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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission file number: 000-24515
CITADEL COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in its charter)
Nevada 86-0748219
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
City Center West, Suite 400,
7201 West Lake Mead Blvd., Las Vegas, Nevada 89128
- -------------------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 804-5200
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- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
- --------------------------------------------------------------------------------
As of April 28, 1999 there were 26,041,136 shares of common stock,
$.001 par value per share, outstanding.
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Citadel Communications Corporation
Form 10-Q
March 31, 1999
Index
Page
----
Part I
Item 1 - Financial Statements......................................... 3
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 9
Item 3 - Qualitative and Quantitative Disclosures about Market Risk... 18
Part II
Item 1 - Legal Proceedings............................................ 19
Item 6 - Exhibits and Reports on Form 8-K............................. 20
2
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<TABLE>
<CAPTION>
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 31,615 $102,842
Accounts receivable, less allowance for doubtful
accounts of $2,232 in 1999 and $1,187 in 1998 35,734 34,197
Notes receivable from related parties 103 215
Prepaid expenses 2,881 1,956
Assets held for sale 25,954 25,938
-------- --------
Total current assets 96,287 165,148
Property and equipment, net 42,070 34,085
Intangible assets, net 335,173 268,790
Other assets 4,344 4,238
-------- --------
$477,874 $472,261
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,062 $ 4,360
Accrued liabilities 14,036 10,900
Current maturities of other long-term obligations 270 287
-------- --------
Total current liabilities 18,368 15,547
Senior subordinated notes payable, net of discount 210,192 210,091
Other long-term obligations, less current maturities 1,023 1,041
Deferred tax liability 31,938 24,844
Exchangeable preferred stock 120,837 116,775
Shareholders' equity:
Common stock, $.001 par value; authorized
200,000,000 shares, issued and outstanding;
26,036,634 and 25,728,771 shares as of March
31, 1999 and December 31, 1998, respectively 26 26
Additional paid-in capital 134,530 137,899
Deferred compensation (988) (1,044)
Unrealized loss on hedging contract (189) (236)
Accumulated deficit (37,863) (32,682)
-------- --------
Total shareholders' equity 95,516 103,963
-------- --------
$477,874 $472,261
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1999 1998
---------- ---------
<S> <C> <C>
Gross broadcasting revenue $ 35,861 $ 31,071
Less agency commissions (3,228) (2,932)
---------- ---------
Net broadcasting revenue 32,633 28,139
Operating expenses:
Station operating expenses 24,626 21,897
Depreciation and amortization 7,003 5,946
Corporate general and administrative 1,491 1,118
---------- ---------
Operating expenses 33,120 28,961
Operating loss (487) (822)
Nonoperating expenses (income):
Interest expense 5,744 4,759
Other (income) expense, net (631) (37)
---------- ---------
Nonoperating expenses, net 5,113 4,722
Loss before income taxes (5,600) (5,544)
Income tax (benefit) (419) (429)
---------- ---------
Net loss (5,181) (5,115)
Dividend requirement for exchangeable
preferred stock 4,013 3,572
---------- ---------
Net loss applicable to common shares $ (9,194) $ (8,687)
========== =========
Basic and diluted net loss per
common share $ (0.36) $ (2.70)
========== =========
Weighted average common shares
outstanding 25,744,861 3,219,774
========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 1998
-------- --------
<S> <C> <C>
Net loss $(5,181) $(5,115)
Other comprehensive income:
Unrealized gain on hedging contract, net of tax 47 --
------- --------
Comprehensive loss $(5,134) $(5,115)
======= ========
See accompanying notes to consolidated financial statements.
</TABLE>
5
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<TABLE>
<CAPTION>
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED MARCH 31,
-------------------------------------------
1999 1998
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,181) $ (5,115)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 7,003 5,946
Amortization of debt issuance costs and debt discounts 253 96
Bad debt expense 605 258
Deferred tax benefit (478) (429)
Deferred compensation 56 --
Changes in assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable and notes
receivable from related parties (749) 1,145
Increase in prepaid expenses (908) (736)
Decrease in other assets 2 664
Increase in accounts payable (1,714) (1,816)
(Decrease) increase in accrued liabilities 3,214 (992)
--------- --------
Net cash provided by (used in) operating activities 2,103 (979)
Cash flows from investing activities:
Capital expenditures (927) (186)
Capitalized acquisition/IPO costs (691) (858)
Cash paid to acquire stations (72,029) (20,431)
Deposits for pending acquisitions -- 650
--------- --------
Net cash used in investing activities (73,647) (20,825)
Cash flows from financing activities:
Proceeds from exercise of stock options 693 41
Proceeds from notes payable -- 17,000
Principal payments on other long-term obligations (92) (55)
Payment of debt issuance costs (284) (75)
--------- --------
Net cash provided by financing activities 317 16,911
Net decrease in cash and cash equivalents (71,227) (4,893)
Cash and cash equivalents, beginning of period 102,842 7,685
--------- --------
Cash and cash equivalents, end of period $ 31,615 $ 2,792
========= ========
See accompanying notes to consolidated financial statements.
</TABLE>
6
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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.
7
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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 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.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters in this Form 10-Q, including, without limitation,
certain matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, and in Quantitative and
Qualitative Disclosures about Market Risk, constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Those statements include statements regarding the intent, belief or current
expectations of Citadel Communications Corporation and its subsidiary
(collectively the "Company"), its directors or its officers with respect to,
among other things, future events and financial trends affecting the Company.
Forward-looking statements are typically identified by the words
"believes," "expects," "anticipates," "intends," "estimates," and similar
expressions. Readers are cautioned that any such forward-looking statements are
not guarantees of future performance and that matters referred to in such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the impact of current or pending
legislation and regulation, antitrust considerations and other risks and
uncertainties, as well as those matters discussed under the captions "Year 2000
Matters" and "Certain Investment Considerations" in this Management's Discussion
and Analysis of Financial Condition and Results of Operations. The Company
undertakes no obligation to publicly update or revise these forward-looking
statements because of new information, future events or otherwise.
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 Communications Corporation, Citadel
Broadcasting and Citadel License are collectively referred to as the "Company."
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.
General economic conditions have an impact on the Company's business and
financial results. From time to time the markets in which the Company operates
experience weak economic conditions that may negatively affect the revenue of
the Company. However, management believes that this impact is somewhat mitigated
by the Company's diverse geographical presence. In addition, the Company's
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.
9
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In the following analysis, management discusses the Company's broadcast
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 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. Earnings
before interest, taxes, depreciation and amortization, or EBITDA, consists of
operating income (loss) before depreciation and amortization. Although
broadcast cash flow and EBITDA are not measures of performance calculated in
accordance with generally accepted accounting principles, management believes
that they are useful to an investor in evaluating the Company because they are
measures widely used in the broadcasting industry to evaluate a radio company's
operating performance. However, broadcast cash flow and EBITDA should not be
considered in isolation or as substitutes for net income, cash flows from
operating activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles as a measure of
liquidity or profitability.
The principal source of the Company's revenue is the sale of broadcasting
time on its radio stations for advertising. As a result, the Company's revenue
is affected primarily by the advertising rates its radio stations charge.
Correspondingly, the rates are based upon a station's ability to attract
audiences in the demographic groups targeted by its advertisers, as measured
principally by periodic Arbitron Radio Market Reports. The number of
advertisements that can be broadcast without jeopardizing listening levels, and
the resulting ratings, is limited in part by the format of a particular station.
Each of the Company's stations has a general pre-determined level of on-air
inventory that it makes available for advertising, which may be different at
different times of the day and tends to remain stable over time.
The Company's revenue varies throughout the year. As is typical in the
radio broadcasting industry, the Company's 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. The Company strives to control these
expenses by working closely with local station management. The Company also
incurs and will continue to incur significant depreciation, amortization and
interest expense as a result of completed and anticipated future acquisitions of
stations and existing and future borrowings.
The Company's internet service provider recorded gross revenue, operating
income and net income (loss) of $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 amount is not considered material to understanding the changes in the
results of operations for the three months ended March 31, 1999 as compared to
the three months ended March 31, 1998.
RESULTS OF OPERATIONS
The Company's unaudited consolidated financial statements tend not to
be directly comparable from period to period due to acquisition activity. The
Company's acquisitions in the first quarter of 1999 and during the year ended
1998, all of which have been accounted for using the purchase method of
accounting, and the results of operations of which have been included since the
date of acquisition, were as follows:
1998 Acquisitions and Dispositions: WEMR-AM and WEMR-FM in
Wilkes-Barre/Scranton, Pennsylvania were acquired on January 2, 1998. KQFC-FM,
KKGL-FM and KBOI-AM in Boise, Idaho were acquired on February 12, 1998. WCTP-FM,
WCTD-FM and WCDL-AM in Wilkes-Barre/Scranton, Pennsylvania were acquired on
March 26, 1998. KIZN-FM and KZMG-FM in Boise, Idaho were acquired on April 21,
1998. On July 7, 1998, the Company disposed of WEST-AM in Allentown,
Pennsylvania, in connection with a prior acquisition. The Company also disposed
of all of the stations in the Quincy, Illinois market on October 8, 1998.
KAAY-AM in Little Rock, Arkansas was acquired on November 17, 1998. In
conjunction with this acquisition, the Company sold KRNN-AM in Little Rock,
Arkansas. Digital Planet in Salt Lake City, Utah was acquired on September 18,
1998. Internet Technology Systems, Inc. in Salt Lake City, Utah was acquired on
September 30, 1998. In Quo, The Johnson Connection, LLC and the Friendly Net,
LLC in Salt Lake City, Utah were acquired on October 15, 1998, October 26, 1998
and December 8, 1998, respectively.
1999 First Quarter Acquisitions: WBHT-FM in Wilkes-Barre, Pennsylvania
was acquired on January 4, 1999. Prior to the acquisition, Citadel Broadcasting
had operated WBHT-FM under a local marketing agreement since July 3, 1997. On
February 9, 1999 Citadel Broadcasting acquired the assets of 62nd Street
Broadcasting of Saginaw, LLC. The acquisition of these assets included 5 FM
radio stations and 1 AM radio station in Saginaw/Bay City, Michigan. WHYL-AM/FM
in Carlisle, Pennsylvania were acquired on February 17, 1999. 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. In connection with the acquisition, Citadel
Broadcasting acquired 6 FM and 3 AM radio stations in the Baton Rouge and
Lafayette, Louisiana markets. Brainiac Services, Inc, an internet service
provider, in Riverside, Rhode Island was acquired on March 2, 1999.
10
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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% 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 1999 and 1998, 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 three months ended March 31, 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 March 31, 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 the Company's 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
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 March 31, 1998, primarily due to interest expense associated
with Citadel Broadcasting's 9-1/4% Senior Subordinated Notes issued on November
19, 1998 offset by a repayment of Citadel Broadcasting's credit facility in the
third quarter of 1998 from the net proceeds of the Company's 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.
LIQUIDITY AND CAPITAL RESOURCES
Recent liquidity needs have been driven by the Company's acquisition
strategy. The Company's principal liquidity requirements are for acquisition
financing, debt service, working capital and general corporate purposes,
including capital expenditures. The Company's acquisition strategy has required,
and is expected to continue in the foreseeable future to require, a significant
portion of the Company's capital resources. The Company 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% Senior Subordinated Notes and
Citadel Broadcasting's 9-1/4% Senior Subordinated Notes and approximately $2.2
million for capital expenditures. Citadel Broadcasting's 13-1/4% Exchangeable
Preferred Stock does not require cash dividends through July 1, 2002.
At March 31, 1999, the Company held approximately $31.6 million in cash
and cash equivalents and had $135.0 million in unborrowed availability under
Citadel Broadcasting's credit facility.
For the three months ended March 31, 1999, net cash provided by
operations increased to $2.1 million from a 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.
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.
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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 period for station acquisitions.
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 .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 .09375%.
The credit facility prohibits Citadel Broadcasting from paying cash
dividends on its capital stock. Similarly, the credit facility restricts the
ability of 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. Citadel Broadcasting and Citadel
License are in compliance with the financial ratios and financial condition
tests in their debt obligations.
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 ("10 1/4% notes"). 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 Public Equity Offerings (as defined
in the indenture governing the 10 1/4% 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.
On November 19, 1998, Citadel Broadcasting completed the issuance of
$115.0 million of 9 1/4% Senior Subordinated Notes due 2008 ("9 1/4% notes").
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 Public Equity Offerings (as defined in the indenture governing
the 9 1/4% notes), 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.
12
<PAGE> 13
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 of all or substantially all of its assets. At March 31, 1999, Citadel
Broadcasting was in compliance with all covenants under the indentures.
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 therefor, 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 Public Equity
Offerings (as defined in the Certificate of Designation governing the
exchangeable preferred stock), 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.
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.
PENDING ACQUISITIONS AND DISPOSITION. There are several transactions
currently pending which, if completed, would result in the Company 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. The Company 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 Federal Communication Commission. Although the
Company believes these closing conditions will be satisfied in each case, there
can be no assurance thereof.
RECENTLY COMPLETED ACQUISITIONS. Subsequent to March 31, 1999, the
Company 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. The Company had capital expenditures of $0.9
million for the three months ended March 31, 1999. The Company's equipment
purchases consist primarily of broadcasting equipment and transmission tower
upgrades.
In addition to acquisitions and debt service, the Company's principal
liquidity requirements will be for working capital and general corporate
purposes, including capital expenditures, which are not expected to be material
in amount. Management believes that cash from operating activities, revolving
loans under the Company's credit facility and proceeds from the pending
disposition should be sufficient to permit the Company to meet its financial
obligations and to fund its operations for at least the next 12 months, although
additional capital resources may be required in connection with the further
implementation of the Company's acquisition strategy.
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 a system or product failure or other computer errors and a
disruption in the operation of such systems and products.
13
<PAGE> 14
The Company's project team has identified its traffic/accounting
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 the Company which are not Year 2000 compliant, the
vendors of this software have committed to provide Year 2000 compliant updates
to the Company. The Company expects to have all such updates tested and
operational by June 1999.
The Company has identified five phases for the project team to address
for each of the Company's risk areas. These phases are (1) an inventory of the
Company's 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 the 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 the Company 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 the Company's information
hardware and software, and expects to complete such assessment in the second
quarter of 1999. The Company expects that some amount of the testing will be
performed during this assessment phase. Additional testing is expected to
continue throughout the third quarter of 1999.
In each of its markets, the Company employs centralized accounting and
traffic (advertising scheduling) systems for all of its stations in the market.
In September 1998, the Company completed the replacement and upgrading of
software certified as Year 2000 compliant by the software vendor. The Company
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. The Company anticipates that evaluation for Year 2000 compliance of the
hardware and the new software used in its accounting and traffic systems for
stations currently owned by the Company will be completed during the second
quarter of 1999. The Company expects that the accounting and traffic systems for
stations that it may acquire will be converted to the software used for its
other stations. 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 the Company's
radio stations from outside sources, represent a third party risk to the Company
arising from the Year 2000 issue. The Company has sent questionnaires to each of
the vendors of these programs during the fourth quarter of 1998 asking them to
update the Company on the status of their Year 2000 compliance. Until those
questionnaires are returned and reviewed, the Company is unable to determine the
potential for disruption in its programming arising from this third party risk.
If the Company does not receive reasonable assurances regarding Year 2000
compliance from any vendor of these programs, the Company would then develop
contingency plans for alternative programming.
The Company is currently reviewing a proposal to update and expand the
digital automation systems used in the Company. Although not directly related to
the Year 2000 problem, the expansion and replacement of these systems, which the
Company anticipates would be completed by the end of December 1999, would
minimize or eliminate Year 2000 problems associated with these systems. If the
Company 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 the Company
cannot be quantified at this time.
The Company 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.
14
<PAGE> 15
In addition to identification of those mission critical systems, the
Company has identified the top 10 advertisers on each of its radio stations at
December 31, 1998. Questionnaires were sent to each of these advertisers during
the fourth quarter of 1998 asking them to update the Company on the status of
their Year 2000 compliance. The Company 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 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 the Company. Until the questionnaires are
returned and reviewed, the Company is unable to determine the effect of these
third party risks on the Company's operations. There can be no assurance that
the Company will be successful in finding alternative Year 2000 compliant
advertisers, suppliers and service providers, if required.
The Company 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 the Company's
non-information technology systems at its current stations is expected to be
completed by June 1999. The Company intends to promptly extend this inquiry to
stations it acquires.
The Company is in the process of determining its contingency plans,
which are expected to include the identification of the Company's most
reasonably likely worst-case scenarios. Preliminary contingency plans are
expected to be completed during the second quarter of 1999 and comprehensive
contingency plans are estimated to be completed by the second or third quarter
of 1999. At this time, the Company does not have sufficient information to
assess the likelihood of such worst-case scenarios. Currently, the Company
believes that the most reasonably likely sources of risk to the Company include
(i) disruptions in the supply of satellite delivered programs and (ii)
diminished demand for advertising time arising from Year 2000 problems both
specific to the Company's advertisers or more generally related to the potential
for economic disruptions related to the Year 2000 issues.
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 results of operations.
However, as described above, the failure by third parties to be Year 2000 ready
could have a material adverse effect on the Company.
CERTAIN INVESTMENT CONSIDERATIONS
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT. The Company is highly
leveraged. At March 31, 1999, Citadel Broadcasting had outstanding senior
subordinated notes payable, net of discount, of approximately $210.2 million. At
March 31, 1999, Citadel Broadcasting's exchangeable preferred stock had an
aggregate liquidation preference of $120.8 million. At March 31, 1999, the
Company had shareholder's equity of approximately $95.5 million. The Company's
high degree of leverage will have important consequences, including the
following:
o A substantial portion of the cash flow of the Company will be
used to pay interest expense, which will reduce the funds
which would otherwise be available to fund operations and
future business opportunities,
o The ability of the Company to obtain additional financing in the
future for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes, if needed, may be
impaired,
o The Company may be more highly leveraged than its competitors
which may place it at a competitive disadvantage, and
o The Company's high degree of leverage will make it more
vulnerable to a downturn in its business or in the economy in
general.
15
<PAGE> 16
The Company's ability to satisfy its debt obligations and to pay cash
dividends on, and to satisfy the redemption obligations in respect of, the
exchangeable preferred stock, will depend upon its future financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and financial, business and other factors, certain of which are
beyond its control. If the Company's cash flow and capital resources are
insufficient to fund its debt service obligations, the Company may be forced to
reduce or delay planned acquisitions and capital expenditures, sell assets,
obtain additional equity capital or restructure its debt. There can be no
assurance that the Company's cash flow and capital resources will be sufficient
for payment of its debt service and other obligations in the future, and there
can be no assurance that the Company would be able to obtain sufficient funding
to satisfy its debt service and other obligations.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS. The covenants in Citadel
Broadcasting's credit facility and in the agreements governing its other
outstanding debt and its exchangeable preferred stock restrict, among other
things, Citadel Broadcasting's ability to incur additional debt, incur liens on
non-senior debt, pay dividends or make certain other restricted payments,
purchase its capital stock, consummate certain asset sales, enter into certain
transactions with affiliates, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets. In addition, Citadel Broadcasting's credit
facility contains limits on future acquisitions and capital expenditures without
lender consent. This may adversely affect the Company's ability to pursue its
acquisition strategy. Citadel Broadcasting's credit facility also requires
Citadel Broadcasting to maintain specific financial ratios and to satisfy
certain financial condition tests. The ability of Citadel Broadcasting to meet
those financial ratios and financial conditions can be affected by events beyond
its control, and there can be no assurance that those tests will be met. A
breach of any of these covenants could result in a default under the credit
facility and/or the agreements governing Citadel Broadcasting's other
outstanding debt and its exchangeable preferred stock. In the event of a default
under Citadel Broadcasting's credit facility, the lenders thereunder could elect
to declare all amounts outstanding thereunder, together with accrued interest,
to be immediately due and payable. If Citadel Broadcasting were unable to repay
those amounts, the lenders under the credit facility could proceed against the
collateral granted to them to secure that indebtedness. If the maturity of
borrowings under the credit facility were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
indebtedness under the credit facility and other indebtedness of Citadel
Broadcasting. Substantially all of the assets of Citadel Broadcasting are
pledged as collateral under the credit facility. The Company has pledged all of
the outstanding shares of the common stock of Citadel Broadcasting to secure its
guarantee of the credit facility.
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 the Company's control
over Citadel Broadcasting. The indentures governing Citadel Broadcasting's 9
1/4% notes and 10 1/4% notes and its credit facility restrict Citadel
Broadcasting from paying dividends on or repurchasing, redeeming or otherwise
acquiring any shares of capital stock, including its exchangeable preferred
stock.
HISTORY OF NET LOSSES. The Company had a net loss of $3.9 million, $5.3
million and $5.2 million for the years ended December 31, 1998 and December 31,
1997 and the three months ended March 31, 1999, respectively. The primary reason
for these losses are significant charges for depreciation and amortization
relating to the acquisition of radio stations and interest charges on
outstanding debt. If the Company continues to acquire additional stations, these
charges will probably increase. The Company expects to continue to experience
net losses through at least 1999.
LIMITATIONS ON ACQUISITION STRATEGY. Although the Company believes that its
acquisition strategies are reasonable, there can be no assurance that it will be
able to implement its plans without delay or that, when implemented, its efforts
will result in the increased broadcast cash flow or other benefits currently
anticipated by the Company's management. In addition, there can be no assurance
that the Company will not encounter unanticipated problems or liabilities in
connection with acquired stations.
The Company's acquisition strategy involves numerous other risks,
including but not limited to:
o Difficulties in the integration of operations and systems and
the management of a large and geographically diverse group of
stations,
o The diversion of management's attention from other business
concerns, and
o The potential loss of key employees of acquired stations.
The Company competes and expects to continue to compete with many other
buyers for the acquisition of radio stations. Many of those competitors have
greater financial and other resources than those of the Company. In addition,
the Company may find fewer acceptable acquisition opportunities in the future.
16
<PAGE> 17
POTENTIAL DIFFICULTIES IN COMPLETING PENDING AND FUTURE TRANSACTIONS DUE TO
GOVERNMENTAL REVIEW. The completion of each of the Company's pending
transactions is, and future transactions it 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, as well as the license transfer approval process of the Federal
Communications Commission ("FCC"). 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 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 the
Company to abandon an otherwise attractive opportunity.
SIGNIFICANT COMPETITION IN THE RADIO BROADCASTING INDUSTRY. The Company's
radio stations face heavy competition from other radio stations in each market
for audience share and advertising revenue. The Company also competes 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 the Company's ability
to, among other things, service its debt obligations. The radio broadcasting
industry is also facing competition from new media technologies that are being
developed such as the following:
o Audio programming by cable television systems, direct
broadcasting satellite systems and other digital audio
broadcasting formats,
o 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
o 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.
The Company cannot predict either the extent to which such competition will
materialize or, if such competition materializes, the extent of its effect on
the Company's radio broadcasting business.
IMPORTANCE OF CERTAIN MARKETS. The Albuquerque, Salt Lake City, Modesto,
Little Rock and Providence markets are particularly important for the Company's
financial well-being. A significant decline in net broadcasting revenue from its
stations in these markets, as a result of a ratings decline or otherwise, could
have a material adverse effect on the Company's operations and financial
condition.
EXTENSIVE REGULATION OF THE RADIO BROADCASTING INDUSTRY. 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 the Company
cannot operate its radio stations without FCC licenses. The failure to renew the
Company's licenses could prevent it from operating the affected stations and
generating revenue from them. If the FCC decides to include conditions or
qualifications in any of the Company's licenses, the Company may be limited in
the manner in which it may operate the affected station. The Company is
experiencing delays in renewing four of its licenses in Salt Lake City.
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 other things, 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 the Company's acquisition strategy because they may prevent the Company
from acquiring additional stations in a particular market.
17
<PAGE> 18
ITEM 3. 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. The Company's primary exposure to market risk is interest rate
risk associated with its credit facility. Amounts borrowed under the credit
facility incur interest at the London Interbank Offered Rate, 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
credit facility. The Company evaluates its exposure to interest rate risk by
monitoring changes in interest rates in the market place.
To manage interest rate risk, the Company entered into an interest rate
swap agreement on December 10, 1996. The notional amount outstanding as of March
31, 1999, 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. The Company 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 based on the original agreement dated December 10, 1996.
LIBOR in effect under the swap agreement as of March 10, 1999, was 4.93813%.
The fair market value of the Company's interest rate swap was a net
liability of approximately $315,000 as of March 31, 1999.
18
<PAGE> 19
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not a party to any
lawsuit or proceeding which, in the opinion of the Company, is likely to have a
material adverse effect on the Company.
The Department of Justice initiated a civil investigation on October 9,
1996 regarding the Company's 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. The
Company and the other interested party reached an agreement with the Department
of Justice to drop its investigation. On April 28, 1999, the Department of
Justice filed a lawsuit in the United States District Court for the District of
Columbia against the Company and Triathlon Broadcasting Company alleging that
they eliminated price competition between their radio stations. A proposed Final
Judgement, the terms of which were stipulated by the parties, was also filed
with the court on April 28, 1999. The proposed Final Judgement is expected to
become final after the expiration of the 60-day comment period required by law.
The proposed Final Judgement would:
o Order the Company to terminate the joint sales agreement
referenced above,
o Prohibit the Company from acquiring any other radio stations that
sell radio advertising time in either Colorado Springs or Spokane,
unless the Company complies with the notice, additional
information and waiting requirements in the proposed Final
Judgment, and
o Prohibit the Company 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 the Company
complies with the notice, additional information and waiting
requirements in the proposed Final Judgement.
The joint sales agreement was terminated on April 30, 1999.
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
------ ----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
On February 17, 1999, Citadel Communications Corporation (the
"Company") filed with the Securities Exchange Commission a
Current Report on Form 8-K. The report was filed to publicly
disseminate updated pro forma financial information of the Company.
(i) Financial Statements. No Financial Statements were filed.
(ii) Pro Forma Financial Information. The following pro forma
financial information of Citadel Communications Corporation
and Subsidiary were filed.
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30, 1998
Notes to Unaudited Pro Forma Condensed Consolidated Statement
of Operations
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30, 1997
Notes to Unaudited Pro Forma Condensed Consolidated Statement
of Operations
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1997
Notes to Unaudited Pro Forma Condensed Consolidated Statement
of Operations
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1998
Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITADEL COMMUNICATIONS CORPORATION
Date: May 7, 1999 By: /s/ LAWRENCE R. WILSON
-------------------- --------------------------------------------
Lawrence R. Wilson
Chairman of the Board
Chief Executive Officer and President
(Principal Executive Officer)
Date: May 7, 1999 By: /s/ DONNA L. HEFFNER
-------------------- --------------------------------------------
Donna L. Heffner
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
21
<PAGE> 22
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS IN CITADEL COMMUNICATIONS CORPORATION'S FORM 10-Q FOR THE THREE
MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 31,615
<SECURITIES> 0
<RECEIVABLES> 37,966
<ALLOWANCES> (2,232)
<INVENTORY> 0
<CURRENT-ASSETS> 96,287
<PP&E> 56,549
<DEPRECIATION> (14,479)
<TOTAL-ASSETS> 477,874
<CURRENT-LIABILITIES> 18,368
<BONDS> 243,153
120,837
0
<COMMON> 26
<OTHER-SE> 95,516
<TOTAL-LIABILITY-AND-EQUITY> 477,874
<SALES> 0
<TOTAL-REVENUES> 32,633
<CGS> 0
<TOTAL-COSTS> 25,512
<OTHER-EXPENSES> 7,003
<LOSS-PROVISION> 605
<INTEREST-EXPENSE> 5,744
<INCOME-PRETAX> (5,600)
<INCOME-TAX> (419)
<INCOME-CONTINUING> (5,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,181)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
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