<PAGE> 1
424(B)(3)
33-62218
***************************************************************************
* *
* This Preliminary Prospectus Supplement and the information contained *
* herein are subject to completion or amendment and prospective *
* purchasers are referred to the related final Prospectus Supplement *
* for definitive information on any matter contained herein. This *
* Preliminary Prospectus Supplement shall not constitute an offer to *
* sell or the solicitation of an offer to buy nor shall there be any *
* sale of these securities in any jurisdiction in which such offer, *
* solicitation or sale would be unlawful prior to registration or *
* qualification under the securities laws of any such jurisdiction. *
* *
***************************************************************************
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED JANUARY 24, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 9, 1993
TURNER BROADCASTING SYSTEM, INC.
$
% SENIOR NOTES DUE 2004
AND
$
% SENIOR DEBENTURES DUE 2024
------------------
The % Senior Notes due 2004 (the "Notes") and the % Senior Debentures
due 2024 (the "Debentures" and, together with the Notes, the "Securities") are
being offered by Turner Broadcasting System, Inc. (the "Company"). Interest on
the Securities will be payable semi-annually on each January and July
commencing July , 1994. The Notes will not be redeemable at the option of the
Company. The Debentures may be redeemed at the Company's option, in whole or
from time to time in part, at any time on or after January , 2004 at the
redemption prices set forth herein, plus accrued and unpaid interest to the
redemption date of the Debentures. See "Description of the Securities --
Redemption -- Redemption at the Option of the Company." Each Holder will have
the right to require the Company to repurchase such Holder's Securities in
whole, but not in part, upon the occurrence of certain Triggering Events (as
defined), including, without limitation, a Change of Control (as defined), a
Restricted Payment (as defined) or certain consolidations, mergers, conveyances
or transfers of assets. The Company will not be required to make mandatory
redemption or sinking fund payments with respect to the Notes or the Debentures
prior to maturity. See "Description of the Securities -- Redemption --
Triggering Events."
The Securities will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Company and will be senior in right of
payment to all subordinated indebtedness of the Company.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
------------------------------------------------------
<S> <C> <C> <C>
Per Note................................. % % %
Per Debenture............................ % % %
Total(3)................................. $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deduction of expenses payable by the Company estimated at
$ .
------------------
The Securities are offered severally by the Underwriters, as specified
herein, subject to receipt and acceptance by them and subject to their right to
reject any orders in whole or in part. It is expected that the Securities will
be ready for delivery in New York, New York, on or about February , 1994.
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MERRILL LYNCH & CO.
------------------
The date of this Prospectus Supplement is January , 1994
<PAGE> 2
Data contained in this Prospectus Supplement attributed to A.C. Nielsen
Company ("Nielsen") represent Nielsen's estimates and should not be construed as
statements of fact. As an industry matter, Nielsen estimates are primarily used
in assessing relative television audiences delivered in connection with
advertising and program performance; they are not intended to be used, among
other things, for computing cable subscribers for subscription revenue purposes.
---------------------
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY OR OTHER SECURITIES OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
OTHERWISE MIGHT PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
THE COMPANY
The Company is a diversified entertainment company whose business segments
include entertainment, news, syndication and licensing and sports. The Company
owns and operates WTBS (commonly known as "TBS SuperStation"), a 24-hour per day
independent UHF television station in Atlanta, Georgia, whose signal is telecast
over-the-air to the Atlanta market and is also retransmitted by common carrier
via satellite to cable systems in all 50 states, Puerto Rico and the Virgin
Islands; Turner Network Television ("TNT"), a 24-hour per day cable television
entertainment program service; and Cable News Network ("CNN"), Headline News and
CNN International, three 24-hour per day television news services. The Company
also owns one of the largest feature film libraries in the world (the "TEC Film
Library") and over 3,000 one-half hours of animated programming associated with
the names "Hanna-Barbera" and "Ruby Spears" (the "HB Library"). The TEC Film
Library and the HB Library are used as sources of programming for the Company's
cable services distributed in a variety of markets worldwide. The Company is the
nation's leading supplier of programming for the basic cable television
industry. On December 22, 1993, the Company acquired Castle Rock Entertainment,
a motion picture production company. On December 29, 1993, the Company acquired
the remaining 50% interest in HB Holding Co. In addition, the Company has
entered into an agreement to acquire New Line Cinema Corporation, which
acquisition is expected to be completed on or about January 28, 1994 but in any
event by no later than February 28, 1994. See "Recent Developments."
The Entertainment Segment principally consists of SuperStation, Inc., which
operates TBS SuperStation, and Turner Network Television, Inc., which operates
TNT. According to Nielsen audience estimates, overall during 1993, TBS
SuperStation was the highest-rated advertiser-supported programming service
distributed, on a 24-hour basis, to cable systems in the United States, and as
of December 1993 was available in approximately 61.5 million U.S. television
households, representing exposure to approximately 94% of U.S. cable homes and
total exposure to 65% of U.S. television homes. In 1988, the Company launched
TNT, with domestic distribution principally to subscribing cable television
systems. According to Nielsen estimates, as of December 1993, TNT was available
in cable systems servicing approximately 60.9 million U.S. television
households, representing exposure to approximately 95% of U.S. cable television
homes and total exposure to 65% of U.S. television homes. TBS SuperStation and
TNT generally have available for their programming needs titles from the TEC
Film Library and other filmed entertainment product, including 980 feature films
and over 300 cartoon shorts and episodes of three television series under a 1990
license agreement with MGM-Pathe Communications Co. (now Metro-Goldwyn-Mayer
Inc. ("MGM")). In January 1991, the Company expanded its Entertainment Segment
internationally with the launch of TNT Latin America, which provides a 24-hour
per day trilingual entertainment service distributed primarily to subscribing
cable television systems in Latin America and the Caribbean. In October 1992 the
Company launched the Cartoon Network, a 24-hour per day cartoon network in North
America, which utilizes animated programming from both the HB Library and the
TEC Film Library. In September 1993, the Company launched TNT Europe, which
consists of European versions of the Cartoon Network and TNT originating in the
United Kingdom and distributed throughout Europe.
S-2
<PAGE> 3
The News Segment principally consists of CNN, Headline News and CNN
International. CNN and Headline News are distributed principally to subscribing
cable television systems and others throughout the United States and Canada. CNN
International is distributed to cable television systems, broadcasters, hotels
and other businesses reaching approximately 140 countries and territories on
five continents as of December 31, 1993. According to Nielsen audience
estimates, as of December 1993, CNN and Headline News were available in cable
television systems serving approximately 62.4 million and 54.2 million U.S.
television households, respectively, representing exposure to approximately 97%
and 85% of U.S. cable television homes, respectively, and total exposure to 66%
and 58% of U.S. television homes, respectively. CNN was the second largest
programming service distributed to cable television systems, based on the number
of U.S. cable television households served as of December 1993.
The principal activity of the Syndication and Licensing Segment is
contracting with third parties relative to their use of the TEC Film Library.
The TEC Film Library, the HB Library and other filmed entertainment product are
distributed by the Company and certain third party distributors to a variety of
markets worldwide, including the theatrical, home video, pay television and
other syndication markets. The Company also syndicates the TEC Film Library, the
HB Library and other filmed entertainment product to the Company's networks. The
TEC Film Library contains approximately 3,700 feature-length motion pictures,
1,150 short subjects, 1,150 cartoon episodes, and a number of television shows.
The TEC Film Library includes the MGM pre-1986 library, the Warner Bros.
pre-1950 library and extensive rights to 750 RKO films. The HB Library consists
of over 3,000 one-half hours of animated programming, including "The
Flintstones," "Scooby Doo," "Yogi Bear" and "The Jetsons."
The Sports Segment consists of the Atlanta Braves, a professional baseball
club.
In addition, the Company owns a 96% limited partnership interest in the
Atlanta Hawks, a professional basketball club; a 44% interest in a limited
partnership that owns SportSouth Network, a regional sports network serving the
Southeast United States; and a 27.5% interest (at September 30, 1993) in a
24-hour per day German language news channel. The Company also owns CNN Center,
a multi-use facility in Atlanta, Georgia, and certain other entities that
operate the Omni Coliseum and contract for major events to be held in the Omni
Coliseum and other venues in Georgia and has a one-third interest in a joint
venture that operates a computerized ticket sales agency.
S-3
<PAGE> 4
RECENT DEVELOPMENTS
NEW LINE MERGER
On October 15, 1993, the Company, New Line Cinema Corporation ("New Line"),
an independent producer and distributor of motion pictures, and NL Acquisition
Co., a wholly owned subsidiary of the Company, entered into an Agreement and
Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, New
Line will become a wholly owned subsidiary of the Company (the "New Line
Merger"). At the effective time of the New Line Merger, each outstanding share
of common stock, par value $0.01 per share, of New Line (the "New Line Common
Stock") will be converted into the right to receive 0.96386 of a share (subject
to appropriate adjustment in the event of certain dividends, stock splits and
similar events) of Class B Common Stock, par value $0.0625 (the "Class B Common
Stock"), of the Company. Assuming a valuation of $20.75 per share of Class B
Common Stock and the exercise of all outstanding New Line options, warrants and
convertible securities resulting in an issuance of a maximum of 21,312,174
shares of Class B Common Stock in the New Line Merger, the acquisition price for
the New Line Common Stock would be approximately $442,228,000. All pro forma
financial information set forth in this Prospectus Supplement with respect to
the New Line Merger assumes a valuation of $20.75 per share of Class B Common
Stock and the issuance of a total of 21,233,000 shares of Class B Common Stock
in the New Line Merger. Such per share valuation for the Class B Common Stock
was used by New Line and the Company for purposes of determining the exchange
ratio to be used in the New Line Merger. The closing per share price of the
Class B Common Stock on the American Stock Exchange, Inc. on August 4, 1993,
immediately prior to the public announcement on August 5, 1993 that New Line and
the Company were holding acquisition discussions was $20.625. See "Selected Pro
Forma Financial Information." The Merger Agreement is subject to approval by the
stockholders of New Line at a meeting to be held on January 28, 1994, and
certain other customary conditions to closing. The New Line Merger is currently
scheduled to close on or about January 28, 1994, but in any event by no later
than February 28, 1994.
CASTLE ROCK ACQUISITION
On December 22, 1993, the Company acquired from Main Street Partners, Sony
Pictures Entertainment, Inc. ("SPE") and Group W Investments, Inc. the equity
interests in Castle Rock Entertainment ("Castle Rock"), a motion picture
production company, for approximately $100 million in cash together with the
repayment of approximately $187 million of outstanding indebtedness of Castle
Rock and certain other acquisition costs. As part of the acquisition of Castle
Rock, the Company entered into seven-year employment arrangements with the
management of Castle Rock: Alan Horn, Rob Reiner, Martin Shafer, Andrew
Scheinman and Glenn Padnick. In addition, the Company, Castle Rock and SPE have
agreed to extend for several years certain theatrical, home video and television
programming distribution agreements currently in place between Castle Rock and
certain subsidiaries of SPE. See "Selected Pro Forma Financial Information."
ACQUISITION OF HB HOLDING CO.
In December 1991, the Company acquired a 50% common stock interest and a
preferred stock interest in HB Holding Co. ("HB Holding Co."), at the time a
newly-formed joint venture. The other investors in HB Holding Co. were Apollo
Investment Fund, L.P. ("Apollo") and its affiliate, Altus Finance, S.A. ("Altus"
and, together with Apollo, the "Investors"). At that time, HB Holding Co.
acquired by merger for $262.5 million in cash, all of the stock of The Great
American Entertainment Company, the subsidiaries of which owned Hanna-Barbera,
Inc. and the HB Library. The Company also entered into a distribution agreement,
a utilization agreement for an overseas production facility, an indemnity
agreement together with Apollo relative to certain taxes and other arrangements
with HB Holding Co.
On December 29, 1993, the Company acquired the remaining 50% interest in HB
Holding Co. in a transaction consisting of (i) the acquisition from Apollo of
its 50% interest in HB Holding Co. for approximately $68 million in cash, (ii)
the acquisition for $33 million of a senior note of HB Holding Co.
S-4
<PAGE> 5
from Altus and (iii) the repayment of other indebtedness of HB Holding Co. See
"Selected Pro Forma Financial Information."
AMENDED 1993 CREDIT AGREEMENT
In December 1993, the Company amended the credit agreement that it entered
into in July 1993 (the "1993 Credit Agreement" and, as so amended, the "Amended
1993 Credit Agreement") with a group of banks. The Amended 1993 Credit Agreement
provides for, among other things, an increase of the original facility from $750
million to $1.5 billion and an extension of the term by six months. Amounts
available for borrowing or reborrowing under the Amended 1993 Credit Agreement
will reduce by $75 million as of the last business day of each of the calendar
quarters ending March 31, 1998, June 30, 1998, September 30, 1998 and December
31, 1998 and by $150 million as of the last business day of each quarter
thereafter until the revolving credit facility is reduced to zero. In addition,
the parties amended the applicable margin rates and the ratios for certain
financial covenants. The amount of borrowing availability under the Amended 1993
Credit Agreement continues to be subject to other provisions of the 1993 Credit
Agreement. Concurrently with the closing of the amendments to the 1993 Credit
Agreement, the Company borrowed under such amended agreement in order to prepay
$636 million of term loans outstanding under a separate credit facility entered
into by the Company in 1989 (the "1989 Credit Agreement"), terminating the 1989
Credit Agreement. In an unrelated transaction, a $125 million secured revolving
credit agreement entered into in 1990 by CNN Center Ventures, an indirect wholly
owned general partnership of the Company, was also cancelled.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities will be
approximately $ . The Company intends to use substantially all of
the net proceeds to repay amounts outstanding under the Amended 1993 Credit
Agreement incurred in connection with the Company's acquisition of Castle Rock
and the remaining 50% interest in HB Holding Co. and expected to be incurred in
connection with the New Line Merger. Amounts outstanding under the Amended 1993
Credit Agreement to be repaid had an effective annual interest rate of 4.35% at
January 14, 1994. Pending the application of such net proceeds, the Company will
invest such proceeds in marketable securities.
S-5
<PAGE> 6
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company at September 30, 1993, (ii) the pro forma capitalization of the Company
at September 30, 1993, giving effect to the Company's acquisition of Castle Rock
and the remaining 50% interest in HB Holding Co. (together, the "Acquisitions")
and the New Line Merger assuming that the Acquisitions and the New Line Merger
had occurred at that date and (iii) the pro forma capitalization, adjusted by
giving effect to the issuance of the Securities offered hereby and the
application of the estimated net proceeds from the sale of the Securities to
repay certain indebtedness under the Amended 1993 Credit Agreement. See "Use of
Proceeds" and "Selected Pro Forma Financial Information."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
-------------------------------------------------
PRO FORMA
PRO FORMA FOR THE
FOR THE ACQUISITIONS
ACQUISITIONS AND THE
AND THE NEW LINE MERGER,
ACTUAL NEW LINE MERGER AS ADJUSTED
----------- ---------------- ----------------
dollars in thousands, except share data
<S> <C> <C> <C>
Bank credit facilities(a)........................... $ 662,000 $ 1,301,081 $
% Senior Notes due 2004........................... 0 0
% Senior Debentures due 2024...................... 0 0
8 3/8% Senior Notes due 2013........................ 297,312 297,312 297,312
12% senior subordinated debentures(b)............... 536,658 536,658 536,658
Zero coupon subordinated convertible notes due
2007(c)........................................... 224,655 224,655 224,655
Other long-term debt(d)............................. 8,697 8,697 8,697
----------- ---------------- ----------------
Total indebtedness(e)..................... 1,729,322 2,368,403 2,368,403
Stockholders' equity (deficit)
Class C Convertible Preferred Stock, par value
$.125; authorized 12,600,000 shares; issued
and outstanding 12,396,976 shares............ 260,438 260,438 260,438
Class A Common Stock, par value $.0625;
authorized 75,000,000 shares; issued and
outstanding 68,330,388 shares................ 4,271 4,271 4,271
Class B Common Stock, par value $.0625;
authorized 300,000,000 shares; issued and
outstanding 120,544,518 shares(f)............ 7,534 8,861 8,861
Capital in excess of par value................. 719,303 1,158,561 1,158,561
Accumulated deficit............................ (1,009,751) (1,009,751) (1,009,751)
----------- ---------------- ----------------
Total stockholders' equity (deficit)...... (18,205) 422,380 422,380
----------- ---------------- ----------------
Total capitalization................. $ 1,711,117 $ 2,790,783 $2,790,783
----------- ---------------- ----------------
----------- ---------------- ----------------
</TABLE>
- ---------------
(a) At December 31, 1993, the borrowings under the bank credit facilities
aggregated $1,225,000,000, which amount gives effect to the borrowings
incurred thereunder in connection with the Acquisitions.
(b) Net of unamortized discount of approximately $3,342,000.
(c) Net of unamortized discount of approximately $357,401,000.
(d) Primarily includes long-term indebtedness of subsidiaries of the Company. At
September 30, 1993, the actual current portion outstanding under other
long-term debt was $2,298,000.
(e) At September 30, 1993, the actual current portion outstanding under the 1989
Credit Agreement was $103,000,000. At September 30, 1993 there were no
amounts outstanding under the 1993 Credit Agreement.
(f) In addition to issued and outstanding shares, at September 30, 1993, there
were reserved for issuance 74,381,856 shares issuable upon conversion of the
Class C Convertible Preferred Stock, 8,412,819 shares issuable upon exercise
of options under the Company's existing stock option plans, 7,440,422 shares
issuable upon conversion of the zero coupon subordinated convertible notes
due 2007 at the conversion rate in effect at September 30, 1993 and up to a
maximum of approximately 7,400,000 shares issuable upon exercise of rights
held by the Investors in HB Holding Co. The pro forma effects of the
Acquisitions and the New Line Merger will reduce the number of shares
reserved for issuance by approximately 7,400,000 as a result of the
Company's acquisition of the remaining 50% interest in HB Holding Co. and
will increase the number of shares issued or reserved for issuance by
21,312,174 to be issued in exchange for shares, warrants, options and
convertible securities of New Line.
S-6
<PAGE> 7
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected consolidated financial data in the following table as of and
for each of the years in the five-year period ended December 31, 1992 are
derived from the consolidated financial statements audited by Price Waterhouse,
independent accountants for the Company. The statement of operations data for
the nine months ended September 30, 1992 and the financial data as of and for
the nine months ended September 30, 1993 are derived from the Company's
unaudited consolidated condensed financial statements for such periods contained
in the Company's Quarterly Report on Form 10-Q for the nine months ended
September 30, 1993, which is incorporated by reference herein, and, in the
opinion of the management of the Company, contain all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of this
information. The selected consolidated balance sheet data set forth below with
respect to September 30, 1992 are derived from the Company's Quarterly Report on
Form 10-Q for the nine months ended September 30, 1992 which is not incorporated
herein by reference. Results for the nine months ended September 30, 1993 are
not necessarily indicative of the results to be expected for the full year. The
information is qualified in its entirety by, and should be read in conjunction
with, the Company's audited consolidated financial statements as of December 31,
1991 and 1992 and for each of the three years ended December 31, 1992 and the
unaudited consolidated condensed financial information as of September 30, 1992
and 1993 and for each of the nine-month periods ended September 30, 1992 and
1993 and the related notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 and Quarterly Report on
Form 10-Q for the nine months ended September 30, 1993, which are incorporated
by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ----------------------
1988 1989 1990 1991 1992 1992 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
in thousands, except ratios
STATEMENT OF OPERATIONS
DATA
Revenue................. $ 806,626 $1,065,051 $1,393,521 $1,480,243 $1,769,892 $1,231,436 $1,386,574
Depreciation and
amortization(a)....... 140,008 147,016 160,380 158,285 189,972 139,530 149,890
Operating profit (b).... 119,740 266,052 201,265 297,121 289,382 204,704 237,365
Interest expense, net of
interest income....... 200,726 192,824 189,741 196,139 189,637 143,644 138,205
Income (loss) before
extraordinary
items and the
cumulative effect of a
change in accounting
for income taxes...... (94,541) 27,632 (15,578) 42,936 34,061 23,393 58,360
Extraordinary
items(c).............. -- (98,279) 20,200 43,000 43,561 24,530 (6,136)
Cumulative effect of a
change in accounting
for income taxes...... -- -- -- -- -- -- (306,000)
Net income (loss)....... (94,541) (70,647) 4,622 85,936 77,622 47,923 (253,776)
Ratio of earnings to
fixed charges(d)...... (e) 1.23x 1.04x 1.43x 1.43x 1.34x 1.64x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
---------------------------------------------------------- ----------------------
1988 1989 1990 1991 1992 1992 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
in thousands
BALANCE SHEET DATA
Working capital......... $ 65,434 $ 221,101 $ 264,796 $ 378,680 $ 475,397 $ 558,392 $ 481,359
Cash and cash
equivalents........... 52,984 142,155 43,733 78,556 126,256 276,356 228,930
Total assets............ 1,859,031 2,114,763 2,152,617 2,397,227 2,523,573 2,605,619 2,594,573
Long-term debt, less
current portion....... 1,260,502 1,688,548 1,855,619 1,968,937 1,709,051 1,832,570 1,624,024
Redeemable preferred
stock(f).............. 316,998 324,996 334,160 4,855 -- 4,898 --
Stockholders' equity
(deficit)............. (375,191) (431,649) (473,092) (37,603) 233,101 205,437 (18,205)
</TABLE>
footnotes on next page
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<PAGE> 8
- ---------------
(a) Includes depreciation of property and equipment, amortization of purchased
program rights and related intangibles, licensed program rights,
participants' share and royalties and other intangibles. Licensed program
rights amortization was $23,935,000, $30,609,000, $47,370,000, $50,632,000,
$65,960,000, $49,495,000, and $52,336,000 for each of the five years ended
December 31, 1992 and the nine months ended September 30, 1992 and 1993,
respectively.
(b) Operating profit is defined as income before interest expense, interest
income, dividends on minority interest, provision for income taxes,
extraordinary items and the cumulative effect of a change in accounting for
income taxes.
(c) Extraordinary items consist of (i) for the year ended December 31, 1989 and
the nine months ended September 30, 1993, a loss on early extinguishment of
indebtedness of $123,191,000, net of tax benefits of $24,912,000, and of
$10,136,000, net of tax benefits of $4,000,000, respectively and (ii) for
the years ended December 31, 1990, 1991 and 1992 and the nine months ended
September 30, 1992 utilization of operating loss carryforwards.
(d) Earnings used in computing the ratios consist of income (loss) before
provision for income taxes, extraordinary items and the cumulative effect of
a change in accounting for income taxes, excluding the undistributed
earnings or losses of less than 50%-owned entities, plus fixed charges
exclusive of interest capitalized. Fixed charges consist of interest expense
(including amortization of debt issue cost and original issue discount),
dividends on minority interest, interest capitalized and one-third of rental
expense (considered by the Company to be representative of the interest
factor).
(e) For the year ended December 31, 1988, fixed charges exceeded earnings
before fixed charges by $89,503,000.
(f) Amounts represent the accreted value of the Class B Cumulative Preferred
Stock outstanding at the end of each period.
S-8
<PAGE> 9
SELECTED OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1988 1989 1990 1991 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Advertising Revenue in thousands(a)
TBS SuperStation............................................ $247,347 $270,992 $276,284 $287,389 $309,684
TNT......................................................... 3,707 39,024 111,117 137,993 183,987
CNN......................................................... 110,034 137,164 151,067 171,844 179,023
Headline News............................................... 29,262 46,946 69,506 76,512 76,527
CNN International........................................... 770 1,161 3,866 13,222 25,983
Subscription Revenue in thousands(a)
TNT......................................................... -- $ 55,123 $168,993 $231,933 $260,048
CNN......................................................... $104,511 127,133 136,881 148,590 166,256
Headline News............................................... 3,956 3,853 4,637 5,623 7,201
TNT Latin America........................................... -- -- -- 2,348 9,524
CNN International........................................... 1,689 3,878 6,100 16,203 22,639
Coverage Households in thousands(b)(c)(d)
TBS SuperStation............................................ 47,925 52,149 55,515 57,457 60,032
TNT......................................................... -- 36,341 51,152 55,641 58,312
CNN......................................................... 49,223 53,799 56,702 58,877 61,172
Headline News............................................... 34,730 40,825 44,708 48,223 51,354
U.S. Cable Television Household Penetration(b)(c)(f)
TBS SuperStation............................................ 93% 94% 94% 94% 94%
TNT......................................................... -- 66 89 93 94
CNN......................................................... 96 97 97 97 97
Headline News............................................... 68 74 77 80 82
U.S. Television Household Penetration(b)(c)(g)
TBS SuperStation............................................ 53% 57% 60% 62% 64%
TNT......................................................... -- 39 55 60 63
CNN......................................................... 54 58 61 64 66
Headline News............................................... 38 44 48 52 55
Average U.S. Viewing Households in thousands(b)(e)(h)
TBS SuperStation............................................ 797 792 840 793 803
TNT......................................................... -- 231 439 509 560
CNN......................................................... 283 335 391 685(i) 400
Headline News............................................... 121 143 153 182(i) 172
Ratings 24-hour basis(b)(e)(j)
TBS SuperStation............................................ 1.7% 1.6% 1.5% 1.4% 1.4%
TNT......................................................... -- .8 .9 .9 1.0
CNN......................................................... .6 .7 .7 1.2(i) .7
Headline News............................................... .4 .4 .4 .4(i) .3
Share of Viewing Households 24-hour basis(b)(e)(k)
TBS SuperStation............................................ 5.4% 5.0% 4.9% 4.4% 4.3%
TNT......................................................... -- 2.6 3.0 3.0 3.1
CNN......................................................... 1.9 2.1 2.2 3.7(i) 2.1
Headline News............................................... 1.2 1.2 1.1 1.2(i) 1.1
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Certain amounts prior to 1992 have been reclassified to conform to the current year presentation.
(b) Information derived by the Company from Nielsen data.
(c) Measured as of the December rating period in each indicated year.
(d) Coverage households, in thousands, for the December 1993 rating period, for TBS SuperStation, TNT, CNN,
Headline News and the Cartoon Network were 61,525, 60,876, 62,420, 54,219 and 8,861, respectively.
(e) Represents the average number or percentage of viewing households for the respective service at any given time
based upon an average for each 24-hour period in the 12 rating periods in each indicated year.
(f) U.S. Cable Television Household Penetration for the December 1993 rating period, for TBS SuperStation, TNT,
CNN, Headline News and the Cartoon Network was 94%, 95%, 97%, 85% and 13%, respectively.
(g) U.S. Television Household Penetration for the December 1993 rating period, for TBS SuperStation, TNT, CNN,
Headline News and the Cartoon Network was 65%, 65%, 66%, 58% and 9%, respectively.
(h) Average U.S. Viewing Households, in thousands, for the 12 rating periods in 1993, for TBS SuperStation, TNT,
CNN, Headline News and the Cartoon Network were 815, 552, 369, 181 and 56, respectively.
(i) Increase primarily due to Persian Gulf War coverage.
(j) Ratings, 24-hour basis, for the average of the 12 rating periods in 1993, for TBS SuperStation, TNT, CNN,
Headline News and the Cartoon Network were 1.3%, 0.9%, 0.6%, 0.3% and 0.9%, respectively.
(k) Share of Viewing Households, 24-hour basis, for the average of the 12 rating periods in 1993, for TBS
SuperStation, TNT, CNN, Headline News and the Cartoon Network was 4.2%, 2.9%, 1.9%, 1.1% and 2.7%,
respectively.
</TABLE>
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<PAGE> 10
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The selected unaudited pro forma financial information set forth below
gives effect to the Acquisitions and the New Line Merger. The unaudited pro
forma statement of operations data for the year ended December 31, 1992 and for
the nine months ended September 30, 1993, present the unaudited pro forma
combined results of the continuing operations of the Company, Castle Rock, HB
Holding Co. and New Line for those periods assuming that the Acquisitions and
the New Line Merger occurred at the beginning of the periods presented. The
unaudited pro forma balance sheet data at September 30, 1993 present the pro
forma condensed combined financial position of the Company, Castle Rock, HB
Holding Co. and New Line assuming that the Acquisitions and the New Line Merger
had occurred at that date. The selected unaudited pro forma financial
information is provided for informational purposes only and does not purport to
be indicative of the future results or financial position of the Company or what
the results of operations or financial position would have been had the
Acquisitions and the New Line Merger been effected on the dates indicated. This
information is qualified in its entirety by, and should be read in conjunction
with, the Company's Unaudited Pro Forma Condensed Combined Financial Information
contained in the Company's Current Report on Form 8-K, dated December 22, 1993,
which is incorporated herein by reference. This information should also be read
in conjunction with the information set forth in "Selected Historical Financial
Information" herein, the historical financial statements, including the related
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of the Company contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 and Quarterly Reports
on Form 10-Q for the nine months ended September 30, 1993, the historical
financial statements and related notes thereto of New Line included in the
Company's Current Report on Form 8-K, dated January 24, 1994, and the historical
financial statements and related notes thereto of Castle Rock included in the
Company's Current Report on Form 8-K, dated December 22, 1993.
The unaudited pro forma financial information is based on the Company's
preliminary review of Castle Rock and New Line and the Company's knowledge of HB
Holding Co. The Company has not received any appraisals or valuations from
independent third parties of the assets or properties of Castle Rock, New Line
or HB Holding Co. However, the unaudited pro forma information presented may be
adjusted once complete information on the fair value of all of such companies'
assets and liabilities is developed and once a more thorough review of such
companies' operating and accounting policies and procedures has been completed.
S-10
<PAGE> 11
<TABLE>
<CAPTION>
PRO FORMA FOR THE ACQUISITIONS
AND THE NEW LINE MERGER
-----------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1992 SEPTEMBER 30, 1993
-------------------- ------------------
in thousands except ratios
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue...................................................... $2,163,103 $1,774,306
Cost of operations........................................... 1,345,494 1,072,276
Selling, general and administrative.......................... 477,191 413,675
Operating profit(a).......................................... 283,142 234,086
Interest expense, net of interest income..................... 225,601 164,454
Income (loss) before extraordinary items and the cumulative
effect of a change in accounting for income taxes.......... (3,804) 36,543
Ratio of earnings to fixed charges........................... 1.15x 1.38x
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA FOR THE ACQUISITIONS
AND THE NEW LINE MERGER
------------------------------
AT SEPTEMBER 30, 1993
------------------------------
in thousands
<S> <C>
BALANCE SHEET DATA
Working capital........................................................... $ 698,566
Cash and cash equivalents................................................. 291,851
Total assets.............................................................. 3,907,527
Total indebtedness........................................................ 2,368,403
Stockholders' equity...................................................... 422,380
</TABLE>
- ---------------
(a) Operating profit is defined as income before interest expense, interest
income, provision for income taxes, extraordinary items and the cumulative
effect of a change in accounting for income taxes.
S-11
<PAGE> 12
DESCRIPTION OF THE SECURITIES
This description of the particular terms of the Securities supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Debt Securities and the Indentures set forth in the
accompanying Prospectus under the heading "Description of the Debt Securities,"
to which description reference is hereby made. The following description of the
terms of the Securities does not purport to be complete and is qualified in its
entirety by reference to the indenture pursuant to which the Securities will be
issued (the "Indenture"), a copy of which has been filed as an exhibit to the
Registration Statement of which the accompanying Prospectus is a part.
Capitalized terms used but not defined herein or in the accompanying Prospectus
have the meanings given to them in the Indenture. The Indenture is referred to
in the Prospectus as the "Senior Indenture" and sometimes collectively with the
Subordinated Indenture as the "Indentures." The Notes and the Debentures are
"Senior Debt Securities" as that term is used in the Prospectus and are also
referred to in the Prospectus as the "Offered Debt Securities." As used in this
"Description of the Securities," the "Company" refers to Turner Broadcasting
System, Inc. and does not include its subsidiaries.
GENERAL
The Notes and the Debentures each constitute a series of Senior Debt
Securities for purposes of the Indenture. The Notes and the Debentures are
limited to $ and $ aggregate principal amount,
respectively. The Notes and the Debentures will bear interest from the date of
issue at the respective rates per annum shown on the front cover of this
Prospectus Supplement and will mature on January , 2004 and January , 2024,
respectively. Interest on the Securities will be payable semi-annually in
arrears on January and July of each year, commencing July , 1994, to the
persons in whose names the Securities are registered at the close of business on
and , as the case may be, next preceding such January
or July , and interest will be calculated on the basis of a 360-day year of
twelve 30-day months. The Company has appointed the Trustee under the Indenture
as the Paying Agent, transfer agent and Registrar for the Securities. The
Securities may be presented for payment, registration of transfer or exchange at
the office of the Trustee.
The Securities will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Company and will be senior in right of
payment to all subordinated indebtedness of the Company.
SATISFACTION AND DISCHARGE
The Company will be discharged from its obligations under the Securities of
any series upon satisfaction of the following conditions: (a) the Company has
irrevocably deposited in trust with the Trustee either (i) money in an amount as
will, or (ii) U.S. Government Obligations, as will, together with the
predetermined and certain income to accrue thereon without consideration of any
reinvestment thereof, or (iii) a combination of (i) and (ii) as will (in a
written opinion with respect to (ii) or (iii) of independent public accountants
delivered to the Trustee), be sufficient to pay and discharge the entire
principal of and interest, if any, to Stated Maturity on the outstanding
Securities of such series at the time such payments become due; (b) the Company
has paid or caused to be paid all other sums payable with respect to the
Securities of such series; (c) no default or Event of Default shall have
occurred and be continuing with respect to the Securities of such series and no
Triggering Event shall have occurred as to which the Company has not fully
satisfied the Redemption Rights of all Holders electing to have their Securities
of such series redeemed; and (d) the Trustee has received an Officers'
Certificate stating that all conditions precedent to the discharge of the
Company's obligations have been complied with and an Opinion of Counsel to the
effect that no other action under the Indenture is required as a precondition to
the discharge of the Company's obligations. Upon and following the deposit of
such funds or U.S. Government Obligations and the satisfaction of such other
conditions the Holders of Securities of such series shall only be entitled to
receive payment of the principal of (and premium, if any) and interest, if any,
on the Securities of such series from deposited funds and the Company shall have
no further obligations with respect thereto except for obligations with respect
to registration of transfer and
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<PAGE> 13
exchange of the Securities of such series. See "Certain Federal Income Tax
Considerations -- Defeasance of Securities."
REDEMPTION
Redemption at the Option of the Company
The Notes are not redeemable at the Company's option.
The Debentures will be subject to redemption at any time on or after
January , 2004, at the option of the Company, in whole or in part, on not less
than 30 nor more than 60 days' prior notice, at the redemption prices set forth
below (expressed as percentages of the principal amount), together with accrued
and unpaid interest, if any, to but excluding the date of redemption, if
redeemed during the 12-month period beginning January of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ----------------- ----------
<S> <C>
2004 %
and thereafter 100%
</TABLE>
If less than all of the Debentures are to be redeemed, the Trustee shall
select the Debentures or the portion thereof to be redeemed pro rata, by lot or
by any other method the Trustee shall deem fair and reasonable.
Redemption at the Option of the Holder
Each Holder will have the option to require the Company to redeem all, but
not less than all, of the Securities owned by such Holder (the "Redemption
Right") at a redemption price, payable in cash, equal to 101% of the principal
amount, plus accrued and unpaid interest to the date fixed for redemption, upon
the occurrence of a Triggering Event (as hereinafter defined) with respect to
the Securities of such series.
In the event of any Triggering Event with respect to Securities of any
series, each Holder of Securities of such series shall have the Redemption Right
for a period of 45 days after the mailing of a notice to the Holders by the
Company that such Triggering Event has occurred. A Holder must exercise such
Redemption Right within the 45-day period after the mailing of such notice by
the Company or such Redemption Right will expire with respect to such Triggering
Event at the close of business on the last day of such period (the "Redemption
Date"). Exercise of such Redemption Right will be irrevocable and interest on
the Securities tendered for redemption will cease to accrue from and after the
Redemption Date. Each Holder's exercise of such Redemption Right shall be made
by submitting to the Trustee not later than the close of business on the
Redemption Date a completed Demand Form (as defined below) relating to the
Securities to be redeemed.
If a Triggering Event occurs with respect to Securities of any series,
then, as soon as practicable and in any event within 30 days after the
occurrence of such Triggering Event, the Company shall mail to each Holder of
Securities of such series and the Trustee a notice which shall disclose the
occurrence of the Triggering Event and the right of the Holder to require the
Company to redeem all, but not less than all, of such Holder's Securities and
shall state the Redemption Date, the redemption price, the name and address of
the paying agent, and that the Securities to be redeemed must be surrendered to
the paying agent in order for the Holder of such Securities to collect the
redemption price. Such notice shall be accompanied by a form of written demand
to be used by the Holder to exercise their Redemption Right (a "Demand Form").
The Company will comply with all applicable tender offer rules under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including but
not limited to, Rule 14e-1, as then in effect, with respect to any offer by the
Company to redeem Securities of any series upon a Triggering Event.
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<PAGE> 14
Because the Holders of Securities may, under the Redemption Right, cause
the Company to redeem their Securities at 101% of the outstanding principal
amount, plus accrued and unpaid interest, upon a Triggering Event, the
Redemption Right may have certain anti-takeover effects. The Redemption Right
could result in additional expense to a person or group that attempts to acquire
the Company, and may render more difficult or discourage a merger, tender offer
or proxy contest, the assumption of control by a holder of a large block of the
Company's securities or the removal of incumbent management.
The occurrence of certain of the events that would constitute a Triggering
Event could constitute an event of default under the Company's existing or
future indebtedness, including the Amended 1993 Credit Agreement. In addition,
the exercise by Holders of the Redemption Right could cause a default under such
indebtedness even if the Triggering Event does not, due to the effect of such
redemptions on the financial condition of the Company. In the event a Triggering
Event occurs and a substantial portion of Securities are presented for payment
there is no assurance that the Company would have sufficient financial resources
to enable it to redeem the Securities. In such event, the Company expects that
it would be required to refinance such Securities to the extent it did not have
funds available to meet its redemption obligations; however, there can be no
assurance that the Company could obtain such financing.
Triggering Events
Mergers and Sales of Assets by the Company. It will be a Triggering Event
with respect to the Securities of any series if (A) the Company consolidates
with, or merges into, any other Person, (B) the Company conveys or transfers (by
sale, lease, assignment or otherwise), directly or indirectly, in a single
transaction or a series of related transactions, its properties and assets as an
entirety or substantially as an entirety to any Person or group of related
Persons or (C) the Company or any Subsidiary conveys or transfers (by sale,
lease, assignment or otherwise), directly or indirectly, in a single transaction
or a series of related transactions not in the ordinary course of the business
of the Company or such Subsidiary, as the case may be, to any Person or group of
related Persons, (other than the Company or another Subsidiary) its properties
or assets (including the Capital Stock representing a majority of the Voting
Power of Subsidiaries that owned such properties or assets) if either (i) such
properties or assets produced more than 25% of the Company's Consolidated
Operating Cash Flow for the four fiscal quarters ending immediately prior to
such conveyance or transfer for which financial information in respect thereof
is available, or (ii) the book value of such property or assets equals or
exceeds 25% of the consolidated assets of the Company and its Subsidiaries at
the end of the most recent fiscal quarter for which financial information in
respect thereof is available, unless: (1) either the Company shall be the
surviving Person or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or to which the properties and
assets of the Company as an entirety or substantially as an entirety are
conveyed or transferred shall be organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
shall expressly assume, by a supplemental indenture, the due and punctual
payment of the principal of, premium, if any, and interest, if any, on all
outstanding Securities of such series and the performance of every covenant of
the Indenture and provisions of the Securities of such series on the part of the
Company to be performed or observed; (2) immediately after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing; (3) if a supplemental indenture is required in connection with such
transaction, the Company shall have delivered to the Trustee an Officers'
Certificate stating that such consolidation, merger, conveyance or transfer and
such supplemental indenture comply with the Indenture and that all conditions
precedent therein provided for relating to such transaction have been complied
with and, upon closing of the consolidation, merger, conveyance or transfer, an
Opinion of Counsel stating that the corporation formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Company as an entirety or
substantially as an entirety is organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and has
assumed, by a supplemental indenture to the Indenture, executed and delivered to
the Trustee, the due and punctual payment of the principal of and interest, if
any, on all the outstanding
S-14
<PAGE> 15
Securities of such series and all other obligations under the Indenture and the
Securities of such series; and (4) immediately after giving effect to such
transaction on a pro forma basis the Consolidated Interest Coverage Ratio of the
Company or such surviving Person shall be at least equal to 1.50 to 1.
Restricted Payments. It will be a Triggering Event with respect to the
Securities of any series if the Company or any of its Subsidiaries declares or
makes any Restricted Payment if, at the time of such Restricted Payment, (A) an
Event of Default shall have occurred and be continuing or would result therefrom
or (B) after giving effect to such Restricted Payment, the Consolidated Interest
Coverage Ratio of the Company would be less than 1.50 to 1. Notwithstanding the
foregoing, the following actions shall not be a Triggering Event: (a) the
payment of any dividend within 60 days after the date of its declaration if the
dividend would have been permitted on the date of declaration; (b) the issuance
of Capital Stock (other than Disqualified Capital Stock) of the Company upon
conversion of the Company's Class C Convertible Preferred Stock; (c) the
issuance of Capital Stock (other than Disqualified Capital Stock) of the Company
upon the conversion of, or in exchange for, Capital Stock of the Company; (d)
the declaration or payment by the Company or any Subsidiary in Capital Stock
(other than Disqualified Capital Stock) of any dividend on, or the making by the
Company or any Subsidiary of any distribution of, Capital Stock (other than
Disqualified Capital Stock) in respect of, the Capital Stock of the Company; (e)
the declaration or payment of any dividend or the making of any distribution in
respect of the Capital Stock of any Subsidiary of the Company to the Company or
another Subsidiary of the Company or the redemption, purchase, retirement or
other acquisition for value by a Subsidiary of shares of such Subsidiary from
the Company or another Subsidiary; (f) the declaration or payment to any Person
other than the Company or a Subsidiary of the Company (the "Equity Holders") of
any dividend or the making of any distribution in respect of the Capital Stock
of a Subsidiary of the Company or the redemption, purchase, retirement or other
acquisition for value by a Subsidiary of the Company of Capital Stock of such
Subsidiary held by any Equity Holder, provided that the amounts declared or paid
in respect thereof subsequent to the issuance of the Securities shall not exceed
the sum of (A) the aggregate proceeds received by such Subsidiary from purchases
of equity interests in such Subsidiary by the Equity Holders or other capital
contributions made by the Equity Holders to such Subsidiary subsequent to the
issuance of the Securities and (B) the Equity Holders' pro rata share of the
aggregate Consolidated Operating Cash Flow of such Subsidiary (or if such
aggregate Consolidated Operating Cash Flow is a deficit, minus 100% of such
deficit) earned subsequent to June 30, 1993 and prior to the last day of the
fiscal quarter immediately preceding the fiscal quarter in which such
declaration or payment occurs, less all other declarations or payments to Equity
Holders subsequent to the issuance of the Securities and prior to such
declaration or payment; or (g) the acquisition by the Company of its Capital
Stock (or, in the case of clause (D), below, warrants, rights or options to
purchase or acquire shares of its Capital Stock) (A) to eliminate fractional
shares, (B) to collect or compromise in good faith a debt, claim or controversy
with any shareholder at a price not in excess of the fair market value thereof,
(C) from any shareholder who, by reason of dissent from any corporate action, is
entitled under applicable laws to be paid the fair market value of his shares,
(D) from a director or an employee who has purchased or otherwise acquired the
shares, warrants, rights or options from the Company or a Subsidiary under an
agreement permitting or obligating the Company or a Subsidiary to repurchase the
shares, warrants, rights or options, but in no event for a price greater than
the higher of the fair market value thereof or the price at which they were sold
by the Company, or (E) pursuant to a court order; provided, that the aggregate
amount paid by the Company subsequent to the date of issuance of the Securities
pursuant to subclauses (A), (B), (C), (D) and (E) shall not exceed $100,000,000.
Change of Control. It will be a Triggering Event with respect to the
Securities of each series if there is a Change of Control with respect to the
Company.
The occurrence of a Triggering Event upon a Change of Control may, in
certain circumstances, make more difficult or discourage a takeover of the
Company, other than by a Permitted Other Holder, and thus the removal of
incumbent management. Subject to the limitations described herein, the Company
could enter into certain transactions, including acquisitions, refinancings,
asset sales or other recapitalizations, that would not constitute a Change of
Control under the Indenture but that could adversely affect the Company's
capital structure or credit rating. In addition, the Company understands that
certain of its
S-15
<PAGE> 16
major stockholders who are Permitted Other Holders own Class C Convertible
Preferred Stock through one or more special purpose subsidiaries. Under the
terms of the Indenture, the acquisition by a third party of such subsidiary (or
of any Permitted Other Holder) would permit such third party to acquire control
of the Company without constituting a Change of Control that resulted in a
Triggering Event.
COVENANTS
Incurrence of Senior Funded Debt
Except as hereinafter described, the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, issue, incur,
assume, guarantee or otherwise become liable, contingently or otherwise, with
respect to, extend the maturity of or otherwise become responsible for the
payment of (collectively "incur"), any Funded Debt, unless, after giving effect
to (A) the issuance of such Funded Debt and (if applicable) the application of
the net proceeds thereof to refinance other Funded Debt as if such Funded Debt
was issued and the application of the proceeds occurred at the beginning of the
period and (B) the issuance and retirement of any other Funded Debt since the
first day of the period as if such Funded Debt was issued or retired at the
beginning of the period, the Consolidated Interest Coverage Ratio is at least
1.50 to 1.
Notwithstanding the foregoing, the Company and its Subsidiaries may incur
each and all of the following: (a) Debt outstanding on the date of issuance of
the Securities and any extension, renewal, replacement or refinancing thereof;
(b) Debt of Subsidiaries of the Company to the Company or to other Subsidiaries
of the Company; (c) up to $200,000,000 in aggregate principal amount at any one
time outstanding of Debt of Subsidiaries of the Company incurred in the ordinary
course of business the proceeds of which are used to finance the production,
completion, distribution or exhibition of Works; (d) Debt of Persons which
become Subsidiaries of the Company after the date of issuance of the Securities,
provided that such Debt is in existence at the time the respective Persons
become Subsidiaries of the Company and was not incurred or created in
anticipation thereof; (e) Debt of the Company to Subsidiaries of the Company;
(f) Debt of the Company which is subordinated in right of payment to the
Securities; and (g) up to $200,000,000 in aggregate principal amount of Funded
Debt of the Company and its Subsidiaries outstanding at any time. For purposes
of the debt incurrence covenant, if the Company or any of its Subsidiaries has
incurred Funded Debt to any other Subsidiary of the Company and such other
Subsidiary thereafter ceases to be a Subsidiary of the Company, the Company and
its Subsidiaries shall be deemed to have incurred such Funded Debt immediately
after such other Subsidiary ceases to be a Subsidiary of the Company. In the
event that an item of Funded Debt meets the criteria of more than one type of
Funded Debt described in this paragraph, the Company has the right to determine
in its sole discretion the category to which such Funded Debt applies and is not
required to include the amount and type of such Funded Debt in more than one of
such categories.
Limitation on Subsidiary Funded Debt
In addition, Subsidiaries may not incur Funded Debt if at the time of
incurrence and after giving effect thereto the aggregate of the outstanding
Funded Debt of Subsidiaries exceeds the greater of (x) 15% of consolidated
Funded Debt of the Company and its Subsidiaries (without including Debt
specified in clauses (i) through (iii) of the following sentence) and (y) 10% of
consolidated borrowing capacity then available to the Company under the
Consolidated Interest Coverage Ratio test described under "Incurrence of Senior
Funded Debt" plus $20,000,000. The foregoing limitation on Funded Debt of
Subsidiaries shall not apply to: (i) Debt of Subsidiaries of the Company
incurred in the ordinary course of business the proceeds of which are used to
finance the production, completion, distribution or exhibition of Works, (ii)
Debt of Subsidiaries outstanding on the date of issuance of the Securities and
any extensions, renewals, replacements or refinancings thereof and (iii) any
Debt of Subsidiaries of the nature described in sections (b) or (d) of the
preceding paragraph.
Incurrence of Certain Liens
The Company will not, and will not permit any Subsidiary to, subject to any
Lien, or suffer to exist any Lien on, the whole or any part of any Property now
owned or hereafter acquired by it, except as
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<PAGE> 17
hereinafter described, unless the Company secures the Securities, and any other
securities which may then be outstanding and entitled to the benefit of a
covenant similar in effect to this covenant, equally and ratably with the
indebtedness or obligations secured by such Lien, so long as any such
indebtedness or obligations shall be so secured. Notwithstanding the foregoing,
this clause is not applicable to the following: (a) Liens imposed by any
governmental authority for taxes, assessments or charges not yet delinquent or
which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or any of its Subsidiaries, as the case may be, in accordance with
generally accepted accounting principles; (b) pledges or deposits securing
non-delinquent obligations under worker's compensation, unemployment insurance
and other social security legislation; (c) easements, rights-of-way,
restrictions and other similar encumbrances incurred in the ordinary course of
business and encumbrances consisting of zoning restrictions, easements, leases,
subleases, licenses, sublicenses, restrictions on the use of Property or minor
imperfections in title thereto which, in the aggregate, are not material in
amount, and which do not in any case materially detract from the value of the
Property subject thereto or interfere with the ordinary conduct of the business
of the Company or any of its Subsidiaries; (d) Liens on Property of Persons
which become Subsidiaries of the Company after the date of issuance of the
Securities securing Debt described in clause (d) of "Incurrence of Funded Debt,"
provided that (i) such Liens were in existence at the time the respective
Persons became Subsidiaries of the Company and were not created in anticipation
thereof or (ii) such Liens do not extend to Property other than the Property of
such Subsidiary that secured such Debt; (e) Liens on Works which either (i)
existed in such Works prior to the time of their acquisition and were not
created in anticipation thereof, or (ii) were created solely for the purpose of
securing obligations to financiers, producers, distributors, exhibitors,
completion guarantors, inventors, copyright holders, financial institutions or
other participants incurred in the ordinary course of business in connection
with the acquisition, financing, production, completion, distribution or
exhibition of Works; (f) Liens upon Property acquired after the date of issuance
of the Securities (by purchase, production, construction or otherwise) by the
Company or any of its Subsidiaries, each of which either (i) existed on such
Property before the time of its acquisition and was not created in anticipation
thereof, or (ii) was created solely for the purpose of securing Debt
representing, or incurred to finance, refinance or refund, the cost (including
cost of construction, production, development or acquisition) of the respective
Property or of the Capital Stock or other ownership interest in the entity which
owns the Property at the time of acquisition; provided that no such Lien shall
extend to or cover any Property of the Company or such Subsidiary other than the
respective Property so acquired (including Property so acquired indirectly as a
result of the acquisition by the Company or any Subsidiary through the
acquisition of such Capital Stock or other ownership interest), improvements
thereon, products and proceeds thereof and revenues therefrom; (g) any Lien on
the office building and hotel complex located in Atlanta, Georgia known as the
CNN Center Complex, including the parking decks for such complex (to the extent
such decks are owned or leased by the Company or its Subsidiaries), or any
portion thereof and all property rights therein and the products, revenues and
proceeds therefrom created as part of any mortgage financing or sale-leaseback
of the CNN Center Complex; (h) Liens on satellite transponders and all property
rights therein and the products, revenues and proceeds therefrom which secure
obligations incurred in connection with the acquisition, utilization or
operation of such satellite transponders or the refinancing of any such
obligations; (i) additional Liens created after the date of issuance of the
Securities on Property, provided that the aggregate Debt secured thereby and
incurred on and after the issue date of the Securities shall not exceed on the
date that any such Lien is granted, the greater of $100,000,000 and five percent
(5%) of the book value, net of depreciation and amortization, of the total
assets of the Company, on a consolidated basis, shown on the consolidated
financial statements of the Company as of the last day of the month preceding
the creation of such Lien; (j) Liens existing on the date of issuance of the
Securities; (k) Liens resulting from progress payments or partial payments under
United States government contracts or subcontracts; (l) Liens arising from legal
proceedings, so long as such proceedings are being contested in good faith by
appropriate proceedings diligently conducted and so long as execution is stayed
on all judgments resulting from any such proceedings; (m) restrictions arising
under the Federal Communications Act of 1934, as amended, and similar statutes
in effect in jurisdictions outside the United States of America; (n)
restrictions on the Atlanta National League
S-17
<PAGE> 18
Baseball Club, Inc. and Atlanta Hawks, L.P. and their respective assets imposed
by Major League Baseball or the Commissioner of Baseball, and the National
Basketball Association, respectively, including, without limitation,
restrictions on the transferability of the Company's or any of its Subsidiary's
interests therein; (o) Liens imposed under capital leases entered into after the
date of issuance of the Securities provided that such Liens extend only to the
property or assets that are the subject of such capital leases; (p) Liens on
Capital Stock of or other ownership interest in any Person not a Subsidiary of
the Company securing Debt of such Person; (q) Liens arising in the ordinary
course of business that do not secure the repayment of Debt, including, without
limitation, the following Liens: (i) Liens on film or television production in
favor of the Screen Actors Guild or other similar trade groups or guilds
securing rights to residual payments owing to the Screen Actors Guild, such
other trade group or their respective members in respect of such film or
television production; (ii) Liens to secure the performance of bids, trade
contracts (other than for borrowed money), statutory obligations, surety and
appeal bonds, leases (other than capital leases), performance bonds and other
obligations of a like nature; (iii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (iv) restrictions (other than security
interests) on the transferability of investments in favor of co-investors or the
issuers of such investments or imposed by law; (v) Liens on works arising out of
the sale, license, syndication, transfer or other disposition of such works made
in accordance with the customary practices in the film, publishing, video and
television industries, of rights or interests in works, so long as such Lien
attaches only to works of the Company or its Subsidiaries being so sold,
licensed, syndicated, transferred or disposed of; (vi) Liens to secure the
performance of operating leases provided that such Liens extend only to the
property or assets that are the subject of such operating leases; (r) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
(whether or not statutory) arising in the ordinary course of business which are
not overdue for a period of more than 90 days or which are being contested in
good faith and by appropriate proceedings, for which a reserve or other
appropriate provision, if any, as shall be required by generally accepted
accounting principles shall have been made; and (s) any extension, renewal or
replacement of the foregoing, provided, however, that the Liens permitted
hereunder shall not be spread to cover any additional Property (other than a
substitution of like Property).
CERTAIN DEFINITIONS
A "Change of Control" is deemed to occur with respect to the Securities of
any series on the first date on which (a) the Permitted Turner Holders and the
Permitted Other Holders (individually, collectively or in the aggregate) cease
to beneficially own and have the power to vote at least a majority of the
aggregate voting power of the Voting Stock of the Company and (b) within 120
days of the occurrence of the event specified in clause (a), the Securities of
such series are downgraded to (i) lower than BB+ by Standard and Poor's
Corporation or any successor rating agency thereto and (ii) lower than Ba2 by
Moody's Investors Service or any successor rating agency thereto. As used
herein, a person shall be deemed to have "beneficial ownership" with respect to,
and shall be deemed to "beneficially own," any securities of the Company in
accordance with the definitions of such terms in Section 13 of the Exchange Act,
and the rules and regulations (including Rule 13d-3, Rule 13d-5, and any
successor rules) promulgated by the Securities and Exchange Commission
thereunder; provided, however, that a person shall be deemed to have beneficial
ownership of all securities that any such person has a right to acquire whether
such right is exercisable immediately or only after the passage of time and
without regard to the 60-day limitation referred to in Rule 13d-3. The Company
understands that certain of its major stockholders who are Permitted Other
Holders own Class C Convertible Preferred Stock through one or more special
purpose subsidiaries. Under the terms of the Indenture, the acquisition by a
third party of such subsidiary (or of any Permitted Other Holder) would permit
such third party to acquire control of the Company without constituting a Change
of Control that resulted in a Triggering Event.
"Consolidated Interest Coverage Ratio" means, for any Person, as of any
date of determination, the ratio of (i) the aggregate amount of Consolidated
Operating Cash Flow of such Person for the four fiscal quarters for which
financial information in respect thereof is available ending immediately prior
to the date
S-18
<PAGE> 19
of the transaction giving rise to the need to calculate the Consolidated
Interest Coverage Ratio (the "Transaction Date") to (ii) the aggregate
Consolidated Interest Expense of such Person for the four fiscal quarters for
which financial information in respect thereof is available ending immediately
prior to the Transaction Date, assuming for purposes of this calculation that
base interest rates in respect of floating interest obligations being incurred
are equal to base interest rates in effect as of the Transaction Date. In
addition to the foregoing, for purposes of this definition "Consolidated
Operating Cash Flow" and "Consolidated Interest Expense" shall be calculated
after giving effect, on a pro forma basis for such four-quarter period, to (a)
the acquisition of the assets, Property or business of another Person during the
period commencing on the first day of such period to and including the
Transaction Date (the "Reference Period") if during the Reference Period such
Person becomes (or such assets, Property or business, as acquired, become all or
substantially all the assets or business of) a consolidated Subsidiary of the
Company and (b) each sale, transfer, lease, mortgage or other disposition
(including, without limitation, a sale-leaseback transaction or a merger or
consolidation) of assets, Property or business ("disposition") or series of
related dispositions during the Reference Period by the Company or any
Subsidiary (other than to the Company or a Subsidiary) which disposition or
series of related dispositions is not in the ordinary course of business of the
Company or the Subsidiary making such disposition.
"Consolidated Interest Expense" means, for any Person, for any period, the
aggregate amount, determined on a consolidated basis in accordance with GAAP, of
interest, whether expensed or capitalized, paid or accrued during such period,
in respect of all Funded Debt of such Person and its consolidated subsidiaries.
"Consolidated Operating Cash Flow" means for any Person, for any period,
net income from continuing operations for such Person and its consolidated
subsidiaries for such period taken as a single accounting period determined on a
consolidated basis in accordance with GAAP, excluding the effect of (i)
Consolidated Interest Expense; (ii) provision for income taxes; (iii)
depreciation of property, plant and equipment; (iv) amortization expense
(excluding amortization of licensed rights); (v) extraordinary items; (vi) the
cumulative effect of a change in accounting principle; and (vii) gains or losses
on the sale of assets to the extent such gains or losses are included in the
calculation of net income from continuing operations, all as determined in
accordance with GAAP.
"Disqualified Capital Stock" means, (i) with respect to any Person, any
Capital Stock of such Person that, by its terms or by the terms of any security
into which it is convertible or exchangeable, is, or upon the happening of an
event or the passage of time would be, required to be redeemed or repurchased by
such Person or its subsidiaries, including at the option of the holder, in whole
or in part, or has, or upon the happening of an event or passage of time would
have, a redemption or similar payment due, on or prior to the earlier of the
Maturity Date of the Notes or Debentures, as the case may be, or the first date
on which none of the Securities of such series are outstanding and (ii) with
respect to any Subsidiary of the Company, any Capital Stock of such Subsidiary
that has a preference, conditionally or otherwise, as to the declaration,
payment or accrual of dividends, the distribution of assets upon liquidation,
dissolution or winding up, or both, over any other Capital Stock of such
Subsidiary.
"Funded Debt" means, with respect to any Person at any date, without
duplication (a) indebtedness created, issued or incurred by such Person for
borrowed money (whether by loan or the issuance and sale of debt securities);
(b) obligations of such Person (contingent or otherwise) in respect of letters
of credit or similar instruments issued or accepted by banks and other financial
institutions for the account of such Person (other than trade letters of credit
or letters of credit securing performance of bids, trade contracts, statutory
obligations (including obligations in respect of taxes and tax refunds), surety
and appeal bonds, leases, performance bonds and similar obligations), (c)
Capitalized Lease Obligations of such Person and (d) Funded Debt of others
Guaranteed by such Person. For purposes of calculating the amount of any Funded
Debt hereunder: (i) there shall be no double-counting of direct obligations,
Guarantees and reimbursement obligations for letters of credit, (ii) the
principal amount of any Funded Debt of any Person arising by reason of such
Person having granted a Lien on its Property to secure Funded Debt of others,
when such Funded Debt has not been assumed by such Person, shall be the lower of
the principal amount of such Funded Debt or the fair
S-19
<PAGE> 20
market value of such Property at the time the Lien is granted by such Person and
(iii) the principal amount of any Funded Debt of any Person arising by reason of
such Person having Guaranteed Funded Debt of others, where the amount of such
Guarantee is limited to an amount less than the principal amount of the Funded
Debt Guaranteed, shall be the amount as so limited.
"GAAP" means generally accepted accounting principles as in effect on the
date of issuance of the Securities.
"Permitted Other Holders" means (a) each Person that, on the date of
issuance of the Securities, was either (i) the beneficial holder (within the
meaning of Rule 13d-3 under the Exchange Act as in effect on the date of
issuance of the Securities) of shares of the Class C Convertible Preferred
Stock, par value $.125 per share, of the Company or (ii) an Affiliate of a
Person specified in clause (i) above and (b) each Person at least 51% of the
voting power of the Voting Stock of which is beneficially owned (within the
meaning of Rule 13d-3 under the Exchange Act as in effect on the date of
issuance of the Securities) by one or more of the Persons specified in clause
(a) above.
"Permitted Turner Holders" means R.E. Turner and his estate, heirs and
legatees, and the legal representatives of any of the foregoing, including,
without limitation, Turner Foundation, Inc., Turner Charitable Remainder
Unitrust or the trustee of any trust of which one or more of the foregoing are
the sole beneficiaries.
"Property" means with respect to any Person, any and all tangible or
intangible property, assets, revenues, rights (including, without limitation
with respect to the Company, rights of the Company and/or any of its
Subsidiaries to use (whether by ownership, license or otherwise) copyrighted
programs, programming, films and similar assets) or business of such Person,
owned by leasehold or in fee, by license, sublicense or outright, whether now
owned or hereafter acquired by such Person.
"Restricted Payment" means (a) the declaration or payment by the Company or
any Subsidiary, either in cash or in property, of any dividend on, or the making
by the Company or any Subsidiary of any other distribution in respect of, the
Capital Stock of the Company or any Subsidiary, or (b) the redemption,
repurchase, retirement or other acquisition for value (whether in cash, property
or otherwise) by the Company or any Subsidiary, directly or indirectly, of any
Capital Stock of the Company.
"Subsidiary" means (i) a corporation at least a majority of whose Capital
Stock with voting power, under ordinary circumstance, to elect directors is at
the date of determination owned, directly or indirectly, by the Company or by
one or more Subsidiaries or by the Company and one or more Subsidiaries or (ii)
a partnership in which the Company or a Subsidiary is, at the date of
determination, the sole general partner of such partnership or (iii) any other
person (other than a corporation or partnership) in which the Company or one or
more Subsidiaries or the Company and one or more Subsidiaries, directly or
indirectly, at the date of determination, has (x) at least a majority ownership
interest or (y) the power to elect or direct the election of the majority of the
directors or other governing body of such person.
"Works" means motion pictures, video, television, interactive or
multi-media programming, audio-visual works, sound recordings, books and other
literary or written material, any software, copyright or other intellectual
property related thereto, acquired directly or indirectly after the date of the
issuance of the Securities by purchase, business combination, production,
creation or otherwise, any component of the foregoing or rights with respect
thereto, and all improvements thereon, products and proceeds thereof and
revenues derived therefrom.
"works" means Works without reference to when acquired.
S-20
<PAGE> 21
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
Set forth below is a summary of certain United States Federal income tax
considerations of importance to the original purchasers of the Securities. The
summary does not discuss all of the aspects of Federal income taxation which may
be relevant to particular investors in light of their personal investment
circumstances, nor does it discuss any international, state or local income or
other tax considerations. The summary is based upon the Internal Revenue Code of
1986, as amended (the "Code"), and on regulations, rulings and decisions that
are in effect as of the date of the Prospectus Supplement, all of which are
subject to change. Prospective investors are advised to consult with their tax
advisors regarding the Federal, state, local and international income and other
tax consequences of purchasing, holding and disposing of the Securities.
DISPOSITION OF SECURITIES
In general an original Holder of a Security will recognize gain or loss on
the sale, redemption, exchange or other disposition of the Security measured by
the difference between the amount of cash received and the Holder's adjusted tax
basis in the Security. Accrued interest is taxable as interest and not as gain
upon such disposition.
DEFEASANCE OF SECURITIES
If the Company exercises its right to satisfy and discharge its obligations
under the Indenture with respect to the Securities of a series prior to their
maturity by depositing money or U.S. Government Obligations in trust for holders
of outstanding Securities of such series, such satisfaction and discharge
("discharge") under present law, is likely to be treated as a redemption of the
Securities of such series prior to maturity in exchange for the property
deposited in trust. In such event, each holder of Securities of such series
would generally recognize, at the time of discharge, gain or loss measured by
the difference between the amount of any cash and the fair market value of any
property deemed received (except to the extent attributable to accrued interest)
and the holder's adjusted tax basis in the Securities deemed surrendered.
Thereafter, each holder of Securities of such series would be treated as if it
held an undivided interest in the cash (or investments made therewith) and the
property held in trust. Each holder of Securities of such series would generally
be subject to tax liability in respect of interest income thereon and would
recognize gain or loss upon any disposition, including redemption, of the assets
held in trust. Although tax might be owed upon discharge, the holder of a
discharged Security would not receive cash (except for current payments of
interest on the Securities) until the maturity or earlier redemption of the
Securities of such series. Such tax treatment could affect the purchase price
that a holder would receive upon the sale of the Securities.
MARKET DISCOUNT ON RESALE OF SECURITIES
Purchasers of Securities should be aware that resale of the Securities may
be affected by the market discount provisions of the Code. These rules, among
other things, generally provide that if a subsequent holder of a Security
purchases it at a market discount and thereafter recognizes gain upon a
disposition, the lesser of such gain or the portion of the market discount that
accrued while the Security was held by such holder will be treated as interest
income at the time of the disposition.
S-21
<PAGE> 22
UNDERWRITING
The underwriters named below (the "Underwriters") have severally agreed to
purchase from the Company the following respective principal amounts of the
Securities:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
-----------------------
UNDERWRITER NOTES DEBENTURES
--------------------------------------------------- ------- ------------
<S> <C> <C>
Goldman, Sachs & Co................................ $ $
CS First Boston Corporation........................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................
------- ------------
Total.................................... $ $
------- ------------
------- ------------
</TABLE>
The Terms Agreement, dated January , 1994, by and among the Company and
the Underwriters provides that the obligations of the Underwriters are subject
to certain conditions precedent and that the Underwriters will be obligated to
purchase all of the Securities if any are purchased.
The Underwriters propose to offer the Securities to the public initially at
the respective public offering prices set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession not
in excess of 1% of the principal amount of such Securities. The Underwriters and
such dealers may allow a discount not in excess of 0.5% of such principal amount
of the Securities on sales to certain other dealers. After the initial public
offering, the public offering price and concession and discount may be changed
by the Underwriters.
The Securities are new issues of securities with no established trading
market. The Company does not intend to list the Securities on any securities
exchange. The Underwriters have advised the Company that they intend to act as a
market maker for the Securities. However, the Underwriters are not obligated to
do so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
Securities.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended and, under certain circumstances, to contribute to payments that the
Underwriters may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Securities being
offered hereby will be passed upon for the Company by Troutman Sanders, Atlanta,
Georgia. Certain legal matters in connection with the Securities will be passed
upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, Los Angeles,
California. Skadden, Arps, Slate, Meagher & Flom have from time to time
represented the Company and are currently representing the Company on certain
other matters.
EXPERTS
The consolidated financial statements of New Line as of December 31, 1992
and 1991, and for each of the three years in the period ended December 31, 1992,
incorporated by reference in this Prospectus Supplement, have been audited by
Ernst & Young, independent auditors, as set forth in their report included
therein and have been so incorporated in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
The financial statements of Castle Rock as of and for the years ended
December 31, 1992 and 1991, incorporated by reference in this Prospectus
Supplement, have been audited by Ernst & Young, independent auditors, as set
forth in their report included therein, in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
S-22
<PAGE> 23
PROSPECTUS
TURNER BROADCASTING SYSTEM, INC.
DEBT SECURITIES
---------------------
Turner Broadcasting System, Inc. (the "Company") may offer from time to
time pursuant to this Prospectus unsecured senior debt securities (the "Senior
Debt Securities") or unsecured senior subordinated debt securities (the
"Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities") consisting of notes, debentures or other evidence of
indebtedness. The Debt Securities will be limited to $1,100,000,000 aggregate
public offering price. The Debt Securities may be offered as a single series or
as two or more separate series in amounts, at prices and on terms to be
determined at the time of offering and to be set forth in one or more Prospectus
Supplements (as defined herein).
The Debt Securities will be issued in registered form without coupons. In
addition, all or a portion of the Debt Securities may be issued as Book-Entry
Securities (as defined herein). Book-Entry Securities will be issued in global
registered form.
The specific designation, aggregate principal amount, authorized
denominations, maturity, rate (or method of determining the same) and time of
payment of interest, if any, any redemption or repurchase terms, any listing on
a securities exchange, the initial public offering price, the net proceeds to
the Company, the names of, and the principal amounts to be purchased by or
through, underwriters, dealers or agents, if any, the compensation of such
persons and other specific terms in connection with the offering and sale of the
series of Debt Securities in respect of which this Prospectus is being delivered
(the "Offered Securities") will be set forth in the accompanying Prospectus
Supplement (the "Prospectus Supplement"). This Prospectus may not be used to
consummate sales of Debt Securities unless accompanied by a Prospectus
Supplement.
The Senior Debt Securities, when issued, will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company. The Subordinated
Debt Securities, when issued, will be unsecured and subordinated to all present
and future Senior Indebtedness (as defined herein) of the Company.
The Debt Securities may be sold to or through one or more underwriters or
dealers, directly by the Company, or through one or more agents designated from
time to time. See "Plan of Distribution." If any underwriter or agent of the
Company is involved in the sale of any Debt Securities in respect of which this
Prospectus is being delivered, the name of such underwriter or agent and any
applicable commission or discount will be set forth in a Prospectus Supplement.
The net proceeds to the Company from such sale also will be set forth in such
Prospectus Supplement.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS IS JUNE 9, 1993
<PAGE> 24
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN, OR INCORPORATED BY REFERENCE IN, THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT,
UNDERWRITER OR DEALER. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT
SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE DEBT SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington D.C. 20549,
and at the Regional Offices of the Commission at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60621; and Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Certain debt and equity securities
of the Company are listed on the American Stock Exchange, and reports and other
information concerning the Company can be inspected at the offices of such
exchange at 86 Trinity Place, New York, New York 10005. This Prospectus does not
contain all of the information set forth in the Registration Statement on Form
S-3 and the exhibits thereto which the Company has filed with the Commission
(the "Registration Statement") under the Securities Act of 1933, as amended, and
to which reference is hereby made for further information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
and are hereby incorporated by reference in this Prospectus and shall be deemed
to be a part hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992; and
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1993.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of the offering made by this Prospectus
also shall be deemed to be incorporated herein by reference and shall be deemed
to be a part hereof from the date of filing of such documents (such documents,
and the document referred to above, being herein referred to as "Incorporated
Documents"). Any statement contained in an Incorporated Document shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed Incorporated
Document or in an accompanying Prospectus Supplement modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of such person, a copy of any or all
of the documents referred to above which have been or may be incorporated in
this Prospectus by reference, other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into such Incorporated
Documents. Requests for such copies should be directed to Steven W. Korn,
Corporate Secretary, Turner Broadcasting System, Inc., One CNN Center, Atlanta,
Georgia 30303 (Telephone: (404) 827-1700).
2
<PAGE> 25
THE COMPANY
The Company is a diversified entertainment company whose business segments
include entertainment, news, syndication and licensing, sports and real estate.
The Entertainment Segment principally consists of SuperStation, Inc., which
operates WTBS (commonly known as "TBS SuperStation"), and Turner Network
Television, Inc., which operates Turner Network Television ("TNT"). The
Entertainment Segment also includes TNT Latin America, the Cartoon Network and
Hanna-Barbera, Inc.
The News Segment principally consists of Cable News Network ("CNN"),
Headline News and Cable News Network International ("CNN International"), three
24-hour per day television news services.
The principal activity of the Syndication and Licensing Segment is
contracting with third parties relative to their use of the Company's TEC Film
Library, one of the largest feature film libraries in the world. The Company
also owns a 50% interest in a joint venture that owns the animated entertainment
library associated with the names "Hanna-Barbera" and "Ruby Spears."
The Sports Segment includes the Atlanta Braves, a professional baseball
club; a 96% limited partnership interest in the Atlanta Hawks, a professional
basketball club; and a 44% interest in a limited partnership that owns
SportSouth Network, a regional sports network serving the Southeast United
States.
The Company's Real Estate Segment consists primarily of its interest in CNN
Center, a multi-use facility in Atlanta, Georgia, and certain entities that
operate the Omni Coliseum.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges for each of the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1988 1989 1990 1991 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings to fixed charges....................... (a) 1.23 1.04 1.43 1.43
</TABLE>
- ---------------
(a) For the year ended December 31, 1988, fixed charges exceeded earnings before
fixed charges by $89,503,000.
Earnings used in computing the ratios consist of income (loss) before
provision for income taxes and extraordinary items plus fixed charges exclusive
of interest capitalized. Fixed charges consist of interest expense (including
amortization of debt issue cost and original issue discount), dividends on
minority interest, interest capitalized and one-third of rental expense
(considered by the Company to be representative of the interest factor).
USE OF PROCEEDS
Except as may be set forth in an applicable Prospectus Supplement, the net
proceeds available to the Company from the sale of the Debt Securities will be
used to reduce borrowings of the Company (including outstanding commercial
paper) and for general corporate purposes.
3
<PAGE> 26
DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued from time to time as a single series or
in two or more separate series. The following description sets forth certain
general terms and provisions of the Debt Securities to which any Prospectus
Supplement may relate. The particular terms and provisions of any Offered
Securities and the extent to which such general terms and provisions described
below may apply thereto, will be described in the Prospectus Supplement relating
to such Offered Securities.
Senior Debt Securities will be issued under an Indenture to be dated as of
May 15, 1993 (the "Senior Indenture") between the Company and The First National
Bank of Boston, as Trustee (the "Senior Trustee"). Subordinated Debt Securities
will be issued under an Indenture to be entered into (the "Subordinated
Indenture") between the Company and a trustee to be selected by the Company (the
"Subordinated Trustee"). The Senior Indenture and the Subordinated Indenture are
sometimes referred to collectively as the "Indentures" and individually as an
"Indenture." The Senior Trustee and the Subordinated Trustee are sometimes
referred to collectively as the "Trustees" and individually as a "Trustee." The
Indentures will be substantially in the forms filed as exhibits to the
Registration Statement. Each of the Indentures incorporates the Company's
Standard Multiple-Series Indenture Provisions (the "Standard Provisions") which
are attached thereto and, to the extent incorporated therein, made a part
thereof. The following are brief summaries of certain provisions of each
Indenture and are subject to the detailed provisions of such Indenture, to which
reference is hereby made for a complete statement of such provisions.
Capitalized terms used herein and not otherwise defined are used with the
meanings ascribed thereto in the Standard Provisions. The term "Securities," as
used under this caption, refers to all securities issued or issuable from time
to time under the Indentures and includes the Debt Securities.
GENERAL
Each Indenture does not limit the aggregate principal amount of Securities
which may be issued thereunder and provides that Securities may be issued from
time to time in one or more series. The Debt Securities will be unsecured
general obligations of the Company. As of the date of this Prospectus, no Senior
Debt Securities are outstanding under the Senior Indenture and no Subordinated
Debt Securities are outstanding under the Subordinated Indenture.
The Debt Securities shall be issued in fully registered form without
coupons. Debt Securities which are book-entry securities ("Book-Entry
Securities") will be issued as registered Global Securities. The Debt Securities
will be issued, unless otherwise provided in the Prospectus Supplement, in
denominations of $1,000 or an integral multiple thereof.
The accompanying Prospectus Supplement describes the following terms of the
Offered Securities to which such Prospectus Supplement relates, including,
without limitation: (1) the title of the Offered Securities; (2) whether the
Offered Securities are Senior Debt Securities or Subordinated Debt Securities;
(3) the price or prices (expressed as a percentage or percentages of the
principal amount thereof) at which the Offered Securities will be issued; (4)
any limit on the aggregate principal amount of the Offered Securities; (5) the
date or dates on which the principal of and premium, if any, on the Offered
Securities are payable or the method of determination thereof; (6) the rate or
rates (which may be fixed or variable) per annum, if any, at which the Offered
Securities will bear interest or the method of determining such rate or rates
and the date or dates from which such interest, if any, will accrue; (7) the
place or places where the principal of, premium, if any, and interest, if any,
on the Offered Securities will be payable; (8) the date or dates on which
interest, if any, on the Offered Securities will be payable and the regular
record dates for such payment dates; (9) the terms for redemption, repurchase or
early payment, if any, including any mandatory or optional sinking fund or
analogous provisions and any provision for remarketing of the Offered
Securities; (10) each office or agency where, subject to the terms of the
Indenture as described below under "Payment and Paying Agents," the principal of
and interest, if any, on the Offered Securities will be payable and each office
or agency where, subject to the terms of the Indenture as described below under
"Exchange, Registration and Transfer," the Offered Securities may be presented
for exchange and registration of transfer; (11) the date, if any, after or on
which, and the price or prices at which, the Offered Securities may, pursuant
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to any optional or mandatory redemption provisions, be redeemed, in whole or in
part, and the other detailed terms and provisions of any such optional or
mandatory redemption provisions; (12) the denominations in which any Offered
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof; (13) if the amounts of payments of principal of and
interest, if any, on the Offered Securities are to be determined by reference to
an index, formula or other method, or based on a coin or currency other than
that in which the Offered Securities are stated to be payable, the manner in
which such amounts shall be determined and the calculation agent, if any, with
respect thereto; (14) if other than the principal amount thereof, the portions
of the principal amount of the Offered Securities that will be payable upon
declaration of acceleration of the Maturity thereof pursuant to an Event of
Default; (15) if other than as defined in the Indenture, the meaning of
"Business Day" when used with respect to the Offered Securities; (16) if the
Offered Securities may be issued or delivered (whether upon original issuance or
upon exchange of a temporary Security of such series or otherwise), or any
installment of principal or interest payable, only upon receipt of certain
certificates or other documents or satisfaction of other conditions in addition
to those specified in the Indenture, the forms and terms of such certificates,
documents or conditions; (17) any addition to, or modification or deletion of,
any Event of Default or any covenant of the Company specified in the Indenture
with respect to the Offered Securities; and (18) any other terms of the Offered
Securities not inconsistent with the provisions of the Indenture, including the
ability of the Company to satisfy and discharge its obligations under the
Indenture with respect to the Offered Securities. Any such Prospectus Supplement
also will describe any special provisions for the payment of additional amounts
with respect to the Offered Securities. The variable terms of the Debt
Securities are subject to change from time to time, but no such change will
affect any Debt Security already issued or as to which an offer to purchase has
been accepted by the Company.
No service charge will be made for any transfer or exchange of the Debt
Securities but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Debt Securities of a single series may be issued with different maturity
dates and different principal repayment provisions, may bear interest at
different rates, may be issued at or above par or with an original issue
discount, and may otherwise vary, all as provided in the Indentures.
Debt Securities may be issued as Original Issue Discount Securities, which
may be sold at a discount below their principal amount. Special federal income
tax considerations applicable to Debt Securities issued at an original issue
discount, including Original Issue Discount Securities, will be set forth in a
Prospectus Supplement relating thereto.
RANKING
Senior Debt Securities
The Senior Debt Securities will be unsecured and unsubordinated general
obligations of the Company and will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Company.
Subordinated Debt Securities
The Subordinated Debt Securities are subordinated to the prior payment when
due of the principal of and interest on all Senior Indebtedness (and, in the
case of the Credit Agreement (as defined herein), all fees, expenses and other
amounts payable thereunder, including Accrued Bankruptcy Interest). No payment
may be made by the Company on account of principal of or interest on the
Subordinated Debt Securities or to acquire any of the Subordinated Debt
Securities (other than through the issuance of common stock of the Company) (i)
upon the maturity of any Senior Indebtedness by lapse of time, mandatory
prepayment, acceleration (unless waived) or otherwise, unless and until all
principal thereof and interest thereon (and, in the case of the Credit
Agreement, all fees, expenses and other amounts payable thereunder, including
Accrued Bankruptcy Interest) shall first be paid in full, in cash or cash
equivalents, or (ii) upon the happening of any default in payment of any
principal of and interest on Senior Indebtedness (or, in the case of the Credit
Agreement, any fees, expenses and other amounts payable thereunder, including
Accrued Bankruptcy
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Interest) when the same becomes due and payable (a "Payment Default"), unless
and until such default shall have been cured or waived or shall have ceased to
exist. Upon the happening of an event of default (other than a Payment Default)
with respect to Senior Indebtedness, as such event of default is defined therein
or in the instrument under which it is outstanding, permitting the holders to
accelerate the maturity thereof, and upon written notice thereof given to the
Company and the Subordinated Trustee ("Payment Notice"), then, unless and until
such event of default shall have been cured or waived or shall have ceased to
exist, no payment may be made by the Company with respect to the principal of or
interest on the Subordinated Debt Securities or to acquire any of the
Subordinated Debt Securities (other than through the issuance of common stock of
the Company); provided, however, that this sentence shall not prevent the making
of any payment for more than 179 days after the Payment Notice shall have been
given. Notwithstanding the foregoing, (a) not more than one Payment Notice shall
be given within a period of 365 consecutive days, (b) no event of default that
existed or was continuing on the date of any Payment Notice (whether or not such
event of default is on the same issue of Senior Indebtedness) shall be made the
basis for the giving of a subsequent Payment Notice, (c) if the Company or the
Subordinated Trustee receives any Payment Notice, a similar notice relating to
or arising out of the same default (other than a default that has been cured) or
facts giving rise to such default (whether or not such default is on the same
issue of Senior Indebtedness) shall not be effective for purposes of the
immediately preceding sentence, and (d) a Payment Notice may only be given (i)
if Senior Indebtedness is then outstanding under the Credit Agreement, by the
Credit Agent and (ii) if no Senior Indebtedness is then outstanding under the
Credit Agreement, by holders (or the Representative of holders) of at least $100
million principal amount of Senior Indebtedness then outstanding.
Upon any payment or distribution of assets or securities of the Company or
upon any dissolution, winding up or liquidation of the Company, the holders of
all Senior Indebtedness shall first be entitled to receive payment in full, in
cash or cash equivalents, of the principal and interest due thereon (and, in the
case of the Credit Agreement, all fees, expenses and other amounts payable
thereunder, including Accrued Bankruptcy Interest) before the Holders of
Subordinated Debt Securities are entitled to receive any payment on account of
the principal of or interest on the Subordinated Debt Securities or to acquire
any of the Subordinated Debt Securities or any distribution of assets or
securities of the Company (other than through the issuance of common stock of
the Company). Failure by the Company to pay the principal of or interest on the
Subordinated Debt Securities as a result of such subordination will not prevent
the occurrence of any Event of Default (as defined below).
So long as the Company's 12% Senior Subordinated Debentures due 2001 are
outstanding, "Debt" is defined in the Subordinated Indenture solely for purposes
of defining "Senior Indebtedness" thereunder to include with respect to any
Person (i) all liabilities, contingent or otherwise, of such Person (a) for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), (b) evidenced by bonds,
notes, debentures or similar instruments or letters of credit or representing
the balance deferred and unpaid of the purchase price of any property or
services (other than any such balance incurred by such Person in the ordinary
course of business of such Person in connection with obtaining film contracts,
other inventory or similar property, or services, which account is not overdue
by more than 120 days unless such account is being contested in good faith and
either such account is not the subject of a judicial proceeding or collection
thereof is stayed), or (c) for the payment of money relating to a Capitalized
Lease Obligation; (ii) reimbursement obligations of such Person with respect to
letters of credit; (iii) obligations of such Person with respect to Interest
Swap Obligations; (iv) all liability of others of the kind described in the
preceding clause (i), (ii) or (iii) that such Person has guaranteed or that are
otherwise its legal liability; (v) all obligations secured by a Lien to which
the property or assets (including, without limitation, leasehold interests and
any other tangible or intangible property rights) of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such Person's legal liability; and (vi) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (i), (ii), (iii), (iv) or (v).
If the Company's 12% Senior Subordinated Debentures due 2001 are no longer
outstanding, "Debt" is defined in the Subordinated Indenture for purposes of
defining "Senior Indebtedness" thereunder to include
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with respect to any Person at any date, without duplication, (a) indebtedness
created, issued or incurred by such Person for borrowed money (whether by loan
or the issuance and sale of debt securities); (b) obligations of such Person to
pay the deferred purchase or acquisition price of property or services, other
than trade, film contracts, employment contracts and other accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business; (c) obligations of such Person (contingent or
otherwise) in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person; (d) Capitalized Lease Obligations of such Person; and (e) Debt of others
guaranteed by such Person.
"Senior Indebtedness" is defined to mean the principal of and interest
(including in the case of the Credit Agreement, Accrued Bankruptcy Interest with
respect thereto) or accrued original issue discount on any Debt of the Company,
including, without limitation, any Debt of the Company in respect of the Credit
Agreement, (and, in the case of the Credit Agreement, all fees and expenses and
other amounts payable thereunder), whether outstanding on the date of the
Subordinated Indenture or thereafter created, incurred, assumed, guaranteed or
in effect guaranteed by the Company unless, in the case of any particular Debt,
the instrument creating the same or the assumption or guarantee thereof
expressly provides that such Debt shall not be senior in right of payment to the
Subordinated Debt Securities. The following do not constitute Senior
Indebtedness: (a) Debt represented by the Company's zero coupon convertible
subordinated debentures due 2004; (b) Debt represented by the Company's zero
coupon convertible subordinated debentures due 2007; (c) Debt to, or guaranteed
on behalf of, any Significant Stockholder, director, officer or employee of the
Company or any Subsidiary (including, without limitation, amounts owed for
compensation); (d) Debt of the Company to any Subsidiary or Affiliate of the
Company; (e) so long as the Company's 12% Senior Subordinated Debentures due
2001 are outstanding, Debt of the Company to trade creditors and other amounts
incurred in connection with obtaining goods, materials, film contracts, other
inventory or similar property or services; (f) if the Company's 12% Senior
Subordinated Debentures due 2001 are no longer outstanding, Debt of the Company
to trade creditors and other amounts not evidenced by bonds, notes or similar
instruments incurred in the ordinary course of business in connection with
obtaining goods, materials, film contracts, other inventory or similar property
or services; (g) Debt represented by the Company's 12% Senior Subordinated
Debentures due 2001; and (h) Debt incurred in violation of the provisions, if
any, of the Subordinated Indenture relating to any incurrence by the Company of
Debt; provided, that clause (h) does not apply to Debt under the Credit
Agreement that is incurred in violation of such provisions if the Credit Agent
shall have received an Officers' Certificate from the Company at the time of the
incurrence thereof to the effect that such Debt is not incurred in violation of
the provisions of the Subordinated Indenture.
"Accrued Bankruptcy Interest," with respect to any Senior Indebtedness,
means all interest accruing after the filing of a petition by or against the
Company under Title 11 of the United States Code or any similar federal, state
or foreign law for the relief of debtors, in accordance with and at the rate
(including any rate applicable upon any default or event of default, to the
extent lawful) specified in the documents relating to such Debt, whether or not
the claim for such interest is allowed as a claim after such filing in any
proceeding under such law.
"Credit Agent" means, at any time, the then-acting agent as defined in and
under the Credit Agreement.
"Credit Agreement" means the Credit Agreement, dated as of October 6, 1989,
by and among the Company, the Banks referred to therein, and The Chase Manhattan
Bank (National Association), as Agent, as the same may be amended or
supplemented from time to time in accordance with the terms thereof, and any
agreement governing Debt incurred to refund or refinance the entirety of the
borrowings and commitments then outstanding or permitted to be outstanding under
such Credit Agreement; provided, that such refunding or refinancing by its terms
states that it is intended to be senior in right of payment to the Subordinated
Debt Securities.
"Interest Swap Obligations" means any obligation of any Person pursuant to
any arrangement with any other Person whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount; provided, that
the term "Interest Swap Obligation" also includes interest rate exchange,
collar, cap, swap option or similar agreements providing interest rate
protection.
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"Significant Stockholder" means, with respect to any Person (the "specified
person"), (i) each other Person who is the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more
than 10% of the voting power of the specified person's Voting Stock and (ii)
each Affiliate of a Significant Stockholder of the specified person (other than
any Affiliate of such Significant Stockholder that would not be an Affiliate of
such Significant Stockholder but for the control by the specified person or its
subsidiaries of such Affiliate).
Subordinated Debt Securities will rank on a parity with all other Senior
Subordinated Debt. "Senior Subordinated Debt" means the Company's 12% Senior
Subordinated Debentures due 2001 and any subordinated debt of the Company which
by the terms of the instrument creating or evidencing such debt ranks pari passu
with the Subordinated Debt Securities.
EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities (other than Book-Entry Securities) of any series will be
exchangeable for other Debt Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations.
Debt Securities may be presented for exchange as provided above, and Debt
Securities (other than Book-Entry Securities) may be presented for registration
of transfer (with the form of transfer endorsed thereon duly executed), at the
office of the Security Registrar or at the office of any transfer agent
designated by the Company for such purpose with respect to any series of Debt
Securities and referred to in an applicable Prospectus Supplement, without
service charge and upon payment of any taxes, assessments and other governmental
charges as described in the applicable Indenture. Such transfer or exchange will
be effected upon the Security Registrar or such transfer agent, as the case may
be, being satisfied with the documents of title and identity of the person
making the request. The Company initially has appointed the Trustee under each
Indenture as Security Registrar. If a Prospectus Supplement refers to any
transfer agents (in addition to the Security Registrar) initially designated by
the Company with respect to any series of Debt Securities, the Company may at
any time rescind the designation of any such transfer agent or approve a change
in the location through which any such transfer agent acts, except the Company
will be required to maintain a transfer agent in each Place of Payment for such
series. The Company may at any time designate additional transfer agents with
respect to any series of Debt Securities.
The Company shall not be required to: (i) issue, register the transfer of
or exchange Debt Securities of any series during a period beginning at the
opening of business 15 days before any selection of Debt Securities of that
series to be redeemed and ending at the close of business on the day of mailing
of the relevant notice of redemption or (ii) register the transfer or exchange
of any Debt Security, or portion thereof, called for redemption, except the
unredeemed portion of any Debt Security being redeemed in part.
A discussion of restrictions on the exchange, registration and transfer of
any series of Debt Securities that will be issued in book-entry form and
represented by one or more Global Securities will be described in an applicable
Prospectus Supplement relating to such series.
PAYMENT AND PAYING AGENTS
Unless otherwise provided in an applicable Prospectus Supplement, payment
of principal of and premium, if any, on Debt Securities will be made in U.S.
Dollars at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, and payment of interest will be made in U.S.
Dollars by check mailed to the address of the person entitled thereto as such
address shall appear in the Security Register. Unless otherwise provided in an
applicable Prospectus Supplement, payment of any installment of interest on Debt
Securities will be made to the person in whose name such Debt Security is
registered at the close of business on the Regular Record Date for such
interest.
Unless otherwise provided in an applicable Prospectus Supplement, the
Corporate Trust Office of each Trustee will be designated as the Company's
Paying Agent for payments. Any other Paying Agents in the United States
initially designated by the Company for the Offered Securities will be named in
an applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts,
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except that the Company will be required to maintain a Paying Agent in each
Place of Payment for each series of Debt Securities.
All moneys paid by the Company to a Paying Agent for the payment of
principal of, premium, if any, or interest, if any, on any Debt Security that
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and the
Holder of such Debt Security will thereafter look only to the Company for
payment thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in global
form (a "Global Security") as one or more Global Securities that will be
deposited with, or on behalf of, a depositary located in the United States. The
specific terms of the depositary arrangement with respect to any Debt Securities
of a series will be described in an applicable Prospectus Supplement relating to
such series.
ABSENCE OF RESTRICTIVE COVENANTS
The Company will not be restricted by the Senior Indenture or the
Subordinated Indenture from paying dividends or from incurring, assuming or
becoming liable for any type of Debt or other obligations or from creating liens
on its property for any purpose. Neither the Senior Indenture nor the
Subordinated Indenture will require the maintenance of any financial ratios or
specified levels of net worth or liquidity. The Indentures do not contain any
covenants or other provisions designed to afford Holders of the Debt Securities
protection in the event of a change in control, reorganization, restructuring,
merger, recapitalization or highly leveraged or other similar transaction
involving the Company.
MERGER AND CONSOLIDATION
Each Indenture will provide that the Company shall not (i) consolidate
with, or merge into, any other Person, or convey or transfer (by lease,
assignment or otherwise) its properties and assets as an entirety or
substantially as an entirety to any Person or (ii) adopt a Plan of Liquidation
unless (A) either the Company shall be the continuing person, or the successor
(if other than the Company) (or, in the case of a Plan of Liquidation, one
Person to which assets are transferred) is a corporation organized under the
laws of any domestic jurisdiction and expressly assumes the Company's
obligations under such Indenture and the Debt Securities issued thereunder; (B)
immediately after giving effect to such transaction, no Event of Default and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing; and (C) if a supplemental
indenture is required in connection with such transaction, certain certificates
and legal opinions are delivered.
"Plan of Liquidation" is defined, with respect to any Person, as a plan
that provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously) (i) the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of such Person otherwise than as an entirety or substantially as an entirety and
(ii) the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and all or substantially all of the
remaining assets of such Person to holders of Capital Stock of such Person.
Each Indenture will provide that, upon any consolidation or merger or
conveyance or transfer of the properties and assets of the Company substantially
as an entirety as described in the preceding paragraph, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such conveyance or transfer is made shall be substituted for the
Company with the same effect as if such successor corporation had been named as
the Company. Thereafter, the Company shall be relieved of the performance and
observance of all obligations and covenants of such Indenture and the Senior
Debt Securities or Subordinated Debt Securities, as the case may be, including
but not limited to the obligation to make payment of the principal of and
interest, if any, on all the Debt Securities then outstanding, and the Company
may thereupon or any time thereafter be liquidated and dissolved.
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SATISFACTION AND DISCHARGE
Unless the Prospectus Supplement provides otherwise, the Company will be
discharged from its obligations under the Outstanding Debt Securities of a
series upon satisfaction of the following conditions: (a) the Company has
irrevocably deposited with the Trustee either (i) money in an amount as will, or
(ii) U.S. Government Obligations as will, together with the predetermined and
certain income to accrue thereon without consideration of any reinvestment
thereof, or (iii) a combination of (i) and (ii) as will (in a written opinion
with respect to (ii) or (iii) of independent public accountants delivered to the
Trustee), be sufficient to pay and discharge the entire principal of, premium,
if any, and interest, if any, to Stated Maturity or any redemption date on, the
Outstanding Debt Securities of such series; (b) the Company has paid or caused
to be paid all other sums payable with respect to the Outstanding Debt
Securities of such series; (c) the Trustee has received an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent have been
complied with; and (d) the Trustee has received an opinion of tax counsel to the
effect that such deposit and discharge will not cause the Holders of the Debt
Securities of such series to recognize income, gain or loss for federal income
tax purposes and that the Holders will be subject to federal income tax in the
same amounts, in the same manner and at the same times as would have been the
case if such deposit and discharge had not occurred. Upon such discharge, the
Company will be deemed to have satisfied all the obligations under the
Indenture, except for obligations with respect to registration of transfer and
exchange of the Debt Securities of such series, and the rights of the Holders to
receive from deposited funds payment of the principal of (and premium, if any)
and interest, if any, on the Debt Securities of such series.
MODIFICATION OF THE INDENTURES
Each Indenture will provide that the Company and the Trustee thereunder
may, without the consent of any Holders of Debt Securities, enter into
supplemental indentures for the purposes, among other things, of adding to the
Company's covenants, adding additional Events of Default, establishing the form
or terms of Debt Securities or curing ambiguities or inconsistencies in such
Indenture or making other provisions; provided such action shall not adversely
affect the interests of the Holders of any series of Debt Securities in any
material respect.
Each Indenture will contain provisions permitting the Company, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of all affected series (acting as one class), to
execute supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of such Indenture or modifying the rights of
the Holders of the Debt Securities of such series, except that no such
supplemental indenture may, without the consent of the Holders of all the
Outstanding Debt Securities affected thereby, among other things: (i) change the
maturity of the principal of, or any installment of principal of or interest on,
any of the Debt Securities; (ii) reduce the principal amount thereof (or any
premium thereon) or the rate of interest, if any, thereon; (iii) reduce the
amount of the principal of Original Issue Discount Securities payable on any
acceleration of maturity; (iv) change any obligation of the Company to maintain
an office or agency in the places and for the purposes required by such
Indenture; (v) impair the right to institute suit for the enforcement of any
such payment on or after the applicable maturity date; (vi) reduce the
percentage in principal amount of the Outstanding Debt Securities of any series,
the consent of the Holders of which is required for any such supplemental
indenture or for any waiver of compliance with certain provisions of, or of
certain defaults under, such Indenture; or (vii) with certain exceptions, modify
the provisions for the waiver of certain covenants and defaults and any of the
foregoing provisions.
EVENTS OF DEFAULT
An Event of Default in respect of any series of Debt Securities (unless it
is either inapplicable to a particular series or has been modified or deleted
with respect to any particular series) is defined in each Indenture to be: (i) a
default for 30 days in the payment when due of any interest on such series of
Debt Securities; (ii) a default in the payment of principal of such series of
Debt Securities, whether payable at maturity, by call for redemption, pursuant
to any sinking fund or repurchase obligation or otherwise; (iii) a default for
60 days after a notice of default with respect to the performance of any
covenant in such Indenture
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(other than a covenant included in such Indenture solely for the benefit of a
series of Debt Securities other than that series); (iv) certain events of
bankruptcy, insolvency or reorganization; (v) an event of default under any
mortgage, indenture (including such Indenture) or other instrument under which
any Debt of the Company or any Subsidiary if (a) such default either (i) results
from the failure to pay any principal of any Debt at maturity (after expiration
of any application grace period) or (ii) relates to an obligation other than the
obligation to pay any principal of such Debt at maturity and results in the
holder or holders of such Debt causing such Debt to become due prior to its
stated maturity and (b) the principal amount of such Debt, together with the
principal amount of any other such Debt in default for failure to pay principal
at maturity or the maturity of which has been so accelerated, aggregates
$100,000,000 or more at any one time; and (vi) any other event of default
provided for such series of Debt Securities.
For purposes of the Event of Default provisions, "Debt" is defined in the
Indentures to include with respect to any Person at any date, without
duplication (a) indebtedness created, issued or incurred by such Person for
borrowed money (whether by loan or by the issuance and sale of debt securities);
(b) obligations of such Person to pay the deferred purchase or acquisition price
of property or services, other than trade, film contracts, employment contracts
and other accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business; (c) obligations of such
Person (contingent or otherwise) in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for the
account of such Person; (d) Capitalized Lease Obligations of such Person; and
(e) Debt of others guaranteed by such Person.
Each Indenture will provide that if an Event of Default specified therein
in respect of any series of Outstanding Debt Securities issued under such
Indenture shall have happened and be continuing, either the Trustee thereunder
or the Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of such series may declare the principal (or, if such Debt Securities
are Original Issue Discount Securities, such portion of the principal amount as
may be specified by the terms of such Debt Securities) of all of the Outstanding
Debt Securities of such series to be immediately due and payable.
Each Indenture will provide that the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of any series may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee thereunder, or exercising any trust or power conferred on such
Trustee, with respect to the Debt Securities of such series; provided that (i)
such direction shall not be in conflict with any rule of law or with the
Indenture, (ii) the Trustee may take any other action deemed proper that is not
inconsistent with such direction and (iii) the Trustee shall not determine that
the action so directed would be unjustly prejudicial to the Holders of Debt
Securities of such series not taking part in such direction.
Each Indenture will provide that the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of any series may on behalf
of the Holders of all of the Outstanding Debt Securities of such series waive
any past default under the applicable Indenture with respect to such series and
its consequences, except a default (i) in the payment of the principal of (or
premium, if any) or any interest, if any, on any of the Debt Securities of such
series or (ii) in respect of a covenant or provision of such Indenture which,
under the terms of such Indenture, cannot be modified or amended without the
consent of the Holders of all of the Outstanding Debt Securities of such series
affected thereby.
Each Indenture will contain provisions entitling the Trustee thereunder,
subject to the duty of such Trustee during an Event of Default in respect of any
series of Debt Securities to act with the required standard of care, to be
indemnified by the Holders of the Debt Securities of such series before
proceeding to exercise any right or power under such Indenture at the request of
the Holders of the Debt Securities of such series.
Each Indenture will provide that the Trustee thereunder will, within 90
days after the occurrence of a default in respect of any series of Debt
Securities, give to the Holders of the Debt Securities of such series notice of
all uncured and unwaived defaults known to it; provided, however, that, except
in the case of a default in the payment of the principal of (or premium, if any)
or any interest on, or any sinking fund installment with respect to, any of the
Debt Securities of such series such Trustee will be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the interests of the Holders of the Debt Securities of such series; and
provided, further, that such notice shall not be given
11
<PAGE> 34
until at least 90 days after the occurrence of an Event of Default regarding the
performance of any covenant of the Company under such Indenture other than for
the payment of the principal of or any interest on, or any sinking fund
installment with respect to, any of the Debt Securities of such series. The term
default for the purpose of this provision only means any event that is, or after
notice or lapse of time, or both, would become, an Event of Default with respect
to the Debt Securities of such series.
NOTICES
Except as otherwise provided in each Indenture, notices to Holders will be
given by mail to the addresses of such Holders as they appear in the Security
Register.
REPORTS
The Company is required to furnish to the Trustee annually a statement to
the fulfillment by the Company of all of its covenants under the respective
Indenture.
THE TRUSTEES
The Senior Trustee is a national banking association organized under the
laws of the United States of America. The Senior Trustee is a participating
lender under a revolving credit agreement of the Company. The Subordinated
Trustee will be designated by the Company and qualified under the Trust
Indenture Act prior to the issuance of any Subordinated Debt Securities and will
be described in any Prospectus Supplement relating thereto. The Indentures
contain certain limitations on the rights of the respective Trustee, as a
creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustees will be permitted to engage in other transactions with
the Company and its Subsidiaries; provided, however, that if such Trustee
acquires any conflicting interest at such time as a default is pending under the
Indentures, such Trustee must (with certain exceptions) eliminate such conflict
or resign.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to one or more underwriters or dealers
for public offering and sale by them or may sell Debt Securities to investors
directly or through one or more agents designated from time to time by the
Company. Any such underwriter or agent involved in the offer and sale of the
Debt Securities will be named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Debt Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters, acting as the Company's agents, to offer and sell the Debt
Securities upon the terms and conditions as shall be set forth in an applicable
Prospectus Supplement. In connection with the sale of Debt Securities,
underwriters may be deemed to have received compensation from the Company in the
form of underwriting discounts or commissions and also may receive commissions
from purchasers of Debt Securities for whom they may act as agent. Underwriters
may sell Debt Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions (which may be changed from time to time) from
the purchasers of Debt Securities for whom they may act as agent.
Any compensation paid by the Company to underwriters or agents in
connection with the offering of Debt Securities, and any discounts, concessions
or commissions allowed by underwriters to participating dealers, will be set
forth in an applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Debt Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Debt Securities may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended, (the "Securities
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<PAGE> 35
Act"). Underwriters, dealers and agents may be entitled, under agreements with
the Company to indemnification against, and contribution toward, certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by the Company for certain expenses.
Underwriters, dealers or agents to or through which Debt Securities may be
offered and sold may engage in transactions with, or perform other services for,
the Company and its subsidiaries in the ordinary course of business.
If so indicated in an applicable Prospectus Supplement, the Company may
authorize underwriters or dealers, acting as the Company's agents, to solicit
offers by certain institutions to purchase Debt Securities from the Company at
the public offering price set forth in such Prospectus Supplement pursuant to
Delayed Delivery Contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate principal amount of Debt
Securities sold pursuant to Contracts shall not be less nor more than, the
respective amounts stated in such Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except: (i) the purchase by an institution of the Debt Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject; and (ii)
if the Debt Securities are being sold to underwriters, the Company shall have
sold to such underwriters the total principal amount of the Debt Securities,
less the principal amount thereof covered by Contracts. Underwriters and dealers
will have no responsibility in respect of the delivery or performance of
Contracts, except to the extent they have entered into a Contract.
The Debt Securities may or may not be listed on a national securities
exchange or an international securities exchange. No assurances can be given
that there will be a market for the Debt Securities.
LEGAL OPINIONS
The legality of the Debt Securities will be passed upon for the Company by
Troutman Sanders, Atlanta, Georgia. Certain legal matters in connection with the
Debt Securities will be passed upon for any underwriters or agents by Skadden,
Arps, Slate, Meagher & Flom, Los Angeles, California. Skadden, Arps, Slate,
Meagher & Flom have from time to time represented the Company and are currently
representing the Company on certain unrelated matters.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the most recent Annual Report on Form 10-K of the Company have been so
incorporated in reliance upon the report of Price Waterhouse, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................... S-2
Recent Developments....................... S-4
Use of Proceeds........................... S-5
Capitalization............................ S-6
Selected Historical Financial
Information............................. S-7
Selected Unaudited Pro Forma Financial
Information............................. S-10
Description of the Securities............. S-12
Certain Federal Income Tax
Considerations.......................... S-21
Underwriting.............................. S-22
Legal Matters............................. S-22
Experts................................... S-22
PROSPECTUS
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
The Company............................... 3
Ratio of Earnings to Fixed Charges........ 3
Use of Proceeds........................... 3
Description of Debt Securities............ 4
Plan of Distribution...................... 12
Legal Opinions............................ 13
Experts................................... 13
</TABLE>
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- ------------------------------------------------------
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TURNER BROADCASTING
SYSTEM, INC.
$
% SENIOR NOTES DUE 2004
AND
$
% SENIOR DEBENTURES
DUE 2024
------------------
PROSPECTUS SUPPLEMENT
------------------
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MERRILL LYNCH & CO.
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