1997, the
amounts that will actually be realized or paid at settlement or maturity of the
instruments could be significantly different.
F-23
<PAGE> 176
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Cash Equivalents and Cash Held in Escrow
The carrying amount is assumed to be the fair value because of the
liquidity of these instruments.
Accounts Receivable and Notes Receivable
The carrying amount is assumed to be the fair value because of the
short-term maturity of the portfolio. The carrying amount of the non-current
note receivable is assumed to be the fair value because the note receivable was
converted by Citadel Communications into a portion of the purchase price of
Deschutes on January 1, 1997 at the carrying value.
Accounts Payable and Accrued Liabilities
The carrying amount approximates fair value because of the short-term
maturity of these instruments.
Notes payable, senior subordinated notes, exchangeable preferred stock, notes
payable to parent company and other long-term obligations
The fair value of the Company's notes payable, senior subordinated notes,
exchangeable preferred stock, notes payable to parent company and other
long-term obligations approximate the terms in the marketplace at which they
could be replaced. Therefore, the fair value approximates the carrying value of
these financial instruments.
In 1996, the Company entered into an interest rate swap agreement with a
financial institution in accordance with the terms of its Senior Credit
Facility. The fair value of the interest rate swap as of December 31, 1996 and
1997 was $190,000 and $3,700, respectively, as determined by the financial
institution, and represents an unrealized gain. The fair value of the interest
rate swap is the estimated amount that the financial institution would receive
or pay to terminate the swap agreement at the reporting date, taking into
account current interest rates and the current creditworthiness of the swap
counterparties.
(22) SUBSEQUENT EVENTS
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 will be accounted for by 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 will be accounted for by the purchase method of
accounting. In conjunction with the acquisition, the Company borrowed an
additional $11,000,000 on its Senior Credit Facility.
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 will be accounted for by the purchase method of
accounting. In conjunction with the acquisition, the Company borrowed an
additional $6,000,000 on its Senior Credit Facility.
F-24
<PAGE> 177
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1998
1997 (UNAUDITED)
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,684,991 $ 7,406,965
Cash held in escrow....................................... 718,561 --
Accounts receivable, less allowance for doubtful accounts
of $808,942 in 1997 and $1,280,553 in 1998............. 25,744,137 31,808,518
Notes receivable from related parties..................... 246,455 235,906
Prepaid expenses.......................................... 1,532,227 3,286,852
------------ ------------
Total current assets................................... 35,926,371 42,738,241
Property and equipment, net................................. 35,242,284 36,833,719
Intangible assets, net...................................... 268,689,516 290,405,370
Deposits for pending acquisitions........................... 650,000 --
Other assets................................................ 3,664,123 3,375,942
------------ ------------
$344,172,294 $373,353,272
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,001,194 $ 3,032,234
Accrued liabilities....................................... 9,060,129 8,367,647
Current maturities of other long-term obligations......... 271,352 281,617
------------ ------------
Total current liabilities.............................. 13,332,675 11,681,498
Notes payable, less current maturities...................... 90,084,059 18,726,126
Senior subordinated notes payable........................... 98,331,117 98,460,823
Other long-term obligations, less current maturities........ 1,012,649 1,011,050
Deferred tax liability...................................... 23,270,338 25,306,162
Exchangeable preferred stock................................ 102,009,531 112,964,761
Shareholder's equity:
Common stock, $.001 par value; authorized 136,300 shares,
issued and outstanding 40,000 shares................... 40 40
Additional paid-in capital................................ 42,296,316 138,243,294
Unrealized loss on hedging contract....................... -- (595,595)
Accumulated deficit....................................... (26,164,431) (32,444,887)
------------ ------------
Total shareholder's equity............................. 16,131,925 105,202,852
------------ ------------
$344,172,294 $373,353,272
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE> 178
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1998
----------- ------------
<S> <C> <C>
Gross broadcasting revenue.................................. $66,516,801 $109,240,243
Less agency commissions................................... (6,491,983) (10,418,869)
----------- ------------
Net broadcasting revenue............................... 60,024,818 98,821,374
Operating expenses:
Station operating expenses................................ 43,305,951 69,411,775
Depreciation and amortization............................. 9,563,084 20,005,073
Corporate general and administrative...................... 2,562,480 3,351,191
----------- ------------
Operating expenses................................ 55,431,515 92,768,039
Operating income............................................ 4,593,303 6,053,335
Nonoperating expenses (income):
Interest expense.......................................... 8,213,550 13,590,447
Other income, net......................................... (401,099) (94,149)
----------- ------------
Nonoperating expenses, net............................. 7,812,451 13,496,298
Income (loss) before income taxes........................... (3,219,148) (7,442,963)
Income tax (benefit)........................................ (105,168) (1,162,507)
----------- ------------
Net income (loss)........................................... (3,113,980) (6,280,456)
Dividend requirement for exchangeable preferred stock....... 3,275,693 10,822,375
----------- ------------
Net loss applicable to common shares........................ $(6,389,673) $(17,102,831)
=========== ============
Basic and diluted net loss per common share................. $ (159.74) $ (427.57)
=========== ============
Weighted average common shares outstanding.................. 40,000 40,000
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE> 179
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Net income (loss)............................... $(3,113,980) $(6,280,456)
Other comprehensive income:
Unrealized loss on hedging contract............. -- (595,595)
----------- -----------
Comprehensive income (loss)..................... $(3,113,980) $(6,876,051)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 180
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (3,113,980) $ (6,280,456)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 9,563,084 20,005,073
Amortization of debt issuance costs and debt
discounts............................................ 138,352 479,620
Bad debt expense....................................... 603,558 886,873
Deferred tax benefit................................... (105,168) (1,341,044)
Unrealized loss on interest rate swap.................. -- (595,595)
Changes in assets and liabilities, net of acquisitions:
Increase in accounts receivable and notes receivable from
related parties........................................ (5,388,399) (6,940,705)
Increase in prepaid expenses.............................. (446,599) (1,751,373)
(Increase) decrease in other assets....................... (266,368) 1,293,436
Increase in accounts payable.............................. (215,156) (968,960)
(Decrease) increase in accrued liabilities................ 3,367,485 (841,172)
------------- -------------
Net cash provided by operating activities.............. 4,136,809 3,945,697
Cash flows from investing activities:
Capital expenditures...................................... (1,478,410) (1,746,810)
Capitalized acquisition costs............................. (2,484,066) (1,963,106)
Cash paid to acquire stations............................. (128,187,024) (36,290,411)
Deposits for pending acquisitions......................... (1,200,000) 650,000
------------- -------------
Net cash used in investing activities.................. (133,349,500) (39,350,327)
Cash flows from financing activities:
Capital contribution from parent company.................. 20,008 48,734
Advances from parent company.............................. 1,000,000 --
Proceeds from notes payable............................... 12,000,000 34,999,999
Proceeds from senior subordinated notes payable........... 97,250,000 --
Proceeds from issuance of exchangeable preferred stock.... 96,850,000 --
Proceeds from initial public offering..................... -- 116,513,904
Cash payment of initial public offering costs............. -- (9,642,586)
Principal payments on notes payable....................... (39,000,000) (106,357,932)
Principal payments on other long-term obligations......... (408,840) (346,259)
Principal payments on advances from parent company........ (12,817,000) --
Payment of debt issuance costs............................ -- (89,256)
Cost of issuance of exchangeable preferred stock.......... (569,997) --
------------- -------------
Net cash provided by financing activities.............. 154,324,171 35,126,604
Net increase (decrease) in cash and cash equivalents........ 25,111,480 (278,026)
Cash and cash equivalents, beginning of period.............. 1,588,366 7,684,991
------------- -------------
Cash and cash equivalents, end of period.................... $ 26,699,846 $ 7,406,965
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 181
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Citadel
Broadcasting Company (the "Company") 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 nine months ended September 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.
On July 14, 1998, the Company signed an agreement to acquire KAAY-AM in
Little Rock, Arkansas for an aggregate purchase price of $5,000,000. 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.
On September 18, 1998, the Company acquired the assets of an internet
service provider, Digitalplanet, L.C., in Salt Lake City, Utah for an aggregate
purchase price of $225,000. The acquisition was accounted for using the purchase
method of accounting.
On September 29, 1998, the Company acquired the assets of an internet
service provider, Internet Technology Systems, Inc., in Salt Lake City, Utah for
an aggregate purchase price of $1,535,000. The acquisition was accounted for
using the purchase method of accounting.
In September 1998, the agreement entered into by the Company to sell
substantially all of the assets of its two FM radio stations in Johnstown,
Pennsylvania and its two FM and two AM radio stations in State College,
Pennsylvania was terminated.
F-29
<PAGE> 182
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PARENT COMPANY INITIAL PUBLIC OFFERING
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 $108,357,932, total proceeds to the selling
stockholders were $9,386,244 and total underwriting discounts and commissions
were $8,862,466.
(4) 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 10 1/4% 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>
SEPTEMBER 30, 1998
------------------
(UNAUDITED)
<S> <C>
Balance Sheets:
Intangible assets, net (broadcast licenses)............... $159,727,372
------------
Total assets........................................... $159,727,372
============
Shareholder's equity...................................... 159,727,372
------------
Total liabilities and shareholder's equity............. $159,727,372
============
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Statements of Operations:
Amortization expense............................... $2,873,989 $8,375,335
---------- ----------
Net loss...................................... $2,873,989 $8,375,335
========== ==========
</TABLE>
At present, Citadel License is the only subsidiary of the Company.
(5) SUBSEQUENT EVENTS
On October 8, 1998, the Company sold the assets of its one AM and three FM
stations in Quincy, Illinois for $2,250,000. A gain of approximately $0.8
million was recognized on the sale.
On October 9, 1998, the Company agreed to purchase the assets of 62nd
Street Broadcasting of Saginaw, L.L.C. in Saginaw, Michigan for an approximate
purchase price of $35,000,000. The acquisition will be accounted for using the
purchase method of accounting.
On October 15, 1998, the Company acquired the assets of an internet service
provider, In Quo, in Salt Lake City, Utah for an aggregate purchase price of
approximately $550,000. The acquisition was accounted for using the purchase
method of accounting.
F-30
<PAGE> 183
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 26, 1998, the Company acquired the assets of an internet service
provider, The Johnson Connection, in Salt Lake City, Utah for an aggregate
purchase price of $320,000. The acquisition was accounted for using the purchase
method of accounting.
On October 29, 1998, the Company agreed to purchase WHYL-AM and WHYL-FM in
Carlisle, Pennsylvania for an approximate purchase price of $4,250,000. The
acquisition will be accounted for using the purchase method of accounting.
On November 5, 1998, the Company agreed to purchase the stock and warrants
of Citywide Communications, Inc., which owns radio stations in Baton Rouge and
Lafayette, Louisiana, for an approximate purchase price of $34,500,000. The
acquisition will be accounted for using the purchase method of accounting.
On November 17, 1998, the Company acquired radio station KAAY-AM in Little
Rock, Arkansas for a purchase price of $5,100,000. The acquisition will be
accounted for using the purchase method of accounting. In conjunction with this
acquisition, the Company sold the assets of KRNN-AM in Little Rock, Arkansas for
$200,000.
The Company sold $115,000,000 million principal amount of its 9 1/4% Senior
Subordinated Notes due 2008 on November 19, 1998 in order to finance certain
acquisitions, repay certain indebtedness and provide cash for working capital
purposes.
On November 23, 1998, the Company agreed to purchase the assets of Wicks
Radio Group, which owns radio Stations in Charleston, South Carolina,
Binghamton, New York, and Muncie and Kokomo, Indiana, for an approximate
purchase price of $77,000,000. The acquisition will be accounted for using the
purchase method of accounting.
On December 8, 1998, the Company acquired the assets of an internet service
provider, The Friendly Net, LLC, in Salt Lake City, Utah for an aggregate
purchase price of $93,000. The acquisition was accounted for using the purchase
method of accounting.
On January 4, 1999, the Company acquired radio station WBHT-FM in
Wilkes-Barre, Pennsylvania for an aggregate purchase price of $1,263,000. The
acquisition will be accounted for using the purchase method of accounting. Prior
to the acquisition, the Company had operated WBHT-FM under a local marketing
agreement since July 3, 1997.
F-31
<PAGE> 184
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Deschutes River Broadcasting, Inc.:
We have audited the accompanying consolidated balance sheets of Deschutes
River Broadcasting, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Deschutes
River Broadcasting, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Portland, Oregon
February 14, 1997
F-32
<PAGE> 185
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ -- $ 823,968
Accounts receivable, less allowance for doubtful accounts
of $49,952 and $122,714 at December 31, 1995 and 1996,
respectively........................................... 1,283,847 1,856,984
Prepaid expenses and other current assets................. 238,868 367,621
Current portion of note receivable........................ -- 156,000
----------- -----------
Total current assets................................... 1,522,715 3,204,573
Intangible assets, net (note 4)............................. 5,281,109 14,142,899
Long-term portion of note receivable........................ -- 143,000
Property and equipment, net (notes 3 and 5)................. 3,606,655 3,153,930
Deposits.................................................... 6,542 3,026
----------- -----------
$10,417,021 $20,647,428
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft............................................ $ 23,133 $ --
Line of credit (notes 7 and 13)........................... 418,168 --
Accounts payable.......................................... 185,071 467,873
Accrued compensation and commissions...................... 313,734 542,502
Other accrued expenses.................................... 128,510 147,985
Current portion of long-term debt (notes 7 and 13)........ 485,983 --
Accrued interest payable (notes 6, 12 and 13)............. 335,501 255,001
----------- -----------
Total current liabilities.............................. 1,890,100 1,413,361
Advance (note 13)........................................... -- 9,123,310
Note payable (notes 6 and 13)............................... -- 8,867,000
Long-term debt, less current portion (notes 7 and 13)....... 2,886,033 --
Subordinated notes payable (notes 7, 12 and 13)............. 3,156,998 --
Other long-term liabilities................................. 38,751 47,735
----------- -----------
Total liabilities................................. 7,971,882 19,451,406
----------- -----------
Stockholders' equity (notes 9 and 13):
Convertible preferred stock, authorized 5,000,000 shares;
issued at stated value of $1 per share:
Series A preferred, no par value, issued and
outstanding 643,000 shares............................ 643,000 643,000
Series B preferred, no par value, issued and
outstanding 1,612,000 shares.......................... 1,612,000 1,612,000
Series C preferred, no par value, issued and
outstanding 592,000 shares............................ 592,000 592,000
Series D preferred, no par value, issued and
outstanding 95,000 shares............................. 95,000 95,000
(Aggregate liquidation preference of $3,172,962 and
$3,426,798 at December 31, 1995 and 1996,
respectively)
Common stock, authorized 10,000,000 shares; no par value;
-0- and 1,096,902 shares issued and outstanding at
December 31, 1995 and 1996, respectively............... -- 136,471
Accumulated deficit....................................... (496,861) (1,882,449)
----------- -----------
Total stockholders' equity........................ 2,445,139 1,196,022
----------- -----------
Commitments and contingencies (notes 9, 10, 12 and 13)...... $10,417,021 $20,647,428
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE> 186
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Revenues:
Net broadcasting revenues................................. $6,845,107 $ 8,843,074
---------- -----------
Operating expenses:
Station operating expenses:
Selling, promoting, programming and engineering........ 4,053,145 5,554,632
General and administrative............................. 1,297,835 1,780,584
Corporate general and administrative expenses............. 374,158 488,831
Management fees (note 12)................................. 171,128 215,938
Depreciation and amortization............................. 765,200 1,173,349
---------- -----------
Income (loss) from operations..................... 183,641 (370,260)
---------- -----------
Nonoperating income (expenses):
Interest expense (notes 12 and 13)........................ (656,897) (1,143,893)
Gain on sale of assets.................................... -- 97,097
Other, net................................................ 1,591 30,162
Net trade income (expense)................................ (22,934) 1,306
---------- -----------
Nonoperating expenses, net........................ (678,240) (1,015,328)
---------- -----------
Loss before income taxes.......................... (494,599) (1,385,588)
Income taxes (note 11)...................................... -- --
---------- -----------
Net loss.......................................... $ (494,599) $(1,385,588)
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE> 187
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK NOTE TOTAL
---------------------- --------------------- ACCUMULATED RECEIVABLE -- STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT DEFICIT OFFICER EQUITY
--------- ---------- --------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994.................... 643,000 $ 643,000 102,000 $ 102,000 $ (2,262) $(42,000) $ 700,738
Repayment of note
receivable -- officer... -- -- -- -- -- 42,000 42,000
Issuance of common
stock................ -- -- 95,000 95,000 -- -- 95,000
Conversion of common
stock to preferred
stock................ 197,000 197,000 (197,000) (197,000) -- -- --
Issuance of preferred
stock................ 2,102,000 2,102,000 -- -- -- -- 2,102,000
Net loss................ -- -- -- -- (494,599) -- (494,599)
--------- ---------- --------- --------- ----------- -------- -----------
Balance, December 31,
1995.................... 2,942,000 2,942,000 -- -- (496,861) -- 2,445,139
Issuance of common
stock................ -- -- 91,649 126,419 -- -- 126,419
Exercise of common stock
warrants............. -- -- 1,005,253 10,052 -- -- 10,052
Net loss................ -- -- -- -- (1,385,588) -- (1,385,588)
--------- ---------- --------- --------- ----------- -------- -----------
Balance, December 31,
1996.................... 2,942,000 $2,942,000 1,096,902 $ 136,471 $(1,882,449) $ -- $ 1,196,022
========= ========== ========= ========= =========== ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE> 188
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (494,599) $(1,385,588)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 314,319 388,284
Amortization........................................... 450,881 785,065
Increase in allowance for doubtful accounts............ 33,500 72,762
Gain on sale of assets................................. -- (97,097)
Changes in assets and liabilities, net of effect of
acquisitions:
Increase in accounts receivable...................... (1,150,810) (645,898)
Increase in prepaid expenses and other current
assets.............................................. (86,257) (100,767)
Increase in accounts payable and accrued expenses.... 414,911 315,973
Increase (decrease) in accrued interest payable...... 314,800 (59,287)
----------- -----------
Net cash used in operating activities............. (203,255) (726,553)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets.............................. -- 1,150,000
Capital expenditures for property and equipment........... (171,177) (237,305)
Capital expenditures for property and equipment related to
acquisitions........................................... (2,898,359) (744,717)
Purchase of intangible assets............................. (5,072,508) (9,532,047)
Purchase of note receivable............................... -- (273,416)
Other..................................................... 11,454 2,340
----------- -----------
Net cash used in investing activities............. (8,130,590) (9,635,145)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of note payable.................... -- 8,867,000
Proceeds from advance..................................... -- 9,123,310
Increase (decrease) in bank overdraft..................... 22,992 (23,133)
Proceeds from note receivable--officer.................... 42,000 --
Proceeds from issuance of long-term debt.................. 3,306,000 --
Principal payments on long-term debt...................... (284,649) (3,372,016)
Proceeds from issuance of subordinated debt............... 2,710,998 2,600,000
Principal payments on subordinated debt................... -- (5,756,998)
Net borrowings under line of credit....................... 315,719 (418,168)
Proceeds from exercise of common stock warrants........... -- 10,052
Proceeds from issuance of preferred stock................. 2,197,000 --
Proceeds from issuance of common stock.................... -- 126,419
Increase in other long-term liabilities................... 23,785 29,200
----------- -----------
Net cash provided by financing activities......... 8,333,845 11,185,666
----------- -----------
Net increase in cash and cash equivalents......... -- 823,968
Cash and cash equivalents, beginning of year................ -- --
----------- -----------
Cash and cash equivalents, end of year...................... $ -- $ 823,968
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 321,396 $ 1,244,393
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE> 189
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
(1) NATURE OF BUSINESS AND ORGANIZATION
Deschutes River Broadcasting, Inc. was formed in 1994 and is a holding
company which wholly-owns eight subsidiaries located in Oregon, Washington and
Montana. The subsidiaries own and operate radio stations and hold Federal
Communications Commission (FCC) licenses.
The subsidiary companies which own and operate radio stations are Deschutes
River Broadcasting of Oregon, Inc., Deschutes River-Tri-Cities Operating
Company, Inc., Deschutes River Broadcasting of Billings, Inc. and Deschutes
River Broadcasting of Bozeman, Inc. The subsidiary companies which hold FCC
licenses are DRB Oregon License, Inc., Deschutes River-Tri-Cities Broadcasting,
Inc., DRB Billings License, Inc. and DRB Bozeman License, Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany items
and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
note receivable, accounts payable and other accrued expenses, accrued interest,
advance, note payable and the line of credit approximate fair value because of
the short-term or intercompany nature of these instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(d) Cash and Cash Equivalents
The Company considers all investments with a maturity of three months or
less at date of purchase to be a cash equivalent.
(e) Intangible Assets
Intangible assets are recorded at cost and amortized using the
straight-line method over the expected periods to be benefited, which range from
three to fifteen years. The Company assesses the recoverability of these
intangible assets by determining whether the balance can be recovered through
undiscounted future operating cash flows of the acquired asset. The amount of
asset impairment, if any, is measured based on
F-37
<PAGE> 190
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of the asset will be impacted if estimated future operating cash
flows are not achieved.
(f) Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated lives of the respective assets, which
range from five to twenty years. Maintenance and repairs are charged to
operations as incurred.
(g) Revenue
Net broadcast revenue is presented net of agency commissions and is
recognized when the advertisements are broadcast.
(h) Trade Transactions
Revenue from trade transactions (advertising provided in exchange for goods
and services) is recognized as income when advertisements are broadcast and
trade expense is recognized when merchandise is consumed or services are
performed. An asset and liability are recorded at the fair market value of the
goods or services received.
(i) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income disclosure for
employee stock option grants as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.
(j) Income Taxes
The Company accounts for taxes on the asset and liability method. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Deferred income taxes are measured
using the enacted tax rates and laws that are anticipated to be in effect when
the differences are expected to reverse.
(k) Reclassifications
Certain 1995 amounts have been reclassified to conform with current year
presentation.
(3) ACQUISITIONS
During 1995, the Company acquired two stations in Medford, Oregon for
approximately $1.9 million and six stations in the Montana markets combined for
approximately $5.4 million. The acquisitions were accounted for by the purchase
method of accounting and, accordingly, the purchase price was allocated to
F-38
<PAGE> 191
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
property and equipment and intangible assets based on their fair values at the
date of acquisition. The purchase price, including acquisition costs of $564,000
was allocated as follows:
<TABLE>
<S> <C>
Property and equipment........................... $2,600,000
Intangible assets................................ 5,264,000
----------
$7,864,000
==========
</TABLE>
During 1996, the Company acquired ten new radio stations in various
markets. The acquisitions included three stations in Eugene, Oregon, four
stations in Medford, Oregon, two stations in Billings, Montana and one station
in Tri-Cities, Washington. The purchase prices were approximately $7.0 million,
$2.0 million, $1.35 million and $500,000, respectively.
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to property and equipment,
intangible assets and payables based on their fair values at the date of
acquisition. The purchase price, including acquisition costs of $112,266 was
allocated as follows:
<TABLE>
<S> <C>
Property and equipment.......................... $ 806,000
Intangible assets............................... 10,206,028
Payables assumed................................ (49,762)
-----------
$10,962,266
===========
</TABLE>
During 1996, the Company disposed of three stations in Bozeman, Montana for
approximately $750,000. A gain of approximately $285,000 was recognized on the
sale.
The consolidated financial statements include the operating results of each
business from the date of acquisition. Pro forma unaudited consolidated
operating results of the Company and the acquired stations for the years ended
December 31, 1995 and 1996, assuming the acquisitions and dispositions had been
made as of January 1, 1995 and 1996, are summarized below:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Net broadcasting revenues......................... $11,316,910 $11,442,108
Income (loss) from operations..................... 423,053 (436,871)
Net loss.......................................... (1,188,707) (2,215,299)
</TABLE>
These pro forma results have been prepared for comparative purposes only
and include certain adjustments for operational expenses that the Company will
not incur in its operation of the stations, for interest expense that would have
been incurred to finance the purchases, additional depreciation expense based on
the fair market value of the property and equipment acquired, and the
amortization of intangibles arising from the transactions. The pro forma
financial information is not necessarily indicative of the results of operations
had the acquisitions and dispositions been consummated as of January 1, 1995 and
1996 or of future results of operations of the consolidated entities.
F-39
<PAGE> 192
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INTANGIBLE ASSETS, NET
Intangible assets, net are as follows at December 31:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ---------- -----------
<S> <C> <C> <C>
Goodwill.................................. 15 years $2,811,354 $ 5,037,425
FCC licenses.............................. 15 years 2,325,000 9,474,000
Covenants not to compete.................. 3-5 years 295,000 456,000
Organizational costs...................... 5 years 255,319 252,970
Deferred financing costs.................. Loan term 88,455 --
---------- -----------
5,775,128 15,220,395
Less accumulated amortization............. 494,019 1,077,496
---------- -----------
Intangible assets, net............... $5,281,109 $14,142,899
========== ===========
</TABLE>
(5) PROPERTY AND EQUIPMENT, NET
Property and equipment, net are as follows at December 31:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
------------- ---------- ----------
<S> <C> <C> <C>
Land................................. -- $ 312,764 $ 312,764
Buildings............................ 20 years 497,430 297,431
Leasehold improvements............... Life of lease 130,000 13,000
Tower and transmitter equipment...... 13 years 1,664,710 1,521,586
Vehicles............................. 5 years 13,260 28,724
Studio equipment..................... 7 years 1,089,163 1,153,715
Furniture and fixtures............... 5 - 7 years 236,859 352,179
---------- ----------
3,944,186 3,679,399
Less accumulated depreciation and
amortization....................... 337,531 525,469
---------- ----------
Property and equipment,
net...................... $3,606,655 $3,153,930
========== ==========
</TABLE>
(6) NOTE PAYABLE
During 1996, in contemplation of the merger discussed at note 13, the
Company obtained financing from Citadel Communications Corporation (CCC) in the
form of an $8.9 million note payable to assist in making current year
acquisitions (see note 3). The note bears interest at the higher of the Euro
dollar rate plus 300 basis points or 9% and is payable quarterly. Accrued
interest at December 31, 1996 was approximately $255,000. The note is secured by
the assets of the acquired stations and stock of the subsidiary corporations
that own the stations acquired with the note proceeds. The note payable was
required to be repaid by July 1, 1997 if the merger did not occur. On the date
of the merger, the note payable was reclassified as an intercompany liability,
therefore it is classified as a non-current liability at December 31, 1996.
F-40
<PAGE> 193
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) LINE OF CREDIT, LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE
At December 31, the Company had the following debt instruments outstanding:
<TABLE>
<CAPTION>
1995 1996
---------- ------
<S> <C> <C>
Line of credit, revolving; rate of prime plus 1.5%..... $ 418,168 $ --
Bank note payable; variable and fixed rates
of 8.5% to 10%....................................... 3,372,016 --
Subordinated notes payable; rate of 11%................ 3,156,998 --
---------- ------
Total........................................ $6,947,182 $ --
========== ======
</TABLE>
Borrowings under the line of credit and bank note payable were
collateralized by substantially all assets of the Company, excluding assets
discussed in note 6.
In contemplation of the merger discussed at note 13, all debt instruments
were paid off on December 31, 1996. As the instruments were paid off by December
31, 1996, the Company did not have to comply with any financial covenants at or
for the year then ended.
(8) LEASES
The Company and its subsidiaries are obligated under certain noncancelable
operating leases for which future minimum payments are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997...................................................... $ 309,542
1998...................................................... 243,062
1999...................................................... 207,604
2000...................................................... 189,175
2001...................................................... 176,279
Subsequent to 2001........................................ 379,705
----------
$1,505,367
==========
</TABLE>
Rental expense, principally for office space, equipment and tower rentals,
amounted to $145,000 and $278,000 for the years ended December 31, 1995 and
1996.
(9) STOCKHOLDERS' EQUITY
Conversion of Stock at Time of Merger
As discussed in note 13, all equity instruments of the Company; preferred
stock, common stock and stock options, were converted into CCC equity
instruments on January 1, 1997, the merger date.
Convertible Preferred Stock
Each share of Deschutes River Broadcasting Series A, B, C and D preferred
stock is convertible at any time into common stock on a one-for-one basis
(subject to certain adjustments). Conversion of each series of preferred stock
is automatic upon the exchange of 51% or more of each series of preferred stock
into common stock.
Dividends are payable when and as declared by the Board of Directors and
are not cumulative. Dividends must be first paid on preferred stock before
amounts are paid on common stock. No dividends were declared or paid during 1995
or 1996.
F-41
<PAGE> 194
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Upon liquidation, dissolution, or winding up of the Company, holders of
convertible preferred stock have preference and priority over common shares for
payment out of the assets of the Company or proceeds thereof available for
distribution to stockholders of $1 per share plus a liquidation preference,
which accrues at an annual compounded rate of 8%.
Common Stock
At December 31, 1995 and 1996, the Company had reserved shares of common
stock for issuance as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Conversion of preferred stock....................... 2,942,000 2,942,000
Issuance of warrants................................ 1,005,253 --
Issuance to employees, officers, directors and
consultants under stock incentive plan............ 708,843 708,843
--------- ---------
4,656,096 3,650,843
========= =========
</TABLE>
Stock Incentive Plan
During 1995, the Company adopted a Stock Incentive Plan (the Plan) for
selected employees, officers, directors and consultants. Under the terms of the
Plan, the option price is determined by the Board of Directors (the Board) at
the time the option is granted. The options generally expire ten years from date
of grant and are exercisable as determined by the Board. At December 31, 1995,
no shares had been granted under the Plan.
During 1996, the Company granted 246,569 options at $.60 and 332,926
options at $2.10. None of the options were exercised during the current year.
The options generally are either 100% vested at the time of grant or become 100%
vested at the time of a merger (see note 13). At December 31, 1996, 579,495
options were outstanding at a weighted average exercise price of $1.46, of which
238,095 options with an exercise price of $2.10 were exercisable.
During 1995, the Financial Accounting Standards Board issued "Accounting
for Stock-Based Compensation" (SFAS 123) which defines a fair value based method
of accounting for an employee stock option and similar equity instruments.
As permitted under SFAS 123, the Company has elected to continue to account
for its stock-based compensation plans under APB Opinion No. 25. The Company has
computed, for pro forma disclosure purposes, the value of all options granted
during 1996 using the minimum value method as prescribed by SFAS 123 using the
following assumptions for grants:
<TABLE>
<S> <C>
Risk-free interest rate..................... 6.04%
Expected dividend yield..................... 0%
Expected lives.............................. 5 years
</TABLE>
Using the minimum value methodology, the total value of options granted
during 1996 was $223,000 which would be amortized on a pro forma basis over the
vesting period of the options (one to five years). The weighted average fair
value per share of options granted during 1996 was $.38. If the Company had
F-42
<PAGE> 195
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounted for its stock-based compensation plans in accordance with SFAS 123,
the Company's net loss would approximate the pro forma disclosure below for the
year ended December 31, 1996:
<TABLE>
<CAPTION>
AS PRO
REPORTED FORMA
---------- ----------
<S> <C> <C>
Net loss.................................. $1,385,588 $1,534,861
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure is not
indicative of future amounts.
Warrants
During 1995, the Company granted 1,005,253 warrants to purchase common
stock to subordinated debt holders at a price of $.01. All warrants granted in
1995 were exercised in 1996 for 1,005,253 shares of common stock. Management
determined that the value associated with these warrants at the date of grant
was not material.
During 1996, the Company granted 290,381 warrants to purchase common stock
to subordinated debt holders at a price of $.01. The warrants were to become
exercisable on January 1, 1997 if the warrant holders' portion of the
subordinated debt was not repaid by December 31, 1996. Due to the contingent
nature of these warrants, no value was assigned at the grant date. These
warrants expired on December 31, 1996, when the subordinated debt was repaid
(see notes 7 and 13).
(10) SALARY SAVINGS AND RETIREMENT PLAN
The Company has a salary savings and retirement plan. The plan covers
primarily all officers and employees of the Company who meet prescribed age and
service requirements. Employees may contribute up to 15% of their compensation.
Matching contributions are determined at the discretion of the Board of
Directors. There were no Company contributions made to the plan during the years
ended December 31, 1995 or 1996.
(11) INCOME TAXES
No income tax benefit was recorded by the Company in 1995 and 1996. Income
tax benefit for the year ended December 31, 1996 differed from the amounts
computed by applying the U.S. Federal income tax rate of 34% to pretax income
primarily due to an increase in the valuation allowance.
F-43
<PAGE> 196
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1996 are presented below:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Federal and state net operating loss carryforwards........ $246,553 $912,219
Allowance for doubtful accounts........................... 19,160 48,983
Payroll accrual........................................... 21,403 2,100
-------- --------
Total gross deferred tax assets................... 287,116 963,302
Less valuation allowance.................................. 190,338 735,645
-------- --------
Net deferred tax assets........................... 96,778 227,657
-------- --------
Deferred tax liabilities:
Book versus tax basis accumulated depreciation............ 96,778 227,657
-------- --------
Total gross deferred tax liabilities.............. 96,778 227,657
-------- --------
Net deferred tax asset............................ $ -- $ --
======== ========
</TABLE>
As of December 31, 1996, the Company had a consolidated net operating loss
carryforward of approximately $2,280,000 for consolidated federal income tax
reporting purposes available to offset future taxable income through the year
2011. Based on the Company's history of operating losses, the more likely than
not criteria for recognizing the tax benefit primarily associated with the net
operating losses cannot be met and, therefore, the Company has recorded a
valuation allowance to the extent of net deferred tax assets.
(12) RELATED PARTY TRANSACTIONS
The preferred stockholders are considered related parties of the Company.
At December 31, 1995, the Company had approximately $3.2 million in notes
payable to subordinated debt holders and $308,000 in accrued interest payable.
During 1996, the Company borrowed an additional $2.6 million in subordinated
debt from the preferred stockholders. Interest expense on the subordinated debt
for fiscal 1995 and 1996 was $308,000 and $548,000, respectively.
One of the preferred stockholders provides certain management services to
the Company. Management fees accrued at December 31, 1995 and 1996 were
approximately $21,000 and $48,000 and expense for the years then ended was
approximately $171,000 and $216,000, respectively.
As part of the merger discussed in note 13, all subordinated debt and
accrued interest was repaid and management services will no longer be provided
to the Company.
(13) SUBSEQUENT EVENTS
The Company was merged with and into a wholly-owned subsidiary of CCC
effective 12:01 a.m. on January 1, 1997. Effective with the merger, the Company
(and its wholly-owned subsidiaries) ceased to exist. All of the Company's equity
instruments, preferred stock, common stock and stock options, existing at
December 31, 1996, were converted into CCC equity instruments at the conversion
multiple defined in the merger agreement, at a per share conversion rate of
.1222948. All options outstanding at December 31, 1996 became fully vested at
the time of the merger. To effectuate the merger, CCC made an advance to the
Company of approximately $9.1 million on December 31, 1996 to pay off
subordinated debt, line of credit, long-term debt and other accrued expenses of
the Company. The advance is considered a non-current liability at December 31,
1996 as the obligation was reclassified as an intercompany liability on the date
of the merger.
F-44
<PAGE> 197
DELOITTE &
TOUCHE LLP
- ----------- -----------------------------------------------------------------
2500 One PPG Place Telephone: (412) 338-7200
Pittsburgh, Pennsylvania 15222-5401 Facsimile: (412) 338-7380
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Tele-Media Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Tele-Media
Broadcasting Company and its partnership interests (collectively, the
"Companies" -- see Note 1) as of December 31, 1995 and 1996, and the related
consolidated statements of operations, deficiency in net assets and cash flows
for each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Companies as of December
31, 1995 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, at
December 31, 1996, the Companies were not in compliance with the terms of a debt
agreement.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Deloitte & Touche LLP
March 28, 1997
- -----------------
DELOITTE & TOUCHE
TOHMATSU
INTERNATIONAL
- -----------------
F-45
<PAGE> 198
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,904,258 $ 2,343,395
Accounts receivable:
Nonbarter--less allowance for doubtful accounts of
$531,000 and $612,000................................. 4,599,032 5,262,484
Barter--net............................................... 363,394 304,244
Other current assets...................................... 157,998 739,831
----------- -----------
Total current assets................................... 7,024,682 8,649,954
----------- -----------
Property, plant and equipment:
Land...................................................... 1,372,571 1,372,571
Buildings and improvements................................ 2,357,447 2,369,520
Broadcasting equipment.................................... 10,653,182 11,169,533
----------- -----------
14,383,200 14,911,624
Less accumulated depreciation............................. 6,916,068 8,259,285
----------- -----------
Property, plant and equipment--net..................... 7,467,132 6,652,339
----------- -----------
Intangibles--Net of accumulated amortization................ 29,036,404 26,904,288
----------- -----------
Other noncurrent assets..................................... 95,641 16,331
----------- -----------
$43,623,859 $42,222,912
=========== ===========
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Accounts payable and other accrued expenses............... $ 1,466,387 $ 2,019,269
Accrued interest.......................................... 999,880 1,895,889
Accrued sales commissions................................. 330,561 358,513
Amounts due to affiliates--net............................ 2,057,456 2,818,179
Current portion of long-term debt......................... 3,106,208 37,528,396
----------- -----------
Total current liabilities.............................. 7,960,492 44,620,246
----------- -----------
Long-term liabilities:
Long-term debt--less current portion...................... 64,417,869 32,382,419
Other..................................................... 32,772 31,266
----------- -----------
Total long-term liabilities............................ 64,450,641 32,413,685
----------- -----------
Redeemable stock warrants................................... 750,950 1,644,000
----------- -----------
Deficiency in net assets:
Common stock, voting, $0.01 par value per share; 25,000
shares authorized, 15,000 shares outstanding........... 150 150
Common stock, nonvoting, $0.01 par value per share; 10,000
shares authorized, none outstanding.................... -- --
Additional paid-in capital................................ 6,924,445 6,924,445
Deficit................................................... (36,462,819) (43,379,614)
----------- -----------
Deficiency in net assets............................... (29,538,224) (36,455,019)
----------- -----------
$43,623,859 $42,222,912
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-46
<PAGE> 199
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Local advertising................................. $17,637,256 $18,539,201 $20,968,055
National advertising.............................. 4,867,471 4,957,359 4,618,104
Barter............................................ 3,561,009 3,646,290 3,451,849
Other............................................. 576,607 511,827 370,932
----------- ----------- -----------
26,642,343 27,654,677 29,408,940
Less agency commissions........................... 2,648,183 2,811,738 2,984,574
----------- ----------- -----------
Net revenues.............................. 23,994,160 24,842,939 26,424,366
----------- ----------- -----------
Selling, general and administrative, programming,
barter and technical expenses:
Selling........................................ 4,719,103 5,154,097 5,001,176
General and administrative..................... 3,552,604 4,088,306 4,674,883
Programming.................................... 3,882,737 4,391,676 4,858,386
Barter......................................... 3,485,969 3,520,426 3,513,231
Technical...................................... 176,459 224,975 245,524
----------- ----------- -----------
15,816,872 17,379,480 18,293,200
----------- ----------- -----------
Operating income before management fees and
depreciation and amortization..................... 8,177,288 7,463,459 8,131,166
----------- ----------- -----------
Management fees and depreciation and amortization:
Management fees -- affiliates..................... 844,579 741,876 804,410
Depreciation and amortization..................... 4,690,730 3,708,809 3,493,509
----------- ----------- -----------
5,535,309 4,450,685 4,297,919
----------- ----------- -----------
Operating income.................................... 2,641,979 3,012,774 3,833,247
Interest expense.................................... 6,093,333 9,132,133 10,750,042
----------- ----------- -----------
Loss before extraordinary item...................... (3,451,354) (6,119,359) (6,916,795)
Extraordinary item -- Loss on extinguishment of
debt.............................................. (1,341,348) -- --
----------- ----------- -----------
Net loss.................................. $(4,792,702) $(6,119,359) $(6,916,795)
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-47
<PAGE> 200
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF DEFICIENCY IN NET ASSETS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN
SHARES AMOUNT CAPITAL DEFICIT
------ ------ ---------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994................................. 2,000 $ 20 $7,125,383 $(25,550,758)
Stock dividend......................................... 13,000 130 (130) --
Capital contributions -- cash.......................... -- -- 1,000 --
Distributions.......................................... -- -- (400,000) --
Contribution of management fees -- affiliates.......... -- -- 198,192 --
Net loss............................................... -- -- -- (4,792,702)
------ ---- ---------- ------------
Balance, December 31, 1994............................... 15,000 150 6,924,445 (30,343,460)
Net loss............................................... -- -- -- (6,119,359)
------ ---- ---------- ------------
Balance, December 31, 1995............................... 15,000 150 6,924,445 (36,462,819)
Net loss............................................... -- -- -- (6,916,795)
------ ---- ---------- ------------
Balance, December 31, 1996............................... 15,000 $150 $6,924,445 $(43,379,614)
====== ==== ========== ============
</TABLE>
See notes to consolidated financial statements.
F-48
<PAGE> 201
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(4,792,702) $(6,119,359) $(6,916,795)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 4,690,730 3,708,809 3,493,509
Interest deferral...................................... 1,343,351 5,114,170 4,932,565
Amortization of loan origination fees.................. -- 311,916 300,795
Management fees--affiliates............................ 198,192 741,876 804,410
Provision for losses on accounts receivable............ 376,732 367,522 387,291
Loss on write-off of intangible assets................. 159,431 -- --
Net barter transactions................................ (75,040) (125,864) 61,382
Increase in fair value of redeemable stock warrants.... -- -- 893,050
Other.................................................. 90,867 (36,420) (78,760)
Changes in operating assets and liabilities:
Accounts receivable--nonbarter....................... (437,520) (938,846) (1,050,743)
Other current assets................................. (249,489) 233,807 (581,833)
Accounts payable and other accrued expenses.......... (96,561) 281,957 552,882
Affiliates activity--net............................. 1,148,600 (407,409) (43,687)
Accrued interest..................................... 35,113 136,081 896,009
Accrued sales commissions............................ (38,885) (6,891) 27,952
----------- ----------- -----------
Net cash provided by operating activities......... 2,352,819 3,261,349 3,678,027
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures...................................... (428,423) (520,440) (468,631)
Purchase of radio stations................................ (1,900,000) (5,100,000) (65,000)
Other..................................................... (4,809) 6,124 6,000
----------- ----------- -----------
Net cash used in investing activities............. (2,333,232) (5,614,316) (527,631)
----------- ----------- -----------
Cash flows from financing activities:
Capital contributions..................................... 1,000 -- --
Borrowings................................................ 61,334,446 5,433,347 95,144
Payments of long-term debt................................ (57,323,706) (2,932,546) (2,640,971)
Loan origination fees and other intangible assets......... (2,668,295) (271,271) (163,764)
Sale of redeemable stock warrants......................... 750,950 -- --
Distributions to stockholders............................. (400,000) -- --
Other..................................................... (12,180) (2,178) (1,668)
----------- ----------- -----------
Net cash provided by (used in) financing
activities...................................... 1,682,215 2,227,352 (2,711,259)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 1,701,802 (125,615) 439,137
Cash and cash equivalents, beginning of year................ 328,071 2,029,873 1,904,258
----------- ----------- -----------
Cash and cash equivalents, end of year...................... $ 2,029,873 $ 1,904,258 $ 2,343,395
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-49
<PAGE> 202
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND BUSINESS
Tele-Media Broadcasting Company (the "Company" or "TMBC") was incorporated
in 1988 under the name TMZ Broadcasting Company ("TMZ"). In April 1994, TMZ
changed its name to Tele-Media Broadcasting Company. Robert E. Tudek and Everett
I. Mundy each own 50% of the outstanding shares of TMBC. TMBC operates radio
stations principally in midsize markets in the eastern United States and in
Illinois.
In May 1989, TMZ acquired all of the outstanding common stock of Eastern
Broadcasting Company ("Eastern") and its wholly-owned subsidiaries: Lehigh
Valley Broadcasting ("Lehigh"), Penn Broadcasting Corporation ("Hershey"),
Providence Broadcasting Corporation ("Providence"), Quincy Communications
Corporation ("Quincy") and State College Communications Corporation ("State
College"). TMZ retained the assets acquired from State College and contributed
the assets acquired from the remaining subsidiaries of Eastern to limited
partnerships with the same names which TMZ had formed to facilitate the
acquisition. TMZ owned between a 95% and 99% general partnership interest in
each of the limited partnerships. With the exception of Quincy, the limited
partnership interests were owned by the shareholders of TMZ and employees of the
Companies (hereinafter defined). The limited partnership interest in Quincy (1%)
was owned by Tele-Media Holding Corporation ("Holding"), which is owned by
Messrs. Tudek and Mundy.
In April 1993, Messrs. Tudek and Mundy formed Tele-Media Broadcasting
Company of America ("America Corporation"), which purchased substantially all of
the assets of two radio stations in Rhode Island, WPRO(AM) and WPRO-FM, for
approximately $6 million, and in May 1993 formed Tele-Media Broadcasting Company
of Johnstown/Altoona ("Johnstown/Altoona Corporation"), which purchased all of
the common stock of Cambria County Broadcasting Company ("CCBC"). CCBC operated
radio station WIYQ(FM). Simultaneous with the purchase, CCBC was merged into
Johnstown/Altoona Corporation with Johnstown/Altoona Corporation being the
surviving corporation. WIYQ(FM)'s call letters were subsequently changed to
WQKK-FM.
In April 1994, Tele-Media Broadcasting Company of Cambria County ("Cambria
County Corporation") was formed by the shareholders of TMBC. Cambria County
Corporation purchased substantially all of the assets of a radio station,
WGLU(FM), in the Johnstown, PA market for approximately $1.9 million.
In June 1994, the companies were restructured in order to facilitate a
refinancing (see Note 4). In order to accomplish the restructuring, Tele-Media
Broadcasting Operating Company Limited Partnership ("Tele-Media Operating") was
formed by TMBC. Holding distributed its 1% limited partnership interest in
Quincy to the shareholders of TMBC. TMBC contributed its general partnership
interests in Lehigh, Hershey, Providence and Quincy to Tele-Media Operating. The
shareholders of TMBC contributed all of their limited partnership interests in
Lehigh, Hershey and Quincy to TMBC. TMBC contributed all of its limited
partnership interest in Lehigh and all but 1% of its limited partnership
interest in Hershey and Quincy to Tele-Media Operating. These limited
partnership interests were, by virtue of an amendment to the respective
partnership agreements, converted into general partnership interests. Tele-Media
Broadcasting Company of America Limited Partnership ("America LP"), Tele-Media
Broadcasting Company of Johnstown/Altoona Limited Partnership
("Johnstown/Altoona LP"), Tele-Media Broadcasting Company of State College
Limited Partnership ("State College LP") and Tele-Media Broadcasting Company of
Cambria County Limited Partnership ("Cambria County LP") were formed by
Tele-Media Operating, and America Corporation, Johnstown/Altoona Corporation and
Cambria County Corporation were merged with and into TMBC and the assets were
then contributed to Tele-Media Operating which in turn conveyed them to the
limited partnerships by the same names. TMBC then transferred all of the assets
acquired in the State College acquisition to Tele-Media Operating which in turn
conveyed them to State College LP.
F-50
<PAGE> 203
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
After the restructuring, TMBC owned a 99% general partnership interest in
Tele-Media Operating, and Tele-Media Operating owned between a 95% and 99%
general partnership interest in the following limited partnerships: Lehigh,
Hershey, Providence, Quincy, State College LP, America LP, Johnstown/Altoona LP
and Cambria County LP (collectively, the "Companies").
In March 1995, Quincy purchased substantially all of the assets of WZLZ-FM
for approximately $367,000 and the call letters were subsequently changed to
WMOS-FM. This acquisition was financed primarily with unsecured seller debt.
During 1994, Tele-Media Operating formed Tele-Media Broadcasting Company of
York Limited Partnership ("York LP"), of which Tele-Media Operating is 99%
general partner and TMBC is 1% limited partner. On May 1, 1995, the Companies
entered into Local Marketing Agreements ("LMAs") to operate WQXA-AM, WQXA-FM and
WIKN-FM. In November 1995, York LP acquired substantially all the assets of
WQXA-AM and WQXA-FM for approximately $5 million. This acquisition was financed
with additional borrowings under the Amended Loan Agreement (see Note 4).
On August 1, 1996, the Companies entered into an LMA to operate WBLF-AM. In
October 1996, State College LP acquired substantially all the assets of WBLF-AM
for approximately $215,000 (including forgiveness of a note receivable from the
seller and cash paid of $65,000).
During 1996, Tele-Media Operating formed Tele-Media Broadcasting Company of
Wilkes Barre/Scranton Limited Partnership ("Wilkes Barre LP") of which
Tele-Media Operating is 99% general partner and TMBC is 1% limited partner. On
August 1, 1996 Wilkes Barre LP entered into an asset purchase agreement to
acquire WAZL-AM and WZMT-FM and entered into an LMA to operate the stations. On
December 1, 1996, TMBC entered into an asset purchase agreement to acquire
WARM-AM and WMGS-FM along with the rights to purchase options for WBHT-FM,
WKQV-FM and WKQV-AM, all of which are located in the Wilkes-Barre market, and
which were being operated under LMAs and Joint Sales Agreements ("JSA's").
Subsequent to December 31, 1996, the Company consummated the acquisition of the
assets of WAZL-AM and WZMT-FM for approximately $3.5 million, which was financed
with borrowings under the Amended Loan Agreement. The Company expects to
consummate the acquisition of the assets of WARM-AM and WMGS-FM in 1997 for
approximately $11 million to be financed through additional borrowings under the
Amended Loan Agreement. The Company has made a nonrefundable escrow deposit of
$550,000 related to this acquisition. The escrow deposit is included in other
current assets and will be a reduction of the purchase price or, in the event
the acquisition is not consummated, paid to the seller.
The accompanying consolidated financial statements include the accounts of
TMBC and its partnership interests, including the acquisition of businesses from
their respective dates of purchase. All of the aforementioned acquisitions were
accounted for under the purchase method, and as such, the purchase price is
allocated among the assets and liabilities purchased based on their relative
fair market values at the date of acquisition. All material intercompany
transactions and balances have been eliminated in the consolidated financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and Cash Equivalents--For purposes of the consolidated statements
of cash flows, the Companies consider highly liquid investments with original
maturities of three months or less to be cash equivalents.
b. Property, Plant and Equipment--Property, plant and equipment, carried at
cost, is depreciated over the estimated useful lives of the related assets,
principally five to ten years. Depreciation is computed on the straight-line
method for financial statement purposes and on accelerated methods for federal
income tax
F-51
<PAGE> 204
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purposes. Depreciation expense totaled $1,446,000, $1,499,000 and $1,358,000 for
the years ended December 31, 1994, 1995 and 1996, respectively.
c. Intangibles--Broadcast licenses are amortized over 20 years. Loan
origination fees and non-compete agreements are amortized over the terms of the
related agreements, and organization costs are amortized over five years. The
Companies write-off these assets and related accumulated amortization when the
assets become fully amortized.
d. Impairment of Long-Lived Assets--Management of the Companies reviews
long-lived assets (including property, plant and equipment and intangibles) for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Management considers the
undiscounted cash flow expected to be generated by the use of the asset and its
eventual disposition to determine when, and if, an impairment has occurred. Any
write-downs due to impairment are charged to operations at the time the
impairment is identified. During the year ended December 31, 1994, the Company
wrote-off loan origination fees with a net carrying value of approximately
$159,000 due to a refinancing of the debt. There were no such write-downs
required in 1995 or 1996.
e. Income Taxes--No provision for income taxes has been made for the
taxable income of the partnerships included in the consolidated financial
statements as income taxes are the responsibility of the partners. TMBC has
Subchapter S status for federal income tax purposes and, therefore, the
shareholders, rather than the Company, have the responsibility for federal
income taxes and for state income taxes in those states that recognize the
equivalent of Subchapter S status.
f. Revenue Recognition--Revenue is recognized as commercials are broadcast.
The Companies also enter into barter transactions in which advertising time is
traded for merchandise or services used principally for promotional and other
business purposes. Barter revenue is recorded as commercials are broadcast at
the estimated fair value of the air time. If merchandise or services are
received prior to the broadcast of commercials, recognition of the related
revenue is deferred and recognized as the commercials are broadcast.
g. Reclassifications--Certain reclassifications have been made to the 1994
and 1995 consolidated financial statements in order to conform to the 1996
presentation.
h. Use of Estimates in Preparation of the Consolidated Financial
Statements--The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities as of the date of the consolidated financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
i. Local Marketing Agreements and Joint Sales Agreements--The Companies use
property, plant and equipment of the radio stations operated under LMAs and JSAs
in exchange for a fee. Under provisions of the Company's LMAs and JSAs, the
expenses of operating the stations (other than depreciation or amortization of
assets) are the obligations of the Companies, and they are entitled to the
revenues generated by the stations. Revenues and expenses related to these
agreements are reflected in the consolidated statements of operations. The
Companies have recorded fees in respect to these agreements of $63,750 for the
year ended December 31, 1996 within general and administrative expenses on the
consolidated statement of operations. No such costs were incurred in 1994 or
1995.
F-52
<PAGE> 205
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Broadcast licenses................................ $36,389,881 $36,440,231
Non-compete agreements............................ 1,487,500 265,000
Loan origination fees............................. 2,854,888 2,937,340
Organization costs................................ 250,387 284,633
----------- -----------
40,982,656 39,927,204
Less accumulated amortization..................... 11,946,252 13,022,916
----------- -----------
$29,036,404 $26,904,288
=========== ===========
</TABLE>
4. LONG-TERM DEBT AND REDEEMABLE STOCK WARRANTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Senior:
Borrowings under Amended Loan Agreement....... $36,383,700 $33,935,700
Discount Notes................................ 30,698,371 35,630,986
Other........................................... 442,006 344,129
----------- -----------
67,524,077 69,910,815
Less current portion............................ 3,106,208 37,528,396
----------- -----------
$64,417,869 $32,382,419
=========== ===========
</TABLE>
The significant provisions of the Amended and Restated Loan Agreement dated
February 26, 1997 (the "Amended Loan Agreement"), Senior Discount Notes (the
"Notes"), and the Redeemable Stock Warrants (the "Warrants") are discussed
below. The debt arrangements discussed in the preceding sentence were entered
into in connection with a refinancing in June 1994 of substantially all of the
debt then outstanding, resulting in an extraordinary loss on the extinguishment
thereof of approximately $1,341,000 during the year ended December 31, 1994.
AMENDED LOAN AGREEMENT
The Amended Loan Agreement permits borrowings of up to approximately $49
million. The remaining permitted borrowings under the Amended Loan Agreement
($16 million at February 26, 1997) were provided to finance the 1997 planned
acquisitions described in Note 1. The Amended Loan Agreement modified principal
and interest payments, and certain financial covenants and requires the payment
of additional fees to the Lender of $250,000 in 1997 and 1998 in the event of a
failure to meet the leverage covenant in either year. Prior to the amendment on
February 26, 1997, and at December 31, 1996, the Companies were not in
compliance with the provisions of the loan agreement then in effect.
Principal is payable in quarterly installments with any remaining principal
due April 1999. The Lender has the option to require the Companies to make an
additional principal payment of up to approximately $8.9 million in 1997 and
$21.4 million in 1998. Prior to the date of the Amended Loan Agreement, interest
was payable quarterly at the prime rate plus 2%, or at the Companies' option,
LIBOR plus 4.75%. At December 31, 1996, the interest rate was 10.25% (prime plus
2%). The Amended Loan Agreement requires interest payments quarterly. Interest
under the Amended Loan Agreement is charged at the prime rate plus
F-53
<PAGE> 206
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2%, or at the Companies' option, LIBOR plus 4.5%, on borrowings up to
approximately $44 million; interest on the next $5 million borrowed will be
charged at the prime rate plus 3.75%. The Amended Loan Agreement requires the
Companies to enter into a two year interest hedge contract on or before
September 30, 1997 in a notional amount not less than $25 million, providing
protection should the prime rate exceed the prime rate at the date the interest
hedge contract is entered into by 2.5%. A penalty of between 2% and 4% is
assessed on any principal prepayment.
Borrowings under the Amended Loan Agreement are collateralized by
substantially all of the assets and partnership interests of Tele-Media
Operating and its partnerships. The Amended Loan Agreement provides for, among
other things, limitations on distributions, indebtedness, mergers, sale and
purchase of assets, capital expenditures, payment of management fees and payment
of interest on the Notes, and requires the achievement of certain minimum cash
flow amounts.
SENIOR DISCOUNT NOTES
The Notes are due June 15, 2004 and were issued with an original issue
discount based on an interest rate of 16%. TMBC did not make interest payments
on the Notes due June 15, 1995, December 15, 1995 and June 15, 1996 and did not
consummate the Exchange Offer by the date as set forth in the original
Registration Rights Agreement (as defined below). Consequently, TMBC and the
Note holders amended the existing agreements to convert the amount of cash
interest payments then due ($2,509,000) plus penalties of approximately
$1,260,000 to notes payable and, in consideration of the conversion, the Note
holders waived TMBC's default. Under the terms of the Note Agreement, as amended
to include the notes issued in 1995 and 1996, interest of approximately $920,000
is payable semi-annually through June 15, 1999, and the remainder of the
interest is deferred and added to principal. After June 15, 1999, semi-annual
interest payments will be made at an annual rate of 16% of the accreted value of
the Notes. The accreted value of the Notes will approximate $47,811,000 at June
15, 1999.
TMBC did not make the required interest payment of $920,585 on the Notes
which was due on December 15, 1996, and consequently it is in default of the
Note Agreement. The holders of the Notes have the right to require immediate
payment of all amounts due under the Note Agreement. The total amount due under
the Note Agreement at December 31, 1996, which is classified as a current
obligation, was $35,630,986. The shareholders of TMBC have negotiated an
agreement to sell their stock in the Company. As part of the transaction, the
holders of the Notes will be paid an amount sufficient to satisfy all
outstanding claims against TMBC, including settlement of claims relating to the
redeemable stock warrants discussed below (see Note 6). In the event the sale is
not consummated, TMBC plans to enter into discussions with the Note holders to
convert the delinquent amount, plus any penalties, into a note payable. If the
Note holders refuse to agree to the conversion or another acceptable
alternative, TMBC intends to search for replacement financing.
Payment under the Notes is restricted by the Amended Loan Agreement.
Redemption of the Notes prior to their scheduled maturity is subject to
prepayment premiums. If a Qualified Public Offering is consummated by June 15,
1999, the Notes may be redeemed at TMBC's option for between 110% to 120% of the
Accreted Value of the Notes. After June 15, 1999, the Notes may be redeemed at
TMBC's option for $47,811,000 plus a premium of up to 8%, which declines ratably
through the date of maturity. In addition, if a Change of Control occurs, the
Note holders have the option to require TMBC to repurchase the Notes at 101% of
the Accreted Value.
The Notes are unsecured and restrict, among other things, the declaration
or payment of any dividends or any other distributions to shareholders, the
incurrence of additional debt, transactions with affiliates, payment of
management fees, formation of additional subsidiaries, mergers, sales of assets
and capital expenditures. Pursuant to a Registration Rights Agreement between
TMBC and the Purchasers, TMBC filed an Exchange
F-54
<PAGE> 207
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Offer Registration Statement (the "Registration Statement") with the Securities
and Exchange Commission on September 19, 1994. Under the terms of the Exchange
Offer the holders of the Notes may exchange the Old Notes for New Notes with
identical terms, except that the New Notes may be offered for resale, be resold
or otherwise transferred, under certain conditions by the holders without
compliance with the registration and prospectus delivery provisions of the
Securities Act of 1933. Pursuant to the terms of the Registration Rights
Agreement, as amended, if the Registration Statement does not become effective
by May 1, 1997, additional interest of 1% per annum will be charged from May 1,
1997 through December 1, 1997 and increase .5% each six months thereafter, not
to exceed an aggregate of 5% based on the Accreted Value of the Notes until the
Registration Statement becomes effective.
REDEEMABLE STOCK WARRANTS
The Warrants are exercisable at no additional cost to the Note holders for
between 3,750 and 5,290 shares of non-voting common stock representing 20% to
26% of the equity of TMBC, based on the achievement of certain levels of
Operating Cash Flow. The Warrant agreement provides registration rights to the
holders and restricts, among other things, the incurrence of additional debt,
payment of management fees, formation of additional subsidiaries, mergers, sale
of assets and distributions to stockholders. In addition, the Warrant holders
have put rights during the period from January 1, 2000 through March 31, 2000 or
upon a Change of Control, to require TMBC to redeem the Warrants for cash at
fair value.
The Warrants expire June 9, 2004 and are exercisable at any time on or
after January 1, 2000, or upon the occurrence of any of the following: the
conversion of TMBC to a Subchapter C corporation for federal income tax
purposes; an Initial Public Offering; a merger where TMBC is not the surviving
entity; a sale, lease, transfer or other disposition of all or substantially all
of the assets of TMBC or its subsidiaries; a liquidation or dissolution of TMBC;
or if Messrs. Tudek and Mundy own less than 50% of TMBC or a successor company.
Holders of the non-voting common stock will enter into a Registration
Rights Agreement providing them with unlimited piggy-back registration rights
and the right to participate in any Initial Public Offering. The non-voting
stock is convertible into voting common stock in connection with the sale of
shares in a public offering, in a brokers' transaction pursuant to Rule 144
under the Securities Act of 1933, and if, after conversion, the shareholder
would own 4.9% or less of the common stock. TMBC has reserved 10,000 shares of
non-voting stock and 10,000 shares of voting stock for exercise of the Warrants.
TMBC estimated the redemption price of the warrants at December 31, 1995
and 1996 as $750,950 and $7,000,000, respectively. Increases in the redemption
price are accounted for prospectively as an adjustment to periodic interest
expense from the date of the increase to January 1, 2000, the earliest date the
put can be exercised. The accreted value of the Warrants at December 31, 1995
and 1996, was $750,950 and $1,644,000, respectively, resulting in a charge to
interest expense for the year ended December 31, 1996 of $893,050. There was no
adjustment to interest expense for the years ended December 31, 1994 and 1995.
Minimum scheduled maturities of long-term debt during the next five years
considering the Amended Loan Agreement and the classification of the Notes as a
current liability resulting from the default are as follows:
<TABLE>
<S> <C>
1997........................................................ $37,528,000
1998........................................................ 2,595,000
1999........................................................ 33,744,000
2000........................................................ 19,000
2001........................................................ 3,000
</TABLE>
F-55
<PAGE> 208
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest paid on all debt in 1994, 1995 and 1996 was approximately
$4,616,000, $3,570,000 and $3,750,000, respectively.
5. OPERATING AGREEMENT WITH AFFILIATE
Under terms of an operating agreement entered into in June 1994, Tele-Media
Corporation of Delaware (an affiliate) ("Tele-Media Delaware") provides certain
management and technical services to the Companies and charges a management fee
of 3.5% of revenues. Payment of the management fee is restricted by the Notes
and the Amended Loan Agreement. The operating agreement expires on June 9, 2004
and continues from year-to-year thereafter unless either party gives written
notice to the other at least 30 days in advance of an expiration date.
Prior to the June 1994 operating agreement discussed above, Tele-Media
Delaware charged a management fee ranging from 3.5% to 7% of revenues. As
required by the provisions of the debt arrangements then outstanding as
discussed in Note 4, Messrs. Tudek and Mundy assumed responsibility for the
payment of certain management fees in 1994. The liabilities assumed by Messrs.
Tudek and Mundy are treated as additional paid-in capital in the consolidated
financial statements.
6. CONTINGENCIES AND COMMITMENTS
In 1995, TMBC and its shareholders entered into a nonbinding letter of
intent to sell the stock of TMBC. TMBC terminated the letter of intent and the
proposed buyer filed suit for damages and specific performance. A motion to
dismiss the suit was heard in early 1996 and the court ruled to dismiss a
majority of the claims, including those for specific performance, as no
definitive agreement had been reached for sale of the stock. On March 28, 1997,
the shareholders of TMBC executed an agreement to sell the stock of the Company
to the plaintiff in this suit. As part of this transaction, the suit was
dismissed with prejudice, and upon motion of the parties, the dismissal of the
suit was approved by the court. As a result of the suit's dismissal, this action
cannot again be filed by the plaintiff.
General and administrative expenses for the year ended December 31, 1995
and 1996 include approximately $274,000 and $260,000, respectively, of legal
expenses incurred relating to the defense of the lawsuit and the proposed sale.
The shareholders have agreed to pay 5.5% of the net proceeds from a sale of
their stock to two key members of management.
* * * * * *
F-56
<PAGE> 209
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,708,373
Accounts receivable:
Nonbarter--less allowance for doubtful accounts of
$800,000.............................................. 5,447,842
Barter--net............................................ 303,749
Other current assets...................................... 303,620
------------
Total current assets.............................. 9,763,584
------------
Property, plant and equipment--net.......................... 8,436,165
------------
Intangibles--net............................................ 38,326,412
------------
Other noncurrent assets..................................... 16,331
------------
$ 56,542,492
============
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Accounts payable and other accrued expenses............... $ 1,514,622
Accrued interest.......................................... 2,969,594
Amounts due to affiliates--net............................ 4,159,152
Current portion of long-term debt......................... 39,491,064
------------
Total current liabilities......................... 48,134,432
------------
Long-term liabilities:
Long-term debt--less current portion...................... 47,306,734
Other..................................................... 31,266
------------
Total long-term liabilities....................... 47,338,000
------------
Redeemable stock warrants................................... 7,000,000
------------
Deficiency in net assets:
Common stock, voting, $0.01 par value per share; 25,000
shares authorized, 15,000 shares outstanding........... 150
Common stock, nonvoting, $0.01 par value per share; 10,000
shares authorized, none outstanding.................... --
Additional paid-in capital................................ 6,924,445
Deficit................................................... (52,854,535)
------------
Deficiency in net assets.......................... (45,929,940)
------------
$ 56,542,492
============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-57
<PAGE> 210
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Revenues:
Local advertising......................................... $ 9,323,963 $ 12,557,493
National advertising...................................... 2,052,723 2,710,273
Barter.................................................... 1,697,415 2,357,519
Other..................................................... 222,507 339,431
------------ ------------
13,296,608 17,964,716
Less agency commissions................................... 1,346,551 1,723,832
------------ ------------
Net revenues...................................... 11,950,057 16,240,884
------------ ------------
Selling, general and administrative, programming, barter and
technical expenses:
Selling................................................... 2,441,926 3,287,451
General and administrative................................ 2,008,273 3,366,246
Programming............................................... 2,337,296 3,491,639
Barter.................................................... 1,697,415 2,357,519
Technical................................................. 127,977 176,110
------------ ------------
8,612,887 12,678,965
------------ ------------
Operating income before management fees and depreciation and
amortization.............................................. 3,337,170 3,561,919
------------ ------------
Management fees and depreciation and amortization:
Management fees--affiliates............................... 358,113 454,258
Depreciation and amortization............................. 2,092,858 2,207,660
------------ ------------
2,450,971 2,661,918
------------ ------------
Operating income............................................ 886,199 900,001
Interest expense............................................ 4,955,734 10,374,922
------------ ------------
Net loss.................................................... (4,069,535) (9,474,921)
Deficit, beginning of period................................ (36,462,819) (43,379,614)
------------ ------------
Deficit, end of period...................................... $(40,532,354) $(52,854,535)
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-58
<PAGE> 211
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(4,069,535) $ (9,474,921)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 2,092,858 2,207,660
Interest deferral...................................... 3,012,406 1,975,012
Management fees--affiliates............................ 358,113 454,258
Provision for losses on accounts receivable............ 158,144 305,581
Increase in fair value of redeemable stock warrants.... -- 5,356,000
----------- ------------
Other.................................................. 849 335
Changes in operating assets and liabilities:
Accounts receivable--nonbarter....................... (6,589) (490,939)
Other current assets................................. (115,852) (114,795)
Accounts payable and other accrued expenses.......... (587,980) (863,160)
Affiliates activity--net............................. (135,961) 886,715
Accrued interest..................................... 478,336 1,073,705
----------- ------------
Net cash provided by operating activities......... 1,184,789 1,315,451
----------- ------------
Cash flows from investing activities:
Capital expenditures...................................... (255,344) (227,926)
Purchase of radio stations................................ -- (14,170,000)
Other..................................................... 2,500 1,500
----------- ------------
Net cash used in investing activities............. (252,844) (14,396,426)
----------- ------------
Cash flows from financing activities:
Borrowings................................................ 79,361 16,000,000
Payments of long-term debt................................ (1,575,046) (1,408,350)
Loan origination fees and other intangible assets......... (25,000) (145,334)
Other..................................................... (1,714) (363)
----------- ------------
Net cash provided by (used in) financing
activities..................................... (1,522,399) 14,445,953
----------- ------------
Net increase (decrease) in cash and cash equivalents........ (590,454) 1,364,978
Cash and cash equivalents, beginning of period.............. 1,904,258 2,343,395
----------- ------------
Cash and cash equivalents, end of period.................... $ 1,313,804 $ 3,708,373
=========== ============
</TABLE>
See notes to consolidated financial statements.
F-59
<PAGE> 212
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of June 30, 1997 and the
condensed consolidated statements of operations and changes in deficit and cash
flows for the six month periods ended June 30, 1996 and 1997 are unaudited. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation for the periods presented
have been included. These interim unaudited condensed consolidated financial
statements for 1996 and 1997 should be read in conjunction with the audited
consolidated financial statements and notes thereto. The consolidated results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the full year.
2. BUSINESS ACQUISITIONS
On February 27, 1997, the Company purchased substantially all of the assets
of two radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for
approximately $3,400,000. The acquisition was accounted for under the purchase
method, with approximately $500,000 allocated to property, plant and equipment
and approximately $2,900,000 allocated to intangibles.
On April 18, 1997, the Company closed the acquisition of two additional
radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for
approximately $11,000,000. The acquisition was financed by $12,000,000 of
additional borrowings under the Amended Loan Agreement. The acquisition was
accounted for under the purchase method, with approximately $1,722,000 allocated
to property, plant and equipment and approximately $9,278,000 allocated to
intangibles.
On May 5, 1997, the Company closed the acquisition of a radio station in
the Quincy, Illinois market for approximately $345,000. The acquisition was
financed primarily by an unsecured seller note and assumption of capital leases.
The acquisition was accounted for under the purchase method, with approximately
$148,000 allocated to property and equipment and approximately $197,000
allocated to intangibles.
3. SUBSEQUENT EVENTS
On July 3, 1997, all of the issued and outstanding stock of the Company was
acquired by Citadel Broadcasting Company, a subsidiary of Citadel Communications
Corporation for approximately $114,400,000. In connection with the acquisition
by Citadel Broadcasting Company, a Change of Control occurred. The Change of
Control has a material effect on the financial statements due to the change in
the earliest put date of the redeemable stock warrants. The Warrant holders have
put rights as of January 1, 2000 or upon a Change of Control. TMBC estimated the
redemption price of the warrants at December 31, 1996 as $7,000,000, and the
accreted value of the warrants at December 31, 1996 was $1,644,000. Previously,
increases in the redemption price were accounted for prospectively as an
adjustment to periodic interest expense from the date of the increase to January
1, 2000, the earliest date the put could be exercised. However, due to the
Change of Control on July 3, 1997, the earliest put date is July 3, 1997 and the
warrants must be accreted to their full value by this time. The accreted value
of the warrants at December 31, 1996 was $1,644,000, thus resulting in a charge
to interest expense of $5,356,000 during the six months ended June 30, 1997 to
accrete the warrants to their $7,000,000 redemption price.
F-60
<PAGE> 213
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Snider Corporation:
We have audited the accompanying consolidated balance sheet of Snider
Corporation as of December 31, 1995 and the related consolidated statements of
income, stockholders' equity, and cash flows for the year then ended. We have
also audited the accompanying balance sheet of Snider Corporation as of December
31, 1996 and the related statements of income, stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Snider
Corporation as of December 31, 1995 and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Snider Corporation as of December 31, 1996 and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
As discussed in Notes 3, 6 and 7, the Company has significant transactions
with related parties.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The combining information is
presented for purposes of additional analysis of the financial statements. The
combining information has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ ERWIN & COMPANY
Little Rock, Arkansas
April 1, 1997
F-61
<PAGE> 214
SNIDER CORPORATION
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 44,870 $ 105,788
Accounts receivable, net of allowance for doubtful
accounts of
$26,652 in 1995 and $34,461 in 1996.................... 566,180 475,065
Due from affiliates....................................... 61,352 38,146
Other..................................................... 34,495 20,867
---------- ----------
Total current assets................................... 706,897 639,866
Other assets:
Non-compete covenant...................................... -- 45,833
Land held for investment, at cost, which approximates
market value........................................... 123,396 97,553
Other..................................................... -- 18,536
---------- ----------
Total other assets..................................... 123,396 161,922
Property and equipment, at cost less accumulated
depreciation.............................................. 666,934 874,992
---------- ----------
$1,497,227 $1,676,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable--related party............................... $ 50,000 $ 50,000
Accounts payable--trade................................... 128,416 152,388
--other................................. 385 --
Accrued expenses.......................................... 96,593 86,481
---------- ----------
Total current liabilities.............................. 275,394 288,869
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000 143,000
Paid in capital........................................... 62,298 474,300
Retained earnings......................................... 1,016,535 770,611
---------- ----------
Total stockholders' equity............................. 1,221,833 1,387,911
---------- ----------
$1,497,227 $1,676,780
========== ==========
</TABLE>
See accompanying notes.
F-62
<PAGE> 215
SNIDER CORPORATION
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenue:
Announcements and programs................................ $3,510,863 $3,583,944
Barter accounts........................................... 360,616 428,129
---------- ----------
Total revenue..................................... 3,871,479 4,012,073
---------- ----------
Direct charges:
Commissions............................................... 440,461 450,944
Royalties and franchise fees.............................. 93,744 140,303
---------- ----------
Total direct charges.............................. 534,205 591,247
---------- ----------
Gross profit................................................ 3,337,274 3,420,826
---------- ----------
Operating expenses:
Technical department...................................... 57,985 95,416
Program department........................................ 608,416 509,877
News department........................................... 264,837 255,458
Sales department.......................................... 839,461 859,674
General and administrative................................ 926,945 974,815
Depreciation and amortization............................. 81,232 186,723
---------- ----------
Total operating expenses.......................... 2,778,876 2,881,963
---------- ----------
Operating income............................................ 558,398 538,863
Other income (expense):
Interest income........................................... 5,275 3,168
Interest expense.......................................... (8,548) (6,917)
Loss on sale of property and equipment.................... -- (59,024)
Minority interest......................................... (48,004) --
Operating agreement--acquired stations.................... -- (65,698)
Other..................................................... (30,540) (124,316)
---------- ----------
Total other income (expense)...................... (81,817) (252,787)
---------- ----------
Net income.................................................. $ 476,581 $ 286,076
========== ==========
</TABLE>
See accompanying notes
F-63
<PAGE> 216
SNIDER CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance -- December 31, 1994................. $143,000 $ 62,298 $ 868,958 $1,074,256
Net income................................. -- -- 476,581 476,581
Distributions to stockholders.............. -- -- (329,004) (329,004)
-------- -------- ---------- ----------
Balance -- December 31, 1995................. 143,000 62,298 1,016,535 1,221,833
Net income................................. -- -- 286,076 286,076
Capital contribution....................... -- 412,002 -- 412,002
Distributions to stockholders.............. -- -- (532,000) (532,000)
-------- -------- ---------- ----------
Balance -- December 31, 1996................. $143,000 $474,300 $ 770,611 $1,387,911
======== ======== ========== ==========
</TABLE>
See accompanying notes
F-64
<PAGE> 217
SNIDER CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 476,581 $ 286,076
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 81,232 186,723
Loss on disposal of assets............................. -- 59,023
Minority interest...................................... 48,004 --
Recognition of unearned income......................... (107,813) --
Bad debt provision..................................... 30,636 34,461
Net changes in operating assets and liabilities:
Accounts receivable.................................. (173,698) 56,654
Other current assets................................. 77,524 13,628
Other non-current assets............................. -- (18,536)
Accounts payable..................................... (15,065) 23,587
Accrued expenses..................................... 6,280 (10,112)
--------- ---------
Net cash provided by operating activities......... 423,681 631,504
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment........................ (192,120) (213,240)
Purchase of land held for investment...................... (22,563) --
Proceeds from sale of property and equipment.............. -- 262,800
Net advances to affiliate................................. (49,064) (38,146)
Payment under non-compete covenant........................ -- (50,000)
--------- ---------
Net cash used in investing activities............. (263,747) (38,586)
--------- ---------
Cash flows from financing activities:
Proceeds from repayments of notes receivable.............. 107,623 --
Repayment of note payable--Bank........................... (45,044) --
Distributions to minority interest........................ (48,004) --
Distributions to stockholders............................. (329,004) (532,000)
--------- ---------
Net cash used in financing activities............. (314,429) (532,000)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ (154,495) 60,918
Cash and cash equivalents:
Beginning of year......................................... 199,365 44,870
--------- ---------
End of year............................................... $ 44,870 $ 105,788
========= =========
Supplemental cash flows information:
Interest paid............................................. $ 8,548 $ 6,917
Significant non-cash investing and financing activities:
Non-cash purchase of property and equipment from
affiliate............................................. -- 473,353
Non-cash contribution of capital....................... -- 412,002
</TABLE>
See accompanying notes
F-65
<PAGE> 218
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation
The consolidated financial statements include the accounts of Snider
Corporation (the Company) and SMN Company (SMN), a 52% owned partnership. All
significant intercompany transactions and accounts have been eliminated in
consolidation. SMN was liquidated effective December 31, 1995.
Nature of operations
The Company operates an AM radio station and two FM radio stations in the
central Arkansas market area and provides news and information to other radio
stations throughout Arkansas. The activities of SMN were not material to 1995
consolidated financial position or results of operations.
Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and amortization
Depreciation is calculated by the straight-line method. Estimated useful
lives are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Transmitter building, antenna system, office machines and 3-25
equipment.................................................
Furniture and fixtures...................................... 5-10
Vehicles.................................................... 2- 4
Other....................................................... 3- 5
</TABLE>
Non-compete covenant
The non-compete covenant with the former owner of certain radio
broadcasting assets acquired in 1996 is being amortized on a straight-line basis
over a period of two years. Total amortization expense was for 1996 was $4,167.
Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less when purchased
to be cash equivalents.
Concentrations of credit risk
Most of the Company's business activity is with customers located within
the state of Arkansas. The Company grants credit to its customers in the normal
course of business, ordinarily without collateral requirements.
The Company's exposure to credit risk from accounts receivable--trade and
notes receivable is represented by the carrying value of those receivables. The
Company also periodically has demand deposit balances with a local financial
institution that exceed federally insured limits. Management periodically
reviews the soundness of this financial institution and does not believe the
Company is exposed to significant financial risk.
F-66
<PAGE> 219
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Reclassifications
Certain reclassifications have been made to the 1995 financial statements
to conform to the 1996 basis of presentation.
(2) PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Land............................................... $ 301,252 $ 57,700
Transmitter building............................... 87,879 87,879
Antenna system..................................... 91,736 91,736
Satellite equipment................................ -- 473,353
Equipment.......................................... 452,326 650,906
Office machines.................................... 325,787 339,616
Furniture and fixtures............................. 149,455 150,289
Vehicles........................................... 63,623 56,272
Other.............................................. 198,714 78,831
---------- ----------
1,670,772 1,986,582
Less accumulated depreciation...................... 1,003,838 1,111,590
---------- ----------
$ 666,934 $ 874,992
========== ==========
</TABLE>
(3) NOTE PAYABLE--RELATED PARTY:
Note payable--related party at December 31, 1995 and 1996 consists of an
unsecured note payable to a stockholder. The note bears interest at 8% and is
due on demand.
(4) INCOME TAXES:
The Company has elected to be treated as an S corporation for federal
income tax purposes and is subject to similar treatment for state income tax
purposes. Under this election, income and losses of the Company are reported in
the income tax returns of the stockholders. As a result, no income taxes are
reflected in the accompanying consolidated financial statements.
(5) ACQUISITIONS:
During 1996, the Company acquired the assets, including broadcast rights
for a local FM radio. Prior to FCC approval of the acquisition, the station was
operated by the Company under a license management agreement. Expenses incurred
under this agreement totaling $65,698 are included in the accompanying 1996
statement of income under the heading "Other Income (Expenses)."
F-67
<PAGE> 220
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 -- CONTINUED
(5) ACQUISITION (CONTINUED):
The acquisition cost of the broadcast assets were allocated as follows:
<TABLE>
<S> <C>
Property and equipment.................................. $132,820
Non-compete covenant.................................... 50,000
--------
Total......................................... $182,820
========
</TABLE>
(6) COMMITMENTS AND CONTINGENCIES:
The Company leases its office building and parking lot under an operating
lease from an officer and principal stockholder of the Company for $10,000 per
month. Additionally, the Company rented satellite space from an affiliate under
an informal lease agreement totaling $107,950 and $6,300 during the years ended
December 31, 1995 and 1996, respectively. Total rent expense was $245,377 and
$140,400 for the years ended December 31, 1995 and 1996, respectively. Rent
expense was offset by $54,000 in 1995 and $48,320 in 1996 by amounts received
from an affiliate under a month to month sublease agreement for office space.
Future minimum rentals under noncancelable operating leases, including
renewal options, at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997.................................................... $120,000
1998.................................................... 120,000
--------
$240,000
========
</TABLE>
(7) RELATED PARTY TRANSACTIONS:
General and administrative expense has been reduced by $23,282 and $21,000
in 1995 and 1996, respectively, for shared office and overhead expenses charged
to an affiliate. The amounts shown in the accompanying balance sheets as due
from affiliates represent amounts owed to the Company for these and certain
other operating expenses paid by the Company on behalf of affiliates.
During 1996, the Company purchased satellite communications equipment from
an affiliate for $473,353. In connection with the purchase, the Company's
stockholders transferred certain assets of another affiliate with a fair value
of $412,002 to the Company. The transfer was recorded as a capital contribution.
These contributed assets, plus accounts receivable due from the affiliate
totaling $61,351 were exchanged for the satellite communications equipment.
Information concerning the note payable--related party is contained in Note
3. Information concerning lease and other rental income and expenses with
related parties is described in Note 5.
F-68
<PAGE> 221
SNIDER CORPORATION
SCHEDULE OF COMBINING OPERATING INCOME,
EXCLUDING DEPRECIATION AND AMORTIZATION
FOR BROADCASTING UNITS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
KARN ARN COMBINED
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Local announcements.................................. $1,604,785 $1,353,472 $2,958,257
National announcements............................... 135,805 -- 135,805
Political announcements.............................. 68,318 193,539 261,857
Network.............................................. 77,236 -- 77,236
Materials and facilities............................. 71,411 79,378 150,789
Barter accounts...................................... 289,797 138,332 428,129
---------- ---------- ----------
Total revenue................................ 2,247,352 1,764,721 4,012,073
Less direct charges:
Agency commissions................................... 156,538 187,616 344,154
National representative commissions.................. 16,676 90,114 106,790
Rights fees.......................................... 78,426 61,877 140,303
---------- ---------- ----------
Totals....................................... 251,640 339,607 591,247
---------- ---------- ----------
Gross profit........................................... 1,995,712 1,425,114 3,420,826
Operating expenses:
Technical department................................. 73,611 21,805 95,416
Program department................................... 356,247 153,630 509,877
News department...................................... 115,269 140,189 255,458
Sales department..................................... 480,476 379,198 859,674
General and administrative........................... 633,288 341,527 974,815
---------- ---------- ----------
Total operating expenses, excluding
depreciation and amortization.............. 1,658,891 1,036,349 2,695,240
---------- ---------- ----------
Operating income, excluding depreciation and
amortization......................................... $ 336,821 $ 388,765 $ 725,586
========== ========== ==========
</TABLE>
F-69
<PAGE> 222
SNIDER CORPORATION
BALANCE SHEET
MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 45,972
Accounts receivable--trade, net of allowance for doubtful
accounts of $38,228.................................... 780,901
Due from affiliates....................................... 44,589
Other..................................................... 7,941
----------
Total current assets.............................. 879,403
Property and equipment, at cost less accumulated
depreciation of $1,193,204................................ 813,910
Other assets:
Non-compete agreement, less accumulated amortization of
$14,583................................................ 35,417
Land held for investment, at cost, which approximates
market value........................................... 97,553
Other..................................................... 25,692
----------
Total other assets................................ 158,662
----------
$1,851,975
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable--related party............................... $ 50,000
Accounts payable--trade................................... 190,990
Accrued expenses.......................................... 103,427
----------
Total current liabilities......................... 344,417
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000
Paid-in capital........................................... 474,300
Retained earnings......................................... 890,258
----------
Total stockholders' equity........................ 1,507,558
----------
$1,851,975
==========
</TABLE>
See accompanying notes to financial statements.
F-70
<PAGE> 223
SNIDER CORPORATION
STATEMENT OF INCOME
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs............................. $1,694,439
Barter accounts........................................ 140,783
----------
Total revenue..................................... 1,835,222
Direct charges:
Commissions............................................ 261,257
Royalties and franchise fees........................... 42,210
----------
Total direct charges.............................. 303,467
----------
Gross profit................................................ 1,531,755
----------
Operating expenses:
Technical department................................... 52,958
Program department..................................... 263,608
News department........................................ 99,351
Sales department....................................... 439,047
General and administrative............................. 437,718
Depreciation and amortization.......................... 92,030
----------
Total operating expenses.......................... 1,384,712
----------
Operating income............................................ 147,043
Other income (expense):
Interest income........................................ 733
Interest expense....................................... (1,677)
Other.................................................. (26,452)
----------
Total other income (expense)...................... (27,396)
----------
Net income.................................................. $ 119,647
==========
</TABLE>
See accompanying notes to financial statements.
F-71
<PAGE> 224
SNIDER CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Balance -- December 31, 1996.................. $143,000 $474,300 $770,611 $1,387,911
Net income.................................... -- -- 119,647 119,647
-------- -------- -------- ----------
Balance -- May 31, 1997....................... $143,000 $474,300 $890,258 $1,507,558
======== ======== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-72
<PAGE> 225
SNIDER CORPORATION
STATEMENT OF CASH FLOWS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $119,647
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 92,030
Bad debt provision..................................... 12,155
Net changes in operating assets and liabilities:
Accounts receivable--trade........................... (317,991)
Other current assets................................. 12,926
Other non-current assets............................. (7,156)
Accounts payable--trade.............................. 38,602
Accrued expenses..................................... 16,946
--------
Net cash used in operating activities............. (32,841)
--------
Cash flows from investing activities:
Capital expenditures...................................... (20,532)
Net advances to affiliate................................. (6,443)
--------
Net cash used in investing activities............. (26,975)
--------
Net decrease in cash and cash equivalents................... (59,816)
Cash and cash equivalents:
Beginning of period....................................... 105,788
--------
End of period............................................. $ 45,972
========
Supplemental cash flows information:
Interest paid............................................. $ 1,677
========
</TABLE>
See accompanying notes to financial statements.
F-73
<PAGE> 226
SNIDER CORPORATION
NOTE TO FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
(1) SUBSEQUENT EVENT
On June 2, 1997, Snider Corporation (the "Company") entered into a local
marketing agreement ("LMA") with Citadel Broadcasting Company ("Citadel")
whereby Citadel pays $89,000 per month to the Company in exchange for supplying
specified programming to the brokered stations and marketing all commercial
advertising time of the brokered stations, subject to the Company's right to
control the content of all programming. On the same date, the Company also
entered into a Merger Agreement with Citadel, upon the consummation of which
Citadel will acquire radio stations KARN-FM, KARN-AM, KKRN-FM, KRNN-AM and
KAFN-FM. The LMA shall terminate upon the closing of the Merger Agreement or the
termination of the Merger Agreement, unless terminated earlier pursuant to the
default provisions of the LMA. In compliance with the LMA, the broadcasting
revenue and station operating expenses of the Company for the month ended June
30, 1997 are included in the financial statements of Citadel and are summarized
as follows:
<TABLE>
<S> <C>
Net broadcasting revenues................................... $270,289
Station operating expenses.................................. 304,259
</TABLE>
F-74
<PAGE> 227
SNIDER CORPORATION
BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 191,595
Accounts receivable--trade, net of allowance for doubtful
accounts of $45,546.................................... 800,790
Due from affiliates....................................... 25,617
Other..................................................... 4,106
----------
Total current assets.............................. 1,022,108
Property and equipment, at cost less accumulated
depreciation of $1,017,541................................ 808,870
Other assets:
Land held for investment, at cost, which approximates
market value........................................... 97,553
Other..................................................... 11,240
----------
Total other assets................................ 108,793
----------
$1,939,771
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable--related party............................... $ 50,000
Accounts payable--trade................................... 153,348
Accrued expenses.......................................... 132,907
----------
Total current liabilities......................... 336,255
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000
Paid-in capital........................................... 474,300
Retained earnings......................................... 986,216
----------
Total stockholders' equity........................ 1,603,516
----------
$1,939,771
==========
</TABLE>
F-75
<PAGE> 228
SNIDER CORPORATION
STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $1,893,131
Barter accounts........................................... 214,064
----------
Total revenue..................................... 2,107,195
Direct charges:
Commissions............................................... 266,398
Royalties and franchise fees.............................. 65,599
----------
Total direct charges.............................. 331,997
----------
Gross profit................................................ 1,775,198
----------
Operating expenses:
Technical department...................................... 35,290
Program department........................................ 236,052
News department........................................... 125,103
Sales department.......................................... 414,766
General and administrative................................ 511,160
Depreciation and amortization............................. 88,507
----------
Total operating expenses.......................... 1,410,878
----------
Operating income............................................ 364,320
Other income (expense):
Loss on sale of property and equipment.................... (59,024)
Interest expense.......................................... (2,541)
Operating agreement--stations under contract.............. (36,839)
Other..................................................... (39,235)
----------
Total other income (expense)...................... (137,639)
----------
Net income.................................................. $ 226,681
==========
</TABLE>
F-76
<PAGE> 229
SNIDER CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance--December 31, 1995......................... $143,000 $ 62,298 $1,016,535 $1,221,833
Net income......................................... 226,681 226,681
Capital contribution............................... 412,002 412,002
Distributions to stockholders...................... (257,000) (257,000)
-------- -------- ---------- ----------
Balance--June 30, 1996............................. $143,000 $474,300 $ 986,216 $1,603,516
======== ======== ========== ==========
</TABLE>
F-77
<PAGE> 230
SNIDER CORPORATION
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $226,681
Adjustments to reconcile net income to net cash provided
by in operating activities:
Depreciation and amortization.......................... 88,507
Loss on sale of property and equipment................. 59,024
Bad debt provision..................................... 19,886
Net changes in operating assets and liabilities:
Accounts receivable--trade........................... (254,496)
Other current assets................................. 19,149
Accounts payable--trade.............................. 24,547
Accrued expenses..................................... 36,314
--------
Net cash provided by operating activities......... 219,612
--------
Cash flows from investing activities:
Capital expenditures...................................... (53,071)
Proceeds from sale of assets.............................. 262,800
Net advances to affiliate................................. (25,616)
--------
Net cash provided by investing activities......... 184,113
--------
Cash flows from financing activities:
Distributions to stockholders............................. (257,000)
--------
Net cash used in financing activities............. (257,000)
--------
Net increase in cash and cash equivalents................... 146,725
Cash and cash equivalents:
Beginning of period....................................... 44,870
--------
End of period............................................. $191,595
========
Supplemental cash flows information:
Interest paid............................................. $ 2,541
Significant non-cash investing and financing activities:
Non-cash purchase of property and equipment from
affiliate............................................. 473,353
Non-cash contribution of capital....................... 412,002
</TABLE>
F-78
<PAGE> 231
INDEPENDENT AUDITORS' REPORT
The Boards of Directors and Stockholders
Snider Broadcasting Corporation and Subsidiary
CDB Broadcasting Corporation:
We have audited the accompanying consolidated balance sheet of Snider
Broadcasting Corporation and Subsidiary, as of December 31, 1995 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the year then ended. We have also audited the combined balance sheet of Snider
Broadcasting Corporation and Subsidiary, and CDB Broadcasting Corporation as of
December 31, 1996 and the related combined statements of operations,
stockholders' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The combined financial statements include the financial statements of
Snider Broadcasting Corporation and Subsidiary, and CDB Broadcasting
Corporation, which are related through common ownership and management.
As described in Notes 3, 5, and 10, the Company has significant
transactions with related parties.
In our opinion, the 1995 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Snider
Broadcasting Corporation and subsidiary as of December 31, 1995 and the
consolidated results of their operations and cash flows for the year then ended
in conformity with generally accepted accounting principles. Also, in our
opinion, the 1996 financial statements referred to above present fairly, in all
material respects, the combined financial position of Snider Broadcasting
Corporation and affiliate as of December 31, 1996 and the combined results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ ERWIN & COMPANY
Little Rock, Arkansas
April 23, 1997
F-79
<PAGE> 232
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 30,813 $ 49,821
Accounts receivable, net of allowance for doubtful
accounts of $8,108 in 1995 and $7,000 in 1996.......... 305,154 376,579
Other.................................................. 2,302 15,366
----------- -----------
Total current assets................................... 338,269 441,766
Property and equipment, at cost less accumulated
depreciation (Note 2)..................................... 59,706 292,286
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated
amortization of $117,476 in 1995 and $130,936 in
1996................................................... 309,710 796,691
Start-up costs, net of accumulated amortization of $8,797
in 1996................................................ -- 61,588
Non-compete agreement, net of accumulated amortization of
$2,083 in 1996......................................... -- 97,917
Other assets.............................................. -- 21,189
----------- -----------
Total other assets..................................... 309,710 977,385
----------- -----------
$ 707,685 $ 1,711,437
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable--stockholders (Note 3)...................... $ 52,698 $ --
Note payable--bank (Note 4)............................... -- 2,637,408
Current maturities of long-term debt (Note 5)............. 206,781 --
Accounts payable--trade................................... 109,406 218,422
Income taxes payable...................................... 2,117 7,803
Accrued expenses.......................................... 12,526 45,778
Accrued interest payable (Note 10)........................ 14,548 10,714
Deferred income taxes (Note 8)............................ -- 2,297
----------- -----------
Total current liabilities......................... 398,076 2,922,422
Long-term debt, less current maturities (Note 5)............ 1,386,490 --
----------- -----------
Total liabilities................................. 1,784,566 2,922,422
Stockholders' deficit:
Common stock (Note 6)..................................... 75,213 75,313
Retained deficit.......................................... (1,152,094) (1,286,298)
----------- -----------
Total stockholders' deficit....................... (1,076,881) (1,210,985)
----------- -----------
$ 707,685 $ 1,711,437
=========== ===========
</TABLE>
See accompanying notes.
F-80
<PAGE> 233
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenue:
Announcements and programs................................ $2,097,623 $2,008,315
Barter accounts........................................... 145,608 137,963
---------- ----------
Total revenue..................................... 2,243,231 2,146,278
Less direct charges--commissions............................ 286,944 264,907
---------- ----------
Gross profit................................................ 1,956,287 1,881,371
---------- ----------
Operating expenses:
Technical department...................................... 45,339 55,616
Program department........................................ 305,344 384,480
Sales department.......................................... 377,007 439,883
General and administrative................................ 465,647 679,475
Ratings enhancement....................................... -- 105,498
Time brokerage............................................ -- 60,470
Consulting and non-compete (Note 9)....................... 64,733 64,733
Goodwill amortization..................................... 10,680 13,460
Depreciation and amortization............................. 27,046 78,820
---------- ----------
Total operating expenses.......................... 1,295,796 1,882,435
---------- ----------
Operating income (loss)..................................... 660,491 (1,064)
---------- ----------
Other income (expense):
Interest expense (Note 10)................................ (189,532) (150,553)
Rent (Note 10)............................................ 12,000 30,000
Other..................................................... -- 39
---------- ----------
Total other income (expense)...................... (177,532) (120,514)
---------- ----------
Income (loss) before income taxes........................... 482,959 (121,578)
Provision for income taxes (Note 8)......................... 2,117 12,626
---------- ----------
Net income (loss)........................................... $ 480,842 $ (134,204)
========== ==========
</TABLE>
See accompanying notes.
F-81
<PAGE> 234
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance--December 31, 1994............................. $75,213 $(1,632,936) $(1,557,723)
Net income........................................... -- 480,842 480,842
------- ----------- -----------
Balance--December 31, 1995............................. 75,213 (1,152,094) (1,076,881)
Common stock issued.................................. 100 -- 100
Net loss............................................. -- (134,204) (134,204)
------- ----------- -----------
Balance--December 31, 1996............................. $75,313 $(1,286,298) $(1,210,985)
======= =========== ===========
</TABLE>
See accompanying notes.
F-82
<PAGE> 235
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 480,842 $ (134,204)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation........................................... 27,046 42,899
Amortization........................................... 10,680 49,381
Deferred income taxes.................................. -- 2,297
Loss on sale of property and equipment................. -- 458
Net changes in operating assets and liabilities:
Accounts receivable.................................. (56,489) (71,425)
Other assets......................................... 446 (59,294)
Accounts payable..................................... 2,896 99,824
Accrued expenses..................................... 12,707 38,938
Accrued interest payable............................. (113,269) (3,834)
--------- -----------
Net cash provided by (used in) operating
activities...................................... 364,859 (34,960)
--------- -----------
Cash flows from investing activities:
Acquisition of business assets............................ (14,921) (768,011)
Non-compete agreement..................................... -- (100,000)
Other..................................................... -- (69,560)
--------- -----------
Net cash used in investing activities............. (14,921) (937,571)
--------- -----------
Cash flows from financing activities:
Repayment of borrowings--affiliates....................... (186,825) (1,291,759)
--other............................ (169,347) (494,210)
Proceeds from borrowings.................................. -- 2,777,408
Common stock issued....................................... -- 100
--------- -----------
Net cash provided by (used in) financing
activities...................................... (356,172) 991,539
--------- -----------
Net increase (decrease) in cash............................. (6,234) 19,008
Cash:
Beginning of year......................................... 37,047 30,813
--------- -----------
End of year............................................... $ 30,813 $ 49,821
========= ===========
Supplemental information:
Interest paid............................................. $ 302,800 $ 154,387
Income taxes paid......................................... -- 4,643
Non-cash investing activities:
Equipment acquired through trade....................... 2,333 9,192
</TABLE>
See accompanying notes.
F-83
<PAGE> 236
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Reporting Entity
The accompanying 1995 financial statements include the accounts of Snider
Broadcasting Corporation and its wholly-owned subsidiary, Cornerstone
Broadcasting Corporation (Snider). The accompanying 1996 financial statements
include these accounts combined with those of CDB Broadcasting Corporation
(CDB), a company affiliated through common ownership and management. CDB was
incorporated and began operations May 17, 1996 . All significant intercompany
transactions and accounts have been eliminated.
Nature of Operations
Snider and CDB operate FM radio stations in the Central Arkansas market
area.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment
Depreciation of property and equipment is calculated using the accelerated
and modified accelerated cost recovery systems. Depreciation calculated under
these methods does not differ significantly from amounts calculated under
methods and lives which conform to generally accepted accounting principles.
Estimated useful lives of property and equipment are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Tower....................................................... 5-10
Radio, office and computer equipment........................ 3- 7
Vehicle..................................................... 5
</TABLE>
Intangible Assets
The excess of cost over carrying value of assets acquired for Snider
Broadcasting Corporation is being amortized over 40 years using the
straight-line method. The excess of cost over carrying value of assets acquired
of CDB Broadcasting Corporation is being amortized over 15 years using the
straight-line method.
The non-compete agreement is being amortized over 24 months using the
straight-line method. Start-up costs are being amortized over five years using
the straight-line method.
Asset Impairment
In the event that facts and circumstances indicate that the carrying value
of long-lived assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to fair value or a value based on discounted cash
flows is required.
F-84
<PAGE> 237
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Income Taxes
Snider incurred net operating losses from the date of its incorporation on
January 1, 1985 through 1991. At December 31, 1996 there are approximately
$610,000 of net operating loss carryforwards available for federal income tax
purposes. These loss carryforwards will expire beginning in the year 2000 if not
previously used to offset future net taxable income. In addition, Snider has
approximately $3,600 in general business credit carryforwards that expire in
2000 and 2001.
Snider provides for deferred income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement provides for a liability approach under which deferred income taxes
are based on enacted tax laws and rates applicable to the periods in which the
taxes become payable.
CDB has elected to be treated as an S corporation for federal income tax
purposes and is subject to similar treatment for state income tax purposes.
Under this election, income and losses of CDB are reported in the income tax
returns of the stockholders. As a result, no provision for income taxes for CDB
is reflected in the accompanying combined financial statements.
Statement of Cash Flows
For purposes of the statement of cash flows, the Companies consider cash on
hand and deposits in financial institutions with initial maturities of three
months or less as cash.
Concentrations of Credit Risk
Most of the Companies' business activity is with customers located within
the central region of Arkansas. The Companies' grant credit to their customers
in the normal course of business, ordinarily without collateral requirements.
Reclassifications
Certain reclassifications have been made to the 1995 financial statements
to conform to the 1996 basis of presentation.
(2) PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Tower................................................. $ 89,909 $104,642
Radio equipment....................................... 186,059 404,648
Office equipment...................................... 67,357 95,921
Computer equipment.................................... 37,727 52,604
Vehicle............................................... 20,113 9,859
-------- --------
401,165 667,674
Less accumulated depreciation......................... 341,459 375,388
-------- --------
$ 59,706 $292,286
======== ========
</TABLE>
F-85
<PAGE> 238
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) NOTES PAYABLE -- STOCKHOLDERS:
Notes payable -- stockholders at December 31, 1995 consist of unsecured
demand notes payable to stockholders of Snider bearing interest at 10.25% at
December 31, 1995.
(4) NOTE PAYABLE -- BANK:
Note payable-bank represents a short-term, $3,000,000 credit facility
shared by Snider and CDB. The note matures June 12, 1997, and is secured by
substantially all assets of the Companies and by guarantees of the Companies
stockholders.
The agreement requires the maintenance of certain ratios related to
leverage and debt service. In addition, the agreement contains certain
covenants, the most restrictive of which prohibit or restrict the Companies'
ability to incur additional debt; pledge assets; merge, consolidate or sell
assets; make certain "restricted" investments or loans and advances; dispose of
certain assets; make distributions to its stockholders; and engage in
transactions with their affiliates.
At December 31, 1996, the Companies were in technical default with respect
to a required leverage ratio and certain reporting requirements, however the
Companies had not defaulted on any required principal or interest payments and
were in compliance with all other ratios required under the agreement. These
technical defaults permit the lender to accelerate the scheduled due date of the
debt. Management anticipates the note to be extended during June 1997 with a new
maturity date of December 1997.
(5) LONG-TERM DEBT:
Long-term debt at December 31, 1995 consists of the following:
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Variable rate (9.0% at December 31, 1995); note payable to
Nationsbank of Texas, N.A................................. $ 169,500
Variable rate (10.0% at December 31, 1995) unsecured,
subordinated note payable to Snider Communications
Corporation, an affiliate; payable on demand.............. 1,291,759
10.0% note payable; payable $4,067 monthly, including
interest through February 1999; secured by real estate and
personal property of Snider and guaranteed by stockholders
of Snider and by a member of the immediate family of
Snider's majority stockholder............................. 132,012
----------
1,593,271
Less current portion........................................ 206,781
----------
Long-term debt, less current portion........................ $1,386,490
==========
</TABLE>
The note payable to affiliate of $1,291,759 at December 31, 1995 was
classified as long-term due to such affiliate waiving its right to demand
payment during the immediately following year.
(6) STOCKHOLDERS EQUITY:
Snider Broadcasting Corporation has 1,000 shares of no par value common
stock authorized and 85 shares issued and outstanding.
CDB Broadcasting Corporation has 1,000 shares of no par value common stock
authorized, issued and outstanding.
F-86
<PAGE> 239
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) RETIREMENT PLAN:
During 1995, Snider adopted a 401(k) savings plan which covers
substantially all employees who have completed one year of service and attained
the age of 21. Participating employees may contribute from 1% to 15% of their
compensation. Snider matches 25% of the first 4% contributed by participating
employees. Matching contributions totaled $3,950 and $3,727 for the years ended
December 31, 1995 and 1996, respectively.
(8) INCOME TAXES:
The provision for income taxes at December 31, 1995 and 1996, consists of
the following:
<TABLE>
<CAPTION>
1995 1996
--------- --------
<S> <C> <C>
Current:
Federal............................................. $ 2,117 $ --
State............................................... -- 10,329
--------- --------
2,117 10,329
--------- --------
Deferred:
Federal............................................. 155,754 84,429
State............................................... 32,802 4,709
Decrease in valuation allowance..................... (188,556) (86,841)
--------- --------
-- 2,297
--------- --------
Provision for income taxes............................ $ 2,117 $ 12,626
========= ========
</TABLE>
The income tax provision computed at the federal statutory rate on pretax
income differs from the reported tax provision due to the decrease in the
valuation allowance, effect of graduated rates and non-deductible expenses, and
the results of operations of CDB reported to stockholders for income tax
purposes.
The components of the net deferred tax liability at December 31, 1995 and
1996 follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Federal............................................ $ 295,680 $ 213,291
State.............................................. 4,319 --
--------- ---------
Valuation allowance................................ (299,999) (213,158)
--------- ---------
-- 133
--------- ---------
Deferred tax liabilities:
Federal............................................ -- 2,040
State.............................................. -- 390
--------- ---------
-- 2,430
--------- ---------
Net deferred tax liability........................... $ -- $ (2,297)
========= =========
</TABLE>
F-87
<PAGE> 240
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES:
The Companies lease office space, office equipment, broadcasting equipment
and tower facilities under operating leases expiring in 1993 through 1999. Total
rent expense under these agreements was $61,939 in 1995 and $61,159 in 1996.
Snider has commitments to pay the former owner of one of its radio stations
consulting fees and amounts due under a non-compete agreement. These commitments
extend through February 1999. Payments related to these commitments totaled
$64,733 for each of the years ended December 31, 1995 and 1996.
Future commitments under noncancelable operating leases, consulting and
non-compete agreements at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997...................................................... $138,557
1998...................................................... 75,607
1999...................................................... 20,569
2000...................................................... 9,780
--------
$244,513
========
</TABLE>
(10) RELATED PARTY TRANSACTIONS:
Interest expense in 1995 and 1996, respectively, includes $144,132 and
$56,846 related to the Company's note payable to an affiliate (Note 5). Included
in accrued expenses at December 31, 1995 is accrued interest payable of $708
related to the note.
The Company leases a subcarrier bandwidth of Snider to an affiliate to
transmit paging and weather information under an operating lease, cancelable
upon six months written notice, expiring in 2000 and requiring monthly lease
payments. Total rental income recognized under this lease was $12,000 in 1995
and $30,000 in 1996.
F-88
<PAGE> 241
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEET
MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 16,874
Accounts receivable--trade, net of allowance for doubtful
accounts of $13,110.................................... 539,057
Other..................................................... 16,652
-----------
Total current assets.............................. 572,583
Property and equipment, at cost less accumulated
depreciation of $421,330.................................. 284,067
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated amortization of $149,287.............. 778,340
Start-up costs, net of accumulated amortization of
$14,663................................................ 55,723
Non-compete agreement, less accumulated amortization of
$22,917................................................ 77,083
-----------
Total other assets................................ 911,146
-----------
$ 1,767,796
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable--bank........................................ $ 2,635,000
Accounts payable--trade................................... 277,793
--affiliate............................. 27,782
Income taxes payable...................................... 2,461
Accrued expenses.......................................... 13,056
Accrued interest payable.................................. 42,216
Deferred income taxes..................................... 4,245
-----------
Total current liabilities......................... 3,002,553
Stockholders' deficit:
Common stock.............................................. 75,313
Retained deficit.......................................... (1,310,070)
-----------
Total stockholders' deficit....................... (1,234,757)
-----------
$ 1,767,796
===========
</TABLE>
See accompanying notes to financial statements.
F-89
<PAGE> 242
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF OPERATIONS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $ 937,865
Barter accounts........................................... 65,293
----------
Total revenue..................................... 1,003,158
Less direct charges--commissions............................ 107,208
----------
Gross profit................................................ 895,950
----------
Operating expenses:
Technical department...................................... 28,843
Program department........................................ 193,887
Sales department.......................................... 222,007
General and administrative................................ 246,680
Consulting and non-compete................................ 26,972
Goodwill amortization..................................... 18,351
Depreciation and amortization............................. 91,903
----------
Total operating expenses.......................... 828,643
----------
Operating income............................................ 67,307
----------
Other income (expense):
Interest expense.......................................... (90,723)
Rent...................................................... 12,500
----------
Total other income (expense)...................... (78,223)
----------
Loss before income taxes.................................... (10,916)
Provision for income taxes.................................. 12,856
----------
Net loss.................................................... $ (23,772)
==========
</TABLE>
See accompanying notes to financial statements.
F-90
<PAGE> 243
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance--December 31, 1996.............................. $75,313 $(1,286,298) $(1,210,985)
Net loss................................................ -- (23,772) (23,772)
------- ----------- -----------
Balance--May 31, 1997................................... $75,313 $(1,310,070) $(1,234,757)
======= =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-91
<PAGE> 244
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF CASH FLOWS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (23,772)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation......................................... 45,942
Amortization......................................... 64,313
Deferred income taxes................................ 1,948
Net changes in operating assets and liabilities:
Accounts receivable--trade........................ (134,431)
Other assets...................................... 640
Accounts payable--trade........................... 56,906
Accrued expenses.................................. (38,064)
Accrued interest payable.......................... 31,502
---------
Net cash provided by operating activities....... 4,984
---------
Cash flows from investing activities:
Capital expenditures...................................... (35,523)
---------
Net cash used in investing activities........... (35,523)
---------
Cash flows from financing activities:
Repayment of borrowings................................... (2,408)
---------
Net cash used in financing activities........... (2,408)
---------
Net decrease in cash........................................ (32,947)
Cash:
Beginning of period....................................... 49,821
---------
End of period............................................. $ 16,874
=========
Supplemental cash flows information:
Interest paid............................................. $ 59,229
Income taxes paid......................................... 16,250
Equipment acquired by trade............................... 2,200
</TABLE>
See accompanying notes to financial statements.
F-92
<PAGE> 245
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTE TO COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
(1) SUBSEQUENT EVENT
On June 2, 1997, Snider Broadcasting Corporation and Subsidiary CDB
Broadcasting Corporation (the "Company") entered into local marketing agreements
("LMA") with Citadel Broadcasting Company ("Citadel") whereby Citadel pays
$97,335 per month to the Company in exchange for supplying specified programming
to the brokered stations and marketing all commercial advertising time of the
brokered stations, subject to the Company's right to control the content of all
programming. On the same date, the Company also entered into an Asset Purchase
Agreement and a Merger Agreement with Citadel, upon the consummation of which
Citadel will acquire radio stations KESR-FM and KIPR-FM. The LMA shall terminate
upon the closing of the Merger Agreement and the Asset Purchase Agreement or the
termination of the Merger Agreement and the Asset Purchase Agreement, unless
terminated earlier pursuant to the default provisions of the LMA. In compliance
with the LMA, the broadcasting revenue and station operating expenses of the
Company for the month ended June 30, 1997 are included in the financial
statements of Citadel and are summarized as follows:
<TABLE>
<S> <C>
Net broadcasting revenues................................... $247,783
Station operating expenses.................................. 169,569
</TABLE>
F-93
<PAGE> 246
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 74,209
Accounts receivable--trade, net of allowance for doubtful
accounts of $6,000..................................... 384,567
Other..................................................... 113,716
----------
Total current assets.............................. 572,492
Property and equipment, at cost less accumulated
depreciation of $346,745.................................. 69,855
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated
amortization of $122,816............................... 304,370
Start-up costs, less accumulated amortization of $2,023... 78,900
----------
Total other assets................................ 383,270
----------
$1,025,617
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable--bank........................................ $1,737,408
Accounts payable--trade................................... 137,490
Income taxes payable...................................... 3,889
Accrued expenses.......................................... 16,638
Accrued interest payable.................................. 19,132
----------
Total current liabilities......................... 1,914,557
Stockholders' deficit:
Common stock.............................................. 75,313
Retained deficit.......................................... (964,253)
----------
Total stockholders' deficit....................... (888,940)
----------
$1,025,617
==========
</TABLE>
F-94
<PAGE> 247
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $ 974,107
Barter accounts........................................... 62,690
----------
Total revenue..................................... 1,036,797
Less direct charges--commissions............................ 136,184
----------
Gross profit................................................ 900,613
----------
Operating expenses:
Technical department...................................... 27,973
Program department........................................ 156,515
Sales department.......................................... 181,298
General and administrative................................ 209,999
Ratings enhancement....................................... 7,657
Consulting and non-compete................................ 32,366
Goodwill amortization..................................... 5,340
Depreciation and amortization............................. 18,925
----------
Total operating expenses.......................... 640,073
----------
Operating income............................................ 260,540
Other income (expense):
Interest expense.......................................... (82,076)
Loss on sale of property and equipment.................... (458)
Rent...................................................... 15,000
----------
Total other income (expense)...................... (67,534)
----------
Income before income taxes.................................. 193,006
Provision for income taxes.................................. 5,165
----------
Net income.................................................. $ 187,841
==========
</TABLE>
F-95
<PAGE> 248
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance--December 31, 1995................................. $75,213 $(1,152,094) $(1,076,881)
Common stock issued........................................ 100 100
Net income................................................. 187,841 187,841
------- ----------- -----------
Balance--June 30, 1996..................................... $75,313 $ (964,253) $ (888,940)
======= =========== ===========
</TABLE>
F-96
<PAGE> 249
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 187,841
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation......................................... 14,256
Amortization......................................... 8,800
Loss on sale of property and equipment............... 458
Net changes in operating assets and liabilities:
Accounts receivable--trade........................ (79,413)
Other assets...................................... (62,851)
Accounts payable--trade........................... 28,084
Accrued expenses.................................. 5,884
Accrued interest payable.......................... 4,584
-----------
Net cash provided by operating activities....... 107,643
-----------
Cash flows from investing activities:
Capital expenditures...................................... (25,688)
Proceeds from sale of assets.............................. 825
Business acquisition costs................................ (50,000)
Start-up costs............................................ (80,923)
-----------
Net cash used in investing activities.................. (155,786)
-----------
Cash flows from financing activities:
Repayment of borrowings--bank............................. (169,500)
--affiliates.................... (1,291,759)
--others........................ (184,710)
Proceeds from borrowings.................................. 1,737,408
Common stock issued....................................... 100
-----------
Net cash provided by financing activities.............. 91,539
-----------
Net increase in cash........................................ 43,396
Cash:
Beginning of period....................................... 30,813
-----------
End of period............................................. $ 74,209
===========
Supplemental cash flows information:
Interest paid............................................. $ 77,492
===========
</TABLE>
F-97
<PAGE> 250
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Maranatha Broadcasting Company, Inc.:
We have audited the accompanying balance sheet of Maranatha Broadcasting
Company, Inc.'s Radio Broadcasting Division (the "Company") as of December 31,
1996, and the related statements of operations and division equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Maranatha Broadcasting
Company, Inc.'s Radio Broadcasting Division as of December 31, 1996, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
September 29, 1997
F-98
<PAGE> 251
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
BALANCE SHEET
DECEMBER 31, 1996 AND SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable, net of reserves of $20,000........... $ 366,278 $ 293,143
Equipment................................................. 213,800 220,562
Accumulated depreciation.................................. (140,828) (155,828)
--------- ---------
72,972 64,734
Broadcast license......................................... 10,325 9,895
--------- ---------
Total assets........................................... $ 449,575 $ 367,772
========= =========
LIABILITIES AND DIVISION EQUITY
Current Liabilities:
Accounts payable.......................................... $ 11,944 $ 9,630
Trade payable............................................. 10,000 --
Accrued compensation and commissions...................... 18,091 12,537
Customer deposits......................................... 16,447 16,964
--------- ---------
Total current liabilities.............................. 56,482 39,131
Commitments and contingencies
Division equity........................................... 393,093 328,641
--------- ---------
Total liabilities and division equity.................. $ 449,575 $ 367,772
========= =========
</TABLE>
See accompanying notes to financial statements.
F-99
<PAGE> 252
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
STATEMENT OF OPERATIONS AND DIVISION EQUITY
YEAR ENDED DECEMBER 31, 1996 AND THE EIGHT AND ONE-HALF-MONTH PERIOD ENDED
SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Net broadcasting revenue.................................. $2,066,271 $1,375,243
Subcarrier rental......................................... 48,796 37,333
---------- ----------
2,115,067 1,412,576
Operating expenses:
Technical expenses........................................ 75,265 54,366
Program expenses.......................................... 191,363 135,229
Selling expenses.......................................... 893,721 656,039
General and administrative expenses....................... 279,090 213,382
Management fee and corporate overhead allocation.......... 139,379 55,966
Bad debts................................................. 62,868 51,511
Depreciation and amortization............................. 20,148 15,430
---------- ----------
Total operating expenses.......................... 1,661,834 1,181,923
---------- ----------
Net income.................................................. 453,233 230,653
Division equity, beginning of period........................ 421,384 393,093
Transfers to parent......................................... (481,524) (295,105)
---------- ----------
Division equity, end of period.............................. $ 393,093 $ 328,641
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-100
<PAGE> 253
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 AND THE EIGHT AND ONE-HALF MONTH PERIOD ENDED
SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 453,233 $ 230,653
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................ 20,148 15,430
Changes in assets and liabilities:
Decrease in accounts receivable...................... 25,809 73,135
Decrease in accounts payable and accruals............ (740) (17,351)
--------- ---------
Net cash provided by operating activities......... 498,450 301,867
--------- ---------
Cash flows from investing activities:
Purchase of radio equipment............................... (16,926) (6,762)
--------- ---------
Net cash used in investing activities............. (16,926) (6,762)
--------- ---------
Cash flows from financing activities:
Cash transfers to parent.................................. (481,524) (295,105)
--------- ---------
Net cash used in financing activities............. (481,524) (295,105)
--------- ---------
Net change in cash........................................ -- --
Cash, beginning of period................................... -- --
--------- ---------
Cash, end of period......................................... $ -- $ --
========= =========
</TABLE>
See accompanying notes to financial statements.
F-101
<PAGE> 254
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION AS OF SEPTEMBER 15, 1997 AND FOR THE EIGHT AND ONE-HALF-MONTH
PERIOD
THEN ENDED IS UNAUDITED)
(1) NATURE OF BUSINESS AND ORGANIZATION
Radio Broadcasting (the "Company") is a division of the Maranatha
Broadcasting Company, Inc. ("Maranatha"). Maranatha is a television and radio
broadcaster with facilities located in Allentown, Pennsylvania. The Company's
operations and facilities are integrated with those of Maranatha. Maranatha
provides management, accounting and certain administrative services for the
Company and charges them for these services based upon a percentage of
utilization which management believes is reasonable. Total allocated
administrative costs were $418,469 and $296,416 for the year ended December 31,
1996 and the eight and one-half months ended September 15, 1997, respectively.
Maranatha collects and retains all cash generated by the Radio Broadcasting
Division.
The Radio Broadcasting Division provides credit to customers, substantially
all of whom are regional businesses engaged in a variety of industries and
services. The Division broadcasts in the Allentown, Bethlehem, Easton region of
Eastern Pennsylvania as WLEV (formerly WFMZ) and broadcasts, through a
translator, in Reading, Pennsylvania as WLEV.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equipment
Equipment is carried at cost, less accumulated depreciation. Depreciation
is provided on the straight-line method over the estimated useful lives of 5 to
7 years. Maintenance and repairs are charged to operations as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue
Net broadcasting revenue is presented net of agency commissions and is
recognized when the advertisements are broadcast.
Trade Transactions
Revenue from trade transactions (advertising provided in exchange for goods
and services) is recognized when advertisements are broadcast and trade expense
is recognized when merchandise is consumed or services are performed. An asset
and liability are recorded at the fair market value of the goods or services
received.
Accounts Receivable
The division generally extends 60 day credit terms to its advertisers and
maintains an allowance for uncollectible accounts based upon past experience.
F-102
<PAGE> 255
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Broadcast License
The broadcast license and translator license were recorded at cost and
amortized over 15 years; the license has been fully amortized.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Maranatha has elected by consent of its shareholders to be taxed under the
provisions of Subchapter S for federal and state income tax purposes. Under
those provisions, Maranatha does not pay corporate income taxes on its taxable
income. Instead, the shareholders are liable for individual income taxes on the
Company's taxable income. Accordingly, these financial statements do not contain
a provision for income taxes.
Interim Financial Information
The financial statements as of September 15, 1997 and for the eight and
one-half months ended September 15, 1997 are unaudited; however, in the opinion
of management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
period have been included. The results for the interim period are not
necessarily indicative of the results to be achieved for the full fiscal year.
Division Equity
Division equity at December 31, 1996 consists of accumulated earnings of
$5,629,473 less distributions to Maranatha of $5,216,380.
(3) CONTINGENT LIABILITIES AND COMMITMENTS
Maranatha has certain debt and a revolving line of credit, which is secured
by all the assets of Maranatha, including the assets of the Radio Broadcasting
Division, as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Total notes and debt payable..................... $ 506,886 $ 826,648
Less current portion............................. (190,286) (183,670)
--------- ---------
Total long-term debt............................. $ 316,600 $ 642,978
========= =========
Revolving line of credit......................... $ -- $ --
========= =========
</TABLE>
The notes and line of credit bear interest primarily at the lender's prime
rate which was 8.25% and 8.5% at December 31, 1996 and September 15, 1997,
respectively. One of the notes bears interest at a fixed rate of 7.90%.
Maranatha is in compliance with the debt covenants as of September 15, 1997.
Proceeds from debt issuance were used to enhance Maranatha's television
operations.
The Division leases its Reading translator site and Reading sales office
under operating leases with future minimum monthly payments of $800 through
November 1998. The Division has also entered into lease
F-103
<PAGE> 256
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
agreements to provide sub-channel broadcast frequency to two lessees. The future
revenue under the lease terms is as follows:
<TABLE>
<S> <C>
1997...................................................... $ 48,796
1998...................................................... 50,516
1999...................................................... 39,121
2000...................................................... 39,817
2001...................................................... 23,891
--------
$202,141
========
</TABLE>
(4) AGREEMENT OF SALE
On July 15, 1997, Maranatha entered into an asset purchase agreement with
Citadel Broadcasting Company ("CBC") and a wholly-owned subsidiary of CBC to
sell the assets and broadcast license of the Radio Broadcasting Division to CBC
for $23,000,000 plus the broadcasting assets of a radio station (WEST-AM in
Easton, Pennsylvania) owned by CBC and a wholly-owned subsidiary of CBC.
On September 15, 1997 Maranatha entered into a local marketing agreement
(LMA) with Citadel Broadcasting Company (Citadel) whereby Citadel pays $25,000
per month to the Company in exchange for supplying specified programming to the
brokered stations and marketing all commercial advertising time of the brokered
stations, subject to the Company's right to control the content of all
programming. In compliance with the LMA, the broadcasting revenue and station
operating expenses of the Company for the 15-day period from September 16, 1997
to September 30, 1997 are included in the financial statements of Citadel.
F-104
<PAGE> 257
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Pacific Northwest Broadcasting Corporation
Boise, Idaho
We have audited the accompanying combined balance sheet of Pacific
Northwest Broadcasting Corporation and Affiliates as of December 31, 1996, and
the related combined statements of operations, changes in owners' equity, and
cash flows for the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Pacific
Northwest Broadcasting Corporation and Affiliates as of December 31, 1996, and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ BALUKOFF, LINDSTROM & CO., P.A.
Boise, Idaho
September 25, 1997
F-105
<PAGE> 258
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 220,381
Trade accounts receivable, net of allowance for doubtful
accounts of $25,000.................................... 1,079,835
Other accounts receivable................................. 57,692
Prepaid expenses.......................................... 189,395
Accrued interest receivable............................... 18,169
Current portion of notes receivable....................... 488,880
-----------
Total current assets................................... 2,054,352
Other assets:
AM and FM broadcast licenses.............................. 4,497,916
Notes receivable, less current portion.................... 3,011,778
Noncompete agreements..................................... 354,441
Equipment deposits and other assets....................... 39,250
Deferred taxes............................................ 42,443
-----------
7,945,828
Property and equipment, at cost
Land and improvements..................................... 130,011
Leasehold improvements.................................... 61,744
Towers and antennas....................................... 402,710
Transmitters and transmitter buildings.................... 508,444
Studio and technical equipment............................ 915,007
Automobiles............................................... 44,930
Furniture and office equipment............................ 360,595
-----------
2,423,441
Accumulated depreciation.................................. (992,576)
-----------
1,430,865
-----------
$11,431,045
===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 268,401
Accrued expenses.......................................... 259,479
Accrued taxes payable..................................... 12,520
Current portion of notes payable to related parties....... 106,868
Current portion of long-term debt......................... 1,195,717
-----------
Total current liabilities.............................. 1,842,985
Long-term debt:
Notes payable to related parties, less current portion.... 1,155,817
Notes payable, less current portion....................... 7,184,057
-----------
8,339,874
Deferred revenue............................................ 235,395
Owners' equity:
Convertible preferred stock, nonvoting, par value $1,000
per share, 5% non cumulative, authorized 3,500 shares,
issued and outstanding 1,396.8 shares.................. 1,396,800
Common stock, voting, no par value, authorized 10,000
shares, issued and outstanding 3,766.6 shares.......... 475,677
Members' equity........................................... 61,176
Accumulated deficit....................................... (920,862)
-----------
1,012,791
-----------
$11,431,045
===========
</TABLE>
See accompanying notes.
F-106
<PAGE> 259
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenues:
Revenues.................................................. $5,404,307
Less agency and representative commissions................ 772,233
----------
4,632,074
Expenses:
Transmission.............................................. 223,366
Programming and production................................ 1,476,235
Sales..................................................... 816,459
General and administrative................................ 1,599,675
Advertising............................................... 150,696
----------
4,266,431
----------
Income from operations................................. 365,643
Nonoperating income (expense)
Gain on sale of assets.................................... 198,581
Noncompete revenue........................................ 184,508
Interest income........................................... 321,759
Interest expense.......................................... (566,783)
----------
138,065
----------
Income before income taxes............................. 503,708
Income tax expense.......................................... 182,480
----------
Net income............................................. $ 321,228
==========
</TABLE>
See accompanying notes.
F-107
<PAGE> 260
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF CHANGES IN OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREFERRED COMMON SHAREHOLDER ACCUMULATED MEMBERS'
STOCK STOCK RECEIVABLE DEFICIT EQUITY TOTAL
---------- --------- ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996... $1,396,800 $ 591,302 $(85,445) $(1,180,914) $ -- $ 721,743
Common stock redemption,
125 shares............... -- (115,625) -- -- -- (115,625)
Decrease in shareholder
receivable............... -- -- 85,445 -- -- 85,445
Net income................. -- -- -- 260,052 61,176 321,228
---------- --------- -------- ----------- ------- ----------
Balance at December 31,
1996....................... $1,396,800 $ 475,677 $ -- $ (920,862) $61,176 $1,012,791
========== ========= ======== =========== ======= ==========
</TABLE>
See accompanying notes.
F-108
<PAGE> 261
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 321,228
Adjustments to reconcile net income to net cash provided
by operating activities Amortization................... 55,427
Depreciation........................................... 71,926
Noncompete revenue..................................... (134,508)
Noncompete expense..................................... 89,257
Provision for bad debts................................ 14,029
Gain on sale of assets................................. (198,581)
Legal expense paid directly by bank.................... 10,200
Changes in operating assets and liabilities
Trade accounts receivable............................ (604,884)
Other accounts receivable............................ (5,319)
Prepaid expenses..................................... 21,658
Prepaid income tax................................... 7,739
Accrued interest receivable.......................... 9,794
Equipment deposits and other assets.................. (14,258)
Deferred taxes....................................... 169,936
Accounts payable..................................... 90,761
Accrued expenses..................................... 82,996
Accrued taxes payable................................ 12,520
---------
Net cash used by operating activities............. (79)
Cash flows from investing activities:
Payments on receivable from shareholders.................. 39
Loans made to shareholders................................ (491,256)
Payments on notes receivable.............................. 773,885
Payments for acquisition of stations...................... (63,360)
Proceeds from sale of assets.............................. 190,244
Additions to property and equipment....................... (152,300)
---------
Net cash provided by investing activities......... 257,252
Cash flows from financing activities:
Decrease in bank overdraft................................ (118,289)
Payments on notes payable................................. (282,906)
Borrowings on notes payable to related parties............ 400,000
Payment on notes payable to related parties............... (35,597)
---------
Net cash provided by financing activities......... (36,792)
---------
Net increase in cash.............................. 220,381
Cash at beginning of year................................... --
---------
Cash at end of year............................... $ 220,381
=========
</TABLE>
See accompanying notes.
F-109
<PAGE> 262
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
The Company operates AM and FM radio stations in southwestern Idaho.
Revenues received from local advertisers and national agencies advertising in
the southwestern Idaho market account for the majority of revenues.
Principles of Combination
The financial statements include the accounts of Pacific Northwest
Broadcasting Corporation (PNWB) and its wholly owned subsidiary, (Richardson
Broadcasting Company), and Wilson Group, LLC (Wilson), a limited liability
company which has common ownership. Wilson operates as an Idaho limited
liability company and its members have limited personal liability for the
obligations or debts of the entity. Wilson will terminate no later than December
31, 2072. Intercompany accounts and transactions have been eliminated in
combination.
Allocation of Earnings
Wilson operates two broadcast signals--KIZN and KZMG. Earnings from these
two signals are reported on the balance sheet as increases or decreases in
members' equity. The other broadcast signals--KBOI, KQFC and KKGL--are operated
by PNWB. Their earnings are reported as increases or decreases in the
accumulated deficit account.
Cash
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
Depreciation
Depreciation of property and equipment is provided using the straight line
method over the estimated useful lives of the assets, which range from 3 to 50
years.
Amortization
Costs related to obtaining AM and FM broadcast licenses are amortized using
the straight line method over fifteen years. Accumulated amortization relating
to these licenses was $133,852 at December 31, 1996.
Costs related to the noncompete agreements are amortized using the
straight-line method over five years, the term of the agreement. Accumulated
amortization relating to the noncompete agreements was $171,848 at December 31,
1996.
Deferred Revenue
Deferred revenue consists of a noncompete agreement and will be earned over
the life of the agreement (7 years).
Revenue Recognition and Trade Transactions
Broadcast revenue is recognized when the advertisements are broadcast.
Revenue from trade transactions (advertising provided in exchange for goods and
services) is recognized as income when advertisements are broadcast and trade
expense is recognized when merchandise is consumed or services are performed.
F-110
<PAGE> 263
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
Advertising
The Company expenses advertising costs as they are incurred.
Income Taxes
Income taxes are provided for the tax effects of PNWB transactions reported
in the financial statements and consist of taxes currently due or recoverable
and deferred taxes related primarily to differences between the bases of assets
and liabilities for financial and income tax reporting. Differences between
financial and income tax reporting relate to accumulated depreciation,
installment sales, basis in subsidiary's stock, allowance for doubtful accounts,
deferred compensation, noncompete amortization and shareholder interest payable.
No provision has been made for the tax effects of the Wilson transactions
since Wilson is taxed as a partnership and taxes are the responsibility of the
individual members.
Estimates
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
reported revenues and expenses. Actual results could differ from these
estimates.
Concentrations of Credit Risk
In the normal course of business, the Company extends unsecured credit to
customers principally national advertising agencies and companies in the
southwestern Idaho market. The Company also has demand deposits on hand in
financial institutions which exceed applicable FDIC insurance.
Acquisitions and Local Marketing Agreement
In October, 1996, the Company acquired two radio stations in Boise, Idaho
for $5,000,000. This acquisition was accounted for using the purchase method of
accounting. The purchase price has been allocated to the assets purchased based
upon fair values as agreed to with the seller.
The Company operated the two radio stations under a Local Marketing
Agreement (LMA) for six months prior to the acquisition. Under the terms of the
LMA, the expenses of operating the stations (other than depreciation or
amortization of assets) were the obligation of the Company and the Company
received the revenues generated by the stations.
NOTE B--NOTES RECEIVABLE
The Company sold radio stations in Medford, Oregon, Chico, California, and
Eugene, Oregon in prior years and financed the sale of the radio stations to the
buyers. In 1996, the Company sold two radio stations and a building in
Pocatello, Idaho, and financed the sale. Each of the sales agreements included
provisions which restrict the Company from competing in markets served by the
radio stations which were sold. The
F-111
<PAGE> 264
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
noncompete agreements extend for periods up to seven years from the dates of the
sales. The terms of the notes are as follows:
<TABLE>
<S> <C>
Note receivable from broadcasting company for Pocatello
stations at $4,003 per month through March 1997 and
$11,592 per month thereafter including interest at 8.5%,
due March 2002, secured by substantially all assets of the
Pocatello stations........................................ $ 564,993
Note receivable from broadcasting company for Pocatello
building at $2,405 per month, including interest at 8.5%,
due March 2002, secured by real estate.................... 108,884
Note receivable from broadcasting company for Chico and
Eugene stations at monthly payments ranging from $37,033
to $53,204 including interest at 7.71%, due September
2002, secured by substantially all assets of the
stations.................................................. 2,826,781
----------
3,500,658
Less current portion........................................ 488,880
----------
$3,011,778
==========
</TABLE>
NOTE C--LONG-TERM DEBT
Long-term debt is summarized as follows:
To banks:
<TABLE>
<S> <C>
Note payable to bank, monthly payments of interest only at
prime plus 1%, secured by substantially all of the
Company's assets. The interest rate at December 31, 1996
was 9.25%................................................. $8,000,000
To individuals:
Note payable to former shareholder at $1,205 per month
including interest at 8% through January 2003,
unsecured................................................. 69,440
Note payable to former shareholder at $991 per month
including interest at 10% through June 2000, unsecured.... 35,002
Note payable to former shareholder at $3,033 per month
including interest at 8% through January 2006,
unsecured................................................. 234,457
Note payable to former shareholder at $375 per month
through January 2006...................................... 40,875
Unsecured notes payable to related party, due on demand... 7,772
Unsecured notes payable to related parties at $4,446 per
month including interest at 9% through August 2018........ 208,093
Unsecured notes payable to related party, due on demand
including interest at 7.5%................................ 53,372
</TABLE>
F-112
<PAGE> 265
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
<TABLE>
<S> <C>
Notes payable to related parties, secured by certain notes
receivable and guaranteed by principal shareholder,
payable in monthly installments, including interest as
follows:
</TABLE>
<TABLE>
<CAPTION>
MONTHLY INTEREST
INSTALLMENTS RATES DUE DATES
------------ -------- ---------
<S> <C> <C> <C> <C>
$5,077 8.0% January 1, 2005.................. $ 679,945
$ 470 8.0% January 1, 2005.................. 58,820
$ 470 8.0% January 1, 2005.................. 58,820
$ 470 8.0% January 1, 2005.................. 58,821
$ 440 8.0% January 1, 2005.................. 58,956
$ 381 8.0% January 1, 2005.................. 50,989
Accrued interest due to related parties............................... 27,097
----------
9,642,459
Less current portion.................................................. 1,302,585
----------
$8,339,874
==========
</TABLE>
Maturities in future years are: 1997--$1,302,585, 1998--$2,589,369;
1999--$4,454,088; 2000--$106,077; 2001--$1,018,430 and thereafter--$171,910.
The note payable to the bank limits the amount of new debt and operating
leases to not more than a total of $50,000 without lender's approval.
The bank issued a commitment letter to refinance $7,000,000 of the
$8,000,000 obligation in 1997, including a bridge loan of $2,000,000 and a term
loan of $5,000,000. The bridge loan has terms which include interest at prime
plus 1% and a maturity date of February 28, 1998. Requirements of the term loan
include interest at prime plus 1%, due August 31, 1999 and monthly payments of
approximately $77,000 (using an interest rate of 9.25%). The current portion and
scheduled maturities have been adjusted to reflect the intended refinance.
NOTE D--RELATED PARTY TRANSACTIONS
Interest expense paid to related parties amounted to $187,646 in 1996. The
Company leases land, office facilities, and equipment from certain shareholders
and officers of the Company. Rental expense paid to related parties amounted to
$99,588 in 1996.
NOTE E--LEASE COMMITMENTS
The Company leases radio transmitter sites, buildings, music and airtime
under noncancellable leases with terms in excess of one year. Future minimum
payments, by year and in the aggregate, under noncancellable operating leases
with initial or remaining terms of one year or more consisted of the following
at December 31, 1996:
<TABLE>
<S> <C>
1997........................................................ $206,120
1998........................................................ 201,980
1999........................................................ 133,202
2000........................................................ 31,300
2001........................................................ 11,150
Thereafter.................................................. 105,850
--------
Total minimum lease payments................................ $689,602
========
</TABLE>
Rental expense amounted to $245,589 in 1996.
F-113
<PAGE> 266
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE F -- INCOME TAXES
The provision for income taxes results from continuing operations and
includes the following components:
<TABLE>
<S> <C>
Federal
Current tax provision............................. $ --
Deferred tax provision............................ 147,548
--------
147,548
State
Current tax provision............................. 12,544
Deferred tax provision............................ 22,388
--------
34,932
--------
Total income tax expense.................................... $182,480
========
</TABLE>
The components of the net deferred tax asset at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
--------- -------- ---------
<S> <C> <C> <C>
Deferred tax liability from:
Taxable temporary differences............................. $(255,017) $(60,004) $(315,021)
Deferred tax asset from:
Deductible temporary differences.......................... 105,662 22,049 127,711
Operating loss carryforward............................... 205,289 -- 205,289
Tax credit carryforward................................... 83,214 2,793 86,007
Valuation allowance....................................... (61,543) -- (61,543)
--------- -------- ---------
332,622 24,842 357,464
--------- -------- ---------
Deferred tax asset (liability).............................. $ 77,605 $(35,162) $ 42,443
========= ======== =========
</TABLE>
The following reconciles the federal tax provision with the expected
provision by applying statutory rates to income before income taxes:
<TABLE>
<S> <C>
Federal tax expense at statutory rate....................... $171,261
Effect of state taxes....................................... (13,701)
Nondeductible expenses...................................... 2,861
Partnership income.......................................... (20,800)
Other....................................................... 7,927
--------
Federal income tax expense.................................. $147,548
========
</TABLE>
For income tax purposes, operating losses and tax credit carryovers used
and available are as follows at December 31, 1996:
<TABLE>
<CAPTION>
USED AVAILABLE
-------- ---------
<S> <C> <C>
Net operating loss, federal............................. $379,789 $710,617
Alternative minimum tax credit.......................... -- 21,671
General business credit................................. -- 61,543
</TABLE>
The federal net operating losses expire during 2004 through 2010. The
general business credits expire during 1998 through 2000. The alternative
minimum tax credits can be carried forward indefinitely.
F-114
<PAGE> 267
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE G -- DEFINED CONTRIBUTION PLAN
The Company maintains a 401(k) plan covering all employees over the age of
twenty-one who have completed one year of service. The Company matches 10% of an
employee's contribution. Contributions to the plan were $7,022 in 1996.
NOTE H -- CONVERTIBLE PREFERRED STOCK
The preferred stockholders have the option to convert the preferred stock
into common stock prior to December 31, 2002 on the basis of five shares of
common stock for each share of preferred stock redeemed. The holders of
preferred stock do not have voting rights. Preferred stock is redeemable at par.
Subsequent to year end, the preferred stockholders converted all of their
preferred stock to common stock at the ratio of five shares of common stock for
each share of preferred stock.
NOTE I -- CASH FLOW INFORMATION
Supplemental cash flow information for the years ended December 31, 1996 is
as follows:
<TABLE>
<S> <C>
Interest paid............................................... $ 347,933
Taxes paid (net of refunds)................................. $ (7,718)
Noncash financing and investing activities:
Purchase of shareholder's common stock and payment of
deferred compensation:
Common stock redeemed.................................. $ 115,625
New debt incurred...................................... (295,000)
Deferred compensation paid............................. 179,375
-----------
$ --
===========
Sale of assets:
Proceeds from sale of property and equipment........... $ 689,000
Increase in notes receivable........................... (689,000)
-----------
$ --
===========
Payment of shareholder receivable with reduction in
shareholder note payable:
Notes payable reduced.................................. $ 1,000,000
Note payable created................................... (7,772)
Shareholder receivable paid............................ (992,228)
-----------
$ --
===========
Refinancing company and shareholder debt and acquisition
of radio stations:
Proceeds from new debt................................. $ 8,000,000
Payments on existing debt.............................. (2,557,188)
Broadcast licenses acquired............................ (4,100,000)
Property and equipment acquired........................ (800,000)
Noncompete agreement................................... (100,000)
Debt repayment on behalf of shareholder................ (415,972)
Loan fees.............................................. (80,000)
Legal fees............................................. (10,200)
-----------
Net cash paid for acquisition $ (63,360)
===========
</TABLE>
F-115
<PAGE> 268
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE J--SUBSEQUENT EVENTS
The Company has entered into an agreement to redirect certain of the
Company's broadcast signals in exchange for a payment of $2,000,000. The
agreement is subject to Federal Communications Commission (FCC) approval and is
secured by a letter of credit. Approval is expected in 1997 and the payment is
expected to be received subsequent to approval.
Subsequent to December 31, 1996, the shareholders of PNWB and the members
of Wilson have signed letters of intent to sell the capital stock of PNWB, the
operating assets of Wilson and a building owned by a shareholder to Citadel
Broadcasting Company (Citadel). The transactions are subject to approval of the
FCC. Under the letters of intent, the Company will enter into a LMA with Citadel
which will allow Citadel use of the property and equipment of the radio stations
in exchange for a fee. The LMA will continue until closing of the sales of the
stock of PNWB and the assets of Wilson. The sale of the stock of PNWB will not
close prior to January 1, 1998 and the sale of the assets of Wilson will not
close prior to April 18, 1998. The sale price of $28,500,000 for the stock,
assets and building is payable in cash, or, if Citadel's parent consummates an
initial public offering prior to closing, such price is payable in cash totaling
$25,650,000 and stock of $2,850,000. The agreement to purchase the stock of PNWB
requires, among other things, that certain minimum levels of net asset value be
met on the date of closing.
The Company made payments of notes payable amounting to approximately
$1,800,000 subsequent to year end in advance of the payment due dates.
Additionally, the Company received approximately $2,600,000 in full payment of
certain notes receivables subsequent to December 31, 1996.
Subsequent to year end, the preferred stockholders converted all of their
preferred stock to common stock at the ratio of five shares of common stock for
each share of preferred stock.
F-116
<PAGE> 269
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED BALANCE SHEET
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 457,658
Trade accounts receivable, net of allowance for doubtful
accounts of $25,000..................................... 1,033,958
Other accounts receivable................................. 47,171
Prepaid expenses.......................................... 92,255
Prepaid income tax........................................ 5,880
Accrued interest receivable............................... 2,119
Current portion of notes receivable....................... 132,952
-----------
Total current assets............................... 1,771,993
Other Assets:
AM and FM broadcast licenses.............................. 4,382,008
Notes receivable, less current portion.................... 525,244
Noncompete agreements..................................... 266,170
Equipment deposits and other assets....................... 43,509
Deferred taxes............................................ 5,452
-----------
5,222,383
Property and equipment, at cost:
Land and improvements..................................... 324,647
Leasehold improvements.................................... 63,063
Towers and antennas....................................... 402,710
Transmitters and transmitter buildings.................... 513,002
Studio and technical equipment............................ 951,467
Automobiles............................................... 44,930
Furniture and office equipment............................ 382,019
-----------
2,681,838
Accumulated depreciation.................................. (1,109,093)
-----------
1,572,745
-----------
$ 8,567,121
===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 203,805
Accrued expenses.......................................... 181,856
Current portion of notes payable to related parties....... 71,720
Current portion of long-term debt......................... 6,533,928
-----------
Total current liabilities.......................... 6,991,309
Long-term debt:
Notes payable to related parties, less current portion.... 832,523
Notes payable, less current portion....................... 284,301
-----------
1,116,824
Deferred revenue............................................ 123,305
Owners' equity:
Common stock, voting, no par value, authorized 20,000
shares, issued and outstanding 10,750.6 shares.......... 1,872,477
Shareholder receivable.................................... (531,500)
Accumulated deficit....................................... (852,164)
Members' deficit.......................................... (153,130)
-----------
335,683
-----------
$ 8,567,121
===========
</TABLE>
See accompanying notes.
F-117
<PAGE> 270
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF OPERATIONS
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Revenues:
Revenues.................................................. $5,717,702
Less agency and representative commissions................ 796,360
----------
4,921,342
Expenses:
Transmission.............................................. 233,678
Programming and production................................ 1,640,619
Sales..................................................... 874,358
General and administrative................................ 1,622,242
Advertising............................................... 137,386
----------
4,508,283
----------
Income from operations............................ 413,059
Nonoperating income (expense):
Loss on sale of assets.................................... (65,639)
Noncompete revenue........................................ 112,090
Interest income........................................... 121,846
Interest expense.......................................... (694,674)
----------
(526,377)
----------
Loss before income taxes.......................... (113,318)
Income tax expense.......................................... 32,290
----------
Net loss.......................................... $ (145,608)
==========
</TABLE>
See accompanying notes.
F-118
<PAGE> 271
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF CHANGES IN OWNERS' EQUITY
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
PREFERRED COMMON SHAREHOLDER ACCUMULATED MEMBERS'
STOCK STOCK RECEIVABLE DEFICIT DEFICIT TOTAL
----------- ---------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997.... $ 1,396,800 $ 475,677 $ -- $(920,862) $ 61,176 $1,012,791
Preferred stock
conversion................ (1,396,800) 1,396,800 -- -- -- --
Increase in shareholder
receivable................ -- -- (531,500) -- -- (531,500)
Net income (loss)........... -- -- -- 68,698 (214,306) (145,608)
----------- ---------- --------- --------- --------- ----------
Balance at October 31, 1997... $ -- $1,872,477 $(531,500) $(852,164) $(153,130) $ 335,683
=========== ========== ========= ========= ========= ==========
</TABLE>
See accompanying notes.
F-119
<PAGE> 272
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF CASH FLOWS
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (145,608)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization........................................... 115,908
Depreciation........................................... 116,517
Noncompete revenue..................................... (112,090)
Noncompete expense..................................... 88,271
Provision for bad debts................................ 20,284
Loss on sale of assets................................. 65,639
Changes in operating assets and liabilities:
Trade accounts receivable............................ 25,593
Other accounts receivable............................ 10,521
Prepaid expenses..................................... 97,140
Prepaid income tax................................... (5,880)
Accrued interest receivable.......................... 16,050
Equipment deposits and other assets.................. (4,259)
Deferred taxes....................................... 36,991
Accounts payable..................................... (64,596)
Accrued expenses..................................... (77,623)
Accrued taxes payable................................ (12,520)
-----------
Net cash provided by operating activities......... 170,338
Cash flows from investing activities:
Loans made to shareholders................................ (531,500)
Advances on notes receivable.............................. (59,836)
Payments on notes receivable.............................. 2,902,298
Proceeds from sale of assets.............................. 61,100
Additions to property and equipment....................... (385,136)
-----------
Net cash provided by investing activities......... 1,986,926
Cash flows from financing activities:
Payments on notes payable................................. (1,561,545)
Payments on notes payable to related parties.............. (358,442)
-----------
Net cash used by financing activities............. (1,919,987)
-----------
Net increase in cash.............................. 237,277
Cash at beginning of period....................... 220,381
-----------
Cash at end of period............................. $ 457,658
===========
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 703,382
Taxes paid................................................ $ 13,699
</TABLE>
See accompanying notes.
F-120
<PAGE> 273
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE A--UNAUDITED INTERIM FINANCIAL STATEMENTS
The combined balance sheet as of October 31, 1997 and the combined
statements of operations, changes in owners' equity, and cash flows for the ten
month period ended October 31, 1997 are unaudited. In the opinion of management,
the accompanying unaudited financial statements contain all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
the financial position of Pacific Northwest Broadcasting Corporation and
Affiliates, (the Company) and the results of operations, changes in owners'
equity, and cash flows. These interim unaudited combined financial statements
should be read in conjunction with the audited combined financial statements.
The combined results of operations for the ten months ended October 31, 1997 are
not necessarily indicative of results to be expected for the full year.
NOTE B--AGREEMENT TO REDIRECT SIGNAL
The Company has entered into an agreement to redirect certain of the
Company's broadcast signals in exchange for a payment of $2,000,000. The
agreement is subject to Federal Communications Commission approval and is
secured by a letter of credit.
NOTE C--SALES AGREEMENTS
On September 29, 1997, the shareholders of Pacific Northwest Broadcasting
Corporation (PNWB) and the members of Wilson Group, LLC (Wilson) signed various
agreements to sell the capital stock of PNWB, the operating assets of Wilson and
a building of the controlling owner to Citadel Broadcasting Company (Citadel).
In conjunction with the agreements, the Company entered into a Local Marketing
Agreement (LMA) with Citadel which allowed Citadel use of the property and
equipment of the radio stations in exchange for a fee. The LMA continued until
the closing of the sale of the assets of Wilson. The sale of the stock of PNWB
closed February 12, 1998 and the sale of the assets of Wilson closed on April
21, 1998. The sales price of $28,500,000 for the stock, assets and building was
paid in cash.
NOTE D--SUBSEQUENT EVENT
On February 12, 1998, PNWB entered into an assignment and distribution
agreement with Wilson Properties, L.P., the sole shareholder. This agreement
transferred certain obligations and assets to the shareholder and resulted in a
net dividend of $245,301. The agreement also assigned the right to collect the
proceeds from the agreement to redirect broadcast signals described in Note B.
The dividend is summarized as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 655,089
Accounts receivable......................................... 1,534,460
Notes receivable............................................ 5,636,732
Real property............................................... 312,872
Other assets................................................ 30,902
Debt........................................................ (7,681,981)
Accounts payable and accrued expenses....................... (242,773)
-----------
Dividend.................................................... $ 245,301
===========
</TABLE>
F-121
<PAGE> 274
INDEPENDENT AUDITORS' REPORT
The Partners
Wicks Radio Group
(a division of Wicks Broadcast Group Limited Partnership)
We have audited the accompanying balance sheet of Wicks Radio Group (a
division of Wicks Broadcast Group Limited Partnership) as of December 31, 1997,
and the related statements of operations and changes in division equity, and
cash flows for the year then ended. These financial statements are the
responsibility of Wicks Radio Group's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wicks Radio Group (a
division of Wicks Broadcast Group Limited Partnership) as of December 31, 1997
and the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
McLean, Virginia
December 15, 1998
F-122
<PAGE> 275
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 104,940 $ 326,168
Accounts receivable, net of allowance for doubtful accounts
of $286,811 at December 31, 1997 and $311,650 at September
30, 1998.................................................. 2,123,972 3,126,098
Prepaid expenses and other assets........................... 58,099 203,819
----------- -----------
Total current assets................................... 2,287,011 3,656,085
Property and equipment, net................................. 4,617,141 6,277,822
Intangible assets, net...................................... 25,047,120 38,242,931
----------- -----------
Total assets........................................... $31,951,272 $48,176,838
=========== ===========
LIABILITIES AND DIVISION EQUITY
Current liabilities -- accounts payable and accrued
expenses.................................................. $ 489,238 $ 513,650
Deferred income taxes....................................... 560,000 530,000
----------- -----------
Total liabilities...................................... 1,049,238 1,043,650
Division equity............................................. 30,902,034 47,133,188
----------- -----------
Total liabilities and division equity.................. $31,951,272 $48,176,838
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-123
<PAGE> 276
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS AND CHANGES IN DIVISION EQUITY
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -----------------
<S> <C> <C>
Revenues:
Broadcast revenues........................................ $12,751,347 $13,837,308
Other revenue............................................. 346,790 500,346
----------- -----------
Gross revenues.............................................. 13,098,137 14,337,654
Less -- agency commissions................................ (1,320,388) (1,387,370)
----------- -----------
Net revenue................................................. 11,777,749 12,950,284
Operating costs:
Station operating expenses................................ 8,269,884 8,668,765
Depreciation and amortization............................. 2,301,180 3,052,064
Corporate overhead........................................ 1,008,602 587,049
----------- -----------
11,579,666 12,307,878
Net income before income taxes.............................. 198,083 642,406
Income taxes (benefit)...................................... (40,000) (30,000)
----------- -----------
Net income.................................................. 238,083 672,406
Division equity, beginning of period........................ 23,281,430 30,902,034
Net corporate transfers..................................... 7,382,521 15,558,748
----------- -----------
Division equity, end of period.............................. $30,902,034 $47,133,188
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-124
<PAGE> 277
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 238,083 $ 672,406
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,301,180 3,052,064
Deferred tax benefit................................... (40,000) (30,000)
(Increase) decrease in receivables..................... 65,154 (1,002,126)
Increase in prepaid expenses and other current
assets............................................... (50,794) (145,720)
Increase (decrease) in accounts payable and accrued
expenses............................................. (1,515,667) 24,412
----------- ------------
Net cash provided by operating activities............ 997,956 2,571,036
----------- ------------
Cash flows used in investing activities:
Purchase of property and equipment........................ (369,460) (145,157)
Acquisition of broadcast properties....................... (8,672,770) (17,763,399)
----------- ------------
Cash flows used in investing activities..................... (9,042,230) (17,908,556)
----------- ------------
Cash flows provided by financing activities -- net corporate
transfers................................................. 7,382,521 15,558,748
----------- ------------
Net increase (decrease) in cash and cash equivalents........ (661,753) 221,228
Cash and cash equivalents, beginning of period.............. 766,693 104,940
----------- ------------
Cash and cash equivalents, end of period.................... $ 104,940 $ 326,168
=========== ============
</TABLE>
See accompanying notes to financial statements.
F-125
<PAGE> 278
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS DESCRIPTION
The Wicks Radio Group (the "Broadcast Group") is a division of Wicks
Broadcast Group Limited Partnership (the "Partnership"). The Broadcast Group
consists of the thirteen radio stations (8 FMs and 5 AMs) serving the
Charleston, SC and Binghamton, NY markets as of December 31, 1997. In January
1998, the Broadcast Group acquired an additional three stations (2 FMs and 1
AM). See note 3.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash equivalents consist
of highly liquid investments with original maturities of three months or less.
The fair market value of such investments approximates cost.
Property and Equipment
Property and equipment are stated at cost. Depreciation expense is computed
using the straight-line method over the estimated useful lives of the assets,
which range from three to twenty years.
Intangible Assets and Recovery of Long-Lived Assets
Intangible assets consist principally of network affiliation agreements,
broadcasting licenses, covenants not to compete and the excess of costs over the
fair value of net assets acquired. Amortization expense is computed on a
straight-line basis over the estimated lives of the assets which range from 2-15
years.
The Partnership's policy is to review its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. The Partnership recognizes an impairment loss when the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset. The measurement of the impairment losses to be recognized
is based upon the difference between the fair value and the carrying amount of
the assets.
Income Taxes
The Broadcast Group is generally not an entity subject to income taxes. The
Broadcast Group's income or loss is passed through to the Partnership and the
related tax attributes are deemed to be distributed to, and to be reportable by,
the partners of the Partnership on their respective income tax returns.
However, the Broadcast Group contains the Partnership's subsidiary,
Regional Group, Inc. Regional Group, Inc. and its subsidiaries are Subchapter C
corporations, and are, therefore, responsible for the income taxes attributable
to their profit and losses.
Income taxes for Regional Group, Inc. and its subsidiaries are accounted
for under the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating losses and tax credit
carryforwards. Deferred tax assets and liabilities are measured using the
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized
into income in the period that includes the enactment date. The income tax
benefit is a result of the amortization of the deferred tax liability.
Revenues
Broadcasting revenues are derived principally from the sale of program time
and spot announcements to local, regional, and national advertisers. Advertising
revenue is recognized in the period during which the program time and spot
announcements are broadcast.
F-126
<PAGE> 279
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Barter Transactions
Barter transactions are recorded at the estimated fair values of the
products and services received. Barter revenues are recognized when commercials
are broadcast. The assets or services received in exchange for broadcast time
are recorded when received or used.
Corporate Overhead
A number of overhead services are maintained centrally by the Partnership
and are allocated to its business units based on the benefits provided. These
services include most of the costs associated with the human resources function
and certain general and administrative costs of the corporate function such as
accounting and finance, treasury and legal.
In addition, the Partnership provides for the working capital needs of the
Broadcast Group. There is no borrowing arrangement between the Partnership and
the Broadcast Group. Accordingly, no interest expense is recorded in the
accompanying financial statements. However, all of the assets of the Broadcast
Group have been pledged as collateral on the Partnership's credit facility.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
A significant portion of the Broadcast's Group accounts receivable are due
from advertising agencies.
Unaudited Interim Financial Information
The unaudited balance sheet, statements of operations and changes in
division equity, and cash flows as of September 30, 1998 and for the nine months
then ended have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions of
Regulation S-X. 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 interim period are not necessarily
indicative of the results that may be expected for any future period including
the year ending December 31, 1998.
(3) ACQUISITION OF BROADCAST RADIO STATIONS
In December 1997, the Partnership acquired certain broadcasting assets of
WBUB-FM (St. George, South Carolina) and WXTC-AM (Charleston, South Carolina)
and upgraded the frequency of one of its existing FM stations in the Charleston,
South Carolina, market through a swap of broadcast license rights.
In January 1998, the Partnership acquired certain broadcasting assets of
WMDH-FM and WMDH-AM (Muncie, Indiana) and WWKI-FM (Kokomo, Indiana).
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<PAGE> 280
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Total consideration paid for these acquisitions including costs of
acquisitions was approximately $8,673,000 in 1997 and $17,764,000 (unaudited) in
1998. These acquisitions have been accounted for under the purchase method of
accounting and, accordingly, the assets acquired and liabilities assumed have
been recorded at their estimated fair value as of the acquisition date, as
determined by an independent appraiser. The allocation of the purchase price is
summarized as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
1997 1998
---------- -----------
<S> <C> <C>
Land........................................................ $ 68,000 $ 107,000
Property and equipment...................................... 2,260,000 2,194,000
Intangible assets........................................... 6,345,000 15,463,000
---------- -----------
Total consideration paid.................................... $8,673,000 $17,764,000
========== ===========
</TABLE>
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Land........................................................ $ 168,615 $ 275,318
Building and improvements................................... 267,370 989,413
Office equipment, furniture, and fixtures................... 430,259 581,724
Broadcast and production equipment.......................... 4,980,885 6,432,008
Vehicles.................................................... 81,137 94,660
----------- -----------
5,928,266 8,373,123
Less accumulated depreciation............................... (1,311,125) (2,095,301)
----------- -----------
$ 4,617,141 $ 6,277,822
=========== ===========
</TABLE>
(5) INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
USEFUL LIFE DECEMBER 31, SEPTEMBER 30,
IN YEARS 1997 1998
----------- ------------ -------------
<S> <C> <C> <C>
FCC licenses......................................... 15 $14,548,860 $23,996,860
Network affiliations................................. 15 1,372,056 2,869,114
Goodwill............................................. 15 9,721,115 14,239,756
Non-compete agreements............................... 2-5 725,000 725,000
Other intangibles.................................... 2-15 2,113,348 2,113,348
----------- -----------
28,480,379 43,944,078
Less accumulated amortization........................ (3,433,259) (5,701,147)
----------- -----------
$25,047,120 $38,242,931
=========== ===========
</TABLE>
(6) DEFERRED INCOME TAXES
The Partnership had established a deferred tax liability arising from the
acquisition of Regional Group, Inc. of $600,000. This liability was attributable
to the difference between the book basis of Regional Group, Inc. and the
carryover basis of the former shareholders at the acquisition date. As the
liability was principally
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<PAGE> 281
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
attributable to the book/tax difference in long-term tangible and intangible
assets, the deferred tax liability was classified as a long-term liability. The
Broadcast Group recognized an income tax benefit of $40,000 in 1997 and $30,000
for the nine months ended September 30, 1998 as a result of amortization of the
deferred tax liability.
(7) LEASES
The Broadcast Group leases certain property and equipment under
noncancelable operating lease agreements. Rental expense was approximately
$261,000 for the year ended December 31, 1997.
Future minimum lease payments under noncancelable operating leases are
approximately:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1998.................................................... $ 308,000
1999.................................................... 239,000
2000.................................................... 188,000
2001.................................................... 153,000
2002.................................................... 153,000
Thereafter.............................................. 675,000
----------
$1,716,000
==========
</TABLE>
(8) SUBSEQUENT EVENT
In November 1998, the Partnership entered into an agreement with Citadel
Broadcasting Company ("Citadel") to sell the Wicks Radio Group to Citadel for
approximately $77 million, subject to approval from the Federal Communications
Commission.
F-129
<PAGE> 282
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF THIS
PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 10
Use of Proceeds....................... 18
Capitalization........................ 19
Information About Station and Market
Data................................ 20
Pro Forma Financial Information....... 21
Selected Historical Financial Data.... 34
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 36
Business.............................. 45
The Pending Transactions.............. 74
Management............................ 77
Certain Transactions.................. 86
Principal Stockholders................ 90
Description of Indebtedness........... 92
The Exchange Offer.................... 100
Description of the Notes.............. 111
Certain U.S. Federal Income Tax
Consequences........................ 143
Plan of Distribution.................. 147
Legal Matters......................... 147
Independent Auditors.................. 147
Available Information................. 148
</TABLE>
UNTIL (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$115,000,000
[CITADEL LOGO]
CITADEL BROADCASTING COMPANY
---------------------------------------------------
EXCHANGE OFFER
FOR
9 1/4% SENIOR
SUBORDINATED NOTES
DUE 2008
---------------------------
PROSPECTUS
---------------------------
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 283
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.7502 of the Nevada General Corporation Law (the "NGCL") empowers
a corporation to indemnify any person who was or is a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and with respect to any criminal proceeding, he had reasonable
cause to believe that his conduct was unlawful.
Section 78.7502 of the NGCL also empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including amounts paid in settlement and attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation unless, and only to the extent
that, the court in which such action or suit was brought or other court of
competent jurisdiction shall determine upon application that in view of all the
circumstances of the case, that despite the adjudication of liability such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
Section 78.7502 of the NGCL further provides that, to the extent that a
director or officer of a corporation has been successful on the merits or
otherwise, in the defense of any action, suit or proceeding referred to above or
in the defense of any claim, issue or matter therein, he must be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith and that indemnification provided for by Section
78.751 of the NGCL shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled, except that such indemnification may not
be made to any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action, unless a court of competent
jurisdiction orders otherwise, utilizing the standard described in the
immediately preceding paragraph.
The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of the officers and directors incurred
in defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by the officer or
director to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation; these provisions do not affect any rights to advancement of
expenses to which corporate personnel other than officers and directors may be
entitled under any contract or otherwise by law.
Any indemnification referred to above, unless ordered by a court or paid as
incurred in advance of final disposition upon receipt of a proper undertaking to
repay the same, must be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The determination
must be made: (i) by the stockholders; (ii) by the board of directors by
majority vote of a quorum consisting of directors who were not parties to the
act, suit or
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<PAGE> 284
proceeding; (iii) if a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or (iv) if a quorum consisting of directors who
were not parties to the act, suit, or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
Article VI of Citadel Broadcasting Company's Restated Articles of
Incorporation provides as follows:
To the full extent permitted by law, the Corporation shall indemnify
any person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he or she is or was a director of the Corporation
or any predecessor of the Corporation or serves or served any other
enterprise as director at the request of the Corporation or any predecessor
of the Corporation.
Citadel Broadcasting Company's Bylaws further implement the permissive
provisions of Section 78.751 of the NGCL discussed above.
As permitted by Section 78.037 of the NGCL, Article V of Citadel
Broadcasting Company's Restated Articles of Incorporation provides as follows:
To the full extent permitted by General Corporation Law of State of
Nevada in effect from time to time and to no greater extent, no officer or
member of the Board of Directors shall be liable for monetary damages for
breach of fiduciary duty in his or her capacity as an officer or a director
in any action brought by or on behalf of the Corporation or any of its
shareholders.
Section 78.037 currently provides that any such provision of a
corporation's articles of incorporation may not eliminate or limit the liability
of a director or officer for (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or (b) the payment of dividends
in violation of the NGCL.
Citadel Broadcasting Company maintains insurance to protect persons
entitled to indemnification pursuant to its amended and Restated Articles of
Incorporation and Bylaws and the NGCL against expenses, judgments, fines and
amounts paid in settlement, to the fullest extent permitted by the NGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
------- -------------------------
<S> <C>
2.1 Asset Purchase Agreement dated November 23, 1998 by and
among Wicks Broadcast Group Limited Partnership, WBG License
Co., L.L.C., Butternut Broadcasting Company, Inc., WBG
Binghamton License Co., Inc. and Citadel Broadcasting
Company (incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Current Report on
Form 8-K/A filed December 16, 1998).
2.2 Stock Purchase Agreement dated September 29, 1997 among
Pacific Northwest Broadcasting Corporation, Wilson
Properties, L.P. and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Registration
Statement No. 333-36771 on Form S-4).
2.3 Asset Purchase Agreement dated September 29, 1997 among
Wilson Group LLC, Citadel Broadcasting Company and Citadel
License, Inc. (incorporated by reference to Exhibit 2.2 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
2.4 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WFMZ-FM)
(incorporated by reference to Exhibit 2.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
</TABLE>
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<PAGE> 285
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
2.5 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WEST-AM)
(incorporated by reference to Exhibit 2.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.6 Merger Agreement dated as of June 2, 1997 among Snider
Corporation, Ted L. Snider, Sr., Jane J. Snider, Citadel
Communications Corporation and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.7 Merger Agreement dated as of June 2, 1997 among Snider
Broadcasting Corporation, Ted L. Snider, Jr., Calvin G.
Arnold, Citadel Communications Corporation and Citadel
Broadcasting Company (incorporated by reference to Exhibit
2.6 to Citadel Broadcasting Company's Registration Statement
No. 333-36771 on Form S-4).
2.8 Asset Purchase Agreement dated as of June 2, 1997 among CDB
Broadcasting Corporation, CDB License Corporation and
Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.7 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
2.9 Agreement of Purchase and Sale dated March 17, 1997 by and
among Tele-Media Broadcasting Company, Tele-Media
Broadcasting Company of Centre Region, Tele-Media
Broadcasting Holding Corporation and their respective
shareholders and Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.19 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
3(i)(a) Restated Articles of Incorporation of Citadel Broadcasting
Company (incorporated by reference to Exhibit 3(i)(a) to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
3(i)(b) Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13 1/4% Series A Exchangeable Preferred
Stock and the 13 1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
3(i)(c) Articles of Incorporation of Citadel License, Inc.
(incorporated by reference to Exhibit 3(i)(c) to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
3(ii)(a) Bylaws of Citadel Broadcasting Company, as amended
(incorporated by reference to Exhibit 3(ii)(a) to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
3(ii)(b) Bylaws of Citadel License, Inc. (incorporated by reference
to Exhibit 3(i)(c) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.1 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 10 1/4% Senior
Subordinated Notes due 2007 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Registration Statement No. 333-36771 on Form S-4).
4.2 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 13 1/4% Exchange
Debentures due 2009 included therein (incorporated by
reference to Exhibit 4.2 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.3 Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13 1/4% Series A Exchangeable Preferred
Stock and the 13 1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
</TABLE>
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<PAGE> 286
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
4.4 Indenture dated as of November 19, 1998 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 9 1/4% Senior
Subordinated Notes due 2008 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Current Report on Form 8-K filed November 30,
1998).
9 Amended and Restated Voting Trust Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment
Partners, L.P., Harlan Levy, as Trustee, and J. Walter
Corcoran and Christopher Hall (incorporated by reference to
Exhibit 9 to Citadel Broadcasting Company's Amendment No. 1
to Registration Statement No. 333-36771 on Form S-4).
5 Opinion of Eckert Seamans Cherin & Mellott, LLC, including
consent.**
8 Opinion of Eckert Seamans Cherin & Mellott, LLC regarding
certain Federal income tax matters, including consent.**
10.1 Employment Agreement dated as of June 28, 1996 among
Lawrence R. Wilson, Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.1 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.2 Citadel Communications Corporation 1996 Equity Incentive
Plan, as amended (incorporated by reference to Exhibit 10.2
to Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.3 Citadel Communications Corporation Nonqualified Stock Option
Agreement made and entered into as of June 28, 1996 between
Citadel Communications Corporation and Lawrence R. Wilson
(incorporated by reference to Exhibit 10.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.4 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of December 21, 1994
(incorporated by reference to Exhibit 10.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.5 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of February 21, 1994
(incorporated by reference to Exhibit 10.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.6 Joint Sales Agreement dated as of December 15, 1995 among
Pourtales Radio Partnership, Pourtales Holdings, Inc.,
Springs Radio, Inc., KVUU/KSSS, Inc. and Citadel
Broadcasting Company (incorporated by reference to Exhibit
10.6 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.7 Second Amended and Restated Stockholders Agreement dated as
of June 28, 1996, among Citadel Communications Corporation,
Baker, Fentress & Company, Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Thomas
E. Van Pelt, Jr., ABRY Broadcast Partners II, L.P., ABRY
Citadel Investment Partners, L.P., Oppenheimer & Co., Inc.,
Finova Capital Corporation, Lawrence R. Wilson, Claire
Wilson, Donna L. Heffner and Stuart Stanek (incorporated by
reference to Exhibit 10.11 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
</TABLE>
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<PAGE> 287
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.8 First Amendment to the Second Amended Stockholders Agreement
dated as of December 31, 1996 among Citadel Communications
Corporation, ABRY Broadcast Partners II, L.P., ABRY/ Citadel
Investment Partners, L.P., Baker, Fentress & Company,
Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, Finova Capital Corporation,
The Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.12 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.9 Second Amendment to the Second Amended and Restated
Stockholders Agreement dated as of March 17, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
Illinois, Christopher J. Perry, Robert F. Perille, M. Ann
O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W.
Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital
Corporation, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.13 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.10 Third Amendment to the Second Amended and Restated
Stockholders Agreement dated as of September 26, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, Finova Capital Corporation, The Endeavour
Capital Fund Limited Partnership, Joseph P. Tennant, The
Schafbuch Family Trust, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Lawrence R. Wilson and
Claire Wilson (incorporated by reference to Exhibit 10.14 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.11 Fourth Amendment to the Second Amended and Restated
Stockholders Agreement dated as of October 15, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Finova
Capital Corporation, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr., Jane
J. Snider, Ted L. Snider, Jr., Calvin G. Arnold, Lawrence R.
Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.17 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
</TABLE>
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<PAGE> 288
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.12 Fourth Amended and Restated Voting Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., Baker Fentress & Company,
Finova Capital Corporation, Oppenheimer & Co., Inc., The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr.,
Jane L. Snider, Ted L. Snider, Jr., Calvin Arnold, Lawrence
R. Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.15 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.13 Amended and Restated Loan Agreement dated as of July 3, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
FINOVA Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.18 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.14 First Amendment to Loan Instruments dated July 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.28 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.15 Second Amendment to Loan Instruments dated September 25,
1997 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.29 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.16 Third Amendment to Loan Instruments dated October 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.30 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.17 Fourth Amendment to Loan Instruments dated November 4, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.31 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.18 Fifth Amendment to Loan Instruments dated December 24, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.32 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.19 Sixth Amendment to Loan Instruments dated February 12, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.33 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.20 Seventh Amendment to Loan Instruments dated March 24, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.34 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
</TABLE>
II-6
<PAGE> 289
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.21 Eighth Amendment to Loan Instruments dated April 21, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.35 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.22 Ninth Amendment to Loan Instruments dated September 15, 1998
among Citadel Communications, Citadel Broadcasting Company,
Citadel License, Inc., FINOVA Capital Corporation and the
Lenders party thereto (incorporated by reference to Exhibit
10.1 to Citadel Broadcasting Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998).
10.23 Tenth Amendment to Loan Instruments dated November 3, 1998
among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.1 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.24 Eleventh Amendment to Loan Instruments dated November 17,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.2 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.25 Twelfth Amendment to Loan Instruments dated November 19,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.3 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.26 Agreement Not to Compete made as of December 31, 1996
between DVS Management Inc. and Citadel Communications
Corporation (incorporated by reference to Exhibit 10.20 to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.27 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.24
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.28 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.25
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.29 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of January 1, 1996
(incorporated by reference to Exhibit 10.26 to Citadel
Broadcasting Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997).
10.30 Purchase Agreement dated November 12, 1998 among Citadel
Broadcasting Company, Citadel Communications Corporation,
Prudential Securities Incorporated and BT Alex. Brown
Incorporated.**
10.31 Registration Rights Agreement dated November 19, 1998 among
Citadel Broadcasting Company, Citadel License, Inc.,
Prudential Securities Incorporated and BT Alex. Brown
Incorporated.**
10.32 Thirteenth Amendment to Loan Instruments dated as of January
4, 1999 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto.*
12 Deficiency of Earnings to Fixed Charges and Preferred Stock
Dividends.**
21 Subsidiaries of Citadel Broadcasting Company (incorporated
by reference to Exhibit 21 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
</TABLE>
II-7
<PAGE> 290
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
its opinions filed herewith as Exhibit 5 and Exhibit 8).**
23.2 Consent of KPMG LLP*
23.3 Consent of KPMG LLP*
23.4 Consent of KPMG LLP*
23.5 Consent of Deloitte & Touche, LLP*
23.6 Consent of Erwin & Company*
23.7 Consent of Balukoff, Lindstrom & Co., P.A.*
23.8 Consent of KPMG LLP*
24 Power of Attorney (included on signature page).**
25 Statement of Eligibility on Form T-1 of Trustee (9 1/4%
Senior Subordinated Notes due 2008).**
27 Financial Data Schedule**
99.1 Form of Letter of Transmittal to Tender for Exchange 9 1/4%
Senior Subordinated Notes due 2008.**
99.2 Form of Exchange Agent Agreement between Citadel
Broadcasting Company and The Bank of New York, as Exchange
Agent.**
</TABLE>
- ---------------
(1) In the case of incorporation by reference to documents filed by the
Registrant under the Exchange Act of 1934, as amended, the Registrant's file
number under such Act is 333-36771.
* Filed Herewith.
** Previously Filed.
(b) Financial Statement Schedules
None
ITEM 22. UNDERTAKINGS
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission (the "Commission") pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
II-8
<PAGE> 291
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of other securities being registered which remain unsold at the
termination of the offering.
The Registrants undertake to respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or
13 of Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
The Registrants undertake to supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the Registration
Statement when it became effective.
The Registrants hereby undertake as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
The Registrants undertake that every prospectus (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-9
<PAGE> 292
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Las Vegas, in the
State of Nevada, on January 8, 1999.
CITADEL BROADCASTING COMPANY
By: /s/ LAWRENCE R. WILSON
------------------------------------
Lawrence R. Wilson
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
Registration Statement has been signed by the following persons in the
capacities indicated on January 8, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ LAWRENCE R. WILSON Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer)
Lawrence R. Wilson
/s/ DONNA L. HEFFNER Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial and Accounting Officer)
Donna L. Heffner
/s/ PATRICIA DIAZ DENNIS Director
- -----------------------------------------------------
Patricia Diaz Dennis
/s/ SCOTT E. SMITH Director
- -----------------------------------------------------
Scott E. Smith
/s/ TED L. SNIDER, SR. Director
- -----------------------------------------------------
Ted L. Snider, Sr.
/s/ JOHN E. VON SCHLEGELL Director
- -----------------------------------------------------
John E. von Schlegell
</TABLE>
II-10
<PAGE> 293
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Las Vegas, in the
State of Nevada, on January 8, 1999.
CITADEL BROADCASTING COMPANY
By: /s/ LAWRENCE R. WILSON
------------------------------------
Lawrence R. Wilson
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
Registration Statement has been signed by the following persons in the
capacities indicated on January 8, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ LAWRENCE R. WILSON Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer and President (Principal Executive
Lawrence R. Wilson Officer)
/s/ DONNA L. HEFFNER Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial and Accounting Officer)
Donna L. Heffner
/s/ PATRICIA DIAZ DENNIS Director
- -----------------------------------------------------
Patricia Diaz Dennis
/s/ SCOTT E. SMITH Director
- -----------------------------------------------------
Scott E. Smith
/s/ TED L. SNIDER, SR. Director
- -----------------------------------------------------
Ted L. Snider, Sr.
/s/ JOHN E. VON SCHLEGELL Director
- -----------------------------------------------------
John E. von Schlegell
</TABLE>
II-11
<PAGE> 294
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
------- -------------------------
<S> <C>
2.1 Asset Purchase Agreement dated November 23, 1998 by and
among Wicks Broadcast Group Limited Partnership, WBG License
Co., L.L.C., Butternut Broadcasting Company, Inc., WBG
Binghamton License Co., Inc. and Citadel Broadcasting
Company (incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Current Report on
Form 8-K/A filed December 16, 1998).
2.2 Stock Purchase Agreement dated September 29, 1997 among
Pacific Northwest Broadcasting Corporation, Wilson
Properties, L.P. and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Registration
Statement No. 333-36771 on Form S-4).
2.3 Asset Purchase Agreement dated September 29, 1997 among
Wilson Group LLC, Citadel Broadcasting Company and Citadel
License, Inc. (incorporated by reference to Exhibit 2.2 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
2.4 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WFMZ-FM)
(incorporated by reference to Exhibit 2.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.5 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WEST-AM)
(incorporated by reference to Exhibit 2.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.6 Merger Agreement dated as of June 2, 1997 among Snider
Corporation, Ted L. Snider, Sr., Jane J. Snider, Citadel
Communications Corporation and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.7 Merger Agreement dated as of June 2, 1997 among Snider
Broadcasting Corporation, Ted L. Snider, Jr., Calvin G.
Arnold, Citadel Communications Corporation and Citadel
Broadcasting Company (incorporated by reference to Exhibit
2.6 to Citadel Broadcasting Company's Registration Statement
No. 333-36771 on Form S-4).
2.8 Asset Purchase Agreement dated as of June 2, 1997 among CDB
Broadcasting Corporation, CDB License Corporation and
Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.7 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
2.9 Agreement of Purchase and Sale dated March 17, 1997 by and
among Tele-Media Broadcasting Company, Tele-Media
Broadcasting Company of Centre Region, Tele-Media
Broadcasting Holding Corporation and their respective
shareholders and Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.19 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
3(i)(a) Restated Articles of Incorporation of Citadel Broadcasting
Company (incorporated by reference to Exhibit 3(i)(a) to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
3(i)(b) Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13 1/4% Series A Exchangeable Preferred
Stock and the 13 1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
3(i)(c) Articles of Incorporation of Citadel License, Inc.
(incorporated by reference to Exhibit 3(i)(c) to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
</TABLE>
<PAGE> 295
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
3(ii)(a) Bylaws of Citadel Broadcasting Company, as amended
(incorporated by reference to Exhibit 3(ii)(a) to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
3(ii)(b) Bylaws of Citadel License, Inc. (incorporated by reference
to Exhibit 3(i)(c) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.1 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 10 1/4% Senior
Subordinated Notes due 2007 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Registration Statement No. 333-36771 on Form S-4).
4.2 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 13 1/4% Exchange
Debentures due 2009 included therein (incorporated by
reference to Exhibit 4.2 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.3 Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13 1/4% Series A Exchangeable Preferred
Stock and the 13 1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.4 Indenture dated as of November 19, 1998 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 9 1/4% Senior
Subordinated Notes due 2008 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Current Report on Form 8-K filed November 30,
1998).
9 Amended and Restated Voting Trust Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment
Partners, L.P., Harlan Levy, as Trustee, and J. Walter
Corcoran and Christopher Hall (incorporated by reference to
Exhibit 9 to Citadel Broadcasting Company's Amendment No. 1
to Registration Statement No. 333-36771 on Form S-4).
5 Opinion of Eckert Seamans Cherin & Mellott, LLC, including
consent.**
8 Opinion of Eckert Seamans Cherin & Mellott, LLC regarding
certain Federal income tax matters, including consent.**
10.1 Employment Agreement dated as of June 28, 1996 among
Lawrence R. Wilson, Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.1 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.2 Citadel Communications Corporation 1996 Equity Incentive
Plan, as amended (incorporated by reference to Exhibit 10.2
to Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.3 Citadel Communications Corporation Nonqualified Stock Option
Agreement made and entered into as of June 28, 1996 between
Citadel Communications Corporation and Lawrence R. Wilson
(incorporated by reference to Exhibit 10.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.4 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of December 21, 1994
(incorporated by reference to Exhibit 10.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.5 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of February 21, 1994
(incorporated by reference to Exhibit 10.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
</TABLE>
<PAGE> 296
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.6 Joint Sales Agreement dated as of December 15, 1995 among
Pourtales Radio Partnership, Pourtales Holdings, Inc.,
Springs Radio, Inc., KVUU/KSSS, Inc. and Citadel
Broadcasting Company (incorporated by reference to Exhibit
10.6 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.7 Second Amended and Restated Stockholders Agreement dated as
of June 28, 1996, among Citadel Communications Corporation,
Baker, Fentress & Company, Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Thomas
E. Van Pelt, Jr., ABRY Broadcast Partners II, L.P., ABRY
Citadel Investment Partners, L.P., Oppenheimer & Co., Inc.,
Finova Capital Corporation, Lawrence R. Wilson, Claire
Wilson, Donna L. Heffner and Stuart Stanek (incorporated by
reference to Exhibit 10.11 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
10.8 First Amendment to the Second Amended Stockholders Agreement
dated as of December 31, 1996 among Citadel Communications
Corporation, ABRY Broadcast Partners II, L.P., ABRY/ Citadel
Investment Partners, L.P., Baker, Fentress & Company,
Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, Finova Capital Corporation,
The Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.12 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.9 Second Amendment to the Second Amended and Restated
Stockholders Agreement dated as of March 17, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
Illinois, Christopher J. Perry, Robert F. Perille, M. Ann
O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W.
Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital
Corporation, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.13 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.10 Third Amendment to the Second Amended and Restated
Stockholders Agreement dated as of September 26, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, Finova Capital Corporation, The Endeavour
Capital Fund Limited Partnership, Joseph P. Tennant, The
Schafbuch Family Trust, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Lawrence R. Wilson and
Claire Wilson (incorporated by reference to Exhibit 10.14 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
</TABLE>
<PAGE> 297
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.11 Fourth Amendment to the Second Amended and Restated
Stockholders Agreement dated as of October 15, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Finova
Capital Corporation, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr., Jane
J. Snider, Ted L. Snider, Jr., Calvin G. Arnold, Lawrence R.
Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.17 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.12 Fourth Amended and Restated Voting Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., Baker Fentress & Company,
Finova Capital Corporation, Oppenheimer & Co., Inc., The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr.,
Jane L. Snider, Ted L. Snider, Jr., Calvin Arnold, Lawrence
R. Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.15 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.13 Amended and Restated Loan Agreement dated as of July 3, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
FINOVA Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.18 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.14 First Amendment to Loan Instruments dated July 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.28 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.15 Second Amendment to Loan Instruments dated September 25,
1997 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.29 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.16 Third Amendment to Loan Instruments dated October 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.30 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.17 Fourth Amendment to Loan Instruments dated November 4, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.31 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.18 Fifth Amendment to Loan Instruments dated December 24, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.32 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
</TABLE>
<PAGE> 298
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.19 Sixth Amendment to Loan Instruments dated February 12, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.33 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.20 Seventh Amendment to Loan Instruments dated March 24, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.34 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.21 Eighth Amendment to Loan Instruments dated April 21, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.35 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.22 Ninth Amendment to Loan Instruments dated September 15, 1998
among Citadel Communications, Citadel Broadcasting Company,
Citadel License, Inc., FINOVA Capital Corporation and the
Lenders party thereto (incorporated by reference to Exhibit
10.1 to Citadel Broadcasting Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998).
10.23 Tenth Amendment to Loan Instruments dated November 3, 1998
among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.1 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.24 Eleventh Amendment to Loan Instruments dated November 17,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.2 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.25 Twelfth Amendment to Loan Instruments dated November 19,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.3 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.26 Agreement Not to Compete made as of December 31, 1996
between DVS Management Inc. and Citadel Communications
Corporation (incorporated by reference to Exhibit 10.20 to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.27 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.24
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.28 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.25
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.29 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of January 1, 1996
(incorporated by reference to Exhibit 10.26 to Citadel
Broadcasting Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997).
10.30 Purchase Agreement dated November 12, 1998 among Citadel
Broadcasting Company, Citadel Communications Corporation,
Prudential Securities Incorporated and BT Alex. Brown
Incorporated.**
</TABLE>
<PAGE> 299
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.31 Registration Rights Agreement dated November 19, 1998 among
Citadel Broadcasting Company, Citadel License, Inc.,
Prudential Securities Incorporated and BT Alex. Brown
Incorporated.**
10.32 Thirteenth Amendment to Loan Instruments dated as of January
4, 1999 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto.*
12 Deficiency of Earnings to Fixed Charges and Preferred Stock
Dividends.**
21 Subsidiaries of Citadel Broadcasting Company (incorporated
by reference to Exhibit 21 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
its opinions filed herewith as Exhibit 5 and Exhibit 8).**
23.2 Consent of KPMG LLP*
23.3 Consent of KPMG LLP*
23.4 Consent of KPMG LLP*
23.5 Consent of Deloitte & Touche, LLP*
23.6 Consent of Erwin & Company*
23.7 Consent of Balukoff, Lindstrom & Co., P.A.*
23.8 Consent of KPMG LLP*
24 Power of Attorney (included on signature page).**
25 Statement of Eligibility on Form T-1 of Trustee (9 1/4%
Senior Subordinated Notes due 2008).**
27 Financial Data Schedule**
99.1 Form of Letter of Transmittal to Tender for Exchange 9 1/4%
Senior Subordinated Notes due 2008.**
99.2 Form of Exchange Agent Agreement between Citadel
Broadcasting Company and The Bank of New York, as Exchange
Agent.**
</TABLE>
- ---------------
(1) In the case of incorporation by reference to documents filed by the
Registrant under the Exchange Act of 1934, as amended, the Registrant's file
number under such Act is 333-36771.
* Filed Herewith.
** Previously Filed.
<PAGE> 1
EXHIBIT 10.32
THIRTEENTH AMENDMENT TO LOAN INSTRUMENTS
THIS THIRTEENTH AMENDMENT TO LOAN INSTRUMENTS (this "Thirteenth
Amendment"), dated as of January 4, 1999, is among CITADEL BROADCASTING COMPANY,
CITADEL LICENSE, INC., CITADEL COMMUNICATIONS CORPORATION, each a Nevada
corporation, FINOVA CAPITAL CORPORATION, a Delaware corporation, in its
individual capacity and as Agent for all Lenders (this and all other capitalized
terms used but not elsewhere defined herein shall have the respective meanings
ascribed to such terms in the Loan Agreement described below, as amended), and
the Lenders which are parties hereto.
RECITALS
A. Borrowers, Agent and Lenders entered into an Amended and Restated
Loan Agreement dated as of July 3, 1997 (as amended to the date hereof, the
"Loan Agreement").
B. Borrowers have requested the consent of Lenders to the acquisition
by Borrowers of the Property and FCC Licenses of Fairview Communications, Inc.,
a Pennsylvania corporation, used in the operation of Station WBHT-FM, licensed
to Mountain Top, Pennsylvania (the "Thirteenth Amendment Acquisition"). Lenders
have agreed to give such consent, subject to the execution of this Thirteenth
Amendment and the performance of the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. CONSENT TO ACQUISITION AND TRANSFER OF FCC LICENSES. Borrowers
represent that attached hereto as SCHEDULE 1 is a true and correct calculation
of the Adjusted Leverage Ratio described in subsection 4.3.4 of the Loan
Agreement, after giving effect to the Thirteenth Amendment Acquisition. Based
on the attached SCHEDULE 1, Lenders hereby consent to the Thirteenth Amendment
Acquisition, subject to the satisfaction of the conditions contained in this
Thirteenth Amendment.
2. AMENDMENT TO LOAN INSTRUMENTS. The Loan Agreement and other Loan
Instruments are amended as follows:
2.1 EXHIBITS TO LOAN INSTRUMENTS. Upon the consummation of the
Thirteenth Amendment Acquisition (i) Borrowers shall deliver to Agent
amendments to the Exhibits attached to each Loan Instrument (the "Exhibit
Amendments") which require modification due to the Thirteenth Amendment
Acquisition and (ii) the Exhibit Amendments applicable to the Thirteenth
Amendment Acquisition shall be deemed to be part of the applicable Loan
Instrument.
2.2 USE AGREEMENT. Upon the consummation of the Thirteenth Amendment
Acquisition, Borrowers shall deliver to Agent a Use Agreement, in a form
substantially
<PAGE> 2
similar to the Amended and Restated Use Agreement, reflecting the use by
CBC of the FCC Licenses acquired in the Thirteenth Amendment Acquisition.
3. CONDITIONS TO EFFECTIVENESS. This Thirteenth Amendment shall not
become effective with respect to the Thirteenth Amendment Acquisition unless and
until all of the conditions set forth in Section 4.3 of the Loan Agreement are
satisfied with respect to the Thirteenth Amendment Acquisition in a manner
satisfactory to Agent as evidenced by a letter from Agent to CBC with respect
thereto.
4. FEES AND EXPENSES. Borrowers hereby agree to reimburse Lenders for
all reasonable fees and expenses incurred in connection with the consummation
of the transactions contemplated by this Thirteenth Amendment.
5. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to
execute this Thirteenth Amendment, each Obligor represents and warrants to
Lenders that the representations and warranties made by such Person in each of
the Loan Instruments to which such Person is a party, as such Loan Instruments
have been amended, are true and correct in all material respects as of the date
hereof, except to the extent such representations and warranties by their
nature relate to an earlier date.
6. CONFIRMATION OF EFFECTIVENESS. Guarantor hereby consents to the
execution of this Thirteenth Amendment. Each Obligor hereby agrees that each
Loan Instrument executed by such Person remains in full force and effect in
accordance with the original terms thereof as amended.
7. COUNTERPARTS. This Thirteenth Amendment may be executed in one or
more counterparts, each of which counterparts shall be deemed to be an
original, but all such counterparts when taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, this Thirteenth Amendment has been executed and
delivered by each of the parties hereto by a duly authorized officer of each
such party on the date first set forth above.
CITADEL BROADCASTING COMPANY,
CITADEL LICENSE, INC. and
CITADEL COMMUNICATIONS CORPORATION,
each a Nevada corporation
By: /s/ Donna L. Heffner
----------------------------------
Donna L. Heffner
Vice President of each corporation
2
<PAGE> 3
FINOVA CAPITAL CORPORATION, a Delaware
corporation, individually and as Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANKBOSTON, N.A.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
NATIONSBANK OF TEXAS, N.A.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE BANK OF NEW YORK
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
UNION BANK OF CALIFORNIA, N.A.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
3
<PAGE> 1
[LOGO]
EXHIBIT 23.2
The Board of Directors
Citadel Broadcasting Company:
We consent to the use of our report dated March 26, 1998 on the consolidated
balance sheets of Citadel Broadcasting Company and subsidiary as of December
31, 1996 and 1997 and the related consolidated statements of operations,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1997 included herein and to the reference to our firm
under the heading "Independent Auditors" in the registration statement.
/s/ KPMG LLP
Phoenix, Arizona
January 8, 1999
<PAGE> 1
[LOGO]
EXHIBIT 23.3
The Board of Directors
Citadel Broadcasting Company:
We consent to the use of our report dated February 14, 1997 on the consolidated
balance sheets of Deschutes River Broadcasting, Inc. and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended
included herein and to the reference to our firm under the heading "Independent
Auditors" in the registration statement.
/s/ KPMG LLP
Portland, Oregon
January 8, 1999
<PAGE> 1
[LOGO]
EXHIBIT 23.4
The Board of Directors
Citadel Broadcasting Company:
We consent to the use of our report dated September 29, 1997 on the balance
sheet of Maranatha Broadcasting Company, Inc.'s Radio Broadcasting Division as
of December 31, 1996 and the related statements of operations and division
equity and cash flows for the year then ended included herein and to the
reference to our firm under the heading "Independent Auditors" in the
registration statement.
/s/ KPMG LLP
Phoenix, Arizona
January 8, 1999
<PAGE> 1
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-69009 of Citadel Broadcasting Company of our report dated March 28, 1997
relating to the consolidated financial statements of Tele-Media Broadcasting
Company and its partnership interests appearing in the Prospectus, which is a
part of such Registration Statement, and to the reference to us as experts
under the heading "Independent Auditors" in such Prospectus.
/s/ Deloitte & Touche LLP
Pittsburgh, PA
January 8, 1999
<PAGE> 1
Exhibit 23.6
ERWIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
900 South Shackleford
Suite 515
Three Financial Centre
Little Rock, AR 72211
(501) 225-5441
(501) 225-6763 (FAX)
The Board of Directors
Citadel Broadcasting Company
We consent to the use in the registration statement titled Amendment No. 1 to
Form S-4 of Citadel Broadcasting Company of our reports dated April 1, 1997 on
the balance sheet of Snider Corporation as of December 31, 1996 and the related
statements of income, stockholders' equity and cash flows for the year then
ended and April 23, 1997 on the combined balance sheet of Snider Broadcasting
Corporation and subsidiary and CDB Broadcasting Corporation as of December 31,
1996 and the related combined statements of operations, stockholders' deficit
and cash flows for the year then ended included herein and to the reference to
our firm under the heading "Independent Auditors" in the registration
statement.
/s/ Erwin & Company
Little Rock, Arkansas
January 8, 1999
<PAGE> 1
Exhibit 23.7
BALUKOFF LINDSTROM & CO., P.A.
Certified Public Accountants
877 West Main Street, Suite 805
Boise, Idaho 83702
(208) 344-7150
FAX: (208) 344-7435
The Board of Directors
Citadel Broadcasting Company:
We consent to the use of our independent auditors' report on the combined
financial statements of Pacific Northwest Broadcasting Corporation and
Affiliates as of and for the year ended December 31, 1996, and to the reference
to our firm under the heading "Independent Auditors" in the Form S-4-Amendment
No. 1.
/s/ BAULKOFF LINDSTROM & CO., P.A.
January 8, 1999
<PAGE> 1
Exhibit 23.8
CONSENT OF INDEPENDENT AUDITORS
The Partners
Wicks Broadcast Group Limited Partnership:
We consent to the use of our report dated December 15, 1998 on the balance sheet
of Wicks Radio Group (a division of Wicks Broadcast Group Limited Partnership)
as of December 31, 1997 and the related statements of operations and changes in
division equity, and cash flows for the year ended included herein and to the
reference to our firm under the heading "Independent Auditors" in the
registration statement.
/s/ KPMG LLP
McLean, Virginia
January 8, 1999
