-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OMS2/9Sjq/h/lH+aLCIeNA82+P6MW0fU+DbViIRQg7ObPkXKLssbGb0aFhqCqzTX pY9dbTCi1UJ9AG9h2VaWmQ== 0000950128-00-000060.txt : 20000203 0000950128-00-000060.hdr.sgml : 20000203 ACCESSION NUMBER: 0000950128-00-000060 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000126 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITADEL BROADCASTING CO CENTRAL INDEX KEY: 0001042742 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 860703641 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-36771 FILM NUMBER: 513419 BUSINESS ADDRESS: STREET 1: CITY CENTER W STE 400 STREET 2: 7201 W LAKE MEAD BLVD CITY: LAS VEGAS STATE: NV ZIP: 89128 BUSINESS PHONE: 7028045200 MAIL ADDRESS: STREET 1: CITY CENTER WEST STE 400 STREET 2: 7201 WEST LAKE MAED BLVD CITY: LAS VEGAS STATE: NV ZIP: 89128 8-K 1 CITADEL BROADCASTING CO. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) January 23, 2000 Citadel Broadcasting Company ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) Nevada ---------------------------------------------- (State or Other Jurisdiction of Incorporation) 000-24515 86-0703641 - -------------------------------- --------------------------------- (Commission File Number) (IRS Employer Identification No.) City Center West, Suite 400 7201 West Lake Mead Boulevard Las Vegas, Nevada 89128 - ---------------------------------------- ------------- (Address of Principal Executive Offices) (Zip Code) (702) 804-5200 ------------------------------------------------------------------ (Registrant's Telephone Number, Including Area Code) 2 This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based largely on current expectations and projections about future events and financial trends affecting Citadel Broadcasting Company's business. The words "intends", "will," "may" and similar words are intended to identify forward-looking statements. In addition, any statements that refer to expectations or other characterizations of future events or circumstances are forward-looking statements. The forward-looking statements in this report are subject to risks, uncertainties and assumptions including, among other things: o the realization of Citadel Broadcasting's business strategy, o general economic and business conditions, both nationally and in Citadel Broadcasting's radio markets, o Citadel Broadcasting's expectations and estimates concerning future financial performance, financing plans and the impact of competition, o anticipated trends in Citadel Broadcasting's industry, and o the impact of current or pending legislation and regulation and antitrust considerations. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report might not transpire. Citadel Broadcasting undertakes no obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise. -1- 3 ITEM 5. OTHER EVENTS On January 23, 2000, Citadel Broadcasting entered into a stock purchase agreement with Bloomington Broadcasting Holdings, Inc. and its stockholders to purchase all of the issued and outstanding capital stock of Bloomington Broadcasting Holdings. Through its subsidiaries, Bloomington Broadcasting Holdings owns and operates three FM radio stations and one AM radio station serving the Grand Rapids, Michigan market; three FM radio stations and one AM radio station serving the Columbia, South Carolina market; three FM radio stations and one AM radio station serving the Chattanooga, Tennessee market; two FM and two AM radio stations serving the Johnson City/Kingsport/Bristol, Tennessee market; and two FM radio stations and one AM radio station serving the Bloomington, Illinois market. Bloomington Broadcasting Holdings has also entered into an agreement to purchase an additional AM radio station serving the Johnson City/Kingsport/ Bristol, Tennessee market. If this transaction has not been completed prior to completion of Citadel Broadcasting's acquisition of Bloomington Broadcasting Holdings, Citadel Broadcasting will be assigned the rights under the purchase agreement. The aggregate purchase price for the transactions described is approximately $176.0 million in cash. This amount includes repayment of indebtedness of Bloomington Broadcasting Holdings that may be outstanding at the time of closing and a deferred obligation relating to a recent radio station purchase by Bloomington Broadcasting Holdings. Certain purchase price adjustments may also be made at closing. Citadel Broadcasting has delivered an irrevocable letter of credit in favor of Bloomington Broadcasting Holdings, issued by Credit Suisse First Boston, in the amount of $15.0 million to secure Citadel Broadcasting's obligations under the stock purchase agreement. Citadel Communications intends to operate these stations through Citadel Broadcasting. The stock 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 transfer of control of the station licenses to Citadel Broadcasting, (2) the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (3) the receipt of consents to the change of control under certain contracts to which Bloomington Broadcasting Holdings or its subsidiaries are a party. An application seeking FCC approval has not yet been filed with the FCC. Certain financial information of Bloomington Broadcasting Holdings, Inc. and certain pro forma financial information of Citadel Broadcasting Company is included in Item 7 of this report. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements. The following financial statements of Bloomington Broadcasting Holdings, Inc. and Subsidiaries are included in this report: Independent Auditors' Report Consolidated Balance Sheet as of December 31, 1998 Consolidated Statement of Income for the year ended December 31, 1998 Consolidated Statement of Stockholders' Equity for the year ended December 31, 1998 Consolidated Statement of Cash Flows for the year ended December 31, 1998 Notes to Consolidated Financial Statements Consolidated Balance Sheet as of September 30, 1999 (unaudited) Consolidated Statements of Operations for the nine months ended September 30, 1999 and 1998 (unaudited) Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 1999 (unaudited) Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 (unaudited) Notes to Condensed Consolidated Financial Statements (unaudited) -2- 4 (b) Pro Forma Financial Information. The following pro forma financial information of Citadel Broadcasting Company is included herein: Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1999 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 1999 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the twelve months ended December 31, 1998 (c) Exhibits. The following exhibits are filed as part of this report: 23.1 Consent of Dunbar, Breitweiser & Company, LLP. 99.1 Press Release of Citadel Communications Corporation, dated January 24, 2000. -3- 5 INDEPENDENT AUDITORS' REPORT To the Board of Directors Bloomington Broadcasting Holdings, Inc. Bloomington, Illinois We have audited the accompanying consolidated balance sheet of Bloomington Broadcasting Holdings, Inc. and subsidiaries as of December 31, 1998, and the related consolidated statement of income, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bloomington Broadcasting Holdings, 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/ DUNBAR, BREITWEISER & COMPANY, LLP Bloomington, Illinois February 4, 1999 (except for Note 14 as to which the date is February 15, 1999) -4- 6 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 1998
1998 ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 605,685 Accounts receivable, less allowance for doubtful accounts, $140,133 4,760,456 Other receivables 58,388 Prepaid expenses 78,875 Refundable income taxes 359,600 Deferred income taxes 179,000 ----------- Total current assets $ 6,042,004 ----------- INVESTMENTS AND OTHER ASSETS Prepaid expenses $ 20,833 Cash value of life insurance 44,374 Deferred compensation trust accounts 423,650 Deferred loan costs 2,602 Deferred income taxes 163,000 ----------- $ 654,459 ----------- PROPERTY AND EQUIPMENT Land $ 729,518 Land improvements 31,104 Buildings and improvements 2,862,429 Technical and other equipment, including equipment acquired under capital lease $19,345 9,290,241 Furniture and fixtures 1,350,011 Vehicles 549,390 ----------- $14,812,693 Less accumulated depreciation, including amortization applicable to equipment acquired under capital lease, $11,929 9,793,392 ----------- $ 5,019,301 ----------- INTANGIBLES, at amortized cost $59,403,557 ----------- $71,119,321 ===========
See Notes to Consolidated Financial Statements. -5- 7
1998 ----------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 1,200,000 Current maturities of capital lease obligation 5,453 Accounts payable 366,287 Accrued expenses 1,868,712 Income received in advance 2,805 ----------- Total current liabilities $ 3,443,257 ----------- LONG-TERM DEBT, less current maturities Notes payable, bank $41,950,000 Notes payable, stockholders 16,831,564 ----------- $58,781,564 ----------- DEFERRED COMPENSATION $ 468,276 ----------- DEFERRED INCOME TAXES $ 566,000 ----------- COMMITMENTS STOCKHOLDERS' EQUITY Capital stock: Preferred, 5% cumulative, Series A Convertible Participating; par value $.01 share; authorized 1,700,000 shares; 109,890 shares issued and outstanding ($12,087,900 aggregate liquidation preference) $ 1,099 Common, $.01 par value; authorized 300,000 shares; 11,477.40 shares issued and outstanding 115 Retained earnings (deficit) (715,460) Accumulated other comprehensive income 21,276 Paid in capital 8,553,194 ----------- $ 7,860,224 ----------- $71,119,321 ===========
-6- 8 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME Year Ended December 31, 1998
1998 ----------- Gross revenue $29,827,868 Deductions from revenue 3,367,355 ----------- Net revenue $26,460,513 ----------- Operating expenses: Selling expenses $ 5,974,717 Technical expenses 500,355 Program and production expenses 7,020,605 General and administrative expenses 9,893,008 ----------- $23,388,685 ----------- Operating income $ 3,071,828 ----------- Nonoperating income (expense): Interest income $ 22,600 Interest expense-lenders (3,212,969) Loss on dispositions of property and equipment and intangible assets (25,159) Other income 112,606 ----------- $(3,102,922) ----------- Income (loss) before income taxes $ (31,094) Federal and state income taxes 1,506 ----------- Net income (loss) $ (32,600) ===========
See Notes to Consolidated Financial Statements. -7- 9 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Year Ended December 31, 1998
Class A Preferred Common Stock Common Stock ----------- -------- ------- Balance, January 1, 1998 $ 2,060,100 $ -- $3,126 Net income (loss), 1998 -- -- -- Stock and retained earnings acquired by parent, eliminated in consolidation (2,060,100) -- (3,126) New shares issued 1,099 115 -- Required reduction in basis for partial change in basis -- -- -- Unrealized loss on investments -- -- -- ----------- ------- ------ Balance, December 31, 1998 $ 1,099 $ 115 $ -- =========== ======= ======
See Notes to Consolidated Financial Statements. -8- 10
Accumulated Class B Discount on Retained Other Common Preferred Earnings Comprehensive Paid-In Stock Stock (Deficit) Income Capital Total -------- ----------- ----------- ------------- ------------ ----------- $ 97,038 $(417,209) $ 6,077,820 $26,125 $ -- $ 7,847,000 -- -- (32,600) -- -- (32,600) (97,038) 417,209 (6,760,680) -- -- (8,503,735) -- -- -- -- 10,999,264 11,000,478 -- -- -- -- (2,446,070) (2,446,070) -- -- -- (4,849) -- (4,849) -------- --------- ----------- ------- ----------- ----------- $ -- $ -- $ (715,460) $21,276 $ 8,553,194 $ 7,860,224 ======== ========= =========== ======= =========== ===========
-9- 11 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended December 31, 1998
1998 ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (32,600) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 1,106,075 Amortization 1,933,057 Provision for doubtful accounts 211,042 Deferred compensation 175,981 Loss on dispositions of property and equipment and intangible assets 25,159 Income earned in deferred compensation trust accounts (112,608) Increase in cash value of life insurance (3,590) Deferred income taxes (93,000) Interest expense added to notes payable 820,564 Change in assets and liabilities: (Increase) in accounts receivable (596,268) Decrease in other receivables 11,442 Decrease in inventories 21,043 Decrease in prepaid expenses 11,628 (Increase) in refundable income taxes (359,600) (Decrease) in accounts payable (139,241) Increase in accrued expenses 167,231 (Decrease) in income received in advance (10,060) (Decrease) in income taxes payable (60,100) ------------ Net cash provided by operating activities $ 3,076,155 ------------ CASH FLOWS FROM INVESTING ACTIVITIES Life insurance premiums applied to increase in cash value of life insurance $ (6,500) Deposits to deferred compensation trust accounts (61,287) Proceeds from disposal of property and equipment 25,149 Purchase of property and equipment (429,024) Purchase of Bloomington Broadcasting Corporation by Bloomington Broadcasting Holdings, Inc. (61,977,867) ------------ Net cash (used in) investing activities $(62,449,529) ------------
See Notes to Consolidated Financial Statements. -10- 12
1998 ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings $ 450,000 Principal payments on short-term borrowings (1,050,000) Proceeds from long-term borrowings 58,928,500 Principal payments on long-term borrowings (8,621,897) Payments on capital lease obligations (5,143) Proceeds from stock issued 9,982,978 ----------- Net cash provided by financing activities $59,684,438 ----------- Increase in cash and cash equivalents $ 311,064 Cash and cash equivalents: Beginning 294,621 ----------- Ending $ 605,685 =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 2,426.395 =========== Income taxes $ 464,812 =========== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Income reinvested in deferred compensation trust accounts $ (112,608) =========== Increase in cash value of life insurance $ (3,590) =========== Stock and note payable value transferred to Bloomington Broadcasting Holdings, Inc. from Bloomington Broadcasting Company $ 2,500,000 ===========
-11- 13 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Business, Use of Estimates and Significant Accounting Policies Nature of business: The Company and its subsidiaries operate AM and FM radio stations in Bloomington-Normal, Illinois; Chattanooga, Tennessee; Johnson City-Kingsport, Tennessee and Bristol, Virginia; Holland-Grand Rapids, Michigan; and Columbia, South Carolina. A subsidiary company also operated a business known as Sign Pro in Bloomington, Illinois. Sign Pro sold customized banners and signs and represented less than one percent of consolidated gross revenue. Sign Pro was sold in April, 1998. The stations are subject to regulation by the Federal Communications Commission. The Company and its subsidiaries grant credit on terms that management establishes for individual accounts. The Companies operated under the following business names during 1998: Twin-Cities Broadcasting Corp. WJBC (AM), WBNQ (FM), WBWN (FM) and Sign Pro Radio Chattanooga, Inc. WGOW (AM), WSKZ (FM), WGOW (FM) and WOGT (FM) Tri-Cities Radio Corp. WJCW (AM), WQUT (FM), WKIN (AM) and WKOS (FM) Michigan Media, Inc. WBBL (AM), WKLQ (FM) and WLAV (FM) Radio South Carolina, Inc. WISW (AM), WTCB (FM) and WOMG (FM) Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting policies: Principles of consolidation: All subsidiary companies are wholly-owned and are included in the accompanying consolidated financial statements. All material intercompany balances and transactions have been eliminated in consolidation. Cash and cash equivalents: For purposes of reporting cash flows, the Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. -12- 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property and equipment: Property and equipment are stated at cost. Major improvements to existing property and equipment are capitalized. Expenditures for maintenance and repairs which do not extend the life of the applicable assets are charged to expense in the period incurred. Depreciation expense of property and equipment is computed principally on the straight-line method over the following estimated useful lives:
Years ----- Land improvements 5-20 Buildings and improvements 4-39 Technical equipment: Studio and control 3-35 Transmitting and radiating 3-20 General 3-20 Furniture and fixtures 3-20 Vehicles and airplane 3-10
It is the Company's policy to include amortization expense on assets acquired under capital leases with depreciation expense on owned assets. When properties are retired or otherwise disposed of, the asset and accumulated depreciation accounts are adjusted accordingly. Any resulting gain or loss is reflected in income in the period realized. Advertising: The Company expenses the costs of advertising as incurred. Total advertising and promotion expense for the year ended December 31, 1998 was $1,321,167. Income taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Stock option plan: The Company has 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 "Accounting for Stock Issued to Employees", and provide pro forma net income 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. There are no unexercised options outstanding as of December 31, 1998. There was no stock-based compensation cost reflected in 1998 net income and there would likewise be none on a pro forma basis. -13- 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2. Leveraged Buyout Effective on July 1, 1998, Bloomington Broadcasting Holdings, Inc. (formerly Bloomington Broadcasting Acquisition Corp.) purchased 100% of the stock of Bloomington Broadcasting Corporation. The transaction has been recorded in accordance with the "purchase method" of Accounting Principles Board (APB) Opinion No. 16, Business Combinations, and guidance from the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB). The stock purchase was financed through a combination of bank debt, stockholder debentures and issuance of preferred stock. These financial statements include the financial position and results of operations of Bloomington Broadcasting Holdings, Inc., Bloomington Broadcasting Corporation, and all subsidiaries, for the calendar year 1998. Bloomington Broadcasting Holdings, Inc. was formed in 1998 for the purpose of this acquisition and had no operations in 1998 other than its ownership of Bloomington Broadcasting Corporation. The acquisition cost of Bloomington Broadcasting Corporation was approximately $64,478,000. Amortization of goodwill and other intangible assets acquired in this transaction is computed on the straight-line basis over various periods from 15 years to 50 years. Following is pro forma financial information for 1998 assuming the leveraged buyout described above had occurred on January 1, 1998: (Unaudited) ----------- Gross revenue $ 29,827,868 Deductions from revenue (3,367,355) ------------ Net revenue 26,460,513 Operating expenses (24,618,685) ------------ Operating income 1,841,828 Nonoperating income (expense) (5,690,681) ------------ Income (loss) before income tax (3,848,853) Income tax provision (refund) (911,704) ------------ Net income (loss) $ (2,937,149) ============ Note 3. Amortization of Intangibles Amortization of intangible assets is on the straight-line method over the following periods:
Years ----------- Premium audience growth pattern asset 21.2 - 45.3 Favorable transmitter site lease 37.3 - 50.0 Going concern value 15.0 - 40.0 FCC licenses 10.0 - 15.0 Goodwill 40.0 Organization and start-up costs 5.0 Agreement not to compete 5.0 Other advertising contracts 0.5 - 40.0 Fixed asset delivery premium 9.0 Other intangible assets 15.0 - 40.0 Sign Pro license 5.0 Consulting agreement 1.0 - 5.0 Favorable antenna site agreements 0.7 - 23.9 Favorable studio and office space lease 1.4 - 1.5
FCC licenses and goodwill acquired prior to October 31, 1970 in the amount of $77,135 are not being amortized and are carried at cost. -14- 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Costs and accumulated amortization of intangibles at December 31, 1998 are as follows:
1998 --------------------------------------------------- Accumulated Net Book Cost Amortization Value ----------- ------------ ----------- Premium audience growth pattern asset $ 8,921,320 $ 651,266 $ 8,270,054 Favorable transmitter site lease 2,554,630 99,900 2,454,730 Going concern value 5,088,914 196,426 4,892,488 FCC licenses 34,391,764 3,369,193 31,022,571 Goodwill 12,454,084 156,000 12,298,084 Organization and start-up costs 72,061 72,061 -- Agreement not to compete 1,000 1,000 -- Other advertising contracts 21,852 12,491 9,361 Fixed asset delivery premium 152,900 152,900 -- Other intangible assets 579,432 146,817 432,615 Sign Pro license 2,000 2,000 -- Consulting agreement 25,000 13,333 11,667 Favorable antenna site agreements 16,953 4,966 11,987 Favorable studio and office space lease 34,723 34,723 -- ----------- ---------- ----------- $64,316,633 $4,913,076 $59,403,557 =========== ========== ===========
-15- 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1998 ------------------------------ Payments Due Within Total One Year ------------- ------------ Note 4. Pledged Assets and Notes Payable The Company and its subsidiaries had the following notes payable at December 31, 1998: First Union National Bank, Fleet National Bank, Bank One Indiana, N.A., collectively as lender, fixed and variable interest rates as described below, secured by substantially all assets and communications licenses of Bloomington Broadcasting Holdings, Inc. and Bloomington Broadcasting Corporation. REVOLVING CREDIT NOTES- combination of Base Rate note, presently 9.625 % and LIBOR Rate note, presently 8.6875%, interest payable quarterly (Base Rate notes) and monthly (LIBOR Rate notes); commitment fee, presently .5% due quarterly on average daily unused portion of the Revolving Credit Commitment; if total outstanding principal exceeds the Revolving Credit Commitment such excess shall be repayable immediately; optional principal payments allowed in a minimum amount of $250,000 for Base Rate notes and $2,000,000 for LIBOR Rate notes; Revolving Credit Commitment presently $15,000,000 with permanent partial reductions scheduled beginning in March 2002; interest on Base Rate notes at higher of First Union National Banks' prime rate, or Federal Funds Rate plus .5%; Revolving Credit Facility shall terminate on the earliest of June 30, 2005 or the date of termination by either the Company or First Union National Bank. Base Rate Note $ 1,150,000 $ -- LIBOR Rate Notes 2,000,000 -- TERM A AND TERM B NOTES- LIBOR Rate notes presently 8.6875%, interest payable monthly, principal payable quarterly beginning on December 31, 1999 in increments stipulated in the note (see five-year maturity schedule at end of the footnote), optional principal prepayments of at least $2,000,000 allowable; mandatory principal prepayments required in the amount of 100% of Net Cash Proceeds from any of the following events, a) debt proceeds not permitted, b) issuance of equity securities, c) asset sales, d) insurance proceeds, e) excess cash flow. Term A Notes 20,000,000 1,000,000 Term B Notes 20,000,000 200,000 Stockholders, interest at 10.25 %, fixed rate, interest payable semiannually at June 30 and December 31, principal due in full on June 30, 2008. These notes are subordinate to the senior indebtedness described above. There are eleven individual notes, all of which are uncollateralized. The maker of the notes, at its option, may pay interest by the issuance of additional subordinated notes ("PIK Note") equal to such interest payment provided that advance notice is given under the terms of the note. 16,011,000 -- Stockholders, "PIK Notes," interest at 10.25%, fixed rate, interest payable semiannually at June 30, and December 31. Maturity date is June 30, 2008. 820,564 -- ------------- ------------ $59,981,564 $1,200,000 ============= ============
-16- 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Credit Agreement with First Union National Bank (and other co-lenders), has several restrictive covenants. The Company must maintain a certain leverage ratio, fixed charge coverage ratio, and interest coverage ratio during the term of the loans. The Company can not, with some exceptions, incur any debt. There are also limitations on future mergers, liquidations or sales of assets. Also, the Company may not declare or pay any dividends on any of its capital stock, or purchase, redeem or retire any of its capital stock. Aggregate future maturities on the above notes are: 1999 $ 1,200,000 2000 2,200,000 2001 2,200,000 2002 3,200,000 2003 4,200,000
Note 5. Deferred Compensation and Life Insurance In connection with an employment agreement, a provision has been made for future compensation which is payable to an employee or his heirs in annual payments of $10,000 per year for ten years commencing on January 1, 2002 if the employee remains employed by a subsidiary Company from January 1, 1992 through December 31, 2001. If employment is terminated by the subsidiary or the employee becomes permanently disabled, he is entitled to receive $10,000 for each full year of employment from January 1, 1992 through the date of termination. In the event of the death of the employee prior to December 31, 2001, a lump sum of $100,000 is to be paid to the employee's heirs. The present value of the estimated liability under this agreement is being accrued over the ten year period ending December 31, 2001. The amount accrued under this agreement and reflected as expense was $7,937 for the year ended December 31, 1998. The subsidiary is the owner and beneficiary of a life insurance policy providing face coverage of $100,000 on the life of the above employee. This policy had a cash value of $44,374 at December 31, 1998, and is available to fund the subsidiary's obligation under the deferred compensation agreement. Bloomington Broadcasting Corporation established certain non-qualified deferred compensation plans accompanied by rabbi trusts which are generally available to general managers, officers and other highly compensated employees of the parent company and its subsidiaries. Qualifying employees may elect to defer portions of their salaries which are then deposited into segregated trust accounts. The employees designate the trustees and direct the investment of the funds for their individual accounts. The amounts held in the trusts will at all times remain solely the property of the participating company and are subject to the claims of its general creditors. -17- 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Upon termination of employment, participating employees are entitled to receive the value of the assets in the trust accounts established for their benefit. The plans also permit early withdrawals of the deferred compensation to the extent that a participant is subject to an unforeseeable emergency which would otherwise result in severe financial hardship. The total amount recorded as expense under these non-qualified deferred compensation plan was $175,982 for the year ended December 31, 1998. The investments held in the rabbi trust accounts are carried at fair value as of December 31, 1998 as follows:
1998 -------- Cost of investments $389,374 Unrealized gains 60,593 Unrealized losses (26,317) -------- $423,650 ========
The net unrealized gain included as accumulated other comprehensive income in stockholders' equity at December 31, 1998 was $21,276, net of deferred income taxes of $13,000. Note 6. Capital Stock The outstanding preferred stock is Series A Convertible Participating Preferred Stock. The Shareholders Agreement, dated June 30, 1998, places certain restrictions on transfers of such shares. The Agreement also contains a "Call" provision, whereby, shares held by "Management Investors" are redeemable by the Company or the "Venture Investors." Each share of preferred stock is entitled to one vote, based on the current "common stock conversion rate." The holders of Series A Convertible Participating Preferred Stock are entitled to receive cumulative, compounding dividends of 5% of the difference between the convertible base liquidation amount (presently $110 per share) and ten dollars, per share. The Series A Convertible Participating Preferred Stock has a liquidation preference over other shares of company stock. The liquidation price per share is the convertible base liquidation amount, presently $110, plus any accumulated but unpaid dividends. In the event of an "extraordinary transaction", if the holders of Series A Convertible Participating Preferred Stock have not converted their shares into Series B Redeemable Preferred Stock or common stock, then the Company shall redeem all the shares at the convertible base liquidation amount. Extraordinary transactions include a) mergers or consolidations, b) sale or transfer of all assets, c) a purchase of the company, d) redemption of a majority of shares, or e) a public offering. -18- 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The authorized number of shares of preferred stock is 1,700,000, of which 300,000 shares are designated as Series A Convertible Participating Preferred Stock (par value $.01 per share), 400,000 shares are designated as Series B Redeemable Preferred Stock (par value $.01 per share), and 1,000,000 shares are undesignated. As of December 31, 1998 there were no issued or outstanding shares of Series B Redeemable Preferred Stock. The authorized number of shares of common stock is 300,000, at par value of $.01 per share. Holders of common stock are entitled to one vote for each share held, and vote together with the holders of the convertible preferred stock as a single class. Holders of common stock are entitled to dividends only after all preferential preferred stock dividends have been paid. If additional dividends are declared, the holders of common stock will share in such dividends with the convertible preferred stockholders as a single class of equal shareholders. As described in Note 2 to these financial statements, effective July 1, 1998 all preferred stock, Class A common stock and Class B common stock of Bloomington Broadcasting Corporation was acquired by Bloomington Broadcasting Holdings, Inc. All previous shares acquired were cancelled, and a new common stock certificate was issued by Bloomington Broadcasting Corporation for 100 shares ($.01 par value per share), representing 100% ownership by Bloomington Broadcasting Holdings, Inc. As of December 31, 1998, the aggregate preferred stock dividends accumulated, not declared or paid was $274,725, representing a $5 per share dividend for one-half year. Note 7. Income Tax Matters The Company reports its income as the parent company of a consolidated federal income tax return which includes the operations of the following subsidiaries: Bloomington Broadcasting Corporation Twin-Cities Broadcasting Corp. Radio Chattanooga, Inc. Tri-Cities Radio Corp. Michigan Media, Inc. Radio South Carolina, Inc. The members of the consolidated group have elected to allocate income taxes among the members of the group by an agreement executed on January 1, 1986, under which each company records a consolidated return tax benefit or cost based upon its current taxable income or loss and governed by any tax elections made for the consolidated return and the tax rate effective for the consolidated group. This benefit or cost is due from or to the parent company, respectively. These allocations are reflected on the balance sheet as consolidated return tax benefit or liability. A similar approach is used for the allocation of deferred income taxes. -19- 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The net deferred tax liability consists of the following components as of December 31, 1998:
1998 ----------- Deferred tax assets $ 794,000 Deferred tax asset valuation allowances (9,000) Deferred tax liabilities (1,009,000) ----------- Net deferred tax liabilities $ (224,000) ===========
Deductible temporary differences giving rise to deferred tax assets primarily relate to accounts receivable, allowances for doubtful accounts, deferred compensation payable, accrued vacation pay, and State and City unused net operating loss carryforwards. Taxable temporary differences giving rise to deferred tax liabilities relate to property and equipment and intangibles. The components giving rise to the net deferred tax liability described above have been included in the accompanying balance sheet as of December 31, 1998 as follows:
1998 --------- Current assets $ 179,000 Noncurrent assets 163,000 Noncurrent liabilities (566,000) --------- $(224,000) =========
The current and noncurrent deferred tax assets are net of allocations of the valuation allowances of $0 and $9,000 for 1998. The valuation allowances have been recorded to reduce the total deferred tax assets to an amount that management believes will ultimately be realized. Approximate Deferred tax assets-current Tax Effect --------------------------- ----------- Allowance for doubtful accounts $ 48,000 Accrued vacation 91,000 State income tax refunds 49,000 Valuation allowance (9,000) -------- $179,000 ======== Deferred tax assets-noncurrent ------------------------------ Deferred compensation payable $163,000 ======== Deferred tax liabilities-noncurrent ----------------------------------- Property and equipment $323,000 Intangible assets 243,000 -------- $566,000 ======== Reconciliation between the actual provision for income taxes and that computed by applying the U.S. statutory rate to income before income tax is as follows: 1998 -------- Provision (refund) computed at statutory rate (34%) $(10,572) Nondeductible meals and entertainment 14,032 Tax-exempt interest (768) State income taxes (refund), net of federal income tax (1,186) -------- Federal and state income tax expense $ 1,506 ======== -20- 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For State and City income tax purposes, under provisions of Tennessee, South Carolina and City of Grand Rapids, Michigan tax statutes and regulations, the Company and its subsidiaries have $9,375,454 in net operating loss carryforwards at December 31, 1998, which may be used to offset future taxable income of the Company and its subsidiaries. These carryforwards expire as follows:
Year Carry- Radio Radio South forwards Chattanooga Michigan Carolina Expire Inc. Media, Inc. Inc. -------- ----------- ----------- ---------- 1999 $ -- $ -- $ -- 2000 -- 824,683 -- 2001 -- 932,225 -- 2002 -- 408,647 -- 2003 -- 804,183 -- 2004 -- 524,299 -- 2005 -- 675,933 664,191 2006 253,532 113,970 1,258,238 2007 31,646 -- 1,223,988 2008 24,642 -- 319,730 2009 390,068 -- 41,433 2010 127,116 -- 138,686 2011 -- 393,397 -- 2012 83,227 11,091 -- 2013 130,529 -- -- ---------- ---------- ---------- $1,040,760 $4,688,428 $3,646,266 ========== ========== ==========
The provision for income taxes charged to operations for the year ended December 31, 1998 consists of the following:
1998 -------- Current tax expense $ 94,506 Deferred tax (benefit) (93,000) -------- $ 1,506 ========
-21- 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 8. Leases The Company and its subsidiaries rent vehicles, office equipment, studio space, office space and an AM tower under various operating leases. These leases expire between December 1999 and December 2013. Generally, the Company and its subsidiaries are required to carry liability and property damage insurance, to pay some common area charges, real estate taxes, and to maintain the properties. Two subsidiaries also lease land where transmitter towers and buildings are located. The first lease (WTCB) expires in December 2026 and the second lease (WBWN) expires in May 2047. The subsidiaries are required to pay all utilities, property taxes and other expenses incidental to the maintenance and operation of the transmitter building and equipment. The subsidiaries are also required to carry liability and property damage insurance. No rental payments are due on this first lease. Instead, the subsidiary must offer space on the tower to the lessor for the lessor's communication antennae. Rental payments of $150 per month are due on the second lease. The total minimum rental commitments under the operating leases described above are due as follows:
Year Ending December 31, ------------------------ 1999 $245,303 2000 189,530 2001 69,746 2002 41,155 2003 33,888 Due thereafter 246,200 -------- $825,822 ========
Total rent expense under operating leases was $233,767 for the year ended December 31, 1998. A subsidiary company has also entered into an agreement to acquire a telephone system through a capitalized lease agreement. The terms of the lease require monthly payments of $534 through November 1999. Following is a schedule of future minimum lease payments under this capital lease together with the present value of the net minimum lease payments as of December 31, 1998:
Year Ending December 31, ------------------------ 1999 $5,878 Less the amount representing interest 425 ------ $5,453 Less current portion 5,453 ------ $ -- ======
-22- 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9. Employees' Profit-Sharing Plan The Company and its subsidiaries have an employees' profit-sharing plan covering substantially all employees to which both the employer and eligible employees contribute. The Company's discretionary contribution for 1998 was 3.0% of net operating earnings, as defined, before depreciation and amortization. Amounts in excess of this amount may be contributed at the discretion of the Board of Directors, but are not to exceed the maximum amount deductible for federal income tax purposes. The Company is also required to make matching contributions equal to 1% of the compensation of employees who contribute to the plan through salary deferral elections. The annual discretionary contribution to the plan for the year ended December 31, 1998 was $220,462. The total matching contribution was $71,476 for the year ended December 31, 1998. Note 10. Concentrations of Credit Risk Arising from Cash Deposits in Excess of Insured Limits The parent and subsidiary companies maintain cash balances at financial institutions in Bloomington, Illinois; Chattanooga, Tennessee; Knoxville, Tennessee; Grand Rapids, Michigan; and West Columbia, South Carolina. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation up to aggregate balances of $100,000 per Company. At December 31, 1998, the Company's uninsured cash balances totalled $937,791, including $359,256 held in repurchase agreements which are collateralized by U.S. Government agency securities held by the bank. This uninsured total does not reflect deductions for outstanding checks not yet presented to the banks for payment or transfers to affiliated companies on the following business day. Note 11. Non-competition Agreements A subsidiary acquired certain assets of Sattler Broadcasting, Inc. (radio station WOGT) in 1993. In connection with this purchase a non-competition agreement was obtained from Virginia Sattler, the sole shareholder of Sattler Broadcasting, Inc. The terms of this agreement, which expired in 1998, required the Company to pay Ms. Sattler $66,667 in 1998. Effective May 1, 1996, Bloomington Broadcasting Corporation acquired certain assets of McLean County Broadcasters, Inc. related to radio station WBWN-FM, licensed to Leroy, Illinois. The asset purchase agreement also provided for a five-year non-competition agreement with the sellers for $25,000. In addition, the Company entered into a consulting agreement, which includes a non-compete provision, with an employee of WBWN. The consulting agreement provides for payments by the Company of $25,000 per year for a ten year period. Effective November 15, 1996, Bloomington Broadcasting Corporation acquired certain assets of Pye Broadcasting , Inc. from Chattanooga Regional Interconnect, Inc. A consulting agreement executed as a part of this purchase required monthly payments of $10,000 through November 1997. -23- 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 12. Financial Instruments The Company has entered into Interest Rate Swap agreements with First Union National Bank relative to the Term A and Term B portions of the borrowing from First Union National Bank as described in Note 4 to these financial statements. The current notional amount is $15,000,000 of the Term A notes and $20,000,000 of the Term B notes. The nature and terms of the interest rate swaps are as follows:
TERM A TERM B ---------------- ------------- ------------- Transaction type Interest rate Interest rate swap swap Effective date July 30, 1998 July 30, 1998 Termination date June 29, 2001 June 30, 2003 Term 3 years 5 years Payment dates last day of last day of each month each month Fixed rate 5.86% 5.94% Floating rate LIBOR LIBOR
The interest rate swap agreements, in effect, create fixed rate loans for much of the total borrowed from First Union National Bank. The instruments' market risk is that fluctuations in interest rates may make the swaps less valuable. The agreements are held for non-trading purposes. The Company's objective for holding the interest rate swaps is to hedge the risk of rising interest rates on its long-term financing. The Company is required to pay interest monthly on the Term A and Term B notes and the swap agreements, and the gain or loss resulting from the interest rate swap agreements is then recorded as a corresponding increase or decrease to interest expense on the underlying debt. Note 13. Stock Option Plan The Company has established the Bloomington Broadcasting Holdings, Inc. 1998 Stock Option and Grant Plan (the "Plan"). The purpose of the Plan is to encourage and enable the officers, employees, directors, consultants, advisors and other key persons of the Company to acquire a proprietary interest in the Company. The maximum number of shares of stock reserved and available for issuance under the Plan is 12,210 shares of common stock. During 1998, 11,477.40 shares of common stock were purchased under Restricted Stock Purchase Agreements pursuant to the Plan. The price paid for the shares issued during 1998 was $1.00 per share. There are no unexercised options outstanding as of December 31, 1998. Note 14. Commitment On February 15, 1999, Radio South Carolina, Inc. had reached an agreement to acquire substantially all of the operating assets and the license of radio station WLXC-FM at a cost of $3,200,000. The Company intends to finance this acquisition through the Revolving Credit Commitment with First Union National Bank. The closing is scheduled for July 1, 1999. The Company has been operating the station since March 1, 1999 under a Lease Management Agreement. -24- 26 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL REPORT (Reviewed) SEPTEMBER 30, 1999 -25- 27 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET September 30, 1999 (Unaudited)
ASSETS CURRENT ASSETS Cash and cash equivalents $ 798,156 Accounts receivable, less allowance for doubtful accounts of $153,112 4,950,651 Other receivables 57,583 Prepaid expenses 149,725 Deferred income taxes 179,000 ----------- Total current assets $ 6,135,115 ----------- INVESTMENTS AND OTHER ASSETS Cash value of life insurance $ 44,374 Deferred compensation trust accounts 466,263 Deferred income taxes 163,000 ----------- $ 673,637 ----------- PROPERTY AND EQUIPMENT Land and land improvements $ 774,686 Buildings and improvements 2,855,865 Technical and other equipment, including equipment acquired under capital lease $19,345 9,697,305 Furniture and fixtures 1,360,333 Vehicles 620,539 ----------- $15,308,728 Less accumulated depreciation, including amortization applicable to equipment acquired under capital lease $14,831 10,509,520 ----------- $ 4,799,208 INTANGIBLES, at amortized cost $59,970,300 ----------- $71,578,260 ===========
See Notes to Condensed Consolidated Financial Statements (Unaudited). -26- 28
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 2,850,000 Current maturities of capital lease obligation 1,049 Accounts payable 264,546 Accrued expenses 1,575,566 Income taxes payable 11,173 ------------ Total current liabilities $ 4,702,334 ------------ LONG-TERM DEBT, less current maturities $ 59,690,002 ------------ DEFERRED COMPENSATION $ 517,318 ------------ DEFERRED INCOME TAXES $ 486,000 ------------ COMMITMENTS STOCKHOLDERS' EQUITY Capital stock: Preferred, 5% cumulative, Series A Convertible Participating; par value $.01 share; authorized 1,700,000 shares; issued and outstanding 109,890 shares; ($12,087,900 aggregate liquidation preference) $ 1,099 Common, $.01 par value; authorized 300,000 shares, issued and outstanding 11,477.40 shares 115 Retained earnings (deficit) (2,393,078) Accumulated other comprehensive income 21,276 Paid in capital 8,553,194 ------------ $ 6,182,606 ------------ $ 71,578,260 ============
-27- 29 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Nine-month Periods Ended September 30, 1999 and 1998 (Unaudited)
1999 1998 ------------ ------------ Gross revenue $ 23,254,275 $ 21,801,923 Deductions from revenue 2,765,072 2,605,194 ------------ ------------ Net revenue $ 20,489,203 $ 19,196,729 ------------ ------------ Operating expenses: Selling expenses $ 4,246,215 $ 4,527,621 Technical expenses 368,396 401,708 Program and production expenses 5,633,253 5,158,736 General and administrative expenses 7,494,048 7,107,599 ------------ ------------ $ 17,741,912 $ 17,195,664 ------------ ------------ Operating income $ 2,747,291 $ 2,001,065 ------------ ------------ Nonoperating income (expense): Interest income $ 23,884 $ 17,369 Interest expense-lenders (4,324,036) (1,735,440) Gain (loss) on dispositions of property and equipment 5,800 (7,062) Other expense (29,589) (8,787) ------------ ------------ $ (4,323,941) $ (1,733,920) ------------ ------------ Income (loss) before income taxes $ (1,576,650) $ 267,145 Federal and state income taxes 100,968 1,000 ------------ ------------ Net income (loss) $ (1,677,618) $ 266,145 ============ ============
See Notes to Condensed Consolidated Financial Statements (Unaudited). -28- 30 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Nine-month Period Ended September 30, 1999 (Unaudited)
Accumulated Retained Other Preferred Common Earnings Comprehensive Paid-In Stock Stock (Deficit) Income Capital Total --------- ------ ----------- ------------- ---------- ----------- Balance, January 1, 1999 $1,099 $115 $ (715,460) $21,276 $8,553,194 $ 7,860,224 Net Loss, 1999 -- -- (1,677,618) -- -- (1,677,618) ------ ---- ----------- ------- ---------- ----------- Balance, September 30, 1999 $1,099 $115 $(2,393,078) $21,276 $8,553,194 $ 6,182,606 ====== ==== =========== ======= ========== ===========
See Notes to Condensed Consolidated Financial Statements (Unaudited). -29- 31 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine-month Periods Ended September 30, 1999 and 1998 (Unaudited)
1999 1998 ----------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(1,677,618) $ 266,145 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 3,111,257 1,971,898 Provision for doubtful accounts 134,660 134,092 Deferred compensation 49,042 (75,892) (Gain) loss on dispositions of property and equipment (5,800) 7,062 Deferred income taxes (80,000) (70,000) Interest expense added to notes payable 1,308,438 410,282 Change in assets and liabilities: (Increase) in accounts receivable (324,855) (364,640) Decrease in other receivables 805 64,012 (Increase) in prepaid expenses (47,415) (229,807) (Increase) decrease in refundable income taxes 359,600 (49,468) (Increase) decrease in deferred compensation trust accounts (42,613) 122,005 (Decrease) in accounts payable (101,741) (291,577) (Decrease) in accrued expenses (295,951) (88,020) Increase (decrease) in income taxes payable 11,173 (60,100) ----------- ------------ Net cash provided by operating activities $ 2,398,982 $ 1,745,992 ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of property and equipment $ 13,229 $ -- Purchase of property and equipment (497,164) (354,847) Purchase of intangibles (2,968,172) -- Purchase of Bloomington Broadcasting Corporation by Bloomington Broadcasting Holdings, Inc. -- (61,661,396) ----------- ------------ Net cash (used in) investing activities $(3,452,107) $(62,016,243) ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings $ -- $ 450,000 Principal payments on short-term borrowings -- (1,050,000) Proceeds from long-term borrowings 1,250,000 58,928,500 Principal payments on long-term borrowings -- (7,871,897) Payments on capital lease obligations (4,404) (3,314) Proceeds from stock issued -- 9,982,978 ----------- ------------ Net cash provided by financing activities $ 1,245,596 $ 60,436,267 ----------- ------------ Increase in cash and cash equivalents $ 192,471 $ 166,016 Cash and cash equivalents: Beginning 605,685 294,621 ----------- ------------ Ending $ 798,156 $ 460,637 =========== ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 3,035,484 $ 1,325,158 =========== ============ Income taxes, net of refunds received 1999: $298,500 $ (111,397) $ 407,812 =========== ============
See Notes to Condensed Consolidated Financial Statements (Unaudited). -30- 32 BLOOMINGTON BROADCASTING HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Organization and Nature of Operations The Company and its subsidiaries operate AM and FM radio stations in Illinois, Tennessee, Virginia, Michigan, and South Carolina. A subsidiary company also operated a business known as Sign Pro in Illinois. Sign Pro sold customized banners and signs and represented less than one percent of consolidated gross revenue. Sign Pro was sold in April, 1998. The stations are subject to regulation by the Federal Communications Commission. The Company and its subsidiaries grant credit on terms that management establishes for individual accounts. The Companies operated under the following business names during 1999 and 1998:
Twin-Cities Broadcasting Corp. WJBC (AM), WBNQ (FM), WBWN (FM) and Sign Pro Radio Chattanooga, Inc. WGOW (AM), WSKZ (FM), WGOW (FM) and WOGT (FM) Tri-Cities Radio Corp. WJCW (AM), WQUT (FM), WKIN (AM) and WKOS (FM) Michigan Media, Inc. WBBL (AM), WKLQ (FM) and WLAV (FM) Radio South Carolina, Inc. WISW (AM), WTCB (FM), WOMG (FM) and WLXC (FM)
Note 2. Leveraged Buyout Effective on July 1, 1998, Bloomington Broadcasting Holdings, Inc. (formerly Bloomington Broadcasting Acquisition Corp.) purchased 100% of the stock of Bloomington Broadcasting Corporation. The transaction has been recorded in accordance with the "purchase method" of Accounting Principles Board (APB) Opinion No. 16, Business Combinations, and guidance from the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB). The stock purchase was financed through a combination of bank debt, stockholder debentures and issuance of preferred stock. These financial statements include the financial position of Bloomington Broadcasting Holdings, Inc., Bloomington Broadcasting Corporation, and all subsidiaries, as of September 30, 1999. Bloomington Broadcasting Holdings, Inc. was formed in 1998 for the purpose of this acquisition and had no operations in 1999 or 1998 other than its ownership of Bloomington Broadcasting Corporation. The acquisition cost of Bloomington Broadcasting Corporation was approximately $64,478,000 of which $61,661,396 was paid in cash. Amortization of goodwill and other intangible assets acquired in this transaction is computed on the straight-line basis over various periods from 15 years to 50 years. -31- 33 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 3. Basis of Presentation The accompanying reviewed condensed consolidated financial statements of Bloomington Broadcasting Holdings, Inc. and its subsidiaries 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 accruals, considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 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 for the year ended December 31, 1998. All inter-company balances and transactions are eliminated in consolidation. Note 4. Acquisition of a Radio Station In July 1999, Radio South Carolina, Inc. acquired substantially all of the assets of WLXC-FM at a cost of approximately $3,200,000. The acquisition was accounted for under the purchase method of accounting. Note 5. Commitments In July 1999, Michigan Media, Inc. agreed to acquire certain radio station and broadcast assets for $7.5 million. The transaction closed on January 6, 2000. The acquisition was accounted for under the purchase method of accounting. Note 6. Subsequent Event Subsequent to September 30,1999, the Company incurred approximately $400,000 of costs pertaining to a failed initial public offering. These costs were charged to expense in December 1999. On January 23, 2000, the stockholders of the Company entered into a definitive agreement to sell 100% of their stock to Citadel Broadcasting Company, a subsidiary of Citadel Communication Corporation, for $176 million. The transaction will be recorded under the purchase method of accounting. -32- 34 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated financial statements reflect the results of operations and balance sheet of Citadel Broadcasting Company after giving effect to: (1) the following completed transactions (collectively, the "Completed Transactions"): o the February 12, 1998 acquisition of Pacific Northwest Broadcasting Corporation which owned KQFC-FM, KKGL-FM and KBOI-AM in Boise, Idaho for the purchase price of approximately $14.4 million and the April 21, 1998 acquisition of KIZN-FM and KZMG-FM in Boise for the purchase price of approximately $14.5 million (collectively, the "Boise Acquisitions"), o the March 26, 1998 acquisition of WCTP-FM, WCTD-FM and WKJN-AM serving the Wilkes-Barre/Scranton market for the purchase price of approximately $6.0 million (the "Wilkes-Barre/Scranton Acquisition"), o the November 17, 1998 acquisition of KAAY-AM in Little Rock, Arkansas for the purchase price of approximately $5.1 million, o the February 9, 1999 acquisition of WKQZ-FM, WYLZ-FM, WILZ-FM, WIOG-FM, WGER-FM and WSGW-AM in Saginaw/Bay City, Michigan for the purchase price of approximately $35.0 million (the "Saginaw/Bay City Acquisition"), o the February 17, 1999 acquisition of WHYL-FM and WHYL-AM in Harrisburg/Carlisle, Pennsylvania for the purchase price of approximately $4.5 million (the "Carlisle Acquisition"), o the March 17, 1999 acquisition of Citywide Communications, Inc., which owned KQXL-FM, WEMX-FM, WCAC-FM, WXOK-AM and WIBR-AM serving the Baton Rouge, Louisiana market and KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM serving the Lafayette, Louisiana market for the purchase price of approximately $31.5 million (the "Baton Rouge/Lafayette Acquisition"), o the April 30, 1999 acquisition of KSPZ-FM serving the Colorado Springs, Colorado market in exchange for KKLI-FM in Colorado Springs, the April 30, 1999 acquisition of KVOR-AM and KTWK-AM serving the Colorado Springs, Colorado market and KEYF-FM and KEYF-AM serving the Spokane, Washington market for the purchase price of approximately $10.0 million and the April 30, 1999 termination of a joint sales agreement under which Citadel Communications operated certain other radio stations in Colorado Springs and Spokane (collectively, the "Capstar Transactions"), o the June 30, 1999 acquisition of WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM, WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM in Charleston, South Carolina, WHWK-FM, WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM in Binghamton, New York, WMDH-FM and WMDH-AM in Muncie, Indiana and WWKI-FM in Kokomo, Indiana for the purchase price of approximately $77.0 million (the "Charleston/Binghamton/Muncie/Kokomo Acquisition"), o the August 31, 1999 acquisition of Fuller-Jeffrey Broadcasting Companies, Inc. which owned WOKQ-FM, WPKQ-FM, WXBB-FM and WXBP-FM serving the Portsmouth/Dover/Rochester, New Hampshire market and WBLM-FM, WCYI-FM, WCYY-FM, WHOM-FM, WJBQ-FM and WCLZ-FM serving the Portland, Maine market for the purchase price of approximately $65.3 million, which amount includes the repayment of certain indebtedness of Fuller-Jeffrey Broadcasting and approximately $1.8 million in consulting and noncompetition payments payable over a seven-year period (the "Portsmouth/Dover/Rochester/Portland Acquisition"), o the November 1, 1999 acquisition of KOOJ-FM in Baton Rouge, Louisiana for the purchase price of approximately $9.5 million, o the December 23, 1999 acquisition of Caribou Communications Co. which owned KATT-FM, KYIS-FM, KCYI-FM, KNTL-FM and WWLS-AM in Oklahoma City, Oklahoma for a purchase price of approximately $61.5 million, which amount includes the repayment of certain indebtedness of Caribou Communications (the "Oklahoma City Acquisition"), o the July 27, 1998 sale of WEST-AM in Allentown/Bethlehem, Pennsylvania as a portion of the consideration for the 1997 acquisition of WLEV-FM in Allentown/Bethlehem, -33- 35 o the October 7, 1998 sale of WQCY-FM, WTAD-AM, WMOS-FM and WBJR-FM in Quincy, Illinois for the sale price of approximately $2.3 million (the "Quincy Sale"), o the November 9, 1999 sale of KKTT-FM, KEHK-FM and KUGN-AM in Eugene, Oregon, KAKT-FM, KBOY-FM, KCMX-FM, KTMT-FM, KCMX-AM and KTMT-AM in Medford, Oregon, KEYW-FM, KORD-FM, KXRX-FM, KTHT-FM and KFLD-AM in Tri-Cities, Washington, KCTR-FM, KKBR-FM, KBBB-FM, KMHK-FM and KBUL-AM in Billings, Montana, WQKK-AM and WGLU-FM in Johnstown, Pennsylvania and WQWK-FM, WNCL-FM, WRSC-AM and WBLF-AM in State College, Pennsylvania for the sale price of approximately $26.0 million (the "Marathon Disposition"), o the July 1998 initial public offering by Citadel Communications of shares of its common stock and the use of net proceeds from that offering, o the November 1998 sale by Citadel Communications' subsidiary, Citadel Broadcasting Company, of $115.0 million principal amount of its 9-1/4% Senior Subordinated Notes due 2008 and the use of net proceeds from that offering, o the June 1999 public offering by Citadel Communications of shares of its common stock and the use of net proceeds from that offering (the "1999 Offering"), and o the August 1999 redemption of a portion of Citadel Broadcasting's outstanding 13-1/4% Exchangeable Preferred Stock (the "Preferred Redemption"); and (2) the following pending acquisitions (collectively, the "Pending Acquisitions'): o the pending acquisition of WGRF-FM, WEDG-FM, WHIT-FM, WMNY-AM and WHLD-AM in Buffalo, New York, WAQX-FM, WLTI-FM, WNSS-AM, and WNTQ-FM in Syracuse, New York, WIII-FM and WKRT-AM in Ithaca, New York, WMME-FM, WEZW-FM, WEBB-FM and WTVL-AM in Augusta-Waterville, Maine, WBPW-FM, WOZI-FM and WQHR-FM in Presque Isle-Caribou, Maine, WCRQ-FM in Dennysville-Calais, Maine, KMYY-FM, KYEA-FM, KZRZ-FM and KTJC-FM in Monroe, Louisiana, KDOK-FM, KTBB-FM, KEES-AM, KYZS-AM and KGLD-AM in Tyler-Longview, Texas, WFPG-AM, WFPG-FM and WPUR-FM in Atlantic City, New Jersey, WFHN-FM and WBSM-AM in New Bedford, Massachusetts, WQGN-FM, WSUB-AM and WVVE-FM in New London, Connecticut and the right to operate WKOE-FM in Atlantic City under a program service and time brokerage agreement for the aggregate purchase price of approximately $190.0 million (the "BPH Acquisition"), o the pending acquisition of KSMB-FM, KDYS-AM, KVOL-FM and KVOL-AM in Lafayette, Louisiana for the purchase price of approximately $8.5 million (the "Lafayette Acquisition"), o the pending acquisition of WMMQ-FM, WJIM-FM, WFMK-FM, WITL-FM, WVFN-AM and WJIM-AM in Lansing, Michigan, WHNN-FM and WTCF-FM in Saginaw, Michigan and WFBE-FM in Flint, Michigan for the aggregate purchase price of approximately $120.5 million, of which, subject to certain conditions, approximately $10.1 million would be paid in shares of Citadel Communications' common stock valued at $50.375 per share (the "Michigan" Acquisition"), o the pending acquisitions of WXLO-FM, WORC-FM and WWFX-FM in Worcester, Massachusetts for the aggregate purchase price of approximately $38.75 million (the "Worcester Acquisitions"), and o the pending acquisition of Bloomington Broadcasting Holdings, Inc., which is expected to own at closing WKLQ-FM, WBBL-AM, WLAV-FM and WODJ-FM, in Grand Rapids, Michigan, WTCB-FM, WOMG-FM, WLXC-FM and WISW-AM in Columbia, South Carolina, WSKZ-FM, WOGT-FM, WGOW-AM and WGOW-FM in Chattanooga, Tennessee, WQUT-FM, WKOS-FM, WJCW-AM, WKIN-AM, and WGOC-AM in Johnson City/Kingsport/Bristol, Tennessee and WJBC-AM, WBNQ-FM and WBWN-FM in Bloomington, Illinois, for the aggregate purchase price of approximately $176.0 million, which amount includes repayment of indebtedness of Bloomington Broadcasting Holdings that may be outstanding at the time of closing and a deferred obligation relating to a recent radio station purchase by Bloomington Broadcasting Holdings (the "Bloomington Acquisition"); and The unaudited pro forma condensed consolidated financial statements are based on Citadel Broadcasting's historical consolidated financial statements, the financial statements of those entities acquired, or from which assets were acquired, in connection with the Completed Transactions, and the financial statements of those entities to be acquired, or from which assets will be acquired, in connection with the Pending Acquisitions. In the opinion of management, all adjustments necessary to fairly present this pro forma information have been made. The interest rate applied to borrowings under, and repayments of, Citadel Broadcasting's credit facility in the pro forma consolidated statements of operations was 8.4375%, which represents the interest rate in effect under the then existing credit facility as of January 1, 1998. Pro forma financial information has been adjusted to reflect the following, when applicable: o Prior to the acquisition dates, Citadel Broadcasting operated some of the acquired stations under a joint sales agreement ("JSA") or local marketing agreement ("LMA"). Citadel Broadcasting receives or pays fees for such services accordingly. Net revenue and station operating expenses for stations operated under JSAs are included to reflect ownership of the stations as of January 1, 1998. Net revenue and station operating expenses for stations operated under LMAs are included in Citadel Broadcasting's historical consolidated financial statements. For those stations operated under JSAs and LMAs and subsequently acquired, associated fees and redundant expenses were eliminated and estimated occupancy costs were included to adjust the results of the operations to reflect ownership of the stations as of January 1, 1998. o Elimination of revenue and operating expenses from the entities acquired, or from which assets were acquired, in connection with the Completed Transactions, and the entities to be acquired, or from which assets will be acquired, in connection with the Pending Acquisitions, which would not have been incurred if the acquisition had occurred on January 1, 1998. The eliminated items were deemed redundant and therefore are not reflected as of January 1, 1998. Depreciation and amortization for the acquisitions are based upon preliminary allocations of the purchase price to property and equipment and intangible assets. Actual depreciation and amortization may differ depending on the final allocation of the purchase price. However, management does not believe these differences will be material. For pro forma purposes, Citadel Broadcasting's balance sheet as of September 30, 1999 has been adjusted to give effect to the following transactions as if each had occurred on September 30, 1999: (1) the Marathon Disposition, (2) the acquisition of KOOJ-FM, (3) the Oklahoma City Acquisition, and -34- 36 (3) the Pending Acquisitions. The unaudited pro forma information is presented for illustrative purposes only and does not indicate the operating results or financial position that would have occurred if the transactions described above had been completed on the dates indicated, nor is it indicative of future operating results or financial position if the pending transactions described above are completed. Citadel Broadcasting cannot predict whether the completion of the Pending Acquisitions will conform to the assumptions used in the preparation of the unaudited pro forma condensed consolidated financial statements. Additionally, completion of each of the Pending Acquisitions is subject to certain conditions. Although Citadel Broadcasting believes these closing conditions are generally customary for transactions of this type, there can be no assurance that such conditions will be satisfied. -35- 37 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET September 30, 1999 (DOLLARS IN THOUSANDS)
CITADEL BROADCASTING AS ADJUSTED ADJUSTMENTS FOR FOR OKLAHOMA OKLAHOMA CITY CITY ACQUISITION, ACQUISITION, MARATHON MARATHON ADJUSTMENTS ACTUAL DISPOSITION DISPOSITION FOR PRO FORMA CITADEL AND ACQUISITION AND ACQUISITION THE PENDING CITADEL BROADCASTING OF KOOJ-FM(1) OF KOOJ-FM ACQUISITIONS(2) BROADCASTING -------------- ----------------- -------------- --------------- -------------- ASSETS Cash and cash equivalents $ 8,798 321 $ 9,119 $ 798 $ 9,917 Restricted cash -- 26,000 26,000 (26,000) -- Accounts and notes receivable, net 48,208 1,906 50,114 2,008 52,122 Prepaid expenses 3,808 21 3,829 150 3,979 Assets held for sale 25,991 (25,991) -- -- -- -------- -------- -------- -------- ---------- Total current assets 86,805 2,257 89,062 (23,044) 66,018 Property and equipment, net 68,088 2,505 70,593 20,670 91,263 Intangible assets, net 480,431 68,034 548,465 546,106 1,094,571 Other assets 4,205 -- 4,205 -- 4,205 -------- -------- -------- -------- ---------- TOTAL ASSETS $639,529 $ 72,796 $712,325 $543,732 $1,256,057 ======== ======== ======== ======== ========== LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable and accrued liabilities $ 15,021 $ 980 $ 16,001 $ 1,841 $ 17,842 Current maturities of other long-term Obligations 994 250 1,244 1,049 2,293 -------- -------- -------- -------- ---------- Total current liabilities 16,015 1,230 17,245 2,890 20,135 Notes payable, less current maturities 57,500 70,916 128,416 497,675 626,091 10-1/4% Notes 210,401 -- 210,401 -- 210,401 9-1/4% Notes Other long-term obligations, less current Maturities 2,685 1,000 3,685 3,465 7,150 Deferred tax liability 46,964 -- 46,964 29,627 76,591 Exchangeable preferred stock 82,526 -- 82,526 -- 82,526 Common stock and additional paid-in capital 260,927 -- 260,927 10,075 271,002 Deferred compensation (3,329) -- (3,329) -- (3,329) Accumulated other comprehensive loss (12) -- (12) -- (12) Accumulated deficit/retained earnings (34,148) (350) (34,498) -- (34,498) -------- -------- -------- -------- ---------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $639,529 $ 72,796 $712,325 $543,732 $1,256,057 ======== ======== ======== ======== ==========
(1) Represents the net effect of the Oklahoma City Acquisition, the Marathon Disposition and the acquisition of KOOJ-FM, as if each transaction had taken place on September 30, 1999. (2) Represents the net effect of the Pending Acquisitions as if each transaction had taken place on September 30, 1999. -36- 38 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (DOLLARS IN THOUSANDS)
CITADEL BROADCASTING AS ADJUSTED ADJUSTMENTS ACTUAL ADJUSTMENTS FOR FOR FOR PRO FORMA CITADEL COMPLETED COMPLETED THE PENDING CITADEL BROADCASTING TRANSACTIONS (1) TRANSACTIONS ACQUISITIONS(2) BROADCASTING -------------- ---------------- ------------ --------------- -------------- Net revenue...................... $126,521 $19,382 $145,903 $ 71,179 $217,082 Station operating expenses....... 85,124 10,241 95,365 49,223 144,588 Depreciation and amortization.... 25,589 11,206 36,795 28,194 64,989 Corporate general and administrative................ 4,921 (131) 4,790 -- 4,790 -------- ------- -------- -------- -------- Operating expenses............ 115,634 21,316 136,950 77,417 214,367 -------- ------- -------- -------- -------- Operating income (loss).......... 10,887 (1,934) 8,953 (6,238) 2,715 Interest expense................. 17,502 4,918 22,420 31,494 53,914 Other (income) expense, net...... (1,187) 350 (837) -- (837) -------- ------- -------- -------- -------- Income (loss) before income taxes......................... (5,428) (7,202) (12,630) (37,732) (50,362) Income taxes (benefit)........... (1,376) (850) (2,226) (1,481) (3,707) Dividend requirement for Exchangeable Preferred Stock.. (11,322) 2,812 (8,510) -- (8,510) -------- ------- -------- -------- -------- Income (loss) from continuing operations applicable to common shares... $(15,374) $(3,540) $(18,914) $(36,251) $(55,165) ======== ======= ======== ======== ========
(1) Represents the net effect of the Completed Transactions that were consummated after January 1, 1999 as if each transaction had taken place on January 1, 1998. Dollars in the table below are shown in thousands.
PORTSMOUTH/ CHARLESTON/ DOVER/ BINGHAMTON OKLAHOMA ROCHESTER/ MUNCIE/ BATON ROUGE/ CITY PORTLAND KOKOMO LAFAYETTE ACQUISITION ACQUISITION ACQUISITION ACQUISITION ----------- ----------- ----------- ------------ Net revenue $ 7,155 $10,642 $ 9,543 $1,371 Station operating expenses 4,831 6,021 6,711 1,275 Depreciation and amortization 3,292 3,628 2,685 628 Corporate general and administrative -- -- -- -- ------- ------- ------- ------ Operating expenses 8,123 9,649 9,396 1,903 ------- ------- ------- ------ Operating income (loss) (968) 993 147 (532) Interest expense 3,897 3,234 2,531 -- Other (income) expenses, net -- -- -- -- ------- ------- ------- ------ Income (loss) before income taxes (4,865) (2,241) (2,384) (532) Income taxes (benefit) (724) -- (126) Dividend requirement for Exchangeable Preferred Stock -- -- -- -- ------- ------- ------- ------ Income (loss) from continuing operations $(4,865) $(1,517) $(2,384) $ (406) ======= ======= ======= ======
CARLISLE ACQUISITION, ADJUSTMENTS CAPSTAR FOR THE TRANSACTIONS, 1999 OFFERING SAGINAW/ KOOJ ACQUISITION AND THE BAY CITY AND MARATHON PREFERRED THE COMPLETED ACQUISITION DISPOSITION REDEMPTION TRANSACTIONS ----------- ----------- ---------- ------------ Net revenue $ 526 $(9,855) $ -- $19,382 Station operating expenses 486 (9,083) -- 10,241 Depreciation and amortization 202 771 -- 11,206 Corporate general and administrative -- (131) -- (131) ----- ------- ------- ------- Operating expenses 688 (8,443) -- 21,316 ----- ------- ------- ------- Operating income (loss) (162) (1,412) -- (1,934) Interest expense -- (1,044) (3,700) 4,918 Other (income) expenses, net -- 350 -- 350 ----- ------- ------- ------- Income (loss) before income taxes (162) (718) 3,700 (7,202) Income taxes (benefit) -- -- -- (850) Dividend requirement for Exchangeable Preferred Stock -- -- 2,812 2,812 ----- ------- ------- ------- Income (loss) from continuing operations $(162) $ (718) $ 6,512 $(3,540) ===== ======= ======= =======
(2) Represents the net effect of the Pending Acquisitions as if each transaction had taken place on January 1, 1998. Dollars in the table below are shown in thousands.
BPH LAFAYETTE MICHIGAN WORCESTER BLOOMINGTON PENDING ACQUISITION ACQUISITION ACQUISITION ACQUISITIONS ACQUISITION ACQUISITIONS ----------- ----------- ----------- ------------ ------------ ------------ Net revenue $ 31,231 $1,749 $14,092 $ 3,618 $ 20,489 $ 71,179 Station operating expenses 23,328 1,331 7,851 2,837 13,876 49,223 Depreciation and amortization 9,649 474 6,039 1,964 10,068 28,194 -------- ------ ------- ------- -------- -------- Operating expenses 32,977 1,805 13,890 4,801 23,944 77,417 -------- ------ ------- ------- -------- -------- Operating income (loss) (1,746) (56) 202 (1,183) (3,455) (6,238) Interest expense 10,378 538 6,988 2,452 11,138 31,494 -------- ------ ------- ------- -------- -------- Income (loss) before income taxes (12,124) (594) (6,786) (3,635) (14,593) (37,732) Income taxes (benefit) -- -- -- -- (1,481) (1,481) -------- ------ ------- ------- -------- -------- Income (loss) from continuing operations $(12,124) $ (594) $(6,786) $(3,635) $(13,112) $(36,251) ======== ====== ======= ======= ======== ========
-37- 39 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (DOLLARS IN THOUSANDS)
CITADEL BROADCASTING ADJUSTMENTS ACTUAL ADJUSTMENTS FOR AS ADJUSTED FOR THE PRO FORMA CITADEL COMPLETED FOR COMPLETED PENDING CITADEL BROADCASTING TRANSACTIONS (1) TRANSACTIONS ACQUISITIONS(2) BROADCASTING -------------- ---------------- ------------ --------------- -------------- Net revenue....................... $135,426 $41,137 $176,563 $ 87,708 $264,271 Station operating expenses........ 93,485 25,056 118,541 61,866 180,407 Depreciation and amortization..... 26,414 21,591 48,005 36,635 84,640 Corporate general and administrative.................. 4,369 (349) 4,020 -- 4,020 -------- ------- -------- -------- -------- Operating expenses.............. 124,268 46,298 170,566 98,501 269,067 -------- ------- -------- -------- -------- Operating income (loss)........... 11,158 (5,161) 5,997 (10,793) (4,796) Interest expense.................. 18,126 3,651 21,777 40,789 62,566 Other (income) expense, net....... (1,651) 350 (1,301) -- (1,301) -------- ------- -------- -------- -------- Income (loss) before income taxes........................... (5,317) (9,162) (14,479) (51,582) (66,061) Income taxes (benefit)............ (1,386) (1,591) (2,977) (1,975) (4,952) Dividend requirement for -- Exchangeable Preferred Stock.... (14,586) 138 (14,448) -- (14,448) -------- ------- -------- -------- -------- Income (loss) from continuing operations applicable to common shares.......................... $(18,517) $(7,433) $(25,950) $(49,607) $(75,557) ======== ======= ======== ======== ========
(1) Represents the net effect of the Completed Transactions as if each transaction had taken place on January 1, 1998. Dollars in the table below are shown in thousands.
PORTSMOUTH/ CHARLESTON/ DOVER/ BINGHAMTON/ BATON OKLAHOMA ROCHESTER/ MUNCIE/ ROUGE/ SAGINAW/ CITY PORTLAND KOKOMO LAFAYETTE BAY CITY ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION ----------- ----------- ----------- ----------- ----------- Net revenue $ 8,250 $13,642 $17,421 $7,331 $6,981 Station operating expenses 6,240 8,676 12,100 5,170 4,447 Depreciation and amortization 4,390 5,441 5,369 2,914 2,421 Corporate general and administrative -- -- -- -- -- ------- ------- ------- ------ ------ Operating expenses 10,630 14,117 17,469 8,084 6,868 Operating income (loss) (2,380) (475) (48) (753) 113 Interest expense 5,196 4,852 5,063 -- -- Other (income) expense, net -- -- -- -- -- ------- ------- ------- ------ ------ Income (loss) before income taxes (7,576) (5,327) (5,111) (753) 113 Income taxes (benefit) -- (1,086) -- (505) -- Dividend requirement for Exchangeable Preferred Stock -- -- -- -- -- ------- ------- ------- ------ ------ Income (loss) from continuing Operations $(7,576) $(4,241) $(5,111) $ (248) $ 113 ======= ======= ======= ====== ======
ADJUSTMENTS OTHER REPAYMENT FOR THE ACQUISITIONS OF THE OFFERING 1999 OFFERING THE AND CREDIT OF THE AND THE COMPLETED DISPOSITIONS FACILITY 9-1/4% PREFERRED TRANS- (a) (b) NOTES(c) REDEMPTION(d) ACTIONS ------------ ------- -------- ------------- ------- Net revenue $(12,488) $ -- $ -- $ -- $41,137 Station operating expenses (11,577) -- -- -- 25,056 Depreciation and amortization 1,056 -- -- -- 21,591 Corporate general and administrative (349) -- -- -- (349) -------- ------- ------- ------- ------- Operating expenses (10,870) -- -- -- 46,298 Operating income (loss) (1,618) -- -- -- (5,161) Interest expense (947) (4,487) 1,374 (7,400) 3,651 Other (income) expense, net 350 -- -- 350 -------- ------- ------- ------- ------- Income (loss) before income taxes (1,021) 4,487 (1,374) 7,400 (9,162) Income taxes (benefit) -- -- -- -- (1,591) Divided requirement for Exchangeable Preferred Stock -- -- -- 138 138 -------- ------- ------- ------- ------- Income (loss) from continuing Operations $ (1,021) $ 4,487 $(1,374) $ 7,538 $(7,433) ======== ======= ======= ======= =======
(a) Represents the net effect of the Marathon Disposition, the Carlisle Acquisition, the Capstar Transactions, the Boise Acquisitions, the Wilkes-Barre/Scranton Acquisition, the acquisition of KOOJ-FM in Baton Rouge, the disposition of WEST-AM in Allentown/Bethlehem, the acquisition of KAAY-AM in Little Rock and the Quincy Sale. (b) Represents the repayment of outstanding borrowings under Citadel Broadcasting's credit facility with the proceeds from the Citadel Communications' initial public offering. (c) Reflects the recording of the net increase in interest expense and the amortization of deferred financing costs of $3.5 million related to Citadel Broadcasting's 9-1/4% Senior Subordinated Notes due 2008. (d) Represents the use of proceeds from the 1999 Offering, including the redemption of approximately 35% of Citadel Broadcasting's issued and outstanding Exchangeable Preferred Stock. -38- 40 (2) Represents the net effect of the Pending Acquisitions as if each transaction had taken place on January 1, 1998. Dollars in the table below are shown in thousands.
BPH LAFAYETTE MICHIGAN WORCESTER BLOOMINGTON PENDING ACQUISITION ACQUISITION ACQUISITION(a) ACQUISITIONS(b) ACQUISITION ACQUISITIONS ----------- ------------ ------------ --------------- ------------ ------------ Net revenue $ 38,628 $ 2,383 $ 16,900 $ 3,336 $ 26,461 $ 87,708 Station operating expenses 28,842 1,984 9,322 2,541 19,177 61,866 Depreciation and amortization 12,865 631 8,052 1,663 13,424 36,635 -------- -------- -------- -------- -------- -------- Operating expenses 41,707 2,615 17,374 4,204 32,601 98,501 Operating income (loss) (3,079) (232) (474) (868) (6,140) (10,793) Interest expense 13,838 717 9,317 2,067 14,850 40,789 -------- -------- -------- -------- -------- -------- Income (loss) before income taxes (16,917) (949) (9,791) (2,935) (20,990) (51,582) Income taxes (benefit) -- -- -- -- (1,975) (1,975) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations $(16,917) $ (949) $ (9,791) $ (2,935) $(19,015) $(49,607) ======== ======== ======== ======== ======== ========
(a) Citadel Broadcasting may sell one or more of its stations serving Saginaw/Bay City in connection with this acquisition. However, Citadel Broadcasting is unable to include the effect of the divestiture in this pro forma financial information until it determines the station or stations it may sell. (b) The current owner of WWFX-FM purchased the station in January 1999. Citadel Broadcasting is unable to provide operating results for the year ended December 31, 1998 as the information is not currently available. In the opinion of management, the 1998 operations are not significant to the pro forma condensed consolidated statement of operations. -39- 41 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CITADEL BROADCASTING COMPANY Date: January 25, 2000 By: /s/ Lawrence R. Wilson ------------------ -------------------------------------- Lawrence R. Wilson Chairman and Chief Executive Officer -40- 42 EXHIBIT INDEX 23.1 Consent of Dunbar, Breitweiser & Company, LLP. 99.1 Press Release of Citadel Communications Corporation, dated January 24, 2000. EX-23.1 2 EXHIBIT 23.1 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT To the Board of Directors Citadel Broadcasting Company We consent to the incorporation by reference in the registration statement (No. 333-92593) on Form S-3 of Citadel Communications Corporation, Citadel Broadcasting Company, CCC Capital Trust I and CCC Capital Trust II of our report dated February 4, 1999 (except for Note 14 as to which the date is February 15, 1999), relating to the consolidated balance sheet of Bloomington Broadcasting Holdings, Inc. and subsidiaries as of December 31, 1998, and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended, which report appears in the Form 8-K of Citadel Broadcasting Company filed January 26, 2000. /s/ Dunbar, Breitweiser & Company, LLP Bloomington, Illinois January 26, 2000 EX-99.1 3 EXHIBIT 99.1 1 Exhibit 99.1 [CITADEL LOGO] Citadel Communications Corporation ---------------------------------------------------------- News Announcement For Immediate Release CONTACT: Donna Heffner Joseph N. Jaffoni Chief Financial Officer Stewart A. Lewack Citadel Communications Corporation Jaffoni & Collins Incorporated 702/804-5200 212/835-8500 or citc@jcir.com CITADEL COMMUNICATIONS AGREES TO ACQUIRE BLOOMINGTON BROADCASTING - Adds 20 Stations in Five New Mid-Sized Markets - BLOOMINGTON, IL and LAS VEGAS, NV, January 24, 2000 - Mid-sized market radio broadcaster Citadel Communications Corporation (Nasdaq: CITC) announced today that its principal operating subsidiary, Citadel Broadcasting Company, has entered into a definitive agreement to acquire Bloomington Broadcasting, the owner of 20 radio stations in five mid-sized markets, for approximately $176 million cash. Upon completion of the transaction, Citadel will add WKLQ-FM, WLAV-FM, WODJ-FM and WBBL-AM in Grand Rapids, Michigan, the nation's 66th largest market; WOMG-FM, WTCB-FM, WLXC-FM and WISW-AM in Columbia, South Carolina, the nation's 88th largest market; WKOS-FM, WQUT-FM, WGOC-AM, WJCW-AM and WKIN-AM in Johnson City-Kingsport-Bristol, Tennessee, the nations's 95th largest market; WOGT-FM, WSKZ-FM, and WGOW-AM/FM in Chattanooga, Tennessee, the nation's 102nd largest market; and, WBNQ-FM, WBWN-FM and WJBC-AM in Bloomington, Illinois, the nation's 230th largest market. Commenting on the transaction, Citadel Chairman and Chief Executive Officer, Larry Wilson, stated, "Bloomington Broadcasting is one of the most well respected private station groups in the industry today, and we're very excited to welcome its management team to the Citadel family. Upon completion of the transaction, Ken Maness, the President of Bloomington, will assume a senior management position at Citadel. Bloomington brings to Citadel some dynamic regional clusters, two of which add to our growing presence in Michigan and South Carolina. We look forward to a long-term partnership with Ken and to extending his company's already impressive track record of success." 2 CITADEL COMMUNICATIONS, 1/24/00 Page 2 Kenneth H. Maness, President and Chief Executive Officer of Bloomington Broadcasting, added, "We're proud of the great people and radio clusters that we have developed and it is especially exciting to pass them forward to one of the most dynamic radio broadcasters in the country. When we decided to sell the company, our goal was to maximize value for our shareholders and to create the best possible opportunities for our employees. In Citadel, we found the perfect match. We are thrilled to be able to advance our vision with a great radio company." Completion of the transaction, expected to close in the second quarter of 2000, is subject to regulatory approval and other customary closing conditions. First Union Securities, Inc. represented the sellers in the transaction. Citadel is a radio broadcasting company that, upon completion of pending transactions, will own or operate 136 FM and 60 AM radio stations concentrated in 42 mid-sized markets. The Company owns all of the issued and outstanding common stock of Citadel. This news announcement contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as "will" or variations of such words and similar expressions are intended to signify such forward-looking statements. Key risks are described in the Company's and Citadel's reports filed with the U.S. Securities and Exchange Commission. Readers should note that these statements may be impacted by several factors, including economic changes and changes in the radio broadcast industry generally and, accordingly, the Company's and Citadel's actual performance and results may vary form those stated herein and the Company and Citadel undertake no obligation to update the information contained herein. # # # -----END PRIVACY-ENHANCED MESSAGE-----