<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 25, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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 Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
------------------------
CITY CENTER WEST
7201 WEST LAKE MEAD BOULEVARD
SUITE 400
LAS VEGAS, NEVADA 89128
(702) 804-5200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
LAWRENCE R. WILSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CITADEL COMMUNICATIONS CORPORATION
CITY CENTER WEST
7201 WEST LAKE MEAD BOULEVARD
SUITE 400
LAS VEGAS, NEVADA 89128
(702) 804-5200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
BRYAN D. ROSENBERGER, ESQ DANIELLE CARBONE, ESQ.
ECKERT SEAMANS CHERIN & MELLOTT, LLC SHEARMAN & STERLING
44TH FLOOR, 600 GRANT STREET 599 LEXINGTON AVENUE
PITTSBURGH, PA 15219 NEW YORK, NY 10022-6069
(412) 566-6000 (212) 848-4000
</TABLE>
------------------------
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. [ ]
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per
share............................ 10,000,000 shares $30.625 $306,250,000 $85,138
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c).
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 25, 1999
10,000,000 Shares
Citadel logoCITADEL COMMUNICATIONS CORPORATION
Common Stock
------------------
We are selling 5,000,000 shares of our common stock and the selling
stockholders are selling 5,000,000 shares of common stock. We will not receive
any proceeds from shares sold by the selling stockholders.
The underwriters have an option to purchase from the selling stockholders a
maximum of 1,500,000 additional shares of common stock to cover over-allotments
of shares.
Our common stock is traded on The Nasdaq Stock Market's National Market
under the symbol "CITC." The last reported sale price for our common stock on
The Nasdaq Stock Market's National Market on May 24, 1999 was $30.375 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 9.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO PROCEEDS TO
PRICE TO DISCOUNTS AND CITADEL THE SELLING
PUBLIC COMMISSIONS COMMUNICATIONS STOCKHOLDERS
-------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Per
Share... $ $ $ $
Total... $ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
FIRST UNION CAPITAL MARKETS CORP.
THOMAS WEISEL PARTNERS LLC
This prospectus is dated , 1999.
<PAGE> 3
[THIS INSIDE FRONT COVER PICTURES A MAP OF UNITED STATES SHOWING THE STATES AND
MARKETS IN WHICH CITADEL COMMUNICATIONS CORPORATION OWNS OR OPERATES RADIO
STATIONS AFTER GIVING EFFECT TO ITS PENDING TRANSACTIONS. TEXT ALSO INCLUDES THE
NUMBER OF FM AND AM RADIO STATIONS OWNED OR OPERATED BY CITADEL COMMUNICATIONS
CORPORATION AND THE 1998 RADIO GROUP REVENUE RANK FOR CITADEL COMMUNICATIONS
CORPORATION'S STATIONS IN EACH OF ITS MARKETS.]
<PAGE> 4
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY.................. 1
RISK FACTORS........................ 9
CAUTIONARY NOTE REGARDING FORWARD-
LOOKING STATEMENTS................ 15
USE OF PROCEEDS..................... 16
MARKET PRICES AND DIVIDEND POLICY... 18
CAPITALIZATION...................... 19
RECENTLY COMPLETED AND PENDING
TRANSACTIONS...................... 20
INFORMATION ABOUT STATION AND MARKET
DATA.............................. 23
PRO FORMA FINANCIAL INFORMATION..... 24
SELECTED HISTORICAL FINANCIAL
DATA.............................. 34
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..................... 37
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
BUSINESS............................ 51
PENDING TRANSACTIONS................ 77
MANAGEMENT.......................... 80
PRINCIPAL AND SELLING
STOCKHOLDERS...................... 90
CERTAIN TRANSACTIONS................ 94
DESCRIPTION OF CAPITAL STOCK........ 99
DESCRIPTION OF INDEBTEDNESS......... 104
UNDERWRITING........................ 113
NOTICE TO CANADIAN RESIDENTS........ 116
LEGAL MATTERS....................... 117
INDEPENDENT AUDITORS................ 117
WHERE YOU CAN FIND ADDITIONAL
INFORMATION....................... 117
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS........................ F-1
</TABLE>
------------------
YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
i
<PAGE> 5
PROSPECTUS SUMMARY
The following summary contains a general discussion of our business, this
offering and our summary financial information. We encourage you to read this
entire prospectus for a more complete understanding of Citadel Communications
Corporation and this offering. Unless otherwise indicated, all information in
this prospectus assumes that the underwriters' over-allotment option will not be
exercised. Citadel Broadcasting Company, our subsidiary, operates our radio
stations and eFortress, our internet service provider. Citadel License, Inc., a
wholly owned subsidiary of Citadel Broadcasting, holds our radio broadcast
licenses and does not conduct any independent business operations. Unless the
context otherwise requires, references in this prospectus to Citadel
Communications include Citadel Broadcasting and Citadel License.
OUR BUSINESS
We are the largest radio broadcaster in the United States, in terms of
broadcasting revenue, that focuses primarily on acquiring, developing and
operating radio stations in mid-sized markets. After we complete our pending
transactions, we will own or operate 82 FM and 35 AM radio stations in 22
markets, including clusters of four or more stations in 18 markets. We also own
eFortress, an internet service provider with more than 25,000 subscribers in 11
of the markets served by our radio stations and their surrounding communities.
Our stations comprise the first or second ranked radio station group in
terms of revenue share in 17 of our markets. As a result of the successful
implementation of our strategies, which are discussed below:
-- same station net broadcasting revenue increased 13.4% from year-end
1997 to year-end 1998 and 11.9% for the three months ended March 31,
1999 compared to the same period in 1998,
-- same station broadcast cash flow increased 32.0% from year-end 1997 to
year-end 1998 and 19.4% for the three months ended March 31, 1999
compared to the same period in 1998, and
-- after-tax cash flow increased 208.6% from year-end 1997 to year-end
1998 and 15.8% for the three months ended March 31, 1999 compared to
the same period in 1998.
We calculate same station results by including only those stations we owned or
operated for both periods being compared.
Our primary strategy is to secure and maintain a leadership position in our
existing markets and to expand into additional mid-sized markets where we
believe a leadership position can be obtained. We believe that mid-sized markets
provide attractive opportunities because, as compared to the 50 largest markets
in the United States, mid-sized markets generally are characterized by:
-- lower radio station purchase prices as a multiple of broadcast cash
flow,
-- fewer sophisticated and well-capitalized competitors, including both
radio and competing advertising media such as newspapers and
television, and
-- less direct format competition due to the smaller number of stations
in any given market.
We believe 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
1
<PAGE> 6
substantial revenue growth and cost efficiencies. As a result, we seek to
achieve broadcast cash flow margins that are comparable to the higher margins
that historically were generally achievable only in the 50 largest markets.
OPERATING STRATEGY
Our operating strategy focuses on maximizing our radio stations' appeal to
advertisers, and consequently our revenue and cash flow. In order to achieve
these goals, we:
-- seek to secure and maintain a leadership position in the markets we
serve by owning multiple stations in those markets,
-- coordinate programming, promotional and selling strategies among each
group of local stations,
-- seek to maximize our share of local advertising revenue in each of our
markets through aggressive sales and marketing initiatives,
-- combine extensive market research with an assessment of our
competitors' vulnerabilities in order to identify significant and
sustainable target audiences and to tailor the programming, marketing
and promotion of each of our stations to maximize its appeal to its
target audience, and
-- decentralize much of our operations as we believe 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.
ACQUISITION STRATEGY
Our acquisition strategy is to expand within our existing markets and into
additional mid-sized markets where we believe we can effectively use our
operating strategies. After we enter a market, we seek to acquire additional
stations which, when integrated with our existing operations, allow us to reach
a wider range of demographic groups that appeal to advertisers, increase revenue
and achieve substantial cost savings. Since the beginning of 1998, we have
purchased or agreed to purchase 41 stations in nine new markets, and we have
purchased or agreed to purchase 22 additional radio stations in six of the
markets in which we owned or operated radio stations in 1997.
OUR PENDING TRANSACTIONS AND STATION PORTFOLIO
We have a national presence, and our portfolio of stations is diversified
in terms of format and target demographics, as well as geographic location. This
diversity reduces our reliance upon the performance of any single station and
helps insulate us from downturns in specific markets and changes in format
preferences.
Pending Transactions. We have entered into agreements to purchase a total
of 20 FM and seven AM radio stations in Charleston, South Carolina; Binghamton,
New York; Muncie and Kokomo, Indiana; Portsmouth/Dover/Rochester, New Hampshire;
Portland, Maine; and Wilkes-Barre/Scranton, Pennsylvania. The aggregate purchase
price for these stations and related assets, including the assumption or
repayment of debt, is approximately $142.7 million. We have entered into an
agreement to sell a total of 18 FM and seven AM radio stations in Eugene and
Medford, Oregon; Tri-Cities, Washington; Billings, Montana; and State College
and Johnstown, Pennsylvania. The aggregate sales price for these stations is
approximately $26.0 million.
2
<PAGE> 7
Station Portfolio. The following table shows the radio stations we will own
or operate after giving effect to the pending transactions described above. See
the "Information About Station and Market Data" section of this prospectus for a
discussion of the sources from which we obtained the data included in the table
and the method used to calculate the station group audience share data.
<TABLE>
<CAPTION>
NUMBER OF STATION STATION GROUP
STATIONS GROUP MARKET REVENUE
MSA ---------- AUDIENCE --------------
RANK FM AM SHARE SHARE RANK
---- --- --- -------- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Providence, RI............................... 32 4 2 24.6% 40.4% 1
Salt Lake City, UT........................... 35 4 2 19.6 23.9 2
Wilkes-Barre/Scranton, PA(1)................. 64 7 5 25.8 34.2 2
Allentown/Bethlehem, PA...................... 67 2 - 25.3 27.3 2
Albuquerque, NM.............................. 71 5 3 35.4 55.7 1
Harrisburg/Carlisle, PA(2)................... 76 3 1 12.6 17.2 3
Baton Rouge, LA.............................. 82 3 2 20.6 27.5 2
Little Rock, AR(3)........................... 83 7 3 33.7 38.2 2
Spokane, WA.................................. 87 4 3 31.9 33.4 2
Colorado Springs, CO......................... 93 3 2 30.9 42.3 1
Lafayette, LA................................ 97 3 1 16.2 10.3 4
York, PA(2).................................. 103 - 1 0.3 4.5 5
Charleston, SC(1)............................ 104 5 3 36.9 53.7 1
Portsmouth/Dover/Rochester, NH(1)............ 117 4 - 16.0 29.5 2
Modesto, CA.................................. 122 4 1 37.9 68.1 1
Saginaw/Bay City, MI......................... 124 5 1 35.7 41.1 1
Boise, ID.................................... 126 4 1 31.1 45.3 1
Reno, NV(4).................................. 127 4 1 25.5 50.2 1
Portland, ME(1).............................. 160 6 - 30.9 43.0 1
Binghamton, NY(1)............................ 166 3 2 44.4 56.9 1
Muncie, IN(1)................................ NA 1 1 NA NA NA
Kokomo, IN(1)................................ NA 1 - NA NA NA
-- --
Total.................................... 82 35
</TABLE>
- ---------------
NA -- information not available
(1) The completion of our pending acquisitions in these markets is subject to
conditions described more fully in the "Pending Transactions" section of
this prospectus.
(2) Harrisburg/Carlisle and York are adjacent markets with numerous overlapping
radio signals.
(3) Does not include one FM station that has been constructed, but is not yet
operational. In addition, three of these stations primarily serve the
surrounding communities outside of Little Rock.
(4) We operate one of the listed FM radio stations in Reno under a local
marketing agreement. We do not own this station.
OUR PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at City Center West, Suite 400,
7201 West Lake Mead Boulevard, Las Vegas, Nevada 89128, and our telephone number
is (702) 804-5200.
3
<PAGE> 8
THE OFFERING
The following information is based on 26,268,723 shares outstanding at May
21, 1999. This number excludes 2,302,642 shares of common stock issuable upon
the exercise of stock options outstanding as of May 21, 1999 at a weighted
average exercise price of $5.05 per share. It also excludes a total of 2,921,661
additional shares reserved for issuance under our 1996 Equity Incentive Plan and
our 1999 Long-Term Incentive Plan.
Common stock offered............ 5,000,000 shares by Citadel Communications
5,000,000 shares by the selling
stockholders
----------
10,000,000 total shares of common stock
==========
Common stock to be outstanding
after this offering............. 31,268,723 shares
Use of proceeds................. We intend to use the net proceeds from our
sale of shares in this offering as follows:
-- to redeem 35% of Citadel
Broadcasting's outstanding 13 1/4%
Exchangeable Preferred Stock, and
-- to pay a portion of the total purchase
price of our pending acquisitions.
See the "Use of Proceeds" section of this
prospectus.
Nasdaq National Market symbol... CITC
4
<PAGE> 9
SUMMARY HISTORICAL FINANCIAL DATA
Our summary historical financial data presented below as of and for each of
the years ended December 31, 1996, 1997 and 1998 are derived from our
consolidated financial statements. These consolidated financial statements have
been audited by KPMG LLP, independent certified public accountants. Our summary
historical financial data presented below as of March 31, 1999 and for the three
months ended March 31, 1998 and 1999 are derived from our unaudited consolidated
financial statements. In our opinion, these unaudited consolidated financial
statements contain all necessary adjustments of a normal recurring nature to
present the financial statements in accordance with generally accepted
accounting principles. Our consolidated financial statements as of December 31,
1997 and 1998 and for each of the years in the three-year period ended December
31, 1998 and the independent auditors' report on those financial statements, as
well as our unaudited consolidated financial statements as of March 31, 1999 and
for the three months ended March 31, 1998 and 1999, are included in this
prospectus beginning on page F-3. Our financial results are not comparable from
year to year because we acquired and sold various radio stations.
As you review the information contained in the following table and
throughout this prospectus, you should note the following:
-- The performance of a radio station group is customarily measured by
its ability to generate broadcast cash flow. The two components of
broadcast cash flow are gross revenue, net of agency commissions, and
operating expenses, excluding depreciation and amortization, corporate
general and administrative expenses and non-cash and non-recurring
charges. Broadcast cash flow assists in comparing performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting
methods, particularly when acquisitions are involved,
-- EBITDA consists of operating income or loss before depreciation and
amortization, and
-- after-tax cash flow consists of net income or loss before
extraordinary items less preferred dividends and the amount of
deferred tax benefit plus depreciation and amortization.
Although broadcast cash flow, EBITDA and after-tax cash flow are not
measures of performance calculated in accordance with generally accepted
accounting principles, we believe that they are useful to an investor in
evaluating our company because they are measures widely used in the broadcasting
industry to evaluate a radio company's operating performance. However, you
should not consider broadcast cash flow, EBITDA and after-tax cash flow 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
generally accepted accounting principles as a measure of liquidity or
profitability.
You should read the summary historical financial data presented below
together with, and it is qualified by reference to, our Consolidated Financial
Statements and related notes and the information contained in the "Selected
Historical Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections included elsewhere in
this prospectus.
5
<PAGE> 10
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
---------- ---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcasting revenue... $ 45,413 $ 89,803 $ 135,426 $ 28,139 $ 32,633
Station operating
expenses................. 33,232 65,245 93,485 21,897 24,626
Depreciation and
amortization............. 5,189 14,661 26,414 5,946 7,003
Corporate general and
administrative........... 3,248 3,530 4,369 1,118 1,491
---------- ---------- ----------- ---------- -----------
Operating income (loss).... 3,744 6,367 11,158 (822) (487)
Interest expense........... 6,155 12,872 18,126 4,759 5,744
Other (income) expense,
net...................... (414) (451) (1,651) (37) (631)
---------- ---------- ----------- ---------- -----------
Income (loss) before income
taxes and extraordinary
item..................... (1,997) (6,054) (5,317) (5,544) (5,600)
Current tax expense........ -- -- 420 -- 59
Deferred tax benefit....... -- (770) (1,806) (429) (478)
---------- ---------- ----------- ---------- -----------
Income (loss) before
extraordinary item....... (1,997) (5,284) (3,931) (5,115) (5,181)
Extraordinary loss......... (1,769) -- -- -- --
---------- ---------- ----------- ---------- -----------
Net income (loss).......... (3,766) (5,284) (3,931) (5,115) (5,181)
Dividend requirement for
exchangeable preferred
stock.................... -- 6,633 14,586 3,572 4,013
---------- ---------- ----------- ---------- -----------
Net loss applicable to
common shares............ $ (3,766) $ (11,917) $ (18,517) $ (8,687) $ (9,194)
========== ========== =========== ========== ===========
Net loss per common
share.................... $ (1.18) $ (3.72) $ (1.51) $ (2.70) $ (0.36)
Shares used in per share
calculation.............. 3,196,551 3,199,467 12,297,588 3,219,774 25,744,861
OTHER DATA:
Broadcast cash flow........ $ 12,181 $ 24,558 $ 41,941 $ 6,242 $ 8,007
EBITDA..................... 8,933 21,028 37,572 5,124 6,516
After-tax cash flow........ 3,192 1,974 6,091 (3,170) (2,669)
Net cash provided by (used
in):
operating activities..... (1,081) 5,651 13,538 (979) 2,103
investing activities..... (61,124) (212,253) (45,812) (20,825) (73,647)
financing activities..... 62,788 212,699 127,430 16,910 317
Capital expenditures....... 2,041 2,070 4,512 186 927
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ MARCH 31,
1996 1997 1998 1999
-------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 1,588 $ 7,685 $102,842 $ 31,615
Working capital (deficiency).................. (4,195) 22,594 149,601 77,919
Intangible assets, net........................ 51,802 268,690 268,790 335,173
Total assets................................ 102,315 344,172 472,261 477,874
Long-term debt (including current portion).... 90,714 189,699 211,419 211,485
Exchangeable preferred stock.................. -- 102,010 116,775 120,837
Shareholders' equity.......................... 6,070 16,132 103,963 95,516
</TABLE>
6
<PAGE> 11
SUMMARY PRO FORMA FINANCIAL DATA
The following tables present our summary unaudited pro forma financial data
as of and for the periods indicated. The summary pro forma operating data
reflect adjustments to our summary historical operating data to give effect to
the following transactions as if they had occurred on January 1, 1998:
-- all radio station acquisitions and dispositions that we completed
since January 1, 1998, except for the acquisitions of two FM radio
stations in Wilkes-Barre/Scranton and one FM radio station in Spokane,
the effect of which we consider to be immaterial,
-- the April 1999 termination of a joint sales agreement relating to
radio stations in Colorado Springs and Spokane,
-- the repayment of outstanding borrowings under Citadel Broadcasting's
credit facility with the proceeds from the July 1998 initial public
offering of our common stock,
-- the November 1998 offering of $115.0 million principal amount of
Citadel Broadcasting's 9 1/4% Senior Subordinated Notes due 2008 and
the use of the net proceeds from that offering,
-- the pending acquisitions of radio stations and related assets in
Charleston, Binghamton, Muncie, Kokomo, Portsmouth/Dover/Rochester and
Portland,
-- the pending disposition of radio stations and related assets in
Eugene, Medford, Tri-Cities, Billings, State College and Johnstown,
and
-- this offering of our common stock and the use of estimated net
proceeds we receive from this offering.
The summary pro forma balance sheet data as of March 31, 1999 give effect
to the following transactions as if they had occurred on March 31, 1999:
-- all radio station acquisitions and dispositions that we completed
since March 31, 1999, except for the acquisition of one FM radio
station in Wilkes-Barre/Scranton and one FM radio station in Spokane,
the effect of which we consider to be immaterial,
-- the April 1999 termination of a joint sales agreement relating to
radio stations in Colorado Springs and Spokane,
-- the pending acquisitions and disposition described above, and
-- this offering of our common stock and the use of estimated net
proceeds we receive from this offering.
The summary pro forma financial data do not necessarily indicate either
future results of operations or the results that would have occurred if those
transactions had been completed on the indicated dates. You should read the
following financial information together with our Consolidated Financial
Statements and related notes, and the information contained in the "Pro Forma
Financial Information," "Selected Historical Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
sections included elsewhere in this prospectus.
7
<PAGE> 12
SUMMARY PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED
------------------------------------
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -------------------
1998 1998 1999
------------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING DATA:
Net broadcasting revenue................... $167,038 $ 34,220 $39,824
Station operating expenses................. 110,616 24,331 28,722
Depreciation and amortization.............. 43,325 10,451 10,843
Corporate general and administrative....... 4,194 1,074 1,447
-------- -------- -------
Operating expenses....................... 158,135 35,856 41,012
-------- -------- -------
Operating income (loss).................... 8,903 (1,636) (1,188)
Interest expense........................... 15,728 3,467 5,812
Other (income) expense, net................ (1,825) (37) (743)
-------- -------- -------
Income (loss) before income taxes.......... (5,000) (5,066) (6,257)
Current tax expense........................ 420 -- 59
Deferred tax benefit....................... (3,639) (887) (936)
Dividend requirement for exchangeable
preferred stock.......................... (14,448) (6,707) (2,825)
-------- -------- -------
Income (loss) from continuing operations
applicable to common shares.............. $(16,229) $(10,886) $(8,205)
======== ======== =======
OTHER DATA:
Broadcast cash flow........................ $ 56,422 $ 9,889 $11,102
EBITDA..................................... 52,228 8,815 9,655
After-tax cash flow........................ 23,457 (1,322) 1,702
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED
MARCH 31, 1999
---------------------
(DOLLARS IN
THOUSANDS)
---------------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 4,715
Working capital........................................... 28,232
Intangible assets, net.................................... 491,772
Total assets.............................................. 599,182
Long-term debt (including current portion)................ 216,431
Exchangeable preferred stock.............................. 75,630
Shareholders' equity...................................... 235,073
</TABLE>
8
<PAGE> 13
RISK FACTORS
Investing in our common stock involves risks. You should carefully consider
the following factors and other information in this prospectus before deciding
to invest in our common stock. These risks and uncertainties are not the only
ones facing us or which may adversely affect our business. Any of the following
risks could have a material adverse effect on our business, financial condition
or results of operations or on the value of our common stock.
SUBSTANTIAL INDEBTEDNESS--OUR DEBT SERVICE CONSUMES A SUBSTANTIAL PORTION OF THE
CASH WE GENERATE AND REDUCES THE CASH AVAILABLE TO INVEST IN OUR OPERATIONS.
We have a significant amount of indebtedness. Our large amount of debt
could significantly impact our business because, among other things, it:
-- requires us to dedicate a substantial portion of our operating cash
flow to pay interest expense, which reduces funds available for
operations, future business opportunities and other purposes,
-- limits our ability to obtain additional financing, if we need it, for
working capital, capital expenditures, acquisitions, debt service
requirements or other purposes,
-- inhibits our ability to compete with competitors who are less
leveraged than we are, and
-- restrains our ability to react to changing market conditions, changes
in our industry and economic downturns.
As of March 31, 1999, on a pro forma basis after giving effect to the
transactions described in the "Pro Forma Financial Information" section balance
sheet data as if they had occurred on March 31, 1999, we would have had:
-- outstanding total debt of $222.2 million, excluding the discount on
Citadel Broadcasting's 10 1/4% Senior Subordinated Notes due 2007 and
its 9 1/4% notes,
-- Citadel Broadcasting's exchangeable preferred stock with an aggregate
liquidation preference of $79.9 million, and
-- shareholders' equity of $235.1 million.
For more information about our indebtedness, see the "Description of
Indebtedness" section of this prospectus.
ABILITY TO SERVICE DEBT--IN ORDER TO SERVICE OUR DEBT, WE REQUIRE A SIGNIFICANT
AMOUNT OF CASH. HOWEVER, OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
WHICH ARE BEYOND OUR CONTROL.
Prevailing economic conditions and financial, business and other factors,
many of which are beyond our control, will affect our ability to satisfy our
debt obligations. If in the future we cannot generate sufficient cash flow from
operations to meet our obligations, we may need to refinance our debt, obtain
additional financing, delay planned acquisitions and capital expenditures or
sell assets. Any of these actions could adversely affect the value of our common
stock. We cannot assure you that we will generate sufficient cash flow or be
able to obtain sufficient funding to satisfy our debt service requirements.
9
<PAGE> 14
RESTRICTIONS IMPOSED ON US BY OUR DEBT INSTRUMENTS--OUR EXISTING DEBT
INSTRUMENTS CONTAIN RESTRICTIONS AND LIMITATIONS WHICH COULD SIGNIFICANTLY
IMPACT OUR ABILITY TO OPERATE OUR BUSINESS AND THE VALUE OF OUR COMMON STOCK.
The covenants in Citadel Broadcasting's credit facility and the agreements
governing its other outstanding debt and preferred stock restrict, among other
things, Citadel Broadcasting's ability to incur additional debt, make particular
types of investments or other restricted payments, swap or sell assets or merge
or consolidate. A breach of any of the covenants contained in the credit
facility could allow the lenders to declare all amounts outstanding under the
credit facility to be immediately due and payable. In addition, the lenders
under the credit facility could proceed against the collateral granted to them
to secure that indebtedness. We have pledged the outstanding shares of common
stock of Citadel Broadcasting owned by us to secure our guarantee of the credit
facility. If the amounts outstanding under the credit facility are accelerated,
we cannot assure you that our assets will be sufficient to repay amounts due
under the credit facility and other outstanding debt obligations.
The credit facility requires Citadel Broadcasting to obtain its banks'
consent before making acquisitions or capital expenditures that exceed the
amount permitted by the credit facility. Consequently, we may experience
difficulties in pursuing our acquisition strategy. The credit facility also
requires Citadel Broadcasting to maintain specific financial ratios and satisfy
financial condition tests. Events beyond our control could affect Citadel
Broadcasting's ability to meet those financial ratios and condition tests, and
we cannot assure you that it will do so.
The indentures governing Citadel Broadcasting's 9 1/4% notes and 10 1/4%
notes and its credit facility restrict, with certain exceptions, Citadel
Broadcasting's ability to pay dividends on or to repurchase, redeem or otherwise
acquire any shares of its capital stock. In the event that, after July 1, 2002,
cash dividends on Citadel Broadcasting's exchangeable preferred stock are in
arrears and unpaid for two or more semi-annual dividend periods, whether or not
consecutive, holders of the exchangeable preferred stock will be entitled to
elect two directors of Citadel Broadcasting. This right to elect directors could
limit our control over Citadel Broadcasting, and could adversely affect the
value of our common stock.
For a more detailed discussion of the credit facility and the outstanding
debt and preferred stock, see the "Description of Indebtedness" section.
HISTORY OF NET LOSSES--WE HAVE A HISTORY OF NET LOSSES WHICH WE EXPECT TO
CONTINUE THROUGH AT LEAST 1999.
We had a net loss of $3.9 million for the year ended December 31, 1998 and
$5.2 million for the three months ended March 31, 1999. We would have had net
losses on a pro forma basis of $1.8 million for the year ended December 31, 1998
and $5.4 million for the three months ended March 31, 1999 after giving effect
to the transactions described in the first paragraph of the "Pro Forma Financial
Information" section as if they had occurred on January 1, 1998.
The primary reasons for these losses are significant charges for
depreciation and amortization relating to the acquisition of radio stations and
interest charges on our
10
<PAGE> 15
outstanding debt. If we acquire additional stations, these charges will probably
increase. We expect to continue to experience net losses through at least 1999.
LIMITATIONS ON ACQUISITION STRATEGY--OUR STRATEGY TO EXPAND OUR BUSINESS AND
INCREASE REVENUE THROUGH ACQUISITIONS MAY FAIL DUE TO A NUMBER OF RISKS INVOLVED
IN IMPLEMENTING THIS STRATEGY.
We intend to grow by acquiring radio stations in mid-sized markets.
However, our acquisition strategy may not increase our cash flow or yield other
anticipated benefits because this strategy is subject to a number of other
risks, including:
-- failure or unanticipated delays in completing acquisitions due to
difficulties in obtaining regulatory approval,
-- difficulty in integrating the operations, systems and management of
our acquired stations,
-- diversion of management's attention from other business concerns,
-- loss of key employees of acquired stations, and
-- increases in prices for radio stations due to increased competition
for acquisition opportunities.
POTENTIAL DIFFICULTIES IN COMPLETING PENDING AND FUTURE TRANSACTIONS DUE TO
GOVERNMENTAL REVIEW--ANTITRUST LAW AND OTHER REGULATORY CONSIDERATIONS COULD
PREVENT OR DELAY OUR STRATEGY TO EXPAND OUR BUSINESS AND INCREASE REVENUE.
The completion of each of our pending transactions is, and future
transactions we may consider will likely be, subject to the notification filing
requirements, applicable waiting periods and possible review by the United
States Department of Justice or the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. All of our
pending and future radio station acquisitions and dispositions will be subject
to the license transfer approval process of the Federal Communications
Commission. Review by the Department of Justice or the Federal Trade Commission
may cause delays in completing transactions and, in some cases, result in
attempts by these agencies to prevent completion of transactions or negotiate
modifications to the proposed terms. Review by the FCC, particularly review of
concentration of market revenue share, may also cause delays in completing
transactions. Any delay, prohibition or modification could adversely affect the
terms of a proposed transaction or could require us to abandon an otherwise
attractive opportunity.
For a discussion of antitrust proceedings in which we are currently
involved, see the "Business" section under the heading "Legal Proceedings." For
a discussion of the delays we are experiencing in connection with some of our
pending transactions because of the FCC's license transfer approval process, see
the "Pending Transactions" section.
IMPORTANCE OF CERTAIN MARKETS--A DOWNTURN IN ANY OF OUR SIGNIFICANT MARKETS
COULD ADVERSELY AFFECT OUR REVENUE AND CASH FLOW.
Our Albuquerque, Providence, Salt Lake City, Little Rock and Modesto
markets are particularly important for our financial well-being. A significant
decline in net broadcasting revenue from our stations in these markets could
have a material adverse effect on our
11
<PAGE> 16
operations and financial condition. To illustrate, on an actual and a pro forma
basis, after giving effect to the transactions described in the first paragraph
of the "Pro Forma Financial Information" section as if they had occurred on
January 1, 1998, our radio stations in these markets would have generated the
following percentages of our total net broadcasting revenue and broadcast cash
flow in 1998:
<TABLE>
<CAPTION>
% OF NET % OF BROADCAST
BROADCASTING REVENUE CASH FLOW
--------------------- -------------------
MARKET ACTUAL PRO FORMA ACTUAL PRO FORMA
------ ------- ---------- ------ ---------
<S> <C> <C> <C> <C>
Albuquerque................... 15.1% 12.2% 18.3% 13.6%
Providence.................... 11.6 9.4 15.2 11.3
Salt Lake City................ 11.3 9.1 11.6 8.7
Little Rock................... 7.3 5.9 7.5 5.6
Modesto....................... 7.0 5.7 10.5 7.8
</TABLE>
For a discussion of delays we are experiencing in renewing four of our
licenses in Salt Lake City, see the "Business" section under the heading
"Federal Regulation of Radio Broadcasting" and the subheading "License Grant and
Renewal." For a discussion of an open Department of Justice matter relating to
our 1996 acquisition of one radio station in Albuquerque, see the "Business"
section under the heading "Legal Proceedings."
IMPACT OF THE YEAR 2000 PROBLEM--THE YEAR 2000 PROBLEM COULD SIGNIFICANTLY
DISRUPT OUR OPERATIONS, CAUSING A DECLINE IN CASH FLOW AND REVENUE AND OTHER
DIFFICULTIES.
We are in the process of assessing and remediating potential risks to our
business related to the Year 2000 problem. Although we believe that, as a result
of these efforts, our critical systems are or will be substantially Year 2000
ready, we cannot assure you that this will be the case. If we experience
significant problems as a result of the Year 2000 problem, our operations,
revenue, cash flow and other important aspects of our business and financial
well-being may be adversely affected.
We believe that our greatest potential Year 2000 risk is that third parties
with whom we deal will fail to be Year 2000 ready. For example, our operations
and revenue may be adversely affected if our programming suppliers or key
advertisers experience significant disruptions in their businesses because of
the Year 2000 problem.
For more information concerning the Year 2000 problem and its potential
impact on our business, see the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section under the heading
"Liquidity and Capital Resources."
SIGNIFICANT COMPETITION IN OUR INDUSTRY--BECAUSE THE RADIO BROADCASTING INDUSTRY
IS HIGHLY COMPETITIVE, WE MAY LOSE AUDIENCE SHARE AND ADVERTISING REVENUE.
Our radio stations face heavy competition from other radio stations in each
market for audience share and advertising revenue. We also compete with other
media such as television, newspapers, direct mail and outdoor advertising for
advertising revenue. A decrease in either audience share or advertising revenue
could result in decreased cash flow, which could impair our ability to, among
other things, service our debt obligations, and which could adversely
12
<PAGE> 17
affect the value of our common stock. The radio broadcasting industry is also
facing competition from new media technologies that are being developed such as
the following:
-- audio programming by cable television systems, direct broadcasting
satellite systems and other digital audio broadcasting formats,
-- satellite-delivered digital audio radio service, which could result in
the introduction of several new satellite radio services with sound
quality equivalent to that of compact discs, and
-- in-band-on-channel digital radio, which could provide digital radio
services in the same frequency range currently occupied by traditional
AM and FM radio services.
We cannot predict either the extent to which such competition will
materialize or, if such competition materializes, the extent of its effect on
our business.
EXTENSIVE REGULATION OF OUR INDUSTRY--THE FEDERAL COMMUNICATIONS COMMISSION'S
EXTENSIVE REGULATION OF THE RADIO BROADCASTING INDUSTRY LIMITS OUR ABILITY TO
OWN AND OPERATE RADIO STATIONS AND OTHER MEDIA OUTLETS.
Licenses. The radio broadcasting industry is subject to extensive
regulation by the FCC under the Communications Act of 1934, as amended.
Issuance, renewal or transfer of radio broadcast station operating licenses
requires FCC approval, and we cannot operate our radio stations without FCC
licenses. The failure to renew our licenses could prevent us from operating the
affected stations and generating revenue from them. If the FCC decides to
include conditions or qualifications in any of our licenses, we may be limited
in the manner in which we may operate the affected station.
For a discussion of radio licensing and the delays we are currently
experiencing in renewing four of our licenses, see the "Business" section under
the heading "Federal Regulation of Radio Broadcasting" and the subheading
"License Grant and Renewal."
Ownership. The Communications Act and FCC rules impose specific limits on
the number of stations and other media outlets an entity can own in a single
market. The FCC attributes interests held by, among others, an entity's
officers, directors and stockholders to that entity for purposes of applying
these ownership limitations. The existing ownership rules or proposed new rules
could affect our acquisition strategy because they may prevent us from acquiring
additional stations in a particular market. We may also be prevented from
engaging in a swap transaction if the swap would cause the other company to
violate these rules.
For a more detailed discussion of these ownership limitations and their
impact on our business, see the "Business" section under the heading "Federal
Regulation of Radio Broadcasting" and the subheadings "Ownership Matters" and
"Proposed Changes."
CONCENTRATION OF OWNERSHIP--ONE OF OUR STOCKHOLDERS BENEFICIALLY OWNS, AND A
VOTING TRUSTEE HAS THE POWER TO VOTE THE SHARES REPRESENTING, A SUBSTANTIAL
AMOUNT OF OUR COMMON STOCK. THIS CONCENTRATION OF OWNERSHIP CAN SIGNIFICANTLY
AFFECT MATTERS REQUIRING A SHAREHOLDER VOTE.
Immediately following the completion of this offering, ABRY Broadcast
Partners II, L.P. and ABRY Capital, L.P. will together beneficially own
approximately 15.2% of our common stock. A voting trust has been established
under which the voting trustee has the sole power
13
<PAGE> 18
to vote these shares. This concentration of ownership will mean that the voting
trustee will have the ability to significantly affect matters that require a
stockholder vote. See the "Principal and Selling Stockholders" section.
POTENTIAL ANTI-TAKEOVER EFFECTS--PROVISIONS OF NEVADA LAW AND FEDERAL
REGULATIONS AND IN OUR ORGANIZATIONAL DOCUMENTS MAY DISCOURAGE FUTURE TAKEOVER
ATTEMPTS.
Nevada statutes, provisions of our Certificate of Incorporation and Bylaws
and FCC regulations may hinder, delay or defer a change in control of Citadel
Communications and may have an anti-takeover effect. This could adversely impact
prevailing market prices for our common stock and could preclude a transaction
in which you might have received a substantial premium for your shares of common
stock over then-current market prices. For a discussion of provisions of Nevada
law and our Certificate of Incorporation and Bylaws that may have an
anti-takeover effect, see the "Description of Capital Stock" section under the
heading "Certain Anti-Takeover Effects." For a discussion of FCC regulations
that may have a similar effect, see the "Business" section under the heading
"Federal Regulation of Radio Broadcasting."
ABSENCE OF DIVIDENDS--YOU SHOULD NOT EXPECT TO RECEIVE DIVIDENDS ON YOUR SHARES
OF COMMON STOCK IN THE FORESEEABLE FUTURE.
It is unlikely that you will receive a return on your shares of common
stock through the payment of cash dividends. We have not declared or paid any
cash dividends on our common stock since our inception, and we do not anticipate
paying or declaring any dividends on our common stock in the foreseeable future.
See the "Market Prices and Dividend Policy" section.
FUTURE SALES OF COMMON STOCK--FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY
AFFECT ITS MARKET PRICE.
The market price for our common stock could fall substantially if our
stockholders who hold restricted shares of common stock sell large amounts of
these shares in the public market following this offering. These sales, or the
possibility that these sales may occur, could make it more difficult for us to
sell equity or equity related securities in the future. These sales in the
public market are limited by restrictions under federal securities law and by
lock-up agreements that we, our directors and officers and some of our existing
stockholders have entered or will enter into with the underwriters. With some
exceptions, the lock-up agreements restrict us, our directors and officers and
some of our existing stockholders, from selling or otherwise disposing of any
shares for a period of 90 days after the date of this prospectus without the
prior written consent of Credit Suisse First Boston Corporation, which may, in
its sole discretion and without notice, release all or any portion of the shares
from the restrictions in the lock-up agreements.
As of May 21, 1999, we had 26,268,723 outstanding shares of common stock.
Of these shares, 9,398,424 are restricted shares, not including those restricted
shares to be sold by the
14
<PAGE> 19
selling stockholders in this offering, and will become eligible for sale in the
public market no sooner than as shown in the following table:
<TABLE>
<CAPTION>
NUMBER OF
SHARES DATE ELIGIBLE FOR PUBLIC RESALE
- --------- -----------------------------------------------------------
<C> <S>
165,813 Date of this prospectus
9,207,609 90 days after the date of this prospectus
25,002 Thereafter
</TABLE>
Any shares that may be purchased in this offering by our affiliates, as
defined in Rule 144 of the Securities Act of 1933, as amended, will be subject
to the volume and other selling limitations under Rule 144 of the Securities
Act. Of the shares eligible for sale on the 90th day after the date of this
prospectus or afterward, 8,246,815 shares will be subject initially to volume
and other limitations under Rule 144.
We also have granted stock options to our key employees and consultants to
purchase 4,052,642 shares of common stock. This includes grants of options to
purchase 1,750,000 shares of common stock under our 1999 Long-Term Incentive
Plan, which grants will become effective at the time we close this offering,
subject to stockholder approval of the 1999 plan. As of May 21, 1999, options to
purchase 1,304,177 shares were vested.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended, principally in the "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business"
sections. We based these forward-looking statements largely on our current
expectations and projections about future events and financial trends affecting
our business. The words believes, may, will, estimates, continues, anticipates,
intends, expects and similar words are intended to identify forward-looking
statements. We undertake no obligation to publicly update or revise any
forward-looking statements because of new information, future events or
otherwise. In light of these risks and uncertainties, the forward-looking events
and circumstances discussed in this prospectus might not transpire. Our
forward-looking statements are subject to risks, uncertainties and assumptions
including, among other things:
-- general economic and business conditions, both nationally and in our
markets,
-- our expectations and estimates concerning future financial
performance, financing plans and the impact of competition,
-- anticipated trends in our industry, and
-- other risk factors discussed in the "Risk Factors" section.
15
<PAGE> 20
USE OF PROCEEDS
The net proceeds to Citadel Communications from this offering are estimated
to be approximately $146.0 million based on an offering price of $30.625 per
share, which is the average of the high and low trading prices on May 24, 1999,
after deducting underwriting discounts and commissions and estimated offering
expenses payable by us. We will not receive any of the proceeds from the sale of
shares of common stock by the selling stockholders. We intend to use the net
proceeds we receive from this offering as set forth below. Pending these uses,
we intend to invest the net proceeds in short-term, investment grade,
interest-bearing securities.
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
SOURCES:
Net proceeds from this offering........................... $146,000
Borrowings under Citadel Broadcasting's credit facility... 3,196
Cash proceeds from pending disposition.................... 25,500
Cash and cash equivalents................................. 17,900
--------
$192,596
========
USES:
Redemption of 35% of Citadel Broadcasting's outstanding
exchangeable preferred stock and payment of the premium
and the accumulated and unpaid dividends on the shares
redeemed(1)............................................ $ 51,696
Purchase price for Charleston/Binghamton/Muncie/Kokomo
acquisition(2)......................................... 77,000
Purchase price for Portsmouth/Dover/Rochester/Portland
acquisition(3)......................................... 63,500
Purchase price for Wilkes-Barre/Scranton acquisition(4)... 400
--------
Total.................................................. $192,596
========
</TABLE>
- ---------------
(1) This assumes that the redemption occurs on August 2, 1999. Of the
$51,695,927, $45,206,859 represents the liquidation preference, $499,159
represents the amount of accumulated and unpaid dividends and $5,989,909
represents the premium over the liquidation preference on the exchangeable
preferred stock as of August 2, 1999.
(2) We have entered into an asset purchase agreement to acquire ten FM and six
AM radio stations in these markets for a purchase price of approximately
$77.0 million. For a more complete description of this transaction, see the
"Pending Transactions" section. If this acquisition closes before we close
this offering, we will need to borrow the purchase price under Citadel
Broadcasting's credit facility. We would then repay the amount borrowed with
proceeds we receive from this offering. If amounts were currently
outstanding under this credit facility, the applicable interest rate would
be dependent upon the amount borrowed and the current LIBOR rate plus an
interest rate spread of 1.5% to 2.75%. Subject to mandatory prepayments of
amounts outstanding under this credit facility, the balance of any amounts
outstanding would be due on September 30, 2003. See the "Description of
Indebtedness" section.
(3) We have entered into a stock purchase agreement with each of the two
stockholders of Fuller-Jeffrey Broadcasting Companies, Inc., which owns and
operates radio stations in the Portsmouth/Dover/Rochester, New Hampshire and
Portland, Maine markets. The $63.5 million purchase price is net of $1.8
million payable under a consulting and noncompetition agreement over a
seven-year period, which likely will be paid from
16
<PAGE> 21
working capital. The $63.5 million assumes that we will repay the
outstanding debt of Fuller-Jeffrey, which is not to exceed $15.8 million at
the time of the closing of the acquisition. If we decide to assume this
debt, proceeds not applied to repay the debt would be available for future
acquisitions, working capital and general corporate purposes. For a more
complete description of this transaction, see the "Pending Transactions"
section.
(4) We have entered into an agreement to acquire one AM radio station in
Wilkes-Barre/ Scranton for a purchase price of approximately $0.4 million.
For a more complete description of this transaction, see the "Pending
Transactions" section.
We may need to change the use of proceeds set forth above in the event that
any of our pending acquisitions indicated above do not close. The completion of
each of these pending acquisitions are subject to conditions, including those
more specifically discussed in the "Pending Transactions" section. If any of our
pending acquisitions do not close, we will likely use the excess proceeds from
this offering to fund future acquisitions or for working capital and general
corporate purposes.
17
<PAGE> 22
MARKET PRICES AND DIVIDEND POLICY
Our common stock is traded on the Nasdaq National Market under the symbol
"CITC." Public trading of our common stock began on July 1, 1998. The following
table presents the high and low closing prices per share for our common stock
for the periods indicated since July 1, 1998.
<TABLE>
<CAPTION>
1998 HIGH LOW
- ---- ------ ------
<S> <C> <C>
Quarter Ended September 30........................... $26.75 $17.75
Quarter Ended December 31............................ $29.38 $14.88
1999 HIGH LOW
- ----------------------------------------------------- ------ ------
Quarter Ended March 31............................... $33.25 $22.75
April 1 to May 24.................................... $37.75 $27.50
</TABLE>
On May 24, 1999, the last reported sale price of our common stock on the
Nasdaq National Market was $30.375. There were 26,268,723 outstanding shares of
our common stock as of May 21, 1999. As of May 21, 1999, there were 79 record
holders of our common stock.
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain earnings to finance the growth and development of our
business and do not anticipate declaring or paying cash dividends on our common
stock in the foreseeable future. Declaration or payment of future dividends, if
any, will be at the discretion of our Board of Directors after taking into
account various factors, including our financial condition, operating results,
current and anticipated cash needs and other factors our Board of Directors
deems relevant. The terms of the various documents governing Citadel
Broadcasting's indebtedness and its exchangeable preferred stock impose
significant restrictions on the payment of dividends and the making of loans by
Citadel Broadcasting to Citadel Communications. Because we are a holding
company, we do not have any other source from which to pay cash dividends on our
common stock. See the "Risk Factors" section under the heading "Absence of
Dividends" and the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section under the heading "Liquidity and Capital
Resources."
18
<PAGE> 23
CAPITALIZATION
The following table sets forth the unaudited capitalization of Citadel
Communications as of March 31, 1999 on:
-- an actual basis,
-- a pro forma basis to give effect to the transactions we completed
since March 31, 1999 and our pending transactions, each as described
in the "Pro Forma Financial Information" section, as if they had
occurred on March 31, 1999, and
-- a pro forma basis as further adjusted to give effect to this offering
and the application of estimated net proceeds we receive from this
offering as if they had occurred on March 31, 1999.
Amounts shown for the 10 1/4% notes, 9 1/4% notes and total long-term debt
exclude the discount on the 10 1/4% notes and the 9 1/4% notes. You should read
this table in conjunction with our Consolidated Financial Statements and related
notes, the information included in the "Pro Forma Financial Information" section
and other information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------------------- PRO FORMA
PRO FORMA FOR OUR AS FURTHER
RECENTLY COMPLETED AND ADJUSTED FOR
ACTUAL PENDING TRANSACTIONS THIS OFFERING
-------- ---------------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, including current
portion:
Credit facility................ $ -- $ 97,500 $ 3,196
Other obligations.............. 1,293 3,043 3,043
10 1/4% notes.................. 101,000 101,000 101,000
9 1/4% notes................... 115,000 115,000 115,000
-------- -------- --------
Total long-term debt............. 217,293 316,543 222,239
13 1/4% exchangeable preferred
stock.......................... 120,837 120,837 75,630
Shareholders' equity:
Common stock................... 26 26 31
Additional paid-in capital..... 134,530 134,530 274,036
Deferred compensation.......... (988) (988) (988)
Accumulated deficit............ (37,863) (37,817) (37,817)
Accumulated other comprehensive
loss........................ (189) (189) (189)
-------- -------- --------
Total shareholders' equity..... 95,516 95,562 235,073
-------- -------- --------
Total capitalization............. $433,646 $532,942 $532,942
======== ======== ========
</TABLE>
19
<PAGE> 24
RECENTLY COMPLETED AND PENDING TRANSACTIONS
RADIO STATION ACQUISITIONS AND DISPOSITIONS
Since January 1, 1998, we have acquired or agreed to acquire 63 radio
stations and related assets. These acquisitions diversify our station portfolio,
broadcast revenue and broadcast cash flow. We have sold or agreed to sell 32
radio stations since January 1, 1998. The information below provides a brief
description of each of our recently completed and pending radio station
acquisitions and dispositions. See the "Pending Transactions" section for a more
detailed description of our pending acquisitions and disposition.
RECENTLY COMPLETED ACQUISITIONS
Wilkes-Barre/Scranton, Pennsylvania Acquisitions. On January 2, 1998, we
acquired WEMR-FM and WEMR-AM for the purchase price of approximately $0.8
million. On March 26, 1998, we acquired WCTP-FM, WCTD-FM and WKJN-AM for the
purchase price of approximately $6.0 million. On January 4, 1999, we acquired
WBHT-FM for the purchase price of approximately $1.3 million. On May 3, 1999, we
acquired WKQV-FM for the purchase price of approximately $1.0 million.
Boise, Idaho Acquisitions. On February 12, 1998, we acquired Pacific
Northwest Broadcasting Corporation which owned KQFC-FM, KKGL-FM and KBOI-AM for
the purchase price of approximately $14.0 million. On April 21, 1998, we
acquired KIZN-FM and KZMG-FM for the purchase price of approximately $14.5
million.
Little Rock, Arkansas Acquisition. On November 17, 1998, we acquired
KAAY-AM for the purchase price of approximately $5.1 million.
Saginaw/Bay City, Michigan Acquisition. On February 9, 1999, we acquired
WKQZ-FM, WYLZ-FM, WILZ-FM, WIOG-FM, WGER-FM and WSGW-AM for the purchase price
of approximately $35.0 million.
Harrisburg/Carlisle, Pennsylvania Acquisition. On February 17, 1999, we
acquired WHYL-FM and WHYL-AM for the purchase price of approximately $4.5
million.
Baton Rouge and Lafayette, Louisiana Acquisition. On March 17, 1999, we
acquired 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.
Colorado Springs, Colorado and Spokane, Washington Acquisitions. On April
30, 1999, we acquired KSPZ-FM serving the Colorado Springs market in exchange
for KKLI-FM in Colorado Springs, and we acquired 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. In a separate transaction on
May 3, 1999, we acquired KNJY-FM serving the Spokane market for the purchase
price of approximately $4.2 million.
20
<PAGE> 25
RECENTLY COMPLETED DISPOSITIONS
Allentown/Bethlehem, Pennsylvania Disposition. On July 27, 1998, we sold
WEST-AM as a portion of the consideration for our 1997 acquisition of WLEV-FM in
Allentown/ Bethlehem.
Quincy, Illinois Disposition. On October 7, 1998, we sold WQCY-FM, WTAD-AM,
WMOS-FM and WBJR-FM for the sale price of approximately $2.3 million.
Little Rock, Arkansas Disposition. On November 17, 1998, we sold KRNN-AM
for the sale price of approximately $0.2 million.
Colorado Springs, Colorado and Spokane, Washington Transactions. On April
30, 1999, we disposed of KKLI-FM in exchange for KSPZ-FM in Colorado Springs. In
connection with this transaction we also terminated a joint sales agreement
under which we operated other radio stations in Colorado Springs and in Spokane.
PENDING ACQUISITIONS
Charleston, South Carolina; Binghamton, New York; and Muncie and Kokomo,
Indiana Acquisitions. On November 23, 1998, we entered into an agreement to
acquire 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. FCC action on the application to assign
these licenses to Citadel Communications has been delayed because a petition to
deny was filed by a competitor in the Binghamton market and because of the FCC's
concerns about ownership concentration in Binghamton. For a discussion of the
FCC license transfer approval process, see the "Business" section under the
heading "Ownership Matters." The completion of this transaction is subject to a
number of other conditions.
Portsmouth/Dover/Rochester, New Hampshire; and Portland, Maine
Acquisition. On April 30, 1999, we entered into agreements to acquire
Fuller-Jeffrey Broadcasting Companies, Inc. which owns 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 $1.8
million in consulting and noncompetition payments payable over a seven-year
period. The completion of this transaction is subject to a number of conditions.
Wilkes-Barre/Scranton Pennsylvania. On January 11, 1999, we entered into an
agreement to acquire WKQV-AM for the purchase price of approximately $0.4
million. The closing of this transaction has been delayed because of an
unresolved real estate issue.
PENDING DISPOSITION
Eugene and Medford, Oregon; Tri-Cities, Washington; Billings, Montana; and
State College and Johnstown, Pennsylvania Disposition. On January 13, 1999, we
entered into an agreement to sell 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, KTHK-FM and KFLD-AM in Tri-Cities, KCTR-FM, KKBR-FM,
21
<PAGE> 26
KBBB-FM, KMHK-FM and KBUL-AM in Billings, WQKK-FM 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. FCC action on the application to assign these
licenses to the purchaser will likely be delayed because comments were filed by
the Department of Justice regarding ownership concentration in Billings and
because of the FCC's concerns about ownership concentration in Billings. For a
discussion of the FCC license transfer approval process, see the "Business"
section under the heading "Ownership Matters." The completion of this
transaction is subject to a number of other conditions.
1998 FINANCINGS
Initial Public Offering. On July 7, 1998, we completed an initial public
offering of 6,880,796 shares of our common stock, at $16.00 per share. Of such
shares, we sold 6,250,000 shares and several of our stockholders sold 630,796
shares. On July 14, 1998, we sold 1,032,119 additional shares when the
underwriters exercised their over-allotment option. The aggregate net proceeds
we received were approximately $106.6 million and were used to repay a portion
of the outstanding indebtedness under Citadel Broadcasting's credit facility. We
did not receive any of the proceeds from the sale of shares by the selling
stockholders.
Senior Subordinated Notes. On November 19, 1998, Citadel Broadcasting sold
$115.0 million principal amount of its 9 1/4% notes in order to finance several
acquisitions, repay indebtedness under its credit facility and provide working
capital.
22
<PAGE> 27
INFORMATION ABOUT STATION AND MARKET DATA
For this prospectus:
-- We obtained all metropolitan statistical area rank information for all
markets and market revenue information, station group market share and
rank information for the Allentown/Bethlehem, Baton Rouge, Binghamton,
Charleston, Colorado Springs, Harrisburg/Carlisle, Lafayette,
Portland, Portsmouth/Dover/Rochester, Saginaw, Spokane and York
markets from Investing in Radio 1999 Market Report (1st ed.) published
by BIA Publications, Inc.
-- We obtained all market revenue, station group market revenue share and
rank information for the Albuquerque, Boise, Little Rock, Modesto,
Providence, Reno, Salt Lake City and Wilkes-Barre/Scranton markets
from the December 31, 1998 Miller, Kaplan Market Revenue Report, a
publication of Miller, Kaplan, Arase & Co., Certified Public
Accountants.
-- We give all market revenue and station group market revenue share and
rank information for 1998.
-- We give all audience share and primary demographic share and rank
information for 1998 and obtained this information from the Fall 1998
Radio Market Report published by The Arbitron Company. In the table in
the "Prospectus Summary" section under the heading "Our Pending
Transactions and Station Portfolio," we derived station group audience
share based on persons ages 25 to 54, listening Monday through Sunday,
6:00 a.m. to 12:00 midnight.
Unless the context otherwise requires, the term operate, as used in
connection with our radio station activities, includes providing programming and
selling advertising under local marketing agreements or selling advertising
under joint sales agreements.
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 we have
owned or operated the station, we describe the station by its call letters
currently in use.
23
<PAGE> 28
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements reflect the results of operations and balance sheet of Citadel
Communications after giving effect to:
(1) the following completed transactions:
-- all radio station acquisitions and dispositions we completed since
January 1, 1998, except for the acquisitions of two FM radio
stations in Wilkes-Barre/ Scranton and one FM radio station in
Spokane, the effect of which we consider to be immaterial,
-- the April 1999 termination of a joint sales agreement relating to
radio stations in Colorado Springs and Spokane,
-- the repayment of outstanding borrowings under Citadel
Broadcasting's credit facility with the proceeds from the July 1998
initial public offering of our common stock, and
-- the November 1998 offering of $115.0 million principal amount of
Citadel Broadcasting's 9 1/4% notes and the use of the net proceeds
from that offering;
(2) the pending acquisitions of radio stations and related assets in
Charleston, Binghamton, Muncie, Kokomo, Portsmouth/Dover/Rochester and Portland;
(3) the pending disposition of radio stations and related assets in Eugene,
Medford, Tri-Cities, Billings, State College and Johnstown; and
(4) this offering of our common stock and the use of estimated net proceeds
we receive from this offering.
The unaudited pro forma condensed consolidated financial statements are
based on our historical consolidated financial statements 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 of the following entities and the related notes,
which are included elsewhere in this prospectus:
-- Citadel Communications Corporation,
-- Tele-Media Broadcasting Company and its Partnership Interests, and
-- Fuller-Jeffrey Broadcasting Companies, Inc.
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, our credit facility in the pro forma
consolidated statements of operations was 8.4375%, which represents the interest
rate in effect under our 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, our balance sheet as of March 31, 1999 has been
adjusted to give effect to the following transactions as if each had occurred on
March 31, 1999:
24
<PAGE> 29
(1) all radio station acquisitions and dispositions that we completed since
March 31, 1999, except for the acquisition of one FM radio station in
Wilkes-Barre/Scranton and one FM radio station in Spokane, the effect of which
we consider to be immaterial,
(2) the April 1999 termination of a joint sales agreement relating to two
FM and two AM radio stations in Colorado Springs and two FM and two AM radio
stations in Spokane,
(3) the pending acquisitions,
(4) the pending disposition, and
(5) this offering of our common stock and the use of estimated net proceeds
we receive from this offering.
For a brief discussion of our radio station acquisitions and dispositions
completed since January 1, 1998 and our pending acquisitions and disposition,
see the "Recently Completed and Pending Transactions" section.
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 transactions described above are completed. We cannot
predict whether the completion of the pending acquisitions and the pending
disposition will conform to the assumptions used in the preparation of the
unaudited pro forma condensed consolidated financial statements.
25
<PAGE> 30
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
ADJUSTMENTS FOR PENDING
FOR AS ADJUSTED FOR ACQUISITIONS ADJUSTMENTS
COMPLETED COMPLETED AND PENDING FOR THIS
ACTUAL TRANSACTIONS TRANSACTIONS DISPOSITION OFFERING PRO FORMA
------- ------------ --------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net broadcasting revenue.................. $32,633 $2,493 $35,126 $ 4,698 $ -- $39,824
Station operating expenses................ 24,626 2,144 26,770 1,952 -- 28,722
Depreciation and amortization............. 7,003 1,035 8,038 2,805 -- 10,843
Corporate general and administrative...... 1,491 -- 1,491 (44) -- 1,447
------- ------ ------- ------- ------- -------
Operating expenses.................... 33,120 3,179 36,299 4,713 -- 41,012
------- ------ ------- ------- ------- -------
Operating income (loss)................... (487) (686) (1,173) (15) -- (1,188)
Interest expense.......................... 5,744 -- 5,744 2,057 (1,989) 5,812
Other (income) expense, net............... (631) -- (631) (112) -- (743)
------- ------ ------- ------- ------- -------
Income (loss) before income taxes......... (5,600) (686) (6,286) (1,960) 1,989 (6,257)
Current tax expense....................... 59 -- 59 -- -- 59
Deferred tax benefit...................... (478) (126) (604) (332) -- (936)
Dividend requirement for exchangeable
preferred stock......................... (4,013) -- (4,013) -- 1,188 (2,825)
------- ------ ------- ------- ------- -------
Income (loss) applicable to common
shares.................................. $(9,194) $ (560) $(9,754) $(1,628) $ 3,177 $(8,205)
======= ====== ======= ======= ======= =======
</TABLE>
In reviewing the information contained in the table above, you should note the
following:
ADJUSTMENTS FOR COMPLETED TRANSACTIONS. The data in the "Adjustments for
Completed Transactions" column represent the net effect of the transactions
completed after January 1, 1999 as if each had taken place on January 1, 1998,
except for the acquisitions of two FM radio stations in Wilkes-Barre/Scranton
and one FM radio station in Spokane, the effect of which we consider to be
immaterial.
Prior to the acquisition dates, Citadel Broadcasting operated six of the
acquired stations under a joint sales agreement or a local marketing agreement
and received fees for such services. The information in the "Adjustments for
Completed Transactions" column includes net revenue and station operating
expenses for stations operated under joint sales agreements to reflect ownership
of the stations as of January 1, 1998. Net revenue and station expenses for
stations operated under local marketing agreements are included in our
historical consolidated financial statements. For those stations operated under
joint sales agreements or local marketing agreements 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.
The table below provides a breakdown of the components in the "Adjustments
for Completed Transactions" column. The data in the "Other Acquisitions and
Disposition" column give effect to our recently completed acquisitions in
Harrisburg/Carlisle, Colorado Springs and Spokane and disposition in Colorado
Springs and the April 1999 termination of the joint sales agreement relating to
stations in Colorado Springs and Spokane.
26
<PAGE> 31
<TABLE>
<CAPTION>
BATON ROUGE OTHER
AND ACQUISITIONS
LAFAYETTE SAGINAW/BAY CITY AND THE COMPLETED
ACQUISITION ACQUISITION DISPOSITION TRANSACTIONS
------------ ----------------- ------------ --------------
<S> <C> <C> <C> <C>
Net broadcasting revenue....... $1,371 $ 526 $596 $2,493
Station operating expenses..... 1,275 486 383 2,144
Depreciation and
amortization................. 628 202 205 1,035
------ ----- ---- ------
Operating expenses........... 1,903 688 588 3,179
------ ----- ---- ------
Income (loss) before income
taxes........................ (532) (162) 8 (686)
Deferred tax benefit........... (126) 0 0 (126)
------ ----- ---- ------
Income (loss).................. $ (406) $(162) $ 8 $ (560)
====== ===== ==== ======
</TABLE>
ADJUSTMENTS FOR PENDING ACQUISITIONS AND PENDING DISPOSITION. The table
below provides a breakdown of the components in the "Adjustments for Pending
Acquisitions and Pending Disposition" column.
<TABLE>
<CAPTION>
CHARLESTON/ PORTSMOUTH/
BINGHAMTON/ DOVER/ PENDING
MUNCIE/ ROCHESTER ACQUISITIONS
KOKOMO AND PORTLAND PENDING AND PENDING
ACQUISITION ACQUISITION DISPOSITION DISPOSITION
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Net broadcasting revenue............ $ 4,582 $ 3,141 $(3,025) $ 4,698
Station operating expenses.......... 3,069 2,171 (3,288) 1,952
Depreciation and amortization....... 1,342 1,463 -- 2,805
Corporate general and
administrative.................... -- -- (44) (44)
------- ------- ------- -------
Operating expenses................ 4,411 3,634 (3,332) 4,713
------- ------- ------- -------
Operating income (loss)............. 171 (493) 307 (15)
Interest expense.................... 1,266 1,339 (548) 2,057
Other (income) expense.............. -- -- (112) (112)
------- ------- ------- -------
Income (loss) before income taxes (1,095) (1,832) 967 (1,960)
Deferred tax benefit -- (332) -- (332)
------- ------- ------- -------
Income (loss)....................... $(1,095) $(1,500) $ 967 $(1,628)
======= ======= ======= =======
</TABLE>
ADJUSTMENTS FOR THIS OFFERING. The data in the "Adjustments for this
Offering" column represent the interest savings from using the estimated net
proceeds we receive from this offering for the repayment of $94.3 million of the
pro forma credit facility balance and the reduction in the dividend requirement
resulting from the redemption of 35% of the outstanding exchangeable preferred
stock.
27
<PAGE> 32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR PENDING
ADJUSTMENTS AS ADJUSTED FOR ACQUISITIONS ADJUSTMENTS
FOR COMPLETED COMPLETED AND PENDING FOR THIS
ACTUAL TRANSACTIONS TRANSACTIONS DISPOSITION OFFERING PRO FORMA
------- ------------- --------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net broadcasting revenue................. $28,139 $ 3,103 $31,242 $ 2,978 $ -- $ 34,220
Station operating expenses............... 21,897 1,620 23,517 814 -- 24,331
Depreciation and amortization............ 5,946 2,048 7,994 2,457 -- 10,451
Corporate general and administrative..... 1,118 -- 1,118 (44) -- 1,074
------- ------- ------- ------- ------- --------
Operating expenses................... 28,961 3,668 32,629 3,227 -- 35,856
------- ------- ------- ------- ------- --------
Operating income (loss).................. (822) (565) (1,387) (249) -- (1,636)
Interest expense......................... 4,759 (1,360) 3,399 2,057 (1,989) 3,467
Other (income) expense, net.............. (37) -- (37) -- -- (37)
------- ------- ------- ------- ------- --------
Income (loss) before income taxes........ (5,544) 795 (4,749) (2,306) 1,989 (5,066)
Deferred tax benefit..................... (429) (126) (555) (332) -- (887)
Dividend requirement for exchangeable
preferred stock........................ (3,572) -- (3,572) -- (3,135) (6,707)
------- ------- ------- ------- ------- --------
Income (loss) applicable to common
shares................................. $(8,687) $ 921 $(7,766) $(1,974) $(1,146) $(10,886)
======= ======= ======= ======= ======= ========
</TABLE>
In reviewing the information contained in the table above, you should note the
following:
ADJUSTMENTS FOR COMPLETED TRANSACTIONS. The data in the "Adjustments for
Completed Transactions" column represent the net effect of the transactions
completed after January 1, 1998 as if each had taken place on January 1, 1998,
except for the acquisitions of two FM radio stations in Wilkes-Barre/Scranton
and one FM radio station in Spokane, the effect of which we consider to be
immaterial.
Prior to the acquisition dates, Citadel Broadcasting operated many of the
acquired stations under a joint sales agreement or local marketing agreement and
received fees for such services. The information in the "Adjustments for
Completed Transactions" column includes net revenue and station operating
expenses for stations operated under joint sales agreements to reflect ownership
of the stations as of January 1, 1998. Net revenue and station expenses for
stations operated under local marketing agreements are included in our
historical consolidated financial statements. For those stations operated under
joint sales agreements or local marketing agreements 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.
The table below provides a breakdown of the components in the "Adjustments
for Completed Transactions" column. As you review this table, you should note
the following:
-- The data in the "Other Acquisitions and Dispositions" column give
effect to our recently completed acquisitions in
Wilkes-Barre/Scranton, Boise, Little Rock, Harrisburg/Carlisle,
Colorado Springs and Spokane, dispositions in Allentown/Bethlehem,
Quincy, Little Rock and Colorado Springs and the termination of a
joint sales agreement relating to stations in Colorado Springs and
Spokane.
28
<PAGE> 33
-- The data in the "Repayment of the Credit Facility" column reflect the
repayment of outstanding borrowings under Citadel Broadcasting's
credit facility with the proceeds from our July 1998 initial public
offering of our common stock, and
-- The data in the "Offering of 9 1/4% Notes" column reflect recording
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% notes.
<TABLE>
<CAPTION>
SAGINAW/ BATON ROUGE OTHER REPAYMENT OFFERING
BAY CITY AND LAFAYETTE ACQUISITIONS AND OF THE CREDIT OF 9 1/4% COMPLETED
ACQUISITION ACQUISITION DISPOSITIONS FACILITY NOTES TRANSACTIONS
------------ ------------- ---------------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net broadcasting
revenue............ $1,306 $1,298 $ 499 $ -- $ -- $3,103
Station operating
expenses........... 1,006 1,011 (397) -- -- 1,620
Depreciation and
amortization....... 605 729 714 -- -- 2,048
------ ------ ----- ------- ----- ------
Operating
expenses......... 1,611 1,740 317 -- -- 3,668
------ ------ ----- ------- ----- ------
Operating income
(loss)............. (305) (442) 182 -- -- (565)
Interest expense..... -- -- 490 (2,243) 393 (1,360)
------ ------ ----- ------- ----- ------
Income (loss) before
income taxes....... (305) (442) (308) 2,243 (393) 795
Deferred tax
benefit............ -- (126) -- -- -- (126)
------ ------ ----- ------- ----- ------
Income (loss)........ $ (305) $ (316) $(308) $ 2,243 $(393) $ 921
====== ====== ===== ======= ===== ======
</TABLE>
ADJUSTMENTS FOR PENDING ACQUISITIONS AND PENDING DISPOSITION. The table
below provides a breakdown of the components in the "Adjustments for Pending
Acquisitions and Pending Disposition" column.
<TABLE>
<CAPTION>
PORTSMOUTH/
CHARLESTON/ DOVER/ PENDING
BINGHAMTON/ ROCHESTER ACQUISITIONS
MUNCIE/KOKOMO AND PORTLAND PENDING AND PENDING
ACQUISITION ACQUISITION DISPOSITION DISPOSITION
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net broadcasting revenue........... $ 3,471 $ 2,647 $(3,140) $ 2,978
Station operating expenses......... 2,257 1,870 (3,313) 814
Depreciation and amortization...... 1,342 1,463 (348) 2,457
Corporate general and
administrative................... -- -- (44) (44)
------- ------- ------- -------
Operating expenses............... 3,599 3,333 (3,705) 3,227
------- ------- ------- -------
Operating income (loss)............ (128) (686) 565 (249)
Interest expense................... 1,266 1,339 (548) 2,057
------- ------- ------- -------
Income (loss) before income
taxes............................ (1,394) (2,025) 1,113 (2,306)
Deferred tax benefit............... -- (332) -- (332)
------- ------- ------- -------
Income (loss)...................... $(1,394) $(1,693) $ 1,113 $(1,974)
======= ======= ======= =======
</TABLE>
ADJUSTMENTS FOR THIS OFFERING. The data in the "Adjustments for this
Offering" column represent the interest savings from using the estimated net
proceeds we receive from this offering for the repayment of $94.3 million of the
pro forma credit facility balance and the reduction in the dividend requirement
resulting from the redemption of 35% of the outstanding exchangeable preferred
stock offset by the redemption premium.
29
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
ADJUSTMENTS FOR PENDING
FOR AS ADJUSTED FOR ACQUISITIONS ADJUSTMENTS
COMPLETED COMPLETED AND PENDING FOR THIS
ACTUAL TRANSACTIONS TRANSACTIONS DISPOSITION OFFERING PRO FORMA
-------- ------------ --------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net broadcasting revenue............... $135,426 $16,849 $152,275 $14,763 $ -- $167,038
Station operating expenses............. 93,485 11,015 104,500 6,116 -- 110,616
Depreciation and amortization.......... 26,414 7,063 33,477 9,848 -- 43,325
Corporate general and administrative... 4,369 -- 4,369 (175) -- 4,194
-------- ------- -------- ------- ------- --------
Operating expenses................... 124,268 18,078 142,346 15,789 -- 158,135
-------- ------- -------- ------- ------- --------
Operating income (loss)................ 11,158 (1,229) 9,929 (1,026) -- 8,903
Interest expense....................... 18,126 (2,668) 15,458 8,227 (7,957) 15,728
Other (income) expense, net............ (1,651) -- (1,651) (174) -- (1,825)
-------- ------- -------- ------- ------- --------
Income (loss) before income taxes...... (5,317) 1,439 (3,878) (9,079) 7,957 (5,000)
Current tax expense.................... 420 -- 420 -- -- 420
Deferred tax benefit................... (1,806) (505) (2,311) (1,328) -- (3,639)
Dividend requirement for exchangeable
preferred stock...................... (14,586) -- (14,586) -- 138 (14,448)
-------- ------- -------- ------- ------- --------
Income (loss) applicable to common
shares............................... $(18,517) $ 1,944 $(16,573) $(7,751) $ 8,095 $(16,229)
======== ======= ======== ======= ======= ========
</TABLE>
In reviewing the information contained in the table above, you should note the
following:
ADJUSTMENTS FOR COMPLETED TRANSACTIONS. The data in the "Adjustments for
Completed Transactions" column represent the net effect of the transactions
completed after January 1, 1998 as if each had taken place on January 1, 1998,
except for the acquisitions of two FM radio stations in Wilkes-Barre/Scranton
and one FM radio station in Spokane, the effect of which we consider to be
immaterial.
Prior to the acquisition dates, Citadel Broadcasting operated many of the
acquired stations under a joint sales agreement or local marketing agreement and
received fees for such services. The information in the "Adjustments for
Completed Transactions" column includes net revenue and station operating
expenses for stations operated under joint sales agreements to reflect ownership
of the stations as of January 1, 1998. Net revenue and station expenses for
stations operated under local marketing agreements are included in our
historical consolidated financial statements. For those stations operated under
joint sales agreements or local marketing agreements 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.
The table below provides a breakdown of the components in the "Adjustments
for Completed Transactions" column. As you review this table, you should note
the following:
-- The data in the "Other Acquisitions and Dispositions" column give
effect to our recently completed acquisitions in
Wilkes-Barre/Scranton, Boise, Little Rock, Harrisburg/Carlisle,
Colorado Springs and Spokane, dispositions in Allentown/Bethlehem,
Quincy, Little Rock and Colorado Springs and the termination of a
joint sales agreement relating to stations in Colorado Springs and
Spokane.
30
<PAGE> 35
-- The data in the "Repayment of the Credit Facility" column reflect the
repayment of outstanding borrowings under Citadel Broadcasting's
credit facility with the proceeds from our July 1998 initial public
offering of our common stock, and
-- The data in the "Offering of 9 1/4% Notes" column reflect recording
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% notes.
<TABLE>
<CAPTION>
SAGINAW/ BATON ROUGE OTHER REPAYMENT OFFERING
BAY CITY AND LAFAYETTE ACQUISITIONS AND OF THE CREDIT OF 9 1/4% COMPLETED
ACQUISITION ACQUISITION DISPOSITIONS FACILITY NOTES TRANSACTIONS
------------ ------------- ---------------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net broadcasting
revenue............ $6,981 $ 7,331 $ 2,537 $ -- $ -- $16,849
Station operating
expenses........... 4,447 5,170 1,398 -- -- 11,015
Depreciation and
amortization....... 2,421 2,914 1,728 -- -- 7,063
------ ------- ------- -------- ------- -------
Operating
expenses......... 6,868 8,084 3,126 -- -- 18,078
------ ------- ------- -------- ------- -------
Operating income
(loss)............. 113 (753) (589) -- -- (1,229)
Interest expense..... -- -- 445 (4,487) 1,374 (2,668)
------ ------- ------- -------- ------- -------
Income (loss) before
income taxes....... 113 (753) (1,034) 4,487 (1,374) 1,439
Deferred tax
benefit............ -- (505) -- -- -- (505)
------ ------- ------- -------- ------- -------
Income (loss)........ $ 113 $ (248) $(1,034) $ 4,487 $(1,374) $ 1,944
====== ======= ======= ======== ======= =======
</TABLE>
ADJUSTMENTS FOR PENDING ACQUISITIONS AND PENDING DISPOSITION. The table
below provides a breakdown of the components in the "Adjustments for Pending
Acquisitions and Pending Disposition" column.
<TABLE>
<CAPTION>
CHARLESTON/ PORTSMOUTH/DOVER/ PENDING
BINGHAMTON/ ROCHESTER ACQUISITIONS
MUNCIE/KOKOMO AND PORTLAND PENDING AND PENDING
ACQUISITION ACQUISITION DISPOSITION DISPOSITION
------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Net broadcasting revenue........... $16,500 $13,642 $(15,379) $14,763
Station operating expenses......... 11,051 8,676 (13,611) 6,116
Depreciation and amortization...... 5,367 5,853 (1,372) 9,848
Corporate general and
administrative................... -- -- (175) (175)
------- ------- -------- -------
Operating expenses............... 16,418 14,529 (15,158) 15,789
------- ------- -------- -------
Operating income (loss)............ 82 (887) (221) (1,026)
Interest expense................... 5,063 5,358 (2,194) 8,227
Other (income) expense............. -- -- (174) (174)
------- ------- -------- -------
Income (loss) before income
taxes............................ (4,981) (6,245) 2,147 (9,079)
Deferred tax benefit............... -- (1,328) -- (1,328)
------- ------- -------- -------
Income (loss)...................... $(4,981) $(4,917) $ 2,147 $(7,751)
======= ======= ======== =======
</TABLE>
ADJUSTMENTS FOR THIS OFFERING. The data in the "Adjustments for this
Offering" column represent the interest savings from using the estimated net
proceeds we receive from this offering for the repayment of $94.3 million of the
pro forma credit facility balance and the reduction in the dividend requirement
resulting from the redemption of 35% of the outstanding exchangeable preferred
stock offset by the redemption premium.
31
<PAGE> 36
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR PENDING
ADJUSTMENTS FOR AS ADJUSTED FOR ACQUISITIONS ADJUSTMENTS
COMPLETED COMPLETED AND PENDING FOR THIS
ACTUAL TRANSACTIONS TRANSACTIONS DISPOSITION OFFERING PRO FORMA
-------- --------------- --------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $ 31,615 $(10,000) $ 21,615 $(16,900) $ -- $ 4,715
Accounts and notes receivable,
net............................... 35,837 -- 35,837 5,252 -- 41,089
Prepaid expenses.................... 2,881 -- 2,881 256 -- 3,137
Assets held for sale................ 25,954 -- 25,954 (25,954) -- --
-------- -------- -------- -------- -------- --------
Total current assets............ 96,287 (10,000) 86,287 (37,346) -- 48,941
Property and equipment, net......... 42,070 -- 42,070 11,650 -- 53,720
Intangible assets, net.............. 335,173 10,000 345,173 146,599 -- 491,772
Other assets........................ 4,344 -- 4,344 405 -- 4,749
-------- -------- -------- -------- -------- --------
$477,874 $ -- $477,874 $121,308 $ -- $599,182
======== ======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued
liabilities....................... $ 18,098 $ -- $ 18,098 $ 2,091 $ -- $ 20,189
Current maturities of other
long-term obligations............. 270 -- 270 250 -- 520
-------- -------- -------- -------- -------- --------
Total current liabilities....... 18,368 -- 18,368 2,341 -- 20,709
-------- -------- -------- -------- -------- --------
Notes payable, less current
maturities........................ -- -- 97,500 (94,304) 3,196
10 1/4% Notes....................... 98,553 -- 98,553 -- -- 98,553
9 1/4% Notes........................ 111,639 -- 111,639 -- -- 111,639
Other long-term obligations, less
current maturities................ 1,023 -- 1,023 1,500 -- 2,523
Deferred tax liability.............. 31,938 -- 31,938 19,921 -- 51,859
Exchangeable preferred stock........ 120,837 -- 120,837 -- (45,207) 75,630
Shareholders' equity:
Common stock and additional
paid-in capital................. 134,556 -- 134,556 -- 146,000
(6,489) 274,067
Deferred compensation............. (988) -- (988) -- -- (988)
Accumulated deficit............... (37,863) -- (37,863) 46 -- (37,817)
Accumulated other comprehensive
loss............................ (189) -- (189) -- -- (189)
-------- -------- -------- -------- -------- --------
Total shareholders' equity...... 95,516 -- 95,516 46 139,511 235,073
-------- -------- -------- -------- -------- --------
$477,874 $ -- $477,874 $121,308 $ -- $599,182
======== ======== ======== ======== ======== ========
</TABLE>
In reviewing the information contained in the table above, you should note
the following:
ADJUSTMENTS FOR COMPLETED TRANSACTIONS. The data in the "Adjustments for
Completed Transactions" column represent the net effect of transactions
completed after March 31, 1999 as if each had taken place on March 31, 1999,
except for the acquisition of one FM radio station in Wilkes-Barre/Scranton and
one FM radio station in Spokane, the effect of which we consider to be
immaterial.
ADJUSTMENTS FOR PENDING ACQUISITIONS AND PENDING DISPOSITION. The data in
the "Adjustments for Pending Acquisitions and Pending Disposition" column give
effect to our pending acquisitions in Charleston, Binghamton, Muncie, Kokomo,
Portsmouth/Dover/ Rochester, and Portland and disposition in Eugene, Medford,
Tri-Cities, Billings, State College and Johnstown.
32
<PAGE> 37
ADJUSTMENTS FOR THIS OFFERING. The data in the "Adjustments for this
Offering" column represent our issuance of 5,000,000 shares of our common stock
at a public offering price of $30.625 per share based on the average of the high
and low trading prices of our common stock on May 24, 1999, net of an aggregate
of $7.1 million of underwriting discounts and commissions and estimated offering
expenses. The application of the estimated net proceeds we receive from this
offering is to repay $94.3 million of the pro forma balance on Citadel
Broadcasting's credit facility and for the redemption of 35% of Citadel
Broadcasting's outstanding exchangeable preferred stock and the payment of $6.5
million for the redemption premium and the accumulated and unpaid dividends on
the shares redeemed.
33
<PAGE> 38
SELECTED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below as of
and for each of the years ended December 31, 1994, 1995, 1996, 1997 and 1998 are
derived from our consolidated financial statements. These consolidated financial
statements have been audited by KPMG LLP, independent certified public
accountants. Our selected historical financial data presented below as of March
31, 1999 and for each of the three month periods ended March 31, 1997 through
March 31, 1999 are derived from our unaudited consolidated financial statements.
In our opinion, these unaudited consolidated financial statements contain all
necessary adjustments of a normal recurring nature to present the financial
statements in accordance with generally accepted accounting principles. Our
consolidated financial statements as of December 31, 1997 and 1998 and for each
of the years in the three-year period ended December 31, 1998 and the
independent auditors' report on those consolidated financial statements, as well
as our unaudited consolidated financial statements as of March 31, 1999 and for
the three months ended March 31, 1998 and 1999, are included elsewhere in this
prospectus. Our financial results are not comparable from year to year because
of our acquisition and disposition of various radio stations.
You should read the summary historical financial data presented above
together with, and it is qualified by reference to, our Consolidated Financial
Statements and related notes and the information contained in the "Selected
Historical Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections.
As you review the information contained in the following table with respect
to the years ended December 31, 1994 through 1998 and the three month periods
ended March 31, 1998 and 1999, you should note the following:
-- Interest Expense. Interest expense includes debt issuance costs and
debt discount amortization of approximately $287,000, $132,000,
$371,000, $441,000 and $717,000 for the years ended December 31, 1994,
1995, 1996, 1997 and 1998, respectively, and $96,000 and $253,000 for
the three months ended March 31, 1998 and 1999, respectively.
-- Extraordinary Loss. On October 9, 1996, we repaid our long-term debt
of $31.3 million, payable to a financial institution, and our 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.
-- Cash Dividends. We have never declared cash dividends on our common
stock.
-- Net Loss Per Common Share. Basic and diluted net loss per common share
are the same for all periods presented due to our net losses.
-- Other (Income) Expense, Net. Other (income) expense includes gain
(loss) on sales of radio stations and property and equipment of
approximately $620,068, $707,286, $(1,749), $0 and $1,044,880 for the
years ended December 31, 1994, 1995, 1996, 1997 and 1998,
respectively, and $0 and $0 for the three months ended March 31, 1998
and 1999, respectively.
-- Broadcast Cash Flow, EBITDA and After-tax Cash Flow. The performance
of a radio station group is customarily measured by its ability to
generate broadcast cash flow. The two components of broadcast cash
flow are gross revenue, net of agency
34
<PAGE> 39
commissions, and operating expenses, excluding depreciation and
amortization, corporate general and administrative expenses and
non-cash and non-recurring charges. Broadcast cash flow assists in
comparing performance on a consistent basis across companies without
regard to depreciation and amortization, which can vary significantly
depending on accounting methods, particularly when acquisitions are
involved. EBITDA consists of operating income (loss) before
depreciation and amortization. After-tax cash flow consists of net
income before extraordinary items less preferred dividends and the
amount of the deferred tax benefit plus depreciation and amortization.
Although broadcast cash flow, EBITDA and after-tax cash flow are not
measures of performance calculated in accordance with generally
accepted accounting principles, we believe that they are useful to an
investor in evaluating our company because they are measures widely
used in the broadcasting industry to evaluate a radio company's
operating performance. However, you should not consider broadcast cash
flow, EBITDA and after-tax cash flow 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 generally
accepted accounting principles as a measure of liquidity or
profitability.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------- --------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcasting revenue...... $ 32,998 $ 34,112 $ 45,413 $ 89,803 $ 135,426 $ 28,139 $ 32,633
Station operating expenses.... 24,331 26,832 33,232 65,245 93,485 21,897 24,626
Depreciation and
amortization................ 7,465 4,921 5,189 14,661 26,414 5,946 7,003
Corporate general and
administrative.............. 2,504 2,274 3,248 3,530 4,369 1,118 1,491
--------- --------- --------- --------- ---------- --------- ----------
Operating income (loss)....... (1,302) 85 3,744 6,367 11,158 (822) (487)
Interest expense.............. 4,866 5,242 6,155 12,872 18,126 4,759 5,744
Other (income) expense, net... (657) (781) (414) (451) (1,651) (37) (631)
--------- --------- --------- --------- ---------- --------- ----------
Income (loss) before income
taxes and extraordinary
item........................ (5,511) (4,376) (1,997) (6,054) (5,317) (5,544) (5,600)
Current tax expense........... -- -- -- -- 420 -- 59
Deferred tax benefit.......... -- -- -- (770) (1,806) (429) (478)
--------- --------- --------- --------- ---------- --------- ----------
Income (loss) before
extraordinary item.......... (5,511) (4,376) (1,997) (5,284) (3,931) (5,115) (5,181)
Extraordinary loss............ -- -- (1,769) -- -- -- --
--------- --------- --------- --------- ---------- --------- ----------
Net income (loss)............. (5,511) (4,376) (3,766) (5,284) (3,931) (5,115) (5,181)
Dividend requirement for
exchangeable preferred
stock....................... -- -- -- 6,633 14,586 3,572 4,013
--------- --------- --------- --------- ---------- --------- ----------
Net loss applicable to common
shares...................... $ (5,511) $ (4,376) $ (3,766) $ (11,917) $ (18,517) $ (8,687) $ (9,194)
========= ========= ========= ========= ========== ========= ==========
Net loss per common share..... $ (1.82) $ (1.35) $ (1.18) $ (3.72) $ (1.51) $ (2.70) $ (0.36)
Shares used in per share
calculation................. 3,020,844 3,234,996 3,196,551 3,199,467 12,297,588 3,219,774 25,744,861
OTHER DATA:
Broadcast cash flow........... $ 8,667 $ 7,280 $ 12,181 $ 24,558 $ 41,941 $ 6,242 $ 8,007
EBITDA........................ 6,163 5,006 8,933 21,028 37,572 5,124 6,516
After-tax cash flow........... 1,954 545 3,192 1,974 6,091 (3,170) (2,669)
Net cash provided by: (used
in)
operating activities........ 324 (434) (1,081) 5,651 13,538 (979) 2,103
investing activities........ (14,037) 4,810 (61,124) (212,253) (45,812) (20,825) (73,647)
financing activities........ 14,393 (4,908) 62,788 212,699 127,430 16,910 317
Capital expenditures.......... 2,857 1,691 2,041 2,070 4,512 186 927
</TABLE>
35
<PAGE> 40
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS, EXCEPT NET LOSS PER COMMON SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net broadcasting revenue.......... $14,506 $17,905 $27,614 $29,778 $28,139 $34,784 $35,898 $36,605
Station operating expenses........ 11,277 13,036 18,993 21,939 21,897 23,543 23,972 24,073
Depreciation and amortization..... 2,529 2,471 4,589 5,072 5,946 7,017 7,042 6,409
Corporate general and
administrative.................. 750 844 968 968 1,118 1,150 1,083 1,018
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)........... (50) 1,554 3,064 1,799 (822) 3,074 3,801 5,105
Interest expense.................. 2,177 2,556 3,736 4,403 4,759 5,283 3,548 4,536
Other (income) expense, net....... (11) (81) (309) (50) (37) (42) (15) (1,557)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes........................... (2,216) (921) (363) (2,554) (5,544) (2,167) 268 2,126
Current tax expense............... -- -- -- -- -- -- 180 240
Deferred tax benefit.............. (35) (35) (35) (665) (429) (455) (459) (463)
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................. (2,181) (886) (328) (1,889) (5,115) (1,712) 547 2,349
Dividend requirement for
exchangeable preferred stock.... -- -- 3,275 3,358 3,572 3,488 3,763 3,763
------- ------- ------- ------- ------- ------- ------- -------
Net loss applicable to common
shares.......................... $(2,181) $ (886) $(3,603) $(5,247) $(8,687) $(5,200) $(3,216) $(1,414)
======= ======= ======= ======= ======= ======= ======= =======
Net loss per common share......... $ (0.68) $ (0.28) $ (1.13) $ (1.63) $ (2.70) $ (1.56) $ (0.20) $ (0.05)
Shares used in per share
calculation..................... 3,194 3,194 3,199 3,211 3,220 3,342 16,469 25,725
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------- MARCH 31,
1994 1995 1996 1997 1998 1999
------- ------- -------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 1,538 $ 1,005 $ 1,588 $ 7,685 $102,842 $ 31,615
Working capital (deficiency).............. 3,382 2,928 (4,195) 22,594 149,601 77,919
Intangible assets, net.................... 18,152 15,093 51,802 268,690 268,790 335,173
Total assets............................ 46,529 37,444 102,315 344,172 472,261 477,874
Long-term debt (including current
portion)................................ 47,805 43,046 90,714 189,699 211,419 211,485
Exchangeable preferred stock.............. -- -- -- 102,010 116,775 120,837
Shareholders' equity (deficit)............ (4,690) (9,177) 6,070 16,132 103,963 95,516
</TABLE>
36
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with
the information contained in the "Selected Historical Financial Data" section,
and Citadel Communications' Consolidated Financial Statements and Notes thereto
included elsewhere in this prospectus. Except for the historical information
contained in this prospectus, the discussions in this prospectus contain
forward-looking statements that involve risks and uncertainties. Citadel
Communications' actual results could differ materially from those discussed in
this prospectus. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements" sections, as well as
those discussed elsewhere in this prospectus. Citadel Communications undertakes
no obligation to publicly release the results of any revisions to these
forward-looking statements to reflect any future events or circumstances.
General economic conditions have an impact on Citadel Communications'
business and financial results. From time to time the markets in which Citadel
Communications operates experience weak economic conditions that may negatively
affect the revenue of Citadel Communications. However, management believes that
this impact is somewhat mitigated by Citadel Communications' diverse
geographical presence. In addition, Citadel Communications' financial results
are also dependent on a number of factors, including the general strength of the
local and national economies, population growth, the 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.
The principal source of Citadel Communications' revenue is the sale of
broadcasting time on its radio stations for advertising. As a result, Citadel
Communications' 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 the format of a particular station.
Each of Citadel Communications' 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
Citadel Communications' selling activity is based on demand for its radio
stations' on-air inventory and, in general, Citadel Communications 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, Citadel
Communications generally enters into trade agreements only if the goods or
services bartered to it will be used in its business. Citadel Communications has
minimized its use of trade agreements and has generally sold over 90% of its
advertising time for cash. In addition, it is Citadel Communications' general
policy not to preempt advertising spots paid for in cash with advertising spots
paid for in trade.
37
<PAGE> 42
Citadel Communications' revenue varies throughout the year. As is typical
in the radio broadcasting industry, Citadel Communications' first calendar
quarter generally produces the lowest revenue, and the fourth quarter generally
produces the highest revenue.
The primary operating expenses incurred in the ownership and operation of
radio stations include employee salaries and commissions, programming expenses
and advertising and promotional expenses. Citadel Communications strives to
control these expenses by working closely with local station management. Citadel
Communications also incurs and will continue to incur significant depreciation,
amortization and interest expense as a result of completed and future
acquisitions of stations and existing and future borrowings.
Citadel Communications also provides on-line services, offering its
subscribers a variety of services, including electronic mail and access to the
internet. Citadel Communications' internet service provider recorded gross
revenue, operating income and net income (loss) of $2.1 million, $0.5 million
and $0.1 million, respectively, for the year ended December 31, 1998 and $1.4
million, $0.2 million and $(0.2) million, respectively, for the three months
ended March 31, 1999. The revenue generated from the internet service provider
has been included in broadcasting revenue as the amounts are not considered
material to understanding the changes in the results of operations for the year
ended December 31, 1998 as compared to prior years and for the three months
ended March 31, 1999 as compared to the three months ended March 31, 1998.
In 1998, Citadel Communications' radio stations derived approximately 83.0%
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, Citadel
Communications engages a national advertising representative firm. Citadel
Communications 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. Therefore, Citadel
Communications focuses on sales of local and regional advertising. During the
year ended December 31, 1998 and the three months ended March 31, 1999, no
single advertiser accounted for more than 10% of net broadcasting revenue of
Citadel Communications.
The advertising revenue of Citadel Communications is typically collected
within 120 days of the date on which the related advertisement is aired. Most
accrued expenses, however, are paid within 45 to 60 days. As a result of this
time lag, working capital requirements have increased as Citadel Communications
has grown and will likely increase in the future.
Historically, Citadel Communications has generated net losses primarily as
a result of significant charges for depreciation and amortization relating to
the acquisition of radio stations and interest charges on outstanding debt.
Citadel Communications amortizes FCC licenses and goodwill attributable to the
acquisition of radio stations over a 15-year period. Based upon the large number
of acquisitions that were consummated within the last two years, Citadel
Communications anticipates that depreciation and amortization charges will
continue to be significant for several years. To the extent that Citadel
Communications completes additional acquisitions, its depreciation and
amortization charges are likely to increase. Citadel Communications expects that
it will continue to incur net losses through at least 1999.
38
<PAGE> 43
Citadel Communications consolidates the operations of stations operated
under local marketing agreements. The Emerging Issues Task Force, a division of
the Financial Accounting Standards Board, is reviewing the accounting method for
contractual management arrangements and may determine that consolidation is
appropriate only if certain requirements for controlling financial interest are
met. Because the provisions of Citadel Communications' existing local marketing
agreement does not meet the proposed control requirements, if the Emerging
Issues Task Force proposal is approved as drafted, consolidation of the station
operated under the local marketing agreement may no longer be appropriate.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Net Broadcasting Revenue. Net broadcasting revenue increased $4.5 million
or 16.0% to $32.6 million for the three months ended March 31, 1999 from $28.1
million for the three months ended March 31, 1998. For stations owned and
operated over the comparable periods in 1998 and 1999, net broadcasting revenue
improved $3.3 million or 11.9% to $31.1 million in 1999 from $27.8 million in
1998, primarily due to increased ratings and improved selling efforts.
Station Operating Expenses. Station operating expenses increased $2.7
million or 12.3% to $24.6 million for the three months ended March 31, 1999 from
$21.9 million for the same period in 1998. The increase was primarily
attributable to the inclusion of station operating expenses of the radio
stations acquired after March 31, 1998.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $1.8 million or 29.0% to $8.0 million for the three months
ended March 31, 1999 from $6.2 million for the three months ended March 31,
1998. For stations owned and operated over the comparable periods in 1998 and
1999, broadcast cash flow increased $1.2 million or 19.4% to $7.4 million in
1999 from $6.2 million in 1998. As a percentage of net broadcasting revenue,
broadcast cash flow improved to 24.5% for the three months ended March 31, 1999
compared to 22.1% for the three months ended 1998.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.4 million or 36.4% to $1.5 million for the
three months ended March 31, 1999 from $1.1 million for the three months ended
March 31, 1998. The increase was due primarily to non-recurring costs to
relocate the corporate offices to Nevada, an increase in staffing levels needed
to support Citadel Communications' growth and increased professional fees and
expenses due to public company reporting requirements.
EBITDA. As a result of the factors described above, EBITDA increased $1.4
million or 27.5% to $6.5 million for the three months ended March 31, 1999 from
$5.1 million for the three months ended March 31, 1998.
Depreciation and Amortization. Depreciation and amortization expense
increased $1.1 million or 18.6% to $7.0 million for the three months ended March
31, 1999 from $5.9 million for the three months ended March 31, 1998, primarily
due to radio station acquisitions completed during 1998 and in the first quarter
of 1999.
Interest Expense. Interest expense increased $0.9 million or 18.8% to $5.7
million for the three months ended March 31, 1999 from $4.8 million for the
three months ended
39
<PAGE> 44
March 31, 1998, primarily due to interest expense associated with Citadel
Broadcasting's 9 1/4% notes issued on November 1998 offset by a repayment of
Citadel Broadcasting's credit facility in the third quarter of 1998 from the net
proceeds of Citadel Communications' initial public offering of its common stock
in July 1998.
Income Tax Benefit. The income tax benefit for the three months ended March
31, 1999 and 1998 represents the reversal of deferred tax liabilities
established at the date of acquisition due to differences in tax bases and the
financial statement carrying amounts of intangibles and fixed assets acquired in
stock-based acquisitions, offset by state tax expense in the first quarter of
1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Broadcasting Revenue. Net broadcasting revenue increased $45.6 million
or 50.8% to $135.4 million for the year ended December 31, 1998 from $89.8
million for the year ended December 31, 1997. The inclusion of revenue from the
acquisitions of radio stations and revenue generated from local marketing
agreements entered into during 1998 provided $36.7 million of the increase. For
stations owned and operated over the comparable periods in 1998 and 1997, net
broadcasting revenue improved $8.9 million or 13.4% to $75.2 million in 1998
from $66.3 million in 1997, primarily due to increased ratings and improved
selling efforts.
Station Operating Expenses. Station operating expenses increased $28.3
million or 43.4% to $93.5 million for the year ended December 31, 1998 from
$65.2 million for the year ended December 31, 1997. The increase was primarily
attributable to the inclusion of station operating expenses of the radio station
acquisitions and the local marketing agreements entered into during 1998.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $17.3 million or 70.3% to $41.9 million for the year ended
December 31, 1998 from $24.6 million for the year ended December 31, 1997. For
stations owned and operated over the comparable periods in 1998 and 1997,
broadcast cash flow increased $5.7 million or 32.0% to $23.5 million in 1998
from $17.8 million in 1997. As a percentage of net broadcasting revenue,
broadcast cash flow improved to 30.9% for the year ended December 31, 1998
compared to 27.4% for the year ended December 31, 1997.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.9 million or 25.7% to $4.4 million for the
year ended December 31, 1998 from $3.5 million for the year ended December 31,
1997. The increase was due primarily to an increase in staffing levels needed to
support Citadel Communications' growth.
EBITDA. As a result of the factors described above, EBITDA increased $16.4
million or 77.7% to $37.5 million for the year ended December 31, 1998 from
$21.1 million for the year ended December 31, 1997.
Depreciation and Amortization. Depreciation and amortization expense
increased $11.7 million or 79.6% to $26.4 million for the year ended December
31, 1998 from $14.7 million for the year ended December 31, 1997, primarily due
to radio station acquisitions completed during 1998 and late 1997.
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Interest Expense. Interest expense increased approximately $5.2 million or
40.3% to $18.1 million for the year ended December 31, 1998 from $12.9 million
for the year ended December 31, 1997, primarily due to interest expense
associated with additional borrowings completed in 1998 and 1997, offset by a
repayment of the borrowings in the third quarter of 1998 from the net proceeds
of Citadel Communications' initial public offering of its common stock in July
1998.
Loss (Gain) on Sale of Assets. The gain on sale of assets in 1998 resulted
primarily from the gain on the sale of four radio stations in Quincy, Illinois
aggregating approximately $1.3 million, offset by certain other dispositions of
assets resulting in losses.
Income Tax Benefit. The income tax benefit in 1998 and 1997 represents the
reversal of deferred tax liabilities established at the date of acquisition due
to differences in the tax bases and the financial statement carrying amounts of
intangibles and fixed assets acquired in stock-based acquisitions, offset by
federal alternative minimum tax and state tax expense in 1998. For the year
ended December 31, 1997, Citadel Communications generated a net loss for both
financial reporting and income tax purposes; therefore, no current tax provision
was recorded.
Net Loss. As a result of the factors described above, net loss decreased
$1.4 million or 26.4% to $3.9 million for the year ended December 31, 1998 from
$5.3 million for the year ended December 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 97.8% to $89.8 million for the year ended December 31, 1997 from $45.4
million for the year ended December 31, 1996. The inclusion of net revenue from
the acquisitions of radio stations and net revenue generated from local
marketing agreements and joint sales agreements entered into during 1997
provided $41.9 million of the increase. For stations owned and operated over the
comparable periods in 1997 and 1996, net broadcasting revenue improved
approximately $2.5 million or 6.5% to $40.7 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 96.4% to $65.2 million for the year ended December 31, 1997 from
$33.2 million for the year ended December 31, 1996. The increase was primarily
attributable to the inclusion of station operating expenses of the radio station
acquisitions and the local marketing agreements and joint sales agreements
entered into during 1997. Citadel Communications acquired 61 radio stations in
1997 and 6 radio stations in 1996.
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 for the year ended
December 31, 1997 from $12.2 million for the year ended December 31, 1996. As a
percentage of net broadcasting revenue, broadcast cash flow increased to 27.4%
for the year ended December 31, 1997 from 26.9% for the year ended December 31,
1996.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.3 million or 9.4% to $3.5 million for the
year ended December 31, 1997 from $3.2 million for the year ended December 31,
1996. The increase is due primarily to an increase in staffing levels required
to support Citadel Communications' growth through
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acquisitions. Professional expenses in 1996 related to Citadel Communications
capital raising activities and a lawsuit between Citadel Communications and
Tele-Media Broadcasting Company, which was settled in 1997.
EBITDA. As a result of the factors described above, EBITDA increased $12.1
million or 134.4% to $21.1 million for the year ended December 31, 1997 from
$9.0 million for the year ended December 31, 1996.
Depreciation and Amortization. Depreciation and amortization expense
increased $9.5 million or 182.7% to $14.7 million for the year ended December
31, 1997 from $5.2 million for the year ended December 31, 1996, primarily due
to radio station acquisitions completed during 1997.
Interest Expense. Interest expense increased $6.7 million or 108.1% to
$12.9 million for the year ended December 31, 1997 from $6.2 million for the
year ended December 31, 1996, primarily due to interest expense associated with
additional borrowings to fund acquisitions completed during 1997.
Income Tax Benefit. The income tax benefit for the year ended December 31,
1997 represents the reversal of deferred tax liabilities established at the date
of acquisition due to differences in the tax bases and the financial statement
carrying amounts of intangibles and fixed assets acquired in stock-based
acquisitions. For the years ended December 31, 1997 and 1996, Citadel
Communications generated a net loss for both financial reporting and income tax
purposes; therefore, no current tax provision was recorded.
Net Loss. As a result of the factors described above, net loss increased
$1.5 million or 39.5% to $5.3 million for the year ended December 31, 1997 from
$3.8 million for the year ended December 31, 1996. Included in the net loss for
1996 is $0.4 million of interest earned on loans advanced by Citadel
Communications to Deschutes River Broadcasting, Inc. prior to the acquisition of
Deschutes by Citadel Communications and a $1.8 million extraordinary loss
related to the repayment of long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
Overview. Recent liquidity needs have been driven by Citadel
Communications' acquisition strategy. Citadel Communications' principal
liquidity requirements are for acquisition financing, debt service, working
capital and general corporate purposes, including capital expenditures. Citadel
Communications' acquisition strategy has required, and is expected to continue
in the foreseeable future to require, a significant portion of Citadel
Communications' capital resources. Citadel Communications expects that its debt
service and capital expenditure obligations within the next twelve months,
without regard to further acquisitions, will include approximately $21.0 million
for interest on Citadel Broadcasting's 10 1/4% notes and Citadel Broadcasting's
9 1/4% notes and approximately $2.2 million for capital expenditures. Citadel
Broadcasting's exchangeable preferred stock does not require cash dividends
through July 1, 2002.
Citadel Communications and Citadel Broadcasting have financed Citadel
Communications' past acquisitions through bank borrowings, sales of equity and
debt securities, internally generated funds and proceeds from asset sales.
Citadel Communications intends to use a portion of the net proceeds it receives
from this offering to pay a portion of the aggregate purchase price of its
pending acquisitions. Citadel Communications expects that
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financing for future acquisitions will be provided through bank borrowings, the
sale of debt and equity securities and internally generated funds. See the "Use
of Proceeds" and the "Pending Transactions" sections.
An important factor in management financing decisions includes the
maintenance of leverage ratios consistent with Citadel Communications' long-term
growth strategy. Management recognizes that Citadel Communications may require
additional resources or may need to consider modifications to its expansion
plans. To the extent Citadel Communications is unable to obtain additional
funding, as needed, management has contingency plans which include curtailing
capital expenditure activities and reducing infrastructure costs associated with
expansion and development plans. No assurance can be given that Citadel
Communications will be successful in raising additional capital, as needed,
achieving profitable results or entering into new markets.
At March 31, 1999, Citadel Communications held approximately $31.6 million
in cash and cash equivalents and had $135.0 million in unborrowed availability
under Citadel Broadcasting's credit facility. Management believes that the net
proceeds from this offering, together with cash from operating activities, the
pending disposition and borrowings under the credit facility, should be
sufficient to permit Citadel Communications to meet its financial obligations
and to fund its present operations for the next twelve months.
Net Cash Provided By Operations. For the three months ended March 31, 1999,
net cash provided by operations increased to $2.1 million from net cash used in
operations of $1.0 million for the comparable 1998 period, primarily due to
increases in depreciation and amortization and accrued liabilities, offset by
increases in accounts receivables.
Net cash provided by operations increased by approximately $7.8 million or
136.8% to $13.5 million for the year ended December 31, 1998 from $5.7 million
for the year ended December 31, 1997. The increase in cash provided by
operations can be primarily attributed to the inclusion of radio stations
acquired in 1998 and a full year of operations of stations acquired in 1997. Net
cash provided by operations in 1998 was approximately $13.5 million resulting
primarily from a net loss of $3.9 million less depreciation and amortization of
$26.4 million, offset by an increase in accounts receivable of approximately
$9.6 million. Net cash provided by operations in 1997 was approximately $5.7
million resulting primarily from a net loss of $5.3 million less depreciation
and amortization of $14.7 million and an increase in accrued liabilities of $5.3
million offset by an increase in accounts receivable of $10.2 million.
Net Cash Used in Investing Activities. For the three months ended March 31,
1999, net cash used in investing activities, primarily for station acquisitions,
increased to $73.6 million from $20.8 million in the comparable 1998 period. For
the year ended December 31, 1998, net cash used in investing activities
decreased to $45.8 million from $212.3 million in the year ended December 31,
1997. The decrease is primarily due to the acquisition of 61 radio stations in
1997, whereas 11 radio stations were acquired in 1998.
Net Cash Provided By Financing Activities. For the three months ended March
31, 1999, net cash provided by financing activities was $0.3 million compared to
$16.9 million in the comparable 1998 period. This decrease is the result of
increased borrowings in the 1998 period for station acquisitions. No additional
borrowings were required in the 1999 comparable period for station acquisitions.
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For the year ended December 31, 1998, net cash provided by financing
activities was $127.4 million compared to $212.7 million in the year ended
December 31, 1997. The decrease primarily resulted from the repayment of the
outstanding balance under Citadel Broadcasting's credit facility, offset by the
net proceeds of Citadel Communications' initial public offering, and the
November 1998 offering of Citadel Broadcasting's 9 1/4% notes. The net cash
provided by financing activities in 1997 of $212.7 million was primarily the
result of the proceeds from the 1997 offerings of Citadel Broadcasting's 10 1/4%
notes and exchangeable preferred stock.
Citadel Communications Equity Offering. On July 7, 1998, Citadel
Communications consummated an initial public offering of 6,880,796 shares of its
common stock at an initial public offering price of $16.00 per share. Of such
shares, 6,250,000 shares were sold by Citadel Communications and 630,796 shares
were sold by certain stockholders of Citadel Communications. On July 14, 1998,
Citadel Communications sold an additional 1,032,119 shares of its common stock
at the initial public offering price pursuant to the exercise of the
underwriters' over-allotment option. The aggregate net proceeds to Citadel
Communications were $106.6 million, which were used to repay a portion of the
outstanding indebtedness under Citadel Broadcasting's credit facility.
Credit Facility. On July 3, 1997, Citadel Broadcasting and Citadel License
entered into an amended and restated financing agreement which originally
allowed for revolving loan borrowings up to a maximum of $150.0 million.
Pursuant to the agreement, this amount began to reduce quarterly on December 31,
1997. The maximum available loan commitment at March 31, 1999 was $135.0
million. At March 31, 1999, no amounts were outstanding under the credit
facility. Citadel Broadcasting must pay, on a quarterly basis, an unused
commitment fee equal to the maximum revolving loan commitment less the average
outstanding principal balance for the preceding quarter, multiplied by 0.125%
or, if the total leverage ratio, determined in accordance with the agreement,
calculated as of the last day of the preceding quarter was less than 4.5, the
multiplier for the commitment fee is reduced to 0.09375%.
The credit facility prohibits Citadel Broadcasting from paying cash
dividends on its capital stock. Similarly, the credit facility restricts the
ability of Citadel Broadcasting's wholly owned subsidiary, Citadel License, to
pay cash dividends or make other distributions in respect of its capital stock.
Citadel Broadcasting is not dependent in any material respect on the receipt of
dividends or other payments from Citadel License. The credit facility also
contains other customary restrictive covenants, which, among other things, and
with certain exceptions, limit the ability of Citadel Broadcasting and Citadel
License to incur additional indebtedness and liens, enter into transactions with
affiliates, consolidate, merge or effect asset sales, issue additional stock,
make capital or overhead expenditures, make investments, loans or prepayments or
change the nature of their business. Citadel Broadcasting and Citadel License
are also required to satisfy financial covenants, which require Citadel
Broadcasting and Citadel License to maintain specified financial ratios and to
comply with financial tests, such as ratios for maximum leverage, senior debt
leverage, minimum interest coverage and minimum fixed charges.
-- Maximum Leverage Test. The maximum leverage test requires that Citadel
Broadcasting and Citadel License not permit the ratio of total debt as
of the last day of any month to operating cash flow, as adjusted for
permitted acquisitions and dispositions,
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for the twelve-month period ending as of the last day of that month,
to be greater than the applicable ratio on that date. The applicable
ratio at March 31, 1999 is 6.0.
-- Senior Debt Leverage Test. The senior debt leverage test requires that
Citadel Broadcasting and Citadel License not permit the ratio of the
unpaid principal balance of the credit facility or any specified
portion thereof outstanding from time to time as of the last day of
any month to operating cash flow, as adjusted for permitted
acquisitions and dispositions, for the twelve-month period ending on
that date to be greater than 4.50 for the period through May 1999. For
each six-month period after May 1999 through maturity, the maximum
ratio shall decrease by 0.25.
-- Minimum Interest Coverage Test. The minimum interest coverage test
requires that Citadel Broadcasting and Citadel License not permit the
ratio of their consolidated operating cash flow for any four-quarter
period to interest expense and cash dividends on Citadel
Broadcasting's exchangeable preferred stock for the same four-quarter
period to be less than 2.25.
-- Minimum Fixed Charges Test. The minimum fixed charges test requires
that Citadel Broadcasting and Citadel License not permit the ratio of
their consolidated operating cash flow for any four-quarter period to
fixed charges for the same four-quarter period to be less than 1.1 to
1.0.
Citadel Broadcasting and Citadel License are in compliance with the
financial ratios and financial condition tests in their debt obligations. For
additional information about the credit facility, see the "Description of
Indebtedness" section under the heading "Existing Loan Agreement."
Senior Subordinated Notes. On July 3, 1997, Citadel Broadcasting completed
the issuance of $101.0 million of 10 1/4% Senior Subordinated Notes due 2007.
Interest is payable semi-annually. The 10 1/4% notes may be redeemed at the
option of Citadel Broadcasting, in whole or in part, at any time on or after
July 1, 2002 at the redemption prices set forth in the indenture governing the
10 1/4% notes. In addition, at any time prior to July 1, 2000, Citadel
Broadcasting may, at its option, redeem a portion of the 10 1/4% notes with the
net proceeds of one or more eligible public equity offerings, 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.
On November 19, 1998, Citadel Broadcasting completed the issuance of $115.0
million of 9 1/4% Senior Subordinated Notes due 2008. Interest is payable
semi-annually. The 9 1/4% notes may be redeemed at the option of Citadel
Broadcasting, in whole or in part, at any time on or after November 15, 2003 at
the redemption prices set forth in the indenture governing the 9 1/4% notes. In
addition, at any time prior to November 15, 2001, Citadel Broadcasting may, at
its option, redeem the 9 1/4% notes with the net proceeds of one or more
eligible public equity offerings, at a redemption price equal to 109.25% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of redemption.
The indentures governing the 10 1/4% notes and the 9 1/4% notes contain
certain restrictive covenants, including limitations which restrict the ability
of Citadel Broadcasting to incur additional debt, incur liens, pay cash
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
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of all or substantially all of its assets. At March 31, 1999, Citadel
Broadcasting was in compliance with all covenants under the indentures. For
additional information about the 10 1/4% and 9 1/4% notes, see the "Description
of Indebtedness" section under the headings "10 1/4% Notes" and "9 1/4% Notes."
Exchangeable Preferred Stock. On July 3, 1997, Citadel Broadcasting sold an
aggregate of 1,000,000 shares of its 13 1/4% Exchangeable Preferred Stock.
Dividends on the exchangeable preferred stock accrue at the rate of 13 1/4% per
annum and are payable semi-annually. 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 Citadel Broadcasting, in cash. Thereafter, all dividends will be payable only
in cash. To date, Citadel Broadcasting has paid all dividends in additional
shares of exchangeable preferred stock. Citadel Broadcasting will be required to
redeem the exchangeable preferred stock on July 1, 2009, subject to the legal
availability of funds for the redemption, at a redemption price equal to the
liquidation preference thereof, plus accumulated and unpaid dividends, if any,
to the date of redemption. Citadel Broadcasting may redeem the exchangeable
preferred stock, 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
Certificate of Designation governing the exchangeable preferred stock (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 exchangeable preferred stock with the net proceeds of one or more eligible
public equity offerings, 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 exchangeable preferred stock. Citadel Communications intends to use a
portion of the net proceeds from this offering to redeem 35% of the outstanding
exchangeable preferred stock. See the "Use of Proceeds" section.
The Certificate of Designation governing the exchangeable preferred stock
also contains covenants that restrict Citadel Broadcasting from taking various
actions, including, subject to specified exceptions, the incurrence of
additional indebtedness, the granting of additional liens, the making of
investments, the payment of dividends and other restricted payments, mergers,
acquisitions and other fundamental corporate changes, capital expenditures and
transactions with affiliates. At March 31, 1999, Citadel Broadcasting was in
compliance with all covenants under the Certificate of Designation. For
additional information about the exchangeable preferred stock, see the
"Description of Indebtedness" section under the heading "Exchangeable Preferred
Stock."
Pending Acquisitions and Dispositions. There are several transactions
currently pending which, if completed, would result in Citadel Communications
purchasing 20 FM and seven AM radio stations and selling 18 FM and seven AM
radio stations. The total cash required to fund the pending acquisitions is
expected to be approximately $142.7 million, which amount includes $1.8 million
in consulting and noncompetition payments over seven years. Citadel
Communications expects to receive $25.5 million in cash and a $0.5 million
promissory note, from the pending disposition. The consummation of the pending
transactions is subject to certain conditions, including the approval of the
FCC. Although Citadel Communications believes these closing conditions are
customary for transactions of this type, there can be no
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assurance that such conditions will be satisfied. See the "Pending Transactions"
section for a description of the pending transactions.
Recently Completed Acquisitions. Subsequent to March 31, 1999, Citadel
Communications acquired one FM radio station in exchange for another FM radio
station, and it also acquired a total of three FM and three AM radio stations
for an aggregate purchase price of approximately $15.1 million.
Capital Expenditures. Citadel Communications had capital expenditures of
$2.0 million, $2.1 million, $4.5 million and $0.9 million for the years ended
December 31, 1996, 1997, and 1998 and the three months ended March 31, 1999,
respectively. Citadel Communications' equipment purchases consist primarily of
broadcasting equipment and transmission tower upgrades.
Year 2000 Matters. The Year 2000 computer issue primarily results from the
fact that information technology hardware and software systems and other
non-information technology products containing embedded microchip processors
were originally programmed using a two digit format, as opposed to four digits,
to indicate the year. Such programming will be unable to interpret dates beyond
the year 1999, which could cause system and product failure, other computer
errors and a disruption in the operation of such systems and products.
Citadel Communications' project team has identified its accounting and
traffic systems, satellite delivered programming, digital automation systems and
internet service provider systems as the mission critical systems to evaluate
for Year 2000 compliance. In addition, while there are several software programs
currently used throughout Citadel Communications' operations which are not Year
2000 compliant, the vendors of this software have committed to provide Year 2000
compliant updates to Citadel Communications. Citadel Communications expects to
have all such updates tested and operational by June 1999.
Citadel Communications has identified five phases for the project team to
address for each of Citadel Communications' risk areas. These phases are:
(1) an inventory of Citadel Communications' systems described above,
(2) assessment of the systems to determine the risk and apparent extent of
Year 2000 problems,
(3) remediation of identified problems,
(4) testing of systems for Year 2000 readiness, and
(5) contingency planning for the worst-case scenarios.
Inventories have been completed for all mission critical company software
applications and hardware systems, and Citadel Communications has substantially
completed an inventory of at-risk non-information technology systems and expects
to complete the inventory in the second quarter of 1999. The project team is
currently assessing compliance issues related to Citadel Communications'
information hardware and software, and expects to complete such assessment in
the second quarter of 1999. Citadel Communications expects that some amount of
the testing will be performed during this assessment phase. Additional testing
is expected to continue through the third quarter of 1999.
In each of its markets, Citadel Communications employs centralized
accounting and traffic (advertising scheduling) systems for all of its stations
in the market. In
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September 1998, Citadel Communications completed the replacement and upgrading
of software certified as Year 2000 compliant by the software vendor. Citadel
Communications intends to complete Year 2000 testing of this software in the
second quarter of 1999. The total cost of the software upgrade was $0.3 million.
In connection with the software upgrade, much of the accounting and traffic
hardware systems were also upgraded or replaced. The total cost of the hardware
upgrade was $0.1 million. Citadel Communications anticipates that evaluation for
Year 2000 compliance of the hardware and the new software used in its accounting
and traffic systems for the stations currently owned by Citadel Communications
will be completed during the second quarter of 1999. Citadel Communications
expects that the accounting and traffic systems for stations that it may acquire
will be converted to the software used for its other stations if the acquired
stations are not already using this software. The cost of any necessary hardware
upgrades for these systems for stations acquired cannot be quantified at this
time.
Satellite delivered programs, which are delivered to Citadel
Communications' radio stations from outside sources, represent a third party
risk to Citadel Communications arising from the Year 2000 issue. Citadel
Communications has sent questionnaires to a majority of the vendors of these
programs during the fourth quarter of 1998 asking them to update Citadel
Communications on the status of their Year 2000 compliance. Citadel
Communications anticipates that it will send such questionnaires to the
significant vendors of satellite delivered programs to stations it acquires.
Until those questionnaires are returned and reviewed, Citadel Communications is
unable to determine the potential for disruption in its programming arising from
this third party risk. If Citadel Communications does not receive reasonable
assurances regarding Year 2000 compliance from any vendor of these programs, it
would then develop contingency plans for alternative programming.
Citadel Communications is currently reviewing a proposal to update and
expand the digital automation systems used in Citadel Communications'
operations. Although not directly related to the Year 2000 problem, Citadel
Communications believes the expansion and replacement of these systems, which it
anticipates would be completed by the end of December 1999, would minimize or
eliminate Year 2000 problems associated with these systems. If Citadel
Communications elects not to pursue such expansion, it anticipates that the
total cost of replacing the non-compliant digital components in its current
digital automation systems would be approximately $0.5 million and that the
replacement would be completed by the end of December 1999. The cost of
replacing non-compliant digital components at stations that may be acquired by
Citadel Communications cannot be quantified at this time.
Citadel Communications recently completed an expansion of its internet
service provider division. All mission critical elements of such division are
certified Year 2000 compliant by the software and hardware vendors. No material
expansion is scheduled for this division prior to the year 2000.
In addition to identification of these mission critical systems, Citadel
Communications has identified the top 10 advertisers on each of its radio
stations owned or operated at December 31, 1998. Questionnaires were sent to
each of these advertisers during the fourth quarter of 1998 asking them to
update Citadel Communications on the status of their Year 2000 compliance.
Citadel Communications intends to send such questionnaires to the top 10
advertisers on each of the radio stations it acquires, and such questionnaires
have been sent for the recently acquired stations in Saginaw/Bay City, Michigan
and Baton Rouge and
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Lafayette, Louisiana. In addition, questionnaires are also being sent to various
equipment vendors, utility and telephone companies, banks and other lending
institutions that provide substantial products and services to Citadel
Communications. Citadel Communications has received varying information from
third parties on the state of compliance or expected compliance. Until the
questionnaires returned to date are fully reviewed and others are returned and
reviewed, Citadel Communications is unable to determine the effect of these
third party risks on Citadel Communications' operations. There can be no
assurance that Citadel Communications will be successful in finding alternative
Year 2000 compliant advertisers, suppliers and service providers, if required.
Citadel Communications also intends to solicit information regarding its
critical internal non-information technology systems such as telephones and HVAC
in the second quarter of 1999. Any required remediation and testing of Citadel
Communications' non-information technology systems at its current stations is
expected to be completed by June 1999. Citadel Communications intends to
promptly extend this inquiry to stations it acquires.
Citadel Communications is in the process of determining its contingency
plans, which are expected to include the identification of Citadel
Communications' most reasonably likely worst-case scenarios. Preliminary
contingency plans are expected to be completed during the second quarter of 1999
and comprehensive plans are expected to be completed by the second or third
quarter of 1999. At this time, Citadel Communications does not have sufficient
information to assess the likelihood of such worst-case scenarios. Currently,
Citadel Communications believes that the most reasonably likely sources of risk
to it include (1) disruptions in the supply of satellite delivered programs and
(2) diminished demand for advertising time arising from Year 2000 problems both
specific to Citadel Communications' advertisers or more generally related to the
potential for economic disruptions related to the Year 2000 issues.
Based on its current assessment efforts, Citadel Communications does not
believe that Year 2000 issues related to its internal systems will have a
material adverse effect on Citadel Communications' financial condition or
results of operations. However, as described above, the failure by third parties
to be Year 2000 ready could have a material adverse effect on Citadel
Communications.
Recently Issued Accounting Pronouncements. In June 1998, the FASB issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which establishes accounting and reporting standards for derivative instruments
and for hedging activities. It requires an entity to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. This pronouncement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. Management does
not believe the implementation of this accounting pronouncement will have a
material effect on its consolidated financial statements.
Qualitative and Quantitative Disclosures about Market Risk. Market risk is
the risk of loss arising from adverse changes in market rates and prices such as
interest rates, foreign currency exchange rates and commodity prices. Citadel
Communications' primary exposure to market risk is interest rate risk associated
with Citadel Broadcasting's credit facility. Amounts borrowed under the credit
facility incur interest at the London Interbank Offered Rate, or LIBOR, plus
additional basis points depending on the outstanding principal balance under the
credit facility. As of March 31, 1999, no amounts were outstanding under the
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credit facility. Citadel Communications evaluates its exposure to interest rate
risk by monitoring changes in interest rates in the market place.
To manage interest rate risk, Citadel Communications entered into an
interest rate swap agreement on December 10, 1996. The notional amount
outstanding as of December 31, 1998, and the expected notional amount to be
outstanding as of December 10, 1999, the maturity date of the agreement, is
approximately $63.5 million. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract. Citadel Communications
receives a variable rate on the notional amount and pays a fixed rate of 5.615%.
The variable rate is based on LIBOR and is adjusted quarterly. LIBOR in effect
under the swap agreement as of December 31, 1998 was 4.93813%.
The fair market value of Citadel Communications' interest rate swap was a
net liability of approximately $393,000 and $315,000 as of December 31, 1998 and
March 31, 1999, respectively.
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BUSINESS
GENERAL
Citadel Communications is the largest radio broadcaster in the United
States, in terms of broadcasting revenue, that focuses on acquiring, developing
and operating radio stations in mid-sized markets. Upon completion of the
transactions described in the "Pending Transactions" section, Citadel
Communications will own or operate 82 FM and 35 AM radio stations in 22 markets,
including clusters of four or more stations in 18 markets, and will have the
right to begin operation of a newly constructed FM radio station in Little Rock.
Citadel Communications also owns eFortress, an internet service provider with
more than 25,000 subscribers in 11 of the markets served by Citadel
Communications' radio stations and their surrounding communities.
Radio Broadcasting. Citadel Communications' stations comprise the first or
second ranked radio station group in terms of revenue share in 17 of its
markets. As a result of the successful implementation of Citadel Communications'
strategies, which are discussed below:
-- same station net broadcasting revenue increased 13.4% from year-end
1997 to year-end 1998 and 11.9% for the three months ended March 31,
1999 compared to the same period in 1998,
-- same station broadcast cash flow increased 32.0% from year-end 1997 to
year-end 1998 and 19.4% for the three months ended March 31, 1999
compared to the same period in 1998, and
-- after-tax cash flow increased 208.6% from year-end 1997 to year-end
1998 and 15.8% for the three months ended March 31, 1999 compared to
the same period in 1998.
Citadel Communications calculates same station results by including only those
stations it owned or operated for both periods being compared.
Citadel Communications' 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, Citadel Communications seeks to acquire 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.
Citadel Communications believes that mid-sized markets represent attractive
opportunities because, as compared to the 50 largest markets in the United
States, mid-sized markets are generally characterized by:
-- lower radio station purchase prices as a multiple of broadcast cash
flow,
-- fewer sophisticated and well-capitalized competitors, including both
radio and competing advertising media such as newspapers and
television, and
-- less direct format competition due to the smaller number of stations
in any given market.
Citadel Communications 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,
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<PAGE> 56
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.
Citadel Communications' portfolio of radio 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, Citadel Communications
believes it is not unduly reliant upon the performance of any single station.
Citadel Communications also believes that the diversity of its portfolio of
radio stations helps insulate Citadel Communications from downturns in specific
markets and changes in format preferences.
On-line Services. Citadel Communications also provides on-line services
through eFortress, its internet service provider. These services include
electronic mail and access to the internet. Citadel Communications began
providing on-line services in late 1997. Citadel Communications plans to offer
on-line services in all of its current radio station markets by the end of 1999.
In 1998 and the three months ended March 31, 1999, on-line services accounted
for less than 2% and 5%, respectively, of Citadel Communications' net
broadcasting revenue.
CORPORATE HISTORY
Citadel Broadcasting was formed August 21, 1991 as a Nevada corporation. In
1992 Citadel Broadcasting acquired all of the radio stations then owned or
operated by Citadel Associates Limited Partnership and Citadel Associates
Montana Limited Partnership and certain other radio stations. Lawrence R.
Wilson, Chief Executive Officer of Citadel Communications, was a co-founder and
one of the two general partners of Citadel Associates Limited Partnership and
Citadel Associates Montana Limited Partnership. In 1993, Citadel Communications
Corporation was incorporated and Citadel Broadcasting was reorganized as a
wholly owned subsidiary of Citadel Communications. Citadel Communications
currently owns all of the issued and outstanding common stock of Citadel
Broadcasting. Citadel License was incorporated in Nevada in 1996 and is a wholly
owned subsidiary of Citadel Broadcasting.
OPERATING STRATEGY
Citadel Communications' operating strategy focuses on maximizing its radio
stations' appeal to advertisers, and consequently its revenue and cash flow. In
order to achieve these goals, Citadel Communications has implemented the
strategies described below. Citadel Communications intends to continue to expand
its existing strategies and to develop new methods to enhance revenue and reduce
costs.
Ownership of Strong Radio Station Groups. Citadel Communications seeks to
secure and maintain a leadership position in the markets it serves by owning
multiple stations in those markets. By coordinating programming, promotional and
selling strategies among each group of local stations, Citadel Communications
attempts to capture a wide range of demographic listener groups which appeal to
advertisers. Citadel Communications believes that the diversification of its
programming formats and its collective inventory of available advertising time
strengthen relationships with advertisers and increase Citadel Communications'
ability to maximize the value of its inventory. Citadel Communications believes
that having multiple stations in a market also enhances its ability to market
the advantages of
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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.
Citadel Communications believes that its ability to leverage the existing
programming and sales resources of its radio 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. Citadel Communications 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, Citadel
Communications 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. Citadel Communications seeks to maximize
its share of local advertising revenue in each of its markets through aggressive
sales and marketing initiatives. Citadel Communications 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, its sales personnel.
Citadel Communications also emphasizes regular, informal exchanges of ideas
among its management and sales personnel across its various markets. Citadel
Communications seeks to maximize its revenue by utilizing 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, Citadel Communications
also offers and markets its ability to create customer traffic through on-site
events staged at, and broadcast from, the advertisers' business locations.
Citadel Communications believes that, prior to their acquisition by Citadel
Communications, many of its acquired stations had underperformed in sales, due
primarily to undersized sales staffs responsible for selling inventory on
multiple stations. Accordingly, Citadel Communications has significantly
expanded the sales forces of many of its acquired stations.
Targeted Programming. To maintain or improve its position in each market,
Citadel Communications combines extensive market research with an assessment of
its competitors' vulnerabilities in order to identify significant and
sustainable target audiences. Citadel Communications then tailors the
programming, marketing and promotion of each radio station to maximize its
appeal to its target audience. Citadel Communications attempts to build strong
markets by:
-- creating 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.,
-- formulating recognizable brand names for select stations such as the
"Bull" and "Cat Country," and
-- actively participating in community events and charities.
Decentralized Operations. Citadel Communications 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, Citadel
Communications decentralizes much of its operations to these levels. Each of
Citadel Communications' regional and local station groups
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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
their 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 corporate policies and serving as a resource to local
management. Citadel Communications 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
of 1996, as amended, which is referred to in this prospectus as 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.
Citadel Communications' acquisition strategy is focused on acquiring
additional radio stations in both its existing markets and in new markets in
which Citadel Communications believes it can effectively use its operating
strategies. Citadel Communications 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, Citadel Communications believes that
less competition exists, particularly from the larger radio operators, in
mid-sized markets. This affords Citadel Communications relatively more
attractive acquisition opportunities in these markets. There can be no
assurance, however, that Citadel Communications will be able to identify
suitable and available acquisition opportunities or that it will be able to
complete any such acquisition opportunities. Additional risks and uncertainties
related to Citadel Communications' acquisition strategy are discussed below
under the heading "Federal Regulation of Radio Broadcasting" and in the "Risk
Factors" section.
In evaluating acquisition opportunities in new markets, Citadel
Communications assesses its potential to build leading radio station groups in
those markets over time. Citadel Communications 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. Citadel Communications 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, Citadel Communications'
ability to improve the operating performance of the radio station or stations
under consideration and the general economic conditions of the market.
Citadel Communications believes that its acquisition strategy, if properly
implemented, could have a number of benefits, including:
-- diversified revenue and broadcast cash flow across a greater number of
stations and markets,
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-- improved broadcast cash flow margins through the consolidation of
facilities and the elimination of redundant expenses,
-- broadened range of advertising packages to offer advertisers,
-- improved leverage in various key vendor negotiations,
-- enhanced appeal to top industry management talent, and
-- increased overall scale which should facilitate Citadel
Communications' capital raising activities.
STATION PORTFOLIO
If all of the pending transactions described in the "Pending Transactions"
section are completed, Citadel Communications will own 81 FM and 35 AM radio
stations in 22 mid-sized markets, operate one additional FM radio station in
Reno pursuant to a local marketing agreement and have the right to begin
operating a newly constructed FM radio station in Little Rock. The following
table sets forth information about stations owned or operated by Citadel
Communications after giving effect to its pending transactions. See the "Pending
Transactions" section.
As you review the information in the following table, you should refer to
the "Information About Station and Market Data" section, and you should note the
following:
-- The year acquired shown in the table below includes acquisitions made
by Citadel Communications' predecessors, Citadel Associates Limited
Partnership and Citadel Associates Montana Limited Partnership,
-- The abbreviation "MSA" in the MSA Rank column means metropolitan
statistical area, the abbreviation "LMA" in the Year Acquired/LMA
column means local marketing agreement and the abbreviation "JSA" in
the Year Acquired/LMA column means joint sales agreement,
-- The symbol "*" indicates a station which is the subject of one of
Citadel Communications' pending transactions. The completion of each
of the pending transactions is subject to conditions. Although Citadel
Communications believes these conditions are customary for
transactions of this type, there can be no assurance that such
conditions will be satisfied,
-- In the Primary Demographic Target column, 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,
-- Combined stations are simulcast. For all simulcast stations, rank and
audience share information is given on a combined basis,
-- 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 shares, as published by The Arbitron Company.
Arbitron periodically samples radio listeners in defined market areas,
principally through the use of diaries returned by selected listeners.
A station's average quarter hour 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
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for all stations in the market area. Station Rank in Primary
Demographic Target in the table is the ranking of a station among all
stations in its target demographic group based upon the station's
average quarter hour shares, and
-- Radio Group Market Revenue Share in the table 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 in the
table is the ranking, by radio group market revenue, of each of
Citadel Communications' radio groups in its market among all other
radio groups in that market.
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO RADIO
PRIMARY PRIMARY PRIMARY GROUP GROUP
STATION DEMO- DEMO- DEMO- MARKET RANK IN
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE MARKET
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET TARGET TARGET SHARE REVENUE
- ----------------------- ---- ----------------------- ----------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROVIDENCE, RI......... 32 40.4% 1
WPRO-AM................ News/Talk 1997 A 25-54 11 2.4
WPRO-FM................ Contemporary Hits 1997 A 18-49 2 8.7
WWLI-FM................ Adult Contemporary 1997 W 25-54 1 13.8
WSKO-AM................ Sports 1997 M 25-54 13 2.2
WHKK-FM/WXEX-FM........ Rock Oldies 1997/1997(WHKK) A 25-54 13 2.2
SALT LAKE CITY, UT..... 35 23.9% 2
KUBL-FM................ Country 1988 A 25-54 6 5.1
KBEE-AM................ Children's 1988 C 4-11 -- --
KFNZ-AM................ Sports 1997/1992 M 25-54 8t 4.0
KBEE-FM................ Adult Contemporary 1997/1992 W 18-49 10t 4.1
KBER-FM................ Album Oriented Rock 1997/1996 A 18-34 7 6.0
KENZ-FM................ Rock Alternative 1997/1996(JSA) A 18-34 1 9.0
WILKES-BARRE/SCRANTON,
PA.................... 64 34.7% 2
WMGS-FM................ Adult Contemporary 1997 W 25-54 1 17.2
WARM-AM................ News/Talk 1997 A 35-64 11t 1.9
WKJN-AM................ Simulcast with WARM-AM 1998/1997
WAZL-AM................ Simulcast with WARM-AM 1997
WXBE-FM................ Album Oriented Rock 1997 M 18-34 1t 18.2
WKQV-FM................ Simulcast with WXBE-FM 1999/1997
WEMR-FM................ Contemporary Hits 1998/1997 W 18-34 -- --
WBHT-FM................ Simulcast with WEMR-FM 1999/1997
WCTP-FM/WCTD-FM........ Country 1998/1997 A 35-64 10 2.1
WEMR-AM................ Nostalgia 1998/1997 A 35-64 -- --
*WKQV-AM............... Sports pending/1997(JSA) M 25-54 -- --
ALLENTOWN/BETHLEHEM,
PA.................... 67 27.3% 2
WCTO-FM................ Country 1997 A 25-54 1 13.4
WLEV-FM................ Adult Contemporary 1997/1997 W 25-54 1 17.6
ALBUQUERQUE, NM........ 71 55.7% 1
KKOB-AM................ News/Talk 1994 A 25-54 2t 7.8
KKOB-FM................ Adult Contemporary 1994 W 25-54 3 6.8
KMGA-FM................ Adult Contemporary 1994 W 25-54 4t 6.0
KHTL-AM................ News/Talk 1994 A 35-64 23t 0.7
KTBL-FM................ Country 1996/1995(JSA) A 25-54 9 4.1
KHFM-FM................ Classical 1996 A 25-54 12t 2.7
KNML-AM................ Sports 1996 M 25-54 13 3
KRST-FM................ Country 1996/1996 A 25-54 1 8.2
HARRISBURG/CARLISLE,
PA.................... 76 17.2% 3
WRKZ-FM................ Country 1997 A 25-54 6 6.4
WHYL-FM................ Simulcast with WRKZ-FM 1999/1998
WQXA-FM................ Rock 1997 M 18-34 1 20.7
WHYL-AM................ Nostalgia 1999/1998 A 35-64 13t 1.2
BATON ROUGE, LA........ 82 27.5% 2
KQXL-FM................ Urban Adult 1999 A 25-54 3 7.5
Contemporary
WXOK-AM................ Gospel 1999 A 35-64 5t 6.8
WEMX-FM................ Urban 1999 A 18-34 1 16.8
WCAC-FM................ Country 1999 A 25-54 12t 2.2
WIBR-AM................ Sports 1999 M 25-54 13t 1.5
</TABLE>
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<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO RADIO
PRIMARY PRIMARY PRIMARY GROUP GROUP
STATION DEMO- DEMO- DEMO- MARKET RANK IN
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE MARKET
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET TARGET TARGET SHARE REVENUE
- ----------------------- ---- ----------------------- ----------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LITTLE ROCK, AR(1)..... 83 38.2% 2
KARN-AM/KARN-FM/
KKRN-FM............... News/Talk/Sports 1997/1997 A 25-54 7 5.7
KIPR-FM................ Urban 1997/1997 A 18-49 2t 8.9
KOKY-FM................ Urban Adult 1997/1997 A 25-54 10 4.1
Contemporary
KLAL-FM................ Modern Adult 1997 A 18-49 11t 3.7
Contemporary
KAFN-FM................ Not yet operational 1997 NA NA NA
KLIH-AM................ Gospel 1997 A 25-54 18 1.3
KURB-FM................ Adult Contemporary 1997 A 25-54 4t 6.5
KVLO-FM................ Soft Adult Contemporary 1997 W 25-54 3 7.7
KAAY-AM................ Religious 1998 A 25-54 20t 0.8
SPOKANE, WA............ 87 33.4% 2
KGA-AM................. News/Talk 1992 A 25-54 10 3.6
KDRK-FM................ Country 1992 A 25-54 2 10.0
KAEP-FM................ Rock Alternative 1993 A 18-34 2 12.2
KJRB-AM................ Talk/Sports 1993/1993 A 35-64 18t 0.6
KEYF-AM/FM............. Oldies 1999/1996(JSA) A 25-54 5 7.5
KNJY-FM................ Rock 1999 M 18-34 3t 12.4
COLORADO SPRINGS, CO... 93 42.3% 1
KKFM-FM................ Classic Rock 1986 M 25-54 1 13.5
KKMG-FM................ Contemporary Hits 1994/1990 W 18-34 1 22.2
KSPZ-FM................ Oldies 1999/1996(JSA) A 25-54 8 5.5
KVOR-AM................ News/Talk 1999/1996(JSA) A 35-64 2t 7.9
KTWK-AM................ Nostalgia 1999/1996(JSA) A 35-64 13t 1.7
LAFAYETTE, LA.......... 97 10.3% 4
KFXZ-FM................ Gospel 1999 A 35-64 6t 4.4
KNEK-FM................ Urban Adult 1999 A 25-54 8 4.7
Contemporary
KNEK-AM................ Urban Adult 1999 A 25-54 -- --
Contemporary
KRRQ-FM................ Urban 1999 A 18-34 1 15.3
YORK, PA............... 103 4.5% 5
WQXA-AM................ Nostalgia 1997 A 35-64 22t 0.6
CHARLESTON, SC......... 104 53.7% 1
*WSSX-FM............... Hot Adult Contemporary pending A 25-54 5t 5.7
*WWWZ-FM............... Urban pending A 18-34 1 15.2
*WMGL-FM............... Urban Adult pending A 25-54 9t 4.4
Contemporary
*WSUY-FM............... Soft Adult Contemporary pending W 25-54 5t 6.0
*WNKT-FM............... Country pending A 25-54 4 6.2
*WTMA-AM............... News/Talk pending A 25-54 11t 4.1
*WTMZ-AM............... News pending A 25-54 25t 0.3
*WXTC-AM............... Urban Gospel pending A 25-54 13t 2.8
PORTSMOUTH/DOVER/
ROCHESTER, NH......... 117 29.5% 2
*WOKQ-FM/WPKQ-FM....... Country pending A 25-54 1 9.4
*WXBB-FM/WXBP-FM....... Classic Rock pending M 25-54 3 6.9
MODESTO, CA............ 122 68.1% 1
KATM-FM(2)............. Country 1992 A 25-54 1 15.7
KANM-AM................ Sports 1992 M 25-54 11t 2.2
KHKK-FM/KDJK-FM(2)..... Rock Oldies 1993/1993(KHKK) A 25-54 2 12.1
KHOP-FM(2)............. Album Oriented Rock 1996 A 18-34 1 12.3
SAGINAW/BAY CITY, MI... 124 41.1% 1
WKQZ-FM................ Rock 1999 M 18-49 1 18.4
WYLZ-FM/WILZ-FM........ Classic Rock 1999 M 25-54 12t 2.1
WIOG-FM................ Hot Adult Contemporary 1999 A 25-54 4 8.9
WGER-FM................ Soft Adult Contemporary 1999 W 25-54 3t 10.2
WSGW-AM................ News/Talk 1999 A 25-54 6t 5.9
BOISE, ID.............. 126 45.3% 1
KIZN-FM................ Country 1998/1997 A 25-54 4 7.5
KZMG-FM................ Contemporary Hits 1998/1997 W 18-34 2 12.7
KKGL-FM................ Classic Rock 1998/1997 M 25-54 6t 5.4
KQFC-FM................ Country 1998/1997 A 25-54 3 7.9
KBOI-AM................ News/Talk 1998/1997 A 35-64 6 4.8
</TABLE>
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<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO RADIO
PRIMARY PRIMARY PRIMARY GROUP GROUP
STATION DEMO- DEMO- DEMO- MARKET RANK IN
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE MARKET
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET TARGET TARGET SHARE REVENUE
- ----------------------- ---- ----------------------- ----------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RENO, NV............... 127 50.2% 1
Owned
KBUL-FM................ Country 1992 A 25-54 3 9.3
KKOH-AM................ News/Talk 1992 A 25-54 4 6.9
KNEV-FM................ Adult Contemporary 1993/1993 W 18-49 4 9.4
KNHK-FM................ Classic Rock 1997/1997 M 25-54 -- --
Operated
KATG-FM(3)............. Country 1998(LMA) A 25-54 -- --
PORTLAND, ME........... 160 43.0% 1
*WBLM-FM............... Album Oriented Rock pending A 18-34 2 11.7
*WCYY-FM/WCYI-FM....... Rock alternative pending A 18-34 1 16.0
*WHOM-FM............... Soft Adult Contemporary pending W 25-54 2 10.3
*WJBQ-FM............... Contemporary Hits pending A 18-34 4 9.6
*WCLZ-FM............... Adult Alternative pending A 18-49 9 3.7
BINGHAMTON, NY......... 166 56.9% 1
*WHWK-FM............... Country pending A 25-54 1 16.6
*WYOS-FM............... Oldies pending A 25-54 3 9.6
*WAAL-FM............... Album Oriented Rock pending M 25-54 1 20.4
*WNBF-AM............... News/Talk pending A 25-54 9 2.7
*WKOP-AM............... Nostalgia pending A 35-64 9t 1.9
MUNCIE, IN............. NA NA NA
*WMDH-FM............... Country pending A 25-54 NA NA
*WMDH-AM............... News/Talk pending A 25-54 NA NA
KOKOMO, IN............. NA NA NA
*WWKI-FM............... Country pending A 25-54 NA NA
</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) Does not include one FM station that is not yet operational. In addition,
three of the stations listed as Little Rock stations primarily serve the
surrounding communities outside of Little Rock. Citadel Communications 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.
(2) These stations also broadcast in the adjacent Stockton, California market
where, in the Fall 1998 Radio Market Report published by The Arbitron
Company, they ranked 1, 3 and 7 in their primary demographic targets,
respectively.
(3) Citadel Communications operates KATG-FM in Reno under a local marketing
agreement.
ADVERTISING SALES
Virtually all of Citadel Communications' revenue is generated from the sale
of local, regional and national advertising for broadcast on its radio stations.
In 1998, approximately 83.0% of Citadel Communications' 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 the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section under the heading "General." The major categories of Citadel
Communications' advertisers include telephone companies, restaurants, fast food,
automotive and grocery. Each station's local sales staff solicits advertising
either directly from the local
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advertiser or indirectly through an advertising agency. Citadel Communications
pays a higher commission rate to the sales staff for generating direct sales
because Citadel Communications 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. Citadel Communications 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 Citadel Communications that is based on Citadel Communications'
gross revenue from the advertising obtained. Regional sales, which Citadel
Communications defines as sales in regions surrounding Citadel Communications'
markets to companies that advertise in Citadel Communications' markets, are
generally made by Citadel Communications' local sales staff.
Depending on the programming format of a particular station, Citadel
Communications 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. Citadel Communications' stations strive to maximize
revenue by managing their on-air inventory of advertising time and adjusting
prices based on local market conditions and on Citadel Communications' ability,
through its marketing efforts, to provide advertisers with an effective means of
reaching a targeted demographic group. Each of Citadel Communications' 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 Citadel
Communications' selling activity is based on demand for its radio stations'
on-air inventory and, in general, Citadel Communications 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.
Citadel Communications 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:
-- 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,
-- the number of stations in the market competing for the same
demographic groups,
-- the supply of, and demand for, radio advertising time, and
-- 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 Citadel Communications to
chart audience growth, set advertising rates and adjust programming. The radio
broadcast industry's principal ratings service is The Arbitron Company, which
publishes periodic ratings surveys for significant domestic radio markets. These
surveys are Citadel Communications' primary source of ratings data.
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COMPETITION
The radio broadcasting industry is highly competitive. The success of each
of Citadel Communications' stations depends largely upon its audience ratings
and its share of the overall advertising revenue within its market. Citadel
Communications' 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
Citadel Communications' radio stations located in that market. There can be no
assurance that any one of Citadel Communications' radio stations will be able to
maintain or increase its current audience ratings or advertising revenue market
share.
Citadel Communications' 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, Citadel
Communications 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 Citadel Communications' 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 Citadel
Communications.
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. Citadel Communications 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, Citadel Communications competes with some
organizations that have greater financial resources than Citadel Communications.
Recent changes in FCC 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 local
marketing agreements or joint sales agreements may in certain circumstances have
lower operating costs and may be able to offer advertisers more attractive rates
and services. Although Citadel Communications currently operates multiple
stations in each of its markets and intends to pursue the creation of additional
multiple station groups, Citadel Communications' competitors in certain markets
include operators of multiple stations or operators who already have entered
into local marketing agreements or joint sales agreements. Citadel
Communications 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 Citadel
Communications.
Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. 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
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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 more information about FCC regulation and the provisions of the
Telecommunications Act, see the discussion below under the heading "Federal
Regulation of Radio Broadcasting." Citadel Communications' 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. Digital audio broadcasting 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 internet also could create a new
form of competition. The radio broadcasting industry historically has grown
despite the introduction of new technologies for the delivery of entertainment
and information. 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, to deliver audio programming. Digital
audio radio services 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.
Citadel Communications 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 the discussion below under the heading "Federal Regulation of
Radio Broadcasting."
FEDERAL REGULATION OF RADIO BROADCASTING
Introduction. The ownership, operation and sale of broadcast stations,
including those licensed to Citadel Communications, are subject to the
jurisdiction of the FCC, which acts under authority derived from the
Communications Act of 1934, as amended, which is referred to in this prospectus
as 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,
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<PAGE> 66
-- 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. These 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 transferability of the applicant's license is
restricted.
A petition to deny renewal has been filed against four of Citadel
Communications' Salt Lake City stations, alleging that they failed to comply
with FCC equal employment opportunity rules, and FCC processing of that petition
has delayed action on those license renewals. In September 1998, subsequent to
the filing of the Salt Lake City petition to deny, the U.S. Court of Appeals for
the D.C. Circuit struck down most of the FCC's equal employment opportunity
rules as unconstitutional. The status of pending petitions to deny license
renewals based on alleged equal employment opportunity violations was rendered
uncertain by the court's decision. The FCC subsequently proposed new rules, but
such proposal does not directly address either the issue of penalties or the
disposition of pending license renewal applications involving equal employment
opportunity allegations. The FCC is currently evaluating public comment on its
new proposals, and will likely delay the grant of license renewals which were
challenged under its current equal employment opportunity rules, until new rules
are final. Under the FCC's current rules, which have been held to be
unconstitutional, the FCC could find that the Salt Lake City stations lacked
effective equal
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employment opportunity policies and procedures, the stations could be fined,
generally $10,000 to $15,000, reporting conditions, including the filing of
periodic documentation of equal employment opportunity efforts, could be
imposed, or renewal of the licenses may be for less than the standard eight-year
period. In rare cases, the FCC has held hearings on equal employment opportunity
violations. Citadel Communications cannot predict whether new equal employment
opportunity rules will be adopted, the form of any such rules, or the impact of
the rules on its pending Salt Lake City license renewal applications.
Except for the Salt Lake City station renewals discussed above, Citadel
Communications 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 Citadel Communications' licenses will be renewed.
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 Citadel Communications, assuming
the completion of the pending transactions described in the "Pending
Transactions" section, and the date on which each station's FCC license expires.
As you review the information in the following table, you should note the
following:
-- The symbol "*" indicates a station which is the subject of one of
Citadel Communications' pending transactions. The completion of each
of the pending transactions is subject to conditions. Although Citadel
Communications believes these conditions are customary for
transactions of this type, there can be no assurance that the
conditions will be satisfied. See the "Pending Transactions" section.
-- A station's actual city of license may be different from the shown
metropolitan market served. In addition, three of the stations listed
as Little Rock stations primarily serve the surrounding communities
outside of Little Rock.
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-- 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.
-- License renewal applications have been filed for the listed stations
showing a license expiration date of October 1, 1997 or August 1,
1998, and the expiration of the licenses is stayed during the pendency
of these renewal proceedings. See the above discussion for the status
of the license renewals for four of Citadel Communications' Salt Lake
City radio stations.
<TABLE>
<CAPTION>
HAAT EXPIRATION
FCC IN POWER IN DATE OF
MARKET STATION CLASS METERS KILOWATTS FREQUENCY FCC LICENSE
------ ------- ----- ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Providence, RI................. WPRO-AM B NA 5.0 630 kHz 04-01-06
WPRO-FM B 168 39.0 92.3 MHz 04-01-06
WSKO-AM B NA 5.0 790 kHz 04-01-06
WWLI-FM B 152 50.0 105.1 MHz 04-01-06
WXEX-FM A 163 2.3 99.7 MHz 04-01-06
WHKK-FM A 90 4.2 100.3 MHz 04-01-06
Salt Lake City, UT............. KBEE-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 08-01-06
WXBE-FM B 222 19.5 97.9 MHz 08-01-06
WARM-AM B NA 5.0 590 kHz 08-01-06
WMGS-FM B 422 5.3 92.9 MHz 08-01-06
WBHT-FM A 336 0.50 97.1 MHz 08-01-06
*WKQV-AM B NA 10.0/0.5 1550 kHz 08-01-06
WKQV-FM A 308 0.30 95.7 MHz 08-01-06
WCTP-FM A 235 0.52 94.3 MHz 08-01-06
WCTD-FM A 207 1.45 93.7 MHz 08-01-06
WKJN-AM B NA 5.0/.037 1440 kHz 08-01-98
WEMR-AM B NA 5.0/1.0 1460 kHz 08-01-06
WEMR-FM A 354 0.24 107.7 MHz 08-01-06
Allentown/Bethlehem, PA........ WCTO-FM B 152 50.0 96.1 MHz 08-01-06
WLEV-FM B 327 10.9 100.7 MHz 08-01-06
Albuquerque, NM................ KKOB-AM B NA 50.0 770 kHz 10-01-05
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/Carlisle and York, B 283 14.1 106.7 MHz 08-01-06
PA........................... WRKZ-FM
WHYL-FM A 100 H3.0/V2.75 102.3 MHz 08-01-06
WHYL-AM B NA 5.0 960 kHz 08-01-06
WQXA-AM B NA 1.0 1250 kHz 08-01-06
WQXA-FM B 215 25.1 105.7 MHz 08-01-06
Baton Rouge, LA................ KQXL-FM C2 148 50.0 106.5 MHz 06-01-04
WXOK-AM B NA 5.0/1.0 1460 kHz 06-01-04
WEMX-FM C1 299 100.0 94.1 MHz 06-01-04
WCAC-FM C 306 100.0 103.3 MHz 06-01-04
WIBR-AM B NA 5.0/1.0 1300 kHz 06-01-04
</TABLE>
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<TABLE>
<CAPTION>
HAAT EXPIRATION
FCC IN POWER IN DATE OF
MARKET STATION CLASS METERS KILOWATTS FREQUENCY FCC LICENSE
------ ------- ----- ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
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
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(1) 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
KAAY-AM A NA 50.0 1090 kHz 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
KEYF-AM B NA 5.0 1050 kHz 02-01-06
KEYF-FM C 490 100.0 101.1 MHz 02-01-06
KNJY-FM C2 432 5.5 103.9 MHz 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
KSPZ-FM C 649 72.0 92.9 MHz 04-01-05
KVOR-AM B NA 5.0/1.0 1300 kHz 04-01-05
KTWK-AM B NA 3.3/1.5 740 kHz 04-01-05
Lafayette, LA.................. KFXZ-FM A 151 2.6 106.3 MHz 06-01-04
KNEK-FM C3 100 25.0 104.7 MHz 06-01-04
KNEK-AM B NA 0.25 1190 kHz 06-01-04
KRRQ-FM C2 135 50.0 95.5 MHz 06-01-04
Charleston, SC................. *WSSX-FM C 317 100.0 95.1 MHz 12-01-03
*WWWZ-FM C2 150 50.0 93.3 MHz 12-01-03
*WMGL-FM C3 128.9 6.5 101.7 MHz 12-01-03
*WSUY-FM C 539.5 100.0 96.9 MHz 12-01-03
*WNKT-FM C 299.9 100.0 107.5 MHz 12-01-03
*WTMA-AM B NA 5.0/1.0 1250 kHz 12-01-03
*WTMZ-AM B NA 0.50 910 kHz 12-01-03
*WXTC-AM B NA 5.0 1390 kHz 12-01-03
Portsmouth/Dover/Rochester, B 150 50.0 97.5 MHz 04-01-06
NH........................... *WOKQ-FM
*WXBB-FM A 113.1 2.2 105.3 MHz 04-01-06
*WXBP-FM A 100 3.0 102.1 MHz 04-01-06
*WPKQ-FM C 1181 H22.5/V17.5 103.7 MHz 04-01-06
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
Saginaw/Bay City, MI........... WKQZ-FM C2 169 39.2 93.3 MHz 10-01-04
WYLZ-FM A 151 2.6 100.9 MHz 10-01-04
WIOG-FM B 244 86 102.5 MHz 10-01-04
WILZ-FM A 126 2.9 104.5 MHz 10-01-04
WGER-FM A 116 2.05 106.3 MHz 10-01-04
WSGW-AM B NA 5.0/1.0 790 kHz 10-01-04
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
KATG-FM(2) A 129 3.6 93.7 MHz 10-01-05
</TABLE>
65
<PAGE> 70
<TABLE>
<CAPTION>
HAAT EXPIRATION
FCC IN POWER IN DATE OF
MARKET STATION CLASS METERS KILOWATTS FREQUENCY FCC LICENSE
------ ------- ----- ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Portland, ME................... *WBLM-FM C 436 100.0 102.9 MHz 04-01-06
*WCYI-FM B 195.1 27.5 93.9 MHz 04-01-06
*WCYY-FM B1 147 11.5 94.3 MHz 04-01-06
*WHOM-FM C 1140.9 50.0 94.9 MHz 04-01-06
*WJBQ-FM B 271.3 16.0 97.9 MHz 04-01-06
*WCLZ-FM B 121.9 47.5 98.9 MHz 04-01-06
Binghamton, NY................. *WHWK-FM B 292.6 10.0 98.1 MHz 06-01-06
*WYOS-FM(3) A 254 0.93 104.1 MHz 11-26-96
*WAAL-FM B 332 7.1 99.1 MHz 06-01-06
*WNBF-AM B NA 5.0 1290 kHz 06-01-06
*WKOP-AM B NA 5.0/0.5 1360 kHz 06-01-06
Muncie, IN..................... *WMDH-FM B 152.4 50.0 102.5 MHz 08-01-04
*WMDH-AM B NA 0.25 1550 kHz 08-01-04
Kokomo, IN..................... *WWKI-FM B 143.3 50.0 100.5 MHz 08-01-04
</TABLE>
- ---------------
(1) KAFN-FM in Little Rock has not yet commenced operations.
(2) Citadel Communications operates KATG-FM under a local marketing agreement.
(3) WYOS-FM in Binghamton operates pursuant to a construction permit. An
application for a license to cover the construction permit has been filed
with the FCC. Expiration of the construction permit is stayed during the
pendency of that application.
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.
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. The FCC has recently instituted an
informal policy of inviting public comment on any proposed radio transaction
that would result in one broadcaster controlling at least half of all radio
advertising revenue in a market, or two broadcasters controlling 70% or more of
market revenue. This policy has resulted in delays in the FCC's acceptance of
applications for filing, and in subsequent action on assignment and transfer
applications. Notice of acceptance of an application 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
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<PAGE> 71
legally a final order. If there is a backlog of applications, the processing
period can extend to 30 days or more.
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 30
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, the FCC's grant is generally 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 timetables
mentioned above 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 Citadel Communications
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 Citadel
Communications and the Certificate of Incorporation of Citadel Broadcasting
contain provisions which permit Citadel Communications 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 Citadel Communications nor Citadel Broadcasting would be
permitted to acquire any daily newspaper or television broadcast station
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<PAGE> 72
(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:
-- 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),
-- In a market with more than 29 but less than 45 commercial radio
stations, an entity may own up to seven commercial radio stations, not
more than four of which are in the same service,
-- In a market with more than 14 but less than 30 commercial radio
stations, an entity may own up to six commercial radio stations, not
more than four of which are in the same service, and
-- 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
Communications' current ownership of radio broadcast stations. However, these
rules will limit the number of additional stations which Citadel Communications
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 Citadel Communications or Citadel Broadcasting which acquires an
attributable interest in Citadel Communications 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 Citadel Communications or Citadel Broadcasting
violates any of these ownership rules, Citadel Communications 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 particular 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
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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, or 10% or more of the corporation's stock in the case of insurance
companies, investment companies, bank trust departments and certain other
passive investors that hold the 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 the discussion
below under the heading "Proposed Changes."
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 Citadel Communications' or
Citadel Broadcasting's voting stock may make or hold.
The FCC has also been more aggressive in examining issues of market revenue
share concentration when considering radio station acquisitions. The FCC has
delayed its approval of several pending radio station purchases by various
parties because of market concentration concerns. Moreover, the FCC has recently
followed an informal policy of giving specific public notice of its intention to
conduct additional ownership concentration analyses and soliciting public
comment on the issue of concentration and its effect on competition and
diversity in connection with applications for consent to radio station
acquisitions, where the proposed transaction would result in one broadcaster
controlling at least half of all radio advertising revenue in a market, or two
broadcasters controlling 70% or more of market revenue. This policy has resulted
in significant delays in action on FCC assignment and transfer applications and
has the potential to result in an attempt by the FCC to set applications for
hearing, prevent completion of transactions or negotiate modifications to the
proposed terms. For a discussion of the effects of this policy on some of our
pending transactions, see the "Pending Transactions" section.
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 types of programming responsive to the needs of a station's
community of license. However, licensees continue to be required to present
programming that is responsive to community problems, needs and interests and to
maintain records demonstrating such responsiveness. Complaints from listeners
concerning a station's programming will be considered by the FCC when it
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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 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 radio frequency radiation in excess of
FCC 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. Citadel Communications anticipates that such
regulations will not have a material effect on its business.
Local Marketing Agreements. Over the past several years, a number of radio
stations, including several of Citadel Communications' stations, have entered
into what commonly are referred to as local marketing agreements 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. Presently,
Citadel Communications operates only one station under a local marketing
agreement.
A station that brokers substantial time on another station in its market or
engages in a local marketing agreement 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 under the heading
"Ownership Matters." As a result, a broadcast station may not enter into a local
marketing agreement 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 (that is, 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 a local marketing agreement
arrangement.
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Another example of a cooperative agreement between separately owned radio
stations in the same market is a joint sales agreement, 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. Currently, joint
sales agreements are not considered by the FCC to be attributable. However, the
FCC has outstanding a notice of proposed rulemaking, which, if adopted, would
require Citadel Communications to terminate any joint sales agreement it might
have with a radio station with which Citadel Communications could not have a
local marketing agreement. Currently, no Citadel Communications groups would be
affected.
Proposed Changes. The FCC has pending a rulemaking proceeding designed to
permit a thorough review of its broadcast media attribution rules. Among the
changes the FCC is considering are the following:
-- raising the basic benchmark for attributing ownership in a corporate
licensee from 5% to 10% of the licensee's voting stock,
-- increasing from 10% to 20% of the licensee's voting stock the
attribution benchmark for passive investors in corporate licensees,
-- restricting the availability of the attribution exemption when a
single party controls more than 50% of the voting stock, and
-- considering local marketing agreements, joint sales agreements, debt
and non-voting stock interests to be attributable under certain
circumstances.
We cannot predict with certainty when this proceeding will be concluded or
what effect, if any, this proposed rulemaking will have on Citadel
Communications. However, if the FCC changes its rules so that certain
cross-interests arising from non-voting stock ownership would be counted as
attributable ownership interests, the interests of ABRY Broadcast Partners II,
L.P., a significant stockholder of Citadel Communications, could be attributed
to Citadel Communications. This attribution could preclude Citadel
Communications from acquiring stations in markets where ABRY Broadcast Partners
II, L.P. already has attributable broadcast interests.
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 Citadel Communications' radio
stations, result in the loss of audience share and advertising revenue for
Citadel Communications' radio stations, and affect the ability of Citadel
Communications 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,
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-- 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.
In January 1995, the FCC adopted rules to allocate spectrum for satellite
digital audio radio service. Satellite digital audio radio service systems
potentially could provide for regional or nationwide distribution of radio
programming with fidelity comparable to compact discs. The FCC has issued two
authorizations to launch and operate satellite digital audio radio service. The
FCC also has undertaken an inquiry into the terrestrial broadcast of digital
audio radio service signals, addressing, among other things, the need for
spectrum outside the existing FM band and the role of existing broadcasters.
In January 1999, the FCC proposed to license new 1000 watt and 100 watt
low-power FM radio stations, and also sought comment on establishing a third
microradio class at power levels from one to ten watts. The comment period in
that proceeding will close in July 1999. 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.
Citadel Communications 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 Federal Trade Commission and the
United States Department of Justice, 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 Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, which is referred to in this
prospectus as the Hart-Scott-Rodino Act, and the rules promulgated thereunder,
require the parties to file Notification and Report Forms with the Federal Trade
Commission and the Department of Justice 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
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determines that 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. The issuance of a formal request extends the waiting
period until the 20th 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 formal 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
completion of the acquisition during their pendency.
At any time before or after the completion of a proposed acquisition, the
Federal Trade Commission or the Department of Justice could take such action
under the antitrust laws as it considers necessary or desirable in the public
interest, including seeking to enjoin the acquisition or seeking divestiture of
the business acquired or other assets of Citadel Communications. Acquisitions
that are not required to be reported under the Hart-Scott-Rodino Act may be
investigated by the Federal Trade Commission or the Department of Justice under
the antitrust laws before or after completion. In addition, private parties may
under certain circumstances bring legal action to challenge an acquisition under
the antitrust laws.
Citadel Communications has received early termination of the applicable
waiting period under the Hart-Scott-Rodino Act for the pending acquisition of
stations in Charleston, South Carolina, Binghamton, New York and Muncie and
Kokomo, Indiana and is awaiting termination of the applicable waiting period for
its acquisition of stations in Portsmouth/ Dover/Rochester, New Hampshire and
Portland, Maine and its sale of stations in Eugene and Medford, Oregon,
Tri-Cities, Washington, Billings, Montana and Johnstown and State College,
Pennsylvania. In March 1999, Citadel Communications received a request for
additional information and documents from the Department of Justice relating,
Citadel Communications believes, to stations in Billings. As discussed above,
this request extends the waiting period under the Hart-Scott-Rodino Act for a
period of 20 days after receipt by the Department of Justice of the information
and documents requested from all parties from whom such information and
documents have been requested.
As part of its increased scrutiny of radio station acquisitions, the
Department of Justice has stated publicly that it believes that commencement of
operations under local marketing agreements, joint sales agreements and other
similar agreements customarily entered into in connection with radio station
transfers prior to the expiration of the waiting period under the
Hart-Scott-Rodino Act could violate the Hart-Scott-Rodino Act. In connection
with acquisitions subject to the waiting period under the Hart-Scott-Rodino Act,
Citadel Communications will not commence operation of any affected station to be
acquired under a local marketing agreement or similar agreement until the
waiting period has expired or been terminated.
Citadel Communications has received civil investigative demands from the
Antitrust Division of the Department of Justice. One demand addresses Citadel
Communications' acquisition of KRST-FM in Albuquerque, New Mexico, and the other
investigation addressed
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Citadel Communications' joint sales agreement relating to stations in Spokane,
Washington and Colorado Springs, Colorado. Citadel Communications has reached an
agreement with the Department of Justice and the other interested party
concerning this Spokane/Colorado Springs investigation, and the joint sales
agreement has been terminated. See the discussion below under the heading "Legal
Proceedings."
TRADEMARKS
Citadel Communications owns a number of trademarks and service marks,
including the federally registered marks Cat Country, Supertalk and the Cat
Country logo. Citadel Communications also owns a number of marks registered in
various states. Citadel Communications considers such trademarks and service
marks to be important to its business. See the discussion above under the
heading "Operating Strategy" and the subheading "Targeted Programming."
EMPLOYEES
At May 24, 1999, Citadel Communications employed approximately 1,768
persons. None of these employees are covered by collective bargaining
agreements, and Citadel Communications considers its relations with its
employees to be good.
Citadel Communications employs several on-air personalities with large
loyal audiences in their respective markets. Citadel Communications 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 Citadel Communications does not believe that any such loss would have a
material adverse effect on Citadel Communications' financial condition or
results of operations.
PROPERTIES AND FACILITIES
The types of properties required to support each of Citadel Communications'
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.
Citadel Communications currently owns studio facilities in Spokane,
Washington; Billings, Montana; Tri-Cities, Washington; East Providence, Rhode
Island; Little Rock, Arkansas; Boise, Idaho; Patton Township (State College),
Lower Yoder Township (Johnstown), South Middleton Township
(Harrisburg/Carlisle), Williams Township (Allentown) and Tunkhannock
(Wilkes-Barre/Scranton), Pennsylvania; Carrollton Township (Saginaw), Michigan;
and St. Landry Parish (Lafayette), Louisiana. Citadel Communications owns
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; Little Rock, Arkansas; Patton Township (State College), Croyle
Township (Johnstown), Mt. Joy Township (Harrisburg/York), Middlesex Township
(Harrisburg/Carlisle), Williams Township and Salisbury Township (Allentown), and
Hanover Township, Plymouth Township, Carbondale and Tunkhannock
(Wilkes-Barre/Scranton), Pennsylvania; Carrollton Township and Blumfield
Township (Saginaw) and Mt. Forest Township (Bay City), Michigan; East Feliciana
Parish
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and Livingston Parish (Baton Rouge) and St. Landry Parish (Lafayette),
Louisiana; and Black Forest, Colorado (Colorado Springs). Citadel Communications
expects to acquire additional real estate and to dispose of certain real estate
in connection with its pending transactions. Citadel Communications leases its
remaining studio and office facilities, including office space in Las Vegas,
Nevada and Pittsburgh, Pennsylvania which is not related to the operations of a
particular station, and it leases its remaining transmitter and antenna sites.
Citadel Communications does not anticipate any difficulties in renewing any
facility leases or in leasing alternative or additional space, if required.
Citadel Communications 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 Citadel Communications' operations. Citadel
Communications believes that its properties are generally in good condition and
suitable for its operations. However, Citadel Communications continually looks
for opportunities to upgrade its properties and intends to upgrade studios,
office space and transmission facilities in several markets.
Substantially all of Citadel Communications' properties and equipment serve
as collateral for Citadel Broadcasting's obligations under its credit facility.
See the "Description of Indebtedness" section under the heading "Existing Loan
Agreement."
LEGAL PROCEEDINGS
Citadel Communications currently and from time to time is involved in
litigation incidental to the conduct of its business, but it is not a party to
any lawsuit or proceeding which, in the opinion of Citadel Communications, is
likely to have a material adverse effect on Citadel Communications.
Citadel Communications received civil investigative demands from the
Department of Justice pursuant to which the Department of Justice requested
information from Citadel Communications to determine whether Citadel
Communications violated particular antitrust laws. One investigative demand was
issued on September 27, 1996 and concerns Citadel Communications' acquisition of
all of the assets of KRST-FM in Albuquerque, New Mexico on October 9, 1996. The
demand requested written answers to interrogatories and the production of
documents concerning the radio station market in Albuquerque, in general, and
the KRST acquisition, in particular, to enable the Department of Justice to
determine, among other things, whether the KRST acquisition would result in
excessive concentration in the market. Citadel Communications responded to the
demand. The Department of Justice requested supplemental information on January
27, 1997, to which Citadel Communications also responded. This matter remains
open. If the Department of Justice were to proceed with and successfully
challenge the KRST acquisition, Citadel Communications may be required to divest
one or more radio stations in Albuquerque.
Another investigation was initiated on October 9, 1996 and concerned
Citadel Communications' now-terminated joint sales agreement relating to a total
of eight radio stations in Spokane, Washington and Colorado Springs, Colorado.
Pursuant to the investigation, the Department of Justice requested information
to determine whether the joint sales agreement constituted a de facto merger,
resulting in a combination or contract in restraint of trade. Citadel
Communications and the other interested party reached an agreement with the
Department of Justice to drop its investigation. On April 28, 1999, the
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Department of Justice filed a lawsuit in the United States District Court for
the District of Columbia against Citadel Communications and Triathlon
Broadcasting Company alleging that they eliminated price competition between
their radio stations. A proposed final judgment, the terms of which were
stipulated by the parties, was also filed with the court on April 28, 1999. The
proposed final judgment is expected to become final after the expiration of the
60-day comment period required by law. The proposed final judgment would:
-- order Citadel Communications to terminate the joint sales agreement
referenced above,
-- prohibit Citadel Communications from acquiring any other radio
stations that sell radio advertising time in either Colorado Springs
or Spokane, unless Citadel Communications complies with the notice,
additional information and waiting period requirements in the final
judgment, and
-- prohibit Citadel Communications from entering into any joint sales
agreement or any other cooperative selling arrangement with any other
operator of radio stations that sells or helps to sell advertising
time in either Colorado Springs or Spokane, unless Citadel
Communications complies with the notice, additional information and
waiting period requirements in the final judgment.
The joint sales agreement was terminated on April 30, 1999.
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PENDING TRANSACTIONS
There are several transactions currently pending which, if completed, would
result in Citadel Communications purchasing 20 FM and seven AM radio stations
and selling 18 FM and seven AM radio stations.
THE CHARLESTON/BINGHAMTON/MUNCIE/KOKOMO ACQUISITION.
WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM, WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM,
Charleston, South Carolina, WHWK-FM, WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM,
Binghamton, New York, WMDH-FM and WMDH-AM, Muncie, Indiana and WWKI-FM, Kokomo,
Indiana. On November 23, 1998, Citadel Communications entered into an asset
purchase agreement with Wicks Broadcast Group Limited Partnership and related
entities to acquire substantially all of the assets of Wicks' 10 FM and six AM
radio stations serving the Charleston, South Carolina, Binghamton, New York,
Muncie, Indiana and Kokomo, Indiana markets for an aggregate purchase price of
approximately $77.0 million in cash. Citadel Communications has delivered an
irrevocable letter of credit in favor of the sellers, issued by BankBoston,
N.A., in the amount of $5.0 million to secure Citadel Communications'
obligations under the asset purchase agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and completion of the acquisition of the stations is
subject to conditions including (1) the receipt of FCC consent to the assignment
of the station licenses to Citadel Communications, (2) the expiration or
termination of the applicable waiting periods under the Hart-Scott-Rodino Act,
and (3) the receipt of consents to the assignment to Citadel Communications of
certain contracts relating to the stations. An application seeking FCC approval
was filed with the FCC on December 2, 1998. A petition to deny the application
was filed in February 1999 by a Binghamton radio broadcasting competitor. Action
on the FCC assignment application has been delayed by the filing of this
petition and the FCC's analysis of market revenue share issues in Binghamton.
Citadel Communications received early termination of the applicable
Hart-Scott-Rodino Act waiting period on December 18, 1998. Citadel
Communications does not own any other radio stations in these markets.
THE MARATHON DISPOSITION.
KKTT-FM, KEHK-FM and KUGN-AM, Eugene, Oregon, KAKT-FM, KBOY-FM, KCMX-FM,
KTMT-FM, KCMX-AM and KTMT-AM, Medford, Oregon, KEYW-FM, KORD-FM, KXRX-FM,
KTHK-FM and KFLD-AM, Tri-Cities, Washington, KCTR-FM, KKBR-FM, KBBB-FM, KMHK-FM
and KBUL-AM, Billings, Montana, WQKK-FM and WGLU-FM, Johnstown, Pennsylvania and
WQWK-FM, WNCL-FM, WRSC-AM and WBLF-AM, State College, Pennsylvania. On January
13, 1999, Citadel Communications entered into an asset purchase agreement with
Marathon Media, L.P. under which Marathon has agreed to acquire substantially
all of the assets of Citadel Communications' 18 FM radio stations and 7 AM radio
stations serving the Eugene, Oregon, Medford, Oregon, Tri-Cities, Washington,
Billings, Montana, Johnstown, Pennsylvania and State College, Pennsylvania
markets for an aggregate purchase price of approximately $26.0 million,
consisting of $25.5 million in cash and a $0.5 million promissory note. Of the
cash portion, $1.0 million has been deposited into escrow to secure Marathon's
obligations under the asset purchase agreement. The promissory note will not
bear interest unless a payment default occurs, and the principal is to be paid
in $0.1 million installments on each of the first through fifth anniversaries of
the closing of the transaction. The note will also provide for a mandatory
prepayment upon the occurrence of certain events and will permit optional
prepayment.
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The asset purchase agreement contains customary representations and
warranties of the parties, and consummation of the acquisition of the stations
is subject to conditions including (1) the receipt of FCC consent to the
assignment of the station licenses to Marathon, (2) the expiration or
termination of the applicable waiting periods under the Hart-Scott-Rodino Act
and (3) the receipt of consents to the assignment to Marathon of certain
contracts relating to the stations. An application seeking FCC approval was
filed with the FCC on February 8, 1999. In March 1999, Citadel Communications
received a request for additional information and documents from the Department
of Justice. Under the applicable rules, this request extends the waiting period
under the Hart-Scott-Rodino Act for a period of 20 days after receipt by the
Department of Justice of the information and documents requested from all
parties from whom such information and documents have been requested. In April
1999, the Department of Justice filed a comment in response to the FCC's public
notice requesting comments on the transfer of the licenses for Citadel
Communications' Billings stations to Marathon. In its comment, the Department of
Justice asserts that the proposed transfer raises substantial and material
issues of fact as to whether the transaction is anticompetitive. Action on the
FCC application will likely be delayed by the filing of these comments and the
FCC's analysis of ownership concentration in Billings. For a discussion of the
effects that this may have on the closing of the transaction, see the "Business"
Section under the heading "Ownership Matters." Citadel Communications does not
own any other radio stations serving these markets.
PORTSMOUTH/DOVER/ROCHESTER AND PORTLAND ACQUISITION.
WOKQ-FM, WPKQ-FM, WXBB-FM and WXBP-FM, Portsmouth/Dover/Rochester, New
Hampshire and WBLM-FM, WCYI-FM, WCYY-FM, WHOM-FM, WJBQ-FM, and WCLZ-FM,
Portland, Maine. On April 30, 1999, Citadel Communications entered into stock
purchase agreements with each of the two stockholders of Fuller-Jeffrey
Broadcasting Companies, Inc. under which Citadel Communications has agreed to
purchase all of the issued and outstanding shares of capital stock of
Fuller-Jeffrey. The aggregate purchase price is approximately $65.3 million,
which includes the repayment or assumption of certain outstanding debt of
Fuller-Jeffrey and approximately $1.8 million in payments related to a
consulting and noncompetition agreement to be entered into in connection with
the acquisition. Citadel Communications has caused to be delivered to the
stockholders of Fuller-Jeffrey irrevocable letters of credit in favor of these
stockholders, issued by BankBoston, N.A., in the aggregate amount of $6.5
million to secure Citadel Communications' obligations under the purchase
agreements. At the time of the closing of these transactions, Fuller-Jeffrey
will be, directly or indirectly through its wholly-owned subsidiaries, the
licensee of and the owner and operator of 10 FM radio stations serving the
Portsmouth/Dover/Rochester, New Hampshire and Portland, Maine markets.
The stock purchase agreements contain customary representations and
warranties of the parties, and consummation of the transaction is subject to
conditions including (1) the receipt of FCC consent to the transfer of control
of the station licenses to Citadel Communications, (2) the expiration or
termination of the applicable waiting periods under the Hart-Scott-Rodino Act
and (3) the receipt of consents to the change of control under certain contracts
to which Fuller-Jeffrey or its wholly-owned subsidiaries are a party. An
application seeking FCC approval was filed with the FCC on May 5, 1999. Citadel
Communications anticipates that if the acquisition of Fuller-Jeffrey closes, it
will close in the third quarter of 1999. At the closing, Citadel Communications
expects to enter into a seven-year consulting and noncompetition agreement with
one of the stockholders of Fuller-Jeffrey. Immediately after closing,
Fuller-Jeffrey and its wholly-owned subsidiaries will be merged into Citadel
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Broadcasting. Citadel Communications does not own any other radio stations
serving these markets.
THE WILKES-BARRE/SCRANTON ACQUISITION.
WKQV-AM, Wilkes-Barre/Scranton, Pennsylvania. On January 11, 1999, Citadel
Communications entered into an asset purchase agreement with Robert C. Cordaro,
Inc. under which Citadel Communications agreed to acquire certain assets used in
the operation of radio station WKQV-AM serving the Wilkes-Barre/Scranton market
for a purchase price of approximately $0.4 million. Citadel Communications has
operated WKQV-AM under a joint sales agreement since July 1997.
The asset purchase agreement contains customary representations and
warranties of the paries, and completion of the acquisition is subject to
conditions including (1) the receipt of FCC consent to the assignment of the
station license to Citadel Communications and (2) the receipt of consents to the
assignment to Citadel Communications of certain contracts relating to the
station. An application seeking FCC approval was filed with the FCC on January
19, 1999, and a grant of the application was received on March 8, 1999. Closing
of this transaction has been delayed because of an unresolved real estate issue.
If this transaction is completed, Citadel Communications will own seven FM and
five AM radio stations in Wilkes-Barre/Scranton.
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<PAGE> 84
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the
directors and executive officers of Citadel Communications:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lawrence R. Wilson......... 54 Chief Executive Officer, Chairman and
President
Donna L. Heffner........... 40 Vice President, Chief Financial Officer and
Secretary
D. Robert Proffitt......... 47 Vice President
Stuart R. Stanek........... 43 Vice President
Peter J. Benedetti......... 35 Vice President
Edward T. Hardy............ 50 Vice President
Patricia Diaz Dennis....... 52 Director
Ike Kalangis............... 62 Director
Ted L. Snider, Sr.......... 70 Director
John E. von Schlegell...... 45 Director
</TABLE>
Lawrence R. Wilson co-founded and was a general partner of Citadel
Communications' predecessor, Citadel Associates Limited Partnership and Citadel
Associates Montana Limited Partnership, from 1984 to July 1992 and has been the
Chief Executive Officer, President and Chairman of Citadel Communications since
it was incorporated in 1993 and Chief Executive Officer and Chairman of the
Board of Citadel Broadcasting since it was incorporated in 1991. Mr. Wilson also
served as President of Citadel Broadcasting from 1991 to October 1998. 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 Citadel Associates Limited Partnership and Citadel
Associates Montana Limited Partnership in 1988 as Controller. Ms. Heffner has
served as Secretary of Citadel Communications since it was incorporated in 1993
and of Citadel Broadcasting since it was incorporated in 1991. She has served as
Chief Financial Officer of Citadel Communications and Citadel Broadcasting since
1993 and 1992, respectively. In January 1997, Ms. Heffner became Vice President
of Citadel Communications and Citadel Broadcasting. Ms. Heffner also served as
Treasurer of Citadel Communications from 1993 to 1999 and as a director of
Citadel Communications for several months in 1993. She served as Treasurer of
Citadel Broadcasting from 1991 to 1999 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.
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<PAGE> 85
D. Robert Proffitt joined Citadel Associates Limited Partnership and
Citadel Associates Montana Limited Partnership 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 Citadel Communications, Mr. Proffitt took over as General
Manager of Citadel Communications' Albuquerque operations in 1994. Mr. Proffitt
served as President of Central Region for Citadel Broadcasting from June 1997 to
October 1998, and he became President and Chief Operating Officer of Citadel
Broadcasting in October 1998.
Stuart R. Stanek joined Citadel Associates Limited Partnership and Citadel
Associates Montana Limited Partnership in 1986 as a General Manager of KKFM-FM
in Colorado Springs. In 1988, he became General Manager of KBEE-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
Broadcasting and in 1993, he was appointed Vice President and elected to the
Board of Directors of Citadel Communications. He served as a Director of Citadel
Communications and Citadel Broadcasting until August 1996. Mr. Stanek became
President of East Region for Citadel Broadcasting in June 1997.
Peter J. Benedetti joined Citadel Communications in April 1995 as Sales
Manager for KMGA-FM in Albuquerque and also became Sales Manager for KHFM-FM in
Albuquerque upon Citadel Communications' acquisition of that station in June
1996. From January 1997 to July 1997, Mr. Benedetti was Director of Sales of
Citadel Communications' Salt Lake City radio station group, and from July 1997
to October 1998, he served as Vice President and General Manager of that radio
station group. In October 1998 Mr. Benedetti became Vice President of Citadel
Communications and Vice President and President of the Central Region for
Citadel Broadcasting. Prior to joining Citadel Communications, he served as an
account executive for Jacor Communications' KBPI-FM in Denver, Colorado. Mr.
Benedetti currently serves on the Board of Directors of the Utah Broadcasters
Association and the Salt Lake City Radio Broadcasters Association.
Edward T. Hardy founded and was elected President and Chief Executive
Officer of Deschutes River Broadcasting, Inc. in 1994. Mr. Hardy joined Citadel
Communications in January 1997 as President of Deschutes following Citadel
Communications' acquisition of Deschutes. Mr. Hardy became President of West
Region for Citadel Broadcasting and Vice President of Citadel Communications and
Citadel Broadcasting in June 1997 when Deschutes was merged with and into
Citadel Broadcasting. From 1984 to 1993, Mr. Hardy was Vice President -- General
Manager of KUPL AM/FM in Portland, Oregon.
Patricia Diaz Dennis became a director of Citadel Communications and
Citadel Broadcasting in November 1997. Since November 1998, Ms. Dennis serves as
Senior Vice President -- Regulatory and Public Affairs of SBC Communications
Inc., a company which provides telecommunications products and services, and
from September 1995, she served as Senior Vice President and Assistant General
Counsel for regulation and public policy of SBC Communications Inc. 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.
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<PAGE> 86
Ike Kalangis became a director of Citadel Communications and Citadel
Broadcasting in May 1999. Mr. Kalangis has over 30 years' experience in the
banking industry, most recently, from 1989 until his retirement in 1997, as
Chairman, President and Chief Executive Officer of Boatman's Sunwest, Inc., a
bank holding company with community banks in New Mexico and Texas, which is now
a part of Bank of America.
Ted L. Snider, Sr. became a director of Citadel Communications and Citadel
Broadcasting in November 1997 following Citadel Communications' 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
Citadel Communications and Citadel Broadcasting since January 1997. He
co-founded and, since 1991, has managed, Endeavour Capital Fund Limited
Partnership, 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.
BOARD COMPOSITION
Four of the five persons presently constituting the Board of Directors of
Citadel Communications were elected under the terms of a Fourth Amended and
Restated Voting Agreement dated as of October 15, 1997, by and among Citadel
Communications, the voting trustee under the Amended and Restated Voting Trust
Agreement dated October 15, 1997 and certain other stockholders of Citadel
Communications. In connection with Citadel Communications' initial public
offering, the Fourth Amended and Restated Voting Agreement and a related
stockholders agreement among Citadel Communications and certain of its
stockholders were terminated. The Amended and Restated Voting Trust Agreement
will continue in effect until terminated in accordance with its terms.
Each director of Citadel Communications holds office until the next annual
meeting of stockholders and until his or her successor has been elected and
qualified. Officers are elected by the Board of Directors and serve at its
discretion.
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<PAGE> 87
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid to Citadel Communications' Chief Executive Officer and each of the other
four most highly compensated executive officers of Citadel Communications during
1998. Information with respect to 1996 compensation is not given for Mr.
Proffitt as he did not begin service as an executive officer of Citadel
Communications until 1997. Information with respect to 1996 and 1997
compensation is not given for Mr. Benedetti as he did not begin service as an
executive officer of Citadel Communications until 1998.
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........ 1998 $358,319 $214,370(2) - 0 - 60,000 $3,046(3)
Chairman, Chief 1997 341,256 120,000(4) - 0 - - 0 - 3,278(3)
Executive and President 1996 325,000 81,250(5) $412,041(6) 450,000 2,786(3)
Donna L. Heffner.......... 1998 $175,000 $ 80,000(2) - 0 - 12,000 $4,537(7)
Vice President and 1997 140,535 50,000(4) - 0 - - 0 - 3,086(7)
Chief Financial Officer 1996 120,000 20,000(5) - 0 - 66,000 2,505(7)
D. Robert Proffitt........ 1998 $200,000 $ 40,000(2) - 0 - 12,000 $3,161(8)
Vice President 1997 192,211 15,000(4) - 0 - -0- 2,541(8)
Stuart R. Stanek.......... 1998 $210,000 $ 50,000(2) - 0 - 12,000 $2,635(9)
Vice President 1997 190,007 30,000(4) - 0 - - 0 - 2,529(9)
1996 165,000 35,000(5) - 0 - 72,000 2,553(9)
Peter J. Benedetti........ 1998 $150,000 $ 65,000(2) - 0 - 21,005 $2,093(10)
Vice President
</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 executive officers 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 executive officer.
(2) Bonuses were earned in 1998 and paid in 1998 or will be paid in 1999. Does
not reflect bonuses earned in 1997 but paid in 1998.
(3) Represents Citadel Communications' contribution of $2,986, $3,200 and
$2,708 in 1998, 1997 and 1996, respectively, to Citadel Communications'
401(k) Plan, which contributions vest over five years, and Citadel
Communications' payment of $60 in 1998 and $78 in each of 1997 and 1996 of
premiums for term life insurance.
(4) Bonuses were earned in 1997 and paid in 1997 and 1998. Does not reflect
bonuses earned in 1996 but paid in 1997.
(5) Bonuses were earned in 1996, but paid in 1997. Does not reflect bonuses
earned in 1995 but paid in 1996.
(6) Represents $3,404 for personal use of company-provided vehicle and for
goods and services received through Citadel Communications' trade
agreements, and the forgiveness of $408,637 of indebtedness in 1996.
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<PAGE> 88
(7) Represents Citadel Communications' contribution of $4,477, $3,008 and
$2,427 in 1998, 1997 and 1996, respectively, to Citadel Communications'
401(k) Plan, which contributions vest over five years, and Citadel
Communications' payment of $60 in 1998 and $78 in each of 1997 and 1996 of
premiums for term life insurance.
(8) Represents Citadel Communications' contribution of $3,101 and $2,463 in
1998 and 1997, respectively, to Citadel Communications' 401(k) Plan, which
contribution vests over five years, and Citadel Communications' payment of
$60 in 1998 and $78 in 1997 of premiums for term life insurance.
(9) Represents Citadel Communications' contribution of $2,575, $2,451 and
$2,475 in 1998, 1997 and 1996, respectively, to Citadel Communications'
401(k) Plan, which contributions vest over five years, and Citadel
Communications' payment of $60 in 1998 and $78 in each of 1997 and 1996 of
premiums for term life insurance.
(10) Represents Citadel Communications' contribution of $2,033 to Citadel
Communications' 401(k) Plan, which contribution vests over five years, and
Citadel Communications' payment of $60 of premiums for term life insurance.
The following table summarizes individual grants of options to purchase
shares of common stock of Citadel Communications to the executive officers
listed in the Summary Compensation Table during the year ended December 31,
1998:
OPTIONS GRANTED IN FISCAL 1998
<TABLE>
<CAPTION>
PERCENT
NUMBER OF OF TOTAL EXERCISE MARKET POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS OR PRICE ASSUMED RATES OF STOCK PRICE
UNDERLYING GRANTED TO BASE ON DATE APPRECIATION FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE OF GRANT EXPIRATION ----------------------------------
NAME GRANTED IN 1998 ($/SH) ($/SH)(1) DATE 0%($) 5%($) 10%($)
- ---- ---------- ---------- -------- --------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence R. Wilson(3) 60,000 29.4% $16.00 $25.813 9/09/08 $588,780 $1,562,820 $3,057,120
Donna L. Heffner(3) 12,000 5.9 16.00 25.813 9/09/08 117,756 312,564 611,424
D. Robert Proffitt(3) 12,000 5.9 16.00 25.813 9/09/08 117,756 312,564 611,424
Stuart R. Stanek(3) 12,000 5.9 16.00 25.813 9/09/08 117,756 312,564 611,424
Peter J. Benedetti(3) 16,005 7.8 16.00 16.000 6/30/08 - 0 - 161,042 408,128
Peter J. Benedetti(3) 5,000 2.5 16.00 25.813 9/09/08 49,065 130,235 254,760
</TABLE>
- ---------------
(1) For options granted on September 9, 1998, the indicated market price on the
date of the grant was the closing market price of the common stock. For the
option granted on June 30, 1998, the indicated market price on the date of
the grant was the initial public offering price in Citadel Communications'
initial public offering.
(2) The potential realizable value is based on the term of the option at the
time of grant, which is ten years for each of the options set forth in the
table. An assumed stock price appreciation of 0%, 5% and 10% is used
pursuant to rules promulgated by the Securities and Exchange Commission. The
potential realizable value is calculated by assuming that the market price
on the date of grant appreciates at the indicated rate, compounded annually,
for the entire term of the option and that the option is exercised and sold
on the last day of its term at this appreciated stock price. The potential
realizable value is not intended to forecast the future appreciation of the
common stock.
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<PAGE> 89
(3) Options vest 20% on each of the first through fifth anniversaries of the
date of grant. Vesting accelerates in the event of a change in control of
Citadel Communications, as provided for in the relevant option agreements.
The following table shows the number and value of unexercised stock options
to purchase shares of common stock of Citadel Communications (rounded to the
nearest whole share) held by the executive officers listed in the Summary
Compensation Table as of December 31, 1998. No options were exercised by these
executive officers in 1998:
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(2)... 479,636/322,312 $10,982,914/$5,878,524
Donna L. Heffner........ 139,243/79,811 3,283,559/1,604,401
D. Robert Proffitt...... 106,420/77,606 2,469,932/1,532,262
Stuart R. Stanek........ 140,827/83,207 3,315,737/1,678,070
Peter J. Benedetti...... 1,800/28,205 28,575/321,724
</TABLE>
- ---------------
(1) These values have been calculated on the basis of the December 31, 1998
closing price per share of $25.875, less the applicable exercise price.
(2) Includes options held by Rio Bravo Enterprise Associates, L.P. Mr. Wilson
owns all of the capital stock of Rio Bravo, Inc., the sole general partner
of Rio Bravo Enterprise Associates, L.P.
EMPLOYMENT AGREEMENT
In June 1996, Citadel Communications 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 $376,234 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 annual
performance criteria of Citadel Communications.
Mr. Wilson's employment with Citadel Communications will terminate upon Mr.
Wilson's becoming permanently disabled or upon:
-- a liquidation or dissolution of Citadel Communications,
-- a sale, transfer or other disposition of all of the assets of Citadel
Communications on a consolidated basis, or
-- any transaction or series of transactions whereby any person or entity
other than ABRY Broadcast Partners II, L.P. or its affiliates or
affiliates of Citadel Communications, becomes the direct or indirect
beneficial owner of securities of Citadel Communications or Citadel
Broadcasting representing 50% or more of the combined voting power of
Citadel Communications' or Citadel Broadcasting's then outstanding
securities.
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<PAGE> 90
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 Citadel Communications 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
Citadel Communications adopted the 1996 Equity Incentive Plan under which
employees, officers, directors (excluding non-employee directors), consultants,
independent contractors and advisors of Citadel Communications are eligible to
receive awards in the form of incentive stock options and options that are not
incentive stock options to purchase common stock of Citadel Communications.
Awards may also be in the form of stock appreciation rights, restricted
securities and other stock-based awards as determined by the Board of Directors,
none of which have been granted to date. The Equity Incentive Plan is
administered by the Compensation Committee of the Board of Directors and in
certain cases the Board. The Compensation Committee or the Board has authority
under the Equity Incentive Plan to designate participants, determine the terms
and conditions of awards to be granted to each participant and decide all
matters relating to any award. At May 21, 1999, the total number of shares of
common stock of Citadel Communications that remained reserved and available for
issuance under the Equity Incentive Plan, or which may be used to provide a
basis of measurement for an award, was 2,512,211 shares, including shares
underlying outstanding grants. The Board of Directors has adopted an amendment
to the Equity Incentive Plan to increase the number of shares available under
the plan to the number of shares equal to ten percent of the outstanding common
stock on a fully-diluted basis as of the closing of this offering, but not
including the 1,750,000 shares reserved for issuance under the Citadel
Communications Corporation 1999 Long-Term Incentive Plan. This amendment is
contingent upon completion of this offering and approval of the amendment by
Citadel Communications' stockholders.
Shares subject to any expired, terminated or lapsed awards are available
for subsequent grants under the Equity Incentive Plan. The exercise price of
incentive stock options granted under the plan may not be less than the fair
market value of the common stock as of the date of grant, and 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 Citadel Communications' capital stock. The Board may provide
that an optionee may pay for shares upon exercise of an option in cash or by
check or through cashless exercise procedures or by such other medium or by any
combination of media as authorized by the Board. 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. In the event a participant's employment with Citadel
Communications is terminated due to disability, retirement or any other reason,
a participant may exercise an option only to the extent it was exercisable on
the termination date of the participant's employment. An incentive stock option
must be exercised prior to the earlier of the expiration of three months (six
months in the case of disability after the
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<PAGE> 91
termination date) or the expiration date of the options set forth in the award
agreement. A non-incentive stock option must be exercised within the applicable
time period for exercise set forth in the award agreement. In the event of the
death of the participant before an option lapses, an option may be exercised
only to the extent it was exercisable on the date of death. However, such
exercise must be made prior to the earlier of the first anniversary of the
participant's death or the expiration date of the option.
1999 LONG-TERM INCENTIVE PLAN
The Board of Directors has adopted the Citadel Communications Corporation
1999 Long-Term Incentive Plan, which is intended to be the primary long-term
incentive plan for senior management. The Long-Term Incentive Plan provides
opportunities for participants to earn the right to purchase shares of Citadel
Communications' common stock if performance goals, measured solely by the
increase in the price of the common stock, and continued employment requirements
are met. Participants under the Long-Term Incentive Plan receive an option grant
based on the Compensation Committee's evaluation of the participant's ability to
contribute to Citadel Communications' overall performance. If the option is not
fully earned during the specific five-year performance period, any portion not
earned is forfeited, and the shares become available for issuance upon exercise
of other options granted under the plan. For the full option to be earned, the
average stock price over the exercise price must double during the performance
period. The per share exercise price of options granted effective as of the
consummation of this offering will be the share price to the public in this
offering. Thereafter, if any shares become available for additional grants, the
exercise price will be the average of the bid and asked prices of the common
stock on the date of the grant. The option is earned in one-fifth increments for
each increase in average stock price equal to one-fifth of the difference
between the doubled exercise price and the exercise price. When an increment of
the option is earned, the earned portion generally vests over a five-year
period. A total of 1,750,000 shares of common stock are available for issuance
under the Long-Term Incentive Plan.
At the time that the Board of Directors adopted the Long-Term Incentive
Plan, the following option grants were made to be effective as of the closing of
this offering, subject to stockholder approval of the Long-Term Incentive Plan:
Lawrence R. Wilson - 875,000 shares; Donna L. Heffner - 250,000 shares; D.
Robert Proffitt - 250,000 shares; Stuart R. Stanek - 250,000 shares; and Peter
J. Benedetti - 125,000 shares. The exercise price for the options granted will
be the price to the public in this offering.
401(k) PLAN
Effective in 1993, Citadel Communications adopted a 401(k) Retirement
Savings Plan for the purpose of providing, at the option of the employee,
retirement benefits to employees of Citadel Communications and its subsidiaries
who have been employed for a period of one year or longer and who meet certain
other requirements of the 401(k) plan. Contributions to the 401(k) plan are made
by the employee and, on a voluntary basis, by Citadel Communications. Citadel
Communications currently matches 100% of that part of the employee's elective
deferrals up to 2% of the employee's salary.
A contribution to the 401(k) plan of $0.4 million was made by Citadel
Communications during the year ended December 31, 1998.
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DIRECTOR COMPENSATION
Ms. Dennis received $20,000 for her services as a director of Citadel
Communications and Citadel Broadcasting in 1998 and the other non-employee
directors of Citadel Communications and Citadel Broadcasting during 1998
received or will receive $6,000 for their services as directors of Citadel
Communications and Citadel Broadcasting in 1998. Currently, all of the
non-employee directors are entitled to receive an annual fee of $12,000 for
their services as directors. This annual fee will be increased to $20,000
following completion of this offering. Directors who are also employees of
Citadel Communications do not receive additional consideration for serving as
directors, except that all directors are entitled to reimbursement for travel
and out-of-pocket expenses in connection with their attendance at Board and
committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, John E. von Schlegell, Patricia Diaz Dennis and former
director, Scott E. Smith, were members of the Compensation Committee of the
Citadel Communications Board of Directors, which determines compensation matters
for Citadel Communications.
Repayment of Indebtedness. In October 1996, Citadel Broadcasting repaid its
indebtedness to Baker, Fentress & Company, which consisted of $7.0 million in
principal amount and $20,534 in accrued and unpaid interest. Citadel
Broadcasting also paid Baker Fentress a $420,000 prepayment penalty. Baker
Fentress beneficially owns more than five percent of the outstanding common
stock of Citadel Communications. Scott E. Smith, a former director of Citadel
Communications, is an Executive Vice President of Baker Fentress. See the
"Principal and Selling Stockholders" section.
Registration Rights Agreement. Citadel Communications is a party to a
Registration Rights Agreement, dated June 28, 1996, as amended, with Lawrence R.
Wilson, Rio Bravo Enterprise Associates, L.P., ABRY Broadcast Partners II, L.P.,
ABRY Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer &
Co., Inc. (now CIBC Oppenheimer Corp.), Edward T. Hardy, Endeavour Capital Fund
Limited Partnership, Ted L. Snider, Sr. and others, which requires Citadel
Communications to register their shares of its common stock under the Securities
Act of 1933, as amended, for offer and sale to the public (including by way of
an underwritten public offering), upon a demand by such stockholders, and which
entitles such parties to join in any registration of equity securities of
Citadel Communications. Royce Yudkoff, a former director of Citadel
Communications and Citadel Broadcasting, is President of ABRY Holdings, Inc.,
the general partner of ABRY Capital, L.P., the general partner of ABRY Broadcast
Partners II, L.P., a significant stockholder of Citadel Communications, and ABRY
Citadel Investment Partners, L.P., formerly a significant stockholder of Citadel
Communications. See the "Principal and Selling Stockholders" section. Mr. Wilson
owns all of the capital stock of Rio Bravo, Inc., the sole general partner of
Rio Bravo Enterprise Associates, L.P.
Securities Purchase and Exchange Agreement. Pursuant to a Securities
Purchase and Exchange Agreement, dated June 28, 1996, as amended, among Citadel
Broadcasting, Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY
Citadel Investment Partners, L.P., Baker Fentress, Oppenheimer, Endeavour
Capital Fund, Edward T. Hardy, Bank of America National Trust and Savings
Association, Ted L. Snider, Sr. and other parties, in 1996, Citadel
Communications redeemed outstanding preferred stock held by Bank of America and
certain
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other parties, repaid the $2.0 million principal balance and the $17,500 in
accrued interest on Citadel Communications' Junior Subordinated Convertible Note
Due 1996 dated May 24, 1996 issued to ABRY Broadcast Partners II, L.P., financed
four radio station acquisitions, and paid certain working capital requirements.
The transactions were financed by Citadel Communications' issuance of shares of
preferred stock to ABRY Broadcast Partners II, L.P. and to ABRY Citadel
Investment Partners, L.P. for a total consideration of approximately $49.5
million, and through borrowings under a $20.0 million revolving line of credit
with ABRY Broadcast Partners II, L.P. and ABRY Citadel Investment Partners, L.P.
Simultaneously, four then existing series of capital stock of Citadel
Communications held by Baker Fentress, Oppenheimer, Bank of America and certain
other parties were reclassified.
Deschutes Transactions. In connection with the acquisition of Deschutes
River Broadcasting, Inc., (1) Edward T. Hardy, an officer, director and
shareholder of Deschutes prior to its acquisition by Citadel Communications and
currently an executive officer of Citadel Communications, and (2) Endeavour
Capital Fund, a shareholder of Deschutes prior to its acquisition by Citadel
Communications and currently a stockholder of Citadel Communications, each
received merger consideration consisting of shares of capital stock of Citadel
Communications valued at approximately $206,500 and approximately $7.2 million,
respectively. John E. von Schlegell, a director of Citadel Broadcasting and
Citadel Communications, is President and a shareholder of the general partner of
Endeavour Capital Fund. Mr. Hardy also received immediately exercisable options
to purchase 68,754 shares of common stock of Citadel Communications 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 acquisition, 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, Citadel Communications 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 River Broadcasting, Inc.,
Citadel Communications entered into an Agreement Not to Compete with DVS
Management, Inc., the general partner of Endeavour Capital Fund, a shareholder
of Deschutes prior to its acquisition by Citadel Communications, pursuant to
which DVS agreed not to compete in radio broadcasting in any geographic area or
market served or competed in by one or more of Citadel Communications' stations.
In consideration for such agreement not to compete with Citadel Communications'
stations, Citadel Communications paid DVS $100,000 in each of 1997 and 1998.
John E. von Schlegell, a director of Citadel Communications, is President and a
shareholder of DVS. This agreement has now expired.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of Citadel Communications' common stock as of May 21, 1999 and after
giving effect to this offering by (1) each person, entity or group known to
Citadel Communications to beneficially own more than five percent of the common
stock, (2) each director of Citadel Communications, (3) each executive officer
listed in the Summary Compensation Table in the "Management" section under the
heading "Executive Compensation," (4) all directors and executive officers of
Citadel Communications as a group and (5) the selling stockholders. All
information with respect to the beneficial ownership of shares held by the
selling stockholders has been provided by the selling stockholders.
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 percentages are rounded to the nearest tenth of a percent. Holders of common
stock are entitled to one vote per share on all matters submitted to a vote of
stockholders generally.
The number of shares and percentages are calculated in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended, 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 of May 21, 1999, and that no other stockholder so
converts. The numbers and percentages of shares owned assume that these
outstanding options have been exercised by such respective stockholders as
follows:
-- Lawrence R. Wilson -- 573,480 shares (including options to purchase
515,817 shares held by Rio Bravo Enterprise Associates, L.P.),
-- Donna L. Heffner -- 162,727 shares,
-- D. Robert Proffitt -- 128,501 shares,
-- Stuart R. Stanek -- 165,307 shares,
-- Peter J. Benedetti -- 5,001 shares,
-- Patricia Diaz Dennis -- 7,500 shares, and
-- all directors and executive officers as a group -- 1,083,763 shares.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRO FORMA
PRIOR TO THIS OFFERING FOR THIS OFFERING
------------------------ SHARES -------------------------
PERCENT OF BEING PERCENT OF
BENEFICIAL OWNER NUMBER COMMON STOCK OFFERED NUMBER COMMON STOCK
- ---------------- --------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Lawrence R. Wilson(1)... 2,812,155 10.5 300,000 2,512,155 7.9
City Center West
Suite 400
7201 West Lake Mead
Boulevard
Las Vegas, NV 89128
Donna L. Heffner(2)..... 200,886 * 15,000 185,886 *
D. Robert Proffitt(3)... 200,430 * 15,000 185,430 *
Stuart R. Stanek(4)..... 232,542 * 15,000 217,542 *
Peter J. Benedetti(5)... 10,628 * -0- 10,628 *
Patricia Diaz Dennis.... 7,500 * -0- 7,500 *
Ike Kalangis............ -0- * -0- -0- *
</TABLE>
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<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRO FORMA
PRIOR TO THIS OFFERING FOR THIS OFFERING
------------------------ SHARES -------------------------
PERCENT OF BEING PERCENT OF
BENEFICIAL OWNER NUMBER COMMON STOCK OFFERED NUMBER COMMON STOCK
- ---------------- --------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
John E. von
Schlegell(6).......... 230,079 * 60,000 170,079 *
Ted L. Snider, Sr.(7)... 340,785 1.3 95,000 245,785 *
Baker, Fentress &
Company(8)............ 1,813,017 6.9 800,000 1,013,017 3.2
200 West Madison
Suite 3510
Chicago, IL 60602
ABRY Capital, L.P.(9)... 8,468,436 32.2 3,700,000 4,768,436 15.2
18 Newbury Street
Boston, MA 02116
Putnam Investments,
Inc.(10).............. 2,079,763 8.0 -0- 2,079,763 6.7
One Post Office Square
Boston, MA 02109
All directors and
executive officers as
a group (10
persons)(11).......... 4,209,472 15.4 500,000 3,709,472 11.5
</TABLE>
- ---------------
* Less than 1%
(1) The numbers of shares include 2,238,675 outstanding shares prior to this
offering and 1,938,675 outstanding shares after this offering held by Rio
Bravo Enterprise Associates, L.P. The numbers of shares also include
515,817 shares of common stock which may be acquired upon exercise of
options held by Rio Bravo Enterprise Associates, L.P. Rio Bravo Enterprise
Associates, L.P. therefore beneficially owns 2,754,492 shares or 10.3% of
the outstanding common stock prior to this offering and will beneficially
own 2,454,492 shares or 7.7% of the outstanding common stock following this
offering. Mr. Wilson, a director and executive officer of Citadel
Communications, owns all of the capital stock of Rio Bravo, Inc., the sole
general partner of Rio Bravo Enterprise Associates, L.P.
(2) Ms. Heffner, a selling stockholder, is also an executive officer of Citadel
Communications. Ms. Heffner's shares are jointly owned by Ms. Heffner and
her spouse, Tim Heffner.
(3) Mr. Proffitt, a selling stockholder, is also an executive officer of
Citadel Communications. Mr. Proffitt's shares are jointly owned by Mr.
Proffitt and his spouse, Lynette Proffitt.
(4) Mr. Stanek, a selling stockholder, is also an executive officer of Citadel
Communications. Mr. Stanek's shares are jointly owned by Mr. Stanek and his
spouse, Kim Stanek.
(5) Mr. Benedetti's shares are jointly owned by Mr. Benedetti and his spouse.
(6) Represents 5,574 shares held by The Endeavour Capital Fund Limited
Partnership and 224,505 shares prior to this offering and 170,079 shares
after this offering held by DVS Management, Inc., a selling stockholder.
Mr. von Schlegell, a director of Citadel Communications, is the Managing
Partner of The Endeavour Capital Fund and the President and a shareholder
of DVS Management, the general partner of The Endeavour Capital Fund.
(7) Mr. Snider, a selling stockholder, is also a director of Citadel
Communications. The number of shares shown does not include 121,713 shares
owned by Mr. Snider's spouse.
(8) Scott E. Smith, an Executive Vice President of Baker, Fentress & Company, a
selling stockholder, was a director of Citadel Communications from 1993 to
1999.
(9) The numbers of shares include 8,460,839 shares or 32.2% of the outstanding
common stock prior to this offering and 4,760,839 shares or 15.2% of the
outstanding common stock following this offering beneficially owned by ABRY
Broadcast Partners II, L.P. ABRY Capital, L.P. is the general partner of
ABRY Broadcast Partners II, L.P. All of the shares beneficially owned by
ABRY Capital, L.P. are held under an Amended and Restated Voting Trust
Agreement dated October 15, 1997. By its terms, the Amended and Restated
Voting Trust Agreement shall continue
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<PAGE> 96
in effect until terminated upon the written agreement of Citadel
Communications 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 Amended and Restated 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 Broadcast Partners II,
L.P. or upon a distribution of shares by ABRY Broadcast Partners II, L.P.
to its partners. During the term of the Amended and Restated Voting Trust
Agreement, the voting trustee has the right to vote the shares of stock
subject to that agreement and to take part in any shareholders' meetings,
including the right to vote the shares for the election of directors of
Citadel Communications. 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 Amended and Restated Voting Trust Agreement. The voting
trustee is Harlan A. Levy, whose address is 1585 Broadway, 19th Floor, New
York, N.Y. 10036. Dispositive power with respect to these shares is held by
Royce Yudkoff, the President of ABRY Holdings, Inc., the general partner of
ABRY Capital, L.P., the general partner of ABRY Broadcast Partners II, L.P.
Royce Yudkoff was a director of Citadel Communications for a portion of
1996 and 1997.
(10) As reported on Schedule 13G filed with the Securities and Exchange
Commission on February 4, 1999 (dated January 26, 1999) by Putnam
Investments, Inc. on behalf of itself and Marsh & McLennan Companies, Inc.,
Putnam Investment Management, Inc. and Putnam Advisory Company, Inc., the
shares indicated are under shared voting and dispositive power among Putnam
Investments, Inc., Putnam Investment Management, Inc. and Putnam Advisory
Company, Inc. Putnam Investment Management, Inc. and Putnam Advisory
Company, Inc. are subsidiaries of Putnam Investments, Inc., and Putnam
Investments, Inc. is a subsidiary of Marsh & McLennan Companies, Inc. The
number of shares shown assume that there has been no change in the number
of shares beneficially owned since the filing of the Schedule 13G. Pursuant
to Rule 13d-4 under the Securities Exchange Act, Marsh & McLennan
Companies, Inc. and Putnam Investments, Inc. declared that their filing of
the Schedule 13G shall not be deemed to be an admission of beneficial
ownership of the shares reported.
(11) Includes shares discussed in footnotes (1) and (6).
The numbers of shares to be sold by the selling stockholders, other than
Messrs. Wilson, Proffitt and Stanek and Ms. Heffner, are subject to adjustment
if other stockholders exercise their rights under a registration rights
agreement.
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<PAGE> 97
ADDITIONAL SELLING STOCKHOLDER INFORMATION
In addition to the relationships noted above, certain of the selling
stockholders have engaged in transactions with Citadel Communications. For
additional information concerning the selling stockholders' relationship to, and
transactions with, Citadel Communications, see the "Management" section under
the captions "Directors and Executive Officers" and "Compensation Committee
Interlocks and Insider Participation" and the "Certain Transactions" section.
Each of Mr. Wilson, Mr. Snider, Baker, Fentress & Company, The Endeavour
Capital Fund Limited Partnership, Rio Bravo Enterprise Associates, L.P. and the
trustee under the voting trust were also party to the now terminated Fourth
Amended and Restated Voting Agreement dated as of October 15, 1997. Under this
agreement, each of Mr. Wilson and Rio Bravo Enterprise Associates, L.P.; Mr.
Snider and the other persons who received shares of Citadel Communications'
capital stock in connection with Citadel Communications' 1997 acquisition of
radio stations in Little Rock; Baker, Fentress & Company; The Endeavour Capital
Fund, L.P. and the other persons who received shares of Citadel Communications'
capital stock in connection with Citadel Communications' acquisition of
Deschutes River Broadcasting, Inc.; and the voting trustee had the right to
designate one director of Citadel Communications. Four of the five current
directors were designated under this agreement.
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CERTAIN TRANSACTIONS
LOAN TRANSACTIONS
Lawrence R. Wilson, an executive officer and director of Citadel
Communications, was indebted to Citadel Communications in the amount of $394,297
(including accrued interest of $46,440) as of December 31, 1995. Approximately
$70,000 of the principal amount of the loan was advanced by Citadel
Communications' predecessor to Mr. Wilson in June 1992 for personal purposes,
approximately $27,860 of the loan was advanced by Citadel Communications'
predecessor to Mr. Wilson in April 1993 to finance Mr. Wilson's purchase of
capital stock of Citadel Broadcasting from a former stockholder and
approximately $250,000 was advanced by Citadel Broadcasting to Mr. Wilson in
1994 for personal purposes. The 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 loan was secured by shares of capital stock of Citadel Communications owned
by Mr. Wilson.
In 1995, Mr. Wilson made a short-term unsecured loan of $365,000 to Citadel
Broadcasting at an annual interest rate of 10%. Citadel Broadcasting repaid such
loan in full in 1996.
SALE AND LEASEBACK OF AIRPLANE
In December 1995, Citadel Broadcasting sold to Wilson Aviation, L.L.C., a
company then owned by Mr. Wilson and his spouse and currently owned by Rio Bravo
Enterprise Associates, L.P., an airplane formerly owned by Citadel Broadcasting,
for a cash purchase price of approximately $1.3 million. Contemporaneously with
the sale of the airplane, Citadel Broadcasting entered into an agreement to
lease the airplane from Wilson Aviation, L.L.C. from December 29, 1995 to
December 31, 2001. The parties subsequently amended the lease to extend its term
through December 31, 2003. Under the terms of the lease, as amended, Citadel
Broadcasting paid monthly rent in the amount of $17,250 through December 31,
1998 and is required to pay monthly rent in the amount of $21,000 thereafter. In
addition, Citadel Broadcasting bears 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 original transaction was reviewed and approved by Citadel
Broadcasting's senior lender and Citadel Communications believes, based upon
such review, that the terms of the transaction are reasonable and at least as
favorable to Citadel Communications as could be obtained generally from
unaffiliated parties. Citadel Broadcasting's Board of Directors approved the
amendment to this lease. Mr. Wilson is a director and an executive officer of
each of Citadel Communications and Citadel Broadcasting. Mr. Wilson owns all of
the capital stock of Rio Bravo, Inc., the sole general partner of Rio Bravo
Enterprise Associates, L.P.
REAL ESTATE PURCHASE IN CONNECTION WITH ACQUISITION
In order to facilitate Citadel Communications' acquisition of an FM radio
station from Tippie Communications, Inc. in 1996, Mr. Wilson purchased from a
shareholder of Tippie associated real estate located in Colorado Springs,
Colorado, which Citadel Communications 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
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<PAGE> 99
real estate, and neither Citadel Communications 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 Citadel
Communications to purchase such property. Citadel Communications believes that
its acquisition of the FM radio station, in the context of the acquisition of
the real estate by Mr. Wilson, was fair to Citadel Communications.
CORPORATE EVENT COSTS
During 1998, Citadel Broadcasting paid an aggregate of $75,964 in respect
of accommodation and activity costs in connection with three corporate events
held at a facility owned indirectly by Rio Bravo Enterprise Associates, L.P.
Citadel Broadcasting's Board of Directors approved the charges. Citadel
Communications believes that these charges are reasonable and reflect terms at
least as favorable to it as could be obtained generally from unaffiliated
providers of similar services.
LITTLE ROCK AND PROVIDENCE ACQUISITIONS
Ted L. Snider, Sr., who became a director of Citadel Communications in
November 1997, and his spouse were the shareholders of Snider Corporation and,
in connection with Citadel Communications' acquisition of Snider Corporation and
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 Citadel
Communications which have been converted into shares of common stock. Mr.
Snider's son, Ted Snider, Jr., and nephew, Calvin Arnold, were principal
shareholders of Snider Broadcasting Corporation and of CDB Broadcasting
Corporation and, in connection with Citadel Communications' acquisition of
Snider Broadcasting and assets from CDB Broadcasting in October 1997, they
received approximately $5.5 million in shares of a newly created series of
preferred stock of Citadel Communications which have been converted into shares
of common stock. In addition, Citadel Communications repaid approximately $2.6
million of indebtedness of Snider Broadcasting and CDB Broadcasting received
approximately $4.9 million in cash. Mr. Arnold was employed by Citadel
Communications in 1997 and 1998 as General Manager of Citadel Communications'
radio stations in the Little Rock area.
Prior to its acquisition by Citadel Communications, Snider Corporation
transferred to Mr. Snider and his spouse its rights to operate under a local
marketing agreement 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 local marketing agreement, Citadel Communications
accepted an assignment of the local marketing agreement and paid the Sniders
$100,000. Citadel Communications subsequently assigned its right to operate this
station to an unrelated party.
Effective June 2, 1997, Citadel Communications began operating the radio
stations formerly owned by Snider Corporation, Snider Broadcasting and CDB
Broadcasting under local marketing agreements under which an aggregate of
approximately $823,000 was paid by Citadel Communications to such entities.
Citadel Communications believes that the terms of the foregoing transactions
were at least as favorable to Citadel Communications as could have been obtained
generally from unaffiliated parties. In May 1998, Citadel Communications
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<PAGE> 100
entered into an agreement pursuant to which an entity controlled by Ted Snider,
Jr. will provide to Citadel Communications telephone access services and other
related services. The term of the agreement is five years and, unless
terminated, the agreement will automatically renew for additional five-year
terms. Citadel Communications believes that the terms of this agreement reflect
arm's-length negotiations and are at least as favorable to Citadel
Communications as could be obtained generally from unaffiliated providers of
similar services.
In connection with Citadel Communications' 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 then
outstanding shares of a newly created series of preferred stock of Citadel
Communications, shares of which series have been converted into shares of common
stock. Mr. Norton is employed by Citadel Communications, and Mr. Urso was
employed by Citadel Communications until May 1999. Mr. Urso and members of his
family were shareholders of Bear Broadcasting Company, which sold WHKK-FM to
Citadel Communications in November 1997 for approximately $4.0 million in cash.
From September 15, 1997 until the acquisition of WHKK-FM, Citadel Communications
operated WHKK-FM under a local marketing agreement pursuant to which Citadel
Communications reimbursed Bear Broadcasting an aggregate of approximately
$17,000 for costs and expenses of station operation. Citadel Communications
believes that the terms of the foregoing transactions were at least as favorable
to it as could have been obtained generally from unaffiliated parties.
CONSULTING ARRANGEMENT
During the fiscal year ended December 31, 1996, Michael J. Ahearn, a
director of Citadel Communications from 1996 to November 1997, provided
financial consulting services to Citadel Communications 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 of Citadel Communications at an exercise price of
$5.72 per share. This option is fully vested. Citadel Communications believes
that such services were provided to Citadel Communications on terms at least as
favorable to it as could have been obtained generally from unaffiliated parties.
LEGAL SERVICES
During the fiscal year ended December 31, 1996, Citadel Communications
retained the law firm of Gallagher & Kennedy, P.A. to represent Citadel
Communications on various matters. Michael J. Ahearn was a shareholder of such
firm and a director of Citadel Communications in 1996.
INVESTMENT BANKING RELATIONSHIPS
Mark A. Leavitt, a director of Citadel Communications from 1992 to November
1997, is a Managing Director of Prudential Securities. Prudential Securities has
provided investment banking services to Citadel Communications since 1996 and
may provide such services in the future. Such services have been provided on
terms customary in the industry. Prudential Securities acted as an initial
purchaser in Citadel Broadcasting's offering of the 9 1/4% notes and in Citadel
Broadcasting's offerings of the 10 1/4% notes and the exchangeable preferred
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stock and as an underwriter of Citadel Communications' initial public offering.
In 1996, Oppenheimer provided investment banking services to Citadel
Communications. Mr. Leavitt was a Managing Director of Oppenheimer during 1996.
Oppenheimer provided services to Citadel Communications on terms customary in
the industry. Oppenheimer was also a party to a now terminated voting agreement
and stockholders agreement and is a party to the Registration Rights and the
Securities Purchase and Exchange Agreements dated June 28, 1996 among Citadel
Communications and certain of its stockholders. Each of the registration rights
agreement and the securities purchase and exchange agreement have been amended
several times.
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
The Securities Purchase and Exchange Agreement identified in the preceding
paragraph established a commitment by ABRY Broadcast Partners II, L.P. and ABRY
Citadel Investment Partners, L.P. in favor of Citadel Communications for a
revolving line of credit in the aggregate principal amount of $20.0 million and
against which ABRY Broadcast Partners II, L.P. and ABRY Citadel Investment
Partners, L.P. made pro rata advances. At June 30, 1997, there were four such
advances outstanding, the aggregate principal balance of which was approximately
$12.8 million. Citadel Broadcasting used a portion of the proceeds from the
offerings of the 10 1/4% notes and the exchangeable preferred stock to repay
advances made to Citadel Broadcasting by Citadel Communications with the
proceeds of the advances from ABRY Broadcast Partners II, L.P. and ABRY Citadel
Investment Partners, L.P. Citadel Communications repaid the advances from ABRY
Broadcast Partners II, L.P. and ABRY Citadel Investment Partners, L.P.
concurrently with the offerings of the 10 1/4% notes and the exchangeable
preferred stock. Thereafter, the commitment terminated and ABRY Broadcast
Partners II, L.P. and ABRY Citadel Investment Partners, L.P. have no further
obligation to make the advances.
VOTING TRUST AGREEMENT
In 1997, Citadel Communications paid ABRY Broadcast Partners II, L.P., for
the account of ABRY Broadcast Partners II, L.P. and ABRY Citadel Investment
Partners, L.P., $75,000 to defray the fees and expenses associated with the
voting trust created by the Amended and Restated Voting Trust Agreement dated
October 15, 1997, including any fees payable to the voting trustee and the
back-up trustees under the Amended and Restated Voting Trust Agreement. Each of
Christopher P. Hall, J. Walter Corcoran and Harlan A. Levy, directors of Citadel
Communications 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 Amended and Restated Voting Trust
Agreement, see the "Management" section under the heading "Board Composition"
and the "Principal and Selling Stockholders" section.
MANAGEMENT AND CONSULTING SERVICES AGREEMENT
In June 1996, Citadel Communications entered into a Management Services and
Consulting Agreement with ABRY Partners, Inc. which was terminated in March
1997. Pursuant to the agreement, ABRY Partners, Inc. provided consultation to
Citadel Communications' Board of Directors and management on business and
financial matters. Citadel Communications paid $37,500 and $62,500 to ABRY
Partners, Inc. under this agreement in
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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
Broadcast Partners II, L.P. and ABRY Citadel Investment Partners, L.P.
PREPAYMENT AND REDEMPTION OF SECURITIES
On June 28, 1996, Citadel Broadcasting prepaid senior subordinated notes in
the principal amount of $4.0 million, and funded Citadel Communications'
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 National Trust and Savings Association. As of June 28, 1996, after
giving effect to the redemption, Bank of America held a warrant to purchase
shares of nonvoting common stock of Citadel Communications which was convertible
into voting common stock upon the occurrence of events, and such conversion
would have resulted in Bank of America owning in excess of five percent of the
then outstanding shares of voting common stock. The warrant was subsequently
converted into a warrant to purchase 414,303 shares of Citadel Communications'
currently existing common stock. Immediately thereafter, the warrant was
transferred to, and exercised for a nominal exercise price by, BankAmerica
Investment Corporation, and the 414,303 shares of common stock were sold in
Citadel Communications' initial public offering. Bank of America had been a
party to the Registration Rights Agreement dated June 28, 1996 among Citadel
Communications and certain of its stockholders and a now terminated stockholders
agreement.
STOCK REPURCHASE
In June 1996, Citadel Communications repurchased shares of capital stock of
Citadel Communications then held by Mesirow Capital Partners VI for an aggregate
of approximately $10.7 million. Mesirow VI had acquired these shares in 1993.
William P. Sutter, Jr., a former director of Citadel Communications, was an
officer of the general partner of Mesirow VI. Mesirow VI had been a party to now
terminated voting and stockholders agreements among Citadel Communications and
certain of its stockholders.
See the "Management" section under the heading "Compensation Committee
Interlocks and Insider Participation" for a description of various other
transactions involving the directors, executive officers and significant
stockholders of Citadel Communications.
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DESCRIPTION OF CAPITAL STOCK
Citadel Communications is authorized to issue 200,000,000 shares of common
stock, 19,013,122 shares of Series AA Convertible Preferred Stock and 20,000,000
shares of undesignated preferred stock. The following discussion describes
provisions of Citadel Communications' Certificate of Incorporation and Bylaws
and of Nevada's laws on private corporations, Chapter 78 of the Nevada Revised
Statutes.
GENERAL
As of May 21, 1999, the only issued and outstanding capital stock of
Citadel Communications is 26,268,723 shares of common stock. If no other shares
are issued prior to completion of this offering, immediately following the
offering, there will be outstanding 31,268,723 shares of common stock, no shares
of Series AA Convertible Preferred Stock and no shares of undesignated preferred
stock. The shares of Series AA Convertible Preferred Stock that had been
outstanding following Citadel Communications' initial public offering in July
1998, have all been converted into shares of common stock and no additional
shares of Series AA Convertible Preferred Stock will be issued.
VOTING RIGHTS OF COMMON STOCK
Holders of the common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders generally. Immediately after this
offering, ABRY Broadcast Partners II, L.P. and ABRY Capital, L.P. will together
beneficially own 4,768,436 shares of common stock, representing approximately
15.2% of the common stock to be issued and outstanding. The voting trustee who
votes such shares will have the power to significantly influence the election of
directors and other matters submitted to a vote of stockholders. The voting
power of the voting trustee may hinder or delay a change in control of Citadel
Communications and may have an anti-takeover effect.
DIVIDENDS ON COMMON STOCK
The holders of the common stock are entitled to receive, pro rata,
dividends as may be declared by Citadel Communications' Board of Directors out
of funds legally available for the payment of dividends.
OTHER PROVISIONS APPLICABLE TO THE COMMON STOCK
There are no preemptive rights to subscribe for any additional securities
which Citadel Communications may issue. There are no redemption provisions or
sinking fund provisions applicable to the common stock, nor is the common stock
subject to calls or assessments by Citadel Communications.
In the event of any liquidation, dissolution or winding-up of the affairs
of Citadel Communications, holders of common stock will be entitled to share
ratably in the assets of Citadel Communications remaining after payment or
provision for payment of all of Citadel Communications' debts and obligations
and liquidation payments to holders of any outstanding shares of undesignated
preferred stock that has a liquidation preference.
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UNDESIGNATED PREFERRED STOCK
The Board of Directors of Citadel Communications may, without further
action of the stockholders, issue up to 20,000,000 shares of undesignated
preferred stock in one or more classes or series. The Board of Directors also
has the power 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 on the shares of each series.
No classes or series have been designated. Any undesignated preferred stock
issued by Citadel Communications may:
-- rank prior to the common stock as to dividend rights, liquidation
preference or both,
-- have full or limited voting rights, and
-- 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.
CERTAIN ANTI-TAKEOVER EFFECTS
CERTIFICATE OF INCORPORATION AND BYLAWS. The provisions of Citadel
Communications' 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 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.
Number of Directors, Removal and Filling Vacancies. Citadel Communications'
Certificate of Incorporation and Bylaws provide that the number of directors
shall not exceed seven and shall be fixed from time to time with the consent of
a majority of the Board of Directors. The Certificate of Incorporation also
provides that directors may only be removed with cause. Removal of a director
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of capital stock of Citadel Communications then entitled to
vote at an election of directors. These provisions prevent stockholders from
removing any incumbent director without cause and allow a majority of the
incumbent directors to add additional directors without approval of stockholders
until the next annual meeting of stockholders at which directors are elected.
Meetings of Stockholders. Citadel Communications' Bylaws provide that a
special meeting of stockholders may be called only by the Chairman or the Board
of Directors unless otherwise required by law. Citadel Communications' Bylaws
provide that only those matters set forth in the notice of the special meeting
may be considered or acted upon at that special meeting unless otherwise
provided by law. In addition, Citadel Communications' Bylaws set forth certain
advance notice and informational requirements and time limitations on any
director nomination or new proposal which a stockholder wishes to make at an
annual meeting of stockholders.
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No Stockholder Action by Written Consent. Citadel Communications' Bylaws
provide that any action required or permitted to be taken by the stockholders of
Citadel Communications at an annual or special meeting of stockholders must be
effected at a duly called meeting and may not be taken or effected by a written
consent of stockholders in lieu of a duly called meeting.
Foreign Ownership. Citadel Communications' Certificate of Incorporation
permits restriction on the ownership, voting and transfer of Citadel
Communications' capital stock in accordance with the Communications Act and the
rules of the FCC, to prohibit ownership of more than 20% of Citadel
Communications' 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 the "Business" section under the caption
"Federal Regulation of Radio Broadcasting." The Certificate of Incorporation
also authorizes the Board to prohibit any transfer of capital stock that would
cause Citadel Communications to violate this prohibition. The 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 Citadel Communications to violate, or would otherwise
result in violation of, any provision of the Communications Act or the rules,
regulations and policies of the FCC under the Communications Act. No
stockholders may exercise any voting rights which would cause Citadel
Communications to be in violation of the rules, regulations or policies of the
FCC.
NEVADA GENERAL CORPORATION LAW. The following provisions of Chapter 78 of
the Nevada Revised Statutes may delay or make more difficult acquisitions or
changes of control of Citadel Communications and may make it more difficult to
accomplish transactions that stockholders may otherwise believe to be in their
best interests. These provisions may also have the effect of preventing changes
in Citadel Communications' management. The Certificate of Incorporation and
Bylaws do not exclude it from these provisions of Chapter 78 of the Nevada
Revised Statutes.
Control Share Acquisitions. Under Sections 78.378 to 78.3793 of Chapter 78
of the Nevada Revised Statutes, an acquiring person, who acquires a controlling
interest in an issuing corporation may not exercise voting rights on any control
shares unless the 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 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:
-- one-fifth or more but less than one-third of the voting power of the
issuing corporation in the election of directors,
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-- one-third or more but less than a majority of the voting power of the
issuing corporation in the election of directors, and/or
-- a majority or more of the voting power of the issuing corporation in
the election of directors.
These provisions are triggered as a stockholder moves from one level to the
next. Voting rights on the control shares 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:
-- acquires or offers to acquire in an acquisition, or
-- acquires within 90 days immediately preceding the date when the
acquiring person became an acquiring person.
Subject to certain exceptions, an acquisition is the direct or indirect
acquisition of a controlling interest. 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 through an affiliated corporation.
The provisions described above do 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
the provisions do not apply. The Certificate of Incorporation and Bylaws do not
exclude Citadel Communications from the restrictions imposed by such provisions.
However, unless and until Citadel Communications has at least 100 stockholders
of record who are resident in Nevada, this act will not apply to Citadel
Communications.
Certain Business Combinations. In general, sections 78.411 to 78.444 of
Chapter 78 of the Nevada Revised Statutes restrict the ability of a Nevada
corporation that has 200 or more stockholders to engage in any combination with
an interested stockholder for three years following the date of the transaction
in which the stockholder became an interested stockholder, unless the
combination or the triggering purchase of shares is approved by the board of
directors of the corporation before the date of the triggering purchase. If the
combination or triggering purchase was not so 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. Interested stockholder means any
person, or its subsidiaries, who is:
-- the beneficial owner, directly or indirectly, of ten percent or more
of the voting power of the outstanding voting shares of the
corporation, or
-- an affiliate or associate of the corporation and, at any time within
three years immediately before the date in question, was the
beneficial owner, directly or indirectly, of ten percent or more of
the voting power of the then outstanding shares of the corporation.
The provisions described do 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.
Citadel Communications' Certificate of Incorporation does not exclude it from
the restrictions imposed by these provisions.
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Directors' Duties. Section 78.138 of Chapter 78 of the Nevada Revised
Statutes 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, any 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 Chapter 78 of the Nevada
Revised Statutes, the Certificate of Incorporation contains a provision
eliminating or limiting liability of directors to Citadel Communications and its
stockholders for damages for breach of fiduciary duty as a director. The
provision does not, however, eliminate or limit the personal liability of a
director for:
-- acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or
-- unlawful distributions in violation of Chapter 78 of the Nevada
Revised Statutes.
This provision offers persons who serve on the Board of Directors
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 Citadel Communications 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 Securities and Exchange 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 Citadel
Communications who, by reason of the fact that he or she is a director or
officer of Citadel Communications, 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 Chapter 78 of the
Nevada Revised Statutes. Citadel Communications also maintains directors' and
officers' liability insurance.
TRANSFER AGENT AND REGISTRAR
BankBoston, N.A. is 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 River Broadcasting,
Inc., formerly known as Deschutes Acquisition Corporation (now merged into
Citadel Broadcasting), Citadel License and Deschutes License, Inc. (now merged
into Citadel License) entered into a 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.
On July 3, 1997, Citadel Broadcasting, Citadel License and the agent and
the lenders under the credit facility entered into amendments to the credit
facility to provide for, among other things, a revolving loan, initially in the
principal amount of $150.0 million, which included a $5.0 million letter of
credit facility. Subsequent amendments have increased the letter of credit
facility to $20.0 million. As of March 31, 1999, the credit facility allowed for
borrowings of up to $135.0 million.
Revolving Loan. As of March 31, 1999, no amounts were outstanding under the
revolving loan under the credit facility. The revolving loan may be drawn upon,
subject to conditions, for 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 additional mandatory reductions in the revolving loan commitment, and
Citadel Broadcasting and Citadel License are 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 September 30, 2003. At Citadel Broadcasting's and Citadel License's
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.
The obligation of the lenders under the credit facility to make additional
loans under the credit facility or issue letters of credit under the letter of
credit facility is subject to conditions, including, without limitation, that
the adjusted total leverage ratio not exceed the applicable ratio as calculated
on the last day of the most recent month preceding the applicable date for
funding or letter of credit issuance. The adjusted total leverage ratio is the
ratio as of the end of any month of total debt, as adjusted for permitted
acquisitions and dispositions, as of such date to the operating cash flow, as
adjusted for permitted acquisitions and dispositions, for the twelve-month
period ending on such date. The applicable ratio through May 1999 is 6.00. For
each six-month period thereafter through maturity, the applicable ratio shall
decrease by 0.25.
Letter of Credit Facility. The letter of credit facility provides for,
subject to certain limitations, the issuance of letters of credit to be used by
Citadel Broadcasting and Citadel License as security for the obligations of
Citadel Broadcasting and Citadel License under agreements entered into in
connection with certain radio station acquisitions and for such other purposes
as may be approved by the agent under the credit facility. The letter of credit
facility requires the payment by Citadel Broadcasting and Citadel License of a
quarterly fee equal to 1.25% of the amount of each permitted letter of credit
from time to time
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outstanding. As of May 24, 1999, letters of credit in the aggregate amount of
$11.5 million are issued and outstanding in connection with the pending
transactions.
Prepayments. Voluntary prepayments of the credit facility are permitted
without premium or penalty. Mandatory prepayment of the credit facility will be
required if the total leverage ratio, the ratio of total debt to operating cash
flow, as adjusted for permitted acquisitions and dispositions, as of the end of
each year is 4.5 or greater. The amount of the mandatory prepayment shall be the
lesser of (a)(1) 66 2/3% of the excess cash flow if the total leverage ratio as
of the end of such year exceeds 5.5 and (2) 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 of the last day of month for
which Citadel Broadcasting and Citadel License 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 March 31, 1999, which amount will
decline quarterly based on the amount of outstanding borrowings under the credit
facility.
Interest Rates. The credit facility bears interest at a rate equal to (a)
the per annum rate of interest announced or published publicly from time to time
by Citibank, N.A. in New York, New York as its corporate base rate of interest
and which may be changed automatically without notice, in effect from time to
time plus the applicable margin, which is an additional interest rate as
determined under the credit facility, or (b) at the written election of Citadel
Broadcasting and Citadel License, at a rate determined by the agent under the
credit facility to be the LIBOR rate for the respective interest period, plus
the applicable margin. The LIBOR rate is the average of London interbank offered
rates on the LIBO page of the Bloomberg Service or appropriate successor divided
by 1.00 minus the Eurocurrency Reserve Requirements as prescribed by the Federal
Reserve Board or other governmental body, in effect from time to time. Citadel
Broadcasting's and Citadel License's 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.
Other Fees. Citadel Broadcasting and Citadel License are required to pay to
the agent under the credit facility an unused commitment fee on the last
business day of each quarter, which equals the product of the maximum revolving
loan commitment for the preceding quarter minus the average outstanding
principal balance of the revolving loan under the credit facility 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. Citadel Broadcasting and
Citadel License are required to pay an aggregate annual agency fee of $50,000 in
October of each year.
Security and Guarantee. Subject to permitted liens, the credit facility is
secured by:
(a) a first priority pledge on all of Citadel Broadcasting's and Citadel
License's capital stock other than Citadel Broadcasting's exchangeable
preferred stock,
(b) a first priority security interest in all the existing and after
acquired property of Citadel Broadcasting and Citadel License,
including, without limitation, accounts,
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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 Citadel Communications.
Change of Control. The credit facility provides that a change in control or
ownership will be an event of default under the credit facility. A change in
control or ownership shall occur if:
(a) Citadel Communications shall cease to own all of the capital stock of
Citadel Broadcasting (other than the 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 Broadcast Partners II, L.P. or their respective
affiliates, own capital stock possessing more than 35.0% of the voting
power of all voting stock of Citadel Communications, 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 Citadel Broadcasting's and Citadel License's broadcasting
business, unless Mr. Wilson is replaced by a person reasonably
acceptable to the lenders under the credit facility within 90 days
after the occurrence of any such event.
Covenants. The credit facility contains customary restrictive covenants,
which, among other things, and with exceptions, limit the ability of Citadel
Broadcasting and Citadel License to incur additional indebtedness and liens,
enter into transactions with affiliates, pay dividends, consolidate, merge or
affect asset sales, issue additional stock, make capital or overhead
expenditures, make investments, loans or prepayments and change the nature of
their business. Citadel Broadcasting and Citadel License are also required to
satisfy financial covenants, which will require Citadel Broadcasting and Citadel
License to maintain specified financial ratios and to comply with financial
tests, such as ratios for maximum leverage, senior debt 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 Citadel Broadcasting or Citadel License to pay all or any
portion of the principal balance of the credit facility when due or to
pay any other of their obligations within five days after becoming due
and payable,
(b) failure of Citadel Broadcasting or Citadel License 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 Citadel Broadcasting, Citadel License or Citadel
Communications to observe or perform any other covenant or agreement
contained in the credit facility or related documents which is not
remedied within 30 days of written notice,
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(d) breach of warranty or representation and/or false or misleading
statements by Citadel Broadcasting, Citadel License or Citadel
Communications made in connection with the credit facility or related
documents,
(e) certain defaults, including payment defaults, by Citadel Broadcasting
or Citadel License, under other agreements relating to indebtedness,
(f) failure of Citadel Broadcasting, Citadel License or Citadel
Communications to generally pay debts as they become due or to be
adjudicated insolvent,
(g) Citadel Broadcasting's, Citadel License's or Citadel Communications'
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 Citadel Broadcasting, Citadel License or
Citadel Communications under certain circumstances,
(h) failure of Citadel Broadcasting, Citadel License or Citadel
Communications 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 Citadel
Broadcasting's and Citadel License's broadcasting business,
(j) seizure or failure to maintain any item of collateral provided as
security under the 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 Citadel Broadcasting or Citadel License or any ERISA
affiliate for its pension plan which creates a material adverse effect
in the opinion of the lenders under the credit facility,
(m) a change in control or ownership. See the discussion above under the
subheading "Change of Control,"
(n) failure of Citadel Communications' guaranty to remain in full force and
effect, and
(o) Citadel Communications' denial or disaffirmance of obligations under
its guaranty or its failure to make payment when due.
Upon the occurrence of an event of default, with certain limitations,
Citadel Broadcasting's and Citadel License's obligations under the credit
facility which are at that time outstanding may become automatically
accelerated.
10 1/4% 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
10 1/4% notes were issued pursuant to an Indenture dated as of July 1, 1997
among Citadel Broadcasting, Citadel License and The Bank of New York, as
trustee. Interest on the 10 1/4% notes is payable semi-annually at a rate of
10 1/4% per annum, and the 10 1/4% notes mature on July 1, 2007.
The 10 1/4% notes are unconditionally guaranteed on a senior subordinated
basis by Citadel License, and will be similarly guaranteed by certain future
subsidiaries, if any. The
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10 1/4% notes are unsecured senior subordinated obligations of Citadel
Broadcasting and are subordinated to all Senior Debt (as defined in the
indenture governing the 10 1/4% notes) of Citadel Broadcasting, including
indebtedness under its credit facility.
Citadel Broadcasting may redeem the 10 1/4% notes, 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 indenture governing the 10 1/4% notes
(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 10 1/4% notes
with the net proceeds of one or more eligible public equity offerings, 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 10 1/4% notes. Upon the occurrence of certain changes of
control of Citadel Broadcasting, Citadel Broadcasting must make an offer to
purchase all of the then outstanding 10 1/4% 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 must offer to repurchase 10 1/4% 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 certain future subsidiaries, if any, 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 investment in or acquire replacement
assets or assets that will be used in the broadcast business or businesses
reasonably related thereto.
The indenture governing the 10 1/4% notes contains covenants which, among
other things, restrict the ability of Citadel Broadcasting and its subsidiaries
with respect to:
-- the incurrence of additional debt,
-- restricted payments,
-- dividend and other payment restrictions affecting certain
subsidiaries,
-- asset dispositions,
-- certain asset swaps,
-- transactions with affiliates,
-- issuances and sales of stock of subsidiaries,
-- liens, and
-- consolidations, mergers or sales of assets.
Events of default under the indenture governing the 10 1/4% notes include,
among other things, payment defaults, covenant defaults, cross-defaults to
certain other indebtedness, judgment defaults and certain events of bankruptcy
and insolvency.
EXCHANGEABLE PREFERRED STOCK
On July 3, 1997, Citadel Broadcasting also offered and sold 1.0 million
shares of 13 1/4% Exchangeable Preferred Stock, no par value. The exchangeable
preferred stock was sold for, and has a liquidation preference of, $100 per
share. Dividends on the exchangeable preferred
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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
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 exchangeable
preferred stock. On January 1, 1998, July 1, 1998 and January 1, 1999, Citadel
Broadcasting issued an additional 65,514, shares, 70,590 and 75,267 shares,
respectively, of exchangeable preferred stock in payment of dividends on the
then outstanding shares of exchangeable preferred stock.
Citadel Broadcasting may redeem the exchangeable preferred stock, 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 Certificate of Designation
governing the exchangeable preferred stock (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 exchangeable preferred
stock with the net proceeds of one or more eligible public equity offerings, 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 exchangeable preferred stock.
Citadel Communications intends to use a portion of the net proceeds it receives
from this offering to allow Citadel Broadcasting to redeem 35% of the
outstanding exchangeable preferred stock and to pay the premium and accumulated
and unpaid dividends, if any, on the shares redeemed. See the "Use of Proceeds"
section.
Citadel Broadcasting is required, subject to certain conditions, to redeem
all of the 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 certain changes of control of Citadel Broadcasting, Citadel
Broadcasting is required to make an offer to purchase all of the then
outstanding shares of 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 conditions, the 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 exchange debentures. See the discussion
below under the heading "Exchange Debentures."
The Certificate of Designation governing the exchangeable preferred stock
contains covenants which, among other things, restrict the ability of Citadel
Broadcasting and its subsidiaries 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.
In the event that, after July 1, 2002, two or more semi-annual dividends
payable on the exchangeable preferred stock are in arrears and unpaid, or upon
the occurrence of other events, including failure to comply with covenants and
failure to pay the mandatory redemption price when due, then the holders of a
majority of the then outstanding shares of
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exchangeable preferred stock, voting separately as a class, will be entitled to
elect two additional directors of Citadel Broadcasting, who shall serve until
such time as all dividends in arrears or any other failure, breach or default
giving rise to the voting rights is remedied or waived.
EXCHANGE DEBENTURES
Subject to conditions, Citadel Broadcasting may exchange the outstanding
exchangeable preferred stock in whole, but not in part, at the option of Citadel
Broadcasting, on any dividend payment date, for 13 1/4% Subordinated Exchange
Debentures due 2009 in an aggregate principal amount equal to the then effective
liquidation preference of the exchangeable preferred stock, plus accumulated and
unpaid dividends, if any, to the date fixed for exchange. If such exchange
occurs, the exchange debentures will be issued pursuant to an Indenture dated as
of July 1, 1997 among Citadel Broadcasting, Citadel License and The Bank of New
York, as trustee. Interest on the exchange debentures will be payable semi-
annually at a rate of 13 1/4% per annum, and the exchange debentures will mature
on July 1, 2009. Interest on the exchange debentures will be payable in cash or,
at the option of Citadel Broadcasting, on or prior to July 1, 2002, in
additional exchange debentures.
The exchange debentures will be unconditionally guaranteed on a senior
subordinated basis by Citadel License, and will be similarly guaranteed by
certain future subsidiaries, if any. The 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 indenture governing the exchange debentures) of Citadel Broadcasting,
including its 10 1/4% notes.
Citadel Broadcasting may redeem the exchange debentures, 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 indenture governing the exchange
debentures, 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 exchange debentures having an aggregate principal amount of up to
35.0% of the aggregate principal amount of exchange debentures issued upon
exchange of the exchangeable preferred stock or in payment of interest on the
exchange debentures, with the net proceeds of one or more eligible public equity
offerings, 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 certain changes of control of Citadel Broadcasting, Citadel
Broadcasting will be required to make an offer to purchase all of the then
outstanding 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 must offer to repurchase exchange debentures at
100% 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 certain future subsidiaries, if any, 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.
110
<PAGE> 115
The indenture governing the exchange debentures contains covenants which,
among other things, restricts the ability of Citadel Broadcasting and its
subsidiaries with respect to:
-- the incurrence of additional debt,
-- restricted payments,
-- dividend and other payment restrictions affecting certain
subsidiaries,
-- asset dispositions,
-- certain asset swaps,
-- transactions with affiliates,
-- issuances and sales of stock of certain subsidiaries,
-- liens, and
-- consolidations, mergers or sales of assets.
Events of default under the indenture governing the exchange debentures
include, among other things, payment defaults, covenant defaults, cross-defaults
to certain other indebtedness, judgment defaults and certain events of
bankruptcy and insolvency.
9 1/4% NOTES
On November 19, 1998, Citadel Broadcasting offered and sold $115.0 million
aggregate principal amount of 9 1/4% Senior Subordinated Notes due 2008. The
9 1/4% notes were issued pursuant to an Indenture dated as of November 19, 1998
among Citadel Broadcasting, Citadel License and The Bank of New York, as
trustee. Interest on the 9 1/4% notes is payable semi-annually at a rate of
9 1/4% per annum, and the 9 1/4% notes mature on November 15, 2008.
The 9 1/4% notes are unconditionally guaranteed on a senior subordinated
basis by Citadel License, and will be similarly guaranteed by certain future
subsidiaries, if any. The 9 1/4% notes are unsecured senior subordinated
obligations of Citadel Broadcasting and are subordinated to all Senior Debt (as
defined in the indenture governing the 9 1/4% notes) of Citadel Broadcasting,
including indebtedness under its credit facility.
Citadel Broadcasting may redeem the 9 1/4% notes, in whole or in part, at
the option of Citadel Broadcasting, at any time on or after November 15, 2003,
at the redemption prices set forth in the indenture governing the 9 1/4% notes
(ranging from 104.625% to 100.000%), plus accrued and unpaid interest, if any,
to the date of redemption. In addition, at any time prior to November 15, 2001,
Citadel Broadcasting may, at its option, redeem a portion of the 9 1/4% notes
with the net proceeds of one or more eligible public equity offerings, at a
redemption price equal to 109.25% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of redemption; provided, however, that
after any such redemption at least 75% of the aggregate principal amount of the
9 1/4% notes remains outstanding after giving effect to any such redemption.
Upon the occurrence of certain changes of control of Citadel Broadcasting,
Citadel Broadcasting must make an offer to purchase all of the then outstanding
9 1/4% 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 must offer to repurchase 9 1/4% 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 certain future subsidiaries,
111
<PAGE> 116
if any, 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
investment in or acquire replacement assets or assets that will be used in the
broadcast business or businesses reasonably related thereto.
The indenture governing the 9 1/4% notes contains covenants which, among
other things, restrict the ability of Citadel Broadcasting and its subsidiaries
with respect to:
-- the incurrence of additional debt,
-- restricted payments,
-- dividend and other payment restrictions affecting certain
subsidiaries,
-- asset dispositions,
-- certain asset swaps,
-- transactions with affiliates,
-- issuances and sales of stock of subsidiaries,
-- liens, and
-- consolidations, mergers or sales of assets.
Events of default under the indenture governing the 9 1/4% notes include,
among other things, payment defaults, covenant defaults, cross-defaults to
certain other indebtedness, judgment defaults and certain events of bankruptcy
and insolvency.
OTHER INDEBTEDNESS
In connection with its acquisition of Tele-Media Broadcasting Company in
1997, Citadel Broadcasting incurred a $1.0 million contingent payment obligation
which accrues interest at 5.0% per year. Citadel Broadcasting will be obligated
to make such payment to the former holders of corporate bonds and warrants of
Tele-Media only if a particular $2.0 million payment relating to Citadel
Broadcasting's Providence, Rhode Island operations is received from a third
party.
112
<PAGE> 117
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, Citadel Communications and the
selling stockholders have agreed to sell to the underwriters named below, for
whom Credit Suisse First Boston Corporation is acting as representative, the
following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Prudential Securities Incorporated..........................
Salomon Smith Barney Inc. ..................................
Bear, Stearns & Co. Inc. ...................................
BT Alex. Brown Incorporated.................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Goldman, Sachs & Co. .......................................
Lehman Brothers Inc. .......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
BancBoston Robertson Stephens Inc. .........................
First Union Capital Markets Corp. ..........................
Thomas Weisel Partners LLC..................................
--------
Total..................................................
========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
The selling stockholders have granted to the underwriters a 30-day option
to purchase on a pro rata basis up to 1,500,000 additional shares at the initial
public offering price less the underwriting discounts and commissions. The
option may be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the public offering, the public offering
price and concession and discount to dealers may be changed by the
representatives.
113
<PAGE> 118
The following table summarizes the compensation and estimated expenses
Citadel Communications and the selling stockholders will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us...................... $ $ $ $
Expenses payable by
us...................... $ $ $ $
Underwriting discounts
and commissions paid by
selling stockholders.... $ $ $ $
Expenses payable by the
selling stockholders.... $ $ $ $
</TABLE>
Citadel Communications, certain of its officers and directors, the selling
stockholders and certain other stockholders have agreed or will agree not to
offer, sell, contract to sell, announce the intention to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any additional shares of Citadel Communications' common stock or securities
convertible into or exchangeable or exercisable for any of Citadel
Communications' common stock without the prior written consent of Credit Suisse
First Boston Corporation for a period of 90 days after the date of this
prospectus.
Citadel Communications and the selling stockholders have agreed to
indemnify the underwriters against liabilities under the Securities Act, or
contribute to payments which the underwriters may be required to make in that
respect.
Citadel Communications' shares of common stock are listed on The Nasdaq
Stock Market's National Market under the symbol "CITC."
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and "passive" market making in
accordance with Regulation M under the Exchange Act.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions.
- In "passive" market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to certain
limitations, make bids for or purchases of the common stock until the
time, if any, at which a stabilizing bid is made.
114
<PAGE> 119
These stabilizing transactions, syndicate covering transactions, penalty bids
and passive market making may cause the price of the common stock to be higher
than it would otherwise be in the absence of these transactions. These
transactions may be effected on The Nasdaq Stock Market's National Market or
otherwise and, if commenced, may be discontinued at any time.
Certain of the underwriters and their affiliates have engaged in
transactions with and provided various investment banking, commercial banking
and other services for Citadel Communications and its affiliates in the past and
may do so from time to time in the future.
115
<PAGE> 120
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that Citadel Communications
and the selling stockholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of common stock are
effected. Accordingly, any resale of the common stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling stockholders and the
dealer from whom such purchase confirmation is received that (1) the purchaser
is entitled under applicable provincial securities laws to purchase such common
stock without the benefit of a prospectus qualified under such securities laws,
(2) where required by law, that the purchaser is purchasing as principal and not
as agent, and (3) the purchaser has reviewed the text above under the heading
"Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein and the selling stockholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or these persons. All or a substantial
portion of the assets of the issuer and these persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or these persons in Canada or to enforce a judgment obtained in
Canadian courts against the issuer or these persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed in respect of common stock acquired on the same date and under the same
prospectus exemption.
116
<PAGE> 121
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
LEGAL MATTERS
Certain legal matters with respect to the validity of the common stock
being offered in this offering will be passed upon for Citadel Communications 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
this offering will be passed upon for the underwriters by Shearman & Sterling,
New York, New York.
INDEPENDENT AUDITORS
The consolidated financial statements of Citadel Communications Corporation
and subsidiary as of December 31, 1997 and 1998, and for each of the years in
the three-year period ended December 31, 1998, have been included in this
prospectus in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere in this prospectus, and upon the authority of
said firm as experts in accounting and auditing.
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 report appearing in this prospectus, and have been included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of Fuller-Jeffrey Broadcasting
Companies, Inc. and subsidiaries as of December 31, 1998 and for the year then
ended, have been included in this prospectus in reliance upon the report of KPMG
LLP, independent certified public accountants, appearing elsewhere in this
prospectus, and upon the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Citadel Communications has filed with the SEC a Registration Statement on
Form S-1 under the Securities Act concerning the shares of common stock being
offered. This prospectus does not contain all the information set forth in the
registration statement, parts of which are omitted in accordance with the rules
and regulations of the SEC. For further information concerning Citadel
Communications and its common stock, Citadel Communications refers you to the
registration statement and the documents filed as exhibits to the registration
statement. Statements contained in this prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete,
and in each instance reference is made to the copy of such contract, agreement
or other document listed as an exhibit to the registration statement, each such
statement being qualified in all respects
117
<PAGE> 122
by such reference. Citadel Communications also files annual, quarterly and
special reports and other information with the SEC.
The registration statement and any document Citadel Communications files
with the SEC can be read and copied at the Public Reference Section of the SEC,
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the registration
statement and any document Citadel Communications files with the SEC can be
obtained from the Public Reference Section of the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20459, at prescribed rates. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
Citadel Communications files its reports and has filed the registration
statement with the SEC electronically. The SEC maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of that
web site is http://www.sec.gov.
118
<PAGE> 123
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
Independent Auditors' Report................................ F-3
Consolidated Balance Sheets as of December 31, 1997 and
1998...................................................... F-4
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998.......................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1997 and 1998.............. F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998.......................... F-8
Notes to Consolidated Financial Statements.................. F-9
Consolidated Balance Sheet as of March 31, 1999
(unaudited)............................................... F-35
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1999 (unaudited)................. F-36
Consolidated Statements of Comprehensive Income for the
three months ended March 31, 1998 and 1999 (unaudited).... F-37
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1999 (unaudited)................. F-38
Notes to Consolidated Financial Statements.................. F-39
TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP
INTERESTS
Independent Auditors' Report................................ F-42
Consolidated Balance Sheet as of December 31, 1995 and
1996...................................................... F-43
Consolidated Statement of Operations for the years ended
December 31, 1994, 1995 and 1996.......................... F-44
Consolidated Statement of Deficiency in Net Assets for the
years ended December 31, 1994, 1995 and 1996.............. F-45
Consolidated Statement of Cash Flows for the years ended
December 31, 1994, 1995 and 1996.......................... F-46
Notes to Consolidated Financial Statements.................. F-47
Condensed Consolidated Balance Sheet as of June 30, 1997
(unaudited)............................................... F-56
Condensed Consolidated Statements of Operations and Changes
in Deficit for the six months ended June 30, 1996 and 1997
(unaudited)............................................... F-57
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1997 (unaudited)........... F-58
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-59
</TABLE>
F-1
<PAGE> 124
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FULLER-JEFFREY BROADCASTING COMPANIES, INC. AND SUBSIDIARIES
Independent Auditors' Report................................ F-61
Consolidated Balance Sheets as of December 31, 1998 and
March 31, 1999 (unaudited)................................ F-62
Consolidated Statements of Operations for the year ended
December 31, 1998 and the three months ended March 31,
1998 and 1999 (unaudited)................................. F-63
Consolidated Statements of Stockholders' Deficiency for the
year ended December 31, 1998.............................. F-64
Consolidated Statements of Cash Flows for the year ended
December 31, 1998 and the three months ended March 31,
1998 and 1999 (unaudited)................................. F-65
Notes to Consolidated Financial Statements.................. F-67
</TABLE>
F-2
<PAGE> 125
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 subsidiary as of December 31, 1997 and 1998 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, 1998.
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 subsidiary as of December 31, 1997 and 1998 and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Phoenix, Arizona
March 5, 1999, except as to the last two paragraphs of
Note 17, which are as of March 17, 1999
F-3
<PAGE> 126
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,684,991 $102,841,800
Cash held in escrow....................................... 718,561 --
Accounts receivable, less allowance for doubtful accounts
of $808,942 in 1997, and $1,186,546 in 1998............ 25,744,137 34,196,857
Notes receivable from related parties..................... 246,455 214,726
Prepaid expenses.......................................... 1,532,227 1,956,290
Assets held for sale...................................... -- 25,938,227
------------ ------------
Total current assets.............................. 35,926,371 165,147,900
Property and equipment, net................................. 35,242,284 34,084,790
Intangible assets, net...................................... 268,689,516 268,790,120
Deposits for pending acquisitions........................... 650,000 --
Other assets................................................ 3,664,123 4,238,119
------------ ------------
$344,172,294 $472,260,929
============ ============
LIABILITIES, EXCHANGEABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,001,194 $ 4,359,667
Accrued liabilities....................................... 9,060,129 10,900,197
Current maturities of other long-term obligations......... 271,352 287,414
------------ ------------
Total current liabilities......................... 13,332,675 15,547,278
Note payable................................................ 90,084,059 --
Senior subordinated notes payable, net of unamortized
discount.................................................. 98,331,117 210,091,437
Other long-term obligations, less current maturities........ 1,012,649 1,040,436
Deferred tax liability...................................... 23,270,338 24,843,549
------------ ------------
Total liabilities................................. 226,030,838 251,522,700
------------ ------------
Exchangeable preferred stock................................ 102,009,531 116,775,393
------------ ------------
Commitments and contingencies (Note 16)
Shareholders' equity:
Common stock, $.001 par value; authorized 200,000,000
shares, issued and outstanding 25,728,771 shares....... -- 25,729
Class A common stock, $.001 par value; issued and
outstanding 2,931,383 in 1997.......................... 2,931 --
Class B common stock, $.001 par value; issued and
outstanding 56,493 in 1997............................. 56 --
Class C common stock, $.001 par value; issued and
outstanding 223,464 in 1997............................ 223 --
Convertible preferred stock............................... 14,788 --
Additional paid-in capital................................ 44,865,129 137,899,282
Deferred compensation..................................... -- (1,044,103)
Accumulated deficit....................................... (28,751,202) (32,682,238)
Accumulated other comprehensive loss...................... -- (235,834)
------------ ------------
Total shareholders' equity............................. 16,131,925 103,962,836
------------ ------------
$344,172,294 $472,260,929
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 127
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
Consolidated Statements of Operations
Years ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Gross broadcasting revenue.............. $50,824,384 $ 99,469,550 $149,305,406
Less agency commissions............... 5,411,578 9,666,280 13,879,145
----------- ------------ ------------
Net broadcasting revenue........... 45,412,806 89,803,270 135,426,261
----------- ------------ ------------
Operating expenses:
Station operating expenses............ 33,232,485 65,245,095 93,484,646
Depreciation and amortization......... 5,188,419 14,661,092 26,414,242
Corporate general and
administrative..................... 3,247,579 3,530,067 4,369,376
----------- ------------ ------------
Operating expenses................. 41,668,483 83,436,254 124,268,264
----------- ------------ ------------
Operating income................... 3,744,323 6,367,016 11,157,997
----------- ------------ ------------
Nonoperating expenses (income):
Interest expense...................... 6,155,472 12,872,515 18,126,262
Interest income....................... (407,581) (439,229) (821,777)
Loss (gain) on sale of assets......... 1,749 -- (1,044,880)
Other, net............................ (8,123) (11,944) 215,647
----------- ------------ ------------
Nonoperating expenses, net......... 5,741,517 12,421,342 16,475,252
----------- ------------ ------------
Loss before income taxes and
extraordinary item............... (1,997,194) (6,054,326) (5,317,255)
Income tax (benefit).................... -- (769,573) (1,386,219)
----------- ------------ ------------
Loss before extraordinary item..... (1,997,194) (5,284,753) (3,931,036)
Extraordinary loss on extinguishment of
debt.................................. (1,769,000) -- --
----------- ------------ ------------
Net loss........................... (3,766,194) (5,284,753) (3,931,036)
Dividend requirement for exchangeable
preferred stock....................... -- 6,632,939 14,585,842
----------- ------------ ------------
Net loss applicable to common
shares........................... $(3,766,194) $(11,917,692) $(18,516,878)
=========== ============ ============
Basic and diluted net loss per common
share................................. $ (1.18) $ (3.72) $ (1.51)
=========== ============ ============
Weighted average common shares
outstanding........................... 3,196,551 3,199,467 12,297,588
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 128
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK CLASS A
-------------------------------------------------------------------------- COMMON
SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F SERIES G STOCK
-------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995......... $ 2,916 $ 42 $ 828 $ 2,064 $ -- $ -- $ -- $2,880
Net loss.............................. -- -- -- -- -- -- -- --
Series B and D preferred stock
dividend............................ -- -- -- -- -- -- -- --
Forgiveness of receivable from
shareholder......................... -- -- -- -- -- -- -- --
Issuance of Series C preferred stock,
4,968,057 shares.................... -- -- 4,968 -- -- -- -- --
Preferred stock redemption............ (1,308) -- (828) (2,064) -- -- -- --
Class C common stock redemption....... -- -- -- -- -- -- -- --
Issuance of Series D preferred stock,
4,538,502 shares net of $520,649
issuance costs...................... -- -- -- 4,539 -- -- -- --
Conversion of Class B common stock and
reclassification.................... 631 10 -- -- -- -- -- --
Redemption of warrants................ -- -- -- -- -- -- -- --
------- ---- ------- ------- ------- ----- ------- -------
Balances at December 31, 1996......... 2,239 52 4,968 4,539 -- -- -- 2,880
Net loss.............................. -- -- -- -- -- -- -- --
Issuance of Series E preferred stock,
1,448,187 shares.................... -- -- -- -- 1,448 -- -- --
Issuance of Series F preferred stock,
459,793 shares...................... -- -- -- -- -- 460 -- --
Issuance of Series G preferred stock,
1,081,908 shares.................... -- -- -- -- -- -- 1,082 --
Issuance of Class A common stock,
33,624 shares....................... -- -- -- -- -- -- -- 33
Conversion of Series D preferred
stock, 1,423,702 shares............. -- -- 1,424 (1,424) -- -- -- --
Exercise of stock options............. -- -- -- -- -- -- -- 18
Exchangeable preferred stock dividend
requirement......................... -- -- -- -- -- -- -- --
------- ---- ------- ------- ------- ----- ------- -------
Balances at December 31, 1997......... 2,239 52 6,392 3,115 1,448 460 1,082 2,931
Comprehensive loss:
Net loss............................ -- -- -- -- -- -- --
Unrealized loss on hedging contract,
net of tax........................ -- -- -- -- -- -- -- --
Total comprehensive loss............ -- -- -- -- -- -- -- --
Proceeds of initial public offering... -- -- -- -- -- -- -- --
Initial public offering conversion and
split of common stock and preferred
stock............................... (2,239) (52) -- -- (1,448) (460) (1,082) (2,956)
Initial public offering conversion and
split of Series C and Series D
preferred stock..................... -- -- (6,392) (3,115) -- -- -- --
Conversion of preferred stock to
common stock........................ -- -- -- -- -- -- -- --
Cash payments of initial public
offering costs...................... -- -- -- -- -- -- -- --
Exercise of options................... -- -- -- -- -- -- -- 25
Exercise of warrants.................. -- -- -- -- -- -- -- --
Deferred compensation................. -- -- -- -- -- -- -- --
Accretion of exchangeable preferred
stock costs......................... -- -- -- -- -- -- -- --
Exchangeable preferred stock dividend
requirement......................... -- -- -- -- -- -- -- --
------- ---- ------- ------- ------- ----- ------- -------
Balances at December 31, 1998......... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
======= ==== ======= ======= ======= ===== ======= =======
<CAPTION>
CLASS B CLASS C
COMMON COMMON
STOCK STOCK
------- -------
<S> <C> <C>
Balances at December 31, 1995......... $ 222 $ 132
Net loss.............................. -- --
Series B and D preferred stock
dividend............................ -- --
Forgiveness of receivable from
shareholder......................... -- --
Issuance of Series C preferred stock,
4,968,057 shares.................... -- --
Preferred stock redemption............ -- --
Class C common stock redemption....... -- (75)
Issuance of Series D preferred stock,
4,538,502 shares net of $520,649
issuance costs...................... -- --
Conversion of Class B common stock and
reclassification.................... (166) 166
Redemption of warrants................ --
----- -----
Balances at December 31, 1996......... 56 223
Net loss.............................. -- --
Issuance of Series E preferred stock,
1,448,187 shares.................... -- --
Issuance of Series F preferred stock,
459,793 shares...................... -- --
Issuance of Series G preferred stock,
1,081,908 shares.................... -- --
Issuance of Class A common stock,
33,624 shares....................... -- --
Conversion of Series D preferred
stock, 1,423,702 shares............. -- --
Exercise of stock options............. -- --
Exchangeable preferred stock dividend
requirement......................... -- --
----- -----
Balances at December 31, 1997......... 56 223
Comprehensive loss:
Net loss............................ -- --
Unrealized loss on hedging contract,
net of tax........................ -- --
Total comprehensive loss............ -- --
Proceeds of initial public offering... -- --
Initial public offering conversion and
split of common stock and preferred
stock............................... (56) (223)
Initial public offering conversion and
split of Series C and Series D
preferred stock..................... -- --
Conversion of preferred stock to
common stock........................ -- --
Cash payments of initial public
offering costs...................... -- --
Exercise of options................... -- --
Exercise of warrants.................. -- --
Deferred compensation................. -- --
Accretion of exchangeable preferred
stock costs......................... -- --
Exchangeable preferred stock dividend
requirement......................... -- --
----- -----
Balances at December 31, 1998......... $ -- $ --
===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 129
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK CONVERTIBLE ADDITIONAL OTHER TOTAL
-------------------- PREFERRED PAID-IN DEFERRED ACCUMULATED COMPREHENSIVE SHAREHOLDERS'
SHARES AMOUNT STOCK CAPITAL COMPENSATION DEFICIT LOSS EQUITY
---------- ------- ----------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- $ -- $ -- $ 10,457,053 $ -- $(19,643,591) $ -- $ (9,177,454)
-- -- -- -- -- (3,766,194) -- (3,766,194)
-- -- -- -- -- (56,664) -- (56,664)
-- -- -- (408,637) -- -- -- (408,637)
-- -- -- 25,838,606 -- -- -- 25,843,574
-- -- -- (26,197,776) -- -- -- (26,201,976)
-- -- -- (390,714) -- -- -- (390,789)
-- -- -- 23,086,725 -- -- -- 23,091,264
-- -- -- (641) -- -- -- --
-- -- -- (2,862,735) -- -- -- (2,862,735)
---------- ------- --------- ------------ ----------- ------------ --------- ------------
-- -- -- 29,521,881 -- (23,466,449) -- 6,070,389
-- -- -- -- -- (5,284,753) -- (5,284,753)
-- -- -- 7,532,852 -- -- -- 7,534,300
-- -- -- 4,249,540 -- -- -- 4,250,000
-- -- -- 9,998,918 -- -- -- 10,000,000
-- -- -- 174,887 -- -- -- 174,920
-- -- -- -- -- -- -- --
-- -- -- 19,990 -- -- -- 20,008
-- -- -- (6,632,939) -- -- -- (6,632,939)
---------- ------- --------- ------------ ----------- ------------ --------- ------------
-- -- -- 44,865,129 -- (28,751,202) -- 16,131,925
-- -- -- -- -- (3,931,036) -- (3,931,036)
-- -- -- -- -- -- (235,834) (235,834)
------------
-- -- -- -- -- -- -- (4,166,870)
------------
7,282,119 7,282 -- 116,506,622 -- -- -- 116,513,904
8,516,357 8,516 -- -- -- -- -- --
-- -- 9,507 -- -- -- -- --
9,506,561 9,507 (9,507) -- -- -- -- --
-- -- -- (9,876,726) -- -- -- (9,876,726)
9,431 10 -- 51,506 -- -- -- 51,541
414,303 414 -- (69) -- -- -- 345
-- -- -- 1,118,682 (1,044,103) -- -- 74,579
-- -- -- (180,020) -- -- -- (180,020)
-- -- -- (14,585,842) -- -- -- (14,585,842)
---------- ------- --------- ------------ ----------- ------------ --------- ------------
25,728,771 $25,729 $ -- $137,899,282 $(1,044,103) $(32,682,238) $(235,834) $103,962,836
========== ======= ========= ============ =========== ============ ========= ============
</TABLE>
F-7
<PAGE> 130
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (3,766,194) $ (5,284,753) $ (3,931,036)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Extraordinary loss................................. 1,769,000 -- --
Depreciation and amortization...................... 5,188,419 14,661,092 26,414,242
Deferred income tax benefit........................ -- (769,573) (1,806,234)
Deferred compensation expense...................... -- -- 74,579
Amortization of debt issuance costs and debt
discounts........................................ 370,652 441,334 716,897
Bad debt expense................................... 421,378 1,016,375 1,201,341
Loss/(gain) on sale of assets...................... 1,749 -- (1,044,880)
Changes in assets and liabilities, net of
acquisitions:
Increase in accounts receivable and notes
receivable from related parties................ (5,257,849) (10,214,907) (9,585,988)
Increase in prepaid expenses..................... (175,058) (230,070) (424,063)
Increase in accounts payable..................... 94,017 707,945 358,473
Increase in accrued liabilities.................. 272,615 5,323,678 1,565,129
------------ ------------- -------------
Net cash provided by (used in) operating
activities..................................... (1,081,271) 5,651,121 13,538,460
------------ ------------- -------------
Cash flows from investing activities:
Capital expenditures.................................... (2,040,946) (2,070,223) (4,511,507)
Capitalized acquisition costs........................... (1,144,699) (2,928,956) (1,242,238)
Cash paid to acquire stations........................... (57,056,438) (205,973,171) (42,108,647)
Other assets, net....................................... 47,410 (630,765) (389,766)
Deposits for pending acquisitions....................... (930,000) (650,000) --
Proceeds from sales of assets........................... 1,115 -- 2,440,345
------------ ------------- -------------
Net cash used in investing activities............ (61,123,558) (212,253,115) (45,811,813)
------------ ------------- -------------
Cash flows from financing activities:
Principal payments on notes payable..................... (50,970,385) (51,817,000) (125,084,059)
Proceeds from notes payable............................. 98,061,059 52,499,999 35,000,000
Proceeds from senior subordinated notes payable......... -- 97,250,000 111,550,000
Proceeds from issuance of exchangeable preferred
stock................................................. -- 95,376,592 --
Proceeds from initial public offering................... -- -- 116,513,904
Cash payments of initial public offering costs.......... -- -- (9,876,726)
Payment of debt issuance costs.......................... (2,283,124) (1,855,123) (689,054)
Principal payments on other long-term obligations....... (776,107) (735,077) (442,390)
Proceeds from other obligations......................... -- -- 406,601
Proceeds from issuance of common stock.................. 49,455,487 21,959,220 --
Payment of dividends.................................... (302,861) -- --
Prepayment premium...................................... (420,000) -- --
Exercise of stock options............................... -- 20,008 51,886
Cost of equity issuance................................. (520,649) -- --
Redemption of warrants.................................. (2,862,735) -- --
Redemption of stock..................................... (26,592,765) -- --
------------ ------------- -------------
Net cash provided by financing activities........ 62,787,920 212,698,619 127,430,162
------------ ------------- -------------
Net increase in cash and cash equivalents........ 583,091 6,096,625 95,156,809
Cash and cash equivalents, beginning of year.............. 1,005,275 1,588,366 7,684,991
------------ ------------- -------------
Cash and cash equivalents, end of year.................... $ 1,588,366 $ 7,684,991 $ 102,841,800
============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 131
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Citadel Communications Corporation was formed March 24, 1993 as a Nevada
corporation and is a holding company which owns all of the issued and
outstanding common stock of Citadel Broadcasting Company. Citadel License, Inc.
is a wholly-owned subsidiary of Citadel Broadcasting Company. Citadel
Broadcasting Company and Citadel License, Inc. own and operate radio stations
and hold Federal Communications Commission ("FCC") licenses in Arkansas,
California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Pennsylvania,
Rhode Island, Utah and Washington. In addition, Citadel Broadcasting Company
owns and operates an internet service provider, offering its subscribers a
variety of services, including electronic mail and access to the internet.
Principles of Consolidation and Presentation
The accompanying consolidated financial statements include Citadel
Communications Corporation and its wholly-owned subsidiary (collectively
referred to as the "Company"). The assets and liabilities and operating
information for Citadel Broadcasting Company are identical to Citadel
Communications Corporation. 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 due to settlement
of the interest rate swap agreement are recognized as interest expense or income
on a monthly basis. A mark-to-market adjustment is recorded as a component of
shareholders' equity to reflect the fair value of the interest rate swap
agreement.
Property and Equipment
Assets acquired in business combinations are accounted for using the
purchase method of accounting and 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
F-9
<PAGE> 132
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
over the estimated useful lives of the related assets. Leasehold improvements
are capitalized and depreciated straight-line over the shorter of the lease
terms or the estimated useful lives of the assets. Maintenance and repairs are
expensed.
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.
Other intangible assets are comprised of acquisitions costs, agreements not to
compete, broadcast licenses, subscriber lists, premium lease space and
subcarrier antenna income. Pending acquisition costs are deferred and
capitalized as part of completed acquisitions or expensed in the period in which
the pending acquisition is terminated. 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 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.
Debt Issuance Costs
The costs related to the issuance of debt are capitalized and amortized to
interest expense using the effective interest method over the lives of the
related debt.
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.
Income (Loss) Per Share of Common Stock
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
No. 128"). This statement establishes standards for computing and presenting
earnings per share ("EPS"), and supersedes 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 $(0.55).
F-10
<PAGE> 133
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
Revenue Recognition
Broadcasting operations derive revenue from the sale of program time and
commercial announcements to local, regional and national advertisers. Revenue is
recognized when the programs and commercial announcements are broadcast. On-line
service revenue derived from the internet service provider is recognized over
the period in which the services are provided. Revenue generated from the
internet service provider is included in gross broadcasting revenue in the
accompanying consolidated statement of operations.
Barter Transactions
Barter contracts are agreements entered into under which the Company
provides commercial airtime 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.
Comprehensive Loss
As of January 1, 1998, the Company adopted SFAS No. 130 "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for the reporting of
comprehensive loss and its components; however, the adoption of SFAS No. 130 had
no impact on the Company's net loss or shareholders' equity. SFAS No. 130
requires the reporting of a mark-to-market adjustment pertaining to a hedging
contract which is recorded in shareholders' equity as a component of
comprehensive loss.
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
F-11
<PAGE> 134
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 LMAs.
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 statements 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, 1997 and 1998, no receivable from
any customer exceeded five percent of gross accounts receivable nor did any
customer's account exceed more than ten percent of net broadcasting revenue for
any of the periods presented.
Impairment Recognition
Management evaluates the carrying value of all long-lived assets to
determine recoverability based on an analysis of nondiscounted future cash flows
in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." Based on its most recent
analysis, management believes that no material impairment in the value of
long-lived assets existed at December 31, 1998.
Reclassifications
Certain 1996 and 1997 balances have been reclassified to conform to the
1998 presentation.
Recently Issued Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires an
entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This pronouncement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Management does not believe the implementation of
this accounting pronouncement will have a material effect on its consolidated
financial statements.
F-12
<PAGE> 135
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) ACQUISITIONS AND DISPOSITIONS
1997 Acquisitions
During 1997, the Company acquired the assets of 44 FM and 17 AM radio
stations and related assets from various parties as follows:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- ---------------- ----------------- ------------------- ------------
<S> <C> <C> <C>
January 1, 1997........... KCTR-FM/KDWG-AM/ Billings, MT $ 26,008,357
KKBR-FM/KBBB-FM/
KMHK-FM
KUGN-AM/KUGN-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
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-AM/ Wilkes-Barre, PA
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, Edgenet Providence, RI $ 4,250,000
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
Land and
October 15, 1997.......... Buildings Little Rock, AR $ 3,001,537
October 15, 1997.......... KOKY-FM Little Rock, AR $ 7,354,860
October 21, 1997.......... WLEV-FM Allentown, PA $ 23,000,000
</TABLE>
F-13
<PAGE> 136
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- ---------------- ----------------- ------------------- ------------
<S> <C> <C> <C>
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 proceeds from debt, issuance of Exchangeable Preferred Stock of
Citadel Broadcasting and the issuance of capital stock of Citadel
Communications. 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>
F-14
<PAGE> 137
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1998 Acquisitions and Dispositions
1998 Acquisitions
During 1998, the Company acquired the assets of 7 FM and 4 AM radio
stations and 5 internet service providers from various parties as follows:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- ---------------- --------------------------------- ------------------------- -----------
<S> <C> <C> <C>
RADIO STATIONS:
January 2, 1998...... WEMR-AM/WEMR-FM Wilkes-Barre/Scranton, PA $ 815,000
February 12, 1998.... KQFC-FM/KKGL-FM/ Boise, ID $14,400,000
KBOI-AM
March 26, 1998....... WSGD-FM/WDCS-FM/ Wilkes-Barre/Scranton, PA $ 6,000,000
WCDL-AM
April 21, 1998....... KIZN-FM/KAMG-FM Boise, ID $14,506,177
November 17, 1998.... KAAY-AM Little Rock, AK $ 5,107,589
INTERNET SERVICE
PROVIDERS:
September 18, 1998... Digital Planet Salt Lake City, UT $ 225,000
September 30, 1998... Internet Technology Systems, Inc Salt Lake City, UT $ 1,535,000
October 15, 1998..... In Quo Salt Lake City, UT $ 335,000
October 26, 1998..... The Johnson Connection LLC Salt Lake City, UT $ 320,000
December 8, 1998..... The Friendly Net LLC Salt Lake City, UT $ 92,997
</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. The acquisitions were funded with proceeds from debt.
The purchase price, including acquisition costs of $1,242,238, was allocated as
follows:
<TABLE>
<S> <C>
Property and equipment.............................. $ 3,476,618
Intangible assets................................... 41,031,169
Other assets........................................ 71,214
-----------
$44,579,001
===========
</TABLE>
F-15
<PAGE> 138
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1998 Dispositions
In October 1998, the Company sold the assets of WQCY-FM, WTAD-AM, WMOS-FM
and WBJR-FM in Quincy, Illinois for $2,250,000. A gain of approximately
$1,280,000 was recognized on the sale.
In November 1998, the Company sold the assets of KRNN-AM in Little Rock,
Arkansas for $190,345. A loss of approximately $5,400 was recognized on the
sale.
In October 1997, the Company entered into an agreement in which the Company
acquired WFMZ-FM in exchange for $23,000,000 in cash and the FCC license and
studio equipment of WEST-AM. Pending FCC approval, the disposition of WEST-AM
was not recorded until the third quarter of 1998. The disposition of WEST-AM was
recorded as a purchase price adjustment aggregating approximately $463,000.
Pro Forma
The following summary, prepared on a pro forma basis, presents the results
of operations as if all the above acquisitions and dispositions had been
completed as of January 1, 1997.
<TABLE>
<CAPTION>
UNAUDITED
----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998
------------ ------------
<S> <C> <C>
Net broadcasting revenue.............. $119,753,000 $135,194,000
Operating income...................... 6,267,000 11,783,000
Net loss.............................. (6,042,000) (1,897,000)
</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 Acquisitions
On November 23, 1998, the Company entered into an asset purchase agreement
with Wicks Broadcast Group Limited Partnership and related entities to acquire
substantially all of the assets of 10 FM and 6 AM radio stations in Charleston,
South Carolina; Binghamton, New York and Muncie and Kokomo, Indiana for an
aggregate purchase price of approximately $77,000,000 in cash. Citadel
Broadcasting has delivered an irrevocable letter of credit in favor of the
sellers, issued by BankBoston, N.A., in the amount of $5,000,000 to secure the
Company's obligations under the agreement. The closing of this transaction is
subject to various conditions at closing, including FCC approval.
(3) ASSETS HELD FOR SALE
On January 13, 1999, the Company entered into an asset purchase agreement
to sell substantially all of the assets of the Company's 18 FM and 7 AM radio
stations serving the markets of Eugene, Oregon; Medford, Oregon; Tri-Cities,
Washington; Billings, Montana;
F-16
<PAGE> 139
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Johnstown, Pennsylvania and State College, Pennsylvania for an aggregate
purchase price of approximately $26,000,000, consisting of $25,500,000 in cash
and a $500,000 promissory note. The disposition is subject to conditions at
closing, including FCC approval. The Company believes that any gain or loss
resulting from the disposition will not have a material effect on its financial
position.
The net assets of the radio stations are presented in the accompanying
consolidated balance sheet as "Assets held for sale," and are carried at the
lower of cost or net realizable value.
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1998 consists of the
following:
<TABLE>
<CAPTION>
ESTIMATED
1997 1998 USEFUL LIFE
----------- ------------ -----------
<S> <C> <C> <C>
Land....................... $ 3,269,025 $ 3,890,767 --
Buildings and
improvements............. 5,726,701 6,925,691 5-30 years
Transmitters, towers and
equipment................ 29,053,049 28,533,871 5-15 years
Office furniture and
equipment................ 5,615,833 6,308,077 3-5 years
Construction in progress... 736,620 1,077,853 --
----------- ------------
44,401,228 46,736,259
Less accumulated
depreciation and
amortization............. (9,158,944) (12,651,469)
----------- ------------
$35,242,284 $ 34,084,790
=========== ============
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets at December 31, 1997 and 1998 consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
1997 1998 USEFUL LIFE
------------ ------------ -----------
<S> <C> <C> <C>
Goodwill.................. $119,226,136 $129,239,260 15 years
Broadcast licenses........ 162,626,295 168,522,982 15 years
Subscriber lists.......... -- 2,553,955 3 years
Noncompetition
agreements.............. 1,858,593 2,064,667 3-5 years
Premium lease space....... 161,787 49,552 1-13 years
Subcarrier antenna
income.................. 103,878 103,878 1-4 years
------------ ------------
283,976,689 302,534,294
Less accumulated
amortization............ (15,287,173) (33,744,174)
------------ ------------
$268,689,516 $268,790,120
------------ ------------
</TABLE>
F-17
<PAGE> 140
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) ACCRUED LIABILITIES
Accrued liabilities at December 31, 1997 and 1998 consist of the following:
<TABLE>
<CAPTION>
1997 1998
---------- -----------
<S> <C> <C>
Interest................................. $5,118,735 $ 6,417,273
Music license fees....................... 209,734 169,466
Compensation and commissions............. 2,082,492 3,104,357
Other.................................... 1,649,168 1,209,101
---------- -----------
$9,060,129 $10,900,197
========== ===========
</TABLE>
(7) NOTE PAYABLE
On July 3, 1997, the Company entered into an amended and restated financing
agreement ("Senior Credit Facility") which allows for revolving loan borrowings
up to a maximum of $150,000,000. Pursuant to the agreement, this amount is
subject to reduction starting December 31, 1997 and continuing quarterly
thereafter. The maximum available loan commitment at December 31, 1998 was
$137,500,000. 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 multiplier for the
commitment fee is reduced to .09375%. Commitment fees paid in 1996, 1997 and
1998 were $74,931, $380,295 and $412,898, respectively. The agreement requires
that the Company enter into an interest rate swap agreement for a period of at
least two years. See Note 14 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).
At December 31, 1997, the Company's outstanding balance under the Senior
Credit Facility was $90,084,059. Interest was payable at the LIBOR rate (5.72%
at December 31, 1997), plus 2.75%. As of December 31, 1998, the Company did not
have an outstanding balance under the Senior Credit Facility.
The Senior Credit Facility is secured by a pledge of property and equipment
and the common stock of Citadel Broadcasting. Various debt covenants place
restrictions on, among other things, indebtedness, acquisitions, dividends,
capital expenditures and the sale or transfer of assets and provide for certain
minimum operating cash flows for the Company. The debt covenant provisions also
include certain financial ratio covenants, the most restrictive in nature being;
initial total debt to adjusted operating cash flow less than 6.5 times, initial
total senior debt to adjusted operating cash flow less than 4.5 times and
consolidated operating cash flow to interest expense and cash dividends on the
Exchangeable Preferred Stock greater than 1.75 times. At December 31, 1998, the
Company was in compliance with all debt covenant provisions.
F-18
<PAGE> 141
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) SENIOR SUBORDINATED NOTES PAYABLE
On July 3, 1997, the Company completed the issuance of $101,000,000 of its
10 1/4% Senior Subordinated Notes ("1997 Notes") due 2007. Interest is payable
semi-annually. The 1997 Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after July 1, 2002 at a redemption price
as stated in the following percentages:
<TABLE>
<CAPTION>
REDEMPTION
PRICE
----------
<S> <C>
2002.................................................. 105.125%
2003.................................................. 104.100%
2004.................................................. 103.075%
2005.................................................. 102.050%
2006.................................................. 101.025%
</TABLE>
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 1997 Notes
with the net proceeds of one or more Public Equity Offerings (as defined in the
indenture governing the 1997 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 1997 Notes are shown net of unamortized discount of
$2,493,853 at December 31, 1998.
The indenture governing the 1997 Notes 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. At December 31, 1998, Citadel Broadcasting was
in compliance with all debt covenants. Citadel License, Inc. is the guarantor of
the 1997 Notes.
On November 19, 1998, the Company completed the issuance of $115,000,000 of
its 9 1/4% Senior Subordinated Notes ("1998 Notes") due in 2008. The 1998 Notes
may be redeemed at the option of the Company, in whole or in part, at any time
on or after November 15, 2003 at a redemption price as stated in the following
percentages:
<TABLE>
<CAPTION>
REDEMPTION
PRICE
----------
<S> <C>
2003.................................................. 104.625%
2004.................................................. 103.083%
2005.................................................. 101.541%
2006.................................................. 100.000%
</TABLE>
In addition, at any time prior to November 15, 2001, the Company may, at
its option, redeem a portion of the 1998 Notes with the net proceeds of one or
more Public Equity Offerings (as defined in the indenture governing the 1998
Notes), at a redemption price equal to 109.25% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the redemption date. The
1998 Notes are shown net of unamortized discount of $3,414,710 at December 31,
1998.
F-19
<PAGE> 142
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The indenture governing the 1998 Notes contains certain restrictive
covenants, including limitations which restrict the ability of Citadel
Broadcasting to incur additional debt, incur liens, pay cash dividends, purchase
Citadel Broadcasting's common stock 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. At
December 31, 1998, Citadel Broadcasting was in compliance with all covenants.
Citadel License, Inc. is the guarantor of the 1998 Notes.
The aggregate Senior Subordinated Notes payable at December 31, 1998 are as
follows:
<TABLE>
<S> <C>
1997 Notes......................................... $101,000,000
1998 Notes......................................... 115,000,000
------------
216,000,000
Less unamortized discount.......................... (5,908,563)
------------
$210,091,437
============
</TABLE>
(9) OTHER LONG-TERM OBLIGATIONS
Other long-term obligations at December 31, 1997 and 1998 consist of the
following:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Various noncompetition and consulting agreements with
the sellers of radio stations acquired, due at
various dates through July 2003, face amount of
$437,503 and $579,459 at December 31, 1997 and 1998,
respectively, non-interest bearing with interest
imputed at 8.5% to 9.0%, net of discount of $29,640
and $76,617 in 1997 and 1998, respectively.......... 407,863 502,842
Prepayment premium on extinguishment of debt (a)...... 770,779 683,286
Capital leases........................................ 105,359 141,722
---------- ----------
1,284,001 1,327,850
Less current maturities............................... (271,352) (287,414)
---------- ----------
Long-term portion..................................... $1,012,649 $1,040,436
========== ==========
</TABLE>
- ---------------
(a) The prepayment premium on the Senior Credit Facility can be reduced on a
quarterly basis depending on the outstanding balance and is due upon the
termination of the Senior Credit Facility.
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 a
related party of $7,000,000. The early retirement of the long-term debt resulted
in approximately $1,769,000 extraordinary loss due to prepayment premiums and
the write-off of debt issuance costs.
F-20
<PAGE> 143
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The required aggregate principal payments as of December 31, 1998,
excluding the amortization of debt discount, are as follows:
<TABLE>
<S> <C>
1999................................................. $ 287,414
2000................................................. 149,109
2001................................................. 90,615
2002................................................. 93,542
2003................................................. 707,170
----------
$1,327,850
==========
</TABLE>
(10) SHAREHOLDERS' EQUITY
Common and Preferred Stock
Prior to the consummation of the initial public offering ("IPO") the
Company engaged in a series of transactions (collectively, the
"Recapitalization") which resulted in the Company having outstanding capital
stock consisting of common stock and convertible preferred stock, par value
$.001 per share (the "Convertible Preferred Stock"). In conjunction with the
Recapitalization, (i) each share of outstanding capital stock of the Company,
other than those held by ABRY Broadcast Partners II, L.P. ("ABRY II") and
ABRY/Citadel Investment Partners, L.P. ("ABRY/CIP"), was converted into three
shares of new common stock, (ii) each share of capital stock of the company held
by ABRY II or ABRY/CIP was converted into three shares of new convertible
preferred stock and (iii) each outstanding option or warrant to acquire shares
of common stock was converted into an option or warrant to acquire three times
the number of shares of new common stock. All share amounts and EPS have been
restated in the accompanying consolidated financial statements with respect to
the Recapitalization.
In connection with the Recapitalization, the Company amended its
Certificate of Incorporation to authorize the Company to issue 200,000,000
shares of new common stock, 19,013,122 shares of new convertible preferred stock
and 20,000,000 shares of undesignated preferred stock.
On July 7, 1998, the Company consummated an IPO of 6,880,796 shares of its
new common stock at an initial public offering price of $16.00 per share. Of
such shares, 6,250,000 shares were sold by the Company and 630,796 shares were
sold by certain stockholders of the Company. On July 14, 1998, the Company sold
an additional 1,032,119 shares of its new common stock at the initial public
offering price pursuant to the exercise of the underwriters' over-allotment
option. Total proceeds of the IPO, including proceeds for the shares issued upon
the exercise of the over-allotment option, were $126,606,640, of which total
proceeds to the Company were $106,637,178, total proceeds to the selling
stockholders, net of costs of $706,492 were $9,386,244 and total underwriting
discounts, commissions and costs were $9,876,726.
At December 31, 1997, the Company had several series of Convertible
Preferred Stock, all of which had par values of $.001 per share. The following
is a summary of the authorized
F-21
<PAGE> 144
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and outstanding shares of Convertible Preferred Stock which were held at
December 31, 1997, restated for the effect of the three-for-one share
conversion:
<TABLE>
<CAPTION>
AUTHORIZED OUTSTANDING
SHARES SHARES AMOUNT
---------- ----------- -------
<S> <C> <C> <C>
Series A...................... 2,916,000 2,239,236 $ 2,239
Series B...................... 1,447,200 51,602 52
Series C...................... 36,000,000 6,391,761 6,392
Series D...................... 36,000,000 3,114,800 3,115
Series E...................... 1,448,187 1,448,187 1,448
Series F...................... 459,793 459,793 460
Series G...................... 1,081,908 1,081,908 1,082
---------- ---------- -------
79,353,088 14,787,287 $14,788
========== ========== =======
</TABLE>
All outstanding Series A, B, E, F and G shares were converted to 5,280,726
shares of new common stock in the Recapitalization. All outstanding Series C and
D shares were converted to 9,506,561 shares of new convertible preferred stock,
which were subsequently converted into the same number of shares of new common
stock during September 1998.
The holders of the new common stock are entitled to one vote per share on
all matters submitted to a vote of shareholders. Additionally, the Company has
entered into a registration rights agreement with certain shareholders, under
which the Company may be required to register their shares of common stock upon
demand by these shareholders.
Deferred Compensation
In September 1998, the Company entered into stock option award agreements
with several key employees. The terms of the agreements provide for 114,000
options to purchase new common stock at an exercise price of $16.00 per share
which vest over a five-year period. The fair market value on the date of grant
was $25.813 per share. Accordingly, the Company is amortizing to compensation
expense $1,118,682 ratably over the five-year vesting period, which represents
the difference between the exercise price and fair market value. The Company
recognized compensation expense under the agreements of $74,579 for the year
ended December 31, 1998.
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 1,096,128
shares of the Company's Class C non-voting common stock at an exercise price of
$.001 per share were issued. The warrants entitled the holders to purchase the
Class C common stock at any time prior to October 1, 1999 or until the related
notes were paid in full, whichever was later. Subsequent to issuance, in 1993,
warrants to purchase 131,532 shares were exercised. On June 29, 1996, the
warrant holder sold to the Company a warrant to purchase 550,293 shares of Class
C common stock for an aggregate purchase price of $2,862,735. Class C common
stock subject to the remaining warrant was reclassified as Class B common stock
at the same time. A warrant to purchase 414,303 shares of Class B common stock
was outstanding at
F-22
<PAGE> 145
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997. During the Recapitalization, the outstanding warrant was
converted into a warrant to purchase 414,303 shares of new common stock. In
connection with the IPO, the warrant was exercised, therefore there are no
outstanding warrants remaining at December 31, 1998.
Stock Option Plan
Prior to the adoption of the Company's 1996 Equity Incentive Plan, the
Company granted options, including performance options to a principal
shareholder and employees. The options to acquire shares of Class A common stock
had 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. In the
Recapitalization, these options were converted into options to purchase three
times the number of shares of new common stock. Generally, 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 has been subsequently amended, authorizes grants of
options to purchase up to 222,569 shares of authorized but unissued new common
stock at December 31, 1998, which excludes those options granted outside the
Plan and those granted prior to the adoption of the Plan. Stock options are
generally granted with an exercise price equal to the new common stock's fair
market value at the date of grant, with the exception of the 114,000 options
granted during September 1998 for which compensation expense was recorded.
Generally, 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-23
<PAGE> 146
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE PRICE EXERCISABLE
OPTIONS PER SHARE OPTIONS
--------- -------------- -----------
<S> <C> <C> <C>
Outstanding December 31, 1995......... 1,432,227 $ 1.41 365,319
Granted.......................... 930,000 5.67 --
Canceled......................... (36,600) 1.19 --
--------- ------ ---------
Outstanding December 31, 1996......... 2,325,627 3.12 630,297
Granted.......................... 415,107 5.18 --
Exercised........................ (17,757) 2.62 --
Canceled......................... (34,404) 3.29 --
--------- ------ ---------
Outstanding December 31, 1997......... 2,688,573 3.46 1,273,542
Granted.......................... 203,960 15.56 --
Exercised........................ (36,377) 1.42 --
Canceled......................... (31,560) 1.54 --
--------- ------ ---------
Outstanding December 31, 1998......... 2,824,596 $ 4.38 1,753,681
========= ====== =========
</TABLE>
The weighted average fair value of options granted in 1996, 1997 and 1998
was $1.45, $2.56 and $21.04 per share, respectively. Options held by a principal
shareholder and an entity controlled by such principal stockholder total 801,948
of which 479,636 were exercisable at December 31, 1998 at a weighted average
exercise price of $2.98 per share.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
1998 LIFE PRICE 1998 PRICE
--------------- ----------- -------- --------------- --------
<S> <C> <C> <C> <C> <C>
$ 0.97 600,964 5.1 $ 0.97 518,920 $ 0.97
$ 1.64 - $ 1.79 787,914 6.2 1.78 661,138 1.77
$ 4.00 - $ 5.72 1,179,258 7.6 5.68 557,123 5.68
$10.00 67,500 9.0 10.00 16,500 10.00
$16.00 188,960 9.6 16.00 -- 16.00
--------- --- ------ --------- ------
$ 0.97 - $16.00 2,824,596 6.8 $ 4.38 1,753,681 $ 2.86
========= === ====== ========= ======
</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
the year ended December 31, 1998: risk-free interest rate of 4.53 percent;
dividend yield of $0; expected life of 3.4 years; and volatility of 42 percent.
For the years ended December 31, 1997 and 1996 the following assumptions were
utilized: 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 applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation expense has been recognized for its stock options
in the accompanying
F-24
<PAGE> 147
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
consolidated financial statements, with the exception of the 114,000 options
granted during September 30, 1998, for which compensation expense is being
recorded over the vesting period. Had the Company determined compensation
expense based on the fair value at the grant date for its stock options under
SFAS No. 123, the Company's net loss applicable to common shares and net loss
per common share would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Net loss applicable to common
shares:
As reported.................... $(3,766,194) $(11,917,692) $(18,516,878)
Pro forma...................... (3,863,774) (12,146,100) (18,998,382)
Net loss per common share:
As reported.................... (1.18) (3.72) (1.51)
Pro forma...................... (1.21) (3.80) (1.54)
</TABLE>
(11) EXCHANGEABLE PREFERRED STOCK
On July 3, 1997, the Company completed the sale of 1,000,000 shares of
13 1/4% Exchangeable Preferred Stock ("Exchangeable Preferred Stock") for
$100,000,000. 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 and are
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 $4,541,737 and $4,361,717 at December 31, 1997 and 1998, respectively.
The Exchangeable Preferred Stock includes accrued dividends at December 31, 1998
of $7,526,690, which were paid in 75,267 additional shares of Exchangeable
Preferred Stock on January 1, 1999. During 1998, dividends were paid in 65,514
additional shares on January 1, 1998 and 70,590 additional shares on July 1,
1998. At December 31, 1997 and 1998, 1,000,000 and 1,136,104 shares were issued
and outstanding.
The Certificate of Designation for the Exchangeable Preferred Stock
contains certain covenants, which, among other things, restrict the ability of
Citadel Broadcasting 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. Citadel
Broadcasting was in compliance with these covenants at December 31, 1998.
F-25
<PAGE> 148
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) INCOME TAXES
For the years ended December 31, 1996 and 1997, the Company generated a net
loss for both financial reporting and income tax purposes; therefore, no current
tax provision has been recorded. The income tax benefit in 1997 and 1998
represents the reversal of deferred tax liabilities established at the date of
acquisition due to differences in the tax bases and the financial statement
carrying amounts of intangibles and fixed assets acquired in stock-based
acquisitions offset by federal alternative minimum tax and state tax expense in
1998. At December 31, 1998, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $24,200,000 which begin to expire
in 2011.
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 net
operating losses of the acquired Company generated prior to the acquisition are
subject to limitation in future years. The approximate amount of the net
operating losses which are limited at December 31, 1998 is $7,100,000, of which
$4,400,000 may be used in any one year.
The components of the Company's income tax benefit for the year ended
December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
1997 1998
--------- -----------
<S> <C> <C>
Current tax expense:
Federal......................................... $ -- $ 95,790
State........................................... -- 324,225
--------- -----------
-- 420,015
--------- -----------
Deferred tax benefit:
Federal......................................... (654,137) (1,535,299)
State........................................... (115,436) (270,935)
--------- -----------
(769,573) (1,806,234)
--------- -----------
Total income tax benefit.......................... $(769,573) $(1,386,219)
========= ===========
</TABLE>
A reconciliation of the Company's income tax benefit as compared to the tax
benefit calculated by applying the federal statutory rate (34%) to the loss
before income taxes for the years ended December 31, 1996, 1997 and 1998 are as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Federal statutory rate applied to the
loss before income taxes and
extraordinary item................. $(679,046) $(1,856,480) $(1,807,867)
State tax, net of federal benefit.... -- -- 213,989
Amortization of goodwill............. 186,844 425,344 777,809
Nondeductible meals and
entertainment...................... 31,601 51,495 87,573
Effect of the ability to utilize net
operating loss carryforwards....... 458,101 680,040 (666,752)
Other................................ 2,500 (69,972) 9,029
--------- ----------- -----------
$ -- $ (769,573) $(1,386,219)
========= =========== ===========
</TABLE>
F-26
<PAGE> 149
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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>
1997 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Receivables, principally due to allowance for doubtful
accounts.............................................. $ 323,577 $ 474,618
Net operating loss carryforwards........................ 9,926,882 9,666,703
Accrued liabilities not currently deductible............ 193,423 123,922
Unrealized loss on hedging contract..................... -- 157,222
------------ ------------
Total deferred tax assets.......................... 10,443,882 10,422,465
Valuation allowance..................................... (7,515,364) (6,272,469)
------------ ------------
Net deferred tax assets............................ 2,928,518 4,149,996
------------ ------------
Deferred tax liabilities:
Property and equipment, principally due to accelerated
depreciation.......................................... (2,928,218) (3,423,460)
Intangible assets; differences in book and tax
amortization.......................................... (300) (726,536)
Differences between the tax basis and fair value of
intangibles and fixed assets acquired in stock-based
acquisitions.......................................... (23,270,338) (24,843,549)
------------ ------------
Total deferred tax liabilities..................... (26,198,856) (28,993,545)
------------ ------------
Net deferred tax liability.............................. $(23,270,338) $(24,843,549)
============ ============
</TABLE>
The valuation allowance has increased (decreased) by $2,320,699, $755,172
and $(1,242,895) for the years ended December 31, 1996, 1997 and 1998,
respectively. Management has considered certain tax planning strategies as
permitted under SFAS No. 109, "Accounting for Income Taxes." Management has
determined that the tax benefits associated with the recorded deferred tax
assets, net of valuation allowance, are more likely than not realizable through
future taxable income and future reversals of existing taxable temporary
differences.
At December 31, 1998, the Company has an alternative minimum tax credit
(AMT) carryforward of approximately $30,000. AMT credits are available to be
carried forward indefinitely and may be utilized against regular federal tax to
the extent they do not exceed computed AMT calculations.
(13) SUPPLEMENTAL FINANCIAL INFORMATION
The Company paid cash of $7,065,546, $7,271,586 and $16,110,827 for
interest for the years ended December 31, 1996, 1997 and 1998, respectively.
Barter revenue included in gross broadcasting revenue and barter expenses
included in station operating expenses amounted to $3,335,024, $7,388,471 and
$11,014,507, and $3,029,665, $7,062,822 and $9,492,453, for the years ended
December 31, 1996, 1997 and 1998, respectively.
F-27
<PAGE> 150
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of additions and deductions related to the allowance for doubtful
accounts for the years ended December 31, 1996, 1997 and 1998 follows:
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BALANCE AT
PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
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
Year ended December 31, 1998.... 808,942 1,201,341 (823,737) 1,186,546
</TABLE>
The following supplemental information is related to the consolidated
statements of cash flows. The Company recorded the following significant
non-cash items for the years ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
Difference between tax basis and fair value
of intangible assets and fixed assets
acquired in stock-based acquisitions..... $1,640,000 $22,399,911 $ 3,445,090
========== =========== ===========
Dividends for exchangeable preferred
stock.................................... $ -- $ 6,551,389 $14,585,842
========== =========== ===========
Note payable issued for property and
equipment................................ $ -- $ -- $ 120,000
========== =========== ===========
Transfer of fixed assets and intangible
assets, to assets held for sale for
pending disposition...................... $ -- $ -- $25,938,227
========== =========== ===========
Unrealized loss on hedging contract, net of
tax...................................... $ -- $ -- $ 235,834
========== =========== ===========
Accretion of exchangeable preferred stock
issuance costs........................... $ -- $ 81,550 $ 180,020
========== =========== ===========
</TABLE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summary presents a description of the methodologies and
assumptions used to determine the estimated fair values for the Company's
financial instruments as required by SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments."
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 and 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, 1998, the amounts that
will actually be realized or paid at settlement or maturity of the instruments
could be significantly different.
F-28
<PAGE> 151
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued
Liabilities
The carrying amount is assumed to be the fair value because of the
liquidity or short-term maturity of these instruments.
Notes Receivable from Related Parties
The fair value of the Company's notes receivable from related parties
approximate the terms in the marketplace at which they could be replaced.
Therefore, the fair value approximates the carrying value of these financial
instruments.
Senior Subordinated Notes, Exchangeable Preferred Stock and Other Long-Term
Obligations
The fair value of the Company's Senior Subordinated Notes, 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, 1997 and
1998 was $3,700 and $(393,056), respectively, as determined by the financial
institution, and represents an unrealized gain (loss). The fair value of the
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.
(15) TRANSACTIONS WITH RELATED PARTIES
Notes Receivable from Related Parties
Notes receivable from related parties represent advances made to employees
of the Company. Interest rates range from 8.5% to 10.0%. The notes are due at
various dates through July 2003.
Leaseback
On December 29, 1995, the Company entered into a sale-leaseback transaction
with an entity controlled by a principal shareholder. The Company sold an
airplane for its fair value of $1,275,000 to the entity resulting in a loss of
$74,327. The operating lease commenced on December 29, 1995 with monthly
payments ranging from $17,250 to $21,000 due through December 31, 2003.
Indebtedness
In October 1996, the Company repaid its indebtedness to an entity whose
Executive Vice-President is also a director of the Company. The repayment
consisted of $7,000,000 in principal amount, $20,534 in accrued and unpaid
interest and a $420,000 prepayment penalty.
F-29
<PAGE> 152
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Forgiveness of Note Receivable
In 1996, the Company forgave a note receivable from a principal shareholder
of the Company aggregating $408,637, which consisted of principal and accrued
interest outstanding.
Consulting Services
During the year ended December 31, 1996, a director of the Company provided
consulting services for which he was paid $83,520. In addition, the director was
granted an option to purchase 12,000 shares of common stock of the Company at an
exercise price of $5.72.
Legal Services
During the year ended December 31, 1996, the Company retained a law firm
with a shareholder who was then also a director of the Company to represent the
Company on various matters.
Noncompetition Agreement
In connection with an acquisition, the Company entered into a
noncompetition agreement with an entity whose president is also a director of
the Company. In consideration for such noncompetition agreement, the Company
paid the entity $100,000 in 1997 and 1998. The agreement expired during 1998.
Corporate Events
During 1998, the Company paid an aggregate of $75,964 in respect of
accommodations and activity costs in connection with corporate events held at a
facility owned by a separate entity, which is controlled by a principal
shareholder.
(16) COMMITMENTS AND CONTINGENCIES
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties, or other sources are recorded when it is
probable that a liability has been incurred and the amount of the liability can
be reasonably estimated.
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.
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
F-30
<PAGE> 153
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company has provided the requested information in response to each CID, and at
present has been given no indication from the Department of Justice regarding
its intended future actions.
Local Marketing Agreements
At December 31, 1998, the Company has local marketing agreements with
WBHT-FM and WKQV-FM in Wilkes-Barre/Scranton, Pennsylvania, WHYL-FM/AM in
Harrisburg/ Carlisle, Pennsylvania, and KXXL-FM in Reno, Nevada. The agreements
principally provide for the Company to supply specified programming to the
brokered stations and enable the sales staff of the Company to sell advertising
time on the stations for fixed fees to be paid by the Company. Certain of the
agreements also provide the Company with the option to purchase the stations.
The Company's consolidated financial statements include the broadcasting revenue
and station operating expenses of the brokered stations.
Certain of the local marketing agreements enable the Company to extend or
terminate the agreements at the Company's option at various dates through
October 2003. The fees paid under local marketing agreements amounted to
$1,414,527, $1,936,139 and $784,749 for the years ended December 31, 1996, 1997
and 1998, respectively.
Joint Sales Agreements
On January 15, 1996, the Company entered into a joint sales agreement 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, the JSA revenue is calculated as 60% of
the broadcast cash flows of these radio stations and all Company owned radio
stations in these markets, with the exception of KKLI-FM 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 consolidated financial statements include
all sales expenses for the stations 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, 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)
based on monthly revenues of WKQV-AM and of its simulcast station, WARM-AM.
F-31
<PAGE> 154
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 leases that have
an initial or remaining noncancelable lease term in excess of one year as of
December 31, 1998:
<TABLE>
<S> <C>
1999.................................................. $ 2,853,984
2000.................................................. 2,589,119
2001.................................................. 2,651,869
2002.................................................. 2,320,241
2003.................................................. 1,960,155
Thereafter............................................ 3,467,957
-----------
$15,843,325
===========
</TABLE>
Total rental expense was $1,101,237, $1,971,774 and $2,670,248 for the
years ended December 31, 1996, 1997 and 1998, respectively.
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 1996, 1997 and 1998 the Company contributed $143,192,
$298,623 and $448,155, respectively, which represented a two percent matching of
employee contributions to the 401(k) plan.
Impact of the Year 2000 Issue
In 1998, the Company implemented a Year 2000 plan ("Year 2000 Plan") to
identify, assess, and remediate "Year 2000" issues within each of its
significant computer programs and certain equipment which may contain
micro-processors. The Year 2000 Plan is addressing the issue of computer
programs and embedded computer chips being unable to distinguish between the
year 1900 and the year 2000, if a program or chip uses only two digits rather
than four to define the applicable year. The Company expects to complete the
assessment phase of the Year 2000 Plan in the second quarter of 1999. The
Company expects that some amount of testing will be performed during this phase.
Additional testing is expected to continue throughout the third quarter of 1999.
Systems which have been or may be determined not to be Year 2000 compliant are
being or will be either replaced or reprogrammed, and the Company expects
thereafter to test such systems for Year 2000 compliance. The Company
anticipates that by late 1999, the remediation and testing phases will be
completed. The current budget for the total cost of remediation, including
replacement software and hardware, is approximately $400,000 (unaudited).
F-32
<PAGE> 155
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company is in the process of identifying and contacting critical
suppliers and customers whose computerized systems interface with the Company's
systems, regarding their plans and progress in addressing their Year 2000
issues. The Company has received varying information from such third parties on
the state of compliance or expected compliance. Contingency plans are being
developed in the event that any critical supplier or customer is not compliant.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
operations, liquidity and financial condition. Based on its current assessment
efforts, the Company does not believe that Year 2000 issues related to its
internal systems will have a material adverse effect on the Company's financial
condition or the results of operations. However, as described above, the failure
by third parties to be Year 2000 ready could have a material adverse effect on
Citadel Broadcasting.
(17) SUBSEQUENT EVENTS
On January 4, 1999, the Company acquired radio station WBHT-FM in
Wilkes-Barre, Pennsylvania for an aggregate purchase price of $1,263,000. The
acquisition will be accounted for using the purchase method of accounting. Prior
to the acquisition, the Company had operated WBHT-FM under a local marketing
agreement since July 3, 1997.
On January 11, 1999, the Company exercised its options to purchase WKQV-FM
and WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania and agreed to purchase such
stations for approximate purchase prices of $998,000 and $365,000, respectively.
The Company has operated WKQV-FM and WKQV-AM under a local marketing agreement
and a joint sales agreement, respectively, since July 3, 1997. The acquisitions
will be accounted for using the purchase method of accounting.
On January 13, 1999, the Company entered into an asset purchase agreement
to sell substantially all of the assets of its 18 FM and 7 AM radio stations in
Eugene and Medford, Oregon, Tri-Cities, Washington, Billings, Montana and
Johnstown and State College, Pennsylvania for an approximate sale price of
$26,000,000.
On February 2, 1999, the Company agreed to purchase KNJY-FM in Spokane,
Washington for an approximate purchase price of $4,150,000. The acquisition will
be accounted for using the purchase method of accounting.
On February 9, 1999, the Company acquired the assets of 62nd Street
Broadcasting of Saginaw, L.L.C. in Saginaw, Michigan for an approximate purchase
price of $35,000,000. The acquisition of these assets includes 5 FM radio
stations and 1 AM radio station in Saginaw/Bay City. The acquisition will be
accounted for using the purchase method of accounting.
On February 17, 1999, the Company acquired radio stations WHYL-AM/FM in
Carlisle, Pennsylvania for an approximate purchase price of $4,250,000. The
acquisition will be accounted for using the purchase method of accounting. In
conjunction with this acquisition,
F-33
<PAGE> 156
CITADEL COMMUNICATIONS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the Company acquired real estate used in the operation of WHYL-AM/FM for a
purchase price of approximately $250,000.
On February 24, 1999, the Company entered into an asset purchase agreement
with Capstar Acquisition Company, Inc. ("Capstar") under which the Company has
agreed to acquire from Capstar, radio station KSPZ-FM in Colorado Springs in
exchange for the Company's radio station KKLI-FM in Colorado Springs. The
Company also entered into an Asset Purchase agreement with Capstar on February
24, 1999 under which the Company has agreed to acquire radio stations KVOR-AM
and KTWK-AM in Colorado Springs and radio stations KEYF-AM/FM in Spokane for the
aggregate purchase price of approximately $10,000,000. The acquisitions will be
accounted for using the purchase method of accounting.
On March 2, 1999, the Company acquired Brainiac Services, Inc., an internet
service provider, in Riverside, Rhode Island for an approximate purchase price
of $288,000. The acquisition will be accounted for by the purchase method of
accounting.
On March 17, 1999, the Company acquired all of the outstanding shares of
capital stock of Citywide Communications, Inc. and all of the outstanding
warrants to acquire shares of capital stock of Citywide. The aggregate purchase
price was approximately $31,500,000. This amount includes the repayment of
outstanding debt of Citywide and $1,332,000 in payments related to
noncompetition agreements entered into in connection with the acquisition, but
is net of the $970,000 in positive working capital that Citywide had at the
closing of the acquisition. In connection with the acquisition the Company
acquired 6 FM and 3 AM radio stations in the Baton Rouge and Lafayette,
Louisiana markets. The acquisition will be accounted for using the purchase
method of accounting.
For the year ended December 31, 1998, the Company's net broadcasting
revenue would have been approximately $152,850,000 (unaudited) on a pro forma
basis. This amount reflects net broadcasting revenue as if all the completed and
pending acquisitions and dispositions had been completed as of January 1, 1997.
F-34
<PAGE> 157
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 31,615
Accounts receivable, less allowance for doubtful
accounts of $2,232 in 1999............................ 35,734
Notes receivable from related parties.................. 103
Prepaid expenses....................................... 2,881
Assets held for sale................................... 25,954
--------
Total current assets.............................. 96,287
Property and equipment, net................................. 42,070
Intangible assets, net...................................... 335,173
Other assets................................................ 4,344
--------
$477,874
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 4,062
Accrued liabilities.................................... 14,036
Current maturities of other long-term obligations...... 270
--------
Total current liabilities......................... 18,368
Senior subordinated notes payable, net of discount.......... 210,192
Other long-term obligations, less current maturities........ 1,023
Deferred tax liability...................................... 31,938
Exchangeable preferred stock................................ 120,837
Shareholders' equity:
Common stock, $.001 par value; authorized 200,000,000
shares, issued and outstanding; 26,036,634 shares as
of March 31, 1999..................................... 26
Additional paid-in capital............................. 134,530
Deferred compensation.................................. (988)
Unrealized loss on hedging contract.................... (189)
Accumulated deficit.................................... (37,863)
--------
Total shareholders' equity........................ 95,516
--------
$477,874
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE> 158
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1999
--------- ----------
<S> <C> <C>
Gross broadcasting revenue................................. $ 31,071 $ 35,861
Less agency commissions............................... (2,932) (3,228)
--------- ----------
Net broadcasting revenue......................... 28,139 32,633
Operating expenses:
Station operating expenses............................ 21,897 24,626
Depreciation and amortization......................... 5,946 7,003
Corporate general and administrative.................. 1,118 1,491
--------- ----------
Operating expenses.......................... 28,961 33,120
Operating loss............................................. (822) (487)
Nonoperating expenses (income):
Interest expense...................................... 4,759 5,744
Other (income) expense, net........................... (37) (631)
--------- ----------
Nonoperating expenses, net....................... 4,722 5,113
Loss before income taxes................................... (5,544) (5,600)
Income tax (benefit)....................................... (429) (419)
--------- ----------
Net loss................................................... (5,115) (5,181)
Dividend requirement for exchangeable preferred stock...... 3,572 4,013
--------- ----------
Net loss applicable to common shares....................... $ (8,687) $ (9,194)
========= ==========
Basic and diluted net loss per common share................ $ (2.70) $ (0.36)
========= ==========
Weighted average common shares outstanding................. 3,219,774 25,744,861
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE> 159
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Net loss.................................................... $(5,115) $(5,181)
Other comprehensive income:
Unrealized gain on hedging contract, net of tax........ -- 47
------- -------
Comprehensive loss.......................................... $(5,115) $(5,134)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-37
<PAGE> 160
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................... $ (5,115) $ (5,181)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 5,946 7,003
Amortization of debt issuance costs and debt
discounts............................................ 96 253
Bad debt expense....................................... 258 605
Deferred tax benefit................................... (429) (478)
Deferred compensation.................................. -- 56
Changes in assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable and
notes receivable from related parties........... 1,145 (749)
Increase in prepaid expenses...................... (736) (908)
Decrease in other assets.......................... 664 2
Increase in accounts payable...................... (1,816) (1,714)
(Decrease) increase in accrued liabilities........ (992) 3,214
-------- --------
Net cash provided by (used in) operating activities.... (979) 2,103
Cash flows from investing activities:
Capital expenditures................................... (186) (927)
Capitalized acquisition/IPO costs...................... (858) (691)
Cash paid to acquire stations.......................... (20,431) (72,029)
Deposits for pending acquisitions...................... 650 --
-------- --------
Net cash used in investing activities.................. (20,825) (73,647)
Cash flows from financing activities:
Proceeds from exercise of stock options................ 41 693
Proceeds from notes payable............................ 17,000 --
Principal payments on other long-term obligations...... (55) (92)
Payment of debt issuance costs......................... (75) (284)
-------- --------
Net cash provided by financing activities.............. 16,911 317
Net decrease in cash and cash equivalents................... (4,893) (71,227)
Cash and cash equivalents, beginning of period.............. 7,685 102,842
-------- --------
Cash and cash equivalents, end of period.................... $ 2,792 $ 31,615
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-38
<PAGE> 161
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) General
Citadel Communications Corporation was formed March 24, 1993 as a Nevada
corporation and is a holding company which owns all of the issued and
outstanding common stock of Citadel Broadcasting Company ("Citadel
Broadcasting"). Citadel License, Inc. ("Citadel License") is a wholly-owned
subsidiary of Citadel Broadcasting. Citadel Broadcasting and Citadel License own
and operate radio stations and hold Federal Communication Commission licenses in
Arkansas, California, Colorado, Idaho, Louisiana, Michigan, Montana, Nevada, New
Mexico, Oregon, Pennsylvania, Rhode Island, Utah and Washington. In addition,
Citadel Broadcasting owns and operates an internet service provider, offering
its subscribers a variety of services, including electronic mail and access to
the internet.
(2) Basis of Presentation
The accompanying unaudited consolidated financial statements of Citadel
Communications Corporation and Subsidiary (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and notes thereto included in Citadel Communications
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998.
(3) Recent Transactions
On January 4, 1999, Citadel Broadcasting acquired radio station WBHT-FM in
Wilkes-Barre, Pennsylvania for a purchase price of approximately $1.3 million.
The acquisition was accounted for using the purchase method of accounting. Prior
to the acquisition, Citadel Broadcasting operated WBHT-FM under a local
marketing agreement since July 3, 1997.
On January 13, 1999, Citadel Broadcasting entered into an asset purchase
agreement to sell substantially all of the assets of its 18 FM and 7 AM radio
stations in Eugene and Medford, Oregon, Tri-Cities, Washington, Billings,
Montana and Johnstown and State College, Pennsylvania for an approximate sale
price of $26.0 million. The sale is expected to close in the third quarter of
1999.
On February 9, 1999, Citadel Broadcasting acquired the assets of 62nd
Street Broadcasting of Saginaw, LLC for approximately $35.0 million. The
acquisition of these assets included 5 FM radio stations and 1 AM radio station
in Saginaw/Bay City, Michigan. The acquisition was accounted for using the
purchase method of accounting.
On February 17, 1999, Citadel Broadcasting acquired radio stations
WHYL-AM/FM in Carlisle, Pennsylvania for approximately $4.5 million. The
acquisition was accounted for using the purchase method of accounting. In
conjunction with this acquisition, Citadel
F-39
<PAGE> 162
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
Broadcasting acquired real estate used in the operation of WHYL-AM/FM for a
purchase price of approximately $300,000.
On March 2, 1999, Citadel broadcasting acquired Brainiac Services, Inc., an
internet service provider, in Riverside, Rhode Island for approximately
$300,000. The acquisition was accounted for using the purchase method of
accounting.
On March 17, 1999, Citadel Broadcasting acquired all of the outstanding
shares of capital stock of Citywide Communications, Inc. and all of the
outstanding warrants to acquire shares of capital stock of Citywide. The
aggregate purchase price was approximately $31.5 million. In connection with the
acquisition, Citadel Broadcasting acquired 6 FM and 3 AM radio stations in the
Baton Rouge and Lafayette, Louisiana markets. The acquisition was accounted for
using the purchase method of accounting.
(4) Subsequent Events
On April 30, 1999, Citadel Broadcasting purchased radio stations KVOR-AM
and KTWK-AM in Colorado Springs and radio stations KEYF-AM/FM in Spokane from
Capstar Acquisition Company, Inc. ("Capstar") for an aggregate purchase price of
approximately $10.0 million. In addition, Citadel Broadcasting exchanged radio
station KKLI-FM in Colorado Springs for Capstar's radio station KSPZ-FM in
Colorado Springs. The acquisitions will be accounted for using the purchase
method of accounting.
On April 30, 1999, Citadel Broadcasting entered into agreements to acquire
all of the outstanding shares of capital stock of Fuller-Jeffrey Broadcasting
Companies, Inc., which, at the time of the closing will own a total of 10 FM
radio stations, in Portsmouth, New Hampshire and Portland, Maine, for an
approximate purchase price of $65.3 million, which amount includes the
assumption or repayment of certain outstanding indebtedness of Fuller-Jeffrey
and approximately $1.8 million in payments relating to a consulting and non-
competition agreement to be entered into in connection with the acquisition. The
acquisition is expected to be completed in the third quarter of 1999 and will be
accounted for using the purchase method of accounting.
On January 11, 1999, Citadel Broadcasting exercised its options to purchase
WKQV-FM and WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania and on May 3, 1999,
Citadel Broadcasting purchased WKQV-FM for approximately $1.0 million. The
acquisition of WKQV-AM, having an approximate purchase price of $0.4 million,
has not yet closed. Citadel Broadcasting had operated WKQV-FM and operates
WKQV-AM under a local marketing agreement and a joint sales agreement,
respectively, since July 3, 1997. The acquisitions will be accounted for using
the purchase method of accounting.
On May 3, 1999, Citadel Broadcasting purchased KNJY-FM in Spokane,
Washington for approximately $4.2 million. The acquisition will be accounted for
using the purchase method of accounting.
On May 24, 1999, the Company adopted, subject to consummation of a proposed
offering of its common stock and stockholder approval, an amendment to the
Citadel Communications Corporation 1996 Equity Incentive Plan. The amendment
increases the
F-40
<PAGE> 163
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
number of shares of common stock available under the plan to such number of
shares equal to ten percent of the number of shares of the common stock issued
and outstanding on a fully-diluted basis as of the closing of the proposed
offering, but not including the 1,750,000 shares reserved for issuance under the
Citadel Communications Corporation 1999 Long-Term Incentive Plan.
On May 24, 1999, the Company adopted, subject to consummation of a proposed
offering of its common stock and stockholder approval, the Citadel
Communications Corporation 1999 Long-Term Incentive Plan, which provides for the
issuance of up to 1,750,000 shares of common stock upon exercise of performance
options to be granted under the plan.
F-41
<PAGE> 164
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.
/s/ Deloitte & Touche LLP
March 28, 1997
LOGO
F-42
<PAGE> 165
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED BALANCE SHEET
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-43
<PAGE> 166
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENT 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-44
<PAGE> 167
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENT 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-45
<PAGE> 168
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENT 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-46
<PAGE> 169
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
F-47
<PAGE> 170
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
F-48
<PAGE> 171
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-49
<PAGE> 172
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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>
F-50
<PAGE> 173
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-51
<PAGE> 174
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
F-52
<PAGE> 175
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
F-53
<PAGE> 176
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
F-54
<PAGE> 177
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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-55
<PAGE> 178
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-56
<PAGE> 179
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-57
<PAGE> 180
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-58
<PAGE> 181
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
F-59
<PAGE> 182
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-60
<PAGE> 183
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 April 30, 1999
F-61
<PAGE> 184
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS (NOTE 4)
Current assets:
Cash...................................................... $ 588,155 608,435
Receivables:
Accounts receivable, net of allowance for doubtful
accounts of $192,000 in 1998 and $209,793 as of March
31, 1999.............................................. 2,501,189 2,156,123
Other.................................................. 248,342 96,293
------------ -----------
Total receivables................................. 2,749,531 2,252,416
Prepaid expenses.......................................... 220,547 255,977
Deferred tax assets (note 6).............................. 270,856 245,946
------------ -----------
Total current assets.............................. 3,829,089 3,362,774
------------ -----------
Property, plant, and equipment:
Land and improvements..................................... 660,597 660,597
Buildings and improvements................................ 870,394 907,831
Equipment, antenna systems and furnishings................ 5,635,500 5,816,466
Construction in progress.................................. 746,940 1,094,136
------------ -----------
7,913,431 8,479,030
Less accumulated depreciation and amortization............ (3,699,952) (3,828,534)
------------ -----------
Net property, plant and equipment................. 4,213,479 4,650,496
------------ -----------
Other assets:
Due from officers, stockholders and employees............. 55,000 35,000
Deposits and other assets................................. 345,747 369,563
Intangible assets, net (notes 2 and 8).................... 5,700,247 5,587,977
Deferred tax assets (note 6).............................. 841,707 693,177
------------ -----------
$ 14,985,269 14,698,987
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current installments of long-term debt (note 4)........... $ 1,158,822 1,132,983
Accounts payable.......................................... 668,643 683,425
Due to related parties (note 5)........................... 74,827 254,827
Deferred revenue (note 3)................................. 450,000 368,333
Accrued expenses:
Salaries and other..................................... 652,941 542,970
Interest............................................... 65,333 72,333
------------ -----------
Total current liabilities......................... 3,070,566 3,054,871
Long-term debt (note 4)..................................... 14,408,918 14,130,906
Due to related parties (note 5)............................. 487,156 294,304
Deferred revenue (note 3)................................... 500,000 425,000
------------ -----------
Total liabilities................................. 18,466,640 17,905,081
------------ -----------
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) (2,251,094)
------------ -----------
(2,481,371) (2,206,094)
Less treasury stock, 15,000 shares at cost................ (1,000,000) (1,000,000)
------------ -----------
Total stockholders' deficiency.............................. (3,481,371) (3,206,094)
Commitments and contingencies (notes 4, 9 and 11)
------------ -----------
$ 14,985,269 14,698,987
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-62
<PAGE> 185
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue:
Local sales....................................... $11,625,852 2,319,480 2,641,483
National sales.................................... 2,404,837 381,006 507,619
Other income...................................... 298,911 32,718 26,445
----------- ---------- ----------
14,329,600 2,733,204 3,175,547
Less agency commissions........................... 1,884,123 346,953 388,130
----------- ---------- ----------
Net revenue excluding trade revenue............ 12,445,477 2,386,251 2,787,417
----------- ---------- ----------
Operating expenses:
Technical......................................... 546,576 123,545 148,030
Programming....................................... 1,819,215 419,824 467,607
Promotional....................................... 506,229 68,243 75,885
Selling........................................... 2,085,844 432,224 564,837
General and administrative........................ 3,469,174 758,298 836,281
----------- ---------- ----------
8,427,038 1,802,134 2,092,640
----------- ---------- ----------
Gross margin from broadcasting activities,
excluding trades............................. 4,018,439 584,117 694,777
----------- ---------- ----------
Other operating expense (income):
Depreciation and amortization (note 2)............ 1,006,148 185,906 231,763
Noncompete expense (note 2)....................... 142,143 24,894 21,563
Noncompete income................................. (626,667) (156,667) (156,667)
----------- ---------- ----------
Other operating expense, net................... 521,624 54,133 96,659
----------- ---------- ----------
Net operating income before trades............. 3,496,815 529,984 598,118
----------- ---------- ----------
Trade revenue....................................... 1,196,257 260,311 353,183
Trade expense....................................... (1,093,491) (215,318) (256,591)
----------- ---------- ----------
Net trade revenue.............................. 102,766 44,993 96,592
----------- ---------- ----------
Net operating income........................... 3,599,581 574,977 694,710
Interest income..................................... -- -- --
Interest expense (note 4)........................... (1,399,236) (358,355) (315,334)
(Loss) gain on sale of assets....................... -- (2,779) 140,000
Other financing costs............................... (296,000) -- (49,039)
----------- ---------- ----------
Income before income taxes..................... 1,904,345 213,843 470,337
Income tax expense (benefit) (note 6)............... (54,765) 16,686 195,060
----------- ---------- ----------
Net income..................................... $ 1,959,110 197,157 275,277
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-63
<PAGE> 186
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.
F-64
<PAGE> 187
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 1,959,110 197,157 275,277
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............. 1,006,148 185,906 231,763
Amortization of discount on note
receivable............................. -- -- --
Provision for bad debts................... 107,575 29,019 17,793
Noncompete income......................... (626,667) (156,667) (156,667)
Noncompete expense........................ 142,143 24,894 21,563
Net trade expense (revenue)............... (102,766) (44,993) (96,592)
Loss (gain) on sale of assets............. -- 2,779 (140,000)
Decrease (increase) in deferred tax
assets................................. (173,423) 11,686 173,440
Change in assets and liabilities net of
effect of station sales:
Receivables............................ (430,318) 609,616 575,914
Prepaid expenses and other assets...... (117,831) (292,913) (71,720)
Accounts payable....................... 151,843 (377,888) 14,782
Accrued expenses....................... (66,520) (77,353) (102,971)
----------- --------- ---------
Total adjustments................... (109,816) (85,914) 467,305
----------- --------- ---------
Net cash provided by operating
activities........................ 1,849,294 111,243 742,582
----------- --------- ---------
Cash flows from investing activities:
Capital expenditures........................... (1,188,926) (249,992) (565,599)
Loans collected from officers and employees.... -- -- 20,000
Loans made to officers and employees........... (40,000) -- --
Loans collected from unrelated parties......... -- -- --
Purchases of stations.......................... (3,341,580) -- --
Deposit for pending station acquisition........ (10,000) -- --
Payments of organization costs................. -- -- --
Costs incurred for non-compete agreement....... (1,000) -- --
Proceeds from sale of assets................... -- -- 140,000
----------- --------- ---------
Net cash used in investing
activities........................ (4,581,506) (249,992) (405,599)
----------- --------- ---------
</TABLE>
F-65
<PAGE> 188
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from notes payable.................... $15,400,000 -- --
Pay-off of debt upon refinancing............... (13,122,500) -- --
Payments of principal on notes payable......... (375,087) (265,109) (303,851)
Payments of principal on related party
borrowings.................................. (69,057) (11,795) (12,852)
Payment of loan fees........................... (343,973) -- --
----------- --------- ---------
Net cash provided by (used in)
financing activities.............. 1,489,383 (276,904) (316,703)
----------- --------- ---------
Net increase (decrease) in cash.................. (1,242,829) (415,653) 20,280
Cash, beginning of period........................ 1,830,984 1,830,984 588,155
----------- --------- ---------
Cash, end of period.............................. $ 588,155 1,415,331 608,435
=========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest.................................. $ 1,508,992 320,114 299,386
=========== ========= =========
Income taxes.............................. $ 102,032 5,000 --
=========== ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Fixed assets acquired through advertising
trades.................................... $ 44,469 -- --
=========== ========= =========
Restructure of covenant not to compete and
consulting agreement...................... $ -- -- --
=========== ========= =========
Loan fee financed through debt agreement.... $ -- -- --
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-66
<PAGE> 189
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
(The Information as of March 31, 1999 and for the
Three Months Ended March 31, 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 March 31, 1999 and the
consolidated statements of operations and cash flows for the three month
periods ended March 31, 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.
F-67
<PAGE> 190
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.
F-68
<PAGE> 191
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) 1998
---------- ----------
<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 organizational costs relating to acquisitions.
Amortization expense related to intangible assets totaled $255,520 for the year
ended December 31, 1998, and $59,262 and $90,707 for the three months ended
March 31, 1998 and 1999, 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
$24,894 and $21,563 for the three months ended March 31, 1998 and 1999,
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>
1998
-----------
<S> <C>
Term note (a)........................................... $15,140,000
Subordinated notes (b).................................. --
Equipment notes payable (c)............................. 29,554
Other (d)............................................... 398,186
-----------
15,567,740
Less current installments............................... 1,158,822
-----------
$14,408,918
===========
</TABLE>
F-69
<PAGE> 192
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) As of December 31, 1997, the balance consisted of a subordinated note
bearing interest at 12% per annum and maturing in January 2002. This
note was retired as a part of the debt agreement discussed in (a).
(c) 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.
(d) 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 non-compete 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>
F-70
<PAGE> 193
FULLER-JEFFREY BROADCASTING
COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest expense is comprised of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Term loan............................... $1,179,169 293,669 285,586
Subordinated note....................... 90,000 30,000 --
Amortization of loan fees............... -- -- --
Other................................... 130,067 34,686 29,748
---------- -------- --------
$1,399,236 358,355 315,334
========== ======== ========
</TABLE>
(5) RELATED PARTIES
Amounts due to related parties include the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Notes payable to former stockholders (a)............. $381,983 369,131
Notes payable to former station owner (b)............ 180,000 180,000
-------- --------
561,983 549,131
Less current installments............................ 74,827 254,827
-------- --------
Due to related parties, excluding current
installments....................................... $487,156 294,304
======== ========
</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.
F-71
<PAGE> 194
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)
======== ======== ========
Quarter ended March 31, 1998 (unaudited):
Federal..................................... $ -- 91,034 91,034
State....................................... 5,000 (79,348) (74,348)
-------- -------- --------
$ 5,000 11,686 16,686
======== ======== ========
Quarter ended March 31, 1999 (unaudited):
Federal..................................... $ -- 145,495 145,495
State....................................... 21,620 27,945 50,365
-------- -------- --------
$ 21,620 173,440 195,860
======== ======== ========
</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
F-72
<PAGE> 195
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 $13,000 for the three months
ended March 31, 1998 and 1999.
(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.
F-73
<PAGE> 196
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 $89,181 and $84,949 for the three months ended
March 31, 1998 and 1999, 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>
YEAR ENDED
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 1997, 1998 or for the three months ended March 31, 1999.
(11) SUBSEQUENT EVENTS
In January, 1999, the Company signed a letter of intent with Vacationland
Broadcasting, Inc. for the purchase of an existing FM station, WRED. The gross
purchase price is $1,150,000 which will be financed through an additional draw
on the Company's existing term note. The acquisition is expected to close in
July or August of 1999.
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 will acquire all of the outstanding
stock of the Company. It is anticipated that the transaction will close in the
third quarter of 1999 pending final approval.
F-74
<PAGE> 197
Citadel logoCITADEL COMMUNICATIONS CORPORATION
<PAGE> 198
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
CITADEL SELLING
COMMUNICATIONS STOCKHOLDERS
-------------- ------------
<S> <C> <C>
Securities and Exchange Commission filing fee..... $ 85,138 $ 0
National Association of Securities Dealers, Inc.
filing fee...................................... 30,500 0
Nasdaq National Market Fee........................ 17,500 0
Printing expenses................................. 225,000* 0
Accounting fees and expenses...................... 250,000* 0
Legal fees and expenses........................... 300,000* **
Blue Sky fees and expenses........................ 10,000* 0
Transfer agent fees............................... 3,500* 0
Miscellaneous..................................... 5,000* **
-------- --------
TOTAL........................................ 926,638* **
======== ========
</TABLE>
- ---------------
* Estimated.
** 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
II-1
<PAGE> 199
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 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.
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.
II-2
<PAGE> 200
As permitted by Section 78.037 of the NGCL, Citadel Communications
Corporation's Amended and Restated Certificate of Incorporation provides as
follows:
To the full extent permitted by the General Corporation Law of the
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.
For issuances which occurred prior to June 26, 1998, the number of shares
described as being sold in this Item 15 does not give effect to a
recapitalization of Citadel Communications Corporation that was effective on
June 26, 1998. Certain aspects of this recapitalization are described below.
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 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
was exempt from registration under Section 4(2) of the Securities Act.
II-3
<PAGE> 201
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
was 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.
On June 26, 1998, in connection with the Registrant's recapitalization and
initial public offering of common stock, the Registrant reclassified its
outstanding common stock and its outstanding preferred stock and issued
8,930,664 new shares of common stock and 9,506,561 new shares of preferred stock
to its then existing security holders. The issuance of such shares was exempt
from registration under Section 3(a)(9) of the Securities Act.
On June 26, 1998, in connection with the Registrant's recapitalization and
initial public offering of common stock, the Registrant issued 414,303 of its
common stock upon exercise of a warrant for the aggregate purchase price of
$345.25. As such issuance involved no public offering, the issuance of such
shares was exempt from registration under Section 4(2) of the Securities Act.
As of August 7, 1998 and August 11, 1998, the Registrant issued to
employees an aggregate of 5,931 shares of common stock upon the exercise of
vested employee stock options for the aggregate purchase price of $7,733.07. 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 September 18, 1998, the Registrant issued to ABRY Broadcast Partners
II, L.P. and ABRY/Citadel Investment Partnership, L.P. an aggregate of 9,506,561
shares of common stock in exchange for 9,506,561 shares of the Registrant's
Series AA Convertible Preferred Stock. As such issuance involved no public
offering, the issuance of such shares was exempt from registration under Section
4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
1 Form of Underwriting Agreement.*
3(i) Amended and Restated Certificate of Incorporation of Citadel
Communications Corporation (incorporated by reference to
Exhibit 3(i) to Citadel Communications Corporation's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1998).
3(ii) Bylaws of Citadel Communications Corporation (incorporated
by reference to Exhibit 3(ii) to Citadel Communications
Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998).
</TABLE>
II-4
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
4.1 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).
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 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).
4.3 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).
4.4 Indenture dated as of November 19, 1998 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the Form of 9 1/4% Senior
Subordinated Notes due 2008 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Communications
Corporation's Current Report on Form 8-K filed November 30,
1998).
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 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).
</TABLE>
II-5
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
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 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).
10.8 First Amendment to Loan Instruments dated July 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.28 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.9 Second Amendment to Loan Instruments dated September 25,
1997 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.29 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.10 Third Amendment to Loan Instruments dated October 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.30 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.11 Fourth Amendment to Loan Instruments dated November 4, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.31 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.12 Fifth Amendment to Loan Instruments dated December 24, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.32 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
</TABLE>
II-6
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
10.13 Sixth Amendment to Loan Instruments dated February 12, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.33 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.14 Seventh Amendment to Loan Instruments dated March 24, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.34 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.15 Eighth Amendment to Loan Instruments dated April 21, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.35 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.16 Ninth Amendment to Loan Instruments dated September 15, 1998
among Citadel Communications, Citadel Broadcasting Company,
Citadel License, Inc., FINOVA Capital Corporation and the
Lenders party thereto (incorporated by reference to Exhibit
10.1 to Citadel Communications Corporation's Quarterly
Report on Form 10-Q for the fiscal quarter ended September
30, 1998).
10.17 Tenth Amendment to Loan Instruments dated November 3, 1998
among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.1 to Citadel Communications
Corporation's Current Report on Form 8-K filed November 30,
1998).
10.18 Eleventh Amendment to Loan Instruments dated November 17,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.2 to Citadel Communications
Corporation's Current Report on Form 8-K filed November 30,
1998).
10.19 Twelfth Amendment to Loan Instruments dated November 19,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.3 to Citadel Communications
Corporation's Current Report on Form 8-K filed November 30,
1998).
10.20 Thirteenth Amendment to Loan Instruments dated as of January
4, 1999 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.32 to Citadel Broadcasting Company's
Amendment No. 1 to Registration Statement No. 333-69009 on
Form S-4).
</TABLE>
II-7
<PAGE> 205
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
10.21 Fourteenth Amendment to Loan Instruments dated as of
February 9, 1999 among Citadel Broadcasting Company, Citadel
License, Inc., Citadel Communications Corporation, FINOVA
Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.33 to Citadel
Broadcasting Company's Amendment No. 3 to Registration
Statement No. 333-69009 on Form S-4).
10.22 Fifteenth Amendment to Loan Instruments dated as of March
16, 1999 among Citadel Broadcasting Company, Citadel
License, Inc., Citadel Communications Corporation, FINOVA
Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.22 to Citadel
Communications Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998).
10.23 Sixteenth Amendment to Loan Instruments dated as of April
30, 1999 among Citadel Broadcasting Company, Citadel
License, Inc., Citadel Communications Corporation, FINOVA
Capital Corporation and the Lenders party thereto.
10.24 Seventeenth Amendment to Loan Instruments dated as of April
30, 1999 among Citadel Broadcasting Company, Citadel
License, Inc., Citadel Communications Corporation, FINOVA
Capital Corporation and the Lenders party thereto.
10.25 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).
10.26 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).
10.27 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).
10.28 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.
(incorporated by reference to Exhibit 10.24 to Citadel
Communications Corporation's Registration Statement No.
333-51011 on Form S-1).
</TABLE>
II-8
<PAGE> 206
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
10.29 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 (incorporated by
reference to Exhibit 10.25 to Citadel Communications
Corporation's Registration Statement No. 333-51011 on Form
S-1).
10.30 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 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, 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 10.26
to Citadel Communications Corporation's Registration
Statement No. 333-51011 on Form S-1).
10.31 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 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, 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 10.27 to Citadel Communications Corporation's
Registration Statement No. 333-51011 on Form S-1).
10.32 Amended and Restated Guaranty dated as of July 3, 1997 made
by Citadel Communications Corporation for the benefit of
FINOVA Capital Corporation, in its individual capacity and
as Agent for the Lenders, as amended (incorporated by
reference to Exhibit 10.36 to Citadel Communications
Corporation's Amendment No. 2 to Registration Statement No.
333-51011 on Form S-1)
10.33 Citadel Communications Corporation 1999 Long-Term Incentive
Plan.*
21 Subsidiaries of Citadel Communications Corporation
(incorporated by reference to Exhibit 21 to Citadel
Communications Corporation's Registration Statement No.
333-51011 on Form S-1).
</TABLE>
II-9
<PAGE> 207
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
its opinion to be filed as Exhibit 5.1).
23.2 Consent of KPMG LLP.
23.3 Consent of Deloitte & Touche, LLP.
23.4 Consent of KPMG LLP.
24 Power of Attorney (included on signature page).
27 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
(1) In the case of incorporation by reference to documents filed by the
Registrant under the Exchange Act of 1934, as amended, the Registrant's file
number under such Act is 000-24515.
(B) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities and Exchange 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 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
of 1933, 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 of 1933, 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.
II-10
<PAGE> 208
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 of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Las Vegas, in the State
of Nevada, on May 25, 1999.
CITADEL COMMUNICATIONS CORPORATION
By: /s/ LAWRENCE R. WILSON
-----------------------------------
Lawrence R. Wilson
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on May 25, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ LAWRENCE R. WILSON Chairman of the Board, Chief
- ------------------------------------- Executive Officer and President
Lawrence R. Wilson (Principal Executive Officer)
/s/ DONNA L. HEFFNER Vice President and Chief Financial
- ------------------------------------- Officer (Principal Financial and
Donna L. Heffner Accounting Officer)
/s/ PATRICIA DIAZ DENNIS Director
- -------------------------------------
Patricia Diaz Dennis
Director
- -------------------------------------
Ike Kalangis
/s/ TED L. SNIDER, SR. Director
- -------------------------------------
Ted L. Snider, Sr.
/s/ JOHN E. VON SCHLEGELL Director
- -------------------------------------
John E. von Schlegell
</TABLE>
II-11
<PAGE> 209
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
1 Form of Underwriting Agreement.*
3(i) Amended and Restated Certificate of Incorporation of Citadel
Communications Corporation (incorporated by reference to
Exhibit 3(i) to Citadel Communications Corporation's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1998).
3(ii) Bylaws of Citadel Communications Corporation (incorporated
by reference to Exhibit 3(ii) to Citadel Communications
Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998).
4.1 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).
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 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).
4.3 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).
4.4 Indenture dated as of November 19, 1998 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the Form of 9 1/4% Senior
Subordinated Notes due 2008 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Communications
Corporation's Current Report on Form 8-K filed November 30,
1998).
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 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).
</TABLE>
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
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 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).
10.8 First Amendment to Loan Instruments dated July 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.28 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.9 Second Amendment to Loan Instruments dated September 25,
1997 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.29 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.10 Third Amendment to Loan Instruments dated October 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.30 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.11 Fourth Amendment to Loan Instruments dated November 4, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.31 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
</TABLE>
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
10.12 Fifth Amendment to Loan Instruments dated December 24, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.32 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.13 Sixth Amendment to Loan Instruments dated February 12, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.33 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.14 Seventh Amendment to Loan Instruments dated March 24, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.34 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.15 Eighth Amendment to Loan Instruments dated April 21, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.35 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.16 Ninth Amendment to Loan Instruments dated September 15, 1998
among Citadel Communications, Citadel Broadcasting Company,
Citadel License, Inc., FINOVA Capital Corporation and the
Lenders party thereto (incorporated by reference to Exhibit
10.1 to Citadel Communications Corporation's Quarterly
Report on Form 10-Q for the fiscal quarter ended September
30, 1998).
10.17 Tenth Amendment to Loan Instruments dated November 3, 1998
among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.1 to Citadel Communications
Corporation's Current Report on Form 8-K filed November 30,
1998).
10.18 Eleventh Amendment to Loan Instruments dated November 17,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.2 to Citadel Communications
Corporation's Current Report on Form 8-K filed November 30,
1998).
10.19 Twelfth Amendment to Loan Instruments dated November 19,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.3 to Citadel Communications
Corporation's Current Report on Form 8-K filed November 30,
1998).
</TABLE>
<PAGE> 212
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
10.20 Thirteenth Amendment to Loan Instruments dated as of January
4, 1999 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.32 to Citadel Broadcasting Company's
Amendment No. 1 to Registration Statement No. 333-69009 on
Form S-4).
10.21 Fourteenth Amendment to Loan Instruments dated as of
February 9, 1999 among Citadel Broadcasting Company, Citadel
License, Inc., Citadel Communications Corporation, FINOVA
Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.33 to Citadel
Broadcasting Company's Amendment No. 3 to Registration
Statement No. 333-69009 on Form S-4).
10.22 Fifteenth Amendment to Loan Instruments dated as of March
16, 1999 among Citadel Broadcasting Company, Citadel
License, Inc., Citadel Communications Corporation, FINOVA
Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.22 to Citadel
Communications Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998).
10.23 Sixteenth Amendment to Loan Instruments dated as of April
30, 1999 among Citadel Broadcasting Company, Citadel
License, Inc., Citadel Communications Corporation, FINOVA
Capital Corporation and the Lenders party thereto.
10.24 Seventeenth Amendment to Loan Instruments dated as of
December 31, 1999 among Citadel Broadcasting Company,
Citadel License, Inc., Citadel Communications Corporation,
FINOVA Capital Corporation and the Lenders party thereto.
10.25 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).
10.26 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)
10.27 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).
10.28 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.
(incorporated by reference to Exhibit 10.24 to Citadel
Communications Corporation's Registration Statement No.
333-51011 on Form S-1).
</TABLE>
<PAGE> 213
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
10.29 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 (incorporated by
reference to Exhibit 10.25 to Citadel Communications
Corporation's Registration Statement No. 333-51011 on Form
S-1).
10.30 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 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, 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 10.26
to Citadel Communications Corporation's Registration
Statement No. 333-51011 on Form S-1).
10.31 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 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, 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 10.27 to Citadel Communications Corporation's
Registration Statement No. 333-51011 on Form S-1).
10.32 Amended and Restated Guaranty dated as of July 3, 1997 made
by Citadel Communications Corporation for the benefit of
FINOVA Capital Corporation, in its individual capacity and
as Agent for the Lenders, as amended (incorporated by
reference to Exhibit 10.36 to Citadel Communications
Corporation's Amendment No. 2 to Registration Statement No.
333-51011 on Form S-1).
10.33 Citadel Communications Corporation 1999 Long-Term Incentive
Plan.*
21 Subsidiaries of Citadel Communications Corporation
(incorporated by reference to Exhibit 21 to Citadel
Communications Corporation's Registration Statement No.
333-51011 on Form S-1).
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
- ------- -------------------------
<S> <C>
23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
its opinion to be filed as Exhibit 5.1).
23.2 Consent of KPMG LLP.
23.3 Consent of Deloitte & Touche, LLP.
23.4 Consent of KPMG LLP.
24 Power of Attorney (included on signature page).
27 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
(1) In the case of incorporation by reference to documents filed by the
Registrant under the Exchange Act of 1934, as amended, the Registrant's file
number under such Act is 000-24515.
<PAGE> 1
Exhibit 10.23
SIXTEENTH AMENDMENT TO LOAN INSTRUMENTS
THIS SIXTEENTH AMENDMENT TO LOAN INSTRUMENTS (this "Sixteenth
Amendment"), dated as of April 30, 1999, is among CITADEL BROADCASTING COMPANY,
CITADEL LICENSE, INC., CITADEL COMMUNICATIONS CORPORATION, each a Nevada
corporation, FINOVA CAPITAL CORPORATION, a Delaware corporation, in its
individual capacity and as Agent for all Lenders (this and all other capitalized
terms used but not elsewhere defined herein shall have the respective meanings
ascribed to such terms in the Loan Agreement described below, as amended), and
the Lenders which are parties hereto.
RECITALS
A. Borrowers, Agent and Lenders entered into an Amended and Restated
Loan Agreement dated as of July 3, 1997 (as amended to the date hereof, the
"Loan Agreement").
B. Borrowers have requested the consent of Lenders to the acquisition
by Borrowers of the Property and FCC Licenses of (i) Capstar Acquisition
Company, Inc., a Delaware corporation, Triathlon Broadcasting of Colorado
Springs, Inc., a Delaware corporation, Triathlon Broadcasting of Colorado
Springs Licensee, Inc., a Delaware corporation, Triathlon Broadcasting of
Spokane, Inc., a Delaware corporation, and Triathlon Broadcasting of Spokane
Licensee, Inc., a Delaware corporation, used in the operation of radio stations
KSPZ-FM, KVOR (AM) and KTWK (AM), each licensed to Colorado Springs, Colorado,
radio station KEYF-AM licensed to Dishman, Washington and radio station KEYF-FM
licensed to Cheney, Washington (the "Capstar Acquisition"), (ii) AGM- Nevada,
L.L.C., a Nevada limited liability company, used in the operation of radio
station KNJY-FM licensed to Spokane, Washington (the "AGM Acquisition") and
(iii) Robert C. Cordaro, Inc., a Pennsylvania corporation, used in the operation
of radio station WKQV(AM), licensed to Pittston, Pennsylvania, and Monroe and
Delaware Holdings, Inc., a Pennsylvania corporation, used in the operation of
radio station WKQV-FM, licensed to Olyphant, Pennsylvania (collectively, the
"Cordaro Acquisitions") (the Capstar Acquisition, the AGM Acquisition and the
Cordaro Acquisitions hereinafter are referred to individually as a "Sixteenth
Amendment Acquisition" and collectively as the "Sixteenth Amendment
Acquisitions"). Lenders have agreed to give such consent, subject to the
execution of this Sixteenth Amendment and the performance of the terms and
conditions set forth below.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Consent to Acquisition and Transfer of FCC Licenses. Borrowers
represent that attached hereto as Schedule 1 is a true and correct calculation
of the Adjusted Leverage Ratio described in subsection 4.3.4 of the Loan
Agreement, after giving effect to the Sixteenth Amendment Acquisitions. Based on
the attached Schedule 1, Lenders hereby
<PAGE> 2
consent to the Sixteenth Amendment Acquisitions, subject to the satisfaction of
the conditions contained in this Sixteenth Amendment.
2. Amendment to Loan Instruments. The Loan Agreement and other
Loan Instruments are amended as follows:
2.1 Exhibits to Loan Instruments. Upon the consummation of
each Sixteenth Amendment Acquisition (i) Borrowers shall deliver to Agent
amendments to the Exhibits attached to each Loan Instrument (the "Exhibit
Amendments") which require modification due to such Sixteenth Amendment
Acquisition and (ii) the Exhibit Amendments applicable to such Sixteenth
Amendment Acquisition shall be deemed to be part of the applicable Loan
Instrument.
2.2 Use Agreement. Upon the consummation of a Sixteenth
Amendment Acquisition, Borrowers shall deliver to Agent a Use Agreement, in a
form substantially similar to the Amended and Restated Use Agreement, reflecting
the use by CBC of the FCC Licenses acquired in such Sixteenth Amendment
Acquisition.
3. Conditions to Effectiveness. This Sixteenth Amendment shall
not become effective with respect to a Sixteenth Amendment Acquisition unless
and until all of the conditions set forth in Section 4.3 of the Loan Agreement
are satisfied with respect to such Sixteenth Amendment Acquisition in a manner
satisfactory to Agent.
4. Consent. The Capstar Acquisition and the AGM Acquisition
provide that the parties thereto will consummate the transactions contemplated
thereby upon initial orders issued by the FCC, without the need for such orders
to become "final." Agent and Lenders hereby consent to the consummation by
Borrowers of the Capstar Acquisition and the AGM Acquisition notwithstanding
that the applicable FCC orders are not "final" as of the date hereof.
5. Fees and Expenses. Borrowers hereby agree to reimburse Lenders
for all reasonable fees and expenses incurred in connection with the
consummation of the transactions contemplated by this Sixteenth Amendment.
6. Representations and Warranties. In order to induce Lenders to
execute this Sixteenth Amendment, each Obligor represents and warrants to
Lenders that the representations and warranties made by each such Person in each
of the Loan Instruments to which such Person is a party, as such Loan
Instruments have been amended, are true and correct in all material respects as
of the date hereof, except to the extent such representations and warranties by
their nature relate to an earlier date.
7. Confirmation of Effectiveness. Guarantor hereby consents to
the execution of this Sixteenth Amendment. Each Obligor hereby agrees that each
Loan Instrument executed
-2-
<PAGE> 3
by such Person remains in full force and effect in accordance with the original
terms thereof as amended.
8. Counterparts. This Sixteenth Amendment may be executed in one
or more counterparts, each of which counterparts shall be deemed to be an
original, but all such counterparts when taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, this amendment has been executed and delivered by
each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
CITADEL BROADCASTING COMPANY,
CITADEL LICENSE, INC. and
CITADEL COMMUNICATIONS
CORPORATION, each a Nevada corporation
By: /s/ D. Robert Proffitt
----------------------------------------------
Name: D. Robert Proffitt
--------------------------------------------
Title: President, Citadel Broadcasting Company
-------------------------------------------
Vice President, Citadel Communications
Corporation and Citadel License, Inc.
FINOVA CAPITAL CORPORATION, a
Delaware corporation, individually and as Agent
By: /s/ Andrew J. Pluta
----------------------------------------------
Name: Andrew J. Pluta
--------------------------------------------
Title: Vice President
-------------------------------------------
BANKBOSTON, N.A.
By: /s/ Daniel M. Kortick
----------------------------------------------
Name: Daniel M. Kortick
--------------------------------------------
Title: Director
-------------------------------------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ Roselyn Drake
----------------------------------------------
Name: Roselyn Drake
--------------------------------------------
Title: Vice President
-------------------------------------------
(Signatures continued on next page)
-3-
<PAGE> 4
(Signatures continued from previous page)
THE BANK OF NEW YORK
By: /s/ Geoffrey C. Brooks
---------------------------------------
Name: Geoffrey C. Brooks
-------------------------------------
Title: Vice President
------------------------------------
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Lena M. Bryant
---------------------------------------
Name: Lena M. Bryant
-------------------------------------
Title: Assistant Vice President
------------------------------------
-4-
<PAGE> 5
LIST OF AMENDMENTS TO EXHIBITS TO LOAN INSTRUMENTS
Exhibit A - Assignment of Leases
Trademark Security Agreement
L/C Guaranty
Exhibit 1J - Broadcast Markets
Exhibit 1K - CBC Stations
Exhibit 1M - Corporate Overhead
Exhibit 1N - Assignment of Acquisition Instruments
Exhibit 1O - Mortgages
Exhibit 1P - JSA Agreements
Exhibit 1Q - JSA Stations
Exhibit 1S - List of Current Leases and Lessors
Exhibit 1U - LMA Agreements
Exhibit 1V - LMA Stations
Exhibit 1X - Owned Real Property
Exhibit 5.5.2 - FCC Licenses
Exhibit 5.5.5 - Business Locations
Exhibit 5.8 - Litigation
Exhibit 5.12 - Patents, Trademarks and Franchises
Exhibit 5.14 - Environmental Matters
[Pursuant to Registration S-K, Item 601(b)(2), Registrant agrees to furnish
supplementally a copy of these exhibits to the Securities Exchange Commission
upon request.]
-5-
<PAGE> 1
Exhibit 10.24
SEVENTEENTH AMENDMENT TO LOAN INSTRUMENTS
THIS SEVENTEENTH AMENDMENT TO LOAN INSTRUMENTS (this "Seventeenth
Amendment"), dated as of April 30, 1999, is among CITADEL BROADCASTING COMPANY,
CITADEL LICENSE, INC., CITADEL COMMUNICATIONS CORPORATION, each a Nevada
corporation, FINOVA CAPITAL CORPORATION, a Delaware corporation, in its
individual capacity and as Agent for all Lenders (this and all other capitalized
terms used but not elsewhere defined herein shall have the respective meanings
ascribed to such terms in the Loan Agreement described below, as amended), and
the Lenders which are parties hereto.
RECITALS
A. Borrowers, Agent and Lenders entered into an Amended and Restated
Loan Agreement dated as of July 3, 1997 (such Amended and Restated Loan
Agreement, as amended to the date hereof, hereinafter is referred to as the
"Loan Agreement").
B. Borrowers have requested that Lenders amend the Loan Agreement to
increase the amount of permitted L/C Guaranty Obligations from $10,000,000 to
$20,000,000.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Amendment to Loan Agreement. The Loan Agreement is hereby amended by
deleting subsection 2.2.1 of the Loan Agreement in its entirety and substituting
the following in lieu thereof:
"2.2.1 Obligation of Lenders. Subject to the conditions set forth in
Section 2.3, each Lender severally agrees to make Additional Loans to Borrowers
and to issue L/C Guaranties on behalf of Borrowers from time to time on or after
the Closing Date to the Maturity Date, in the case of Additional Loans, and to
the L/C Expiration Date, in the case of L/C Guaranties (i) except Additional
Loans shall be made pursuant to subsection 2.4.3 after the Maturity Date (by
acceleration) to pay L/C Guaranty Obligations incurred pursuant to L/C
Guaranties issued prior to the L/C Expiration Date and (ii) provided at no time
shall the aggregate amount of such Lender's Loans and L/C Guaranty Obligations
exceed such Lender's Commitment and the L/C Guaranty Obligations of all Lenders
exceed $20,000,000. The failure of any Lender to perform its obligations
hereunder or under any other Loan Instrument shall not affect the obligations of
Borrowers under this Loan Agreement or any other Loan Instrument nor shall any
other Lender or Agent be liable for the failure of such Lender to perform its
obligations hereunder or under such other Loan Instrument."
<PAGE> 2
2. Fees and Expenses. Borrowers hereby agree to reimburse Lenders for
all reasonable fees and expenses incurred in connection with the consummation of
the transactions contemplated by this Seventeenth Amendment.
3. Representations and Warranties. In order to induce Lenders to
execute this Seventeenth Amendment, each Obligor represents and warrants to
Lenders that the representations and warranties made by each such Person in each
of the Loan Instruments to which such Person is a party, as such Loan
Instruments have been amended, are true and correct in all material respects as
of the date hereof, except to the extent such representations and warranties by
their nature relate to an earlier date.
4. Confirmation of Effectiveness. Guarantor hereby consents to the
execution of this Seventeenth Amendment. Each Obligor hereby agrees that each
Loan Instrument executed by such Person remains in full force and effect in
accordance with the original terms thereof as amended.
5. Counterparts. This Seventeenth Amendment may be executed in one or
more counterparts, each of which counterparts shall be deemed to be an original,
but all such counterparts when taken together shall constitute one and the same
instrument.
[remainder of this page intentionally left blank]
-2-
<PAGE> 3
IN WITNESS WHEREOF, this amendment has been executed and delivered by
each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
CITADEL BROADCASTING COMPANY,
CITADEL LICENSE, INC. and
CITADEL COMMUNICATIONS
CORPORATION, each a Nevada corporation
By: /s/ Donna L. Heffner
-------------------------------------------
Name: Donna L. Heffner
-----------------------------------------
Title: Vice President/Chief Financial Officer
----------------------------------------
FINOVA CAPITAL CORPORATION, a
Delaware corporation, individually and as Agent
By: /s/ Andrew J. Pluta
-------------------------------------------
Name: Andrew J. Pluta
-----------------------------------------
Title: Vice President
----------------------------------------
BANKBOSTON, N.A.
By: /s/ Daniel M. Kortick
-------------------------------------------
Name: Daniel M. Kortick
-----------------------------------------
Title: Director
----------------------------------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ Roselyn Drake
-------------------------------------------
Name: Roselyn Drake
-----------------------------------------
Title: Vice President
----------------------------------------
(Signatures continued on next page)
-3-
<PAGE> 4
(Signatures continued from previous page)
THE BANK OF NEW YORK
By: /s/ Geoffrey C. Brooks
------------------------------------------
Name: Geoffrey C. Brooks
----------------------------------------
Title: Vice President
---------------------------------------
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Lena M. Bryant
------------------------------------------
Name: Lena M. Bryant
----------------------------------------
Title: Assistant Vice President
---------------------------------------
-4-
<PAGE> 1
Exhibit 23.2
The Board of Directors
Citadel Communications Corporation:
We consent to the use of our report dated March 5, 1999, except as to the last
two paragraphs of Note 17 which are as of March 17, 1999, on the consolidated
balance sheets of Citadel Communications Corporation and subsidiary as of
December 31, 1997 and 1998 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, 1998 included herein and to the reference
to our firm under the heading "Independent Auditors" in the registration
statement.
/s/ KPMG LLP
Phoenix, Arizona
May 25, 1999
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the 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 as of December 31, 1996 and 1995 and for each of the years
in the three year period ended December 31, 1996, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Independent Auditors"
in such Prospectus.
/s/ Deloitte & Touche LLP
Pittsburgh, PA
May 25, 1999
<PAGE> 1
Exhibit 23.4
KPMG
400 Capital Mall
Sacramento, CA 95814
The Board of Directors
Fuller-Jeffrey Broadcasting Companies, Inc.:
We consent to the use of our report dated April 7, 1999, except as to note 11,
which is as of April 30, 1999, on the consolidated balance sheet of
Fuller-Jeffrey Broadcasting Companies, Inc. and subsidiaries as of December 31,
1998, and the related consolidated statements of operations, stockholders'
deficiency and cash flows for the year then ended included herein and to the
reference to our firm under the heading "Independent Auditors" in the
registration statement.
/s/ KPMG LLP
Sacramento, California
May 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE THREE MONTHS ENDED MARCH
31, 1999 IN CITADEL COMMUNICATIONS CORPORATION'S FORM S-1 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<EXCHANGE-RATE> 1 1
<CASH> 102,842 31,615
<SECURITIES> 0 0
<RECEIVABLES> 35,383 37,966
<ALLOWANCES> (1,187) (2,232)
<INVENTORY> 0 0
<CURRENT-ASSETS> 165,148 96,287
<PP&E> 46,736 56,549
<DEPRECIATION> (12,651) (14,479)
<TOTAL-ASSETS> 472,261 477,874
<CURRENT-LIABILITIES> 15,547 18,368
<BONDS> 210,091 243,153
116,775 120,837
0 0
<COMMON> 26 26
<OTHER-SE> 103,937 95,516
<TOTAL-LIABILITY-AND-EQUITY> 472,261 477,874
<SALES> 0 0
<TOTAL-REVENUES> 135,426 32,633
<CGS> 0 0
<TOTAL-COSTS> 96,653 25,512
<OTHER-EXPENSES> 26,414 7,003
<LOSS-PROVISION> 1,201 605
<INTEREST-EXPENSE> 18,126 5,744
<INCOME-PRETAX> (5,317) (5,600)
<INCOME-TAX> (1,386) (419)
<INCOME-CONTINUING> (18,517) (5,181)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (18,517) (5,181)
<EPS-BASIC> (462.92) (.36)
<EPS-DILUTED> (462.92) (.36)
</TABLE>
