<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 31, 1999
---------------
Citadel Communications Corporation
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada
----------------------------------------------
(State of Other Jurisdiction of Incorporation)
000-24515 86-0748219
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
City Center West, Suite 400
7201 West Lake Mead Boulevard
Las Vegas, Nevada 89128
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(702) 804-5200
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
This report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are based largely on current expectations and projections about future events
and financial trends affecting Citadel Communications Corporation's business.
The words intends, believes and similar words are intended to identify
forward-looking statements. The forward-looking statements in this report are
subject to risks, uncertainties and assumptions including, among other things:
o the realization of Citadel Communications' business strategy,
o general economic and business conditions, both nationally and in
Citadel Communications' radio markets,
o Citadel Communications' expectations and estimates concerning future
financial performance, financing plans and the impact of competition,
o anticipated trends in Citadel Communications' industry, and
o the impact of current or pending legislation and regulation and
antitrust considerations.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this report might not transpire. Citadel
Communications undertakes no obligation to publicly update or revise any
forward-looking statements because of new information, future events or
otherwise.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 31, 1999, Citadel Communications Corporation's subsidiary,
Citadel Broadcasting Company, completed its acquisition of all of the issued and
outstanding shares of capital stock of Fuller-Jeffrey Broadcasting Companies,
Inc. from Robert F. Fuller and Joseph N. Jeffrey, Jr., the two former
stockholders of Fuller-Jeffrey Broadcasting. At the time of the closing,
Fuller-Jeffrey Broadcasting was, directly or indirectly through its
subsidiaries, the licensee of and the operator of radio stations WOKQ-FM,
WXBB-FM, WPKQ-FM and WXBP-FM serving the Portsmouth/Dover/Rochester, New
Hampshire market and WBLM-FM, WCYI-FM, WCYY-FM, WHOM-FM, WJBQ-FM and WCLZ-FM
serving the Portland, Maine market. Citadel Communications intends to continue
operating these stations through Citadel Broadcasting. Immediately following the
closing, Fuller-Jeffrey Broadcasting and its subsidiaries were merged into
Citadel Broadcasting.
The aggregate purchase price was approximately $63.5 million, which
amount includes the repayment of approximately $16.4 million of indebtedness
of Fuller-Jeffrey Broadcasting, but does not include approximately $1.8 million
payable over a seven-
2
<PAGE> 3
year period related to a consulting and noncompetition agreement entered into in
connection with the acquisition. Of the purchase price, approximately
$6.1 million was paid using proceeds from the June 1999 public offering of
common stock of Citadel Communications, and the balance was borrowed under
Citadel Broadcasting's credit facility with FINOVA Capital Corporation, as
administrative agent, and FINOVA Capital Corporation, BankBoston, N.A., The
Bank of New York, Nationsbank of Texas, N.A. and Union Bank of California, N.A.,
as lenders.
The parties completed this transaction prior to receipt of a final
order from the Federal Communications Commission. Until the order becomes final,
third parties may file a request for reconsideration or judicial review or the
FCC may reconsider the initial grant on its own motion. Such action could expose
the parties to a modification or set aside of the initial approval. There can be
no assurance that a modification or set aside will not occur.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. The following financial statements are included
pursuant to Item 7(a):
FULLER-JEFFREY BROADCASTING COMPANIES, INC. AND SUBSIDIARIES
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1998 and
June 30, 1999 (unaudited)
Consolidated Statements of Operations for the year ended December 31, 1998 and
the six months ended June 30, 1998 and 1999 (unaudited)
Consolidated Statements of Stockholders' Deficiency for the year ended
December 31, 1998
Consolidated Statements of Cash Flows for the year ended December 31, 1998 and
the six months ended June 30, 1998 and 1999 (unaudited)
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information. The following pro forma financial
information is included herein pursuant to Item 7(b):
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1999
3
<PAGE> 4
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six
months ended June 30, 1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
twelve months ended December 31, 1998
(c) Exhibits. The following exhibits are filed as part of this report:
2.1 Stock Purchase Agreement dated April 30, 1999 by and between Robert F.
Fuller and Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.1 to Citadel Broadcasting Company's Current Report on Form
8-K, date of earliest event reported - August 31, 1999).
2.2 Stock Purchase Agreement dated April 30, 1999 by and between Joseph N.
Jeffrey, Jr. and Citadel Broadcasting Company (incorporated by
reference to Exhibit 2.2 to Citadel Broadcasting Company's Current
Report on Form 8-K, date of earliest event reported - August 31, 1999).
23.1 Consent of KPMG LLP.
4
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Fuller-Jeffrey Broadcasting Companies, Inc.:
We have audited the accompanying consolidated balance sheet of
Fuller-Jeffrey Broadcasting Companies, Inc. and subsidiaries (the Company) as of
December 31, 1998, and the related consolidated statements of operations,
stockholders' deficiency, and cash flows for the year 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 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Fuller-Jeffrey Broadcasting Companies, Inc. and subsidiaries as of December 31,
1998, and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ KPMG LLP
April 7, 1999, except as to note 11,
which is as of August 31, 1999
5
<PAGE> 6
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS (NOTE 4)
Current assets:
Cash...................................................... $ 588,155 631,064
Receivables:
Accounts receivable, net of allowance for doubtful
accounts of $192,000 in 1998 and $209,793 as of June
30, 1999.............................................. 2,501,189 2,908,396
Other.................................................. 248,342 84,795
------------ -----------
Total receivables................................. 2,749,531 2,993,191
Prepaid expenses.......................................... 220,547 214,456
Deferred tax assets (note 6).............................. 270,856 227,624
------------ -----------
Total current assets.............................. 3,829,089 4,066,335
------------ -----------
Property, plant, and equipment:
Land and improvements..................................... 660,597 660,597
Buildings and improvements................................ 870,394 931,437
Equipment, antenna systems and furnishings................ 5,635,500 5,838,855
Construction in progress.................................. 746,940 1,726,894
------------ -----------
7,913,431 9,157,783
Less accumulated depreciation and amortization............ (3,699,952) (3,958,053)
------------ -----------
Net property, plant and equipment................. 4,213,479 5,199,730
------------ -----------
Other assets:
Due from officers, stockholders and employees............. 55,000 35,000
Deposits and other assets................................. 345,747 440,136
Intangible assets, net (notes 2 and 8).................... 5,700,247 5,468,163
Deferred tax assets (note 6).............................. 841,707 491,197
------------ -----------
$ 14,985,269 15,700,561
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current installments of long-term debt (note 4)........... $ 1,158,822 1,106,455
Accounts payable.......................................... 668,643 616,608
Due to related parties (note 5)........................... 74,827 254,827
Deferred revenue (note 3)................................. 450,000 300,000
Accrued expenses:
Salaries and other..................................... 652,941 718,876
Interest............................................... 65,333 79,333
Income tax payable........................................ -- 211,148
------------ -----------
Total current liabilities......................... 3,070,566 3,287,247
Long-term debt (note 4)..................................... 14,408,918 14,453,869
Due to related parties (note 5)............................. 487,156 281,216
Deferred revenue (note 3)................................... 500,000 350,000
------------ -----------
Total liabilities................................. 18,466,640 18,372,332
------------ -----------
Stockholders' deficit:
Common stock, par value $1 per share, authorized 100,000
shares; issued and outstanding 45,000 shares (note
10).................................................... 45,000 45,000
Retained deficit.......................................... (2,526,371) (1,716,771)
------------ -----------
(2,481,371) (1,671,771)
Less treasury stock, 15,000 shares at cost................ (1,000,000) (1,000,000)
------------ -----------
Total stockholders' deficiency.............................. (3,481,371) (2,671,771)
Commitments and contingencies (notes 7, 9 and 11)
------------ -----------
$ 14,985,269 15,700,561
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue:
Local sales....................................... $11,625,852 5,382,890 6,255,845
National sales.................................... 2,404,837 1,087,949 1,355,331
Other income...................................... 298,911 73,916 50,702
----------- ---------- ----------
14,329,600 6,544,755 7,661,878
Less agency commissions........................... 1,884,123 862,971 957,913
----------- ---------- ----------
Net revenue excluding trade revenue............ 12,445,477 5,681,784 6,703,965
----------- ---------- ----------
Operating expenses:
Technical......................................... 546,576 251,207 292,700
Programming....................................... 1,819,215 874,275 1,009,224
Promotional....................................... 506,229 226,339 225,958
Selling........................................... 2,085,844 903,417 1,233,178
General and administrative........................ 3,469,174 1,575,379 1,702,497
----------- ---------- ----------
8,427,038 3,830,617 4,463,557
----------- ---------- ----------
Gross margin from broadcasting activities,
excluding trades............................. 4,018,439 1,851,167 2,240,408
----------- ---------- ----------
Other operating expense (income):
Depreciation and amortization (note 2)............ 1,006,148 377,181 454,289
Noncompete expense (note 2)....................... 142,143 53,790 43,126
Noncompete income................................. (626,667) (313,333) (300,000)
----------- ---------- ----------
Other operating expense, net................... 521,624 117,638 197,415
----------- ---------- ----------
Net operating income before trades............. 3,496,815 1,733,529 2,042,993
----------- ---------- ----------
Trade revenue....................................... 1,196,257 541,808 597,603
Trade expense....................................... (1,093,491) (466,181) (551,233)
----------- ---------- ----------
Net trade revenue.............................. 102,766 75,627 46,370
----------- ---------- ----------
Net operating income........................... 3,599,581 1,809,156 2,089,363
Interest expense (note 4)........................... (1,399,236) (731,061) (630,819)
(Loss) gain on sale of assets....................... -- (2,779) 140,000
Other financing costs............................... (296,000) -- (161,634)
----------- ---------- ----------
Income before income taxes..................... 1,904,345 1,075,316 1,436,910
Income tax (benefit) expense (note 6)............... (54,765) 81,231 627,310
----------- ---------- ----------
Net income..................................... $ 1,959,110 994,085 809,600
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON RETAINED TREASURY
STOCK DEFICIT STOCK TOTAL
------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1997........... 45,000 (4,485,481) (1,000,000) (5,440,481)
Net income for year................ -- 1,959,110 -- 1,959,110
------- ----------- ----------- -----------
Balance, December 31, 1998........... $45,000 (2,526,371) (1,000,000) (3,481,371)
======= =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 9
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 1,959,110 994,085 809,600
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............. 1,006,148 377,181 454,289
Provision for bad debts................... 107,575 61,026 45,819
Noncompete income......................... (626,667) (313,333) (300,000)
Noncompete expense........................ 142,143 53,790 43,126
Net trade revenue......................... (102,766) (75,627) (46,370)
Loss (gain) on sale of assets............. -- 2,779 (140,000)
Decrease (increase) in deferred tax
assets................................. (173,423) 65,411 393,742
Change in assets and liabilities net of
effect of station sales:
Receivables............................ (430,318) 31,593 (243,109)
Prepaid expenses and other assets...... (117,831) (362,798) (95,528)
Accounts payable....................... 151,843 (361,812) (52,035)
Accrued expenses....................... (66,520) (183,366) 79,935
Income tax payable..................... -- -- 211,148
----------- --------- -----------
Total adjustments................... (109,816) (705,156) 351,017
----------- --------- -----------
Net cash provided by operating
activities........................ 1,849,294 288,929 1,160,617
----------- --------- -----------
Cash flows from investing activities:
Capital expenditures........................... (1,188,926) (338,603) (1,244,352)
Loans collected from officers and employees.... -- -- 20,000
Loans made to officers and employees........... (40,000) (40,000) --
Purchases of stations.......................... (3,341,580) -- --
Deposit for pending station acquisition........ (10,000) -- --
Costs incurred for non-compete agreement....... (1,000) -- --
Proceeds from sale of assets................... -- -- 140,000
----------- --------- -----------
Net cash used in investing
activities........................ (4,581,506) (378,603) (1,084,352)
----------- --------- -----------
</TABLE>
9
<PAGE> 10
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from notes payable.................... $15,400,000 -- 600,000
Pay-off of debt upon refinancing............... (13,122,500) -- --
Payments of principal on notes payable......... (375,087) (540,374) (607,416)
Payments of principal on related party
borrowings.................................. (69,057) (23,804) (25,940)
Payment of loan fees........................... (343,973) -- --
----------- --------- ---------
Net cash provided by (used in)
financing activities.............. 1,489,383 (564,178) (33,356)
----------- --------- ---------
Net (decrease) increase in cash.................. (1,242,829) (653,852) 42,909
Cash, beginning of period........................ 1,830,984 1,830,984 588,155
----------- --------- ---------
Cash, end of period.............................. $ 588,155 1,177,132 631,064
=========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest.................................. $ 1,508,992 641,279 599,055
=========== ========= =========
Income taxes.............................. $ 102,032 16,000 800
=========== ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Fixed assets acquired through advertising
trades.................................... $ 44,469 -- --
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE> 11
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
(The information as of June 30, 1999 and for the
Six Months Ended June 30, 1998 and 1999 is Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Fuller-Jeffrey Broadcasting Companies,
Inc. and its wholly owned subsidiaries (the Company) conform with generally
accepted accounting principles and prevailing practices within the broadcasting
industry. In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and revenue and
expense for the period. Actual results could differ from those estimates applied
in the preparation of the consolidated financial statements. The following are
descriptions of the more significant accounting and reporting policies.
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Fuller-Jeffrey
Broadcasting Companies, Inc. and its wholly owned subsidiaries. The
Company's subsidiaries are radio stations in Dover, New Hampshire
(WOKQ/WXBB/WXBP/WPKQ), and Portland, Maine (WBLM/WCYY/WCYI/WCLZ/WHOM/
WJBQ/WJAB) and a sign production and design company, Sign Pro, in Portland,
Maine. All significant intercompany balances and transactions have been
eliminated in consolidation.
(b) INTERIM FINANCIAL STATEMENTS
The accompanying consolidated balance sheet at June 30, 1999 and the
consolidated statements of operations and cash flows for the six month
periods ended June 30, 1998 and 1999, are unaudited and have been prepared
on the same basis as the audited financial statements included herein. In
the opinion of management, such unaudited financial statements include all
adjustments necessary to present fairly the information set forth therein,
which consist solely of normal recurring adjustments. The results of
operations for such interim periods are not necessarily indicative of
results for the full year.
(c) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
by the straight-line method over the estimated useful lives of the
respective assets, which range from 5 to 25 years.
(d) INTANGIBLE ASSETS
The excess of total consideration paid for acquired radio stations over the
amounts assigned to identifiable assets is recorded as goodwill and
amortized on a straight-line basis over the estimated useful lives of the
respective assets, which range from 15 to 40 years.
11
<PAGE> 12
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Other intangibles consist of FCC licenses, lease rights, program formats,
noncompete agreements, and other items. These costs are being amortized by
the straight-line method over their respective useful lives, which range
from 3 to 40 years.
(e) DEFERRED REVENUE
In accordance with certain station sale agreements, the Company has entered
into agreements not to compete with the new owners. The income from
noncompete agreements is deferred and recognized by the straight-line method
over the life of the respective agreement.
(f) INCOME TAXES
The Company accounts for income taxes under the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. 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.
(g) TRADE REVENUES AND EXPENSES
In the course of business the Company receives trades in exchange for
advertising time, some of which are given to various employees and
executives. These trades are recorded as revenue when placed on the air and
as expense when goods and services are used and, when given to employees,
are included in the employees' annual earnings at the fair market value of
the item.
(h) IMPAIRMENT OF LONG-LIVED ASSETS
The Company applies the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of. This statement requires that
long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net
cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount which the carrying value of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of carrying
amount or fair value less costs to sell.
12
<PAGE> 13
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) INTANGIBLE ASSETS
Intangible assets at December 31, 1998 consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
LIFE
(IN YEARS)
----------
<S> <C> <C>
Licenses and goodwill.......................... 15 to 40 $5,717,602
Lease rights................................... 15 to 30 175,000
Noncompete agreements.......................... 3 to 6 568,530
Other.......................................... 4 to 40 298,425
----------
6,759,557
Less accumulated amortization.................. 1,059,310
----------
$5,700,247
==========
</TABLE>
Other intangible assets include costs relating to acquisitions. Amortization
expense related to intangible assets totaled $255,520 for the year ended
December 31, 1998, and $117,096 and $188,958 for the six months ended June 30,
1998 and 1999 (unaudited), respectively, and is included in depreciation and
amortization expense in the accompanying consolidated statements of operations.
Noncompete expense totaled $142,143 for the year ended December 31, 1998, and
$53,790 and $43,126 for the six months ended June 30, 1998 and 1999 (unaudited),
respectively.
(3) DEFERRED REVENUE
The income from noncompete agreements has been deferred and will be recognized
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------
<S> <C>
1999.................................................... $450,000
2000.................................................... 300,000
2001.................................................... 200,000
--------
$950,000
========
</TABLE>
(4) LONG-TERM DEBT
Long-term debt at December 31, 1998 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Term note (a)........................................... $15,140,000
Equipment notes payable (b)............................. 29,554
Other (c)............................................... 398,186
-----------
15,567,740
Less current installments............................... 1,158,822
-----------
$14,408,918
===========
</TABLE>
13
<PAGE> 14
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(a) On September 28, 1998, the Company entered into a debt agreement with a
new lender to refinance the term notes from the prior year. The term
loan provides for an $18,000,000 facility with $15,140,000 outstanding
and an additional $2,860,000 credit available. The terms call for
quarterly principal and interest payments at 7.63% per annum, maturing
in September, 2008. Substantially all assets of the Company have been
pledged as collateral to secure the term note. The Company was in
compliance with all debt covenants as of December 31, 1998.
(b) Equipment notes payable consist of various notes and capital leases on
tangible property and equipment with interest rates ranging from 8.5%
to 18.0% per annum. Such notes and leases mature at varying dates
through August 2000 and are secured by equipment.
Capitalized lease obligations total $29,554 at December 31, 1998. The
book value of equipment under capital leases is $37,104. Depreciation
expense related to capital leases is included in depreciation and
amortization in the accompanying statements of operations.
(c) On October 3, 1996, the Company entered into a consulting and
noncompete agreement whereby the seller of a station will provide
consulting services to the Company related to radio stations acquired
during 1996, and will not compete with the Company during a period of
six years. The contract payable will be fully paid off on October 3,
1999. The Company has issued a note to the seller in exchange for this
consulting and noncompete agreement.
During August 1996, the Company entered into a bonus agreement whereby
a former station owner would receive $350,000 upon the Company's sale
of the station. Principal and accrued interest at 8% are due on October
15, 2001.
The aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
DECEMBER 31:
- ------------
<S> <C>
1999.................................................... $ 1,158,822
2000.................................................... 1,186,581
2001.................................................... 1,619,045
2002.................................................... 1,368,678
2003.................................................... 1,476,135
Thereafter.............................................. 8,758,479
-----------
$15,567,740
===========
</TABLE>
14
<PAGE> 15
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest expense is comprised of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Term loan............................... $1,179,169 587,776 572,287
Subordinated note....................... 90,000 60,000 --
Other................................... 130,067 83,285 58,532
---------- -------- --------
$1,399,236 731,061 630,819
========== ======== ========
</TABLE>
(5) RELATED PARTIES
Amounts due to related parties include the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Notes payable to former stockholders (a)............. $381,983 356,043
Notes payable to former station owner (b)............ 180,000 180,000
-------- --------
561,983 536,043
Less current installments............................ 74,827 254,827
-------- --------
Due to related parties, excluding current
installments....................................... $487,156 281,216
======== ========
</TABLE>
(a) The notes payable to former stockholders represent two notes owed in
connection with the Company's exercise of its option to acquire all the
common shares owned by such stockholders. The first note bears interest
at 10% per annum and provides for equal monthly installments through
December 2000. However, the Company has the option to defer four
monthly payments in any one note year. During 1997 and 1998, the
Company exercised this option and deferred four monthly payments.
The second note bears interest at 10% per annum and provides for equal
monthly installments through January 2006.
(b) The note to a former station owner bears interest at the rate of 10%
per annum payable monthly with the principal due in January 2000.
15
<PAGE> 16
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of amounts due to related parties are as follows:
<TABLE>
<CAPTION>
DECEMBER 31:
- ------------
<S> <C>
1999.................................................... $ 74,827
2000.................................................... 255,156
2001.................................................... 38,534
2002.................................................... 42,569
2003.................................................... 47,027
Thereafter.............................................. 103,870
--------
$561,983
========
</TABLE>
(6) INCOME TAXES
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
Year ended December 31, 1998:
Federal..................................... $ 23,400 581,973 605,373
State....................................... 95,258 (755,396) (660,138)
-------- -------- --------
$118,658 (173,423) (54,765)
======== ======== ========
Six months ended June 30, 1998 (unaudited):
Federal..................................... $ -- 447,885 447,885
State....................................... 15,820 (382,474) (366,654)
-------- -------- --------
$ 15,820 65,411 81,231
======== ======== ========
Six months ended June 30, 1999 (unaudited):
Federal..................................... $183,444 302,458 485,902
State....................................... 50,124 91,284 141,408
-------- -------- --------
$233,568 393,742 627,310
======== ======== ========
</TABLE>
At December 31, 1998, the Company has net federal and state operating loss
carryforwards for financial and tax reporting purposes as follows:
<TABLE>
<S> <C>
Federal............................................ $ 725,000
State.............................................. $4,000,000
</TABLE>
These carryforwards expire at various times through 2017.
Temporary differences whose tax effects give rise to significant portions of
deferred tax assets and deferred tax liabilities include net operating loss
carryforwards; income from noncompete agreements that was recognized in the year
of sale for tax purposes but is being deferred and amortized for financial
reporting purposes; provisions for bad debts and amortization which
16
<PAGE> 17
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
are not deductible for income tax purposes; and differences between the
depreciation methods used for tax purposes and financial reporting purposes.
<TABLE>
<CAPTION>
TOTAL
CURRENT NONCURRENT DEFERRED
DEFERRED DEFERRED TAXES
-------- ---------- ---------
<S> <C> <C> <C>
December 31, 1998:
Deferred tax assets:
Federal................................ $236,131 1,304,269 1,540,400
State.................................. 34,725 659,892 694,617
-------- --------- ---------
Total deferred tax assets............ 270,856 1,964,161 2,235,017
Valuation allowance.................. -- (440,000) (440,000)
-------- --------- ---------
Total deferred tax assets............ 270,856 1,524,161 1,795,017
Deferred tax liabilities:
Federal................................ -- (590,396) (590,396)
State.................................. -- (92,058) (92,058)
-------- --------- ---------
Total deferred tax liabilities....... -- (682,454) (682,454)
-------- --------- ---------
Net deferred tax assets.............. $270,856 841,707 1,112,563
======== ========= =========
</TABLE>
Management believes that a valuation allowance of $440,000 for deferred tax
assets as of December 31, 1998 is adequate to reduce the deferred tax assets to
an amount that will more likely than not be realized. The net change in the
total valuation allowance was a decrease of $860,000 for the year ended December
31, 1998. A benefit of approximately $570,000 related to net operating loss
carryforwards is included in income tax expense for the year ended December 31,
1998.
(7) RETIREMENT PLANS
The Company has a nonqualified retirement agreement with a former
officer/stockholder which provides for annual payments of $25,000 for eighteen
years. The annual payments are expensed as incurred and will be made through
2005.
The Company maintains an Employee Savings 401(k) plan which covers all eligible
employees who have completed six months of service and have attained the age of
18. Company contributions are discretionary. The Company contributions totaled
$44,000 for the year ended December 31, 1998, and $23,626 and $27,515 for the
six months ended June 30, 1998 and 1999 (unaudited), respectively.
(8) SALES AND ACQUISITIONS OF STATION PROPERTIES
On September 28, 1998, the Company purchased the assets of existing AM/FM
stations, WCLZ-AM and WCLZ-FM. The net purchase price of the assets was
approximately $3,078,000 and included land, a building, tower/antenna, various
equipment, furniture and the FCC license. Also included in the purchase price
was a $1,000 one-year noncompete agreement. The financing for this purchase was
a component of the new debt agreement described in Note 4.
17
<PAGE> 18
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In September, 1997, the Company purchased the assets of an existing FM station,
WXBP, which consisted of a transmitter, antenna, license and equipment. The
purchase price of the assets was approximately $850,000. In addition to the
purchase price, the Company paid $150,000 in exchange for the seller's promise
not to compete with the Company for three years. The noncompete agreement has
been included in intangibles in the accompanying consolidated balance sheets.
(9) COMMITMENTS AND CONTINGENCIES
The Company leases, under operating leases, certain real property and equipment
with lease terms from one to thirty-nine years, with extensions available for
successive one-year periods. Rental expense amounted to $356,725 for the year
ended December 31, 1998, and $178,362 and $169,898 for the six months ended June
30, 1998 and 1999 (unaudited), respectively.
The following is a schedule by year of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year:
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------
<S> <C>
1999.................................................... $ 339,796
2000.................................................... 309,698
2001.................................................... 237,766
2002.................................................... 224,631
2003.................................................... 214,083
Thereafter.............................................. 1,766,373
----------
$3,092,347
==========
</TABLE>
(10) STOCK OPTIONS
During 1990, the Company adopted a nonqualified stock option agreement to grant
stock options to certain key employees. Under the agreement, 12,859 shares were
available for grant. In 1990, options to purchase 12,859 shares were granted at
an exercise price of $10 per share. The options are exercisable upon grant, and
expire 10 years thereafter. No options were granted, exercised, or expired
during 1998 or for the six months ended June 30, 1999.
(11) SUBSEQUENT EVENTS
On April 30, 1999 the two stockholders of the Company signed definitive stock
purchase agreements with Citadel Broadcasting Company. In connection with this
transaction, Citadel Broadcasting Company acquired all of the outstanding
stock of the Company on August 31, 1999.
18
<PAGE> 19
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements reflect the results of operations and balance sheet of Citadel
Communications Corporation after giving effect to:
(1) the following completed transactions (collectively, the "Completed
Transactions"):
o the January 2, 1998 acquisition of WEMR-FM and
WEMR-AM serving the Wilkes/Barre-Scranton market for
the purchase price of approximately $0.8 million and
the March 26, 1998 acquisition of WCTP-FM, WCTD-FM
and WKJN-AM serving the Wilkes/Barre-Scranton market
for the purchase price of approximately $6.0 million
(collectively, the "Wilkes/Barre Scranton
Acquisitions"),
o the February 12, 1998 acquisition of Pacific
Northwest Broadcasting Corporation which owned
KQFC-FM, KKGL-FM and KBOI-AM in Boise for the
purchase price of approximately $14.0 million and the
April 21, 1998 acquisition of KIZN-FM and KZMG-FM in
Boise for the purchase price of approximately $14.5
million (collectively, the "Boise Acquisition"),
o the November 17, 1998 acquisition of KAAY-AM in
Little Rock for the purchase price of approximately
$5.1 million,
o the February 9, 1999 acquisition of WKQZ-FM, WYLZ-FM,
WILZ-FM, WIOG-FM, WGER-FM and WSGW-AM in Saginaw/Bay
City for the purchase price of approximately $35.0
million (the "Saginaw/Bay City Acquisition"),
o the February 17, 1999 acquisition of WHYL-FM and
WHYL-AM in Harrisburg/Carlisle for the purchase price
of approximately $4.5 million (the "Carlisle
Acquisition"),
o the March 17, 1999 acquisition of Citywide
Communications, Inc., which owned KQXL-FM, WEMX-FM,
WCAC-FM, WXOK-AM and WIBR-AM serving the Baton Rouge
market and KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM
serving the Lafayette market for the purchase price
of approximately $31.5 million (the "Baton
Rouge/Lafayette Acquisition"),
19
<PAGE> 20
o the April 30, 1999 acquisition of KSPZ-FM serving the
Colorado Springs market in exchange for KKLI-FM in
Colorado Springs, the April 30, 1999 acquisition of
KVOR-AM and KTWK-AM serving the Colorado Springs
market and KEYF-FM and KEYF-AM serving the Spokane
market for the purchase price of approximately $10.0
million and the April 30, 1999 termination of a joint
sales agreement under which Citadel Communications
operated certain other radio stations in Colorado
Springs and in Spokane (collectively, the "Capstar
Transactions"),
o the June 30, 1999 acquisition of WSSX-FM, WWWZ-FM,
WMGL-FM, WSUY-FM, WNKT-FM, WTMA-AM, WTMZ-AM and
WXTC-AM in Charleston, WHWK-FM, WYOS-FM, WAAL-FM,
WNBF-AM and WKOP-AM in Binghamton, WMDH-FM and
WMDH-AM in Muncie and WWKI-FM in Kokomo for the
purchase price of approximately $77.0 million (the
"Charleston/Binghamton/Muncie/Kokomo Acquisition"),
o the August 31, 1999 acquisition of Fuller-Jeffrey
Broadcasting Companies, Inc. which owned WOKQ-FM,
WPKQ-FM, WXBB-FM and WXBP-FM serving the
Portsmouth/Dover/Rochester market and WBLM-FM,
WCYI-FM, WCYY-FM, WHOM-FM, WJBQ-FM and WCLZ-FM
serving the Portland market for the purchase price of
approximately $65.3 million, which amount includes
approximately $1.8 million in consulting and
noncompetition payments payable over a seven-year
period (the "Portsmouth/Dover/Rochester/Portland
Acquisition"),
o the July 27, 1998 sale of WEST-AM in
Allentown/Bethlehem as a portion of the consideration
for the 1997 acquisition of WLEV-FM in
Allentown/Bethlehem,
o the October 7, 1998 sale of WQCY-FM, WTAD-AM, WMOS-FM
and WBJR-FM in Quincy for the sale price of
approximately $2.3 million (the "Quincy Sale"),
o the November 17, 1998 sale of KRNN-AM in Little Rock
for the sale price of approximately $0.2 million,
o the July 1998 initial public offering by Citadel
Communications of shares of its common stock and the
use of net proceeds from that offering,
20
<PAGE> 21
o the November 1998 sale by Citadel Communications'
subsidiary, Citadel Broadcasting Company, of $115.0
million principal amount of its 9-1/4% Senior
Subordinated Notes due 2008 and the use of net
proceeds from that offering,
o the June 1999 public offering by Citadel
Communications of shares of its common stock and the
use of net proceeds from that offering, and
o the August 1999 redemption of a portion of Citadel
Broadcasting's outstanding 13-1/4% Exchangeable
Preferred Stock (the "Preferred Redemption");
(2) the pending acquisition of KATT-FM, KYIS-FM, KCYI-FM, KNTL-FM and
WWLS-AM in Oklahoma City for a purchase price of approximately $60.0 million
(the "Pending Acquisition"); and
(3) the pending disposition of KKTT-FM, KEHK-FM and KUGN-AM in Eugene,
KAKT-FM, KBOY-FM, KCMX-FM, KTMT-FM, KCMX-AM and KTMT-AM in Medford, KEYW-FM,
KORD-FM, KXRX-FM, KTHT-FM and KFLD-AM in Tri-Cities, KCTR-FM, KKBR-FM, KBBB-FM,
KMHK-FM and KBUL-AM in Billings, WQKK-AM and WGLU-FM in Johnstown and WQWK-FM,
WNCL-FM, WRSC-AM and WBLF-AM in State College for the sale price of
approximately $26.0 million (the "Pending Disposition").
The unaudited pro forma condensed consolidated financial statements are
based on Citadel Communications' historical consolidated financial statements
and the financial statements of those entities acquired, or from which assets
were acquired, in connection with the Completed Transactions.
In the opinion of management, all adjustments necessary to fairly
present this pro forma information have been made. The interest rate applied to
borrowings under, and repayments of, Citadel Broadcasting's credit facility in
the pro forma consolidated statements of operations was 8.4375%, which
represents the interest rate in effect under the credit facility as of January
1, 1998.
Depreciation and amortization for the acquisitions are based upon
preliminary allocations of the purchase price to property and equipment and
intangible assets. Actual depreciation and amortization may differ depending on
the final allocation of the purchase price. However, management does not believe
these differences will be material.
For pro forma purposes, Citadel Communications' balance sheet as of
June 30, 1999 has been adjusted to give effect to the following transactions as
if each had occurred on June 30, 1999:
(1) the Portsmouth/Dover/Rochester/Portland Acquisition,
21
<PAGE> 22
(2) the Pending Acquisition,
(3) the Pending Disposition, and
(4) the Preferred Redemption.
The unaudited pro forma information is presented for illustrative
purposes only and does not indicate the operating results or financial position
that would have occurred if the transactions described above had been completed
on the dates indicated, nor is it indicative of future operating results or
financial position if the pending transactions described above are completed.
Citadel Communications cannot predict whether the completion of the Pending
Acquisition and the Pending Disposition will conform to the assumptions used in
the preparation of the unaudited pro forma condensed consolidated financial
statements. Additionally, consummation of each of the Pending Acquisition and
the Pending Disposition is subject to certain conditions. Although Citadel
Communications believes these closing conditions are customary for transactions
of this type, there can be no assurance that such conditions will be satisfied.
22
<PAGE> 23
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR
CITADEL THE PENDING
ADJUSTMENTS COMMUNICATIONS ACQUISITION
ACTUAL FOR AS ADJUSTED AND PRO FORMA
CITADEL COMPLETED FOR COMPLETED THE PENDING CITADEL
COMMUNICATIONS TRANSACTIONS (1) TRANSACTIONS DISPOSITION (2) COMMUNICATIONS
-------------- ---------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 68,680 $ (57,096) $ 11,584 $ (500) $ 11,084
Accounts and notes receivable, net 41,218 4,752 45,970 2,629 48,599
Prepaid expenses 3,149 256 3,405 114 3,519
Assets held for sale 25,974 -- 25,974 (25,974) --
- --------------------------------------------- --------- --------- --------- --------- ---------
Total current assets 139,021 (52,088) 86,933 (23,731) 63,202
Property and equipment, net 59,659 4,650 64,309 3,120 67,429
Intangible assets, net 412,150 56,678 468,828 56,162 524,990
Other assets 4,377 405 4,782 -- 4,782
- --------------------------------------------- --------- --------- --------- --------- ---------
TOTAL ASSETS $ 615,207 $ 9,645 $ 624,852 $ 35,551 $ 660,403
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable and accrued liabilities $ 15,383 $ 2,091 $ 17,474 $ -- $ 17,474
Current maturities of other long-term
obligations 212 1,750 1,962 360 2,322
- --------------------------------------------- --------- --------- --------- --------- ---------
Total current liabilities 15,595 3,841 19,436 360 19,796
Notes payable, less current maturities -- 42,236 42,236 34,000 76,236
10 1/4% Notes 98,657 -- 98,657 -- 98,657
9 1/4% Notes 111,638 -- 111,638 -- 111,638
Other long-term obligations, less current
maturities 1,004 15,264 16,268 1,165 17,433
Deferred tax liability 31,354 -- 31,354 -- 31,354
Exchangeable preferred stock 124,900 (51,696) 73,204 -- 73,204
Common stock and APIC 270,233 -- 270,233 -- 270,233
Deferred compensation (932) -- (932) -- (932)
Accumulated other comprehensive loss (52) -- (52) -- (52)
Accumulated deficit/retained earnings (37,190) -- (37,190) 26 (37,164)
- --------------------------------------------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 615,207 $ 9,645 $ 624,852 $ 35,551 $ 660,403
========= ========= ========= ========= =========
</TABLE>
(1) Represents the net effect of the Portsmouth/Dover/Rochester/Portland
Acquisition and the Preferred Redemption as if each of the transactions had
taken place on June 30, 1999. In the Preferred Redemption Citadel
Broadcasting redeemed approximately 35% of its issued and outstanding
13-1/4% Exchangeable Preferred Stock. Approximately 452,000 shares were
redeemed at a redemption price of $113.25 per share for a total of
approximately $51.2 million. In addition Citadel Broadcasting paid
approximately $515,000 of accrued dividends on the shares redeemed.
(2) Represents the net effect of the Pending Acquisition and the Pending
Disposition.
23
<PAGE> 24
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CITADEL ADJUSTMENTS FOR
COMMUNICATIONS THE PENDING
AS ADJUSTED ACQUISITION ADJUSTMENTS
ACTUAL ADJUSTMENTS FOR FOR AND THE FOR THE PRO FORMA
CITADEL COMPLETED COMPLETED PENDING PREFERRED CITADEL
COMMUNICATIONS TRANSACTIONS (1) TRANSACTIONS DISPOSITION (2) REDEMPTION COMMUNICATIONS
-------------- ---------------- --------------- --------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue ............................ 75,077 19,673 94,750 (2,257) -- 92,493
Station operating expenses ............. 51,706 13,686 65,392 (3,567) -- 61,825
Depreciation and amortization .......... 15,124 6,699 21,823 2,723 -- 24,546
Corporate general and administrative ... 2,886 -- 2,886 (88) -- 2,798
------- ------- ------- ------- ------- -------
Operating expenses .................. 69,716 20,385 90,101 (932) -- 89,169
------- ------- ------- ------- ------- -------
Operating income (loss) ................ 5,361 (712) 4,649 (1,325) -- 3,324
Interest expense ....................... 11,482 4,313 15,795 1,434 (1,850) 15,379
Other (income) expense, net ............ (709) -- (709) -- -- (709)
------- ------- ------- ------- ------- -------
Income (loss) before income taxes ...... (5,412) (5,025) (10,437) (2,759) 1,850 (11,346)
Income taxes (benefit) ................. (903) (790) (1,693) (566) -- (2,259)
Dividend requirement for Exchangeable
Preferred Stock ..................... (8,025) -- (8,025) -- 3,405 (4,620)
------- ------- ------- ------- ------- -------
Income (loss) from continuing operations
applicable to common shares .......... (12,534) (4,235) (16,769) (2,193) 5,255 (13,707)
======= ======= ======= ======= ======= =======
</TABLE>
24
<PAGE> 25
(1) Represents the net effect of the Completed Transactions that were
consummated after January 1, 1999, except the Preferred Redemption, as if each
transaction had taken place on January 1, 1998. Prior to the acquisition dates,
Citadel Communications operated many of the acquired stations under a joint
sales agreement ("JSA") or local marketing agreement ("LMA"). Citadel
Communications receives fees for such services. Includes net revenue and station
operating expenses for stations operated under JSAs to reflect ownership of the
stations as of January 1, 1998. Net revenue and station expenses for stations
operated under LMAs are included in Citadel Communications' historical
consolidated financial statements. For those stations operated under JSAs or
LMAs and subsequently acquired, associated fees and redundant expenses were
eliminated and estimated occupancy costs were included to adjust the results of
operations to reflect ownership of the stations as of January 1, 1998. Dollars
in the table below are shown in thousands.
<TABLE>
<CAPTION>
PORTSMOUTH/ CHARLESTON/
DOVER/ BINGHAMTON CARLISLE
ROCHESTER/ MUNCIE/ BATON ROUGE/ SAGINAW/ ACQUISITION
PORTLAND KOKOMO LAFAYETTE BAY CITY AND CAPSTAR THE COMPLETED
ACQUISITION ACQUISITION ACQUISITION ACQUISITION TRANSACTIONS TRANSACTIONS
----------- ----------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue 7,302 9,687 1,371 526 787 19,673
Station operating expenses 4,630 6,752 1,275 486 543 13,686
Depreciation and amortization 2,926 2,683 628 202 260 6,699
------- ------- ------- ------- ------- -------
Operating expenses 7,556 9,435 1,903 688 803 20,385
------- ------- ------- ------- ------- -------
Operating income (loss) (254) 252 (532) (162) (16) (712)
Interest expense 1,782 2,531 -- -- -- 4,313
------- ------- ------- ------- ------- -------
Income (loss) before income taxes (2,036) (2,279) (532) (162) (16) (5,025)
Income taxes (benefit) (664) -- (126) -- -- (790)
------- ------- ------- ------- ------- -------
Income (loss) from continuing operations (1,372) (2,279) (406) (162) (16) (4,235)
======= ======= ======= ======= ======= =======
</TABLE>
(2) Represents the net effect of the Pending Acquisition and the Pending
Disposition as if each transaction had taken place on January 1, 1998.
Dollars in the table below are shown in thousands.
<TABLE>
<CAPTION>
PENDING
ACQUISITION AND
PENDING PENDING PENDING
DISPOSITION ACQUISITION DISPOSITION
----------- ------------- ---------------
<S> <C> <C> <C>
Net revenue (6,879) 4,622 (2,257)
Station operating expenses (6,723) 3,156 (3,567)
Depreciation and amortization -- 2,723 2,723
Corporate general and administrative (88) -- (88)
------ ------ ------
Operating expenses (6,811) 5,879 (932)
------ ------ ------
</TABLE>
25
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
Operating income (loss) (68) (1,257) (1,325)
Interest expense (1,097) 2,531 1,434
------ ------ ------
Income (loss) before income taxes 1,029 (3,788) (2,759)
Income taxes (benefit) -- (566) (566)
------ ------ ------
Income (loss) from continuing operations 1,029 (3,222) (2,193)
====== ====== ======
</TABLE>
26
<PAGE> 27
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CITADEL ADJUSTMENTS FOR
COMMUNICATIONS THE PENDING ADJUSTMENTS
ACTUAL ADJUSTMENTS FOR AS ADJUSTED ACQUISITION AND FOR THE PRO FORMA
CITADEL COMPLETED FOR COMPLETED THE PENDING PREFERRED CITADEL
COMMUNICATIONS TRANSACTIONS (1) TRANSACTIONS DISPOSITION (2) REDEMPTION COMMUNICATIONS
-------------- ---------------- ------------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue .............................. 135,426 46,991 182,417 (7,179) -- 175,238
Station operating expenses ............... 93,485 30,742 124,227 (7,371) -- 116,856
Depreciation and amortization ............ 26,414 18,283 44,697 4,073 -- 48,770
Corporate general and administrative ..... 4,369 -- 4,369 (175) -- 4,194
-------- -------- -------- -------- -------- --------
Operating expenses .................... 124,268 49,025 173,293 (3,473) -- 169,820
-------- -------- -------- -------- -------- --------
Operating income (loss) .................. 11,158 (2,034) 9,124 (3,706) -- 5,418
Interest expense ......................... 18,126 7,753 25,879 2,869 (7,400) 21,348
Other (income) expense, net .............. (1,651) -- (1,651) (174) (1,825)
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes ........ (5,317) (9,787) (15,104) (6,401) 7,400 (14,105)
Income taxes (benefit) ................... (1,386) (1,833) (3,219) (1,132) -- (4,351)
Dividend requirement for Exchangeable
Preferred Stock ....................... (14,586) -- (14,586) -- 138 (14,448)
-------- -------- -------- -------- -------- --------
Income (loss) from continuing operations
applicable to common shares ............ (18,517) (7,954) (26,471) (5,269) 7,538 (24,202)
======== ======== ======== ======== ======== ========
</TABLE>
27
<PAGE> 28
(1) Represents the net effect of the Completed Transactions, except the
Preferred Redemption, as if each transaction had taken place on January 1, 1998.
Prior to the acquisition dates, Citadel Communications operated many of the
acquired stations under a JSA or LMA. Citadel Communications receives fees for
such services. Includes net revenue and station operating expenses for stations
operated under JSAs to reflect ownership of the stations as of January 1, 1998.
Net revenue and station expenses for stations operated under LMAs are included
in Citadel Communications' historical consolidated financial statements. For
those stations operated under JSAs or LMAs and subsequently acquired, associated
fees and redundant expenses were eliminated and estimated occupancy costs were
included to adjust the results of operations to reflect ownership of the
stations as of January 1, 1998. Dollars in the table below are shown in
thousands.
<TABLE>
<CAPTION>
PORTSMOUTH/ CHARLESTON/ REPAYMENT
DOVER/ BINGHAMTON/ BATON OTHER OF THE OFFERING THE
ROCHESTER/ MUNCIE/ ROUGE/ SAGINAW/ ACQUISITIONS CREDIT OF THE COMPLETED
PORTLAND KOKOMO LAFAYETTE BAY CITY AND DISPOSITIONS FACILITY 9-1/4% TRANS-
ACQUISITION ACQUISITION ACQUISITION ACQUISITION (a) (b) NOTES (c) ACTIONS
----------- ----------- ----------- ----------- ---------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue 13,642 16,500 7,331 6,981 2,537 -- -- 46,991
Station operating expenses 8,676 11,051 5,170 4,447 1,398 -- -- 30,742
Depreciation and amortization 5,853 5,367 2,914 2,421 1,729 -- -- 18,284
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses 14,529 16,418 8,084 6,868 3,127 -- -- 49,026
Operating income (loss) (887) 82 (753) 113 (590) -- -- (2,035)
Interest expense 5,358 5,063 -- -- 445 (4,487) 1,374 7,753
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes (6,245) (4,981) (753) 113 (1,035) 4,487 (1,374) (9,788)
Income taxes (benefit) (1,328) -- (505) -- -- -- -- (1,833)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations (4,917) (4,981) (248) 113 (1,035) 4,487 (1,374) (7,955)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(a) Represents the net effect of the Carlisle Acquisition, the Capstar
Transactions, the Boise Acquisition, the Wilkes-Barre/Scranton Acquisitions,
the disposition of WEST-AM in Allentown/Bethlehem, the acquisition of KAAY-AM
and the disposition of KRNN-AM in Little Rock and the Quincy Sale.
(b) Represents the repayment of outstanding borrowings under Citadel
Broadcatings's credit facility with the proceeds from the Citadel
Communications' initial public offering.
28
<PAGE> 29
(c) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $3.5 million related to Citadel
Broadcasting's 9-1/4% Senior Subordinated Notes due 2008.
(2) Represents the net effect of the Pending Acquisition and the Pending
Disposition as if each transaction had taken place on January 1, 1998.
Dollars in the table below are shown in thousands.
<TABLE>
<CAPTION>
PENDING
ACQUISITION AND
PENDING PENDING PENDING
DISPOSITION ACQUISITION DISPOSITION
----------- ------------- ---------------
<S> <C> <C> <C>
Net revenue (15,379) 8,200 (7,179)
Station operating expenses (13,611) 6,240 (7,371)
Depreciation and amortization (1,372) 5,445 4,073
Corporate general and administrative (175) -- (175)
------- ------- -------
Operating expenses (15,158) 11,685 (3,473)
Operating income (loss) (221) (3,485) (3,706)
Interest expense (2,194) 5,063 2,869
Other (income) expense (174) -- (174)
------- ------- -------
Income (loss) before income taxes 2,147 (8,548) (6,401)
Income taxes (benefit) -- (1,132) (1,132)
------- ------- -------
Income (loss) from continuing operations 2,147 (7,416) (5,269)
======= ======= =======
</TABLE>
29
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CITADEL COMMUNICATIONS
CORPORATION
Date: September 14, 1999 By: /s/ Lawrence R. Wilson
-----------------------------
Lawrence R. Wilson
Chairman, Chief Executive Officer and
President
<PAGE> 31
EXHIBIT INDEX
2.1 Stock Purchase Agreement dated April 30, 1999 by and between Robert F.
Fuller and Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.1 to Citadel Broadcasting Company's Current Report on Form
8-K, date of earliest event reported - August 31, 1999).
2.2 Stock Purchase Agreement dated April 30, 1999 by and between Joseph N.
Jeffrey, Jr. and Citadel Broadcasting Company (incorporated by
reference to Exhibit 2.2 to Citadel Broadcasting Company's Current
Report on Form 8-K, date of earliest event reported - August 31, 1999).
23.1 Consent of KPMG LLP.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Citadel Communications Corporation:
We consent to the Incorporation by reference in the registration statements
(Nos. 333-65279, 333-85701 and 333-85703) on Form S-8 of Citadel Communications
Corporation of our report dated April 7, 1999, except as to note 11, which is as
of August 31, 1999, with respect to the consolidated balance sheet of
Fuller-Jeffrey Broadcasting Companies, Inc. and Subsidiary as of December 31,
1998 and the related consolidated statements of operations, stockholders'
deficiency and cash flows for the year then ended, which report appears in the
Form 8-K of Citadel Communications Corporation dated August 31, 1999.
/s/ KPMG LLP
Sacramento, California
September 10, 1999
