<PAGE>
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 September 30, 1995
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
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 November 1, 1995, there were 13,330,808 shares of Common
Stock outstanding.
EXHIBIT INDEX Page 14
<PAGE>
CITICASTERS INC. - 10-Q
PART I
FINANCIAL INFORMATION
CITICASTERS INC. AND SUBSIDIARIES
BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 7,072 $ 46,258
Trade receivables, less allowance for
doubtful accounts of $1,709 and $1,244 30,508 31,851
Broadcast program rights 5,742 5,488
Prepaid and other current assets 1,755 2,635
Total current assets 45,077 86,232
Broadcast program rights, less current portion 4,196 4,466
Property and equipment, net 35,300 25,083
Contracts, broadcasting licenses and other
intangibles, less accumulated amortization
of $15,198 and $8,932 313,048 274,695
Deferred charges and other assets 14,535 13,016
$412,156 $403,492
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and
other current liabilities $15,776 $ 33,673
Broadcast program rights fees payable 5,426 5,041
Total current liabilities 21,202 38,714
Broadcast program rights fees payable,
less current portion 3,689 3,666
Long-term debt 128,432 122,291
Deferred income taxes 44,486 44,486
Other liabilities 53,714 43,398
Total liabilities 251,523 252,555
Shareholders' equity:
Common Stock, $.01 par value, including additional
paid-in capital; 500,000,000 shares authorized;
13,468,808 and 13,468,832 shares outstanding 87,725 87,831
Retained earnings from January 1, 1994 72,908 63,106
Total shareholders' equity 160,633 150,937
$412,156 $403,492
See notes to financial statements.
</TABLE>
<PAGE>
CITICASTERS INC. - 10-Q
CITICASTERS INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Revenues:
Television broadcasting $14,040 $33,583 $ 44,555 $110,487
Radio broadcasting 20,086 17,325 55,502 49,293
34,126 50,908 100,057 159,780
Costs and expenses:
Operating expenses 9,670 16,231 28,043 51,291
Selling, general and administrative 10,711 14,303 33,033 46,148
Corporate general and administrative 1,085 1,187 3,246 3,649
Depreciation and amortization 3,750 5,801 10,513 19,792
25,216 37,522 74,835 120,880
Operating income 8,910 13,386 25,222 38,900
Other income (expense):
Interest expense (3,411) (8,598) (10,296) (28,012)
Investment income 67 186 1,134 400
Miscellaneous, net (184) 70,077 (58) 69,572
(3,528) 61,665 (9,220) 41,960
Earnings before income taxes 5,382 75,051 16,002 80,860
Income taxes 2,100 30,200 6,200 32,600
NET EARNINGS $ 3,282 $44,851 $ 9,802 $ 48,260
SHARE DATA:
Primary and Fully Diluted:
Net earnings $.23 $2.62 $.70 $2.82
Average common shares 14,168 17,106 14,050 17,111
See notes to financial statements.
</TABLE>
<PAGE>
CITICASTERS INC. - 10-Q
CITICASTERS INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
<S> <C> <C>
Common Stock, including additional
paid-in capital:
Beginning balance $ 87,831 $138,588
Common Stock issued:
Exercise of stock options 235 -
Stock bonus awarded - 297
Common Stock repurchased
and retired (341) (16,833)
Balance at end of period 87,725 122,052
Retained earnings:
Beginning balance 63,106 -
Net earnings 9,802 48,260
$ 72,908 $ 48,260
TOTAL SHAREHOLDERS' EQUITY $160,633 $170,312
See notes to financial statements.
</TABLE>
<PAGE>
CITICASTERS INC. - 10-Q
CITICASTERS INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 9,802 $ 48,260
Adjustments:
Depreciation and amortization 10,513 19,792
Non-cash interest expense 141 152
Realized gains on investing activities - (42,120)
Decrease in trade receivables 1,343 1,826
Decrease (increase) in broadcast program
rights, net of fees payable 424 (147)
Decrease in accounts payable, accrued
expenses and other liabilities (7,537) (2,663)
Decrease in deferred income taxes - (1,002)
Other 778 4,417
15,464 28,515
INVESTING ACTIVITIES:
Purchases of:
Broadcast stations (50,500) (16,380)
Real estate, property and equipment (9,378) (4,689)
Sales of broadcast stations - 287,499
Other (666) 699
(60,544) 267,129
FINANCING ACTIVITIES:
Retirements and refinancing of long-term debt - (432,568)
Additional long-term borrowings 6,000 195,350
Common shares repurchased (341) (16,833)
Other 235 297
5,894 (253,754)
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (39,186) 41,890
Cash and short-term investments at beginning of period 46,258 4,789
Cash and short-term investments at end of period $ 7,072 $ 46,679
See notes to financial statements.
</TABLE>
<PAGE>
CITICASTERS INC. - 10-Q
NOTES TO FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
BASIS OF PRESENTATION The accompanying financial statements for
Citicasters Inc. 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.
On December 28, 1993, the Company completed its comprehensive
financial restructuring through a prepackaged plan of reorganization
under chapter 11 of the Bankruptcy Code. As of December 31, 1993,
the Company adopted fresh-start reporting as required by AICPA
Statement of Position No. 90-7 entitled "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code." Pursuant to
the adoption of fresh-start reporting the Company adjusted its
assets and liabilities to their estimated fair values and restated
retained earnings to zero.
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.
American Financial Group, Inc. and its Subsidiaries ("American
Financial") owned 5,044,593 shares (37.8%) of Citicasters'
outstanding Common Stock at November 1, 1995. At that date,
American Financial's Chairman, Carl H. Lindner, owned an additional
2,319,796 shares (17.4%) of Citicasters' outstanding 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 35 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.
<PAGE>
DEBT DISCOUNT Debt discount is being amortized over the life of the
related debt obligations by the interest method.
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 PER SHARE Primary and fully diluted earnings per share are
based upon the weighted average number of common shares and gives
effect to common equivalent shares (dilutive options) outstanding
during the respective periods. The effect of the options was to
increase average shares outstanding by 701 and 582 shares for the
three and nine months ended September 30, 1995.
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 June 1995, Citicasters
acquired its second FM station in Portland (KKCW) for $30 million.
During August 1995, Citicasters acquired a second FM radio station
in Tampa (WTBT) for $5.5 million. The purchase price for WTBT-FM
could increase to $8 million depending on the satisfaction of
certain conditions. Citicasters began operating WTBT-FM during
March 1995.
During 1994, Citicasters sold one AM and three FM radio stations and
acquired or commenced the operation of two FM radio stations. The
following table sets forth certain information regarding these radio
station transactions:
<TABLE>
<CAPTION>
Date Operations Date of Acquisition Price/
Commenced/Ceased Closing Sales Price
<S> <C> <C> <C>
Acquisitions:
Sacramento (KRXQ-FM) January 1, 1994 May 27, 1994 $16 million
Cincinnati (WWNK-FM) April 25, 1994 April 21, 1995 $15 million
Dispositions:
Detroit (WRIF-FM) January 23, 1994 September 23, 1994 $11.5 million
Milwaukee (WLZR-FM&AM) April 14, 1994 April 14, 1994 $7 million
Denver (KBPI-FM) April 19, 1994 August 5, 1994 $8 million
</TABLE>
In the aggregate, the purchases and sales of radio stations
completed in 1994 and 1995 will not have a material effect on
Citicasters' results.
<PAGE>
During September and October 1994, Citicasters sold four of its
network affiliated television stations to entities affiliated with
New World Communications Group Incorporated ("New World"). The
stations sold included KSAZ in Phoenix, WDAF in Kansas City, WBRC in
Birmingham and WGHP in Greensboro/Highpoint. Citicasters received
$355.5 million in cash and a warrant expiring in September 1999 to
purchase, 5,000,000 shares of New World Common Stock at $15 per
share. The warrant was valued at $10 million and is included in the
balance sheet caption "Deferred charges and other assets."
Citicasters recorded a pretax gain of $95.3 million ($50.1 million
after tax) on these sales. Proceeds from the sales were used to
retire long-term debt and to repurchase shares of the Company's
Common Stock.
The following proforma financial information is based on the
historical financial statements of Citicasters, adjusted to reflect
the television station sales, retirement of long-term debt and the
February 1994 refinancing of subordinated debt (in thousands except
per share data):
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, September 30,
1994 1994
<S> <C> <C>
Net revenues $31,730 $92,055
Operating income $ 7,638 $18,335
Net earnings $ 2,635 $ 4,749
Net earnings per share $ .15 $ .28
C. LONG-TERM DEBT Long-term debt consisted of the following (in thousands):
September 30, December 31,
1995 1994
Citicasters:
9-3/4% Senior Subordinated Notes
due February 2004, less unamortized
discount of $2,568 and $2,709
(imputed interest rate 10.13%) $122,432 $122,291
Subsidiaries:
Bank credit facility 6,000 -
$128,432 $122,291
</TABLE>
As of September 30, 1995, Citicasters had $119 million of bank
credit available under a $125 million acquisition facility and all
$25 million of bank credit available under a working capital
facility. During the second quarter of 1995, Citicasters borrowed
$6 million using the acquisition facility to partially fund the
purchase of its second FM station in Portland. No additional funds
have been drawn under either of these facilities as of November 1,
1995.
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, $.01 par value and 9.5 million shares of
Serial Preferred Stock, $.01 par value. The preferred stock may
have such preferences and other rights and limitations as the Board
of Directors may designate with respect to each series.
<PAGE>
On April 19, 1995, Citicasters' Board of Directors declared a three
for two stock split of its outstanding Common Stock. The stock
split was effective for holders of record at the close of business
on May 4, 1995 with a distribution made on May 18, 1995 and resulted
in the issuance of 4,488,418 additional common shares. All share
and per share data have been restated to reflect the stock split.
Citicasters' bank credit agreement permits it to acquire up to $65
million of its common stock. During the last four months of 1994,
Citicasters acquired 3,518,212 shares of its common stock for $51.1
million from several unaffiliated institutions. During the first
quarter of 1995, Citicasters completed an odd lot tender pursuant to
which it acquired an additional 16,457 shares at a cost of $20 per
share from holders of fewer than 100 shares.
E. SUBSEQUENT EVENT On November 1, 1995, Citicasters' Board of
Directors declared a three for two stock split of its outstanding
Common Stock. The stock split will be effective for holders of
record at the close of business on November 16, 1995 with a
distribution expected to be made two weeks later. Prior to the
split Citicasters had 13,330,808 shares of its Common Stock
outstanding. The split will increase this number to approximately
20 million shares.
<PAGE>
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 Citicasters' liquidity and capital
resources and certain factors affecting Citicasters' results of
operations for the three and nine month periods ended September 30,
1995. This discussion should be read in conjunction with Citicasters'
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Citicasters is a holding company and depends on advances, dividends and
tax allocation payments from its operating subsidiary, Citicasters Co.,
to meet its expenditures for administrative expenses and debt service
obligations. Based upon current levels of Citicasters Co.'s operations
and anticipated growth, it is expected that operating cash flow will be
sufficient to meet expenditures for operations (including capital
expenditures), administrative expenses and debt service. Citicasters'
credit agreement provides two credit facilities: an acquisition facility
of $125 million and a working capital facility of $25 million.
Citicasters Co. is permitted to advance funds or pay dividends to
Citicasters Inc. for administrative expenses, borrowing costs and
payment of dividends. During 1995, Citicasters used $44.5 million of
cash-on-hand and borrowed $6 million from the acquisition facility to
fund the purchases of three FM stations. No additional funds have been
drawn under either of these facilities as of November 1, 1995 and it is
anticipated that excess operating cash flow will be utilized to repay
the $6 million outstanding balance during the fourth quarter of 1995.
Anticipated capital expenditures for 1995 include two major projects; a
building renovation for the three Cincinnati stations expected to cost
$4.7 million and the construction of a FM tower in Tampa expected to
cost $3 million. At September 30, 1995, approximately $3.9 million had
been spent for the Cincinnati project and approximately $2.5 million had
been spent on the Tampa project.
Citicasters expects to use its excess operating cash flow and the
acquisition facility to fund future acquisitions of radio stations.
Citicasters expects to pursue the acquisition of additional stations in
its present markets and stations in markets where it does not currently
own stations.
<PAGE>
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
(news, sports and entertainment), 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 Nine months ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net revenues:
Television broadcasting:
Local $ 6,893 $17,033 $ 22,633 $ 57,698
National 6,499 14,787 19,781 47,299
Other 648 1,763 2,141 5,490
Total 14,040 33,583 44,555 110,487
Radio broadcasting:
Local 16,391 13,852 45,075 40,572
National 3,552 3,278 9,945 8,234
Other 143 195 482 487
Total 20,086 17,325 55,502 49,293
Total net revenues 34,126 50,908 100,057 159,780
Operating, selling, general
and administrative expenses (20,381) (30,534) (61,076) (97,439)
Corporate general and
administrative expenses (1,085) (1,187) (3,246) (3,649)
Operating income before
depreciation and
amortization 12,660 19,187 35,735 58,692
Depreciation and amortization (3,750) (5,801) (10,513) (19,792)
Operating income $ 8,910 $13,386 $ 25,222 $ 38,900
</TABLE>
<PAGE>
Net revenues and operating income adjusted to remove the operating
results of the four television stations sold, are shown below (in
thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net revenues:
Television broadcasting $14,040 $14,405 $ 44,555 $42,762
Radio broadcasting 20,086 17,325 55,502 49,293
Total net revenues 34,126 31,730 100,057 92,055
Operating, selling, general
and administrative expenses (20,381) (19,887) (61,076) (60,149)
Corporate general and
administrative expenses (1,085) (1,187) (3,246) (3,649)
Operating income before
depreciation and
amortization 12,660 10,656 35,735 28,257
Depreciation and amortization (3,750) (3,018) (10,513) (9,922)
Operating income $ 8,910 $ 7,638 $ 25,222 $18,335
</TABLE>
Three and nine months ended September 30, 1995 compared to September 30,
1994
The decrease in television net revenues for the three and nine months
ended September 30, 1995 is primarily attributable to the sale of four
television stations in September and October 1994. Excluding the
results of the stations sold, television net revenues decreased 3% in
the quarter and increased 4% during the nine months ended September 30,
1995 compared to the same period a year ago. Net revenues at the Tampa
TV station have been adversely affected by the switch in network
affiliations that took place in the market. Viewing patterns were
disrupted and ratings declined in the spring rating period. This trend
was reversed in the summer rating period. In addition, 1994 television
revenues for the quarter included approximately $700,000 from political
advertising, relating to the biannual elections. Radio net revenues
increased by 16% and 13% for the three and nine months, respectively,
due to the expanding economy, sales efforts, improved ratings at several
of the stations, and the acquisition of an additional FM station in late
June, 1995.
Costs and expenses including depreciation and amortization decreased as
a result of the sale of the television stations. Excluding the
operating expenses of the television stations that were sold, operating
expense increases were less than 3% and 2%, respectively, due to cost
controls.
Operating income declined as a result of the sale of the four television
stations in September and October 1994. Excluding the results of the
stations sold, operating income increased 17% and 38% respectively,
during the quarter and nine months ended September 30, 1995 compared to
the same periods in 1994 due to the increases in net revenue and expense
controls.
<PAGE>
Operating Outlook - three months ended December 31, 1995 compared to
December 31, 1994
The fourth quarter of 1994 included over $2.4 million of net revenues
attributable to the biannual elections which represented approximately
7% of fourth quarter net revenues. Given the absence of federal
elections in 1995, the Company does not expect significant percentage
increases in net revenue or operating income before depreciation and
amortization in the fourth quarter of 1995.
Other Income (Expense) Information
Interest expense decreased $5.2 million (60%) and $17.7 million (63%)
during the quarter and nine months ended September 30, 1995,
respectively, compared to the same periods in 1994 due primarily to
reduced debt levels resulting from the sale of four television stations
in September and October 1994.
<PAGE>
CITICASTERS INC. 10-Q
PART II
OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K
a) Exhibits: 27 Financial Data Schedule
b) Reports on Form 8-K: None
<PAGE>
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.
November 10, 1995 BY: GREGORY C. THOMAS
Gregory C. Thomas
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,072
<SECURITIES> 0
<RECEIVABLES> 32,217
<ALLOWANCES> 1,709
<INVENTORY> 0
<CURRENT-ASSETS> 45,077
<PP&E> 43,229
<DEPRECIATION> 7,929
<TOTAL-ASSETS> 412,156
<CURRENT-LIABILITIES> 21,202
<BONDS> 128,432
<COMMON> 87,725
0
0
<OTHER-SE> 72,908
<TOTAL-LIABILITY-AND-EQUITY> 412,156
<SALES> 0
<TOTAL-REVENUES> 100,057
<CGS> 0
<TOTAL-COSTS> 64,322
<OTHER-EXPENSES> 10,513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,296
<INCOME-PRETAX> 16,002
<INCOME-TAX> 6,200
<INCOME-CONTINUING> 9,802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,802
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.70
</TABLE>
