<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 15, 2000
Citadel Broadcasting Company
----------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada
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(State or Other Jurisdiction of Incorporation)
333-36771 86-0703641
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
City Center West, Suite 400
7201 West Lake Mead Boulevard
Las Vegas, Nevada 89128
- ---------------------------------------- ----------------------
(Address of Principal Executive Offices) (Zip Code)
(702) 804-5200
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
This report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are based largely on current expectations and projections about future events
and financial trends affecting Citadel Broadcasting Company's business.
The words "believes" and "intends" and similar words are intended to identify
forward-looking statements. In addition, any statements that refer to
expectations or other characterizations of future events or circumstances are
forward-looking statements. The forward-looking statements in this report are
subject to risks, uncertainties and assumptions including, among other things:
o the realization of Citadel Broadcasting's business strategy,
o general economic and business conditions, both nationally and in Citadel
Broadcasting's radio markets,
o Citadel Broadcasting's expectations and estimates concerning future
financial performance, financing plans and the impact of competition,
o anticipated trends in Citadel Broadcasting's industry, and
o the impact of current or pending legislation and regulation and antitrust
considerations.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this report might not transpire. Citadel
Broadcasting undertakes no obligation to publicly update or revise any
forward-looking statements because of new information, future events or
otherwise.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 15, 2000, Citadel Broadcasting Company completed its acquisition
from Broadcasting Partners Holdings, L.P. of a total of 23 FM and 12 AM radio
stations serving the markets of Buffalo/Niagara Falls, Syracuse and Ithaca, New
York; Atlantic City/Cape May, New Jersey; Tyler/Longview, Texas; Monroe,
Louisiana; New London, Connecticut; New Bedford/Fall River, Massachusetts; and
Augusta/Waterville, Presque Isle and Dennysville/Calais, Maine, as well as the
right to operate an additional FM radio station in Atlantic City/Cape May under
a program service and time brokerage agreement and the right to sell advertising
in the United States for one FM radio station in Niagara Falls, Ontario under a
joint sales agreement. The aggregate purchase price was approximately $189.0
million in cash. Proceeds from Citadel Broadcasting's November 1999 sale of 25
radio stations and proceeds from Citadel Broadcasting's parent, Citadel
Communication Corporation's February 2000 public offering of common stock were
used to complete the acquisition. In addition to the stations and operating
rights acquired, Citadel Broadcasting was assigned the rights under a purchase
agreement to acquire one additional AM radio station in Buffalo/Niagara Falls
that an affiliate of the seller had entered into an agreement to purchase. The
aggregate consideration paid or to be paid for this AM radio station is expected
to be approximately $0.8 million. The completion of this transaction is subject
to various conditions. Although Citadel Broadcasting believes that these closing
conditions are generally customary for transactions of this type, there can be
no assurances that the conditions will be satisfied. Pending the acquisition,
Citadel Broadcasting operates this station under a time brokerage agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. The following financial statements of Broadcasting
Partners Holdings Radio Group are included in this report:
Independent Auditors' Report
Combined Balance Sheets as of December 31, 1998 and 1999
Combined Statements of Operations for the years ended December 31, 1997,
1998 and 1999
Combined Statements of Partners' Capital for the years ended December 31,
1997, 1998 and 1999
Combined Statements of Cash Flows for the years ended December 31, 1997,
1998 and 1999
Notes to Combined Financial Statements
1
<PAGE> 3
(b) Pro Forma Financial Information. The following pro forma financial
information of Citadel Broadcasting Company is included herein:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1999
(c) Exhibits. The following exhibits are filed as part of this report:
2.1 Asset Purchase Agreement dated October 27, 1999 by and between Citadel
Broadcasting Company and Broadcasting Partners Holdings, L.P. (incorporated
by reference to Exhibit 2.1 to Citadel Communications Corporation's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1999).
23.1 Consent of KPMG LLP.
2
<PAGE> 4
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Financial Statements
December 31, 1998 and 1999
(With Independent Auditors' Report Thereon)
3
<PAGE> 5
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 5
Combined Balance Sheets 6
Combined Statements of Operations 7
Combined Statements of Partners' Capital 8
Combined Statements of Cash Flows 9
Notes to Combined Financial Statements 10
4
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
The Partners
Broadcasting Partners Holdings, L.P.:
We have audited the accompanying combined balance sheets of Broadcasting
Partners Holdings Radio Group as of December 31, 1998 and 1999 and the related
combined statements of operations, cash flows and partners' capital for the
period from January 9, 1997 (inception) through December 31, 1997 and for each
of the years in the two-year period ended December 31, 1999. These financial
statements are the responsibility of the Group'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 financial position of Broadcasting
Partners Holdings Radio Group as of December 31, 1998 and 1999 and the results
of its operations and its cash flows for the period from January 9, 1997
(inception) through December 31, 1997 and for each of the years in the two-year
period ended December 31, 1999 in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the financial statements, the Company changed its
accounting for start-up costs in accordance with AICPA Statement of Position
98-5, Reporting on the Cost of Start-Up Activities.
/s/ KPMG LLP
McLean, Virginia
March 24, 2000
5
<PAGE> 7
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
ASSETS 1998 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,584,767 673,907
Receivables, net 8,970,792 9,597,486
Other receivables 925,267 693,724
Trade receivables 863,299 796,337
Due from seller 35,477 --
Prepaid and other current assets 736,411 570,521
------------ ------------
Total current assets 13,116,013 12,331,975
Property and equipment, net 9,518,274 10,796,010
Intangible assets, net 95,582,524 90,790,577
Due from related party 55,445 72,323
Other noncurrent assets, net 1,384,799 1,569,217
------------ ------------
$119,657,055 115,560,102
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current installments of long-term debt $ 10,676,765 10,843,753
Current installments of capital lease obligations 57,232 61,741
Accounts payable 3,057,798 3,020,053
Trade payables 940,729 660,612
Due to related party 132,584 744,260
Accrued expenses 1,184,869 944,206
Accrued interest 1,057,608 451,490
Due to receiver 96,733 86,762
Due to seller -- 1,100,000
Other current liabilities 292,883 393,459
------------ ------------
Total current liabilities 17,497,201 18,306,336
Long-term debt, less current installments 60,559,310 56,839,981
Deferred compensation -- 1,703,000
Capital lease obligations, less current installments 87,884 26,143
Due to related party, non-current 365,278 --
Other noncurrent liabilities 302,039 235,465
------------ ------------
Total liabilities 78,811,712 77,110,925
Commitments and contingencies
Partners' capital 40,845,343 38,449,177
------------ ------------
$119,657,055 115,560,102
============ ============
</TABLE>
See accompanying notes to combined financial statements
6
<PAGE> 8
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Statements of Operations
<TABLE>
<CAPTION>
JANUARY 9, 1997
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Broadcast revenues $ 21,920,579 37,855,506 42,723,354
Trade revenues 3,093,236 4,228,085 5,068,041
Other revenues 756,503 500,416 570,288
------------ ------------ ------------
Gross revenues 25,770,318 42,584,007 48,361,683
Less: agency commissions (2,377,182) (3,956,627) (4,277,427)
------------ ------------ ------------
Net revenue 23,393,136 38,627,380 44,084,256
------------ ------------ ------------
Operating costs:
Station operating expenses 5,225,267 8,430,940 10,247,077
Selling expenses 4,654,221 9,337,926 10,123,848
General and administrative expenses 4,591,520 7,177,313 8,349,965
Trade expenses 3,112,187 4,220,219 4,919,548
LMA fees 1,842,475 353,675 147,702
Depreciation and amortization 555,273 1,400,758 1,729,385
Amortization of intangible assets 3,862,133 7,497,199 7,318,488
Deferred compensation expense -- -- 1,703,000
Costs related to terminated acquisitions -- -- 406,190
------------ ------------ ------------
23,843,076 38,418,030 44,945,203
------------ ------------ ------------
Operating income (loss) (449,940) 209,350 (860,947)
------------ ------------ ------------
Other income (expense):
Interest expense (3,179,183) (6,560,152) (6,300,698)
Interest income 29,261 60,667 26,523
Other, net 38,692 (17,289) (54,084)
------------ ------------ ------------
Loss before cumulative effect of
accounting change (3,561,170) (6,307,424) (7,189,206)
Cumulative effect of accounting change:
Write-off of organization costs -- -- (517,416)
------------ ------------ ------------
Net loss $ (3,561,170) (6,307,424) (7,706,622)
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements
7
<PAGE> 9
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Statements of Partners' Capital
<TABLE>
<S> <C>
Partners' capital, January 9, 1997 (inception) $ --
Capital contributions 46,502,401
Net loss (3,561,170)
------------
Partners' capital, December 31, 1997 42,941,231
Capital contributions 4,201,087
Net activity with affiliated broadcast property 54,999
Distributions to members (44,550)
Net loss (6,307,424)
------------
Partners' capital, December 31, 1998 40,845,343
Capital contributions 876,472
Net activity with affiliated broadcast property 4,444,096
Distributions to members (10,112)
Net loss (7,706,622)
------------
Partners' capital, December 31, 1999 $ 38,449,177
============
</TABLE>
See accompanying notes to combined financial statements
8
<PAGE> 10
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
JANUARY 9, 1997
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------------
1997 1998 1999
------------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,561,170) (6,307,424) (7,706,622)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on disposals of fixed assets -- -- 56,257
Bad debt expense 469,875 451,675 524,329
Amortization of intangibles 3,862,133 7,497,199 7,318,488
Write-off of organization costs -- -- 517,416
Amortization of deferred debt costs 86,905 254,358 245,744
Depreciation and amortization 555,273 1,400,758 1,729,385
Net trade expense (revenue) (104,669) 104,225 (178,476)
Deferred compensation expense -- -- 1,703,000
Change in assets and liabilities, net of effects
from purchase of broadcast properties:
Receivables, net (4,117,613) (3,175,106) (1,151,023)
Prepaid and other current assets (144,879) (1,082,513) 486,273
Other noncurrent assets 8,832 18,546 262,463
Accounts payable, accrued expenses and other
current liabilities 1,267,756 2,309,207 (808,810)
Due to receiver / seller -- (63,238) 1,064,523
Due to related party 28,601 415,628 148,253
Other noncurrent liabilities 143,907 (149,371) 117,860
------------ ------------ ------------
Net cash provided by (used in) operating activities (1,505,049) 1,673,944 4,329,060
------------ ------------ ------------
Cash flows from investing activities:
Costs to acquire broadcast properties, net of cash
acquired (78,769,710) (10,514,010) (5,173,753)
Capital expenditures (475,166) (2,411,882) (1,381,825)
Increase in organization costs (421,591) (213,349) --
Cash received from disposal of assets -- 27,499 86,000
Other -- (286,503) (77,214)
------------ ------------ ------------
Net cash used in investing activities (79,666,467) (13,398,245) (6,546,792)
------------ ------------ ------------
Cash flows from financing activities:
Repayment of long-term debt (3,371,108) (1,386,779) (41,868,584)
Cash received from long term debt 48,850,000 7,350,000 39,300,000
Cash received from loans -- 362,424 --
Net borrowings (repayments) on line of credit (433,866) 1,620,000 (1,185,000)
Loan acquisition fees (1,177,500) (284,814) (250,000)
Net activity with affiliated broadcast property (2,912,799) 54,999 4,444,096
Proceeds from partners' capital contributions 41,415,165 4,201,087 876,472
Distributions to Partners -- (44,550) (10,112)
------------ ------------ ------------
Net cash provided by financing activities 82,369,892 11,872,367 1,306,872
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 1,198,376 148,066 (910,860)
Cash and cash equivalents, beginning of period 238,325 1,436,701 1,584,767
------------ ------------ ------------
Cash and cash equivalents, end of period $ 1,436,701 1,584,767 673,907
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
9
<PAGE> 11
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(1) BASIS OF COMBINATION AND BUSINESS DESCRIPTION
Broadcasting Partners Holdings Radio Group ("Broadcasting Partners")
represents the broadcasting properties of Broadcasting Partners Holding
Limited Partnership (the "Partnership") which are subject to an asset
purchase agreement with Citadel Communications Corporation. These
financial statements exclude broadcasting properties sold to third
parties.
Partners' capital represents the combined partner capital of the
individual platform companies, and includes the capital allocable to the
Partnership as well as the minority investors in the Partnership's
subsidiaries.
The Partnership operates the broadcasting properties through its
subsidiaries Spring Broadcasting, LLC, Pilot Communications, LLC, Mercury
Radio Communications, LLC, Sound Broadcasting, LLC and Gleiser
Communications, L.P. (collectively the platform companies) which operate
the following radio stations, either through direct ownership, or through
Time Brokerage Agreements, Joint Sales Agreements or Local Marketing
Agreements (collectively LMAs):
<TABLE>
<CAPTION>
Subsidiary Broadcast Properties City of License
---------- -------------------- ---------------
<S> <C> <C>
Spring Broadcasting, LLC WBSM-AM New Bedford, MA
WFHN-FM New Bedford, MA
WFPG-AM/FM Atlantic City, NJ
WKOE-FM (LMA) Atlantic City, NJ
WPUR-FM Atlantic City, NJ
WQGN-FM Groton, CT
WSUB-AM Groton, CT
WVVE-FM Stonington, CT
Pilot Communications, LLC WAQX-FM Syracuse, NY
WNTQ-FM Syracuse, NY
WLTI-FM Syracuse, NY
WNSS-AM Syracuse, NY
WMME-FM Augusta-Waterville, ME
WEZW-AM Augusta-Waterville, ME
WEBB-FM Augusta-Waterville, ME
WTVL-AM Augusta-Waterville, ME
WBPW-FM Presque Isle, ME
WQHR-FM Presque Isle, ME
WOZI-FM Presque Isle, ME
WCRQ-FM Dennysville, ME
(formerly WHRR-FM)
WIII-FM Cortland, NY
WKRT-AM Cortland, NY
Mercury Radio WGRF-FM Buffalo, NY
Communications, LLC WEDG-FM Buffalo, NY
WHTT-AM/FM Buffalo, NY
CKEY-FM (JSA) Niagara Falls, Ontario
</TABLE>
(Continued)
10
<PAGE> 12
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
<TABLE>
<CAPTION>
Subsidiary Broadcast Properties City of License
---------- -------------------- ---------------
<S> <C> <C>
Sound Broadcasting, LLC KYEA-FM Monroe, LA
KMYY-FM Monroe, LA
KZRZ-FM Monroe, LA
KTJC-FM Monroe, LA
Gleiser Communications, L.P. KDOK-FM Tyler-Longview, TX
Gleiser Communications, LLC KTBB-AM Tyler-Longview, TX
KGLD-AM Tyler-Longview, TX
KEES-AM Tyler-Longview, TX
KYZS-AM Tyler-Longview, TX
</TABLE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH EQUIVALENTS
For purposes of the statement of cash flows, Broadcasting Partners
considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents. The fair market
value of such investments approximates cost.
(b) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is
computed using the straight-line method, or an accelerated method,
over the estimated useful lives of the assets, which range from
three to thirty-nine years.
The costs of leasehold improvements are amortized using the
straight-line method over the lesser of their estimated useful
lives or the terms of the respective leases.
(c) INTANGIBLE 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.
(d) INCOME TAXES
The platform companies are pass-through entities for income tax
purposes since profits and losses and the related tax attributes
are deemed to be distributed to, and to be reportable by, the
members of the platform companies on their respective income tax
returns.
(e) LIMITED LIABILITY AGREEMENT
The allocation of Partnership profits and losses, cash
distributions, voting rights, certain equity preference and
appreciation rights, and other matters are defined in the Limited
Liability Agreement.
(Continued)
11
<PAGE> 13
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(f) REVENUES
Broadcast 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.
(g) TRANSACTIONS WITH AFFILIATED BROADCAST PROPERTIES
Broadcasting Partners previously owned additional radio properties
which were sold to a third party. The assets, liabilities and
results of operations of these properties have been excluded from
these financial statements. However, Broadcasting Partners had
certain activities with these properties, including advancing
funds and receiving excess cash from these stations' operations.
Additionally, during the year ended December 31, 1999, the
affiliated broadcast properties were sold. Broadcasting Partners
received the net proceeds from the sale. These activities have
been presented as capital transactions under the caption Net
activity with affiliated broadcast properties.
(h) SALES AGREEMENTS
Broadcasting Partners enters into joint sales agreements (JSA),
local marketing agreements (LMA), and time brokerage agreements
(TBA) with third party broadcast properties or in connection with
its acquisitions of broadcast properties. Under certain of these
agreements, the Company purchases all advertising time of the
stations in exchange for a monthly fee. The revenue from the sale
of such advertising time is recorded as broadcast revenues in the
accompanying statements of operations. The monthly fee is recorded
as a separate component of operating expenses captioned LMA fees.
The other expenses relating to stations operated under LMAs are
classified in the same manner as owned properties.
Other agreements call for the Partnership to act as a sales agent
for the other broadcast properties and share in the revenues
generated. These activities are included in other revenues.
(i) BARTER TRANSACTIONS (TRADE REVENUES AND EXPENSES)
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.
(j) 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.
(k) CONCENTRATION OF CREDIT RISK
A significant portion of the Broadcasting Partners accounts
receivable are due from local, regional, and national advertising
agencies.
(l) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF
Broadcasting Partners accounts for the impairment of long-lived
assets in accordance with the provisions of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. This Statement requires that
long-lived assets and certain
(Continued)
12
<PAGE> 14
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to
be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair
value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.
(m) DERIVATIVE FINANCIAL INSTRUMENTS
Broadcasting Partners has purchased a rate ceiling and interest
rate collar agreement, which is amortized to interest expense over
the terms of the ceiling. Unamortized premiums are included in
other assets in the consolidated balance sheet. Amounts receivable
under the ceiling agreements and payable under the floor agreement
are accrued as a component of interest expense. No amounts have
been due under these arrangements (note 14).
(n) COMPREHENSIVE INCOME
As of January 1, 1998, Broadcasting Partners adopted Statement of
Financial Accounting Standard No. 130 (SFAS No. 130), Reporting
Comprehensive Income. SFAS No. 130 establishes new rules for
reporting and display of comprehensive income and its components:
however, the adoption of SFAS No. 130 had no impact on the
financial statements as the Partnership had no transactions which
would be considered Other Comprehensive Income.
(o) ACCOUNTING FOR ORGANIZATION COSTS
As of January 1, 1999, Broadcasting Partners adopted the
provisions of Statement of Position No. 98-5, Reporting on the
Costs of Start-up Activities (SOP 98-5), which requires costs of
start-up activities, including organization costs, to be expensed
as incurred. Broadcasting Partners has capitalized certain
organization costs associated with the set-up of some of its radio
stations and platform companies. The remaining balances of the
organization costs were written-off as of January 1, 1999 in
implementing SOP 98-5. Broadcasting Partners recognized a charge
to income of $517,416 for the year ended December 31, 1999 as a
cumulative effect of a change in accounting principle.
(p) ADVERTISING AND PROMOTION
Advertising and promotion costs consist primarily of media
advertising and listener prizes, and are expensed as incurred.
(q) CHANGES IN PRESENTATION
Certain amounts as of December 31, 1998 have been reclassified to
conform to the current year's presentation.
(3) ACQUISITION OF BROADCAST PROPERTIES
In January 1997, Spring acquired WBSM-AM and WFHN-FM (New Bedford, MA),
WFPG-AM/FM (Atlantic City, NJ) and the LMA rights for, and an option to
purchase, WKOE-FM (Atlantic City, NJ), WQGN-FM and WSUB-AM (Groton, CT)
and other broadcast properties, out of receivership, for $14.0 million.
$2.4 million was applicable to these other broadcast properties which
were sold during 1999 and will not be included as part of the sale to
Citadel.
(Continued)
13
<PAGE> 15
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
Also in January 1997, the Partnership acquired a 62.5 percent interest in
Pilot for $6.25 million. At the date of acquisition Pilot operated
WAQX-FM, WNTQ-FM and WNSS-AM (Syracuse, NY) and WMME-FM, WEZW-AM, WEBB-FM
and WTVL-AM (Augusta-Waterville, ME). Pilot then purchased the assets of
WLTI-FM (Syracuse, NY) for $2.8 million.
In October 1997, the Partnership acquired a 60.3 percent interest in
Mercury Radio Communications, LLC through a leveraged buy-out
transaction. Broadcast properties include WGRF-FM, WEDG-FM, and
WHTT-AM/FM (Buffalo, NY), which had a value of $62 million.
In November 1997, Sound purchased the assets of KYEA-FM, KMYY-FM, and
KZRZ-FM in three separate transactions for an aggregate purchase price of
$4.97 million. This amount includes cash paid as well as notes payable to
the seller and amounts due under noncompete agreements.
In November 1997, Gleiser purchased the assets of KDOK-FM, KTBB-AM and
KGLD-AM (Tyler, TX) for $2.3 million plus the assumption of certain
liabilities. From August 8, 1997 through the date of acquisition, Gleiser
operated the station through an LMA agreement with Gleiser
Communications, Inc.
In October 1998, Spring purchased substantially all of the assets of
WPUR-FM (Atlantic City, NJ) - (formerly WZZP-FM) for $2.9 million. From
May 1998 through the date of acquisition, Spring operated the station
through an LMA agreement.
In April 1998, Pilot purchased substantially all of the assets of
WBPW-FM, WQHR-FM, WOZI-FM (Presque Isle, ME) and WCRQ-FM (formerly
WHRR-FM) (Dennysville, ME) for $5.2 million.
In June 1998, Pilot purchased substantially all of the assets of WIII-FM
and WKRT-AM (Cortland, NY) for $1.6 million. From March 1998 through the
date of acquisition, Pilot operated the stations through a Time Brokerage
Agreement.
In July 1998, Gleiser purchased substantially all of the assets of
KEES-AM and KYZS-AM (Tyler, TX) for $950,000. From November 1997 through
the date of acquisition, Gleiser operated the stations through an LMA
agreement.
In November 1999, Sound purchased substantially all of the assets of
KTJC-FM (Monroe, LA) for $650,000. From April 1999 through the date of
acquisition, Sound operated the station through an LMA agreement.
In December 1999, Spring purchased substantially all of the assets of
WVVE-FM (Stonington, CT) for $3,850,000.
(Continued)
14
<PAGE> 16
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
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 estimated by management. The acquisitions are generally financed
through a combination of capital contributions and borrowing arrangements
with financial institutions. In instances where the former owners have
retained a minority interest, the portion of the assets and liabilities
owned by the former owners has been maintained at the predecessors'
carrying value at the date of the transaction. The allocation of the
aggregate purchase prices is summarized as follows (in thousands):
1998 1999
------- -------
Land $ 184 --
Property and equipment 937 1,660
Intangible assets 10,258 2,782
------- -------
Total consideration $11,379 4,442
======= =======
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
-------- --------
<S> <C> <C>
Land $ 898 1,116
Land improvements 17 17
Leasehold improvements 453 340
Buildings and improvements 1,889 2,853
Office equipment, furniture, and fixtures 1,738 1,893
Tower and antenna equipment 1,909 2,070
Broadcast and production equipment 5,440 7,026
Tools and materials 125 125
Vehicles 466 516
Construction in progress 200 130
-------- --------
13,135 16,086
Less: accumulated depreciation (3,617) (5,290)
-------- --------
$ 9,518 10,796
======== ========
</TABLE>
(Continued)
15
<PAGE> 17
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(5) INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets are comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIFE -----------------------------
IN YEARS 1998 1999
------------ --------- ---------
<S> <C> <C> <C>
FCC licenses 15 $ 96,218 100,366
Network affiliations 15 2,681 4,004
Noncompete agreements 2 - 5 1,007 1,471
Goodwill 15 3,649 1,105
Other intangibles 2 - 15 3,486 2,621
--------- ---------
107,041 109,567
Accumulated amortization (11,458) (18,776)
--------- ---------
$ 95,583 90,791
========= =========
</TABLE>
The useful lives for licenses, network affiliations and goodwill are
determined to be 15 years. The useful lives of noncompete agreements and
other intangibles are based on contracted periods.
(Continued)
16
<PAGE> 18
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(6) LONG-TERM DEBT
Details of long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
-------- -------
<S> <C> <C>
Spring Broadcasting Term Loans, payable in quarterly installments through
December 31, 2001, bearing interest at the Bank's base rate plus 1%, 8.75%
and 9.25% as of December 31, 1998 and 1999,
respectively $ 7,220 8,720
Spring Broadcasting credit facility due December 31, 2001,
bearing interest at 8.75% and 9.25% as of December 31, 1998 and
1999, respectively 1,480 275
Spring Broadcasting Acquisition Loan, due March 31, 1999, bearing
interest at the Bank's base rate plus 1%, 8.75% as of
December 31, 1998 2,500 --
Spring Broadcasting term Loans, payable in monthly installments
through 2016, bearing interest at 8% 241 236
Mercury Radio Communications Term Loans, payable in quarterly installments
through June 30, 2006, bearing interest at LIBOR plus 2.75%, 8.098% as of
December 31, 1998 and ranging from 9.19%-9.69% as of December 31, 1999 37,000 34,650
Mercury Radio Communications credit facility due June 30, 2005, bearing
interest at 8.39% as of December 31, 1999 -- 1,000
Pilot Communications Term Loans, payable quarterly in installments
through 2003, bearing interest at the Bank's base rate plus 1.75%, 9.5%
and 9.75% as of December 31, 1998 and 1999, respectively 10,400 9,620
Pilot Communications Term Loan, payable in quarterly installments
through March 31, 2003, bearing interest at the Bank's base rate plus 1.75%,
9.5% and 9.75% as of December 31, 1998 and 1999, respectively 3,750 3,375
Pilot Communications credit facility due March 31, 2000 bearing interest
at 9.5% and 10.0% as of December 31, 1998 and 1999, respectively -- 1,119
Pilot Communications Notes Payable, Pi-Com Partners, L.P.,
due January 31, 2001, bearing interest at 12% 589 589
Pilot Communications Notes Payable, Pi-Com Partners, L.P.,
due January 31, 2001, bearing interest at 15% 2,061 2,061
Pilot Communications Notes Payable, Salt City Communications,
due 2002 bearing interest at the greater of 8% or prime 800 800
Pilot Communications payable to Cayuga Radio Partners Limited
Partnership, secured by letter of credit, payable in annual installments
through June 2002, accrues interest at 10% 200 100
Sound Broadcasting and Gleiser Communications Term Loans,
payable in installments beginning March 31, 1999 through December 31, 2004,
bearing interest at LIBOR plus 3%, ranging from 8.313% - 8.69% as of
December 31, 1998 and 8.18% - 8.46% as of December 31, 1999 4,650 4,185
Sound Broadcasting Notes Payable, Tom Gay, due in installments
through October 2007, bearing interest at a rate of 8.5% 139 128
Sound Broadcasting and Gleiser Communications credit facility bearing interest
at 9.75% and ranging from 8.18% - 9.5% as of
December 31, 1998 and 1999 , respectively 140 245
Sound Broadcasting Notes Payable, Ken Diebel, due in installments through
October 2008, bearing interest at rate of 7.65% -- 400
Capital lease obligations 145 97
Other 66 172
-------- --------
Total 71,381 67,772
Less current installments (10,734) (10,906)
-------- --------
Long-term debt $ 60,647 56,866
======== ========
</TABLE>
(Continued)
17
<PAGE> 19
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
The Radio Group also has working capital and acquisition credit
facilities available for each of the platform companies.
Mercury IBJ Schroder, as agent, $2,000,000
revolving credit facility, expires
2005, $2,000,000 and $1,000,000
available as of December 31, 1998 and
December 31, 1999, respectively
During 1999, IBJ Schroder, as agent,
$3,850,000 acquisition facility,
expires 2006, $3,850,000 available as
of December 31, 1999
Spring Summit Bank $1,750,000 revolving credit
facility and $4,250,000 acquisition
facility, expire 2001, $2,020,000 and
$5,725,000 available as of December 31,
1998 and December 31, 1999,
respectively
Pilot Summit Bank $1,500,000 revolving credit
facility, expired March 31, 2000,
$1,500,000 and $381,000 available as of
December 31, 1998 and December 31,
1999, respectively
Sound and Gleiser IBJ Schroder, as agent, $2,000,000
revolving credit facility as of
December 31, 1998, $1,860,000
available as of December 31, 1998.
During 1999, this credit facility was
reduced to $350,000, $105,000 was
available as of December 31, 1999.
The interest rate for borrowings under the Mercury, Spring, Pilot, Sound
and Gleiser facilities are based upon either LIBOR or the lender's Base
rate and have a margin ranging from 0% to 3.00% for LIBOR borrowings and
0% to 1.75% for Base rate borrowings.
The aggregate future maturities of long-term debt are as follows (in
thousands):
YEAR ENDING DECEMBER 31:
2000 $10,906
2001 12,501
2002 9,546
2003 12,385
2004 7,185
Thereafter 15,248
-------
$67,771
=======
In addition, each of the Term Loans requires prepayments, at the lenders'
option, to the extent that certain operating or cash flow results are
obtained. Furthermore, Broadcasting Partners has the ability to prepay a
portion of the Term Loans without penalty.
Each of the Term Loans and credit facilities are secured by substantially
all of the assets and membership interests of the respective platform
companies. The credit agreements contain certain restrictive covenants
and operating requirements, including a restriction on the payment of
dividends from the platform companies to the members or partners,
including the Partnership.
(Continued)
18
<PAGE> 20
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
Gleiser, Mercury, Pilot and Sound are each in default of its loan
agreements; however, management has obtained stand-by commitments for
financing with similar terms should it be unable to close the pending
sale to Citadel Broadcasting Company in a timely manner.
In June 1998, Pilot issued two irrevocable letters of credit in the
amount of $230,000 to Cayuga Radio Partners Limited Partnership in
conjunction with the purchase of broadcast properties. The first $100,000
may be fully drawn upon within one year of the above date, and the
remaining $130,000 within two years; which includes accrued interest. The
letters of credit are to be drawn against the unused credit facility for
each due date. As of December 31, 1998, no amounts had been drawn under
these letters of credit. As of December 31, 1999, $100,000 had been drawn
under the first letter of credit.
(7) LEASES
Broadcasting Partners leases certain property and equipment under
noncancelable operating lease agreements. Rental expense charged to
earnings was approximately $271,000 for the period from January 9, 1997
(inception) through December 31, 1997, $509,000 and $517,000 for the
years ended December 31, 1998 and 1999, respectively.
Future minimum lease payments under noncancelable operating leases,
exclusive of LMAs, as of December 31, 1999 is approximately (in
thousands):
YEAR ENDING DECEMBER 31:
2000 $ 408
2001 348
2002 298
2003 200
2004 181
Thereafter 308
------
$1,743
======
(8) LOCAL MARKETING AGREEMENTS, TIME BROKERAGE AGREEMENTS AND JOINT SALES
AGREEMENTS
In January 1997, Spring Broadcasting, LLC assumed the rights to an LMA to
operate WKOE-FM (Atlantic City, NJ). In October 1999, Spring exercised an
option to extend the LMA through March 2003. The LMA agreement includes
monthly payments of $10,500 through March 2000 and decreases on March 27,
2000 to $9,500 per month. Spring has an additional option to extend the
LMA through 2006. Total LMA fees were $115,500 for the period January 9,
1997 (inception) through December 31, 1997 and $126,000 for each of the
years ended December 31, 1998 and 1999.
On June 30, 1997, Broadcasting Partners Buffalo, LLC entered into an LMA
with Mercury Radio Communications, L.P. (Old Mercury) to operate WGRF-FM,
WEDG-FM and WHTT-AM/FM. Payments under this LMA totaled $1,645,000. This
LMA was terminated with the merger between Old Mercury and BT resulting
in the formation of Mercury Radio Communications, LLC.
On August 6, 1997, Gleiser Communications, LLC, entered into a Time
Brokerage Agreement with Gleiser Communications, Inc. to operate the
stations KDOK-FM, KGLD-AM and KTBB-AM, Tyler, Texas. Payments under the
agreement totaled $47,168 through contract termination during 1997.
(Continued)
19
<PAGE> 21
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
On October 15, 1997, Mercury entered into a Joint Sales Agreement with
CKEY-FM (Niagara Falls, Ontario Canada) in which Mercury obtained
exclusive rights to sell advertising time in the U.S. on the Canadian
station. Under the terms of the agreement, Mercury and CKEY will share
all U.S. revenues, net of agency and sales commissions and national
representation fees on a 50/50 basis. The agreement extends through
October 14, 2007 with one renewal term of an additional five-year term at
Mercury's option.
In November 1997, Gleiser entered into an LMA to operate KEES-AM and
KYZS-AM. Total LMA fees were $10,000 for the period from January 9, 1997
(inception) through December 31, 1997 and $59,743 for the year ended
December 31, 1998 and consisted of the LMA fees of $5,000 per month and
any related costs to operate the station. The LMA agreement was
terminated when these stations were purchased by Gleiser in July 1998.
In March 1998, Pilot entered into a Time Brokerage Agreement to operate
WIII-FM and WKRT-AM, Cortland, NY. Payments under the agreement totaled
$25,500 for the year ended December 31, 1998. This agreement was
terminated in June 1998 when Pilot acquired the assets of the station.
In June 1998, Spring entered into an LMA to broker all programming rights
for WZZP-FM for $23,800 per month LMA fee plus reimbursement of expenses.
The LMA agreement was terminated in October 1998 when Spring acquired the
station (currently called WPUR-FM). Total LMA fees were $142,432 for the
year ended December 31, 1998.
In April 1999, Sound entered into an LMA to broker all programming rights
for KTJC-FM for $1,750 per month LMA fees plus reimbursement of expenses.
The LMA agreement was terminated in November 1999 upon closure of the
related acquisition of KTJC-FM. Total LMA fees were $16,302 for the year
ended December 31, 1999.
During August 1999, Mercury entered into an LMA to broker all programming
rights for WHLD-AM for $1,200 per month LMA fee plus reimbursement of
expenses. Total LMA fees were $5,400 for the year ended December 31,
1999.
(9) SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest totaled approximately $2,229,000 for the period
January 9, 1997 (inception) through December 31, 1997, $5,512,229 for the
year ended December 31, 1998 and $5,682,679 for the year ended December
31, 1999.
In connection with the acquisitions during the period January 9, 1997
(inception) through December 31, 1997, the Company assumed certain
liabilities of $19,796,000. Additionally, the Company issued $950,000 in
notes payable to the sellers of broadcast properties acquired.
In connection with the acquisitions for the year ended December 31, 1998,
Broadcasting Partners committed to pay $200,000 in the future which is
supported by a $230,000 letter of credit.
(10) RELATED PARTY TRANSACTIONS
(a) FINANCIAL ADVISORY AGREEMENT
Broadcasting Partners has entered into various agreements which
require payments to Veronis Suhler & Associates (VS&A), and other
affiliates, upon the disposal or purchase of additional
(Continued)
20
<PAGE> 22
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
stations or receipt of additional capital contributions to certain
of the platform companies. These payments are based upon a fixed
percentage of the purchase price should additional station
acquisitions or disposals occur. For the periods January 9, 1997
(inception) through December 31, 1997, the years ended December
31, 1998 and 1999, fees for these services totaling $1,128,000,
$68,000 and $50,000, respectively, were capitalized as acquisition
costs.
(b) MANAGEMENT AND MONITORING FEES
Pursuant to the platform companies' operating agreements,
Broadcasting Partners pays management fees to Broadcasting
Partners Management Corporation, an affiliate. These fees are
generally a defined percentage of net revenues. Additionally,
Broadcasting Partners pays monitoring fees to VS&A. Some of the
monitoring fee payments are deferred until the sale or rollup of
the platform company. As of December 31, 1997, 1998 and 1999,
$242,345, $497,862 and $765,570, respectively, are due to these
related parties for such fees, including deferred amounts.
(11) EMPLOYEE BENEFITS PLAN
Broadcasting Partners maintains qualified profit-sharing plans with
trustees, which include thrift provisions qualifying under Section 401(k)
of the Internal Revenue Code, covering substantially all employees. The
provisions allow the participants to contribute up to 15 percent of their
compensation in the plan year, subject to statutory limitations. The
Partnership does not contribute to the plan.
(12) COMMITMENTS AND CONTINGENCIES
Broadcasting Partners is involved in certain litigation matters arising
in the normal course of business. In the opinion of management, these
matters are not significant and will not have a material adverse effect
on the Partnership's financial position.
(a) SPRING PURCHASE PRICE ADJUSTMENTS
Broadcasting Partners is currently negotiating the final purchase
price of the broadcast properties acquired with the receiver from
whom Spring acquired its broadcasting assets. The dispute relates
to the interpretation of the purchase agreement.
(b) EQUITY BASED COMPENSATION AND EMPLOYMENT AGREEMENTS
The Partnership maintains various equity based compensation
agreements for certain key executives of the platform companies.
Such plans are deemed to be variable plans for accounting
purposes, and as such compensation expense is determined based
upon the fair value of the platform companies within the Group,
and is recognized over the vesting term. No amounts were earned
under these agreements for the periods January 9, 1997 (inception)
through December 31, 1997 or the year ended December 31, 1998.
Based upon the pending sale of the platform broadcast properties
to Citadel, management has determined the approximate compensation
expense for certain key executives of the platform companies to be
$1,703,000. The Partnership has also entered into employment
agreements in the ordinary course of business.
(c) PENDING ACQUISITIONS
In 1999, Mercury entered into an asset purchase agreement to
acquire WHLD-AM (Buffalo, NY) for $750,000. This acquisition is
pending subject to FCC approval.
(Continued)
21
<PAGE> 23
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
The Partnership continues to evaluate potential acquisitions and
consider other transactions to maximize the Partners' interests
however, as of December 31, 1999 the Company has not committed to
any other transaction.
(d) LITIGATION
One of the platform companies has been named in an administrative
filing alleging that certain members of management have committed
sexual harassment. Broadcasting Partners intends to vigorously
defend against this matter; however, assessment of the outcome of
the potential damages cannot be reasonably determined at this
time.
(13) SALE OF BROADCAST PROPERTIES
In October 1999, the Partnership entered into an agreement with Citadel
Broadcasting Company to sell the broadcasting properties of the platform
companies to Citadel for $185 million, subject to approval from the
Federal Communication Commission. The purchase price will be adjusted for
the pending and closed acquisitions during the period from October 1999
through closure of the sale as well as other customary adjustments.
(Continued)
22
<PAGE> 24
BROADCASTING PARTNERS HOLDINGS RADIO GROUP
Notes to Combined Financial Statements
(14) FINANCIAL INSTRUMENTS
(a) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, receivables,
accounts payable, and due to receiver approximate their fair value
due to the short duration to maturity. The carrying value and
related estimated fair value of Broadcasting Partners' remaining
financial instruments are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999
-------------------------- ---------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Liabilities:
Term loans $62,011 62,011 60,786 60,786
Other notes payable 3,589 3,722 4,314 4,192
Other long-term debt 5,781 5,781 3,419 3,419
Interest rate ceilings 36 36 -- --
Off-balance sheet:
Lines of credit -- 20 -- 28
</TABLE>
The carrying value of the Term Loans approximates fair value as
these notes are variable rate instruments. The carrying value of
the Notes Receivable, Other Notes Payable and Other Long-Term Debt
was estimated based upon the related cash flows discounted at the
Group's current borrowing rates for similar instruments.
Unused credit facilities and lines of credit are estimated based
upon the fees currently charged for similar agreements or on the
estimated cost to sell or terminate.
The fair value of the interest rate ceilings reflect the estimated
amounts that Broadcasting Partners would receive or pay to
terminate the contacts on the reporting date based upon quotes
from commercial banks.
(b) DERIVATIVE FINANCIAL INSTRUMENTS
The group uses derivative financial instruments to hedge interest
rate risk associated with borrowing under variable rate credit
facilities. These interest rate hedges are required pursuant to
the provisions of the debt agreements and apply to the current
balance under the specified borrowing. As of December 31 1999 the
group entered into interest rate collar agreements with a notional
principal of $20,000,000, an interest rate ceiling of 9.0 percent
plus the applicable margin for LIBOR loans, and an interest rate
floor of 4.0 percent plus the applicable margin for LIBOR loans.
The collar expires during February 2001.
23
<PAGE> 25
CITADEL BROADCASTING COMPANY
UNAUDITED 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 completed transactions (collectively, the "Completed
Transactions"):
o the February 9, 1999 acquisition of WKQZ-FM, WYLZ-FM, WILZ-FM,
WIOG-FM, WGER-FM and WSGW-AM in Saginaw/Bay City/Midland, Michigan for
the purchase price of approximately $35.0 million (the "Saginaw/Bay
City Acquisition"),
o the February 17, 1999 acquisition of WHYL-FM and WHYL-AM in
Harrisburg/Lebanon/Carlisle, Pennsylvania for the purchase price of
approximately $4.5 million (the "Carlisle Acquisition"),
o the March 17, 1999 acquisition of Citywide Communications, Inc., which
owned KQXL-FM, WEMX-FM, WCAC-FM, WXOK-AM and WIBR-AM serving the Baton
Rouge, Louisiana market and KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM
serving the Lafayette, Louisiana market for the purchase price of
approximately $31.5 million (the "Baton Rouge/Lafayette Acquisition"),
o the April 30, 1999 acquisition of KSPZ-FM serving the Colorado
Springs, Colorado market in exchange for KKLI-FM in Colorado Springs,
the April 30, 1999 acquisition of KVOR-AM and KTWK-AM serving the
Colorado Springs, Colorado market and KEYF-FM and KEYF-AM serving the
Spokane, Washington market for the purchase price of approximately
$10.0 million and the April 30, 1999 termination of a joint sales
agreement under which Citadel Broadcasting operated certain other
radio stations in Colorado Springs and Spokane (collectively, the
"Capstar Transactions"),
o the June 30, 1999 acquisition of WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM,
WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM in Charleston, South Carolina,
WHWK-FM, WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM in Binghamton, New
York, WMDH-FM and WMDH-AM in Muncie, Indiana and WWKI-FM in Kokomo,
Indiana for the purchase price of approximately $77.0 million (the
"Charleston/Binghamton/Muncie/Kokomo Acquisition"),
o the August 31, 1999 acquisition of Fuller-Jeffrey Broadcasting
Companies, Inc. which owned WOKQ-FM, WPKQ-FM, WXBB-FM and WXBP-FM
serving the Portsmouth/Dover/Rochester, New Hampshire market and
WBLM-FM, WCYI-FM, WCYY-FM, WHOM-FM, WJBQ-FM and WCLZ-FM serving the
Portland, Maine market for the purchase price of approximately $65.3
million, which amount includes the repayment of certain indebtedness
of Fuller-Jeffrey Broadcasting and approximately $1.8 million in
consulting and noncompetition payments payable over a seven-year
period (the "Portsmouth/Dover/Rochester/Portland Acquisition"),
o the November 1, 1999 acquisition of KOOJ-FM in Baton Rouge, Louisiana
for the purchase price of approximately $9.5 million (the "KOOJ
Acquisition"),
o the December 23, 1999 acquisition of Caribou Communications Co., which
owned KATT-FM, KYIS-FM, KCYI-FM, KNTL-FM and WWLS-AM in Oklahoma City,
Oklahoma, for a purchase price of approximately $60.0 million, which
amount includes the repayment of certain indebtedness of Caribou
Communications (the "Oklahoma City Acquisition"),
o the February 10, 2000 acquisition of WXLO-FM in Worcester,
Massachusetts for the purchase price of approximately $21.0 million
(the "WXLO Acquisition"),
o the March 31, 2000 acquisition of KSMB-FM, KDYS-AM, KVOL-FM and
KVOL-AM in Lafayette, Louisiana for the purchase price of
approximately $8.5 million (the "Lafayette Acquisition"),
o the April 7, 2000 acquisition of WORC-FM in Worcester, Massachusetts
for the purchase price of approximately $3.5 million (the "WORC
Acquisition"),
o the April 15, 2000 acquisition of WGRF-FM, WEDG-FM, WHTT-FM, WMNY-AM
and WHLD-AM in Buffalo/Niagara Falls, New York, WAQX-FM, WLTI-FM,
WNSS-AM, and WNTQ-FM in Syracuse, New York, WIII-FM and WKRT-AM in
Ithaca,
24
<PAGE> 26
New York, WMME-FM, WEZW-AM, WEBB-FM and WTVL-AM in Augusta/Waterville,
Maine, WBPW-FM, WOZI-FM and WQHR-FM in Presque Isle, Maine, WCRQ-FM in
Dennysville/Calais, Maine, KMYY-FM, KYEA-FM, KZRZ-FM and KTJC-FM in
Monroe, Louisiana, KDOK-FM, KTBB-AM, KEES-AM, KYZS-AM and KGLD-AM in
Tyler/Longview, Texas, WFPG-AM, WFPG-FM and WPUR-FM in Atlantic
City/Cape May, New Jersey, WFHN-FM and WBSM-AM in New Bedford/Fall
River, Massachusetts, WQGN-FM, WSUB-AM and WVVE-FM in New London,
Connecticut and the right to operate WKOE-FM in Atlantic City/Cape May
under a program service and time brokerage agreement and the right to
sell advertising in the United States for one FM radio station in
Niagara Falls, Ontario under a joint sales agreement for the aggregate
purchase price of approximately $189.8 million (the "BPH
Acquisition"),
o the November 9, 1999 sale of KKTT-FM, KEHK-FM and KUGN-AM in Eugene,
Oregon, KAKT-FM, KBOY-FM, KCMX-FM, KTMT-FM, KCMX-AM and KTMT-AM in
Medford, Oregon, KEYW-FM, KORD-FM, KXRX-FM, KTHT-FM and KFLD-AM in
Tri-Cities, Washington, KCTR-FM, KKBR-FM, KBBB-FM, KMHK-FM and KBUL-AM
in Billings, Montana, WQKK-AM and WGLU-FM in Johnstown, Pennsylvania
and WQWK-FM, WNCL-FM, WRSC-AM and WBLF-AM in State College,
Pennsylvania for the sale price of approximately $26.0 million (the
"Marathon Disposition"),
o the June 1999 public offering by Citadel Broadcasting's parent,
Citadel Communications Corporation, of shares of its common stock and
the use of net proceeds from that offering (the "1999 Offering"),
o the August 1999 redemption of a portion of Citadel Broadcasting's
outstanding 13-1/4% Exchangeable Preferred Stock (the "Preferred
Redemption"),
o the February 2000 public offering by Citadel Communications of shares
of its common sock and the use of net proceeds from that offering (the
"2000 Offering"); and
(2) the following pending acquisitions (collectively, the "Pending
Acquisitions"):
o the pending acquisition of WMMQ-FM, WJIM-FM, WFMK-FM, WITL-FM, WVFN-AM
and WJIM-AM in Lansing/East Lansing, Michigan, WHNN-FM and WTCF-FM in
Saginaw/Bay City/Midland, Michigan and WFBE-FM in Flint, Michigan for
the aggregate purchase price of approximately $120.5 million,
consisting of 200,000 shares of Citadel Communications' common stock
valued at $50.375 per share, based on the closing share price of the
common stock on December 2, 1999, and approximately $110.4 million in
cash. However, if the value of the common stock at the time of
closing, based on the 20-day average closing sale price per share
prior to closing, is less than $45.3375 (90% of the value on December
2, 1999), then no common stock will be issued and the purchase price
will be paid entirely in cash (the "Michigan Acquisition"), the
unaudited proforma financial information assumes payment of the
purchase price in cash and common stock,
o the pending acquisition of WWFX-FM in Worcester, Massachusetts for the
purchase price of approximately $14.3 million (the "WWFX
Acquisition"), and
o the pending acquisition of Bloomington Broadcasting Holdings, Inc.,
which is expected to own at closing WKLQ-FM, WBBL-AM, WLAV-FM and
WODJ-FM, in Grand Rapids, Michigan, WTCB-FM, WOMG-FM, WLXC-FM and
WISW-AM in Columbia, South Carolina, WSKZ-FM, WOGT-FM, WGOW-AM and
WGOW-FM in Chattanooga, Tennessee, WQUT-FM, WKOS-FM, WJCW-AM, WKIN-AM,
and WGOC-AM in Johnson City/Kingsport/Bristol, Tennessee and WJBC-AM,
WBNQ-FM and WBWN-FM in Bloomington, Illinois, for the aggregate
purchase price of approximately $176.0 million, which amount includes
repayment of indebtedness of Bloomington Broadcasting Holdings that
may be outstanding at the time of closing and a deferred obligation
relating to a recent radio station purchase by Bloomington
Broadcasting Holdings (the "Bloomington Acquisition").
The unaudited pro forma condensed financial statements are based on Citadel
Broadcasting's historical consolidated financial statements, the financial
statements of those entities acquired, or from which assets were acquired, in
connection with the Completed Transactions, and the financial statements of
those entities to be acquired, or from which assets will be acquired, in
connection with the Pending Acquisitions.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The interest rate applied to
borrowings under, and repayments of, Citadel Broadcasting's credit facility in
the pro forma consolidated statements of operations was 7.8%, which represents
the interest rate in effect under the then existing credit facility as of
January 1, 1999. Pro forma financial information has been adjusted to reflect
the following, when applicable:
25
<PAGE> 27
o Prior to the acquisition dates, Citadel Broadcasting operated some
of the acquired stations under a joint sales agreement ("JSA") or
local marketing agreement ("LMA"). Citadel Broadcasting receives or
pays fees for such services accordingly. Net revenue and station
operating expenses for stations operated under JSAs are included to
reflect ownership of the stations as of January 1, 1999. Net revenue
and station operating expenses for stations operated under LMAs are
included in Citadel Broadcasting's historical consolidated financial
statements. For those stations operated under JSAs and LMAs and
subsequently acquired, associated fees and redundant expenses were
eliminated and estimated occupancy costs were included to adjust the
results of the operations to reflect ownership of the stations as of
January 1, 1999.
o Elimination of revenue and operating expenses from the entities
acquired, or from which assets were acquired, in connection with the
Completed Transactions, and the entities to be acquired, or from which
assets will be acquired, in connection with the Pending Acquisitions,
which would not have been incurred if the acquisition had occurred on
January 1, 1999. The eliminated items were deemed redundant and
therefore are not reflected as of January 1, 1999.
Depreciation and amortization for the acquisitions are based upon
preliminary allocations of the purchase price to property and equipment and
intangible assets. 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.
For pro forma purposes, Citadel Broadcasting's balance sheet as of
December 31, 1999 has been adjusted to give effect to the following transactions
as if each had occurred on December 31, 1999 (collectively, the "2000
Transactions"):
(1) the WXLO Acquisition,
(2) the Lafayette Acquisition,
(3) the WORC Acquisition,
(4) the BPH Acquisition,
(5) the 2000 Offering, and
(6) the Pending Acquisitions.
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 transactions described above had been completed on
the dates indicated, nor is it indicative of future operating results or
financial position if the pending transactions described above are completed.
Citadel Broadcasting cannot predict whether the completion of the Pending
Acquisitions will conform to the assumptions used in the preparation of the
unaudited pro forma condensed consolidated financial statements. Additionally,
completion of each of the Pending Acquisitions is subject to certain conditions.
Although Citadel Broadcasting believes these closing conditions are generally
customary for transactions of this type, there can be no assurance that such
conditions will be satisfied.
26
<PAGE> 28
CITADEL BROADCASTING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CITADEL
BROADCASTING ADJUSTMENTS
ACTUAL ADJUSTMENTS AS ADJUSTED FOR PRO FORMA
CITADEL FOR 2000 FOR 2000 THE PENDING CITADEL
BROADCASTING TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) BROADCASTING
-------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 17,981 (1,190) $ 16,791 $ 948 $ 17,739
Accounts and notes receivable,
net 53,190 -- 53,190 5,276 58,466
Prepaid expenses 2,708 -- 2,708 183 2,891
Net assets of discontinued
operations 2,275 -- 2,275 -- 2,275
-------- -------- -------- ---------- ----------
Total current assets 76,154 (1,190) 74,964 6,407 81,371
Property and equipment, net 68,035 12,181 80,216 9,970 90,186
Intangible assets, net 538,664 210,819 749,483 334,287 1,083,770
Restricted cash 26,192 (26,192) -- -- --
Other assets 7,568 -- 7,568 -- 7,568
-------- -------- -------- ---------- ----------
TOTAL ASSETS $716,613 $195,618 $912,231 $ 350,664 $1,262,895
======== ======== ======== ========== ==========
LIABILITIES AND SHAREHOLDER'S
EQUITY
Accounts payable and accrued
liabilities $ 15,040 $ -- $ 15,040 $ 3,087 $ 18,127
Current maturities of other
long-term Obligations 6,337 -- 6,337 -- 6,337
-------- -------- -------- ---------- ----------
Total current liabilities 21,377 -- 21,377 3,087 24,464
Notes payable, less current
maturities 132,000 (38,032) 93,968 300,675 394,643
Senior subordinated notes 210,509 -- 210,509 -- 210,509
Other long-term obligations,
less current maturities 2,516 -- 2,516 -- 2,516
Deferred tax liability 45,640 -- 45,640 36,827 82,467
Exchangeable preferred stock 85,362 -- 85,362 -- 85,362
Common stock and additional
paid-in capital 285,156 233,650 518,806 10,075 528,881
Deferred compensation (26,924) -- (26,924) -- (26,924)
Accumulated other comprehensive
loss
Accumulated deficit/retained
earnings (39,023) -- (39,023) -- (39,023)
-------- -------- -------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY $716,613 $195,618 $912,231 $ 350,664 $1,262,895
======== ======== ======== ========== ==========
</TABLE>
(1) Represents the net effect of the WXLO Acquisition, the Lafayette
Acquisition, the WORC Acquisition, the BPH Acquisition and the 2000
Offering, as if each transaction had taken place on December 31, 1999.
(2) Represents the net effect of the Pending Acquisitions as if each
transaction had taken place on December 31, 1999.
27
<PAGE> 29
CITADEL BROADCASTING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CITADEL
BROADCASTING
AS ADJUSTED ADJUSTMENTS
ACTUAL ADJUSTMENTS FOR FOR FOR PRO FORMA
CITADEL COMPLETED COMPLETED THE PENDING CITADEL
BROADCASTING TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) BROADCASTING
-------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Net revenue..................... $178,495 $71,479 $249,974 $ 48,177 $298,151
Station operating expenses...... 115,312 46,690 162,002 30,914 192,916
Depreciation and amortization... 35,749 27,307 63,056 22,771 85,827
Corporate general and
administrative............... 7,010 (131) 6,879 -- 6,879
Non-cash deferred compensation.. 1,727 -- 1,727 -- 1,727
-------- ------- -------- -------- --------
Operating expenses.............. 159,798 73,866 233,664 53,685 287,349
-------- ------- -------- -------- --------
Operating income (loss)......... 18,697 (2,387) 16,310 (5,508) 10,802
Interest expense................ 25,385 2,338 27,723 23,484 51,207
Other (income) expense, net..... (388) (9,638) (10,026) -- (10,026)
-------- ------- -------- -------- --------
Income (loss) from continuing...
operations before
income taxes................. (6,300) 4,913 (1,387) (28,992) (30,379)
Income tax (benefit)............ (1,647) (850) (2,497) (2,455) (4,952)
Net income (loss) from
continuing operations........ (4,653) 5,763 1,110 (26,537) (25,427)
Net (loss) from discontinued
operations, net of tax........ (4,275) -- (4,275) -- (4,275)
Net income (loss)............... (8,928) 5,763 (3,165) (26,537) (29,702)
Dividend requirement for
Exchangeable Preferred Stock. (14,103) 3,324 (10,779) -- (10,779)
-------- ------- -------- -------- --------
Income (loss) applicable to
common shares............... $(23,031) $ 9,087 $(13,944) $(26,537) $(40,481)
======== ======= ======== ======== ========
</TABLE>
(1) Represents the net effect of the Completed Transactions as if each
transaction had taken place on January 1, 1999. Dollars in the table below
are shown in thousands.
<TABLE>
<CAPTION>
PORTSMOUTH/ CHARLESTON/
DOVER/ BINGHAMTON
OKLAHOMA ROCHESTER/ MUNCIE/
BPH LAFAYETTE CITY PORTLAND KOKOMO
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue..................... $ 44,084 $2,385 $ 9,736 $10,642 $ 9,543
Station operating expenses...... 30,824 1,785 6,402 6,021 6,711
Depreciation and
amortization................. 12,814 605 4,251 3,628 2,685
Corporate general and
administrative............... -- -- -- -- --
-------- ------ ------- ------- -------
Operating expenses.............. 43,638 2,390 10,653 9,649 9,396
-------- ------ ------- ------- -------
Operating income (loss)......... 446 (5) (917) 993 147
Interest expense................ 12,793 664 4,282 2,994 2,343
Other (income) expenses,
net.......................... -- -- -- -- --
-------- ------ ------- ------- -------
Income (loss) from
continuing operations
before income taxes.......... (12,347) (669) (5,199) (2001) (2,196)
Income tax (benefit)............ -- -- -- (724) --
Net income (loss) from
continuing operations........ (12,347) (669) (5,199) (1,277) (2,196)
Net (loss) from discontinued
operations, net of tax....... -- -- -- -- --
Net income (loss)............... (12,347) (669) (5,199) (1,277) (2,196)
Dividend requirement for
Exchangeable Preferred
Stock........................ -- -- -- -- --
-------- ------ ------- ------- -------
Income (loss) applicable
to common shares............. $(12,347) $ (669) $(5,199) $(1,277) $(2,196)
======== ====== ======= ======= =======
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
CARLISLE
ACQUISITION,
CAPSTAR ADJUSTMENTS
TRANSACTIONS, FOR THE
KOOJ ACQUISITION, 1999 OFFERING,
WXLO ACQUISITION, THE PREFERRED
BATON ROUGE/ SAGINAW/ WORC ACQUISITION REDEMPTION
LAFAYETTE BAY CITY AND MARATHON AND THE THE COMPLETED
ACQUISITION ACQUISITION DISPOSITION 2000 OFFERING TRANSACTIONS
----------- ----------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenue.................... $1,371 $ 526 $(6,808) $ -- $71,479
Station operating expenses..... 1,275 486 (6,814) -- 46,690
Depreciation and
amortization................ 628 202 2,494 -- 27,307
Corporate general and
administrative.............. -- -- (131) -- (131)
------ ----- ------- -------- -------
Operating expenses............. 1,903 688 (4,451) -- 73,866
------ ----- ------- -------- -------
Operating income (loss)........ (532) (162) (2,357) -- (2,387)
Interest expense............... -- -- 970 (21,708) 2,338
Other (income) expenses,
net......................... -- -- (9,638) -- (9,638)
------ ----- ------- -------- -------
Income (loss) from
continuing operations
before income taxes......... (532) (162) 6,311 21,708 4,913
Income tax (benefit)........... (126) -- -- -- (850)
Net income (loss) from
continuing operations....... (406) (162) 6,311 21,708 5,763
Net (loss) from
discontinued operations,
net of tax.................. -- -- -- -- --
Net income (loss).............. (406) (162) 6,311 21,708 5,763
Dividend requirement for
Exchangeable Preferred
Stock....................... -- -- -- 3,324 3,324
------ ----- ------- -------- -------
Income (loss) applicable
to common shares............ $ (406) $(162) $ 6,311 $ 25,032 $ 9,087
====== ===== ======= ======== =======
</TABLE>
(2) Represents the net effect of the Pending Acquisitions as if each
transaction had taken place on January 1, 1999. Dollars in the table below
are shown in thousands.
<TABLE>
<CAPTION>
MICHIGAN WWFX BLOOMINGTON PENDING
ACQUISITION(a) ACQUISITION ACQUISITION ACQUISITIONS
-------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenue.................... $ 18,917 $ 956 $ 28,304 $ 48,177
Station operating expenses..... 10,665 895 19,354 30,914
Depreciation and amortization.. 7,968 955 13,848 22,771
-------- ------- -------- --------
Operating expenses.......... 18,633 1,850 33,202 53,685
-------- ------- -------- --------
Operating income (loss)........ 284 (894) (4,898) (5,508)
Interest expense............... 8,624 1,114 13,746 23,484
-------- ------- -------- --------
Income (loss) from
continuing operations
before income taxes......... (8,340) (2,008) (18,644) (28,992)
Income tax (benefit)........... -- -- (2,455) (2,455)
-------- ------- -------- --------
Income (loss) from continuing
operations................... $ (8,340) $(2,008) $(16,189) $(26,537)
======== ======= ======== ========
</TABLE>
(a) In February 2000, Citadel Broadcasting received a request for additional
information and documents from the United States Department of Justice
relating to stations in Saginaw/Bay City/Midland. To resolve the Department
of Justice's concerns, Citadel Broadcasting may agree to sell one or more
of is existing stations, or stations to be acquired, serving Saginaw/Bay
City/Midland in connection with the Michigan Acquisition. However, Citadel
Broadcasting is unable to include the effect of the divestiture in this
pro forma information until approval from the Department of Justice has
been received and a definitive agreement has been signed for the
divestiture.
29
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CITADEL BROADCASTING
COMPANY
Date: /s/ May 1, 2000 By: /s/ Lawrence R. Wilson
---------------------------- ------------------------------------
Lawrence R. Wilson
Chairman and Chief Executive Officer
<PAGE> 32
EXHIBIT INDEX
2.1 Asset Purchase Agreement dated October 27, 1999 by and between Citadel
Broadcasting Company and Broadcasting Partners Holdings, L.P. (incorporated
by reference to Exhibit 2.1 to Citadel Communications Corporation's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1999).
23.1 Consent of KPMG LLP.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Citadel Broadcasting Company:
We consent to incorporation by reference in the registration statement filed
(No. 333-92593) on Form S-3 of Citadel Broadcasting Company of our report dated
March 24, 2000 on the combined balance sheets of Broadcasting Partners Holdings
Radio Group as of December 31, 1998 and 1999 and the related combined statements
of operations, partners' capital and cash flows for the period from January 9,
1997 (date of inception) through December 31, 1997 and for each of the years in
the two-year period ended December 31, 1999, which report appears in Form 8-K of
Citadel Broadcasting Company dated April 15, 2000.
Our report refers to a change in accounting for start-up costs.
/s/ KPMG LLP
McLean, Virginia
April 27, 2000
