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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) December 17, 1999
Citadel Communications Corporation
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(Exact Name of Registrant as Specified in its Charter)
Nevada
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(State or Other Jurisdiction of Incorporation)
000-24515 86-0748219
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(Commission File Number) (IRS Employer Identification No.)
City Center West, Suite 400
7201 West Lake Mead Boulevard
Las Vegas, Nevada 89128
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(Address of Principal Executive Offices) (Zip Code)
(702) 804-5200
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(Registrant's Telephone Number, Including Area Code)
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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 Communications Corporation's business.
The words "intends", "believes" 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 Communications' business strategy,
o general economic and business conditions, both nationally and in Citadel
Communications' radio markets,
o Citadel Communications' expectations and estimates concerning future
financial performance, financing plans and the impact of competition,
o anticipated trends in Citadel Communications' 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
Communications 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 December 23, 1999, Citadel Communications' subsidiary, Citadel
Broadcasting Company, completed its acquisition of all the equity interests of
Caribou Communications Co. from CAT Communications, Inc. and Desert
Communications III, Inc., the two former equity holders of Caribou
Communications. At the time of the closing, Caribou Communications was the
licensee, and the owner and operator, of radio stations KATT-FM, KYIS-FM,
KCYI-FM, KNTL-FM and WWLS-AM serving the Oklahoma City, Oklahoma market. Citadel
Communications intends to continue operating these stations through Citadel
Broadcasting.
The aggregate purchase price was approximately $61.5 million, which amount
includes the repayment of approximately $12.5 million of indebtedness of Caribou
Communications. Of the purchase price, approximately $56.0 million was paid in
cash at the time of closing, $250,000 is being held to secure certain
obligations of the sellers under the purchase agreement and the remainder was
evidenced by promissory notes of Citadel Broadcasting, which bear interest at
5.47% per annum. The principal balances of the promissory notes, together with
accrued and unpaid interest thereon, were paid on January 4, 2000. The cash
amount paid at closing and the amounts needed to pay the promissory notes were
borrowed under Citadel Broadcasting's credit facility with Credit Suisse First
Boston, as administrative agent, and Credit Suisse First Boston, Bank of
America, N.A., Bank of Montreal, The Bank of New York, Bank of Nova Scotia, The
Chase Manhattan Bank, Compagnie Financiere De Cic Et De L'Union Europeenne,
FINOVA Capital Corporation, First Union National Bank and Fleet National Bank,
as lenders. See Item 5 of this report for a description of Citadel
Broadcasting's credit facility.
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ITEM 5. OTHER EVENTS
New Credit Facility
On December 17, 1999, Citadel Communications and Citadel Broadcasting
entered into a credit facility (the "Credit Facility") provided pursuant to a
Credit Agreement of even date therewith, by and among Citadel Broadcasting and
Citadel Communications, Credit Suisse First Boston, as Lead Arranger,
Administrative Agent and Collateral Agent, and Bank of America, N.A., Bank of
Montreal, The Bank of New York, Bank of Nova Scotia, Credit Suisse First Boston,
The Chase Manhattan Bank, Compagnie Financiere De Cic Et De L'Union Europeenne,
FINOVA Capital Corporation, First Union National Bank and Fleet National Bank,
as lenders (the "Credit Agreement").
The Credit Agreement provides for the making to Citadel Broadcasting,
by the lenders of (a) term loans at any time during the period from December 17,
1999 to December 15, 2000, in an aggregate principal amount not in excess of
$250.0 million (together with the additional term loans described below, the
"Term Loan Facility") and (b) revolving loans at any time and from time to time
prior to March 31, 2007 (subject to extension to December 31, 2007), in an
aggregate principal amount at any one time outstanding not in excess of $150.0
million (together with the additional revolving loans described below, the
"Revolving Credit Facility"). Of the $150.0 million which is available in the
form of revolving loans under the Revolving Credit Facility, (x) until March 31,
2000, up to $75.0 million of the Revolving Credit Facility may be made available
in the form of letters of credit, and (y) after March 31, 2000, 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 $300.0
million in additional term loans, which term loans may be made at the sole
discretion of the lenders. Of such additional $300.0 million amount, at the
request of Citadel Broadcasting, up to $100.0 million may be in the form of an
increase in the $150.0 million revolving credit commitment. The lenders are
under no obligation whatsoever to make such additional $300.0 million available,
whether in the form of term loans, revolving loans or otherwise. Citadel
Broadcasting and Citadel Communications are currently in compliance in all
material respects with the terms of the Credit Agreement.
Term Loans. Draws may be made under the Term Loan Facility solely to
(a) refinance Citadel Broadcasting's credit facility with FINOVA Capital
Corporation (the "Finova Credit Facility"), (b) to finance a portion of the
acquisitions currently planned by Citadel Broadcasting, (c) to finance a portion
of future permitted acquisitions, and (d) to pay related fees and expenses. The
Term Loan Facility must be repaid as follows:
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Repayment Date Percentage of Aggregate Amount of Term
- -------------- Loans Outstanding on December 17, 2002
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March 31, 2003 3.75%
June 30, 2003 3.75%
September 30, 2003 3.75%
December 31, 2003 3.75%
March 31, 2004 5.00%
June 30, 2004 5.00%
September 30, 2004 5.00%
December 31, 2004 5.00%
March 31, 2005 5.00%
June 30, 2005 5.00%
September 30, 2005 5.00%
December 31, 2005 5.00%
March 31, 2006 5.00%
June 30, 2006 5.00%
September 30, 2006 5.00%
December 31, 2006 5.00%
March 31, 2007 6.25%
June 30, 2007 6.25%
September 30, 2007 6.25%
December 31, 2007 6.25%
In addition, the Credit Agreement requires that the following mandatory
prepayments be made under the Term Loan Facility:
(a) 100% of the cash proceeds in excess of $5.0 million (net of
transaction expenses, reserves and amounts used to repay indebtedness secured by
an asset being sold, hereinafter referred to as "Net Cash Proceeds") of a sale
of assets of Citadel Broadcasting (an "Asset Sale"), which proceeds are not
reinvested within 330 days of the Asset Sale, in productive assets of a kind
then used or usable in the business of Citadel Broadcasting, must be used to
prepay outstanding term loans and/or to permanently reduce the commitment of the
lenders to make revolving loans (the "Revolving Credit Commitment");
(b) if at the time of the issuance of equity securities by Citadel
Communications or Citadel Broadcasting (each an "Equity Issuance"), the
Consolidated Leverage Ratio (the ratio of total debt to consolidated EBITDA, and
for any rolling four-quarter period in which a permitted acquisition or Asset
Sale occurred, determined on a pro forma basis as if such permitted acquisition
or disposition had occurred at the beginning of such rolling four-quarter
period) is greater than 5.00 to 1.00, the lesser of (x) 50% of Net Cash Proceeds
received from such Equity Issuance, and (y) the amount of such Net Cash Proceeds
as shall be necessary to reduce the Consolidated Leverage Ratio to 5.00 to 1.00,
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must be used to prepay outstanding term loans and/or to permanently reduce the
Revolving Credit Commitment;
(c) beginning in calendar year 2001, if the Consolidated Leverage Ratio
as of the end of the immediately preceding fiscal year is greater than 5.00 to
1.00, an amount equal to 50% of excess cash flow for such fiscal year then
ended, must be used to prepay the term loans or to reduce the Revolving Credit
Commitment; and
(d) if at the time of the issuance of debt by Citadel Communications or
Citadel Broadcasting (each a "Debt Issuance"), the Consolidated Leverage Ratio
is greater than 5.00 to 1.00, 100% of the Net Cash Proceeds received from such
Debt Issuance must be used to prepay outstanding term loans and/or to
permanently reduce the Revolving Credit Commitment.
All of the foregoing required prepayments shall be applied as follows:
o first, pro rata against the remaining scheduled installments of
principal due in respect of term 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.
Revolving Loans. Citadel Broadcasting used the proceeds of a $71.0
million revolving credit loan under the Credit Facility to refinance Citadel
Broadcasting's then existing $68.0 million of revolving credit loans under the
FINOVA Credit Facility (the "FINOVA Indebtedness") and to pay transaction
expenses incurred in connection with entry into the Credit Agreement and the
refinancing of the FINOVA Indebtedness (the "Refinancing"). 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 a portion of certain acquisitions
contemplated by Citadel Broadcasting and for certain future permitted
acquisitions by Citadel Broadcasting. The Revolving Credit Facility must be paid
in full on or before March 31, 2007 (subject to extension until December 31,
2007). In addition, the Credit Agreement requires that the following mandatory
prepayments be made under the Revolving Credit Facility:
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(a) 100% of Net Cash Proceeds which are not reinvested within 330 days
of an Asset Sale, in productive assets of a kind then used or usable in the
business of Citadel Broadcasting, must be used to prepay outstanding term loans
and/or to permanently reduce the Revolving Credit Commitment;
(b) if at the time of an Equity Issuance, the Consolidated Leverage
Ratio is greater than 5.00 to 1.00, the lesser of (a) 50% of Net Cash Proceeds
received from such Equity Issuance, and (b) the amount of such Net Cash Proceeds
as shall be necessary to reduce the Consolidated Leverage Ratio to 5.00 to 1.00,
must be used to prepay outstanding term loans and/or to permanently reduce the
Revolving Credit Commitment;
(c) beginning in calendar year 2001, if the Consolidated Leverage
Ratio as of the end of the immediately preceding fiscal year is greater than
5.00 to 1.00, an amount equal to 50% of excess cash flow for such fiscal year
then ended, must be used to prepay the term loans or to reduce the Revolving
Credit Commitment; and
(d) if at the time of a Debt Issuance, the Consolidated Leverage Ratio
is greater than 5.00 to 1.00, 100% of the Net Cash Proceeds received from such
Debt Issuance must be used to prepay outstanding term loans and/or to
permanently reduce the Revolving Credit Commitment.
All of the foregoing required prepayments shall be applied as follows:
o first, pro rata against the remaining scheduled installments of
principal due in respect of term 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.
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 ("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
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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 LIBOR advances under the Credit Facility. Standard
issuance and drawing fees are also payable to the bank or banks issuing the
letters of credit. As of December 31, 1999, letters of credit in the aggregate
amount of approximately $20.4 million are issued and outstanding in connection
with pending radio station acquisitions.
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.
Mandatory prepayments are described above under the headings "Term Loans" and
"Revolving Loans."
Interest Rates. The Credit Facility bears interest at a rate equal to
the applicable margin plus (a) the greater of
o 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, and
o 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 (a) or (b) 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 (x) the LIBO Rate and (y) a fraction, the numerator of
which is 1.00 and the denominator of which is 1.00 minus the eurocurrency
reserve requirements as prescribed by the Federal Reserve Board or other
governmental body, in effect from time to time. The applicable margins for the
Credit Facility are expected to range between 0% and 1.5% for the Alternate Base
Rate and 0.75% to 2.5% 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 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
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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.
Other Fees. Citadel Broadcasting is required to pay other customary
fees under the Credit Facility.
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 13-1/4% 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
(c) all proceeds of the foregoing.
The Credit Facility is also guaranteed by Citadel Communications.
Change of Control. The Credit Facility provides that a change in
control or ownership will be an event of default under the Credit Facility. A
change in control or ownership shall occur if:
(a) 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
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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.
Permitted Acquisitions. A Permitted Acquisition is an
acquisition of (a) a radio station or radio stations (each a "Station"), or (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 or related
businesses shall 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-quarter period ending as of the last day of
such quarter, to be greater than the applicable ratio on that date. The
applicable ratios are as follows:
Period Ratio
- ------ -----
January 1, 2000 through March 31, 2000 7.25x
April 1, 2000 through June 30, 2000 7.00x
July 1, 2000 through September 30, 2000 6.75x
October 1,2000 through December 31, 2000 6.50x
January 1, 2001 through March 31, 2001 6.25x
April 1, 2001 through June 30, 2001 6.00x
July 1, 2001 through September 30, 2001 6.00x
October 1, 2001 through December 31, 2001 5.75x
January 1, 2002 through March 31, 2002 5.50x
April 1, 2002 through June 30, 2002 5.25x
July 1, 2002 through September 30, 2002 5.00x
October 1, 2002 through December 31, 2002 4.50x
Thereafter 4.00x
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-quarter period
to (b) their consolidated interest expense for such period, to be less than the
applicable ratio on that date. The applicable ratios are as follows:
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Period Ratio
- ------ -----
January 1, 2000 through March 31, 2000 1.50x
April 1, 2000 through June 30, 2000 1.50x
July 1, 2000 through September 30, 2000 1.50x
October 1,2000 through December 31, 2000 1.50x
January 1, 2001 through March 31, 2001 1.75x
April 1, 2001 through June 30, 2001 1.75x
July 1, 2001 through September 30, 2001 1.75x
October 1, 2001 through December 31, 2001 2.00x
January 1, 2002 through March 31, 2002 2.00x
April 1, 2002 through June 30, 2002 2.25x
July 1, 2002 through September 30, 2002 2.25x
Thereafter 2.50x
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-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, including without limitation:
o breach of any representation or warranty and/or false or
misleading statements by Citadel Broadcasting or Citadel
Communications made in connection with the Credit Facility or
related documents;
o failure of Citadel Broadcasting to pay (a) when due under the
Credit Facility, all or any portion of the principal balance of
any loan or any reimbursement obligation with respect to letters
of credit or (b) within 5 business days after the same shall
become due and payable, any other of its obligations under the
Credit Facility (including interest obligations);
o failure of Citadel Broadcasting or Citadel Communications to
observe or perform (a) certain affirmative covenants or
agreements, specifically those pertaining to legal existence, use
of proceeds and notices of events of default, material litigation
and developments which have resulted in, or could reasonably be
expected to result in, a material adverse effect, and (b) negative
covenants;
o failure of Citadel Broadcasting or Citadel Communications to
observe or perform any other covenant or agreement contained in
the Credit Agreement or any other loan document which is not
remedied within 30 days after written notice thereof;
o certain defaults, including payment defaults, by Citadel
Broadcasting or Citadel Communications, under other agreements
relating to material indebtedness;
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o the insolvency of Citadel Broadcasting or Citadel Communications,
including the failure of Citadel Broadcasting or Citadel
Communications to generally pay debts as they become due;
o Citadel Broadcasting's or Citadel Communications' filing, or
consent to the filing against it, of a petition for relief or
reorganization or arrangement or any other petition in bankruptcy
or insolvency under the law of any jurisdiction or making of an
assignment for the benefit of creditors, or the appointment of a
custodian, receiver or trustee for Citadel Broadcasting or Citadel
Communications under certain circumstances;
o failure of Citadel Broadcasting or Citadel Communications to
discharge certain judgments against either of them;
o any security interest purported to be created by a loan document
entered into in connection with the Credit Facility shall cease to
be, or shall be asserted not to be, a valid, perfected, first
priority, security interest;
o existence of certain conditions which result in actual or
potential liability to Citadel Broadcasting or Citadel
Communications or any ERISA affiliate for its pension plan in an
amount in excess of $5.0 million;
o a change in control or ownership. See the discussion above under
the subheading "Change of Control;"
o failure of Citadel Communications' guaranty to remain in full
force and effect; and
o Citadel Communications' denial or disaffirmance of obligations
under its guaranty or its failure to make payment when due.
Upon the occurrence of an event of default, with certain limitations,
Citadel Broadcasting's and Citadel Communications' obligations under the Credit
Facility which are at that time outstanding may become accelerated.
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Additional Worcester Acquisition
On December 22, 1999, Citadel Broadcasting entered into an asset purchase
agreement with WBA, Inc. to acquire WWFX-FM serving the Worcester, Massachusetts
market for the purchase price of approximately $14.25 million in cash. The
closing of the transaction is subject to various conditions, including Federal
Communications Commission consent to the assignment of the station license to
Citadel Broadcasting. Although Citadel Communications believes that the
conditions to closing are customary for transactions of this type, there can be
no assurance that such conditions will be satisfied.
Merger of Subsidiaries
On December 28, 1999, Citadel License, Inc. merged with and into Citadel
Broadcasting Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. The following financial statements were previously
reported on Citadel Communications Corporation's Current Report on Form 8-K
filed on December 10, 1999:
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CARIBOU COMMUNICATIONS CO.
Independent Auditors' Report
Balance Sheets as of December 31, 1997 and 1998
Statements of Operations for the years ended December 31, 1997 and 1998
Statements of Changes in Partners' Equity for the years ended December 31, 1997
and 1998
Statements of Cash Flows for the years ended December 31, 1997 and 1998
Notes to Financial Statements
The following financial statements are included in this report pursuant to Item
7(a):
CARIBOU COMMUNICATIONS CO.
Balance Sheets as of September 30, 1999 and 1998 (unaudited)
Statements of Operations for the nine months ended September 30, 1999 and 1998
(unaudited)
Statements of Changes in Partners' Equity for the nine months ended September
30, 1999 and 1998 (unaudited)
Statements of Cash Flows for the nine months ended September 30, 1999 and 1998
(unaudited)
Notes to Unaudited Financial Statements
(b) Pro Forma Financial Information. The following pro forma financial
information of Citadel Communications Corporation and Subsidiary is included
herein pursuant to Item 7(b):
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine
months ended September 30, 1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
twelve months ended December 31, 1998
(c) Exhibits. The following exhibits are filed as part of this report:
2.1 Purchase Agreement dated August 23, 1999 by and among Cat
Communications, Inc., Desert Communications III, Inc. and Citadel
Broadcasting Company.
2.2 Amendment to Purchase Agreement dated December 22, 1999 by and among
Cat Communications, Inc., Desert Communications III, Inc. and Citadel
Broadcasting Company.
4.1 Credit Agreement dated as of December 17, 1999 among Citadel
Broadcasting Company, Citadel Communications Corporation, Citadel
License, Inc., Credit Suisse First Boston, as lead Arranger,
Administrative Agent and Collateral Agent, FINOVA Capital Corporation,
as Syndication Agent, First Union Securities, Inc. and Fleet National
Bank, as Co-Documentation Agents, and the lenders named therein.
10.1 Parent Guarantee Agreement dated as of December 17, 1999 between
Citadel Communications Corporation and Credit Suisse First Boston, as
Collateral Agent.
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BALANCE SHEETS (unaudited)
CARIBOU COMMUNICATIONS CO.
September 30
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 321,063 $ 69,062
Accounts receivable, net of allowance for doubtful
accounts of $68,047 for 1999 and $80,093 for 1998 1,905,990 1,758,802
Prepaid expenses and other current assets 130,935 277,307
Deposit in escrow -- 350,000
----------- -----------
TOTAL CURRENT ASSETS 2,357,988 2,455,171
NET PROPERTY AND EQUIPMENT 1,905,007 1,525,079
OTHER ASSETS
Deposits 9,061 8,961
Intangible assets 15,680,035 13,654,571
----------- -----------
15,689,096 13,663,532
$19,952,091 $17,643,782
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 183,748 $ 329,738
Accrued expenses 737,869 487,995
Payroll taxes payable 58,292 70,205
Current portion of long-term debt 12,729,750 610,000
----------- -----------
TOTAL CURRENT LIABILITIES 13,709,659 1,497,938
LONG-TERM DEBT -- 8,878,846
PARTNERS' EQUITY 6,242,432 7,266,998
----------- -----------
$19,952,091 $17,643,782
=========== ===========
See accompanying notes.
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STATEMENTS OF OPERATIONS (unaudited)
CARIBOU COMMUNICATIONS CO.
Nine Months Ended
September 30
1999 1998
----------- -----------
REVENUES
KATT-FM $ 3,101,820 $ 2,779,905
KYIS-FM 1,706,260 1,600,832
KCYI-FM (formerly KTNT-FM) 604,868 764,035
KNTL-FM and WWLS-AM 1,601,347 616,866
Other revenue 140,967 154,185
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TOTAL REVENUES 7,155,262 5,915,823
OPERATING EXPENSES
Program expenses 2,171,603 1,968,709
Technical expenses 217,277 226,835
Sales expenses 1,563,369 1,484,962
Advertising and promotion 157,389 192,400
KATT products 15,701 15,796
Corporate expenses 564,030 493,545
General and administrative 733,150 640,062
Loan fees 150,678 150,678
Amortization expense 1,040,361 730,257
Depreciation expense 360,134 293,268
----------- -----------
6,973,692 6,196,512
----------- -----------
INCOME (LOSS) FROM OPERATIONS 181,570 (280,689)
OTHER EXPENSE
Interest expense 836,742 588,752
Miscellaneous expense 182,215 75,793
----------- -----------
1,018,957 664,545
----------- -----------
NET LOSS $ (837,387) $ (945,234)
=========== ===========
See accompanying notes.
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STATEMENTS OF CHANGES IN PARTNERS' EQUITY (unaudited)
CARIBOU COMMUNICATIONS CO.
CAT Desert
Communications, Communications
Inc. III, Inc. Total
--------------- -------------- -----------
Partners' equity at January 1, 1998 $ 2,443,095 $ 1,769,137 $ 4,212,232
Capital contribution 2,320,000 1,680,000 4,000,000
Net loss (548,236) (396,998) (945,234)
----------- ----------- -----------
Partners' equity at September 30, 1998 $ 4,214,859 $ 3,052,139 $ 7,266,998
=========== =========== ===========
Partners' equity at January 1, 1999 $ 4,106,295 $ 2,973,524 $ 7,079,819
Net loss (485,684) (351,703) (837,387)
----------- ----------- -----------
Partners' equity at September 30, 1999 $ 3,620,611 $ 2,621,821 $ 6,242,432
=========== =========== ===========
See accompanying notes.
15
17
STATEMENTS OF CASH FLOWS (unaudited)
CARIBOU COMMUNICATIONS CO.
Nine Months Ended
September 30
1999 1998
---------- ----------
OPERATING ACTIVITIES
Net loss (837,387) (945,234)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Bad debt expense 80,290 49,529
Depreciation 360,134 293,268
Amortization 1,040,361 730,257
Loan fees expense 150,678 150,678
Increase in accounts receivable (154,445) (514,742)
(Increase) decrease in prepaid expenses and other assets 78,230 (119,538)
Increase in accounts payable and accrued expenses 10,765 322,314
---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 728,626 (33,468)
INVESTING ACTIVITIES
Purchases of property and equipment (288,742) (131,482)
Cash paid for the purchase of WWLS-AM net assets (3,461,686) (5,846,162)
Cash paid for intangible assets (10,000) --
Net receipt of earnest money from escrow agent -- 150,000
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (3,760,428) (5,827,644)
FINANCING ACTIVITIES
Proceeds from long-term debt 3,485,000 3,269,608
Payments on long-term debt (310,000) (1,359,608)
Capital contribution by partners -- 4,000,000
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,175,000 5,910,000
---------- ----------
INCREASE IN CASH 143,198 48,888
CASH AT BEGINNING OF PERIOD 177,865 20,174
---------- ----------
CASH AT END OF PERIOD $ 321,063 $ 69,062
========== ==========
See accompanying notes.
16
18
NOTES TO UNAUDITED FINANCIAL STATEMENTS
CARIBOU COMMUNICATIONS CO.
September 30, 1999
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Company's Business: Caribou Communications Co. (the "Partnership")
is an Oklahoma General Partnership, organized to engage in the radio
broadcasting business through the control and operation of KATT-FM, KYIS-FM,
KCYI-FM (formerly KTNT-FM), KNTL-FM, and WWLS-AM radio stations in Oklahoma
City. The Partnership was organized on December 29, 1994 and started business on
January 1, 1995. The Partnership's corporate offices are located in Denver,
Colorado, and operations facilities are located in Oklahoma City, Oklahoma.
Financial Statement Presentation: The Partnership prepares its financial
statements in accordance with generally accepted accounting principles. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Partnership Formation: The Partnership was formed through the contributions of
substantially all of the respective properties and assets at the appraised
values, subject to substantially all of the respective liabilities and
obligations of Cat Communications, Inc. ("CAT") and Desert Communications III,
Inc. ("DCI") to the capital account of the Partnership having an aggregate net
asset value of $6,769,378 on December 29, 1994. The Partnership equity was
divided $3,926,239 (58%) to CAT and $2,843,139 (42%) to DCI.
Earnings and losses of the Partnership are divided based on the aforementioned
percentages.
Property and Equipment: Property and equipment is recorded at cost and
depreciated by the straight-line method over the estimated useful life of the
assets. When assets are sold or retired, the costs and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
operations.
Advertising Costs: All advertising costs of the Partnership are expensed as
incurred.
Income Taxes: No provision for income taxes is made in the financial statements
because, as a Partnership, any income or loss is included in the tax returns of
the partners. For income tax purposes, income or loss allocated to the partners
shall consider the effect of the difference in the basis of assets contributed
for income tax purposes and the amounts recorded for financial statement
purposes.
Concentration of Credit: Financial instruments which potentially subject the
Partnership to concentrations of credit risk consist primarily of trade
receivables. Such credit risk is considered by management to be limited due to
the large number of customers comprising the Partnership's customer base.
Generally, the Partnership does not require collateral or other security to
support customer accounts receivable.
The Partnership maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Partnership does not believe there is a
significant risk of loss to these deposits.
17
19
NOTES TO UNAUDITED FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
September 30, 1999
NOTE B--PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1999 and 1998 is summarized as follows:
1999 1998
---------- ----------
Land $ 180,000 $ 30,000
Buildings 257,200 167,200
Automobiles 40,806 40,806
Computers and office equipment 173,493 162,431
Furniture and fixtures 342,813 342,813
Leasehold improvements 509,665 508,635
Studio and technical equipment 1,019,189 843,099
Tower and transmitter equipment 1,024,746 688,410
Projects in-process 77,734 --
---------- ----------
3,625,646 2,783,394
Less accumulated depreciation 1,720,639 1,258,315
---------- ----------
$1,905,007 $1,525,079
========== ==========
NOTE C--INTANGIBLE ASSETS
Goodwill consists of: (1) the difference between the appraised fair market value
of the KATT-FM and KYIS-FM radio stations under a hypothetical scenario of the
stations operating as a duopoly in the Oklahoma City radio market and the fair
market values of the stations' assets at the date of the Partnership agreement,
(2) the excess of the purchase price over the net assets of the KCYI-FM,
KNTL-FM, and WWLS-AM stations, and (3) the entire purchase price of SportsTalk
Communications L.L.C.
Intangible assets at September 30, 1999 and 1998 are summarized as follows:
Useful Life 1999 1998
----------- ----------- ------------
Goodwill 15 $15,235,583 $11,880,408
FCC License 15 4,261,002 4,261,002
Organization costs 5 309,698 309,698
----------- -----------
19,806,283 16,451,108
Less accumulated amortization 4,126,248 2,796,537
----------- -----------
$15,680,035 $13,654,571
=========== ===========
Total amortization provided for in 1999 and 1998 was $1,040,361 and $730,257,
respectively.
18
20
NOTES TO UNAUDITED FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
September 30, 1999
NOTE D--LONG-TERM DEBT
The following is a summary of long-term debt at September 30, 1999 and 1998:
1999 1998
----------- ----------
Notes payable to Finova Capital Corporation bearing interest at 1% above
the prime rate, interest payable monthly, secured by all assets of the
Partnership $11,830,000 $8,790,000
Accrued and unpaid loan fees, payable to Finova Capital Corporation, due
January 31, 2000, secured by all assets of the Partnership 899,750 698,846
----------- ----------
12,729,750 9,488,846
Less current maturities 12,729,750 610,000
----------- ----------
$ -- $8,878,846
=========== ==========
The notes payable (excluding the loan fees) are due in monthly installments as
follows:
June 1, 1997 to March 1, 1998 $35,000
April 1, 1998 to February 1, 1999 45,000
March 1, 1999 to January 1, 2000 55,000
January 31, 2000 Full payment of remaining principal
Loan fees of $950,000 are being accrued at $16,742 per month through December 1,
1999. Full payment is due January 31, 2000.
Final payment on all debt is due January 31, 2000; however, repayment of the
debt will be made at the time of closing of the proposed sale of the
Partnership, as discussed in Note J.
In addition, the Partnership will pay a "recapture amount" following the end of
each year upon the demand of the lender. The "recapture amount" is equal to 50%
of excess cash flows (as defined in the debt agreement) for the preceding year,
and reduces the principal payments due on the long-term debt. However, the
"recapture amount" will not be made or will be reduced to the extent necessary
so that the Partnership's cash on hand plus the outstanding amount available on
the line of credit will not be less than $300,000. There were no excess cash
flows at September 30, 1999 and 1998 and, therefore, no recapture amount is due.
The loan agreement, dated December 29, 1994 (as amended), requires the
Partnership to maintain certain financial ratios and other covenants.
19
21
NOTES TO UNAUDITED FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
September 30, 1999
NOTE D--LONG-TERM DEBT--Continued
Finova Capital Corporation is a related party in that it owns 100% of Desert
Communications III, Inc., which owns a 42% interest in the Partnership.
Interest payments for the nine months ended September 30, 1999 and 1998 totaled
$857,125 and $519,176, respectively.
NOTE E--OPERATING LEASES
As of September 30, 1999, the Partnership is leasing office space, certain
equipment, and computer software under various noncancelable operating leases.
Rental expense for the nine months ended September 30, 1999 and 1998 was
approximately $244,000 and $227,000, respectively.
Approximate future minimum lease payments required under these operating leases
are as follows:
2000 $ 239,000
2001 227,000
2002 242,000
2003 242,000
2004 232,000
Thereafter 405,000
-------------
$ 1,587,000
-------------
NOTE F--TRADE TRANSACTIONS
In accordance with accounting practices in the broadcast industry, trade
transactions (the exchange of unsold advertising time for products or services)
are recorded at the Partnership's standard rates for air time at the time the
spot is broadcast, net of expenses of the same amount representing the value of
the products or services received. Such transactions approximated $430,000 and
$398,000 for the nine months ended September 30, 1999 and 1998, respectively.
20
22
NOTES TO UNAUDITED FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
September 30, 1999
NOTE G--RESERVED NET PROFITS AGREEMENT
On November 28, 1995, the Board of Managers approved a Reserved Net Profits
Agreement for key employees and consultants of the Partnership. The Reserved Net
Profit Amount would equal twenty-five percent of the difference on the
termination date of the Partnership between the value of the Partnership's
business and the capital invested by the Partners, including interest at the
rate of 6.4% per annum on such capital compounded annually from January 1, 1995,
up to $8 million plus twelve and one-half percent of any amounts over $8
million. The Board also authorized the President of the Partnership to allocate
the Reserved Net Profits among the key employees and consultants of the
Partnership as he, in his sole discretion, deems appropriate.
The term "value of the business" means the business sales price plus the net
current assets of the Partnership on the termination date less the legal and
brokerage expenses incurred from the sale of the assets and the Partnership's
long-term liabilities and deferred loan fees.
The Agreement also provides a means for calculating the Net Profit Amount if one
of the key employees or consultants dies, becomes permanently disabled, or
ceases to be an employee of the Partnership after December 31, 2004. In these
circumstances, the "value of the business" would be ten times the Partnership's
trailing twelve month's cash flow (as defined) less three percent for cost of
sale.
NOTE H--STATION AND OTHER ACQUISITIONS
On May 4, 1998, the Partnership acquired substantially all of the assets of the
KNTL-FM radio station ("KNTL") from Bott Communications, Inc ("Bott"). For
financial statement purposes, the acquisition was accounted for as a purchase
and, accordingly, KNTL's results of operations are included in the financial
statements since the date of acquisition. The aggregate purchase price was
approximately $5,890,000, which includes costs of acquisition. The aggregate
purchase price, which was financed primarily through capital contributions from
the partners and a note from Finova Capital Corporation, has been allocated to
the assets of KNTL, based on their respective estimated fair market values. The
excess of the purchase price over assets acquired approximated $5,050,000 and is
being amortized over fifteen years (see Note C).
On January 14, 1998, the Partnership signed an agreement with SportsTalk
Communications L.L.C. to acquire all of its assets, including its sports talk
format, for $530,000, plus incentives. This format began broadcasting on KNTL-FM
on January 17, 1998 through a time brokerage agreement with Bott. The
transaction closed on May 4, 1998. The total cost of $560,000 is considered
goodwill for financial statement purposes, and is being amortized over fifteen
years (see Note C).
21
23
NOTES TO UNAUDITED FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
September 30, 1999
NOTE H--STATION AND OTHER ACQUISITIONS--Continued
On July 22, 1998, the Partnership agreed to purchase WWLS-AM radio station
("WWLS") from Fox Broadcasting Co., Inc. In connection with this purchase, the
Partnership deposited earnest money with an escrow agent in the amount of
$350,000. At September 30, 1998, the purchase was awaiting approval of the
Federal Communications Commission, and approval was subsequently granted and
closing of the purchase occurred on January 7, 1999. The aggregate purchase
price of approximately $3,800,000, which includes costs of acquisition, was
financed through a note from Finova Capital Corporation and has been allocated
to the assets of WWLS, based on their respective estimated fair market values.
The excess of the purchase price over assets acquired approximated $3,280,000
and is being amortized over fifteen years (see Note C).
NOTE I--OTHER RELATED PARTY TRANSACTIONS
Effective January 1, 1997, the Partnership entered into a management agreement
with Caribou Broadcasting, L.P. ("Broadcasting") to manage three radio stations
in Honolulu, Hawaii. Under the five year agreement, the Partnership will earn
$100,000 each year. Desert Communications II, Inc. ("Desert II") is a 98.99%
limited partner in Broadcasting, and CAT Communications II, Inc. ("CAT II") is a
1.01% general partner in Broadcasting. Desert II and CAT II ownership is
primarily the same as that of DCI and CAT.
Effective August 1, 1998, the management agreement discussed above was
reassigned to New Wave Broadcasting, L.P. ("New Wave"). New Wave, also a debtor
of Finova Capital Corporation, operates an otherwise unrelated group of radio
stations.
The Partnership earned $50,000 in management fees for 1998. At September 30,
1998, $41,667 was due from Broadcasting and is included in prepaid expenses and
other current assets on the balance sheet. In accordance with the management
agreement, the Partnership is to be reimbursed by Broadcasting for expenses
incurred in managing these stations. At September 30, 1998, the Partnership was
due approximately $53,000 from Broadcasting for unreimbursed expenses, which is
included in prepaid expenses and other current assets on the balance sheet.
These amounts were received from Broadcasting in 1999.
The President of the Partnership earns a bonus each year based upon attaining
certain operating results. Bonus expense reflected in the financial statements
is $75,000 for 1999 and $50,000 for 1998.
22
24
NOTES TO UNAUDITED FINANCIAL STATEMENTS--Continued
CARIBOU COMMUNICATIONS CO.
September 30, 1999
NOTE J--SUBSEQUENT EVENTS
In August 1999, the Partnership entered into an agreement with Citadel
Broadcasting Company ("Citadel") to sell all of the equity interest in the
Partnership to Citadel for approximately $60 million. This amount includes
repayment of the debt listed in Note D that may be outstanding at the time of
closing. The transaction is expected to close in December 1999.
In connection with the sale, a key employee's contract was not assumed by
Citadel. The employee's employment agreement provides for a severance payment of
$100,000. This amount has been recorded at September 30, 1999 and is included in
accrued expenses.
In addition, approximately $350,000 of the sale proceeds will be set aside to
pay liabilities of the Partnership not assumed by Citadel. These include the
bonus discussed in Note I, the severance payment discussed above, lease and
other general expenses, and payments to certain officers and employees to
administer the closing of the Partnership's business.
23
25
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements reflect the results of operations and balance sheet of Citadel
Communications Corporation after giving effect to:
(1) the following completed transactions (collectively, the "Completed
Transactions"):
o the March 26, 1998 acquisition of WCTP-FM, WCTD-FM and WKJN-AM serving
the Wilkes-Barre/Scranton market for the purchase price of
approximately $6.0 million (the "Wilkes-Barre/Scranton Acquisition"),
o the February 12, 1998 acquisition of Pacific Northwest Broadcasting
Corporation which owned KQFC-FM, KKGL-FM and KBOI-AM in Boise, Idaho
for the purchase price of approximately $14.4 million and the April 21,
1998 acquisition of KIZN-FM and KZMG-FM in Boise for the purchase price
of approximately $14.5 million (collectively, the "Boise
Acquisitions"),
o the November 17, 1998 acquisition of KAAY-AM in Little Rock, Arkansas
for the purchase price of approximately $5.1 million,
o the February 9, 1999 acquisition of WKQZ-FM, WYLZ-FM, WILZ-FM, WIOG-FM,
WGER-FM and WSGW-AM in Saginaw/Bay City, Michigan for the purchase
price of approximately $35.0 million (the "Saginaw/Bay City
Acquisition"),
o the February 17, 1999 acquisition of WHYL-FM and WHYL-AM in
Harrisburg/Carlisle, Pennsylvania for the purchase price of
approximately $4.5 million (the "Carlisle Acquisition"),
o the March 17, 1999 acquisition of Citywide Communications, Inc., which
owned KQXL-FM, WEMX-FM, WCAC-FM, WXOK-AM and WIBR-AM serving the Baton
Rouge, Louisiana market and KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM
serving the Lafayette, Louisiana market for the purchase price of
approximately $31.5 million (the "Baton Rouge/Lafayette Acquisition"),
o the April 30, 1999 acquisition of KSPZ-FM serving the Colorado Springs,
Colorado market in exchange for KKLI-FM in Colorado Springs, the April
30, 1999 acquisition of KVOR-AM and KTWK-AM serving the Colorado
Springs, Colorado market and KEYF-FM and KEYF-AM serving the Spokane,
Washington market for the purchase price of approximately $10.0 million
and the April 30, 1999 termination of a joint sales agreement under
which Citadel Communications operated certain other radio stations in
Colorado Springs and in Spokane (collectively, the "Capstar
Transactions"),
o the June 30, 1999 acquisition of WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM,
WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM in Charleston, South Carolina,
WHWK-FM, WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM in Binghamton, New York,
WMDH-FM and WMDH-AM in Muncie, Indiana and WWKI-FM in Kokomo, Indiana
for the purchase price of approximately $77.0 million (the
"Charleston/Binghamton/Muncie/Kokomo Acquisition"),
o the August 31, 1999 acquisition of Fuller-Jeffrey Broadcasting
Companies, Inc. which owned WOKQ-FM, WPKQ-FM, WXBB-FM and WXBP-FM
serving the Portsmouth/Dover/Rochester, New Hampshire market and
WBLM-FM, WCYI-FM, WCYY-FM, WHOM-FM, WJBQ-FM and WCLZ-FM serving the
Portland, Maine market for the purchase price of approximately $65.3
million, which amount includes the repayment of certain indebtedness of
Fuller-Jeffrey Broadcasting and approximately $1.8 million in
consulting and noncompetition payments payable over a seven-year period
(the "Portsmouth/Dover/Rochester/Portland Acquisition"),
o the November 1, 1999 acquisition of KOOJ-FM in Baton Rouge, Louisiana
for the purchase price of approximately $9.5 million,
o the December 23, 1999 acquisition of Caribou Communications Co. which
owned KATT-FM, KYIS-FM, KCYI-FM, KNTL-FM and WWLS-AM in Oklahoma City,
Oklahoma for a purchase price of approximately $61.5 million, which
amount includes the repayment of certain indebtedness of Caribou
Communications (the "Oklahoma City Acquisition"),
o the July 27, 1998 sale of WEST-AM in Allentown/Bethlehem, Pennsylvania
as a portion of the consideration for the 1997 acquisition of WLEV-FM
in Allentown/Bethlehem,
24
26
o the October 7, 1998 sale of WQCY-FM, WTAD-AM, WMOS-FM and WBJR-FM in
Quincy, Illinois for the sale price of approximately $2.3 million (the
"Quincy Sale"),
o the November 9, 1999 disposition of KKTT-FM, KEHK-FM and KUGN-AM in
Eugene, Oregon, KAKT-FM, KBOY-FM, KCMX-FM, KTMT-FM, KCMX-AM and KTMT-AM
in Medford, Oregon, KEYW-FM, KORD-FM, KXRX-FM, KTHT-FM and KFLD-AM in
Tri-Cities, Washington, KCTR-FM, KKBR-FM, KBBB-FM, KMHK-FM and KBUL-AM
in Billings, Montana, WQKK-AM and WGLU-FM in Johnstown, Pennsylvania
and WQWK-FM, WNCL-FM, WRSC-AM and WBLF-AM in State College,
Pennsylvania for the sale price of approximately $26.0 million (the
"Marathon Disposition"),
o the July 1998 initial public offering by Citadel Communications of
shares of its common stock and the use of net proceeds from that
offering,
o the November 1998 sale by Citadel Communications' subsidiary, Citadel
Broadcasting Company, of $115.0 million principal amount of its 9-1/4%
Senior Subordinated Notes due 2008 and the use of net proceeds from
that offering,
o the June 1999 public offering by Citadel Communications of shares of
its common stock and the use of net proceeds from that offering (the
"1999 Offering"),
o the August 1999 redemption of a portion of Citadel Broadcasting's
outstanding 13-1/4% Exchangeable Preferred Stock (the "Preferred
Redemption"), and
(2) the following pending acquisitions (collectively, the "Pending
Acquisitions'):
o the pending acquisition of WGRF-FM, WEDG-FM, WHIT-FM, WMNY-AM and
WHLD-AM in Buffalo, New York, WAQX-FM, WLTI-FM, WNSS-AM, and WNTQ-FM in
Syracuse, New York, WIII-FM and WKRT-AM in Ithaca, New York, WMME-FM,
WEZW-FM, WEBB-FM and WTVL-AM in Augusta-Waterville, Maine, WBPW-FM,
WOZI-FM and WQHR-FM in Presque Isle-Caribou, Maine, WCRQ-FM in
Dennysville-Calais, Maine, KMYY-FM, KYEA-FM, KZRZ-FM and KTJC-FM in
Monroe, Louisiana, KDOK-FM, KTBB-FM, KEES-AM, KYZS-AM and KGLD-AM in
Tyler-Longview, Texas, WFPG-AM, WFPG-FM and WPUR-FM in Atlantic City,
New Jersey, WFHN-FM and WBSM-AM in New Bedford, Massachusetts, WQGN-FM,
WSUB-AM and WVVE-FM in New London, Connecticut and the right to operate
WKOE-FM in Atlantic City under a program service and time brokerage
agreement for the aggregate purchase price of approximately $190.0
million (the "BPH Acquisition"),
o the pending acquisition of KSMB-FM, KDYS-AM, KVOL-FM and KVOL-AM in
Lafayette, Louisiana for the purchase price of approximately $8.5
million (the "Lafayette Acquisition"),
o the pending acquisition of WMMQ-FM, WJIM-FM, WFMK-FM, WITL-FM, WVFN-AM
and WJIM-AM in Lansing, Michigan, WHNN-FM and WTCF-FM in Saginaw,
Michigan and WFBE-FM in Flint, Michigan for the aggregate purchase
price of approximately $120.5 million, of which, subject to certain
conditions, approximately $10.1 million would be paid in shares of
Citadel Communications' common stock valued at $50.375 per share (the
"Michigan" Acquisition"), and
o the pending acquisitions of WXLO-FM, WORC-FM and WWFX-FM in Worcester,
Massachusetts for the aggregate purchase price of approximately $38.75
million (the "Worcester Acquisitions").
The unaudited pro forma condensed consolidated financial statements are
based on Citadel Communications' historical consolidated financial statements,
the financial statements of those entities acquired, or from which assets were
acquired, in connection with the Completed Transactions, and the financial
statements of those entities to be acquired, or from which assets will be
acquired, in connection with the Pending Acquisitions.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The interest rate applied to
borrowings under, and repayments of, Citadel Broadcasting's credit facility in
the pro forma consolidated statements of operations was 8.4375%, which
represents the interest rate in effect under the then existing credit facility
as of January 1, 1998. Pro forma financial information has been adjusted to
reflect the following, when applicable:
o Prior to the acquisition dates, Citadel Communications operated some of the
acquired stations under a joint sales agreement ("JSA") or local marketing
agreement ("LMA"). Citadel Communications receives or pays fees for such
services accordingly. Net revenue and station operating expenses for
stations operated under JSAs are included to reflect ownership of the
stations as of January 1, 1998. Net revenue and station operating expenses
for stations operated under LMAs are included in Citadel Communications'
historical consolidated financial statements. For those stations operated
under JSAs and LMAs and subsequently acquired, associated fees and
redundant expenses were eliminated and estimated occupancy costs were
included to adjust the results of the operations to reflect ownership of
the stations as of January 1, 1998.
o Elimination of revenue and operating expenses from the entities acquired,
or from which assets were acquired, in connection with the Completed
Transactions, and the entities to be acquired, or from which assets will be
acquired, in connection with the Pending Acquisitions, which would not have
been incurred if the acquisition had occurred on January 1, 1998. The
eliminated items were deemed redundant and therefore are not reflected as
of January 1, 1998.
Depreciation and amortization for the acquisitions are based upon
preliminary allocations of the purchase price to property and equipment and
intangible assets. Actual depreciation and amortization may differ depending on
the final allocation of the purchase price. However, management does not believe
these differences will be material.
For pro forma purposes, Citadel Communications' balance sheet as of
September 30, 1999 has been adjusted to give effect to the following
transactions as if each had occurred on September 30, 1999:
(1) the Marathon Disposition,
(2) the acquisition of KOOJ-FM,
(3) the Oklahoma City Acquisition, and
25
27
(3) the Pending Acquisitions.
The unaudited pro forma information is presented for illustrative purposes
only and does not indicate the operating results or financial position that
would have occurred if the transactions described above had been completed on
the dates indicated, nor is it indicative of future operating results or
financial position if the pending transactions described above are completed.
Citadel Communications cannot predict whether the completion of the Pending
Acquisitions will conform to the assumptions used in the preparation of the
unaudited pro forma condensed consolidated financial statements. Additionally,
consummation of each of the Pending Acquisitions is subject to certain
conditions. Although Citadel Communications believes these closing conditions
are generally customary for transactions of this type, there can be no assurance
that such conditions will be satisfied.
26
28
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1999
(DOLLARS IN THOUSANDS)
CITADEL
COMMUNICATIONS
AS ADJUSTED
FOR
ADJUSTMENTS OKLAHOMA CITY
FOR ACQUISITION,
MARATHON MARATHON ADJUSTMENTS
ACTUAL ADJUSTMENTS FOR DISPOSITION DISPOSITION FOR PRO FORMA
CITADEL OKLAHOMA CITY AND ACQUISITION AND ACQUISITION THE PENDING CITADEL
COMMUNICATIONS ACQUISITION(1) OF KOOJ-FM(2) OF KOOJ-FM ACQUISITIONS(3) COMMUNICATIONS
-------------- --------------- --------------- -------------- --------------- --------------
ASSETS
Cash and cash equivalents $ 8,798 $ 321 -- $ 9,119 $ -- $ 9,119
Restricted cash -- -- 26,000 26,000 -- 26,000
Accounts and notes receivable,
net 48,208 1,906 -- 50,114 -- 50,114
Prepaid expenses 3,808 131 (110) 3,829 -- 3,829
Assets held for sale 25,991 -- (25,991) -- -- --
-------- ------- -------- -------- -------- ----------
Total current assets 86,805 2,358 (101) 89,062 -- 89,062
Property and equipment, net 68,088 1,826 679 70,593 15,871 86,464
Intangible assets, net 480,431 59,462 8,572 548,465 341,879 890,344
Other assets 4,205 -- -- 4,205 -- 4,205
-------- ------- -------- -------- -------- ----------
TOTAL ASSETS $639,529 $63,646 $ 9,150 $712,325 $357,750 $1,070,075
======== ======= ======== ======== ======== ==========
LIABILITIES AND SHAREHOLDER'S
EQUITY
Accounts payable and accrued
liabilities $ 15,021 $ 980 $ -- $ 16,001 $ -- $ 16,001
Current maturities of other
long-term Obligations 994 250 -- 1,244 -- 1,244
-------- ------- -------- -------- -------- ----------
Total current liabilities 16,015 1,230 -- 17,245 -- 17,245
Notes payable, less current
maturities 57,500 61,416 9,500 128,416 347,675 476,091
10-1/4% Notes 210,401 -- -- 210,401 -- 210,401
9-1/4% Notes
Other long-term obligations,
less current Maturities 2,685 1,000 -- 3,685 -- 3,685
Deferred tax liability 46,964 -- -- 46,964 -- 46,964
Exchangeable preferred stock 82,526 -- -- 82,526 -- 82,526
Common stock and APIC 263,514 -- -- 263,514 10,075 273,589
Deferred compensation (3,329) -- -- (3,329) -- (3,329)
Accumulated other comprehensive
loss (12) -- -- (12) -- (12)
Accumulated deficit/retained
earnings (36,735) -- (350) (37,085) -- (37,085)
-------- ------- -------- -------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY $639,529 $63,646 $ 9,150 $712,325 $357,750 $1,070,075
======== ======= ======== ======== ======== ==========
(1) Represents the net effect of the Oklahoma City Acquisition as if the
transaction had taken place on September 30, 1999.
(2) Represents the net effect of the Marathon Disposition and the acquisition
of KOOJ-FM as if each transaction had taken place on September 30, 1999.
(3) Represents the net effect of the Pending Acquisitions as if each transaction
had taken place on September 30, 1999.
27
29
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
CITADEL
COMMUNICATIONS
AS ADJUSTED ADJUSTMENTS
ACTUAL ADJUSTMENTS FOR FOR FOR PRO FORMA
CITADEL COMPLETED COMPLETED THE PENDING CITADEL
COMMUNICATIONS TRANSACTIONS (1) TRANSACTIONS ACQUISITIONS(2) COMMUNICATIONS
-------------- ---------------- ------------ --------------- --------------
Net revenue...................... $126,521 $19,382 $145,903 $ 50,690 $196,593
Station operating expenses....... 85,124 10,241 95,365 35,347 130,712
Depreciation and amortization.... 25,589 11,206 36,795 18,126 54,921
Corporate general and
administrative................ 4,921 (131) 4,790 -- 4,790
-------- ------- -------- -------- --------
Operating expenses............ 115,634 21,316 136,950 53,473 190,423
-------- ------- -------- -------- --------
Operating income (loss).......... 10,887 (1,934) 8,953 (2,783) 6,170
Interest expense................. 17,502 4,918 22,420 22,001 44,421
Other (income) expense, net...... (1,187) 350 (837) -- (837)
-------- ------- -------- -------- --------
Income (loss) before income
taxes......................... (5,428) (7,202) (12,630) (24,784) (37,414)
Income taxes (benefit)........... (1,376) (850) (2,226) -- (2,226)
Dividend requirement for
Exchangeable Preferred Stock.. (11,322) 2,812 (8,510) -- (8,510)
-------- ------- -------- -------- --------
Income (loss) from
continuing operations
applicable to common shares... $(15,374) $(3,540) $(18,914) $(24,784) $(43,698)
======== ======= ======== ======== ========
(1) Represents the net effect of the Completed Transactions that were
consummated after January 1, 1999 as if each transaction had taken place on
January 1, 1998. Dollars in the table below are shown in thousands.
PORTSMOUTH/ CHARLESTON/
DOVER/ BINGHAMTON
OKLAHOMA ROCHESTER/ MUNCIE/ BATON ROUGE/
CITY PORTLAND KOKOMO LAFAYETTE
ACQUISITION ACQUISITION ACQUISITION ACQUISITION
----------- ----------- ----------- ------------
Net revenue $ 7,155 $10,642 $ 9,543 $1,371
Station operating expenses 4,831 6,021 6,711 1,275
Depreciation and
amortization 3,292 3,628 2,685 628
Corporate general and
administrative -- -- -- --
------- ------- ------- ------
Operating expenses 8,123 9,649 9,396 1,903
------- ------- ------- ------
Operating income (loss) (968) 993 147 (532)
Interest expense 3,897 3,234 2,531 --
Other (income) expenses,
net -- -- -- --
------- ------- ------- ------
Income (loss) before
income taxes (4,865) (2,241) (2,384) (532)
Income taxes (benefit) (724) -- (126)
Dividend requirement for
Exchangeable Preferred
Stock -- -- -- --
------- ------- ------- ------
Income (loss) from
continuing operations $(4,865) $(1,517) $(2,384) $ (406)
======= ======= ======= ======
CARLISLE
ACQUISITION, ADJUSTMENTS
CAPSTAR FOR THE
TRANSACTIONS, 1999 OFFERING
SAGINAW/ KOOJ ACQUISITION AND THE
BAY CITY AND MARATHON PREFERRED THE COMPLETED
ACQUISITION DISPOSITION REDEMPTION TRANSACTIONS
----------- ----------- ---------- ------------
Net revenue $ 526 $(9,855) $ -- $19,382
Station operating expenses 486 (9,083) -- 10,241
Depreciation and
amortization 202 771 -- 11,206
Corporate general and
administrative -- (131) -- (131)
----- ------- ------- -------
Operating expenses 688 (8,443) -- 21,316
----- ------- ------- -------
Operating income (loss) (162) (1,412) -- (1,934)
Interest expense -- (1,044) (3,700) 4,918
Other (income) expenses,
net -- 350 -- 350
----- ------- ------- -------
Income (loss) before
income taxes (162) (718) 3,700 (7,202)
Income taxes (benefit) -- -- -- (850)
Dividend requirement for
Exchangeable Preferred
Stock -- -- 2,812 2,812
----- ------- ------- -------
Income (loss) from
continuing operations $(162) $ (718) $ 6,512 $(3,540)
===== ======= ======= =======
(2) Represents the net effect of the Pending Acquisitions as if each
transaction had taken place on January 1, 1998. Dollars in the table below
are shown in thousands.
BPH LAFAYETTE MICHIGAN WORCESTER PENDING
ACQUISITION ACQUISITION ACQUISITION ACQUISITIONS ACQUISITIONS
----------- ----------- ----------- ------------ ------------
Net revenue $ 31,231 $1,749 $14,092 $ 3,618 $ 50,690
Station operating expenses 23,328 1,331 7,851 2,837 35,347
Depreciation and amortization 9,649 474 6,039 1,964 18,126
-------- ------ ------- ------- --------
Operating expenses 32,977 1,805 13,890 4,801 53,473
-------- ------ ------- ------- --------
Operating income (loss) (1,746) (56) 202 (1,183) (2,783)
Interest expense 12,023 538 6,988 2,452 22,001
-------- ------ ------- ------- --------
Income (loss) from continuing
operations $(13,769) $ (594) $(6,786) $(3,635) $(24,784)
======== ====== ======= ======= ========
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30
CITADEL COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
CITADEL
COMMUNICATIONS ADJUSTMENTS
ACTUAL ADJUSTMENTS FOR AS ADJUSTED FOR THE PRO FORMA
CITADEL COMPLETED FOR COMPLETED PENDING CITADEL
COMMUNICATIONS TRANSACTIONS (1) TRANSACTIONS ACQUISITIONS(2) COMMUNICATIONS
-------------- ---------------- ------------ --------------- --------------
Net revenue....................... $135,426 $41,137 $176,563 $ 61,247 $237,810
Station operating expenses........ 93,485 25,056 118,541 42,689 161,230
Depreciation and amortization..... 26,414 21,591 48,005 23,211 71,216
Corporate general and
administrative.................. 4,369 (349) 4,020 -- 4,020
-------- ------- -------- -------- --------
Operating expenses.............. 124,268 46,298 170,566 65,900 236,466
-------- ------- -------- -------- --------
Operating income (loss)........... 11,158 (5,161) 5,997 (4,653) 1,344
Interest expense.................. 18,126 3,651 21,777 28,132 49,909
Other (income) expense, net....... (1,651) 350 (1,301) -- (1,301)
-------- ------- -------- -------- --------
Income (loss) before income
taxes........................... (5,317) (9,162) (14,479) (32,785) (47,264)
Income taxes (benefit)............ (1,386) (1,591) (2,977) -- (2,977)
Dividend requirement for --
Exchangeable Preferred Stock.... (14,586) 138 (14,448) -- (14,448)
-------- ------- -------- -------- --------
Income (loss) from continuing
operations applicable to common
shares.......................... $(18,517) $(7,433) $(25,950) $(32,785) $(58,735)
======== ======= ======== ======== ========
(1) Represents the net effect of the Completed Transactions as if each
transaction had taken place on January 1, 1998. Dollars in the table
below are shown in thousands.
PORTSMOUTH/ CHARLESTON/
DOVER/ BINGHAMTON/ BATON
OKLAHOMA ROCHESTER/ MUNCIE/ ROUGE/ SAGINAW/
CITY PORTLAND KOKOMO LAFAYETTE BAY CITY
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION
----------- ----------- ----------- ----------- -----------
Net revenue $ 8,250 $13,642 $17,421 $7,331 $6,981
Station operating
expenses 6,240 8,676 12,100 5,170 4,447
Depreciation and
amortization 4,390 5,441 5,369 2,914 2,421
Corporate general and
administrative -- -- -- -- --
------- ------- ------- ------ ------
Operating expenses 10,630 14,117 17,469 8,084 6,868
Operating income (loss) (2,380) (475) (48) (753) 113
Interest expense 5,196 4,852 5,063 -- --
Other (income) expense,
net -- -- -- -- --
------- ------- ------- ------ ------
Income (loss) before
income taxes (7,576) (5,327) (5,111) (753) 113
Income taxes (benefit) -- (1,086) -- (505) --
Dividend requirement for
Exchangeable Preferred
Stock -- -- -- -- --
------- ------- ------- ------ ------
Income (loss) from
continuing
Operations $(7,576) $(4,241) $(5,111) $ (248) $ 113
======= ======= ======= ====== ======
ADJUSTMENTS
OTHER REPAYMENT FOR THE
ACQUISITIONS OF THE OFFERING 1999 OFFERING THE
AND CREDIT OF THE AND THE COMPLETED
DISPOSITIONS FACILITY 9-1/4% PREFERRED TRANS-
(a) (b) NOTES(c) REDEMPTION(d) ACTIONS
------------ ------- -------- ------------- -------
Net revenue $(12,488) $ -- $ -- $ -- $41,137
Station operating
expenses (11,577) -- -- -- 25,056
Depreciation and
amortization 1,056 -- -- -- 21,591
Corporate general and
administrative (349) -- -- -- (349)
-------- ------- ------- ------- -------
Operating expenses (10,870) -- -- -- 46,298
Operating income (loss) (1,618) -- -- -- (5,161)
Interest expense (947) (4,487) 1,374 (7,400) 3,651
Other (income) expense,
net 350 -- -- 350
-------- ------- ------- ------- -------
Income (loss) before
income taxes (1,021) 4,487 (1,374) 7,400 (9,162)
Income taxes (benefit) -- -- -- -- (1,591)
Divided requirement for
Exchangeable
Preferred Stock -- -- -- 138 138
-------- ------- ------- ------- -------
Income (loss) from
continuing
Operations $ (1,021) $ 4,487 $(1,374) $ 7,538 $(7,433)
======== ======= ======= ======= =======
(a) Represents the net effect of the Marathon Disposition, the Carlisle
Acquisition, the Capstar Transactions, the Boise Acquisitions, the
Wilkes-Barre/Scranton Acquisition, the acquisition of KOOJ-FM in Baton
Rouge, the disposition of WEST-AM in Allentown/Bethlehem, the acquisition
of KAAY-AM in Little Rock and the Quincy Sale.
(b) Represents the repayment of outstanding borrowings under Citadel
Broadcasting's credit facility with the proceeds from the Citadel
Communications' initial public offering.
(c) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $3.5 million related to Citadel
Broadcasting's 9-1/4% Senior Subordinated Notes due 2008.
(d) Represents the use of proceeds from the 1999 Offering, including the
redemption of approximately 35% of Citadel Broadcasting's issued and
outstanding Exchangeable Preferred Stock.
29
31
(2) Represents the net effect of the Pending Acquisitions as if each transaction
had taken place on January 1, 1998. Dollars in the table below are shown in
thousands.
BPH LAFAYETTE MICHIGAN WORCESTER PENDING
ACQUISITION ACQUISITION ACQUISITION(a) ACQUISITIONS(b) ACQUISITIONS
----------- ------------ ------------ --------------- ------------
Net revenue $ 38,628 $ 2,383 $ 16,900 $ 3,336 $ 61,247
Station operating expenses 28,842 1,984 9,322 2,541 42,689
Depreciation and amortization 12,865 631 8,052 1,663 23,211
-------- -------- -------- -------- --------
Operating expenses 41,707 2,615 17,374 4,204 65,900
Operating income (loss) (3,079) (232) (474) (868) (4,653)
Interest expense 16,031 717 9,317 2,067 28,132
-------- -------- -------- -------- --------
Income (loss) from continuing
operations $(19,110) $ (949) $ (9,791) $ (2,935) $(32,785)
======== ======== ======== ======== ========
(a) Citadel Communications expects to sell one or more of its stations serving
the Saginaw market to comply with the ownership limits of the
Telecommunications Act of 1996. However, Citadel Communications is unable
to include the effect of the divestiture in this pro forma financial
information until it determines the station or stations required to
be sold.
(b) The current owner of WWFX-FM purchased the station in January 1999. Citadel
Communications is unable to provide operating results for the year ended
December 31, 1998 as the information is not currently available. In the
opinion of management, the 1998 operations are not significant to the pro
forma condensed consolidated statement of operations.
30
32
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 COMMUNICATIONS
CORPORATION
Date: January 6, 1999 By: /s/ Lawrence R. Wilson
------------------ --------------------------------------
Lawrence R. Wilson
Chairman, Chief Executive Officer and
President
31
33
EXHIBIT INDEX
2.1 Purchase Agreement dated August 23, 1999 by and among Cat Communications,
Inc., Desert Communications III, Inc. and Citadel Broadcasting Company.
2.2 Amendment to Purchase Agreement dated December 22, 1999 by and among Cat
Communications, Inc., Desert Communications III, Inc. and Citadel
Broadcasting Company.
4.1 Credit Agreement dated as of December 17, 1999 among Citadel Broadcasting
Company, Citadel Communications Corporation, Citadel License, Inc.,
Credit Suisse First Boston, as lead Arranger, Administrative Agent and
Collateral Agent, FINOVA Capital Corporation, as Syndication Agent, First
Union Securities, Inc. and Fleet National Bank, as Co-Documentation
Agents, and the lenders named therein.
10.1 Parent Guarantee Agreement dated as of December 17, 1999 between Citadel
Communications Corporation and Credit Suisse First Boston, as Collateral
Agent.
32