8-K 1 j8440301e8-k.txt 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) October 2, 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 "expects" 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 October 2, 2000, Citadel Broadcasting Company completed its acquisition from Dick Broadcasting Company, Inc. of Tennessee and related entities of (i) three FM radio stations and one AM radio station serving Knoxville, Tennessee, two FM radio stations serving Nashville, Tennessee, and three FM and two AM radio stations serving Birmingham, Alabama, and (ii) related real estate used in connection with the operation of the stations. The aggregate purchase price was approximately $288.6 million in cash. The asset purchase agreement governing the acquisition provides for future purchase price adjustments in favor of Citadel Broadcasting if the stations do not meet certain financial criteria. The purchase price was paid with amounts borrowed under Citadel Broadcasting's credit facility with Credit Suisse First Boston, as Lead Arranger, Administrative Agent and Collateral Agent; FINOVA Capital Corporation, as Syndication Agent; First Union National Bank and Fleet National Bank, as Documentation Agents; and 3 the lenders identified in Exhibit 4.1 to this report. A description of the credit facility is included in Item 5 of this report. Citadel Broadcasting began operating the acquired radio stations on October 1, 2000, and intends to continue operating the stations. Certain financial information of certain of the selling entities and pro forma financial information of Citadel Broadcasting Company is included in Item 7 of this report. ITEM 5. OTHER EVENTS Amended and Restated Credit Facility On October 2, 2000, Citadel Broadcasting and its parent, Citadel Communications Corporation, entered into a credit facility (the "Credit Facility") provided pursuant to a Second Amended and Restated Credit Agreement of the same date, by and among Citadel Broadcasting and Citadel Communications, Credit Suisse First Boston, as Lead Arranger, Administrative Agent and Collateral Agent, and the lenders named therein (the "Credit Agreement"). The Credit Agreement provides for the making to Citadel Broadcasting, by the lenders of (a) term loans (the "Tranche A Term Loans") at any time prior to December 15, 2000 in an aggregate principal amount not in excess of $325.0 million, (b) a term loan (the "Tranche B Term Loan" and together with the Tranche A Term Loans, the "Term Loan Facility") in the principal amount of $200.0 million, and (c) revolving loans at any time and from time to time prior to March 31, 2006, in an aggregate principal amount at any one time outstanding not in excess of $225.0 million (the "Revolving Credit Facility"). Of the $225.0 million which is available in the form of revolving loans under the Revolving Credit Facility, up to $50.0 million of the Revolving Credit Facility may be made available in the form of letters of credit. In addition, Citadel Broadcasting may request up to $150.0 million in additional loans, which loans may be made at the sole discretion of the lenders. Of such additional $150.0 million amount, at the request of Citadel Broadcasting, up to $100.0 million may be in the form of an increase in the $225.0 million revolving credit commitment. The lenders are under no obligation whatsoever to make such additional $150.0 million available, whether in the form of term loans, revolving loans or otherwise. As of October 2, 2000, $249.0 million had been borrowed as Tranche A Term Loans, $200.0 million had been borrowed as a Tranche B Term Loan and $220.0 million had been borrowed under the Revolving Credit Facility. No letters of credit were issued and outstanding. Term Loans. Additional draws may be made under the Tranche A Term Loans to finance permitted acquisitions and to pay related fees and expenses. The maturity date for the Tranche A Term Loans is December 31, 2006 (subject to extension to December 31, 2007). The amount of any Tranche A Term Loans outstanding on December 17, 2002 must be repaid in varying quarterly installments ranging from 3.75% of the amount on March 31, 2003 to 6.25% of the amount on December 31, 2007 (if maturity is extended to such date). 4 The maturity date of the Tranche B Term Loan is March 31, 2007 (subject to extension to June 30, 2008). The Tranche B Term Loan must be repaid in quarterly installments ranging from .25% of the amount from March 31, 2003 to March 31, 2008 and 94.75% of the amount on June 30, 2008 (if maturity is extended to such date). In addition, mandatory prepayments must be made under the Term Loan Facility upon the happening of certain events. All required prepayments shall be applied as follows: o first, pro rata between the then outstanding Tranche A Term Loans and the Tranche B Term Loan against the remaining scheduled installments of principal due in respect of such terms loans until all such principal is paid in full, and o thereafter, to permanently reduce the revolving credit commitment and, if necessary, prepay revolving loans and/or cash collateralize letters of credit to the extent that letter of credit exposure would exceed the total revolving credit commitment after giving effect to any such reduction. However, for so long as the Tranche B Term Loan is outstanding, lenders with any portion of such outstanding loan may decline to accept any mandatory prepayment of such loan and cause all or a portion of the prepayment to instead be allocated to the then-outstanding Tranche A Term Loans to be applied pro rata against the remaining scheduled installments of principal due in respect thereof. Revolving Loans. Additional draws may be made under the Revolving Credit Facility, subject to the satisfaction of certain conditions, for general corporate purposes, including for working capital, capital expenditures, and to finance permitted acquisitions. The Revolving Credit Facility must be paid in full on or before December 31, 2006 (subject to extension to December 31, 2007). In addition, the mandatory prepayments must be made under the Revolving Credit Facility upon the happening of certain events. All required prepayments shall be applied as discussed above. Voluntary Prepayments. Voluntary prepayments of the Credit Facility are permitted without premium or penalty, subject to minimum notice requirements and minimum prepayment requirements and the payment of any applicable LIBOR breakage fees. At Citadel Broadcasting's option, any portion of the revolving loans which has been prepaid or repaid may be reborrowed, and the maximum amount of the revolving credit commitment may be permanently reduced. Letter of Credit Facility. The letter of credit facility, which is a subfacility of the Revolving Credit Facility, provides for the issuance of letters of credit to be used by Citadel Broadcasting as security for the obligations of Citadel Broadcasting under agreements entered into in connection with certain radio station acquisitions and for any other purposes related to the business of Citadel Broadcasting. The letter of credit facility requires the payment by Citadel Broadcasting of a fronting fee of 1/8 of 1% on the face amount of each outstanding letter of credit. Such fronting fee is payable quarterly in arrears to the bank issuing the letter of credit. Citadel Broadcasting is also required to pay to each revolving credit lender (through the Administrative Agent), on the last day of each quarter, a letter of credit participation fee equal to such lender's pro rata portion of the outstanding letters of credit multiplied by the then applicable margin for 5 Adjusted LIBO Rate (as defined below) advances under the Revolving Credit Facility. Standard issuance and drawing fees are also payable to the bank or banks issuing the letters of credit. Interest Rates. The Credit Facility bears interest at a rate equal to the applicable margin plus either (a) the greater of (i) the per annum rate of interest publicly announced from time to time by Credit Suisse First Boston in New York, New York, as its prime rate of interest (the "Prime Rate") and which may be changed automatically without notice, as the Prime Rate changes, or (ii) the federal funds effective rate as in effect from time to time plus 1/2 of 1%, and which may be changed automatically without notice, as the federal funds effective rate changes (with the greater of (i) or (ii) being referred to herein as the "Alternate Base Rate"), or (b) at the written election of Citadel Broadcasting, at a rate determined by the Administrative Agent to be the Adjusted LIBO Rate for the respective interest period. The LIBO Rate is determined by reference to the British Bankers' Association Interest Settlement Rates for deposits in dollars (as set forth by the Bloomberg Information Service or an appropriate successor) for a period equal to the interest period selected by Citadel Broadcasting. The Adjusted LIBO Rate is the product of (i) the LIBO Rate and (ii) a fraction, the numerator of which is 1.00 and the denominator of which is 1.00 minus the aggregate of the maximum reserve percentages established by the Federal Reserve Board or other banking authority to which the Administrative Agent or any lender is subject, in effect from time to time. The applicable margin for the Tranche B Term Loan is 2.00% or 3.00%, respectively, for Alternative Base Rate and Adjusted LIBO Rate. The applicable margins for the Tranche A Term Loans and the revolving loans are expected to range between 0.00% and 1.75% for the Alternate Base Rate and 0.75% to 2.75% for the Adjusted LIBO Rate, depending on the consolidated leverage ratio from time to time. Except as otherwise provided with respect to voluntary and mandatory prepayments, interest on loans bearing interest at the Alternate Base Rate plus the applicable margin, will be payable quarterly in arrears on the last business day of each calendar quarter, and interest on loans bearing interest at the Adjusted LIBO Rate plus the applicable margin, will be payable on the last day of the interest period applicable to such loan (unless the interest period is greater than 3 months, in which event interest shall be payable at the end of each successive 3 month period during which such interest period is in effect). The interest rate after a payment default shall, in the case of a default in the payment of principal, be 2% in excess of the otherwise applicable interest rate, and, in the case of any other payment default, be 2% in excess of the Alternate Base Rate plus the applicable margin at such time. Certain Other Fees. Citadel Broadcasting is required to pay to each lender (through the Administrative Agent), on the last business day of each calendar quarter, a commitment fee equal to the applicable percentage per annum on the daily unused amount of the commitments of such lender during the preceding quarter. The applicable percentage will vary from 0.25% to 0.5% depending on the consolidated leverage ratio. Security and Guarantee. Subject to permitted liens, the Credit Facility is secured by: (a) a first priority pledge on all of Citadel Broadcasting's capital stock other than Citadel Broadcasting's exchangeable preferred stock, (b) a first priority security interest in all the existing and after-acquired property of Citadel Communications and Citadel Broadcasting, including, without limitation, accounts, machinery, equipment, inventory, real estate, general intangibles and investment property, and 6 (c) all proceeds of the foregoing. The Credit Facility is also guaranteed by Citadel Communications. Hedging Obligations. The Credit Facility also requires that no less than 50% of Citadel Broadcasting's long-term indebtedness be subject to fixed interest rates. If Citadel Broadcasting's total variable debt under the Credit Facility exceeds this 50% threshold, Citadel Broadcasting is required to enter into a hedging contract that will convert a portion of the variable rate into a fixed rate. On June 30, 2000 and August 23, 2000, Citadel Broadcasting entered into one-year interest rate swap transactions in notional amounts of $25.0 million and $40.0 million, respectively. The Company will pay a fixed rate of 7.055% and 6.855%, respectively, and will receive a variable rate based on LIBOR. As a result of the borrowings made to complete the acquisition reported in Item 2 of this report, Citadel Broadcasting expects to enter into one or more additional interest rate swap transactions in the aggregate notional amount of approximately $140.0 million. Change of Control. The Credit Facility provides that a change in control or ownership will be an event of default under the Credit Facility. A change in control or ownership shall occur if: (a) any person or group of persons acting in concert shall own more than 35% of the common stock of Citadel Communications; (b) a majority of the seats (other than vacant seats) on the board of directors of Citadel Communications shall at any time be occupied by persons who were neither (i) nominated by the board of directors of Citadel Communications nor (ii) appointed by directors so nominated; (c) any change in control (or similar event, however denominated) with respect to Citadel Communications or Citadel Broadcasting shall occur under and as defined in any indenture or agreement in respect of material indebtedness; or (d) Citadel Communications shall cease to own, directly or indirectly, 100% of the issuing and outstanding voting equity interests of Citadel Broadcasting. Covenants. The Credit Facility contains customary restrictive covenants, which, among other things, and with exceptions, limit the ability of Citadel Broadcasting and Citadel Communications to incur additional indebtedness and liens, enter into transactions with affiliates, make acquisitions other than permitted acquisitions, pay dividends, redeem or repurchase capital stock, enter into certain sale and leaseback transactions, consolidate, merge or effect asset sales, issue additional equity, make capital expenditures, make investments, loans or prepayments or change the nature of their business. Citadel Broadcasting and Citadel Communications are also required to satisfy financial covenants which will require Citadel Communications and Citadel Broadcasting to maintain specified financial ratios and to comply with financial tests, including ratios with respect to maximum leverage, minimum interest coverage and minimum fixed charge coverage. 7 Permitted Acquisitions. A permitted acquisition under the Credit Facility is an acquisition of (a) a radio station or radio stations (each a "Station"), (b) any business which is ancillary to the ownership or operation of a Station, or (c) any business that is an internet service provider or ancillary to the business of an internet service provider (provided that the aggregate consideration for the acquisition of internet service providers does not exceed $10.0 million). In addition, a permitted acquisition is subject to pro forma compliance with the leverage, interest coverage and fixed charge coverage ratios set forth below. All acquired assets will be subject to a security interest in favor of the Administrative Agent for the benefit of the lenders. Maximum Leverage Test. The maximum leverage test requires that Citadel Broadcasting and Citadel Communications not permit the ratio of (a) their total debt as of the last day of the most recently ended quarter to (b) their consolidated EBITDA, as adjusted for permitted acquisitions and dispositions, for the rolling four-fiscal-quarter period ending as of the last day of such quarter, to be greater than the applicable ratio on that date. The applicable ratios range from 7.25x through September 30, 2001 to 4.0x after March 31, 2004. Minimum Interest Coverage Test. The minimum interest coverage test requires that Citadel Broadcasting and Citadel Communications not permit the ratio of (a) their consolidated EBITDA for any rolling four-fiscal-quarter period to (b) their consolidated interest expense for such period, to be less than the applicable ratio on that date. The applicable ratios range from 1.5x through June 30, 2002 to 2.5x after December 31, 2003. Minimum Fixed Charges Coverage Test. The minimum fixed charges coverage test requires that Citadel Broadcasting and Citadel Communications not permit the ratio of (a) their consolidated EBITDA for any rolling four-fiscal-quarter period to (b) their fixed charges for such period to be less than 1.25 to 1.00. Events of Default. The Credit Facility contains customary events of default. Upon the occurrence of an event of default, with certain limitations, Citadel Broadcasting's and Citadel Communications' obligations under the Credit Facility which are at that time outstanding may become accelerated. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements. The following audited combined financial statements of Dick Broadcasting Company, Inc. of Tennessee and Subsidiaries, Dick Broadcasting Company, Inc. of Nashville, and Dick Radio Alabama, Inc. are included in this report: Independent Auditors' Report Combined Balance Sheet as of December 31, 1999 Combined Statement of Income for the year ended December 31, 1999 Combined Statement of Stockholders' Equity for the year ended December 31, 1999 8 Combined Statement of Cash Flows for the year ended December 31, 1999 Notes to Combined Financial Statements The following unaudited consolidated financial statements of Dick Broadcasting Company, Inc. of Tennessee and Subsidiaries are included in this report: Consolidated Balance Sheets as of June 30, 2000 and 1999 Consolidated Statements of Income (Loss) for the six months ended June 30, 2000 and 1999 Consolidated Statements of Stockholders' Equity for the six months ended June 30, 2000 and 1999 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999 Notes to Unaudited Consolidated Financial Statements (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 June 30, 2000 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended June 30, 2000 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 effective as of April 30, 2000 among Dick Broadcasting Company, Inc. of Tennessee, Dick Broadcasting Company, Inc. of Alabama, Dick Broadcasting Company, Inc. of Nashville, Dick Radio Alabama, Inc., DFT Realty, DFT Realty II, LLC, James Allen Dick, Sr., James Allen Dick, Jr., Charles Arthur Dick, Emily Dick McAlister, Jeannette Dick Hundley and Citadel Broadcasting Company (incorporated by reference to Exhibit 2.1 to Citadel Communications Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000). 2.2 First Amendment to Asset Purchase Agreement dated September 30, 2000 among Dick Broadcasting Company, Inc. of Tennessee, Dick Broadcasting Company, Inc. of Alabama, DFT Realty, DFT Realty II, LLC, James Allen Dick, Sr., James Allen Dick, Jr., Charles Arthur Dick, Emily Dick McAlister, Jeannette Dick Hundley and Citadel Broadcasting Company (incorporated by reference to Exhibit 2.2 to Citadel Communications Corporation's Current Report on Form 8-K filed on October 17, 2000). 4.1 Second Amended and Restated Credit Agreement dated as of October 2, 2000 among Citadel Broadcasting Company, Citadel Communications Corporation, Credit Suisse First Boston, as Lead Arranger, Administrative Agent and Collateral Agent, FINOVA Capital Corporation, as Syndication 9 Agent, First Union National Bank and Fleet National Bank, as Documentation Agents, and the lenders named therein. 23.1 Consent of Hines and Company, P.C. 10 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. DECEMBER 31, 1999 WITH INDEPENDENT AUDITORS' REPORT 11 HINES AND COMPANY, P.C. Certified Public Accountants 405 Agnes Road Post Office Box 11447 Knoxville, Tennessee 37939 Phone: (865) 584-3300 Fax: (865) 588-5757 Jenny L. Hines, CPA Claudia P. Depew, CPA Janna S. Hubbs, CPA Karen N. Ellis, CPA Tracy L. Wright, CPA -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Dick Broadcasting Company, Inc. of Tennessee Dick Broadcasting Company, Inc. of Nashville Dick Radio Alabama, Inc. We have audited the accompanying combined balance sheets of Dick Broadcasting Company, Inc. of Tennessee and subsidiaries, Dick Broadcasting Company, Inc. of Nashville, and Dick Radio Alabama, Inc. as of December 31, 1999 and the related combined statements of income, stockholders' equity, and cash flows for the year then ended. These combined financial statements are the responsibility of the Company'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 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 combined financial statements referred to above present fairly, in all material respects, the financial position of Dick Broadcasting Company, Inc. of Tennessee and subsidiaries, Dick Broadcasting Company, Inc. of Nashville, and Dick Radio Alabama, Inc. at December 31, 1999 and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ Hines and Company, P.C. March 10, 2000 12 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. COMBINED BALANCE SHEET DECEMBER 31, 1999
1999 ----------- ASSETS Current assets: Cash $ 802,096 Accounts and notes receivable: Trade, less allowance for doubtful accounts Of $215,585 and $243,712 in 1999 7,958,692 Stockholders 124,864 Related party 118,867 Other 127,745 Interest receivable: Stockholders 23,257 Related party 44,923 Prepaid expenses 1,025,408 Deferred income tax 46,807 ----------- Total current assets 10,272,659 ----------- Cash value of life insurance, net policy loans of $63,621 in 1999 and 1998 613,344 Note receivable: Stockholder 20,638,245 Related party 4,342,380 Deferred income tax 698,415 Investments 534,310 Other assets 60,972 ----------- 26,887,666 ----------- Property and equipment 26,812,121 Less accumulated depreciation and amortization 13,482,603 ----------- 13,329,518 ----------- Intangible assets: Federal Communications Commission licenses 21,345,818 Other 374,603 ----------- 21,720,421 ----------- Total assets $72,210,264 ===========
See accompanying notes to financial statements. 13
1999 ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 3,583,671 Current maturities of capitalized lease Obligations 287,064 Notes payable - stockholders 804,548 Interest payable: Stockholders 210,580 Other 495,924 Accounts payable 604,846 Accrued expenses 992,388 Income taxes payable 28,333 Deferred income taxes 2,697 ----------- Total current liabilities 7,067,296 ----------- Long-term debt, less current maturities 27,264,335 Capitalized lease obligations, less current maturities 4,191,846 Notes payable - stockholders 15,382,200 Deferred income taxes 1,449,306 Deferred compensation 1,621,042 ----------- 49,908,729 ----------- Stockholders' equity: Common stock 3,001,592 Additional paid-in capital 183,102 Retained earnings 12,049,545 ----------- Total stockholders' equity 15,234,239 ----------- Total liabilities and stockholders' equity $72,210,264 ===========
See accompanying notes to financial statements. 14 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. COMBINED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1999
1999 ----------- Revenue: Sales $44,377,263 Other operating revenue 1,404,956 ----------- 45,782,219 Direct expenses 4,927,131 ----------- Gross profit 40,855,088 ----------- Operating expenses: Technical expenses 1,003,689 Program and news expense 13,014,048 Sales expense 9,425,385 Rental and leasing expenses 491,041 ----------- 23,934,163 General and administrative expenses 12,548,841 ----------- 36,483,004 ----------- Income from operations 4,372,084 ----------- Other income (expense): Interest income 1,600,007 Interest expense (3,354,015 Rent income 250,420 Gain(loss)on sale of assets (140,617 Loss from partnership (246,322 Income (loss) in joint venture (1,231,808 Other income 30,981 ----------- (3,091,354 ----------- Income before income taxes 1,280,730 Income tax expense 448,326 ----------- Net income $ 832,404 ===========
See accompanying notes to financial statements. 15 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. COMBINED STATEMENT OF STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1999
COMMON STOCK ---------------------- ADDITIONAL STATED PAID-IN RETAINED SHARES VALUE CAPITAL EARNINGS TOTAL ------ ---------- -------- ----------- ----------- Balance, December 31, 1998 18,466 3,001,592 183,102 14,658,242 17,842,936 ------ ---------- -------- ----------- ----------- Net income, 1999 832,404 832,404 ------ ---------- -------- ----------- ----------- Distribution to shareholders (3,441,101) (3,441,101) ------ ---------- -------- ----------- ----------- Balance, December 31, 1999 18,466 $3,001,592 $183,102 $12,049,545 $15,234,239 ====== ========== ======== =========== ===========
See accompanying notes to financial statements. 16 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. COMBINED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1999
1999 ---------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 832,404 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 3,606,112 Net loss from investments 249,131 (Gain)(Loss) on disposal of fixed assets 141,585 Deferred income taxes (154,178) Deferred compensation 55,744 Changes in assets and liabilities (Increase) decrease in assets: Trade receivables 1,111,168 Other receivables (1,196) Interest receivable (47,903) Prepaid expenses 128,506 Other assets 94,787 Increase (decrease) in liabilities: Accounts payable 289,192 Interest payable 532,800 Accrued expenses (113,804) Income tax payable (47,054) ---------- Net cash provided (used) by operating Activities 6,677,294 ----------
See accompanying notes to financial statements. 17 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. COMBINED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1999
1999 ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in cash value of life insurance (99,494) Capital expenditures (1,404,144) Proceeds from sale of assets 62,325 Contributions to investments -- Issuance of stockholder notes receivable (2,492,039) Stockholder notes repaid 1,554,792 Issuance of related party notes receivable (252,441) Related party notes repaid 450,704 Principal repayments of capitalized lease obligations (266,385) Distributions from investments -- ----------- Net cash provided (used) by investing activities (2,446,682) ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal repayments on long-term debt (3,578,446) Proceeds from issuance of long term debt 3,500,000 Proceeds from issuance of stockholder notes payable 3,519,036 Repayment of stockholder notes payable (1,106,178) Distributions paid to shareholders (3,441,101) ----------- Net cash provided (used) by financing activities (4,606,689) ----------- Net increase (decrease) in cash (376,077) Cash at beginning of year 1,178,173 ----------- Cash at end of year $ 802,096 =========== Supplemental disclosure of cash flow information: Cash payments for: Interest $ 2,838,554 =========== Income Taxes $ 586,646 ===========
See accompanying notes to financial statements. 18 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Activity Dick Broadcasting Company's operations are primarily related to radio broadcasting. The Company has operations in Tennessee, North Carolina and Alabama. Credit is extended to customers in the normal course of business. Intangible Assets Federal Communications Commission (FCC) licenses are being amortized over a range of fifteen (15) to forty (40) years using the straight-line method. Other intangible assets are amortized over the life of the underlying agreement using the straight-line method. Trade-Out Transactions The Company enters into agreements in which advertising time is traded for various products or services. Trade-out transactions are valued at the normal advertising rates in effect. The company records both an asset and liability at the time of the transaction. Income and expense are recognized when advertisements are aired or when goods and services are received. Income Taxes Deferred income taxes have been provided under the liability method. Deferred tax assets and liabilities are determined based upon the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities, as measured by the current enacted tax rates. Deferred tax expense is the result of changes in the deferred tax asset and liability. Dick Broadcasting Company, Inc. of Tennessee and subsidiaries (with the exception of Dick Broadcasting Company, Inc. of Alabama), Dick Broadcasting Company, Inc. of Nashville, and Dick Radio Alabama, Inc. have elected to be taxed under the provisions of subchapter "S" of the Internal Revenue Code and comparable state regulations. Under these provisions, the corporations do not pay federal income taxes on their taxable income (nor are they allowed a net operating loss carryback or carryover). Instead, the stockholders report their proportionate share of each companies' taxable income (loss) and tax credits on their personal income tax returns. The company has committed to distribute dividends to the shareholders at least sufficient to reimburse them for income taxes incurred as a result of the subchapter "S" election. 19 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred Compensation Plan The Company previously had a deferred compensation plan. Under this plan an annual provision, based on pro rata shares of the net increase in stockholders' investment, was allocated to certain officers of the Company. Beginning January 1, 1998, there were no additional accruals of payment obligations under the old plan. Interest of 7% per annum will be credited on certain deferred balances accumulated prior to January 1, 1998, by the Company. This interest will either be paid out within 90 days of the end of each fiscal year or added to the deferred balance and compounded annually at the option of each officer. In the event of termination of the officer's employment, the deferred balance, together with any interest earned but not previously paid out, is to be paid to the officer, in a lump sum within 90 days. If the termination is not due to death or disability, the Company may elect to pay the deferred obligation in monthly installments of principal and interest over a period not to exceed three years. Principles of Combination The accompanying combined financial statements present the combination of the consolidated financial statements of Dick Broadcasting Company, Inc. of Tennessee and subsidiaries and the financial statements of its affiliates, Dick Broadcasting Company, Inc. of Nashville and Dick Radio Alabama, Inc., all of which are under common control. Material intercompany transactions and balances have been eliminated in combination. Dick Broadcasting Company, Inc. of Tennessee's approximate percentage of ownership in its subsidiaries are as follows:
1999 ---- DBC of North Carolina, Inc. 100% DBC of Alabama, Inc. 100%
20 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Related Companies Arthur Dick Construction Company, a related corporation with a common shareholder, has operations in North Carolina. Eagle Syndication, a related limited liability company with common management, has operations in North Carolina. Dick Family Realty I and II, related limited liability companies with common directors, have operations in Tennessee, Alabama and North Carolina. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line and declining balance methods. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized. Cash Equivalents For purposes of the statements of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from these estimates. Advertising Costs The Company expenses advertising costs as incurred. 21 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 2. NOTES RECEIVABLE
1999 ---------- Stockholders: Notes receivable from stockholders consisted of the following at December 31, 1999: Unsecured promissory note receivable bearing a variable interest rate equivalent to a local lending institution. Annual repayment terms correspond to like amounts required by revolving credit commitment. $3,095,550 Unsecured promissory note receivable bearing a variable interest rate equivalent to a local lending institution. Annual repayment terms correspond to like amounts required by revolving credit commitment. 3,095,550 Unsecured promissory note receivable bearing a variable interest rate equivalent to a local lending institution. Annual repayment terms correspond to like amounts required by revolving credit commitment. 3,095,550 Unsecured promissory note receivable bearing a variable interest rate equivalent to a local lending institution. Annual repayment terms correspond to like amounts required by revolving credit commitment. 3,095,550 7% promissory note requiring forty quarterly payments commencing 3/1/97. All outstanding principal and accrued interest shall be due and payable on 1/1/07. Secured by stock pledge agreement. 1,285,714
22 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 2. NOTES RECEIVABLE (CONTINUED)
1999 --------- 7% promissory note requiring forty quarterly payments commencing 3/1/97. All outstanding principal and accrued interest shall be due and payable 1/1/07. Secured by stock pledge agreement. 364,981 7% promissory note requiring forty quarterly payments commencing 3/1/97. All outstanding principal and accrued interest shall be due and payable on 1/1/07. Secured by stock pledge agreement. 1,342,761 7% promissory note requiring forty quarterly payments commencing 3/1/97. All outstanding principal and accrued interest shall be due and payable on 1/1/07. Secured by stock pledge agreement. 1,337,241 Unsecured variable rate demand note receivable. Interest rate based on prime plus .25%. Interest only due annually. Principal is due on demand. 237,643 Unsecured variable rate demand note receivable. Interest rate based on prime plus .25%. Interest only due annually. Principal is due on demand. 351,120 Unsecured variable rate demand note receivable. Interest rate based on prime plus .25%. Interest only due annually. Principal is due on demand. 321,733 Unsecured variable rate demand note receivable. Interest rate based on prime plus .25%. Interest only due annually. Principal is due on demand. 262,960 Unsecured variable rate demand note Receivable. Interest due quarterly. 108,330 Unsecured variable rate demand note Receivable. Interest due quarterly. 146,865 Unsecured variable rate demand note Receivable. Interest due quarterly. 268,613
23 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 2. NOTES RECEIVABLE (CONTINUED)
1999 ----------- Unsecured variable rate demand note receivable. Interest due quarterly. 764,922 Unsecured variable rate demand note receivable. Interest due quarterly. 292,853 Unsecured variable rate demand note receivable. Interest due quarterly. 292,853 Unsecured variable rate demand note receivable. Interest due quarterly. 292,853 Unsecured variable rate demand note receivable. Interest due quarterly. 292,853 Variable rate promissory note with interest due annually. Principal is due on March 31, 2001. Secured by deed of trust. 291,750 Loans to stockholders 124,864 ----------- $20,763,109 =========== Current $ 124,864 Long-term 20,638,245 ----------- $20,763,109 =========== Other related parties: Notes receivable from other related parties consisted of the following at December 31, 1999: Unsecured variable rate demand note receivable. Interest due quarterly. $ 164,991 Unsecured variable rate demand note requiring forty quarterly payments Interest due quarterly. 2,536,409
24 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 2. NOTES RECEIVABLE (CONTINUED)
1999 ---------- Variable rate promissory note requiring twenty-seven quarterly payments commencing 12/1/97. Secured by aircraft. 623,701 Unsecured variable rate demand note receivable. Interest rate based on prime plus .25%. Interest due quarterly. Principal is due on demand. 1,017,279 Loans to related parties. Interest rate based on prime rate. 118,867 ---------- $4,461,247 ========== Current $ 118,867 Long-term 4,342,380 ---------- $4,461,247 ==========
3. INVESTMENTS Investments held by the Company as of December 31, 1999 consist of a 50% interest in one partnership and a joint venture The Company's investments are accounted for on the equity method
1999 -------- DBC of North Carolina/Ellison Company 238,433 DBC of Nashville/Capitol Sports 295,877 -------- $534,310 ========
25 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 3. INVESTMENTS (CONTINUED) A summary of the changes in the recorded amount of each investment for the year ended December 31, 1999 follows:
DBC OF NORTH CAROLINA/ELLISON COMPANY ------------------------------------- Contributions $ 484,755 Pro rata share of net loss (246,322) --------- Carrying value of investment $ 238,433 ========= Assets $ 489,861 ========= Liabilities $ 12,994 Partners' capital 476,867 --------- $ 489,861 ========= Net loss $(492,644) =========
26 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 3. INVESTMENTS (CONTINUED)
DBC OF NASHVILLE/CAPITOL SPORTS 1999 ------------------------------- ----------- Contributions $ 1,527,685 Pro rata share of net income (loss) (1,231,808) ----------- Carrying value of investment $ 295,877 =========== Assets $ 1,584,407 =========== Liabilities $ 992,654 Partners' capital 591,753 ----------- $ 1,584,407 =========== Net income (loss) $(1,231,808) ===========
4. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
DECEMBER 31, ESTIMATED 1999 USEFUL LIVES ----------- -------------- Land $ 2,580,872 Buildings 4,654,094 5 - 31.5 years Equipment and fixtures 13,496,622 3 - 15 years Transportation equipment 533,315 4 - 10 years Capital lease - buildings 5,547,218 15 years ----------- $26,812,121 ===========
Depreciation expense amounted to $1,610,348 and $1,940,864 in 1999. Amortization expense for the capital leases amounted to $369,815 in 1999. 27 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 5. DEBT Long-term Debt:
1999 ----------- Revolving credit commitment with local lending institution with predetermined maximum annual outstanding balances. The loan bears a variable interest rate of Libor plus 1.0%. Commitment is required to be paid in annual installments through 1/1/2004. The loan is secured by the Company's closely held stock and all company assets. $30,000,000 Installment note requiring a quarterly payment of $34,377 beginning March 1, 1998. The note bears a 6.5% interest rate. The loan is secured by a letter of credit. 848,006 ----------- 30,848,006 Less current portion 3,583,671 ----------- $27,264,335 ===========
Maturities of long-term debt in each of the next five years are as follows: 2000 $ 3,583,671 2001 3,589,243 2002 3,595,187 2003 19,601,527 2004 108,288 Thereafter 370,090 ------------ $30,848,006 ===========
28 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 5. DEBT (CONTINUED) Notes payable - stockholders:
1999 ----------- Promissory note payable bearing a variable interest rate equivalent to a local lending institution. $ 3,095,550 Promissory note payable bearing a variable interest rate equivalent to a local lending institution. 3,095,550 Promissory note payable bearing a variable interest rate equivalent to a local lending institution. 3,095,550 Promissory note payable bearing a variable interest rate equivalent to a local lending institution. 3,095,550 Promissory note payable bearing a variable interest rate equivalent to a local lending institution. 750,000 Promissory note payable bearing a variable interest rate equivalent to a local lending institution. 750,000 Promissory note payable bearing a variable interest rate equivalent to a local lending institution. 750,000 Promissory note payable bearing a variable interest rate equivalent to a local lending institution. 750,000 Promissory notes payable bearing a variable interest rate equivalent to a local lending institution. 804,548 ----------- 16,186,748 Less current portion 804,548 ----------- $15,382,200 ===========
29 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 6. CAPITAL LEASE OBLIGATIONS Long term leases for operations have been contracted with related parties. Those leases have been capitalized as follows:
DECEMBER 31 1999 ----------- Capitalized lease obligation at 7.5% interest beginning September 1, 1995 through August 31, 2010. The obligation requires monthly payments of $24,167. $ 3,093,376 Capitalized lease obligation at 7.5% interest beginning June 28, 1995 through June 30, 2010. The obligation requires monthly payments of $18,750. 2,343,750 Capitalized lease obligation at 7.5% interest beginning December 31, 1995 through December 31, 2010. The obligation requires monthly payments of $8,187. 1,072,497 ----------- 6,509,623 Less amount representing interest (2,030,713) ----------- Present value of minimum lease payments 4,478,910 Less current portion (287,064) ----------- Total $ 4,191,846 ===========
The present value of future minimum lease payments under the capital leases mature as follows: 2000 $ 287,064 2001 309,350 2002 333,366 2003 359,245 2004 387,135 Thereafter 2,802,750 ---------- $4,478,910 ==========
30 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 7. LINE OF CREDIT The Company has a revolving line of credit with a bank that is available until January 1, 2004 in the amount of $1,000,000. No draw exists on this note at December 31, 1999. 8. COMMON STOCK A summary of common stock follows:
Dick Dick Broadcasting Broadcasting Co., Inc. of Co., Inc. of Dick Radio Tennessee Nashville Alabama, Inc. Combined ------------ ------------ ------------- ---------- Total value $2,881,592 $100,000 $20,000 $3,001,592 ========== ======== ======= ========== Authorized shares 80,000 2,000 2,000 Shares issued and outstanding 15,466 1,000 2,000
Common stock has no par value. One half of Dick Broadcasting Co., Inc. of Tennessee's stock authorized, issued and outstanding, is nonvoting. 9. PENSION PLAN The Company has established a qualified contributory profit sharing plan which covers all full-time employees. On May 1, 1991 the Company amended the plan to allow 401(K) contributions. The contributions are at the discretion of the Board of Directors and were $126,111 for 1999. 31 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 10. INCOME TAXES Effective January 1, 1997, the Company has elected under subchapter S regulations whereby all income is taxed to the shareholders with the exception of Dick Broadcasting Company, Inc. of Alabama which remained a C corporation The provision for income taxes for Dick Broadcasting, Inc. of Tennessee and its subsidiaries consists of the following:
DECEMBER 31 1999 ----------- Current tax expense: Federal $ 489,867 State 112,637 --------- Total current 602,504 --------- Deferred tax expense (benefit): Federal 220,060 State (326,692) --------- Total deferred (106,632) --------- Net benefits of state operating carry forward (expires 2003 through 2012) (47,546) --------- Total provision for income taxes $ 448,326 =========
32 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 10. INCOME TAXES (CONTINUED) The components of the deferred tax assets and liabilities are as follows:
1999 ---------- Deferred tax assets: Allowance for doubtful accounts $ 30,762 Accrued shareholder bonuses 10,163 Deferred compensation 97,263 Net operating loss carryforwards - State 482,581 Amortization of favorable lease 111,818 Accrued related party interest 12,635 ---------- Total deferred tax assets 745,222 Deferred tax liabilities: Excess (deficiency) of tax over book depreciation 6,278 Accrued related party interest 8,592 Amortization of FCC licenses 1,494,378 Allowance for doubtful accounts -- Deferred compensation -- ---------- Total deferred tax liabilities 1,509,248 ---------- Net deferred tax asset (liability) $ (764,026) ==========
33 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 11. RELATED PARTY TRANSACTIONS In the ordinary course of conducting business, the Company has financial transactions with related parties. Balances or transaction amounts for such parties are presented in the numerous statements under the following captions:
1999 ----------- BALANCE SHEET ------------- Notes receivable: Stockholders $20,763,109 Related parties 4,461,247 Interest receivable: Stockholder 23,257 Related parties 44,923 Notes payable: Stockholders 16,186,748 Interest payable: Stockholder 210,580 INCOME STATEMENT ---------------- Interest income: Stockholders 1,150,167 Related parties 277,893 Interest expense: Stockholders 855,931 Reduction of lease obligations and related interest: Related parties $ 613,248
34 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES DICK BROADCASTING COMPANY, INC. OF NASHVILLE DICK RADIO ALABAMA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 12. CONCENTRATION OF CREDIT RISK Cash The company maintains its cash in several banking institutions. The amount on deposit with the institutions exceeds the $100,000 federally insured limit. The carrying amount and bank balance are categorized as follows:
Carrying Bank Amount Balance -------- ---------- Amount insured by FDIC $429,400 $ 442,442 Uninsured 370,796 1,941,216 Petty cash 1,900 -- -------- ---------- Total $802,096 $2,383,658 ======== ==========
Accounts & Notes Receivable There are significant related party notes receivable and payable. The Company's ability to collect the outstanding notes is dependent on distributions of income to the stockholders. See note 11. 13. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at December 31, 1999, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. 14. SUBSEQUENT EVENT On May 9, 2000 the Company signed an asset purchase agreement with The Citadel Communications Corporation to sell Dick Broadcasting of Tennessee Inc., Dick Broadcasting of Nashville Inc., Dick Broadcasting of Alabama Inc. and Dick Radio of Alabama Inc. The projected sale date is October 1, 2000. 15. UNREVIEWED PRO FORMA BALANCE SHEET AND SCHEDULE OF INCOME FROM OPERATIONS The Asset Purchase Agreement (described in Note 16) specifically excludes: (1) all cash, cash equivalents, or similar type investments, (2) accounts receivable, (3) assets not used in connection with the operations of the stations, (4) any and all claims with respect to transactions occurring or arising prior to the closing date, including, without limitation, notes receivable, intercompany debt, debts or other obligations due from stockholders and claims for refund of taxes for periods prior to the closing date, and (5) the assets of Dick Broadcasting Company, Inc. of North Carolina. Income and expense specifically related to the lease management arrangement with WOKI in Knoxville have been excluded from the Schedule of Income from Operations.
DECEMBER 31, 1999 --------------------------------------------------------------------------- EXCLUDED ASSETS AND LIABILITIES -------------------------------- COMBINED PRO FORMA BALANCE NORTH ASSETS SHEET CAROLINA OTHER TO BE SOLD ----------- ----------- ----------- ----------- Assets: Current assets $10,272,659 $ 1,604,418 $ 7,712,031 $ 956,210 Other assets 26,887,666 238,617 26,353,172 295,877 Property and equipment 13,329,518 1,381,700 -- 11,947,818 Intangible assets 21,720,421 1,786,390 -- 19,934,031 Other assets eliminated in Consolidation -- 8,089,061 (8,089,061) -- ----------- ----------- ----------- ----------- Total assets $72,210,264 $13,100,186 $25,976,142 $33,133,936 =========== =========== =========== =========== Liabilities and stockholders' equity: Current liabilities $ 7,067,296 $ 267,538 $ 6,799,758 $ -- Long-term liabilities 49,908,729 685,835 49,222,894 -- Other liabilities eliminated in Consolidation -- 5,817,880 (5,817,880) -- Stockholders' equity 15,234,239 6,328,933 8,905,306 ----------- ----------- ----------- ----------- Total Liabilities and stockholders' equity $72,210,264 $13,100,186 $59,110,078 $ -- =========== =========== =========== ===========
35 17. UNAUDITED PRO FORMA CONDENSED BALANCE SHEET AND SCHEDULE OF INCOME FROM OPERATIONS (CONTINUED)
PRO FORMA SCHEDULE OF INCOME FROM OPERATIONS YEAR ENDED DECEMBER 31, 1999 ----------------------------------------------------------- ------------------------------------------------------ COMBINED PRO FORMA INCOME FROM EXCLUDED INCOME FROM OPERATIONS OPERATIONS OPERATIONS ----------- ---------- ----------- Revenue $45,782,219 $9,623,423 $36,158,796 Direct expenses 4,927,131 932,293 3,994,838 ----------- ---------- ----------- Gross profit 40,855,088 8,691,130 32,163,958 ----------- ---------- ----------- Operating expenses 23,934,163 5,612,375 18,321,788 General and administrative expenses 12,548,841 2,466,003 10,082,838 ----------- ---------- ----------- 36,483,004 8,078,378 28,404,626 ----------- ---------- ----------- Income from operations $ 4,372,084 $ 612,752 $ 3,759,332 =========== ========== ===========
36 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 37 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ----------- ----------- ASSETS Current assets: Cash $ 1,110,017 $ 1,967,455 Accounts and notes receivable: Trade, less allowance for doubtful accounts of $196,610 8,242,782 7,564,928 Stockholders 124,864 108,916 Related party 118,867 125,989 Other 1,849 31,848 Interest receivable: Stockholders 514,927 311,521 Related party 59,230 33,637 Other 12,894 0 Prepaid expenses 935,525 915,298 Deferred income tax 83,000 43,357 ----------- ----------- Total current assets 11,203,955 11,102,949 ----------- ----------- Cash value of life insurance, net policy loans Of $63,621 613,344 563,599 Note receivable: Stockholder 20,663,245 19,339,770 Related party 4,230,002 4,464,389 Deferred income tax 550,000 630,632 Investments 429,540 555,309 Other assets 109,692 122,846 ----------- ----------- 26,595,823 25,676,545 Property and equipment 26,916,521 26,607,199 Less accumulated depreciation and amortization 14,340,070 12,519,301 ----------- ----------- 12,576,451 14,087,898 ----------- ----------- Intangible assets: Federal Communications Commission licenses 20,592,489 22,099,147 Other 345,505 434,249 ----------- ----------- 20,937,994 22,533,396 ----------- ----------- Total assets $71,314,223 $73,400,788 =========== ===========
See accompanying notes. 38
2000 1999 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 3,586,412 $ 3,581,016 Current maturities of capitalized lease obligations 297,999 276,531 Notes payable - stockholders 595,756 471,004 Interest payable - stockholders 600,654 389,151 Accounts payable 510,880 617,827 Accrued expenses 883,388 1,023,182 Income taxes payable 216,305 31,772 Deferred income taxes 28,000 4,326 ----------- ----------- Total current liabilities 6,719,394 6,394,809 ----------- ----------- Long-term debt, less current maturities 27,220,433 30,306,845 Capitalized lease obligations, less current maturities 4,040,062 4,338,061 Notes payable - stockholders 15,382,200 13,196,355 Deferred income taxes 1,221,000 1,424,535 Deferred compensation 1,583,707 1,592,963 ----------- ----------- 49,447,402 50,858,759 ----------- ----------- Stockholders' equity: Common stock 3,184,694 3,184,694 Retained earnings 11,962,733 12,962,526 ----------- ----------- Total stockholders' equity 15,147,427 16,147,220 ----------- ----------- Total liabilities and stockholders' equity $71,314,223 $73,400,788 =========== ===========
See accompanying notes. 39 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ----------- ----------- Revenue: Sales $22,013,949 $21,490,598 Other operating revenue 208,241 228,433 ----------- ----------- 22,222,190 21,719,031 Direct expenses 2,443,023 2,328,296 ----------- ----------- Gross profit 19,779,167 19,390,735 ----------- ----------- Operating expenses: Technical expenses 494,920 490,272 Program and news expense 6,783,951 6,526,538 Sales expense 5,065,806 4,794,033 Rental and leasing expenses 131,518 363,841 ----------- ----------- 12,476,195 12,174,684 General and administrative expenses 5,512,119 6,926,682 ----------- ----------- 17,988,314 19,101,366 ----------- ----------- Income from operations 1,790,853 289,369 ----------- ----------- Other income (expense): Interest income 933,127 794,810 Interest expense (2,006,688) (1,682,982) Rent income 117,876 131,935 Gain(loss)on sale of assets 146 (188,804) Loss from partnership (74,617) (13,671) Loss in joint venture (57,153) (214,461) Other income 247 18,422 ----------- ----------- (1,087,062) (1,154,751) ----------- ----------- Income (loss) before income taxes 703,791 (865,382) Income tax expense (333,499) 34,208 ----------- ----------- Net income (loss) $ 370,292 $ (831,174) =========== ===========
See accompanying notes. 40 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
COMMON STOCK ------------------------ STATED RETAINED SHARES VALUE EARNINGS TOTAL -------- ---------- ------------ ----------- Balance, December 31, 1999, as previously reported 15,466 $2,881,592 $ 13,301,366 $16,182,958 Adjustments, retroactive to December 31, 1999, for merger with Dick Broadcasting Company, Inc. of Nashville and Dick Radio Alabama, Inc. 5,180 303,102 (1,251,821) (948,719) -------- ---------- ------------ ----------- Balance, December 31, 1999, as restated 20,646 3,184,694 12,049,545 15,234,239 Net income 370,292 370,292 Distribution to shareholders (457,104) (457,104) -------- ---------- ------------ ----------- Balance, June 30, 2000 20,646 $3,184,694 $ 11,962,733 $15,147,427 ======== ========== ============ =========== Balance, December 31, 1998, or previously reported 15,466 $2,881,592 $ 15,910,063 $18,791,655 Adjustments, retroactive to December 31, 1998, for merger with Dick Broadcasting Company, Inc. of Nashville and Dick Radio Alabama, Inc. 5,180 303,102 (1,251,821) (948,719) -------- ---------- ------------ ----------- Balance, December 31, 1998, as restated 20,646 3,184,694 (14,658,242) 17,842,936 Net Loss (831,174) (831,174) Distribution to shareholders (864,542) (864,542) -------- ---------- ------------ ----------- Balance, June 30, 1999 20,646 $3,184,694 $ 12,962,526 $16,147,220 ======== ========== ============ ===========
See accompanying notes. 41 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ---------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 370,292 $ (831,174) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 1,665,114 1,821,650 Net loss from investments 104,770 228,132 (Gain) on disposal of fixed assets (146) 188,804 Deferred income taxes (148,026) (163,332) Deferred compensation (37,335) 27,665 Changes in assets and liabilities (Increase) decrease in assets: Trade receivables (284,088) 1,504,932 Other receivables 125,896 94,701 Interest receivable (518,871) (324,881) Prepaid expenses 89,883 238,616 Other assets (48,722) 32,913 Increase (decrease) in liabilities: Accounts payable (93,966) 302,173 Interest payable (105,850) 215,447 Accrued expenses (109,000) (83,011) Income tax payable 187,972 (43,615) ---------- ----------- Net cash provided by operating activities 1,197,923 3,209,020 ========== =========== CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (293,361) (1,238,224) Proceeds from sale of assets 3,887 62,293 Increase in cash surrender value of life -- insurance 0 (49,749) ---------- ----------- Net cash used by investing activities (289,474) (1,225,680) ========== =========== CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of stockholder notes receivable (25,000) 0 Related party notes repaid 112,378 0 Proceeds from restated party notes receivable 0 69,133 Proceeds from stockholders notes receivable 0 377,176 Principal repayments of capitalized lease obligations (140,849) (130,703) Principal repayments on long-term debt (41,161) (538,591) Repayment of stockholder notes payable (48,792) (106,531) Distributions paid to shareholders (457,104) (864,542) ---------- ----------- Net cash used by financing activities (600,528) (1,194,058) ========== ===========
See accompanying notes. 42
2000 1999 ---------- ---------- Net increase in cash 307,921 789,282 Cash at beginning of year 802,096 1,178,173 ---------- ---------- Cash at end of year $1,110,017 $1,967,455 ========== ========== Supplemental disclosure of cash flow information: Cash payments for: Interest $2,099,645 $1,784,018 ========== ========== Income taxes $ 116,000 $ 176,259 ========== ==========
NONCASH INVESTING AND FINANCING ACTIVITIES: During 2000, the Company sold a parcel of land by exchanging title to the land for a stockholder note payable in the amount of $160,000. 43 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations Dick Broadcasting Company's operations are primarily related to radio broadcasting in Tennessee, North Carolina, and Alabama. The Company has two wholly-owned subsidiaries: Dick Broadcasting Company, Inc. of North Carolina and Dick Broadcasting Company, Inc. of Alabama. Effective May 1, 2000, Dick Broadcasting Company, Inc. of Tennessee merged with Dick Broadcasting Company, Inc. of Nashville and Dick Radio Alabama, Inc., with Dick Broadcasting Company, Inc. of Tennessee being the surviving company. The historical costs of the separate companies assets and liabilities were combined in the merger. The Company has reported its operations for the six months ended June 30, 2000 and the six months ended June 30, 1999 as if the merger occurred as of December 31, 1999. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, after elimination of all intercompany accounts and transactions. Intangible Assets Federal Communications Commission (FCC) licenses are being amortized over a range of fifteen (15) to forty (40) years using the straight-line method. Other intangible assets are amortized over the life of the underlying agreement using the straight-line method. Trade-Out Transactions The Company enters into agreements in which advertising time is traded for various products or services. Trade-out transactions are valued at the normal advertising rates in effect. The company records both an asset and liability at the time of the transaction. Income and expense are recognized when advertisements are aired or when goods and services are received. Income Taxes Deferred income taxes have been provided under the liability method. Deferred tax assets and liabilities are determined based upon the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities, as measured by the current enacted tax rates. Deferred tax expense is the result of changes in the deferred tax asset and liability. 44 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes (continued) Dick Broadcasting Company, Inc. of Tennessee and subsidiaries (with the exception of Dick Broadcasting Company, Inc. of Alabama), Dick Broadcasting Company, Inc. of Nashville, and Dick Radio Alabama, Inc. have elected to be taxed under the provisions of subchapter "S" of the Internal Revenue Code and comparable state regulations. Under these provisions, the corporations do not pay federal income taxes on their taxable income (nor are they allowed a net operating loss carryback or carryover). Instead, the stockholders report their proportionate share of each companies' taxable income (loss) and tax credits on their personal income tax returns. The company has committed to distribute dividends to the shareholders at least sufficient to reimburse them for income taxes incurred as a result of the subchapter "S" election. Deferred Compensation Plan The Company previously had a deferred compensation plan. Under this plan an annual provision, based on pro rata shares of the net increase in stockholders' investment, was allocated to certain officers of the Company. Beginning January 1, 1998, there are to be no additional accruals of payment obligations under the old plan. Interest of 7% per annum will be credited on certain deferred balances accumulated prior to January 1, 1998, by the Company. This interest will either be paid out within 90 days of the end of each fiscal year or added to the deferred balance and compounded annually at the option of each officer. In the event of termination of the officer's employment, the deferred balance, together with any interest earned but not previously paid out, is to be paid to the officer, in a lump sum within 90 days. If the termination is not due to death or disability, the Company may elect to pay the deferred obligation in monthly installments of principal and interest over a period not to exceed three years. Related Companies Arthur Dick Construction Company, a related corporation with a common shareholder, has operations in North Carolina. Eagle Syndication, a related limited liability company with common management, has operations in North Carolina. Dick Family Realty I and II, related limited liability companies with common directors, have operations in Tennessee, Alabama and North Carolina. 45 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line and declining balance methods. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized. Cash Equivalents For purposes of the statements of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from these estimates. Advertising Costs The Company expenses advertising costs as incurred. 2. NOTES RECEIVABLE Stockholders: Notes receivable from stockholders consisted of the following at June 30, 2000 and June 30, 1999:
2000 1999 ----------- ----------- Unsecured promissory notes receivable (4) bearing a variable interest rate equivalent to a local lending institution. Annual repayment terms correspond to like amounts required by revolving credit commitment. $12,382,200 $13,196,355 7% promissory notes (4) requiring forty quarterly payments commencing 3/1/97. All outstanding principal and accrued interest shall be due and payable on 1/1/07. Secured by stock pledge agreement. 4,330,697 4,652,363
46 DICK BROADCASTING COMPANY, INC. OF TENNESSEE SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 2. NOTES RECEIVABLE - (CONTINUED)
2000 1999 ----------- ----------- Unsecured variable rate demand notes receivable (4). Interest rate based on prime plus .25%. Interest only due annually. Principal is due on demand. 1,198,456 1,199,302 Unsecured variable rate demand notes receivable (8). Interest due quarterly. 2,460,142 0 Variable rate promissory note with interest due annually. Principal is due on March 31, 2001. Secured by deed of trust. 291,750 291,750 Loans to stockholders 124,864 108,916 ----------- ----------- $20,788,109 $19,448,686 =========== =========== Current $ 124,864 108,916 Long-term 20,663,245 19,339,770 ----------- ----------- $20,788,109 $19,448,686 =========== =========== Other related parties: ---------------------- Notes receivable from other related parties consisted of the following at June 30, 2000 and 1999: Unsecured variable rate demand note receivable. Interest due quarterly. $ 92,744 $ 12,173 Unsecured variable rate demand note requiring forty quarterly payments. Interest due quarterly. 2,536,509 2,744,348 Variable rate promissory note requiring twenty-seven quarterly payments commencing 12/1/97. Secured by aircraft. 583,462 663,939 Unsecured variable rate demand note receivable. Interest rate based on prime plus .25%. Interest due quarterly. Principal is due on demand. 1,017,287 1,043,929 Loans to related parties. Interest rate based on prime rate. 118,867 125,989 ----------- ----------- $ 4,348,869 $ 4,590,378 =========== =========== Current $ 118,867 $ 125,989 Long-term 4,230,002 4,464,389 ----------- ----------- $ 4,348,869 $ 4,590,378 =========== ===========
47 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 3. INVESTMENTS Investments held by the Company as of June 30, 2000 and 1999 consist of a 50% interest in one partnership and a joint venture. The Company's investments are accounted for on the equity method.
2000 1999 --------- --------- DBC of North Carolina/Ellison Company $ 190,816 $ 138,224 DBC of Nashville/Capitol Sports 238,724 444,084 --------- --------- $ 429,540 $ 582,308 ========= =========
A summary of the changes in the recorded amount of each investment for the six months ended June 30, 2000 and 1999 follows:
DBC OF NORTH CAROLINA/ELLISON COMPANY 2000 1999 --------- --------- Contributions $ 265,433 430,756 Pro rata share of net loss (74,617) (13,671) --------- --------- Carrying value of investment $ 190,816 417,085 --------- --------- Assets $ 407,037 $ 670,300 --------- --------- Liabilities $ 25,403 31,640 Partners' capital 381,634 638,660 --------- --------- $ 407,037 $ 670,300 --------- --------- Net loss $(149,234) $ (27,343) ========= =========
DBC OF NASHVILLE/CAPITOL SPORTS 2000 1999 --------- --------- Contributions $ 295,877 $ 352,685 Pro rata share of net income (loss) (57,153) (214,461) --------- --------- Carrying value of investment $ 238,724 $ 138,224 --------- --------- Assets $ 629,097 $ 280,278 --------- --------- Liabilities $ 151,650 $ 3,830 Partners' capital 477,447 276,448 --------- --------- $ 629,097 $ 280,278 --------- --------- Net loss $(114,307) $(428,922) ========= =========
48 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 4. PROPERTY AND EQUIPMENT Property and equipment consist of the following at June 30, 2000 and 1999:
ESTIMATED 2000 1999 USEFUL LIVES ----------- ----------- -------------- Land $ 2,420,872 $ 2,580,872 Buildings 4,689,100 4,609,603 5 - 31.5 years Equipment and fixtures 13,661,749 13,336,191 3 - 15 years Transportation equipment 597,582 533,315 4 - 10 years Capital lease - buildings 5,547,218 5,547,218 15 years ----------- ----------- $26,916,521 $26,607,199 =========== ===========
For the six months ending June 30, 2000 and 1999, the provision for depreciation amounted to $882,687 and $823,768, respectively, and the amortization provision for capital leases amounted $184,908 and $184,906,respectively. 5. DEBT
2000 1999 ----------- ----------- Revolving credit commitment with local lending institution with predetermined maximum annual outstanding balances. The loan bears a variable interest rate of Libor plus 1.0% Commitment is required to e paid in annual installments through 1/1/2004. The loan is secured by the Company's closely held stock and all company assets. $30,000,000 $33,000,000 Installment note requiring a quarterly payment of $34,377 beginning March 1, 1998. the note bears a 6.5% interest rate. The loan is secured by a letter of credit. 806,845 887,861 ----------- ----------- 30,806,845 33,887,861 Less current portion 3,586,412 3,581,016 ----------- ----------- $27,220,433 $30,306,845 =========== ===========
Maturities of long-term debt in each of the next five years are as follows:
June 30, -------- 2001 $ 3,586,412 2002 3,592,167 2003 3,598,306 2004 19,604,853 2005 111,836 Thereafter 313,271 ----------- $30,806,845 ===========
49 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 5. DEBT - (CONTINUED) Notes payable - stockholders:
2000 1999 ----------- ----------- Promissory notes payable (4) bearing variable interests rate equivalent to a local lending institution. $12,382,200 $13,196,355 Promissory notes payable (5) bearing variable interests rate equivalent to a local lending institution. 3,595,756 471,004 ----------- ----------- 15,977,956 13,667,359 Less current portion 595,756 471,004 ----------- ----------- $15,382,200 $13,196,355 =========== ===========
6. CAPITAL LEASE OBLIGATIONS Long term leases for operations have been contracted with related parties. Those leases have been capitalized as follows:
2000 1999 ----------- ----------- Capitalized lease obligation at 7.5% interest beginning September 1, 1995 through August 31, 2010. The obligation requires monthly payments of $24,167. $ 2,948,374 $ 3,238,378 Capitalized lease obligation at 7.5% interest beginning June 28, 1995 through June 30, 2010. The obligation requires monthly payments of $18,750. 2,231,250 2,456,250 Capitalized lease obligation at 7.5% interest beginning December 31, 1995 through December 31, 2010. The obligation requires monthly payments of $8,187. 1,023,375 1,121,619 ----------- ----------- 6,202,999 6,816,247 Less amount representing interest (1,864,938) (2,201,655) ----------- ----------- Present value of minimum lease payments 4,338,061 4,614,592 Less current portion (276,531) (276,531) ----------- ----------- Total $ 4,040,062 $ 4,338,061 =========== ===========
50 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 6. CAPITAL LEASE OBLIGATIONS (CONTINUED) At June 30, 2000, the present value of future minimum lease payments under the capital leases mature as follows:
June 30, -------- 2001 $ 297,999 2002 321,133 2003 346,063 2004 372,930 2005 401,881 Thereafter 2,598,055 ---------- $4,338,061 ==========
7. LINE OF CREDIT The Company has a revolving line of credit with a bank that is available until January 1, 2004 in the amount of $1,000,000. No draw exists on this note at June 30, 2000. 8. COMMON STOCK Details of the Company's common stock follow: Total value $3,184,694 Authorized shares, no par value 80,000 Shares issued and outstanding 20,646
9. PENSION PLAN The Company has established a qualified contributory profit sharing plan which covers all full-time employees. On May 1, 1991, the Company amended the plan to allow 401(K) contributions. The contributions are at the discretion of the Board of Directors and are made at the end of the year. 10. INCOME TAXES Effective January 1, 1997, the Company has elected under subchapter S regulations whereby all income is taxed to the shareholders with the exception of Dick Broadcasting Company, Inc. of Alabama which remained a C corporation The provision for income taxes for Dick Broadcasting, Inc. of Tennessee and its subsidiaries consists of the following: 51 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 10. INCOME TAXES - (CONTINUED)
2000 1999 ---------- ---------- Current tax expense (benefit): Federal $ 339,158 $ 57,677 State 142,368 71,447 ---------- ---------- Total current 481,526 129,124 ---------- ---------- Deferred tax expense (benefit): Federal (186,748) (33,318) State 66,302 (35,140) ---------- ---------- Total deferred (120,446) (68,458) ---------- ---------- Net benefits of state operating carry forward (expires 2003 through 2012) (27,581) (94,874) ---------- ---------- Total provision for income taxes(benefit) $ 333,499 $ (34,208) ========== ==========
The components of the deferred tax assets and liabilities are as follows:
2000 1999 ---------- ---------- Deferred tax assets: Allowance for doubtful accounts $ 68,000 $ 32,279 Deferred compensation 95,000 105,741 Net operating loss carryforwards - State 455,000 524,891 Accrued related party interest 15,000 11,078 ---------- ---------- Total deferred tax assets 633,000 673,989 ---------- ---------- Deferred tax liabilities: Excess (deficiency) of tax over book Depreciation 18,000 6,112 Accrued related party interest 28,000 4,326 Amortization of FCC licenses and favorable leases 1,203,000 1,418,423 ---------- ---------- Total deferred tax liabilities 1,249,000 1,428,861 ---------- ---------- Net deferred tax asset (liability) $ (616,000) $ (754,872) ========== ==========
11. RELATED PARTY TRANSACTIONS In the ordinary course of conducting business, the Company has financial transactions with related parties. Balances or transaction amounts for such parties are included in the numerous statements under the following captions: 52 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 11. RELATED PARTY TRANSACTIONS - (CONTINUED)
2000 1999 ----------- ----------- BALANCE SHEET ------------- Notes receivable: Stockholders $20,788,109 $19,448,686 Related parties 4,348,869 4,590,378 Interest receivable: Stockholder 514,927 311,521 Related parties 59,230 33,637 Notes payable: Stockholders 15,977,956 13,667,359 Interest payable: Stockholder 600,654 389,151 INCOME STATEMENT ---------------- Interest income: Stockholders 575,083 Related parties 23,967 Interest expense: Stockholders 427,965 BALANCE SHEET AND INCOME STATEMENT ---------------------------------- Reduction of capital lease obligations and related interest: 306,624 306,624 Related parties
12. CONCENTRATION OF CREDIT RISK At June 30, 2000, cash deposits in excess of federally insured limits approximate $293,920. The Company extends credit to customers in the normal course of business in the amount of its trade accounts receivable amounting to $8,622,519 at June 30, 2000. There are significant related party notes receivable and payable. The Company's ability to collect the outstanding notes is dependent on distributions of income to the stockholders (see note 11). 13. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at June 30, 2000 and 1999, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. 53 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 14. ASSET PURCHASE AGREEMENT On May 9, 2000 the Company signed an asset purchase agreement with The Citadel Communications Corporation to sell Dick Broadcasting of Tennessee Inc., Dick Broadcasting of Nashville Inc., Dick Broadcasting of Alabama Inc. and Dick Radio of Alabama Inc. for approximately $300,000,000, subject to adjustments provided in the agreement. The sale date was September 30, 2000. 15. UNREVIEWED PRO FORMA BALANCE SHEET AND SCHEDULE OF INCOME FROM OPERATIONS The Asset Purchase Agreement (described in Note 14) specifically excludes: (1) all cash, cash equivalents, or similar type investments, (2) accounts receivable, (3) assets not used in connection with the operations of the stations, (4) any and all claims with respect to transactions occurring or arising prior to the closing date, including, without limitation, notes receivable, intercompany debt, debts or other obligations due from stockholders and claims for refund of taxes for periods prior to the closing date, and (5) the assets of Dick Broadcasting Company, Inc. of North Carolina. Income and expense specifically related to the lease management arrangement with WOKI in Knoxville have been excluded from the Schedule of Income from Operations. 54 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 15. UNREVIEWED PRO FORMA BALANCE SHEET AND SCHEDULE OF INCOME FROM OPERATIONS - (CONTINUED)
PRO FORMA BALANCE SHEET ----------------------- JUNE 30, 2000 ------------------------------------------------------------------- EXCLUDED ASSETS AND LIABILITIES ----------------------------- PRO FORMA CONSOLIDATED NORTH ASSETS BALANCE SHEET CAROLINA OTHER TO BE SOLD ------------- ---------- ----------- ----------- ASSETS CURRENT ASSETS CASH $ 1,110,017 $ 270,905 $ 839,112 $ -- ACCOUNTS/NOTES RECEIVABLES: TRADE LESS ALLOWANCE 8,242,782 1,465,493 6,777,289 -- STOCKHOLDERS 124,864 124,864 -- -- RELATED PARTY 118,867 108,497 10,370 -- OTHER 1,849 1,849 -- -- INTEREST RECEIVABLE: STOCKHOLDERS 514,927 -- 514,927 -- RELATED PARTY 59,230 -- 59,230 -- OTHER 12,894 -- 12,894 -- PREPAID EXPENSES 935,525 62,178 -- 873,347 DEFERRED INCOME TAX 83,000 -- 83,000 -- ----------- ---------- ----------- ----------- TOTAL CURRENT ASSETS 11,203,955 2,033,786 8,296,822 873,347 CASH VALUE OF LIFE INSURANCE NET LOANS 613,344 -- 613,344 -- NOTE RECEIVABLE: -- STOCKHOLDER 20,663,245 -- 20,663,245 -- RELATED PARTY 4,230,002 -- 4,230,002 -- DEFERRED INCOME TAX 550,000 -- 550,000 -- INVESTMENTS 429,540 190,817 -- 238,723 OTHER ASSETS 109,692 184 109,508 -- PROPERTY AND EQUIPMENT LESS ACCUMULATED DEPRECIATION 12,576,451 1,340,045 -- 11,236,406 INTANGIBLE ASSETS 20,937,994 1,745,242 -- 19,192,752 OTHER ASSETS ELIMINATED IN CONSOLIDATION -- 3,385,966 (3,385,966) -- ----------- ---------- ----------- ----------- TOTAL ASSETS $71,314,223 $8,696,040 $31,076,955 $31,541,228 =========== ========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES CURRENT MATURITIES OF LONG-TERM DEBT $ 3,586,412 $ -- $ 3,586,412 $ -- CURRENT MATURITIES OF CAPITAL LEASE OBLIGATIONS 297,999 46,672 251,327 -- NOTES PAYABLE- STOCKHOLDERS 595,756 -- 595,756 -- INTEREST PAYABLE- STOCKHOLDERS 600,654 -- 600,654 -- ACCOUNTANTS PAYABLE 510,880 150,792 360,088 -- ACCRUED EXPENSES 883,388 113,593 769,795 -- INCOME TAXES PAYABLE 216,305 (27,725) 244,030 -- DEFERRED INCOME TAXES 28,000 -- 28,000 -- ----------- ---------- ----------- ----------- TOTAL CURRENT LIABILITIES 6,719,394 283,332 6,436,062 -- LONG-TERM DEBT, LESS CURRENT MATURITIES 27,220,433 -- 27,220,433 -- CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT MATURITIES 4,040,062 662,063 3,377,999 -- NOTES PAYABLE - STOCKHOLDERS 15,382,200 -- 15,382,200 -- DEFERRED INCOME TAXES 1,221,000 -- 1,221,000 -- DEFERRED COMPENSATION 1,583,707 -- 1,583,707 -- OTHER LIABILITIES ELIMINATED IN CONSOLIDATION -- 1,049,677 (1,049,677) -- ----------- ---------- ----------- ----------- TOTAL LIABILITIES 56,166,796 1,995,072 54,171,724 -- STOCKHOLDERS' EQUITY 15,147,427 6,700,968 8,446,459 -- ----------- ---------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $71,314,223 $8,696,040 $62,618,183 $ -- =========== ========== =========== ===========
55 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 15. UNREVIEWED PRO FORMA BALANCE SHEET AND SCHEDULE OF INCOME FROM OPERATIONS - (CONTINUED)
PRO FORMA BALANCE SHEET JUNE 30, 1999 -------------------------------------------------------------------- EXCLUDED ASSETS AND LIABILITIES ------------------------------ PRO FORMA CONSOLIDATED NORTH ASSETS BALANCE SHEET CAROLINA OTHER TO BE SOLD ------------- ----------- ----------- ----------- ASSETS CURRENT ASSETS CASH $ 1,967,455 $ 355,090 $ 1,612,365 $ -- ACCOUNTS/NOTES RECEIVABLES: TRADE LESS ALLOWANCE 7,564,928 1,385,712 6,179,216 -- STOCKHOLDERS 108,916 108,916 -- -- RELATED PARTY 125,989 115,619 10,370 -- OTHER 31,848 16,044 15,804 -- INTEREST RECEIVABLE: STOCKHOLDERS 311,521 -- 311,521 -- RELATED PARTY 33,637 -- 33,637 -- OTHER -- -- -- -- PREPAID EXPENSES 915,298 46,612 -- 868,686 DEFERRED INCOME TAX 43,357 -- 43,357 -- ----------- ----------- ----------- ----------- TOTAL CURRENT ASSETS 11,102,949 2,027,993 8,206,270 868,686 CASH VALUE OF LIFE INSURANCE NET LOANS 563,599 -- 563,599 -- NOTE RECEIVABLE: -- STOCKHOLDER 19,339,770 -- 19,339,770 -- RELATED PARTY 4,464,389 -- 4,464,389 -- DEFERRED INCOME TAX 630,632 -- 630,632 -- INVESTMENTS 555,309 417,085 -- 138,224 OTHER ASSETS 122,846 184 122,662 -- PROPERTY AND EQUIPMENT LESS ACCUMULATED DEPRECIATION 14,087,898 1,455,311 -- 12,632,587 INTANGIBLE ASSETS 22,099,147 1,827,538 -- 20,271,609 OTHER ASSETS ELIMINATED IN CONSOLIDATION 434,249 7,171,441 (6,737,192) -- ----------- ----------- ----------- ----------- TOTAL ASSETS $73,400,788 $12,899,552 $25,590,130 $33,911,106 =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES CURRENT MATURITIES OF LONG-TERM DEBT $ 3,581,016 $ -- $ 3,581,016 $ -- CURRENT MATURITIES OF CAPITAL LEASE OBLIGATIONS 276,531 43,309 233,222 -- NOTES PAYABLE- STOCKHOLDERS 471,004 -- 471,004 -- INTEREST PAYABLE- STOCKHOLDERS 389,151 -- 389,151 -- ACCOUNTANTS PAYABLE 617,827 97,185 520,642 -- ACCRUED EXPENSES 1,023,182 127,996 865,186 -- INCOME TAXES PAYABLE 31,772 (29,099) 60,871 -- DEFERRED INCOME TAXES 4,326 -- 4,326 -- ----------- ----------- ----------- ----------- TOTAL CURRENT LIABILITIES 6,394,809 239,391 6,155,418 -- LONG-TERM DEBT, LESS CURRENT MATURITIES 30,306,845 -- 30,306,845 -- CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT MATURITIES 4,338,061 708,735 3,629,326 -- NOTES PAYABLE - STOCKHOLDERS 13,196,355 -- 13,196,355 -- DEFERRED INCOME TAXES 1,424,535 -- 1,424,535 -- DEFERRED COMPENSATION 1,592,963 -- 1,592,963 -- OTHER LIABILITIES ELIMINATED IN CONSOLIDATION -- 6,003,651 (6,003,651) -- ----------- ----------- ----------- ----------- TOTAL LIABILITIES 57,253,568 6,951,777 50,301,791 -- STOCKHOLDERS' EQUITY 16,147,220 5,947,776 10,199,444 -- ----------- ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $73,400,788 $12,899,553 $60,501,235 $ -- =========== =========== =========== ===========
56 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 15. UNREVIEWED PRO FORMA BALANCE SHEET AND SCHEDULE OF INCOME FROM OPERATIONS - (CONTINUED)
PRO FORMA SCHEDULE OF INCOME FROM OPERATIONS -------------------------------------------- JUNE 30, 2000 ----------------------------------------------- Consolidated Pro Forma Income Excluded Income Statement Operations Statement ------------ ---------- ----------- REVENUE: SALES $22,013,949 $ 4,421,070 $17,592,879 OTHER OPERATING REVENUE 208,241 90,247 117,994 ----------- ----------- ----------- 22,222,190 4,511,317 17,710,873 DIRECT EXPENSES 2,443,023 434,466 2,008,557 ----------- ----------- ----------- GROSS PROFIT 19,779,167 4,076,851 15,702,316 ----------- ----------- ----------- OPERATING EXPENSES 12,476,195 2,740,603 9,735,592 GENERAL AND ADMINISTRATIVE EXPENSES 5,512,119 1,258,724 4,253,395 ----------- ----------- ----------- 17,988,314 3,999,327 13,988,987 ----------- ----------- ----------- INCOME FROM OPERATIONS $ 1,790,853 $ 77,524 $ 1,713,329 =========== =========== ===========
57 DICK BROADCASTING COMPANY, INC. OF TENNESSEE AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 15. UNREVIEWED PRO FORMA BALANCE SHEET AND SCHEDULE OF INCOME FROM OPERATIONS - (CONTINUED)
PRO FORMA SCHEDULE OF INCOME FROM OPERATIONS -------------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, 1999 ------------------------------------------------ Consolidated Pro Forma Income Excluded Income Statement Operations Statement ------------ ---------- ----------- REVENUE: SALES $21,490,598 $4,734,626 $16,755,972 OTHER OPERATING REVENUE 228,433 105,986 122,447 ----------- ---------- ----------- 21,719,031 4,840,612 16,878,419 DIRECT EXPENSES 2,328,296 476,583 1,851,713 ----------- ---------- ----------- GROSS PROFIT 19,390,735 4,364,029 15,026,706 ----------- ---------- ----------- OPERATING EXPENSES 12,174,684 2,858,641 9,316,043 GENERAL AND ADMINISTRATIVE EXPENSES 6,926,682 1,201,250 5,725,432 ----------- ---------- ----------- 19,101,366 4,059,891 15,041,475 ----------- ---------- ----------- INCOME(LOSS) FROM OPERATIONS $ 289,369 $ 304,138 $ (14,769) =========== ========== ===========
58 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 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 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 (the "KOOJ Acquisition"), 59 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 (A) 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, 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 $189.0 million, and (B) entry into a local marketing agreement dated June 1, 2000 pursuant to which a third party operates the five Tyler/Longview, Texas stations acquired and has an obligation to purchase such stations (the unaudited pro forma financial information does not give effect to any future sale of the stations pursuant to this agreement) (collectively, the "BPH Transactions"), o the June 19, 2000 acquisition of WWFX-FM in Worcester, Massachusetts for the purchase price of approximately $12.8 million (the "WWFX Acquisition"), o the June 28, 2000 acquisition of Bloomington Broadcasting Holdings, Inc., which owned 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 $175.9 million, which amount includes repayment of indebtedness of Bloomington Broadcasting Holdings and a deferred obligation relating to a recent radio station purchase by Bloomington Broadcasting Holdings (the "Bloomington Acquisition"), 60 o the (A) August 1, 2000 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, and the right to operate WTRX-AM in Flint under a time brokerage agreement, as well as the right to acquire such station, for the aggregate purchase price of approximately $120.9 million in cash, and (B) the concurrent sale of WSGW-AM, WGER-FM and WTCF-FM in Saginaw/Bay City/Midland, Michigan for the sale price of approximately $16.1 million in cash (collectively, the "Michigan Transactions"), o the October 2, 2000 acquisition of WKDF-FM and WGFX-FM in Nashville, Tennessee, WIVK-FM, WNOX-AM, WNOX-FM and WSMJ-FM in Knoxville, Tennessee, and WRAX-FM, WZRR-FM, WYSF-FM, WJOX-AM and WAPI-AM in Birmingham, Alabama for the aggregate purchase price of approximately $288.6 million in cash (the "Dick 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"), and 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"). 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. 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: 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 61 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, 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 June 30, 2000 has been adjusted to give effect to the Michigan Transactions and the Dick Acquisition as if each had occurred on June 30, 2000 (collectively, the "Recent 2000 Transactions"). 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. 62 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 2000 (DOLLARS IN THOUSANDS)
ACTUAL ADJUSTMENTS PRO FORMA CITADEL FOR RECENT 2000 CITADEL BROADCASTING TRANSACTIONS (1) BROADCASTING -------------- ---------------- -------------- ASSETS Cash and cash equivalents $ 6,610 $ (4,074) $ 2,536 Accounts and notes receivable, net 68,041 -- 68,041 Prepaid expenses 4,487 -- 4,487 Net assets of discontinued operations 2,350 -- 2,350 ---------- -------- ---------- Total current assets 81,488 (4,074) 77,414 Property and equipment, net 90,783 19,013 109,796 Intangible assets, net 939,809 375,712 1,315,521 Restricted cash 2,000 -- 2,000 Other assets 7,105 -- 7,105 ---------- -------- ---------- TOTAL ASSETS $1,121,185 $390,651 $1,511,836 ========== ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $ 16,577 $ -- $ 16,577 Current maturities of other long-term obligations 842 -- 842 ---------- -------- ---------- Total current liabilities 17,419 -- 17,419 Notes payable, less current maturities 280,000 389,000 669,000 Senior subordinated notes 210,734 -- 210,734 Other long-term obligations, less current maturities 2,744 -- 2,744 Deferred tax liability 77,692 -- 77,692 Exchangeable preferred stock 89,818 -- 89,818 Common stock and additional paid-in capital 514,582 -- 514,582 Deferred compensation (20,681) -- (20,681) Accumulated deficit/ retained earnings (51,123) 1,651 (49,472) ---------- -------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,121,185 $390,651 $1,511,836 ========== ======== ==========
(1) Represents the net effect of the Michigan Transactions and the Dick Acquisition, as if each transaction had taken place on June 30, 2000. 63 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (DOLLARS IN THOUSANDS)
ACTUAL ADJUSTMENTS FOR PRO FORMA CITADEL COMPLETED CITADEL BROADCASTING TRANSACTIONS(1) BROADCASTING ------------ --------------- ------------ Net revenue $114,349 $ 51,545 $165,894 Station operating expenses 72,490 36,076 108,566 Depreciation and amortization 28,518 24,460 52,978 Corporate general and administrative 4,382 -- 4,382 Non-cash deferred compensation 6,455 -- 6,455 -------- -------- -------- Operating expenses 111,845 60,536 172,381 Operating income (loss) 2,504 (8,991) (6,487) Interest expense 17,632 23,809 41,441 Other (income) expense, net (3,497) 57 (3,440) --------- -------- -------- Income (loss) from continuing operations before income taxes (11,631) (32,857) (44,488) Income taxes (benefit) (1,307) (1,062) (2,369) Net income (loss) from continuing operations (10,324) (31,795) (42,119) Net (loss) from discontinued operations, net of tax (1,775) -- (1,775) Net income (loss) (12,099) (31,795) (43,894) Dividend requirement for exchangeable preferred stock (5,832) -- (5,832) --------- -------- -------- Income (loss) applicable to common shares $(17,931) $(31,795) $(49,726) ======== ======== ========
(1) Represents the net effect of the Completed Transactions that were consummated after January 1, 2000 as if each transaction had taken place on January 1, 1999. Dollars in the tables below are shown in thousands.
DICK MICHIGAN BLOOMINGTON WWFX BPH ACQUISITION TRANSACTIONS ACQUISITION ACQUISITION TRANSACTIONS ----------- ------------ ----------- ----------- ------------ Net revenue $ 15,703 $ 7,692 $14,692 $ 922 $11,362 Station operating expenses 12,359 4,024 10,094 457 8,310 Depreciation and amortization 9,554 3,527 6,847 409 3,793 Corporate general and administrative -- -- -- -- -- -------- ------- ------- ----- ------- Operating expenses 21,913 7,551 16,941 866 12,103 -------- ------- ------- ----- ------- Operating income (loss) (6,210) 141 (2,249) 56 (741) Interest expense 11,271 3,866 6,248 473 3,696 Other (income) expenses, net 57 -- -- -- -- -------- ------- ------- ----- ------- Income (loss) from continuing operations before income taxes (17,538) (3,725) (8,497) (417) (4,437) Income taxes (benefit) -- -- (1,062) -- -- -------- ------- ------- ----- ------- Net income (loss) from continuing operations $(17,538) $(3,725) $(7,435) $(417) $(4,437) ======== ======= ======= ===== =======
64
WORC AND ADJUSTMENTS LAFAYETTE WXLO FOR THE THE COMPLETED ACQUISITION ACQUISITION 2000 OFFERING TRANSACTIONS ----------- ----------- ------------- ------------- Net revenue $ 688 $ 486 $ -- $ 51,545 Station operating expenses 464 368 -- 36,076 Depreciation and amortization 151 179 -- 24,460 Corporate general and administrative -- -- -- -- ----- ----- ------- -------- Operating expenses 615 547 -- 60,536 ----- ----- ------- -------- Operating income (loss) 73 (61) -- (8,991) Interest expense 166 178 (2,089) 23,809 Other (income) expenses, net -- -- -- 57 ----- ----- ------- -------- Income (loss) from continuing operations before income taxes (93) (239) 2,089 (32,857) Income tax (benefit) -- -- -- (1,062) ----- ----- ------- -------- Net income (loss) from continuing operations (93) (239) 2,089 (31,795) ===== ===== ======= ========
65 CITADEL BROADCASTING COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) C
ACTUAL ADJUSTMENTS FOR PRO FORMA CITADEL COMPLETED CITADEL BROADCASTING TRANSACTIONS(1) BROADCASTING ------------ --------------- ------------ Net revenue $ 178,495 $145,185 $323,680 Station operating expenses 115,312 95,143 210,455 Depreciation and amortization 35,749 68,245 103,994 Corporate general and administrative 7,010 (131) 6,879 Non-cash deferred compensation 1,727 -- 1,727 --------- -------- -------- Operating expenses 159,798 163,257 323,055 --------- -------- -------- Operating income (loss) 18,697 (18,072) 625 Interest expense 25,385 45,746 71,131 Other (income) expense, net (388) (8,406) (8,794) --------- -------- -------- Income (loss) from continuing operations before income taxes (6,300) (55,412) (61,712) Income tax (benefit) (1,647) (2,975) (4,622) Net income (loss) from continuing operations (4,653) (52,437) (57,090) Net (loss) from discontinued operations, net of tax (4,275) -- (4,275) Net income (loss) (8,928) (52,437) (61,365) Dividend requirement for exchangeable preferred stock (14,103) 3,324 (10,779) --------- -------- -------- Income (loss) applicable to common shares $ (23,031) $(49,113) $(72,144) ========= ======== ========
(1) Represents the net effect of the Completed Transactions as if each transaction had taken place on January 1, 1999. Dollars in the tables below are shown in thousands. 66
DICK MICHIGAN BLOOMINGTON BPH ACQUISITION TRANSACTIONS ACQUISITION TRANSACTIONS ----------- ------------ ----------- ------------ Net Revenue $ 31,205 $15,264 $ 28,304 $ 42,061 Station operating expenses 21,960 8,071 19,354 28,997 Depreciation and amortization 19,107 7,054 13,695 13,006 Corporate general and administrative -- -- -- -- -------- ------- -------- -------- Operating expenses 41,067 15,125 33,049 42,003 -------- ------- -------- -------- Operating income (loss) (9,862) 139 (4,745) 58 Interest expense 22,541 7,732 12,496 12,671 Other (income) expenses, net 1,232 -- -- -- -------- ------- -------- -------- Income (loss) from continuing operations before income taxes (33,635) (7,593) (17,241) (12,613) Income tax (benefit) -- -- (2,125) -- Net income (loss) from continuing operations (33,635) (7,593) (15,116) (12,613) Net (loss) from discontinued operations, net of tax -- -- -- -- Net income (loss) (33,635) (7,593) (15,116) (12,613) Dividend requirement for exchangeable preferred stock -- -- -- -- -------- ------- -------- -------- Income (loss) applicable to common shares (33,635) (7,593) (15,116) (12,613) ======== ======= ======== ========
67
PORTSMOUTH/ CHARLESTON/ DOVER/ BINGHAMTON/ OKLAHOMA ROCHESTER/ MUNCIE/ BATON ROUGE/ CITY PORTLAND KOKOMO LAFAYETTE ACQUISITION ACQUISITION ACQUISITION ACQUISITION ----------- ----------- ----------- ----------- Net Revenue $ 9,736 $10,642 $ 9,543 $1,371 Station operating expenses 6,402 6,021 6,711 1,275 Depreciation and amortization 4,298 3,628 2,685 628 Corporate general and administrative -- -- -- -- ------- ------- ------- ------ Operating expenses 10,700 9,649 9,396 1,903 ------- ------- ------- ------ Operating income (loss) (964) 993 147 (532) Interest expense 4,282 2,994 2,343 -- Other (income) expenses, net -- -- -- -- ------- ------- ------- ------ Income (loss) from continuing operations before income taxes (5,246) (2,001) (2,196) (532) Income tax (benefit) -- (724) -- (126) Net income (loss) from continuing operations (5,246) (1,277) (2,196) (406) Net (loss) from discontinued operations, net of tax -- -- -- -- Net income (loss) (5,246) (1,277) (2,196) (406) Dividend requirement for exchangeable preferred stock -- -- -- -- ------- ------- ------- ------ Income (loss) applicable to common shares $(5,246) (1,277) $(2,196) $ (406) ======= ======= ======= ======
68
CARLISLE ACQUISITION, CAPSTAR TRANSACTIONS, KOOJ ACQUISITION WXL0 ACQUISITION, ADJUSTMENTS LAFAYETTE FOR THE ACQUISITION, 1999 OFFERING, WORC ACQUISITION, THE PREFERRED SAGINAW/ WWFX ACQUISITION AND REDEMPTION BAY CITY MARATHON AND THE THE COMPLETED ACQUISITION DISPOSITION 2000 OFFERING TRANSACTIONS ----------- ----------- ------------- ------------ Net Revenue $ 526 $(3,467) $ -- $145,185 Station operating expenses 486 (4,134) -- 95,143 Depreciation and amortization 202 3,942 -- 68,245 Corporate general and administrative -- (131) -- (131) ----- ------- -------- -------- Operating expenses 688 (323) -- 163,257 ----- ------- -------- -------- Operating income (loss) (162) (3,144) -- (18,072) Interest expense -- 2,395 (21,708) 45,746 Other (income) expenses, net -- (9,638) -- (8,406) ----- ------- -------- -------- Income (loss) from continuing operations before income taxes (162) 4,099 21,708 (55,412) Income tax (benefit) -- -- -- (2,975) Net income (loss) from continuing operations (162) 4,099 21,708 (52,437) Net (loss) from discontinued operations, net of tax -- -- -- -- Net income (loss) (162) 4,099 21,708 (52,437) Dividend requirement for exchangeable preferred stock -- -- 3,324 3,324 ----- ------- -------- -------- Income (loss) applicable to common shares $(162) 4,099 $ 25,032 (49,113) ===== ======= ======== ========
69 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: October 17, 2000 By: /s/ Lawrence R. Wilson ---------------------- -------------------------- Lawrence R. Wilson Chairman and Chief Executive Officer 70 EXHIBIT INDEX 2.1 Asset Purchase Agreement effective as of April 30, 2000 among Dick Broadcasting Company, Inc. of Tennessee, Dick Broadcasting Company, Inc. of Alabama, Dick Broadcasting Company, Inc. of Nashville, Dick Radio Alabama, Inc., DFT Realty, DFT Realty II, LLC, James Allen Dick, Sr., James Allen Dick, Jr., Charles Arthur Dick, Emily Dick McAlister, Jeannette Dick Hundley and Citadel Broadcasting Company (incorporated by reference to Exhibit 2.1 to Citadel Communications Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000). 2.2 First Amendment to Asset Purchase Agreement dated September 30, 2000 among Dick Broadcasting Company, Inc. of Tennessee, Dick Broadcasting Company, Inc. of Alabama, DFT Realty, DFT Realty II, LLC, James Allen Dick, Sr., James Allen Dick, Jr., Charles Arthur Dick, Emily Dick McAlister, Jeannette Dick Hundley and Citadel Broadcasting Company (incorporated by reference to Exhibit 2.2 to Citadel Communications Corporation's Current Report on Form 8-K filed on October 17, 2000). 4.1 Second Amended and Restated Credit Agreement dated as of October 2, 2000 among Citadel Broadcasting Company, Citadel Communications Corporation, Credit Suisse First Boston, as Lead Arranger, Administrative Agent and Collateral Agent, FINOVA Capital Corporation, as Syndication Agent, First Union National Bank and Fleet National Bank, as Documentation Agents, and the lenders named therein. 23.1 Consent of Hines and Company, P.C.