<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CITADEL COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 4832 86-0748219
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
140 SOUTH ASH AVENUE
TEMPE, ARIZONA 85281
(602) 731-5222
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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LAWRENCE R. WILSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CITADEL COMMUNICATIONS CORPORATION
140 SOUTH ASH AVENUE
TEMPE, ARIZONA 85281
(602) 731-5222
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
<TABLE>
<S> <C>
BRYAN D. ROSENBERGER, ESQ. MARC WEINGARTEN, ESQ.
ECKERT SEAMANS CHERIN & MELLOTT, LLC MICHAEL R. LITTENBERG, ESQ.
42ND FLOOR, 600 GRANT STREET SCHULTE ROTH & ZABEL LLP
PITTSBURGH, PA 15219 900 THIRD AVENUE
(412) 566-6000 NEW YORK, NY 10022
(212) 756-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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=================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(1) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per
share........................... shares $ $115,000,000 $33,925
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</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as amended,
the number of shares being registered and the proposed maximum offering
price per share are not included in this table.
(2) Estimated pursuant to Rule 457 under the Securities Act of 1933, as amended,
solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION--DATED APRIL 24, 1998
PROSPECTUS
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Shares
Citadel logo CITADEL COMMUNICATIONS CORPORATION
Common Stock
- --------------------------------------------------------------------------------
All of the shares of common stock, par value $.001 per share (the "Common
Stock"), offered hereby are being sold by Citadel Communications Corporation
(the "Company"). Prior to this offering (the "Offering"), there has been no
public market for the Common Stock of the Company. It is currently anticipated
that the initial public offering price for the Common Stock will be between
$ and $ per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
The Company intends to apply for inclusion of the Common Stock in The Nasdaq
Stock Market's National Market (the "Nasdaq National Market") under the symbol
"CITC."
SEE "RISK FACTORS" ON PAGES 15 TO 22 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share.............................. $ $ $
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Total(3)............................... $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act."). See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $1,000,000.
(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase up to additional shares of the Common Stock on the
same terms and conditions as set forth above. If all such additional shares
are purchased by the Underwriters, the total Price to Public will be
$ , the total Underwriting Discounts and Commissions will be
$ and the total Proceeds to Company will be $ . See
"Underwriting."
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The shares of Common Stock are offered by the several Underwriters, subject to
delivery by the Company and acceptance by the Underwriters, to prior sale and to
withdrawal, cancellation or modification of the offer without notice. Delivery
of the shares to the Underwriters is expected to be made through the facilities
of The Depository Trust Company, New York, New York, on or about ,
1998.
PRUDENTIAL SECURITIES INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
, 1998.
<PAGE> 3
[A map of the United States depicting the markets in which the Company owns
and operates radio stations]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK, THE BROADCASTING NOTES, THE
BROADCASTING EXCHANGEABLE PREFERRED STOCK AND, IF ISSUED, THE BROADCASTING
EXCHANGE DEBENTURES (AS SUCH TERMS ARE DEFINED) TO STABILIZE THEIR MARKET
PRICES, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION
IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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MARKET AND STATION DATA AND CERTAIN DEFINITIONS
Unless otherwise indicated herein, (i) all metropolitan statistical area
("MSA") rank information and information concerning the number of stations in a
market have been obtained from Investing in Radio 1998 Market Report (1st ed.)
(the "1998 BIA Report") published by BIA Publications, Inc. ("BIA"); (ii) all
audience share and primary demographic share and rank information have been
obtained from the Fall 1997 Radio Market Report (the "Arbitron Reports")
published by The Arbitron Company ("Arbitron"); (iii) station group market
revenue share and rank information for the Albuquerque, Colorado Springs,
Eugene, Little Rock, Modesto, Reno, Salt Lake City, Spokane and
Wilkes-Barre/Scranton markets are given for 1997 and have been obtained from the
December 1997 Miller, Kaplan Market Revenue Report, a publication of Miller,
Kaplan, Arase & Co., Certified Public Accountants; (iv) station group market
revenue share and rank information for the Allentown/Bethlehem, Billings, Boise,
Harrisburg, Medford, Tri-Cities and York markets are given for 1997 and have
been obtained from the 1998 BIA Report; (v) station group market revenue share
and rank information for the Providence market is given for 1997 and has been
obtained from the December 1997 Radio Revenue Report, a publication of
Hungerford, Aldrin, Nichols & Carter, P.C., Certified Public Accountants
("Hungerford"); (vi) market revenue is given for the period indicated and, with
respect to a particular market, has been obtained from the same source from
which station group market revenue share and rank information have been obtained
for such market; and (vii) information concerning the number of viable stations
in a market has been obtained from Duncan's Radio Market Guide (1997 ed.)
("Duncan's") compiled by Duncan's American Radio, Inc. Duncan's defines "viable
stations" as stations which are active and viable competitors for advertising
dollars in the market. If the total number of viable AM or viable FM stations
within a market was not a whole number, that number was rounded up to the
nearest whole number. A viable AM/FM combination has been counted as one viable
FM station.
A radio station's designated market may be different from its community of
license. If a radio station's call letters have changed during the time the
Company has owned or operated the station, the station is described by its call
letters currently in use, unless otherwise indicated.
"Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate expenses. "EBITDA" consists of
operating income (loss) before depreciation and amortization. Although broadcast
cash flow and EBITDA are not measures of performance calculated in accordance
with generally accepted accounting principles ("GAAP"), management believes that
they are useful to an investor in evaluating the Company because they are
measures widely used in the broadcasting industry to evaluate a radio company's
operating performance. However, broadcast cash flow and EBITDA should not be
considered in isolation or as substitutes for net income, cash flows from
operating activities and other income or cash flow statement data prepared in
accordance with GAAP as a measure of liquidity or profitability.
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless the
context otherwise requires, the term "Company" refers to Citadel Communications
Corporation and its subsidiaries, and the term "Citadel Broadcasting" refers to
Citadel Broadcasting Company, all of the common stock of which is owned by
Citadel Communications Corporation, and its subsidiary. Unless the context
otherwise requires, the term "operate," as used in connection with the Company's
radio station activities, includes the provision of programming and the sale of
advertising pursuant to local marketing agreements ("LMA") or the sale of
advertising pursuant to joint sales agreements ("JSA"). Unless otherwise
indicated, all information in this Prospectus assumes that (i) the Underwriters'
over-allotment option will not be exercised and (ii) prior to the closing of the
Offering, the Recapitalization, including a three-for-one stock split, discussed
under "Description of Capital Stock" will occur. Certain capitalized terms used
in this Prospectus are defined herein under the caption "Glossary of Certain
Defined Terms."
THE COMPANY
The Company is a radio broadcasting company that focuses on acquiring,
developing and operating radio stations in mid-sized markets. Upon completion of
the Pending Dispositions (as defined), the Company will own or operate 68 FM and
31 AM radio stations in 18 markets, including clusters of four or more stations
in 14 markets. The Company's stations comprise the first or second ranked radio
station group in terms of revenue share in 15 of its 18 markets. On a pro forma
basis, after giving effect to the Completed Transactions (as defined) and the
Pending Dispositions as if all such transactions had occurred on January 1,
1997, the Company would have had net revenue and broadcast cash flow of $118.6
million and $36.1 million, respectively, for the 12 months ended March 31, 1998.
The Company's primary strategy is to secure and maintain a leadership
position in the markets it serves and to expand into additional mid-sized
markets where it believes a leadership position can be obtained. Upon entering a
market, the Company seeks to acquire additional stations which, when integrated
with its existing operations, allow it to reach a wider range of demographic
groups that appeal to advertisers, increase revenue and achieve substantial cost
savings. The Company has completed 30 station acquisitions in markets where it
already owned stations and entered into a JSA for eight additional stations in
those markets. Primarily as a result of this strategy, in the six markets in
which the Company has owned radio stations since 1994, the Company has increased
its average revenue share and average broadcast cash flow margin from 37.2% and
21.8%, respectively, for the year ended December 31, 1995, to 51.5% and 32.1%,
respectively, for the 12 months ended March 31, 1998.
The Company believes that mid-sized markets represent attractive
opportunities because, as compared to the 50 largest markets in the United
States, they are generally characterized by (i) lower radio station purchase
prices as a multiple of broadcast cash flow, (ii) fewer sophisticated and
well-capitalized competitors, including both radio and competing advertising
media such as newspapers and television, and (iii) less direct format
competition due to the smaller number of stations in any given market. The
Company believes that the attractive operating characteristics of mid-sized
markets coupled with the opportunity to establish or expand in-market radio
station groups create the potential for substantial revenue growth and cost
efficiencies. As a result, management seeks to achieve broadcast cash flow
margins that are comparable to the higher margins that historically were
generally achievable only in the 50 largest markets.
The Company chooses programming formats for its stations that are intended
to maximize its cash flow. The Company's portfolio of stations is diversified in
terms of format, target demographics and geographic location. Because of the
size of its portfolio and its individual radio station groups, the Company
believes it is not unduly reliant upon the performance of any single station.
The Company also believes that the diversity of its portfolio of radio stations
helps insulate the Company from downturns in specific markets and changes in
format preferences. The Company considers many of the radio station groups it
has assembled in the last 18
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months to be underdeveloped with the potential for substantial growth through
the implementation of the Company's operating strategies, including targeted
programming and aggressive sales techniques.
STATION PORTFOLIO
Upon completion of the Pending Dispositions, the Company will own 62 FM and
26 AM radio stations in 18 mid-sized markets, operate six additional FM and five
additional AM radio stations in its markets pursuant to LMAs or JSAs and have
the right to construct one additional FM radio station.
The Company has entered into an agreement to sell its two FM radio stations
in Johnstown, Pennsylvania and its two FM and two AM radio stations in State
College, Pennsylvania for the aggregate sale price of approximately $8.5 million
in cash. In addition, the Company has entered into an agreement to sell one AM
radio station in Allentown/Bethlehem, Pennsylvania in connection with the
acquisition by the Company of one FM radio station in that market in October
1997. Such transactions are collectively referred to as the "Pending
Dispositions." See "The Pending Dispositions."
The following chart sets forth certain information with respect to the
radio stations owned or operated by the Company after giving effect to the
Pending Dispositions:
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COMBINED
MARKET
COMBINED
NUMBER OF STATIONS
----------------------------------- 1997
FM AM MARKET REVENUE
MSA ---------------- ---------------- AUDIENCE ------------
RANK OWNED OPERATED OWNED OPERATED SHARE(1) SHARE RANK
---- ----- -------- ----- -------- -------- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Providence, RI................... 31 4 -- 2 -- 22.2% 36.7% 1
Salt Lake City, UT............... 35 4 -- 2 -- 22.3 22.5 2
Wilkes-Barre/Scranton, PA(2)..... 63 5 2 4 1 29.6 31.6 2
Allentown/Bethlehem, PA.......... 66 2 -- -- -- 23.8 26.5 2
Albuquerque, NM.................. 70 5 -- 3 -- 37.6 55.9 1
Harrisburg, PA(3)................ 73 1 -- -- -- 4.9 13.5 3
Little Rock, AR(4)............... 82 8 -- 3 -- 31.0 41.1 2
Spokane, WA(5)................... 87 2 2 2 2 42.0 52.7 1
Colorado Springs, CO(5).......... 94 3 2 -- 2 39.4 63.5 1
York, PA(3)...................... 103 1 -- 1 -- 10.2 10.2 4
Modesto, CA...................... 121 4 -- 1 -- 27.5 64.3 1
Boise, ID........................ 126 4 -- 1 -- 37.4 42.0 2
Reno, NV......................... 130 3 -- 1 -- 31.5 48.5 1
Eugene, OR....................... 144 2 -- 1 -- 20.2 31.5 1
Tri-Cities, WA................... 202 4 -- 1 -- 30.3 42.2 1
Medford, OR...................... 204 4 -- 2 -- 32.3 40.8 1
Billings, MT..................... 242 4 -- 1 -- 45.2 50.5 1
Quincy, IL....................... NA 3 -- 1 -- NA NA NA
-- -- -- --
TOTAL..................... 63 6 26 5
</TABLE>
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"NA" denotes information that is not available.
(1) Combined market audience share has been derived from Arbitron surveys of
persons ages 25 to 54, listening Monday through Sunday, 6:00 a.m. to 12:00
midnight.
(2) Includes two stations for which the Company provides programming and sells
advertising under an LMA and one station for which the Company sells
advertising under a JSA (all of which the Company has an option to acquire).
(3) Harrisburg and York are adjacent markets with numerous overlapping radio
signals.
(4) One FM station is not yet operational. Three of these stations serve the
surrounding communities outside of Little Rock.
(5) Includes four stations in each of Colorado Springs and Spokane for which the
Company sells advertising under a JSA.
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OPERATING STRATEGY
In order to maximize its radio stations' appeal to advertisers, and thus
its revenue and cash flow, the Company has implemented the strategies described
below. The Company intends to continue to expand its existing strategies and to
develop new methods to enhance revenue and reduce costs.
Ownership of Strong Station Groups. The Company seeks to secure and
maintain a leadership position in the markets it serves through the ownership of
multiple stations in a market. By strategically coordinating programming,
promotional and selling strategies among a group of local stations, the Company
attempts to capture a wide range of demographic groups which appeal to
advertisers. The Company believes that the diversification of its programming
formats and its collective inventory of available advertising time strengthen
relationships with advertisers and increase the Company's ability to maximize
the value of its inventory. The Company believes that having multiple stations
in a market also enhances its ability to market the advantages of radio
advertising versus other advertising media, such as newspaper and television,
thus potentially increasing radio's share of the total advertising dollars spent
in a given market.
The Company believes that its ability to leverage the existing programming
and sales resources of its station groups enables it to enhance the growth
potential of both new and underperforming stations while reducing the risks
associated with undertaking means of improving station performance, including
launching new formats. The Company also believes that operating leading station
groups allows it to attract and retain talented local management teams, on-air
personalities and sales personnel, which it believes are essential to operating
success. Furthermore, the Company seeks to achieve substantial cost savings
through the consolidation in each of its markets of facilities, management,
sales and administrative personnel and operating resources (such as on-air
talent, programming and music research) and through the reduction of other
redundant expenses.
Aggressive Sales and Marketing. The Company seeks to maximize its share of
local advertising revenue in each of its markets through numerous sales and
marketing initiatives. The Company provides extensive training for its sales
personnel through in-house sales and time management programs, and it retains
various independent consultants who hold frequent seminars for, and are
available for consultation with, the Company's sales personnel. The Company also
emphasizes regular, informal exchanges of ideas among its management and sales
personnel across its various markets. Because advertising time is perishable,
the Company seeks to maximize its revenue through the utilization of
sophisticated inventory management techniques that allow it to provide its sales
personnel with frequent price adjustments based on regional and local market
conditions. To further strengthen its relationships with advertisers, the
Company also offers and markets its ability to create customer traffic through
on-site events staged at, and broadcast from, an advertiser's business. The
Company believes that, prior to their acquisition by the Company, many of its
acquired stations had underperformed in sales, due primarily to undersized sales
staffs responsible for selling inventory on multiple stations. Accordingly, the
Company has significantly expanded the sales forces of many of its acquired
stations.
Targeted Programming. To maintain or improve its position in each market,
the Company combines extensive market research with an assessment of its
competitors' vulnerabilities in order to identify significant and sustainable
target audiences. The Company then tailors the programming, marketing and
promotion of each station to maximize its appeal to its target audience. Within
each market, the Company attempts to build strong franchises through (i) the
creation of distinct, highly visible profiles for its on-air personalities,
particularly those broadcasting during morning "drive time" traditionally
between 6:00 a.m. and 10:00 a.m., (ii) the formulation of recognizable "brand
names" for select stations such as the "Bull" and "Cat Country" and (iii) active
involvement in community events and charities. The Company has achieved
particular success in programming country formats and currently operates the
leading country station in nine of its 14 markets where it programs country
music.
Decentralized Operations. The Company believes that radio is primarily a
local business and that much of its success is the result of the efforts of
regional and local management and staff. Accordingly, the Company decentralizes
much of its operations to these levels. Each of the Company's regional and local
station groups is managed by a team of experienced broadcasters who understand
radio format trends, demographics and
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competitive opportunities of the particular market. Regional and local managers
are responsible for preparing annual operating budgets, and a portion of their
compensation is linked to meeting or surpassing operating targets. Corporate
management approves each station group's annual operating budgets and imposes
strict financial reporting requirements to track station performance. Corporate
management is responsible for long range planning, establishing Company policies
and serving as a resource to local management. The Company has implemented local
sales reporting systems at each station to provide local and corporate
management with daily sales information.
ACQUISITION STRATEGY
As the Company has achieved a leading position in most of the markets it
currently serves, the Company expects that, in addition to acquiring additional
radio stations in existing markets, it will emphasize the acquisition of radio
stations in new markets which present opportunities for the Company to apply its
operating strategies. The Company believes that such acquisitions will enable it
to achieve, among other things, greater size and geographic diversification. The
Company anticipates that it will continue to focus on mid-sized markets rather
than attempt to expand into larger markets. Although competition among potential
purchasers for suitable radio station acquisitions is intense throughout the
United States, the Company believes that less competition exists, particularly
from the larger radio operators, in mid-sized markets as compared to larger
markets, affording the Company relatively more attractive acquisition
opportunities in these markets. There can be no assurance, however, that the
Company will be able to identify suitable and available acquisition
opportunities or that it will be able to consummate any such acquisition
opportunities.
In evaluating acquisition opportunities in new markets, the Company
assesses its potential, over time, to build leading radio station groups in
those markets. The Company believes that the creation of strong station groups
in local markets is essential to its operating success and generally will not
consider entering a new market unless it believes it can acquire multiple
stations in the market. The Company also analyzes a number of additional factors
which it believes are important to its success, including the number and quality
of commercial radio signals broadcasting in the market, the nature of the
competition in the market, the Company's ability to improve the operating
performance of the radio station or stations under consideration and the general
economic conditions of the market.
The Company believes that its acquisition strategy, if properly
implemented, could have a number of benefits, including (i) diversification of
revenue and broadcast cash flow across a greater number of stations and markets,
(ii) improved broadcast cash flow margins through the consolidation of
facilities and the elimination of redundant expenses, (iii) a broader range of
advertising packages to offer advertisers, (iv) improved leverage in various key
vendor negotiations, (v) greater appeal to top industry management talent and
(vi) increased overall scale which should facilitate the Company's capital
raising activities.
CORPORATE HISTORY AND RECENTLY COMPLETED TRANSACTIONS
Citadel Broadcasting was incorporated in Nevada in 1991, and in 1992 it
acquired all of the radio stations then owned or operated by Citadel Associates
Limited Partnership and Citadel Associates Montana Limited Partnership
(collectively, "Predecessor") and certain other radio stations. Lawrence R.
Wilson, Chief Executive Officer of the Company, was a co-founder and one of the
two general partners of Predecessor. In 1993, the Company was incorporated and
Citadel Broadcasting was reorganized as a wholly-owned subsidiary of the
Company. The Company acquired ownership of additional radio stations in each of
1993, 1994, 1996, 1997 and 1998.
The Company's operations are conducted through Citadel Broadcasting and
Citadel License, Inc. ("Citadel License"), a wholly-owned subsidiary of Citadel
Broadcasting. The Company owns all of the outstanding common stock of Citadel
Broadcasting.
Effective as of January 1, 1997, the Company acquired Deschutes River
Broadcasting, Inc. ("Deschutes") which owned 18 radio stations in Montana,
Oregon and Washington. The total consideration paid
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<PAGE> 10
was approximately $26.0 million. Following the acquisition, Deschutes was
operated as a sister company to Citadel Broadcasting until June 20, 1997 when
Deschutes was merged with and into Citadel Broadcasting.
On July 3, 1997, the Company purchased all of the outstanding capital stock
of Tele-Media Broadcasting Company ("Tele-Media") which owned or operated 16 FM
and ten AM radio stations in Pennsylvania, Rhode Island and Illinois (the
"Tele-Media Acquisition"). The purchase price for the Tele-Media Acquisition,
following post-closing adjustments, was approximately $115.8 million, which
included the repayment of certain indebtedness of Tele-Media and the redemption
of certain corporate bonds and warrants of Tele-Media (collectively, the
"Tele-Media Bonds"). Upon consummation of the Tele-Media Acquisition, Tele-
Media was merged with and into Citadel Broadcasting.
In addition, in various other transactions consummated since January 1,
1997, the Company has acquired in eight markets an aggregate of 29 stations, the
right to construct an additional station and certain related assets, including
an Internet access service provider, for an aggregate purchase price of $123.6
million.
On July 3, 1997, Citadel Broadcasting consummated the offerings of $101.0
million principal amount of its 10 1/4% Senior Subordinated Notes due 2007 (the
"Broadcasting Notes") and 1.0 million shares of its 13 1/4% Exchangeable
Preferred Stock (the "Broadcasting Exchangeable Preferred Stock") which, subject
to certain conditions, at the option of Citadel Broadcasting, are convertible
into its 13 1/4% Subordinated Exchange Debentures due 2009 (the "Broadcasting
Exchange Debentures"). Concurrently with the closing of such offerings (the
"Broadcasting Offerings"), Citadel Broadcasting entered into amendments to its
Credit Facility (as defined). As of April 23, 1998, the Credit Facility allowed
for borrowings of up to $145.0 million, and the outstanding principal amount
borrowed thereunder was approximately $121.1 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Indebtedness."
THE RECAPITALIZATION
Prior to the consummation of the Offering, the Company will engage in a
series of transactions (collectively, the "Recapitalization") which will result
in the Company having outstanding capital stock consisting of the Common Stock
and convertible preferred stock, par value $.001 per share (the "Convertible
Preferred Stock"). Contemporaneously, (i) each outstanding share of capital
stock of the Company, other than those owned beneficially or of record by ABRY
Broadcast Partners II, L.P. ("ABRY II") and ABRY/ Citadel Investment Partners,
L.P. ("ABRY/CIP"), will be converted into one share of Common Stock, (ii) each
share of capital stock of the Company owned beneficially or of record by ABRY II
or ABRY/CIP will be converted into one share of Convertible Preferred Stock,
(iii) each outstanding option or warrant to acquire shares of capital stock of
the Company will be converted into an option or warrant to acquire the same
number of shares of Common Stock and (iv) the Company will effect a
three-for-one stock split of the outstanding shares of Common Stock and
Convertible Preferred Stock. See "Description of Capital Stock."
9
<PAGE> 11
THE OFFERING
Common Stock Offered Hereby(1)...................... shares
Common Stock to be Outstanding after the
Offering(1)(2)(3)................................... shares
Convertible Preferred Stock(3)...................... 9,506,561 shares
Capital Stock to be Outstanding after the
Offering(1)(2)...................................... shares
Relative Voting Rights of Common
Stock and Convertible Preferred
Stock......................... After giving effect to the Recapitalization,
holders of the Common Stock offered hereby
and holders of the Convertible Preferred
Stock are entitled to one vote per share on
all matters submitted to a vote of
stockholders generally. Both classes vote
together as a single class on all matters
except the election or removal of the Class B
Director (as defined) and when class voting
is required by applicable law. Only holders
of Convertible Preferred Stock are entitled
to vote for the election of the Class B
Director. Immediately after the Offering,
ABRY II and ABRY/CIP together will
beneficially own all of the outstanding
Convertible Preferred Stock, representing
approximately % of the voting power of
the outstanding capital stock of the Company,
and the Voting Trustee (as defined) who votes
such shares will have the power to elect the
Class B Director and significantly influence
the election of Class A Directors (as
defined) and other matters submitted to a
vote of the stockholders. See "Management,"
"Principal Stockholders" and "Description of
Capital Stock."
Other Rights.................... After giving effect to the Recapitalization,
the Convertible Preferred Stock is
convertible into Common Stock on a one-for-
one basis at the election of the holder and
automatically upon transfer to a
non-affiliate and in certain other
circumstances. Except for the differences
described above and a nominal liquidation
preference applicable to the Convertible
Preferred Stock, the Common Stock and the
Convertible Preferred Stock are identical in
all respects. See "Description of Capital
Stock."
Use of Proceeds................. To repay outstanding indebtedness under the
Credit Facility. See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol........................ CITC
- ---------------
(1) Excludes shares of Common Stock that may be issued if the
Underwriters' over-allotment option is exercised in full. See
"Underwriting."
(2) Gives effect to the Recapitalization. Does not include (i) 3,042,255 shares
of Common Stock issuable upon the exercise of options and warrants at an
average exercise price of $3.00 per share and (ii) 427,287 additional shares
of Common Stock reserved for issuance under the Company's 1996 Equity
Incentive Plan. See "Management" and "Description of Capital Stock."
(3) Gives effect to the Recapitalization. Convertible Preferred Stock is
convertible into Common Stock on a one-for-one basis at the election of the
holder and automatically upon transfer to a non-affiliate and in certain
other circumstances. See "Description of Capital Stock."
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Such risks include the Company's history of net losses, the Company's
substantial leverage, certain limitations on the Company's acquisition strategy
and the restrictions imposed by the Company's indebtedness. See "Risk Factors"
for a discussion of these and other risks attendant to an investment in the
Common Stock.
10
<PAGE> 12
SUMMARY HISTORICAL FINANCIAL DATA
The summary historical financial data of the Company presented below as of
and for each of the years in the five-year period ended December 31, 1997 are
derived from the consolidated financial statements of the Company, which
consolidated financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The summary historical financial data
of the Company presented below as of March 31, 1998 and for the three months
ended March 31, 1997 and 1998 are derived from unaudited consolidated financial
statements of the Company which, in the opinion of management, contain all
necessary adjustments of a normal recurring nature to present the financial
statements in conformity with GAAP. The consolidated financial statements of the
Company as of December 31, 1996 and 1997 and for each of the years in the
three-year period ended December 31, 1997 and the independent auditors' report
thereon, as well as the unaudited consolidated financial statements of the
Company as of March 31, 1998 and for the three months ended March 31, 1997 and
1998, are included elsewhere in this Prospectus. The financial results of the
Company are not comparable from year to year because of the acquisition and
disposition of various radio stations by the Company. The summary historical
financial data below should be read in conjunction with, and is qualified by
reference to, the Company's Consolidated Financial Statements and related notes,
"Selected Historical Financial Data," "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcasting revenue................ $ 21,376 $ 32,998 $ 34,112 $ 45,413 $ 89,803 $ 14,506 $ 28,139
Station operating expenses.............. 17,081 24,331 26,832 33,232 65,245 11,277 21,897
Depreciation and amortization........... 5,265 7,465 4,921 5,189 14,661 2,529 5,946
Corporate general and administrative.... 961 2,504 2,274 3,248 3,530 750 1,118
-------- -------- -------- -------- --------- -------- --------
Operating income (loss)................. (1,931) (1,302) 85 3,744 6,367 (50) (822)
Interest expense (1).................... 2,637 4,866 5,242 6,155 12,872 2,177 4,759
Other income, net....................... 149 657 781 414 451 11 37
-------- -------- -------- -------- --------- -------- --------
Income (loss) before income taxes and
extraordinary item.................... (4,419) (5,511) (4,376) (1,997) (6,054) (2,216) (5,544)
Deferred income tax benefit............. -- -- -- -- (770) (35) (429)
-------- -------- -------- -------- --------- -------- --------
Income (loss) before extraordinary
item.................................. (4,419) (5,511) (4,376) (1,997) (5,284) (2,181) (5,115)
Extraordinary loss (2).................. -- -- -- (1,769) -- -- --
-------- -------- -------- -------- --------- -------- --------
Net income (loss)....................... (4,419) (5,511) (4,376) (3,766) (5,284) (2,181) (5,115)
Dividend requirement for
Broadcasting Exchangeable Preferred
Stock................................. -- -- -- -- (6,633) -- (3,572)
-------- -------- -------- -------- --------- -------- --------
Net loss applicable to common shares.... $ (4,419) $ (5,511) $ (4,376) $ (3,766) $ (11,917) $ (2,181) $ (8,687)
======== ======== ======== ======== ========= ======== ========
Pro forma basic and diluted net income
(loss) per common share (3)........... NA NA NA NA $ NA $
======== ======== ======== ======== ========= ======== ========
Pro forma weighted average common shares
outstanding (3)....................... NA NA NA NA NA
======== ======== ======== ======== ========= ======== ========
OTHER DATA:
Broadcast cash flow (4)................. $ 4,295 $ 8,667 $ 7,280 $ 12,181 $ 24,558 $ 3,229 $ 6,242
EBITDA (4).............................. 3,334 6,163 5,006 8,933 21,028 2,479 5,124
Capital expenditures.................... 679 2,857 1,691 2,041 2,070 800 186
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------- MARCH 31,
1993 1994 1995 1996 1997 1998
------- ------- ------- -------- -------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 857 $ 1,538 $ 1,005 $ 1,588 $ 7,685 $ 2,792
Working capital (deficit).............. 1,701 3,382 2,928 (4,195) 22,594 18,946
Intangible assets, net................. 17,454 18,152 15,093 51,802 268,690 286,006
Total assets........................... 36,282 46,529 37,444 102,315 344,172 356,393
Long-term debt (including current
portion)............................. 30,468 47,805 43,046 90,714 189,699 206,656
Broadcasting Exchangeable Preferred
Stock................................ -- -- -- -- 102,010 105,582
Shareholders' equity (deficit)......... 3,615 (4,690) (9,177) 6,070 16,132 7,471
</TABLE>
- ---------------
"NA" denotes information that is not applicable.
(1) Includes debt issuance costs and debt discount amortization of $139,000,
$287,000, $132,000, $371,000 and $441,000 for the years ended December 31,
1993, 1994, 1995, 1996 and 1997, respectively, and $11,000 and $96,000 for
the three months ended March 31, 1997 and 1998, respectively.
(2) On October 9, 1996, the Company extinguished its long-term debt of $31.3
million, payable to a financial institution, and its note payable to a
related party of $7.0 million. The early retirement of the long-term debt
resulted in a $1.8 million extraordinary loss due to prepayment premiums and
the write-off of debt issuance costs.
(3) Reflects the effect of the Recapitalization on the number of shares
outstanding.
(4) "Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate general and administrative
expenses. "EBITDA" consists of operating income (loss) before depreciation
and amortization. Although broadcast cash flow and EBITDA are not measures
of performance calculated in accordance with GAAP, management believes that
they are useful to an investor in evaluating the Company because they are
measures widely used in the broadcasting industry to evaluate a radio
company's operating performance. However, broadcast cash flow and EBITDA
should not be considered in isolation or as substitutes for net income, cash
flows from operating activities and other income or cash flow statement data
prepared in accordance with GAAP as a measure of liquidity or profitability.
12
<PAGE> 14
SUMMARY PRO FORMA FINANCIAL DATA
The following tables present summary unaudited pro forma financial data of
the Company as of and for the periods indicated. The summary pro forma operating
data reflect adjustments to the summary historical operating data of the Company
to give effect to (i) all acquisitions completed by the Company after January 1,
1997 and the Broadcasting Offerings (collectively, the "Completed
Transactions"), including acquisitions completed by the Company after March 31,
1998 (collectively, the "Recent 1998 Acquisitions"), (ii) the Pending
Dispositions, (iii) the Recapitalization and (iv) the Offering and the
application of the estimated net proceeds therefrom, as if such transactions had
occurred on January 1, 1997. The summary pro forma balance sheet data as of
March 31, 1998 give effect to the Recent 1998 Acquisitions, the Pending
Dispositions, the Recapitalization and the Offering and the application of the
estimated net proceeds therefrom, as if such transactions had occurred on that
date.
The summary pro forma financial data are not necessarily indicative of
either future results of operations or the results that would have occurred if
those transactions had been consummated on the indicated dates. The following
financial information should be read in conjunction with the historical
consolidated financial statements and related notes of the Company, "Unaudited
Pro Forma Condensed Consolidated Financial Statements," "Selected Historical
Financial Data," "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
13
<PAGE> 15
SUMMARY PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------------
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------
1997 1997 1998
-------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATING DATA:
Net broadcasting revenue.................................. $116,827 $25,652 $27,436
Station operating expenses................................ 81,790 19,832 20,591
Depreciation and amortization............................. 25,700 6,925 6,417
Corporate general and administrative...................... 3,196 904 1,118
-------- ------- -------
Operating expenses................................... 110,686 27,661 28,126
-------- ------- -------
Operating income (loss)................................... 6,141 (2,009) (690)
Interest expense.......................................... 12,363 3,091 3,091
Other income, net......................................... 451 13 37
-------- ------- -------
Income (loss) before income taxes......................... (5,771) (5,087) (3,744)
Deferred income tax (benefit)............................. (1,818) (458) (458)
Dividend requirement for Broadcasting Exchangeable
Preferred Stock......................................... (13,858) (3,353) (3,809)
-------- ------- -------
Income (loss) from continuing operations applicable to
common shares........................................ $(17,811) $(7,982) $(7,095)
======== ======= =======
Pro forma basic and diluted net income (loss) per common
share................................................... $ $ $
======== ======= =======
Pro forma weighted average number of common shares
outstanding.............................................
======== ======= =======
OTHER DATA:
Broadcast cash flow....................................... $ 35,037 $ 5,820 $ 6,845
EBITDA.................................................... 31,841 4,916 5,727
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, 1998
---------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2,692
Working capital........................................... 18,846
Intangible assets, net.................................... 293,109
Total assets.............................................. 362,393
Long-term debt (including current portion)................ 120,656
Broadcasting Exchangeable Preferred Stock................. 105,582
Shareholders' equity...................................... 99,471
</TABLE>
14
<PAGE> 16
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information set forth in this Prospectus,
in connection with an investment in the Common Stock offered hereby.
This Prospectus contains forward looking statements that involve risks and
uncertainties. Those statements appear in a number of places in this Prospectus
and include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to, among other things:
(i) the realization of the Company's business strategy; (ii) the sufficiency of
cash flow to fund the Company's debt service requirements and working capital
needs; (iii) anticipated trends in the radio broadcasting industry; (iv)
potential acquisitions by the Company and the successful integration of both
completed and future acquisitions; and (v) governmental regulation. Forward
looking statements are typically identified by the words "believe," "expect,"
"anticipate," "intend," "estimate" and similar expressions. Prospective
investors are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those contained in the forward looking
statements as a result of various factors. The accompanying information
contained in this Prospectus, including without limitation the information set
forth under the headings "Risk Factors," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business" and "The Pending
Dispositions," identifies important factors that could cause such differences.
HISTORY OF NET LOSSES. The Company had a net loss of $5.3 million and $5.1
million for the year ended December 31, 1997 and the three months ended March
31, 1998, respectively. After giving effect to the Completed Transactions, the
Pending Dispositions and the Offering and the application of the estimated net
proceeds therefrom as if they had occurred at January 1, 1997, on a pro forma
basis, the Company would have had a net loss from continuing operations of $4.0
million and $3.3 million for the year ended December 31, 1997 and the three
months ended March 31, 1998, respectively. Such net losses have resulted
primarily from significant charges for depreciation and amortization relating to
the acquisition of radio stations and interest charges on outstanding debt. The
Company expects to continue to experience net losses in the foreseeable future,
principally as a result of depreciation, amortization and interest expense
associated with completed and anticipated future acquisitions. Such losses are
expected to be greater than those experienced historically by the Company.
SUBSTANTIAL LEVERAGE. The Company is highly leveraged. At March 31, 1998,
after giving pro forma effect to the Recent 1998 Acquisitions, the Pending
Dispositions and the Offering and the application of the net proceeds therefrom,
the Company would have had outstanding total debt of $123.3 million (excluding
the discount on the Broadcasting Notes), Broadcasting Exchangeable Preferred
Stock with an aggregate liquidation preference of $110.1 million and
shareholders' equity of $99.5 million. The Company's high degree of leverage
will have important consequences, including the following: (i) the ability of
the Company to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other
purposes, if needed, may be impaired; (ii) a substantial portion of the cash
flow of the Company will be used to pay interest expense, which will reduce the
funds which would otherwise be available to fund operations and future business
opportunities; (iii) the Company may be more highly leveraged than its
competitors and, therefore, may be at a competitive disadvantage; (iv) the
Company's high degree of leverage will make it more vulnerable to a downturn in
its business or in the economy in general; and (v) certain of the Company's
borrowings will be at variable rates of interest (including the borrowings under
the Credit Facility) which will expose the Company to the risks associated with
fluctuating interest rates. See "Capitalization," "Selected Historical Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Description of Indebtedness" and the Company's Consolidated
Financial Statements and the notes thereto.
The Company's ability to satisfy its debt obligations and to pay cash
dividends on, and to satisfy the redemption obligations in respect of, the
Broadcasting Exchangeable Preferred Stock will depend upon the Company's future
financial and operating performance, which, in turn, is subject to prevailing
economic
15
<PAGE> 17
conditions and financial, business and other factors, certain of which are
beyond its control. If the Company's cash flow and capital resources are
insufficient to fund its debt service obligations, the Company may be forced to
reduce or delay planned acquisitions and capital expenditures, sell assets,
obtain additional equity capital or restructure its debt. There can be no
assurance that the Company's operating results, cash flow and capital resources
will be sufficient for payment of its debt service and other obligations in the
future. In the absence of such cash flow and capital resources, the Company
could face substantial liquidity problems and might be required to sell material
assets or operations to meet its debt service and other obligations, and there
can be no assurance as to the timing of such sales or the proceeds that the
Company could realize therefrom or that such sales can be effected on terms
satisfactory to the Company or at all. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of Indebtedness."
LIMITATIONS ON ACQUISITION STRATEGY; ANTITRUST CONSIDERATIONS. The Company
intends to pursue growth through the acquisition of radio station groups and
individual radio stations in mid-sized markets. See "Business--Acquisition
Strategy." The Company cannot predict whether it will be successful in pursuing
such acquisition opportunities or what the consequences of any such acquisitions
would be. The Company is currently evaluating certain acquisitions; however, the
Company currently has no binding commitments to acquire any specific business or
other material assets.
Although the Company believes that its acquisition strategies are
reasonable, there can be no assurance that it will be able to implement its
plans without delay or at all, or that, if implemented, its efforts will result
in the increased broadcast cash flow or other benefits currently anticipated by
the Company's management. In addition, there can be no assurance that the
Company will not encounter unanticipated problems or liabilities in connection
with acquired stations. The Company's acquisition strategy involves numerous
other risks, including difficulties in the integration of operations and systems
and the management of a large and geographically diverse group of stations, the
diversion of management's attention from other business concerns and the
potential loss of key employees of acquired stations. There can be no assurance
that the Company's management will be able to manage effectively the resulting
business or that such acquisitions will benefit the Company. Depending upon the
nature, size and timing of future acquisitions, the Company may be required to
raise additional financing. There can be no assurance that the Credit Facility,
the indenture governing the Broadcasting Notes (the "Broadcasting Notes
Indenture"), the certificate of designation governing the Broadcasting
Exchangeable Preferred Stock (the "Broadcasting Certificate of Designation")
and, if the Broadcasting Exchange Debentures are issued, the indenture governing
the Broadcasting Exchange Debentures (the "Broadcasting Exchange Indenture") or
any other loan agreements to which the Company may become a party or subject to
will permit such additional financing or that such additional financing will be
available to the Company on terms acceptable to its management or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The Company competes and will continue to compete with many other buyers
for the acquisition of radio stations. Many of those competitors have
significantly greater financial and other resources than those of the Company.
In addition, if, as management believes may happen, the prices sought by sellers
of radio stations continue to rise, the Company may find fewer acceptable
acquisition opportunities.
In addition to the operational risks associated with the acquisition of
radio stations, the Company also is aware that the Federal Trade Commission
("FTC") and the United States Department of Justice ("DOJ"), which evaluate
transactions to determine whether those transactions should be challenged under
the federal antitrust laws, have been increasingly active recently in their
review of radio station acquisitions, particularly where an operator proposes to
acquire additional stations in its existing markets. The Federal Communications
Commission (the "FCC") is also currently reevaluating its own policies relating
to possible anticompetitive local radio ownership structures (for example, where
an owner's share of local radio revenue may exceed 50%), and FCC approval of
several pending radio station purchases by various parties has been delayed
while this policy review is taking place. There can be no assurance that the
DOJ, the FTC or the FCC will not prohibit or require the restructuring of future
acquisitions.
16
<PAGE> 18
The Company has received two civil investigative demands ("CIDs") from the
Antitrust Division of the DOJ. One CID addresses the Company's acquisition of
KRST-FM in Albuquerque, New Mexico, and the second CID addresses the Company's
JSA relating to stations in Spokane, Washington and Colorado Springs, Colorado.
The Company has provided the requested information in response to each CID. If
the DOJ were to proceed with and successfully challenge the Company's
acquisition of KRST-FM, the Company may be required to divest one or more radio
stations in Albuquerque and/or it may be subject to the payment of fines. If the
DOJ were to proceed with and successfully challenge the Spokane/Colorado Springs
JSA, the Company may be required to terminate that JSA and/or it may be subject
to the payment of fines. At this time, the Company is unable to quantify the
effect, if any, that such proceedings may have on the Company's business,
results of operations and financial condition. See "Business--Legal
Proceedings."
As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that commencement of operations under LMAs
and other similar agreements customarily entered into in connection with radio
station transfers prior to the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), could violate the HSR Act. The DOJ has also stated publicly that it
will apply only prospectively its new policy prohibiting operation under LMAs in
connection with purchase agreements until the expiration or termination of the
HSR waiting period. In connection with acquisitions subject to the waiting
period under the HSR Act, the Company will not commence operation of any
affected station to be acquired under an LMA or similar agreement until the
waiting period has expired or been terminated.
The Company is also aware that on November 7, 1996, the FCC issued a
Further Notice of Proposed Rulemaking which, among other things, reviews the
regulations of the FCC governing the attribution of broadcast interests,
including the attribution of ownership as a result of time brokerage agreements
and LMAs. One of the FCC rule proposals is to assign an attributable ownership
interest to non-voting stock interests under certain circumstances. If such a
rule were to be adopted, it could preclude the Company from acquiring stations
in markets where one or more of its shareholders already possesses attributable
broadcast interests. At this time, no determination can be made as to what
effect, if any, this proposed rulemaking will have on the Company. See
"Business--Federal Regulation of Radio Broadcasting--Proposed Changes."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS AND BROADCASTING EXCHANGEABLE
PREFERRED STOCK. Each of the Broadcasting Notes Indenture, the Broadcasting
Certificate of Designation and, if the Broadcasting Exchange Debentures are
issued, the Broadcasting Exchange Indenture contains certain restrictive
covenants, including limitations which restrict the ability of Citadel
Broadcasting to incur additional debt, incur liens, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, merge or consolidate with any other person
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets. In addition, the Credit Facility contains
certain other and more restrictive covenants than those contained in the
Broadcasting Notes Indenture, including certain limitations on future
acquisitions and capital expenditures without lender consent. This may adversely
affect the Company's ability to pursue its acquisition strategy. The Credit
Facility also requires Citadel Broadcasting to maintain specific financial
ratios and to satisfy certain financial condition tests. The ability of Citadel
Broadcasting to meet those financial ratios and financial conditions can be
affected by events beyond its control, and there can be no assurance that those
tests will be met. A breach of any of these covenants could result in a default
under the Credit Facility, the Broadcasting Notes Indenture, the Broadcasting
Certificate of Designation and/or the Broadcasting Exchange Indenture. In the
event of a default under the Credit Facility, the lenders thereunder could elect
to declare all amounts outstanding thereunder, together with accrued interest,
to be immediately due and payable. In the event of a default under the Credit
Facility, if Citadel Broadcasting or the Company were unable to repay those
amounts, the lenders thereunder could proceed against the collateral granted to
them to secure that indebtedness. If the maturity of borrowings under the Credit
Facility were to be accelerated, there can be no assurance that the assets of
the Company would be sufficient to repay in full such indebtedness and other
indebtedness of the Company. Substantially all of the assets of the Company are
pledged as collateral under the Credit Facility. See
17
<PAGE> 19
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Indebtedness."
COMPETITIVE CONDITIONS. The financial success of each of the Company's
radio stations is dependent, to a significant degree, upon its audience ratings
and share of the overall radio advertising revenue within its geographic market.
The radio broadcasting industry is a highly competitive business. Each of the
Company's radio stations competes within its market for audience share and
revenue directly with other AM and FM radio stations, as well as with other
media, including television, newspapers, direct mail and outdoor advertising.
The audience ratings and advertising revenue of the Company's individual
stations are subject to change. Any adverse change in a particular market
affecting advertising expenditures or an adverse change in the relative market
positions of the stations located in a particular market could have a material
adverse effect on the revenue and broadcast cash flow of the Company's stations
located in that market and on the Company's operating results as a whole. There
can be no assurance that any one of the Company's radio stations will be able to
maintain or increase its current audience ratings and radio advertising revenue
market share. See "Business--Advertising Sales" and "-- Competition."
The radio broadcasting industry is also subject to competition from new
media technologies that may be developed or introduced, such as the delivery of
audio programming by cable television systems, the introduction of terrestrial
digital audio broadcasting services and the introduction of satellite digital
audio radio services which may provide a medium for the delivery of multiple new
audio programming formats by terrestrial and satellite means, respectively, to
local and national audiences. The Company cannot predict the effect, if any,
that any such new technologies may have in the radio broadcasting industry. See
"Business--Competition" and "-- Federal Regulation of Radio
Broadcasting--Proposed Changes."
Companies that operate radio stations must be alert to the possibility of
another station changing its format to compete directly for listeners and
advertisers. Typically, other well-capitalized stations compete in the same
geographic markets as the Company. Another station's decision to convert to a
format similar to that of one of the Company's radio stations in the same
geographic area may result in lower ratings and advertising revenue, increased
promotion and other expenses and, consequently, lower broadcast cash flow for
the Company's station.
GOVERNMENT REGULATION. The broadcasting industry is subject to extensive
federal regulation that, among other things, requires approval by the FCC for
the issuance, renewal, transfer of control and assignment of broadcasting
station operating licenses and limits the number of broadcasting properties that
the Company may acquire in any market. Additionally, the Communications Act and
FCC rules will operate to impose limitations on alien ownership and voting of
the capital stock of the Company. The Telecommunications Act of 1996 (the
"Telecommunications Act") creates significant new opportunities for broadcasting
companies but also creates uncertainties as to how the FCC and the courts will
enforce and interpret the Telecommunications Act.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. The
interests of the Company's officers, directors and shareholders are generally
attributable to the Company. Certain of the Company's officers and directors may
acquire attributable broadcast interests, which will limit the number of radio
stations that the Company may acquire or own in any market in which such
officers or directors hold or acquire attributable broadcast interests.
In addition, the number of radio stations the Company may acquire in any
market is limited by FCC rules and may vary depending upon whether the interests
in other radio stations or certain other media properties of certain individuals
affiliated with the Company are attributable to those individuals under FCC
rules. Moreover, under the FCC's cross-interest policy, the FCC in certain
instances may prohibit one party from acquiring an attributable interest in one
media outlet and a substantial non-attributable economic interest in another
media outlet in the same market, thereby prohibiting a particular acquisition by
the Company. The FCC has under consideration proposals to change its rules so
that certain cross-interests arising from non-voting stock ownership would be
counted as attributable ownership interests. Certain interests of
18
<PAGE> 20
ABRY II and ABRY/CIP could be attributed to the Company if this rule is adopted,
possibly precluding the Company from acquiring stations in markets where ABRY II
or ABRY/CIP already possesses attributable broadcast interests.
The Certificates of Incorporation of each of the Company and Citadel
Broadcasting contain provisions which permit restrictions on the ownership,
voting and transfer of such entity's capital stock in accordance with the
Communications Act and the rules and regulations of the FCC to prohibit the
ownership or voting of more than a certain percentage of such entity's
outstanding capital stock by or for the account of aliens or their
representatives or by a foreign government or representative thereof or by any
corporation organized under the laws of a foreign country, or by or for
corporations of which any officer is an alien, more than one-fourth of its
directors are aliens or more than one-fourth of its capital stock is owned of
record or voted by aliens, or by any other entity (i) that is subject to or
deemed to be subject to management influence by aliens or (ii) the equity of
which is owned, controlled by or held for the benefit of aliens in a manner that
would cause the Company or Citadel Broadcasting to be in violation of the
Communications Act or the FCC's regulations.
The Company's business will be dependent upon maintaining its broadcasting
licenses issued by the FCC, which are ordinarily issued for a maximum term of
eight years. Although it is rare for the FCC to deny a renewal application,
there can be no assurance that future renewal applications of the Company will
be approved or that such renewals will not include conditions or qualifications
that could adversely affect the Company. A petition to deny renewal has been
filed against four of the Company's Salt Lake City stations, alleging that they
failed to comply with FCC equal opportunity employment rules, and FCC processing
of that petition has delayed action on those license renewals. Moreover,
governmental regulations and policies may change over time and there can be no
assurance that such changes would not have a material adverse impact upon the
Company. See "Business--Federal Regulation of Radio Broadcasting."
IMPORTANCE OF CERTAIN MARKETS. In 1997, the Company's radio stations in
Albuquerque, Salt Lake City and Modesto generated 20.4%, 13.9% and 9.3%,
respectively, of the Company's net revenue and 28.6%, 11.8% and 14.6%,
respectively, of the Company's broadcast cash flow. On a pro forma basis after
giving effect to the Completed Transactions and the Pending Dispositions, the
Company's radio stations in Albuquerque, Salt Lake City, Modesto and Providence
would have generated 15.3%, 10.5%, 6.9% and 12.0%, respectively, of the
Company's net revenue in 1997 and 19.9%, 9.6%, 10.1% and 13.6%, respectively, of
the Company's broadcast cash flow in 1997. A significant decline in net revenue
from the Company's stations in these markets, as a result of a ratings decline
or otherwise, could have a material adverse effect on the Company's financial
position and results of operations.
DEPENDENCE ON KEY PERSONNEL. The Company's business is dependent upon the
performance of certain key individuals, particularly Lawrence R. Wilson, the
Chief Executive Officer. The loss of the services of Mr. Wilson would have a
material adverse effect on the Company, including causing an event of default
under the Credit Facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Description of Indebtedness -- Existing Loan Agreement." The Company has
entered into an employment agreement with Mr. Wilson, expiring in June 2001. See
"Management--Employment Agreement." In addition, the Company has purchased
key-man life insurance covering Mr. Wilson in the amount of $5.0 million.
Notwithstanding the foregoing, should there be an event of default under the
Credit Facility as a result of the death, disability or termination of
employment of Mr. Wilson (which the lender thereunder could declare if, within
90 days after such death, disability or employment termination, the Company has
not replaced Mr. Wilson with a person acceptable to the lender in its reasonable
discretion), it is unlikely that the proceeds of such policy would be sufficient
to repay the outstanding indebtedness under the Credit Facility. The Company
employs three regional presidents, 19 general managers, numerous sales managers,
sales personnel and program directors, and several high-profile on-air
announcers, whose services are also important to the Company. The Company
sometimes enters into employment agreements, including non-competition
agreements, with its on-air announcers. However, there can be no assurance that
the Company will be able to retain any such employees or that such
non-competition agreements would be enforceable.
19
<PAGE> 21
CONCENTRATION OF SHARE OWNERSHIP AND VOTING CONTROL; POTENTIAL
ANTI-TAKEOVER EFFECTS. After giving effect to the Recapitalization, the
Company's capital stock is divided into two classes with different voting
rights. Holders of the Common Stock offered hereby and holders of the
Convertible Preferred Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders generally. Both classes vote together as a
single class on all matters except the election or removal of the Class B
Director and when class voting is required by applicable law. Only holders of
Convertible Preferred Stock are entitled to vote for the election of the Class B
Director. Immediately following the Offering, ABRY II and ABRY/CIP together will
beneficially own all of the outstanding shares of the Convertible Preferred
Stock, representing approximately % of the voting power of the outstanding
capital stock of the Company, and the Voting Trustee who votes such shares will
have the power to elect the Class B Director and significantly influence the
election of Class A Directors and other matters submitted to a vote of the
stockholders. See "Description of Capital Stock." Purchasers in the Offering
will be acquiring shares of Common Stock representing, in the aggregate,
approximately % of all of the outstanding Common Stock but possessing
approximately % of the total voting power of the capital stock to be
outstanding immediately following the Offering, after giving effect to the
Recapitalization.
The voting power of the Voting Trustee may hinder, delay or defer a change
in control of the Company and may have an antitakeover effect. In addition, the
Company is subject to (i) Nevada statutes regulating business combinations and
restricting voting rights of certain persons acquiring shares of capital stock
of the Company and (ii) the Communications Act of 1934, as amended (the
"Communications Act"), and the rules of the FCC, which require the consent of
the FCC to any change of control of the Company. The Company's Certificate of
Incorporation and Bylaws also contain certain provisions that could inhibit a
change in control of the Company by means of a tender offer, merger, proxy
contest or otherwise, including provisions that enable the Board of Directors to
issue "blank check" preferred stock. The foregoing provisions could adversely
impact prevailing market prices for the Common Stock and could preclude a
transaction in which the holders of the Common Stock may have received a
substantial premium for their shares over then-current market prices. See
"Description of Capital Stock--Certain Anti-Takeover Effects."
ABSENCE OF DIVIDENDS; HOLDING COMPANY STRUCTURE. The Company has not
declared or paid any cash dividends on its common stock since its inception and
does not anticipate paying or declaring any dividends on the Common Stock or the
Convertible Preferred Stock in the foreseeable future. The Company intends to
reinvest earnings, if any, in the development and expansion of its business. See
"Dividend Policy." Additionally, the Company is a holding company whose only
material asset is its investments in its subsidiary, Citadel Broadcasting. As a
result, the Company's ability to meet its future financial obligations and to
pay dividends on the Common Stock is dependent upon the availability of cash
flows from Citadel Broadcasting through dividends, intercompany advances,
management fees and other payments or the issuance of new equity. Citadel
Broadcasting is under no obligation to pay dividends to the Company and is
subject to statutory and contractual restrictions that limit its ability to pay
dividends and make other payments to the Company. Each of the Broadcasting Notes
Indenture, the Broadcasting Certificate of Designation and the Credit Facility,
and, if the Broadcasting Exchange Debentures are issued, the Broadcasting
Exchange Indenture, imposes restrictions on the payment of dividends and the
making of loans by Citadel Broadcasting to the Company. Additionally, the
outstanding shares of common stock of Citadel Broadcasting owned by the Company
have been pledged to secure the Company's guarantee of the Credit Facility. The
Company's right to participate in the distribution of assets of Citadel
Broadcasting upon its liquidation or reorganization will be subject to prior
claims of the creditors of Citadel Broadcasting, including trade creditors,
except to the extent that the Company may itself be a creditor with recognized
claims against Citadel Broadcasting. See "Description of Indebtedness."
DIVIDENDS ON BROADCASTING EXCHANGEABLE PREFERRED STOCK; RIGHT TO APPOINT
DIRECTORS. Citadel Broadcasting is restricted under the Broadcasting Notes
Indenture and the Credit Facility from paying dividends on or repurchasing,
redeeming or otherwise acquiring any shares of capital stock, including the
Broadcasting Exchangeable Preferred Stock, unless certain financial tests are
met and then only in accordance with a formula based on cash flow and only in
the absence of a default. Citadel Broadcasting may elect to pay
20
<PAGE> 22
dividends on the Broadcasting Exchangeable Preferred Stock on any dividend
payment date occurring on or before July 1, 2002 by issuing either additional
shares of Broadcasting Exchangeable Preferred Stock or cash. After July 1, 2002,
dividends may be paid only in cash. In the event that, after July 1, 2002, cash
dividends on the Broadcasting Exchangeable Preferred Stock are in arrears and
unpaid for two or more semi-annual dividend periods (whether or not
consecutive), holders of Broadcasting Exchangeable Preferred Stock will be
entitled to certain voting rights with respect to the election of directors of
Citadel Broadcasting. See "Description of Indebtedness--Broadcasting
Exchangeable Preferred Stock."
YEAR 2000. The Company is in the process of upgrading its centralized
accounting and traffic (advertising scheduling) computer systems for all of its
stations in each market, which process is expected to minimize year 2000
problems associated with such systems. In addition, the Company has assembled a
task force to inventory and assess the Company's other internal information and
operating systems. Until the task force makes substantial progress in
identifying problem areas, it is not possible to estimate the extent of year
2000 deficiencies in the Company's systems, the costs to the Company of
correcting such deficiencies and the time frame in which any required
corrections will be made. Given the uncertainties and preliminary nature of the
Company's investigations to date, there can be no assurances that year
2000-related deficiencies and required corrective measures will not have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Matters."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior
to the Offering, there has been no public market for the Common Stock, and there
can be no assurance that an active trading market will develop or, if developed,
be sustained. The initial public offering price for the Common Stock offered
hereby will be determined by negotiations between the Company and the
representatives of the Underwriters and may not be indicative of the market
price of the Common Stock after the Offering. See "Underwriting" for a
description of the factors to be considered in determining the initial public
offering price. After the Offering, the market price of the Common Stock could
be subject to significant fluctuations in response to variations in results of
operations, changes in earnings estimates by securities analysts, announcements
by competitors, general economic and market conditions and other factors. In
addition, the stock market has experienced price and volume fluctuations which
have particularly affected the market price of many companies in similar
industries and which often have been unrelated to the operating performance of
these companies. These market fluctuations may adversely affect the market price
of the Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of the shares of Common
Stock in the Offering will experience an immediate and substantial dilution of
approximately $ per share (based upon an assumed initial public
offering price of $ per share) in net tangible book value per share of
Common Stock from the initial public offering price. To the extent outstanding
options and warrants to purchase 3,042,255 shares of Common Stock, subject to
vesting requirements, are exercised, there will be further dilution. See
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering and after
giving effect to the Recapitalization, the Company will have outstanding
shares of Common Stock ( shares if the Underwriters' over-allotment option
is exercised in full) and 9,506,561 shares of Convertible Preferred Stock, all
of which shares of Convertible Preferred Stock are convertible into shares of
Common Stock on a share-for-share basis. Of these shares, the shares of
Common Stock offered hereby will be freely tradeable without restriction or
registration under the Securities Act by persons other than "affiliates" of the
Company, as defined under the Securities Act. The remaining shares of Common
Stock and the shares of Convertible Preferred Stock outstanding will be
"restricted securities" as defined in Rule 144 under the Securities Act ("Rule
144"), and, accordingly, none of these securities may be sold unless they are
registered under the Securities Act or sold pursuant to an exemption from
registration. The Company, together with officers, directors and stockholders of
the Company owning upon completion of the Offering an aggregate of shares
of Common Stock and Convertible Preferred Stock, have agreed not to, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or
21
<PAGE> 23
disposition) of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock for a period of 180 days from the
date of this Prospectus without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, except for shares
offered pursuant to the Offering and the exercise of options granted under
employee benefit plans existing as of the date of consummation of the Offering
or pursuant to the terms of warrants of the Company outstanding as of the date
of consummation of the Offering. Prudential Securities Incorporated may, in its
sole discretion, at any time and without notice, release all or any portion of
the securities subject to such lock-up agreements. Thereafter, all such
restricted securities outstanding could become eligible for future sale in the
public market at varying times following the Offering subject to the applicable
volume, holding period and other limitations of Rule 144. Holders of 15,258,085
shares (including shares issuable upon conversion of the Convertible Preferred
Stock and an outstanding warrant) may require the Company to register such
shares under the Securities Act which would permit such holders to sell such
securities without complying with Rule 144. See "Management--Compensation
Committee Interlocks and Insider Participation--Registration Rights Agreement."
In addition, the Company may finance a portion of the cost of future radio
station acquisitions through additional issuances of Common Stock or other
equity securities. The Company also has granted stock options to key employees
and consultants of the Company to purchase shares of Common Stock and a warrant
to purchase shares of Common Stock. Sales of substantial amounts of Common Stock
into the public market following the Offering, or the perception that such sales
might occur, could adversely impact prevailing market prices for the Common
Stock and the ability of the Company to raise equity capital. See "Shares
Eligible for Future Sale."
22
<PAGE> 24
USE OF PROCEEDS
The net proceeds to the Company from the Offering, assuming an initial
public offering price of $ per share, are estimated to be approximately
$ million ($ million if the Underwriters' over-allotment option is
exercised in full), after deducting underwriting discounts and commissions and
estimated Offering expenses. The Company intends to use the net proceeds of the
Offering to repay outstanding indebtedness under the Credit Facility.
As of April 23, 1998, an aggregate principal amount of $121.1 million was
outstanding under the Credit Facility, and the applicable interest rate was
8.40625%. Subject to certain mandatory prepayments of amounts outstanding under
the Credit Facility, the balance of any amounts outstanding would be due on
September 30, 2003. Amounts borrowed under the Credit Facility have been used
for acquisitions and working capital purposes. See "Description of
Indebtedness."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its common
stock. The Company currently intends to retain earnings to finance the growth
and development of its business and does not anticipate declaring or paying cash
dividends on either the Common Stock or the Convertible Preferred Stock in the
foreseeable future. Declaration or payment of future dividends, if any, will be
at the discretion of the Company's Board of Directors after taking into account
various factors, including the Company's financial condition, operating results,
current and anticipated cash needs and other factors it deems relevant. The
Broadcasting Notes Indenture, the Broadcasting Certificate of Designation and
the Credit Facility, and, if the Broadcasting Exchange Debentures are issued,
the Broadcasting Exchange Indenture, impose significant restrictions on the
payment of dividends and the making of loans by Citadel Broadcasting to the
Company. The Company does not have any other source from which to pay cash
dividends on its Common Stock or Convertible Preferred Stock. See "Risk
Factors--Absence of Dividends; Holding Company Structure," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Notes to Consolidated Financial
Statements.
23
<PAGE> 25
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of March 31, 1998 (i) on an actual basis, (ii) on a pro forma basis to give
effect to the Recent 1998 Acquisitions and the Pending Dispositions and (iii) on
a pro forma basis as further adjusted to give effect to the Recapitalization and
the Offering and the application of the estimated net proceeds therefrom. This
table should be read in conjunction with the Company's Consolidated Financial
Statements and related notes, "Unaudited Pro Forma Condensed Consolidated
Financial Statements" and other information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------------
PRO FORMA
FOR THE PRO FORMA
RECENT 1998 AS FURTHER
ACQUISITIONS ADJUSTED FOR THE
AND RECAPITALIZATION
PENDING AND THE
ACTUAL DISPOSITIONS OFFERING
------ ------------ ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, including current portion:
Credit Facility........................................ $107,084 $112,584 $ 20,584
Other obligations...................................... 1,199 1,699 1,699
Broadcasting Notes..................................... 98,373 98,373 98,373
-------- -------- --------
Total long-term debt................................ 206,656 212,656 120,656
Broadcasting Exchangeable Preferred Stock................ 105,582 105,582 105,582
Shareholders' equity:
Convertible preferred stock............................ 5 5 --
Class A common stock, $.001 par value; 15,910,471
shares authorized; 985,224 shares issued and
outstanding actual and no shares issued or
outstanding pro forma and as adjusted............... 1 1 --
Class B common stock, $.001 par value; 156,933 shares
authorized; 18,832 shares issued and outstanding
actual and no shares issued or outstanding pro forma
and as adjusted..................................... -- -- --
Class C common stock, $.001 par value; 12,000,000
shares authorized; 74,488 shares issued and
outstanding actual and no shares issued or
outstanding pro forma and as adjusted............... -- -- --
Convertible Preferred Stock, $.001 par value; no shares
authorized, issued or outstanding actual; and
9,506,561 shares authorized and 9,506,561 shares
issued and outstanding pro forma and as adjusted.... -- -- 9
Common Stock, $.001 par value; no shares authorized,
issued or outstanding actual; and shares
authorized and shares issued and outstanding pro
forma and as adjusted (1)........................... -- -- 10
Additional paid-in capital............................. 41,331 41,331 133,318
Accumulated deficit.................................... (33,866) (33,866) (33,866)
-------- -------- --------
Total shareholders' equity........................ 7,471 7,471 99,471
-------- -------- --------
Total capitalization......................... $319,709 $325,709 $325,709
======== ======== ========
</TABLE>
- ---------------
(1) Excludes 3,042,255 shares of Common Stock issuable upon the exercise of
options and warrants at an average price of $3.00 per share.
24
<PAGE> 26
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the net tangible book value of the Common Stock
(assuming the conversion of all shares of the Convertible Preferred Stock) from
the initial public offering price. Net tangible book value per share represents
the amount of the total tangible assets less total liabilities of the Company,
divided by the number of shares of Common Stock outstanding. At March 31, 1998,
on a pro forma basis to reflect the Recent 1998 Acquisitions, the
Recapitalization and the Pending Dispositions, but not the Offering, the Company
had net tangible book value of approximately $(285.6) million or $(33.54) per
share of Common Stock. After giving effect to the sale of the shares
of Common Stock offered by the Company (at an assumed initial public offering
price of $ per share and after the deduction of underwriting discounts
and commissions and estimated Offering expenses payable by the Company), the pro
forma net tangible book value of the Company at March 31, 1998 would have been
$(193.6) million or $ per share. This represents an immediate increase
in such net tangible book value of $ per share to existing stockholders
and an immediate and substantial dilution of $ per share to new
investors purchasing Common Stock in the Offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................ $
Pro forma net tangible book value as of March 31,
1998............................................... $
Increase attributable to new investors............... $
-------
Pro forma net tangible book value after the Offering.............
-------
Dilution in pro forma net tangible book value to new investors... $
=======
</TABLE>
The following table summarizes, on the pro forma basis set forth above as
of March 31, 1998, the differences between existing stockholders and new
investors in this Offering with respect to the number of shares of capital stock
purchased from the Company, the total consideration paid to the Company and the
average consideration paid per share (based upon an assumed initial public
offering price of $ per share and before the deduction of underwriting
discounts and commissions and estimated Offering expenses payable by the
Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------------ ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Current Stockholders............. 18,022,918 $41,337,316 $ 2.29
New Investors....................
Total.......................... $
</TABLE>
The foregoing tables give effect to the Recapitalization, but do not
include (i) 3,042,255 shares of Common Stock issuable upon the exercise of
options and warrants at an average exercise price of $3.00 per share and (ii)
427,287 additional shares of Common Stock reserved for issuance under the
Company's 1996 Equity Incentive Plan. See "Management" and "Description of
Capital Stock."
25
<PAGE> 27
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements reflect the results of operations and balance sheet of the Company
after giving effect to (i) the Completed Transactions, (ii) the Pending
Dispositions, (iii) the Recapitalization and (iv) the Offering and the
application of the estimated net proceeds therefrom. The unaudited pro forma
condensed consolidated financial statements are based on the historical
consolidated financial statements of the Company and the financial statements of
those entities acquired, or from which assets were acquired, in connection with
the Completed Transactions, and should be read in conjunction with the financial
statements and the notes thereto of (i) the Company, (ii) Tele-Media
Broadcasting Company and its Partnership Interests, (iii) Deschutes River
Broadcasting, Inc., (iv) Snider Corporation, (v) Snider Broadcasting Corporation
and subsidiary and CDB Broadcasting Corporation, (vi) Maranatha Broadcasting
Company, Inc.'s, Radio Broadcasting Division and (vii) Pacific Northwest
Broadcasting Corporation and Affiliates which are included elsewhere in this
Prospectus.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. For pro forma purposes, the Company's
consolidated statements of operations for the year ended December 31, 1997 and
the three months ended March 31, 1997 and 1998 have been adjusted to give effect
to the Completed Transactions, the Pending Dispositions, the Recapitalization
and the Offering and the application of the estimated net proceeds therefrom as
if each occurred on January 1, 1997. For pro forma purposes, the Company's
consolidated balance sheet as of March 31, 1998 has been adjusted to give effect
to the Recent 1998 Acquisitions, the Pending Dispositions, the Recapitalization
and the Offering and the application of the estimated net proceeds therefrom as
if each had occurred on March 31, 1998.
The unaudited pro forma information is presented for illustrative purposes
only and is not indicative of the operating results or financial position that
would have occurred if the Completed Transactions, the Pending Dispositions, the
Recapitalization and the Offering had been consummated on the dates indicated,
nor is it indicative of future operating results or financial position if the
aforementioned transactions are completed. The Company cannot predict whether
the consummation of the Pending Dispositions will conform to the assumptions
used in the preparation of the unaudited pro forma condensed consolidated
financial statements.
26
<PAGE> 28
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR ADJUSTMENTS FOR THE
ACTUAL THE COMPLETED THE COMPLETED THE PENDING RECAPITALIZATION PRO FORMA
THE COMPANY TRANSACTIONS(1) TRANSACTIONS DISPOSITIONS(2) AND THE OFFERING(3) THE COMPANY
----------- --------------- --------------- --------------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net broadcasting
revenue................. $28,139 $ -- $28,139 $(703) $ -- $27,436
Station operating
expenses................ 21,897 (554) 21,343 (752) -- 20,591
Depreciation and
amortization............ 5,946 621 6,567 (150) -- 6,417
Corporate general and
administrative.......... 1,118 -- 1,118 -- -- 1,118
------- ----- ------- ----- ------- -------
Operating expenses...... 28,961 67 29,028 (902) -- 28,126
------- ----- ------- ----- ------- -------
Operating income (loss)... (822) (67) (889) 199 -- (690)
Interest expense.......... 4,759 452 5,211 (179) (1,941) 3,091
Other income, net......... 37 -- 37 -- -- 37
------- ----- ------- ----- ------- -------
Income (loss) before
income taxes............ (5,544) (519) (6,063) 378 1,941 (3,744)
Deferred income tax
(benefit)............... (429) (29) (458) -- -- (458)
Dividend requirement for
Broadcasting
Exchangeable Preferred
Stock................... (3,572) (237) (3,809) -- -- (3,809)
------- ----- ------- ----- ------- -------
Income (loss) from
continuing operations
applicable to common
shares.................. $(8,687) $(727) $(9,414) $ 378 $ 1,941 $(7,095)
======= ===== ======= ===== ======= =======
</TABLE>
27
<PAGE> 29
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) the acquisition of WSGD-FM, WDLS-FM and
WCDL-AM in Wilkes-Barre/Scranton, (b) the acquisition of KBOI-AM, KQFC-FM
and KKGL-FM in Boise and (c) the acquisition of KZMG-FM and KIZN-FM in Boise
(the "Recent 1998 Acquisitions") as if each transaction had taken place as
of January 1, 1997. Depreciation and amortization for such acquisitions are
based upon preliminary allocations of the purchase price to property and
equipment and intangible assets which will be amortized over periods of one
to 25 years. Actual depreciation and amortization may differ depending on
the final allocation of the purchase price; however, management does not
believe these differences will be material. Prior to the acquisition dates,
the Company operated KBOI-AM, KQFC-FM, KKGL-FM, WSGD-FM, WDLS-FM, WCDL-AM,
KZMG-FM and KIZN-FM under LMAs and received fees for such services. Net
broadcasting revenue and station operating expenses for stations operated
under LMAs are included in the Company's historical consolidated financial
statements. For such stations, associated fees and redundant expenses were
eliminated and estimated occupancy costs were included to adjust the results
of operations to reflect ownership of the stations as of January 1, 1997.
(2) Represents the net effect of the pending dispositions of WEST-AM in
Allentown/Bethlehem, WQKK-FM and WGLU-FM in Johnstown and WQWK-FM, WIKN-FM,
WRSC-AM and WBLF-AM in State College, as if each transaction had taken place
on January 1, 1997.
(3) Represents the net effect of the reduction in interest expense from the
application of the estimated net proceeds from the Offering used to pay down
the Credit Facility.
28
<PAGE> 30
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR ADJUSTMENTS FOR THE
ACTUAL THE COMPLETED THE COMPLETED THE PENDING RECAPITALIZATION AND PRO FORMA
THE COMPANY TRANSACTIONS (1) TRANSACTIONS DISPOSITIONS (2) THE OFFERING (3) THE COMPANY
----------- ---------------- --------------- ---------------- -------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net broadcasting
revenue............... $14,506 $11,875 $ 26,381 $(729) $ -- $25,652
Station operating
expenses.............. 11,277 9,302 20,579 (747) -- 19,832
Depreciation and
amortization.......... 2,529 4,546 7,075 (150) -- 6,925
Corporate general and
administrative........ 750 154 904 -- -- 904
------- ------- -------- ----- ------- -------
Operating expenses.... 14,556 14,002 28,558 (897) -- 27,661
------- ------- -------- ----- ------- -------
Operating income
(loss)................ (50) (2,127) (2,177) 168 -- (2,009)
Interest expense........ 2,177 3,034 5,211 (179) (1,941) 3,091
Other income, net....... 11 2 13 -- -- 13
------- ------- -------- ----- ------- -------
Income (loss) before
income taxes.......... (2,216) (5,159) (7,375) 347 1,941 (5,087)
Deferred income tax
(benefit)............. (35) (423) (458) -- -- (458)
Dividend requirement for
Broadcasting
Exchangeable
Preferred Stock....... -- (3,353) (3,353) -- -- (3,353)
------- ------- -------- ----- ------- -------
Income (loss) from
continuing operations
applicable to common
shares................ $(2,181) $(8,089) $(10,270) $ 347 $ 1,941 $(7,982)
======= ======= ======== ===== ======= =======
</TABLE>
29
<PAGE> 31
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) the Tele-Media Acquisition, (b) the
acquisitions of KENZ-FM, KBER-FM, KBEE-FM and KFNZ-AM in Salt Lake City, (c)
the acquisition of KNHK-FM in Reno, (d) the acquisition of KTHK-FM in
Tri-Cities, (e) the acquisitions of WXEX-FM and WHKK-FM in Providence, (f)
the acquisitions of KARN-AM/FM, KKRN-FM, KRNN-AM, KIPR-FM, KOKY-FM, KLAL-FM,
KLIH-AM, KURB-FM, KVLO-FM and the right to construct an additional FM radio
station in Little Rock (collectively, the "Little Rock Acquisitions"), (g)
the acquisition of WLEV-FM in Allentown/Bethlehem, (h) the acquisition of
WEMR-AM/FM, WSGD-FM, WDLS-FM and WCDL-AM in Wilkes-Barre/Scranton, (i) the
acquisition of KBOI-AM, KQFC-FM and KKGL-FM in Boise, (j) the Recent 1998
Acquisitions and (k) the Broadcasting Offerings as if each transaction had
taken place as of January 1, 1997. Depreciation and amortization for such
acquisitions are based upon preliminary allocations of the purchase price to
property and equipment and intangible assets which will be amortized over
periods of one to 25 years. Actual depreciation and amortization may differ
depending on the final allocation of the purchase price; however, management
does not believe these differences will be material. Prior to the
acquisition dates, the Company operated KENZ-FM, KBER-FM, KBEE-FM, KFNZ-FM,
KNHK-FM, KTHK-FM, KARN-AM/FM, KKRN-FM, KRNN-AM, KIPR-FM, KOKY-FM, WHKK-FM,
WEMR-AM/FM, KBOI-AM, KQFC-FM, KKGL-FM, WSGD-FM, WDLS-FM and WCDL-AM under
JSAs or LMAs and received fees for such services. Net broadcasting revenue
and station operating expenses for stations operated under LMAs are included
in the Company's historical consolidated financial statements. For stations
operating under JSAs, net broadcasting revenue and station operating
expenses have been adjusted to reflect ownership of the stations as of
January 1, 1997. Additionally, for those stations operated under JSAs or
LMAs and subsequently acquired, associated fees and redundant expenses were
eliminated and estimated occupancy costs were included to adjust the results
of operations to reflect ownership of the stations as of January 1, 1997.
Dollars in the table below are shown in thousands.
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
ACTUAL THE TELE-MEDIA LITTLE ROCK OTHER BROADCASTING
TELE-MEDIA(A) ACQUISITION ACQUISITIONS ACQUISITIONS(F) OFFERINGS
------------- --------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Net broadcasting revenue.................. $ 7,247 $ -- $2,254 $ 2,374 $ --
Station operating expenses................ 6,354 (233)(b) 1,722 1,459 --
Depreciation and amortization............. 926 1,316(c) 750 1,554 --
Corporate general and administrative...... 208 (108)(d) -- 54 --
------- ------- ------ ------- -------
Operating expenses...................... 7,488 975 2,472 3,067 --
------- ------- ------ ------- -------
Operating income (loss)................... (241) (975) (218) (693) --
Interest expense.......................... 2,783 (342)(e) 675 1,654 (1,736)(g)
Other income, net......................... -- -- -- 2 --
------- ------- ------ ------- -------
Income (loss) before income taxes......... (3,024) (633) (893) (2,345) 1,736
Deferred income tax (benefit)............. -- (259) (71) (93) --
Dividend requirement for Broadcasting
Exchangeable Preferred Stock............ -- -- -- -- (3,353)(h)
------- ------- ------ ------- -------
Income (loss) from continuing operations
applicable to common shares............. $(3,024) $ (374) $ (822) $(2,252) $(1,617)
======= ======= ====== ======= =======
<CAPTION>
THE COMPLETED
TRANSACTIONS
-------------
<S> <C>
Net broadcasting revenue.................. $11,875
Station operating expenses................ 9,302
Depreciation and amortization............. 4,546
Corporate general and administrative...... 154
-------
Operating expenses...................... 14,002
-------
Operating income (loss)................... (2,127)
Interest expense.......................... 3,034
Other income, net......................... 2
-------
Income (loss) before income taxes......... (5,159)
Deferred income tax (benefit)............. (423)
Dividend requirement for Broadcasting
Exchangeable Preferred Stock............ (3,353)
-------
Income (loss) from continuing operations
applicable to common shares............. $(8,089)
=======
</TABLE>
(a) Represents the unaudited historical results of Tele-Media for the period
January 1, 1997 through March 31, 1997, including the historical
operating results of the Wilkes-Barre/Scranton stations acquired by
Tele-Media in February and April 1997 which had been operated under an
LMA or JSA.
(b) Includes the elimination of $43,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by the Company to a
national representative for national advertising, $108,000 of LMA/JSA
fees related to the Wilkes-Barre/Scranton stations and $82,000 of
expenses incurred by Tele-Media associated with the litigation between
the Company and Tele-Media. Had the Tele-Media Acquisition occurred on
January 1, 1997, these expenses would not have been incurred.
(c) Reflects increased depreciation and amortization resulting from the
purchase price allocation.
(d) Reflects the elimination of the management fees paid to affiliates by
Tele-Media of $208,000 and the recording of corporate overhead of
$100,000 which represents the Company's estimate of the incremental
expense necessary to oversee the Tele-Media stations.
(e) Reflects the elimination of Tele-Media interest expense of $2.8 million
and the recording of interest expense of $2.4 million that would have
been incurred if the acquisition of Tele-Media had occurred on January
1, 1997.
(f) Gives effect to the acquisitions of WLEV-FM in Allentown/Bethlehem;
KBOI-AM, KQFC-FM and KKGL-FM in Boise; KENZ-FM, KBER-FM, KBEE-FM and
KFNZ-AM in Salt Lake City; KNHK-FM in Reno; KTHK-FM in Tri-Cities;
WXEX-FM and WHKK-FM in Providence; WEMR-AM/FM, WSGD-FM, WDLS-FM and
WCDL-AM in Wilkes-Barre/Scranton and KIZN-FM and KZMG-FM in Boise as if
such transactions had taken place on January 1, 1997.
(g) Reflects the reduction of the Company's pro forma interest expense, the
recording of interest expense related to the Broadcasting Notes and the
amortization of deferred financing costs of $3.3 million related to the
Broadcasting Notes.
30
<PAGE> 32
(h) Reflects recording of dividends on the Broadcasting Exchangeable
Preferred Stock as if the Broadcasting Offerings had taken place on
January 1, 1997.
(2) Represents the net effect of the pending dispositions of WEST-AM in
Allentown/Bethlehem, WQKK-FM and WGLU-FM in Johnstown and WQWK-FM, WIKN-FM,
WRSC-AM and WBLF-AM in State College, as if each transaction had taken place
on January 1, 1997.
(3) Represents the net effect of the reduction in interest expense from the
application of the estimated net proceeds from the Offering used to pay down
the Credit Facility.
31
<PAGE> 33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR ADJUSTMENTS FOR THE
ACTUAL THE COMPLETED THE COMPLETED THE PENDING RECAPITALIZATION PRO FORMA
THE COMPANY TRANSACTIONS(1) TRANSACTIONS DISPOSITIONS(2) AND THE OFFERING(3) THE COMPANY
----------- --------------- --------------- --------------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net broadcasting
revenue................. $ 89,803 $ 30,439 $120,242 $(3,415) $ -- $116,827
Station operating
expenses................ 65,245 19,613 84,858 (3,068) -- 81,790
Depreciation and
amortization............ 14,661 11,639 26,300 (600) -- 25,700
Corporate general and
administrative.......... 3,530 (334) 3,196 -- -- 3,196
-------- -------- -------- ------- ------- --------
Operating expenses...... 83,436 30,918 114,354 (3,668) -- 110,686
-------- -------- -------- ------- ------- --------
Operating income (loss)... 6,367 (479) 5,888 253 -- 6,141
Interest expense.......... 12,872 7,971 20,843 (717) (7,763) 12,363
Other income, net......... 451 -- 451 -- -- 451
-------- -------- -------- ------- ------- --------
Income (loss) before
income taxes............ (6,054) (8,450) (14,504) 970 7,763 (5,771)
Deferred income tax
(benefit)............... (770) (1,048) (1,818) -- -- (1,818)
Dividend requirement for
Broadcasting
Exchangeable Preferred
Stock................... (6,633) (7,225) (13,858) -- -- (13,858)
-------- -------- -------- ------- ------- --------
Income (loss) from
continuing operations
applicable to common
shares.................. $(11,917) $(14,627) $(26,544) $ 970 $ 7,763 $(17,811)
======== ======== ======== ======= ======= ========
</TABLE>
32
<PAGE> 34
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) the Tele-Media Acquisition, (b) the
acquisitions of KENZ-FM, KBER-FM, KBEE-FM and KFNZ-AM in Salt Lake City, (c)
the acquisition of KNHK-FM in Reno, (d) the acquisition of KTHK-FM in
Tri-Cities, (e) the acquisitions of WXEX-FM and WHKK-FM in Providence, (f)
the Little Rock Acquisitions, (g) the acquisition of WLEV-FM in
Allentown/Bethlehem, (h) the acquisition of WEMR-AM/FM, WSGD-FM, WDLS-FM and
WCDL-AM in Wilkes-Barre/Scranton, (i) the acquisition of KBOI-AM, KQFC-FM
and KKGL-FM in Boise, (j) the Recent 1998 Acquisitions and (k) the
Broadcasting Offerings as if each transaction had taken place as of January
1, 1997. Depreciation and amortization for such acquisitions are based upon
preliminary allocations of the purchases price to property and equipment and
intangible assets which will be amortized over periods of one to 25 years.
Actual depreciation and amortization may differ depending on the final
allocation of the purchase price; however, management does not believe these
differences will be material. Prior to the acquisition dates, the Company
operated KENZ-FM, KBER-FM, KBEE-FM, KFNZ-AM, KNHK-FM, KTHK-FM, KARN-AM/FM,
KKRN-FM, KRNN-AM, KIPR-FM, KOKY-FM, WHKK-FM, WEMR-AM/FM, KBOI-AM, KQFC-FM,
KKGL-FM, WSGD-FM, WDLS-FM and WCDL-AM under JSAs or LMAs, and received fees
for such services. Net broadcasting revenue and station operating expenses
for stations operated under LMAs are included in the Company's historical
consolidated financial statements. For stations operating under JSAs, net
broadcasting revenue and station operating expenses have been adjusted to
reflect ownership of the stations as of January 1, 1997. Additionally, for
those stations operated under JSAs or LMAs and subsequently acquired,
associated fees and redundant expenses were eliminated and estimated
occupancy costs were included to adjust the results of operations to reflect
ownership of the stations as of January 1, 1997. Dollars in the table below
are shown in thousands.
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
ACTUAL THE TELE-MEDIA LITTLE ROCK OTHER BROADCASTING
TELE-MEDIA(A) ACQUISITION ACQUISITIONS ACQUISITIONS(F) OFFERINGS
------------- --------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Net broadcasting revenue.................. $16,241 $ -- $5,596 $ 8,602 $ --
Station operating expenses................ 12,679 (573)(b) 2,835 4,672 --
Depreciation and amortization............. 2,208 2,278(c) 2,358 4,795 --
Corporate general and administrative...... 454 (788)(d) -- -- --
------- ------- ------ ------- -------
Operating expenses.................... 15,341 917 5,193 9,467 --
------- ------- ------ ------- -------
Operating income (loss)................... 900 (917) 403 (865) --
Interest expense.......................... 10,375 (708)(e) 591 5,011 (7,298)(g)
Other income, net......................... -- -- -- -- --
------- ------- ------ ------- -------
Income (loss) before income taxes......... (9,475) (209) (188) (5,876) 7,298
Deferred income tax (benefit)............. -- (519) (225) (304) --
Dividend requirement for Broadcasting
Exchangeable Preferred Stock............ -- -- -- -- (7,225)(h)
------- ------- ------ ------- -------
Income (loss) from continuing operations
applicable to common shares............. $(9,475) $ 310 $ 37 $(5,572) $ 73
======= ======= ====== ======= =======
<CAPTION>
THE COMPLETED
TRANSACTIONS
-------------
<S> <C>
Net broadcasting revenue.................. $ 30,439
Station operating expenses................ 19,613
Depreciation and amortization............. 11,639
Corporate general and administrative...... (334)
--------
Operating expenses.................... 30,918
--------
Operating income (loss)................... (479)
Interest expense.......................... 7,971
Other income, net......................... --
--------
Income (loss) before income taxes......... (8,450)
Deferred income tax (benefit)............. (1,048)
Dividend requirement for Broadcasting
Exchangeable Preferred Stock............ (7,225)
--------
Income (loss) from continuing operations
applicable to common shares............. $(14,627)
========
</TABLE>
(a) Represents the unaudited historical results of Tele-Media for the period
January 1, 1997 through July 3, 1997, including the historical operating
results of the Wilkes-Barre/Scranton stations acquired by Tele-Media in
February and April 1997 which had been operated under an LMA or JSA. The
operating results of Tele-Media are included in the Company's results of
operations beginning July 3, 1997, the date of acquisition.
(b) Includes the elimination of $115,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by the Company to a
national representative for national advertising, $211,000 of LMA and
JSA fees relating to the Wilkes-Barre/Scranton stations and $247,000 of
expenses incurred by Tele-Media associated with the litigation between
the Company and Tele-Media. Had the Tele-Media Acquisition occurred on
January 1, 1997, these expenses would not have been incurred.
(c) Reflects increased depreciation and amortization resulting from the
purchase price allocation.
(d) Reflects the elimination of the management fees paid to affiliates by
Tele-Media of $454,000 and the recording of corporate overhead of
$200,000 which represents the Company's estimate of the incremental
expense necessary to oversee the Tele-Media stations and the elimination
of $534,000 of expenses incurred by the Company associated with the
litigation between the Company and Tele-Media. Had the Broadcasting
Offerings and the Tele-Media Acquisition occurred on January 1, 1997,
these expenses would not have been incurred.
(e) Reflects the elimination of Tele-Media interest expense of $10.4 million
and the recording of interest expense of $9.7 million that would have
been incurred if the acquisition of Tele-Media had occurred on January
1, 1997.
(f) Gives effect to the acquisitions of WLEV-FM in Allentown/Bethlehem;
KBOI-AM, KQFC-FM and KKGL-FM in Boise; KENZ-FM, KBER-FM, KBEE-FM and
KFNZ-AM in Salt Lake City; KNHK-FM in Reno; KTHK-FM in Tri-Cities;
WXEX-FM and WHKK-FM in Providence; WEMR-AM/FM, WSGD-FM, WDLS-FM and
WCDL-AM in Wilkes-Barre/ Scranton and KIZN-FM and KZMG-FM in Boise as if
such transactions had taken place on January 1, 1997.
33
<PAGE> 35
(g) Reflects the reduction of the Company's pro forma interest expense, the
recording of interest expense related to the Broadcasting Notes and the
amortization of deferred financings costs of $3.3 million related to the
Broadcasting Notes.
(h) Reflects recording of dividends on the Broadcasting Exchangeable
Preferred Stock as if the Broadcasting Offerings had taken place on
January 1, 1997.
(2) Represents the net effect of the pending dispositions of WEST-AM in
Allentown/Bethlehem, WQKK-FM and WGLU-FM in Johnstown and WQWK-FM, WIKN-FM,
WRSC-AM and WBLF-AM in State College, as if each transaction had taken place
on January 1, 1997.
(3) Represents the net effect of the reduction in interest expense from the
application of the estimated net proceeds from the Offering used to pay down
the Credit Facility.
34
<PAGE> 36
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS FOR ADJUSTMENTS FOR ADJUSTMENTS FOR THE
ACTUAL THE RECENT 1998 THE PENDING RECAPITALIZATION AND PRO FORMA
THE COMPANY ACQUISITIONS (1) DISPOSITIONS (2) THE OFFERING (3) THE COMPANY
----------- ---------------- ---------------- ----------------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents........... $ 2,792 $ (100) $ -- $ 92,000(a) $ 2,692
(92,000)(b)
Accounts and notes receivable,
net............................... 24,588 -- -- -- 24,588
Prepaid expenses.................... 2,271 -- -- -- 2,271
-------- ------- -------- -------- --------
Total current assets................ 29,651 (100) -- -- 29,551
Property and equipment, net......... 37,103 150 (1,153) -- 36,100
Intangible assets, net.............. 286,006 14,450 (7,347) -- 293,109
Other assets........................ 3,633 -- -- -- 3,633
-------- ------- -------- -------- --------
$356,393 $14,500 $ (8,500) $ -- $362,393
======== ======= ======== ======== ========
Liabilities and Shareholders' Equity
Other current liabilities........... 10,705 -- -- -- 10,705
-------- ------- -------- -------- --------
Total current liabilities........... 10,705 -- -- -- 10,705
Notes payable....................... 205,457 14,000 (8,500) (92,000)(b) 118,957
Other long-term obligations, less
current maturities................ 895 500 -- -- 1,395
Broadcasting Exchangeable Preferred
Stock............................. 105,582 -- -- -- 105,582
Deferred tax liability.............. 26,283 -- -- -- 26,283
Shareholders' equity
Old convertible preferred stock... 5 -- -- (5)(c) --
Convertible Preferred Stock....... -- -- -- 9(c) 9
Old common stock.................. 1 -- -- (1)(c) --
Common Stock...................... -- -- -- 9(c) 10
1(a)
Additional paid-in capital........ 41,331 -- -- (12)(c) 133,318
91,999(a)
Accumulated deficit............... (33,866) -- -- -- (33,866)
-------- ------- -------- -------- --------
Total shareholders' equity...... 7,471 -- -- 92,000 99,471
-------- ------- -------- -------- --------
$356,393 $14,500 $ (8,500) $ -- $362,393
======== ======= ======== ======== ========
</TABLE>
35
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(1) Represents the net effect of the acquisition of KIZN-FM and KZMG-FM in Boise
as if such transaction had taken place on March 31, 1998. The preliminary
allocation of purchase price is based on estimated fair values.
(2) Represents the net effect of the pending dispositions of WEST-AM in
Allentown/Bethlehem, WQKK-FM and WGLU-FM in Johnstown and WQWK-FM, WIKN-FM,
WRSC-AM and WBLF-AM in State College, as if each transaction had taken place
on March 31, 1998.
(3) Gives effect to the Recapitalization and the Offering as if each transaction
took place on March 31, 1998.
(a) Reflects the issuance of shares of Common Stock to the public at
the estimated public offering price of $ per share ($.001 par value)
net of estimated underwriting commissions and offering costs of $8.0
million.
(b) Reflects the anticipated use of proceeds from the Offering to repay
$92.0 million of outstanding indebtedness under the Credit Facility.
(c) Reflects the conversion of the capital stock of the Company into shares
of Common Stock and Convertible Preferred Stock and a three-for-one
stock split of the capital stock.
36
<PAGE> 38
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data of the Company presented below as of
and for each of the years in the five-year period ended December 31, 1997 are
derived from the consolidated financial statements of the Company, which
consolidated financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The selected historical financial data
of the Company presented below as of March 31, 1998 and for the three months
ended March 31, 1997 and 1998 are derived from unaudited consolidated financial
statements of the Company which, in the opinion of management, contain all
necessary adjustments of a normal recurring nature to present the financial
statements in conformity with GAAP. The consolidated financial statements of the
Company as of December 31, 1996 and 1997 and for each of the years in the
three-year period ended December 31, 1997 and the independent auditors' report
thereon, as well as the unaudited consolidated financial statements of the
Company as of March 31, 1998 and for the three months ended March 31, 1997 and
1998, are included elsewhere in this Prospectus. The financial results of the
Company are not comparable from year to year because of the acquisition and
disposition of various radio stations by the Company. The selected historical
financial data below should be read in conjunction with, and is qualified by
reference to, the Company's Consolidated Financial Statements and related notes,
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcasting revenue........... $ 21,376 $ 32,998 $ 34,112 $ 45,413 $ 89,803 $ 14,506 $ 28,139
Station operating expenses......... 17,081 24,331 26,832 33,232 65,245 11,277 21,897
Depreciation and amortization...... 5,265 7,465 4,921 5,189 14,661 2,529 5,946
Corporate general and
administrative................... 961 2,504 2,274 3,248 3,530 750 1,118
-------- -------- -------- -------- --------- -------- --------
Operating income (loss)............ (1,931) (1,302) 85 3,744 6,367 (50) (822)
Interest expense (1)............... 2,637 4,866 5,242 6,155 12,872 2,177 4,759
Other income, net.................. 149 657 781 414 451 11 37
-------- -------- -------- -------- --------- -------- --------
Income (loss) before income tax and
extraordinary item............... (4,419) (5,511) (4,376) (1,997) (6,054) (2,216) (5,544)
Deferred income tax benefit........ -- -- -- -- (770) (35) (429)
-------- -------- -------- -------- --------- -------- --------
Income (loss) before extraordinary
item............................. (4,419) (5,511) (4,376) (1,997) (5,284) (2,181) (5,115)
Extraordinary loss (2)............. -- -- -- (1,769) -- -- --
-------- -------- -------- -------- --------- -------- --------
Net income (loss).................. (4,419) (5,511) (4,376) (3,766) (5,284) (2,181) (5,115)
Dividend requirement for
Broadcasting Exchangeable
Preferred Stock.................. -- -- -- -- (6,633) -- (3,572)
-------- -------- -------- -------- --------- -------- --------
Net loss applicable to common
shares........................... $ (4,419) $ (5,511) $ (4,376) $ (3,766) $ (11,917) $ (2,181) $ (8,687)
======== ======== ======== ======== ========= ======== ========
Pro forma basic and diluted net
income (loss) per common share
(3).............................. NA NA NA NA $ NA $
======== ======== ======== ======== ========= ======== ========
Pro forma weighted average common
shares outstanding (3)........... NA NA NA NA NA
======== ======== ======== ======== ========= ======== ========
OTHER DATA:
Broadcast cash flow (4)............ $ 4,295 $ 8,667 $ 7,280 $ 12,181 $ 24,558 $ 3,229 $ 6,242
EBITDA(4).......................... 3,334 6,163 5,006 8,933 21,028 2,479 5,124
Cash flows from operating
activities....................... 361 324 (434) (1,034) 5,020 861 (979)
Cash flows from investing
activities....................... (10,818) (14,037) 4,810 (61,171) (211,622) (13,608) (20,825)
Cash flows from financing
activities....................... 10,070 14,393 (4,908) 62,788 212,699 13,205 16,910
Capital expenditures............... 679 2,857 1,691 2,041 2,070 800 186
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------ MARCH 31,
1993 1994 1995 1996 1997 1998
------- ------- -------- -------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (IN THOUSANDS)
Cash and cash equivalents.............. $ 857 $ 1,538 $ 1,005 $ 1,588 $ 7,685 $ 2,792
Working capital (deficit).............. 1,701 3,382 2,928 (4,195) 22,594 18,946
Intangible assets, net................. 17,454 18,152 15,093 51,802 268,690 286,006
Total assets........................... 36,282 46,529 37,444 102,315 344,172 356,393
Long-term debt (including current
portion)............................. 30,468 47,805 43,046 90,714 189,699 206,656
Broadcasting Exchangeable Preferred
Stock................................ -- -- -- -- 102,010 105,582
Shareholders' equity (deficit)......... 3,615 (4,690) (9,177) 6,070 16,132 7,471
</TABLE>
- ---------------
"NA" denotes information that is not applicable.
(1) Includes debt issuance costs and debt discount amortization of $139,000,
$287,000, $132,000, $371,000 and $441,000 for the years ended December 31,
1993, 1994, 1995, 1996 and 1997, respectively, and $11,000 and $96,000 for
the three months ended March 31, 1997 and 1998, respectively.
(2) On October 9, 1996, the Company extinguished its long-term debt of $31.3
million, payable to a financial institution, and its note payable to a
related party of $7.0 million. The early retirement of the long-term debt
resulted in a $1.8 million extraordinary loss due to prepayment premiums and
the write-off of debt issuance costs.
(3) Reflects the effect of the Recapitalization on the number of shares
outstanding.
(4) "Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate general and administrative
expenses. "EBITDA" consists of operating income (loss) before depreciation
and amortization. Although broadcast cash flow and EBITDA are not measures
of performance calculated in accordance with GAAP, management believes that
they are useful to an investor in evaluating the Company because they are
measures widely used in the broadcasting industry to evaluate a radio
company's operating performance. However, broadcast cash flow and EBITDA
should not be considered in isolation or as substitutes for net income, cash
flows from operating activities and other income or cash flow statement data
prepared in accordance with GAAP as a measure of liquidity or profitability.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with
"Selected Historical Financial Data" and the Company's Consolidated Financial
Statements and related notes included elsewhere in this Prospectus. Except for
the historical information contained herein, the discussions in this Prospectus
contain forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and in the section entitled "Risk Factors," as
well as those discussed elsewhere in this Prospectus.
The principal source of the Company's revenue is the sale of broadcasting
time on its radio stations for advertising. As a result, the Company's revenue
is affected primarily by the advertising rates its radio stations charge.
Correspondingly, the rates are based upon a station's ability to attract
audiences in the demographic groups targeted by its advertisers, as measured
principally by periodic Arbitron Radio Market Reports. The number of
advertisements that can be broadcast without jeopardizing listening levels (and
the resulting ratings) is limited in part by, among other things, the format of
a particular station. Each of the Company's stations has a general
pre-determined level of on-air inventory that it makes available for
advertising, which may be different at different times of the day and tends to
remain stable over time. Much of the Company's selling activity is based on
demand for its radio stations' on-air inventory and, in general, the Company
responds to this demand by varying prices rather than by changing the available
inventory.
In the broadcasting industry, radio stations often utilize trade (or
barter) agreements to exchange advertising time for goods or services (such as
other media advertising, travel or lodging), in lieu of cash. In order to
preserve most of its on-air inventory for cash advertising, the Company
generally enters into trade agreements only if the goods or services bartered to
the Company will be used in the Company's business. The Company has minimized
its use of trade agreements and has generally sold over 90% of its advertising
time for cash. In addition, it is the Company's general policy not to preempt
advertising spots paid for in cash with advertising spots paid for in trade.
In 1997, the Company's radio stations derived approximately 84.7% of their
net broadcasting revenue from local and regional advertising in the markets in
which they operate, and the remainder resulted principally from the sale of
national advertising. Local and regional advertising is sold primarily by each
station's sales staff. To generate national advertising sales, the Company
engages a national advertising representative firm. The Company believes that
the volume of national advertising revenue tends to adjust to shifts in a
station's audience share position more rapidly than does the volume of local and
regional advertising revenue and, therefore, focuses on sales of local and
regional advertising. During the year ended December 31, 1997 and the three
months ended March 31, 1998, no single advertiser accounted for more than 11.3%
of the net revenue of any of the Company's station groups or more than 1.4% of
total net revenue of the Company.
The Company's quarterly revenue varies throughout the year, as is typical
in the radio broadcasting industry. The Company's first calendar quarter
typically produces the lowest revenue for the year, and the second and fourth
calendar quarters generally produce the highest revenue for the year. The
advertising revenue of the Company is typically collected within 120 days of the
date on which the related advertising is aired and its corresponding revenue is
recognized. Most accrued expenses, however, are paid within 45 to 60 days. As a
result of this time lag, working capital requirements have increased as the
Company has grown and will likely increase further in the future.
The primary operating expenses incurred in the ownership and operation of
radio stations include employee salaries and commissions, programming expenses
and advertising and promotion expenses. The Company also incurs and will
continue to incur significant depreciation, amortization and interest expense as
a result of completed and future acquisitions of stations, and due to existing
and future borrowings, including the Broadcasting Notes, the Broadcasting
Exchangeable Preferred Stock and borrowings under the Credit
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Facility. The Company's consolidated financial statements tend not to be
directly comparable from period to period due to the Company's acquisition
activity.
The Company's financial results are dependent on a number of factors,
including the general strength of the local and national economies, population
growth, ability to provide popular programming, local market and regional
competition, relative efficiency of radio broadcasting compared to other
advertising media, signal strength and government regulation and policies.
"Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate expenses. "EBITDA" consists of
operating income (loss) before depreciation and amortization. Although broadcast
cash flow and EBITDA are not measures of performance calculated in accordance
with GAAP, management believes that they are useful to an investor in evaluating
the Company because they are measures widely used in the broadcasting industry
to evaluate a radio company's operating performance. However, broadcast cash
flow and EBITDA should not be considered in isolation or as substitutes for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP as a measure of liquidity or
profitability.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Net Broadcasting Revenue. Net broadcasting revenue increased $13.6 million
or 94.0% to $28.1 million in the period ended March 31, 1998 from $14.5 million
in the period ended March 31, 1997. The inclusion of revenue from the
acquisitions of radio stations and revenue generated from LMAs and JSAs entered
into during 1997 and 1998 provided $12.4 million of the increase. For stations
owned and operated over the comparable period in 1997 and 1998, net broadcasting
revenue improved $1.2 million or 8.7% to $15.5 million in 1998 from $14.3
million in 1997, primarily due to increased ratings and improved selling
efforts.
Station Operating Expenses. Station operating expenses increased $10.6
million or 94.2% to $21.9 million in the period ended March 31, 1998 from $11.3
million in the period ended March 31, 1997. The increase was primarily
attributable to the inclusion of station operating expenses of the radio station
acquisitions and the LMAs and JSAs entered into during 1997 and 1998.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $3.0 million or 93.3% to $6.2 million in the period ended
March 31, 1998 from $3.2 million in the period ended March 31, 1997. As a
percentage of net broadcasting revenue, broadcast cash flow remained
approximately even, 22.2% in the period ended March 31, 1998 compared to 22.3%
in the period ended March 31, 1997.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.4 million or 48.9% to $1.1 million in the
period ended March 31, 1998 from $0.7 million in the period ended March 31,
1997. The increase was primarily due to an increase in staffing levels required
to support the Company's growth.
EBITDA. As a result of the factors described above, EBITDA increased $2.6
million or 106.7% to $5.1 million in the period ended March 31, 1998 from $2.5
million in the period ended March 31, 1998.
For the period ended March 31, 1998, net cash used in operations decreased
to $1.0 million from net cash provided by operations of $0.9 million for the
period ended March 31, 1997, due to a decrease in accounts payable partially
offset by a decrease in accounts receivable.
For the period ended March 31, 1998, net cash used in investing activities,
primarily for station acquisitions, increased to $20.8 million from $13.6 for
the period ended March 31, 1997.
For the period ended March 31, 1998, net cash provided by financing
activities increased to $16.9 million from $13.2 million for the period ended
March 31, 1997. This increase is the result of increased borrowings in the
period ended March 31, 1998 for station acquisitions. The period ended March 31,
1997 includes $7.5 million in proceeds from the issuance of preferred stock,
while no such amounts were attributable to the period ended March 31, 1998.
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Depreciation and Amortization. Depreciation and amortization expense
increased $3.4 million or 135.2% to $5.9 million in the period ended March 31,
1998 from $2.5 million in the period ended March 31, 1997, primarily due to
radio station acquisitions consummated during 1997 and 1998.
Interest Expense. Interest expense increased $2.6 million or 118.6% to
$4.8 million in the period ended March 31, 1998 from $2.2 million in the period
ended March 31, 1997, primarily due to interest expense associated with
additional borrowings to fund acquisitions consummated in 1997 and 1998.
Net Loss. As a result of the factors described above, net loss increased
$2.9 million or 134.5% to $5.1 million in the period ended March 31, 1998 from
$2.2 million in the period ended March 31, 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Broadcasting Revenue. Net broadcasting revenue increased $44.4 million
or 97.7% to $89.8 million in 1997 from $45.4 million in 1996. The inclusion of
net revenue from the acquisitions of radio stations and net revenue generated
from LMAs and JSAs entered into during 1997 provided $41.8 million of the
increase. For stations owned and operated over the comparable period in 1997 and
1996, net broadcasting revenue improved approximately $2.6 million or 6.7% to
$40.8 million in 1997 from $38.2 million in 1996 primarily due to increased
ratings and improved selling efforts.
Station Operating Expenses. Station operating expenses increased $32.0
million or 96.3% to $65.2 million in 1997 from $33.2 million in 1996. The
increase was primarily attributable to the inclusion of station operating
expenses of the radio station acquisitions and the LMAs and JSAs entered into
during 1997.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $12.4 million or 101.6% to $24.6 million in 1997 from $12.2
million in 1996. As a percentage of net broadcasting revenue, broadcast cash
flow increased to 27.3% in 1997 from 26.8% in 1996.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.3 million or 8.7% to $3.5 million in 1997
from $3.2 million in 1996. The increase is due primarily to an increase in
staffing levels required to support the Company's growth.
EBITDA. As a result of the factors described above, EBITDA increased $12.1
million or 135.4% to $21.0 million in 1997 from $8.9 million in 1996.
Net cash provided by operations increased to $5.0 million in 1997 from net
cash used in operations of $1.0 million in 1996. This increase resulted
primarily from an increase in net broadcasting revenue as a result of
acquisitions and internal growth.
Net cash used in investing activities in 1997 was $211.6 million, compared
to $61.2 million in 1996. This increase resulted primarily from an increase in
cash paid to acquire stations and a related increase in capitalized acquisition
costs.
Net cash provided by financing activities in 1997 was $212.7 million,
primarily from proceeds from the Broadcasting Offerings, compared to $62.8
million in 1996.
Depreciation and Amortization. Depreciation and amortization expense
increased $9.5 million or 182.6% to $14.7 million in 1997 from $5.2 million in
1996, primarily due to radio station acquisitions consummated during 1997.
Interest Expense. Interest expense increased $6.7 million or 109.1% to
$12.9 million in 1997 from $6.2 million in 1996, primarily due to interest
expense associated with additional borrowings to fund acquisitions consummated
during 1997.
Net Loss. As a result of the factors described above, net loss increased
$1.5 million or 40.3% to $5.3 million in 1997 from $3.8 million in 1996.
Included in the net loss for 1996 is a $1.8 million extraordinary loss related
to the repayment of long-term debt.
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YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Broadcasting Revenue. Net broadcasting revenue increased $11.3 million
or 33.1% to $45.4 million in 1996 from $34.1 million in 1995. The inclusion of
revenue from the acquisitions of radio stations and revenue generated from LMAs
and JSAs entered into during 1996 provided $7.8 million of the increase. For
stations owned and operated over the comparable period in 1995 and 1996, net
broadcasting revenue improved $3.5 million or 11.4% to $34.2 million in 1996
from $30.7 million in 1995 primarily due to increased ratings and improved
selling efforts.
Station Operating Expenses. Station operating expenses increased $6.4
million or 23.9% to $33.2 million in 1996 from $26.8 million in 1995. The
increase was primarily attributable to the inclusion of station operating
expenses of the radio station acquisitions and the LMAs and JSAs entered into
during 1996.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $4.9 million or 67.3% to $12.2 million in 1996 from $7.3
million in 1995. As a percentage of net broadcasting revenue, broadcast cash
flow increased to 26.8% in 1996 from 21.3% in 1995.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.9 million or 42.8% to $3.2 million in 1996
from $2.3 million in 1995. Substantially all of the increase was due to
professional expenses incurred in 1996 related to the Company's capital raising
activities and a lawsuit.
EBITDA. As a result of the factors described above, EBITDA increased $3.9
million or 78.4% to $8.9 million in 1996 from $5.0 million in 1995.
Net cash used in operations increased to $1.0 million in 1996 from $0.4
million in 1995. This increase resulted primarily from an increase in accounts
receivable partially offset by the reduction in the loss before extraordinary
item in 1996 and gain on sale of property in 1995.
Net cash used in investing activities in 1996, primarily for station
acquisitions, was $61.2 million, compared to net cash provided by investing
activities of $4.8 million in 1995.
Net cash provided by financing activities in 1996 was $62.8 million, due
primarily to proceeds from the issuance of notes payable and preferred stock,
compared to net cash used in financing activities of $4.9 million in 1995.
Depreciation and Amortization. Depreciation and amortization expense
increased $0.3 million or 5.4% to $5.2 million in 1996 from $4.9 million in
1995, primarily due to radio station acquisitions consummated during 1996.
Interest Expense. Interest expense increased $0.9 million or 17.4% to $6.1
million in 1996 from $5.2 million in 1995, primarily due to interest expense
associated with additional borrowings to fund acquisitions consummated during
1996.
Net Loss. As a result of the factors described above, net loss decreased
$0.6 million or 13.9% to $3.8 million in 1996 from $4.4 million in 1995.
Included in the net loss for 1996 is $0.4 million of interest earned on loans
advanced by the Company to Deschutes prior to the acquisition of Deschutes by
the Company and a $1.8 million extraordinary loss related to the repayment of
long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1998, net cash used in operations
decreased to $1.0 million from net cash provided by operations of $0.9 million
for the three months ended March 31, 1997, primarily due to decreases in
accounts payable. Net cash provided by operations increased to $5.0 million for
the year ended December 31, 1997 from net cash used in operations of $1.0
million for the year ended December 31, 1996. This increase resulted primarily
from increases in net broadcasting revenue.
For the three months ended March 31, 1998, net cash used in investing
activities, primarily for station acquisitions, increased to $20.8 million from
$13.6 million for the three months ended March 31, 1997. Net
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cash used in investing activities for the year ended December 31, 1997,
primarily for station acquisitions, was $211.6 million, compared to $61.2
million for the year ended December 31, 1996.
For the three months ended March 31, 1998, net cash provided by financing
activities was $16.9 million compared to $13.2 million for the three months
ended March 31, 1997. This increase is the result of increased borrowings in the
1998 period for station acquisitions. The 1997 period includes proceeds from
issuance of stock, while no such amounts were attributable to the 1998 period.
Net cash provided by financing activities for the year ended December 31, 1997
was $212.7 million, primarily from proceeds from the Broadcasting Offerings,
compared to $62.8 million for the year ended December 31, 1996.
The Company's acquisition strategy has required, and will continue in the
foreseeable future to require, a significant portion of the Company's capital
resources. The Company has financed the Company's past acquisitions through bank
financing, private sales of equity and debt securities, including the
Broadcasting Offerings, and proceeds from asset sales. The Company frequently
evaluates potential acquisitions of stations and station groups, including
station swap opportunities. The Company expects that any required financing for
acquisitions will be provided through the incurrence of debt, the sale of equity
securities, internally generated funds or a combination of the foregoing. There
can be no assurance, however, that external financing will be available to the
Company on terms considered favorable by management or that cash flow from
operations will be sufficient to fund the Company's acquisition strategy. See
"Risk Factors--Limitations on Acquisition Strategy; Antitrust Considerations."
The Company will use the net proceeds from the Offering to reduce
outstanding indebtedness. See "Use of Proceeds."
Management believes that cash from operating activities and revolving loans
under the Credit Facility should be sufficient to permit the Company to meet its
financial obligations and to fund its operations for at least the next 12
months, although additional capital resources may be required in connection with
the further implementation of the Company's acquisition strategy. In addition to
acquisitions and debt service, the Company's principal liquidity requirements
will be for working capital and general corporate purposes, including capital
expenditures, which are not expected to be material in amount. At March 31,
1998, after giving pro forma effect to the Recent 1998 Acquisitions, the Pending
Dispositions and the Offering and the application of the estimated net proceeds
therefrom, the Company would have had approximately $124.4 million of unused
borrowing capacity under the Credit Facility. In addition to debt service
requirements under the Credit Facility, which are described under "Description
of Indebtedness--Existing Loan Agreement," Citadel Broadcasting will be required
to pay interest on the Broadcasting Notes. The Broadcasting Exchangeable
Preferred Stock does not require cash dividends through July 1, 2002 since
Citadel Broadcasting may issue additional shares of Broadcasting Exchangeable
Preferred Stock in lieu of cash dividends. See "Description of
Indebtedness--Broadcasting Notes" and "-- Broadcasting Exchangeable Preferred
Stock."
Each of the Broadcasting Notes Indenture, the Broadcasting Certificate of
Designation and the Credit Facility, and, if the Broadcasting Exchange
Debentures are issued, the Broadcasting Exchange Indenture, imposes restrictions
on the payment of dividends and the making of loans by Citadel Broadcasting to
the Company. Although such restrictions will limit the Company's ability to pay
dividends on its capital stock, such restrictions are not expected to have a
material adverse effect on the Company as substantially all of its operations
are currently conducted through, and all of its currently outstanding debt has
been incurred by, Citadel Broadcasting.
YEAR 2000 MATTERS
Many existing computer programs use only two digits to identify a year (for
example, "98" is used to represent "1998"). Such programs may read "00" as the
year 1900, thus incorrectly recognizing dates beginning with the year 2000, or
may otherwise produce erroneous results or cease processing when dates after
1999 are encountered. Such failures could cause disruptions in normal business
operations.
In each of its markets, the Company employs centralized accounting and
traffic (advertising scheduling) systems for all of its stations in the market.
Although not directly related to the year 2000 problem, the
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Company has undertaken to replace its accounting and traffic software in each
market. The Company expects that this program will minimize or eliminate year
2000 problems associated with the software for such systems. This software
upgrade is expected to be completed in 1998 at a cost of approximately $0.3
million in 1998, which consists primarily of the annual lease rental payment of
$0.2 million for software and $0.1 million in related one-time costs. The
operating lease for the computer software is anticipated to be for a period of
five years. In connection with this software upgrade, the Company expects that
its accounting and traffic hardware systems will be assessed by the software
vendor for both compatibility with the new software and year 2000 compliance,
and that the Company may also engage outside consultants, as necessary and as
available, for such purpose. Much of the total cost of the hardware upgrade will
be subject to trade agreements and, as such, will be expensed in accordance with
the Company's policy of accounting for barter transactions. The Company cannot
yet estimate the costs of replacing or otherwise upgrading such computer
hardware, as required.
The Company has recently assembled a task force consisting of the Company's
three regional Presidents, Chief Financial Officer, regional engineers and two
internal information systems employees to inventory and assess the Company's
other internal information and operating systems, including its broadcast and
related support systems which may contain embedded microprocessors, in order to
develop a strategy to address the computer software and hardware changes and
facility upgrades that may be required to remedy the year 2000-related
deficiencies of those systems. The Company recognizes that it must also conduct
an assessment of year 2000-related problems originating with third parties
outside of the Company's control, including vendors of programming software and
providers of satellite programming.
Until the task force makes substantial progress in identifying problem
areas, it is not possible to estimate the extent of year 2000 deficiencies in
the Company's systems, the costs to the Company of correcting such deficiencies
and the time frame in which any required corrections will be made. In addition,
numerous uncertainties relating to such matters exist, including the ability to
locate, test and correct or replace relevant computer codes in software and
embedded microprocessors, the availability and cost of personnel trained in this
area, if required, and the extent to which third parties will be able to timely
correct year 2000 problems which may originate with such third parties, but
which impact the Company's operations. Given such uncertainties and the
preliminary nature of the Company's investigations to date, there can be no
assurances that year 2000-related deficiencies and required corrective measures
will not have a material adverse effect on the Company's business, financial
condition and results of operations.
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BUSINESS
GENERAL
The Company is a radio broadcasting company that focuses on acquiring,
developing and operating radio stations in mid-sized markets. Upon completion of
the Pending Dispositions, the Company will own or operate 68 FM and 31 AM radio
stations in 18 markets, including clusters of four or more stations in 14
markets, and will have the right to construct one additional FM station. The
Company's stations comprise the first or second ranked radio station group in
terms of revenue share in 15 of its 18 markets. On a pro forma basis, after
giving effect to the Completed Transactions and the Pending Dispositions as if
all such transactions had occurred on January 1, 1997, the Company would have
had net revenue and broadcast cash flow of $118.6 million and $36.1 million,
respectively, for the 12 months ended March 31, 1998.
The Company's primary strategy is to secure and maintain a leadership
position in the markets it serves and to expand into additional mid-sized
markets where it believes a leadership position can be obtained. Upon entering a
market, the Company seeks to acquire additional stations which, when integrated
with its existing operations, allow it to reach a wider range of demographic
groups that appeal to advertisers, increase revenue and achieve substantial cost
savings. The Company has completed 30 station acquisitions in markets where it
already owned stations and entered into a JSA for eight additional stations in
those markets. Primarily as a result of this strategy, in the six markets in
which the Company has owned radio stations since 1994, the Company has increased
its average revenue share and average broadcast cash flow margin from 37.2% and
21.8%, respectively, for the year ended December 31, 1995, to 51.5% and 32.1%,
respectively, for the 12 months ended March 31, 1998.
The Company believes that mid-sized markets represent attractive
opportunities because, as compared to the 50 largest markets in the United
States, they are generally characterized by (i) lower radio station purchase
prices as a multiple of broadcast cash flow, (ii) fewer sophisticated and
well-capitalized competitors, including both radio and competing advertising
media such as newspapers and television, and (iii) less direct format
competition due to the smaller number of stations in any given market. The
Company believes that the attractive operating characteristics of mid-sized
markets coupled with the opportunity to establish or expand in-market radio
station groups create the potential for substantial revenue growth and cost
efficiencies. As a result, management seeks to achieve broadcast cash flow
margins that are comparable to the higher margins that historically were
generally achievable only in the 50 largest markets.
The Company chooses programming formats for its stations that are intended
to maximize its cash flow. The Company's portfolio of stations is diversified in
terms of format, target demographics and geographic location. Because of the
size of its portfolio and its individual radio station groups, the Company
believes it is not unduly reliant upon the performance of any single station.
The Company also believes that the diversity of its portfolio of radio stations
helps insulate the Company from downturns in specific markets and changes in
format preferences. The Company considers many of the radio station groups it
has assembled in the last 18 months to be underdeveloped with the potential for
substantial growth through the implementation of the Company's operating
strategies, including targeted programming and aggressive sales techniques.
CORPORATE HISTORY AND RECENTLY COMPLETED TRANSACTIONS
Citadel Broadcasting was incorporated in Nevada in 1991, and in 1992 it
acquired all of the radio stations then owned or operated by Predecessor and
certain other radio stations. Lawrence R. Wilson, Chief Executive Officer of the
Company, was a co-founder and one of the two general partners of Predecessor. In
1993, the Company was incorporated and Citadel Broadcasting was reorganized as a
wholly owned subsidiary of the Company. The Company acquired ownership of
additional radio stations in each of 1993, 1994, 1996, 1997 and 1998.
The Company's operations are conducted through Citadel Broadcasting and
Citadel License. The Company owns all of the outstanding common stock of Citadel
Broadcasting. Citadel License holds the Company's radio broadcast licenses and
does not conduct any independent business operations.
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Effective as of January 1, 1997, the Company acquired Deschutes which owned
18 radio stations in Montana, Oregon and Washington. The total consideration
paid was approximately $26.0 million. Following the acquisition, Deschutes was
operated as a sister company to Citadel Broadcasting until June 20, 1997 when
Deschutes was merged with and into Citadel Broadcasting.
On July 3, 1997, the Company purchased all of the outstanding capital stock
of Tele-Media which owned or operated 16 FM and ten AM radio stations in
Pennsylvania, Rhode Island and Illinois. The purchase price for the Tele-Media
Acquisition, following post-closing adjustments, was approximately $115.8
million, which included the repayment of certain indebtedness of Tele-Media and
the redemption of the Tele-Media Bonds. Upon consummation of the Tele-Media
Acquisition, Tele-Media was merged with and into Citadel Broadcasting.
In addition, in various other transactions consummated since January 1,
1997, the Company has acquired in eight markets an aggregate of 29 stations, the
right to construct an additional station and certain related assets, including
an Internet access service provider, for an aggregate purchase price of $123.6
million.
On July 3, 1997, Citadel Broadcasting consummated the offerings of $101.0
million principal amount of the Broadcasting Notes and 1.0 million shares of
Broadcasting Exchangeable Preferred Stock which, subject to certain conditions,
at the option of Citadel Broadcasting, are convertible into the Broadcasting
Exchange Debentures. Concurrently with the closing of the Broadcasting
Offerings, Citadel Broadcasting entered into amendments to its Credit Facility.
As of April 23, 1998, the Credit Facility allowed for borrowings of up to $145.0
million, and the outstanding principal amount borrowed thereunder was
approximately $121.1 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Description of Indebtedness."
The Company's principal executive offices are located at 140 South Ash
Avenue, Tempe, Arizona, 85281, and its telephone number is (602) 731-5222.
OPERATING STRATEGY
In order to maximize its radio stations' appeal to advertisers, and thus
its revenue and cash flow, the Company has implemented the strategies described
below. The Company intends to continue to expand its existing strategies and to
develop new methods to enhance revenue and reduce costs.
Ownership of Strong Station Groups. The Company seeks to secure and
maintain a leadership position in the markets it serves through ownership of
multiple stations in a market. By strategically coordinating programming,
promotional and selling strategies among a group of local stations, the Company
attempts to capture a wide range of demographic groups which appeal to
advertisers. The Company believes that the diversification of its programming
formats and its collective inventory of available advertising time strengthen
relationships with advertisers and increase the Company's ability to maximize
the value of its inventory. The Company believes that having multiple stations
in a market also enhances its ability to market the advantages of radio
advertising versus other advertising media, such as newspapers and television,
thus potentially increasing radio's share of the total advertising dollars spent
in a given market.
The Company believes that its ability to leverage the existing programming
and sales resources of its station groups enables it to enhance the growth
potential of both new and underperforming stations while reducing the risks
associated with undertaking means of improving station performance, including
launching new formats. The Company also believes that operating leading station
groups allows it to attract and retain talented local management teams, on-air
personalities and sales personnel, which it believes are essential to operating
success. Furthermore, the Company seeks to achieve substantial cost savings
through the consolidation in each of its markets of facilities, management,
sales and administrative personnel and operating resources (such as on-air
talent, programming and music research) and through the reduction of other
redundant expenses.
Aggressive Sales and Marketing. The Company seeks to maximize its share of
local advertising revenue in each of its markets through numerous sales and
marketing initiatives. The Company provides extensive training for its sales
personnel through in-house sales and time management programs, and it retains
various
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independent consultants who hold frequent seminars for, and are available for
consultation with, the Company's sales personnel. The Company also emphasizes
regular, informal exchanges of ideas among its management and sales personnel
across its various markets. Because advertising time is perishable, the Company
seeks to maximize its revenue through the utilization of sophisticated inventory
management techniques that allow it to provide its sales personnel with frequent
price adjustments based on regional and local market conditions. To further
strengthen its relationship with advertisers, the Company also offers and
markets its ability to create customer traffic through on-site events staged at,
and broadcast from, an advertiser's business. The Company believes that, prior
to their acquisition by the Company, many of its acquired stations had
underperformed in sales, due primarily to undersized sales staffs responsible
for selling inventory on multiple stations. Accordingly, the Company has
significantly expanded the sales forces of many of its acquired stations.
Targeted Programming. To maintain or improve its position in each market,
the Company combines extensive market research with an assessment of its
competitors' vulnerabilities in order to identify significant and sustainable
target audiences. The Company then tailors the programming, marketing and
promotion of each station to maximize its appeal to its target audience. Within
each market, the Company attempts to build strong franchises through (i) the
creation of distinct, highly visible profiles for its on-air personalities,
particularly those broadcasting during morning "drive time" traditionally
between 6:00 a.m. and 10:00 a.m., (ii) the formulation of recognizable "brand
names" for select stations such as the "Bull" and "Cat Country" and (iii) active
involvement in community events and charities. The Company has achieved
particular success in programming country formats and currently operates the
leading country station in nine of its 14 markets where it programs country
music.
Decentralized Operations. The Company believes that radio is primarily a
local business and that much of its success is the result of the efforts of
regional and local management and staff. Accordingly, the Company decentralizes
much of its operations to these levels. Each of the Company's regional and local
station groups is managed by a team of experienced broadcasters who understand
the musical tastes, demographics and competitive opportunities of the particular
market. Regional and local managers are responsible for preparing annual
operating budgets, and a portion of their compensation is linked to meeting or
surpassing operating targets. Corporate management approves each station group's
annual operating budget and imposes strict financial reporting requirements to
track station performance. Corporate management is responsible for long range
planning, establishing Company policies and serving as a resource to local
management. The Company has implemented local sales reporting systems at each
station to provide local and corporate management with daily sales information.
ACQUISITION STRATEGY
In February 1996, as a result of the passage of the Telecommunications Act,
radio broadcasting companies were permitted to increase their ownership of
stations within a single market from four to a maximum of between five and eight
stations, depending on market size. The Telecommunications Act also eliminated
the national ownership restriction that generally had limited companies to the
ownership of no more than 40 stations (20 AM and 20 FM) throughout the United
States. As the Company has achieved a leading position in most of the markets it
currently serves, the Company expects that, in addition to acquiring additional
radio stations in existing markets as permitted by the Telecommunications Act,
it will emphasize the acquisition of additional radio stations in new markets
which present opportunities for the Company to apply its operating strategies.
The Company believes that such acquisitions will enable it to achieve, among
other things, greater size and geographic diversification. The Company
anticipates that it will continue to focus on mid-sized markets rather than
attempt to expand into larger markets. Although competition among potential
purchasers for suitable radio station acquisitions is intense throughout the
United States, the Company believes that less competition exists, particularly
from the larger radio operators, in mid-sized markets as compared to larger
markets, affording the Company relatively more attractive acquisition
opportunities in these markets. There can be no assurance, however, that the
Company will be able to identify suitable and available acquisition
opportunities or that it will be able to consummate any such acquisition
47
<PAGE> 49
opportunities. Additional risks and uncertainties attendant to the Company's
acquisition strategy are discussed under "Risk Factors--Limitations on
Acquisition Strategy; Antitrust Considerations."
In evaluating acquisition opportunities in new markets, the Company
assesses its potential, over time, to build leading radio station groups in
those markets. The Company believes that the creation of strong station groups
in local markets is essential to its operating success and generally will not
consider entering a new market unless it believes it can acquire multiple
stations in the market. The Company also analyzes a number of additional factors
which it believes are important to its success, including the number and quality
of commercial radio signals broadcasting in the market, the nature of the
competition in the market, the Company's ability to improve the operating
performance of the radio station or stations under consideration and the general
economic conditions of the market.
The Company believes that its acquisition strategy, if properly
implemented, could have a number of benefits, including (i) diversification of
revenue and broadcast cash flow across a greater number of stations and markets,
(ii) improved broadcast cash flow margins through the consolidation of
facilities and the elimination of redundant expenses, (iii) a broader range of
advertising packages to offer advertisers, (iv) improved leverage in various key
vendor negotiations, (v) greater appeal to top industry management talent and
(vi) increased overall scale which should facilitate the Company's capital
raising activities.
RADIO INDUSTRY OVERVIEW
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. From 1987
to 1996, local advertising revenue as a percentage of total radio advertising
revenue has ranged from approximately 74% to 78%. The growth in total radio
advertising revenue tends to be fairly stable and has generally grown at a rate
faster than the Gross Domestic Product (the "GDP"). Total radio advertising
revenue in 1997 of $13.6 billion represented a 9.7% increase over 1996, as
reported by the Radio Advertising Bureau ("RAB").
Radio is considered an efficient means of reaching specifically identified
demographic groups. Stations are typically classified by their on-air format,
such as country, adult contemporary, oldies or news/talk. A station's format and
style of presentation enable it to target certain demographic and psychographic
groups. By capturing a specific listening audience share of a market's radio
audience, with particular concentration in a targeted demographic group, a
station is able to market its broadcasting time to advertisers seeking to reach
a specific audience. Advertisers and stations utilize data published by audience
measuring services, such as Arbitron, to estimate how many people within
particular geographical markets and demographic groups listen to specific
stations.
Stations determine the number of advertisements broadcast hourly that will
maximize available revenue dollars without jeopardizing listening levels.
Although the number of advertisements broadcast during a given time period may
vary, the total number of advertisements broadcast on a particular station
generally does not vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station will
engage a firm that specializes in soliciting radio advertising sales on a
national level. National sales representatives obtain advertising principally
from advertising agencies located outside the station's market and receive
commissions based on the revenue from the advertising obtained.
According to the RAB's Radio Marketing Guide and Fact Book for Advertisers,
April 1998-March 1999, radio reaches approximately 96% of all Americans over the
age of 12 each week. More than one-half of all radio listening is done outside
the home, in contrast to other advertising mediums, and three out of four adults
are reached by car radio each week. The average listener spends approximately
three hours per day listening to radio. The highest portion of radio
listenership occurs during the morning, particularly between the time a listener
wakes up and the time the listener reaches work. This morning "drive time"
period reaches more than 80% of people over 12 years of age and, as a result,
radio advertising sold during this period achieves premium
48
<PAGE> 50
advertising rates. Radio listeners have gradually shifted over the years from AM
(amplitude modulation) to FM (frequency modulation) stations. FM reception, as
compared to AM, is generally clearer and provides greater tonal range and higher
fidelity. FM's listener share is now in excess of 75%, despite the fact that the
number of AM and FM commercial stations in the United States is approximately
equal.
STATION PORTFOLIO
Upon completion of the Pending Dispositions, the Company will own 62 FM and
26 AM radio stations in 18 mid-sized markets, operate six additional FM and five
additional AM radio stations in its markets pursuant to LMAs or JSAs and have
the right to construct one additional FM radio station.
49
<PAGE> 51
The following table sets forth certain information about stations owned or
operated by the Company after giving effect to the Pending Dispositions. The
year acquired shown in the table below includes acquisitions made by the
Company's Predecessor. See "--Corporate History."
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- ----------------------- ---- ----------------------- -------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PROVIDENCE, RI......... 31 36.7%
Owned
WPRO-AM............... News/Talk 1997 A 25-54 10 2.5%
WPRO-FM............... Contemporary Hits 1997 A 18-49 3 6.8
WWLI-FM............... Adult Contemporary 1997 W 25-54 1 12.2
WSKO-AM............... Sports 1997 M 25-54 26t 0.8
WXEX-FM............... Rock 1997 M 18-34 4 5.8
WHKK-FM............... Rock Oldies 1997/1997 A 25-54 13t 1.7
SALT LAKE CITY, UT..... 35 22.5%
Owned
KUBL-FM............... Country 1988 A 25-54 5 5.6
KCNR-AM............... Children's 1988 C 4-11 -- --
KFNZ-AM............... Sports 1997/1992 M 25-54 6 5.7%
KBEE-FM............... Adult Contemporary 1997/1992 W 18-49 2 8.5
KBER-FM............... Album Oriented Rock 1997/1996 A 18-34 1 9.7
KENZ-FM............... Rock Alternative 1997/1996(JSA) A 18-34 2 7.6
WILKES-BARRE/ SCRANTON,
PA.................... 63 31.6%
Owned
WMGS-FM............... Adult Contemporary 1997 W 25-54 1t 16.4%
WARM-AM............... News/Talk 1997 A 35-64 9t 2.8
WZMT-FM(4)............ Album Oriented Rock 1997 M 18-34 1 20.1
WAZL-AM............... Nostalgia 1997 A 35-64 32t 0.4
WEMR-FM(4)............ Contemporary Hits 1998/1997 W 18-34 4t 8.4
WSGD-FM/ WDLS-FM(5)... Oldies 1998/1997 A 25-54 5t 4.7
WCDL-AM............... Country 1998/1997 A 35-64 -- --
WEMR-AM............... Country 1998/1997 A 35-64 -- --
Operated
WKQV-AM(6)(7)......... Sports 1997(JSA) M 25-54 -- --
WKQV-FM(4)(7)......... Simulcast with WZMT-FM 1997(LMA)
WBHT-FM(4)(7)......... Simulcast with WEMR-FM 1997(LMA)
ALLENTOWN/ BETHLEHEM,
PA.................... 66 26.5%
Owned
WCTO-FM............... Country 1997 A 25-54 2 14.2%
WLEV-FM............... Adult Contemporary 1997/1997 W 25-54 4 11.6
ALBUQUERQUE, NM........ 70 55.9%
Owned
KKOB-AM............... News/Talk 1994 A 25-54 2 6.9%
KKOB-FM............... Adult Contemporary 1994 W 25-54 6 5.2
KMGA-FM............... Adult Contemporary 1994 W 25-54 4 6.0
KHTL-AM............... News/Talk 1994 A 35-64 20t 1.1
KTBL-FM............... Country 1996/1995(JSA) A 25-54 10t 3.6
KHFM-FM............... Classical 1996 A 25-54 13t 3.3
KNML-AM............... Sports 1996 M 25-54 16 2.2
KRST-FM............... Country 1996/1996 A 25-54 1 12.6
HARRISBURG, PA......... 73 13.5%
Owned
WRKZ-FM............... Country 1997 A 25-54 8 4.9%
<CAPTION>
RADIO
GROUP RANK
RADIO GROUP/ IN MARKET
STATION CALL LETTERS REVENUE(3)
- ----------------------- -----------
<S> <C>
PROVIDENCE, RI......... 1
Owned
WPRO-AM...............
WPRO-FM...............
WWLI-FM...............
WSKO-AM...............
WXEX-FM...............
WHKK-FM...............
SALT LAKE CITY, UT..... 2
Owned
KUBL-FM...............
KCNR-AM...............
KFNZ-AM...............
KBEE-FM...............
KBER-FM...............
KENZ-FM...............
WILKES-BARRE/ SCRANTON,
PA.................... 2
Owned
WMGS-FM...............
WARM-AM...............
WZMT-FM(4)............
WAZL-AM...............
WEMR-FM(4)............
WSGD-FM/ WDLS-FM(5)...
WCDL-AM...............
WEMR-AM...............
Operated
WKQV-AM(6)(7).........
WKQV-FM(4)(7).........
WBHT-FM(4)(7).........
ALLENTOWN/ BETHLEHEM,
PA.................... 2
Owned
WCTO-FM...............
WLEV-FM...............
ALBUQUERQUE, NM........ 1
Owned
KKOB-AM...............
KKOB-FM...............
KMGA-FM...............
KHTL-AM...............
KTBL-FM...............
KHFM-FM...............
KNML-AM...............
KRST-FM...............
HARRISBURG, PA......... 3
Owned
WRKZ-FM...............
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- ----------------------- ---- ----------------------- -------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
LITTLE ROCK, AR(8)..... 82 41.1%
Owned
KARN-AM/KARN-FM/
KKRN-FM/............ News/Talk/Sports 1997/1997 A 25-54 11 3.9%
KRNN-AM(6)............ Sports 1997/1997 A 35-64 -- --
KIPR-FM............... Urban 1997/1997 A 18-49 3 9.9
KOKY-FM(6)............ Urban Adult 1997/1997 A 25-54 -- --
Contemporary
KLAL-FM............... Modern Adult 1997 A 18-49 7t 4.4
Contemporary
KAFN-FM(8)............ NA 1997 NA NA NA
KLIH-AM............... Gospel 1997 A 25-54 17t 1.3
KURB-FM............... Adult Contemporary 1997 A 25-54 3t 7.9
KVLO-FM............... Soft Adult Contemporary 1997 W 25-54 6 6.7
SPOKANE, WA............ 87 52.7%
Owned
KGA-AM................ News/Talk 1992 A 25-54 10 4.0
KDRK-FM............... Country 1992 A 25-54 2 9.3%
KAEP-FM............... Rock Alternative 1993 A 18-34 3t 10.7
KJRB-AM............... Talk 1993/1993 A 35-64 17t 0.6
Operated
KKZX-FM(9)............ Classic Rock 1996(JSA) M 25-54 1 23.7
KEYF-AM/FM(5)(9)...... Oldies 1996(JSA) A 25-54 7t 5.9
KUDY-AM(9)............ Talk/Religion 1996(JSA) A 25-54 -- --
COLORADO SPRINGS, CO 94 63.5%
Owned
KKFM-FM............... Classic Rock 1986 M 25-54 1 15.3%
KKMG-FM............... Contemporary Hits 1994/1990 W 18-34 1 20.5
KKLI-FM............... Soft Adult Contemporary 1996 W 25-54 5t 7.1
Operated
KVUU-FM(9)............ Adult Contemporary 1996(JSA) W 18-49 5t 7.2
KSPZ-FM(9)............ Oldies 1996(JSA) A 25-54 6t 5.6
KVOR-AM(9)............ News/Talk 1996(JSA) A 35-64 4 7.6
KTWK-AM(9)............ Nostalgia 1996(JSA) A 35-64 14t 1.4
YORK, PA............... 103 10.2%
Owned
WQXA-FM............... Rock 1997 M 18-34 1 21.6%
WQXA-AM............... Nostalgia 1997 A 35-64 25t 0.6
MODESTO, CA(10)........ 121 64.3%
Owned
KATM-FM............... Country 1992 A 25-54 1 13.9%
KANM-AM............... Sports 1992 M 25-54 15t 1.2
KHKK-FM/ KDJK-FM(5)... Rock Oldies 1993/1993(KHKK) A 25-54 6 5.5
KHOP-FM............... Album Oriented Rock 1996 A 18-34 4 8.9
BOISE, ID.............. 126 42.0%
Owned
KIZN-FM............... Country 1998/1997 A 25-54 4 7.4%
KZMG-FM............... Contemporary Hits 1998/1997 W 18-34 1t 15.2
KKGL-FM............... Classic Rock 1998/1997 M 25-54 1 9.2
KQFC-FM............... Country 1998/1997 A 25-54 1 10.0
KBOI-AM............... News/Talk 1998/1997 A 35-64 3 7.9
RENO, NV............... 130 48.5%
Owned
KBUL-FM............... Country 1992 A 25-54 1 10.2%
KKOH-AM............... News/Talk 1992 A 25-54 2 9.9
KNEV-FM............... Adult Contemporary 1993/1993 W 18-49 2 9.7
KNHK-FM............... Rock Oldies 1997/1997 A 25-54 10 3.8
EUGENE, OR............. 144 31.5%
Owned
KUGN-AM............... News/Talk 1997 A 35-64 3 9.2%
KKTT-FM............... Country 1997 A 25-54 6t 6.3
KEHK-FM............... Rock Oldies 1997 A 25-54 4 7.2
<CAPTION>
RADIO
GROUP RANK
RADIO GROUP/ IN MARKET
STATION CALL LETTERS REVENUE(3)
- ----------------------- -----------
<S> <C>
LITTLE ROCK, AR(8)..... 2
Owned
KARN-AM/KARN-FM/
KKRN-FM/............
KRNN-AM(6)............
KIPR-FM...............
KOKY-FM(6)............
KLAL-FM...............
KAFN-FM(8)............
KLIH-AM...............
KURB-FM...............
KVLO-FM...............
SPOKANE, WA............ 1
Owned
KGA-AM................
KDRK-FM...............
KAEP-FM...............
KJRB-AM...............
Operated
KKZX-FM(9)............
KEYF-AM/FM(5)(9)......
KUDY-AM(9)............
COLORADO SPRINGS, CO 1
Owned
KKFM-FM...............
KKMG-FM...............
KKLI-FM...............
Operated
KVUU-FM(9)............
KSPZ-FM(9)............
KVOR-AM(9)............
KTWK-AM(9)............
YORK, PA............... 4
Owned
WQXA-FM...............
WQXA-AM...............
MODESTO, CA(10)........ 1
Owned
KATM-FM...............
KANM-AM...............
KHKK-FM/ KDJK-FM(5)...
KHOP-FM...............
BOISE, ID.............. 2
Owned
KIZN-FM...............
KZMG-FM...............
KKGL-FM...............
KQFC-FM...............
KBOI-AM...............
RENO, NV............... 1
Owned
KBUL-FM...............
KKOH-AM...............
KNEV-FM...............
KNHK-FM...............
EUGENE, OR............. 1
Owned
KUGN-AM...............
KKTT-FM...............
KEHK-FM...............
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- ----------------------- ---- ----------------------- -------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
TRI-CITIES, WA......... 202 42.2%
Owned
KEYW-FM............... Adult Contemporary 1997 A 25-54 6t 6.2%
KFLD-AM............... Sports 1997 M 25-54 9t 4.3
KORD-FM............... Country 1997 A 25-54 4t 7.0
KXRX-FM............... Album Oriented Rock 1997 M 18-34 1 20.0
KTHK-FM............... Rock Oldies 1997/1997 A 25-54 10 4.7
MEDFORD, OR............ 204 40.8%
Owned
KAKT-FM............... Country 1997 A 25-54 9t 3.3%
KBOY-FM............... Classic Rock 1997 M 25-54 3 9.2
KCMX-AM............... News/Talk 1997 A 35-64 8t 4.8
KCMX-FM............... Adult Contemporary 1997 W 25-54 2 14.3
KTMT-AM............... Sports 1997 M 25-54 12t 1.5
KTMT-FM............... Contemporary Hits 1997 W 18-34 1t 16.0
BILLINGS, MT........... 242 50.5%
Owned
KCTR-FM/
KBUL-AM(5).......... Country 1997 A 25-54 1 23.5%
KKBR-FM............... Oldies 1997 A 25-54 3 11.3
KBBB-FM............... Adult Contemporary 1997 W 25-54 3t 9.1
KMHK-FM............... Rock Oldies 1997 A 25-54 8 4.7
QUINCY, IL............. NA NA
Owned
WQCY-FM............... Country 1997 A 25-54 NA NA
WMOS-FM............... Album Oriented Rock 1997 M 18-34 NA NA
WTAD-AM/ WBRJ-FM(5)... News/Talk 1997 A 25-54 NA NA
<CAPTION>
RADIO
GROUP RANK
RADIO GROUP/ IN MARKET
STATION CALL LETTERS REVENUE(3)
- ----------------------- -----------
<S> <C>
TRI-CITIES, WA......... 1
Owned
KEYW-FM...............
KFLD-AM...............
KORD-FM...............
KXRX-FM...............
KTHK-FM...............
MEDFORD, OR............ 1
Owned
KAKT-FM...............
KBOY-FM...............
KCMX-AM...............
KCMX-FM...............
KTMT-AM...............
KTMT-FM...............
BILLINGS, MT........... 1
Owned
KCTR-FM/
KBUL-AM(5)..........
KKBR-FM...............
KBBB-FM...............
KMHK-FM...............
QUINCY, IL............. NA
Owned
WQCY-FM...............
WMOS-FM...............
WTAD-AM/ WBRJ-FM(5)...
</TABLE>
- ---------------
"t" denotes tied with one or more other radio stations.
"NA" denotes information that is not available.
"--" denotes information that is not meaningful.
(1) The letter "A" designates adults, the letter "W" designates women, the
letter "M" designates men and the letter "C" designates children. The
numbers following each letter designate the range of ages included within
the demographic group.
(2) The generally accepted method of measuring the relative size of a radio
station's audience is by reference to total persons, within specific
demographic groups, Monday--Sunday, 6:00 a.m.--12:00 midnight Average
Quarter Hour ("AQH") shares, as published by Arbitron. Arbitron
periodically samples radio listeners in defined market areas, principally
through the use of diaries returned by selected listeners. A station's AQH
share is a percentage computed by dividing the average number of persons
listening to a particular station for at least five minutes during an
average quarter hour in a given time period by the average number of such
persons for all stations in the market area. Station Rank in Primary
Demographic Target is the ranking of a station among all stations in its
target demographic group based upon the station's AQH shares. Arbitron
compiles ratings data for various demographic groups. All information
concerning ratings and audience listening information used in this
Prospectus is given pursuant to the method described above and derived from
the Arbitron Reports.
(3) Radio Group Market Revenue Share was derived for each radio group by
summing the market share of revenue of each station included within the
group. Radio Group Rank in Market Revenue is the ranking, by radio group
market revenue, of each of the Company's radio groups in its market among
all other radio groups in such market.
(4) WZMT-FM is simulcast with WKQV-FM. WEMR-FM is simulcast with WBHT-FM. Rank
and audience share information is given on a combined basis.
(5) Combined stations are simulcast. Rank and audience share information is
given on a combined basis.
(6) This station recently changed its programming format and its primary
demographic target. Therefore, station rank in primary demographic target
and station audience share in primary demographic target are not given for
this station.
(7) WKQV-FM, WKQV-AM and WBHT-FM in Wilkes-Barre/Scranton are operated pursuant
to an LMA or a JSA, and the Company has the option to purchase these
stations.
(8) KAFN-FM is not yet operational. Three of the stations serve the surrounding
communities outside of Little Rock.
(9) The Company sells advertising on behalf of the listed stations under a JSA.
(10) KATM-FM, KHKK-FM/KDJK-FM and KHOP-FM also broadcast in the adjacent
Stockton, California market where, in the Fall 1997 Arbitron Report, they
ranked 1, 2 and 8t in their primary demographic targets, respectively.
52
<PAGE> 54
The following is a description of the markets served by the Company's radio
stations after giving effect to the consummation of the Pending Dispositions.
Providence, Rhode Island. The Company owns four FM and two AM radio
stations in Providence. Providence has an MSA rank of 31, and had market revenue
of approximately $38.8 million in 1997, an approximate 1.6% increase over 1996.
There are 37 stations in the Providence market, including ten viable FM and
three viable AM stations. The six stations owned by the Company rank first in
the market in terms of their combined gross revenue, with approximately 36.7% of
the market revenue in 1997.
Salt Lake City, Utah. The Company owns four FM and two AM radio stations
in Salt Lake City. Salt Lake City has an MSA rank of 35, and had market revenue
of approximately $59.3 million in 1997, an approximate 13.3% increase over 1996.
There are 43 stations in the Salt Lake City market, including 16 viable FM and
four viable AM stations. The six stations owned by the Company rank second in
the market in terms of their combined gross revenue, with approximately 22.5% of
the market revenue in 1997.
Wilkes-Barre/Scranton, Pennsylvania. The Company owns five FM and four AM
radio stations and operates two FM radio stations and one AM radio station under
an LMA and a JSA, respectively, in Wilkes-Barre/Scranton. Wilkes-Barre/Scranton
has an MSA rank of 63, and had market revenue of approximately $18.2 million in
1997, an approximate 18.0% increase over 1996. There are 40 stations in the
Wilkes-Barre/ Scranton market, including ten viable FM and four viable AM
stations. The twelve stations owned or operated by the Company rank second in
the market in terms of their combined gross revenue, with approximately 31.6% of
market revenue in 1997.
Allentown/Bethlehem, Pennsylvania. The Company owns two FM radio stations
in Allentown/ Bethlehem. Allentown/Bethlehem has an MSA rank of 66, and had
market revenue of approximately $24.3 million in 1997, an approximate 7.5%
increase over 1996. There are 19 stations in the Allentown market, including six
viable FM and three viable AM stations. The two stations owned by the Company
rank second in the market in terms of their combined gross revenue, with
approximately 26.5% of market revenue in 1997.
Albuquerque, New Mexico. The Company owns five FM and three AM radio
stations in Albuquerque. Albuquerque has an MSA rank of 70, and had market
revenue of approximately $33.3 million in 1997, an approximate 11.4% increase
over 1996. There are 37 stations in the Albuquerque market, including 17 viable
FM and three viable AM stations. The eight stations owned by the Company rank
first in the market in terms of their combined gross revenue, with approximately
55.9% of the market revenue in 1997.
Harrisburg, Pennsylvania and York, Pennsylvania. The Company owns one FM
radio station in Harrisburg and one FM radio station and one AM radio station in
York. Harrisburg and York are adjacent markets with numerous overlapping radio
signals. The Company is operating these stations as a single station group.
Harrisburg has an MSA rank of 73, and had market revenue of approximately
$24.4 million in 1997, an approximate 0.4% decrease from 1996. There are 23
stations in the Harrisburg market, including eight viable FM and three viable AM
stations. The station owned by the Company ranks third in the market in terms of
gross revenue, with approximately 13.5% of the market revenue in 1997.
York has an MSA rank of 103, and had market revenue of approximately $16.6
million in 1997, an approximate 7.8% increase over 1996. There are 15 stations
in the York market, including seven viable FM stations and one viable AM
station. The two stations owned by the Company rank fourth in the market in
terms of their combined gross revenue, with approximately 10.2% of the market
revenue in 1997.
Little Rock, Arkansas. The Company owns seven FM and three AM radio
stations and has the right to construct and operate one additional FM radio
station in Little Rock. Little Rock has an MSA rank of 82, and had market
revenue of approximately $19.7 million in 1997, an approximate 10.9% increase
over 1996. There are 31 stations in the Little Rock market, including 13 viable
FM stations and one viable AM station. The ten operating stations owned by the
Company rank second in the market in terms of their combined gross revenue, with
approximately 41.1% of market revenue in 1997.
53
<PAGE> 55
The Company also owns the Arkansas Radio Network, which was established in
1968 and is a state-wide news network with affiliates in nearly every county in
Arkansas. The Arkansas Radio Network feeds hourly newscasts in addition to
agricultural programs, market reports, weather and special events.
Spokane, Washington. The Company owns two FM and two AM radio stations and
sells advertising on behalf of two FM and two AM radio stations under a JSA in
Spokane. Spokane has an MSA rank of 87, and had market revenue of approximately
$14.6 million in 1997, an approximate 8.7% increase over 1996. There are 26
stations in the Spokane market, including 12 viable FM and four viable AM
stations. The four stations owned by the Company plus the four stations marketed
under a JSA rank first in the market in terms of their combined gross revenue,
with approximately 52.7% of the market revenue in 1997.
Colorado Springs, Colorado. The Company owns three FM radio stations and
sells advertising on behalf of two FM and two AM radio stations under a JSA in
Colorado Springs. Colorado Springs has an MSA rank of 94, and had market revenue
of approximately $17.0 million in 1997, an approximate 14.5% increase over 1996.
There are 21 stations in the Colorado Springs market, including 11 viable FM and
two viable AM stations. The three stations owned by the Company plus the four
stations marketed under a JSA rank first in the market in terms of their
combined gross revenue, with approximately 63.5% of the market revenue in 1997.
Modesto, California. The Company owns four FM radio stations and one AM
radio station in Modesto. Modesto has an MSA rank of 121, and had market revenue
of approximately $13.8 million in 1997, an approximate 0.9% increase over 1996.
There are 22 stations in the Modesto market, including nine viable FM and two
viable AM stations. The five stations owned by the Company rank first in the
market in terms of their combined gross revenue, with approximately 64.3% of the
market revenue in 1997.
Boise, Idaho. The Company owns four FM radio stations and one AM radio
station in Boise. Boise has an MSA rank of 126, and had market revenue of
approximately $15.7 million in 1997, an approximate 5.4% increase over 1996.
There are 24 stations in the Boise market, including 11 viable FM and three
viable AM stations. The five stations owned by the Company rank second in the
market in terms of their combined gross revenue, with approximately 42.0% of
market revenue in 1997.
Reno, Nevada. The Company owns three FM radio stations and one AM radio
station in Reno. Reno has an MSA rank of 130, and had market revenue of
approximately $15.2 million in 1997, an approximate 8.5% increase over 1996.
There are 26 stations in the Reno market, including 13 viable FM and two viable
AM stations. The four stations owned by the Company rank first in the market in
terms of their combined gross revenue, with approximately 48.5% of the market
revenue in 1997.
Eugene, Oregon. The Company owns two FM radio stations and one AM radio
station in Eugene. Eugene has an MSA rank of 144, and had market revenue of
approximately $9.2 million in 1997, an approximate 9.5% decrease from 1996.
There are 19 stations in the Eugene market, including eight viable FM and three
viable AM stations. The three stations owned by the Company rank first in the
market in terms of their combined gross revenue, with approximately 31.5% of the
market revenue in 1997.
Tri-Cities, Washington. The Company owns four FM radio stations and one AM
radio station in Tri-Cities. Tri-Cities (includes the communities of Richland,
Kennewick and Pasco, Washington) has an MSA rank of 202, and had market revenue
of approximately $5.8 million in 1997, an approximate 5.5% increase over 1996.
There are 18 stations in the Tri-Cities market, including, according to the 1998
BIA Report, six viable FM stations. The five stations owned by the Company rank
first in the market in terms of their combined gross revenue, with approximately
42.2% of the market revenue in 1997.
Medford, Oregon. The Company owns four FM and two AM radio stations in
Medford. Medford has an MSA rank of 204, and had market revenue of approximately
$6.0 million in 1997, an approximate 9.1% increase over 1996. There are 17
stations in the Medford market, including, according to the 1998 BIA Report, six
viable FM stations. The six stations owned by the Company rank first in the
market in terms of their combined gross revenue, with approximately 40.8% of the
market revenue in 1997.
Billings, Montana. The Company owns four FM radio stations and one AM
radio station in Billings. Billings has an MSA rank of 242, and had market
revenue of approximately $6.0 million in 1997, an
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<PAGE> 56
approximate 5.3% increase over 1996. There are 14 stations in the Billings
market, including seven viable FM and three viable AM stations. The five
stations owned by the Company rank first in the market in terms of their
combined gross revenue, with approximately 50.5% of the market revenue in 1997.
Quincy, Illinois. The Company owns three FM radio stations and one AM
radio station in Quincy. MSA rank, market revenue, station ownership and viable
station data are not available for the Quincy market.
ADVERTISING SALES
Virtually all of the Company's revenue is generated from the sale of local,
regional and national advertising for broadcast on its radio stations. In 1997,
approximately 84.7% of the Company's net broadcasting revenue was generated from
the sale of local and regional advertising. Additional broadcasting revenue is
generated from the sale of national advertising, network compensation payments
and other miscellaneous transactions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--General." The major categories
of the Company's advertisers include telephone companies, restaurants, fast
food, automotive and grocery. Each station's local sales staff solicits
advertising either directly from the local advertiser or indirectly through an
advertising agency. The Company pays a higher commission rate to the sales staff
for generating direct sales because the Company believes that through direct
advertiser relationships it can better understand the advertiser's business
needs and more effectively design an advertising campaign to help the advertiser
sell its product. The Company employs personnel in each of its markets to
produce commercials for the advertisers. National sales are made by a firm
specializing in radio advertising sales on the national level in exchange for a
commission from the Company that is based on the Company's gross revenue from
the advertising obtained. Regional sales, which the Company defines as sales in
regions surrounding the Company's markets to companies that advertise in the
Company's markets, are generally made by the Company's local sales staff.
Depending on the programming format of a particular station, the Company
estimates the optimum number of advertisements available for sale. The number of
advertisements that can be broadcast without jeopardizing listening levels (and
the resulting ratings) is limited in part by the format of a particular station.
The Company's stations strive to maximize revenue by managing their on-air
inventory of advertising time and adjusting prices based on local market
conditions and on the Company's ability, through its marketing efforts, to
provide advertisers with an effective means of reaching a targeted demographic
group. Each of the Company's stations has a general target level of on-air
inventory that it makes available for advertising. This target level of
inventory for sale may be different at different times of the day but tends to
remain stable over time. Much of the Company's selling activity is based on
demand for its radio stations' on-air inventory and, in general, the Company
responds to this demand by varying prices rather than by varying its target
inventory level for a particular station. Therefore, most changes in revenue are
explained by demand-driven pricing changes rather than by changes in the
available inventory.
The Company believes that radio is one of the most efficient and
cost-effective means for advertisers to reach specific demographic groups.
Advertising rates charged by radio stations are based primarily on (i) a
station's share of audiences in the demographic groups targeted by advertisers
(as measured by ratings surveys estimating the number of listeners tuned to the
station at various times), (ii) the number of stations in the market competing
for the same demographic groups, (iii) the supply of and demand for radio
advertising time and (iv) certain qualitative factors. Rates are generally
highest during morning and afternoon commuting hours.
A station's listenership is reflected in ratings surveys that estimate the
number of listeners tuned to the station and the time they spend listening. Each
station's ratings are used by its advertisers and advertising representatives to
consider advertising with the station and are used by the Company to chart
audience growth, set advertising rates and adjust programming. The radio
broadcast industry's principal ratings service is Arbitron, which publishes
periodic ratings surveys for significant domestic radio markets. These surveys
are the Company's primary source of ratings data.
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<PAGE> 57
COMPETITION
The radio broadcasting industry is highly competitive. The success of each
of the Company's stations depends largely upon its audience ratings and its
share of the overall advertising revenue within its market. The Company's
audience ratings and advertising revenue are subject to change, and any adverse
change in a particular market affecting advertising expenditures or an adverse
change in the relative market positions of the stations located in a particular
market could have a material adverse effect on the revenue of the Company's
radio stations located in that market. There can be no assurance that any one of
the Company's radio stations will be able to maintain or increase its current
audience ratings or advertising revenue market share.
The Company's stations compete for listeners and advertising revenue
directly with other radio stations within their respective markets. Radio
stations compete for listeners primarily on the basis of program content that
appeals to a particular demographic group. By building a strong listener base
consisting of a specific demographic group in each of its markets, the Company
is able to attract advertisers seeking to reach those listeners. Companies that
operate radio stations must be alert to the possibility of another station
changing its format to compete directly for listeners and advertisers. Another
station's decision to convert to a format similar to that of one of the
Company's radio stations in the same geographic area may result in lower ratings
and advertising revenue, increased promotion and other expenses and,
consequently, lower broadcast cash flow for the Company.
Factors that are material to a radio station's competitive position include
management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. The Company attempts to improve its competitive position in each
market by extensively researching its stations' programming, by implementing
advertising campaigns aimed at the demographic groups for which its stations
program and by managing its sales efforts to attract a larger share of
advertising dollars. However, the Company competes with some organizations that
have greater financial resources than the Company.
Recent changes in the FCC's policies and rules permit increased ownership
and operation of multiple local radio stations. Management believes that radio
stations that elect to take advantage of joint arrangements such as LMAs or JSAs
may in certain circumstances have lower operating costs and may be able to offer
advertisers more attractive rates and services. Although the Company currently
operates multiple stations in each of its markets and intends to pursue the
creation of additional multiple station groups, the Company's competitors in
certain markets include operators of multiple stations or operators who already
have entered into LMAs or JSAs. The Company also competes with other radio
station groups to purchase additional stations. Some of these groups are owned
or operated by companies that have substantially greater financial and other
resources than the Company.
Although the radio broadcasting industry is highly competitive, some
barriers to entry exist (which can be mitigated to some extent by changing
existing radio station formats and upgrading power, among other actions). The
operation of a radio broadcast station requires a license from the FCC, and the
number of radio stations that can operate in a given market is limited by the
availability of FM and AM radio frequencies allotted by the FCC to communities
in that market, as well as by the FCC's multiple ownership rules regulating the
number of stations that may be owned and controlled by a single entity. The
FCC's multiple ownership rules have changed significantly as a result of the
Telecommunications Act. For a discussion of FCC regulation and the provisions of
the Telecommunications Act, see "-- Federal Regulation of Radio Broadcasting."
The Company's stations also compete for advertising revenue with other
media, including newspapers, broadcast television, cable television, magazines,
direct mail, coupons and outdoor advertising. In addition, the radio
broadcasting industry is subject to competition from new media technologies that
are being developed or introduced, such as the delivery of audio programming by
cable television systems, by satellite and by digital audio broadcasting
("DAB"). DAB may deliver by satellite to nationwide and regional audiences,
multi-channel, multi-format, digital radio services with sound quality
equivalent to compact discs. The delivery of information through the presently
unregulated Internet also could create a new form of
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competition. The radio broadcasting industry historically has grown despite the
introduction of new technologies for the delivery of entertainment and
information, such as television broadcasting, cable television, audio tapes and
compact disks. A growing population and greater availability of radios,
particularly car and portable radios, have contributed to this growth. There can
be no assurance, however, that the development or introduction in the future of
any new media technology will not have an adverse effect on the radio
broadcasting industry.
The FCC has recently authorized spectrum for the use of a new technology,
satellite digital audio radio services ("DARS"), to deliver audio programming.
DARS may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences. It is
not known at this time whether this digital technology also may be used in the
future by existing radio broadcast stations either on existing or alternate
broadcasting frequencies. There are proposals before the FCC to permit a new
"low power" radio service which could open up opportunities for low cost
neighborhood service on frequencies which would not interfere with existing
stations. No FCC action has been taken on this proposal to date.
The Company cannot predict what other matters might be considered in the
future by the FCC, nor can it assess in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
See "-- Federal Regulation of Radio Broadcasting."
FEDERAL REGULATION OF RADIO BROADCASTING
Introduction. The ownership, operation and sale of broadcast stations,
including those licensed to the Company, are subject to the jurisdiction of the
FCC, which acts under authority derived from the Communications Act. The
Communications Act was amended in 1996 by the Telecommunications Act to make
changes in several broadcast laws. Among other things, the FCC assigns frequency
bands for broadcasting; determines whether to approve changes in ownership or
control of station licenses; regulates equipment used by stations; adopts and
implements regulations and policies that directly or indirectly affect the
ownership, operation and employment practices of stations; and has the power to
impose penalties for violations of its rules under the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Failure to
observe these or other rules and policies can result in the imposition of
various sanctions, including fines, the grant of "short" (less than the maximum)
license renewal terms or, for particularly egregious violations, the denial of a
license renewal application, the revocation of a license or the denial of FCC
consent to acquire additional broadcast properties. Reference should be made to
the Communications Act, FCC rules and the public notices and rulings of the FCC
for further information concerning the nature and extent of federal regulation
of broadcast stations.
License Grant and Renewal. Until recently, radio broadcast licenses were
granted for maximum terms of seven years, but acting under the authority of the
Telecommunications Act, the FCC recently revised its rules to extend the maximum
term for future renewals to eight years. Licenses may be renewed through an
application to the FCC. Prior to the Telecommunications Act, during certain
periods when a renewal application was pending, competing applicants could file
for the radio frequency being used by the renewal applicant. The
Telecommunications Act prohibits the FCC from considering such competing
applications if the FCC finds that the station has served the public interest,
convenience and necessity, that there have been no serious violations by the
licensee of the Communications Act or the rules and regulations of the FCC, and
that there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC that, when taken together, would
constitute a pattern of abuse.
Petitions to deny license renewals can be filed by interested parties,
including members of the public. Such petitions may raise various issues before
the FCC. The FCC is required to hold hearings on renewal applications if the FCC
is unable to determine that renewal of a license would serve the public
interest, convenience and necessity, or if a petition to deny raises a
"substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. Also, during certain periods when a renewal
application is pending, the
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transferability of the applicant's license is restricted. A petition to deny
renewal has been filed against four of the Company's Salt Lake City stations,
alleging that they failed to comply with FCC equal opportunity employment rules,
and FCC processing of that petition has delayed action on those license
renewals. Except for that case, the Company is not currently aware of any facts
that would prevent the timely renewal of its licenses to operate its radio
stations, although there can be no assurance that the Company's licenses will be
renewed. See "Risk Factors -- Government Regulation."
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designated to render primary and secondary service over an
extended area; Class B stations, which operate on an unlimited time basis and
are designed to render service only over a primary service area; or Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
The following table sets forth the market, call letters, FCC license
classification, antenna height above average terrain (HAAT), power and frequency
of each of the stations owned or operated by the Company, assuming the
consummation of the Pending Dispositions, and the date on which each station's
FCC license expires. License renewal applications have been filed for the listed
stations showing a license expiration date of October 1, 1997, February 1, 1998,
April 1, 1998 or August 1, 1998, and the expiration of the licenses is stayed
during the pendency of such proceedings.
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
--------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Providence, RI............................ WPRO-AM B NA 5.0 630 kHz 04-01-98
WPRO-FM B 168 39.0 92.3 MHz 04-01-98
WSKO-AM B NA 5.0 790 kHz 04-01-98
WWLI-FM B 152 50.0 105.1 MHz 04-01-98
WXEX-FM A 163 2.3 99.7 MHz 04-01-98
WHKK-FM A 90 4.2 100.3 MHz 04-01-06
Salt Lake City, UT........................ KCNR-AM B NA 10.0/0.195 860 kHz 10-01-97
KUBL-FM C 1140 26.0 93.3 MHz 10-01-97
KENZ-FM C 869 45.0 107.5 MHz 10-01-97
KBER-FM C 1140 25.0 101.1 MHz 10-01-97
KFNZ-AM B NA 5.0 1320 kHz 10-01-05
KBEE-FM C 894 40.0 98.7 MHz 10-01-05
Wilkes-Barre/Scranton, PA................. WAZL-AM C NA 1.0 1490 kHz 08-01-98
WZMT-FM B 222 19.5 97.9 MHz 08-01-98
WARM-AM B NA 5.0 590 kHz 08-01-98
WMGS-FM B 422 5.3 92.9 MHz 08-01-98
WBHT-FM A 336 0.50 97.1 MHz 08-01-98
(3)
WKQV-AM B NA 10.0/0.5 1550 kHz 08-01-98
(3)
WKQV-FM A 308 0.30 95.7 kHz 08-01-98
(3)
WSGD-FM A 235 0.52 94.3 MHz 08-01-98
WDLS-FM A 207 1.45 93.7 MHz 08-01-98
WCDL-AM B NA 5.0/.037 1440 kHz 08-01-98
WEMR-AM B NA 5.0/1.0 1460 kHz 08-01-98
WEMR-FM A 354 0.24 107.7 MHz 08-01-98
</TABLE>
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<PAGE> 60
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
--------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Allentown/Bethlehem, PA................... WCTO-FM B 152 50.0 96.1 MHz 08-01-98
WLEV-FM B 327 10.9 100.7 MHz 08-01-98
Albuquerque, NM........................... KKOB-AM B NA 50.0 770 kHz 10-01-97
KKOB-FM C 1265 20.2 93.3 MHz 10-01-97
KHTL-AM B NA 1.0/0.5 920 kHz 10-01-05
KMGA-FM C 1259 22.5 99.5 MHz 10-01-97
KTBL-FM C 1276 20.4 103.3 MHz 10-01-97
KHFM-FM C 1260 20.0 96.3 MHz 10-01-97
KRST-FM C 1268 22.0 92.3 MHz 10-01-97
KNML-AM B NA 1.0/0.5 1050 kHz 10-01-05
Harrisburg/York, PA....................... WRKZ-FM B 283 14.1 106.7 MHz 08-01-98
WQXA-AM B NA 1.0 1250 kHz 08-01-98
WQXA-FM B 215 25.1 105.7 MHz 08-01-98
Little Rock, AR........................... KARN-FM A 100 3.0 102.5 MHz 06-01-04
KARN-AM B NA 5.0 920 kHz 06-01-04
KKRN-FM A 100 6.0 101.7 MHz 06-01-04
KRNN-AM B NA 5.0/2.5 1380 kHz 06-01-04
KIPR-FM C1 286 100.0 92.3 MHz 06-01-04
KOKY-FM A 118 4.10 102.1 MHz 06-01-04
KLAL-FM C2 95 50.0 107.7 MHz 06-01-04
KAFN-FM(4) A 100 6.0 102.5 MHz 06-01-04
KLIH-AM B NA 2.0/1.2 1250 kHz 06-01-04
KURB-FM C 392 100.0 98.5 MHz 06-01-04
KVLO-FM C2 150 50.0 102.9 MHz 06-01-04
Spokane, WA............................... KGA-AM A NA 50.0 1510 kHz 02-01-06
KDRK-FM C 725 56.0 93.7 MHz 02-01-06
KJRB-AM B NA 5.0 790 kHz 02-01-06
KAEP-FM C 582 100.0 105.7 MHz 02-01-06
KKZX-FM(3) C 492 100.0 98.9 MHz 02-01-98
KEYF-AM(3) B NA 5.0 1050 kHz 02-01-06
KEYF-FM(3) C 490 100.0 101.1 MHz 02-01-98
KUDY-AM(3) B NA 5.0 1280 kHz 02-01-06
Colorado Springs, CO...................... KKFM-FM C 698 71.0 98.1 MHz 04-01-05
KKMG-FM C 695 57.0 98.9 MHz 04-01-05
KKLI-FM C2 678 1.6 106.3 MHz 04-01-05
KVUU-FM(3) C 610 68.0 99.9 MHz 04-01-05
KSPZ-FM(3) C 649 72.0 92.9 MHz 04-01-05
KVOR-AM(3) B NA 5.0/1.0 1300 kHz 04-01-05
KTWK-AM(3) B NA 3.3/1.5 740 kHz 04-01-05
Modesto, CA............................... KANM-AM B NA 1.0 970 kHz 12-01-05
KATM-FM B 152 50.0 103.3 MHz 12-01-05
KHKK-FM B 152 50.0 104.1 MHz 12-01-05
KDJK-FM A 624 0.071 103.9 MHz 12-01-05
KHOP-FM B 193 29.5 95.1 MHz 12-01-05
Boise, ID................................. KIZN-FM C 762 44.0 92.3 MHz 10-01-05
KZMG-FM C 802 50.0 93.1 MHz 10-01-05
KKGL-FM C 768 44.0 96.9 MHz 10-01-05
KQFC-FM C 762 47.0 97.9 MHz 10-01-05
KBOI-AM B NA 50.0 960 kHz 10-01-05
Reno, NV.................................. KKOH-AM B NA 50.0 780 kHz 10-01-05
KNEV-FM C 695 60.0 95.5 MHz 10-01-05
KBUL-FM C 699 72.0 98.1 MHz 10-01-05
KNHK-FM C 809 44.7 92.9 MHz 10-01-05
Eugene, OR................................ KUGN-AM B NA 5.0/1.0 590 kHz 02-01-06
KKTT-FM C 308 100.0 97.9 MHz 02-01-98
KEHK-FM C1 301 95.0 102.3 MHz 02-01-98
</TABLE>
59
<PAGE> 61
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
--------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pasco (Tri-Cities), WA.................... KFLD-AM B NA 10.0/0.25 870 kHz 02-01-06
KEYW-FM A 59 3.0 98.3 MHz 02-01-06
KORD-FM C 335 100.0 102.7 MHz 02-01-06
KXRX-FM C 408 50.0 97.1 MHz 02-01-98
KTHK-FM C2 339 8.0 97.9 MHz 02-01-98
Medford, OR............................... KTMT-AM B NA 1.0 880 kHz 02-01-06
KTMT-FM C 994 31.0 93.7 MHz 02-01-06
KBOY-FM C1 299 60.0 95.7 MHz 02-01-06
KCMX-AM B NA 1.0 580 kHz 02-01-06
KCMX-FM C1 435 31.6 101.9 MHz 02-01-06
KAKT-FM C1 166 51.7 105.1 MHz 02-01-98
Billings, MT.............................. KBUL-AM B NA 5.0 970 kHz 04-01-05
KCTR-FM C1 152 100.0 102.9 MHz 04-01-05
KKBR-FM C2 122 28.0 97.1 MHz 04-01-05
KBBB-FM C1 146 100.0 103.7 MHz 04-01-05
KMHK-FM C 300 100.0 95.5 MHz 04-01-05
Quincy, IL................................ WTAD-AM B NA 5.0/1.0 930 kHz 12-01-04
WQCY-FM B 229 27.0 99.5 MHz 12-01-04
WMOS-FM A 88 3.0 103.9 MHz 12-01-04
WBRJ-FM B1 100 25.0 106.7 MHz 12-01-04
</TABLE>
- ---------------
(1) Actual city of license may be different from the metropolitan market served.
(2) Pursuant to FCC rules and regulations, many AM radio stations are licensed
to operate at a reduced power during nighttime broadcasting hours, which
results in reducing the radio station's coverage during those hours of
operation. Both power ratings are shown, where applicable.
(3) The Company provides certain sales and marketing services to stations
KVUU-FM, KSPZ-FM, KVOR-AM and KTWK-AM in Colorado Springs, Colorado,
stations KKZX-FM, KEYF-AM, KEYF-FM and KUDY-AM in Spokane, Washington and
station WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania, pursuant to JSAs.
The Company provides certain sales, programming and marketing services to
stations WBHT-FM and WKQV-FM in Wilkes-Barre/Scranton, Pennsylvania,
pursuant to LMAs.
(4) KAFN-FM is under construction and has not yet commenced operations.
Ownership Matters. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast license without the
prior approval of the FCC. In determining whether to assign, transfer, grant or
renew a broadcast license, the FCC considers a number of factors pertaining to
the licensee, including compliance with various rules limiting common ownership
of media properties, the "character" of the licensee and those persons holding
"attributable" interests therein, and compliance with the Communications Act's
limitation on alien ownership, as well as compliance with other FCC policies,
including equal employment opportunity requirements.
Once a station purchase agreement has been signed, an application for FCC
consent to assignment of license or transfer of control (depending upon whether
the underlying transaction is an asset purchase or stock acquisition) is filed
with the FCC. Approximately 10 to 15 days after this filing, the FCC normally
publishes a notice assigning a file number to the application and advising that
the application has been "accepted for filing." This notice begins a 30-day
statutory waiting period, which provides the opportunity for third parties to
file formal petitions to deny the transaction; informal objections may be filed
any time prior to grant of an application. The FCC staff will normally review
the application in this period and seek further information and amendments to
the application if it has questions.
Once the 30-day public notice period ends, the staff will complete its
processing, assuming that no petitions or informal objections were received and
that the application is otherwise consistent with FCC rules and policies. The
staff often grants the application by delegated authority approximately 10 to 20
days after the public notice period ends. At this point, the parties are legally
authorized to close the purchase, although the FCC action is not legally a
"final order." If there is a backlog of applications, the processing period can
extend to 30 days or more.
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Public notice of the FCC staff grant is usually issued about a week after
the grant is made, stating that the grant was effective when the staff made the
grant. On the date of this notice, another 30-day period begins, within which
time interested parties can file petitions seeking either staff reconsideration
or full FCC review of the staff action. During this time the grant can still be
modified, set aside or stayed, and is not a "final order." In the absence of a
stay, however, the seller and buyer are not prevented from closing despite the
absence of a final order. Also, within 40 days after the public notice of the
grant, the full FCC can review and reconsider the staff's grant on its own
motion. Thus, during the additional 10 days beyond the 30-day period available
to third parties, the grant is still not "final." In the event that review by
the full FCC is requested and the FCC subsequently affirms the staff's grant of
the application, interested parties may thereafter seek judicial review in the
United States Court of Appeals for the District of Columbia Circuit within
thirty days of public notice of the full FCC's action. In the event the Court
affirms the FCC's action, further judicial review may be sought by seeking
rehearing en banc from the Court of Appeals or by certiorari from the United
States Supreme Court.
In the absence of the submission of a timely request for reconsideration,
administrative review or judicial review, the FCC staff's grant of an
application becomes final by operation of law. Upon the occurrence of that
event, counsel is able to deliver an opinion that the FCC's grant is no longer
subject to administrative or judicial review, although such action can
nevertheless be set aside in rare circumstances, such as fraud on the agency by
a party to the application.
The pendency of a license renewal application can alter the aforementioned
timetables because the FCC normally will not issue an unconditional assignment
grant if the station's license renewal is pending.
Under the Communications Act, a broadcast license may not be granted to or
held by a corporation that has more than one-fifth of its capital stock owned or
voted by aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations. Under the Communications Act, a
broadcast license also may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation more than
one-fourth of whose capital stock is owned or voted by aliens or their
representatives, by foreign governments or their representatives, or by non-U.S.
corporations. These restrictions apply in modified form to other forms of
business organizations, including partnerships. Each of the Company, which
serves as a holding company for its direct and indirect radio station
subsidiaries, and Citadel Broadcasting therefore may be restricted from having
more than one-fourth of its stock owned or voted by aliens, foreign governments
or non-U.S. corporations. The Certificate of Incorporation of the Company and
the Certificate of Incorporation of Citadel Broadcasting contain provisions
which permit the Company and Citadel Broadcasting to prohibit alien ownership
and control consistent with the prohibitions contained in the Communications
Act.
The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
absent waivers, neither the Company nor Citadel Broadcasting would be permitted
to acquire any daily newspaper or television broadcast station (other than low
power television) in a local market where it then owned any radio broadcast
station. The FCC's rules provide for the liberal grant of a waiver of the rule
prohibiting common ownership of radio and television stations in the same
geographic market in the top 25 television markets if certain conditions are
satisfied. The Telecommunications Act extends this waiver policy to stations in
the top 50 television markets, although the FCC has not yet implemented this
change.
In response to the Telecommunications Act, the FCC amended its multiple
ownership rules to eliminate the national limits on ownership of AM and FM
stations. The FCC's broadcast multiple ownership rules restrict the number of
radio stations one person or entity may own, operate or control on a local
level. These limits are:
(i) in a market with 45 or more commercial radio stations, an entity
may own up to eight commercial radio stations, not more than five of which
are in the same service (FM or AM);
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(ii) in a market with between 30 and 44 (inclusive) commercial radio
stations, an entity may own up to seven commercial radio stations, not more
than four of which are in the same service;
(iii) in a market with between 15 and 29 (inclusive) commercial radio
stations, an entity may own up to six commercial radio stations, not more
than four of which are in the same service;
(iv) in a market with 14 or fewer commercial radio stations, an entity
may own up to five commercial radio stations, not more than three of which
are in the same service, except that an entity may not own more than 50% of
the stations in such market.
None of these multiple ownership rules requires any change in Citadel
Broadcasting's current ownership of radio broadcast stations. However, these
rules will limit the number of additional stations which Citadel Broadcasting
may acquire in the future in certain of its markets.
Because of these multiple and cross-ownership rules, a purchaser of voting
stock of either the Company or Citadel Broadcasting which acquires an
"attributable" interest in the Company or Citadel Broadcasting may violate the
FCC's rule if it also has an attributable interest in other television or radio
stations, or in daily newspapers, depending on the number and location of those
radio or television stations or daily newspapers. Such a purchaser also may be
restricted in the companies in which it may invest, to the extent that these
investments give rise to an attributable interest. If an attributable
shareholder of the Company or Citadel Broadcasting violates any of these
ownership rules, the Company or Citadel Broadcasting may be unable to obtain
from the FCC one or more authorizations needed to conduct its radio station
business and may be unable to obtain FCC consents for certain future
acquisitions.
The FCC generally applies its television/radio/newspaper cross-ownership
rules and its broadcast multiple ownership rules by considering the
"attributable," or cognizable interests held by a person or entity. A person or
entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner or shareholder of a company
that owns that station or newspaper. Whether that interest is cognizable under
the FCC's ownership rules is determined by the FCC's attribution rules. If an
interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.
With respect to a corporation, officers and directors and persons or
entities that directly or indirectly can vote 5% or more of the corporation's
stock (10% or more of such stock in the case of insurance companies, investment
companies, bank trust departments and certain other "passive investors" that
hold such stock for investment purposes only) generally are attributed with
ownership of whatever radio stations, television stations and daily newspapers
the corporation owns.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
nonvoting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership, and
minority (under 5%) voting stock, generally do not subject their holders to
attribution. However, the FCC is currently reviewing its rules on attribution of
broadcast interests, and it may adopt stricter criteria. See "-- Proposed
Changes" below.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock and
limited partnership interests) and significant employment positions. This policy
may limit the permissible investments a purchaser of the Company's or Citadel
Broadcasting's voting stock may make or hold.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." Since 1981, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it developed to promote the
broadcast of certain types of programming responsive to the needs of a station's
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community of license. However, licensees continue to be required to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming will be considered by the FCC when
it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time.
Stations also must pay regulatory and application fees and follow various
FCC rules that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, sponsorship identification and
technical operations (including limits on radio frequency radiation). In
addition, licensees must develop and implement programs designed to promote
equal employment opportunities and must submit reports to the FCC on these
matters annually and in connection with a renewal application. The broadcast of
contests and lotteries also is regulated by FCC rules.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short" (less than the maximum) renewal terms or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
In 1985, the FCC adopted rules regarding human exposures to levels of radio
frequency ("RF") radiation. These rules require applicants for new broadcast
stations, renewals of broadcast licenses or modifications of existing licenses
to inform the FCC at the time of filing such applications whether a new or
existing broadcast facility would expose people to RF radiation in excess of
certain guidelines. In August 1996, the FCC adopted more restrictive radiation
limits. These limits became effective on September 1, 1997 and govern
applications filed after that date. The Company anticipates that such
regulations will not have a material effect on its business.
Local Marketing Agreements. Over the past five years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "local marketing agreements" (LMAs) or "time
brokerage agreements." These agreements take various forms. Separately-owned and
licensed stations may agree to function cooperatively in terms of programming,
advertising sales and other matters, subject to compliance with the antitrust
laws and the FCC's rules and policies, including the requirement that the
licensee of each station maintains independent control over the programming and
other operations of its own station. The FCC has held that such agreements do
not violate the Communications Act as long as the licensee of the station that
is being substantially programmed by another entity maintains complete
responsibility for, and control over, operations of its broadcast stations and
otherwise ensures compliance with applicable FCC rules and policies.
A station that brokers substantial time on another station in its market or
engages in an LMA with a station in the same market will be considered to have
an attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into an LMA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit the broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns one and programs the other through an LMA arrangement.
Another example of a cooperative agreement between differently owned radio
stations in the same market is a joint sales agreement (JSA), whereby one
station sells advertising time in combination, both on itself and on a station
under separate ownership. In the past, the FCC has determined that issues of
joint advertising sales should be left to antitrust enforcement. The Company has
entered into several JSAs whereby it sells time on behalf of other local
stations. Currently, JSAs are not deemed by the FCC to be attributable. However,
the FCC has outstanding a notice of proposed rulemaking, which, if adopted,
would require the Company to terminate any JSA it might have with a radio
station with which the Company could not have an LMA. Currently, the only
Company groups that would be so affected would be its groups in Spokane and
Colorado Springs. See "-- General" and "-- Station Portfolio."
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Proposed Changes. In December, 1994, the FCC initiated a proceeding to
solicit comment on whether it should revise its radio and television ownership
"attribution" rules by among other proposals (i) raising the basic benchmark for
attributing ownership in a corporate licensee from 5% to 10% of the licensee's
voting stock, (ii) increasing from 10% to 20% of the licensee's voting stock the
attribution benchmark for "passive investors" in corporate licensees, (iii)
restricting the availability of the attribution exemption when a single party
controls more than 50% of the voting stock and (iv) considering LMAs, JSAs, debt
and non-voting stock interests to be attributable under certain circumstances.
No decision has been made by the FCC in these matters. At this time, no
determination can be made as to what effect, if any, this proposed rulemaking
will have on the Company.
The Congress and the FCC from time to time have under consideration, and
may in the future consider and adopt, new laws, regulations and policies
regarding a wide variety of matters that could, directly or indirectly, affect
the operation, ownership and profitability of the Company's radio stations,
result in the loss of audience share and advertising revenues for the Company's
radio stations, and affect the ability of the Company to acquire additional
radio stations or finance such acquisitions. Such matters include: proposals to
impose spectrum use or other fees on FCC licensees; the FCC's equal employment
opportunity rules and matters relating to political broadcasting; technical and
frequency allocation matters; proposals to restrict or prohibit the advertising
of beer, wine and other alcoholic beverages on radio; changes in the FCC's
cross-interest, multiple ownership and cross-ownership policies; changes to
broadcast technical requirements; proposals to allow telephone or cable
television companies to deliver audio and video programming to the home through
existing phone or other communication lines; proposals to limit the tax
deductibility of advertising expenses by advertisers; and proposals to auction
the right to use the radio broadcast spectrum to the highest bidder, instead of
granting FCC licenses and subsequent license renewals without such bidding.
The FCC, on April 2, 1997, awarded two licenses for the provision of
satellite digital audio radio services ("DARS"). Under rules adopted for this
service, licensees must begin construction of their space stations within one
year, begin operating within four years, and be operating their entire system
within six years. The Company cannot predict whether the service will be
subscription or advertiser supported. Digital technology also may be used in the
future by terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital sound
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth for the AM band and on March 17,
1997, adopted an allotment plan for the expanded band which identified the 88 AM
radio stations selected to move into the band. At the end of a five-year
transition period, those licensees will be required to return to the FCC either
the license for their existing AM band station or the license for the expanded
AM band station.
The Company cannot predict whether any proposed changes will be adopted or
what other matters might be considered in the future, nor can it judge in
advance what impact, if any, the implementation of any of these proposals or
changes might have on its business.
The foregoing is a brief summary of certain provisions of the
Communications Act and of specific FCC rules and policies. This description does
not purport to be comprehensive and reference should be made to the
Communications Act, the FCC's rules and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
Federal Antitrust Considerations. The Company is aware that the FTC and the
DOJ, which evaluate transactions to determine whether those transactions should
be challenged under the federal antitrust laws, have been increasingly active
recently in their review of radio station acquisitions, particularly where an
operator proposes to acquire additional stations in its existing markets.
For an acquisition meeting certain size thresholds, the HSR Act and the
rules promulgated thereunder require the parties to file Notification and Report
Forms with the FTC and the DOJ and to observe specified waiting period
requirements before consummating the acquisition. During the initial 30-day
period after the filing, the agencies decide which of them will investigate the
transaction. If the investigating agency determines that the transaction does
not raise significant antitrust issues, then it will either terminate the
waiting period or allow it to expire after the initial 30 days. On the other
hand, if the agency determines that
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the transaction requires a more detailed investigation, then, at the conclusion
of the initial 30-day period, it will issue a formal request for additional
information (a "Second Request"). The issuance of a Second Request extends the
waiting period until the twentieth calendar day after the date of substantial
compliance by all parties to the acquisition. Thereafter, such waiting period
may only be extended by court order or with the consent of the parties. In
practice, complying with a Second Request can take a significant amount of time.
In addition, if the investigating agency raises substantive issues in connection
with a proposed transaction, then the parties frequently engage in lengthy
discussions or negotiations with the investigating agency concerning possible
means of addressing those issues, including but not limited to persuading the
agency that the proposed acquisition would not violate the antitrust laws,
restructuring the proposed acquisition, divestiture of other assets of one or
more parties, or abandonment of the transaction. Such discussions and
negotiations can be time consuming, and the parties may agree to delay
consummation of the acquisition during their pendency.
At any time before or after the consummation of a proposed acquisition, the
FTC or the DOJ could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition or seeking divestiture of the business acquired or other assets of
the Company. Acquisitions that are not required to be reported under the HSR Act
may be investigated by the FTC or the DOJ under the antitrust laws before or
after consummation. In addition, private parties may under certain circumstances
bring legal action to challenge an acquisition under the antitrust laws.
As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that commencement of operations under LMAs,
JSAs and other similar agreements customarily entered into in connection with
radio station transfers prior to the expiration of the waiting period under the
HSR Act could violate the HSR Act. In connection with acquisitions subject to
the waiting period under the HSR Act, the Company will not commence operation of
any affected station to be acquired under an LMA or similar agreement until the
waiting period has expired or been terminated.
The Company has received two civil investigative demands from the Antitrust
Division of the DOJ. One CID addresses the Company's acquisition of KRST-FM in
Albuquerque, New Mexico, and the second CID addresses the Company's JSA relating
to stations in Spokane, Washington and Colorado Springs, Colorado. See "--Legal
Proceedings."
SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are primarily the result of fluctuations in advertising expenditures by
retailers. The Company's revenue is typically lowest in the first quarter and
highest in the second and fourth quarters. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation--General."
TRADEMARKS
The Company owns a number of trademarks and service marks, including the
federally registered marks "Cat Country," "KHOP," "Supertalk" and the Cat
Country logo. The Company also owns a number of marks registered in various
states. The Company considers such trademarks and service marks to be important
to its business. See "-- Operating Strategy--Targeted Programming."
EMPLOYEES
At April 1, 1998, the Company employed approximately 1,560 persons. None of
such employees are covered by collective bargaining agreements, and the Company
considers its relations with its employees to be good.
The Company employs several on-air personalities with large loyal audiences
in their respective markets. The Company generally enters into employment
agreements with these personalities to protect its interests in those
relationships that it believes to be valuable. The loss of one of these
personalities could result in a short-term loss of audience share, but the
Company does not believe that any such loss would have a material adverse effect
on the Company's financial condition or results of operations.
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PROPERTIES AND FACILITIES
The types of properties required to support each of the Company's radio
stations include offices, studios, transmitter sites and antenna sites. A
station's studios are generally housed with its offices in business districts.
The transmitter sites and antenna sites are generally located so as to provide
maximum market coverage.
The Company currently owns certain studio facilities in Spokane,
Washington; Billings, Montana; Tri-Cities, Washington; East Providence, Rhode
Island; Little Rock, Arkansas; Boise, Idaho; and Patton Township (State
College), Lower Yoder Township (Johnstown), Williams Township (Allentown) and
Tunkhannock (Wilkes-Barre/Scranton), Pennsylvania, and it owns certain
transmitter and antenna sites in Reno, Nevada; Salt Lake City, Utah; Spokane and
Tri-Cities, Washington; Tracy (Modesto), California; Billings, Montana; Santa Fe
and Albuquerque, New Mexico; Medford, Oregon; East Providence and Johnston,
Rhode Island; Township One (Quincy), Illinois; Little Rock, Arkansas; and Patton
Township (State College), Croyle Township (Johnstown), Mt. Joy Township
(Harrisburg/York), Williams Township and Salisbury Township (Allentown) and
Hanover Township, Plymouth Township, Carbondale and Tunkhannock
(Wilkes-Barre/Scranton), Pennsylvania. The Company leases its remaining studio
and office facilities, including office space in Tempe, Arizona which is not
related to the operations of a particular station, and it leases its remaining
transmitter and antenna sites. The Company does not anticipate any difficulties
in renewing any facility leases or in leasing alternative or additional space,
if required. The Company owns substantially all of its other equipment,
consisting principally of transmitting antennae, transmitters, studio equipment
and general office equipment.
No one property is material to the Company's operations. The Company
believes that its properties are generally in good condition and suitable for
its operations; however, the Company continually looks for opportunities to
upgrade its properties and intends to upgrade studios, office space and
transmission facilities in certain markets.
Substantially all of the Company's properties and equipment serve as
collateral for the Company's obligations under the Credit Facility. See
"Description of Indebtedness--Existing Loan Agreement."
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not a party to any
lawsuit or proceeding which, in the opinion of the Company, is likely to have a
material adverse effect on the Company.
The Company has received two CIDs from the DOJ pursuant to which the DOJ
has requested information from the Company to determine whether the Company has
violated certain antitrust laws. The first CID was issued on September 27, 1996
and concerns the Company's acquisition of all of the assets of KRST-FM in
Albuquerque, New Mexico on October 9, 1996 (the "KRST Acquisition"). The CID
requested written answers to interrogatories and the production of certain
documents concerning the radio station market in Albuquerque, in general, and
the KRST Acquisition, in particular, to enable the DOJ to determine, among other
things, whether the KRST Acquisition would result in excessive concentration in
the market. The Company has responded to the CID. The DOJ requested supplemental
information on January 27, 1997, to which the Company also responded. There have
been no communications since that time and, at present, the Company has been
given no indication from the DOJ regarding its intended future actions. If the
DOJ were to proceed with and successfully challenge the KRST Acquisition, the
Company may be required to divest one or more radio stations in Albuquerque
and/or it may be subject to the payment of fines.
The second CID was issued on October 9, 1996 and concerned the Company's
JSA relating to a total of eight radio stations in Spokane, Washington and
Colorado Springs, Colorado and which became effective in January 1996. Pursuant
to such CID, the DOJ has requested information to determine whether the JSAs
constituted a de facto merger, resulting in a combination or contract in
restraint of trade. The Company responded to the CID, and has recently met with
the DOJ concerning this matter. If the DOJ were to proceed with and successfully
challenge the JSA, the Company may be required to terminate the JSA and/or it
may be subject to the payment of fines.
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At this time, the Company cannot predict the impact on the Company, if any,
of these proceedings or any future DOJ demands. See "Risk Factors -- Limitations
on Acquisition Strategy; Antitrust Considerations."
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THE PENDING DISPOSITIONS
There are several transactions currently pending which, if consummated,
would result in the Company selling four FM and three AM radio stations.
THE JOHNSTOWN/STATE COLLEGE DISPOSITIONS
WQKK-FM and WGLU-FM, Johnstown, Pennsylvania and WRSC-AM, WQWK-FM, WBLF-AM
and WIKN-FM, State College, Pennsylvania. On September 29, 1997, the Company
entered into an Asset Purchase Agreement with Talleyrand Broadcasting, Inc.
("Talleyrand") pursuant to which Talleyrand has agreed to purchase substantially
all of the assets of radio stations WQKK-FM and WGLU-FM in Johnstown,
Pennsylvania and radio stations WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM in State
College, Pennsylvania for the aggregate purchase price of approximately $8.5
million in cash. In addition to the stations it owns in Johnstown and State
College, the Company also will sell to Talleyrand its right of first refusal to
purchase two additional radio stations in Johnstown.
The Asset Purchase Agreement with Talleyrand contains customary
representations and warranties of the parties, and consummation of the sale of
WQKK-FM, WGLU-FM, WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM is subject to certain
conditions including (i) the receipt of FCC consent to the assignment of the
station licenses to Talleyrand and (ii) the receipt of consents to the
assignment to Talleyrand of certain contracts relating to the stations. An
application seeking FCC approval was filed with the FCC on October 10, 1997. The
FCC approval of the application has been delayed beyond the normal time frame by
virtue of questions about the purchaser's market share if the transaction were
consummated. The Company is uncertain when a decision will be forthcoming. If
the transaction is consummated, it is expected that the proceeds from the sale
of these stations will be used to repay outstanding indebtedness. The Company
does not own any other radio stations in either Johnstown or State College.
THE ALLENTOWN DISPOSITION
WEST-AM, Allentown/Bethlehem, Pennsylvania. On July 15, 1997, the Company
entered into an Asset Purchase Agreement with Maranatha Broadcasting Company,
Inc. ("Maranatha") pursuant to which Maranatha has agreed to acquire from the
Company certain of the assets used in the operation of radio station WEST-AM in
Allentown/Bethlehem. In October 1997, the Company acquired radio station WLEV-FM
from Maranatha, and the assets of WEST-AM constitute a portion of the purchase
price for WLEV-FM.
The Asset Purchase Agreement with Maranatha contains customary
representations and warranties of the parties, and consummation of the sale of
WEST-AM is subject to certain conditions including (i) the receipt of FCC
consent to the assignment of the WEST-AM license to Maranatha and (ii) the
receipt of consents to the assignment to Maranatha of certain contracts relating
to WEST-AM. An application seeking FCC approval was filed on August 21, 1997. A
grant of such application was received on February 6, 1998, and the Company has
filed with the FCC a request for an extension of time to close the transaction.
The Company anticipates that the sale of WEST-AM will close in June 1998. Upon
consummation of such sale, the Company will own two FM radio stations in
Allentown/Bethlehem.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Lawrence R. Wilson.............. 53 Chief Executive Officer, President and Chairman
of the Board of Directors
Donna L. Heffner................ 38 Vice President, Chief Financial Officer,
Treasurer and Secretary
Stuart R. Stanek................ 42 Vice President; President--East Region of
Citadel Broadcasting
D. Robert Proffitt.............. 45 Vice President; President--West Region of
Citadel Broadcasting
Edward T. Hardy................. 49 Vice President; President--Central Region of
Citadel Broadcasting
Patricia Diaz Dennis............ 51 Director
Scott E. Smith.................. 42 Director
Ted L. Snider, Sr............... 69 Director
John E. von Schlegell........... 44 Director
</TABLE>
The five persons presently constituting the Board of Directors of the
Company are serving pursuant to the terms of a Fourth Amended and Restated
Voting Agreement dated as of October 15, 1997 (the "Voting Agreement"), by and
among the Company, the Voting Trustee under the Voting Trust Agreement (as
defined) and certain other stockholders of the Company. It is anticipated that,
in connection with the Offering, (a) the Voting Agreement and a related
Stockholders Agreement among the Company and certain of its stockholders (the
"Stockholders Agreement") will be terminated, (b) the Voting Trust Agreement
will continue in effect until terminated in accordance with its terms, (c)
following amendments to the Company's Certificate of Incorporation and Bylaws,
Messrs. Wilson, Smith, Snider and von Schlegell will become the Class A
Directors and Patricia Diaz Dennis will become the Class B Director, (d) Mr.
Smith, Ms. Dennis and Mr. von Schlegell will continue as members of the
Compensation Committee of the Board of Directors and (e) Messrs. von Schlegell,
Smith and Snider will continue as members of the Audit Committee of the Board of
Directors.
Lawrence R. Wilson co-founded and was a general partner of Predecessor from
1984 to July 1992 and has been the Chief Executive Officer, President and
Chairman of the Board of the Company since it was incorporated in May 1993 and
of Citadel Broadcasting since it was incorporated in August 1991. From 1974 to
1979, Mr. Wilson was Executive Vice President and General Counsel of Combined
Communications Corporation, a national media company, where he handled all
acquisitions and mergers and oversaw the broadcast, newspaper and outdoor
billboard divisions as a part of a five person management committee. From 1979
to 1986, he was engaged in the private practice of law.
Donna L. Heffner joined Predecessor in 1988 as its Controller. Ms. Heffner
has served as Treasurer and Secretary of the Company since it was incorporated
in May 1993 and of Citadel Broadcasting since it was incorporated in August
1991. She has served as Chief Financial Officer of the Company and Citadel
Broadcasting since May 1993 and July 1992, respectively. In January 1997, Ms.
Heffner became Vice President of the Company and Citadel Broadcasting. Ms.
Heffner also served as a director of the Company for several months in 1993 and
as a director of Citadel Broadcasting from 1992 to 1993. From 1982 to 1985 and
in 1987, she was employed by Price Waterhouse, and in 1986, she was employed by
Lowrimore, Warwick & Company as an accountant.
Stuart R. Stanek joined Predecessor in 1986 as a General Manager of KKFM-FM
in Colorado Springs. In 1988, he became General Manager of KCNR-AM/KUBL-FM in
Salt Lake City, in 1991, he was appointed Vice President of Citadel
Broadcasting, in 1992 he was elected to the Board of Directors of Citadel
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Broadcasting and in 1993, he was appointed Vice President and elected to the
Board of Directors of the Company. He served as a Director of the Company and
Citadel Broadcasting until August 1996. Mr. Stanek became President of East
Region for Citadel Broadcasting in June 1997.
D. Robert Proffitt joined Predecessor in 1988 as Vice President--General
Manager of KKFM-FM in Colorado Springs. In 1991, he was appointed Vice President
of Citadel Broadcasting, and in 1993, he was appointed Vice President of the
Company. Mr. Proffitt took over as General Manager of the Company's Albuquerque
operations in 1994. Mr. Proffitt became President of Central Region for Citadel
Broadcasting in June 1997.
Edward T. Hardy founded and was elected President and Chief Executive
Officer of Deschutes in 1994. Mr. Hardy joined the Company in January 1997 as
President of Deschutes following the Company's acquisition of Deschutes. Mr.
Hardy became President of West Region for Citadel Broadcasting and Vice
President of the Company and Citadel Broadcasting in June 1997. From 1984 to
1993, Mr. Hardy was Vice President--General Manager of KUPL AM/FM in Portland.
Patricia Diaz Dennis became a director of the Company and Citadel
Broadcasting in November 1997. Since September 1995, Ms. Dennis has served as
Senior Vice President and Assistant General Counsel for regulation and public
policy of SBC Communications Inc., a company which provides telecommunications
products and services. From March 1993 until joining SBC Communications Inc.,
Ms. Dennis served as special counsel for communications matters for the law firm
of Sullivan & Cromwell. Ms. Dennis served as a commissioner of the FCC from June
1986 to September 1989 and as Assistant Secretary of State for Human Rights and
Humanitarian Affairs in the United States Department of State from August 1992
to January 1993. Ms. Dennis also serves as director for various entities,
including Massachusetts Mutual Life Insurance Company and National Public Radio.
Scott E. Smith has served as a member of the Board of Directors of the
Company since 1993 and of Citadel Broadcasting since 1992. He is an Executive
Vice President of Baker, Fentress & Company ("Baker Fentress"). Since 1989, Mr.
Smith has managed the private placement portfolio of Baker Fentress.
Ted L. Snider, Sr. became a director of the Company and Citadel
Broadcasting in November 1997 following the Company's October 1997 acquisition
of Snider Corporation. Mr. Snider had been Chairman of Snider Corporation since
its incorporation in 1971. Snider Corporation owned two FM and two AM radio
stations, the right to construct an additional FM radio station and the Arkansas
Radio Network.
John E. von Schlegell has served as a member of the Board of Directors of
the Company and Citadel Broadcasting since January 1997. He co-founded and,
since 1991, has managed, Endeavour Capital Fund Limited Partnership ("Endeavour
Capital"), a firm that invests equity capital in privately held businesses
throughout the northwest. Prior to 1991, Mr. von Schlegell was a general partner
at Golder, Thoma & Cressey, a private equity firm based in Chicago.
Following consummation of the Offering, non-employee directors of the
Company will receive an annual fee of $ for their services as directors
of the Company. Directors who are also employees of the Company will not receive
additional consideration for serving as directors, except that all directors
will be reimbursed for travel and out-of-pocket expenses in connection with
their attendance at Board and committee meetings.
BOARD COMPOSITION AND GOVERNANCE MATTERS
Immediately prior to the consummation of the Offering, the Board of
Directors will consist of four Class A Directors and one Class B Director.
Following the Offering, at each annual meeting of the stockholders of the
Company, one director will be elected by the holders of the Convertible
Preferred Stock (the "Class B Director") and the remaining directors will be
elected by the holders of the Common Stock and the Convertible Preferred Stock
voting as a single class (the "Class A Directors").
The Company's Certificate of Incorporation and Bylaws will provide that so
long as any shares of Convertible Preferred Stock are outstanding there shall be
one Class B Director and that the number of
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Class A Directors shall not exceed six and shall be determined from time to time
by the Board of Directors. Class A Directors may be removed only with cause by
the holders of capital stock of the Company then entitled to vote in the
election of directors, and Class B Directors may be removed with or without
cause by the holders of Convertible Preferred Stock. A Class A Director vacancy
created by the removal or resignation of a Class A Director or by the expansion
of the authorized number of Class A Directors may be filled by the remaining
directors then in office, even if less than a quorum. Only holders of
Convertible Preferred Stock may fill a Class B Director vacancy.
In connection with the Recapitalization, only ABRY II and ABRY/CIP will
receive shares of Convertible Preferred Stock and thus will be entitled to elect
the Class B Director. Pursuant to an Amended and Restated Voting Trust Agreement
dated October 15, 1997 (the "Voting Trust Agreement"), the Trustee thereunder
(the "Voting Trustee") votes the shares of ABRY II and ABRY/CIP. See "Principal
Stockholders." The Company has been advised that the Voting Trustee is, and
pursuant to the terms of the Voting Trust Agreement any successor trustee is
required to be, an independent person having no familial or extra-trust business
relationship (within the rules and policies of the FCC under the Communications
Act) with ABRY II, ABRY/CIP or any of their affiliates. At such time that ABRY
II, ABRY/CIP and their respective affiliates no longer exercise sole or shared
dispositive control over at least 50% of the shares of Convertible Preferred
Stock that ABRY II and ABRY/CIP own at the time of consummation of the
Recapitalization, each outstanding share of Convertible Preferred Stock will
automatically convert into one share of Common Stock, the Board of Directors
will cease to be a classified board and the holders of Common Stock will be
entitled to elect and remove all directors in accordance with the terms of the
Company's Certificate of Incorporation, Bylaws and applicable law. See
"Description of Capital Stock."
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EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid to the Company's Chief Executive Officer and each of the other four persons
who were executive officers of the Company during 1997 (collectively, the "Named
Executives"). Information with respect to 1996 compensation is not given for
Messrs. Proffitt and Hardy, as such persons did not begin service as executive
officers of the Company until 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
- ------------------ ---- -------- -------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence R. Wilson...... 1997 $341,256 $120,000(2) -0 - -0 - $3,278(3)
Chief Executive 1996 325,000 81,250(4) $412,041(5) 450,000 2,786(3)
Officer and
President
Donna L. Heffner........ 1997 $140,535 $ 50,000(2) -0 - -0 - $3,086(6)
Vice President and 1996 120,000 20,000(4) -0 - 66,000 2,505(6)
Chief Financial
Officer
Stuart R. Stanek........ 1997 $190,007 $ 30,000(2) -0 - -0 - $2,529(7)
Vice President and 1996 165,000 35,000(4) -0 - 72,000 2,553(7)
President of the
East Region
D. Robert Proffitt...... 1997 $192,211 $ 15,000(2) -0 - -0 - $2,541(8)
Vice President and
President of
Central Region
Edward T. Hardy......... 1997 $150,000 $ 5,000(2) -0 - -0 - $1,026(9)
Vice President and
President of the
West Region
</TABLE>
- ---------------
(1) In accordance with applicable regulations, the amounts set forth in this
column do not include perquisites and other personal benefits received by
the Named Executives unless the aggregate value of such perquisites and
other benefits exceeded the lesser of $50,000 or 10% of the total salary and
bonus reported for the Named Executive.
(2) Bonuses were earned in 1997 and paid in 1997 and 1998. Does not reflect
bonuses earned in 1996 but paid in 1997.
(3) Represents the Company's contribution of $3,200 and $2,708 in 1997 and 1996,
respectively, to the Company's 401(k) Plan, which contributions vest over
five years, and the Company's payment of $78 in each year of premiums for
term life insurance.
(4) Bonuses were earned in 1996, but paid in 1997. Does not reflect bonuses
earned in 1995, but paid in 1996.
(5) Represents $3,404 for personal use of Company-provided vehicle and for goods
and services received through the Company's trade agreements, and the
forgiveness of $408,637 of indebtedness in 1996. See "Certain Transactions."
(6) Represents the Company's contribution of $3,008 and $2,427 in 1997 and 1996,
respectively, to the Company's 401(k) Plan, which contributions vest over
five years, and the Company's payment of $78 in each year of premiums for
term life insurance.
(7) Represents the Company's contribution of $2,451 and $2,475 in 1997 and 1996,
respectively, to the Company's 401(k) Plan, which contributions vest over
five years, and the Company's payment of $78 in each year of premiums for
term life insurance.
(8) Represents the Company's contribution of $2,463 in 1997 to the Company's
401(k) Plan, which contribution vests over five years, and the Company's
payment of $78 of premiums for term life insurance.
(9) Represents the Company's contribution of $1,000 in 1997 to the Company's
401(k) Plan, which contribution vests over five years, and the Company's
payment of $26 of premiums for term life insurance.
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Stock Options. No stock options were granted to the Named Executives during
1997. The following table shows the number and value of unexercised stock
options to purchase shares of Common Stock (rounded to the nearest whole share)
held by the Named Executives as of December 31, 1997. No options were exercised
by the Named Executives in 1997.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS(1)
------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C>
Lawrence R. Wilson........... 334,231/407,717
Donna L. Heffner............. 97,832/109,222
Stuart R. Stanek............. 98,420/113,614
D. Robert Proffitt........... 72,016/100,010
Edward T. Hardy.............. 115,089/88,800
</TABLE>
- ---------------
(1) There was no public trading market for the Common Stock as of December 31,
1997. Accordingly, these values have been calculated on the basis of an
assumed initial public offering price of $ per share, less the
applicable exercise price.
EMPLOYMENT AGREEMENT
In June 1996, the Company entered into an employment agreement with
Lawrence R. Wilson which has an initial term ending in June 2001. Mr. Wilson's
current annual base salary under the agreement is $358,313 which is to be
increased by 5% in January of each year during the term of the agreement. The
agreement also provides for an annual bonus calculated as a percentage of Mr.
Wilson's base salary in effect at the end of the year and based on certain
annual performance criteria of the Company.
Mr. Wilson's employment with the Company will terminate upon Mr. Wilson's
becoming permanently disabled or upon (i) a liquidation or dissolution of the
Company, (ii) a sale, transfer or other disposition of all of the assets of the
Company on a consolidated basis or (iii) any transaction or series of
transactions whereby any person or entity other than ABRY II or its affiliates
or affiliates of the Company, becomes the direct or indirect beneficial owner of
securities of the Company or Citadel Broadcasting representing 50% or more of
the combined voting power of the Company's or Citadel Broadcasting's then
outstanding securities. In such event, Mr. Wilson or his beneficiary will be
entitled to receive Mr. Wilson's then base salary through the end of the month
in which the termination occurs. In addition, upon the affirmative vote or
written consent of not less than 66 2/3% of the members of the Company's Board
of Directors, Mr. Wilson's employment may be terminated with or without cause.
If any such termination is without cause, Mr. Wilson will be entitled to receive
his then current base salary through the end of the then current term of the
employment agreement.
1996 EQUITY INCENTIVE PLAN
The Company has adopted the 1996 Equity Incentive Plan (the "Plan")
pursuant to which all employees of the Company are eligible to receive awards in
the form of non-qualified options and incentive options to purchase Common
Stock, stock appreciation rights, restricted securities and other stock-based
awards as determined by the Board of Directors. The Plan is administered by the
Board of Directors, which determines the price and type of awards granted and
the key managerial employees eligible to receive awards and the terms thereof,
including vesting, all in a manner consistent with the Plan. The Board of
Directors may delegate responsibility for administration of the Plan to a
committee of the Board of Directors. After giving effect to the
Recapitalization, the total number of shares of Common Stock reserved and
available for awards under the Plan (or which may be used to provide a basis of
measurement for an award) is 1,577,646 shares. Shares subject to any option
which terminates or expires unexercised will be available for subsequent grants.
The exercise price of incentive stock options granted under the Plan is to be at
least 100% of the fair market value of the Common Stock on the date of grant
(110% of the fair market value of the Common Stock in the case of an incentive
stock option to an individual who at the time of the grant owns more than 10% of
the combined voting power of the Company's capital stock). The Board of
Directors may provide that an optionee may pay
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<PAGE> 75
for shares upon exercise of an option in cash or by check or by such other
medium or by any combination of media as authorized by the Board of Directors.
The grant of an option may be accompanied by a reload option, which gives an
optionee who pays the exercise price of an option with shares of Common Stock an
additional option to acquire the same number of shares that was used to pay for
the original option at an exercise price of not less than the fair market value
of Common Stock as of the reload option grant date. An unexercised option
normally expires upon termination of employment, provided that the Board of
Directors may permit the holder of the option to exercise it during the 90 days
following termination. Under certain circumstances, including termination of
employment upon retirement, disability or death, the option may be exercised
during an extended period. In the event of termination of employment under
certain circumstances following certain change in control events, an option
generally may be exercised in full during the 90 days following termination. The
Plan also provides for the grant of performance units and shares of restricted
stock, none of which have been granted.
401(K) PLAN
Effective in 1993, the Company adopted a 401(k) Savings Plan (the
"Retirement Plan") for the purpose of providing, at the option of the employee,
retirement benefits to full-time employees of the Company and its subsidiaries
who have been employed for a period of one year or longer. Contributions to the
Retirement Plan are made by the employee and, on a voluntary basis, by the
Company. The Company currently matches 100% of that part of the employee's
deferred compensation which does not exceed 2% of such employee's salary.
A contribution to the Retirement Plan of $0.3 million was made by the
Company during the year ended December 31, 1997.
DIRECTOR COMPENSATION
Ms. Dennis received an annual fee of $20,000 for services as a Board
member. In addition, on November 25, 1997, Ms. Dennis was granted an immediately
exercisable option to purchase 7,500 shares of Common Stock at an exercise price
of $10.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Scott E. Smith, John E. von Schlegell and Patricia Diaz Dennis
and former directors Mark A. Leavitt and Royce Yudkoff were members of the
Compensation Committee of the Citadel Board, which determines compensation
matters for the Company. Such persons are or were also directors of the Company.
Mr. Yudkoff is President of ABRY Holdings, Inc., the general partner of ABRY
Capital, L.P., the general partner of ABRY II and ABRY/CIP. See "Principal
Stockholders."
Investment Banking Relationships. Mark A. Leavitt, a director of the
Company from 1993 to November 1997, is a Managing Director of Prudential
Securities Incorporated, which has provided since 1996, and may in the future
provide, investment banking services to the Company. Such services have been
provided on terms customary in the industry. Prudential Securities Incorporated
was an initial purchaser in the Broadcasting Offerings and is an Underwriter of
the Offering. See "Underwriting." In each of 1995 and 1996, Oppenheimer & Co.,
Inc. ("Oppenheimer") provided investment banking services to the Company. During
such years, Mr. Leavitt was a Managing Director of Oppenheimer. Such services
were provided on terms customary in the industry. Oppenheimer is also a party to
the Voting Agreement, the Securities Purchase and Exchange Agreement (as
defined), the Stockholders Agreement and the Registration Rights Agreement (as
defined).
Repayment of Certain Indebtedness. In October 1996, the Company repaid its
indebtedness to Baker Fentress, which consisted of $7.0 million in principal
amount and $20,534 in accrued and unpaid interest. The Company also paid Baker
Fentress a $420,000 prepayment penalty. Baker Fentress beneficially owns all of
the outstanding shares of one series of preferred stock of the Company which
will be converted into approximately 2,239,236 shares of Common Stock in the
Recapitalization. Scott E. Smith, a director of the Company, is an Executive
Vice President of Baker Fentress. See "Principal Stockholders."
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<PAGE> 76
Registration Rights Agreement. The Company is a party to a Registration
Rights Agreement, dated June 28, 1996, as amended (the "Registration Rights
Agreement"), with Lawrence R. Wilson, Rio Bravo Enterprise Associates, L.P.
("Rio Bravo"), ABRY II, ABRY/CIP, Baker Fentress, Bank of America National Trust
and Savings Association ("Bank of America") (and certain of its employees and
its affiliates), Oppenheimer, Edward T. Hardy, Endeavour Capital, Ted L. Snider,
Sr. and others, which requires the Company to register their shares of Common
Stock of the Company under the Securities Act for offer and sale to the public
(including by way of an underwritten public offering), upon a one-time demand by
such stockholders on or after the earlier of (i) the consummation of an initial
public offering of the Company's Common Stock which is registered pursuant to
the Securities Act or (ii) August 1, 2000, and which entitles such parties to
join in any registration of equity securities of the Company. Consummation of
the Offering will cause such rights to become exercisable. Mr. Wilson owns all
of the capital stock of Rio Bravo, Inc., the sole general partner of Rio Bravo.
Securities Purchase and Exchange Agreement. Pursuant to a Securities
Purchase and Exchange Agreement, dated June 28, 1996, as amended (the
"Securities Purchase and Exchange Agreement"), among the Company, Citadel
Broadcasting, ABRY II, ABRY/CIP, Baker Fentress, Oppenheimer, Endeavour Capital,
Edward T. Hardy, Bank of America Illinois, Ted L. Snider, Sr. and certain other
parties, the Company redeemed outstanding preferred stock held by Bank of
America and certain other parties, repaid the $2.0 million principal balance and
the $17,500 in accrued interest on the Company's Junior Subordinated Convertible
Note Due 1996 dated May 24, 1996 issued to ABRY II, financed four radio station
acquisitions, and paid certain working capital requirements. The transactions
were financed by the Company's issuance of shares of its preferred stock to ABRY
II and to ABRY/CIP for a total consideration of approximately $49.5 million, and
through borrowings under a $20.0 million revolving line of credit with ABRY II
and ABRY/CIP. Simultaneously, four then existing series of capital stock of the
Company held by Baker Fentress, Oppenheimer, Bank of America Illinois and
certain other parties were reclassified.
The Securities Purchase and Exchange Agreement established a commitment
(the "Facility A Commitment") by ABRY II and ABRY/CIP in favor of the Company
for a revolving line of credit in the aggregate principal amount of $20.0
million and against which ABRY II and ABRY/CIP made pro rata advances (the
"Facility A Advances"). At June 30, 1997, there were four Facility A Advances
outstanding, the aggregate principal balance of which was approximately $12.8
million. Contemporaneously with the consummation of the Broadcasting Offerings,
a portion of the proceeds was used to repay advances made to Citadel
Broadcasting by the Company with the proceeds of the Facility A Advances. The
Company repaid the Facility A Advances concurrently with the Broadcasting
Offerings. Thereafter, the Facility A Commitment terminated and ABRY II and
ABRY/CIP have no further obligation to make Facility A Advances.
The Securities Purchase and Exchange Agreement will be terminated in
connection with the Recapitalization.
Voting Trust Agreement. In 1997, the Company paid ABRY II (for the account
of ABRY II and ABRY/CIP) $75,000 to defray the fees and expenses associated with
the Voting Trust, including any fees payable to the Voting Trustee and the
Back-Up Trustees. Each of Christopher P. Hall, J. Walter Corcoran and Harlan A.
Levy, directors of the Company for a portion of 1997, served as either the
Voting Trustee or a Back-Up Trustee in 1997. Mr. Levy currently serves as the
Voting Trustee. For additional information concerning the Voting Trust
Agreement, see "Management--Board Composition and Governance Matters" and
"Principal Stockholders."
Management and Consulting Services Agreement. In June 1996, the Company
entered into a Management Services and Consulting Agreement with ABRY Partners,
Inc. (the "Management and Consulting Services Agreement") which was terminated
in March 1997. Pursuant to the agreement, ABRY Partners, Inc. provided
consultation to the Company's Board of Directors and management on business and
financial matters. The Company paid $37,500 and $62,500 to ABRY Partners, Inc.
under this agreement in 1996 and 1997, respectively, and reimbursed ABRY
Partners, Inc. for reasonable out-of-pocket costs and expenses. ABRY Partners,
Inc. is an affiliate of ABRY II and ABRY/CIP.
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<PAGE> 77
Deschutes Transactions. In connection with the acquisition of Deschutes,
Edward T. Hardy, an officer, director and shareholder of Deschutes prior to its
acquisition by the Company and currently an executive officer of the Company,
and Endeavour Capital, a shareholder of Deschutes prior to its acquisition by
the Company and currently a stockholder of the Company, each received merger
consideration consisting of shares of capital stock of the Company valued at
approximately $206,500 and approximately $7.2 million, respectively. John E. von
Schlegell, a director of the Company, is President and a shareholder of the
general partner of Endeavour Capital. Mr. Hardy also received immediately
exercisable options to purchase 68,754 shares of Common Stock at an exercise
price of $1.64 per share and 24,135 shares of Common Stock at an exercise price
of $5.72 per share in exchange for options to acquire shares of Deschutes
capital stock. Following the Deschutes merger, he was granted options to
purchase an aggregate of 111,000 shares of Common Stock at an exercise price of
$5.72 per share, which options vest 20% per year beginning with the first
anniversary of the date of the grant. In contemplation of the proposed
acquisition of Deschutes, during 1996, the Company made advances to Deschutes to
enable Deschutes to acquire various radio stations and pay-off existing debt. At
December 31, 1996, an aggregate of approximately $18.3 million was due under
these advances, which was credited against the cash portion of the purchase
price for Deschutes.
In connection with the acquisition of Deschutes, the Company entered into
an Agreement Not to Compete with DVS Management, Inc. ("DVS"), the general
partner of Endeavour Capital, a shareholder of Deschutes prior to its
acquisition by the Company, pursuant to which DVS has agreed not to compete in
radio broadcasting in any geographic area or market served or competed in by one
or more of the Company's stations. In consideration for such agreement not to
compete with the Company's stations, the Company paid DVS $100,000 in 1997 and
is obligated to pay DVS $100,000 in 1998. John E. von Schlegell, a director of
the Company, is President and a shareholder of DVS.
In February 1995, the Company sold the assets of six radio stations located
in Montana to Deschutes for the aggregate purchase price of $5.4 million. At the
time of the transaction, Mr. Hardy was a director, executive officer and
shareholder of Deschutes and Endeavour Capital was a shareholder of Deschutes.
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<PAGE> 78
CERTAIN TRANSACTIONS
CERTAIN LOAN TRANSACTIONS
Lawrence R. Wilson, an executive officer and director of the Company, was
indebted to the Company in the amount of $394,297 (including accrued interest of
$46,440) as of December 31, 1995 (the "Principal Shareholder Loan").
Approximately $70,000 of the principal amount of the Principal Shareholder Loan
was advanced by Predecessor to Mr. Wilson in June 1992 for personal purposes,
approximately $27,860 of the Principal Shareholder Loan was advanced by
Predecessor to Mr. Wilson in April 1993 to finance Mr. Wilson's purchase of
capital stock of the Company from a former stockholder and approximately
$250,000 was advanced by the Company to Mr. Wilson in 1994 for personal
purposes. The Principal Shareholder Loan, which bore interest at the rate of
8.5% per annum, was forgiven in June 1996, at which time an aggregate of
$408,637 principal and accrued interest was outstanding. Mr. Wilson's
indebtedness under the Principal Shareholder Loan was secured by certain shares
of capital stock of the Company owned by Mr. Wilson.
In 1995, Mr. Wilson made a short-term unsecured loan of $365,000 to the
Company at an annual interest rate of 10%. The Company repaid such loan in full
in 1996.
SALE AND LEASEBACK OF AIRPLANE
In December 1995, the Company sold to Wilson Aviation, L.L.C., a company
owned by Mr. Wilson and his spouse, an airplane formerly owned by the Company,
for a cash purchase price of approximately $1.3 million. Contemporaneously with
the sale of the airplane, the Company entered into an agreement to lease the
airplane from Wilson Aviation, L.L.C. from December 29, 1995 to December 31,
2001. Under the terms of the lease, the Company is required to pay monthly rent
in the amount of $17,250 and, in addition, to bear all of the costs of the
maintenance, repair and operation of the airplane during the term of the lease.
The sale and leaseback were not independently established in an arm's length
transaction; however, the transaction was reviewed and approved by the Company's
senior lender and the Company believes, based upon such review, that the terms
of the transaction are reasonable.
REAL ESTATE PURCHASE IN CONNECTION WITH ACQUISITION
In order to facilitate the Company's acquisition of KKLI-FM from Tippie
Communications, Inc. ("Tippie") in 1996, Mr. Wilson purchased from a shareholder
of Tippie certain associated real estate located in Colorado Springs, Colorado,
which the Company did not desire to acquire. The purchase price for the real
estate was $350,000. The purchase price and terms of the transaction were
negotiated between Mr. Wilson and the seller of the real estate, and neither the
Company nor Mr. Wilson obtained an independent appraisal of such real estate. In
acquiring the real estate involved, Mr. Wilson did not obtain funds directly or
indirectly from the Company to purchase such property. The Company believes that
its acquisition of KKLI-FM, in the context of the acquisition of the real estate
by Mr. Wilson, was fair to the Company.
LITTLE ROCK AND PROVIDENCE ACQUISITIONS
Ted L. Snider, Sr., who became a director of the Company in November 1997,
and his spouse were the shareholders of Snider Corporation and, in connection
with the Company's acquisition of Snider Corporation and certain other assets
from Mr. Snider and his spouse in October 1997, Mr. Snider and his spouse
received approximately $7.4 million in cash and approximately $4.5 million in
shares of a newly created series of preferred stock of the Company which will be
converted into shares of Common Stock in the Recapitalization. Mr. Snider's son,
Ted Snider, Jr., and nephew, Calvin Arnold, were principal shareholders of
Snider Broadcasting Corporation ("Snider Broadcasting") and of CDB Broadcasting
Corporation ("CDB") and, in connection with the Company's acquisition of Snider
Broadcasting and certain assets from CDB in October 1997, they received
approximately $5.5 million in shares of a newly created series of preferred
stock of the Company which will be converted into shares of Common Stock in the
Recapitalization. In addition, the Company repaid approximately $2.6 million of
indebtedness of Snider Broadcasting and CDB received approximately $4.9 million
in cash. Mr. Arnold is employed by the Company as General Manager of the
Company's radio stations in the Little Rock area.
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<PAGE> 79
Prior to its acquisition by the Company, Snider Corporation transferred to
Mr. Snider and his spouse its rights to operate under an LMA an FM radio station
under construction. Accordingly, the cash portion of the purchase price for
Snider Corporation was reduced by $100,000. Because a designated third party did
not take an assignment and assume the Sniders' rights under the LMA, the Company
accepted an assignment of the LMA and paid the Sniders $100,000.
Effective June 2, 1997, the Company began operating the radio stations
formerly owned by Snider Corporation, Snider Broadcasting and CDB under LMAs
under which an aggregate of approximately $823,000 was paid by the Company to
such entities.
In connection with the Company's September 1997 acquisition of WXEX-FM and
related assets in Providence, Rhode Island, each of Philip Urso and Phillip
Norton acquired ownership of more than five percent of the outstanding shares of
a newly created series of preferred stock of the Company, shares of which series
will be converted into shares of Common Stock in the Recapitalization. Mr. Urso
and Mr. Norton are employed by the Company. Mr. Urso and certain of his family
members were shareholders of Bear Broadcasting Company ("Bear"), which sold
WHKK-FM to the Company in November 1997 for approximately $4.0 million in cash.
From September 15, 1997 until the acquisition of WHKK-FM, the Company operated
WHKK-FM under an LMA pursuant to which the Company reimbursed Bear an aggregate
of approximately $17,000 for certain costs and expenses of station operation.
CONSULTING ARRANGEMENT
During the fiscal year ended December 31, 1996, Michael J. Ahearn, a
director of the Company from 1996 to November 1997, provided financial
consulting services to the Company for which he was paid $83,520. On June 28,
1996, Mr. Ahearn was also granted an option to purchase 12,000 shares of Common
Stock at an exercise price of $5.72 per share. Such option is fully vested.
LEGAL SERVICES
During each of the fiscal years ended December 31, 1995 and 1996, the
Company retained the law firm of Gallagher & Kennedy, P.A. to represent the
Company on various matters. Michael J. Ahearn was a shareholder of such firm and
a director of the Company in such years.
PREPAYMENT AND REDEMPTION OF CERTAIN SECURITIES
On June 28, 1996, pursuant to the Securities Purchase and Exchange
Agreement, the Company prepaid certain Senior Subordinated Notes in the
principal amount of $4.0 million, and funded the Company's redemption of a
portion of the stock purchase warrants, issued under a Senior Subordinated Note
and Warrant Purchase Agreement dated as of October 1, 1993. These Senior
Subordinated Notes and warrants were held, in part, by Bank of America. As of
June 28, 1996 (after giving effect to the redemption), Bank of America held
warrants to purchase 138,101 shares of nonvoting common stock of the Company,
which will be converted into warrants to purchase 414,303 shares of Common Stock
in the Recapitalization.
STOCK REPURCHASE
In June 1996, the Company repurchased shares of capital stock of the
Company then held by Mesirow Capital Partners VI ("Mesirow VI") for an aggregate
of approximately $10.7 million. Mesirow VI had acquired such shares in 1993.
William P. Sutter, Jr., a former director of the Company, was an officer of the
general partner of Mesirow VI. Mesirow VI had been a party to the Registration
Rights Agreement, the Voting Agreement and the Stockholders Agreement.
See also "Management--Compensation Committee Interlocks and Insider
Participation" for a description of certain other transactions involving the
directors, executive officers and certain shareholders of the Company.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock and the Convertible Preferred Stock as
of the effective date of the Recapitalization and after giving effect to the
sale of the shares of Common Stock offered hereby by (i) each person, entity or
group known to the Company to beneficially own more than 5% of the Common Stock
or the Convertible Preferred Stock, (ii) each director of the Company, (iii)
each Named Executive and (iv) all directors and executive officers of the
Company as a group.
Except as indicated below, the persons named have sole voting and
investment power with respect to the shares shown as beneficially owned by them.
The number of shares shown are rounded to the nearest whole share, and
percentages are rounded to the nearest tenth of a percent. Holders of the Common
Stock and holders of the Convertible Preferred Stock are entitled to one vote
per share on all matters submitted to a vote of stockholders generally. Both
classes vote together as a single class on all matters except the election or
removal of the Class B Director and when class voting is required by applicable
law. Only holders of Convertible Preferred Stock are entitled to vote for the
election of the Class B Director. See "Description of Capital Stock."
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
BENEFICIAL OWNERSHIP OWNERSHIP OF
OWNERSHIP OF OF CONVERTIBLE CAPITAL STOCK
COMMON STOCK(1) PREFERRED STOCK AFTER OFFERING(2)
------------------- ------------------- --------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
------------------------ --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Lawrence R. Wilson(3)..................... 2,748,401 30.6% -- -- 2,748,401
1256 E. Dines Point Road
Greenbank, WA 98253
Donna L. Heffner(4)....................... 157,867 1.8 -- -- 157,867
Stuart R. Stanek(5)....................... 186,973 2.2 -- -- 186,973
D. Robert Proffitt(6)..................... 164,417 1.9 -- -- 164,417
Edward T. Hardy........................... 152,267 1.8 -- -- 152,267
Patricia Diaz Dennis...................... 7,500 * -- -- 7,500 *
Scott E. Smith(7)......................... 2,239,236 26.3 -- -- 2,239,236
John von Schlegell(8)..................... 1,255,836 14.7 -- -- 1,255,836
Ted L. Snider, Sr.(9)..................... 349,251 4.1 -- -- 349,251
Rio Bravo Enterprise...................... 2,709,869 30.3 -- -- 2,709,869
Associates, L.P.(3)
1256 E. Dines Point Road
Greenbank, WA 98253
Baker, Fentress & Company................. 2,239,236 26.3 -- -- 2,239,236
200 West Madison
Suite 3510
Chicago, IL 60602
The Endeavour Capital Fund Limited
Partnership............................. 1,255,836 14.7 -- -- 1,255,836
4380 SW Macadam
Suite 460
Portland, OR 97201
ABRY Broadcast Partners II, L.P.(10)...... 8,460,839 49.8 8,460,839 89.0% 8,460,839
18 Newbury Street
Boston, MA 02116
ABRY/Citadel Investment Partners,
L.P.(11)................................ 1,045,722 10.9 1,045,722 11.0% 1,045,722
18 Newbury Street
Boston, MA 02116
Harlan A. Levy(11)........................ 9,506,561 52.7 9,506,561 100% 9,506,561
All directors and executive officers as a
group (9 persons)(12)................... 7,261,748 76.8 -- -- 7,261,748
</TABLE>
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<PAGE> 81
- ---------------
* Less than 1%
(1) The number of shares and percentages are calculated in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on a stockholder by stockholder basis, assuming that each
stockholder converted all securities owned by such stockholder that are
convertible into Common Stock at the option of the holder within 60 days,
and that no other stockholder so converts. The number of shares and
percentage figures include shares covered by options that are currently
exercisable or that are exercisable within 60 days of the anticipated date
of the Recapitalization. The numbers and percentages of shares owned assume
that such outstanding options have been exercised by such respective
stockholders as follows: Lawrence R. Wilson--479,636 shares (including
options held by Rio Bravo); Donna L. Heffner--121,316 shares; Stuart R.
Stanek--122,900 shares; D. Robert Proffitt--94,096 shares; Edward T.
Hardy--115,089 shares; Patricia Diaz Dennis--7,500 shares; Rio
Bravo--441,194 shares; and all directors and executive officers as a
group--940,537 shares.
(2) Represents beneficial ownership of both Common Stock and Convertible
Preferred Stock calculated in accordance with Rule 13d-3 under the Exchange
Act. The numbers and percentages of shares owned assume the conversion of
all shares of Convertible Preferred Stock into shares of Common Stock on a
one-for-one basis and that outstanding options have been exercised as
discussed in footnote (1).
(3) Includes 2,268,675 shares of outstanding Common Stock and 441,194 shares of
Common Stock which may be acquired upon exercise of options that are
currently exercisable or that are exercisable within 60 days of the
anticipated date of the Recapitalization, which shares and options are
owned by Rio Bravo. Mr. Wilson owns all of the capital stock of Rio Bravo,
Inc., the sole general partner of Rio Bravo.
(4) Ms. Heffner's shares are jointly owned by Ms. Heffner and her spouse.
(5) Mr. Stanek's shares are jointly owned by Mr. Stanek and his spouse.
(6) Mr. Proffitt's shares are jointly owned by Mr. Proffitt and his spouse.
(7) Represents shares held by Baker Fentress, as described in the table. Mr.
Smith is an Executive Vice President of Baker Fentress and, since 1989, has
managed its private placement portfolio.
(8) Represents shares held by Endeavour Capital, as described in the table. Mr.
von Schlegell is the Managing Partner of Endeavour Capital.
(9) Does not include 121,713 shares owned by Mr. Snider's spouse.
(10) These shares are held pursuant to the Voting Trust Agreement. By its terms,
the Voting Trust Agreement shall continue in effect until terminated upon
the written agreement of the Company and the holders of voting trust
certificates which represent a majority of the shares held in the voting
trust as determined in accordance with the Voting Trust Agreement. The
Voting Trust also terminates with respect to any shares upon transfer of
such shares to a person who is not an affiliate of ABRY II or ABRY/CIP or
upon a distribution of shares by ABRY II or ABRY/CIP to its partners.
During the term of the Voting Trust Agreement, the Voting Trustee has the
right to vote the shares of stock subject to that Agreement (the "Voting
Trust Shares") and to take part in any shareholders' meetings, including
the right to vote the Voting Trust Shares for the election of directors of
the Company. The Voting Trustee may assign his rights and delegate his
obligations to a successor Voting Trustee, who shall be a Back-Up Trustee
or other person appointed in the manner provided under the terms of the
Voting Trust Agreement.
(11) Represents shares held by Mr. Levy as Voting Trustee under the Voting Trust
Agreement.
(12) Includes shares discussed in footnotes (3), (7) and (8).
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DESCRIPTION OF CAPITAL STOCK
Prior to the consummation of the Offering, the Company will undertake the
Recapitalization. Prior to the Recapitalization, the Company's capital stock
consists of three classes of common stock (collectively, the "Old Common Stock")
and seven classes of preferred stock (collectively, the "Old Preferred Stock").
In connection with the Recapitalization, the Company intends to amend its
Certificate of Incorporation to authorize the Company to issue only shares
of Common Stock, 9,506,561 shares of Convertible Preferred Stock and shares
of undesignated preferred stock (the "Undesignated Preferred Stock"). Upon the
filing of such amendment, (i) each outstanding share of Old Common Stock will be
converted into one share of Common Stock, (ii) each outstanding share of Old
Preferred Stock, other than shares owned beneficially or of record by ABRY II
and ABRY/CIP, will be converted into one share of Common Stock, (iii) each
outstanding share of Old Preferred Stock owned beneficially or of record by ABRY
II and ABRY/CIP will be converted into one share of Convertible Preferred Stock
and (iv) each outstanding option or warrant to acquire shares of Old Common
Stock will be converted into an option to acquire the same number of shares of
Common Stock. Following the foregoing conversions, the Company will effect a
three-for-one stock split of the outstanding shares of Common Stock and
Convertible Preferred Stock.
The following is a description of certain provisions of the Company's
Certificate of Incorporation (the "Certificate of Incorporation") and Bylaws
(the "Bylaws"), as the Certificate of Incorporation and Bylaws are proposed to
be amended prior to the closing of the Offering, and of Nevada's laws on private
corporations, Chapter 78 of the Nevada Revised Statutes (the "NGCL"). The
discussion gives effect to the Recapitalization.
GENERAL
Immediately following the Offering, there will be outstanding shares
( shares if the Underwriters' over-allotment option is exercised in full)
of Common Stock, 9,506,561 shares of Convertible Preferred Stock and no shares
of Undesignated Preferred Stock.
VOTING RIGHTS OF COMMON STOCK AND CONVERTIBLE PREFERRED STOCK
Holders of the Common Stock and the Convertible Preferred Stock are
entitled to one vote per share on all matters submitted to a vote of
stockholders generally. Both classes vote together as a single class on all
matters except the election or removal of the Class B Director and when class
voting is required by applicable law. Only holders of Convertible Preferred
Stock are entitled to vote for the election of the Class B Director. Immediately
after the Offering, ABRY II and ABRY/CIP together will beneficially own all of
the outstanding Convertible Preferred Stock, representing approximately % of
the voting power of the outstanding capital stock of the Company, and the Voting
Trustee who votes such shares will have the power to elect the Class B Director
and to significantly influence the election of Class A Directors and other
matters submitted to a vote of stockholders.
DIVIDENDS ON COMMON STOCK AND CONVERTIBLE PREFERRED STOCK
Dividends must be paid on both the Common Stock and the Convertible
Preferred Stock at any time dividends are paid on either. The holders of the
Common Stock and the Convertible Preferred Stock are entitled to receive, pro
rata, such dividends as may be declared by the Board of Directors out of funds
legally available therefor. Any dividend so declared and payable in cash,
capital stock of the Company (other than Common Stock or Convertible Preferred
Stock) or other property will be paid equally, pro rata, on the Common Stock and
the Convertible Preferred Stock. Dividends and distributions payable in shares
of Common Stock may only be paid on Common Stock and dividends and distributions
payable in shares of Convertible Preferred Stock may only be paid on Convertible
Preferred Stock. Pursuant to any such dividend or distribution, each share of
Convertible Preferred Stock will receive a number of shares of Convertible
Preferred Stock equal to the number of shares of Common Stock payable on each
share of Common Stock.
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OTHER PROVISIONS APPLICABLE TO THE COMMON STOCK AND THE CONVERTIBLE PREFERRED
STOCK
There are no preemptive rights to subscribe for any additional securities
which the Company may issue, and there are no redemption provisions or sinking
fund provisions applicable to the Common Stock or the Convertible Preferred
Stock, nor is either class subject to calls or assessments by the Company.
In the event of any liquidation, dissolution or winding-up of the affairs
of the Company, holders of Common Stock and Convertible Preferred Stock will be
entitled to share ratably in the assets of the Company remaining after payment
or provision for payment of all of the Company's debts and obligations and
liquidation payments to holders of outstanding shares of Convertible Preferred
Stock or Undesignated Preferred Stock. The Convertible Preferred Stock is senior
to the Common Stock on liquidation to the extent of a liquidation preference of
$0.001 per share.
In the event of a merger or consolidation to which the Company is a party,
each share of Common Stock and Convertible Preferred Stock will be entitled to
receive the same consideration.
To the extent an increase or decrease in the number of outstanding shares
of either Common Stock or Convertible Preferred Stock results from a stock
split, combination or consolidation of shares or other capital reclassification,
the Company is required to take parallel action with respect to the other class
so that the number of shares of each class outstanding immediately following the
stock split, combination or consolidation of shares or other capital
reclassification bears the same relationship to each other as the number of
shares of each class outstanding before such event.
OTHER PROVISIONS APPLICABLE TO CONVERTIBLE PREFERRED STOCK
Each share of Convertible Preferred Stock is convertible at any time at the
option of the holder into one share of Common Stock. In addition, each share of
Convertible Preferred Stock automatically converts into a share of Common Stock
at the time voting and dispositive power with respect thereto is sold,
transferred or otherwise disposed of by ABRY II, ABRY/CIP or a subsequent
permitted transferee to a third party other than an affiliate of either ABRY II
or ABRY/CIP. All shares of Convertible Preferred Stock will convert into shares
of Common Stock at such time that ABRY II, ABRY/CIP and their respective
affiliates no longer exercise sole or shared dispositive control over at least
50% of the shares of Convertible Preferred Stock that ABRY II and ABRY/CIP
beneficially own at the time of consummation of the Recapitalization.
UNDESIGNATED PREFERRED STOCK
The Board of Directors of the Company is authorized, without further action
of the stockholders, to issue up to shares of Undesignated Preferred Stock
in one or more classes or series and to fix the designations, powers,
preferences and the relative participating, optional or other special rights of
the shares of each series and any qualifications, limitations and restrictions
thereon. No classes or series have been designated. Any Undesignated Preferred
Stock issued by the Company may rank prior to the Common Stock and the
Convertible Preferred Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock.
The issuance of Undesignated Preferred Stock could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from, acquiring or seeking to acquire, a significant portion of the
outstanding Common Stock. See "Risk Factors--Concentration of Share Ownership
and Voting Control; Potential Anti-takeover Effects."
CERTAIN ANTI-TAKEOVER EFFECTS
Certificate of Incorporation and Bylaws. Certain provisions of the
Certificate of Incorporation and Bylaws summarized in the following paragraphs
may be deemed to have anti-takeover effects. These provisions may have the
effect of discouraging a future takeover attempt which is not approved by the
Board of Directors, but which individual Company stockholders may deem to be in
their best interests or in which stockholders may receive a substantial premium
for their shares over then-current market prices. As a result, stockholders who
might desire to participate in such a transaction may not have an opportunity to
do so. See "Risk Factors--Concentration of Share Ownership and Voting Control;
Potential Anti-takeover Effects."
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Number of Directors; Removal; Filling Vacancies. The Certificate of
Incorporation and Bylaws provide that, for so long as any shares of Convertible
Preferred Stock are outstanding, the number of Class B Directors shall be one
and the number of Class A Directors shall not exceed six and shall be fixed from
time to time with the consent of a majority of the Board of Directors. Moreover,
the Certificate of Incorporation provides that Class A Directors may only be
removed with cause and that the Class B Director may be removed with or without
cause. Removal of a Class A Director requires the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock of the
Company then entitled to vote at an election of directors, and removal of a
Class B Director requires the affirmative vote of the holders of at least a
majority of the outstanding Convertible Preferred Stock. These provisions
prevent stockholders from removing any incumbent Class A Director without cause
and allow a majority of the incumbent directors to add additional Class A
Directors without approval of stockholders until the next annual meeting of
stockholders at which directors are elected.
Advance Notice of Nominations and Stockholder Proposals. The Bylaws
contain a provision requiring at least but not more than days' advance
notice by a stockholder of a proposal or director nomination that such
stockholder desires to present at any annual or special meeting of stockholders,
which would prevent a stockholder from making a proposal or a director
nomination at a stockholder meeting without the Company having advance notice of
the proposal or director nomination. This provision could make a change in
control more difficult by providing the directors of the Company with more time
to prepare an opposition to a proposed change in control.
Foreign Ownership. The Certificate of Incorporation permits restriction on
the ownership, voting and transfer of the Company's capital stock in accordance
with the Communications Act and the rules of the FCC, to prohibit ownership of
more than 20% of the Company's outstanding capital stock (or more than 20% of
the voting rights it represents) by or for the account of aliens or corporations
otherwise subject to domination or control by aliens. See "Business--Federal
Regulation of Radio Broadcasting." The Certificate of Incorporation also
authorizes the Company's Board to prohibit any transfer of the Company's capital
stock that would cause the Company to violate this prohibition. The Company's
Board of Directors may also prohibit the ownership, voting or transfer of any
portion of its outstanding capital stock to the extent the ownership, voting or
transfer of such portion would cause the Company to violate, or would otherwise
result in violation of, any provision of the Communications Act or the rules,
regulations and policies promulgated by the FCC under the Communications Act. No
stockholders may exercise any voting rights the result of which would cause the
Company to be in violation of the rules, regulations or policies of the FCC.
Nevada General Corporation Law. Under certain circumstances, the following
provisions of the NGCL may delay or make more difficult acquisitions or changes
of control of the Company and may make it more difficult to accomplish
transactions that stockholders may otherwise believe to be in their best
interests. Such provisions may also have the effect of preventing changes in the
Company's management. The Company's Certificate of Incorporation and Bylaws do
not exclude it from these provisions of the NGCL.
Control Share Acquisitions. Under Sections 78.378 to 78.3793 of the NGCL
(the "Control Share Act"), an "acquiring person," who acquires a "controlling
interest" in an "issuing corporation" may not exercise voting rights on any
"control shares" unless such voting rights are conferred by a majority vote of
the disinterested stockholders of the issuing corporation at an annual meeting
or at a special meeting of such stockholders held upon the request and at the
expense of the acquiring person. If the control shares are accorded full voting
rights and the acquiring person acquires control shares with a majority or more
of all the voting power, any stockholder, other than the acquiring person, who
does not vote for authorizing voting rights for the control shares, is entitled
to demand payment for the fair value of their shares, and the corporation must
comply with the demand. For the above provisions, "acquiring person" means
(subject to certain exceptions) any person who, individually or in association
with others, acquires or offers to acquire, directly or indirectly, a
controlling interest in an issuing corporation. "Controlling interest" means the
ownership of outstanding voting shares of an issuing corporation sufficient to
enable the acquiring person, individually or in association with others,
directly or indirectly, to exercise (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, and/or (iii) a
majority or more of the voting power of the issuing corporation in the election
of directors. The Control Share Act is triggered as a stockholder moves from one
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level to the next. Voting rights must be conferred by a majority of the
disinterested stockholders as each threshold is reached and/or exceeded.
"Control shares" means those outstanding voting shares of an issuing corporation
which an acquiring person (1) acquires or offers to acquire in an acquisition or
(2) acquires within 90 days immediately preceding the date when the acquiring
person became an acquiring person. "Issuing corporation" means a corporation
that is organized in Nevada, has 200 or more stockholders (at least 100 of whom
are stockholders of record and residents of Nevada) and does business in Nevada
directly or though an affiliated corporation. The above does not apply if the
articles of incorporation or bylaws of the corporation in effect on the 10th day
following the acquisition of a controlling interest by an acquiring person
provide that said provisions do not apply. The Company's Certificate of
Incorporation and Bylaws do not exclude it from the restrictions imposed by such
provisions. However, unless and until the Company has 200 or more stockholders
at least 100 of whom are stockholders of record and resident in Nevada, the
Control Share Act will not apply to the Company.
Certain Business Combinations. Sections 78.411 to 78.444 of the NGCL (the
"Business Combinations Act") restrict the ability of a "resident domestic
corporation" to engage in any combination with an "interested stockholder" for
three years following the interested stockholder's date of acquiring the shares
that cause such stockholder to become an interested stockholder, unless the
combination or the purchase of shares by the interested stockholder on the
interested stockholder's date of acquiring the shares that cause such
stockholder to become an interested stockholder is approved by the board of
directors of the resident domestic corporation before that date. If the
combination was not previously approved, the interested stockholder may effect a
combination after the three-year period only if such stockholder receives
approval from a majority of the disinterested shares or the offer meets certain
fair price criteria. For the above provisions, "resident domestic corporation"
means a Nevada corporation that has 200 or more stockholders. The provisions of
the Business Combinations Act do not apply to any combination of a resident
domestic corporation which does not, as of the date of acquiring shares, have a
class of voting shares registered with the Commission under Section 12 of the
Exchange Act, unless the corporation's articles of incorporation provide
otherwise. "Interested stockholder," when used in reference to any resident
domestic corporation, means any person, or its subsidiaries, who is (i) the
beneficial owner, directly or indirectly, of 10% or more of the voting power of
the outstanding voting shares of the resident domestic corporation or (ii) an
affiliate or associate of the resident domestic corporation and, at any time
within three years immediately before the date in question, was the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the then
outstanding shares of the resident domestic corporation. The above does not
apply to corporations that so elect in a charter amendment approved by a
majority of the disinterested shares. Such a charter amendment, however, would
not become effective for 18 months after its passage and would apply only to
stock acquisitions occurring after its effective date. The Company's Certificate
of Incorporation does not exclude it from the restrictions imposed by such
provisions. If, as is likely, the Company will have at least 200 stockholders
following the Offering, the Business Combinations Act will apply to the Company.
Directors' Duties. Section 78.138 of the NGCL allows directors and
officers, in exercising their respective powers to further the interests of the
corporation, to consider the interests of the corporation's employees,
suppliers, creditors and customers. They can also consider the economy of the
state and the nation; the interests of the community and of society and the long
and short-term interests of the corporation and its stockholders, including the
possibility that these interests may be best served by the continued
independence of the corporation. Directors may resist a change or potential
change in control if the directors, by a majority vote of a quorum, determine
that the change or potential change is opposed to or not in the best interest of
the corporation. In so determining, the board of directors may consider the
interests described above or have reasonable grounds to believe that, within a
reasonable time, the debt created as a result of the change in control would
cause the assets of the corporation or any successor to be less than the
liabilities or would render the corporation or any successor insolvent or lead
to bankruptcy proceedings.
LIMITATIONS ON LIABILITIES AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitations on Liabilities. Consistent with the NGCL, the Certificate of
Incorporation contains a provision eliminating or limiting liability of
directors to the Company and its stockholders for damages for breach of
fiduciary duty as a director. The provision does not, however, eliminate or
limit the personal liability
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of a director (i) for acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law or (ii) for unlawful distributions in
violation of the NGCL. This provision offers persons who serve on the Board of
Directors of the Company protection against awards of monetary damages resulting
from breaches of their fiduciary duty, except as indicated above. As a result of
this provision, the ability of the Company or a stockholder thereof to
successfully prosecute an action against a director for a breach of his
fiduciary duty is limited. However, the provision does not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his fiduciary duty. The Commission has taken the
position that the provision will have no effect on claims arising under the
federal securities laws.
Indemnification. The Certificate of Incorporation and Bylaws provide for
mandatory indemnification rights to the maximum extent permitted by applicable
law, subject to limited exceptions, to any director or officer of the Company
who, by reason of the fact that he is a director or officer of the Company, is
involved in a legal proceeding of any nature. Such indemnification rights
include reimbursement for expenses incurred by such director or officer in
advance of the final disposition of such proceeding in accordance with the
applicable provisions of the NGCL. The Company also maintains directors' and
officers' liability insurance.
QUOTATION OF COMMON STOCK; TRANSFER AGENT AND REGISTRAR
The Company intends to apply for the Common Stock to be included in the
Nasdaq National Market under the symbol "CITC." The Company has selected
as the transfer agent and registrar for the Common Stock.
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DESCRIPTION OF INDEBTEDNESS
EXISTING LOAN AGREEMENT
On October 9, 1996, Citadel Broadcasting, Deschutes f/k/a Deschutes
Acquisition Corporation (now merged into Citadel Broadcasting), Citadel License
and Deschutes License, Inc. (now merged into Citadel License) (collectively, the
"Borrowers") entered into a loan agreement (as thereafter amended, the "Credit
Facility") with FINOVA Capital Corporation, as administrative agent (the
"Agent"), and other lending institutions party thereto (the "Lenders").
On July 3, 1997, the Borrowers, the Agent and the Lenders entered into
amendments to the Credit Facility which permitted the issuance of the
Broadcasting Notes and the Broadcasting Exchangeable Preferred Stock subject to
certain limitations and restrictions regarding, among other things, redemption
of or payment prior to maturity of principal on the Broadcasting Notes or the
Broadcasting Exchange Debentures, if issued, the redemption of or exchange of
the Broadcasting Exchangeable Preferred Stock and the payment of cash dividends
on the Broadcasting Exchangeable Preferred Stock. The amendments to the Credit
Facility provided for a revolving loan (the "Revolving Loan"), initially in the
principal amount of $150.0 million, which includes a $5.0 million letter of
credit facility (the "L/C Facility"). A portion of the proceeds of the
Broadcasting Offerings was used to repay a portion of Borrowers' indebtedness
under the Credit Facility. As of April 23, 1998, the Credit Facility allowed for
borrowings of up to $145.0 million.
Revolving Loan
As of April 23, 1998, the outstanding principal amount of the Revolving
Loan under the Credit Facility was approximately $121.1 million, and there was
no interest accrued thereon. The Revolving Loan will be due on September 30,
2003 (the "Maturity Date") and it may be drawn upon, subject to certain
conditions, for certain acquisitions, working capital and other permitted uses.
On the last business day of each quarter, the Revolving Loan commitment is to be
reduced by an amount increasing from $2.5 million at December 31, 1997 to
approximately $8.1 million at June 30, 2003. The Credit Facility also provides
for certain additional mandatory reductions in the Revolving Loan commitment.
The Borrowers will be required to pay any amount by which the outstanding
principal balance exceeds the Revolving Loan commitment, as adjusted. The
remaining principal balance of the Revolving Loan shall be due and payable on
the Maturity Date. At the Borrowers' election (a) any portion of the Revolving
Loan which has been prepaid or repaid may be reborrowed and (b) the maximum
amount of the Revolving Loan commitment may be permanently reduced.
L/C Facility
The L/C Facility provides for, subject to certain limitations, the issuance
of letters of credit to be used by Borrowers as security for the obligations of
Borrowers under agreements entered into in connection with certain radio station
acquisitions and for such other purposes as may be approved by the Agent
("Permitted Letters of Credit"). The Borrowers will be required to pay a
quarterly fee equal to 1.25% of the amount of each Permitted Letter of Credit
from time to time outstanding. No letters of credit are currently issued.
Prepayments
Voluntary prepayments of the amended Credit Facility are permitted without
premium or penalty. Mandatory prepayment of the amended Credit Facility will be
required if the Total Leverage Ratio (as defined in the Credit Facility) as of
the end of each year is 4.5 or greater. The amount of the mandatory prepayment
shall be the lesser of (a)(i) 66 2/3% of the Excess Cash Flow (as defined in the
Credit Facility) if the Total Leverage Ratio as of the end of such year exceeds
5.5 and (ii) 50% of the Excess Cash Flow if the Total Leverage Ratio as of the
end of each such year is 4.5 to 5.5, inclusive, or (b) an amount by which Cash
Equivalents (as defined in the Credit Facility), as of the last day of March in
which the Borrowers are required to deliver financial statements, exceeds $5.0
million. Notwithstanding the foregoing, upon retirement of the Credit Facility,
Citadel Broadcasting will be required to pay a fee in the maximum amount of $0.7
million as of April 23, 1998, which amount will decline quarterly based on the
amount of outstanding borrowings under the amended Credit Facility.
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Interest Rates
The Credit Facility bears interest at a rate equal to the applicable Base
Rate (as defined in the Credit Facility) in effect from time to time plus the
Applicable Margin (as defined in the Credit Facility) or, at the written
election of the Borrowers, at a rate equal to the applicable LIBOR Rate (as
defined in the amended Credit Facility) in effect from time to time as
determined by the Agent for the respective Interest Period (as defined in the
Credit Facility), plus the Applicable Margin. The Borrowers' right to elect a
LIBOR Rate will be subject to certain limitations. The Applicable Margins for
the Credit Facility are expected to range between 0.50% and 1.75% for the Base
Rate and 1.50% and 2.75% for the LIBOR Rate, depending on the Total Leverage
Ratio from time to time. Except as otherwise provided with respect to voluntary
and mandatory prepayments, interest on the Credit Facility is payable quarterly
in arrears on the last business day of each quarter. At April 23, 1998, the
interest rate under the Credit Facility was 8.40625%.
Other Fees
The Borrowers are required to pay to the Agent an unused commitment fee on
the last business day of each quarter, which equals the product of the Maximum
Revolving Loan Commitment (as defined in the Credit Facility) for the preceding
quarter minus the average outstanding principal balance of the Revolving Loan
during such preceding quarter, multiplied by 0.125%. This multiplier will be
reduced to 0.09375% if the Total Leverage Ratio calculated as of the last day of
the quarter preceding such quarter was less than 4.5. The Borrowers are required
to pay an annual agency fee of $50,000 in October of each year.
Security and Guarantee
Subject to certain permitted liens, the Credit Facility is secured by (a) a
first priority pledge on all of the Borrowers' capital stock other than the
Broadcasting Exchangeable Preferred Stock, (b) a first priority security
interest in all the existing and after acquired property of the Borrowers,
including, without limitation, accounts, machinery, equipment, inventory,
general intangibles, investment property and insurance on the life of Lawrence
R. Wilson, and (c) all proceeds of the foregoing. The Credit Facility is also
guaranteed by the Company pursuant to a guaranty (the "Guaranty").
Change of Control
The Credit Facility provides that a change in control or ownership will be
an Event of Default. A change in control or ownership shall occur if (a) the
Company shall cease to own all of the capital stock of Citadel Broadcasting
(other than the Broadcasting Exchangeable Preferred Stock), (b) Citadel
Broadcasting shall cease to own or control all of the capital stock of its
subsidiaries, (c) any person (including entities) or affiliates of such person,
except Mr. Wilson or ABRY II or their respective affiliates, own capital stock
possessing more than 35.0% of the voting power of all voting stock of the
Company or (d) Mr. Wilson shall die, become permanently disabled or cease, for a
period in excess of 60 days, to devote his full business time to the operation
of the Borrowers' broadcasting business, unless Mr. Wilson is replaced by a
person reasonably acceptable to certain Lenders within 90 days after the
occurrence of any such event.
Covenants
The Credit Facility contains customary restrictive covenants, which, among
other things, and with certain exceptions, will limit the ability of the
Borrowers to incur additional indebtedness and liens in connection therewith,
enter into certain transactions with affiliates, pay dividends, consolidate,
merge or affect certain asset sales, issue additional stock, make certain
capital or overhead expenditures, make certain investments, loans or prepayments
and change the nature of their business. The Borrowers are also required to
satisfy certain financial covenants, which will require the Borrowers to
maintain specified financial ratios and to comply with certain financial tests,
such as ratios for maximum leverage, minimum interest coverage and minimum fixed
charges.
Events of Default
The Credit Facility contains customary Events of Default, including without
limitation: (a) failure of Borrowers to pay all or any portion of the principal
balance of the amended Credit Facility when due or to pay
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any other of the Borrowers' Obligations (as defined in the amended Credit
Facility) within five days after becoming due and payable; (b) failure of
Borrowers to observe or perform certain affirmative covenants or agreements,
specifically those pertaining to legal existence, good standing, insurance,
environmental matters, the interest hedge contract and all negative covenants;
(c) failure of Borrowers or the Company to observe or perform any other covenant
or agreement contained in the amended Credit Facility or related documents which
is not remedied within 30 days of written notice; (d) breach of warranty or
representation and/or false or misleading statements by Borrowers or the Company
made in connection with the amended Credit Facility or related documents; (e)
certain defaults, including payment defaults, by Borrowers, under other
agreements relating to indebtedness; (f) failure of Borrowers or the Company to
generally pay debts as they become due or to be adjudicated insolvent; (g)
Borrowers' or the Company's filing, or consent to the filing against it, of a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy or insolvency under the law of any jurisdiction or making of an
assignment for the benefit of creditors, or the appointment of a custodian,
receiver or trustee for the Borrowers or the Company under certain
circumstances; (h) failure of the Borrowers or the Company to discharge certain
judgments and awards against any of them; (i) revocation, termination,
suspension or adverse modification of any license which is material to the
continuation of the Borrowers' broadcasting business; (j) seizure or failure to
maintain any item of collateral provided as security under the amended Credit
Facility; (k) complete interruption of on-air broadcast operations in two or
more markets at any time for more than 72 hours during any consecutive ten-day
period; (l) existence of certain conditions which result in actual or potential
liability to Borrower or any ERISA affiliate for its pension plan which creates
a material adverse effect in the opinion of certain Lenders; (m) a change of
ownership or control; (n) failure of the Guaranty to remain in full force and
effect; and (o) the Company's denial or disaffirmance of obligations under the
Guaranty or its failure to make payment when due.
Upon the occurrence of an Event of Default, with certain limitations, the
Borrowers' obligations under the Credit Facility which are at that time
outstanding may become automatically accelerated.
BROADCASTING NOTES
On July 3, 1997, Citadel Broadcasting offered and sold $101.0 million
aggregate principal amount of 10 1/4% Senior Subordinated Notes due 2007. The
Broadcasting Notes were issued pursuant to the Broadcasting Notes Indenture
dated as of July 1, 1997 among Citadel Broadcasting, Citadel License and The
Bank of New York, as trustee. Interest on the Broadcasting Notes is payable
semi-annually at a rate of 10 1/4% per annum, and the Broadcasting Notes mature
on July 1, 2007.
The Broadcasting Notes are unconditionally guaranteed on a senior
subordinated basis by Citadel License, and will be similarly guaranteed by
future Restricted Subsidiaries (as defined in the Broadcasting Notes Indenture).
The Broadcasting Notes are unsecured senior subordinated obligations of Citadel
Broadcasting and are subordinated to all Senior Debt (as defined in the
Broadcasting Notes Indenture) of Citadel Broadcasting, including indebtedness
under the Credit Facility.
The Broadcasting Notes are redeemable, in whole or in part, at the option
of Citadel Broadcasting, at any time on or after July 1, 2002, at the redemption
prices set forth in the Broadcasting Notes Indenture (ranging from 105.125% to
101.025%), plus accrued and unpaid interest, if any, to the date of redemption.
In addition, at any time prior to July 1, 2000, Citadel Broadcasting may, at its
option, redeem a portion of the Broadcasting Notes with the net proceeds of one
or more Public Equity Offerings (as defined in the Broadcasting Notes
Indenture), at a redemption price equal to 110.25% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of redemption;
provided, however, that after any such redemption there is outstanding at least
$75.0 million aggregate principal amount of the Broadcasting Notes. Upon the
occurrence of a Change of Control (as defined in the Broadcasting Notes
Indenture), Citadel Broadcasting is required to make an offer to purchase all of
the then outstanding Broadcasting Notes at a price equal to 101.0% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
repurchase date.
Citadel Broadcasting also is required to offer to repurchase Broadcasting
Notes at 100.0% of their principal amount plus accrued and unpaid interest to
the date of redemption in the event that the net proceeds of certain asset sales
of Citadel Broadcasting or its Restricted Subsidiaries are not used within 12
months after the occurrence of such sales to permanently reduce Senior Debt of
Citadel Broadcasting and/or to make an
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investment in or acquire replacement assets or assets that will be used in the
broadcast business or businesses reasonably related thereto.
The Broadcasting Notes Indenture contains certain covenants which, among
other things, restrict the ability of Citadel Broadcasting and its subsidiaries
with respect to (i) the incurrence of additional debt; (ii) restricted payments;
(iii) dividend and other payment restrictions affecting certain subsidiaries;
(iv) asset dispositions; (v) certain asset swaps; (vi) transactions with
affiliates; (vii) issuances and sales of stock of certain subsidiaries; (viii)
liens; and (ix) consolidations, mergers or sales of assets.
Events of default under the Broadcasting Notes Indenture include, among
other things, payment defaults, covenant defaults, cross-defaults to certain
other indebtedness, judgment defaults and certain events of bankruptcy and
insolvency.
BROADCASTING EXCHANGEABLE PREFERRED STOCK
On July 3, 1997, Citadel Broadcasting also offered and sold 1.0 million
shares of 13 1/4% Series A Exchangeable Preferred Stock, no par value. The
Broadcasting Exchangeable Preferred Stock was sold for, and has a liquidation
preference of, $100.0 per share. Dividends on the Broadcasting Exchangeable
Preferred Stock accumulate from the date of issuance and are payable
semi-annually at a rate of 13 1/4% of the liquidation preference per share.
Dividends on the Broadcasting Exchangeable Preferred Stock are payable in cash
or, at the option of Citadel Broadcasting, on or prior to July 1, 2002, in
additional shares of Broadcasting Exchangeable Preferred Stock. On January 1,
1998, Citadel Broadcasting issued an additional 65,514 shares of Broadcasting
Exchangeable Preferred Stock in payment of dividends on the then outstanding
shares of Broadcasting Exchangeable Preferred Stock.
The Broadcasting Exchangeable Preferred Stock is redeemable, in whole or in
part, at the option of Citadel Broadcasting, at any time on or after July 1,
2002, at the redemption prices set forth in the Broadcasting Certificate of
Designation (ranging from 107.729% to 101.104%), plus accumulated and unpaid
dividends, if any, to the date of redemption. In addition, at any time prior to
July 1, 2000, Citadel Broadcasting may, at its option, redeem up to an aggregate
of 35% of the shares of Broadcasting Exchangeable Preferred Stock with the net
proceeds of one or more Public Equity Offerings (as defined in the Broadcasting
Certificate of Designation), at a redemption price equal to 113.25% of the
liquidation preference thereof, plus accumulated and unpaid dividends, if any,
to the date of redemption; provided, however, that after any such redemption
there is outstanding at least $75.0 million aggregate liquidation preference of
the Broadcasting Exchangeable Preferred Stock. Citadel Broadcasting is required,
subject to certain conditions, to redeem all of the Broadcasting Exchangeable
Preferred Stock outstanding on July 1, 2009, at a redemption price equal to 100%
of the liquidation preference thereof, plus accumulated and unpaid dividends, if
any, to the date of redemption. Upon the occurrence of a Change of Control (as
defined in the Broadcasting Certificate of Designation), Citadel Broadcasting is
required to make an offer to purchase all of the then outstanding shares of
Broadcasting Exchangeable Preferred Stock at a price equal to 101.0% of the
liquidation preference thereof, plus accumulated and unpaid dividends, if any,
to the repurchase date.
Subject to certain conditions, the Broadcasting Exchangeable Preferred
Stock is exchangeable in whole, but not in part, at the option of Citadel
Broadcasting, on any dividend payment date, for Citadel Broadcasting's 13 1/4%
Subordinated Exchange Debentures due 2009. See "--Broadcasting Exchange
Debentures."
The Broadcasting Certificate of Designation contains certain covenants
which, among other things, restrict the ability of Citadel Broadcasting and its
subsidiaries with respect to (i) the incurrence of additional debt; (ii)
restricted payments; (iii) issuances and sales of stock of certain subsidiaries;
and (iv) consolidations, mergers or sales of assets.
In the event that, after July 1, 2002, two or more semi-annual dividends
payable on the Broadcasting Exchangeable Preferred Stock are in arrears and
unpaid, or upon the occurrence of certain other events (including failure to
comply with certain covenants and failure to pay the mandatory redemption price
when due), then the holders of a majority of the then outstanding shares of
Broadcasting Exchangeable Preferred Stock, voting separately as a class, will be
entitled to elect two additional directors of Citadel Broadcasting,
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who shall serve until such time as all dividends in arrears or any other
failure, breach or default giving rise to such voting rights is remedied or
waived.
BROADCASTING EXCHANGE DEBENTURES
Subject to certain conditions, the Broadcasting Exchangeable Preferred
Stock is exchangeable in whole, but not in part, at the option of Citadel
Broadcasting, on any dividend payment date, for Broadcasting Exchange Debentures
in an aggregate principal amount equal to the then effective liquidation
preference of the Broadcasting Exchangeable Preferred Stock, plus accumulated
and unpaid dividends, if any, to the date fixed for exchange. If such exchange
occurs, the Broadcasting Exchange Debentures will be issued pursuant to the
Broadcasting Exchange Indenture dated as of July 1, 1997 among Citadel
Broadcasting, Citadel License and The Bank of New York, as trustee. Interest on
the Broadcasting Exchange Debentures will be payable semi-annually at a rate of
13 1/4% per annum, and the Broadcasting Exchange Debentures will mature on July
1, 2009. Interest on the Broadcasting Exchange Debentures will be payable in
cash or, at the option of Citadel Broadcasting, on or prior to July 1, 2002, in
additional Broadcasting Exchange Debentures.
The Broadcasting Exchange Debentures will be unconditionally guaranteed on
a senior subordinated basis by Citadel License, and will be similarly guaranteed
by future Restricted Subsidiaries (as defined in the Broadcasting Exchange
Indenture). The Broadcasting Exchange Debentures will be unsecured subordinated
obligations of Citadel Broadcasting and will be subordinated to all existing and
future Senior Debt and Senior Subordinated Debt (each as defined in the
Broadcasting Exchange Indenture) of Citadel Broadcasting, including the
Broadcasting Notes.
The Broadcasting Exchange Debentures will be redeemable, in whole or in
part, at the option of Citadel Broadcasting, at any time on or after July 1,
2002, at the redemption prices set forth in the Broadcasting Exchange Indenture,
plus accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time prior to July 1, 2000, Citadel Broadcasting may, at its
option, redeem Broadcasting Exchange Debentures having an aggregate principal
amount of up to 35.0% of the aggregate principal amount of Broadcasting Exchange
Debentures issued upon exchange of the Broadcasting Exchangeable Preferred Stock
or in payment of interest on the Broadcasting Exchange Debentures, with the net
proceeds of one or more Public Equity Offerings (as defined in the Broadcasting
Exchange Indenture), at a redemption price equal to 113.25% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption; provided, however, that after any such redemption there is
outstanding at least $75.0 million aggregate principal amount of the Exchange
Debentures. Upon the occurrence of a Change of Control (as defined in the
Broadcasting Exchange Indenture), Citadel Broadcasting will be required to make
an offer to purchase all of the then outstanding Broadcasting Exchange
Debentures at a price equal to 101.0% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the repurchase date.
Citadel Broadcasting also will be required to offer to repurchase
Broadcasting Exchange Debentures at 100.0% of their principal amount plus
accrued and unpaid interest to the date of redemption in the event that the net
proceeds of certain asset sales of Citadel Broadcasting or its Restricted
Subsidiaries are not used within 12 months after the occurrence of such sales to
permanently reduce Senior Debt or Senior Subordinated Debt of Citadel
Broadcasting and/or to make an investment in or acquire replacement assets or
assets that will be used in the broadcast business or businesses reasonably
related thereto.
The Broadcasting Exchange Indenture contains certain covenants which, among
other things, restricts the ability of Citadel Broadcasting and its subsidiaries
with respect to (i) the incurrence of additional debt; (ii) restricted payments;
(iii) dividend and other payment restrictions affecting certain subsidiaries;
(iv) asset dispositions; (v) certain asset swaps; (vi) transactions with
affiliates; (vii) issuances and sales of stock of certain subsidiaries; (viii)
liens; and (ix) consolidations, mergers or sales of assets.
Events of default under the Broadcasting Exchange Indenture include, among
other things, payment defaults, covenant defaults, cross-defaults to certain
other indebtedness, judgment defaults and certain events of bankruptcy and
insolvency.
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OTHER INDEBTEDNESS
In connection with the Tele-Media Acquisition, the Company incurred a $1.0
million contingent payment obligation which accrues interest at 5.0% per year.
The Company will be obligated to make such payment to the former holders of the
Tele-Media Bonds only if a particular $2.0 million payment relating to the
Company's Providence, Rhode Island operations is received from a third party.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and after giving effect to the
Recapitalization, the Company will have outstanding shares of Common
Stock ( shares if the Underwriters' over-allotment option is
exercised in full, in each case assuming no exercise of options or warrants) and
9,506,561 shares of Convertible Preferred Stock, all of which shares of
Convertible Preferred Stock are convertible into shares of Common Stock on a
share-for-share basis. These shares will consist of shares of Common
Stock held by the existing stockholders of the Company, and shares of
Common Stock sold in the Offering.
The shares of Common Stock sold in the Offering will immediately be
freely tradable, except that any shares purchased by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act
("Affiliates"), may generally only be sold in compliance with the limitations of
Rule 144 ("Rule 144") under the Securities Act, as described below.
The remaining shares of Common Stock and the shares of Convertible
Preferred Stock outstanding will be "restricted securities" as defined in Rule
144 and, accordingly, none of these securities may be sold unless they are
registered under the Securities Act or sold pursuant to an exemption from
registration. The Company, together with officers, directors and stockholders of
the Company owning upon completion of the Offering an aggregate of shares
of Common Stock and Convertible Preferred Stock, have agreed not to, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable therefor for a period of 180
days from the date of this Prospectus without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, except for
shares offered pursuant to the Offering and the exercise of options granted
under employee benefit plans existing as of the date of consummation of the
Offering or pursuant to the terms of warrants of the Company outstanding as of
the date of consummation of the Offering. Prudential Securities Incorporated
may, in its sole discretion, at any time and without notice, release all or any
portion of the securities subject to such lock-up agreements. Thereafter, all
such restricted securities outstanding could become eligible for future sale in
the public market at varying times following the Offering subject to the
applicable volume, holding period and other limitations of Rule 144. In
addition, the holders of 15,258,085 shares (including shares issuable upon
conversion of the Convertible Preferred Stock and the outstanding warrant
described below) will have certain rights to require the Company to register
such shares under the Securities Act for public offering and sale. See
"Compensation Committee Interlocks and Insider Participation--Registration
Rights Agreement."
In addition to the shares described above, 3,055,239 additional shares of
Common Stock have been reserved for issuance upon exercise of options that have
been or may be granted by the Company, including under the 1996 Equity Incentive
Plan. As of the closing of the Offering, options granted to employees and
consultants to purchase an aggregate of 2,627,952 shares of Common Stock will be
outstanding. The Company intends to file one or more registration statements on
Form S-8 under the Securities Act to register all of these shares of Common
Stock, which registration statements will become effective immediately upon
filing. Shares covered by these registration statements will be eligible for
sale in the public markets upon the effectiveness of such registration
statements (unless such shares are held by an Affiliate). Following the closing
of the Offering, there will also be outstanding a warrant to purchase an
aggregate of 414,303 shares of Common Stock.
Any shares of Common Stock that have not been registered under the
Securities Act could be sold under Rule 144. In general, under Rule 144 as
currently in effect, beginning 90 days after the Offering, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least one year, including a person who may be deemed an Affiliate, is entitled
to sell within any three-month period a number of shares of Common Stock that
does not exceed the greater of one percent of the then outstanding shares of
Common Stock or the average weekly reported trading volume of the Common Stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
subject to certain restrictions relating to manner of sale, notice, and the
availability of current public information about the Company. A person who is
not an Affiliate at any time during the three months preceding a sale, and who
has beneficially owned shares for at least two
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years, would be entitled to sell such shares immediately following the Offering
without regard to the volume limitations, manner of sale provisions, or notice
or other requirements of Rule 144.
Prior to the Offering, there has been no public market for the Common
Stock. Sales of substantial amounts of Common Stock into the public market after
the Offering, or the perception that such sales could occur, could adversely
affect the prevailing market price for the Common Stock and the ability of the
Company to raise equity capital. The Company can make no prediction as to the
effect, if any, that the sale or availability for future sale of shares of
additional Common Stock will have on the market price of the Common Stock
prevailing from time to time.
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UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation,
Goldman, Sachs & Co. and NationsBanc Montgomery Securities LLC are acting as the
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the underwriting agreement between the Company
and the Underwriters (the "Underwriting Agreement"), to purchase from the
Company the number of shares of Common Stock set forth opposite their respective
names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Prudential Securities Incorporated..........................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Goldman, Sachs & Co.........................................
NationsBanc Montgomery Securities LLC.......................
Total.......................................................
</TABLE>
The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the shares of Common Stock offered hereby if any are purchased.
The Underwriters, through their Representatives, have advised the Company
that they propose to offer the shares of Common Stock initially at the initial
public offering price set forth on the cover page of this Prospectus; that the
Underwriters may allow to selected dealers a concession of $ per share;
and that such dealers may reallow a concession of $ per share to
certain other dealers. After the initial public offering, the offering price and
the concessions may be changed by the Representatives.
The Company has granted to the Underwriters an over-allotment option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
additional shares of Common Stock at the initial public offering price less
the underwriting discounts and commissions as set forth on the cover page of
this Prospectus. The Underwriters may exercise such option solely for the
purpose of covering over-allotments incurred in the sale of the shares of Common
Stock offered hereby. To the extent such option to purchase is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to
shares.
The Company, together with officers, directors and stockholders of the
Company owning upon completion of the Offering an aggregate of shares of
Common Stock and Convertible Preferred Stock, have agreed not to, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable therefor for a period of 180
days from the date of this Prospectus without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, except for
shares offered pursuant to the Offering and the exercise of options granted
under employee benefit plans existing as of the date of consummation of the
Offering or pursuant to the terms of warrants of the Company outstanding as of
the date of consummation of the Offering. Prudential Securities Incorporated
may, in its sole discretion, at any time and without notice, release all or any
portion of the securities subject to such lock-up agreements.
The Company has agreed to indemnify the several Underwriters and contribute
to losses arising out of certain liabilities, including liabilities under the
Securities Act.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiations between the Company and the Representatives. Among the factors
to be considered in determining the initial public offering price will be the
economic
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outlook for the industry in which the Company operates, the Company's position
in the industry, the Company's earnings prospects, the Company's financial
position, the ability and experience of the Company's management, the prevailing
conditions of the securities market at the time of the Offering and the stock
prices of publicly traded companies which the Company and the Representatives
believe to be comparable to the Company.
Prudential Securities Incorporated, the lead Underwriter, has provided, and
may in the future provide, investment banking services to the Company. Such
services have been provided under terms customary in the industry. Mark A.
Leavitt, a former member of the Board of Directors of the Company, is a Managing
Director of Prudential Securities Incorporated.
In connection with the Offering, certain Underwriters (and selling group
members if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market prices of the Common Stock
and of the Broadcasting Notes, the Broadcasting Exchangeable Preferred Stock
and, if issued, the Broadcasting Exchange Debentures. Such transactions may
include stabilization transactions effected in accordance with Rule 104 of
Regulation M promulgated by the Commission pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position, up to shares of Common Stock, by
exercising the Underwriters' over-allotment option referred to above. In
addition, Prudential Securities Incorporated, on behalf of the Underwriters, may
impose "penalty bids" under contractual arrangements with the Underwriters
whereby it may reclaim from an Underwriter (or any selling group member
participating in the Offering) for the account of the other Underwriters, the
selling concession with respect to Common Stock that is distributed in the
Offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph are required and, if they are undertaken, they may be
discontinued at any time.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Eckert Seamans
Cherin & Mellott, LLC, Pittsburgh, Pennsylvania. As to matters of Nevada law,
Eckert Seamans Cherin & Mellott, LLC will rely upon the opinion of Lionel Sawyer
& Collins, Las Vegas, Nevada. Certain legal matters related to the Offering will
be passed upon for the Underwriters by Schulte Roth & Zabel LLP, New York, New
York.
EXPERTS
The consolidated financial statements of Citadel Communications Corporation
as of December 31, 1996 and 1997, and for each of the years in the three-year
period ended December 31, 1997, have been included in this Prospectus in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Deschutes River Broadcasting, Inc.
and Subsidiaries as of December 31, 1995 and 1996, and for each of the years in
the two-year period ended December 31, 1996, have been included in this
Prospectus in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Maranatha Broadcasting Company,
Inc.'s Radio Broadcasting Division, as of December 31, 1996, and for the year
then ended, have been included in this Prospectus in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
95
<PAGE> 97
The consolidated financial statements of Tele-Media Broadcasting Company
and its partnership interests as of December 31, 1995 and 1996 and for each of
the years in the three-year period ended December 31, 1996 included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and have been included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Snider Corporation and Snider Broadcasting
Corporation and Subsidiary and CDB Broadcasting Corporation as of December 31,
1995 and 1996 and for each of the years in the two-year period ended December
31, 1996 have been included in this Prospectus in reliance upon the reports of
Erwin & Company, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
The combined financial statements of Pacific Northwest Broadcasting
Corporation and Affiliates as of December 31, 1996 and for the year ended
December 31, 1996 have been included in this Prospectus in reliance upon the
report of Balukoff, Lindstrom & Co., P.A., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all the information set forth in the Registration Statement and in
the exhibits and schedules thereto. For further information concerning the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected, without charge, at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade
Center, 13th Floor, New York, New York 10048; and Citicorp Center, Suite 1400,
500 West Madison Street, Chicago, Illinois 60661. Copies of each such document
may be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington D.C. 20549. The Commission also
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
such materials electronically with the Commission.
The Company intends to distribute to its stockholders annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information for each of the first three quarters of its
fiscal year.
96
<PAGE> 98
GLOSSARY OF CERTAIN DEFINED TERMS
Following is a list of certain defined terms with their respective
definitions, as used in this Prospectus:
"A/C" means an adult contemporary radio programming format.
"AOR" means an album oriented rock radio programming format.
"Broadcast cash flow" means operating income (loss) before depreciation,
amortization and corporate expenses. Although broadcast cash flow is not a
measure of performance calculated in accordance with GAAP, management believes
that it is useful to an investor in evaluating the Company because it is a
measure widely used in the broadcasting industry to evaluate a radio company's
operating performance. However, broadcast cash flow should not be considered in
isolation or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in accordance
with GAAP as a measure of liquidity or profitability.
"Broadcasting Certificate of Designation" means the certificate of
designation governing the Broadcasting Exchangeable Preferred Stock.
"Broadcasting Exchangeable Preferred Stock" means the outstanding shares of
13 1/4% Exchangeable Preferred Stock issued by Citadel Broadcasting.
"Broadcasting Exchange Debentures" means Citadel Broadcasting's 13 1/4%
Subordinated Exchange Debentures due 2009 which are issuable upon conversion of
the Broadcasting Exchangeable Preferred Stock.
"Broadcasting Exchange Indenture" means the indenture dated as of July 1,
1997 governing the Broadcasting Exchange Debentures among Citadel Broadcasting,
Citadel License and The Bank of New York, as trustee.
"Broadcasting Notes" means the outstanding $101.0 million aggregate
principal amount of 10 1/4% Senior Subordinated Notes due 2004, issued by
Citadel Broadcasting and guaranteed by Citadel License.
"Broadcasting Notes Indenture" means the indenture dated as of July 1, 1997
governing the Broadcasting Notes among Citadel Broadcasting, Citadel License and
The Bank of New York, as trustee.
"Broadcasting Offerings" means the July 1997 sale by Citadel Broadcasting
of the Broadcasting Notes and the Broadcasting Exchangeable Preferred Stock.
"CHR" means a contemporary hit radio programming format.
"Communications Act" means the Communications Act of 1934, as amended.
"Completed Transactions" means collectively the Company's February 1997
acquisition of KENZ-FM in Salt Lake City, its April 1997 acquisition of KBER-FM
in Salt Lake City, the Tele-Media Acquisition, the Company's July 1997
acquisition of KNHK-FM in Reno, its September 1997 acquisitions of KTHK-FM in
Tri-Cities and WXEX-FM in Providence, its October 1997 acquisitions of KBEE-FM
and KFNZ-AM in Salt Lake City, WLEV-FM in Allentown/Bethlehem and KARN-AM/FM,
KIPR-FM, KOKY-FM, KKRN-FM, KRNN-AM and the right to construct KAFN-FM in Little
Rock, its November 1997 acquisitions of WHKK-FM in Providence and KURB-FM,
KLAL-FM, KVLO-FM and KLIH-AM in Little Rock, its January 1998 acquisition of
WEMR-AM/FM in Wilkes-Barre/Scranton, its February 1998 acquisition of KQFC-FM,
KKGL-FM and KBOI-AM in Boise, its March 1998 acquisition of WSGD-FM, WDLS-FM and
WCDL-AM in Wilkes-Barre/Scranton, the Recent 1998 Acquisitions and the
Broadcasting Offerings.
"DAB" means digital audio broadcasting.
"DARs" means satellite digital audio radio services.
"Deschutes" means Deschutes River Broadcasting, Inc., now merged with and
into Citadel Broadcasting.
"EBITDA" means operating income (loss) before depreciation and
amortization. Although EBITDA is not a measure of performance calculated in
accordance with GAAP, management believes that it is useful to an investor in
evaluating the Company because it is a measure widely used in the broadcasting
industry to evaluate a radio company's operating performance. However, EBITDA
should not be considered in isolation
97
<PAGE> 99
or as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP as a
measure of liquidity or profitability.
"Heritage" means a station or on-air show that is firmly established in its
format and market and has been so for many years.
"JSA" means a joint sales agreement or similar arrangement under which a
radio station operator sells advertising on behalf of a radio station it does
not own.
"KRST Acquisition" means the acquisition by the Company of all the assets
of radio station KRST-FM in Albuquerque, New Mexico on October 9, 1996.
"Little Rock Acquisitions" means collectively the several transactions
which resulted in the Company owning KARN-AM/FM, KKRN-FM, KIPR-FM, KOKY-FM,
KLAL-FM, KURB-FM, KVLO-FM, KRNN-AM and KLIH-AM and the right to construct
KAFN-FM in Little Rock, Arkansas.
"LMA" means a local marketing agreement or similar arrangement under which
a radio station operator sells advertising on behalf of, and provides
programming to, a radio station it does not own.
"MSA" means metropolitan statistical area.
"Pending Dispositions" means collectively the agreements entered into by
the Company to sell radio stations WQKK-FM and WGLU-FM in Johnstown,
Pennsylvania; WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM in State College,
Pennsylvania; and WEST-AM in Allentown/Bethlehem, Pennsylvania.
"Predecessor" means collectively Citadel Associates Limited Partnership and
Citadel Associates Montana Limited Partnership.
"Recapitalization" means the series of transactions in which the Company
will engage prior to the consummation of the Offering and which will result in
the Company's outstanding capital stock consisting of the Common Stock and
Convertible Preferred Stock.
"Recent 1998 Acquisitions" means the April 1998 acquisitions by the Company
of KIZN-FM and KZMG-FM in Boise, Idaho.
"Telecommunications Act" means the Telecommunications Act of 1996.
"Tele-Media" means Tele-Media Broadcasting Company.
"Tele-Media Acquisition" means the July 1997 acquisition by the Company of
Tele-Media Broadcasting Corporation.
"Tele-Media Bonds" means certain corporate bonds and warrants of Tele-Media
whose redemption was included in the purchase price for the July 1997
acquisition of Tele-Media by the Company.
98
<PAGE> 100
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Independent Auditors' Report................................ F-3
Consolidated Balance Sheets as of December 31, 1996 and 1997
and March 31, 1998 (unaudited)............................ F-4
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997 and the three months
ended March 31, 1997 and 1998 (unaudited)................. F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1995, 1996 and 1997 and the three
months ended March 31, 1998 (unaudited)................... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 and the three months
ended March 31, 1997 and 1998 (unaudited)................. F-7
Notes to Consolidated Financial Statements.................. F-9
DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES
Independent Auditors' Report................................ F-30
Consolidated Balance Sheets as of December 31, 1995 and
1996...................................................... F-31
Consolidated Statements of Operations for the years ended
December 31, 1995 and 1996................................ F-32
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995 and 1996.................... F-33
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1996................................ F-34
Notes to Consolidated Financial Statements.................. F-35
TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP
INTERESTS
Independent Auditors' Report................................ F-43
Consolidated Balance Sheets as of December 31, 1995 and
1996...................................................... F-44
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996.......................... F-45
Consolidated Statements of Deficiency in Net Assets for the
years ended December 31, 1994,
1995 and 1996............................................. F-46
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996.......................... F-47
Notes to Consolidated Financial Statements.................. F-48
Condensed Consolidated Balance Sheet as of June 30, 1997
(unaudited)............................................... F-55
Condensed Consolidated Statements of Operations and Changes
in Deficit for the six months ended June 30, 1996 and 1997
(unaudited)............................................... F-56
Condensed Consolidated Statements of Cash Flows for the six
months ended
June 30, 1996 and 1997 (unaudited)........................ F-57
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-58
SNIDER CORPORATION
Independent Auditors' Report................................ F-59
Balance Sheets as of December 31, 1995 and 1996............. F-60
Statements of Income for the years ended December 31, 1995
and 1996.................................................. F-61
Statements of Stockholders' Equity for the years ended
December 31, 1995 and 1996................................ F-62
Statements of Cash Flows for the years ended December 31,
1995 and 1996............................................. F-63
Notes to Financial Statements............................... F-64
Balance Sheet as of May 31, 1997 (unaudited)................ F-68
Statement of Income for the five months ended May 31, 1997
(unaudited)............................................... F-69
Statement of Stockholders' Equity for the five months ended
May 31, 1997 (unaudited).................................. F-70
Statement of Cash Flows for the five months ended May 31,
1997 (unaudited).......................................... F-71
Note to Financial Statements (unaudited).................... F-72
Balance Sheet as of June 30, 1996 (unaudited)............... F-73
Statement of Income for the six months ended June 30, 1996
(unaudited)............................................... F-74
</TABLE>
F-1
<PAGE> 101
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Statement of Stockholders' Equity for the six months ended
June 30, 1996 (unaudited)................................. F-75
Statement of Cash Flows for the six months ended June 30,
1996 (unaudited).......................................... F-76
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY AND
CDB BROADCASTING CORPORATION
Independent Auditors' Report................................ F-77
Combined Balance Sheets as of December 31, 1995 and 1996.... F-78
Combined Statements of Operations for the years ended
December 31, 1995 and 1996................................ F-79
Combined Statements of Stockholders' Deficit for the years
ended
December 31, 1995 and 1996................................ F-80
Combined Statements of Cash Flows for the years ended
December 31, 1995 and 1996................................ F-81
Notes to Combined Financial Statements...................... F-82
Combined Balance Sheet as of May 31, 1997 (unaudited)....... F-87
Combined Statement of Operations for the five months ended
May 31, 1997 (unaudited).................................. F-88
Combined Statement of Stockholders' Deficit for the five
months ended May 31, 1997 (unaudited)..................... F-89
Combined Statement of Cash Flows for the five months ended
May 31, 1997 (unaudited).................................. F-90
Note to Combined Financial Statements (unaudited)........... F-91
Combined Balance Sheet as of June 30, 1996 (unaudited)...... F-92
Combined Statement of Operations for the six months ended
June 30, 1996 (unaudited)................................. F-93
Combined Statement of Stockholders' Deficit for the six
months ended June 30, 1996 (unaudited).................... F-94
Combined Statement of Cash Flows for the six months ended
June 30, 1996 (unaudited)................................. F-95
MARANATHA BROADCASTING COMPANY, INC.'S RADIO BROADCASTING
DIVISION
Independent Auditors' Report................................ F-96
Balance Sheet as of December 31, 1996 and September 15, 1997
(unaudited)............................................... F-97
Statement of Operations and Division Equity for the year
ended December 31, 1996 and the eight and one-half-month
period ended September 15, 1997 (unaudited)............... F-98
Statement of Cash Flows for the year ended December 31, 1996
and the eight and one-half-month period ended September
15, 1997 (unaudited)...................................... F-99
Notes to Financial Statements............................... F-100
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
Independent Auditors' Report................................ F-103
Combined Balance Sheet as of December 31, 1996.............. F-104
Combined Statement of Operations for the year ended December
31, 1996.................................................. F-105
Combined Statement of Changes in Owners' Equity for the year
ended
December 31, 1996......................................... F-106
Combined Statement of Cash Flows for the year ended December
31, 1996.................................................. F-107
Notes to Combined Financial Statements...................... F-108
Unaudited Combined Balance Sheets as of October 31, 1997.... F-115
Unaudited Combined Statements of Operations for the ten
months ended October 31, 1997............................. F-116
Unaudited Combined Statements of Changes in Owners' Equity
for the ten months ended October 31, 1997................. F-117
Unaudited Combined Statements of Cash Flows for the ten
months ended October 31, 1997............................. F-118
Notes to Unaudited Combined Financial Statements............ F-119
</TABLE>
F-2
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Citadel Communications Corporation:
We have audited the accompanying consolidated balance sheets of Citadel
Communications Corporation and subsidiaries as of December 31, 1996 and 1997 and
the related consolidated statements of operations, shareholders' equity
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Citadel
Communications Corporation and subsidiaries as of December 31, 1996 and 1997 and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
March 26, 1998, except as to note 25
which is as of April 21, 1998
F-3
<PAGE> 103
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 1,588,366 $ 7,684,991 $ 2,792,033
Cash held in escrow................................ -- 718,561 --
Accounts receivable, less allowance for doubtful
accounts of $621,054 in 1996, $808,942 in 1997
and $1,001,643 in 1998........................... 12,199,973 25,744,137 24,317,915
Notes receivable from related parties.............. 118,646 246,455 269,608
Prepaid expenses................................... 595,755 1,532,227 2,271,302
------------ ------------ ------------
Total current assets............................. 14,502,740 35,926,371 29,650,858
Property and equipment, net.......................... 15,208,569 35,242,284 37,103,472
Note receivable...................................... 18,251,402 -- --
Intangible assets, net............................... 51,801,835 268,689,516 286,005,832
Deposits for pending acquisitions.................... 300,000 650,000 --
Other assets......................................... 2,250,778 3,664,123 3,633,078
------------ ------------ ------------
$102,315,324 $344,172,294 $356,393,240
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 1,286,019 $ 4,001,194 $ 2,185,289
Accrued liabilities................................ 2,659,132 9,060,129 8,215,588
Current maturities of notes payable................ 2,500,000 -- --
Notes payable to shareholder....................... 11,817,000 -- --
Current maturities of other long-term
obligations...................................... 435,791 271,352 304,009
------------ ------------ ------------
Total current liabilities........................ 18,697,942 13,332,675 10,704,886
Notes payable, less current maturities............... 75,084,060 90,084,059 107,084,059
Senior subordinated notes payable.................... -- 98,331,117 98,373,254
Other long-term obligations, less current
maturities......................................... 877,600 1,012,649 894,629
Deferred tax liability............................... 1,585,333 23,270,338 26,283,501
Exchangeable preferred stock......................... -- 102,009,531 105,581,675
Commitments and contingencies
Shareholders' equity:
Convertible preferred stock........................ 3,932 4,929 4,929
Class A common stock, $.001 par value; issued and
outstanding 960,000 shares in 1996, 977,127 in
1997 and 985,224 shares in 1998.................. 960 977 986
Class B common stock, $.001 par value; issued and
outstanding 18,832 shares in 1996, 1997 and
1998............................................. 19 19 19
Class C common stock, $.001 par value; issued and
outstanding 74,488 shares in 1996, 1997 and
1998............................................. 74 74 74
Additional paid-in capital......................... 29,531,853 44,877,128 41,331,308
Accumulated deficit................................ (23,466,449) (28,751,202) (33,866,080)
------------ ------------ ------------
Total shareholders' equity....................... 6,070,389 16,131,925 7,471,236
------------ ------------ ------------
$102,315,324 $344,172,294 $356,393,240
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 104
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross broadcasting revenue..... $38,047,879 $50,824,384 $ 99,469,550 $16,071,222 $31,070,596
Less agency commissions...... 3,936,169 5,411,578 9,666,280 1,565,626 2,931,392
----------- ----------- ------------ ----------- -----------
Net broadcasting revenue... 34,111,710 45,412,806 89,803,270 14,505,596 28,139,204
----------- ----------- ------------ ----------- -----------
Operating expenses:
Station operating expenses... 26,832,123 33,232,485 65,245,095 11,276,722 21,897,467
Depreciation and
amortization............... 4,920,730 5,188,419 14,661,092 2,528,636 5,946,338
Corporate general and
administrative............. 2,273,744 3,247,579 3,530,067 750,446 1,117,733
----------- ----------- ------------ ----------- -----------
Operating expenses......... 34,026,597 41,668,483 83,436,254 14,555,804 28,961,538
----------- ----------- ------------ ----------- -----------
Operating income (loss)........ 85,113 3,744,323 6,367,016 (50,208) (822,334)
----------- ----------- ------------ ----------- -----------
Nonoperating expenses (income):
Interest expense............. 5,241,760 6,155,472 12,872,515 2,176,703 4,759,308
Interest income.............. (70,503) (407,581) (439,229) (40,282) (32,909)
Loss (gain) on sale of
property and equipment..... (707,286) 1,749 -- -- --
Other (income) expense,
net........................ (3,221) (8,123) (11,944) 29,333 (4,449)
----------- ----------- ------------ ----------- -----------
Nonoperating expenses,
net..................... 4,460,750 5,741,517 12,421,342 2,165,754 4,721,950
----------- ----------- ------------ ----------- -----------
Loss before income taxes and
extraordinary item........... (4,375,637) (1,997,194) (6,054,326) (2,215,962) (5,544,284)
Deferred income tax
(benefit).................... -- -- (769,573) (35,056) (429,406)
----------- ----------- ------------ ----------- -----------
Loss before extraordinary
item......................... (4,375,637) (1,997,194) (5,284,753) (2,180,906) (5,114,878)
Extraordinary loss on
extinguishment of debt....... -- (1,769,000) -- -- --
----------- ----------- ------------ ----------- -----------
Net loss....................... (4,375,637) (3,766,194) (5,284,753) (2,180,906) (5,114,878)
Dividend requirement for
exchangeable preferred
stock........................ -- -- 6,632,939 -- 3,572,347
----------- ----------- ------------ ----------- -----------
Net loss applicable to common
shares....................... $(4,375,637) $(3,766,194) $(11,917,692) $(2,180,906) $(8,687,225)
=========== =========== ============ =========== ===========
Basic and diluted net loss per
common share................. $ (4.06) $ (3.53) $ (11.17) $ (2.05) $ (8.09)
=========== =========== ============ =========== ===========
Weighted average common shares
outstanding.................. 1,078,332 1,065,517 1,066,489 1,064,527 1,073,258
=========== =========== ============ =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 105
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
------------------------------------------------------------ CLASS A CLASS B CLASS C
SERIES SERIES SERIES SERIES SERIES SERIES SERIES COMMON COMMON COMMON
A B C D E F G STOCK STOCK STOCK
- - - - - - - ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994........ $972 $14 $ 276 $ 688 $ -- $ -- $ -- $960 $74 $44
Series B and D preferred stock
dividend......................... -- -- -- -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- -- -- -- --
---- --- ------ ------ ---- ---- ---- ---- --- ---
Balances, December 31, 1995........ 972 14 276 688 -- -- -- 960 74 44
Series B and D preferred stock
dividend......................... -- -- -- -- -- -- -- -- -- --
Forgiveness of receivable from
shareholder...................... -- -- -- -- -- -- -- -- -- --
Issuance of Series C preferred
stock, 1,656,019 shares.......... -- -- 1,656 -- -- -- -- -- -- --
Preferred stock redemption......... (436) -- (276) (688) -- -- -- -- -- --
Class C common stock redemption.... -- -- -- -- -- -- -- -- -- (25)
Issuance of Series D preferred
stock, 1,512,834 shares, net of
$520,649 issuance costs.......... -- -- -- 1,513 -- -- -- -- -- --
Conversion of Class B common stock
and reclassification............. 210 3 -- -- -- -- -- -- (55) 55
Redemption of warrants............. -- -- -- -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- -- -- -- --
---- --- ------ ------ ---- ---- ---- ---- --- ---
Balances, December 31, 1996........ 746 17 1,656 1,513 -- -- -- 960 19 74
Issuance of Series E preferred
stock, 482,729 shares............ -- -- -- -- 483 -- -- -- -- --
Issuance of Series F preferred
stock, 153,264 shares............ -- -- -- -- -- 153 -- -- -- --
Issuance of Series G preferred
stock, 360,636 shares............ -- -- -- -- -- -- 361 -- -- --
Issuance of Class A common stock,
11,208 shares.................... -- -- -- -- -- -- -- 11 -- --
Conversion of Series D preferred
stock, 5,919 shares.............. -- -- 475 (475) -- -- -- -- -- --
Exercise of stock options.......... -- -- -- -- -- -- -- 6 -- --
Exchangeable preferred stock
dividend......................... -- -- -- -- -- -- -- -- -- --
Net loss........................... -- -- -- -- -- -- -- -- -- --
---- --- ------ ------ ---- ---- ---- ---- --- ---
Balances, December 31, 1997........ 746 17 2,131 1,038 483 153 361 977 19 74
Exercise of stock options
(unaudited)...................... -- -- -- -- -- -- -- 9 -- --
Additional issuance of costs of
exchangeable preferred stock..... -- -- -- -- -- -- -- -- -- --
Exchangeable preferred stock
dividend (unaudited)............. -- -- -- -- -- -- -- -- -- --
Net loss (unaudited)............... -- -- -- -- -- -- -- -- -- --
---- --- ------ ------ ---- ---- ---- ---- --- ---
Balances, March 31, 1998
(unaudited)...................... $746 $17 $2,131 $1,038 $483 $153 $361 $986 $19 $74
==== === ====== ====== ==== ==== ==== ==== === ===
<CAPTION>
TOTAL
ADDITIONAL SHAREHOLDERS'
PAID-IN ACCUMULATED EQUITY
CAPITAL DEFICIT (DEFICIT)
------- ------- ---------
<S> <C> <C> <C>
Balances, December 31, 1994........ $10,463,109 $(15,156,614) $ (4,690,477)
Series B and D preferred stock
dividend......................... -- (111,340) (111,340)
Net loss........................... -- (4,375,637) (4,375,637)
----------- ------------ ------------
Balances, December 31, 1995........ 10,463,109 (19,643,591) (9,177,454)
Series B and D preferred stock
dividend......................... -- (56,664) (56,664)
Forgiveness of receivable from
shareholder...................... (408,637) -- (408,637)
Issuance of Series C preferred
stock, 1,656,019 shares.......... 25,841,918 -- 25,843,574
Preferred stock redemption......... (26,200,576) -- (26,201,976)
Class C common stock redemption.... (390,764) -- (390,789)
Issuance of Series D preferred
stock, 1,512,834 shares, net of
$520,649 issuance costs.......... 23,089,751 -- 23,091,264
Conversion of Class B common stock
and reclassification............. (213) -- --
Redemption of warrants............. (2,862,735) -- (2,862,735)
Net loss........................... -- (3,766,194) (3,766,194)
----------- ------------ ------------
Balances, December 31, 1996........ 29,531,853 (23,466,449) 6,070,389
Issuance of Series E preferred
stock, 482,729 shares............ 7,533,817 -- 7,534,300
Issuance of Series F preferred
stock, 153,264 shares............ 4,249,847 -- 4,250,000
Issuance of Series G preferred
stock, 360,636 shares............ 9,999,639 -- 10,000,000
Issuance of Class A common stock,
11,208 shares.................... 174,909 -- 174,920
Conversion of Series D preferred
stock, 5,919 shares.............. -- -- --
Exercise of stock options.......... 20,002 -- 20,008
Exchangeable preferred stock
dividend......................... (6,632,939) -- (6,632,939)
Net loss........................... -- (5,284,753) (5,284,753)
----------- ------------ ------------
Balances, December 31, 1997........ 44,877,128 (28,751,202) 16,131,925
Exercise of stock options
(unaudited)...................... 40,647 -- 40,656
Additional issuance of costs of
exchangeable preferred stock..... (14,120) -- (14,120)
Exchangeable preferred stock
dividend (unaudited)............. (3,572,347) -- (3,572,347)
Net loss (unaudited)............... -- (5,114,878) (5,114,878)
----------- ------------ ------------
Balances, March 31, 1998
(unaudited)...................... $41,331,308 $(33,866,080) $ 7,471,236
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 106
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss....................... $(4,375,637) $ (3,766,194) $ (5,284,753) $ (2,180,906) $ (5,114,878)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating
activities:
Extraordinary loss........... -- 1,769,000 -- -- --
Depreciation and
amortization............... 4,920,730 5,188,419 14,661,092 2,528,636 5,946,338
Deferred tax benefit......... -- -- (769,573) (35,056) (429,406)
Amortization of debt issuance
costs and debt discounts... 131,752 370,652 441,334 10,740 96,088
Bad debt expense............. 484,702 421,378 1,016,375 157,244 258,305
Loss/(gain) on sale of
property and equipment..... (707,286) 1,749 -- -- --
Changes in assets and
liabilities, net of
acquisitions:
(Increase) decrease in
accounts receivable and
notes receivable from
related parties............ (1,069,681) (5,257,849) (10,214,907) 614,427 1,144,764
(Increase) decrease in
prepaid expenses........... 55,531 (175,058) (230,070) (35,298) (735,823)
(Increase) decrease in other
assets..................... 75,432 47,410 (630,765) (113,254) 664,325
Increase (decrease) in
accounts payable........... 651,247 94,017 707,945 168,039 (1,815,905)
Increase (decrease) in
accrued liabilities........ (600,847) 272,615 5,323,678 (253,860) (992,541)
----------- ------------ ------------- ------------ ------------
Net cash provided by (used
in) operating
activities.............. (434,057) (1,033,861) 5,020,356 860,712 (978,733)
----------- ------------ ------------- ------------ ------------
Cash flows from investing
activities:
Capital expenditures........... (1,690,950) (2,040,946) (2,070,223) (800,328) (185,616)
Capitalized acquisition
costs........................ (33,480) (1,144,699) (2,928,956) (306,731) (857,920)
Cash paid to acquire
stations..................... -- (57,056,438) (205,973,171) (12,000,451) (20,431,101)
Deposits for pending
acquisitions................. (150,000) (930,000) (650,000) (500,000) 650,000
Proceeds from sales of property
and equipment................ 6,684,479 1,115 -- -- --
----------- ------------ ------------- ------------ ------------
Net cash provided by (used
in) investing
activities.............. $ 4,810,049 $(61,170,968) $(211,622,350) $(13,607,510) $(20,824,637)
----------- ------------ ------------- ------------ ------------
</TABLE>
F-7
<PAGE> 107
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from financing
activities:
Principal payments on notes
payable...................... $(6,866,198) $(50,970,385) $ (51,817,000) $ -- $ --
Proceeds from notes payable.... 2,400,000 98,061,059 52,499,999 6,000,000 17,000,000
Proceeds from senior
subordinated notes payable... -- -- 97,250,000 -- --
Proceeds from issuance of
exchangeable preferred
stock........................ -- -- 95,376,592 -- --
Payment of debt issuance
costs........................ (30,000) (2,283,124) (1,855,123) -- (75,448)
Principal payments on other
long-term obligations........ (412,066) (776,107) (735,077) (328,862) (54,796)
Prepayment premium............. -- (420,000) -- -- --
Redemption of stock............ -- (26,592,765) -- -- --
Cost of equity issuance........ -- (520,649) -- -- --
Redemption of warrants......... -- (2,862,735) -- -- --
Exercise of stock options...... -- -- 20,008 -- 40,656
Proceeds from issuance of
stock........................ -- 49,455,487 21,959,220 7,534,300 --
Payment of dividends........... -- (302,861) -- -- --
----------- ------------ ------------- ------------ ------------
Net cash provided by (used
in) financing activities... (4,908,264) 62,787,920 212,698,619 13,205,438 16,910,412
----------- ------------ ------------- ------------ ------------
Net increase (decrease) in cash
and cash equivalents........... (532,272) 583,091 6,096,625 458,640 (4,892,958)
Cash and cash equivalents,
beginning of period............ 1,537,547 1,005,275 1,588,366 1,588,366 7,684,991
----------- ------------ ------------- ------------ ------------
Cash and cash equivalents, end of
period......................... $ 1,005,275 $ 1,588,366 $ 7,684,991 $ 2,047,006 $ 2,792,033
=========== ============ ============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 108
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Citadel Communications Corporation was formed August 21, 1991 as a Nevada
corporation and is a holding company which wholly owns Citadel Broadcasting
Company and Citadel License, Inc. The subsidiaries own and operate radio
stations and hold Federal Communications Commission ("FCC") licenses in
Arkansas, California, Colorado, Idaho, Illinois, Montana, Nevada, New Mexico,
Oregon, Pennsylvania, Rhode Island, Utah and Washington.
Principles of Consolidation and Presentation
The accompanying consolidated financial statements include Citadel
Communications Corporation and its wholly-owned subsidiaries ("Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
Derivative Financial Instruments
The Company uses an interest rate swap agreement to hedge the effects of
fluctuations in interest rates. Amounts receivable or payable under the interest
rate swap agreement are recognized as interest expense or income.
Property and Equipment
Assets acquired in business combinations accounted for using the purchase
method of accounting are recorded at their estimated fair value upon acquisition
as determined by management or by independent appraisal. Property and equipment
additions are recorded at cost. Depreciation of property and equipment is
determined using the straight-line method over the estimated useful lives of the
related assets.
Intangible Assets
Intangible assets with determinable lives have been allocated among various
categories of customer-based or market-based intangibles at their estimated fair
value upon acquisition as determined by management or by independent appraisal.
Goodwill represents the excess of cost over the fair value of tangible assets
and intangible assets with determinable lives. Amortization is provided on the
straight-line method over the estimated useful lives of the related assets (see
note 5). The Company's policy is to write-off intangible assets once they have
become fully amortized. The useful lives and recoverability of intangible assets
are evaluated at least annually. This evaluation encompasses the undiscounted
historical broadcast cash flow of each station
F-9
<PAGE> 109
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
and existing broadcast cash flow multiples for sales of similar radio properties
to estimate the potential selling price for the station and, therefore,
recoverability of the assets.
Barter Transactions
Barter contracts are agreements entered into under which the Company
provides commercial air time in exchange for goods and services used principally
for promotional, sales and other business activities. An asset and liability are
recorded at the fair market value of the goods or services received. Revenue is
recorded and the liability is relieved when commercials are broadcast and
expense is recorded and the asset is relieved when goods or services are used.
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Revenue Recognition
Revenue is recognized as commercials are broadcast.
Local Marketing Agreements
Fees earned or incurred pursuant to various local marketing agreements
("LMA") are recognized as gross broadcasting revenue or station operating
expenses, respectively, in the period that the services performed or received
occur. The Company's consolidated financial statements include broadcasting
revenues and station operating expenses of stations marketed under LMA's.
Joint Sales Agreements
Fees earned or incurred pursuant to various joint sales agreements ("JSA")
are recognized pursuant to the terms in the various agreements under one of two
methods: (a) the JSA fee is recognized as a reduction to sales expense (included
in station operating expenses in the Company's consolidated statement of
operations), or (b) the Company is allocated a percentage of the JSA stations'
net revenue and operating expenses and these amounts are recognized as
broadcasting revenue and station operating expenses, respectively, in the period
earned or incurred.
Business and Credit Concentrations
In the opinion of management, credit risk with respect to receivables is
limited due to the large number of customers and the geographic diversification
of the Company's customer base. The Company performs credit evaluations of its
customers and believes that adequate allowances for any uncollectible
receivables are maintained. At December 31, 1996 and 1997 and March 31, 1998, no
receivable from any customer exceeded five percent of net shareholders' equity
nor did any customer's account exceed more than ten percent of net broadcasting
revenue for any of the periods presented.
F-10
<PAGE> 110
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Long-Lived Assets
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of ", ("SFAS No. 121") which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. SFAS
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of. The Company adopted SFAS No. 121 in the first quarter of the
fiscal year ended December 31, 1996 and this adoption did not have a material
impact on the consolidated financial statements.
Income (Loss) Per Share of Common Stock
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share" ("SFAS
No. 128"). This statement establishes standards for computing and presenting
earnings per share ("EPS"), and supersedes Accounting Principles Board ("APB")
Opinion No. 15. The Statement replaces primary EPS with basic EPS and requires
dual presentation of basic and diluted EPS. All prior period EPS data has been
restated to conform to SFAS No. 128. The basic and diluted per share effect of
the extraordinary loss on extinguishment of debt in 1996 was $(1.66).
Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of APB Opinion No. 25, "Accounting for Stock
Issued to Employees", and related interpretations. As such, compensation expense
would be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the Company
adopted SFAS No. 123, "Accounting for Stock-Based Compensation", ("SFAS No.
123") which permits entities to recognize as expense over the vesting period the
fair value of all stock-based awards on the date of grant. Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.
Reclassifications
Certain 1995 and 1996 balances have been reclassified to conform to the
1997 presentation.
(2) ACQUISITIONS AND DISPOSITIONS
1995 Dispositions
On February 15, 1995, the Company sold the assets of KBOZ-AM, KBOZ-FM and
KATH-FM, and KCTR-FM, KBUL-AM, and KKBR-FM in Bozeman and Billings, Montana,
respectively, for $5,400,000. A gain of approximately $800,000 was recognized on
the sale.
F-11
<PAGE> 111
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
1996 Acquisitions
During 1996, the Company acquired the assets of five FM and one AM radio
stations from various parties as follows:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- --------------------------- --------------- --------------------- -----------
<S> <C> <C> <C>
June 28, 1996.............. KHFM-FM/KHFN-AM Albuquerque, NM $ 5,500,000
June 28, 1996.............. KTBL-FM Albuquerque, NM 5,000,000
June 28, 1996.............. KDJK-FM Modesto, CA 5,010,000
October 1, 1996............ KKLI-FM Colorado Springs, CO 3,450,000
October 9, 1996............ KRST-FM Albuquerque, NM 20,000,000
</TABLE>
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to current assets as well as
noncurrent tangible and intangible assets based on their fair values as
determined by management or by independent appraisal. The acquisitions were
funded with proceeds from the senior credit facility and a securities purchase
and exchange agreement. The purchase price, including acquisition costs of
$782,881, was allocated as follows:
<TABLE>
<S> <C>
Property and equipment...................................... $ 2,446,594
Intangible assets........................................... 37,135,955
Accounts receivable......................................... 160,332
-----------
$39,742,881
===========
</TABLE>
1997 Acquisitions
During 1997, the Company acquired the assets of 44 FM and 17 AM radio
stations from various parties as follows:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- ---------------------------- --------------- --------------------- ------------
<S> <C> <C> <C>
January 1, 1997............. KCTR-FM/KBUL-AM/ Billings, MT $ 26,008,357
KKBR-FM/KBBB-FM/
KMHK-FM/
KUGN-AM/KKTT-FM/ Eugene, OR
KEHK-FM
KAKT-FM/KBOY-FM/ Medford, OR
KCMX-AM/KCMX-FM/
KTMT-AM/KTMT-FM
KEYW-FM/KFLD-AM/ Tri-Cities, WA
KORD-FM/KXRX-FM
February 14, 1997........... KENZ-FM Salt Lake City, UT 5,590,119
April 10, 1997.............. KBER-FM Salt Lake City, UT 7,760,000
July 3, 1997................ WPRO-AM/WPRO-FM/ Providence, RI 115,795,216
WSKO-AM/WWLI-FM
</TABLE>
F-12
<PAGE> 112
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- ---------------------------- --------------- --------------------- ------------
<S> <C> <C> <C>
WQCY-FM/WMOS-FM/ Quincy, IL
WTAD-AM/WBRJ-FM
WQWK-FM/WIKN-FM/ State College, PA
WRSC-AM/WBLF-AM
WGLU-FM/WQKK-FM Johnstown, PA
WRKZ-FM Harrisburg, PA
WQXA-AM/WQXA-FM York, PA
WCTO-FM/WEST-AM Allentown, PA
WMGS-FM/WARM- Wilkes-Barre, PA
AM/
WZMT-FM/WAZL-AM
July 17, 1997............... KNHK-FM Reno, NV 1,300,000
September 25, 1997.......... KTHK-FM Tri-Cities, WA 600,500
September 29, 1997.......... WXEX-FM, Providence, RI 4,250,000
Edgenet
October 15, 1997............ KARN-AM/KARN-FM/ Little Rock, AR 9,000,000
KKRN-FM/KRNN-AM/
KAFN-FM
October 15, 1997............ KIPR-FM Little Rock, AR 5,544,506
October 15, 1997............ Land and Little Rock, AR 3,001,537
Buildings
October 15, 1997............ KOKY-FM Little Rock, AR 7,354,860
October 21, 1997............ WLEV-FM Allentown, PA 23,000,000
October 24, 1997............ KBEE-FM/KFNZ-AM Salt Lake City, UT 2,867,092
November 4, 1997............ KLAL-FM Little Rock, AR 1,500,000
November 4, 1997............ KURB-FM/KVLO-FM/ Little Rock, AR 12,000,000
KLIH-FM
November 18, 1997........... WHKK-FM Providence, RI 3,999,310
</TABLE>
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to current assets as well as
noncurrent tangible and intangible assets based on their fair values as
determined by management or by independent appraisal. The acquisitions were
funded with
F-13
<PAGE> 113
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
proceeds from the senior credit facility and a securities purchase and exchange
agreement. The purchase price, including acquisition costs of $2,928,956, was
allocated as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 877,693
Accounts receivable......................................... 4,473,441
Prepaid expenses............................................ 706,402
Property and equipment...................................... 21,203,071
Intangible assets........................................... 208,964,226
Other assets................................................ 10,100
Accounts payable and accrued liabilities.................... (3,084,549)
Current maturities of other long-term obligations........... (649,931)
------------
$232,500,453
============
</TABLE>
1998 Acquisitions (unaudited)
During the three months ended March 31, 1998, the Company acquired the
assets of five FM and three AM radio stations from various parties as follows:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- ----------------------------- --------------- --------------------- -----------
<S> <C> <C> <C>
January 2, 1998.............. WEMR-FM/WEMR-AM Wilkes-Barre/ $ 815,000
Scranton, PA
February 12, 1998............ KQFC-FM/KKGL-FM/ Boise, ID $14,414,101
KBOI-AM
March 26, 1998............... WSGD-FM/WDLS-FM/ Wilkes-Barre/ $ 6,000,000
WCDL-AM Scranton, PA
</TABLE>
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to current assets as well as
noncurrent tangible and intangible assets based on their fair values as
determined by management or by independent appraisal. The acquisitions were
funded with proceeds from the senior credit facility. The purchase price,
including acquisition costs of $857,920 was allocated as follows:
<TABLE>
<S> <C>
Property and equipment...................................... $ 2,799,000
Intangible assets........................................... 19,432,769
Prepaid expenses............................................ 3,252
Accrued liabilities......................................... (148,000)
-----------
$22,087,021
===========
</TABLE>
F-14
<PAGE> 114
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Pro Forma
The following summary, prepared on a pro forma basis, presents the results
of operations as if all the above noted radio stations had been acquired as of
January 1, 1996, after including the impact of the amortization of intangible
assets, depreciation of property and equipment and increased interest expense on
the acquisition debt since the date of acquisition.
<TABLE>
<CAPTION>
UNAUDITED
--------------------------------------------
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net broadcasting revenue................. $106,683,000 $117,976,000 $28,139,000
Operating income (loss).................. 2,212,000 6,647,000 (856,000)
Net loss................................. (17,365,000) (12,565,000) (5,314,000)
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the radio stations had been owned for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
Pending Dispositions
On September 29, 1997, the Company entered into an asset purchase agreement
to sell substantially all of the assets of radio stations WQKK-FM and WGLU-FM in
Johnstown, Pennsylvania and radio stations WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM
in State College, Pennsylvania. The net book value of the assets of these radio
stations is $5,066,000 as of December 31, 1997. The disposition is pending
approval by the Federal Communications Commission.
(3) NOTE RECEIVABLE
During 1996 the Company made various advances to Deschutes River
Broadcasting, Inc. ("DRB"), a non-related party, to allow DRB to acquire various
radio stations and pay off existing debt, in conjunction with the proposed
acquisition of DRB by the Company. These advances were funded in part through
borrowings the Company made on the Senior Credit Facility. As of December 31,
1996, $18,251,402 was due under these advances.
During 1997, the Company acquired DRB in a stock-based acquisition. These
advances became the cash portion of the purchase price of DRB, resulting in the
elimination of the note receivable in 1997.
F-15
<PAGE> 115
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, ESTIMATED
------------------------- MARCH 31, USEFUL
1996 1997 1998 LIFE
----------- ----------- ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land.............................. $ 569,638 $ 3,269,025 $ 4,069,796 --
Buildings and improvements........ 1,216,287 5,726,701 6,882,885 5-30 years
Transmitters, towers and
equipment....................... 15,509,084 29,053,049 29,786,580 5-15 years
Office furniture and equipment.... 3,268,426 5,615,833 5,849,411 3-5 years
Construction in progress.......... 578,289 736,620 778,665 --
----------- ----------- ------------
21,141,724 44,401,228 47,367,337
Less accumulated depreciation and
amortization.................... (5,933,155) (9,158,944) (10,263,865)
----------- ----------- ------------
$15,208,569 $35,242,284 $ 37,103,472
=========== =========== ============
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, ESTIMATED
--------------------------- MARCH 31, USEFUL
1996 1997 1998 LIFE
------------ ------------ ------------ ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Goodwill............................ $ 28,925,936 $119,226,136 $130,222,287 15 years
Broadcast licenses.................. 26,262,983 162,626,295 173,769,370 15 years
Noncompetition agreements........... 5,168,854 1,858,593 1,858,593 3-5 years
Local marketing agreements.......... 1,909,998 -- -- 5 years
Presold commercials................. 496,380 -- -- less than 1 year
Premium lease space................. 161,787 161,787 161,787 1-13 years
On-air talent contracts............. 1,383,323 -- -- 1-3 years
Subcarrier antenna income........... 219,162 100,878 100,878 1-4 years
Programming contracts............... 503,000 3,000 3,000 3 years
------------ ------------ ------------
65,031,423 283,976,689 306,115,915
Less accumulated amortization....... (13,229,588) (15,287,173) (20,110,083)
------------ ------------ ------------
$ 51,801,835 $268,689,516 $286,005,832
============ ============ ============
</TABLE>
F-16
<PAGE> 116
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(6) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Interest...................................... $ 368,838 $5,118,735 $2,588,128
Music license fees............................ 245,715 209,734 261,690
Compensation and commissions.................. 1,237,392 2,082,492 3,002,019
Other......................................... 807,187 1,649,168 2,363,751
---------- ---------- ----------
$2,659,132 $9,060,129 $8,215,588
========== ========== ==========
</TABLE>
(7) NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to financial institution (Senior
Credit Facility), interest payable at the
LIBOR rate (5.78% at December 31, 1996 and
5.72% at December 31, 1997) plus 2.75%,
principal due only when required by the
loan agreement in quarterly amounts through
September 30, 2003, at which time all
outstanding amounts are due in full,
subject to optional prepayments............ $77,584,060 $90,084,059 $107,084,059
Less current maturities...................... 2,500,000 -- --
----------- ----------- ------------
Long-term portion............................ $75,084,060 $90,084,059 $107,084,059
=========== =========== ============
</TABLE>
On July 3, 1997, the Company entered into a revised financing agreement
(the "Senior Credit Facility") which allows for revolving loan borrowings up to
a maximum of $150,000,000. Per the agreement, this amount is subject to
reduction starting December 31, 1997 and continuing quarterly thereafter. The
maximum available loan commitment at December 31, 1997 and March 31, 1998 is
$147,500,000 and $145,000,000, respectively. The Company must pay, on a
quarterly basis, an unused commitment fee equal to the maximum revolving loan
commitment less the average of the outstanding principal balance for the
preceding quarter, multiplied by .125% or if the total leverage ratio (as
defined in the agreement) calculated as of the last day of the preceding quarter
was less than 4.5, the commitment fee is .09375%. Commitment fees paid in 1996
and 1997 were $74,931 and $380,295, respectively, and $81,250 and $64,173 for
the three months ended March 31, 1997 and 1998, respectively. The agreement
requires that the Company enter into an interest rate swap agreement for a
period of at least two years. See note 24 for information on the interest rate
swap agreement. Principal payments are not scheduled to commence until the
outstanding principal balance exceeds the maximum loan commitment adjusted by
quarterly mandatory commitment reductions (as defined in the agreement).
F-17
<PAGE> 117
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
The Senior Credit Facility is secured by a pledge of property and equipment
and the common stock of the Company's wholly-owned subsidiaries, which own
substantially all of the assets of the Company. Various debt covenants place
restrictions on, among other things, indebtedness, acquisitions, dividends,
capital expenditures, leverage calculations, and the sale or transfer of assets.
At December 31, 1997 and March 31, 1998, the Company was in compliance with all
debt covenant provisions.
The required aggregate principal payments, excluding the consideration of
any payments required based upon annual excess cash flow (as defined), as of
December 31, 1997 and March 31, 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1998
------------------ ---------------
<S> <C> <C>
2000......................................... $ -- $ 11,709,059
2001......................................... 23,209,059 28,500,000
2002......................................... 30,500,000 30,500,000
Thereafter................................... 36,375,000 36,375,000
------------ ------------
$ 90,084,059 $107,084,059
============ ============
</TABLE>
(8) NOTES PAYABLE TO SHAREHOLDER
The Company entered into a securities purchase and exchange agreement with
certain related parties and various other parties on June 28, 1996. As part of
this agreement, a revolving line of credit with a maximum amount available of
$20 million was established. Interest was payable quarterly at the LIBOR rate
(5.78% at December 31, 1996) plus 2.75% or 9%, whichever is greater. The amount
outstanding at December 31, 1996 was $11,817,000, which was paid in full in
1997, and the revolving line of credit was terminated.
(9) SENIOR SUBORDINATED NOTES PAYABLE
On July 3, 1997, the Company completed the issuance of $101 million of
10 1/4% Senior Subordinated Notes ("Notes") due 2007. Interest is payable
semi-annually. The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 1, 2002. In addition, at any time
prior to July 1, 2000, subject to certain conditions, the Company may, at its
option, redeem a portion of the Notes with the net proceeds of one or more
Public Equity Offerings (as defined in the indenture governing the Notes), at a
redemption price equal to 110.25% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of redemption. The Notes are shown net
of unamortized discount of $2,668,883 and $2,626,746 at December 31, 1997 and
March 31, 1998, respectively.
The indenture governing the Notes contains certain restrictive covenants,
including limitations which restrict the ability of the Company to incur
additional debt, incur liens, pay dividends or make certain other restricted
payments, consummate asset sales, enter into certain transactions with
affiliates, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets. At December 31, 1997 and March 31, 1998, the Company was in compliance
with all debt covenants.
F-18
<PAGE> 118
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(10) OTHER LONG-TERM OBLIGATIONS
Other long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Various noncompetition and consulting agreements
with the sellers of radio stations acquired,
due at various dates through July 2003, face
amount of $486,113 and $437,503 at December 31,
1996 and 1997, respectively, and $393,754 at
March 31, 1998, non-interest bearing with
interest imputed at 8.5% to 9.0%, net of
discount of $54,540, $29,640 and $22,688 in
1996, 1997 and 1998, respectively.............. $ 431,573 $ 407,863 $ 371,068
Prepayment premium on extinguishment of
debt(a)........................................ 881,818 770,779 732,831
Capital leases................................... -- 105,359 94,739
---------- ---------- ----------
1,313,391 1,284,001 1,198,638
Less current maturities.......................... 435,791 271,352 304,009
---------- ---------- ----------
Long-term portion................................ $ 877,600 $1,012,649 $ 894,629
========== ========== ==========
</TABLE>
The required aggregate principal payments, net of the amortization of debt
discount as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998......................................... $ 271,352
1999......................................... 321,843
2000......................................... 138,648
2001......................................... 132,363
2002......................................... 127,694
Thereafter................................... 292,101
----------
$1,284,001
==========
</TABLE>
- ------------
(a) On October 9, 1996, the Company extinguished its long-term debt of
$31,310,385, payable to a financial institution, and its note payable to
shareholder of $7,000,000. The early retirement of the long-term debt
resulted in a $1,769,000 extraordinary loss due to prepayment premiums and
the write-off of debt issuance costs. The prepayment premium can be reduced
on a quarterly basis dependent on the outstanding balance of the Senior
Credit Facility. The balance of the premium is due upon the repayment of the
Senior Credit Facility.
(11) LEASE COMMITMENTS
The Company leases certain tower sites, transmitters and equipment,
automobiles, office equipment and an airplane. The following is a schedule by
year of future minimum rental payments required under operating
F-19
<PAGE> 119
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
leases that have an initial or remaining noncancelable lease term in excess of
one year as of December 31, 1997:
<TABLE>
<S> <C>
1998......................................... $ 2,030,301
1999......................................... 1,939,314
2000......................................... 1,874,159
2001......................................... 1,859,330
2002......................................... 1,457,545
Thereafter................................... 5,357,157
-----------
$14,517,806
===========
</TABLE>
Total rental expense was $744,395, $1,101,237 and $1,971,774 for the years
ended December 31, 1995, 1996 and 1997, respectively, and $434,662 and $653,282
for the three months ended March 31, 1997 and 1998, respectively.
(12) INCOME TAXES
For the years ended December 31, 1995, 1996 and 1997 and the three months
ended March 31, 1997 and 1998, the Company generated a net loss for both
financial reporting and income tax purposes; therefore, no current tax provision
has been recorded. The deferred income tax benefit in 1997 and for the three
months ended March 31, 1997 and 1998 represents the reversal of deferred tax
liabilities established at the date of acquisition due to differences in the tax
basis and the financial statement carrying amounts of intangibles and property
and equipment acquired in stock-based acquisitions. At December 31, 1997, the
Company has net operating loss carryforwards for federal income tax purposes of
approximately $18,600,000 which begin to expire in 2007.
On June 28, 1996, the Company underwent an ownership change in accordance
with Section 382 of the Internal Revenue Code. Due to this change, the
utilization of net operating losses of the Company are subject to limitation in
future years. The approximate amount of the net operating loss which may be used
in any one year is $4,400,000.
F-20
<PAGE> 120
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
The reconciliation of the expected income tax benefit calculated at the
U.S. federal statutory rate to the actual income tax benefit per the financial
statements for the years ended December 31, 1995, 1996 and 1997 and the three
months ended March 31, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------- -----------------------
1995 1996 1997 1997 1998
----------- --------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
U.S. federal statutory rate
applied to the loss before
income taxes and extraordinary
item........................... $(1,487,717) $(679,046) $(2,058,471) $(879,121) $(1,885,057)
Amortization of goodwill....... 16,563 186,844 425,344 52,841 187,777
Nondeductible meals and
entertainment.................. 19,786 31,601 51,495 12,875 9,596
Net operating losses providing no
current benefit for federal
income tax purposes............ 1,467,025 458,101 882,031 795,227 1,165,155
Other............................ (15,657) 2,500 (69,972) (16,878) 93,123
----------- --------- ----------- --------- -----------
Deferred income tax benefit...... $ -- $ -- $ (769,573) $ (35,056) $ (429,406)
=========== ========= =========== ========= ===========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets, liabilities and the valuation allowance are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Receivables, principally due to valuation
allowances..................................... $ 248,422 $ 323,577 $ 400,657
Net operating loss carryforward................... 6,720,659 7,436,896 8,098,096
Accrued liabilities not deductible................ 18,465 193,423 234,305
Intangible assets; differences in book and tax
amortization................................... (834,071) (300) 836,256
----------- ------------ ------------
Total deferred tax assets...................... 6,153,475 7,953,596 9,569,314
Valuation allowance............................... (4,270,206) (5,025,378) (6,506,934)
----------- ------------ ------------
Net deferred tax assets........................ 1,883,269 2,928,218 3,062,380
----------- ------------ ------------
Deferred tax liabilities:
Property and equipment, principally due to
accelerated depreciation....................... (1,883,269) (2,928,218) (3,062,380)
Differences between the tax basis and fair value
of intangibles and property and equipment
acquired....................................... (1,585,333) (23,270,338) (26,283,501)
----------- ------------ ------------
Total deferred tax liabilities................. (3,468,602) (26,198,556) (29,345,881)
----------- ------------ ------------
Net deferred tax liability.......................... $(1,585,333) $(23,270,338) $(26,283,501)
=========== ============ ============
</TABLE>
The valuation allowance has been increased by $2,320,699 in 1996, $755,172
in 1997 and $1,481,556 for the three months ended March 31, 1998. The Company
has established a valuation allowance for the amount of the net deferred tax
asset which management has determined that it is more likely than not will not
be realized.
F-21
<PAGE> 121
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(13) EXCHANGEABLE PREFERRED STOCK
On July 3, 1997, the Company completed the sale of 1,000,000 shares of
Series A Exchangeable Preferred Stock (Exchangeable Preferred Stock) for $100
million. The Exchangeable Preferred Stock has a liquidation preference of $100
per share, plus accumulated and unpaid dividends. Dividends on the Exchangeable
Preferred Stock accrue at the rate of 13 1/4% per annum. All dividends will be
payable semi-annually on January 1 and July 1 of each year, commencing January
1, 1998. On or prior to July 1, 2002, dividends are payable in additional shares
of Exchangeable Preferred Stock having an aggregate liquidation preference equal
to the amount of such dividends, or, at the option of the Company, in cash.
Thereafter, all dividends will be payable only in cash. The Company will be
required to redeem the Exchangeable Preferred Stock on July 1, 2009 (subject to
the legal availability of funds therefor) at a redemption price equal to the
liquidation preference thereof, plus accumulated and unpaid dividends, if any,
to the date of redemption.
The Exchangeable Preferred Stock is presented net of unamortized issuance
costs of $4,541,858 and includes accrued dividends at December 31, 1997 of
$6,551,389, which were paid in 65,514 additional shares of exchangeable
preferred stock on January 1, 1998. At March 31, 1998 the Exchangeable Preferred
Stock is presented net of unamortized issuance costs of $4,499,024 and includes
accrued dividends of $3,529,515.
The Certificate of Designation for the Exchangeable Preferred Stock
contains certain covenants, which, among other things, restrict the ability of
the Company with respect to the incurrence of additional debt, restricted
payments, issuances and sales of stock of certain subsidiaries and
consolidations, mergers or sales of assets. The Company was in compliance with
these covenants at December 31, 1997 and March 31, 1998.
F-22
<PAGE> 122
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(14) CONVERTIBLE PREFERRED STOCK
Convertible preferred stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Convertible preferred stock, Series A, $.001 par value;
authorized 972,000 shares; issued and outstanding 746,412
shares in 1996, 1997 and 1998. Liquidation value
$1,861,029 in 1997 and 1998............................... $ 746 $ 746 $ 746
Convertible preferred stock, Series B, $.001 par value;
authorized 482,400 shares; issued and outstanding 17,201
shares in 1996, 1997 and 1998. Liquidation value $50,003
in 1997 and 1998.......................................... 17 17 17
Convertible preferred stock, Series C, $.001 par value;
authorized 12,000,000 shares; issued and outstanding
1,656,020 shares in 1996 and 2,130,587 shares in 1997 and
1998. Liquidation value $33,251,432 in 1997 and 1998...... 1,656 2,131 2,131
Convertible preferred stock, Series D, $.001 par value;
authorized 12,000,000 shares; issued and outstanding
1,512,834 shares in 1996 and 1,038,267 shares in 1997 and
1998. Liquidation value $16,203,922 in 1997 and 1998...... 1,513 1,038 1,038
Convertible preferred stock, Series E. $.001 par value;
authorized 482,729 shares; issued and outstanding 482,729
shares in 1997 and 1998. Liquidation value $7,533,807 in
1997 and 1998............................................. -- 483 483
Convertible preferred stock, Series F, $.001 par value;
authorized 153,264 shares; issued and outstanding 153,264
shares in 1997 and 1998. Liquidation value $4,250,011 in
1997 and 1998............................................. -- 153 153
Convertible preferred stock, Series G, $.001 par value;
authorized 360,636 shares; issued and outstanding 360,636
shares in 1997 and 1998. Liquidation value $10,000,436 in
1997 and 1998............................................. -- 361 361
------ ------ ------
$3,932 $4,929 $4,929
====== ====== ======
</TABLE>
The Series A, B, C, E, F and G convertible preferred stock have voting
rights equal to the number of common shares they are convertible into, as
described below. The Series D convertible preferred stock has no voting rights.
All convertible preferred shares except Series C and D are mandatorily
convertible into shares of common stock at the time the Company effects an
initial public offering. Preferred stock is convertible on a one-to-one basis.
All convertible preferred shares have equal rank in liquidation preference.
The Series A, B, C, D, E, F and G convertible preferred stock are entitled
to dividends when and if declared by the Board of Directors of the Company. In
1995, 1996 and 1997, and for the three months ended March 31, 1998, $111,340,
$56,664, $0 and $0 dividends were declared on the convertible preferred stock.
At December 31, 1997, 4,929,096 shares of Class A common stock are reserved for
conversion of the convertible preferred stock.
F-23
<PAGE> 123
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(15) COMMON STOCK
The Company is authorized to issue three classes of common stock: Class
A--15,910,471 shares; Class B--156,933 shares; and Class C--12,000,000 shares.
The Class B and C common stock is non-voting. As and when dividends are
declared, the holders of the then outstanding shares of Class A, B and C common
stock shall be entitled to participate in such dividends ratably on a per share
basis. As of December 31, 1997 and March 31, 1998, there have been no dividends
declared on the Company's common stock.
(16) STOCK WARRANTS
In connection with the issuance of the Company's old senior subordinated
notes payable to a shareholder in October 1993, warrants to acquire 365,376
shares of the Company's Class C non-voting common stock at an exercise price of
$.001 per share were issued. The warrants entitle the holders to purchase the
common stock at any time prior to October 1, 1999 or until the related notes are
paid in full, whichever is later. These warrants were assigned a value of
$350,000 upon issuance. Subsequent to issuance, in 1993, warrants to purchase
43,844 shares were exercised. On June 28, 1996, the warrant holder sold to the
Company a warrant to purchase 183,431 shares of Class C Common Stock for an
aggregate purchase price of $2,862,735. Warrants to purchase 138,101 shares of
Class C Common Stock were outstanding at December 31, 1997 and March 31, 1998.
(17) STOCK OPTION PLAN
Prior to the adoption of the Company's 1996 Equity Incentive Plan, the
Company granted options, including performance options to the principal
shareholder and employees. The options to acquire shares of Class A common stock
have an exercise price which represented the Company's Board of Directors'
estimate of the fair market value of the shares at the date of grant. The
options can be earned over a five-year period commencing one year from the date
of grant and expire on the earlier of ten years from the date granted or
termination of employment. The performance options are dependent upon the
Company achieving certain annual operating results and are fully vested when
earned.
On June 28, 1996, the Company adopted the Citadel Communications
Corporation 1996 Equity Incentive Plan ("Plan") pursuant to which the Company's
Board of Directors may grant stock options to officers, employees and related
parties. The Plan, which was subsequently amended, authorizes grants of options
to purchase up to 532,743 shares of authorized but unissued Class A common stock
which excludes those options granted prior to the adoption of the Plan. Stock
options are granted with an exercise price equal to the common stock's fair
market value at the date of grant as determined by the Company's Board of
Directors. Stock options will vest ratably over a five-year period, commencing
one year after the date of grant and expire on the earlier of ten years from the
date granted or termination of employment, or they will vest immediately, as
determined by the Company's Board of Directors at the date of grant.
F-24
<PAGE> 124
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
PRICE PER EXERCISABLE
OPTIONS SHARE OPTIONS
------- --------- -----------
<S> <C> <C> <C>
Outstanding December 31, 1994....................... 590,338 $ 4.10 45,755
Canceled.......................................... (95,742) 3.52 --
------- ------- -------
Outstanding December 31, 1995....................... 494,596 4.16 121,773
Granted........................................... 310,000 17.00 --
Canceled.......................................... (12,200) 3.56 --
------- ------- -------
Outstanding December 31, 1996....................... 792,396 9.20 210,099
Granted........................................... 138,369 15.53 --
Exercised......................................... (5,919) 7.87 --
Canceled.......................................... (11,468) 9.88 --
------- ------- -------
Outstanding December 31, 1997....................... 913,378 10.24 424,514
Exercised......................................... (8,982) 4.53 --
Canceled.......................................... (3,000) 2.91 --
------- ------- -------
Outstanding March 31, 1998 (unaudited).............. 901,396 $ 10.32 455,320
======= ======= =======
</TABLE>
The weighted average fair value of options granted in 1996 and 1997 was
$3.07 and $4.35 per share, respectively. Options held by the principal
shareholder total 264,504 of which 110,130 are exercisable at December 31, 1997
at a weighted average exercise price of $5.38 per share.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- -----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF OUTSTANDING AT CONTRACTUAL EXERCISE EXERCISABLE AT EXERCISE
EXERCISE PRICES DECEMBER 31, 1997 LIFE PRICE DECEMBER 31, 1997 PRICE
- ---------------- ------------------ ----------- -------- ------------------ --------
<S> <C> <C> <C> <C> <C>
$ 2.91 232,676 6.0 $ 2.91 137,806 $ 2.91
$ 4.91 - $ 5.37 268,717 6.4 5.33 182,923 5.31
$12.00 - $17.17 394,485 8.5 17.04 101,285 17.07
$30.00 17,500 9.9 30.00 2,500 30.00
- --------------- ------- --- ------ ------- ------
$ 2.91 - $30.00 913,378 7.3 $10.24 424,514 $ 7.48
=============== ======= === ====== ======= ======
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions for
1996 and 1997: risk-free interest rates of 6.0 percent; dividend yield of $0;
expected lives of 3.4 years; and volatility of 0 percent since the Company did
not have publicly traded shares. The Company did not grant options in 1995.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company
F-25
<PAGE> 125
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
determined compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, the Company's net loss, would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Net loss
As reported.................................... $(3,766,194) $(5,284,753)
Pro forma...................................... (3,863,774) (5,513,161)
Net loss per common share
As reported.................................... (3.53) (11.17)
Pro forma...................................... (3.63) (11.39)
</TABLE>
(18) DEFINED CONTRIBUTION PLAN
The Company has a defined contribution 401(k) plan for all employees who
are at least 21 years of age and have worked at least 1,000 hours in the year.
Under the 401(k) plan, employees can contribute up to 20% of their compensation,
subject to the maximum contribution allowed by the Internal Revenue Code.
Participants vest immediately in their contributions. The Company may make
discretionary contributions as approved by the Board of Directors. Participants'
rights to amounts contributed by the Company vest on a graded schedule over a
five-year period. During 1995, 1996, and 1997 the Company contributed $133,215,
$144,048, and $298,623, respectively, and $47,640 and $107,036 for the
three-months ended March 31, 1997 and 1998, respectively, which represented a
two percent matching of employee contributions to the 401(k) plan.
(19) TRANSACTIONS WITH RELATED PARTIES
On December 29, 1995, the Company entered into a sale-leaseback transaction
with the principal shareholder. The Company sold an airplane for its fair value
of $1,275,000 to the shareholder resulting in a loss of $74,327. The operating
lease commenced on December 29, 1995 with monthly payments of $17,250 due
through December 31, 2001.
(20) LOCAL MARKETING AGREEMENTS
At December 31, 1997, the Company had local marketing agreements to market
stations WBHT-FM, WKQV-FM, WEMR-AM, WEMR-FM, WSGD-FM, WDLS-FM and WCDL-AM in
Wilkes-Barre/ Scranton, Pennsylvania and stations KIZN-FM, KZMG-FM, KKGL-FM,
KQFC-FM and KBOI-AM in Boise, Idaho. The agreements principally provide for the
Company to supply specified programming to the brokered stations and enables the
sales staff of the Company to sell advertising time on the station for a fixed
fee to be paid by the Company. The agreements also provide the Company with the
option to purchase the stations. The Company's financial statements include the
broadcasting revenue and station operating expenses of the brokered stations.
All stations under LMAs except for WBHT-FM and WKQV-FM in Wilkes-Barre/ Scranton
and Boise were acquired by the Company in 1998.
The local marketing agreements enable the Company to extend or terminate
the agreements at the Company's option through August 1, 2002. The fees paid
under the local marketing agreements amounted to $350,000, $1,414,527 and
$1,936,139 for the years ended December 31, 1995, 1996 and 1997, respectively,
and $290,001 and $518,705 for the three months ended March 31, 1997 and 1998,
respectively.
F-26
<PAGE> 126
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(21) JOINT SALES AGREEMENTS
On January 15, 1996, the Company entered into a joint sales agreement (JSA)
to sell advertising for radio stations KEYF-AM/FM, KUDY-AM and KKZX-FM in
Spokane, Washington and radio stations KVOR-AM, KSPZ-FM, KTWK-AM, and KVUU-FM in
Colorado Springs, Colorado. As stated in the JSA agreement, JSA revenue is
calculated as 60% of the broadcast cash flows of these radio stations and all
Citadel owned radio stations in these markets, with the exception of KKLI in
Colorado Springs which is not included in the JSA calculation.
On April 22, 1996, the Company entered into a JSA for radio station KENZ-FM
in Salt Lake City, Utah. The Company's financial statements include all sales
expenses for the station as well as revenue for the JSA fee calculated at 30% of
net revenue of the station. On February 14, 1997 the Company acquired KENZ-FM.
On July 3, 1997, the Company acquired all of the issued and outstanding
capital stock of Tele-Media Broadcasting Company ("Tele-Media"). As a result of
this acquisition, the Company assumed a Tele-Media JSA for radio station WKQV-AM
in Wilkes-Barre/Scranton, Pennsylvania. As stated in the JSA agreement, JSA
revenue is calculated as the sum of (i) a base monthly payment of $5,000, and
(ii) an additional monthly fee ranging from 5% to 8% of revenues (as defined in
the JSA agreement) based on monthly revenues of WKQV-AM and of its simulcast
station, WARM-AM.
(22) SUPPLEMENTAL FINANCIAL INFORMATION
The Company paid cash of $5,237,240, $7,065,546 and $7,271,586 for interest
for the years ended December 31, 1995, 1996 and 1997, respectively, and
$2,411,306 and $7,252,746 for the three months ended March 31, 1997 and 1998,
respectively.
Dividends on preferred stock of $111,340 were accrued during the year ended
December 31, 1995 and subsequently paid in 1996. Dividends on preferred stock of
$56,664 were declared and paid during the year ended December 31, 1996. No
dividends were declared on preferred stock during the year ended December 31,
1997 or the three months ended March 31, 1998.
Barter revenue included in gross broadcasting revenue and barter expenses
included in station operating expenses, amounted to $3,087,871, $3,335,024,
$7,388,471, $1,158,659 and $2,564,061, and $3,214,284, $3,029,665, $7,062,822,
$900,306 and $2,195,011 for the years ended December 31, 1995, 1996 and 1997,
and the three months ended March 31, 1997 and 1998, respectively.
The activity for the allowance for doubtful accounts consists of the
following:
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BALANCE AT
YEAR ADDITIONS WRITE-OFFS END OF YEAR
------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1995....... $380,531 $ 484,702 $(350,700) $514,533
Year ended December 31, 1996....... 514,533 421,378 (314,857) 621,054
Year ended December 31, 1997....... 621,054 1,016,375 (828,487) 808,942
</TABLE>
(23) LITIGATION
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. Management believes that such litigation and claims
will be resolved without a material effect on the Company's financial position.
F-27
<PAGE> 127
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
The Company has received two civil investigative demands ("CIDs") from the
Antitrust Division of the U.S. Department of Justice. One CID addresses the
Company's acquisition of station KRST in Albuquerque, New Mexico and the second
CID addresses the joint sales agreement for stations in Spokane, Washington and
Colorado Springs, Colorado. The Company has provided the requested information
in response to each CID.
(24) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. The following summary
presents a description of the methodologies and assumptions used to determine
such amounts.
Limitations
Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument; they
are subjective in nature and involve uncertainties, matters of judgment and,
therefore, cannot be determined with precision. These estimates do not reflect
any premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular instrument. Changes in assumptions
could significantly affect these estimates.
Since the fair value is estimated as of December 31, 1996 and 1997, the
amounts that will actually be realized or paid at settlement or maturity of the
instruments could be significantly different.
Cash equivalents and cash held in escrow
The carrying amount is assumed to be the fair value because of the
liquidity of these instruments.
Accounts receivable and notes receivable
The carrying amount is assumed to be the fair value because of the
short-term maturity of the portfolio. The carrying amount of the non-current
note receivable is assumed to be the fair value because the note receivable was
converted into a portion of the purchase price of Deschutes River Broadcasting,
Inc. on January 1, 1997 at the carrying value.
Accounts payable and accrued liabilities
The carrying amount approximates fair value because of the short-term
maturity of these instruments.
Notes payable, notes payable to shareholder, exchangeable preferred stock,
senior subordinated notes payable, and other long-term obligations
The fair value of the Company's notes payable, notes payable to
shareholder, senior subordinated notes payable, exchangeable preferred stock and
other long-term obligations approximate the terms in the marketplace at which
they could be replaced. Therefore, the fair value approximates the carrying
value of these financial instruments.
In 1996, the Company entered into an interest rate swap agreement with a
financial institution in accordance with the terms of its Senior Credit
Facility. The fair value of the interest rate swap as of December 31, 1996 and
1997 and March 31, 1998 was $190,000, $3,700 and $(43,324), respectively, as
determined by the financial institution and represents unrealized gains or
(losses). The fair value of the
F-28
<PAGE> 128
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL DATA AS OF MARCH 31, 1998 AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
interest rate swap is the estimated amount that the financial institution would
receive or pay to terminate the swap agreement at the reporting date, taking
into account current interest rates and the current creditworthiness of the swap
counterparties.
(25) SUBSEQUENT EVENTS
On April 21, 1998, the Company acquired radio stations KIZN-FM and KZMG-FM
in Boise, Idaho for an aggregate purchase price of $14,600,000. The acquisition
will be accounted for by the purchase method of accounting. In conjunction with
the acquisition, the Company borrowed an additional $14,000,000 on its Senior
Credit Facility.
F-29
<PAGE> 129
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Deschutes River Broadcasting, Inc.:
We have audited the accompanying consolidated balance sheets of Deschutes
River Broadcasting, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Deschutes
River Broadcasting, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Portland, Oregon
February 14, 1997
F-30
<PAGE> 130
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ -- $ 823,968
Accounts receivable, less allowance for doubtful accounts
of $49,952 and $122,714 at December 31, 1995 and 1996,
respectively........................................... 1,283,847 1,856,984
Prepaid expenses and other current assets................. 238,868 367,621
Current portion of note receivable........................ -- 156,000
----------- -----------
Total current assets................................... 1,522,715 3,204,573
Intangible assets, net (note 4)............................. 5,281,109 14,142,899
Long-term portion of note receivable........................ -- 143,000
Property and equipment, net (notes 3 and 5)................. 3,606,655 3,153,930
Deposits.................................................... 6,542 3,026
----------- -----------
$10,417,021 $20,647,428
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft............................................ $ 23,133 $ --
Line of credit (notes 7 and 13)........................... 418,168 --
Accounts payable.......................................... 185,071 467,873
Accrued compensation and commissions...................... 313,734 542,502
Other accrued expenses.................................... 128,510 147,985
Current portion of long-term debt (notes 7 and 13)........ 485,983 --
Accrued interest payable (notes 6, 12 and 13)............. 335,501 255,001
----------- -----------
Total current liabilities.............................. 1,890,100 1,413,361
Advance (note 13)........................................... -- 9,123,310
Note payable (notes 6 and 13)............................... -- 8,867,000
Long-term debt, less current portion (notes 7 and 13)....... 2,886,033 --
Subordinated notes payable (notes 7, 12 and 13)............. 3,156,998 --
Other long-term liabilities................................. 38,751 47,735
----------- -----------
Total liabilities................................. 7,971,882 19,451,406
----------- -----------
Stockholders' equity (notes 9 and 13):
Convertible preferred stock, authorized 5,000,000 shares;
issued at stated value of $1 per share:
Series A preferred, no par value, issued and
outstanding 643,000 shares............................ 643,000 643,000
Series B preferred, no par value, issued and
outstanding 1,612,000 shares.......................... 1,612,000 1,612,000
Series C preferred, no par value, issued and
outstanding 592,000 shares............................ 592,000 592,000
Series D preferred, no par value, issued and
outstanding 95,000 shares............................. 95,000 95,000
(Aggregate liquidation preference of $3,172,962 and
$3,426,798 at December 31, 1995 and 1996,
respectively)
Common stock, authorized 10,000,000 shares; no par value;
-0- and 1,096,902 shares issued and outstanding at
December 31, 1995 and 1996, respectively............... -- 136,471
Accumulated deficit....................................... (496,861) (1,882,449)
----------- -----------
Total stockholders' equity........................ 2,445,139 1,196,022
----------- -----------
Commitments and contingencies (notes 9, 10, 12 and 13)...... $10,417,021 $20,647,428
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE> 131
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Revenues:
Net broadcasting revenues................................. $6,845,107 $ 8,843,074
---------- -----------
Operating expenses:
Station operating expenses:
Selling, promoting, programming and engineering........ 4,053,145 5,554,632
General and administrative............................. 1,297,835 1,780,584
Corporate general and administrative expenses............. 374,158 488,831
Management fees (note 12)................................. 171,128 215,938
Depreciation and amortization............................. 765,200 1,173,349
---------- -----------
Income (loss) from operations..................... 183,641 (370,260)
---------- -----------
Nonoperating income (expenses):
Interest expense (notes 12 and 13)........................ (656,897) (1,143,893)
Gain on sale of assets.................................... -- 97,097
Other, net................................................ 1,591 30,162
Net trade income (expense)................................ (22,934) 1,306
---------- -----------
Nonoperating expenses, net........................ (678,240) (1,015,328)
---------- -----------
Loss before income taxes.......................... (494,599) (1,385,588)
Income taxes (note 11)...................................... -- --
---------- -----------
Net loss.......................................... $ (494,599) $(1,385,588)
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE> 132
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK NOTE TOTAL
---------------------- --------------------- ACCUMULATED RECEIVABLE -- STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT DEFICIT OFFICER EQUITY
--------- ---------- --------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... 643,000 $ 643,000 102,000 $ 102,000 $ (2,262) $(42,000) $ 700,738
Repayment of note
receivable -- officer... -- -- -- -- -- 42,000 42,000
Issuance of common
stock............... -- -- 95,000 95,000 -- -- 95,000
Conversion of common
stock to preferred
stock............... 197,000 197,000 (197,000) (197,000) -- -- --
Issuance of preferred
stock............... 2,102,000 2,102,000 -- -- -- -- 2,102,000
Net loss............... -- -- -- -- (494,599) -- (494,599)
--------- ---------- --------- --------- ----------- -------- -----------
Balance, December 31,
1995................... 2,942,000 2,942,000 -- -- (496,861) -- 2,445,139
Issuance of common
stock............... -- -- 91,649 126,419 -- -- 126,419
Exercise of common
stock warrants...... -- -- 1,005,253 10,052 -- -- 10,052
Net loss............... -- -- -- -- (1,385,588) -- (1,385,588)
--------- ---------- --------- --------- ----------- -------- -----------
Balance, December 31,
1996................... 2,942,000 $2,942,000 1,096,902 $ 136,471 $(1,882,449) $ -- $ 1,196,022
========= ========== ========= ========= =========== ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE> 133
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (494,599) $(1,385,588)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 314,319 388,284
Amortization........................................... 450,881 785,065
Increase in allowance for doubtful accounts............ 33,500 72,762
Gain on sale of assets................................. -- (97,097)
Changes in assets and liabilities, net of effect of
acquisitions:
Increase in accounts receivable...................... (1,150,810) (645,898)
Increase in prepaid expenses and other current
assets.............................................. (86,257) (100,767)
Increase in accounts payable and accrued expenses.... 414,911 315,973
Increase (decrease) in accrued interest payable...... 314,800 (59,287)
----------- -----------
Net cash used in operating activities............. (203,255) (726,553)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets.............................. -- 1,150,000
Capital expenditures for property and equipment........... (171,177) (237,305)
Capital expenditures for property and equipment related to
acquisitions........................................... (2,898,359) (744,717)
Purchase of intangible assets............................. (5,072,508) (9,532,047)
Purchase of note receivable............................... -- (273,416)
Other..................................................... 11,454 2,340
----------- -----------
Net cash used in investing activities............. (8,130,590) (9,635,145)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of note payable.................... -- 8,867,000
Proceeds from advance..................................... -- 9,123,310
Increase (decrease) in bank overdraft..................... 22,992 (23,133)
Proceeds from note receivable -- officer.................. 42,000 --
Proceeds from issuance of long-term debt.................. 3,306,000 --
Principal payments on long-term debt...................... (284,649) (3,372,016)
Proceeds from issuance of subordinated debt............... 2,710,998 2,600,000
Principal payments on subordinated debt................... -- (5,756,998)
Net borrowings under line of credit....................... 315,719 (418,168)
Proceeds from exercise of common stock warrants........... -- 10,052
Proceeds from issuance of preferred stock................. 2,197,000 --
Proceeds from issuance of common stock.................... -- 126,419
Increase in other long-term liabilities................... 23,785 29,200
----------- -----------
Net cash provided by financing activities......... 8,333,845 11,185,666
----------- -----------
Net increase in cash and cash equivalents......... -- 823,968
Cash and cash equivalents, beginning of year................ -- --
----------- -----------
Cash and cash equivalents, end of year...................... $ -- $ 823,968
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 321,396 $ 1,244,393
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE> 134
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
(1) NATURE OF BUSINESS AND ORGANIZATION
Deschutes River Broadcasting, Inc. was formed in 1994 and is a holding
company which wholly-owns eight subsidiaries located in Oregon, Washington and
Montana. The subsidiaries own and operate radio stations and hold Federal
Communications Commission (FCC) licenses.
The subsidiary companies which own and operate radio stations are Deschutes
River Broadcasting of Oregon, Inc., Deschutes River-Tri-Cities Operating
Company, Inc., Deschutes River Broadcasting of Billings, Inc. and Deschutes
River Broadcasting of Bozeman, Inc. The subsidiary companies which hold FCC
licenses are DRB Oregon License, Inc., Deschutes River-Tri-Cities Broadcasting,
Inc., DRB Billings License, Inc. and DRB Bozeman License, Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany items
and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
note receivable, accounts payable and other accrued expenses, accrued interest,
advance, note payable and the line of credit approximate fair value because of
the short-term or intercompany nature of these instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(d) Cash and Cash Equivalents
The Company considers all investments with a maturity of three months or
less at date of purchase to be a cash equivalent.
(e) Intangible Assets
Intangible assets are recorded at cost and amortized using the
straight-line method over the expected periods to be benefited, which range from
three to fifteen years. The Company assesses the recoverability of these
intangible assets by determining whether the balance can be recovered through
undiscounted future operating cash flows of the acquired asset. The amount of
asset impairment, if any, is measured based on
F-35
<PAGE> 135
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of the asset will be impacted if estimated future operating cash
flows are not achieved.
(f) Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated lives of the respective assets, which
range from five to twenty years. Maintenance and repairs are charged to
operations as incurred.
(g) Revenue
Net broadcast revenue is presented net of agency commissions and is
recognized when the advertisements are broadcast.
(h) Trade Transactions
Revenue from trade transactions (advertising provided in exchange for goods
and services) is recognized as income when advertisements are broadcast and
trade expense is recognized when merchandise is consumed or services are
performed. An asset and liability are recorded at the fair market value of the
goods or services received.
(i) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income disclosure for
employee stock option grants as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.
(j) Income Taxes
The Company accounts for taxes on the asset and liability method. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Deferred income taxes are measured
using the enacted tax rates and laws that are anticipated to be in effect when
the differences are expected to reverse.
(k) Reclassifications
Certain 1995 amounts have been reclassified to conform with current year
presentation.
(3) ACQUISITIONS
During 1995, the Company acquired two stations in Medford, Oregon for
approximately $1.9 million and six stations in the Montana markets combined for
approximately $5.4 million. The acquisitions were accounted for by the purchase
method of accounting and, accordingly, the purchase price was allocated to
F-36
<PAGE> 136
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
property and equipment and intangible assets based on their fair values at the
date of acquisition. The purchase price, including acquisition costs of $564,000
was allocated as follows:
<TABLE>
<S> <C>
Property and equipment........................... $2,600,000
Intangible assets................................ 5,264,000
----------
$7,864,000
==========
</TABLE>
During 1996, the Company acquired ten new radio stations in various
markets. The acquisitions included three stations in Eugene, Oregon, four
stations in Medford, Oregon, two stations in Billings, Montana and one station
in Tri-Cities, Washington. The purchase prices were approximately $7.0 million,
$2.0 million, $1.35 million and $500,000, respectively.
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to property and equipment,
intangible assets and payables based on their fair values at the date of
acquisition. The purchase price, including acquisition costs of $112,266 was
allocated as follows:
<TABLE>
<S> <C>
Property and equipment.......................... $ 806,000
Intangible assets............................... 10,206,028
Payables assumed................................ (49,762)
-----------
$10,962,266
===========
</TABLE>
During 1996, the Company disposed of three stations in Bozeman, Montana for
approximately $750,000. A gain of approximately $285,000 was recognized on the
sale.
The consolidated financial statements include the operating results of each
business from the date of acquisition. Pro forma unaudited consolidated
operating results of the Company and the acquired stations for the years ended
December 31, 1995 and 1996, assuming the acquisitions and dispositions had been
made as of January 1, 1995 and 1996, are summarized below:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Net broadcasting revenues......................... $11,316,910 $11,442,108
Income (loss) from operations..................... 423,053 (436,871)
Net loss.......................................... (1,188,707) (2,215,299)
</TABLE>
These pro forma results have been prepared for comparative purposes only
and include certain adjustments for operational expenses that the Company will
not incur in its operation of the stations, for interest expense that would have
been incurred to finance the purchases, additional depreciation expense based on
the fair market value of the property and equipment acquired, and the
amortization of intangibles arising from the transactions. The pro forma
financial information is not necessarily indicative of the results of operations
had the acquisitions and dispositions been consummated as of January 1, 1995 and
1996 or of future results of operations of the consolidated entities.
F-37
<PAGE> 137
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INTANGIBLE ASSETS, NET
Intangible assets, net are as follows at December 31:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ---------- -----------
<S> <C> <C> <C>
Goodwill................................. 15 years $2,811,354 $ 5,037,425
FCC licenses............................. 15 years 2,325,000 9,474,000
Covenants not to compete................. 3-5 years 295,000 456,000
Organizational costs..................... 5 years 255,319 252,970
Deferred financing costs................. Loan term 88,455 --
---------- -----------
5,775,128 15,220,395
Less accumulated amortization............ 494,019 1,077,496
---------- -----------
Intangible assets, net.............. $5,281,109 $14,142,899
========== ===========
</TABLE>
(5) PROPERTY AND EQUIPMENT, NET
Property and equipment, net are as follows at December 31:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
------------- ---------- ----------
<S> <C> <C> <C>
Land................................. -- $ 312,764 $ 312,764
Buildings............................ 20 years 497,430 297,431
Leasehold improvements............... Life of lease 130,000 13,000
Tower and transmitter equipment...... 13 years 1,664,710 1,521,586
Vehicles............................. 5 years 13,260 28,724
Studio equipment..................... 7 years 1,089,163 1,153,715
Furniture and fixtures............... 5 - 7 years 236,859 352,179
---------- ----------
3,944,186 3,679,399
Less accumulated depreciation and
amortization....................... 337,531 525,469
---------- ----------
Property and equipment,
net...................... $3,606,655 $3,153,930
========== ==========
</TABLE>
(6) NOTE PAYABLE
During 1996, in contemplation of the merger discussed at note 13, the
Company obtained financing from Citadel Communications Corporation (CCC) in the
form of an $8.9 million note payable to assist in making current year
acquisitions (see note 3). The note bears interest at the higher of the Euro
dollar rate plus 300 basis points or 9% and is payable quarterly. Accrued
interest at December 31, 1996 was approximately $255,000. The note is secured by
the assets of the acquired stations and stock of the subsidiary corporations
that own the stations acquired with the note proceeds. The note payable was
required to be repaid by July 1, 1997 if the merger did not occur. On the date
of the merger, the note payable was reclassified as an intercompany liability,
therefore it is classified as a non-current liability at December 31, 1996.
F-38
<PAGE> 138
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) LINE OF CREDIT, LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE
At December 31, the Company had the following debt instruments outstanding:
<TABLE>
<CAPTION>
1995 1996
---------- ------
<S> <C> <C>
Line of credit, revolving; rate of prime plus 1.5%..... $ 418,168 $ --
Bank note payable; variable and fixed rates
of 8.5% to 10%....................................... 3,372,016 --
Subordinated notes payable; rate of 11%................ 3,156,998 --
---------- ------
Total........................................ $6,947,182 $ --
========== ======
</TABLE>
Borrowings under the line of credit and bank note payable were
collateralized by substantially all assets of the Company, excluding assets
discussed in note 6.
In contemplation of the merger discussed at note 13, all debt instruments
were paid off on December 31, 1996. As the instruments were paid off by December
31, 1996, the Company did not have to comply with any financial covenants at or
for the year then ended.
(8) LEASES
The Company and its subsidiaries are obligated under certain noncancelable
operating leases for which future minimum payments are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997...................................................... $ 309,542
1998...................................................... 243,062
1999...................................................... 207,604
2000...................................................... 189,175
2001...................................................... 176,279
Subsequent to 2001........................................ 379,705
----------
$1,505,367
==========
</TABLE>
Rental expense, principally for office space, equipment and tower rentals,
amounted to $145,000 and $278,000 for the years ended December 31, 1995 and
1996.
(9) STOCKHOLDERS' EQUITY
Conversion of Stock at Time of Merger
As discussed in note 13, all equity instruments of the Company; preferred
stock, common stock and stock options, were converted into CCC equity
instruments on January 1, 1997, the merger date.
Convertible Preferred Stock
Each share of Deschutes River Broadcasting Series A, B, C and D preferred
stock is convertible at any time into common stock on a one-for-one basis
(subject to certain adjustments). Conversion of each series of preferred stock
is automatic upon the exchange of 51% or more of each series of preferred stock
into common stock.
Dividends are payable when and as declared by the Board of Directors and
are not cumulative. Dividends must be first paid on preferred stock before
amounts are paid on common stock. No dividends were declared or paid during 1995
or 1996.
F-39
<PAGE> 139
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Upon liquidation, dissolution, or winding up of the Company, holders of
convertible preferred stock have preference and priority over common shares for
payment out of the assets of the Company or proceeds thereof available for
distribution to stockholders of $1 per share plus a liquidation preference,
which accrues at an annual compounded rate of 8%.
Common Stock
At December 31, 1995 and 1996, the Company had reserved shares of common
stock for issuance as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Conversion of preferred stock....................... 2,942,000 2,942,000
Issuance of warrants................................ 1,005,253 --
Issuance to employees, officers, directors and
consultants under stock incentive plan............ 708,843 708,843
--------- ---------
4,656,096 3,650,843
========= =========
</TABLE>
Stock Incentive Plan
During 1995, the Company adopted a Stock Incentive Plan (the Plan) for
selected employees, officers, directors and consultants. Under the terms of the
Plan, the option price is determined by the Board of Directors (the Board) at
the time the option is granted. The options generally expire ten years from date
of grant and are exercisable as determined by the Board. At December 31, 1995,
no shares had been granted under the Plan.
During 1996, the Company granted 246,569 options at $.60 and 332,926
options at $2.10. None of the options were exercised during the current year.
The options generally are either 100% vested at the time of grant or become 100%
vested at the time of a merger (see note 13). At December 31, 1996, 579,495
options were outstanding at a weighted average exercise price of $1.46, of which
238,095 options with an exercise price of $2.10 were exercisable.
During 1995, the Financial Accounting Standards Board issued "Accounting
for Stock-Based Compensation" (SFAS 123) which defines a fair value based method
of accounting for an employee stock option and similar equity instruments.
As permitted under SFAS 123, the Company has elected to continue to account
for its stock-based compensation plans under APB Opinion No. 25. The Company has
computed, for pro forma disclosure purposes, the value of all options granted
during 1996 using the minimum value method as prescribed by SFAS 123 using the
following assumptions for grants:
<TABLE>
<S> <C>
Risk-free interest rate..................... 6.04%
Expected dividend yield..................... 0%
Expected lives.............................. 5 years
</TABLE>
Using the minimum value methodology, the total value of options granted
during 1996 was $223,000 which would be amortized on a pro forma basis over the
vesting period of the options (one to five years). The weighted average fair
value per share of options granted during 1996 was $.38. If the Company had
accounted
F-40
<PAGE> 140
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for its stock-based compensation plans in accordance with SFAS 123, the
Company's net loss would approximate the pro forma disclosure below for the year
ended December 31, 1996:
<TABLE>
<CAPTION>
AS PRO
REPORTED FORMA
---------- ----------
<S> <C> <C>
Net loss.................................. $1,385,588 $1,534,861
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure is not
indicative of future amounts.
Warrants
During 1995, the Company granted 1,005,253 warrants to purchase common
stock to subordinated debt holders at a price of $.01. All warrants granted in
1995 were exercised in 1996 for 1,005,253 shares of common stock. Management
determined that the value associated with these warrants at the date of grant
was not material.
During 1996, the Company granted 290,381 warrants to purchase common stock
to subordinated debt holders at a price of $.01. The warrants were to become
exercisable on January 1, 1997 if the warrant holders' portion of the
subordinated debt was not repaid by December 31, 1996. Due to the contingent
nature of these warrants, no value was assigned at the grant date. These
warrants expired on December 31, 1996, when the subordinated debt was repaid
(see notes 7 and 13).
(10) SALARY SAVINGS AND RETIREMENT PLAN
The Company has a salary savings and retirement plan. The plan covers
primarily all officers and employees of the Company who meet prescribed age and
service requirements. Employees may contribute up to 15% of their compensation.
Matching contributions are determined at the discretion of the Board of
Directors. There were no Company contributions made to the plan during the years
ended December 31, 1995 or 1996.
(11) INCOME TAXES
No income tax benefit was recorded by the Company in 1995 and 1996. Income
tax benefit for the year ended December 31, 1996 differed from the amounts
computed by applying the U.S. Federal income tax rate of 34% to pretax income
primarily due to an increase in the valuation allowance.
F-41
<PAGE> 141
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1996 are presented below:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Federal and state net operating loss carryforwards........ $246,553 $912,219
Allowance for doubtful accounts........................... 19,160 48,983
Payroll accrual........................................... 21,403 2,100
-------- --------
Total gross deferred tax assets................... 287,116 963,302
Less valuation allowance.................................. 190,338 735,645
-------- --------
Net deferred tax assets........................... 96,778 227,657
-------- --------
Deferred tax liabilities:
Book versus tax basis accumulated depreciation............ 96,778 227,657
-------- --------
Total gross deferred tax liabilities.............. 96,778 227,657
-------- --------
Net deferred tax asset............................ $ -- $ --
======== ========
</TABLE>
As of December 31, 1996, the Company had a consolidated net operating loss
carryforward of approximately $2,280,000 for consolidated federal income tax
reporting purposes available to offset future taxable income through the year
2011. Based on the Company's history of operating losses, the more likely than
not criteria for recognizing the tax benefit primarily associated with the net
operating losses cannot be met and, therefore, the Company has recorded a
valuation allowance to the extent of net deferred tax assets.
(12) RELATED PARTY TRANSACTIONS
The preferred stockholders are considered related parties of the Company.
At December 31, 1995, the Company had approximately $3.2 million in notes
payable to subordinated debt holders and $308,000 in accrued interest payable.
During 1996, the Company borrowed an additional $2.6 million in subordinated
debt from the preferred stockholders. Interest expense on the subordinated debt
for fiscal 1995 and 1996 was $308,000 and $548,000, respectively.
One of the preferred stockholders provides certain management services to
the Company. Management fees accrued at December 31, 1995 and 1996 were
approximately $21,000 and $48,000 and expense for the years then ended was
approximately $171,000 and $216,000, respectively.
As part of the merger discussed in note 13, all subordinated debt and
accrued interest was repaid and management services will no longer be provided
to the Company.
(13) SUBSEQUENT EVENTS
The Company was merged with and into a wholly-owned subsidiary of CCC
effective 12:01 a.m. on January 1, 1997. Effective with the merger, the Company
(and its wholly-owned subsidiaries) ceased to exist. All of the Company's equity
instruments, preferred stock, common stock and stock options, existing at
December 31, 1996, were converted into CCC equity instruments at the conversion
multiple defined in the merger agreement, at a per share conversion rate of
.1222948. All options outstanding at December 31, 1996 became fully vested at
the time of the merger. To effectuate the merger, CCC made an advance to the
Company of approximately $9.1 million on December 31, 1996 to pay off
subordinated debt, line of credit, long-term debt and other accrued expenses of
the Company. The advance is considered a non-current liability at December 31,
1996 as the obligation was reclassified as an intercompany liability on the date
of the merger.
F-42
<PAGE> 142
LOGO
------------------------------------------------------------------
2500 One PPG Place Telephone: (412) 338-7200
Pittsburgh, Pennsylvania 15222-5401 Facsimile: (412) 338-7380
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Tele-Media Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Tele-Media
Broadcasting Company and its partnership interests (collectively, the
"Companies" -- see Note 1) as of December 31, 1995 and 1996, and the related
consolidated statements of operations, deficiency in net assets and cash flows
for each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Companies as of December
31, 1995 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, at
December 31, 1996, the Companies were not in compliance with the terms of a debt
agreement.
LOGO
March 28, 1997
LOGO
F-43
<PAGE> 143
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,904,258 $ 2,343,395
Accounts receivable:
Nonbarter -- less allowance for doubtful accounts of
$531,000 and $612,000................................. 4,599,032 5,262,484
Barter -- net............................................. 363,394 304,244
Other current assets...................................... 157,998 739,831
----------- -----------
Total current assets................................... 7,024,682 8,649,954
----------- -----------
Property, plant and equipment:
Land...................................................... 1,372,571 1,372,571
Buildings and improvements................................ 2,357,447 2,369,520
Broadcasting equipment.................................... 10,653,182 11,169,533
----------- -----------
14,383,200 14,911,624
Less accumulated depreciation............................. 6,916,068 8,259,285
----------- -----------
Property, plant and equipment -- net................... 7,467,132 6,652,339
----------- -----------
Intangibles -- Net of accumulated amortization.............. 29,036,404 26,904,288
----------- -----------
Other noncurrent assets..................................... 95,641 16,331
----------- -----------
$43,623,859 $42,222,912
=========== ===========
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Accounts payable and other accrued expenses............... $ 1,466,387 $ 2,019,269
Accrued interest.......................................... 999,880 1,895,889
Accrued sales commissions................................. 330,561 358,513
Amounts due to affiliates -- net.......................... 2,057,456 2,818,179
Current portion of long-term debt......................... 3,106,208 37,528,396
----------- -----------
Total current liabilities.............................. 7,960,492 44,620,246
----------- -----------
Long-term liabilities:
Long-term debt -- less current portion.................... 64,417,869 32,382,419
Other..................................................... 32,772 31,266
----------- -----------
Total long-term liabilities............................ 64,450,641 32,413,685
----------- -----------
Redeemable stock warrants................................... 750,950 1,644,000
----------- -----------
Deficiency in net assets:
Common stock, voting, $0.01 par value per share; 25,000
shares authorized, 15,000 shares outstanding........... 150 150
Common stock, nonvoting, $0.01 par value per share; 10,000
shares authorized, none outstanding.................... -- --
Additional paid-in capital................................ 6,924,445 6,924,445
Deficit................................................... (36,462,819) (43,379,614)
----------- -----------
Deficiency in net assets............................... (29,538,224) (36,455,019)
----------- -----------
$43,623,859 $42,222,912
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-44
<PAGE> 144
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Local advertising................................. $17,637,256 $18,539,201 $20,968,055
National advertising.............................. 4,867,471 4,957,359 4,618,104
Barter............................................ 3,561,009 3,646,290 3,451,849
Other............................................. 576,607 511,827 370,932
----------- ----------- -----------
26,642,343 27,654,677 29,408,940
Less agency commissions........................... 2,648,183 2,811,738 2,984,574
----------- ----------- -----------
Net revenues.............................. 23,994,160 24,842,939 26,424,366
----------- ----------- -----------
Selling, general and administrative, programming,
barter and technical expenses:
Selling........................................ 4,719,103 5,154,097 5,001,176
General and administrative..................... 3,552,604 4,088,306 4,674,883
Programming.................................... 3,882,737 4,391,676 4,858,386
Barter......................................... 3,485,969 3,520,426 3,513,231
Technical...................................... 176,459 224,975 245,524
----------- ----------- -----------
15,816,872 17,379,480 18,293,200
----------- ----------- -----------
Operating income before management fees and
depreciation and amortization..................... 8,177,288 7,463,459 8,131,166
----------- ----------- -----------
Management fees and depreciation and amortization:
Management fees -- affiliates..................... 844,579 741,876 804,410
Depreciation and amortization..................... 4,690,730 3,708,809 3,493,509
----------- ----------- -----------
5,535,309 4,450,685 4,297,919
----------- ----------- -----------
Operating income.................................... 2,641,979 3,012,774 3,833,247
Interest expense.................................... 6,093,333 9,132,133 10,750,042
----------- ----------- -----------
Loss before extraordinary item...................... (3,451,354) (6,119,359) (6,916,795)
Extraordinary item -- Loss on extinguishment of
debt.............................................. (1,341,348) -- --
----------- ----------- -----------
Net loss.................................. $(4,792,702) $(6,119,359) $(6,916,795)
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-45
<PAGE> 145
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF DEFICIENCY IN NET ASSETS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN
SHARES AMOUNT CAPITAL DEFICIT
------ ------ ---------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994................................ 2,000 $ 20 $7,125,383 $(25,550,758)
Stock dividend........................................ 13,000 130 (130) --
Capital contributions -- cash......................... -- -- 1,000 --
Distributions......................................... -- -- (400,000) --
Contribution of management fees -- affiliates......... -- -- 198,192 --
Net loss.............................................. -- -- -- (4,792,702)
------ ---- ---------- ------------
Balance, December 31, 1994.............................. 15,000 150 6,924,445 (30,343,460)
Net loss.............................................. -- -- -- (6,119,359)
------ ---- ---------- ------------
Balance, December 31, 1995.............................. 15,000 150 6,924,445 (36,462,819)
Net loss.............................................. -- -- -- (6,916,795)
------ ---- ---------- ------------
Balance, December 31, 1996.............................. 15,000 $150 $6,924,445 $(43,379,614)
====== ==== ========== ============
</TABLE>
See notes to consolidated financial statements.
F-46
<PAGE> 146
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(4,792,702) $(6,119,359) $(6,916,795)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 4,690,730 3,708,809 3,493,509
Interest deferral...................................... 1,343,351 5,114,170 4,932,565
Amortization of loan origination fees.................. -- 311,916 300,795
Management fees -- affiliates.......................... 198,192 741,876 804,410
Provision for losses on accounts receivable............ 376,732 367,522 387,291
Loss on write-off of intangible assets................. 159,431 -- --
Net barter transactions................................ (75,040) (125,864) 61,382
Increase in fair value of redeemable stock warrants.... -- -- 893,050
Other.................................................. 90,867 (36,420) (78,760)
Changes in operating assets and liabilities:
Accounts receivable -- nonbarter..................... (437,520) (938,846) (1,050,743)
Other current assets................................. (249,489) 233,807 (581,833)
Accounts payable and other accrued expenses.......... (96,561) 281,957 552,882
Affiliates activity -- net........................... 1,148,600 (407,409) (43,687)
Accrued interest..................................... 35,113 136,081 896,009
Accrued sales commissions............................ (38,885) (6,891) 27,952
----------- ----------- -----------
Net cash provided by operating activities......... 2,352,819 3,261,349 3,678,027
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures...................................... (428,423) (520,440) (468,631)
Purchase of radio stations................................ (1,900,000) (5,100,000) (65,000)
Other..................................................... (4,809) 6,124 6,000
----------- ----------- -----------
Net cash used in investing activities............. (2,333,232) (5,614,316) (527,631)
----------- ----------- -----------
Cash flows from financing activities:
Capital contributions..................................... 1,000 -- --
Borrowings................................................ 61,334,446 5,433,347 95,144
Payments of long-term debt................................ (57,323,706) (2,932,546) (2,640,971)
Loan origination fees and other intangible assets......... (2,668,295) (271,271) (163,764)
Sale of redeemable stock warrants......................... 750,950 -- --
Distributions to stockholders............................. (400,000) -- --
Other..................................................... (12,180) (2,178) (1,668)
----------- ----------- -----------
Net cash provided by (used in) financing
activities...................................... 1,682,215 2,227,352 (2,711,259)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 1,701,802 (125,615) 439,137
Cash and cash equivalents, beginning of year................ 328,071 2,029,873 1,904,258
----------- ----------- -----------
Cash and cash equivalents, end of year...................... $ 2,029,873 $ 1,904,258 $ 2,343,395
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-47
<PAGE> 147
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND BUSINESS
Tele-Media Broadcasting Company (the "Company" or "TMBC") was incorporated
in 1988 under the name TMZ Broadcasting Company ("TMZ"). In April 1994, TMZ
changed its name to Tele-Media Broadcasting Company. Robert E. Tudek and Everett
I. Mundy each own 50% of the outstanding shares of TMBC. TMBC operates radio
stations principally in midsize markets in the eastern United States and in
Illinois.
In May 1989, TMZ acquired all of the outstanding common stock of Eastern
Broadcasting Company ("Eastern") and its wholly-owned subsidiaries: Lehigh
Valley Broadcasting ("Lehigh"), Penn Broadcasting Corporation ("Hershey"),
Providence Broadcasting Corporation ("Providence"), Quincy Communications
Corporation ("Quincy") and State College Communications Corporation ("State
College"). TMZ retained the assets acquired from State College and contributed
the assets acquired from the remaining subsidiaries of Eastern to limited
partnerships with the same names which TMZ had formed to facilitate the
acquisition. TMZ owned between a 95% and 99% general partnership interest in
each of the limited partnerships. With the exception of Quincy, the limited
partnership interests were owned by the shareholders of TMZ and employees of the
Companies (hereinafter defined). The limited partnership interest in Quincy (1%)
was owned by Tele-Media Holding Corporation ("Holding"), which is owned by
Messrs. Tudek and Mundy.
In April 1993, Messrs. Tudek and Mundy formed Tele-Media Broadcasting
Company of America ("America Corporation"), which purchased substantially all of
the assets of two radio stations in Rhode Island, WPRO(AM) and WPRO-FM, for
approximately $6 million, and in May 1993 formed Tele-Media Broadcasting Company
of Johnstown/Altoona ("Johnstown/Altoona Corporation"), which purchased all of
the common stock of Cambria County Broadcasting Company ("CCBC"). CCBC operated
radio station WIYQ(FM). Simultaneous with the purchase, CCBC was merged into
Johnstown/Altoona Corporation with Johnstown/Altoona Corporation being the
surviving corporation. WIYQ(FM)'s call letters were subsequently changed to
WQKK-FM.
In April 1994, Tele-Media Broadcasting Company of Cambria County ("Cambria
County Corporation") was formed by the shareholders of TMBC. Cambria County
Corporation purchased substantially all of the assets of a radio station,
WGLU(FM), in the Johnstown, PA market for approximately $1.9 million.
In June 1994, the companies were restructured in order to facilitate a
refinancing (see Note 4). In order to accomplish the restructuring, Tele-Media
Broadcasting Operating Company Limited Partnership ("Tele-Media Operating") was
formed by TMBC. Holding distributed its 1% limited partnership interest in
Quincy to the shareholders of TMBC. TMBC contributed its general partnership
interests in Lehigh, Hershey, Providence and Quincy to Tele-Media Operating. The
shareholders of TMBC contributed all of their limited partnership interests in
Lehigh, Hershey and Quincy to TMBC. TMBC contributed all of its limited
partnership interest in Lehigh and all but 1% of its limited partnership
interest in Hershey and Quincy to Tele-Media Operating. These limited
partnership interests were, by virtue of an amendment to the respective
partnership agreements, converted into general partnership interests. Tele-Media
Broadcasting Company of America Limited Partnership ("America LP"), Tele-Media
Broadcasting Company of Johnstown/Altoona Limited Partnership
("Johnstown/Altoona LP"), Tele-Media Broadcasting Company of State College
Limited Partnership ("State College LP") and Tele-Media Broadcasting Company of
Cambria County Limited Partnership ("Cambria County LP") were formed by
Tele-Media Operating, and America Corporation, Johnstown/Altoona Corporation and
Cambria County Corporation were merged with and into TMBC and the assets were
then contributed to Tele-Media Operating which in turn conveyed them to the
limited partnerships by the same names. TMBC then transferred all of the assets
acquired in the State College acquisition to Tele-Media Operating which in turn
conveyed them to State College LP.
F-48
<PAGE> 148
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
After the restructuring, TMBC owned a 99% general partnership interest in
Tele-Media Operating, and Tele-Media Operating owned between a 95% and 99%
general partnership interest in the following limited partnerships: Lehigh,
Hershey, Providence, Quincy, State College LP, America LP, Johnstown/Altoona LP
and Cambria County LP (collectively, the "Companies").
In March 1995, Quincy purchased substantially all of the assets of WZLZ-FM
for approximately $367,000 and the call letters were subsequently changed to
WMOS-FM. This acquisition was financed primarily with unsecured seller debt.
During 1994, Tele-Media Operating formed Tele-Media Broadcasting Company of
York Limited Partnership ("York LP"), of which Tele-Media Operating is 99%
general partner and TMBC is 1% limited partner. On May 1, 1995, the Companies
entered into Local Marketing Agreements ("LMAs") to operate WQXA-AM, WQXA-FM and
WIKN-FM. In November 1995, York LP acquired substantially all the assets of
WQXA-AM and WQXA-FM for approximately $5 million. This acquisition was financed
with additional borrowings under the Amended Loan Agreement (see Note 4).
On August 1, 1996, the Companies entered into an LMA to operate WBLF-AM. In
October 1996, State College LP acquired substantially all the assets of WBLF-AM
for approximately $215,000 (including forgiveness of a note receivable from the
seller and cash paid of $65,000).
During 1996, Tele-Media Operating formed Tele-Media Broadcasting Company of
Wilkes Barre /Scranton Limited Partnership ("Wilkes Barre LP") of which
Tele-Media Operating is 99% general partner and TMBC is 1% limited partner. On
August 1, 1996 Wilkes Barre LP entered into an asset purchase agreement to
acquire WAZL-AM and WZMT-FM and entered into an LMA to operate the stations. On
December 1, 1996, TMBC entered into an asset purchase agreement to acquire
WARM-AM and WMGS-FM along with the rights to purchase options for WBHT-FM,
WKQV-FM and WKQV-AM, all of which are located in the Wilkes-Barre market, and
which were being operated under LMAs and Joint Sales Agreements ("JSA's").
Subsequent to December 31, 1996, the Company consummated the acquisition of the
assets of WAZL-AM and WZMT-FM for approximately $3.5 million, which was financed
with borrowings under the Amended Loan Agreement. The Company expects to
consummate the acquisition of the assets of WARM-AM and WMGS-FM in 1997 for
approximately $11 million to be financed through additional borrowings under the
Amended Loan Agreement. The Company has made a nonrefundable escrow deposit of
$550,000 related to this acquisition. The escrow deposit is included in other
current assets and will be a reduction of the purchase price or, in the event
the acquisition is not consummated, paid to the seller.
The accompanying consolidated financial statements include the accounts of
TMBC and its partnership interests, including the acquisition of businesses from
their respective dates of purchase. All of the aforementioned acquisitions were
accounted for under the purchase method, and as such, the purchase price is
allocated among the assets and liabilities purchased based on their relative
fair market values at the date of acquisition. All material intercompany
transactions and balances have been eliminated in the consolidated financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and Cash Equivalents -- For purposes of the consolidated statements
of cash flows, the Companies consider highly liquid investments with original
maturities of three months or less to be cash equivalents.
b. Property, Plant and Equipment -- Property, plant and equipment, carried
at cost, is depreciated over the estimated useful lives of the related assets,
principally five to ten years. Depreciation is computed on the straight-line
method for financial statement purposes and on accelerated methods for federal
income tax
F-49
<PAGE> 149
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purposes. Depreciation expense totaled $1,446,000, $1,499,000 and $1,358,000 for
the years ended December 31, 1994, 1995 and 1996, respectively.
c. Intangibles -- Broadcast licenses are amortized over 20 years. Loan
origination fees and non-compete agreements are amortized over the terms of the
related agreements, and organization costs are amortized over five years. The
Companies write-off these assets and related accumulated amortization when the
assets become fully amortized.
d. Impairment of Long-Lived Assets -- Management of the Companies reviews
long-lived assets (including property, plant and equipment and intangibles) for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Management considers the
undiscounted cash flow expected to be generated by the use of the asset and its
eventual disposition to determine when, and if, an impairment has occurred. Any
write-downs due to impairment are charged to operations at the time the
impairment is identified. During the year ended December 31, 1994, the Company
wrote-off loan origination fees with a net carrying value of approximately
$159,000 due to a refinancing of the debt. There were no such write-downs
required in 1995 or 1996.
e. Income Taxes -- No provision for income taxes has been made for the
taxable income of the partnerships included in the consolidated financial
statements as income taxes are the responsibility of the partners. TMBC has
Subchapter S status for federal income tax purposes and, therefore, the
shareholders, rather than the Company, have the responsibility for federal
income taxes and for state income taxes in those states that recognize the
equivalent of Subchapter S status.
f. Revenue Recognition -- Revenue is recognized as commercials are
broadcast. The Companies also enter into barter transactions in which
advertising time is traded for merchandise or services used principally for
promotional and other business purposes. Barter revenue is recorded as
commercials are broadcast at the estimated fair value of the air time. If
merchandise or services are received prior to the broadcast of commercials,
recognition of the related revenue is deferred and recognized as the commercials
are broadcast.
g. Reclassifications -- Certain reclassifications have been made to the
1994 and 1995 consolidated financial statements in order to conform to the 1996
presentation.
h. Use of Estimates in Preparation of the Consolidated Financial
Statements -- The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities as of the date of the consolidated financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
i. Local Marketing Agreements and Joint Sales Agreements -- The Companies
use property, plant and equipment of the radio stations operated under LMAs and
JSAs in exchange for a fee. Under provisions of the Company's LMAs and JSAs, the
expenses of operating the stations (other than depreciation or amortization of
assets) are the obligations of the Companies, and they are entitled to the
revenues generated by the stations. Revenues and expenses related to these
agreements are reflected in the consolidated statements of operations. The
Companies have recorded fees in respect to these agreements of $63,750 for the
year ended December 31, 1996 within general and administrative expenses on the
consolidated statement of operations. No such costs were incurred in 1994 or
1995.
F-50
<PAGE> 150
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Broadcast licenses................................ $36,389,881 $36,440,231
Non-compete agreements............................ 1,487,500 265,000
Loan origination fees............................. 2,854,888 2,937,340
Organization costs................................ 250,387 284,633
----------- -----------
40,982,656 39,927,204
Less accumulated amortization..................... 11,946,252 13,022,916
----------- -----------
$29,036,404 $26,904,288
=========== ===========
</TABLE>
4. LONG-TERM DEBT AND REDEEMABLE STOCK WARRANTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Senior:
Borrowings under Amended Loan Agreement....... $36,383,700 $33,935,700
Discount Notes................................ 30,698,371 35,630,986
Other........................................... 442,006 344,129
----------- -----------
67,524,077 69,910,815
Less current portion............................ 3,106,208 37,528,396
----------- -----------
$64,417,869 $32,382,419
=========== ===========
</TABLE>
The significant provisions of the Amended and Restated Loan Agreement dated
February 26, 1997 (the "Amended Loan Agreement"), Senior Discount Notes (the
"Notes"), and the Redeemable Stock Warrants (the "Warrants") are discussed
below. The debt arrangements discussed in the preceding sentence were entered
into in connection with a refinancing in June 1994 of substantially all of the
debt then outstanding, resulting in an extraordinary loss on the extinguishment
thereof of approximately $1,341,000 during the year ended December 31, 1994.
AMENDED LOAN AGREEMENT
The Amended Loan Agreement permits borrowings of up to approximately $49
million. The remaining permitted borrowings under the Amended Loan Agreement
($16 million at February 26, 1997) were provided to finance the 1997 planned
acquisitions described in Note 1. The Amended Loan Agreement modified principal
and interest payments, and certain financial covenants and requires the payment
of additional fees to the Lender of $250,000 in 1997 and 1998 in the event of a
failure to meet the leverage covenant in either year. Prior to the amendment on
February 26, 1997, and at December 31, 1996, the Companies were not in
compliance with the provisions of the loan agreement then in effect.
Principal is payable in quarterly installments with any remaining principal
due April 1999. The Lender has the option to require the Companies to make an
additional principal payment of up to approximately $8.9 million in 1997 and
$21.4 million in 1998. Prior to the date of the Amended Loan Agreement, interest
was payable quarterly at the prime rate plus 2%, or at the Companies' option,
LIBOR plus 4.75%. At December 31, 1996, the interest rate was 10.25% (prime plus
2%). The Amended Loan Agreement requires interest payments quarterly. Interest
under the Amended Loan Agreement is charged at the prime rate plus
F-51
<PAGE> 151
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2%, or at the Companies' option, LIBOR plus 4.5%, on borrowings up to
approximately $44 million; interest on the next $5 million borrowed will be
charged at the prime rate plus 3.75%. The Amended Loan Agreement requires the
Companies to enter into a two year interest hedge contract on or before
September 30, 1997 in a notional amount not less than $25 million, providing
protection should the prime rate exceed the prime rate at the date the interest
hedge contract is entered into by 2.5%. A penalty of between 2% and 4% is
assessed on any principal prepayment.
Borrowings under the Amended Loan Agreement are collateralized by
substantially all of the assets and partnership interests of Tele-Media
Operating and its partnerships. The Amended Loan Agreement provides for, among
other things, limitations on distributions, indebtedness, mergers, sale and
purchase of assets, capital expenditures, payment of management fees and payment
of interest on the Notes, and requires the achievement of certain minimum cash
flow amounts.
SENIOR DISCOUNT NOTES
The Notes are due June 15, 2004 and were issued with an original issue
discount based on an interest rate of 16%. TMBC did not make interest payments
on the Notes due June 15, 1995, December 15, 1995 and June 15, 1996 and did not
consummate the Exchange Offer by the date as set forth in the original
Registration Rights Agreement (as defined below). Consequently, TMBC and the
Note holders amended the existing agreements to convert the amount of cash
interest payments then due ($2,509,000) plus penalties of approximately
$1,260,000 to notes payable and, in consideration of the conversion, the Note
holders waived TMBC's default. Under the terms of the Note Agreement, as amended
to include the notes issued in 1995 and 1996, interest of approximately $920,000
is payable semi-annually through June 15, 1999, and the remainder of the
interest is deferred and added to principal. After June 15, 1999, semi-annual
interest payments will be made at an annual rate of 16% of the accreted value of
the Notes. The accreted value of the Notes will approximate $47,811,000 at June
15, 1999.
TMBC did not make the required interest payment of $920,585 on the Notes
which was due on December 15, 1996, and consequently it is in default of the
Note Agreement. The holders of the Notes have the right to require immediate
payment of all amounts due under the Note Agreement. The total amount due under
the Note Agreement at December 31, 1996, which is classified as a current
obligation, was $35,630,986. The shareholders of TMBC have negotiated an
agreement to sell their stock in the Company. As part of the transaction, the
holders of the Notes will be paid an amount sufficient to satisfy all
outstanding claims against TMBC, including settlement of claims relating to the
redeemable stock warrants discussed below (see Note 6). In the event the sale is
not consummated, TMBC plans to enter into discussions with the Note holders to
convert the delinquent amount, plus any penalties, into a note payable. If the
Note holders refuse to agree to the conversion or another acceptable
alternative, TMBC intends to search for replacement financing.
Payment under the Notes is restricted by the Amended Loan Agreement.
Redemption of the Notes prior to their scheduled maturity is subject to
prepayment premiums. If a Qualified Public Offering is consummated by June 15,
1999, the Notes may be redeemed at TMBC's option for between 110% to 120% of the
Accreted Value of the Notes. After June 15, 1999, the Notes may be redeemed at
TMBC's option for $47,811,000 plus a premium of up to 8%, which declines ratably
through the date of maturity. In addition, if a Change of Control occurs, the
Note holders have the option to require TMBC to repurchase the Notes at 101% of
the Accreted Value.
The Notes are unsecured and restrict, among other things, the declaration
or payment of any dividends or any other distributions to shareholders, the
incurrence of additional debt, transactions with affiliates, payment of
management fees, formation of additional subsidiaries, mergers, sales of assets
and capital expenditures. Pursuant to a Registration Rights Agreement between
TMBC and the Purchasers, TMBC filed an Exchange Offer Registration Statement
(the "Registration Statement") with the Securities and Exchange Commission
F-52
<PAGE> 152
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on September 19, 1994. Under the terms of the Exchange Offer the holders of the
Notes may exchange the Old Notes for New Notes with identical terms, except that
the New Notes may be offered for resale, be resold or otherwise transferred,
under certain conditions by the holders without compliance with the registration
and prospectus delivery provisions of the Securities Act of 1933. Pursuant to
the terms of the Registration Rights Agreement, as amended, if the Registration
Statement does not become effective by May 1, 1997, additional interest of 1%
per annum will be charged from May 1, 1997 through December 1, 1997 and increase
.5% each six months thereafter, not to exceed an aggregate of 5% based on the
Accreted Value of the Notes until the Registration Statement becomes effective.
REDEEMABLE STOCK WARRANTS
The Warrants are exercisable at no additional cost to the Note holders for
between 3,750 and 5,290 shares of non-voting common stock representing 20% to
26% of the equity of TMBC, based on the achievement of certain levels of
Operating Cash Flow. The Warrant agreement provides registration rights to the
holders and restricts, among other things, the incurrence of additional debt,
payment of management fees, formation of additional subsidiaries, mergers, sale
of assets and distributions to stockholders. In addition, the Warrant holders
have put rights during the period from January 1, 2000 through March 31, 2000 or
upon a Change of Control, to require TMBC to redeem the Warrants for cash at
fair value.
The Warrants expire June 9, 2004 and are exercisable at any time on or
after January 1, 2000, or upon the occurrence of any of the following: the
conversion of TMBC to a Subchapter C corporation for federal income tax
purposes; an Initial Public Offering; a merger where TMBC is not the surviving
entity; a sale, lease, transfer or other disposition of all or substantially all
of the assets of TMBC or its subsidiaries; a liquidation or dissolution of TMBC;
or if Messrs. Tudek and Mundy own less than 50% of TMBC or a successor company.
Holders of the non-voting common stock will enter into a Registration
Rights Agreement providing them with unlimited piggy-back registration rights
and the right to participate in any Initial Public Offering. The non-voting
stock is convertible into voting common stock in connection with the sale of
shares in a public offering, in a brokers' transaction pursuant to Rule 144
under the Securities Act of 1933, and if, after conversion, the shareholder
would own 4.9% or less of the common stock. TMBC has reserved 10,000 shares of
non-voting stock and 10,000 shares of voting stock for exercise of the Warrants.
TMBC estimated the redemption price of the warrants at December 31, 1995
and 1996 as $750,950 and $7,000,000, respectively. Increases in the redemption
price are accounted for prospectively as an adjustment to periodic interest
expense from the date of the increase to January 1, 2000, the earliest date the
put can be exercised. The accreted value of the Warrants at December 31, 1995
and 1996, was $750,950 and $1,644,000, respectively, resulting in a charge to
interest expense for the year ended December 31, 1996 of $893,050. There was no
adjustment to interest expense for the years ended December 31, 1994 and 1995.
Minimum scheduled maturities of long-term debt during the next five years
considering the Amended Loan Agreement and the classification of the Notes as a
current liability resulting from the default are as follows:
<TABLE>
<S> <C>
1997........................................................ $37,528,000
1998........................................................ 2,595,000
1999........................................................ 33,744,000
2000........................................................ 19,000
2001........................................................ 3,000
</TABLE>
Interest paid on all debt in 1994, 1995 and 1996 was approximately
$4,616,000, $3,570,000 and $3,750,000, respectively.
F-53
<PAGE> 153
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. OPERATING AGREEMENT WITH AFFILIATE
Under terms of an operating agreement entered into in June 1994, Tele-Media
Corporation of Delaware (an affiliate) ("Tele-Media Delaware") provides certain
management and technical services to the Companies and charges a management fee
of 3.5% of revenues. Payment of the management fee is restricted by the Notes
and the Amended Loan Agreement. The operating agreement expires on June 9, 2004
and continues from year-to-year thereafter unless either party gives written
notice to the other at least 30 days in advance of an expiration date.
Prior to the June 1994 operating agreement discussed above, Tele-Media
Delaware charged a management fee ranging from 3.5% to 7% of revenues. As
required by the provisions of the debt arrangements then outstanding as
discussed in Note 4, Messrs. Tudek and Mundy assumed responsibility for the
payment of certain management fees in 1994. The liabilities assumed by Messrs.
Tudek and Mundy are treated as additional paid-in capital in the consolidated
financial statements.
6. CONTINGENCIES AND COMMITMENTS
In 1995, TMBC and its shareholders entered into a nonbinding letter of
intent to sell the stock of TMBC. TMBC terminated the letter of intent and the
proposed buyer filed suit for damages and specific performance. A motion to
dismiss the suit was heard in early 1996 and the court ruled to dismiss a
majority of the claims, including those for specific performance, as no
definitive agreement had been reached for sale of the stock. On March 28, 1997,
the shareholders of TMBC executed an agreement to sell the stock of the Company
to the plaintiff in this suit. As part of this transaction, the suit was
dismissed with prejudice, and upon motion of the parties, the dismissal of the
suit was approved by the court. As a result of the suit's dismissal, this action
cannot again be filed by the plaintiff.
General and administrative expenses for the year ended December 31, 1995
and 1996 include approximately $274,000 and $260,000, respectively, of legal
expenses incurred relating to the defense of the lawsuit and the proposed sale.
The shareholders have agreed to pay 5.5% of the net proceeds from a sale of
their stock to two key members of management.
* * * * * *
F-54
<PAGE> 154
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,708,373
Accounts receivable:
Nonbarter -- less allowance for doubtful accounts of
$800,000.............................................. 5,447,842
Barter -- net.......................................... 303,749
Other current assets...................................... 303,620
------------
Total current assets.............................. 9,763,584
------------
Property, plant and equipment -- net........................ 8,436,165
------------
Intangibles -- net.......................................... 38,326,412
------------
Other noncurrent assets..................................... 16,331
------------
$ 56,542,492
============
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Accounts payable and other accrued expenses............... $ 1,514,622
Accrued interest.......................................... 2,969,594
Amounts due to affiliates -- net.......................... 4,159,152
Current portion of long-term debt......................... 39,491,064
------------
Total current liabilities......................... 48,134,432
------------
Long-term liabilities:
Long-term debt -- less current portion.................... 47,306,734
Other..................................................... 31,266
------------
Total long-term liabilities....................... 47,338,000
------------
Redeemable stock warrants................................... 7,000,000
------------
Deficiency in net assets:
Common stock, voting, $0.01 par value per share; 25,000
shares authorized, 15,000 shares outstanding........... 150
Common stock, nonvoting, $0.01 par value per share; 10,000
shares authorized, none outstanding.................... --
Additional paid-in capital................................ 6,924,445
Deficit................................................... (52,854,535)
------------
Deficiency in net assets.......................... (45,929,940)
------------
$ 56,542,492
============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-55
<PAGE> 155
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Revenues:
Local advertising......................................... $ 9,323,963 $ 12,557,493
National advertising...................................... 2,052,723 2,710,273
Barter.................................................... 1,697,415 2,357,519
Other..................................................... 222,507 339,431
------------ ------------
13,296,608 17,964,716
Less agency commissions................................... 1,346,551 1,723,832
------------ ------------
Net revenues...................................... 11,950,057 16,240,884
------------ ------------
Selling, general and administrative, programming, barter and
technical expenses:
Selling................................................... 2,441,926 3,287,451
General and administrative................................ 2,008,273 3,366,246
Programming............................................... 2,337,296 3,491,639
Barter.................................................... 1,697,415 2,357,519
Technical................................................. 127,977 176,110
------------ ------------
8,612,887 12,678,965
------------ ------------
Operating income before management fees and depreciation and
amortization.............................................. 3,337,170 3,561,919
------------ ------------
Management fees and depreciation and amortization:
Management fees -- affiliates............................. 358,113 454,258
Depreciation and amortization............................. 2,092,858 2,207,660
------------ ------------
2,450,971 2,661,918
------------ ------------
Operating income............................................ 886,199 900,001
Interest expense............................................ 4,955,734 10,374,922
------------ ------------
Net loss.................................................... (4,069,535) (9,474,921)
Deficit, beginning of period................................ (36,462,819) (43,379,614)
------------ ------------
Deficit, end of period...................................... $(40,532,354) $(52,854,535)
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-56
<PAGE> 156
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(4,069,535) $ (9,474,921)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 2,092,858 2,207,660
Interest deferral...................................... 3,012,406 1,975,012
Management fees -- affiliates.......................... 358,113 454,258
Provision for losses on accounts receivable............ 158,144 305,581
Increase in fair value of redeemable stock warrants.... -- 5,356,000
----------- ------------
Other.................................................. 849 335
Changes in operating assets and liabilities:
Accounts receivable -- nonbarter..................... (6,589) (490,939)
Other current assets................................. (115,852) (114,795)
Accounts payable and other accrued expenses.......... (587,980) (863,160)
Affiliates activity -- net........................... (135,961) 886,715
Accrued interest..................................... 478,336 1,073,705
----------- ------------
Net cash provided by operating activities......... 1,184,789 1,315,451
----------- ------------
Cash flows from investing activities:
Capital expenditures...................................... (255,344) (227,926)
Purchase of radio stations................................ -- (14,170,000)
Other..................................................... 2,500 1,500
----------- ------------
Net cash used in investing activities............. (252,844) (14,396,426)
----------- ------------
Cash flows from financing activities:
Borrowings................................................ 79,361 16,000,000
Payments of long-term debt................................ (1,575,046) (1,408,350)
Loan origination fees and other intangible assets......... (25,000) (145,334)
Other..................................................... (1,714) (363)
----------- ------------
Net cash provided by (used in) financing
activities...................................... (1,522,399) 14,445,953
----------- ------------
Net increase (decrease) in cash and cash equivalents........ (590,454) 1,364,978
Cash and cash equivalents, beginning of period.............. 1,904,258 2,343,395
----------- ------------
Cash and cash equivalents, end of period.................... $ 1,313,804 $ 3,708,373
=========== ============
</TABLE>
See notes to consolidated financial statements.
F-57
<PAGE> 157
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of June 30, 1997 and the
condensed consolidated statements of operations and changes in deficit and cash
flows for the six month periods ended June 30, 1996 and 1997 are unaudited. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation for the periods presented
have been included. These interim unaudited condensed consolidated financial
statements for 1996 and 1997 should be read in conjunction with the audited
consolidated financial statements and notes thereto. The consolidated results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the full year.
2. BUSINESS ACQUISITIONS
On February 27, 1997, the Company purchased substantially all of the assets
of two radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for
approximately $3,400,000. The acquisition was accounted for under the purchase
method, with approximately $500,000 allocated to property, plant and equipment
and approximately $2,900,000 allocated to intangibles.
On April 18, 1997, the Company closed the acquisition of two additional
radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for
approximately $11,000,000. The acquisition was financed by $12,000,000 of
additional borrowings under the Amended Loan Agreement. The acquisition was
accounted for under the purchase method, with approximately $1,722,000 allocated
to property, plant and equipment and approximately $9,278,000 allocated to
intangibles.
On May 5, 1997, the Company closed the acquisition of a radio station in
the Quincy, Illinois market for approximately $345,000. The acquisition was
financed primarily by an unsecured seller note and assumption of capital leases.
The acquisition was accounted for under the purchase method, with approximately
$148,000 allocated to property and equipment and approximately $197,000
allocated to intangibles.
3. SUBSEQUENT EVENTS
On July 3, 1997, all of the issued and outstanding stock of the Company was
acquired by Citadel Broadcasting Company, a subsidiary of Citadel Communications
Corporation for approximately $114,400,000. In connection with the acquisition
by Citadel Broadcasting Company, a Change of Control occurred. The Change of
Control has a material effect on the financial statements due to the change in
the earliest put date of the redeemable stock warrants. The Warrant holders have
put rights as of January 1, 2000 or upon a Change of Control. TMBC estimated the
redemption price of the warrants at December 31, 1996 as $7,000,000, and the
accreted value of the warrants at December 31, 1996 was $1,644,000. Previously,
increases in the redemption price were accounted for prospectively as an
adjustment to periodic interest expense from the date of the increase to January
1, 2000, the earliest date the put could be exercised. However, due to the
Change of Control on July 3, 1997, the earliest put date is July 3, 1997 and the
warrants must be accreted to their full value by this time. The accreted value
of the warrants at December 31, 1996 was $1,644,000, thus resulting in a charge
to interest expense of $5,356,000 during the six months ended June 30, 1997 to
accrete the warrants to their $7,000,000 redemption price.
F-58
<PAGE> 158
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Snider Corporation:
We have audited the accompanying consolidated balance sheet of Snider
Corporation as of December 31, 1995 and the related consolidated statements of
income, stockholders' equity, and cash flows for the year then ended. We have
also audited the accompanying balance sheet of Snider Corporation as of December
31, 1996 and the related statements of income, stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Snider
Corporation as of December 31, 1995 and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Snider Corporation as of December 31, 1996 and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
As discussed in Notes 3, 6 and 7, the Company has significant transactions
with related parties.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The combining information is
presented for purposes of additional analysis of the financial statements. The
combining information has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ ERWIN & COMPANY
Little Rock, Arkansas
April 1, 1997
F-59
<PAGE> 159
SNIDER CORPORATION
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 44,870 $ 105,788
Accounts receivable, net of allowance for doubtful
accounts of
$26,652 in 1995 and $34,461 in 1996.................... 566,180 475,065
Due from affiliates....................................... 61,352 38,146
Other..................................................... 34,495 20,867
---------- ----------
Total current assets................................... 706,897 639,866
Other assets:
Non-compete covenant...................................... -- 45,833
Land held for investment, at cost, which approximates
market value........................................... 123,396 97,553
Other..................................................... -- 18,536
---------- ----------
Total other assets..................................... 123,396 161,922
Property and equipment, at cost less accumulated
depreciation.............................................. 666,934 874,992
---------- ----------
$1,497,227 $1,676,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable -- related party............................. $ 50,000 $ 50,000
Accounts payable -- trade................................. 128,416 152,388
-- other.............................. 385 --
Accrued expenses.......................................... 96,593 86,481
---------- ----------
Total current liabilities.............................. 275,394 288,869
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000 143,000
Paid in capital........................................... 62,298 474,300
Retained earnings......................................... 1,016,535 770,611
---------- ----------
Total stockholders' equity............................. 1,221,833 1,387,911
---------- ----------
$1,497,227 $1,676,780
========== ==========
</TABLE>
See accompanying notes.
F-60
<PAGE> 160
SNIDER CORPORATION
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenue:
Announcements and programs................................ $3,510,863 $3,583,944
Barter accounts........................................... 360,616 428,129
---------- ----------
Total revenue..................................... 3,871,479 4,012,073
---------- ----------
Direct charges:
Commissions............................................... 440,461 450,944
Royalties and franchise fees.............................. 93,744 140,303
---------- ----------
Total direct charges.............................. 534,205 591,247
---------- ----------
Gross profit................................................ 3,337,274 3,420,826
---------- ----------
Operating expenses:
Technical department...................................... 57,985 95,416
Program department........................................ 608,416 509,877
News department........................................... 264,837 255,458
Sales department.......................................... 839,461 859,674
General and administrative................................ 926,945 974,815
Depreciation and amortization............................. 81,232 186,723
---------- ----------
Total operating expenses.......................... 2,778,876 2,881,963
---------- ----------
Operating income............................................ 558,398 538,863
Other income (expense):
Interest income........................................... 5,275 3,168
Interest expense.......................................... (8,548) (6,917)
Loss on sale of property and equipment.................... -- (59,024)
Minority interest......................................... (48,004) --
Operating agreement -- acquired stations.................. -- (65,698)
Other..................................................... (30,540) (124,316)
---------- ----------
Total other income (expense)...................... (81,817) (252,787)
---------- ----------
Net income.................................................. $ 476,581 $ 286,076
========== ==========
</TABLE>
See accompanying notes
F-61
<PAGE> 161
SNIDER CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance -- December 31, 1994................. $143,000 $ 62,298 $ 868,958 $1,074,256
Net income................................. -- -- 476,581 476,581
Distributions to stockholders.............. -- -- (329,004) (329,004)
-------- -------- ---------- ----------
Balance -- December 31, 1995................. 143,000 62,298 1,016,535 1,221,833
Net income................................. -- -- 286,076 286,076
Capital contribution....................... -- 412,002 -- 412,002
Distributions to stockholders.............. -- -- (532,000) (532,000)
-------- -------- ---------- ----------
Balance -- December 31, 1996................. $143,000 $474,300 $ 770,611 $1,387,911
======== ======== ========== ==========
</TABLE>
See accompanying notes
F-62
<PAGE> 162
SNIDER CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 476,581 $ 286,076
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 81,232 186,723
Loss on disposal of assets............................. -- 59,023
Minority interest...................................... 48,004 --
Recognition of unearned income......................... (107,813) --
Bad debt provision..................................... 30,636 34,461
Net changes in operating assets and liabilities:
Accounts receivable.................................. (173,698) 56,654
Other current assets................................. 77,524 13,628
Other non-current assets............................. -- (18,536)
Accounts payable..................................... (15,065) 23,587
Accrued expenses..................................... 6,280 (10,112)
--------- ---------
Net cash provided by operating activities......... 423,681 631,504
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment........................ (192,120) (213,240)
Purchase of land held for investment...................... (22,563) --
Proceeds from sale of property and equipment.............. -- 262,800
Net advances to affiliate................................. (49,064) (38,146)
Payment under non-compete covenant........................ -- (50,000)
--------- ---------
Net cash used in investing activities............. (263,747) (38,586)
--------- ---------
Cash flows from financing activities:
Proceeds from repayments of notes receivable.............. 107,623 --
Repayment of note payable -- Bank......................... (45,044) --
Distributions to minority interest........................ (48,004) --
Distributions to stockholders............................. (329,004) (532,000)
--------- ---------
Net cash used in financing activities............. (314,429) (532,000)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ (154,495) 60,918
Cash and cash equivalents:
Beginning of year......................................... 199,365 44,870
--------- ---------
End of year............................................... $ 44,870 $ 105,788
========= =========
Supplemental cash flows information:
Interest paid............................................. $ 8,548 $ 6,917
Significant non-cash investing and financing activities:
Non-cash purchase of property and equipment from
affiliate............................................. -- 473,353
Non-cash contribution of capital....................... -- 412,002
</TABLE>
See accompanying notes
F-63
<PAGE> 163
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation
The consolidated financial statements include the accounts of Snider
Corporation (the Company) and SMN Company (SMN), a 52% owned partnership. All
significant intercompany transactions and accounts have been eliminated in
consolidation. SMN was liquidated effective December 31, 1995.
Nature of operations
The Company operates an AM radio station and two FM radio stations in the
central Arkansas market area and provides news and information to other radio
stations throughout Arkansas. The activities of SMN were not material to 1995
consolidated financial position or results of operations.
Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and amortization
Depreciation is calculated by the straight-line method. Estimated useful
lives are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Transmitter building, antenna system, office machines and 3-25
equipment.................................................
Furniture and fixtures...................................... 5-10
Vehicles.................................................... 2- 4
Other....................................................... 3- 5
</TABLE>
Non-compete covenant
The non-compete covenant with the former owner of certain radio
broadcasting assets acquired in 1996 is being amortized on a straight-line basis
over a period of two years. Total amortization expense was for 1996 was $4,167.
Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less when purchased
to be cash equivalents.
Concentrations of credit risk
Most of the Company's business activity is with customers located within
the state of Arkansas. The Company grants credit to its customers in the normal
course of business, ordinarily without collateral requirements.
The Company's exposure to credit risk from accounts receivable -- trade and
notes receivable is represented by the carrying value of those receivables. The
Company also periodically has demand deposit balances with a local financial
institution that exceed federally insured limits. Management periodically
reviews the soundness of this financial institution and does not believe the
Company is exposed to significant financial risk.
F-64
<PAGE> 164
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Reclassifications
Certain reclassifications have been made to the 1995 financial statements
to conform to the 1996 basis of presentation.
(2) PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Land............................................... $ 301,252 $ 57,700
Transmitter building............................... 87,879 87,879
Antenna system..................................... 91,736 91,736
Satellite equipment................................ -- 473,353
Equipment.......................................... 452,326 650,906
Office machines.................................... 325,787 339,616
Furniture and fixtures............................. 149,455 150,289
Vehicles........................................... 63,623 56,272
Other.............................................. 198,714 78,831
---------- ----------
1,670,772 1,986,582
Less accumulated depreciation...................... 1,003,838 1,111,590
---------- ----------
$ 666,934 $ 874,992
========== ==========
</TABLE>
(3) NOTE PAYABLE -- RELATED PARTY:
Note payable -- related party at December 31, 1995 and 1996 consists of an
unsecured note payable to a stockholder. The note bears interest at 8% and is
due on demand.
(4) INCOME TAXES:
The Company has elected to be treated as an S corporation for federal
income tax purposes and is subject to similar treatment for state income tax
purposes. Under this election, income and losses of the Company are reported in
the income tax returns of the stockholders. As a result, no income taxes are
reflected in the accompanying consolidated financial statements.
(5) ACQUISITIONS:
During 1996, the Company acquired the assets, including broadcast rights
for a local FM radio. Prior to FCC approval of the acquisition, the station was
operated by the Company under a license management agreement. Expenses incurred
under this agreement totaling $65,698 are included in the accompanying 1996
statement of income under the heading "Other Income (Expenses)."
F-65
<PAGE> 165
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 -- CONTINUED
(5) ACQUISITION (CONTINUED):
The acquisition cost of the broadcast assets were allocated as follows:
<TABLE>
<S> <C>
Property and equipment.................................. $132,820
Non-compete covenant.................................... 50,000
--------
Total......................................... $182,820
========
</TABLE>
(6) COMMITMENTS AND CONTINGENCIES:
The Company leases its office building and parking lot under an operating
lease from an officer and principal stockholder of the Company for $10,000 per
month. Additionally, the Company rented satellite space from an affiliate under
an informal lease agreement totaling $107,950 and $6,300 during the years ended
December 31, 1995 and 1996, respectively. Total rent expense was $245,377 and
$140,400 for the years ended December 31, 1995 and 1996, respectively. Rent
expense was offset by $54,000 in 1995 and $48,320 in 1996 by amounts received
from an affiliate under a month to month sublease agreement for office space.
Future minimum rentals under noncancelable operating leases, including
renewal options, at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997.................................................... $120,000
1998.................................................... 120,000
--------
$240,000
========
</TABLE>
(7) RELATED PARTY TRANSACTIONS:
General and administrative expense has been reduced by $23,282 and $21,000
in 1995 and 1996, respectively, for shared office and overhead expenses charged
to an affiliate. The amounts shown in the accompanying balance sheets as due
from affiliates represent amounts owed to the Company for these and certain
other operating expenses paid by the Company on behalf of affiliates.
During 1996, the Company purchased satellite communications equipment from
an affiliate for $473,353. In connection with the purchase, the Company's
stockholders transferred certain assets of another affiliate with a fair value
of $412,002 to the Company. The transfer was recorded as a capital contribution.
These contributed assets, plus accounts receivable due from the affiliate
totaling $61,351 were exchanged for the satellite communications equipment.
Information concerning the note payable -- related party is contained in
Note 3. Information concerning lease and other rental income and expenses with
related parties is described in Note 5.
F-66
<PAGE> 166
SNIDER CORPORATION
SCHEDULE OF COMBINING OPERATING INCOME,
EXCLUDING DEPRECIATION AND AMORTIZATION
FOR BROADCASTING UNITS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
KARN ARN COMBINED
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Local announcements.................................. $1,604,785 $1,353,472 $2,958,257
National announcements............................... 135,805 -- 135,805
Political announcements.............................. 68,318 193,539 261,857
Network.............................................. 77,236 -- 77,236
Materials and facilities............................. 71,411 79,378 150,789
Barter accounts...................................... 289,797 138,332 428,129
---------- ---------- ----------
Total revenue................................ 2,247,352 1,764,721 4,012,073
Less direct charges:
Agency commissions................................... 156,538 187,616 344,154
National representative commissions.................. 16,676 90,114 106,790
Rights fees.......................................... 78,426 61,877 140,303
---------- ---------- ----------
Totals....................................... 251,640 339,607 591,247
---------- ---------- ----------
Gross profit........................................... 1,995,712 1,425,114 3,420,826
Operating expenses:
Technical department................................. 73,611 21,805 95,416
Program department................................... 356,247 153,630 509,877
News department...................................... 115,269 140,189 255,458
Sales department..................................... 480,476 379,198 859,674
General and administrative........................... 633,288 341,527 974,815
---------- ---------- ----------
Total operating expenses, excluding
depreciation and amortization.............. 1,658,891 1,036,349 2,695,240
---------- ---------- ----------
Operating income, excluding depreciation and
amortization......................................... $ 336,821 $ 388,765 $ 725,586
========== ========== ==========
</TABLE>
F-67
<PAGE> 167
SNIDER CORPORATION
BALANCE SHEET
MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 45,972
Accounts receivable -- trade, net of allowance for
doubtful accounts of $38,228........................... 780,901
Due from affiliates....................................... 44,589
Other..................................................... 7,941
----------
Total current assets.............................. 879,403
Property and equipment, at cost less accumulated
depreciation of $1,193,204................................ 813,910
Other assets:
Non-compete agreement, less accumulated amortization of
$14,583................................................ 35,417
Land held for investment, at cost, which approximates
market value........................................... 97,553
Other..................................................... 25,692
----------
Total other assets................................ 158,662
----------
$1,851,975
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable -- related party............................. $ 50,000
Accounts payable -- trade................................. 190,990
Accrued expenses.......................................... 103,427
----------
Total current liabilities......................... 344,417
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000
Paid-in capital........................................... 474,300
Retained earnings......................................... 890,258
----------
Total stockholders' equity........................ 1,507,558
----------
$1,851,975
==========
</TABLE>
See accompanying notes to financial statements.
F-68
<PAGE> 168
SNIDER CORPORATION
STATEMENT OF INCOME
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs............................. $1,694,439
Barter accounts........................................ 140,783
----------
Total revenue..................................... 1,835,222
Direct charges:
Commissions............................................ 261,257
Royalties and franchise fees........................... 42,210
----------
Total direct charges.............................. 303,467
----------
Gross profit................................................ 1,531,755
----------
Operating expenses:
Technical department................................... 52,958
Program department..................................... 263,608
News department........................................ 99,351
Sales department....................................... 439,047
General and administrative............................. 437,718
Depreciation and amortization.......................... 92,030
----------
Total operating expenses.......................... 1,384,712
----------
Operating income............................................ 147,043
Other income (expense):
Interest income........................................ 733
Interest expense....................................... (1,677)
Other.................................................. (26,452)
----------
Total other income (expense)...................... (27,396)
----------
Net income.................................................. $ 119,647
==========
</TABLE>
See accompanying notes to financial statements.
F-69
<PAGE> 169
SNIDER CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Balance -- December 31, 1996.................. $143,000 $474,300 $770,611 $1,387,911
Net income.................................... -- -- 119,647 119,647
-------- -------- -------- ----------
Balance -- May 31, 1997....................... $143,000 $474,300 $890,258 $1,507,558
======== ======== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-70
<PAGE> 170
SNIDER CORPORATION
STATEMENT OF CASH FLOWS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $119,647
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 92,030
Bad debt provision..................................... 12,155
Net changes in operating assets and liabilities:
Accounts receivable -- trade......................... (317,991)
Other current assets................................. 12,926
Other non-current assets............................. (7,156)
Accounts payable -- trade............................ 38,602
Accrued expenses..................................... 16,946
--------
Net cash used in operating activities............. (32,841)
--------
Cash flows from investing activities:
Capital expenditures...................................... (20,532)
Net advances to affiliate................................. (6,443)
--------
Net cash used in investing activities............. (26,975)
--------
Net decrease in cash and cash equivalents................... (59,816)
Cash and cash equivalents:
Beginning of period....................................... 105,788
--------
End of period............................................. $ 45,972
========
Supplemental cash flows information:
Interest paid............................................. $ 1,677
========
</TABLE>
See accompanying notes to financial statements.
F-71
<PAGE> 171
SNIDER CORPORATION
NOTE TO FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
(1) SUBSEQUENT EVENT
On June 2, 1997, Snider Corporation (the "Company") entered into a local
marketing agreement ("LMA") with Citadel Broadcasting Company ("Citadel")
whereby Citadel pays $89,000 per month to the Company in exchange for supplying
specified programming to the brokered stations and marketing all commercial
advertising time of the brokered stations, subject to the Company's right to
control the content of all programming. On the same date, the Company also
entered into a Merger Agreement with Citadel, upon the consummation of which
Citadel will acquire radio stations KARN-FM, KARN-AM, KKRN-FM, KRNN-AM and
KAFN-FM. The LMA shall terminate upon the closing of the Merger Agreement or the
termination of the Merger Agreement, unless terminated earlier pursuant to the
default provisions of the LMA. In compliance with the LMA, the broadcasting
revenue and station operating expenses of the Company for the month ended June
30, 1997 are included in the financial statements of Citadel and are summarized
as follows:
<TABLE>
<S> <C>
Net broadcasting revenues................................... $270,289
Station operating expenses.................................. 304,259
</TABLE>
F-72
<PAGE> 172
SNIDER CORPORATION
BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 191,595
Accounts receivable--trade, net of allowance for doubtful
accounts of $45,546.................................... 800,790
Due from affiliates....................................... 25,617
Other..................................................... 4,106
----------
Total current assets.............................. 1,022,108
Property and equipment, at cost less accumulated
depreciation of $1,017,541................................ 808,870
Other assets:
Land held for investment, at cost, which approximates
market value........................................... 97,553
Other..................................................... 11,240
----------
Total other assets................................ 108,793
----------
$1,939,771
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable--related party............................... $ 50,000
Accounts payable--trade................................... 153,348
Accrued expenses.......................................... 132,907
----------
Total current liabilities......................... 336,255
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000
Paid-in capital........................................... 474,300
Retained earnings......................................... 986,216
----------
Total stockholders' equity........................ 1,603,516
----------
$1,939,771
==========
</TABLE>
F-73
<PAGE> 173
SNIDER CORPORATION
STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $1,893,131
Barter accounts........................................... 214,064
----------
Total revenue..................................... 2,107,195
Direct charges:
Commissions............................................... 266,398
Royalties and franchise fees.............................. 65,599
----------
Total direct charges.............................. 331,997
----------
Gross profit................................................ 1,775,198
----------
Operating expenses:
Technical department...................................... 35,290
Program department........................................ 236,052
News department........................................... 125,103
Sales department.......................................... 414,766
General and administrative................................ 511,160
Depreciation and amortization............................. 88,507
----------
Total operating expenses.......................... 1,410,878
----------
Operating income............................................ 364,320
Other income (expense):
Loss on sale of property and equipment.................... (59,024)
Interest expense.......................................... (2,541)
Operating agreement--stations under contract.............. (36,839)
Other..................................................... (39,235)
----------
Total other income (expense)...................... (137,639)
----------
Net income.................................................. $ 226,681
==========
</TABLE>
F-74
<PAGE> 174
SNIDER CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance--December 31, 1995......................... $143,000 $ 62,298 $1,016,535 $1,221,833
Net income......................................... 226,681 226,681
Capital contribution............................... 412,002 412,002
Distributions to stockholders...................... (257,000) (257,000)
-------- -------- ---------- ----------
Balance--June 30, 1996............................. $143,000 $474,300 $ 986,216 $1,603,516
======== ======== ========== ==========
</TABLE>
F-75
<PAGE> 175
SNIDER CORPORATION
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $226,681
Adjustments to reconcile net income to net cash provided
by in operating activities:
Depreciation and amortization.......................... 88,507
Loss on sale of property and equipment................. 59,024
Bad debt provision..................................... 19,886
Net changes in operating assets and liabilities:
Accounts receivable--trade........................... (254,496)
Other current assets................................. 19,149
Accounts payable--trade.............................. 24,547
Accrued expenses..................................... 36,314
--------
Net cash provided by operating activities......... 219,612
--------
Cash flows from investing activities:
Capital expenditures...................................... (53,071)
Proceeds from sale of assets.............................. 262,800
Net advances to affiliate................................. (25,616)
--------
Net cash provided by investing activities......... 184,113
--------
Cash flows from financing activities:
Distributions to stockholders............................. (257,000)
--------
Net cash used in financing activities............. (257,000)
--------
Net increase in cash and cash equivalents................... 146,725
Cash and cash equivalents:
Beginning of period....................................... 44,870
--------
End of period............................................. $191,595
========
Supplemental cash flows information:
Interest paid............................................. $ 2,541
Significant non-cash investing and financing activities:
Non-cash purchase of property and equipment from
affiliate............................................. 473,353
Non-cash contribution of capital....................... 412,002
</TABLE>
F-76
<PAGE> 176
INDEPENDENT AUDITORS' REPORT
The Boards of Directors and Stockholders
Snider Broadcasting Corporation and Subsidiary
CDB Broadcasting Corporation:
We have audited the accompanying consolidated balance sheet of Snider
Broadcasting Corporation and Subsidiary, as of December 31, 1995 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the year then ended. We have also audited the combined balance sheet of Snider
Broadcasting Corporation and Subsidiary, and CDB Broadcasting Corporation as of
December 31, 1996 and the related combined statements of operations,
stockholders' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The combined financial statements include the financial statements of
Snider Broadcasting Corporation and Subsidiary, and CDB Broadcasting
Corporation, which are related through common ownership and management.
As described in Notes 3, 5, and 10, the Company has significant
transactions with related parties.
In our opinion, the 1995 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Snider
Broadcasting Corporation and subsidiary as of December 31, 1995 and the
consolidated results of their operations and cash flows for the year then ended
in conformity with generally accepted accounting principles. Also, in our
opinion, the 1996 financial statements referred to above present fairly, in all
material respects, the combined financial position of Snider Broadcasting
Corporation and affiliate as of December 31, 1996 and the combined results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ ERWIN & COMPANY
Little Rock, Arkansas
April 23, 1997
F-77
<PAGE> 177
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 30,813 $ 49,821
Accounts receivable, net of allowance for doubtful
accounts of $8,108 in 1995 and $7,000 in 1996.......... 305,154 376,579
Other.................................................. 2,302 15,366
----------- -----------
Total current assets................................... 338,269 441,766
Property and equipment, at cost less accumulated
depreciation (Note 2)..................................... 59,706 292,286
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated amortization of $117,476 in 1995 and
$130,936 in 1996....................................... 309,710 796,691
Start-up costs, net of accumulated amortization of $8,797
in 1996................................................ -- 61,588
Non-compete agreement, net of accumulated amortization of
$2,083 in 1996......................................... -- 97,917
Other assets.............................................. -- 21,189
----------- -----------
Total other assets..................................... 309,710 977,385
----------- -----------
$ 707,685 $ 1,711,437
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable -- stockholders (Note 3).................... $ 52,698 $ --
Note payable -- bank (Note 4)............................. -- 2,637,408
Current maturities of long-term debt (Note 5)............. 206,781 --
Accounts payable -- trade................................. 109,406 218,422
Income taxes payable...................................... 2,117 7,803
Accrued expenses.......................................... 12,526 45,778
Accrued interest payable (Note 10)........................ 14,548 10,714
Deferred income taxes (Note 8)............................ -- 2,297
----------- -----------
Total current liabilities......................... 398,076 2,922,422
Long-term debt, less current maturities (Note 5)............ 1,386,490 --
----------- -----------
Total liabilities................................. 1,784,566 2,922,422
Stockholders' deficit:
Common stock (Note 6)..................................... 75,213 75,313
Retained deficit.......................................... (1,152,094) (1,286,298)
----------- -----------
Total stockholders' deficit....................... (1,076,881) (1,210,985)
----------- -----------
$ 707,685 $ 1,711,437
=========== ===========
</TABLE>
See accompanying notes.
F-78
<PAGE> 178
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenue:
Announcements and programs................................ $2,097,623 $2,008,315
Barter accounts........................................... 145,608 137,963
---------- ----------
Total revenue..................................... 2,243,231 2,146,278
Less direct charges -- commissions.......................... 286,944 264,907
---------- ----------
Gross profit................................................ 1,956,287 1,881,371
---------- ----------
Operating expenses:
Technical department...................................... 45,339 55,616
Program department........................................ 305,344 384,480
Sales department.......................................... 377,007 439,883
General and administrative................................ 465,647 679,475
Ratings enhancement....................................... -- 105,498
Time brokerage............................................ -- 60,470
Consulting and non-compete (Note 9)....................... 64,733 64,733
Goodwill amortization..................................... 10,680 13,460
Depreciation and amortization............................. 27,046 78,820
---------- ----------
Total operating expenses.......................... 1,295,796 1,882,435
---------- ----------
Operating income (loss)..................................... 660,491 (1,064)
---------- ----------
Other income (expense):
Interest expense (Note 10)................................ (189,532) (150,553)
Rent (Note 10)............................................ 12,000 30,000
Other..................................................... -- 39
---------- ----------
Total other income (expense)...................... (177,532) (120,514)
---------- ----------
Income (loss) before income taxes........................... 482,959 (121,578)
Provision for income taxes (Note 8)......................... 2,117 12,626
---------- ----------
Net income (loss)........................................... $ 480,842 $ (134,204)
========== ==========
</TABLE>
See accompanying notes.
F-79
<PAGE> 179
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance -- December 31, 1994.......................... $75,213 $(1,632,936) $(1,557,723)
Net income.......................................... -- 480,842 480,842
------- ----------- -----------
Balance -- December 31, 1995.......................... 75,213 (1,152,094) (1,076,881)
Common stock issued................................. 100 -- 100
Net loss............................................ -- (134,204) (134,204)
------- ----------- -----------
Balance -- December 31, 1996.......................... $75,313 $(1,286,298) $(1,210,985)
======= =========== ===========
</TABLE>
See accompanying notes.
F-80
<PAGE> 180
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 480,842 $ (134,204)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation........................................... 27,046 42,899
Amortization........................................... 10,680 49,381
Deferred income taxes.................................. -- 2,297
Loss on sale of property and equipment................. -- 458
Net changes in operating assets and liabilities:
Accounts receivable.................................. (56,489) (71,425)
Other assets......................................... 446 (59,294)
Accounts payable..................................... 2,896 99,824
Accrued expenses..................................... 12,707 38,938
Accrued interest payable............................. (113,269) (3,834)
--------- -----------
Net cash provided by (used in) operating
activities...................................... 364,859 (34,960)
--------- -----------
Cash flows from investing activities:
Acquisition of business assets............................ (14,921) (768,011)
Non-compete agreement..................................... -- (100,000)
Other..................................................... -- (69,560)
--------- -----------
Net cash used in investing activities............. (14,921) (937,571)
--------- -----------
Cash flows from financing activities:
Repayment of borrowings -- affiliates..................... (186,825) (1,291,759)
-- other...................... (169,347) (494,210)
Proceeds from borrowings.................................. -- 2,777,408
Common stock issued....................................... -- 100
--------- -----------
Net cash provided by (used in) financing
activities...................................... (356,172) 991,539
--------- -----------
Net increase (decrease) in cash............................. (6,234) 19,008
Cash:
Beginning of year......................................... 37,047 30,813
--------- -----------
End of year............................................... $ 30,813 $ 49,821
========= ===========
Supplemental information:
Interest paid............................................. $ 302,800 $ 154,387
Income taxes paid......................................... -- 4,643
Non-cash investing activities:
Equipment acquired through trade....................... 2,333 9,192
</TABLE>
See accompanying notes.
F-81
<PAGE> 181
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Reporting Entity
The accompanying 1995 financial statements include the accounts of Snider
Broadcasting Corporation and its wholly-owned subsidiary, Cornerstone
Broadcasting Corporation (Snider). The accompanying 1996 financial statements
include these accounts combined with those of CDB Broadcasting Corporation
(CDB), a company affiliated through common ownership and management. CDB was
incorporated and began operations May 17, 1996 . All significant intercompany
transactions and accounts have been eliminated.
Nature of Operations
Snider and CDB operate FM radio stations in the Central Arkansas market
area.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment
Depreciation of property and equipment is calculated using the accelerated
and modified accelerated cost recovery systems. Depreciation calculated under
these methods does not differ significantly from amounts calculated under
methods and lives which conform to generally accepted accounting principles.
Estimated useful lives of property and equipment are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Tower....................................................... 5-10
Radio, office and computer equipment........................ 3- 7
Vehicle..................................................... 5
</TABLE>
Intangible Assets
The excess of cost over carrying value of assets acquired for Snider
Broadcasting Corporation is being amortized over 40 years using the
straight-line method. The excess of cost over carrying value of assets acquired
of CDB Broadcasting Corporation is being amortized over 15 years using the
straight-line method.
The non-compete agreement is being amortized over 24 months using the
straight-line method. Start-up costs are being amortized over five years using
the straight-line method.
Asset Impairment
In the event that facts and circumstances indicate that the carrying value
of long-lived assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to fair value or a value based on discounted cash
flows is required.
F-82
<PAGE> 182
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Income Taxes
Snider incurred net operating losses from the date of its incorporation on
January 1, 1985 through 1991. At December 31, 1996 there are approximately
$610,000 of net operating loss carryforwards available for federal income tax
purposes. These loss carryforwards will expire beginning in the year 2000 if not
previously used to offset future net taxable income. In addition, Snider has
approximately $3,600 in general business credit carryforwards that expire in
2000 and 2001.
Snider provides for deferred income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement provides for a liability approach under which deferred income taxes
are based on enacted tax laws and rates applicable to the periods in which the
taxes become payable.
CDB has elected to be treated as an S corporation for federal income tax
purposes and is subject to similar treatment for state income tax purposes.
Under this election, income and losses of CDB are reported in the income tax
returns of the stockholders. As a result, no provision for income taxes for CDB
is reflected in the accompanying combined financial statements.
Statement of Cash Flows
For purposes of the statement of cash flows, the Companies consider cash on
hand and deposits in financial institutions with initial maturities of three
months or less as cash.
Concentrations of Credit Risk
Most of the Companies' business activity is with customers located within
the central region of Arkansas. The Companies' grant credit to their customers
in the normal course of business, ordinarily without collateral requirements.
Reclassifications
Certain reclassifications have been made to the 1995 financial statements
to conform to the 1996 basis of presentation.
(2) PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Tower................................................. $ 89,909 $104,642
Radio equipment....................................... 186,059 404,648
Office equipment...................................... 67,357 95,921
Computer equipment.................................... 37,727 52,604
Vehicle............................................... 20,113 9,859
-------- --------
401,165 667,674
Less accumulated depreciation......................... 341,459 375,388
-------- --------
$ 59,706 $292,286
======== ========
</TABLE>
F-83
<PAGE> 183
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) NOTES PAYABLE -- STOCKHOLDERS:
Notes payable -- stockholders at December 31, 1995 consist of unsecured
demand notes payable to stockholders of Snider bearing interest at 10.25% at
December 31, 1995.
(4) NOTE PAYABLE -- BANK:
Note payable-bank represents a short-term, $3,000,000 credit facility
shared by Snider and CDB. The note matures June 12, 1997, and is secured by
substantially all assets of the Companies and by guarantees of the Companies
stockholders.
The agreement requires the maintenance of certain ratios related to
leverage and debt service. In addition, the agreement contains certain
covenants, the most restrictive of which prohibit or restrict the Companies'
ability to incur additional debt; pledge assets; merge, consolidate or sell
assets; make certain "restricted" investments or loans and advances; dispose of
certain assets; make distributions to its stockholders; and engage in
transactions with their affiliates.
At December 31, 1996, the Companies were in technical default with respect
to a required leverage ratio and certain reporting requirements, however the
Companies had not defaulted on any required principal or interest payments and
were in compliance with all other ratios required under the agreement. These
technical defaults permit the lender to accelerate the scheduled due date of the
debt. Management anticipates the note to be extended during June 1997 with a new
maturity date of December 1997.
(5) LONG-TERM DEBT:
Long-term debt at December 31, 1995 consists of the following:
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Variable rate (9.0% at December 31, 1995); note payable to
Nationsbank of Texas, N.A................................. $ 169,500
Variable rate (10.0% at December 31, 1995) unsecured,
subordinated note payable to Snider Communications
Corporation, an affiliate; payable on demand.............. 1,291,759
10.0% note payable; payable $4,067 monthly, including
interest through February 1999; secured by real estate and
personal property of Snider and guaranteed by stockholders
of Snider and by a member of the immediate family of
Snider's majority stockholder............................. 132,012
----------
1,593,271
Less current portion........................................ 206,781
----------
Long-term debt, less current portion........................ $1,386,490
==========
</TABLE>
The note payable to affiliate of $1,291,759 at December 31, 1995 was
classified as long-term due to such affiliate waiving its right to demand
payment during the immediately following year.
(6) STOCKHOLDERS EQUITY:
Snider Broadcasting Corporation has 1,000 shares of no par value common
stock authorized and 85 shares issued and outstanding.
CDB Broadcasting Corporation has 1,000 shares of no par value common stock
authorized, issued and outstanding.
F-84
<PAGE> 184
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) RETIREMENT PLAN:
During 1995, Snider adopted a 401(k) savings plan which covers
substantially all employees who have completed one year of service and attained
the age of 21. Participating employees may contribute from 1% to 15% of their
compensation. Snider matches 25% of the first 4% contributed by participating
employees. Matching contributions totaled $3,950 and $3,727 for the years ended
December 31, 1995 and 1996, respectively.
(8) INCOME TAXES:
The provision for income taxes at December 31, 1995 and 1996, consists of
the following:
<TABLE>
<CAPTION>
1995 1996
--------- --------
<S> <C> <C>
Current:
Federal............................................ $ 2,117 $ --
State.............................................. -- 10,329
--------- --------
2,117 10,329
--------- --------
Deferred:
Federal............................................ 155,754 84,429
State.............................................. 32,802 4,709
Decrease in valuation allowance.................... (188,556) (86,841)
--------- --------
-- 2,297
--------- --------
Provision for income taxes........................... $ 2,117 $ 12,626
========= ========
</TABLE>
The income tax provision computed at the federal statutory rate on pretax
income differs from the reported tax provision due to the decrease in the
valuation allowance, effect of graduated rates and non-deductible expenses, and
the results of operations of CDB reported to stockholders for income tax
purposes.
The components of the net deferred tax liability at December 31, 1995 and
1996 follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Federal........................................... $ 295,680 $ 213,291
State............................................. 4,319 --
--------- ---------
Valuation allowance............................... (299,999) (213,158)
--------- ---------
-- 133
--------- ---------
Deferred tax liabilities:
Federal........................................... -- 2,040
State............................................. -- 390
--------- ---------
-- 2,430
--------- ---------
Net deferred tax liability.......................... $ -- $ (2,297)
========= =========
</TABLE>
F-85
<PAGE> 185
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES:
The Companies lease office space, office equipment, broadcasting equipment
and tower facilities under operating leases expiring in 1993 through 1999. Total
rent expense under these agreements was $61,939 in 1995 and $61,159 in 1996.
Snider has commitments to pay the former owner of one of its radio stations
consulting fees and amounts due under a non-compete agreement. These commitments
extend through February 1999. Payments related to these commitments totaled
$64,733 for each of the years ended December 31, 1995 and 1996.
Future commitments under noncancelable operating leases, consulting and
non-compete agreements at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997...................................................... $138,557
1998...................................................... 75,607
1999...................................................... 20,569
2000...................................................... 9,780
--------
$244,513
========
</TABLE>
(10) RELATED PARTY TRANSACTIONS:
Interest expense in 1995 and 1996, respectively, includes $144,132 and
$56,846 related to the Company's note payable to an affiliate (Note 5). Included
in accrued expenses at December 31, 1995 is accrued interest payable of $708
related to the note.
The Company leases a subcarrier bandwidth of Snider to an affiliate to
transmit paging and weather information under an operating lease, cancelable
upon six months written notice, expiring in 2000 and requiring monthly lease
payments. Total rental income recognized under this lease was $12,000 in 1995
and $30,000 in 1996.
F-86
<PAGE> 186
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEET
MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 16,874
Accounts receivable -- trade, net of allowance for
doubtful accounts of $13,110........................... 539,057
Other..................................................... 16,652
-----------
Total current assets.............................. 572,583
Property and equipment, at cost less accumulated
depreciation of $421,330.................................. 284,067
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated amortization of $149,287.............. 778,340
Start-up costs, net of accumulated amortization of
$14,663................................................ 55,723
Non-compete agreement, less accumulated amortization of
$22,917................................................ 77,083
-----------
Total other assets................................ 911,146
-----------
$ 1,767,796
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable -- bank...................................... $ 2,635,000
Accounts payable -- trade................................. 277,793
-- affiliate........................... 27,782
Income taxes payable...................................... 2,461
Accrued expenses.......................................... 13,056
Accrued interest payable.................................. 42,216
Deferred income taxes..................................... 4,245
-----------
Total current liabilities......................... 3,002,553
Stockholders' deficit:
Common stock.............................................. 75,313
Retained deficit.......................................... (1,310,070)
-----------
Total stockholders' deficit....................... (1,234,757)
-----------
$ 1,767,796
===========
</TABLE>
See accompanying notes to financial statements.
F-87
<PAGE> 187
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF OPERATIONS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $ 937,865
Barter accounts........................................... 65,293
----------
Total revenue..................................... 1,003,158
Less direct charges -- commissions.......................... 107,208
----------
Gross profit................................................ 895,950
----------
Operating expenses:
Technical department...................................... 28,843
Program department........................................ 193,887
Sales department.......................................... 222,007
General and administrative................................ 246,680
Consulting and non-compete................................ 26,972
Goodwill amortization..................................... 18,351
Depreciation and amortization............................. 91,903
----------
Total operating expenses.......................... 828,643
----------
Operating income............................................ 67,307
----------
Other income (expense):
Interest expense.......................................... (90,723)
Rent...................................................... 12,500
----------
Total other income (expense)...................... (78,223)
----------
Loss before income taxes.................................... (10,916)
Provision for income taxes.................................. 12,856
----------
Net loss.................................................... $ (23,772)
==========
</TABLE>
See accompanying notes to financial statements.
F-88
<PAGE> 188
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance -- December 31, 1996........................... $75,313 $(1,286,298) $(1,210,985)
Net loss............................................... -- (23,772) (23,772)
------- ----------- -----------
Balance -- May 31, 1997................................ $75,313 $(1,310,070) $(1,234,757)
======= =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-89
<PAGE> 189
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF CASH FLOWS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (23,772)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation......................................... 45,942
Amortization......................................... 64,313
Deferred income taxes................................ 1,948
Net changes in operating assets and liabilities:
Accounts receivable -- trade...................... (134,431)
Other assets...................................... 640
Accounts payable -- trade......................... 56,906
Accrued expenses.................................. (38,064)
Accrued interest payable.......................... 31,502
---------
Net cash provided by operating activities....... 4,984
---------
Cash flows from investing activities:
Capital expenditures...................................... (35,523)
---------
Net cash used in investing activities........... (35,523)
---------
Cash flows from financing activities:
Repayment of borrowings................................... (2,408)
---------
Net cash used in financing activities........... (2,408)
---------
Net decrease in cash........................................ (32,947)
Cash:
Beginning of period....................................... 49,821
---------
End of period............................................. $ 16,874
=========
Supplemental cash flows information:
Interest paid............................................. $ 59,229
Income taxes paid......................................... 16,250
Equipment acquired by trade............................... 2,200
</TABLE>
See accompanying notes to financial statements.
F-90
<PAGE> 190
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTE TO COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
(1) SUBSEQUENT EVENT
On June 2, 1997, Snider Broadcasting Corporation and Subsidiary CDB
Broadcasting Corporation (the "Company") entered into local marketing agreements
("LMA") with Citadel Broadcasting Company ("Citadel") whereby Citadel pays
$97,335 per month to the Company in exchange for supplying specified programming
to the brokered stations and marketing all commercial advertising time of the
brokered stations, subject to the Company's right to control the content of all
programming. On the same date, the Company also entered into an Asset Purchase
Agreement and a Merger Agreement with Citadel, upon the consummation of which
Citadel will acquire radio stations KESR-FM and KIPR-FM. The LMA shall terminate
upon the closing of the Merger Agreement and the Asset Purchase Agreement or the
termination of the Merger Agreement and the Asset Purchase Agreement, unless
terminated earlier pursuant to the default provisions of the LMA. In compliance
with the LMA, the broadcasting revenue and station operating expenses of the
Company for the month ended June 30, 1997 are included in the financial
statements of Citadel and are summarized as follows:
<TABLE>
<S> <C>
Net broadcasting revenues................................... $247,783
Station operating expenses.................................. 169,569
</TABLE>
F-91
<PAGE> 191
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 74,209
Accounts receivable--trade, net of allowance for doubtful
accounts of $6,000..................................... 384,567
Other..................................................... 113,716
----------
Total current assets.............................. 572,492
Property and equipment, at cost less accumulated
depreciation of $346,745.................................. 69,855
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated
amortization of $122,816............................... 304,370
Start-up costs, less accumulated amortization of $2,023... 78,900
----------
Total other assets................................ 383,270
----------
$1,025,617
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable--bank........................................ $1,737,408
Accounts payable--trade................................... 137,490
Income taxes payable...................................... 3,889
Accrued expenses.......................................... 16,638
Accrued interest payable.................................. 19,132
----------
Total current liabilities......................... 1,914,557
Stockholders' deficit:
Common stock.............................................. 75,313
Retained deficit.......................................... (964,253)
----------
Total stockholders' deficit....................... (888,940)
----------
$1,025,617
==========
</TABLE>
F-92
<PAGE> 192
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $ 974,107
Barter accounts........................................... 62,690
----------
Total revenue..................................... 1,036,797
Less direct charges--commissions............................ 136,184
----------
Gross profit................................................ 900,613
----------
Operating expenses:
Technical department...................................... 27,973
Program department........................................ 156,515
Sales department.......................................... 181,298
General and administrative................................ 209,999
Ratings enhancement....................................... 7,657
Consulting and non-compete................................ 32,366
Goodwill amortization..................................... 5,340
Depreciation and amortization............................. 18,925
----------
Total operating expenses.......................... 640,073
----------
Operating income............................................ 260,540
Other income (expense):
Interest expense.......................................... (82,076)
Loss on sale of property and equipment.................... (458)
Rent...................................................... 15,000
----------
Total other income (expense)...................... (67,534)
----------
Income before income taxes.................................. 193,006
Provision for income taxes.................................. 5,165
----------
Net income.................................................. $ 187,841
==========
</TABLE>
F-93
<PAGE> 193
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance--December 31, 1995................................. $75,213 $(1,152,094) $(1,076,881)
Common stock issued........................................ 100 100
Net income................................................. 187,841 187,841
------- ----------- -----------
Balance--June 30, 1996..................................... $75,313 $ (964,253) $ (888,940)
======= =========== ===========
</TABLE>
F-94
<PAGE> 194
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 187,841
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation......................................... 14,256
Amortization......................................... 8,800
Loss on sale of property and equipment............... 458
Net changes in operating assets and liabilities:
Accounts receivable--trade........................ (79,413)
Other assets...................................... (62,851)
Accounts payable--trade........................... 28,084
Accrued expenses.................................. 5,884
Accrued interest payable.......................... 4,584
----------
Net cash provided by operating activities....... 107,643
----------
Cash flows from investing activities:
Capital expenditures...................................... (25,688)
Proceeds from sale of assets.............................. 825
Business acquisition costs................................ (50,000)
Start-up costs............................................ (80,923)
----------
Net cash used in investing activities.................. (155,786)
----------
Cash flows from financing activities:
Repayment of borrowings--bank............................. (169,500)
--affiliates................... (1,291,759)
--others....................... (184,710)
Proceeds from borrowings.................................. 1,737,408
Common stock issued....................................... 100
----------
Net cash provided by financing activities.............. 91,539
----------
Net increase in cash........................................ 43,396
Cash:
Beginning of period....................................... 30,813
----------
End of period............................................. $ 74,209
==========
Supplemental cash flows information:
Interest paid............................................. $ 77,492
==========
</TABLE>
F-95
<PAGE> 195
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Maranatha Broadcasting Company, Inc.:
We have audited the accompanying balance sheet of Maranatha Broadcasting
Company, Inc.'s Radio Broadcasting Division (the "Company") as of December 31,
1996, and the related statements of operations and division equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Maranatha Broadcasting
Company, Inc.'s Radio Broadcasting Division as of December 31, 1996, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
September 29, 1997
F-96
<PAGE> 196
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
BALANCE SHEET
DECEMBER 31, 1996 AND SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable, net of reserves of $20,000........... $ 366,278 $ 293,143
Equipment................................................. 213,800 220,562
Accumulated depreciation.................................. (140,828) (155,828)
--------- ---------
72,972 64,734
Broadcast license......................................... 10,325 9,895
--------- ---------
Total assets........................................... $ 449,575 $ 367,772
========= =========
LIABILITIES AND DIVISION EQUITY
Current Liabilities:
Accounts payable.......................................... $ 11,944 $ 9,630
Trade payable............................................. 10,000 --
Accrued compensation and commissions...................... 18,091 12,537
Customer deposits......................................... 16,447 16,964
--------- ---------
Total current liabilities.............................. 56,482 39,131
Commitments and contingencies
Division equity........................................... 393,093 328,641
--------- ---------
Total liabilities and division equity.................. $ 449,575 $ 367,772
========= =========
</TABLE>
See accompanying notes to financial statements.
F-97
<PAGE> 197
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
STATEMENT OF OPERATIONS AND DIVISION EQUITY
YEAR ENDED DECEMBER 31, 1996 AND THE EIGHT AND ONE-HALF-MONTH PERIOD ENDED
SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Net broadcasting revenue.................................. $2,066,271 $1,375,243
Subcarrier rental......................................... 48,796 37,333
---------- ----------
2,115,067 1,412,576
Operating expenses:
Technical expenses........................................ 75,265 54,366
Program expenses.......................................... 191,363 135,229
Selling expenses.......................................... 893,721 656,039
General and administrative expenses....................... 279,090 213,382
Management fee and corporate overhead allocation.......... 139,379 55,966
Bad debts................................................. 62,868 51,511
Depreciation and amortization............................. 20,148 15,430
---------- ----------
Total operating expenses.......................... 1,661,834 1,181,923
---------- ----------
Net income.................................................. 453,233 230,653
Division equity, beginning of period........................ 421,384 393,093
Transfers to parent......................................... (481,524) (295,105)
---------- ----------
Division equity, end of period.............................. $ 393,093 $ 328,641
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-98
<PAGE> 198
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 AND THE EIGHT AND ONE-HALF MONTH PERIOD ENDED
SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 453,233 $ 230,653
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................ 20,148 15,430
Changes in assets and liabilities:
Decrease in accounts receivable...................... 25,809 73,135
Decrease in accounts payable and accruals............ (740) (17,351)
--------- ---------
Net cash provided by operating activities......... 498,450 301,867
--------- ---------
Cash flows from investing activities:
Purchase of radio equipment............................... (16,926) (6,762)
--------- ---------
Net cash used in investing activities............. (16,926) (6,762)
--------- ---------
Cash flows from financing activities:
Cash transfers to parent.................................. (481,524) (295,105)
--------- ---------
Net cash used in financing activities............. (481,524) (295,105)
--------- ---------
Net change in cash........................................ -- --
Cash, beginning of period................................... -- --
--------- ---------
Cash, end of period......................................... $ -- $ --
========= =========
</TABLE>
See accompanying notes to financial statements.
F-99
<PAGE> 199
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION AS OF SEPTEMBER 15, 1997 AND FOR THE EIGHT AND ONE-HALF-MONTH
PERIOD
THEN ENDED IS UNAUDITED)
(1) NATURE OF BUSINESS AND ORGANIZATION
Radio Broadcasting (the "Company") is a division of the Maranatha
Broadcasting Company, Inc. ("Maranatha"). Maranatha is a television and radio
broadcaster with facilities located in Allentown, Pennsylvania. The Company's
operations and facilities are integrated with those of Maranatha. Maranatha
provides management, accounting and certain administrative services for the
Company and charges them for these services based upon a percentage of
utilization which management believes is reasonable. Total allocated
administrative costs were $418,469 and $296,416 for the year ended December 31,
1996 and the eight and one-half months ended September 15, 1997, respectively.
Maranatha collects and retains all cash generated by the Radio Broadcasting
Division.
The Radio Broadcasting Division provides credit to customers, substantially
all of whom are regional businesses engaged in a variety of industries and
services. The Division broadcasts in the Allentown, Bethlehem, Easton region of
Eastern Pennsylvania as WLEV (formerly WFMZ) and broadcasts, through a
translator, in Reading, Pennsylvania as WLEV.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equipment
Equipment is carried at cost, less accumulated depreciation. Depreciation
is provided on the straight-line method over the estimated useful lives of 5 to
7 years. Maintenance and repairs are charged to operations as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue
Net broadcasting revenue is presented net of agency commissions and is
recognized when the advertisements are broadcast.
Trade Transactions
Revenue from trade transactions (advertising provided in exchange for goods
and services) is recognized when advertisements are broadcast and trade expense
is recognized when merchandise is consumed or services are performed. An asset
and liability are recorded at the fair market value of the goods or services
received.
Accounts Receivable
The division generally extends 60 day credit terms to its advertisers and
maintains an allowance for uncollectible accounts based upon past experience.
F-100
<PAGE> 200
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Broadcast License
The broadcast license and translator license were recorded at cost and
amortized over 15 years; the license has been fully amortized.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Maranatha has elected by consent of its shareholders to be taxed under the
provisions of Subchapter S for federal and state income tax purposes. Under
those provisions, Maranatha does not pay corporate income taxes on its taxable
income. Instead, the shareholders are liable for individual income taxes on the
Company's taxable income. Accordingly, these financial statements do not contain
a provision for income taxes.
Interim Financial Information
The financial statements as of September 15, 1997 and for the eight and
one-half months ended September 15, 1997 are unaudited; however, in the opinion
of management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
period have been included. The results for the interim period are not
necessarily indicative of the results to be achieved for the full fiscal year.
Division Equity
Division equity at December 31, 1996 consists of accumulated earnings of
$5,629,473 less distributions to Maranatha of $5,216,380.
(3) CONTINGENT LIABILITIES AND COMMITMENTS
Maranatha has certain debt and a revolving line of credit, which is secured
by all the assets of Maranatha, including the assets of the Radio Broadcasting
Division, as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Total notes and debt payable...................... $506,886 $ 826,648
Less current portion.............................. (190,286) (183,670)
-------- ---------
Total long-term debt.............................. $316,600 $ 642,978
======== =========
Revolving line of credit.......................... $ -- $ --
======== =========
</TABLE>
The notes and line of credit bear interest primarily at the lender's prime
rate which was 8.25% and 8.5% at December 31, 1996 and September 15, 1997,
respectively. One of the notes bears interest at a fixed rate of 7.90%.
Maranatha is in compliance with the debt covenants as of September 15, 1997.
Proceeds from debt issuance were used to enhance Maranatha's television
operations.
The Division leases its Reading translator site and Reading sales office
under operating leases with future minimum monthly payments of $800 through
November 1998. The Division has also entered into lease
F-101
<PAGE> 201
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
agreements to provide sub-channel broadcast frequency to two lessees. The future
revenue under the lease terms is as follows:
<TABLE>
<S> <C>
1997...................................................... $ 48,796
1998...................................................... 50,516
1999...................................................... 39,121
2000...................................................... 39,817
2001...................................................... 23,891
--------
$202,141
========
</TABLE>
(4) AGREEMENT OF SALE
On July 15, 1997, Maranatha entered into an asset purchase agreement with
Citadel Broadcasting Company ("CBC") and a wholly-owned subsidiary of CBC to
sell the assets and broadcast license of the Radio Broadcasting Division to CBC
for $23,000,000 plus the broadcasting assets of a radio station (WEST-AM in
Easton, Pennsylvania) owned by CBC and a wholly-owned subsidiary of CBC.
On September 15, 1997 Maranatha entered into a local marketing agreement
(LMA) with Citadel Broadcasting Company (Citadel) whereby Citadel pays $25,000
per month to the Company in exchange for supplying specified programming to the
brokered stations and marketing all commercial advertising time of the brokered
stations, subject to the Company's right to control the content of all
programming. In compliance with the LMA, the broadcasting revenue and station
operating expenses of the Company for the 15-day period from September 16, 1997
to September 30, 1997 are included in the financial statements of Citadel.
F-102
<PAGE> 202
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Pacific Northwest Broadcasting Corporation
Boise, Idaho
We have audited the accompanying combined balance sheet of Pacific
Northwest Broadcasting Corporation and Affiliates as of December 31, 1996, and
the related combined statements of operations, changes in owners' equity, and
cash flows for the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Pacific
Northwest Broadcasting Corporation and Affiliates as of December 31, 1996, and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ BALUKOFF, LINDSTROM & CO., P.A.
Boise, Idaho
September 25, 1997
F-103
<PAGE> 203
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 220,381
Trade accounts receivable, net of allowance for doubtful
accounts of $25,000.................................... 1,079,835
Other accounts receivable................................. 57,692
Prepaid expenses.......................................... 189,395
Accrued interest receivable............................... 18,169
Current portion of notes receivable....................... 488,880
-----------
Total current assets................................... 2,054,352
Other assets:
AM and FM broadcast licenses.............................. 4,497,916
Notes receivable, less current portion.................... 3,011,778
Noncompete agreements..................................... 354,441
Equipment deposits and other assets....................... 39,250
Deferred taxes............................................ 42,443
-----------
7,945,828
Property and equipment, at cost
Land and improvements..................................... 130,011
Leasehold improvements.................................... 61,744
Towers and antennas....................................... 402,710
Transmitters and transmitter buildings.................... 508,444
Studio and technical equipment............................ 915,007
Automobiles............................................... 44,930
Furniture and office equipment............................ 360,595
-----------
2,423,441
Accumulated depreciation.................................. (992,576)
-----------
1,430,865
-----------
$11,431,045
===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 268,401
Accrued expenses.......................................... 259,479
Accrued taxes payable..................................... 12,520
Current portion of notes payable to related parties....... 106,868
Current portion of long-term debt......................... 1,195,717
-----------
Total current liabilities.............................. 1,842,985
Long-term debt:
Notes payable to related parties, less current portion.... 1,155,817
Notes payable, less current portion....................... 7,184,057
-----------
8,339,874
Deferred revenue............................................ 235,395
Owners' equity:
Convertible preferred stock, nonvoting, par value $1,000
per share, 5% non cumulative, authorized 3,500 shares,
issued and outstanding 1,396.8 shares.................. 1,396,800
Common stock, voting, no par value, authorized 10,000
shares, issued and outstanding 3,766.6 shares.......... 475,677
Members' equity........................................... 61,176
Accumulated deficit....................................... (920,862)
-----------
1,012,791
-----------
$11,431,045
===========
</TABLE>
See accompanying notes.
F-104
<PAGE> 204
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenues:
Revenues.................................................. $5,404,307
Less agency and representative commissions................ 772,233
----------
4,632,074
Expenses:
Transmission.............................................. 223,366
Programming and production................................ 1,476,235
Sales..................................................... 816,459
General and administrative................................ 1,599,675
Advertising............................................... 150,696
----------
4,266,431
----------
Income from operations................................. 365,643
Nonoperating income (expense)
Gain on sale of assets.................................... 198,581
Noncompete revenue........................................ 184,508
Interest income........................................... 321,759
Interest expense.......................................... (566,783)
----------
138,065
----------
Income before income taxes............................. 503,708
Income tax expense.......................................... 182,480
----------
Net income............................................. $ 321,228
==========
</TABLE>
See accompanying notes.
F-105
<PAGE> 205
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF CHANGES IN OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREFERRED COMMON SHAREHOLDER ACCUMULATED MEMBERS'
STOCK STOCK RECEIVABLE DEFICIT EQUITY TOTAL
---------- --------- ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996... $1,396,800 $ 591,302 $(85,445) $(1,180,914) $ -- $ 721,743
Common stock redemption,
125 shares............... -- (115,625) -- -- -- (115,625)
Decrease in shareholder
receivable............... -- -- 85,445 -- -- 85,445
Net income................. -- -- -- 260,052 61,176 321,228
---------- --------- -------- ----------- ------- ----------
Balance at December 31,
1996....................... $1,396,800 $ 475,677 $ -- $ (920,862) $61,176 $1,012,791
========== ========= ======== =========== ======= ==========
</TABLE>
See accompanying notes.
F-106
<PAGE> 206
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 321,228
Adjustments to reconcile net income to net cash provided
by operating activities Amortization................... 55,427
Depreciation........................................... 71,926
Noncompete revenue..................................... (134,508)
Noncompete expense..................................... 89,257
Provision for bad debts................................ 14,029
Gain on sale of assets................................. (198,581)
Legal expense paid directly by bank.................... 10,200
Changes in operating assets and liabilities
Trade accounts receivable............................ (604,884)
Other accounts receivable............................ (5,319)
Prepaid expenses..................................... 21,658
Prepaid income tax................................... 7,739
Accrued interest receivable.......................... 9,794
Equipment deposits and other assets.................. (14,258)
Deferred taxes....................................... 169,936
Accounts payable..................................... 90,761
Accrued expenses..................................... 82,996
Accrued taxes payable................................ 12,520
---------
Net cash used by operating activities............. (79)
Cash flows from investing activities:
Payments on receivable from shareholders.................. 39
Loans made to shareholders................................ (491,256)
Payments on notes receivable.............................. 773,885
Payments for acquisition of stations...................... (63,360)
Proceeds from sale of assets.............................. 190,244
Additions to property and equipment....................... (152,300)
---------
Net cash provided by investing activities......... 257,252
Cash flows from financing activities:
Decrease in bank overdraft................................ (118,289)
Payments on notes payable................................. (282,906)
Borrowings on notes payable to related parties............ 400,000
Payment on notes payable to related parties............... (35,597)
---------
Net cash provided by financing activities......... (36,792)
---------
Net increase in cash.............................. 220,381
Cash at beginning of year................................... --
---------
Cash at end of year............................... $ 220,381
=========
</TABLE>
See accompanying notes.
F-107
<PAGE> 207
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
The Company operates AM and FM radio stations in southwestern Idaho.
Revenues received from local advertisers and national agencies advertising in
the southwestern Idaho market account for the majority of revenues.
Principles of Combination
The financial statements include the accounts of Pacific Northwest
Broadcasting Corporation (PNWB) and its wholly owned subsidiary, (Richardson
Broadcasting Company), and Wilson Group, LLC (Wilson), a limited liability
company which has common ownership. Wilson operates as an Idaho limited
liability company and its members have limited personal liability for the
obligations or debts of the entity. Wilson will terminate no later than December
31, 2072. Intercompany accounts and transactions have been eliminated in
combination.
Allocation of Earnings
Wilson operates two broadcast signals--KIZN and KZMG. Earnings from these
two signals are reported on the balance sheet as increases or decreases in
members' equity. The other broadcast signals--KBOI, KQFC and KKGL--are operated
by PNWB. Their earnings are reported as increases or decreases in the
accumulated deficit account.
Cash
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
Depreciation
Depreciation of property and equipment is provided using the straight line
method over the estimated useful lives of the assets, which range from 3 to 50
years.
Amortization
Costs related to obtaining AM and FM broadcast licenses are amortized using
the straight line method over fifteen years. Accumulated amortization relating
to these licenses was $133,852 at December 31, 1996.
Costs related to the noncompete agreements are amortized using the
straight-line method over five years, the term of the agreement. Accumulated
amortization relating to the noncompete agreements was $171,848 at December 31,
1996.
Deferred Revenue
Deferred revenue consists of a noncompete agreement and will be earned over
the life of the agreement (7 years).
Revenue Recognition and Trade Transactions
Broadcast revenue is recognized when the advertisements are broadcast.
Revenue from trade transactions (advertising provided in exchange for goods and
services) is recognized as income when advertisements are broadcast and trade
expense is recognized when merchandise is consumed or services are performed.
F-108
<PAGE> 208
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
Advertising
The Company expenses advertising costs as they are incurred.
Income Taxes
Income taxes are provided for the tax effects of PNWB transactions reported
in the financial statements and consist of taxes currently due or recoverable
and deferred taxes related primarily to differences between the bases of assets
and liabilities for financial and income tax reporting. Differences between
financial and income tax reporting relate to accumulated depreciation,
installment sales, basis in subsidiary's stock, allowance for doubtful accounts,
deferred compensation, noncompete amortization and shareholder interest payable.
No provision has been made for the tax effects of the Wilson transactions
since Wilson is taxed as a partnership and taxes are the responsibility of the
individual members.
Estimates
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
reported revenues and expenses. Actual results could differ from these
estimates.
Concentrations of Credit Risk
In the normal course of business, the Company extends unsecured credit to
customers principally national advertising agencies and companies in the
southwestern Idaho market. The Company also has demand deposits on hand in
financial institutions which exceed applicable FDIC insurance.
Acquisitions and Local Marketing Agreement
In October, 1996, the Company acquired two radio stations in Boise, Idaho
for $5,000,000. This acquisition was accounted for using the purchase method of
accounting. The purchase price has been allocated to the assets purchased based
upon fair values as agreed to with the seller.
The Company operated the two radio stations under a Local Marketing
Agreement (LMA) for six months prior to the acquisition. Under the terms of the
LMA, the expenses of operating the stations (other than depreciation or
amortization of assets) were the obligation of the Company and the Company
received the revenues generated by the stations.
NOTE B -- NOTES RECEIVABLE
The Company sold radio stations in Medford, Oregon, Chico, California, and
Eugene, Oregon in prior years and financed the sale of the radio stations to the
buyers. In 1996, the Company sold two radio stations and a building in
Pocatello, Idaho, and financed the sale. Each of the sales agreements included
provisions which restrict the Company from competing in markets served by the
radio stations which were sold. The
F-109
<PAGE> 209
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
noncompete agreements extend for periods up to seven years from the dates of the
sales. The terms of the notes are as follows:
<TABLE>
<S> <C>
Note receivable from broadcasting company for Pocatello
stations at $4,003 per month through March 1997 and
$11,592 per month thereafter including interest at 8.5%,
due March 2002, secured by substantially all assets of the
Pocatello stations........................................ $ 564,993
Note receivable from broadcasting company for Pocatello
building at $2,405 per month, including interest at 8.5%,
due March 2002, secured by real estate.................... 108,884
Note receivable from broadcasting company for Chico and
Eugene stations at monthly payments ranging from $37,033
to $53,204 including interest at 7.71%, due September
2002, secured by substantially all assets of the
stations.................................................. 2,826,781
----------
3,500,658
Less current portion........................................ 488,880
----------
$3,011,778
==========
</TABLE>
NOTE C -- LONG-TERM DEBT
Long-term debt is summarized as follows:
To banks:
<TABLE>
<S> <C>
Note payable to bank, monthly payments of interest only at
prime plus 1%, secured by substantially all of the
Company's assets. The interest rate at December 31, 1996
was 9.25%................................................. $8,000,000
To individuals:
Note payable to former shareholder at $1,205 per month
including interest at 8% through January 2003,
unsecured................................................. 69,440
Note payable to former shareholder at $991 per month
including interest at 10% through June 2000, unsecured.... 35,002
Note payable to former shareholder at $3,033 per month
including interest at 8% through January 2006,
unsecured................................................. 234,457
Note payable to former shareholder at $375 per month
through January 2006...................................... 40,875
Unsecured notes payable to related party, due on demand... 7,772
Unsecured notes payable to related parties at $4,446 per
month including interest at 9% through August 2018........ 208,093
Unsecured notes payable to related party, due on demand
including interest at 7.5%................................ 53,372
</TABLE>
F-110
<PAGE> 210
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
<TABLE>
<S> <C>
Notes payable to related parties, secured by certain notes
receivable and guaranteed by principal shareholder,
payable in monthly installments, including interest as
follows:
</TABLE>
<TABLE>
<CAPTION>
MONTHLY INTEREST
INSTALLMENTS RATES DUE DATES
------------ -------- ---------
<S> <C> <C> <C> <C>
$5,077 8.0% January 1, 2005.................. $ 679,945
$ 470 8.0% January 1, 2005.................. 58,820
$ 470 8.0% January 1, 2005.................. 58,820
$ 470 8.0% January 1, 2005.................. 58,821
$ 440 8.0% January 1, 2005.................. 58,956
$ 381 8.0% January 1, 2005.................. 50,989
Accrued interest due to related parties............................... 27,097
----------
9,642,459
Less current portion.................................................. 1,302,585
----------
$8,339,874
==========
</TABLE>
Maturities in future years are: 1997 -- $1,302,585, 1998 -- $2,589,369;
1999 -- $4,454,088; 2000 -- $106,077; 2001 -- $1,018,430 and
thereafter -- $171,910.
The note payable to the bank limits the amount of new debt and operating
leases to not more than a total of $50,000 without lender's approval.
The bank issued a commitment letter to refinance $7,000,000 of the
$8,000,000 obligation in 1997, including a bridge loan of $2,000,000 and a term
loan of $5,000,000. The bridge loan has terms which include interest at prime
plus 1% and a maturity date of February 28, 1998. Requirements of the term loan
include interest at prime plus 1%, due August 31, 1999 and monthly payments of
approximately $77,000 (using an interest rate of 9.25%). The current portion and
scheduled maturities have been adjusted to reflect the intended refinance.
NOTE D -- RELATED PARTY TRANSACTIONS
Interest expense paid to related parties amounted to $187,646 in 1996. The
Company leases land, office facilities, and equipment from certain shareholders
and officers of the Company. Rental expense paid to related parties amounted to
$99,588 in 1996.
NOTE E -- LEASE COMMITMENTS
The Company leases radio transmitter sites, buildings, music and airtime
under noncancellable leases with terms in excess of one year. Future minimum
payments, by year and in the aggregate, under noncancellable operating leases
with initial or remaining terms of one year or more consisted of the following
at December 31, 1996:
<TABLE>
<S> <C>
1997........................................................ $206,120
1998........................................................ 201,980
1999........................................................ 133,202
2000........................................................ 31,300
2001........................................................ 11,150
Thereafter.................................................. 105,850
--------
Total minimum lease payments................................ $689,602
========
</TABLE>
Rental expense amounted to $245,589 in 1996.
F-111
<PAGE> 211
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE F -- INCOME TAXES
The provision for income taxes results from continuing operations and
includes the following components:
<TABLE>
<S> <C>
Federal
Current tax provision............................. $ --
Deferred tax provision............................ 147,548
--------
147,548
State
Current tax provision............................. 12,544
Deferred tax provision............................ 22,388
--------
34,932
--------
Total income tax expense.................................... $182,480
========
</TABLE>
The components of the net deferred tax asset at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
--------- -------- ---------
<S> <C> <C> <C>
Deferred tax liability from:
Taxable temporary differences............................. $(255,017) $(60,004) $(315,021)
Deferred tax asset from:
Deductible temporary differences.......................... 105,662 22,049 127,711
Operating loss carryforward............................... 205,289 -- 205,289
Tax credit carryforward................................... 83,214 2,793 86,007
Valuation allowance....................................... (61,543) -- (61,543)
--------- -------- ---------
332,622 24,842 357,464
--------- -------- ---------
Deferred tax asset (liability).............................. $ 77,605 $(35,162) $ 42,443
========= ======== =========
</TABLE>
The following reconciles the federal tax provision with the expected
provision by applying statutory rates to income before income taxes:
<TABLE>
<S> <C>
Federal tax expense at statutory rate....................... $171,261
Effect of state taxes....................................... (13,701)
Nondeductible expenses...................................... 2,861
Partnership income.......................................... (20,800)
Other....................................................... 7,927
--------
Federal income tax expense.................................. $147,548
========
</TABLE>
For income tax purposes, operating losses and tax credit carryovers used
and available are as follows at December 31, 1996:
<TABLE>
<CAPTION>
USED AVAILABLE
-------- ---------
<S> <C> <C>
Net operating loss, federal............................. $379,789 $710,617
Alternative minimum tax credit.......................... -- 21,671
General business credit................................. -- 61,543
</TABLE>
The federal net operating losses expire during 2004 through 2010. The
general business credits expire during 1998 through 2000. The alternative
minimum tax credits can be carried forward indefinitely.
F-112
<PAGE> 212
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE G -- DEFINED CONTRIBUTION PLAN
The Company maintains a 401(k) plan covering all employees over the age of
twenty-one who have completed one year of service. The Company matches 10% of an
employee's contribution. Contributions to the plan were $7,022 in 1996.
NOTE H -- CONVERTIBLE PREFERRED STOCK
The preferred stockholders have the option to convert the preferred stock
into common stock prior to December 31, 2002 on the basis of five shares of
common stock for each share of preferred stock redeemed. The holders of
preferred stock do not have voting rights. Preferred stock is redeemable at par.
Subsequent to year end, the preferred stockholders converted all of their
preferred stock to common stock at the ratio of five shares of common stock for
each share of preferred stock.
NOTE I -- CASH FLOW INFORMATION
Supplemental cash flow information for the years ended December 31, 1996 is
as follows:
<TABLE>
<S> <C>
Interest paid............................................... $ 347,933
Taxes paid (net of refunds)................................. $ (7,718)
Noncash financing and investing activities:
Purchase of shareholder's common stock and payment of
deferred compensation:
Common stock redeemed.................................. $ 115,625
New debt incurred...................................... (295,000)
Deferred compensation paid............................. 179,375
-----------
$ --
===========
Sale of assets:
Proceeds from sale of property and equipment........... $ 689,000
Increase in notes receivable........................... (689,000)
-----------
$ --
===========
Payment of shareholder receivable with reduction in
shareholder note payable:
Notes payable reduced.................................. $ 1,000,000
Note payable created................................... (7,772)
Shareholder receivable paid............................ (992,228)
-----------
$ --
===========
Refinancing company and shareholder debt and acquisition
of radio stations:
Proceeds from new debt................................. $ 8,000,000
Payments on existing debt.............................. (2,557,188)
Broadcast licenses acquired............................ (4,100,000)
Property and equipment acquired........................ (800,000)
Noncompete agreement................................... (100,000)
Debt repayment on behalf of shareholder................ (415,972)
Loan fees.............................................. (80,000)
Legal fees............................................. (10,200)
-----------
Net cash paid for acquisition $ (63,360)
===========
</TABLE>
F-113
<PAGE> 213
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE J -- SUBSEQUENT EVENTS
The Company has entered into an agreement to redirect certain of the
Company's broadcast signals in exchange for a payment of $2,000,000. The
agreement is subject to Federal Communications Commission (FCC) approval and is
secured by a letter of credit. Approval is expected in 1997 and the payment is
expected to be received subsequent to approval.
Subsequent to December 31, 1996, the shareholders of PNWB and the members
of Wilson have signed letters of intent to sell the capital stock of PNWB, the
operating assets of Wilson and a building owned by a shareholder to Citadel
Broadcasting Company (Citadel). The transactions are subject to approval of the
FCC. Under the letters of intent, the Company will enter into a LMA with Citadel
which will allow Citadel use of the property and equipment of the radio stations
in exchange for a fee. The LMA will continue until closing of the sales of the
stock of PNWB and the assets of Wilson. The sale of the stock of PNWB will not
close prior to January 1, 1998 and the sale of the assets of Wilson will not
close prior to April 18, 1998. The sale price of $28,500,000 for the stock,
assets and building is payable in cash, or, if Citadel's parent consummates an
initial public offering prior to closing, such price is payable in cash totaling
$25,650,000 and stock of $2,850,000. The agreement to purchase the stock of PNWB
requires, among other things, that certain minimum levels of net asset value be
met on the date of closing.
The Company made payments of notes payable amounting to approximately
$1,800,000 subsequent to year end in advance of the payment due dates.
Additionally, the Company received approximately $2,600,000 in full payment of
certain notes receivables subsequent to December 31, 1996.
Subsequent to year end, the preferred stockholders converted all of their
preferred stock to common stock at the ratio of five shares of common stock for
each share of preferred stock.
F-114
<PAGE> 214
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED BALANCE SHEET
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 457,658
Trade accounts receivable, net of allowance for doubtful
accounts of $25,000..................................... 1,033,958
Other accounts receivable................................. 47,171
Prepaid expenses.......................................... 92,255
Prepaid income tax........................................ 5,880
Accrued interest receivable............................... 2,119
Current portion of notes receivable....................... 132,952
-----------
Total current assets............................... 1,771,993
Other Assets:
AM and FM broadcast licenses.............................. 4,382,008
Notes receivable, less current portion.................... 525,244
Noncompete agreements..................................... 266,170
Equipment deposits and other assets....................... 43,509
Deferred taxes............................................ 5,452
-----------
5,222,383
Property and equipment, at cost:
Land and improvements..................................... 324,647
Leasehold improvements.................................... 63,063
Towers and antennas....................................... 402,710
Transmitters and transmitter buildings.................... 513,002
Studio and technical equipment............................ 951,467
Automobiles............................................... 44,930
Furniture and office equipment............................ 382,019
-----------
2,681,838
Accumulated depreciation.................................. (1,109,093)
-----------
1,572,745
-----------
$ 8,567,121
===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 203,805
Accrued expenses.......................................... 181,856
Current portion of notes payable to related parties....... 71,720
Current portion of long-term debt......................... 6,533,928
-----------
Total current liabilities.......................... 6,991,309
Long-term debt:
Notes payable to related parties, less current portion.... 832,523
Notes payable, less current portion....................... 284,301
-----------
1,116,824
Deferred revenue............................................ 123,305
Owners' equity:
Common stock, voting, no par value, authorized 20,000
shares, issued and outstanding 10,750.6 shares.......... 1,872,477
Shareholder receivable.................................... (531,500)
Accumulated deficit....................................... (852,164)
Members' deficit.......................................... (153,130)
-----------
335,683
-----------
$ 8,567,121
===========
</TABLE>
See accompanying notes.
F-115
<PAGE> 215
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF OPERATIONS
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Revenues:
Revenues.................................................. $5,717,702
Less agency and representative commissions................ 796,360
----------
4,921,342
Expenses:
Transmission.............................................. 233,678
Programming and production................................ 1,640,619
Sales..................................................... 874,358
General and administrative................................ 1,622,242
Advertising............................................... 137,386
----------
4,508,283
----------
Income from operations............................ 413,059
Nonoperating income (expense):
Loss on sale of assets.................................... (65,639)
Noncompete revenue........................................ 112,090
Interest income........................................... 121,846
Interest expense.......................................... (694,674)
----------
(526,377)
----------
Loss before income taxes.......................... (113,318)
Income tax expense.......................................... 32,290
----------
Net loss.......................................... $ (145,608)
==========
</TABLE>
See accompanying notes.
F-116
<PAGE> 216
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF CHANGES IN OWNERS' EQUITY
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
PREFERRED COMMON SHAREHOLDER ACCUMULATED MEMBERS'
STOCK STOCK RECEIVABLE DEFICIT DEFICIT TOTAL
---------- ---------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997..... $1,396,800 $ 475,677 $ -- $ (920,862) $ 61,176 $1,012,791
Preferred stock conversion... (1,396,800) 1,396,800 -- -- -- --
Increase in shareholder
receivable................. -- -- (531,500) -- -- (531,500)
Net income (loss)............ -- -- -- 68,698 (214,306) (145,608)
---------- ---------- --------- ----------- --------- ----------
Balance at October 31, 1997.... $ -- $1,872,477 $(531,500) $ (852,164) $(153,130) $ 335,683
========== ========== ========= =========== ========= ==========
</TABLE>
See accompanying notes.
F-117
<PAGE> 217
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF CASH FLOWS
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (145,608)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization............................................ 115,908
Depreciation............................................ 116,517
Noncompete revenue...................................... (112,090)
Noncompete expense...................................... 88,271
Provision for bad debts................................. 20,284
Loss on sale of assets.................................. 65,639
Changes in operating assets and liabilities:
Trade accounts receivable............................. 25,593
Other accounts receivable............................. 10,521
Prepaid expenses...................................... 97,140
Prepaid income tax.................................... (5,880)
Accrued interest receivable........................... 16,050
Equipment deposits and other assets................... (4,259)
Deferred taxes........................................ 36,991
Accounts payable...................................... (64,596)
Accrued expenses...................................... (77,623)
Accrued taxes payable................................. (12,520)
-----------
Net cash provided by operating activities.......... 170,338
Cash flows from investing activities:
Loans made to shareholders................................ (531,500)
Advances on notes receivable.............................. (59,836)
Payments on notes receivable.............................. 2,902,298
Proceeds from sale of assets.............................. 61,100
Additions to property and equipment....................... (385,136)
-----------
Net cash provided by investing activities.......... 1,986,926
Cash flows from financing activities:
Payments on notes payable................................. (1,561,545)
Payments on notes payable to related parties.............. (358,442)
-----------
Net cash used by financing activities.............. (1,919,987)
-----------
Net increase in cash............................... 237,277
Cash at beginning of period........................ 220,381
-----------
Cash at end of period.............................. $ 457,658
===========
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 703,382
Taxes paid................................................ $ 13,699
</TABLE>
See accompanying notes.
F-118
<PAGE> 218
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE A -- UNAUDITED INTERIM FINANCIAL STATEMENTS
The combined balance sheet as of October 31, 1997 and the combined
statements of operations, changes in owners' equity, and cash flows for the ten
month period ended October 31, 1997 are unaudited. In the opinion of management,
the accompanying unaudited financial statements contain all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
the financial position of Pacific Northwest Broadcasting Corporation and
Affiliates, (the Company) and the results of operations, changes in owners'
equity, and cash flows. These interim unaudited combined financial statements
should be read in conjunction with the audited combined financial statements.
The combined results of operations for the ten months ended October 31, 1997 are
not necessarily indicative of results to be expected for the full year.
NOTE B -- AGREEMENT TO REDIRECT SIGNAL
The Company has entered into an agreement to redirect certain of the
Company's broadcast signals in exchange for a payment of $2,000,000. The
agreement is subject to Federal Communications Commission approval and is
secured by a letter of credit.
NOTE C -- SALES AGREEMENTS
On September 29, 1997, the shareholders of Pacific Northwest Broadcasting
Corporation (PNWB) and the members of Wilson Group, LLC (Wilson) signed various
agreements to sell the capital stock of PNWB, the operating assets of Wilson and
a building of the controlling owner to Citadel Broadcasting Company (Citadel).
In conjunction with the agreements, the Company entered into a Local Marketing
Agreement (LMA) with Citadel which allowed Citadel use of the property and
equipment of the radio stations in exchange for a fee. The LMA continued until
the closing of the sale of the assets of Wilson. The sale of the stock of PNWB
closed February 12, 1998 and the sale of the assets of Wilson closed on April
21, 1998. The sales price of $28,500,000 for the stock, assets and building was
paid in cash.
NOTE D -- SUBSEQUENT EVENT
On February 12, 1998, PNWB entered into an assignment and distribution
agreement with Wilson Properties, L.P., the sole shareholder. This agreement
transferred certain obligations and assets to the shareholder and resulted in a
net dividend of $245,301. The agreement also assigned the right to collect the
proceeds from the agreement to redirect broadcast signals described in Note B.
The dividend is summarized as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 655,089
Accounts receivable......................................... 1,534,460
Notes receivable............................................ 5,636,732
Real property............................................... 312,872
Other assets................................................ 30,902
Debt........................................................ (7,681,981)
Accounts payable and accrued expenses....................... (242,773)
-----------
Dividend.................................................... $ 245,301
===========
</TABLE>
F-119
<PAGE> 219
=======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE ANY SUCH OFFER TO SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................ 5
Risk Factors.............................. 15
Use of Proceeds........................... 23
Dividend Policy........................... 23
Capitalization............................ 24
Dilution.................................. 25
Unaudited Pro Forma Condensed Consolidated
Financial Statements.................... 26
Selected Historical Financial Data
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 39
Business.................................. 45
The Pending Dispositions.................. 68
Management................................ 69
Certain Transactions...................... 77
Principal Stockholders.................... 79
Description of Capital Stock.............. 81
Description of Indebtedness............... 86
Shares Eligible for Future Sale........... 92
Underwriting.............................. 94
Legal Matters............................. 95
Experts................................... 95
Available Information..................... 96
Glossary of Certain Defined Terms......... 97
Index to Financial Statements............. F-1
</TABLE>
=======================================================
=======================================================
Shares
CITADEL LOGO
Common Stock
---------------------
PROSPECTUS
---------------------
PRUDENTIAL SECURITIES INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY
SECURITIES LLC
, 1998
=======================================================
<PAGE> 220
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $ 33,925
National Association of Securities Dealers, Inc. filing
fee....................................................... 12,000
Printing expenses........................................... *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Blue Sky fees and expenses.................................. *
Transfer agent fees......................................... *
Miscellaneous............................................... *
---------
TOTAL.................................................. *
=========
</TABLE>
- ---------
* To be supplied by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.7502 of the Nevada General Corporation Law (the "NGCL") empowers
a corporation to indemnify any person who was or is a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and with respect to any criminal proceeding, he had reasonable
cause to believe that his conduct was unlawful.
Section 78.7502 of the NGCL also empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including amounts paid in settlement and attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation unless, and only to the extent
that, the court in which such action or suit was brought or other court of
competent jurisdiction shall determine upon application that in view of all the
circumstances of the case, that despite the adjudication of liability such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
Section 78.7502 of the NGCL further provides that, to the extent that a
director or officer of a corporation has been successful on the merits or
otherwise, in the defense of any action, suit or proceeding referred to above or
in the defense of any claim, issue or matter therein, he must be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith and that indemnification provided for by Section
78.751 of the NGCL shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled, except that such indemnification may not
be made to any
II-1
<PAGE> 221
director or officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing violation of the
law and was material to the cause of action, unless a court of competent
jurisdiction orders otherwise, utilizing the standard described in the
immediately preceding paragraph.
The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of the officers and directors incurred
in defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by the officer or
director to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation; these provisions do not affect any rights to advancement of
expenses to which corporate personnel other than officers and directors may be
entitled under any contract or otherwise by law.
Any indemnification referred to above, unless ordered by a court or paid as
incurred in advance of final disposition upon receipt of a proper undertaking to
repay the same, must be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The determination
must be made: (i) by the stockholders; (ii) by the board of directors by
majority vote of a quorum consisting of directors who were not parties to the
act, suit or proceeding; (iii) if a majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or (iv) if a quorum consisting
of directors who were not parties to the act, suit, or proceeding cannot be
obtained, by independent legal counsel in a written opinion.
Article VIII of Citadel Communications Corporation's Amended and Restated
Certificate of Incorporation provides as follows:
To the full extent permitted by law, the Corporation shall indemnify
any person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he or she is or was a director of the Corporation
or any predecessor of the Corporation or serves or served any other
enterprise as director at the request of the Corporation or any predecessor
of the Corporation.
Citadel Communications Corporation's Bylaws further implement the
permissive provisions of Section 78.751 of the NGCL discussed above.
As permitted by Section 78.037 of the NGCL, Article IX of Citadel
Communications Corporation's Amended and Restated Certificate of Incorporation
provides as follows:
To the full extent permitted by General Corporation Law of State of
Nevada in effect from time to time and to no greater extent, no officer or
member of the Board of Directors shall be liable for monetary damages for
breach of fiduciary duty in his or her capacity as an officer or a director
in any action brought by or on behalf of the Corporation or any of its
shareholders.
Section 78.037 currently provides that any such provision of a
corporation's articles of incorporation may not eliminate or limit the liability
of a director or officer for (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or (b) the payment of dividends
in violation of the NGCL.
Citadel Communications Corporation maintains insurance to protect persons
entitled to indemnification pursuant to its Amended and Restated Certificate of
Incorporation and Bylaws and the NGCL against expenses, judgments, fines and
amounts paid in settlement, to the fullest extent permitted by the NGCL.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The number of shares described as being sold in this Item 15 does not give
effect to the Recapitalization described in this Registration Statement.
On June 28, 1996, in connection with refinancing transactions, the
Registrant issued to ABRY Broadcast Partners II, L.P. and ABRY Citadel
Investment Partners, L.P. an aggregate of 3,168,853.7 shares of two
newly-created classes of preferred stock for the aggregate purchase price of
$49,465,806.26, and it issued an
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aggregate of 231,420.947 shares of common stock and 763,612.584 shares of
preferred stock as two classes of then-existing common stock and two classes of
then-existing preferred stock were reclassified. As no public offering was
involved, the issuance of such shares was exempt from registration under Section
4(2) of the Securities Act.
On December 31, 1996, in connection with the acquisition of Deschutes River
Broadcasting, Inc. ("Deschutes"), the Registrant issued to the shareholders of
Deschutes an aggregate of 11,208 shares of common stock and 482,727 shares of
preferred stock. As no public offering was involved, the issuance of such shares
was exempt from registration under Section 4(2) of the Securities Act.
As of April 15, 1997, the Registrant issued to certain employees an
aggregate of 1,454 shares of common stock for the aggregate purchase price of
$22,932.44. As no public offering was involved, the issuance of such shares was
exempt from registration under Section 4(2) of the Securities Act.
On September 29, 1997, in connection with the acquisition of certain radio
stations and related assets in Providence, Rhode Island, the Registrant issued
to the shareholders of the selling entities an aggregate of 153,264 shares of
preferred stock. As no public offering was involved, the issuance of such shares
will be exempt from registration under Section 4(2) of the Securities Act.
On October 15, 1997, in connection with the acquisition of certain radio
stations and related assets in Little Rock, Arkansas, the Registrant issued to
the shareholders of the selling entities an aggregate of 360,636 shares of
preferred stock. As no public offering was involved, the issuance of such shares
will be exempt from registration under Section 4(2) of the Securities Act.
As of April 15, 1997, September 30, 1997, February 10, 1998, March 18, 1998
and March 25, 1998, the Registrant issued to former employees an aggregate of
14,901 shares of common stock upon the exercise of vested employee stock options
for the aggregate purchase price of $62,696.61 plus delivery to the Registrant
of 885 shares of common stock. As no public offering was involved, the issuance
of such shares was exempt from registration under Section 4(2) of the Securities
Act.
In connection with the proposed Recapitalization described in this
Registration Statement, the Company will reclassify its outstanding common stock
and its outstanding preferred stock and will issue new shares of common stock
and preferred stock to its existing security holders. The issuance of such
shares will be exempt from registration under Section 3(a)(9) of the Securities
Act.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
1 Form of Underwriting Agreement*
2.1 Stock Purchase Agreement dated September 29, 1997 among
Pacific Northwest Broadcasting Corporation, Wilson
Properties, L.P. and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Registration
Statement No. 333-36771 on Form S-4).
2.2 Asset Purchase Agreement dated September 29, 1997 among
Wilson Group, LLC, Citadel Broadcasting Company and Citadel
License, Inc. (incorporated by reference to Exhibit 2.2 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
2.3 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WFMZ-FM)
(incorporated by reference to Exhibit 2.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.4 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WEST-AM)
(incorporated by reference to Exhibit 2.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.5 Merger Agreement dated as of June 2, 1997 among Snider
Corporation, Ted L. Snider, Sr., Jane J. Snider, Citadel
Communications Corporation and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.6 Merger Agreement dated as of June 2, 1997 among Snider
Broadcasting Corporation, Ted L. Snider, Jr., Calvin G.
Arnold, Citadel Communications Corporation and Citadel
Broadcasting Company (incorporated by reference to Exhibit
2.6 to Citadel Broadcasting Company's Registration Statement
No. 333-36771 on Form S-4).
2.7 Asset Purchase Agreement dated as of June 2, 1997 among CDB
Broadcasting Corporation, CDB License Corporation and
Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.7 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
2.8 Agreement of Purchase and Sale dated March 17, 1997 by and
among Tele-Media Broadcasting Company, Tele-Media
Broadcasting Company of Centre Region, Tele-Media
Broadcasting Holding Corporation and their respective
shareholders and Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.19 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
3(i) Form of Amended and Restated Articles of Incorporation of
Citadel Communications Corporation.*
3(ii) Form of Amended and Restated Bylaws of Citadel
Communications Corporation.*
4.1 Form of Recapitalization Agreement.*
4.2 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the forms of 10 1/4% Senior
Subordinated Notes due 2007 and 10 1/4% Series B Senior
Subordinated Notes due 2007 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Registration Statement No. 333-36771 on Form S-4).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
4.3 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the forms of 13 1/4% Exchange
Debentures due 2009 and 13 1/4% Series B Exchange Debentures
due 2009 included therein (incorporated by reference to
Exhibit 4.2 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
4.4 Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13 1/4% Series A Exchangeable Preferred
Stock and the 13 1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
5.1 Opinion of Eckert Seamans Cherin & Mellott, LLC, including
consent.*
5.2 Opinion of Lionel Sawyer & Collins.*
9 Amended and Restated Voting Trust Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment
Partners, L.P., Harlan Levy as Trustee, and J. Walter
Corcoran and Christopher Hall (incorporated by reference to
Exhibit 9 to Citadel Broadcasting Company's Amendment No. 1
to Registration Statement No. 333-36771 on Form S-4).
10.1 Employment Agreement dated as of June 28, 1996 among
Lawrence R. Wilson, Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.1 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.2 Citadel Communications Corporation 1996 Equity Incentive
Plan, as amended (incorporated by reference to Exhibit 10.2
to Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.3 Citadel Communications Corporation Nonqualified Stock Option
Agreement made and entered into as of June 28, 1996 between
Citadel Communications Corporation and Lawrence R. Wilson
(incorporated by reference to Exhibit 10.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.4 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of December 21, 1994
(incorporated by reference to Exhibit 10.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.5 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of February 21, 1994
(incorporated by reference to Exhibit 10.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.6 Joint Sales Agreement dated as of December 15, 1995 among
Pourtales Radio Partnership, Pourtales Holdings, Inc.,
Springs Radio, Inc., KVUU/KSSS, Inc. and Citadel
Broadcasting Company (incorporated by reference to Exhibit
10.6 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.7 Securities Purchase and Exchange Agreement dated as of June
28, 1996 among Citadel Communications Corporation, Citadel
Broadcasting Company, ABRY Broadcast Partners II, L.P.,
ABRY/Citadel Investment Partners, L.P., Baker, Fentress &
Company, Bank of America Illinois, Oppenheimer & Co., Inc.,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, and
Thomas E. Pelt, Jr. (incorporated by reference to Exhibit
10.7 to Citadel Broadcasting Company's to Registration
Statement No. 333-36771 on Form S-4).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.8 First Amendment to the Securities Purchase Agreement dated
as of December 31, 1996 among Citadel Communications
Corporation, Citadel Broadcasting Company, Deschutes
Acquisition Corporation, ABRY Broadcast Partners II, L.P.,
ABRY/Citadel Investment Partners, L.P., Baker, Fentress &
Company, Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund
Limited Partnership, Joseph P. Tennant, The Schafbuch Family
Trust u/a/d 2-15-94, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy and Ralph W. McKee
(incorporated by reference to Exhibit 10.8 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.9 Second Amendment to the Securities Purchase and Exchange
Agreement dated as of March 17, 1997 among Citadel
Communications Corporation, Citadel Broadcasting Company,
Deschutes Acquisition Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
Illinois, Christopher J. Perry, Robert F. Perille, M. Ann
O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W.
Clary, Sheryl E. Bartol, Andrea P. Joselit, The Endeavour
Capital Fund Limited Partnership, Joseph P. Tennant, The
Schafbuch Family Trust u/a/d 2-15-94, Babson Capital
Partners Limited Partnership, Tal Johnson, Edward T. Hardy
and Ralph W. McKee (incorporated by reference to Exhibit
10.9 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.10 Third Amendment to the Securities Purchase and Exchange
Agreement dated as of September 26, 1997 among Citadel
Communications Corporation, Citadel Broadcasting Company,
Deschutes Acquisition Corporation, ABRY Broadcast Partners
II, L.P., ABRY/ Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavor Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust u/a/d 2-15-94,
Babson Capital Partners Limited Partnership, Tal Johnson,
Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip
Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins,
Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso and
Juliet Rice (incorporated by reference to Exhibit 10.10 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.11 Second Amended and Restated Stockholders Agreement dated as
of June 28, 1996, among Citadel Communications Corporation,
Baker, Fentress & Company, Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Thomas
E. Van Pelt, Jr., ABRY Broadcast Partners II, L.P., ABRY
Citadel Investment Partners, L.P., Oppenheimer & Co., Inc.,
Finova Capital Corporation, Lawrence R. Wilson, Claire
Wilson, Donna L. Heffner and Stuart Stanek (incorporated by
reference to Exhibit 10.11 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
10.12 First Amendment to the Second Amended Stockholders Agreement
dated as of December 31, 1996 among Citadel Communications
Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel
Investment Partners, L.P., Baker, Fentress & Company,
Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, Finova Capital Corporation,
The Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.12 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
</TABLE>
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<PAGE> 226
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.13 Second Amendment to the Second Amended and Restated
Stockholders Agreement dated as of March 17, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
Illinois, Christopher J. Perry, Robert F. Perille, M. Ann
O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W.
Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital
Corporation, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.13 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.14 Third Amendment to the Second Amended and Restated
Stockholders Agreement dated as of September 26, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, Finova Capital Corporation, The Endeavour
Capital Fund Limited Partnership, Joseph P. Tennant, The
Schafbuch Family Trust, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Lawrence R. Wilson and
Claire Wilson (incorporated by reference to Exhibit 10.14 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.15 Fourth Amended and Restated Voting Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., Baker Fentress & Company,
Finova Capital Corporation, Oppenheimer & Co., Inc., The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr.,
Jane L. Snider, Ted L. Snider, Jr., Calvin Arnold, Lawrence
R. Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.15 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.16 Fourth Amendment to the Securities Purchase and Exchange
Agreement dated as of October 15, 1997 among Citadel
Communications Corporation, Citadel Broadcasting Company,
Deschutes Acquisition Corporation, ABRY Broadcast Partners
II, L.P., ABRY/ Citadel Investment Partners, L.P., Baker
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust u/a/d 2-15-94,
Babson Capital Partners Limited Partnership, Tal Johnson,
Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip
Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins,
Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso, Juliet
Rice, Ted L. Snider, Sr., Jane J. Snider, Ted L. Snider,
Jr., and Calvin G. Arnold (incorporated by reference to
Exhibit 10.16 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.17 Fourth Amendment to the Second Amended and Restated
Stockholders Agreement dated as of October 15, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Finova
Capital Corporation, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr., Jane
J. Snider, Ted L. Snider, Jr., Calvin G. Arnold, Lawrence R.
Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.17 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.18 Amended and Restated Loan Agreement dated as of July 3, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
FINOVA Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.18 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.19 Agreement Not to Compete made as of December 31, 1996
between DVS Management Inc. and Citadel Communications
Corporation (incorporated by reference to Exhibit 10.20 to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.20 Purchase Agreement dated June 30, 1997 by and among Citadel
Broadcasting Company, Citadel Communications Corporation,
Prudential Securities Incorporated, NationsBanc Capital
Markets, Inc., and BancBoston Securities Inc. (incorporated
by reference to Exhibit 10.21 to Citadel Broadcasting
Company's Registration Statement No. 333-36771 on Form S-4).
10.21 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.24
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.22 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.25
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.23 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of January 1, 1996
(incorporated by reference to Exhibit 10.26 to Citadel
Broadcasting Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997).
10.24 Third Amended and Restated Registration Rights Agreement
dated as of June 28, 1996 among Citadel Communications
Corporation, Lawrence R. Wilson, Claire Wilson, Baker
Fentress & Company, ABRY Broadcast Partners II, L.P.,
ABRY/Citadel Investment Partners, L.P., Oppenheimer & Co.,
Inc., Bank of America Illinois, Christopher J. Perry, Robert
F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M.
Mann, Matthew W. Clary and Thomas E. VanPelt, Jr.
10.25 First Amendment to Third Amended and Restated Registration
Rights Agreement dated as of December 31, 1996 among Citadel
Communications Corporation, Lawrence R. Wilson, Claire
Wilson, Baker Fentress & Company, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P.,
Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund
Limited Partnership, Joseph P. Tennant, The Schafbuch Family
Trust, Babson Capital Partners Limited Partnership, Tal
Johnson, Edward T. Hardy and Ralph W. McKee.
</TABLE>
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<PAGE> 228
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.26 Second Amendment to Third Amended and Restated Registration
Rights Agreement dated as of September 26, 1997 among
Citadel Communications Corporation, Lawrence R. Wilson,
Claire Wilson, Baker Fentress & Company, ABRY Broadcast
Partners II, L.P., ABRY/ Citadel Investment Partners, L.P.,
Oppenheimer & Co., Inc., Bank of America National Trust and
Savings Association, Christopher J. Perry, Robert F.
Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann,
Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso and Juliet Rice.
10.27 Third Amendment to Third Amended and Restated Registration
Rights Agreement dated as of October 15, 1997 among Citadel
Communications Corporation, Lawrence R. Wilson, Claire
Wilson, Baker Fentress & Company, ABRY Broadcast Partners
II, L.P., ABRY/ Citadel Investment Partners, L.P.,
Oppenheimer & Co., Inc., Bank of America National Trust and
Savings Association, Christopher J. Perry, Robert F.
Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann,
Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr.,
Jane J. Snider, Ted L. Snider, Jr. and Calvin G. Arnold.
21 Subsidiaries of Citadel Communications Corporation.
23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
its opinion to be filed herewith as Exhibit 5.1).*
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Deloitte & Touche LLP.
23.6 Consent of Erwin & Company.
23.7 Consent of Balukoff, Lindstrom & Co., P.A.
24 Power of Attorney (included on signature page).
27 Financial Data Schedule.
</TABLE>
- ---------
*To be Filed by Amendment
(B) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid
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<PAGE> 229
by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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<PAGE> 230
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Lawrence
R. Wilson and Donna L. Heffner and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tempe, in the State of
Arizona, on April 24, 1998.
CITADEL COMMUNICATIONS CORPORATION
By: /s/ LAWRENCE R. WILSON
----------------------------------------
Lawrence R. Wilson
Chairman of the Board,
Chief Executive Office and President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on April 24, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ LAWRENCE R. WILSON Chairman of the Board, Chief Executive Officer
- ---------------------------------------------- and President (Principal Executive Officer)
Lawrence R. Wilson
/s/ DONNA L. HEFFNER Vice President and Chief Financial Officer
- ---------------------------------------------- (Principal Financial and Accounting Officer)
Donna L. Heffner
/s/ PATRICIA DIAZ DENNIS Director
- ----------------------------------------------
Patricia Diaz Dennis
/s/ SCOTT E. SMITH Director
- ----------------------------------------------
Scott E. Smith
/s/ TED L. SNIDER, SR. Director
- ----------------------------------------------
Ted L. Snider, Sr.
/s/ JOHN E. VON SCHLEGELL Director
- ----------------------------------------------
John E. von Schlegell
</TABLE>
II-11
<PAGE> 231
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
1 Form of Underwriting Agreement*
2.1 Stock Purchase Agreement dated September 29, 1997 among
Pacific Northwest Broadcasting Corporation, Wilson
Properties, L.P. and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Registration
Statement No. 333-36771 on Form S-4).
2.2 Asset Purchase Agreement dated September 29, 1997 among
Wilson Group, LLC, Citadel Broadcasting Company and Citadel
License, Inc. (incorporated by reference to Exhibit 2.2 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
2.3 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WFMZ-FM)
(incorporated by reference to Exhibit 2.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.4 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WEST-AM)
(incorporated by reference to Exhibit 2.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.5 Merger Agreement dated as of June 2, 1997 among Snider
Corporation, Ted L. Snider, Sr., Jane J. Snider, Citadel
Communications Corporation and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.6 Merger Agreement dated as of June 2, 1997 among Snider
Broadcasting Corporation, Ted L. Snider, Jr., Calvin G.
Arnold, Citadel Communications Corporation and Citadel
Broadcasting Company (incorporated by reference to Exhibit
2.6 to Citadel Broadcasting Company's Registration Statement
No. 333-36771 on Form S-4).
2.7 Asset Purchase Agreement dated as of June 2, 1997 among CDB
Broadcasting Corporation, CDB License Corporation and
Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.7 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
2.8 Agreement of Purchase and Sale dated March 17, 1997 by and
among Tele-Media Broadcasting Company, Tele-Media
Broadcasting Company of Centre Region, Tele-Media
Broadcasting Holding Corporation and their respective
shareholders and Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.19 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
3(i) Form of Amended and Restated Articles of Incorporation of
Citadel Communications Corporation.*
3(ii) Form of Amended and Restated Bylaws of Citadel
Communications Corporation.*
4.1 Form of Recapitalization Agreement.*
4.2 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the forms of 10 1/4% Senior
Subordinated Notes due 2007 and 10 1/4% Series B Senior
Subordinated Notes due 2007 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Registration Statement No. 333-36771 on Form S-4).
</TABLE>
<PAGE> 232
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
4.3 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the forms of 13 1/4% Exchange
Debentures due 2009 and 13 1/4% Series B Exchange Debentures
due 2009 included therein (incorporated by reference to
Exhibit 4.2 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
4.4 Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13 1/4% Series A Exchangeable Preferred
Stock and the 13 1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
5.1 Opinion of Eckert Seamans Cherin & Mellott, LLC, including
consent.*
5.2 Opinion of Lionel Sawyer & Collins.*
9 Amended and Restated Voting Trust Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment
Partners, L.P., Harlan Levy as Trustee, and J. Walter
Corcoran and Christopher Hall (incorporated by reference to
Exhibit 9 to Citadel Broadcasting Company's Amendment No. 1
to Registration Statement No. 333-36771 on Form S-4).
10.1 Employment Agreement dated as of June 28, 1996 among
Lawrence R. Wilson, Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.1 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.2 Citadel Communications Corporation 1996 Equity Incentive
Plan, as amended (incorporated by reference to Exhibit 10.2
to Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.3 Citadel Communications Corporation Nonqualified Stock Option
Agreement made and entered into as of June 28, 1996 between
Citadel Communications Corporation and Lawrence R. Wilson
(incorporated by reference to Exhibit 10.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.4 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of December 21, 1994
(incorporated by reference to Exhibit 10.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.5 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of February 21, 1994
(incorporated by reference to Exhibit 10.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.6 Joint Sales Agreement dated as of December 15, 1995 among
Pourtales Radio Partnership, Pourtales Holdings, Inc.,
Springs Radio, Inc., KVUU/KSSS, Inc. and Citadel
Broadcasting Company (incorporated by reference to Exhibit
10.6 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.7 Securities Purchase and Exchange Agreement dated as of June
28, 1996 among Citadel Communications Corporation, Citadel
Broadcasting Company, ABRY Broadcast Partners II, L.P.,
ABRY/Citadel Investment Partners, L.P., Baker, Fentress &
Company, Bank of America Illinois, Oppenheimer & Co., Inc.,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, and
Thomas E. Pelt, Jr. (incorporated by reference to Exhibit
10.7 to Citadel Broadcasting Company's to Registration
Statement No. 333-36771 on Form S-4).
</TABLE>
<PAGE> 233
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.8 First Amendment to the Securities Purchase Agreement dated
as of December 31, 1996 among Citadel Communications
Corporation, Citadel Broadcasting Company, Deschutes
Acquisition Corporation, ABRY Broadcast Partners II, L.P.,
ABRY/Citadel Investment Partners, L.P., Baker, Fentress &
Company, Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund
Limited Partnership, Joseph P. Tennant, The Schafbuch Family
Trust u/a/d 2-15-94, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy and Ralph W. McKee
(incorporated by reference to Exhibit 10.8 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.9 Second Amendment to the Securities Purchase and Exchange
Agreement dated as of March 17, 1997 among Citadel
Communications Corporation, Citadel Broadcasting Company,
Deschutes Acquisition Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
Illinois, Christopher J. Perry, Robert F. Perille, M. Ann
O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W.
Clary, Sheryl E. Bartol, Andrea P. Joselit, The Endeavour
Capital Fund Limited Partnership, Joseph P. Tennant, The
Schafbuch Family Trust u/a/d 2-15-94, Babson Capital
Partners Limited Partnership, Tal Johnson, Edward T. Hardy
and Ralph W. McKee (incorporated by reference to Exhibit
10.9 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.10 Third Amendment to the Securities Purchase and Exchange
Agreement dated as of September 26, 1997 among Citadel
Communications Corporation, Citadel Broadcasting Company,
Deschutes Acquisition Corporation, ABRY Broadcast Partners
II, L.P., ABRY/ Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavor Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust u/a/d 2-15-94,
Babson Capital Partners Limited Partnership, Tal Johnson,
Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip
Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins,
Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso and
Juliet Rice (incorporated by reference to Exhibit 10.10 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.11 Second Amended and Restated Stockholders Agreement dated as
of June 28, 1996, among Citadel Communications Corporation,
Baker, Fentress & Company, Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Thomas
E. Van Pelt, Jr., ABRY Broadcast Partners II, L.P., ABRY
Citadel Investment Partners, L.P., Oppenheimer & Co., Inc.,
Finova Capital Corporation, Lawrence R. Wilson, Claire
Wilson, Donna L. Heffner and Stuart Stanek (incorporated by
reference to Exhibit 10.11 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
10.12 First Amendment to the Second Amended Stockholders Agreement
dated as of December 31, 1996 among Citadel Communications
Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel
Investment Partners, L.P., Baker, Fentress & Company,
Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, Finova Capital Corporation,
The Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.12 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
</TABLE>
<PAGE> 234
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.13 Second Amendment to the Second Amended and Restated
Stockholders Agreement dated as of March 17, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
Illinois, Christopher J. Perry, Robert F. Perille, M. Ann
O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W.
Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital
Corporation, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.13 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.14 Third Amendment to the Second Amended and Restated
Stockholders Agreement dated as of September 26, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, Finova Capital Corporation, The Endeavour
Capital Fund Limited Partnership, Joseph P. Tennant, The
Schafbuch Family Trust, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Lawrence R. Wilson and
Claire Wilson (incorporated by reference to Exhibit 10.14 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.15 Fourth Amended and Restated Voting Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., Baker Fentress & Company,
Finova Capital Corporation, Oppenheimer & Co., Inc., The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr.,
Jane L. Snider, Ted L. Snider, Jr., Calvin Arnold, Lawrence
R. Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.15 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.16 Fourth Amendment to the Securities Purchase and Exchange
Agreement dated as of October 15, 1997 among Citadel
Communications Corporation, Citadel Broadcasting Company,
Deschutes Acquisition Corporation, ABRY Broadcast Partners
II, L.P., ABRY/ Citadel Investment Partners, L.P., Baker
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust u/a/d 2-15-94,
Babson Capital Partners Limited Partnership, Tal Johnson,
Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip
Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins,
Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso, Juliet
Rice, Ted L. Snider, Sr., Jane J. Snider, Ted L. Snider,
Jr., and Calvin G. Arnold (incorporated by reference to
Exhibit 10.16 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
</TABLE>
<PAGE> 235
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.17 Fourth Amendment to the Second Amended and Restated
Stockholders Agreement dated as of October 15, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Finova
Capital Corporation, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr., Jane
J. Snider, Ted L. Snider, Jr., Calvin G. Arnold, Lawrence R.
Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.17 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.18 Amended and Restated Loan Agreement dated as of July 3, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
FINOVA Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.18 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.19 Agreement Not to Compete made as of December 31, 1996
between DVS Management Inc. and Citadel Communications
Corporation (incorporated by reference to Exhibit 10.20 to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.20 Purchase Agreement dated June 30, 1997 by and among Citadel
Broadcasting Company, Citadel Communications Corporation,
Prudential Securities Incorporated, NationsBanc Capital
Markets, Inc., and BancBoston Securities Inc. (incorporated
by reference to Exhibit 10.21 to Citadel Broadcasting
Company's Registration Statement No. 333-36771 on Form S-4).
10.21 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.24
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.22 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.25
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.23 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of January 1, 1996
(incorporated by reference to Exhibit 10.26 to Citadel
Broadcasting Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997).
10.24 Third Amended and Restated Registration Rights Agreement
dated as of June 28, 1996 among Citadel Communications
Corporation, Lawrence R. Wilson, Claire Wilson, Baker
Fentress & Company, ABRY Broadcast Partners II, L.P.,
ABRY/Citadel Investment Partners, L.P., Oppenheimer & Co.,
Inc., Bank of America Illinois, Christopher J. Perry, Robert
F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M.
Mann, Matthew W. Clary and Thomas E. VanPelt, Jr.
10.25 First Amendment to Third Amended and Restated Registration
Rights Agreement dated as of December 31, 1996 among Citadel
Communications Corporation, Lawrence R. Wilson, Claire
Wilson, Baker Fentress & Company, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P.,
Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund
Limited Partnership, Joseph P. Tennant, The Schafbuch Family
Trust, Babson Capital Partners Limited Partnership, Tal
Johnson, Edward T. Hardy and Ralph W. McKee.
</TABLE>
<PAGE> 236
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.26 Second Amendment to Third Amended and Restated Registration
Rights Agreement dated as of September 26, 1997 among
Citadel Communications Corporation, Lawrence R. Wilson,
Claire Wilson, Baker Fentress & Company, ABRY Broadcast
Partners II, L.P., ABRY/ Citadel Investment Partners, L.P.,
Oppenheimer & Co., Inc., Bank of America National Trust and
Savings Association, Christopher J. Perry, Robert F.
Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann,
Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso and Juliet Rice.
10.27 Third Amendment to Third Amended and Restated Registration
Rights Agreement dated as of October 15, 1997 among Citadel
Communications Corporation, Lawrence R. Wilson, Claire
Wilson, Baker Fentress & Company, ABRY Broadcast Partners
II, L.P., ABRY/ Citadel Investment Partners, L.P.,
Oppenheimer & Co., Inc., Bank of America National Trust and
Savings Association, Christopher J. Perry, Robert F.
Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann,
Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr.,
Jane J. Snider, Ted L. Snider, Jr. and Calvin G. Arnold.
21 Subsidiaries of Citadel Communications Corporation.
23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
its opinion to be filed herewith as Exhibit 5.1).*
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Deloitte & Touche LLP.
23.6 Consent of Erwin & Company.
23.7 Consent of Balukoff, Lindstrom & Co., P.A.
24 Power of Attorney (included on signature page).
27 Financial Data Schedule.
</TABLE>
- ---------
*To be Filed by Amendment
<PAGE> 1
Exhibit 10.24
THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made as of June 28, 1996, by and among Citadel Communications
Corporation, a Nevada corporation (the "Company"), the investors whose names are
listed on the Investor Signature Pages attached hereto (herein referred to
collectively as the "Investors" and individually as an "Investor") and, with
respect to Section 4(a) hereof, Lawrence R. Wilson and Claire Wilson
(collectively, "Wilson").
RECITALS:
WHEREAS, the Company granted registration rights to certain of the
Investors pursuant to the Second Amended and Restated Registration Rights
Agreement dated October 1, 1993 (the "Previous Agreement"); and
WHEREAS, the Company, as issuer, and ABRY, ABRY/CIP, BofA, the BofA
Co-Investors, BFC, OPCO and certain other parties are entering into the
Securities Purchase and Exchange Agreement pursuant to which the Company will
repurchase certain Equity Securities of the Company held by BofA, BFC and the
BofA Co-Investors, and BofA, BFC, OPCO and the BofA Co-Investors will exchange
through reclassification certain Equity Securities of the Company for other
Equity Securities of the Company and ABRY and ABRY/CIP will purchase certain
Equity Securities of the Company; and
WHEREAS, in order to induce BofA, BFC, OPCO and the BofA Co-Investors
to enter into the Securities Purchase and Exchange Agreement and to effect such
sale of Equity Securities and exchanges and to induce ABRY and ABRY/CIP to enter
into the Securities Purchase and Exchange Agreement and to purchase such Equity
Securities of the Company, the Company wishes to grant certain registration
rights to ABRY and ABRY/CIP and amend and restate the terms of the Previous
Agreement; and
WHEREAS, the execution of this Agreement is a condition to the closing
of the transactions contemplated by the Securities Purchase and Exchange
Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree that
the Previous Agreement is hereby amended and restated in its entirety as
follows:
1. Definitions
As used in this Agreement, the following capitalized terms
shall have the following meanings:
<PAGE> 2
"ABRY/CIP" shall mean ABRY/Citadel Investment Partners, L.P.,
a Delaware limited partnership.
"Additional Preferred Stock" shall mean any additional series
of preferred stock issued by the Company other than the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock.
"BFC" shall mean Baker, Fentress & Company, a Delaware
corporation.
"BofA" shall mean Bank of America Illinois, an Illinois
banking corporation.
"BofA Co-Investors" shall mean and refer, individually and
collectively, to those individuals who are designated on the Investor Signature
Pages as the "BofA Co-Investors."
"BofA Warrants" shall mean those warrants issued by the
Company pursuant to the Senior Subordinated Note and Purchase Agreement, dated
as of October 1st, 1993, by and among the Company, Citadel, BofA (f/k/a
Continental Bank N.A.) and certain other parties thereto.
"Citadel" shall mean Citadel Broadcasting Company, a Nevada
corporation and wholly owned Subsidiary of the Company.
"Claim" shall mean any loss, claim, damages, liability or
expense (including the reasonable costs of investigation and legal fees and
expenses).
"Class A Common Stock" shall mean the Class A Common Stock,
par value $.001 per share, of the Company.
"Class B Common Stock" shall mean the Class B Common Stock,
par value $.001 per share, of the Company.
"Class C Common Stock" shall mean the Class C Common Stock,
par value $.001 per share, of the Company.
"Commission" shall mean the Securities and Exchange
Commission, including any governmental body or agency succeeding to the
functions thereof.
"Common Stock" shall mean, collectively, the Class A Common
Stock, Class B Common Stock and Class C Common Stock.
"Conversion Stock" means all Investor Stock which is Common
Stock. For purposes of this Agreement, any Person who holds any Investor Stock
which is not Common Stock will be deemed to be the Holder of the Common Stock
obtainable upon the conversion, exercise or exchange to the fullest extent
possible of such Investor Stock (including the
2
<PAGE> 3
conversion, exercise or exchange of all other Investor Stock directly or
indirectly obtainable upon any such conversion, exercise or exchange), without
regard to any restriction or limitation on any such conversion, exercise or
exchange; provided that no Holder of any Facility A Note (as that term is
defined in the Securities Purchase and Exchange Agreement), on or prior to the
Maturity Date (as that term is defined in such Facility A Note) of such Facility
A Note, shall be deemed to be the Holder of any such Common Stock by reason of
holding such Facility A Note.
"Demand Registration" shall mean a registration pursuant to
Section 2 hereof.
"Equity Securities" of any Person means (i) any capital stock,
partnership, membership, joint venture or other ownership or equity interest,
participation or securities (whether voting or non-voting, whether preferred,
common or otherwise, and including any stock appreciation, contingent interest
or similar right) and (ii) any option, warrant, security or other right
(including debt securities) directly or indirectly convertible into or
exercisable or exchangeable for, or otherwise to acquire directly or indirectly,
any stock, interest, participation or security described in clause (i) above.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Firm Commitment Underwritten Offering" shall mean an offering
in which the underwriters agree to purchase securities for distribution pursuant
to a registration statement under the Securities Act and in which the obligation
of the underwriters is to purchase all the securities being offered if any are
purchased.
"Holder" shall mean the beneficial owner of a security. For
all purposes of this Agreement, the Company shall be entitled to treat the
record owner of a security as the beneficial owner of such security unless it
has been given written notice of the existence and identity of a different
beneficial owner.
"Indemnified Holders" shall mean any Holder of Restricted
Stock, any officer, director, employee or agent of any such Holder and any
Person who controls any such Holder within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act.
"Investor Stock" has the meaning set forth in the Securities
Purchase and Exchange Agreement.
"Misstatement" shall mean an untrue statement of a material
fact or an omission to state a material fact required to be stated in a
Registration Statement or Prospectus or necessary to make the statements in a
Registration Statement, Prospectus or preliminary prospectus not misleading.
"OPCO" shall mean Oppenheimer & Co., Inc., a Delaware
corporation.
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"Person" shall mean all natural persons, corporations,
business trusts, limited liability companies, associations, companies,
partnerships, joint ventures, governments, agencies, political subdivisions and
other entities.
"Piggyback Registration" shall mean a registration pursuant to
Section 3 hereof.
"Preferred Stock" shall mean the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Additional Preferred Stock, collectively.
"Previous Investors" shall mean BofA, the BofA Co-Investors,
BFC and OPCO.
"Prospectus" shall mean the prospectus included in any
Registration Statement, as supplemented by any and all prospectus supplements
and as amended by any and all post-effective amendments and including all
material incorporated by reference in such prospectus.
"Qualified Public Offering" means the closing of the issuance
and sale of Common Stock in an underwritten public offering which is registered
pursuant to the Securities Act and which results in the receipt by the Company
of cash proceeds of at least $25,000,000 (net of applicable commissions,
discounts and expenses).
"Registration" shall mean a Demand Registration or a Piggyback
Registration.
"Registration Expenses" shall mean the out-of-pocket expenses
of a Registration, including:
(a) all registration and filing fees (including fees with
respect to filing required to be made with the National Association of
Securities Dealers);
(b) fees and expenses of compliance with securities or blue
sky laws (including fees and disbursements of counsel for the underwriters or
selling Holders in connection with blue sky qualifications of the Restricted
Stock and determinations of their eligibility for investment under the laws of
such jurisdictions as the managing underwriters or holders of a majority of the
Restricted Stock being sold may designate);
(c) printing, messenger, telephone and delivery expenses;
(d) fees and disbursements of counsel for the Company, counsel
for the underwriters and of not more than one firm of attorneys for the sellers
of the Restricted Stock selected by the Holders which own a majority of the
Restricted Stock which is requested to be included in such Registration;
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(e) fees and disbursements of all independent certified public
accountants of the Company incurred in connection with such Registration
(including the expenses of any special audit and "cold comfort" letters incident
to such registration); and
(f) fees and disbursements of underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals relating to the distribution of the
Restricted Stock).
"Registration Statement" shall mean any registration statement
which covers Restricted Stock pursuant to the provisions of this Agreement,
including the Prospectus included in such registration statement, amendments
(including post-effective amendments) and supplements to such registration
statement, and all exhibits to and all material incorporated by reference in
such registration statement.
"Restricted Stock" shall mean (i) all shares of Common Stock
owned now or in the future by the Investors, (ii) the Conversion Stock, whether
owned by the Investors or not, and (iii) any securities issued or issuable with
respect to such securities by way of any stock dividend or stock split, or in
connection with a combination or exchange of shares, recapitalization, merger,
consolidation, reorganization or otherwise; provided that any such share or
other security shall be deemed to be Restricted Stock only if and so long as it
is a Transfer Restricted Security.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal law then in force.
"Securities Purchase and Exchange Agreement" shall mean the
Securities Purchase Agreement dated as of the date hereof by and among the
Company, Citadel and the Investors, as in effect from time to time.
"Series A Preferred Stock" shall mean the Series A Convertible
Preferred Stock, par value $.001 per share, of the Company.
"Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock, par value $.001 per share, of the Company.
"Series C Preferred Stock" shall mean the Series C Convertible
Preferred Stock, par value $.001 per share, of the Company.
"Series D Preferred Stock" shall mean the Series D Convertible
Preferred Stock, par value $.001 per share, of the Company.
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"Stockholders Agreement" shall mean the Second Amended and
Restated Stockholders Agreement of even date herewith by and among the Company
and the Investors, as in effect from time to time.
"Transfer Restricted Security" shall mean a security that has
not been sold to or through a broker, dealer or underwriter in a public
distribution or other public securities transaction or sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Rule 144 promulgated thereunder (or any successor rule).
The foregoing notwithstanding, a security shall remain a Transfer Restricted
Security until (i) all stop transfer instructions or notations and restrictive
legends with respect to such security have been lifted or removed, (ii) the
Holder of such security has received at the expense of the Company an opinion of
counsel to the Company (which counsel and opinion are reasonably satisfactory to
such Holder), to the effect that such shares in such Holder's hands are freely
transferable in any public or private transaction without registration under the
Securities Act (or such Holder has waived receipt of such opinion) and (iii) a
Qualified Public Offering has occurred.
2. Demand Registrations
(a) In-General
At any time on or after the earlier of (i) the consummation of
the initial public offering of the Company's Common Stock which is registered
pursuant to the Securities Act (other than on Form S-8) or (ii) August 1, 2000,
the Holders of a majority of the shares of Conversion Stock constituting
Restricted Stock then outstanding may request that the Company file a
Registration Statement under the Securities Act covering the shares of
Restricted Stock that are the subject of such request. Any such request will be
accompanied by a statement of the range of proposed offering prices for the
offering of such Restricted Stock.
(b) Number of Demand Registrations
The Company shall be obligated to prepare, file and cause to
become effective, pursuant to this Section 2, one Registration Statement in
connection with which the Company will bear all Registration Expenses. If (i)
the Company withdraws a Registration Statement filed pursuant to a Demand
Registration prior to the effectiveness thereof, (ii) the sale of securities to
which a Registration Statement filed pursuant to a Demand Registration applies
is not consummated because of the failure of the Company to comply with the
provisions of Section 5 hereof, or (iii) upon the consummation of a sale of
securities to which a Registration Statement filed pursuant to a Demand
Registration applies, less than 80% of the securities requested to be registered
for sale thereunder is sold, such Registration Statement shall not be counted as
the one Demand Registration in connection with which the Company will bear all
Registration Expenses or otherwise adversely affect such Holder's rights
hereunder.
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(c) Required Thresholds
The Company shall not be obligated to prepare, file and cause
to become effective pursuant to this Section 2 a Registration Statement unless
the proposed aggregate number of shares of Conversion Stock to be included in
such Demand Registration equals the greater of (i) at least 25% of the
outstanding shares of Conversion Stock and (ii) such number of shares, the sale
of which would result in aggregate net proceeds in excess of $3,000,000, based
on the mid-point of the range of offering prices proposed by the Holders making
the request pursuant to Section 2(a).
(d) Participation
The Company shall promptly give written notice to all Holders
of Restricted Stock upon receipt of a request for a Demand Registration pursuant
to Section 2(a) above. The Company shall include in such Demand Registration
such shares of Restricted Stock for which it has received written requests to
register such shares within 30 days after such written notice has been given.
(e) Underwriter's Cutback
If the public offering of Restricted Stock is to be
underwritten and, in the good faith judgment of the managing underwriter, the
inclusion of all the Restricted Stock requested to be registered hereunder would
interfere with the successful marketing of a smaller number of such shares of
Restricted Stock, the number of shares of Restricted Stock to be included shall
be reduced to such smaller number with the participation in such offering to be
pro rata among the Holders of Restricted Stock requesting such registration,
based upon the number of shares of Restricted Stock owned by such Holders.
Any shares that are thereby excluded from the offering shall
be withheld from the market by the Holders thereof for a period (not to begin
more than 30 days prior to the proposed effective date nor continue for more
than 90 days thereafter) that the managing underwriter reasonably determines is
necessary in order to effect the underwritten pubic offering.
The Company and, subject to the requirements of Section 11
hereof, other Holders of applicable securities of the Company may include such
securities in such Registration if, but only if, the managing underwriter
concludes that such inclusion will not interfere with the successful marketing
of all the Restricted Stock requested to be included in such registration.
(f) Managing Underwriter
The managing underwriter or underwriters of any underwritten
public offering covered by a Demand Registration shall be selected by the
Holders of a majority of the shares of Restricted Stock that initiate such
registration, subject to the approval of the Board of Directors, which shall not
be unreasonably withheld.
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3. Piggyback Registrations
(a) Participation
Each time the Company decides to file a registration statement
under the Securities Act (other than on Forms S-4 or S-8 or pursuant to Section
2 hereof) covering the offer and sale by the Company or any of its respective
security holders of any of its securities for money, the Company shall give
written notice thereof to all Holders of Restricted Stock. The Company shall
include in such registration statement such shares of Restricted Stock for which
it has received written requests to register such shares within 30 days after
such written notice has been given. If the registration statement is to cover an
underwritten offering, such Restricted Stock shall be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters.
(b) Underwriter's Cutback
Subject to the requirements of Section 11 hereof, if in the
good faith judgment of the managing underwriter of such offering the inclusion
of all of the shares of Restricted Stock and any other securities requested to
be registered would interfere with the successful marketing of a smaller number
of such shares, then the number of shares of Restricted Stock and other
securities to be included in the offering (except for securities to be issued by
the Company in an offering initiated by the Company) shall be reduced to such
smaller number with the participation in such offering to be in the following
order of priority: (1) first Restricted Stock requested to be included, and (2)
second, any other securities requested to be included. Any necessary allocation
among the Holders of shares within each of the foregoing groups shall be pro
rata among such Holders requesting such registration based upon the number of
shares of Restricted Stock or other securities, as applicable, owned by such
Holders. All shares so excluded from the underwritten public offering shall be
withheld from the market by the Holders thereof for a period (not to begin more
than 30 days prior to the proposed effective date nor continue for more than 90
days thereafter) that the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering.
(c) Registrant Controls
The Company may decline to file a Registration Statement
described in Section 3(a) above after giving notice to any Holder or withdraw
any such Registration Statement after filing and after such notice, but prior to
the effectiveness thereof, provided that such registrant shall promptly notify
each Holder in writing of any such action and provided further that such
registrant shall bear all reasonable expenses incurred by such Holder or
otherwise in connection with such withdrawn Registration Statement.
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4. Hold-Back Agreements
(a) By Holders of Restricted Stock; Wilson
Upon the written request of the managing underwriter of any
underwritten offering of the Company's securities, neither Wilson nor a Holder
of Restricted Stock shall sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any Restricted Stock (other than
those included in such registration) without the prior written consent of such
managing underwriter for a period (not to begin more than 30 days before the
proposed effective date nor continue for more than 90 days thereafter) that such
managing underwriter reasonably determines is necessary in order to effect the
underwritten public offering. In addition, the Company will use its best efforts
to cause each of the officers and directors of the registrant to enter into
substantially similar holdback agreements with such managing underwriter
covering at least the same period. Lawrence R. Wilson does hereby agree, by his
execution hereof, to enter into substantially similar holdback agreements with
such managing underwriter covering at least the same period.
(b) By the Company and Others
The Company agrees:
(1) not to effect any public or private
sale or distribution of its Equity Securities during the 30-day period prior to,
and during the 90-day period after, the effective date of each underwritten
offering made pursuant to a Demand Registration or a Piggyback Registration, if
so requested in writing by the managing underwriter (except as part of such
underwritten offering or pursuant to registrations on Form S-4 or S-8), and
(2) not to issue any Equity Securities other
than for sale in a registered public offering unless each of the Persons to
which such securities are issued has entered a written agreement binding on its
transferees not to effect any public sale or distribution of such securities
during such period, including without limitation a sale pursuant to Rule 144
under the Securities Act (except as part of such underwritten registration, if
and to the extent permitted hereunder).
5. Registration Procedures
If and whenever the Company is required to register Restricted
Stock in a Demand Registration or a Piggyback Registration, the Company will use
its best efforts to effect such registration to permit the sale of such
Restricted Stock in accordance with the intended plan of distribution thereof,
and pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the Commission as soon as
practicable a Registration Statement with respect to such Restricted Stock and
use its best efforts to cause such Registration Statement to become effective
and remain effective until the Restricted Stock covered by such
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Registration Statement has been sold; provided that the registrant shall not be
required to maintain the effectiveness of any Registration Statement not
covering an underwritten public offering for more than 90 days after such
registration statement becomes effective; and further provided that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, the registrant shall furnish to the Holders of the Restricted Stock
covered by such Registration Statement and the underwriters, if any, draft
copies of all such documents proposed to be filed, which documents will be
subject to the review of such Holders and underwriters, and the registrant shall
not file any Registration Statement of amendment thereto or any Prospectus or
any supplement thereto to which the Holders of a majority of the Restricted
Stock covered by such Registration Statement or the underwriters, if any, shall
reasonably object;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement, and such supplements to
the Prospectus, as may be requested by any Holder of Restricted Stock or any
underwriter of Restricted Stock or as may be required by the rules, regulations
or instructions applicable to the registration form used by the registrant or by
the Securities Act or rules and regulations thereunder to keep the Registration
Statement effective until all shares of Restricted Stock covered by such
Registration Statement are sold in accordance with the intended plan of
distribution set forth in such Registration Statement or supplement to the
Prospectus or for such shorter period of time during which such Registration
Statement must be kept effective by the terms of this Agreement;
(c) promptly notify the applicable selling Holders of
Restricted Stock and the managing underwriter, if any, and (if requested by any
such Person) confirm such advice in writing:
(1) when the Prospectus or any supplement or
post-effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become effective,
(2) of any request by the Commission for
amendments or supplements to the Registration Statement, the Prospectus or for
additional information,
(3) of the issuance by the Commission of any
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose,
(4) if at any time the representations and
warranties of the Company contemplated by clause (1) of paragraph (o) below
cease to be accurate in all material respects,
(5) of the receipt by the registrant of any
notification with respect to the suspension of the qualification of the
Restricted Stock for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose, and
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(6) of the existence of any fact which results
in the Registration Statement, the Prospectus or any document incorporated
therein by reference containing a Misstatement;
(d) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at the
earliest possible time;
(e) if requested by the managing underwriter or a Holder of
Restricted Stock being sold in connection with an underwritten offering,
immediately incorporate in a supplement or post-effective amendment such
information as the managing underwriter and the Holders of a majority of the
shares of Restricted Stock being sold agree should be included therein relating
to the sale of the Restricted Stock, including, without limitation, information
with respect to the number of shares of Restricted Stock being sold to
underwriters, the purchase price being paid therefor by such underwriters and
with respect to any other terms of the underwritten offering of the Restricted
Stock to be sold in such offering; and make all required filings of such
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such supplement or post-effective amendment;
(f) promptly prior to the filing of any document which is to
be incorporated by reference into the Registration Statement or the Prospectus
(after initial filing of the Registration Statement) provide copies of such
document to counsel to the selling Holders of Restricted Stock and to the
managing underwriter, if any, and make the registrant's representatives
available for discussion of such document and make such changes in such document
prior to the filing thereof as counsel for such selling Holders or underwriters
may be reasonably request;
(g) furnish to each selling Holder of Restricted Stock and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(h) deliver to each selling Holder of Restricted Stock and the
underwriters, if any, without charge, as many copies of each Prospectus (and
each preliminary prospectus) as such Persons may reasonably request (the Company
hereby consenting to the use of each such Prospectus (or preliminary prospectus)
by each of the selling Holders of Restricted Stock and the underwriters, if any,
in connection with the offering and sale of the Restricted Stock covered by such
Prospectus (or preliminary prospectus));
(i) prior to any public offering of Restricted Stock, register
or qualify or cooperate with the selling Holders of Restricted Stock, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Restricted Stock for offer and sale under
the securities or blue sky laws of such jurisdictions as such selling Holders or
underwriters may designate in writing and do anything else reasonably necessary
or
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advisable to enable the disposition in such jurisdictions of the Restricted
Stock covered by the Registration Statement; provided that the registrant shall
not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
(j) cooperate with the selling Holders of Restricted Stock and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Restricted Stock to be sold and cause such Restricted Stock to be in such
denominations and registered in such names as the managing underwriter may
request at least three business days prior to any sale of Restricted Stock to
the underwriters;
(k) use its best efforts to cause the Restricted Stock covered
by the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the underwriters, if any, to consummate the disposition of
such Restricted Stock;
(l) if the Registration Statement or the Prospectus contains a
Misstatement, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Restricted Stock, the Prospectus will not
contain a Misstatement;
(m) use its best efforts to cause all Restricted Stock covered
by the Registration Statement to be listed on any national securities exchange
or authorized for quotation on the Nasdaq National Market System, if requested
by the Holders of a majority of such Restricted Stock or the managing
underwriter, if any;
(n) provide a CUSIP number for all Restricted Stock not later
than the effective date of the Registration Statement;
(o) enter into such agreements (including an underwriting
agreement) and do anything else reasonably necessary or advisable in order to
expedite or facilitate the disposition of such Restricted Stock, and in such
connection, whether or not the registration is an underwritten registration:
(1) make such representations and warranties to
the Holders of such Restricted Stock and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings;
(2) obtain opinions of counsel to the registrant
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriter, if any, and the
Holders of a majority of the Restricted Stock being sold) addressed to each
selling Holder and the underwriter, if any, covering the matters
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customarily covered in opinions delivered to underwriters in primary
underwritten offerings and such other matters as may be reasonably requested by
such Holders or underwriters;
(3) obtain "cold comfort" letters and updates thereof
from the registrant's independent certified public accountants addressed to the
selling Holders of Restricted Stock and the underwriters, if any, such letter to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters by underwriters in connection with primary underwritten
offerings;
(4) if an underwriting agreement is entered into,
cause the same to include the indemnification and contribution provisions and
procedures of Section 7 hereof with respect to all parties to be indemnified
pursuant to said Section (or, with respect to the indemnification of such
underwriters, such similar indemnification and contribution provisions as such
underwriters shall customarily require); and
(5) deliver such documents and certificates as may
be requested by the Holders of a majority of the Restricted Stock being sold and
the managing underwriter, if any, to evidence compliance with clause (i) above
and with any customary conditions contained in the underwriting agreement or
other agreement entered into by the registrant.
The above shall be done at each closing under such
underwriting or similar agreement or as and to the extent otherwise reasonably
requested by the Holders of a majority of the Restricted Stock being sold;
(p) make available for inspection by representatives of
the Holders of a majority of the Restricted Stock being sold, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant retained by the sellers or any such underwriter, all
financial and other records and pertinent corporate documents and properties of
the registrant, and cause the registrant's officers, directors and employees to
supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with the Registration;
provided that any records, information or documents that are designated by the
registrant in writing as confidential shall be kept confidential by such Persons
unless disclosure of such records, information or documents is required by court
or administrative order;
(q) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders earning statements satisfying the provisions of Section
11(a) of the Securities Act, no later than 45 days after the end of any 12-month
period (or 90 days, if such period is a fiscal year) (x) commencing at the end
of any fiscal quarter in which Restricted Stock are sold to underwriters in an
underwritten offering, or, if not sold to underwriters in such an offering, (y)
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which statements shall
cover said 12-month periods; and
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(r) use its best efforts to cause the Company's management to
participate fully in the sale process, including, without limitation, the
preparation of the Registration Statement and the preparation and presentation
of any "road shows," whether domestic or international, and for so long as
Wilson is employed by the Company he agrees to participate fully in the sale
process, including without limitation, the preparation of the Registration
Statement and the preparation and presentation of any such road shows.
6. Registration Expenses
(a) Demand Registrations
The Company shall bear all Registration Expenses incurred in
connection with one Demand Registration requested by the Holders of Conversion
Stock.
(b) Piggyback Registrations
The Company shall bear all Registration Expenses incurred in
connection with Piggyback Registrations.
(c) Expenses of Registrants
The Company will, in any event, pay its respective internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with any listing
of the securities to be registered on a securities exchange, and the fees and
expenses of any Person, including special experts, retained by the Company.
7. Indemnification
(a) Indemnification by the Company
The Company (the "Indemnifying Party") agrees to indemnify and
hold harmless each Indemnified Holder from and against all Claims arising out of
or based upon any Misstatement or alleged Misstatement, except insofar as such
Misstatement or alleged Misstatement was based upon information furnished in
writing to the registrant by such Indemnified Holder expressly for use in the
document containing such Misstatement or alleged Misstatement. This indemnity
shall not be exclusive and shall be in addition to any liability which the
Company may otherwise have.
The foregoing notwithstanding, the Indemnifying Party shall
not be liable to the extent that any such Claim arises out of or is based upon a
Misstatement or alleged Misstatement made in any preliminary prospectus if (i)
such Indemnified Holder failed to send or deliver a copy of the Prospectus with
or prior to the delivery of written confirmation of the sale of
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Restricted Stock giving rise to such Claim and (ii) the Prospectus would have
corrected such untrue statement or omission.
In addition, the Indemnifying Party shall not be liable to the
extent that any such Claim arises out of or is based upon a Misstatement or
alleged Misstatement in a Prospectus, (x) if such Misstatement or alleged
Misstatement is corrected in an amendment or supplement to such Prospectus and
(y) having previously been furnished by or on behalf of the Indemnifying Party
with copies of the Prospectus as so amended or supplemented, such Indemnified
Holder thereafter fails to deliver such Prospectus as so amended or supplemented
prior to or concurrently with the sale to the person who purchased the
Restricted Stock from such Indemnified Holder and who is asserting such Claim.
The Indemnifying Party shall also indemnify underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in a distribution covered by a Registration Statement, their
officers and directors and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the
Indemnified Holders of Restricted Stock.
(b) Indemnification Procedures
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an Indemnified
Holder in respect of which indemnity may be sought from the Indemnifying Party,
such Indemnified Holder shall promptly notify the Indemnifying Party in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel satisfactory to such Indemnified Holder and the payment of
all expenses.
Such Indemnified Holder shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such separate counsel shall be the expense of such
Indemnified Holder unless (i) the Indemnifying Party has agreed to pay such fees
and expenses, (ii) the Indemnifying Party shall have failed to assume the
defense of such action or proceeding or has failed to employ counsel
satisfactory to such Indemnified Holder in any such action or proceeding or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both such Indemnified Holder and the Indemnifying
Party, and such Indemnified Holder shall have been advised by counsel that there
may be one or more legal defenses available to such Indemnified Holder that are
different from or additional to those available to the Indemnifying Party.
If such Indemnified Holder notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party as permitted by the provisions of the preceding paragraph,
the Indemnifying Party shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Holder. The foregoing
notwithstanding, the Indemnifying Party shall not be liable for the reasonable
fees and expenses
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of more than one separate firm of attorneys at any time for such Indemnified
Holder and any other Indemnified Holders (which firm shall be designated in
writing by such Indemnified Holders) in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances.
The Indemnifying Party shall not be liable for any settlement
of any such action or proceeding effected without its written consent, but if
settled with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the Indemnifying Party agrees to
indemnify and hold harmless such Indemnified Holders from and against any loss
or liability by reason of such settlement or judgment.
(c) Indemnification by Holder of Restricted Stock
Each Holder of Restricted Stock agrees to indemnify and hold
harmless the Company, their respective directors and officers and each Person,
if any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Indemnified Party to such Holder, but only with
respect to information relating to such Holder furnished in writing by such
Holder expressly for use in any Registration Statement, Prospectus or
preliminary prospectus. In no event, however, shall the liability hereunder of
any selling Holder of Restricted Stock be greater than the dollar amount of the
proceeds received (net of underwriting commissions and discounts) by such Holder
upon the sale of the Restricted Stock giving rise to such indemnification
obligation.
In case any action or proceeding shall be brought against the
Company or its directors or officers or any such controlling person, in respect
of which indemnity may be sought against a Holder of Restricted Stock, such
Holder shall have the rights and duties given the Company or its directors of
officers and such controlling person shall have the rights and duties given to
each Holder by Section 7(a) and 7(b) above.
The Company shall be entitled to received indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement.
(d) Contribution
If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under Section 7(a) or Section 7(c) above
(other than by reason of exceptions provided in those Sections) in respect of
any Claims referred to in such Sections, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such Claims in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and of
16
<PAGE> 17
the Indemnified Holder on the other in connection with the statements or
omissions which resulted in such Claims as well as any other relevant equitable
considerations. The amount paid or payable by a party as a result of the Claims
referred to above shall be deemed to include, subject to the limitations set
forth in Section 7(b), any legal or other fees or expenses reasonably incurred
by such party in connection investigating or defending any action or claim.
The relative fault of the Company on the one hand and of the
Indemnified Holder on the other shall be determined by reference to, among other
things, whether the Misstatement or alleged Misstatement related to information
supplied by the Company or by the Indemnified Holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such Misstatement or alleged Misstatement.
The Company and each Holder of Restricted Stock agree that it
would not be just and equitable if contribution pursuant to this Section 7(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7(d), an
Indemnified Holder shall not be required to contribute any amount in excess of
the amount by which (i) the total price (net of underwriting commissions and
discounts) at which the securities that were sold by such Indemnified Holder and
distributed to the public were offered to the public exceeds (ii) the amount of
any damages which such Indemnified Holder has otherwise been required to pay by
reason of such Misstatement.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Exchange Act Reporting Requirements
When it is first legally required to do so, the Company shall
register its Common Stock under Section 12 of the Exchange Act and shall timely
file such information, documents and reports as the Commission may require or
prescribe under Section 13 of the Exchange Act. From and after the effective
date of the first registration statement filed by the Company under the
Securities Act, the Company shall (whether or not it shall then be required to
do so) timely file such information, documents and reports as the Commission may
require or prescribe under Section 13 or 15(d) (whichever is applicable) of the
Exchange Act. In addition, the Company shall take such other measures and file
such other information, documents and reports, as shall hereafter be required by
the Commission as a condition to the availability of Rule 144 under the
Securities Act (or any successor provision) and the use of Form S-3.
Immediately upon becoming subject to the reporting
requirements of either Section 13 or 15(d) of the Exchange Act, the Company
shall forthwith upon request furnish any Holder of applicable Restricted Stock
(i) a written statement by the Company that it has complied with
17
<PAGE> 18
such reporting requirements, (ii) a copy of the most recent annual or quarterly
report of the Company and (iii) such other reports and documents filed by the
Company with the Commission as such Holder may reasonably request in availing
itself of an exemption for the sale of Restricted Stock without registration
under the Securities Act.
The purpose of the foregoing requirements are (x) to enable
any such Holder to comply with the current public information requirements
contained in paragraph (c) of Rule 144 under the Securities Act (or any
successor provision) and (y) to qualify the Company for the use of registration
statements on Form S-3.
9. Requirements for Participation in Underwritten Offerings
No Person may participate in any underwritten offering
pursuant to a Registration hereunder unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Suspension of Sales
Upon receipt of written notice from the Company that a
Registration Statement or Prospectus contains a Misstatement, each Holder of
Restricted Stock shall forthwith discontinue disposition of Restricted Stock
until such Holder has received copies of the supplemented or amended Prospectus
required by Section 5(1) hereof, or until such Holder is advised in writing by
the registrant that the use of the Prospectus may be resumed, and, if so
directed by the registrant, such Holder shall deliver to the registrant (at the
registrant's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Restricted Stock current at
the time of receipt of such notice. In the event the registrant shall give any
such notice, the 90-day period referred to in Section 5(a) hereof shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of
Restricted Stock covered by such Registration Statement either has received the
copies of the supplemented or amended prospectus contemplated by Section 5(1)
hereof or has been advised in writing by the registrant that the use of the
Prospectus may be resumed.
11. Future Registration Rights Agreements
Except for an underwriting agreement between the Company and
one or more professional underwriters of securities, the Company shall not agree
to register any Equity Securities under the Securities Act unless such agreement
specifically provides that:
18
<PAGE> 19
(a) the Holder of such Equity Securities may not
participate in any Demand Registration without the consent of the Holders of a
majority of the shares of the Restricted Stock included in such registration
unless:
(1) the offering of the Restricted Stock is to
be a Firm Commitment Underwritten Offering and the managing underwriter
concludes that the public offering or sale of such Equity Securities would not
interfere with the successful marketing of all Restricted Stock requested to be
sold and
(2) the Holders of Restricted Stock shall have
the right to participate, to the extent they may request, in any registration
statement initiated under a demand registration right exercised by the Holder of
such Equity Securities, except that if the managing underwriter of a public
offering made pursuant to such demand registration limits the number of shares
of Equity Securities to be sold, the participation of the Holders of the
Restricted Stock and the Holders of all other Equity Securities (other than the
Equity Securities held by such Holder of Equity Securities) shall be determined
as set forth in Section 3 hereof;
(b) the holder of such Equity Securities may not
participate in any Piggyback Registration if the sale of Restricted Stock is to
be underwritten unless, if the managing underwriter limits the total number of
shares to be sold, the Holders of such Equity Securities and the Holder of
Restricted Stock are entitled to participate in such underwritten distribution
based on the order of priority set forth in Section 3 hereof, and
(c) all Equity Securities excluded from any Registration
as a result of the foregoing limitations may not be publicly offered or sold for
a period (not to exceed at least 30 days prior to the effective date and 90 days
thereafter) that the managing underwriter reasonably determined is necessary in
order to effect the underwritten public offering of Restricted Stock registered
pursuant to this Agreement.
12. Miscellaneous
(a) Remedies
Each Holder of Restricted Stock, in addition to being entitled
to exercise all rights provided herein, and granted by law, including recovery
of damages, shall be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
19
<PAGE> 20
(b) Agreements; Entire Agreement
The Company shall not on or after the date of this Agreement
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders of Restricted Stock in this Agreement or
otherwise conflicts with the provisions hereof.
Except for the Registration Rights Agreement dated May 3,
1993, the Amended and Restated Registration Rights Agreement dated May 28, 1993
and the Second Amended and Restated Registration Rights Agreement dated October
1, 1993 (collectively, the "Prior Agreements"), the Company has not previously
entered into any agreement with respect to its securities granting any
registration rights to any Person. This Agreement constitutes the entire
agreement among the parties and supersedes any prior understandings, agreements
or representations by or among the parties, written or oral, that may have
related in any way to the subject matter hereof, including, without limitation,
the Prior Agreements.
(c) Amendments and Waivers
The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given unless the
Company has obtained the written consent of the Holders of at least 66? % of the
outstanding shares of Restricted Stock; provided, that for so long as BofA or
BFC holds any Restricted Stock any waiver or amendment that would (i) nullify
the underlying purpose of this Agreement or (ii) adversely affect BFC or BofA,
as the case may be, vis a vis the other Investors on a proportionate basis shall
not be made without the prior written consent of BFC or BofA as applicable. The
foregoing notwithstanding, a waiver or consent to departure from the provisions
hereof that relates exclusively to the rights of Holders of shares of Restricted
Stock whose shares are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect the rights of other Holders of shares of
Restricted Stock may be given by the Holders of a majority of the shares of
Restricted Stock being sold.
(d) Notices
All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder of Restricted Stock, at the
most current address given by such Holder to the Company in accordance with the
provisions hereof, which address initially is, with respect to each Investor,
the address set forth on Schedule A to the Stockholders Agreement; and
(2) if to the Company, by each Investor
initially at its address set forth in the Applicable Agreement and thereafter at
such other address, notice of which is given in accordance with the provisions
hereof, with a copy to Osborn Maledon, P.A., 2929 North
20
<PAGE> 21
Central Avenue, Suite 2100, Phoenix, Arizona 85012-2794, Attention: Michelle M.
Matiski, Esq.
All such notices and communications shall be deemed
to have been duly given at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air courier
guaranteeing overnight delivery. The Company shall promptly provide a list of
the most current addresses of the Holders of Restricted Stock given to it in
accordance with the provisions hereof to any such Holder for the purpose of
enabling such Holder to communicate with other Holders in connection with this
Agreement.
(e) Successors and Assigns
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties, including without
limitation and without the need for an express assignment, subsequent Holders of
Restricted Stock.
(f) Counterparts
This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(g) Table of Contents and Headings
The table of contents and headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Arizona, without regard to any
provision or rule of the laws of the State of Arizona which would otherwise
cause the laws of a jurisdiction other than the State of Arizona to be applied.
(i) Severability
In the event that only one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
21
<PAGE> 22
(j) Forms
All references in this Agreement to particular forms of
registration statements are intended to include all successor forms which are
intended to replace, or to apply to similar transactions as, the forms herein
referenced.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CITADEL COMMUNICATIONS CORPORATION
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
------------------------------------
Lawrence R. Wilson
(for purposes of Section 4(a) only)
------------------------------------
Claire Wilson
(for purposes of Section 4(a) only)
22
<PAGE> 23
INVESTOR SIGNATURE PAGES
BAKER, FENTRESS & COMPANY
By:
---------------------------------
Name:
---------------------------
Title:
---------------------------
ABRY BROADCAST PARTNERS, II, L.P.
By ABRY CAPITAL, L.P.
Its General Partner
By ABRY HOLDINGS, INC.
Its General Partner
By:
----------------------------------
Name:
---------------------------
Title:
--------------------------
ABRY/CITADEL INVESTMENT PARTNERS, L.P.
By: ABRY CAPITAL, L.P.
Its General Partner
By: ABRY HOLDINGS, INC.
Its General Partner
By:
----------------------------------
Name:
---------------------------
Title:
--------------------------
23
<PAGE> 24
OPPENHEIMER & CO., INC.
By:
----------------------------------
Name:
---------------------------
Title:
--------------------------
BANK OF AMERICA ILLINOIS
By:
----------------------------------
Name:
---------------------------
Title:
--------------------------
24
<PAGE> 25
BofA Co-Investors:
*
--------------------------------
Christopher J. Perry
*
--------------------------------
Robert F. Perille
*
--------------------------------
M. Ann O'Brien
*
--------------------------------
Ford S. Bartholow
*
--------------------------------
Jeffrey M. Mann
*
--------------------------------
Matthew W. Clary
*
--------------------------------
Thomas E. Van Pelt, Jr.
*By:
----------------------------
Name:
Attorney-in-Fact
25
<PAGE> 1
Exhibit 10.25
FIRST AMENDMENT TO THIRD AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This FIRST AMENDMENT TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT (this "First Amendment") is made as of December 31, 1996 by and among
Citadel Communications Corporation, a Nevada corporation (the "Company"); The
Endeavour Capital Fund Limited Partnership, an Oregon limited partnership
("Endeavour"); the investors whose names are designated on the Signature Pages
to this First Amendment as "Endeavour Co-Investors" (the "Endeavour
Co-Investors"); the investors whose names are listed on the Investor Signature
Pages (herein referred to collectively as the "Original Investors" and
individually as an "Original Investor") of that certain Third Amended and
Restated Registration Rights Agreement dated as of June 28, 1996 (the
"Registration Rights Agreement") between the Company, the Original Investors
and, with respect to section 4(a) of the Registration Rights Agreement, Lawrence
R. Wilson and Claire Wilson (collectively, "Wilson"); and Wilson. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Registration Rights Agreement.
RECITALS
A. As of June 28, 1996, the Company and the Investors entered into that
certain Securities Purchase and Exchange Agreement (the "Securities Purchase and
Exchange Agreement"). In connection with the execution of the Securities
Purchase and Exchange Agreement, the Company, the Investors and Wilson executed
the Registration Rights Agreement.
B. Endeavour and the Endeavour Co-Investors are the sole owners of all
of the outstanding preferred stock of Deschutes River Broadcasting Inc., an
Oregon corporation ("Deschutes"). As of August 30, 1996, the Company, Citadel
Acquisition Corporation, a Nevada corporation and wholly-owned subsidiary of the
Company ("CAC"), and Deschutes entered into that certain Merger Agreement (the
"Merger Agreement"). As of September 17, 1996, CAC changed its name to Deschutes
License, Inc. ("DLI"), and as of December 18, 1996 DLI assigned its rights under
the Merger Agreement to Deschutes Acquisition Corporation, a Nevada corporation
and wholly-owned subsidiary of the Company ("DAC"). Pursuant to the Merger
Agreement, Deschutes and DAC will merge, with DAC to be the surviving
corporation. In consideration of such merger, Endeavour, the Endeavour
Co-Investors and the holders of the Common Stock of Deschutes will receive Class
A Common Stock, Series E Preferred Stock and/or options to purchase Class A
Common Stock.
C. In order to induce Endeavour and the Endeavour Co-Investors to
permit the transactions contemplated by the Merger Agreement, the Company, the
Original Investors, and Wilson wish to amend the Registration Rights Agreement
to grant registration rights to Endeavour and the Endeavour Co-Investors to the
same extent as the Original Investors under the Registration Rights Agreement.
<PAGE> 2
D. In connection with the transactions contemplated by the Merger
Agreement, the Company, Endeavour, the Endeavour Co-Investors, and certain other
parties have also agreed to enter into the following agreements, each dated as
of the date hereof: that certain First Amendment to Second Amended and Restated
Stockholders Agreement; that certain First Amendment to Securities Purchase and
Exchange Agreement; that certain First Amendment to Amended and Restated Voting
Agreement; and that certain Security Holder Agreement (the "Endeavour Proxy")
(together with this First Amendment, the Merger Agreement, and the transactions
contemplated thereby, the "Contemplated Transactions").
ACCORDINGLY, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this First Amendment agree as follows:
1. Consents and Waivers. The Original Investors hereby consent to this
First Amendment and inclusion of Endeavour and the Endeavour Co-Investors as
"Investors" under the Registration Rights Agreement. Further, Original Investors
waive any rights they may have pursuant to Section 11 of the Registration Rights
Agreement in connection with the Contemplated Transactions.
2. Amendments.
(a) Section 1 of the Registration Rights Agreement is amended by
deleting the definitions of "Additional Preferred Stock" and "Preferred Stock"
and adding the following definitions in appropriate alphabetical order:
"Additional Preferred Stock" shall mean any additional shares of
preferred stock issued by the Company other than the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock.
"Endeavour" shall mean and refer to Endeavour Capital Fund Limited
Partnership, an Oregon limited partnership.
"Endeavour Co-Investors" shall mean and refer, individually and
collectively, to those individuals who are designated on the
Endeavour Signature Page to the First Amendment as the "Endeavour
Co-Investors."
"First Amendment" shall mean that First Amendment to this Agreement
dated as of December 31, 1996 between the Company, the Original
Investors, Endeavour, the Endeavour Co-Investors and Wilson.
"Investor" and "Investors" shall mean those investors whose names
are listed on the Investor Signature Pages of this Agreement,
Endeavour and the Endeavour Co-Investors.
2
<PAGE> 3
"Preferred Stock" shall mean the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Additional Preferred Stock,
collectively.
"Original Investors" shall mean the investors whose names are listed
on the Investor Signature Pages of the Registration Rights Agreement
prior to the execution of the First Amendment.
"Series E Preferred Stock" shall mean the Series E Convertible
Preferred Stock, par value $.001 per share, of the Company.
(b) The parties listed on the Endeavour Signature Page for the
First Amendment to Third Amended and Restated Registration Rights Agreement
attached hereto shall be deemed parties to the Registrations Rights Agreement,
as amended, and are deemed added to the Investor Signature Pages to the
Registration Rights Agreement, as amended.
(c) The following additional Section (k) will be added to
Section 12 of the Registration Rights Agreement:
(k) Incorporation of Recitals. The Recitals set forth
in the First Amendment are incorporated herein.
3. Choice of Law. This First Amendment shall be governed by and
construed in accordance with the internal laws of the State of Arizona, without
regard to any provision or rule of the laws of the State of Arizona which would
otherwise cause the laws of a jurisdiction other than the State of Arizona to be
applied.
4. Counterparts. This First Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
5. Fees and Expenses. The Company shall pay the reasonable legal fees
and expenses of the Original Investors incurred in the preparation of this First
Amendment, review of the documents and agreements in connection with the
transactions described in the Recital hereof and the preparation of additional
documents and agreements related to such transactions.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
3
<PAGE> 4
[SIGNATURE PAGE FOR FIRST AMENDMENT TO THIRD AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT]
CITADEL COMMUNICATIONS CORPORATION
By
------------------------------------
Its
-----------------------------------
------------------------------------
Lawrence R. Wilson
(for purposes of Section 4(a) of
the Registration Rights Agreement only)
------------------------------------
Claire Wilson
(for purposes of Section 4(a) of the
Registration Rights Agreement only)
ABRY BROADCAST PARTNERS II, L.P.
By ABRY CAPITAL, L.P.
Its General partner
By ABRY HOLDINGS, INC.
Its General Partner
By
-------------------------
Its
------------------------
ABRY/CITADEL INVESTMENT PARTNERS, L.P.
By ABRY CAPITAL, L.P.
Its General partner
By ABRY HOLDINGS, INC.
Its General Partner
By
-------------------------
Its
------------------------
4
<PAGE> 5
[SIGNATURE PAGE FOR FIRST AMENDMENT TO THIRD AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT]
BAKER, FENTRESS & COMPANY
By
------------------------------------
Its
-------------------------------
OPPENHEIMER & CO., INC.
By
------------------------------------
Its
-------------------------------
BANK OF AMERICA ILLINOIS
By
------------------------------------
Its
-------------------------------
BOFA CO-INVESTORS:
*
--------------------------------------
Christopher J. Perry
*
--------------------------------------
Robert F. Perille
*
--------------------------------------
M. Ann O'Brien
*
--------------------------------------
Ford S. Bartholow
*
--------------------------------------
Jeffrey M. Mann
*
--------------------------------------
Matthew W. Clary
*
--------------------------------------
Sheryl E. Bartol
*
--------------------------------------
Andrea P. Joselit
* By:
---------------------------------
Name:
Attorney-In-Fact
5
<PAGE> 6
[ENDEAVOUR SIGNATURE PAGE FOR FIRST AMENDMENT TO THIRD AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT]
ENDEAVOUR:
THE ENDEAVOUR CAPITAL FUND LIMITED
PARTNERSHIP
By DVS Management, Inc.
Its General Partner
By
--------------------------------
Its
-------------------------------
ENDEAVOUR CO-INVESTORS:
--------------------------------------
Joseph P. Tennant
THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94
By:
--------------------------------
Richard M. Schafbuch, Trustee
By:
--------------------------------
Susan P. Schafbuch, Trustee
BABSON CAPITAL PARTNERS LIMITED
PARTNERSHIP
By
--------------------------------
Its
-------------------------------
--------------------------------------
Tal Johnson
--------------------------------------
Edward T. Hardy
--------------------------------------
Ralph W. McKee
6
<PAGE> 1
Exhibit 10.26
SECOND AMENDMENT TO THIRD AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This SECOND AMENDMENT TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT (this "Second Amendment") is made as of September 26, 1997, by and
among Citadel Communications Corporation, a Nevada corporation (the "Company");
Philip J. Urso ("Urso"); the investors whose names are designated on the Urso
Signature Page to this Second Amendment as "Urso Co-Investors" (the "Urso
Co-Investors"); The Endeavour Capital Fund Limited Partnership, an Oregon
limited partnership ("Endeavour"); the investors whose names are designated on
the Signature Pages to the First Amendment to Third Amended and Restated
Registration Rights Agreement dated as of December 31, 1996 (the "First
Amendment"), as "Endeavour Co-Investors" (the "Endeavour Co-Investors"); the
investors whose names are listed on the Investor Signature Pages (herein
referred to collectively as the "Original Investors" and individually as an
"Original Investor") of that certain Third Amended and Restated Registration
Rights Agreement dated as of June 28, 1996 (the "Registration Rights Agreement")
between the Company, the Original Investors and, with respect to section 4(a) of
the Registration Rights Agreement, Lawrence R. Wilson and Claire Wilson
(collectively, "Wilson"); and Wilson. Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the
Registration Rights Agreement.
RECITALS
A. As of June 28, 1996, the Company and the Investors entered into that
certain Securities Purchase and Exchange Agreement (the "Securities Purchase and
Exchange Agreement"). In connection with the execution of the Securities
Purchase and Exchange Agreement, the Company, the Investors and Wilson executed
the Registration Rights Agreement.
B. In connection with the execution of the First Amendment, the
Company, the Investors, Wilson, Endeavor and the Endeavour Co-Investors executed
the Registration Rights Agreement, as amended by the First Amendment.
C. Urso and certain Urso Co-Investors are the sole owners of all of the
outstanding stock of Urso Major Broadcasting Company, a Rhode Island corporation
("Urso Major"). As of June 6, 1997, the Company, Citadel, Urso Major, Urso and
certain Urso Co-Investors entered into that certain Merger Agreement (the "Urso
Major Merger Agreement"). Pursuant to the Urso Major Merger Agreement, Urso
Major and Citadel will merge, with Citadel to be the surviving corporation. In
consideration of the Urso Major Merger, Urso and certain Urso Co-Investors will
receive Series F Preferred Stock. Urso and certain Urso Co-Investors are the
sole owners of all of the outstanding equity interests in Bear Broadcasting
Limited Liability Company, a Rhode Island limited liability company ("Bear"). As
of June 6, 1997, the Company, Citadel, Bear, Urso and certain Urso Co-Investors
entered into that certain Merger Agreement (the "Bear Merger Agreement", and
<PAGE> 2
collectively with the Urso Major Merger Agreement, the "Urso Merger
Agreements"). Pursuant to the Bear Merger Agreement, Bear and Citadel will
merge, with Citadel to be the surviving corporation. In consideration of the
Bear Merger, Urso and certain Urso Co-Investors will receive Series F Preferred
Stock.
D. In order to induce Urso and the Urso Co-Investors to consummate the
transactions contemplated by the Urso Merger Agreements, the parties to this
Second Amendment wish to amend the Registration Rights Agreement to grant
registration rights to Urso and the Urso Co-Investors to the same extent as the
Original Investors under the Registration Rights Agreement.
E. In connection with the transactions contemplated by the Urso Merger
Agreements, the Company, Urso, the Urso Co-Investors, and certain other parties
have also agreed to enter into the following agreements, each dated as of the
date hereof: that certain Third Amendment to Second Amended and Restated
Stockholders Agreement; that certain Third Amendment to Securities Purchase and
Exchange Agreement; that certain Second Amendment to Third Amended and Restated
Voting Agreement; and that certain Security Holder Agreement (the "Urso Proxy")
(together with this Second Amendment, the Urso Merger Agreements, and the
transactions contemplated thereby, the "Contemplated Transactions").
ACCORDINGLY, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Second Amendment agree as follows:
1. Consents and Waivers. The Original Investors, Endeavour and
the Endeavour Co-Investors hereby consent to this Second Amendment and inclusion
of Urso and the Urso Co-Investors as "Investors" under the Registration Rights
Agreement. Further, the Original Investors, Endeavour and the Endeavour
Co-Investors waive any rights they may have pursuant to Section 11 of the
Registration Rights Agreement in connection with the Contemplated Transactions.
2. Amendments.
(a) Section 1 of the Registration Rights Agreement is amended
by deleting the definitions of "Additional Preferred Stock" and "Preferred
Stock" and adding the following definitions in appropriate alphabetical order:
"Additional Preferred Stock" shall mean any additional shares
of preferred stock issued by the Company other than the Series
A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock.
"Investor" and "Investors" shall mean those investors whose
names are listed on the Investor Signature Pages of this
Agreement, Endeavour, the Endeavour Co-Investors, Urso and the
Urso Co-Investors.
2
<PAGE> 3
"Original Investors" shall mean the investors whose names are
listed on the Investor Signature Pages of this Agreement prior
to the execution of the First Amendment.
"Preferred Stock" shall mean the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock and Additional Preferred Stock, collectively.
"Second Amendment" shall mean that Second Amendment to this
Agreement dated as of September 26, 1997, among the Company,
the Original Investors, Wilson, Endeavour, the Endeavour
Co-Investors, Urso and the Urso Co-Investors.
"Series F Preferred Stock" shall mean the Series F Convertible
Preferred Stock, par value $.001 per share, of the Company.
"Urso" shall mean and refer Philip J. Urso.
"Urso Co-Investors" shall mean and refer, individually and
collectively, to those individuals who are designated on the
Urso Signature Page to the Second Amendment as the "Urso
Co-Investors."
(b) The parties listed on the Urso Signature Page for the
Second Amendment to Third Amended and Restated Registration Rights Agreement
attached hereto shall be deemed parties to the Registration Rights Agreement, as
amended, and are deemed added to the Investor Signature Pages to the
Registration Rights Agreement, as amended.
(c) The following additional Section (l) will be added to
Section 12 of the Registration Rights Agreement:
(l) Incorporation of Recitals. The Recitals set forth
in the Second Amendment are incorporated herein.
3. Choice of Law. This Second Amendment shall be governed by and
construed in accordance with the internal laws of the State of Arizona, without
regard to any provision or rule of the laws of the State of Arizona which would
otherwise cause the laws of a jurisdiction other than the State of Arizona to be
applied.
4. Counterparts. This Second Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
CITADEL COMMUNICATIONS CORPORATION
By
--------------------------------------
Its
----------------------------------
----------------------------------------
Lawrence R. Wilson
(for purposes of Section 4(a) of the
Registration Rights Agreement only)
----------------------------------------
Claire Wilson
(for purposes of Section 4(a) of the
Registration Rights Agreement only)
ABRY BROADCAST PARTNERS II, L.P.
By ABRY CAPITAL, L.P.
Its General partner
By ABRY HOLDINGS, INC.
Its General Partner
By
--------------------------------
Its
----------------------------
ABRY/CITADEL INVESTMENT PARTNERS, L.P.
By ABRY CAPITAL, L.P.
Its General partner
By ABRY HOLDINGS, INC.
Its General Partner
By
--------------------------------
Its
----------------------------
4
<PAGE> 5
[SIGNATURE PAGE FOR SECOND AMENDMENT TO THIRD AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT]
BAKER, FENTRESS & COMPANY
By
--------------------------------
Its
----------------------------
OPPENHEIMER & CO., INC.
By
--------------------------------
Its
----------------------------
BANK OF AMERICA, NT&SA, a National
Trust and Savings Association
By
--------------------------------
Its
----------------------------
BOFA CO-INVESTORS:
*
----------------------------------
Christopher J. Perry
*
----------------------------------
Robert F. Perille
*
----------------------------------
M. Ann O'Brien
*
----------------------------------
Ford S. Bartholow
*
----------------------------------
Jeffrey M. Mann
*
----------------------------------
Matthew W. Clary
*
----------------------------------
Sheryl E. Bartol
*
----------------------------------
Andrea P. Joselit
* By:
-----------------------------
Name:
Attorney-In-Fact
5
<PAGE> 6
[ENDEAVOUR SIGNATURE PAGE FOR SECOND AMENDMENT TO THIRD
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]
ENDEAVOUR:
THE ENDEAVOUR CAPITAL FUND LIMITED
PARTNERSHIP
By DVS Management, Inc.
Its General Partner
By
------------------------------------
Its
---------------------------------
ENDEAVOUR CO-INVESTORS:
*
------------------------------------------
Joseph P. Tennant
THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94
By *
------------------------------------
Richard M. Schafbuch, Trustee
By *
------------------------------------
Susan P. Schafbuch, Trustee
BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP
By
---------------------------------------
Its
------------------------------------
*
-----------------------------------------
Tal Johnson
*
-----------------------------------------
Edward T. Hardy
*
-----------------------------------------
Ralph W. McKee
* By:
------------------------------------
Name:
Attorney-In-Fact
6
<PAGE> 7
[URSO SIGNATURE PAGE FOR SECOND AMENDMENT TO THIRD AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT]
URSO:
---------------------------------------
Philip J. Urso
URSO CO-INVESTORS:
---------------------------------------
Phillip Norton
---------------------------------------
Richard Poholek
---------------------------------------
Karen Kutniewski
---------------------------------------
Pat Bowen
---------------------------------------
Tom Jenkins
---------------------------------------
Juliet Rice
---------------------------------------
Jeff Thompson
---------------------------------------
M. Linda Urso
---------------------------------------
Mark Urso
7
<PAGE> 1
Exhibit 10.27
THIRD AMENDMENT TO THIRD AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This THIRD AMENDMENT TO THIRD AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT (this "Third Amendment") is made as of October 15, 1997, by and among
Citadel Communications Corporation, a Nevada corporation (the "Company"); the
investors whose names are designated on the Snider Signature Page to this Second
Amendment as "Snider Co-Investors" (the "Snider Co-Investors"); Philip J. Urso
("Urso"); the investors whose names are designated on the Urso Signature Page to
the Second Amendment to Third Amended and Restated Registration Rights Agreement
dated as of September 26, 1997 as "Urso Co-Investors" (the "Urso Co-Investors");
The Endeavour Capital Fund Limited Partnership, an Oregon limited partnership
("Endeavour"); the investors whose names are designated on the Signature Pages
to the First Amendment to Third Amended and Restated Registration Rights
Agreement dated as of December 31, 1996 (the "First Amendment"), as "Endeavour
Co-Investors" (the "Endeavour Co-Investors"); the investors whose names are
listed on the Investor Signature Pages (herein referred to collectively as the
"Original Investors" and individually as an "Original Investor") of that certain
Third Amended and Restated Registration Rights Agreement dated as of June 28,
1996 (the "Registration Rights Agreement") between the Company, the Original
Investors and, with respect to section 4(a) of the Registration Rights
Agreement, Lawrence R. Wilson and Claire Wilson (collectively, "Wilson"); and
Wilson. Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Registration Rights Agreement.
RECITALS
A. As of June 28, 1996, the Company and the Investors entered into that
certain Securities Purchase and Exchange Agreement (the "Securities Purchase and
Exchange Agreement"). In connection with the execution of the Securities
Purchase and Exchange Agreement, the Company, the Investors and Wilson executed
the Registration Rights Agreement.
B. In connection with the execution of the First and Second Amendments,
the Company, the Investors, Wilson, Endeavor, the Endeavour Co-Investors, Urso
and the Urso Co-Investors executed the Registration Rights Agreement, as amended
by the First Amendment and the Second Amendment.
C. The Snider Co-Investors are the respective sole owners of all of the
outstanding stock of Snider Corporation, an Arkansas corporation (owned by T.
Snider and J. Snider), and of Snider Broadcasting Corporation, an Arkansas
corporation (owned by D. Snider and Arnold) (such corporations, collectively,
the "Snider Entities"). As of June 2, 1997, the Company and Citadel entered into
Merger Agreements with the respective Snider Entities and their respective
shareholders (the "Merger Agreements"). Pursuant to the Merger Agreements, each
of the Snider Entities will merge with Citadel, with Citadel to be
<PAGE> 2
the surviving corporation. In consideration of such mergers, the Snider
Co-Investors will receive Series G Preferred Stock.
D. In order to induce the Snider Co-Investors to consummate the
transactions contemplated by the Merger Agreements, the parties to this Third
Amendment wish to amend the Registration Rights Agreement to grant registration
rights to the Snider Co-Investors to the same extent as the Original Investors
under the Registration Rights Agreement.
E. In connection with the transactions contemplated by the Merger
Agreements, the Company, the Snider Co-Investors, and certain other parties have
also agreed to enter into the following agreements, each dated as of the date
hereof: that certain Fourth Amendment to Second Amended and Restated
Stockholders Agreement; that certain Fourth Amendment to Securities Purchase and
Exchange Agreement; and that certain Fourth Amended and Restated Voting
Agreement (together with this Third Amendment, the Merger Agreements, and the
transactions contemplated thereby, the "Contemplated Transactions").
ACCORDINGLY, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Third Amendment agree as follows:
1. Consents and Waivers. The Original Investors, Endeavour, the
Endeavour Co-Investors, Urso and the Urso Co-Investors hereby consent to this
Third Amendment and inclusion of the Snider Co-Investors as "Investors" under
the Registration Rights Agreement. Further, the Original Investors, Endeavour,
the Endeavour Co-Investors, Urso and the Urso Co-Investors waive any rights they
may have pursuant to Section 11 of the Registration Rights Agreement in
connection with the Contemplated Transactions.
2. Amendments.
(a) Section 1 of the Registration Rights Agreement is amended by
deleting the definitions of "Additional Preferred Stock" and "Preferred Stock"
and adding the following definitions in appropriate alphabetical order:
"Additional Preferred Stock" shall mean any additional shares
of preferred stock issued by the Company other than the Series
A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock and Series G Preferred Stock.
"Investor" and "Investors" shall mean those investors whose
names are listed on the Investor Signature Pages of this
Agreement, Endeavour, the Endeavour Co-Investors, Urso, the
Urso Co-Investors and the Snider Co-Investors.
2
<PAGE> 3
"Original Investors" shall mean the investors whose names are
listed on the Investor Signature Pages of this Agreement prior
to the execution of the First Amendment.
"Preferred Stock" shall mean the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock and Additional Preferred
Stock, collectively.
"Series G Preferred Stock" shall mean the Series G Convertible
Preferred Stock, par value $.001 per share, of the Company.
"Snider Co-Investors" shall mean and refer, individually and
collectively, to those individuals who are designated on the
Snider Signature Page to the Third Amendment as the "Snider
Co-Investors."
"Third Amendment" shall mean that Third Amendment to this
Agreement dated as of October 15, 1997, among the Company, the
Original Investors, Wilson, Endeavour, the Endeavour
Co-Investors, Urso, the Urso Co-Investors and the Snider
Co-Investors.
(b) The parties listed on the Snider Signature Page for this
Third Amendment shall be deemed parties to the Registration Rights Agreement, as
amended, and are deemed added to the Investor Signature Pages to the
Registration Rights Agreement, as amended.
(c) The following additional Section (l) will be added to
Section 12 of the Registration Rights Agreement:
(l) Incorporation of Recitals. The Recitals set forth
in the Third Amendment are incorporated herein.
3. Choice of Law. This Third Amendment shall be governed by and
construed in accordance with the internal laws of the State of Arizona, without
regard to any provision or rule of the laws of the State of Arizona which would
otherwise cause the laws of a jurisdiction other than the State of Arizona to be
applied.
4. Counterparts. This Third Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
CITADEL COMMUNICATIONS CORPORATION
By
-----------------------------------
Its
----------------------------------
-------------------------------------
Lawrence R. Wilson
(for purposes of Section 4(a) of the
Registration Rights Agreement only)
-------------------------------------
Claire Wilson
(for purposes of Section 4(a) of the
Registration Rights Agreement only)
ABRY BROADCAST PARTNERS II, L.P.
By ABRY CAPITAL, L.P.
Its General partner
By ABRY HOLDINGS, INC.
Its General Partner
By
-----------------------------
Its
-----------------------------
ABRY/CITADEL INVESTMENT PARTNERS, L.P.
By ABRY CAPITAL, L.P.
Its General Partner
By ABRY HOLDINGS, INC.
Its General Partner
By
-----------------------------
Its
-----------------------------
4
<PAGE> 5
[SIGNATURE PAGE FOR SECOND AMENDMENT TO THIRD AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT]
BAKER, FENTRESS & COMPANY
By
--------------------------------
Its
----------------------------
OPPENHEIMER & CO., INC.
By
--------------------------------
Its
----------------------------
BANK OF AMERICA, NT&SA, a National
Trust and Savings Association
By
--------------------------------
Its
----------------------------
BOFA CO-INVESTORS:
*
----------------------------------
Christopher J. Perry
*
----------------------------------
Robert F. Perille
*
----------------------------------
M. Ann O'Brien
*
----------------------------------
Ford S. Bartholow
*
----------------------------------
Jeffrey M. Mann
*
----------------------------------
Matthew W. Clary
*
----------------------------------
Sheryl E. Bartol
*
----------------------------------
Andrea P. Joselit
* By:
-----------------------------
Name:
Attorney-In-Fact
5
<PAGE> 6
[ENDEAVOUR SIGNATURE PAGE FOR SECOND AMENDMENT TO THIRD
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]
ENDEAVOUR:
THE ENDEAVOUR CAPITAL FUND LIMITED
PARTNERSHIP
By DVS Management, Inc.
Its General Partner
By
------------------------------------
Its
---------------------------------
ENDEAVOUR CO-INVESTORS:
*
------------------------------------------
Joseph P. Tennant
THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94
By *
------------------------------------
Richard M. Schafbuch, Trustee
By *
------------------------------------
Susan P. Schafbuch, Trustee
BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP
By *
---------------------------------------
Its
------------------------------------
*
-----------------------------------------
Tal Johnson
*
-----------------------------------------
Edward T. Hardy
*
-----------------------------------------
Ralph W. McKee
* By:
------------------------------------
Name:
Attorney-In-Fact
6
<PAGE> 7
[URSO SIGNATURE PAGE FOR SECOND AMENDMENT TO THIRD AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT]
URSO:
---------------------------------------
Philip J. Urso
URSO CO-INVESTORS:
*
---------------------------------------
Phillip Norton
*
---------------------------------------
Richard Poholek
*
---------------------------------------
Karen Kutniewski
*
---------------------------------------
Pat Bowen
*
---------------------------------------
Tom Jenkins
*
---------------------------------------
Juliet Rice
*
---------------------------------------
Jeff Thompson
*
---------------------------------------
M. Linda Urso
*
---------------------------------------
Mark Urso
* By:
----------------------------------
Name:
Attorney-In-Fact
7
<PAGE> 8
[SNIDER SIGNATURE PAGE FOR THIRD AMENDMENT TO THIRD AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT]
SNIDER CO-INVESTORS:
-----------------------------------
Ted L. Snider, Sr.
Address: 571 Valley Club Circle
Little Rock, Arkansas 72212
------------------------------------
Jane J. Snider
------------------------------------
Ted L. Snider, Jr.
------------------------------------
Calvin G. Arnold
8
<PAGE> 1
Exhibit 21
Subsidiaries of Citadel Communications Corporation
--------------------------------------------------
Name State of Incorporation
- ---- ----------------------
Citadel Broadcasting Company Nevada
Citadel License, Inc.(1) Nevada
- -----------------------------
(1) Citadel License, Inc. is an indirect subsidiary of Citadel
Communications Corporation and a direct subsidiary of Citadel
Broadcasting Company.
<PAGE> 1
Exhibit 23.2
The Board of Directors
Citadel Communications Corporation:
We consent to the use of our report dated March 26, 1998, except as to note 25
which is as of April 21, 1998, on the consolidated balance sheets of Citadel
Communications Corporation and subsidiaries as of December 31, 1996 and 1997
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997 included herein and to the reference to our firm under the heading
"Experts" in the registration statement.
/s/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
April 24, 1998
<PAGE> 1
Exhibit 23.3
The Board of Directors
Citadel Communications Corporation:
We consent to the use of our report dated February 14, 1997, on the consolidated
balance sheets of Deschutes River Broadcasting, Inc. and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended
included herein and to the reference to our firm under the heading "Experts" in
the registration statement.
/s/ KPMG PEAT MARWICK LLP
Portland, Oregon
April 24, 1998
<PAGE> 1
Exhibit 23.4
The Board of Directors
Citadel Communications Corporation:
We consent to the use of our report dated September 29, 1997, on the balance
sheet of Maranatha Broadcasting Company, Inc.'s Radio Broadcasting Division as
of December 31, 1996 and the related statements of operations and division
equity and cash flows for the year then ended included herein and to the
reference to our firm under the heading "Experts" in the registration statement.
/s/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
April 24, 1998
<PAGE> 1
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Citadel Communications
Corporation on Form S-1 of our report dated March 28, 1997 (relating to the
consolidated financial statements of Tele-Media Broadcasting Company and Its
Partnership Interests) appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
April 24, 1998
<PAGE> 1
EXHIBIT 23.6
ERWIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
900 South Shackleford
Suite 515
Three Financial Centre
Little Rock, AR 72211
(501) 225-5441
(501) 225-6763 (FAX)
The Board of Directors
Citadel Communications Corporation
We consent to the use of our reports dated April 1, 1997 on the balance sheet
of Snider Corporation as of December 31, 1996 and the related statements of
income, stockholders' equity and cash flows for the year then ended and April
23, 1997 on the combined balance sheet of Snider Broadcasting Corporation and
subsidiary and CDB Broadcasting Corporation as of December 31, 1996 and the
related combined statements of operations, stockholders' deficit and cash flows
for the year then ended included herein and to the reference to our firm under
the heading "Experts" in the registration statement.
/s/ Erwin & Company
Little Rock, Arkansas
April 24, 1998
<PAGE> 1
Exhibit 23.7
BALUKOFF LINDSTROM & CO., P.A.
Certified Public Accountants
Wells Fargo Building
877 West Main Street, Suite 805
Boise, Idaho 83702
(208) 344-7150
FAX: (208) 344-7435
We consent to the use of our independent auditors' report on the combined
financial statements of Pacific Northwest Broadcasting Corporation and
Affiliates as of and for the year ended December 31, 1996, and to the reference
to our firm under the heading "Experts" in Form S-1 for Citadel Communications
Corporation.
/s/ BALUKOFF LINDSTROM & CO., P.A.
April 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE THREE MONTHS ENDED MARCH
31, 1998 IN CITADEL COMMUNICATIONS CORPORATION'S FORM S-1 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<EXCHANGE-RATE> 1 1
<CASH> 7,684,991 2,792,033
<SECURITIES> 0 0
<RECEIVABLES> 26,553,079 25,319,558
<ALLOWANCES> (808,942) (1,001,643)
<INVENTORY> 0 0
<CURRENT-ASSETS> 35,926,371 29,650,858
<PP&E> 44,401,228 47,367,337
<DEPRECIATION> (9,158,944) (10,263,865)
<TOTAL-ASSETS> 344,172,294 356,393,240
<CURRENT-LIABILITIES> 13,332,675 10,704,886
<BONDS> 189,427,825 206,351,941
102,009,531 105,364,662
0 0
<COMMON> 1,070 1,079
<OTHER-SE> 16,130,855 7,687,170
<TOTAL-LIABILITY-AND-EQUITY> 0 0
<SALES> 0 0
<TOTAL-REVENUES> 89,803,270<F1> 28,139,204<F1>
<CGS> 0 0
<TOTAL-COSTS> 67,758,787 22,756,895
<OTHER-EXPENSES> 14,661,092 5,946,338
<LOSS-PROVISION> 1,016,375 258,305
<INTEREST-EXPENSE> 12,872,515 4,759,308
<INCOME-PRETAX> (6,054,326) (5,544,284)
<INCOME-TAX> (769,573) (429,406)
<INCOME-CONTINUING> (5,284,753) (5,114,878)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,284,753) (5,114,878)
<EPS-PRIMARY> (11.17) (8.09)
<EPS-DILUTED> (11.17) (8.09)
<FN>
<F1>Comprised of net revenues (gross revenues net of agency commissions).
</FN>
</TABLE>
