<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
Commission File No. 1-8283
CITICASTERS INC.
Incorporated under the laws of Florida
IRS Employer Identification No. 59-2054850
One East Fourth Street, Cincinnati, Ohio 45202
Phone: (513) 562-8000
Former name if changed since last report: Great American Communications Company
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
As of August 1, 1994, there were 10,153,672 shares of Class A Common
Stock and 1,163,524 shares of Class B Common Stock outstanding.
EXHIBIT INDEX Page 18
Page 1 of 20
<PAGE> 2
<TABLE>
CITICASTERS INC. - 10-Q
PART I
FINANCIAL INFORMATION
CITICASTERS INC. AND SUBSIDIARIES
BALANCE SHEET
(Dollars in Thousands)
<CAPTION>
June 30, December 31,
1994 1993
--------- ------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and short-term investments $ 11,189 $ 4,789
Trade receivables, less allowance for
doubtful accounts of $2,041 and $2,010 50,493 48,294
Broadcast program rights 11,219 15,910
Prepaid and other current assets 5,952 3,355
-------- --------
Total current assets 78,853 72,348
Broadcast program rights, less current portion 10,112 11,368
Property and equipment, net 57,614 60,660
Contracts, broadcasting licenses and other
intangibles, less accumulated amortization
of $8,307 and $0 569,613 574,878
Deferred charges and other assets 214 315
-------- --------
$716,406 $719,569
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 26,500 $ 23,500
Accounts payable, accrued expenses and
other current liabilities 34,665 31,924
Broadcast program rights fees payable 10,456 15,439
-------- --------
Total current liabilities 71,621 70,863
Broadcast program rights fees payable,
less current portion 8,069 8,468
Deferred income taxes 79,950 77,152
Long-term debt, less current maturities 400,450 409,068
Other liabilities 14,319 15,430
-------- --------
Total liabilities 574,409 580,981
Shareholders' equity:
Class A Common Stock, $.01 par value; 500,000,000
shares authorized; 10,153,672 shares outstanding 101 101
Class B Common Stock $.01 par value; 125,000,000
shares authorized; 1,163,524 shares outstanding 12 12
Capital in excess of par value 138,475 138,475
Retained earnings from January 1, 1994 3,409 -
-------- --------
Total shareholders' equity 141,997 138,588
-------- --------
$716,406 $719,569
======== ========
<FN>
See notes to financial statements.
</TABLE>
Page 2
<PAGE> 3
<TABLE>
CITICASTERS INC. - 10-Q
CITICASTERS INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- -----------------------
Predecessor Predecessor
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues:
Television broadcasting $42,362 | $37,449 $76,904 | $68,327
Radio broadcasting 18,061 | 18,441 31,968 | 31,138
------- | ------- ------- | -------
60,423 | 55,890 108,872 | 99,465
------- | ------- ------- | -------
Costs and expenses: | |
Operating expenses 17,818 | 18,237 35,060 | 35,437
Selling, general and | |
administrative 16,080 | 15,829 31,845 | 30,758
Corporate general and | |
administrative expenses 1,304 | 1,011 2,462 | 1,991
Depreciation and amortization 6,900 | 7,111 13,991 | 14,199
------- | ------- ------- | -------
42,102 | 42,188 83,358 | 82,395
------- | ------- ------- | -------
Operating income 18,321 | 13,702 25,514 | 17,080
| |
Other income (expense): | |
Interest expednse (9,652)| (17,932) (19,414)| (33,419)
Minority interest - | (7,901) - | (15,802)
Investment income 158 | 111 214 | 199
Miscellaneous, net (66)| 1,915 (505)| 2,088
------- | ------- ------- | -------
(9,560)| (23,807) (19,705)| (46,934)
------- | ------- ------- | -------
Earnings (loss) before income | |
taxes 8,761 | (10,105) 5,809 | (29,854)
Federal income tax provision 3,600 | - 2,400 | -
------- | ------- ------- | -------
| |
Earnings (loss) before | |
extraordinary items 5,161 | (10,105) 3,409 | (29,854)
| |
Extraordinary items, net of tax - | (2,299) - | (3,136)
------- | ------- ------- | -------
| |
NET EARNINGS (LOSS) $5,161 | ($12,404) $3,409 |($32,990)
======= | ======= ======= | =======
| |
PER SHARE DATA (Primary and | |
Fully Diluted): | |
Earnings before | |
extraordinary items $.45 | * $.30 | *
Net earnings .45 | * .30 | *
Average common shares 11,400 | * 11,400 | *
<FN>
* Share amounts are not relevant due to the effects of the reorganization.
See notes to financial statements.
</TABLE>
Page 3
<PAGE> 4
<TABLE>
CITICASTERS INC. - 10-Q
CITICASTERS INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(in Thousands)
<CAPTION>
Stated Value
------------------ Capital Total
Class A Class B In Excess Accumu- Shareholders'
Common Common of Par lated Equity
Stock Stock Value Deficit (Deficit)
-------- ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR:
-----------
Balances, December 31, 1992 $567 $ - $270,324 ($609,920) ($339,029)
Net loss - - - (32,990) (32,990)
---- ---- -------- -------- --------
Balances June 30, 1993 $567 $ - $270,324 ($642,910) ($372,019)
==== ==== ======== ======== ========
REORGANIZED COMPANY:
--------------------
Balances, December 31, 1993 $101 $ 12 $138,475 $ - $138,588
Net earnings - - - 3,409 3,409
---- ---- -------- -------- --------
Balances, June 30, 1994 $101 $ 12 $138,475 $ 3,409 $141,997
==== ==== ======== ======== ========
<FN>
See notes to financial statements.
</TABLE>
Page 4
<PAGE> 5
<TABLE>
CITICASTERS INC. - 10-Q
CITICASTERS INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
(In Thousands)
<CAPTION>
Six months ended
June 30,
----------------------
Predecessor
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) $ 3,409 | ($32,990)
Adjustments: |
Depreciation and amortization 13,991 | 14,199
|
Non-cash interest expense 101 | 5,100
Other non-cash adjustments (primarily non-cash dividends |
on the preferred stock of a former subsidiary) - | 15,895
Realized gains on investing activities (156) | (1,871)
Extraordinary loss related to the restructuring - | 3,136
Increase in trade receivables (2,199) | (1,840)
|
Decrease in broadcast program rights, |
net of fees payable 565 | 326
Increase in accounts payable, accrued expenses |
and other liabilities 2,135 | 9,653
Increase in deferred income taxes 2,798 | -
|
Other 1,981 | (1,340)
-------- | -------
22,625 | 10,268
-------- | -------
INVESTING ACTIVITIES: |
Purchases of: |
Broadcast stations (16,380) | -
Real estate, property and equipment (3,275) | (3,124)
|
Sales of broadcast stations 9,500 | 1,600
Other (352) | (1,899)
-------- | -------
(10,507) | (3,423)
-------- | -------
FINANCING ACTIVITIES: |
Retirements and refinancing of long-term debt (201,068) | (14,837)
|
Additional long-term borrowings 195,350 | -
-------- | -------
(5,718) | (14,837)
-------- | -------
|
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 6,400 | (7,992)
|
Cash and short-term investments at beginning of period 4,789 | 25,076
-------- | -------
|
|
Cash and short-term investments at end of period $ 11,189 | $17,084
======== | =======
<FN>
See notes to financial statements.
</TABLE>
Page 5
<PAGE> 6
CITICASTERS INC. - 10-Q
NOTES TO FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
-------------------
BASIS OF PRESENTATION The accompanying financial statements for
Citicasters Inc. (formerly Great American Communications Company) are
unaudited, but Citicasters believes that all adjustments (consisting
only of normal recurring accruals, unless otherwise disclosed herein)
necessary for fair presentation have been made. The results of
operations for interim periods are not necessarily indicative of
results to be expected for the year. The financial statements have
been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary to be
in conformity with generally accepted accounting principles.
Significant intercompany balances and transactions have been
eliminated. Certain reclassifications have been made to conform to
the current year's presentation.
As a result of the Company's emergence from Bankruptcy and its
adoption of fresh-start reporting as of December 31, 1993,
Citicasters' statements of operations, changes in shareholders' equity
(deficit) and cash flows for periods subsequent to December 31, 1993
are generally not comparable to prior periods and are separated by a
line. For purposes of the financial statements, the term
"Predecessor" refers to the Company prior to its reorganization.
All acquisitions have been treated as purchases. The accounts and
results of operations of companies since their formation or
acquisition are included in the consolidated financial statements.
At August 1, 1994, American Financial Corporation, its Chairman, Carl
H. Lindner, and one of AFC's affiliates (collectively "AFC") owned an
aggregate of 4,846,525 shares (42.8%) of Citicasters' outstanding
Class A and Class B Common Stock.
BROADCAST PROGRAM RIGHTS The rights to broadcast non-network programs
on Citicasters' television stations are stated at cost, less
accumulated amortization. These costs are charged to operations on a
straight-line basis over the contract period or on a per showing
basis, whichever results in the greater aggregate amortization.
PROPERTY AND EQUIPMENT Property and equipment are based on cost and
depreciation is calculated primarily using the straight-line method.
Depreciable lives are: land improvements, 8-20 years; buildings and
improvements, 8-20 years; operating and other equipment, 3-20 years;
and leasehold improvements, over the life of the lease.
CONTRACTS, BROADCASTING LICENSES AND OTHER INTANGIBLES Contracts,
broadcasting licenses and other intangibles represent the excess of
the value of the broadcast stations over the values of their net
tangible assets, and is attributable to FCC licenses, network
affiliation agreements and other contractual or market related
factors. Reorganization value in excess of amounts allocable to
identifiable assets represents the excess of the estimated fair value
of the Company at the time of the reorganization over the estimated
fair value allocated to its net identifiable assets. Intangible
assets are being amortized on a straight-line basis over an average of
34 years. On an ongoing basis, Citicasters reviews the carrying value
of its intangible assets. If this review indicates that intangible
assets will not be recoverable, as determined based on undiscounted
cash flows of the Company's broadcast stations over the remaining
amortization period, Citicasters' carrying values of intangible assets
are reduced by the amount of the estimated shortfall of cash flows.
DEBT DISCOUNT AND EXPENSE Debt discount is being amortized over the
life of the related debt obligations primarily by the interest method.
Costs of issuance are capitalized and are amortized over the life of
the related debt obligations primarily on the straight-line method.
Page 6
<PAGE> 7
CITICASTERS INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
INCOME TAXES Citicasters files a consolidated Federal income tax
return which includes all 80% or more owned subsidiaries. Deferred
income tax assets and liabilities are determined based on differences
between financial reporting and tax bases and are measured using
enacted tax rates. Deferred tax assets are recognized if it is more
likely than not that a benefit will be realized.
EARNINGS (LOSS) PER SHARE Primary and fully-diluted earnings (loss)
per share are based upon the weighted average number of common shares
and give effect to common equivalent shares (dilutive options)
outstanding during the respective periods. As a result of the effects
of the reorganization, per share data for periods ending on or prior
to December 31, 1993 have been rendered meaningless and, therefore,
omitted from the accompanying Financial Statements.
STATEMENT OF CASH FLOWS For cash flow purposes, "investing
activities" are defined as making and collecting loans and acquiring
and disposing of debt or equity instruments and property and
equipment. "Financing activities" include obtaining resources from
owners and providing them with a return on their investments,
borrowing money and repaying amounts borrowed. All other activities
are considered "operating". Short-term investments for purposes of
the Financial Statements are those which had a maturity of three
months or less when acquired.
B. ACQUISITIONS AND DISPOSITIONS During the second quarter of 1994,
Citicasters acquired its second FM radio station in Sacramento for $16
million and sold its AM and FM radio stations in Milwaukee for $7
million. No gain or loss was recognized on the sale. The pending
sales of Citicasters' FM radio stations in Denver and Detroit for $8
million ($2.5 million of which has been received) and $11.5 million,
respectively, and the acquisition of Citicasters' second FM radio
station in Cincinnati for $15 million are expected to be consummated
during the second half of 1994. In the aggregate, these purchases and
sales of radio stations will not have a material effect on
Citicasters' results. The sale and pending sales of radio stations
and the acquisition or pending acquisition of radio stations is not
included in the pro forma financial statements because these
transactions are not material individually and in the aggregate the
adjustments offset each other.
On May 4, 1994, Citicasters entered into agreements for the sale of
four of its network affiliated television stations to entities
affiliated with New World Communications Group, Incorporated ("New
World") for $360 million. The sale price includes warrants valued at
$10 million which would give Citicasters the right for five years to
purchase five million common shares of New World at $15 per share.
The four stations to be sold are located in Phoenix, Birmingham,
Kansas City and Greensboro/High Point. Citicasters expects to use the
proceeds to reduce long-term debt. Citicasters estimates that it will
record a net gain of approximately $50 million on the transactions.
The sale of the Phoenix, Kansas City and Greensboro/High Point
television stations is anticipated to occur in September 1994; the
sale of the Birmingham television station is expected to occur during
the fourth quarter of 1994 and is currently pending FCC approval.
Citicasters has reached an agreement in principle with its bank
lenders and the holders of the 9-3/4% Senior Subordinated Notes (the
"9-3/4%" Notes) under which Citicasters will retire the existing bank
credit facility and redeem $75 million principal amount of the 9-3/4%
Notes at a redemption price of $976.75 per $1,000 principal amount
using the proceeds from the sale of the four television stations.
Citicasters will also retire approximately $17 million of 9-1/2%
Notes. Upon retirement of the bank credit facility, the agent banks
have agreed to provide Citicasters with two revolving credit
facilities: a $125 million facility to fund future acquisitions and a
$25 million facility for general corporate purposes.
Page 7
<PAGE> 8
CITICASTERS INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following pro forma
balance sheet as of June 30, 1994 gives effect to the proposed sale of
Citicasters four television stations as if such sale had occurred on
June 30, 1994. The following pro forma statements of operations for
the six months ended June 30, 1994 and the year ended December 31,
1993 give effect to the proposed sale as if such sale had occurred as
of the beginning of 1993. The gain on disposition is not reflected in
the pro forma statements of operations.
The pro forma information contained herein is based on the historical
financial statements of Citicasters, adjusted to reflect the effects
of the reorganization completed in December 1993, the refinancing
completed in February 1994, the proposed television station sale
transactions and the recent agreements in principle with its lenders
regarding the use of proceeds from the television station sales. The
pro forma financial statements presented in Citicasters' Form 10-Q
report for the quarter ended March 31, 1994 did not reflect the recent
agreements with the lenders.
Page 8
<PAGE> 9
<TABLE>
CITICASTERS INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
PRO FORMA BALANCE SHEET (UNAUDITED)
June 30, 1994
(In thousands)
<CAPTION>
Pro Forma Adjustments
(Note 1)
-----------------------
Historical Operations Divestiture Pro Forma
Statements Divested Adjustments Results
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
------
Current assets:
Cash and short-term investments $ 11,189 $ - $ 4,950 $ 16,139
Trade receivables, net 50,493 - - 50,493
Broadcast program rights 11,219 (5,091) - 6,128
Prepaid expenses and other
current assets 5,952 (850) - 5,102
------- -------- ------- --------
Total current assets 78,853 (5,941) 4,950 77,862
Broadcast program rights,
less current portion 10,112 (6,773) - 3,339
Property and equipment net 57,614 (33,990) - 23,624
Contracts, licenses and other
intangibles, net 569,613 (238,437) (39,600) 291,576
Deferred charges and other assets 214 (22) 10,000 10,192
-------- -------- -------- --------
$716,406 ($285,163) ($ 24,650) $406,593
======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 26,500 $ - ($ 25,000) $ 1,500
Accounts payable, accrued expenses and
other current liabilities 34,665 - - 34,665
Broadcast program rights fees payable 10,456 (4,581) - 5,875
-------- -------- -------- --------
Total current liabilities 71,621 (4,581) (25,000) 42,040
Broadcast program rights fees payable,
less current portion 8,069 (5,710) - 2,359
Deferred income taxes 79,950 - (47,155) 32,795
Long-term debt, less current portion 400,450 - (278,250) 122,200
Other liabilities 14,319 - - 14,319
-------- -------- -------- --------
574,409 (10,291) (350,405) 213,713
Shareholders' Equity:
Common stock, including capital
in excess of par value 138,588 - - 138,588
Retained earnings from
January 1, 1994 3,409 - 50,883 54,292
-------- -------- -------- --------
Total shareholders' equity 141,997 - 50,883 192,880
-------- -------- -------- --------
$716,406 ($ 10,291) ($299,522) $406,593
======== ======== ======== ========
<FN>
See notes to unaudited pro forma financial statements.
</TABLE>
Page 9
<PAGE> 10
<TABLE>
CITICASTERS INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
Six Months Ended June 30, 1994
(In thousands, except per share amounts)
<CAPTION>
Pro Forma Adjustments
(Note 2)
-----------------------
Historical Operations Divestiture Pro Forma
Statements Divested Adjustments Results
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues:
Television broadcasting $ 76,904 ($48,546) $ - $28,358
Radio broadcasting 31,968 - - 31,968
-------- ------- ------- -------
108,872 (48,546) - 60,326
-------- ------- ------- -------
Costs and expenses:
Operating expenses 35,060 (16,100) - 18,960
Selling, general, and
administrative 31,845 (10,544) - 21,301
Corporate general and
administrative 2,462 - - 2,462
Depreciation and amortization 13,991 (7,092) - 6,899
-------- ------- ------- -------
83,358 (33,736) - 49,622
-------- ------- ------- -------
Operating income 25,514 (14,810) - 10,704
Other income (expense):
Interest expense (19,414) - 12,400 (7,014)
Investment income 214 - - 214
Miscellaneous, net (505) (29) - (534)
------- ------- ------- -------
(19,705) (29) 12,400 (7,334)
------- ------- ------- -------
Loss before income taxes 5,809 (14,839) 12,400 3,370
Provision (benefit) for Federal
income taxes 2,400 - (1,000) 1,400
------- ------- ------- -------
NET EARNINGS $ 3,409 ($14,839) $13,400 $ 1,970
======= ======= ======= =======
PER SHARE DATA (Primary and Fully
Diluted):
Net earnings $0.30 $0.17
Average common shares 11,400 11,400
<FN>
See notes to unaudited pro forma financial statements.
</TABLE>
Page 10
<PAGE> 11
<TABLE>
CITICASTERS INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
Year Ended December 31, 1993
(In thousands, except per share amounts)
<CAPTION>
Pro Forma
Adjustments Pro Forma Adjustments
for Reorgan- (Note 2)
Predecessor ization & ---------------------------
Historical Refinancing Operations Divestiture Pro Forma
Statements (Note 2) Divested Adjustments Results
---------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues:
Television broadcasting $139,576 $ - ($85,571) $ - $ 54,005
Radio broadcasting 65,592 - - - 65,592
-------- ------- ------- ------- --------
205,168 - (85,571) - 119,597
-------- ------- ------- ------- --------
Costs and expenses:
Operating expenses 71,730 - (32,682) - 39,048
Selling, general and
administrative 61,925 - (19,189) - 42,736
Corporate, general and
administrative 3,411 - - - 3,411
Depreciation and
amortization 28,119 451 (14,310) - 14,260
-------- ------- ------- ------- --------
165,185 451 (66,181) - 99,455
-------- ------- ------- ------- --------
Operating income 39,983 (451) (19,390) - 20,142
Other income (expense):
Interest expense (64,942) 28,590 - 23,900 (12,452)
Minority interest (26,776) 26,776 - - -
Investment income 305 - - - 305
Miscellaneous, net (494) - (57) - (551)
-------- ------- ------- ------- --------
(91,907) 55,366 (57) 23,900 (12,698)
-------- ------- ------- ------- --------
Earnings (loss) before
reorganization items
and income taxes (51,924) 54,915 (19,447) 23,900 7,444
Reorganization items (14,872) 14,872 - - -
-------- ------- ------- ------- --------
Earnings (loss) before
income taxes (66,796) 69,787 (19,447) 23,900 7,444
Provision for Federal
income taxes - 2,400 - 800 3,200
-------- ------- ------- ------- --------
EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEMS ($ 66,796) $67,387 ($19,447) $23,100 $ 4,244
======== ======= ======= ======= ========
PER SHARE DATA (Primary and
Fully Diluted):
Earnings before
extraordinary items * $0.37
Average common shares * 11,400
<FN>
* Share data is not meaningful due to the effects of the reorganization.
See notes to unaudited pro forma financial statements.
</TABLE>
Page 11
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CITICASTERS INC. 10-Q
NOTES TO FINANCIAL STATEMENT - CONTINUED
NOTES TO PRO FORMA FINANCIAL STATEMENTS
- ---------------------------------------
1. PRO FORMA ADJUSTMENTS TO BALANCE SHEET The pro forma adjustments for
operations divested represent the assets sold to and liabilities
assumed by the buyer. The pro forma divestiture adjustments to the
June 30, 1994 balance sheet are as follows (in thousands):
<TABLE>
<S> <C>
Gross proceeds: $360,000
Proceeds received in warrants to purchase five
million shares of New World common stock at $15
per share (10,000)
Estimated cash income taxes related to the sale (40,000)
Estimated cash expenses related to the sale (1,800)
--------
Net proceeds $308,200
========
Assumed use of proceeds:
Retirement of debt $303,250
Cash and short-term investments 4,950
--------
Total assumed use of proceeds $308,200
========
Gain on disposition, net of taxes of $32,445,
assuming sale occurred June 30, 1994 $ 50,883
========
Reduction in intangibles (reorganization value in
excess of amounts allocable to identifiable
assets) attributable to utilization of
pre-reorganization net operating loss
carryforwards $ 39,600
========
Reduction in deferred income taxes related to
difference between financial reporting and tax
bases of assets sold $ 47,155
========
</TABLE>
2. PRO FORMA ADJUSTMENTS TO STATEMENTS OF OPERATIONS For purposes of
presenting the pro forma effects of the sale of Citicasters' four
television stations, the operations divested as shown in the pro forma
statements of operations represent the results of those stations
during the periods presented. Management anticipates that there may
be additional reductions in corporate general and administrative
expenses as a result of the transaction however, such reductions are
not factually quantifiable or assured and, accordingly, are not
reflected herein.
The reduction in interest expense reflects the effects of the
long-term debt assumed to be retired with the proceeds from the sale
and a mortgage note of $2 million that was retired in early July 1994,
which related to one of the television stations. Citicasters' only
remaining debt will be $125 million principal amount of 9-3/4% Notes.
The pro forma interest expense represents the cash interest on these
notes and the amortization of original issue discount related thereto.
Although management intends to actively seek out radio station
acquisitions, no agreements with respect to any such acquisitions have
been entered into at this time. Accordingly, the use of the $125
million acquisition credit facility has not been reflected in the pro
forma adjustments.
Page 12
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CITICASTERS INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Certain tax and other sale related expenses are expected to be paid on
certain dates within one year subsequent to the consummation of the
sale transactions. In addition, Citicasters will retain the net
working capital of the stations to be sold which totaled approximately
$16 million as of June 30, 1994. Assuming the proceeds reserved for
future payments related to the sale and the stations' net working
capital were invested in short-term securities as of the beginning of
1993, pro forma investment income would be increased by $100,000 and
$900,000 for the six months ended June 30, 1994 and year ended
December 31, 1993, respectively. Average interest rates earned on
Citicasters' short-term investments for the six months ended June 30,
1994 and the year ended December 31, 1993 were 3.5% and 3.0%,
respectively. Such adjustments have not been reflected in the
accompanying pro forma statements of operations.
The pro forma divestiture adjustments to the statements of operations,
as they relate to the proposed sale transactions, are as follows (in
thousands):
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1994 December 31, 1993
------------- -----------------
<S> <C> <C> <C>
a. Elimination of operations divested:
Net revenues ($48,546) ($85,571)
Operating costs 16,100 32,682
Selling, general and administrative
expenses 10,544 19,189
Depreciation and amortization 7,092 14,310
Miscellaneous, net (29) (57)
b. Interest expense reduction based upon
Citicasters' interest rates in effect
for the periods presented after
assumed debt reduction 12,400 23,900
c. Decrease (increase) in provision for
Federal income taxes resulting from
effects of sale transactions 1,000 (800)
------- -------
PRO FORMA DECREASE IN NET
EARNINGS (LOSS) ($ 1,439) $ 3,653
======= =======
</TABLE>
The pro forma statement of operations for 1993 includes adjustments to
reflect the effects of the reorganization and refinancing completed in
December 1993 and February 1994, respectively, as if such transactions
had occurred as of the beginning of 1993.
Page 13
<PAGE> 14
CITICASTERS INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
C. LONG-TERM DEBT Long-term debt consisted of the following (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- ------------
<S> <C> <C>
GACC:
9-3/4% Senior Subordinated Notes
due February 2004, less unamortized
discount of $4,549 (imputed interest rate 10.13%) $195,451 $ -
14% Senior Extendable Notes due June 2001 - 77,568
Subsidiaries:
Guaranteed by GACC:
Bank credit facility 210,500 220,000
Other:
13% Senior Subordinated Notes of Great American
Broadcasting Company due May 2001 - 111,500
9-1/2% Notes due December 1999 (secured) 17,500 17,500
Other obligations 3,500 6,000
-------- --------
231,500 355,000
-------- --------
Total long-term debt 426,951 432,568
Less current maturities (26,500) (23,500)
-------- --------
$400,451 $409,068
======== ========
</TABLE>
On February 18, 1994, Citicasters refinanced the 14% Senior Extendable
Notes initially due 2001 and Great American Broadcasting Company's 13%
Senior Subordinated Notes due 2001 through the issuance of $200
million principal amount of 9-3/4% Notes due 2004. No gain or loss
was recognized by Citicasters on the transaction.
At June 30, 1994, the sinking-fund payments on long term debt of
Citicasters' subsidiaries for the remainder of 1994 and the next five
years are as follows: remainder of 1994 - $11.5 million; 1995 - $27.5
million; 1996 - $20 million; 1997 - $26 million; 1998 - $129
million; and 1999 - $17.5 million. The sinking fund payments due in
1998 include a $114 million payment in December 1998 for the final
maturity of the bank credit facility, exclusive of any payments under
a cash sweep feature. The cash sweep feature of the bank credit
facility contains a provision whereby, in addition to mandatory
scheduled principal payments Citicasters' cash on hand at the end of
any fiscal year in excess of $7.5 million must be used to prepay the
bank credit facility in March of the following fiscal year.
D. SHAREHOLDERS' EQUITY Citicasters is authorized to issue 500 million
shares of Class A Common Stock, $.01 par value, 125 million shares of
Class B Common Stock, $0.1 par value and 9.5 million shares of Serial
Preferred Stock, $.01 par value. Class A Common shares are entitled
to one vote for each share held of record; Class B shares are entitled
to one vote for every five shares held of record. Class A and Class B
Common shares will vote together as a single class on all matters
requiring shareholders approval. The Class A and Class B shares are
entitled to the same treatment per share in the event of any dividend,
distribution, split-up or recapitalization. Class B shares are
convertible (on a one-for-one basis) into Class A shares if such
conversion does not violate the Communications Act of 1934, as
amended, or the rules, regulations or policies of the FCC promulgated
thereunder. The preferred stock may have such preferences and other
rights and limitations as the Board of Directors may designate with
respect to each series.
E. EXTRAORDINARY ITEMS Extraordinary items for the first half of 1993
consisted of expenses incurred in connection with the restructuring.
Page 14
<PAGE> 15
CITICASTERS INC. 10-Q
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
GENERAL
The following is a discussion of certain factors affecting Citicasters' results
of operations for the three and six month periods ended June 30, 1994 and its
liquidity and capital resources. This discussion should be read in conjunction
with Citicasters' Financial Statements beginning on page 2. For purposes of
the following discussion, the term "Predecessor" refers to the Company prior to
its emergence from Chapter 11 bankruptcy.
As a result of the Company's emergence from Bankruptcy and its adoption of
fresh-start reporting as of December 31, 1993, Citicasters' results of
operations for periods ending after December 31, 1993 will not be comparable to
prior periods.
LIQUIDITY AND CAPITAL RESOURCES
Citicasters is a holding company and depends on advances, dividends and tax
allocation payments from its operating subsidiary, Citicasters Co. (formerly
Great American Television and Radio Company, Inc.), to meet its expenditures
for administrative expenses and debt service obligations. Restrictions in its
subsidiary's debt agreements limit the amount of distributions its subsidiary
may make to Citicasters. All such distributions would be prohibited if
Citicasters or its subsidiaries were not in compliance with the agreements. At
December 31, 1993 and June 30 and August 1,1994, Citicasters and its
subsidiaries were in compliance with such agreements and sufficient funds were
available to meet Citicasters' administrative and debt service expenditures.
The debt instruments of Citicasters and its subsidiaries also limit the amount
of additional debt that can be incurred. Under the most restrictive of these
covenants the additional debt capacity of Citicasters and its subsidiaries was
$10 million at June 30, 1994.
Operating cash flow is expected to be sufficient to meet expenditures for
operations (including capital expenditures), administrative expenses and debt
service. Although its subsidiary's bank credit facility requires a final
maturity principal payment of $114 million in December 1998, (exclusive of any
excess cash sweeps prior to that date), Citicasters has reached an agreement in
principle with its bank lenders and holders of the 9-3/4% Notes and plans to
retire the bank credit facility and redeem $75 million principal amount of
9-3/4% Notes through the use of proceeds from the sale of four of its
television stations. On May 4, 1994, Citicasters entered into agreements for
the sale of four of its network affiliated television stations to entities
affiliated with New World Communications Group Incorporated ("New World") for
$350 million in cash and warrants to purchase for five years 5,000,000 common
shares of New World at $15 per share. The television stations to be sold are
located in Phoenix, Birmingham, Kansas City and Greensboro/High Point.
The expansion of the radio group while achieving and maintaining manageable
debt levels is Citicasters' top priority and would be made possible by the sale
to New World. Citicasters has negotiated two new revolving lines of credit
with a syndicate of banks: (1) a new $125 million facility to fund future
acquisitions of radio stations and (2) a $25 million facility for general
corporate purposes. Citicasters expects to pursue the acquisition of
additional stations in its present markets and stations in markets where it
does not currently own stations. Prior to the sale of the television stations,
Citicasters entered into agreements to purchase additional stations in
Sacramento and Cincinnati. The acquisition of these two stations has or will
be funded, in part, by the sale of radio stations in Milwaukee, Detroit and
Denver.
Page 15
<PAGE> 16
CITICASTERS INC. 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
------------------------------------------------------------
RESULTS OF OPERATIONS
The financial results of Citicasters' business are seasonal. Broadcast
revenues are generally higher in the second and fourth calendar quarters than
in the first and third quarters.
The amount of broadcast advertising time available for sale by Citicasters'
stations is relatively fixed, and by its nature cannot be stockpiled for later
sale. Therefore, the primary variables affecting revenue levels are the demand
for advertising time, the viewing or listening audience of the station and the
entry of new stations in the marketplace. The major variable costs of
operation are programming (entertainment, news and sports), sales costs related
to revenues and promotional costs. The success of the programming determines
the audience levels and therefore affects revenue.
Citicasters' management believes that operating income before depreciation and
amortization is helpful in understanding cash flow generated from its
broadcasting operations that is available for debt service, capital
expenditures and taxes, and in comparing operating performance of Citicasters'
broadcast stations to other broadcast stations. Operating income before
depreciation and amortization should not be considered an alternative to net
income as an indicator of Citicasters' overall performance.
Net revenues and operating income are shown below (in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- ------------------------
Predecessor Predecessor
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Television broadcasting:
Local $21,501 | $19,225 $40,665 | $35,736
National 18,894 | 16,626 32,512 | 29,343
Other 1,967 | 1,598 3,727 | 3,248
------- ------- ------- -------
Total 42,362 | 37,449 76,904 | 68,327
------- ------- ------- -------
Radio broadcasting:
Local 15,110 | 15,129 26,720 | 25,593
National 2,798 | 3,054 4,956 | 4,932
Other 153 | 258 292 | 613
------- ------- ------- -------
Total 18,061 | 18,441 31,948 | 31,138
------- ------- ------- -------
TOTAL NET REVENUES 60,423 | 55,890 108,872 | 99,465
Operating, selling, general
and administrative expenses (33,898) | (34,066) (66,905) | (66,195)
Corporate general and
administrative expenses (1,304) | (1,011) (2,462) | (1,991)
------- ------- ------- -------
OPERATING INCOME BEFORE
DEPRECIATION AND
AMORTIZATION 25,221 | 20,813 39,505 | 31,279
Depreciation and amortization (6,900) | (7,111) (13,991) | (14,199)
------- ------- ------- -------
OPERATING INCOME $18,321 | $13,702 $25,514 | $17,080
======= ======= ======= =======
</TABLE>
Page 16
<PAGE> 17
CITICASTERS, INC. 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
------------------------------------------------------------
THREE AND SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO JUNE 30, 1993
Television revenues increased 13% during both the first quarter and first half
of 1994 compared to the same periods a year ago. Radio revenues decreased
marginally during the second quarter, however, year-to-date radio revenues
increased 3% compared to the first half last year. Radio revenues for the
second quarter of 1994 included revenues from 10 FM stations; radio revenues
for the second quarter of 1993 included revenues from 11 FM stations. The
scheduled sales and acquisitions of radio stations are not expected to have a
material effect on Citicasters' results for the year ended December 31, 1994.
The revenue increases were due to several factors including: the expanding
economy's effect on advertising expenditures; improved ratings at several
stations; and sales efforts.
Costs and expenses did not increase during the three months ended June 30, 1994
compared to the same period a year ago as a result of cost controls and the
decrease in the number of FM radio stations. Cost and expenses increased 2%
during the six month period compared to last year due largely to increased
selling and promotion expenses in the first quarter.
Operating income increased 34% and 49% for the three and six months,
respectively, compared to last year due to the combination of revenue increases
and expense controls.
OUTLOOK - THIRD QUARTER 1994
The demand for advertising time on both television and radio continues to
outpace last year's levels. Comparisons with the results from last year's third
quarter are likely to be affected, however, by the anticipated sale in
September 1994 of three of the television stations.
OTHER INCOME (EXPENSE) INFORMATION
- ----------------------------------
Interest expense decreased 46% and 42% during the three and six months ended
June 30, 1994, respectively, compared to the same periods a year ago due
primarily to reduced debt levels resulting from the reorganization in December
1993.
INCOME TAXES
- ------------
Citicasters has substantial net operating loss carryforwards, a substantial
portion of which are presently unavailable to offset future taxable income.
Citicasters' ability to utilize such operating loss carryforwards has been
substantially restricted based upon tax rules governing availability of net
operating loss carryforwards following certain changes in ownership.
Citicasters anticipates, however, that it will be able to substantially offset
taxable gains generated by the sale of its four television stations with its
remaining net operating loss carry forwards. Subsequent to the sale,
Citicasters would no longer have net operating loss carryforwards to offset
future taxable income.
Page 17
<PAGE> 18
CITICASTERS INC. 10-Q
PART II
OTHER INFORMATION
ITEM 1
Legal Proceedings
-----------------
The Securities and Exchange Commission has been conducting a formal
investigation regarding the issuance by the Company in 1989 of approximately
3.6 million shares of Common Stock in exchange for outstanding public debt of
the Company. The Staff of the SEC has indicated that it is considering
recommending enforcement action against the Company alleging that the issuances
of the Common Stock in those exchange transactions were in violation of the
registration provisions of the Securities Act of 1933. The Company believes
that the issuance of Common Stock was exempt from those registration
requirements and is engaged in discussions with the Staff concerning this
matter.
ITEM 4
Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On May 12, 1994, shareholders representing 52.2% of the Company's outstanding
Class A Common Stock and 100% of the Company's outstanding Class B Common Stock
took an action in writing to amend the Company's Articles of Incorporation to
change the name of the Company to Citicasters Inc.
ITEM 6
Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits: 11.1 Computation of Earnings Per Common Share
b) Reports on Form 8-K: None
Page 18
<PAGE> 19
CITICASTERS, INC. 10-Q
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITICASTERS INC.
August 8, 1994 BY: GREGORY C. THOMAS
------------------------------
Gregory C. Thomas
Executive Vice President and
Chief Financial Officer
Page 19
<PAGE> 1
<TABLE>
CITICASTERS INC. AND SUBSIDIARIES
EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<CAPTION>
Three months Six months
ended ended
June 30, 1994 June 30, 1994
------------- -------------
<S> <C> <C>
Computation of primary and fully diluted earnings
-------------------------------------------------
per common share:
-----------------
Earnings before extraordinary items $ 5,161 $3,409
Earnings (loss) from extraordinary items - -
------- -------
Net earnings used to calculate primary and fully
diluted earnings per share $ 5,161 $ 3,409
======= =======
Shares used in calculation of per share data:
Weighted average Class A common shares 10,154 10,154
Weighted average Class B common shares 1,163 1,163
Dilutive effect of assumed exercise of certain stock
options for the purchase of Class A common shares 83 83
------- -------
Weighted average common shares used to calculate
primary and fully diluted earnings per share 11,400 11,400
======= =======
Primary and fully diluted earnings per common share:
Earnings before extraordinary items $.45 $.30
Net earnings .45 .30
</TABLE>
Page 20
