-----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, Ldl973Z3HLlXp8aqSC/Tu1yxDIw6NwFEyAC6M8xyomLbV8TF/0OUm83Hw7OUtIXa l10p7X5RJWpv2uaWFCnKJg== 0000950128-00-000721.txt : 20000502 0000950128-00-000721.hdr.sgml : 20000502 ACCESSION NUMBER: 0000950128-00-000721 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000415 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000501 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: 615779 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 COMPANY FORM 8-K 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) April 15, 2000 Citadel Broadcasting Company ---------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Nevada ---------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 333-36771 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 "believes" and "intends" 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. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On April 15, 2000, Citadel Broadcasting Company completed its acquisition from Broadcasting Partners Holdings, L.P. of a total of 23 FM and 12 AM radio stations serving the markets of Buffalo/Niagara Falls, Syracuse and Ithaca, New York; Atlantic City/Cape May, New Jersey; Tyler/Longview, Texas; Monroe, Louisiana; New London, Connecticut; New Bedford/Fall River, Massachusetts; and Augusta/Waterville, Presque Isle and Dennysville/Calais, Maine, as well as the right to operate an additional FM radio station in Atlantic City/Cape May under a program service and time brokerage agreement and the right to sell advertising in the United States for one FM radio station in Niagara Falls, Ontario under a joint sales agreement. The aggregate purchase price was approximately $189.0 million in cash. Proceeds from Citadel Broadcasting's November 1999 sale of 25 radio stations and proceeds from Citadel Broadcasting's parent, Citadel Communication Corporation's February 2000 public offering of common stock were used to complete the acquisition. In addition to the stations and operating rights acquired, Citadel Broadcasting was assigned the rights under a purchase agreement to acquire one additional AM radio station in Buffalo/Niagara Falls that an affiliate of the seller had entered into an agreement to purchase. The aggregate consideration paid or to be paid for this AM radio station is expected to be approximately $0.8 million. The completion of this transaction is subject to various conditions. Although Citadel Broadcasting believes that these closing conditions are generally customary for transactions of this type, there can be no assurances that the conditions will be satisfied. Pending the acquisition, Citadel Broadcasting operates this station under a time brokerage agreement. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements. The following financial statements of Broadcasting Partners Holdings Radio Group are included in this report: Independent Auditors' Report Combined Balance Sheets as of December 31, 1998 and 1999 Combined Statements of Operations for the years ended December 31, 1997, 1998 and 1999 Combined Statements of Partners' Capital for the years ended December 31, 1997, 1998 and 1999 Combined Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999 Notes to Combined Financial Statements 1 3 (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 December 31, 1999 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1999 (c) Exhibits. The following exhibits are filed as part of this report: 2.1 Asset Purchase Agreement dated October 27, 1999 by and between Citadel Broadcasting Company and Broadcasting Partners Holdings, L.P. (incorporated by reference to Exhibit 2.1 to Citadel Communications Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1999). 23.1 Consent of KPMG LLP. 2 4 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Combined Financial Statements December 31, 1998 and 1999 (With Independent Auditors' Report Thereon) 3 5 BROADCASTING PARTNERS HOLDINGS RADIO GROUP TABLE OF CONTENTS PAGE Independent Auditors' Report 5 Combined Balance Sheets 6 Combined Statements of Operations 7 Combined Statements of Partners' Capital 8 Combined Statements of Cash Flows 9 Notes to Combined Financial Statements 10 4 6 INDEPENDENT AUDITORS' REPORT The Partners Broadcasting Partners Holdings, L.P.: We have audited the accompanying combined balance sheets of Broadcasting Partners Holdings Radio Group as of December 31, 1998 and 1999 and the related combined statements of operations, cash flows and partners' capital for the period from January 9, 1997 (inception) through December 31, 1997 and for each of the years in the two-year period ended December 31, 1999. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Broadcasting Partners Holdings Radio Group as of December 31, 1998 and 1999 and the results of its operations and its cash flows for the period from January 9, 1997 (inception) through December 31, 1997 and for each of the years in the two-year period ended December 31, 1999 in conformity with generally accepted accounting principles. As discussed in Note 2 to the financial statements, the Company changed its accounting for start-up costs in accordance with AICPA Statement of Position 98-5, Reporting on the Cost of Start-Up Activities. /s/ KPMG LLP McLean, Virginia March 24, 2000 5 7 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Combined Balance Sheets
DECEMBER 31, ---------------------------------- ASSETS 1998 1999 ------------ ------------ Current assets: Cash and cash equivalents $ 1,584,767 673,907 Receivables, net 8,970,792 9,597,486 Other receivables 925,267 693,724 Trade receivables 863,299 796,337 Due from seller 35,477 -- Prepaid and other current assets 736,411 570,521 ------------ ------------ Total current assets 13,116,013 12,331,975 Property and equipment, net 9,518,274 10,796,010 Intangible assets, net 95,582,524 90,790,577 Due from related party 55,445 72,323 Other noncurrent assets, net 1,384,799 1,569,217 ------------ ------------ $119,657,055 115,560,102 ============ ============ LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Current installments of long-term debt $ 10,676,765 10,843,753 Current installments of capital lease obligations 57,232 61,741 Accounts payable 3,057,798 3,020,053 Trade payables 940,729 660,612 Due to related party 132,584 744,260 Accrued expenses 1,184,869 944,206 Accrued interest 1,057,608 451,490 Due to receiver 96,733 86,762 Due to seller -- 1,100,000 Other current liabilities 292,883 393,459 ------------ ------------ Total current liabilities 17,497,201 18,306,336 Long-term debt, less current installments 60,559,310 56,839,981 Deferred compensation -- 1,703,000 Capital lease obligations, less current installments 87,884 26,143 Due to related party, non-current 365,278 -- Other noncurrent liabilities 302,039 235,465 ------------ ------------ Total liabilities 78,811,712 77,110,925 Commitments and contingencies Partners' capital 40,845,343 38,449,177 ------------ ------------ $119,657,055 115,560,102 ============ ============
See accompanying notes to combined financial statements 6 8 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Combined Statements of Operations
JANUARY 9, 1997 (INCEPTION) THROUGH YEAR ENDED DECEMBER 31, DECEMBER 31, ----------------------------------- 1997 1998 1999 ------------ ------------ ------------ Revenue: Broadcast revenues $ 21,920,579 37,855,506 42,723,354 Trade revenues 3,093,236 4,228,085 5,068,041 Other revenues 756,503 500,416 570,288 ------------ ------------ ------------ Gross revenues 25,770,318 42,584,007 48,361,683 Less: agency commissions (2,377,182) (3,956,627) (4,277,427) ------------ ------------ ------------ Net revenue 23,393,136 38,627,380 44,084,256 ------------ ------------ ------------ Operating costs: Station operating expenses 5,225,267 8,430,940 10,247,077 Selling expenses 4,654,221 9,337,926 10,123,848 General and administrative expenses 4,591,520 7,177,313 8,349,965 Trade expenses 3,112,187 4,220,219 4,919,548 LMA fees 1,842,475 353,675 147,702 Depreciation and amortization 555,273 1,400,758 1,729,385 Amortization of intangible assets 3,862,133 7,497,199 7,318,488 Deferred compensation expense -- -- 1,703,000 Costs related to terminated acquisitions -- -- 406,190 ------------ ------------ ------------ 23,843,076 38,418,030 44,945,203 ------------ ------------ ------------ Operating income (loss) (449,940) 209,350 (860,947) ------------ ------------ ------------ Other income (expense): Interest expense (3,179,183) (6,560,152) (6,300,698) Interest income 29,261 60,667 26,523 Other, net 38,692 (17,289) (54,084) ------------ ------------ ------------ Loss before cumulative effect of accounting change (3,561,170) (6,307,424) (7,189,206) Cumulative effect of accounting change: Write-off of organization costs -- -- (517,416) ------------ ------------ ------------ Net loss $ (3,561,170) (6,307,424) (7,706,622) ============ ============ ============
See accompanying notes to combined financial statements 7 9 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Combined Statements of Partners' Capital Partners' capital, January 9, 1997 (inception) $ -- Capital contributions 46,502,401 Net loss (3,561,170) ------------ Partners' capital, December 31, 1997 42,941,231 Capital contributions 4,201,087 Net activity with affiliated broadcast property 54,999 Distributions to members (44,550) Net loss (6,307,424) ------------ Partners' capital, December 31, 1998 40,845,343 Capital contributions 876,472 Net activity with affiliated broadcast property 4,444,096 Distributions to members (10,112) Net loss (7,706,622) ------------ Partners' capital, December 31, 1999 $ 38,449,177 ============
See accompanying notes to combined financial statements 8 10 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Combined Statements of Cash Flows
JANUARY 9, 1997 (INCEPTION) THROUGH YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------- 1997 1998 1999 ------------- ----------- ----------- Cash flows from operating activities: Net loss $ (3,561,170) (6,307,424) (7,706,622) Adjustments to reconcile net loss to net cash provided by operating activities: Loss on disposals of fixed assets -- -- 56,257 Bad debt expense 469,875 451,675 524,329 Amortization of intangibles 3,862,133 7,497,199 7,318,488 Write-off of organization costs -- -- 517,416 Amortization of deferred debt costs 86,905 254,358 245,744 Depreciation and amortization 555,273 1,400,758 1,729,385 Net trade expense (revenue) (104,669) 104,225 (178,476) Deferred compensation expense -- -- 1,703,000 Change in assets and liabilities, net of effects from purchase of broadcast properties: Receivables, net (4,117,613) (3,175,106) (1,151,023) Prepaid and other current assets (144,879) (1,082,513) 486,273 Other noncurrent assets 8,832 18,546 262,463 Accounts payable, accrued expenses and other current liabilities 1,267,756 2,309,207 (808,810) Due to receiver / seller -- (63,238) 1,064,523 Due to related party 28,601 415,628 148,253 Other noncurrent liabilities 143,907 (149,371) 117,860 ------------ ------------ ------------ Net cash provided by (used in) operating activities (1,505,049) 1,673,944 4,329,060 ------------ ------------ ------------ Cash flows from investing activities: Costs to acquire broadcast properties, net of cash acquired (78,769,710) (10,514,010) (5,173,753) Capital expenditures (475,166) (2,411,882) (1,381,825) Increase in organization costs (421,591) (213,349) -- Cash received from disposal of assets -- 27,499 86,000 Other -- (286,503) (77,214) ------------ ------------ ------------ Net cash used in investing activities (79,666,467) (13,398,245) (6,546,792) ------------ ------------ ------------ Cash flows from financing activities: Repayment of long-term debt (3,371,108) (1,386,779) (41,868,584) Cash received from long term debt 48,850,000 7,350,000 39,300,000 Cash received from loans -- 362,424 -- Net borrowings (repayments) on line of credit (433,866) 1,620,000 (1,185,000) Loan acquisition fees (1,177,500) (284,814) (250,000) Net activity with affiliated broadcast property (2,912,799) 54,999 4,444,096 Proceeds from partners' capital contributions 41,415,165 4,201,087 876,472 Distributions to Partners -- (44,550) (10,112) ------------ ------------ ------------ Net cash provided by financing activities 82,369,892 11,872,367 1,306,872 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 1,198,376 148,066 (910,860) Cash and cash equivalents, beginning of period 238,325 1,436,701 1,584,767 ------------ ------------ ------------ Cash and cash equivalents, end of period $ 1,436,701 1,584,767 673,907 ============ ============ ============
See accompanying notes to combined financial statements. 9 11 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements (1) BASIS OF COMBINATION AND BUSINESS DESCRIPTION Broadcasting Partners Holdings Radio Group ("Broadcasting Partners") represents the broadcasting properties of Broadcasting Partners Holding Limited Partnership (the "Partnership") which are subject to an asset purchase agreement with Citadel Communications Corporation. These financial statements exclude broadcasting properties sold to third parties. Partners' capital represents the combined partner capital of the individual platform companies, and includes the capital allocable to the Partnership as well as the minority investors in the Partnership's subsidiaries. The Partnership operates the broadcasting properties through its subsidiaries Spring Broadcasting, LLC, Pilot Communications, LLC, Mercury Radio Communications, LLC, Sound Broadcasting, LLC and Gleiser Communications, L.P. (collectively the platform companies) which operate the following radio stations, either through direct ownership, or through Time Brokerage Agreements, Joint Sales Agreements or Local Marketing Agreements (collectively LMAs):
Subsidiary Broadcast Properties City of License ---------- -------------------- --------------- Spring Broadcasting, LLC WBSM-AM New Bedford, MA WFHN-FM New Bedford, MA WFPG-AM/FM Atlantic City, NJ WKOE-FM (LMA) Atlantic City, NJ WPUR-FM Atlantic City, NJ WQGN-FM Groton, CT WSUB-AM Groton, CT WVVE-FM Stonington, CT Pilot Communications, LLC WAQX-FM Syracuse, NY WNTQ-FM Syracuse, NY WLTI-FM Syracuse, NY WNSS-AM Syracuse, NY WMME-FM Augusta-Waterville, ME WEZW-AM Augusta-Waterville, ME WEBB-FM Augusta-Waterville, ME WTVL-AM Augusta-Waterville, ME WBPW-FM Presque Isle, ME WQHR-FM Presque Isle, ME WOZI-FM Presque Isle, ME WCRQ-FM Dennysville, ME (formerly WHRR-FM) WIII-FM Cortland, NY WKRT-AM Cortland, NY Mercury Radio WGRF-FM Buffalo, NY Communications, LLC WEDG-FM Buffalo, NY WHTT-AM/FM Buffalo, NY CKEY-FM (JSA) Niagara Falls, Ontario
(Continued) 10 12 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements
Subsidiary Broadcast Properties City of License ---------- -------------------- --------------- Sound Broadcasting, LLC KYEA-FM Monroe, LA KMYY-FM Monroe, LA KZRZ-FM Monroe, LA KTJC-FM Monroe, LA Gleiser Communications, L.P. KDOK-FM Tyler-Longview, TX Gleiser Communications, LLC KTBB-AM Tyler-Longview, TX KGLD-AM Tyler-Longview, TX KEES-AM Tyler-Longview, TX KYZS-AM Tyler-Longview, TX
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) CASH EQUIVALENTS For purposes of the statement of cash flows, Broadcasting Partners considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The fair market value of such investments approximates cost. (b) PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation expense is computed using the straight-line method, or an accelerated method, over the estimated useful lives of the assets, which range from three to thirty-nine years. The costs of leasehold improvements are amortized using the straight-line method over the lesser of their estimated useful lives or the terms of the respective leases. (c) INTANGIBLE ASSETS Intangible assets consist principally of network affiliation agreements, broadcasting licenses, covenants not to compete, and the excess of costs over the fair value of net assets acquired. Amortization expense is computed on a straight-line basis over the estimated lives of the assets which range from 2-15 years. (d) INCOME TAXES The platform companies are pass-through entities for income tax purposes since profits and losses and the related tax attributes are deemed to be distributed to, and to be reportable by, the members of the platform companies on their respective income tax returns. (e) LIMITED LIABILITY AGREEMENT The allocation of Partnership profits and losses, cash distributions, voting rights, certain equity preference and appreciation rights, and other matters are defined in the Limited Liability Agreement. (Continued) 11 13 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements (f) REVENUES Broadcast revenues are derived principally from the sale of program time and spot announcements to local, regional, and national advertisers. Advertising revenue is recognized in the period during which the program time and spot announcements are broadcast. (g) TRANSACTIONS WITH AFFILIATED BROADCAST PROPERTIES Broadcasting Partners previously owned additional radio properties which were sold to a third party. The assets, liabilities and results of operations of these properties have been excluded from these financial statements. However, Broadcasting Partners had certain activities with these properties, including advancing funds and receiving excess cash from these stations' operations. Additionally, during the year ended December 31, 1999, the affiliated broadcast properties were sold. Broadcasting Partners received the net proceeds from the sale. These activities have been presented as capital transactions under the caption Net activity with affiliated broadcast properties. (h) SALES AGREEMENTS Broadcasting Partners enters into joint sales agreements (JSA), local marketing agreements (LMA), and time brokerage agreements (TBA) with third party broadcast properties or in connection with its acquisitions of broadcast properties. Under certain of these agreements, the Company purchases all advertising time of the stations in exchange for a monthly fee. The revenue from the sale of such advertising time is recorded as broadcast revenues in the accompanying statements of operations. The monthly fee is recorded as a separate component of operating expenses captioned LMA fees. The other expenses relating to stations operated under LMAs are classified in the same manner as owned properties. Other agreements call for the Partnership to act as a sales agent for the other broadcast properties and share in the revenues generated. These activities are included in other revenues. (i) BARTER TRANSACTIONS (TRADE REVENUES AND EXPENSES) Barter transactions are recorded at the estimated fair values of the products and services received. Barter revenues are recognized when commercials are broadcast. The assets or services received in exchange for broadcast time are recorded when received or used. (j) 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. (k) CONCENTRATION OF CREDIT RISK A significant portion of the Broadcasting Partners accounts receivable are due from local, regional, and national advertising agencies. (l) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF Broadcasting Partners accounts for the impairment of long-lived assets in accordance with the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This Statement requires that long-lived assets and certain (Continued) 12 14 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (m) DERIVATIVE FINANCIAL INSTRUMENTS Broadcasting Partners has purchased a rate ceiling and interest rate collar agreement, which is amortized to interest expense over the terms of the ceiling. Unamortized premiums are included in other assets in the consolidated balance sheet. Amounts receivable under the ceiling agreements and payable under the floor agreement are accrued as a component of interest expense. No amounts have been due under these arrangements (note 14). (n) COMPREHENSIVE INCOME As of January 1, 1998, Broadcasting Partners adopted Statement of Financial Accounting Standard No. 130 (SFAS No. 130), Reporting Comprehensive Income. SFAS No. 130 establishes new rules for reporting and display of comprehensive income and its components: however, the adoption of SFAS No. 130 had no impact on the financial statements as the Partnership had no transactions which would be considered Other Comprehensive Income. (o) ACCOUNTING FOR ORGANIZATION COSTS As of January 1, 1999, Broadcasting Partners adopted the provisions of Statement of Position No. 98-5, Reporting on the Costs of Start-up Activities (SOP 98-5), which requires costs of start-up activities, including organization costs, to be expensed as incurred. Broadcasting Partners has capitalized certain organization costs associated with the set-up of some of its radio stations and platform companies. The remaining balances of the organization costs were written-off as of January 1, 1999 in implementing SOP 98-5. Broadcasting Partners recognized a charge to income of $517,416 for the year ended December 31, 1999 as a cumulative effect of a change in accounting principle. (p) ADVERTISING AND PROMOTION Advertising and promotion costs consist primarily of media advertising and listener prizes, and are expensed as incurred. (q) CHANGES IN PRESENTATION Certain amounts as of December 31, 1998 have been reclassified to conform to the current year's presentation. (3) ACQUISITION OF BROADCAST PROPERTIES In January 1997, Spring acquired WBSM-AM and WFHN-FM (New Bedford, MA), WFPG-AM/FM (Atlantic City, NJ) and the LMA rights for, and an option to purchase, WKOE-FM (Atlantic City, NJ), WQGN-FM and WSUB-AM (Groton, CT) and other broadcast properties, out of receivership, for $14.0 million. $2.4 million was applicable to these other broadcast properties which were sold during 1999 and will not be included as part of the sale to Citadel. (Continued) 13 15 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements Also in January 1997, the Partnership acquired a 62.5 percent interest in Pilot for $6.25 million. At the date of acquisition Pilot operated WAQX-FM, WNTQ-FM and WNSS-AM (Syracuse, NY) and WMME-FM, WEZW-AM, WEBB-FM and WTVL-AM (Augusta-Waterville, ME). Pilot then purchased the assets of WLTI-FM (Syracuse, NY) for $2.8 million. In October 1997, the Partnership acquired a 60.3 percent interest in Mercury Radio Communications, LLC through a leveraged buy-out transaction. Broadcast properties include WGRF-FM, WEDG-FM, and WHTT-AM/FM (Buffalo, NY), which had a value of $62 million. In November 1997, Sound purchased the assets of KYEA-FM, KMYY-FM, and KZRZ-FM in three separate transactions for an aggregate purchase price of $4.97 million. This amount includes cash paid as well as notes payable to the seller and amounts due under noncompete agreements. In November 1997, Gleiser purchased the assets of KDOK-FM, KTBB-AM and KGLD-AM (Tyler, TX) for $2.3 million plus the assumption of certain liabilities. From August 8, 1997 through the date of acquisition, Gleiser operated the station through an LMA agreement with Gleiser Communications, Inc. In October 1998, Spring purchased substantially all of the assets of WPUR-FM (Atlantic City, NJ) - (formerly WZZP-FM) for $2.9 million. From May 1998 through the date of acquisition, Spring operated the station through an LMA agreement. In April 1998, Pilot purchased substantially all of the assets of WBPW-FM, WQHR-FM, WOZI-FM (Presque Isle, ME) and WCRQ-FM (formerly WHRR-FM) (Dennysville, ME) for $5.2 million. In June 1998, Pilot purchased substantially all of the assets of WIII-FM and WKRT-AM (Cortland, NY) for $1.6 million. From March 1998 through the date of acquisition, Pilot operated the stations through a Time Brokerage Agreement. In July 1998, Gleiser purchased substantially all of the assets of KEES-AM and KYZS-AM (Tyler, TX) for $950,000. From November 1997 through the date of acquisition, Gleiser operated the stations through an LMA agreement. In November 1999, Sound purchased substantially all of the assets of KTJC-FM (Monroe, LA) for $650,000. From April 1999 through the date of acquisition, Sound operated the station through an LMA agreement. In December 1999, Spring purchased substantially all of the assets of WVVE-FM (Stonington, CT) for $3,850,000. (Continued) 14 16 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements These acquisitions have been accounted for under the purchase method of accounting and, accordingly, the assets acquired and liabilities assumed have been recorded at their estimated fair value as of the acquisition date, as estimated by management. The acquisitions are generally financed through a combination of capital contributions and borrowing arrangements with financial institutions. In instances where the former owners have retained a minority interest, the portion of the assets and liabilities owned by the former owners has been maintained at the predecessors' carrying value at the date of the transaction. The allocation of the aggregate purchase prices is summarized as follows (in thousands): 1998 1999 ------- ------- Land $ 184 -- Property and equipment 937 1,660 Intangible assets 10,258 2,782 ------- ------- Total consideration $11,379 4,442 ======= ======= (4) PROPERTY AND EQUIPMENT A summary of property and equipment is as follows (in thousands):
DECEMBER 31, --------------------------- 1998 1999 -------- -------- Land $ 898 1,116 Land improvements 17 17 Leasehold improvements 453 340 Buildings and improvements 1,889 2,853 Office equipment, furniture, and fixtures 1,738 1,893 Tower and antenna equipment 1,909 2,070 Broadcast and production equipment 5,440 7,026 Tools and materials 125 125 Vehicles 466 516 Construction in progress 200 130 -------- -------- 13,135 16,086 Less: accumulated depreciation (3,617) (5,290) -------- -------- $ 9,518 10,796 ======== ========
(Continued) 15 17 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements (5) INTANGIBLE ASSETS AND AMORTIZATION Intangible assets are comprised of the following (in thousands):
DECEMBER 31, USEFUL LIFE ----------------------------- IN YEARS 1998 1999 ------------ --------- --------- FCC licenses 15 $ 96,218 100,366 Network affiliations 15 2,681 4,004 Noncompete agreements 2 - 5 1,007 1,471 Goodwill 15 3,649 1,105 Other intangibles 2 - 15 3,486 2,621 --------- --------- 107,041 109,567 Accumulated amortization (11,458) (18,776) --------- --------- $ 95,583 90,791 ========= =========
The useful lives for licenses, network affiliations and goodwill are determined to be 15 years. The useful lives of noncompete agreements and other intangibles are based on contracted periods. (Continued) 16 18 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements (6) LONG-TERM DEBT Details of long-term debt are as follows (in thousands):
DECEMBER 31, --------------------------- 1998 1999 -------- ------- Spring Broadcasting Term Loans, payable in quarterly installments through December 31, 2001, bearing interest at the Bank's base rate plus 1%, 8.75% and 9.25% as of December 31, 1998 and 1999, respectively $ 7,220 8,720 Spring Broadcasting credit facility due December 31, 2001, bearing interest at 8.75% and 9.25% as of December 31, 1998 and 1999, respectively 1,480 275 Spring Broadcasting Acquisition Loan, due March 31, 1999, bearing interest at the Bank's base rate plus 1%, 8.75% as of December 31, 1998 2,500 -- Spring Broadcasting term Loans, payable in monthly installments through 2016, bearing interest at 8% 241 236 Mercury Radio Communications Term Loans, payable in quarterly installments through June 30, 2006, bearing interest at LIBOR plus 2.75%, 8.098% as of December 31, 1998 and ranging from 9.19%-9.69% as of December 31, 1999 37,000 34,650 Mercury Radio Communications credit facility due June 30, 2005, bearing interest at 8.39% as of December 31, 1999 -- 1,000 Pilot Communications Term Loans, payable quarterly in installments through 2003, bearing interest at the Bank's base rate plus 1.75%, 9.5% and 9.75% as of December 31, 1998 and 1999, respectively 10,400 9,620 Pilot Communications Term Loan, payable in quarterly installments through March 31, 2003, bearing interest at the Bank's base rate plus 1.75%, 9.5% and 9.75% as of December 31, 1998 and 1999, respectively 3,750 3,375 Pilot Communications credit facility due March 31, 2000 bearing interest at 9.5% and 10.0% as of December 31, 1998 and 1999, respectively -- 1,119 Pilot Communications Notes Payable, Pi-Com Partners, L.P., due January 31, 2001, bearing interest at 12% 589 589 Pilot Communications Notes Payable, Pi-Com Partners, L.P., due January 31, 2001, bearing interest at 15% 2,061 2,061 Pilot Communications Notes Payable, Salt City Communications, due 2002 bearing interest at the greater of 8% or prime 800 800 Pilot Communications payable to Cayuga Radio Partners Limited Partnership, secured by letter of credit, payable in annual installments through June 2002, accrues interest at 10% 200 100 Sound Broadcasting and Gleiser Communications Term Loans, payable in installments beginning March 31, 1999 through December 31, 2004, bearing interest at LIBOR plus 3%, ranging from 8.313% - 8.69% as of December 31, 1998 and 8.18% - 8.46% as of December 31, 1999 4,650 4,185 Sound Broadcasting Notes Payable, Tom Gay, due in installments through October 2007, bearing interest at a rate of 8.5% 139 128 Sound Broadcasting and Gleiser Communications credit facility bearing interest at 9.75% and ranging from 8.18% - 9.5% as of December 31, 1998 and 1999 , respectively 140 245 Sound Broadcasting Notes Payable, Ken Diebel, due in installments through October 2008, bearing interest at rate of 7.65% -- 400 Capital lease obligations 145 97 Other 66 172 -------- -------- Total 71,381 67,772 Less current installments (10,734) (10,906) -------- -------- Long-term debt $ 60,647 56,866 ======== ========
(Continued) 17 19 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements The Radio Group also has working capital and acquisition credit facilities available for each of the platform companies. Mercury IBJ Schroder, as agent, $2,000,000 revolving credit facility, expires 2005, $2,000,000 and $1,000,000 available as of December 31, 1998 and December 31, 1999, respectively During 1999, IBJ Schroder, as agent, $3,850,000 acquisition facility, expires 2006, $3,850,000 available as of December 31, 1999 Spring Summit Bank $1,750,000 revolving credit facility and $4,250,000 acquisition facility, expire 2001, $2,020,000 and $5,725,000 available as of December 31, 1998 and December 31, 1999, respectively Pilot Summit Bank $1,500,000 revolving credit facility, expired March 31, 2000, $1,500,000 and $381,000 available as of December 31, 1998 and December 31, 1999, respectively Sound and Gleiser IBJ Schroder, as agent, $2,000,000 revolving credit facility as of December 31, 1998, $1,860,000 available as of December 31, 1998. During 1999, this credit facility was reduced to $350,000, $105,000 was available as of December 31, 1999. The interest rate for borrowings under the Mercury, Spring, Pilot, Sound and Gleiser facilities are based upon either LIBOR or the lender's Base rate and have a margin ranging from 0% to 3.00% for LIBOR borrowings and 0% to 1.75% for Base rate borrowings. The aggregate future maturities of long-term debt are as follows (in thousands): YEAR ENDING DECEMBER 31: 2000 $10,906 2001 12,501 2002 9,546 2003 12,385 2004 7,185 Thereafter 15,248 ------- $67,771 ======= In addition, each of the Term Loans requires prepayments, at the lenders' option, to the extent that certain operating or cash flow results are obtained. Furthermore, Broadcasting Partners has the ability to prepay a portion of the Term Loans without penalty. Each of the Term Loans and credit facilities are secured by substantially all of the assets and membership interests of the respective platform companies. The credit agreements contain certain restrictive covenants and operating requirements, including a restriction on the payment of dividends from the platform companies to the members or partners, including the Partnership. (Continued) 18 20 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements Gleiser, Mercury, Pilot and Sound are each in default of its loan agreements; however, management has obtained stand-by commitments for financing with similar terms should it be unable to close the pending sale to Citadel Broadcasting Company in a timely manner. In June 1998, Pilot issued two irrevocable letters of credit in the amount of $230,000 to Cayuga Radio Partners Limited Partnership in conjunction with the purchase of broadcast properties. The first $100,000 may be fully drawn upon within one year of the above date, and the remaining $130,000 within two years; which includes accrued interest. The letters of credit are to be drawn against the unused credit facility for each due date. As of December 31, 1998, no amounts had been drawn under these letters of credit. As of December 31, 1999, $100,000 had been drawn under the first letter of credit. (7) LEASES Broadcasting Partners leases certain property and equipment under noncancelable operating lease agreements. Rental expense charged to earnings was approximately $271,000 for the period from January 9, 1997 (inception) through December 31, 1997, $509,000 and $517,000 for the years ended December 31, 1998 and 1999, respectively. Future minimum lease payments under noncancelable operating leases, exclusive of LMAs, as of December 31, 1999 is approximately (in thousands): YEAR ENDING DECEMBER 31: 2000 $ 408 2001 348 2002 298 2003 200 2004 181 Thereafter 308 ------ $1,743 ====== (8) LOCAL MARKETING AGREEMENTS, TIME BROKERAGE AGREEMENTS AND JOINT SALES AGREEMENTS In January 1997, Spring Broadcasting, LLC assumed the rights to an LMA to operate WKOE-FM (Atlantic City, NJ). In October 1999, Spring exercised an option to extend the LMA through March 2003. The LMA agreement includes monthly payments of $10,500 through March 2000 and decreases on March 27, 2000 to $9,500 per month. Spring has an additional option to extend the LMA through 2006. Total LMA fees were $115,500 for the period January 9, 1997 (inception) through December 31, 1997 and $126,000 for each of the years ended December 31, 1998 and 1999. On June 30, 1997, Broadcasting Partners Buffalo, LLC entered into an LMA with Mercury Radio Communications, L.P. (Old Mercury) to operate WGRF-FM, WEDG-FM and WHTT-AM/FM. Payments under this LMA totaled $1,645,000. This LMA was terminated with the merger between Old Mercury and BT resulting in the formation of Mercury Radio Communications, LLC. On August 6, 1997, Gleiser Communications, LLC, entered into a Time Brokerage Agreement with Gleiser Communications, Inc. to operate the stations KDOK-FM, KGLD-AM and KTBB-AM, Tyler, Texas. Payments under the agreement totaled $47,168 through contract termination during 1997. (Continued) 19 21 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements On October 15, 1997, Mercury entered into a Joint Sales Agreement with CKEY-FM (Niagara Falls, Ontario Canada) in which Mercury obtained exclusive rights to sell advertising time in the U.S. on the Canadian station. Under the terms of the agreement, Mercury and CKEY will share all U.S. revenues, net of agency and sales commissions and national representation fees on a 50/50 basis. The agreement extends through October 14, 2007 with one renewal term of an additional five-year term at Mercury's option. In November 1997, Gleiser entered into an LMA to operate KEES-AM and KYZS-AM. Total LMA fees were $10,000 for the period from January 9, 1997 (inception) through December 31, 1997 and $59,743 for the year ended December 31, 1998 and consisted of the LMA fees of $5,000 per month and any related costs to operate the station. The LMA agreement was terminated when these stations were purchased by Gleiser in July 1998. In March 1998, Pilot entered into a Time Brokerage Agreement to operate WIII-FM and WKRT-AM, Cortland, NY. Payments under the agreement totaled $25,500 for the year ended December 31, 1998. This agreement was terminated in June 1998 when Pilot acquired the assets of the station. In June 1998, Spring entered into an LMA to broker all programming rights for WZZP-FM for $23,800 per month LMA fee plus reimbursement of expenses. The LMA agreement was terminated in October 1998 when Spring acquired the station (currently called WPUR-FM). Total LMA fees were $142,432 for the year ended December 31, 1998. In April 1999, Sound entered into an LMA to broker all programming rights for KTJC-FM for $1,750 per month LMA fees plus reimbursement of expenses. The LMA agreement was terminated in November 1999 upon closure of the related acquisition of KTJC-FM. Total LMA fees were $16,302 for the year ended December 31, 1999. During August 1999, Mercury entered into an LMA to broker all programming rights for WHLD-AM for $1,200 per month LMA fee plus reimbursement of expenses. Total LMA fees were $5,400 for the year ended December 31, 1999. (9) SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest totaled approximately $2,229,000 for the period January 9, 1997 (inception) through December 31, 1997, $5,512,229 for the year ended December 31, 1998 and $5,682,679 for the year ended December 31, 1999. In connection with the acquisitions during the period January 9, 1997 (inception) through December 31, 1997, the Company assumed certain liabilities of $19,796,000. Additionally, the Company issued $950,000 in notes payable to the sellers of broadcast properties acquired. In connection with the acquisitions for the year ended December 31, 1998, Broadcasting Partners committed to pay $200,000 in the future which is supported by a $230,000 letter of credit. (10) RELATED PARTY TRANSACTIONS (a) FINANCIAL ADVISORY AGREEMENT Broadcasting Partners has entered into various agreements which require payments to Veronis Suhler & Associates (VS&A), and other affiliates, upon the disposal or purchase of additional (Continued) 20 22 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements stations or receipt of additional capital contributions to certain of the platform companies. These payments are based upon a fixed percentage of the purchase price should additional station acquisitions or disposals occur. For the periods January 9, 1997 (inception) through December 31, 1997, the years ended December 31, 1998 and 1999, fees for these services totaling $1,128,000, $68,000 and $50,000, respectively, were capitalized as acquisition costs. (b) MANAGEMENT AND MONITORING FEES Pursuant to the platform companies' operating agreements, Broadcasting Partners pays management fees to Broadcasting Partners Management Corporation, an affiliate. These fees are generally a defined percentage of net revenues. Additionally, Broadcasting Partners pays monitoring fees to VS&A. Some of the monitoring fee payments are deferred until the sale or rollup of the platform company. As of December 31, 1997, 1998 and 1999, $242,345, $497,862 and $765,570, respectively, are due to these related parties for such fees, including deferred amounts. (11) EMPLOYEE BENEFITS PLAN Broadcasting Partners maintains qualified profit-sharing plans with trustees, which include thrift provisions qualifying under Section 401(k) of the Internal Revenue Code, covering substantially all employees. The provisions allow the participants to contribute up to 15 percent of their compensation in the plan year, subject to statutory limitations. The Partnership does not contribute to the plan. (12) COMMITMENTS AND CONTINGENCIES Broadcasting Partners is involved in certain litigation matters arising in the normal course of business. In the opinion of management, these matters are not significant and will not have a material adverse effect on the Partnership's financial position. (a) SPRING PURCHASE PRICE ADJUSTMENTS Broadcasting Partners is currently negotiating the final purchase price of the broadcast properties acquired with the receiver from whom Spring acquired its broadcasting assets. The dispute relates to the interpretation of the purchase agreement. (b) EQUITY BASED COMPENSATION AND EMPLOYMENT AGREEMENTS The Partnership maintains various equity based compensation agreements for certain key executives of the platform companies. Such plans are deemed to be variable plans for accounting purposes, and as such compensation expense is determined based upon the fair value of the platform companies within the Group, and is recognized over the vesting term. No amounts were earned under these agreements for the periods January 9, 1997 (inception) through December 31, 1997 or the year ended December 31, 1998. Based upon the pending sale of the platform broadcast properties to Citadel, management has determined the approximate compensation expense for certain key executives of the platform companies to be $1,703,000. The Partnership has also entered into employment agreements in the ordinary course of business. (c) PENDING ACQUISITIONS In 1999, Mercury entered into an asset purchase agreement to acquire WHLD-AM (Buffalo, NY) for $750,000. This acquisition is pending subject to FCC approval. (Continued) 21 23 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements The Partnership continues to evaluate potential acquisitions and consider other transactions to maximize the Partners' interests however, as of December 31, 1999 the Company has not committed to any other transaction. (d) LITIGATION One of the platform companies has been named in an administrative filing alleging that certain members of management have committed sexual harassment. Broadcasting Partners intends to vigorously defend against this matter; however, assessment of the outcome of the potential damages cannot be reasonably determined at this time. (13) SALE OF BROADCAST PROPERTIES In October 1999, the Partnership entered into an agreement with Citadel Broadcasting Company to sell the broadcasting properties of the platform companies to Citadel for $185 million, subject to approval from the Federal Communication Commission. The purchase price will be adjusted for the pending and closed acquisitions during the period from October 1999 through closure of the sale as well as other customary adjustments. (Continued) 22 24 BROADCASTING PARTNERS HOLDINGS RADIO GROUP Notes to Combined Financial Statements (14) FINANCIAL INSTRUMENTS (a) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents, receivables, accounts payable, and due to receiver approximate their fair value due to the short duration to maturity. The carrying value and related estimated fair value of Broadcasting Partners' remaining financial instruments are as follows (in thousands):
DECEMBER 31, 1998 DECEMBER 31, 1999 -------------------------- --------------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE ------ ---------- ------ ---------- Liabilities: Term loans $62,011 62,011 60,786 60,786 Other notes payable 3,589 3,722 4,314 4,192 Other long-term debt 5,781 5,781 3,419 3,419 Interest rate ceilings 36 36 -- -- Off-balance sheet: Lines of credit -- 20 -- 28
The carrying value of the Term Loans approximates fair value as these notes are variable rate instruments. The carrying value of the Notes Receivable, Other Notes Payable and Other Long-Term Debt was estimated based upon the related cash flows discounted at the Group's current borrowing rates for similar instruments. Unused credit facilities and lines of credit are estimated based upon the fees currently charged for similar agreements or on the estimated cost to sell or terminate. The fair value of the interest rate ceilings reflect the estimated amounts that Broadcasting Partners would receive or pay to terminate the contacts on the reporting date based upon quotes from commercial banks. (b) DERIVATIVE FINANCIAL INSTRUMENTS The group uses derivative financial instruments to hedge interest rate risk associated with borrowing under variable rate credit facilities. These interest rate hedges are required pursuant to the provisions of the debt agreements and apply to the current balance under the specified borrowing. As of December 31 1999 the group entered into interest rate collar agreements with a notional principal of $20,000,000, an interest rate ceiling of 9.0 percent plus the applicable margin for LIBOR loans, and an interest rate floor of 4.0 percent plus the applicable margin for LIBOR loans. The collar expires during February 2001. 23 25 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 9, 1999 acquisition of WKQZ-FM, WYLZ-FM, WILZ-FM, WIOG-FM, WGER-FM and WSGW-AM in Saginaw/Bay City/Midland, 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/Lebanon/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 Broadcasting 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 (the "KOOJ Acquisition"), 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 $60.0 million, which amount includes the repayment of certain indebtedness of Caribou Communications (the "Oklahoma City Acquisition"), o the February 10, 2000 acquisition of WXLO-FM in Worcester, Massachusetts for the purchase price of approximately $21.0 million (the "WXLO Acquisition"), o the March 31, 2000 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 April 7, 2000 acquisition of WORC-FM in Worcester, Massachusetts for the purchase price of approximately $3.5 million (the "WORC Acquisition"), o the April 15, 2000 acquisition of WGRF-FM, WEDG-FM, WHTT-FM, WMNY-AM and WHLD-AM in Buffalo/Niagara Falls, New York, WAQX-FM, WLTI-FM, WNSS-AM, and WNTQ-FM in Syracuse, New York, WIII-FM and WKRT-AM in Ithaca, 24 26 New York, WMME-FM, WEZW-AM, WEBB-FM and WTVL-AM in Augusta/Waterville, Maine, WBPW-FM, WOZI-FM and WQHR-FM in Presque Isle, Maine, WCRQ-FM in Dennysville/Calais, Maine, KMYY-FM, KYEA-FM, KZRZ-FM and KTJC-FM in Monroe, Louisiana, KDOK-FM, KTBB-AM, KEES-AM, KYZS-AM and KGLD-AM in Tyler/Longview, Texas, WFPG-AM, WFPG-FM and WPUR-FM in Atlantic City/Cape May, New Jersey, WFHN-FM and WBSM-AM in New Bedford/Fall River, Massachusetts, WQGN-FM, WSUB-AM and WVVE-FM in New London, Connecticut and the right to operate WKOE-FM in Atlantic City/Cape May under a program service and time brokerage agreement and the right to sell advertising in the United States for one FM radio station in Niagara Falls, Ontario under a joint sales agreement for the aggregate purchase price of approximately $189.8 million (the "BPH Acquisition"), 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 June 1999 public offering by Citadel Broadcasting's parent, Citadel Communications Corporation, of shares of its common stock and the use of net proceeds from that offering (the "1999 Offering"), o the August 1999 redemption of a portion of Citadel Broadcasting's outstanding 13-1/4% Exchangeable Preferred Stock (the "Preferred Redemption"), o the February 2000 public offering by Citadel Communications of shares of its common sock and the use of net proceeds from that offering (the "2000 Offering"); and (2) the following pending acquisitions (collectively, the "Pending Acquisitions"): o the pending acquisition of WMMQ-FM, WJIM-FM, WFMK-FM, WITL-FM, WVFN-AM and WJIM-AM in Lansing/East Lansing, Michigan, WHNN-FM and WTCF-FM in Saginaw/Bay City/Midland, Michigan and WFBE-FM in Flint, Michigan for the aggregate purchase price of approximately $120.5 million, consisting of 200,000 shares of Citadel Communications' common stock valued at $50.375 per share, based on the closing share price of the common stock on December 2, 1999, and approximately $110.4 million in cash. However, if the value of the common stock at the time of closing, based on the 20-day average closing sale price per share prior to closing, is less than $45.3375 (90% of the value on December 2, 1999), then no common stock will be issued and the purchase price will be paid entirely in cash (the "Michigan Acquisition"), the unaudited proforma financial information assumes payment of the purchase price in cash and common stock, o the pending acquisition of WWFX-FM in Worcester, Massachusetts for the purchase price of approximately $14.3 million (the "WWFX Acquisition"), 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"). The unaudited pro forma condensed 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 7.8%, which represents the interest rate in effect under the then existing credit facility as of January 1, 1999. Pro forma financial information has been adjusted to reflect the following, when applicable: 25 27 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, 1999. 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, 1999. 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, 1999. The eliminated items were deemed redundant and therefore are not reflected as of January 1, 1999. 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 December 31, 1999 has been adjusted to give effect to the following transactions as if each had occurred on December 31, 1999 (collectively, the "2000 Transactions"): (1) the WXLO Acquisition, (2) the Lafayette Acquisition, (3) the WORC Acquisition, (4) the BPH Acquisition, (5) the 2000 Offering, and (6) 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. 26 28 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1999 (DOLLARS IN THOUSANDS)
CITADEL BROADCASTING ADJUSTMENTS ACTUAL ADJUSTMENTS AS ADJUSTED FOR PRO FORMA CITADEL FOR 2000 FOR 2000 THE PENDING CITADEL BROADCASTING TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) BROADCASTING -------------- --------------- -------------- --------------- -------------- ASSETS Cash and cash equivalents $ 17,981 (1,190) $ 16,791 $ 948 $ 17,739 Accounts and notes receivable, net 53,190 -- 53,190 5,276 58,466 Prepaid expenses 2,708 -- 2,708 183 2,891 Net assets of discontinued operations 2,275 -- 2,275 -- 2,275 -------- -------- -------- ---------- ---------- Total current assets 76,154 (1,190) 74,964 6,407 81,371 Property and equipment, net 68,035 12,181 80,216 9,970 90,186 Intangible assets, net 538,664 210,819 749,483 334,287 1,083,770 Restricted cash 26,192 (26,192) -- -- -- Other assets 7,568 -- 7,568 -- 7,568 -------- -------- -------- ---------- ---------- TOTAL ASSETS $716,613 $195,618 $912,231 $ 350,664 $1,262,895 ======== ======== ======== ========== ========== LIABILITIES AND SHAREHOLDER'S EQUITY Accounts payable and accrued liabilities $ 15,040 $ -- $ 15,040 $ 3,087 $ 18,127 Current maturities of other long-term Obligations 6,337 -- 6,337 -- 6,337 -------- -------- -------- ---------- ---------- Total current liabilities 21,377 -- 21,377 3,087 24,464 Notes payable, less current maturities 132,000 (38,032) 93,968 300,675 394,643 Senior subordinated notes 210,509 -- 210,509 -- 210,509 Other long-term obligations, less current maturities 2,516 -- 2,516 -- 2,516 Deferred tax liability 45,640 -- 45,640 36,827 82,467 Exchangeable preferred stock 85,362 -- 85,362 -- 85,362 Common stock and additional paid-in capital 285,156 233,650 518,806 10,075 528,881 Deferred compensation (26,924) -- (26,924) -- (26,924) Accumulated other comprehensive loss Accumulated deficit/retained earnings (39,023) -- (39,023) -- (39,023) -------- -------- -------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $716,613 $195,618 $912,231 $ 350,664 $1,262,895 ======== ======== ======== ========== ==========
(1) Represents the net effect of the WXLO Acquisition, the Lafayette Acquisition, the WORC Acquisition, the BPH Acquisition and the 2000 Offering, as if each transaction had taken place on December 31, 1999. (2) Represents the net effect of the Pending Acquisitions as if each transaction had taken place on December 31, 1999. 27 29 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 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..................... $178,495 $71,479 $249,974 $ 48,177 $298,151 Station operating expenses...... 115,312 46,690 162,002 30,914 192,916 Depreciation and amortization... 35,749 27,307 63,056 22,771 85,827 Corporate general and administrative............... 7,010 (131) 6,879 -- 6,879 Non-cash deferred compensation.. 1,727 -- 1,727 -- 1,727 -------- ------- -------- -------- -------- Operating expenses.............. 159,798 73,866 233,664 53,685 287,349 -------- ------- -------- -------- -------- Operating income (loss)......... 18,697 (2,387) 16,310 (5,508) 10,802 Interest expense................ 25,385 2,338 27,723 23,484 51,207 Other (income) expense, net..... (388) (9,638) (10,026) -- (10,026) -------- ------- -------- -------- -------- Income (loss) from continuing... operations before income taxes................. (6,300) 4,913 (1,387) (28,992) (30,379) Income tax (benefit)............ (1,647) (850) (2,497) (2,455) (4,952) Net income (loss) from continuing operations........ (4,653) 5,763 1,110 (26,537) (25,427) Net (loss) from discontinued operations, net of tax........ (4,275) -- (4,275) -- (4,275) Net income (loss)............... (8,928) 5,763 (3,165) (26,537) (29,702) Dividend requirement for Exchangeable Preferred Stock. (14,103) 3,324 (10,779) -- (10,779) -------- ------- -------- -------- -------- Income (loss) applicable to common shares............... $(23,031) $ 9,087 $(13,944) $(26,537) $(40,481) ======== ======= ======== ======== ========
(1) Represents the net effect of the Completed Transactions as if each transaction had taken place on January 1, 1999. Dollars in the table below are shown in thousands.
PORTSMOUTH/ CHARLESTON/ DOVER/ BINGHAMTON OKLAHOMA ROCHESTER/ MUNCIE/ BPH LAFAYETTE CITY PORTLAND KOKOMO ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION ----------- ----------- ----------- ----------- ----------- Net revenue..................... $ 44,084 $2,385 $ 9,736 $10,642 $ 9,543 Station operating expenses...... 30,824 1,785 6,402 6,021 6,711 Depreciation and amortization................. 12,814 605 4,251 3,628 2,685 Corporate general and administrative............... -- -- -- -- -- -------- ------ ------- ------- ------- Operating expenses.............. 43,638 2,390 10,653 9,649 9,396 -------- ------ ------- ------- ------- Operating income (loss)......... 446 (5) (917) 993 147 Interest expense................ 12,793 664 4,282 2,994 2,343 Other (income) expenses, net.......................... -- -- -- -- -- -------- ------ ------- ------- ------- Income (loss) from continuing operations before income taxes.......... (12,347) (669) (5,199) (2001) (2,196) Income tax (benefit)............ -- -- -- (724) -- Net income (loss) from continuing operations........ (12,347) (669) (5,199) (1,277) (2,196) Net (loss) from discontinued operations, net of tax....... -- -- -- -- -- Net income (loss)............... (12,347) (669) (5,199) (1,277) (2,196) Dividend requirement for Exchangeable Preferred Stock........................ -- -- -- -- -- -------- ------ ------- ------- ------- Income (loss) applicable to common shares............. $(12,347) $ (669) $(5,199) $(1,277) $(2,196) ======== ====== ======= ======= =======
28 30
CARLISLE ACQUISITION, CAPSTAR ADJUSTMENTS TRANSACTIONS, FOR THE KOOJ ACQUISITION, 1999 OFFERING, WXLO ACQUISITION, THE PREFERRED BATON ROUGE/ SAGINAW/ WORC ACQUISITION REDEMPTION LAFAYETTE BAY CITY AND MARATHON AND THE THE COMPLETED ACQUISITION ACQUISITION DISPOSITION 2000 OFFERING TRANSACTIONS ----------- ----------- ----------------- ------------- ------------- Net revenue.................... $1,371 $ 526 $(6,808) $ -- $71,479 Station operating expenses..... 1,275 486 (6,814) -- 46,690 Depreciation and amortization................ 628 202 2,494 -- 27,307 Corporate general and administrative.............. -- -- (131) -- (131) ------ ----- ------- -------- ------- Operating expenses............. 1,903 688 (4,451) -- 73,866 ------ ----- ------- -------- ------- Operating income (loss)........ (532) (162) (2,357) -- (2,387) Interest expense............... -- -- 970 (21,708) 2,338 Other (income) expenses, net......................... -- -- (9,638) -- (9,638) ------ ----- ------- -------- ------- Income (loss) from continuing operations before income taxes......... (532) (162) 6,311 21,708 4,913 Income tax (benefit)........... (126) -- -- -- (850) Net income (loss) from continuing operations....... (406) (162) 6,311 21,708 5,763 Net (loss) from discontinued operations, net of tax.................. -- -- -- -- -- Net income (loss).............. (406) (162) 6,311 21,708 5,763 Dividend requirement for Exchangeable Preferred Stock....................... -- -- -- 3,324 3,324 ------ ----- ------- -------- ------- Income (loss) applicable to common shares............ $ (406) $(162) $ 6,311 $ 25,032 $ 9,087 ====== ===== ======= ======== =======
(2) Represents the net effect of the Pending Acquisitions as if each transaction had taken place on January 1, 1999. Dollars in the table below are shown in thousands.
MICHIGAN WWFX BLOOMINGTON PENDING ACQUISITION(a) ACQUISITION ACQUISITION ACQUISITIONS -------------- ----------- ----------- ------------ Net revenue.................... $ 18,917 $ 956 $ 28,304 $ 48,177 Station operating expenses..... 10,665 895 19,354 30,914 Depreciation and amortization.. 7,968 955 13,848 22,771 -------- ------- -------- -------- Operating expenses.......... 18,633 1,850 33,202 53,685 -------- ------- -------- -------- Operating income (loss)........ 284 (894) (4,898) (5,508) Interest expense............... 8,624 1,114 13,746 23,484 -------- ------- -------- -------- Income (loss) from continuing operations before income taxes......... (8,340) (2,008) (18,644) (28,992) Income tax (benefit)........... -- -- (2,455) (2,455) -------- ------- -------- -------- Income (loss) from continuing operations................... $ (8,340) $(2,008) $(16,189) $(26,537) ======== ======= ======== ========
(a) In February 2000, Citadel Broadcasting received a request for additional information and documents from the United States Department of Justice relating to stations in Saginaw/Bay City/Midland. To resolve the Department of Justice's concerns, Citadel Broadcasting may agree to sell one or more of is existing stations, or stations to be acquired, serving Saginaw/Bay City/Midland in connection with the Michigan Acquisition. However, Citadel Broadcasting is unable to include the effect of the divestiture in this pro forma information until approval from the Department of Justice has been received and a definitive agreement has been signed for the divestiture. 29 31 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: /s/ May 1, 2000 By: /s/ Lawrence R. Wilson ---------------------------- ------------------------------------ Lawrence R. Wilson Chairman and Chief Executive Officer 32 EXHIBIT INDEX 2.1 Asset Purchase Agreement dated October 27, 1999 by and between Citadel Broadcasting Company and Broadcasting Partners Holdings, L.P. (incorporated by reference to Exhibit 2.1 to Citadel Communications Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1999). 23.1 Consent of KPMG LLP. EX-23.1 2 INDEPENDENT AUDITORS CONSENT 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors Citadel Broadcasting Company: We consent to incorporation by reference in the registration statement filed (No. 333-92593) on Form S-3 of Citadel Broadcasting Company of our report dated March 24, 2000 on the combined balance sheets of Broadcasting Partners Holdings Radio Group as of December 31, 1998 and 1999 and the related combined statements of operations, partners' capital and cash flows for the period from January 9, 1997 (date of inception) through December 31, 1997 and for each of the years in the two-year period ended December 31, 1999, which report appears in Form 8-K of Citadel Broadcasting Company dated April 15, 2000. Our report refers to a change in accounting for start-up costs. /s/ KPMG LLP McLean, Virginia April 27, 2000 -----END PRIVACY-ENHANCED MESSAGE-----