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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________________ TO ________________
COMMISSION FILE NUMBER 1-14599
INFINITY BROADCASTING CORPORATION
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(Exact name of registrant as specified in its charter)
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DELAWARE 13-4030071
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(State of Incorporation) (I.R.S. Employer Identification No.)
40 WEST 57TH STREET
NEW YORK, NEW YORK 10019 (212) 314-9200
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(Address of Principal Executive Offices) (Telephone No.)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Class A Common Stock, par value $.01 per Share New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by checkmark whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
Infinity Broadcasting Corporation had 155,250,000 shares of Class A common stock
and 700,000,000 shares of Class B common stock outstanding at January 31, 1999.
As of that date, the aggregate market value of common stock held by
non-affiliates was $4,294 million for Class A and $0 million for Class B.
DOCUMENT INCORPORATED BY REFERENCE INTO THE PARTS OF THIS REPORT INDICATED:
1. Portions of Infinity Broadcasting Corporation's Notice of 1999 Annual Meeting
and Proxy Statement to be filed with the Commission pursuant to Regulation
14A of the Securities Exchange Act of 1934 (the Proxy Statement). (Parts I
and III)
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The terms "Infinity" and "Company" as used in this Report on Form 10-K refer to
Infinity Broadcasting Corporation and its consolidated subsidiaries unless the
context indicates otherwise.
PART I
ITEM 1. BUSINESS.
GENERAL
The Company was formed in September 1998 to own and operate the radio and
outdoor advertising business of CBS Corporation. In December 1998, the Company
completed an initial public offering of 155,250,000 shares of its Class A common
stock resulting in $3.2 billion in proceeds to the Company ($3.0 billion, net of
offering costs). At December 31, 1998, CBS Corporation beneficially owned 100%
of the Company's Class B common stock representing 81.8% of the Company's equity
ownership and 95.8% of the combined voting power of Infinity's Class A and Class
B common stock. CBS Corporation, prior to December 1, 1997, was known as
Westinghouse Electric Corporation (Westinghouse). In November 1995, Westinghouse
acquired CBS Inc. In December 1996, Westinghouse acquired Infinity Media
Corporation, formerly known as Infinity Broadcasting Corporation (Old Infinity).
At the time of the acquisition, Old Infinity owned TDI Worldwide, Inc. (TDI) and
had a minority equity interest in and managed Westwood One, Inc. (Westwood One).
On June 4, 1998, CBS Corporation acquired the radio broadcasting operations of
American Radio Systems Corporation (American Radio). Both Old Infinity and
American Radio were publicly traded companies prior to their acquisition by
Westinghouse and CBS Corporation, respectively. Prior to the stock offering, CBS
Corporation transferred substantially all of its radio, outdoor advertising and
related assets to the Company.
The Company is one of the largest radio broadcasting and outdoor advertising
companies in the United States. The Company's 160 radio stations, which serve 34
markets, collectively accounted for approximately 11% of total 1998 U.S. radio
advertising expenditures. The Company's stations ranked first or second, in
terms of 1998 pro forma radio revenues, in 30 out of the 34 markets in which the
Company operates stations. Approximately 93% of the Company's radio stations are
located in the 50 largest radio markets in the United States, and 67%, 83% and
98% of the Company's pro forma 1998 net radio revenues were generated in the 10,
25 and 50 largest U.S. radio markets, respectively. The Company believes that
this focus on large markets makes it more appealing to advertisers, enables it
to attract more highly skilled management, employees and on-air talent, and also
enables it to more efficiently manage its business and generate higher levels of
cash flow than would be the case if it managed a larger number of smaller
stations.
The Company participates in the outdoor advertising business through its wholly
owned subsidiary, TDI. TDI is based in New York with 18 branch offices
throughout the United States, 10 branch offices throughout the United Kingdom
and the Republic of Ireland, and operations in the Netherlands. TDI is one of
the largest outdoor advertising companies in the United States, operating
approximately 100 franchises, the majority of which are in large metropolitan
areas. TDI sells advertising space on various media including buses, trains,
train platforms and terminals throughout commuter rail systems, and on
billboards and phone kiosks. TDI also has the exclusive rights to manage
advertising space within the London Underground and on more than 90% of the
buses in London and the United Kingdom, has the exclusive rights to transit
advertising in the Republic of Ireland and parts of Northern Ireland, and has a
variety of outdoor advertising displays in the Netherlands. The Company owns the
CBS Radio Network and also has a minority equity investment in Westwood One,
which it manages pursuant to a management agreement between the Company and
Westwood One. Westwood One is a leader in producing and distributing syndicated
and network radio programming, and it manages the CBS Radio Network.
The Company characterizes its radio and outdoor advertising business as the
out-of-home business segment because a majority of radio listening, and
virtually all viewing of outdoor advertising, takes place in automobiles,
transit systems, on the street and other locations outside the consumer's home.
The Company operates and seeks to opportunistically acquire out-of-home media
properties in the largest markets.
The Company's radio stations serve diverse target demographics through a broad
range of programming formats. The Company believes that this diversity provides
advertisers with "one-stop shopping" by enabling advertisers to select stations
to reach a targeted demographic group or to select groups of stations and
outdoor advertising
2 INFINITY BROADCASTING CORPORATION
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properties to reach broad groups of consumers within and across markets. The
Company believes that this diversity also reduces its dependence on any single
station, local economy, format or advertiser.
The substantial majority of the Company's revenues are generated from the sale
of local, regional and national advertising. The major categories of out-of-home
advertisers include: automotive, retail, healthcare, telecommunications, fast
food, beverage, movies, entertainment and services.
For information about principal acquisitions and divestitures, see note 3 to the
consolidated financial statements included in Part II, Item 8 of this report.
Infinity Broadcasting Corporation is a corporation organized under the laws of
Delaware. Its principal executive offices are located at 40 West 57th Street,
New York, New York 10019, and its telephone number is (212) 314-9200.
PROGRAMMING
The Company seeks to maintain substantial diversity among its stations in many
respects. The geographically wide-ranging stations serve diverse target
demographics through a broad range of programming formats, such as rock, oldies,
news/talk, adult contemporary, sports/talk and country, and the Company has
established leading franchises in news, sports, and personality programming.
This diversity reduces the Company's dependence on any particular station, local
economy, format, on-air personality or advertiser. The overall mix of each radio
station's programming is designed to fit the station's specific format and serve
its local community. The Company's general programming strategy includes
acquiring significant on-air talent, sports franchises and news for its radio
stations. The Company believes that this strategy, in addition to developing
loyal audiences for its radio stations, creates the opportunity for the Company
to obtain additional revenues from syndicating such programming franchises to
other radio stations. Similarly, the Company's relationship with CBS Corporation
gives it access to certain CBS Corporation programming.
The Company owns a 16% equity interest in Westwood One and vested warrants to
purchase an additional 9% equity interest. Westwood One is one of the leading
producers and distributors of syndicated and network radio programming in the
United States and distributes syndicated and network radio programming to the
Company's radio stations as well as to competitors of the Company.
INFINITY BROADCASTING CORPORATION 3
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RADIO STATIONS AND OUTDOOR DISPLAYS
The following table sets forth certain selected information with regard to the
Company's radio stations and outdoor displays as of February 15, 1999:
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MARKET
RANK
BY 1998 RADIO TDI(1)
METRO AREA -------------------------------------------- -----------------------------
MARKET POPULATION STATIONS AM/FM FORMAT DISPLAY TYPE
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New York, NY 1 WCBS FM Oldies Bus, Commuter Rail, Phone
WCBS AM News Kiosks, Billboards, Walls,
WFAN AM Sports Trestles, "Spectacular
WINS AM News Signage," In-station Displays
WNEW FM Classic Rock
WXRK FM Rock
Los Angeles, CA 2 KCBS FM Classic Rock Bus, Phone Kiosks, Beach
KFWB AM News Panels, Campus Kiosks
KLSX FM Talk
KNX AM News
KRLA AM Talk
KROQ FM Alternative Rock
KRTH FM Oldies
KTWV FM Smooth Jazz
Chicago, IL 3 WBBM FM Contemporary Hit Bus, Bus Shelters, Rail,
Bridge
Radio/Dance Bulletins
WBBM AM News
WCKG FM Talk
WJMK FM Oldies
WMAQ AM News/Sports
WSCR AM Sports/Talk
WUSN FM Country
WXRT FM Adult Alternative Rock
San Francisco, CA 4 KCBS AM News Bus, Cable Cars, Commuter
Rail
KFRC FM Oldies
KFRC AM Oldies
KITS FM Alternative Rock
KLLC FM Modern Rock
KYCY AM Country
KYCY FM Country
Philadelphia, PA 5 KYW AM News Commuter Rail
WIP AM Sports
WOGL FM Oldies
WPHT AM Talk
WYSP FM Active Rock
Detroit, MI 6 WKRK FM Talk --
WOMC FM Oldies
WVMV FM Smooth Jazz
WWJ AM News
WXYT AM Talk/Sports
WYCD FM Country
Dallas--Fort Worth, TX 7 KHVN AM Gospel Bus
KLUV FM Oldies
KLUV AM Oldies
KOAI FM Smooth Jazz
KRBV FM Rhythmic Contemporary
Hits
KRLD AM News/Talk
KVIL FM Adult Contemporary
KYNG FM Country
Boston, MA 8 WBCN FM Modern Rock --
WBMX FM Modern Adult Contemporary
WBZ AM News/Talk/Sports
WODS FM Oldies
WZLX FM Classic Rock
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4 INFINITY BROADCASTING CORPORATION
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MARKET
RANK
BY 1998 RADIO TDI(1)
METRO AREA -------------------------------------------- -----------------------------
MARKET POPULATION STATIONS AM/FM FORMAT DISPLAY TYPE
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Washington, D.C. 9 WARW FM Classic Rock Bus, Commuter Rail
WHFS FM Alternative Rock
WJFK FM Talk
WPGC FM Contemporary Hit Radio/
Rhythmic
WPGC AM Gospel
Houston, TX 10 KIKK FM Country --
KIKK AM Country
KILT FM Country
KILT AM Sports
Atlanta, GA 12 WAOK AM Gospel Bus, Commuter Rail, Eight-
WVEE FM Urban Sheet Billboards
WZGC FM Classic Rock
Seattle-Tacoma, WA 14 KBKS FM Modern Adult Contemporary Bus
KMPS FM Country
KRPM AM Modern Adult Contemporary
KYCW FM Country
KZOK FM Classic Rock
Minneapolis, MN 18 WCCO AM Full Service Bus
WLTE FM Soft Adult Contemporary
WXPT FM Modern Adult Contemporary
KSGS AM Urban
St. Louis, MO 19 KEZK FM Soft Adult Contemporary --
KMOX AM News/Talk/Sports
KYKY FM Adult Contemporary
Baltimore, MD 20 WBGR AM Gospel --
WBMD AM Religion
WJFK AM Talk
WLIF FM Soft Adult Contemporary
WQSR FM Oldies
WWMX FM Hot Adult Contemporary
WXYV FM Contemporary Hit Radio
Pittsburgh, PA 21 KDKA AM News/Talk Bus
WBZZ FM Contemporary Hit Radio
WDSY FM Country
WZPT FM Classic Hits
Tampa, FL 22 WLLD FM Contemporary Hit Radio Bus
WQYK FM Country
WQYK AM Talk
WYUU FM Oldies
Cincinnati, OH 24 WGRR FM Oldies --
WKRQ FM Contemporary Hit Radio
WYLX FM Classic Hits
Portland, OR 25 KBBT FM Modern Adult Contemporary --
KINK FM Adult Alternative Rock
KKJZ FM Smooth Jazz
KUFO FM Album Oriented Rock
KUPL FM Country
KUPL AM Classic Country
San Jose, CA 27 KBAY FM Soft Rock Bus
KEZR FM Adult Contemporary
Sacramento, CA 28 KHTK AM Talk --
KNCI FM Country
KRAK AM Country
KXOA FM Adult Contemporary
KSFM FM Contemporary Hit Radio
KYMX FM Adult Contemporary
KZZO FM Modern Adult Contemporary
Riverside, CA 29 KFRG FM Country --
KXFG FM Country
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INFINITY BROADCASTING CORPORATION 5
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<CAPTION>
MARKET
RANK
BY 1998 RADIO TDI(1)
METRO AREA -------------------------------------------- -----------------------------
MARKET POPULATION STATIONS AM/FM FORMAT DISPLAY TYPE
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Kansas City, MO 30 KBEQ FM Country --
KFKF FM Country
KMXV FM Contemporary Hit Radio
KSRC FM Soft Adult Contemporary
Columbus, OH 33 WAZU FM Album Oriented Rock --
WHOK FM Country
WLVQ FM Classic Rock
Charlotte, NC 37 WBAV FM Urban Adult Contemporary --
WFNZ AM Sports/Talk
WGIV AM Gospel
WNKS FM Contemporary Hits Radio
WPEG FM Urban
WSOC FM Country
WSSS FM Classic Hits
Las Vegas, NV 40 KLUC FM Contemporary Hit Radio --
KMXB FM Modern Adult Contemporary
KMZQ FM Soft Adult Contemporary
KSFN AM Sports
KXNT AM News/Talk/Sports
KXTE FM Alternative
Buffalo, NY 43 WBLK(2) FM Urban Adult Contemporary Bus, Commuter Rail, Bus
WECK AM Adult Standards Shelters
WJYE FM Soft Adult Contemporary
WLCE FM Modern Adult Contemporary
WYRK FM Country
Hartford, CT 45 WRCH FM Soft Adult Contemporary --
WTIC FM Top 40
WTIC AM News/Talk
WZMX FM Classic Hits
Austin, TX 49 KAMX FM Modern Adult Contemporary --
KJCE AM Urban Adult Contemporary
KKMJ FM Soft Adult Contemporary
KQBT FM Rhythmic Contemporary Hit
Rochester, NY 50 WCMF FM Album Oriented Rock --
WPXY FM Contemporary Hit Radio
WRMM FM Soft Adult Contemporary
WZNE FM Modern Adult Contemporary
W. Palm Beach, FL 51 WEAT FM Soft Adult Contemporary --
WIRK FM Country
Fresno, CA 65 KMJ AM News/Talk/Sports --
KMGV FM Rhythmic Oldies
KOOR AM Spanish
KOQO FM Spanish
KRNC FM Spanish
KSKS FM Country
KVSR FM Modern Adult Contemporary
Monterey-Salinas, CA 77 KLUE FM Adult Contemporary --
Palm Springs, CA 154 KEZN FM Easy --
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TOTAL STATIONS 160
RADIO STATIONS SUBJECT TO
ACQUISITION
Tampa, FL 22 WRBQ(3) FM Country
WSJT(3) FM Smooth Jazz
Cleveland, OH 24 WNCX(3) FM Classic Rock
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(1) TDI also has outdoor displays, including bus, rail and billboard displays,
in the following markets: New Jersey; New Orleans, Louisiana; North San
Diego, California; Phoenix, Arizona; San Antonio, Texas; Great Britain;
Ireland; and the Netherlands.
(2) Operated by the Company pursuant to a local marketing agreement.
(3) Being acquired from Clear Channel Communications Corp.; letter of intent
signed and subject to Federal Communications Commission (FCC) approval.
6 INFINITY BROADCASTING CORPORATION
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COMPETITION
The Company operates in a highly competitive industry. The Company's radio
stations and outdoor advertising properties compete for audiences and
advertising revenues directly with other radio stations and outdoor advertising
companies, as well as with other media, such as broadcast television,
newspapers, magazines, cable television, the Internet and direct mail, within
their respective markets. The Company's audience ratings and market shares are
subject to change and any adverse change in a particular market could have a
material adverse effect on the Company's revenues in that market and possibly
adversely affect revenues in other markets.
Radio stations compete for listeners primarily on the basis of program content
that appeals to a particular demographic group. From time to time other stations
may change their format or programming to compete directly with the Company's
stations for audiences and advertisers, or engage in aggressive promotional
campaigns, which could result in lower ratings and advertising revenues or
increased promotion and other expenses. Audience preferences as to format or
programming may also shift due to demographic or other reasons. Any failure by
the Company to respond, or to respond as quickly as its competitors, could have
a material adverse effect on the Company's position in that market.
Factors that are material to a radio station's competitive position include
management experience, the station's audience rank in its local market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. The Company attempts to improve its competitive position in each
market by extensively researching its stations' programming, by implementing
advertising campaigns aimed at the demographic groups for which its stations
program and by managing its sales efforts to attract a larger share of
advertising dollars. The Company also competes with other radio station groups
to purchase additional stations.
Although the radio broadcasting industry is highly competitive, some barriers to
entry exist (which can be mitigated to some extent by changing existing radio
station formats and upgrading power, among other actions). The operation of a
radio station requires a license or other authorization from the FCC, and the
number of radio stations that can operate in a given market is limited by the
availability of FM and AM radio frequencies allotted by the FCC to communities
in that market. In addition, the FCC's multiple ownership rules regulate the
number of stations that may be owned and controlled by a single entity in a
given market. The FCC's multiple ownership rules have, in recent years, changed
significantly as a result of the Telecommunications Act of 1996 (Telecom Act).
The out-of-home media industry is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems, by satellite and by terrestrial
delivery of digital audio broadcasting. The FCC has recently authorized spectrum
for the use of a new technology, satellite digital audio radio services, to
deliver audio programming. It is not known at this time whether digital
technology also may be used in the future by existing radio broadcast stations
either on existing or alternate broadcasting frequencies. There are also
proposals before the FCC to permit a new "low power" radio or
"microbroadcasting" service which could open up opportunities for low cost
neighborhood service on frequencies which would not interfere with existing
stations. No FCC action has been taken on these proposals to date.
The delivery of information through the presently unregulated Internet also
could create a new form of competition. The radio broadcasting industry
historically has grown despite the introduction of new technologies for the
delivery of entertainment and information, such as television broadcasting,
cable television, audio tapes and compact discs. A growing population and
greater availability of radios, particularly car and portable radios, have
contributed to this growth. There can be no assurance, however, that the
development or introduction in the future of any new media technology will not
have an adverse effect on the radio broadcasting industry.
The Company cannot predict what other matters might be considered in the future
by the FCC, nor can it assess in advance what impact, if any, the implementation
of any of these proposals or changes might have on its business.
INFINITY BROADCASTING CORPORATION 7
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SEASONALITY
Seasonal revenue fluctuations are common in the out-of-home media industry and
are primarily the result of fluctuations in advertising expenditures by
retailers. The Company's revenues are typically lowest in the first quarter and
highest in the second and fourth quarters.
EMPLOYEES
As of December 31, 1998, the Company had approximately 6,000 full-time employees
and approximately 2,300 part-time employees. Approximately 975 of the Company's
full-time employees are represented by unions. The Company believes that its
relations with its employees and their unions are generally satisfactory.
The Company employs several high-profile on-air personalities with large loyal
audiences in their respective markets. The Company generally enters into
employment agreements with its on-air talent and commissioned sales
representatives to protect its interests in those relationships that it believes
to be valuable. The Company has entered into employment agreements with certain
of its executive officers, and certain other executive officers have employment
agreements with CBS Corporation.
GOVERNMENT REGULATION
FEDERAL REGULATION OF RADIO BROADCASTING
The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act of 1934, as amended (the Communications Act). Among other
things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and operating power of stations; issues,
renews, revokes and modifies station licenses; determines whether to approve
changes in ownership or control of station licenses; establishes technical
requirements for certain transmitting equipment used by stations; and adopts and
implements regulations and policies that directly or indirectly affect the
ownership, operation and employment practices of stations. The FCC has the power
to impose penalties for violation of its rules or the Communications Act,
including the imposition of monetary forfeitures, the issuance of short-term
licenses, the imposition of a condition on the renewal of a license, and the
revocation of operating authority.
The following is a brief summary of certain provisions of the Communications Act
and of specific FCC regulations and policies. Reference should be made to the
Communications Act, FCC rules and the public notices and rulings of the FCC for
further information concerning the nature and extent of federal regulation of
radio stations.
FCC Licenses
Generally, the FCC renews radio broadcast licenses without a hearing upon
finding that: (i) the radio station has served the public interest, convenience
and necessity; (ii) there have been no serious violations by the licensee of the
Communications Act or FCC rules and regulations; and (iii) there have been no
other violations by the licensee of the Communications Act or FCC rules and
regulations that, taken together, indicate a pattern of abuse. After considering
these factors, the FCC may grant the license renewal application with or without
conditions, including renewal for a term lesser than the maximum otherwise
permitted, or hold an evidentiary hearing. In addition, the Communications Act
authorizes the filing of petitions to deny a license renewal during specific
periods of time after a renewal application has been filed. Interested parties,
including members of the public, may use such petitions to raise issues
concerning a renewal applicant's qualifications. If a substantial and material
question of fact concerning a renewal application is raised by the FCC or other
interested parties, or if for any reason the FCC cannot determine that the grant
of the renewal application would serve the public interest, convenience and
necessity, the FCC will hold an evidentiary hearing on the application. If as a
result of an evidentiary hearing the FCC determines that the licensee has failed
to meet the requirements specified above and that no mitigating factors justify
the imposition of a lesser sanction, then the FCC may deny a license renewal
application. Only after a license renewal application is denied will the FCC
accept and consider competing applications for the vacated frequency.
Historically, FCC licenses have generally been renewed. The Company has no
reason to believe that its licenses will not be renewed in the ordinary course,
although there can be no
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assurance to that effect. The non-renewal of the Company's licenses could have a
material adverse effect on the Company.
Ownership Matters
The Communications Act prohibits the assignment of a broadcast license or the
transfer of control of a broadcast licensee without the prior approval of the
FCC. In determining whether to grant such approval, the FCC considers a number
of factors pertaining to the proposed assignee or transferee, including
compliance with the various rules limiting common ownership of media properties
in a given market, the "character" of the proposed assignee or transferee and
those persons holding "attributable" interests therein, and compliance with the
Communications Act's limitations on alien ownership as well as compliance with
other FCC policies, including FCC equal employment opportunity requirements. The
equal opportunity requirements, as they relate to outreach efforts for the
recruitment of minorities, have been declared unconstitutional by the U.S. Court
of Appeals for the D.C. Circuit, and the court recently declined to review the
decision en banc.
As a consequence of passage of the Telecom Act, the FCC amended its multiple
ownership rules to eliminate the national limits on the ownership of AM and FM
stations. Additionally, it established new local ownership rules that use a
sliding scale of permissible ownership, depending on market size. FCC ownership
rules continue to permit an entity to own one FM and one AM station in a local
market regardless of market size. In addition to the numerical limitations on
ownership depending on market size, the FCC is currently pursuing a new policy
that involves review of proposed transactions if they would enable a single
owner or two owners to attain a high degree of revenue concentration in a
market.
The FCC's "one-to-a-market" rule prohibits the common ownership, operation or
control of a radio broadcast station and a television broadcast station serving
the same geographic market (subject to a waiver of such prohibition if certain
conditions are satisfied) and the common ownership, operation or control of a
radio broadcast station and a daily newspaper serving the same geographic
market. Under these rules, absent waivers, neither the Company nor CBS
Corporation would be permitted to acquire any daily newspaper or television
broadcast station (other than low-power television) in any geographic market in
which the Company now owns radio broadcast properties. CBS Corporation has
received, in the past, numerous permanent and temporary waivers to permit
ownership of a television station and numerous radio stations in the same
market. The temporary waivers, which affect 39 of the Company's radio stations,
are subject to the outcome of pending rulemaking proceedings focusing upon the
possible relaxation of the "one-to-a-market" rule. If these waivers are not made
permanent, divestitures of certain of the Company's radio stations or of CBS
Corporation's television stations may be required within certain time periods
specified by the FCC. On October 1, 1996, the FCC commenced a proceeding to
explore possible revisions of its policies concerning waiver of the
newspaper/radio cross-ownership restrictions.
The FCC generally applies its ownership limits to "attributable" interests held
by an individual, corporation, partnership or other association. In the case of
corporations holding, or through subsidiaries controlling, broadcast licenses,
the interests of officers, directors and those who, directly or indirectly, have
the right to vote 5% or more of the corporation's voting stock (or 10% or more
of such stock in the case of insurance companies, investment companies and bank
trust departments that are passive investors) are generally attributable. If a
single individual or entity controls more than 50% of a corporation's
outstanding voting stock, that individual or entity is viewed as a single
majority stockholder; thus, the FCC views CBS Corporation as a single majority
stockholder of the Company. In the case of a single majority stockholder, the
interests of other stockholders are not attributable unless the stockholders are
also officers or directors of the corporation. The FCC is currently reviewing
its attribution rules to determine whether changes in those rules are
appropriate, including whether to continue the attribution exception in the case
of a single majority stockholder.
The Communications Act prohibits the issuance of broadcast licenses to, or the
holding of broadcast licenses by, any corporation of which more than 20% of the
capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country. The
Communications Act also authorizes the FCC, if the FCC determines that it would
be in the public interest, to prohibit the issuance of a broadcast license to,
or the holding of a broadcast license by, any corporation directly or indirectly
controlled by any other corporation (such as CBS Corporation in
INFINITY BROADCASTING CORPORATION 9
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the case of the Company) of which more than 25% of the capital stock is owned of
record or voted by aliens. As a result of these provisions, the licenses granted
to the Company by the FCC could be revoked if more than 20% of the Company's
stock were directly or indirectly voted by aliens or if more than 25% of CBS
Corporation's stock were directly or indirectly held or voted by aliens. The
Company's restated certificate restricts the ownership, voting and transfer of
the Company's capital stock in accordance with the Communications Act and the
rules of the FCC, and prohibits the issuance of more than 20% of the Company's
outstanding capital stock (or more than 20% of the voting rights it represents)
to or for the account of aliens. The restated certificate authorizes the
Company's Board of Directors to enforce these prohibitions. In addition, the
restated certificate provides that shares of capital stock of the Company
determined by the Company's Board of Directors to be owned beneficially by an
alien or an entity directly or indirectly owned by aliens in whole or in part
shall be subject to redemption by the Company by action of the Board of
Directors to the extent necessary, in the judgment of the Board of Directors, to
comply with these alien ownership restrictions.
Time Brokerage Agreements
Over the past few years, a number of radio stations have entered into what have
commonly been referred to as Time Brokerage Agreements (TBAs). One typical type
of TBA, commonly referred to as a local marketing agreement (LMA), is a
programming agreement between two separately owned radio stations serving a
common service area, whereby the licensee of one station provides substantial
portions of the broadcast programming for airing on the other licensee's
station, subject to ultimate editorial and other controls being exercised by the
latter licensee, and sells advertising time during those program segments. The
staff of the FCC's Mass Media Bureau has held that TBAs are not contrary to the
Communications Act provided that the licensee of the station that is being
substantially programmed by another entity: (i) maintains complete
responsibility for, and control over, programming and operations of its
broadcast station; and (ii) assures compliance with applicable FCC rules and
policies. The FCC's multiple ownership rules specifically permit radio station
TBAs to continue to be entered into and implemented, but provide that a licensee
or a radio station that brokers more than 15% of the weekly broadcast time on
another station serving the same market will be considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's multiple ownership rules. The Company is party to an LMA with a station in
Buffalo, NY, pursuant to which the Company has acquired virtually all of the
programming time on the station and is entitled to sell all of the advertising
inventory within such acquired time. The foregoing LMA involves programming of
more than 15% of the broadcast time of the relevant station.
Programming and Operations
The Communications Act requires broadcasters to serve the "public interest." A
licensee is required to present programming that is responsive to issues of the
station's community of license and to maintain certain records demonstrating
such responsiveness. Complaints from listeners concerning a station's
programming often will be considered by the FCC when it evaluates renewal
applications of a licensee, although listener complaints may be filed at any
time, are required to be maintained in the station's public file and generally
may be considered by the FCC at any time. Stations also must pay regulatory and
application fees and follow various rules promulgated under the Communications
Act that regulate, among other things, political advertising, sponsorship
identifications, the advertisement of contests and lotteries, obscene and
indecent broadcasts, and technical operations, including limits on human
exposure to radio frequency radiation. In addition, the FCC recently has
proposed to establish a system of random audits to ensure and verify licensee
compliance with various FCC rules and regulations.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short term" (less than the maximum eight-year term) license renewal, the
imposition of a condition on the renewal of a license or, for particularly
egregious violations, the denial of a license renewal application or the
revocation of a license.
Possible Changes
Congress and the FCC have under consideration, and in the future may consider
and adopt, new laws, regulations and policies regarding a wide variety of
matters that could affect, directly or indirectly, the operation, ownership and
profitability of the Company's radio stations, result in the loss of audience
share and advertising revenues for
10 INFINITY BROADCASTING CORPORATION
<PAGE> 11
the Company's radio stations, and affect the ability of the Company to acquire
additional radio stations or to finance those acquisitions. Such matters may
include spectrum use or other fees on FCC licenses; foreign ownership of
broadcast licenses; revisions to the FCC's equal employment opportunity rules
and rules relating to political broadcasting; technical and frequency allocation
matters; proposals to restrict or prohibit the advertising of beer, wine and
other alcoholic beverages on radio; changes in the FCC's cross-interest,
multiple ownership and attribution policies; new technologies such as
satellite-digital audio radio services and microbroadcasting; and the
development of rules to govern auctions for the right to use the radio broadcast
spectrum. Finally, as required by the Telecom Act, the FCC has instituted a
proceeding to investigate, among other things, the effect of the revised
ownership rules for radio stations adopted in accordance with the Telecom Act,
and the resulting consolidation in the radio industry, on the diversity of
programming and ownership, and on programming and advertising competition. The
FCC may conclude, as a consequence of this review, to modify the radio ownership
rules.
The Company cannot predict what other matters might be considered in the future
by the FCC or Congress, nor can it judge in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
OUTDOOR ADVERTISING
The outdoor advertising industry is subject to governmental regulation at the
federal, state and local level. These include regulations on the construction,
repair, upgrading, height, size and location of, and, in some instances, content
of advertising copy being displayed on outdoor advertising structures adjacent
to federally-aided highways and to other thoroughfares. Regulations affecting
outdoor advertising at any level of government could have a material adverse
effect on the Company.
ALCOHOL AND TOBACCO ADVERTISING
There are significant legal and regulatory constraints on the use of out-of-home
media to advertise alcohol and tobacco products. Additional limitations have
been proposed from time to time, particularly in connection with a possible
global settlement of tobacco-related litigation. The Company is not aware of
similar proposals to further restrict alcohol advertising.
ANTITRUST
An element of the Company's growth strategy involves the acquisition of
additional radio stations and other outdoor advertising properties, many of
which are likely to require antitrust review by the Federal Trade Commission
(FTC) and the Department of Justice (DOJ) prior to such acquisition. Following
passage of the Telecom Act, the DOJ has become more aggressive in reviewing
proposed acquisitions of radio stations and radio station networks, particularly
in instances where the proposed acquirer already owns one or more radio station
properties in a particular market and the acquisition involves another radio
station in the same market. In connection with certain recent acquisitions, the
DOJ has obtained consent decrees requiring certain radio station divestitures in
a particular market based on allegations that acquisitions would lead to
unacceptable concentration levels. The DOJ has also been active in reviewing
proposed acquisitions of outdoor advertising properties. There can be no
assurance that the DOJ or the FTC will not seek to bar the Company from
acquiring additional radio stations or other media-related and outdoor
advertising properties in any market where the Company already has a significant
position. In addition, to the extent the Company makes acquisitions of
international broadcasting properties or display faces, the Company will also be
subject to the antitrust laws of foreign jurisdictions.
ENVIRONMENTAL
As the owner, lessee or operator of various real properties and facilities, the
Company is subject to various federal, state and local environmental laws and
regulations. Historically, compliance with such laws and regulations has not had
a material adverse effect on the Company's business. There can be no assurance,
however, that compliance with existing or new environmental laws and regulations
will not require the Company to make significant expenditures in the future.
INFINITY BROADCASTING CORPORATION 11
<PAGE> 12
ITEM 2. PROPERTIES.
The Company's corporate headquarters are located in midtown Manhattan and are
leased from third parties. The types of properties required to support each of
the Company's radio stations include offices, studios, transmitter sites and
antenna sites. A station's studios are generally housed with its offices in
downtown or business districts. The transmitter sites and antenna sites are
generally located so as to provide maximum market coverage. TDI's transit
displays are owned by the transit system or other franchisor and are managed by
the Company pursuant to three to five year agreements, and its outdoor displays
are generally located on leased properties.
No one property is material to the Company's overall operations. The Company
believes that its properties are in good condition and suitable for its
operations; however, the Company continually looks for opportunities to upgrade
its properties. The Company owns substantially all of the equipment used in its
radio broadcasting business.
ITEM 3. LEGAL PROCEEDINGS.
The Company is party to various legal proceedings arising in the ordinary course
of business. In the opinion of management of the Company, however, there are no
legal proceedings pending against the Company likely to have a material adverse
effect on the Company. For a description of certain matters before the FCC, see
"Government Regulation."
12 INFINITY BROADCASTING CORPORATION
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter of 1998 since the Company became a reporting
company.
EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age and position held during the past five years by each of the
executive officers of the Company as of February 19, 1999 are listed below.
Officers are elected annually by the Board of Directors and hold office until
the earlier of his or her resignation or removal. There are no family
relationships among any of the directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AND POSITIONS AGE
- -------------------------------------------------------------------------------
<S> <C>
Mel Karmazin--Chairman, President and Chief Executive 55
Officer
Farid Suleman--Executive Vice President, Chief Financial 47
Officer and Treasurer
Daniel R. Mason--President, Infinity Radio Group, and Vice 47
President of the Company
William M. Apfelbaum--President and Chief Executive Officer, 52
TDI
- -------------------------------------------------------------------------------
</TABLE>
Messrs. Karmazin and Suleman are employees of CBS Corporation and provide
services to the Company pursuant to the terms of an intercompany agreement
between the Company and CBS Corporation. As employees of CBS Corporation,
Messrs. Karmazin and Suleman render services to CBS Corporation.
Mr. Karmazin has been Chairman, President and Chief Executive Officer of the
Company since September 17, 1998. He joined CBS Corporation (then Westinghouse
Electric Corporation) in December 1996 as Chairman and Chief Executive Officer
of CBS Radio. In May 1997, he also assumed responsibility for CBS Corporation's
owned and operated television stations and became Chairman and Chief Executive
Officer of the CBS Station Group. In April 1998, Mr. Karmazin was elected
President and Chief Operating Officer of CBS Corporation, and became its Chief
Executive Officer on January 1, 1999. Prior to joining CBS Corporation, from
1988 until December 1996, Mr. Karmazin served as President and Chief Executive
Officer of Infinity Media Corporation, formerly known as Infinity Broadcasting
Corporation.
Mr. Suleman has been Executive Vice President, Chief Financial Officer and
Treasurer of the Company since September 17, 1998. He has also served as Senior
Vice President and Chief Financial Officer of the CBS Station Group since June
1997 and Senior Vice President -- Finance of CBS Corporation since August 1998.
From January 1997 to June 1997, he served as Senior Vice President and Chief
Financial Officer of CBS Radio. Prior to joining CBS Corporation, he was Vice
President -- Finance and Chief Financial Officer of Infinity Media Corporation,
formerly known as Infinity Broadcasting Corporation from 1986 until 1996. Mr.
Suleman has also been the Executive Vice President, Chief Financial Officer and
Secretary of Westwood One since February 1994.
Mr. Mason has been Vice President of the Company since September 17, 1998. He
has been President of the CBS Radio group (now also known as Infinity Radio)
since November 1995. From 1993 to 1995, Mr. Mason served as President of Group W
Radio. Mr. Mason was President of Cook Inlet Radio Partners, LP from 1988 to
1993.
Mr. Apfelbaum has been President and Chief Executive Officer of TDI since August
1989. Prior to joining TDI, from July 1988 to July 1989, Mr. Apfelbaum served as
President of Gannett Transit, Inc. (formerly New York Subway Advertising Co.,
Inc.).
INFINITY BROADCASTING CORPORATION 13
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal markets for the Company's Class A common stock are identified on
page 1 of this report. The remaining information required by this item appears
on page 32 of this report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item appears on page 36 of this report and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item appears on pages 15 through 19 of this
report and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this item appears on page 18 of this report and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item, together with the report of KPMG LLP
dated January 27, 1999, appears on pages 21 through 35 of this report and is
incorporated herein by reference.
<TABLE>
<CAPTION>
PAGE
- ------------------------------------------------------------------
<S> <C>
Report of Management 20
Independent Auditors' Report 21
Consolidated Statement of Earnings for the years ended
December 31, 1998, 1997 and 1996 22
Consolidated Balance Sheet as of December 31, 1998 and 1997 23
Consolidated Statement of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 24
Consolidated Statement of Changes in Stockholders' Equity
for the years ended December 31, 1998, 1997 and 1996 25
Notes to the Consolidated Financial Statements 26
Quarterly Financial Data (unaudited) 35
Five-Year Summary of Selected Financial and Statistical Data
(unaudited) 36
- ------------------------------------------------------------------
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There were no reportable events.
14 INFINITY BROADCASTING CORPORATION
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
Infinity Broadcasting Corporation (Infinity or the Company) was formed in
September 1998 as a wholly owned subsidiary of CBS Corporation (CBS) to own and
operate CBS's radio and outdoor advertising segment. The radio broadcasting
properties and TDI Worldwide, Inc. (TDI), one of the largest outdoor advertising
companies in the United States, now comprise Infinity's out-of-home media
business focusing on providing advertising to targeted demographic audiences
outside the consumer's home.
In December, the Company completed an initial public offering of 155,250,000
shares of its Class A common stock, generating net proceeds of $3.0 billion.
Following the stock offering, CBS owned all of Infinity's Class B common stock,
representing 81.8% of the Company's equity and 95.8% of the voting power.
The consolidated financial statements present Infinity's operations as if the
Company had been a separate entity for all periods presented. In addition, any
acquisitions of radio and outdoor advertising properties by CBS during these
periods are deemed to have been made by Infinity. The consideration to effect
the acquisitions has been treated as a capital contribution by CBS to Infinity.
These acquisitions include (a) the November 24, 1995 acquisition of the radio
operations of CBS Inc. for $1.2 billion of cash, (b) the December 31, 1996
acquisition of Infinity Media Corporation, formerly known as Infinity
Broadcasting Corporation, (Old Infinity) for $4.7 billion, consisting of $3.8
billion of CBS's common stock and $0.9 billion of debt that was repaid
immediately prior to the acquisition, and (c) the June 4, 1998 acquisition of
the radio operations of American Radio Systems Corporation (American Radio) for
$1.4 billion of cash plus the assumption of debt with a fair value of
approximately $1.3 billion. See note 3 to the consolidated financial statements.
While the Company does not believe that it needs to make acquisitions to grow
its business, it intends to pursue acquisition opportunities that would enable
it to continue to compete effectively for advertising revenues and to increase
its cash flow growth rate. As an experienced operator of out-of-home media
properties, the Company believes that it will have opportunities to acquire
additional properties and to improve its operating performance. In general, the
Company intends to pursue acquisitions of radio stations primarily in the 50
largest radio markets in the United States. This strategy may include acquiring
radio stations in markets where the Company currently owns stations, as well as
in markets in which the Company does not currently operate. The Company will
also seek to acquire additional outdoor properties both in the United States and
internationally.
The consolidated historical financial information presented in this report is
not necessarily indicative of the results of operations, financial position, and
cash flows that would have resulted had the Company actually operated as a
separate, stand-alone entity since January 1, 1994.
SOURCES OF REVENUE
The Company derives substantially all of its revenues from sales of advertising,
either on its radio stations or on its outdoor advertising displays. The
Company's revenues are affected primarily by the advertising rates the Company
is able to charge. These rates are in large part based on conditions in the
economy, conditions in each market, and on the ability to attract audiences in
the demographic groups targeted by its advertisers. The ability to attract radio
audiences is measured principally by independent national rating services.
COMPONENTS OF EXPENSES
The primary operating expenses involved in owning and operating radio stations
and outdoor advertising facilities are employee costs, programming, solicitation
of advertising, franchise payments, and promotion. The Company's net earnings
also reflect substantial amortization of broadcast licenses and goodwill as well
as income taxes. In addition, the Company's effective tax rate exceeds the
federal statutory rate primarily because of the non-deductible goodwill
amortization resulting from recent business acquisitions.
USE OF EBITDA
Management believes that earnings before interest, taxes, minority interest,
depreciation and amortization (EBITDA) is an appropriate measure for evaluating
the operating performance of the Company's business. EBITDA eliminates the
effect of depreciation and amortization of tangible and intangible assets, most
of which were acquired in acquisitions accounted for under the purchase method
of accounting, including
INFINITY BROADCASTING CORPORATION 15
<PAGE> 16
CBS Inc.'s radio operations, Old Infinity and American Radio. The exclusion of
amortization expense eliminates variations in results among stations or other
entities caused by the timing of acquisitions. More recent acquisitions reflect
higher amortization expense due to increasing prices associated with FCC
licenses and goodwill. However, EBITDA should be considered in addition to, not
as a substitute for, operating earnings, net earnings, cash flows and other
measures of financial performance reported in accordance with generally accepted
accounting principles.
RESULTS OF OPERATIONS
Where appropriate, the discussion below provides a comparison of actual results
with pro forma results. For the 1998 and 1997 comparisons, pro forma results
were determined as if the acquisition of American Radio and related divestitures
and exchanges had occurred on January 1, 1997. For the 1997 and 1996
comparisons, pro forma results were determined as if the acquisition of Old
Infinity and related divestitures and exchanges had occurred on January 1, 1996.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO
YEAR ENDED DECEMBER 31, 1997
Net revenues for 1998 were $1,893 million compared to $1,480 million for 1997,
an increase of 28%. Driving this increase was the continued strong performance
of the Company's existing operations, and the inclusion of the operations of
American Radio in the Company's results subsequent to its June 1998 acquisition.
On a pro forma basis, net revenues for 1998 compared to 1997 increased
approximately 12%.
Operating expenses excluding depreciation and amortization expense for 1998 were
$1,084 million compared to $888 million for 1997, an increase of 22%. Operating
expenses did not increase in the same proportion as the increase in revenues
because a substantial portion of the Company's costs are fixed. On a pro forma
basis, operating expenses for 1998 compared to 1997 increased approximately 8%.
Depreciation and amortization expense for 1998 was $250 million compared to $197
million for 1997, an increase of 27%. The increase represents additional
depreciation and amortization expense resulting from the June 4, 1998
acquisition of American Radio. Corporate expenses for 1998 were $17 million
compared to $22 million for the prior year, a decrease of $5 million. This
improvement was driven by the efforts to control overhead costs, including
transaction processing and information systems costs.
Operating earnings for 1998 were $542 million compared to $372 million for 1997,
an increase of 46%. This increase was primarily attributable to improvements at
the existing operations and the June 1998 acquisition of American Radio. On a
pro forma basis, operating earnings for 1998 compared to 1997 increased
approximately 36%.
EBITDA for 1998 was $798 million compared to $575 million for 1997, an increase
of 39%. On a pro forma basis, EBITDA for 1998 compared to 1997 increased
approximately 21%.
Interest expense for 1998 was $64 million compared to $4 million for 1997. The
interest expense for 1998 resulted from debt assumed in the American Radio
acquisition and interest on a $2.5 billion note due CBS that was created in
connection with a dividend from Old Infinity to CBS and repaid in December 1998
with the proceeds from the stock offering (see note 9 to the consolidated
financial statements). Interest for 1997 primarily represents interest on $149
million of notes issued by Old Infinity prior to its acquisition, which were
redeemed by the Company in March 1997.
Income taxes for 1998 were $249 million compared to $197 million for 1997. The
effective tax rate was 51% for 1998 compared to 53% for the prior year.
Net earnings for 1998 totaled $235 million, or $0.33 per share, compared to $178
million, or $0.25 per share, for 1997, an increase of $57 million, or $0.08 per
share.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO
YEAR ENDED DECEMBER 31, 1996
Net revenues for 1997 were $1,480 million compared to $554 million for 1996.
This increase in revenues was driven primarily by the inclusion of the results
of operations for Old Infinity, which was acquired on December 31, 1996, and the
overall strong performance of the existing radio stations. On a pro forma basis,
net revenues for 1997 increased approximately 20%. These results reflect strong
markets combined with management's continued focus on improving revenue growth.
Operating expenses excluding depreciation and amortization expense for 1997 were
$888 million compared to $344 million for 1996. The increase was due principally
to the acquisition of Old Infinity and expenses associated with higher revenues.
On a pro forma basis, operating expenses in 1997 increased approximately 6%.
Depreciation and amortization
16 INFINITY BROADCASTING CORPORATION
<PAGE> 17
expense for 1997 was $197 million compared to $58 million for 1996. The increase
was due to the amortization expense resulting from the acquisition of Old
Infinity. Corporate expenses for 1997 were $22 million compared to $13 million
for the prior year, an increase of $9 million primarily from the acquisition of
Old Infinity.
Operating earnings for 1997 were $372 million compared to $139 million for 1996.
The increase was due principally to the acquisition of Old Infinity and improved
results at the Company's radio stations. On a pro forma basis, operating
earnings in 1997 increased approximately 26% as a result of the revenue
increase.
EBITDA for 1997 was $575 million compared to $197 million for 1996. On a pro
forma basis, EBITDA increased approximately 29%.
Interest expense for 1997 totaled $4 million, while there was no interest
expense for 1996. The interest expense for 1997 resulted from debt originally
issued by Old Infinity, which was repaid by the Company in March 1997.
Other income of $6 million for 1997 consists primarily of a gain on the disposal
of a radio station.
Income taxes for 1997 totaled $197 million compared to $68 million for 1996. The
effective tax rate was 53% for 1997 compared to 49% for 1996. The increase
resulted primarily from non-deductible goodwill associated with the acquisition
of Old Infinity.
Net earnings for 1997 totaled $178 million compared to $72 million for 1996.
SEASONALITY
Seasonal revenue fluctuations are common in the out-of-home media industry. The
Company's revenue is typically lowest in the first quarter and highest in the
second and fourth quarters.
NEW PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued. SFAS
133 standardizes the accounting for derivative instruments by requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. The statement is effective
for all fiscal quarters of all fiscal years beginning after June 15, 1999. The
Company has entered into an insignificant number of derivative and hedging
transactions and does not anticipate that the adoption of this standard will
have a material impact on the Company's consolidated financial position, results
of operations or disclosure.
LIQUIDITY AND CAPITAL RESOURCES
In December 1998, the Company completed an initial public offering of
155,250,000 shares of its Class A common stock, resulting in proceeds to the
Company of $3.0 billion, net of offering costs. The Company used a portion of
the proceeds to prepay a $2.5 billion intercompany note to CBS, to purchase some
of its outstanding debt, and for general corporate purposes.
In general, the Company's operations generate cash substantially in excess of
that required for recurring operations and capital expenditures. At December 31,
1998, the Company had $524 million of long-term debt outstanding, substantially
all of which was assumed in the June 1998 acquisition of American Radio. This
debt was offset by nearly $500 million of cash and cash equivalents, resulting
in virtually no net debt. The Company's equity at year-end 1998 totaled $8.9
billion. As a result, management expects that the Company will have sufficient
liquidity to meet its future business needs. Sources of liquidity generally
available to the Company include cash from operations, cash and cash
equivalents, borrowings, and issuances of equity securities.
OPERATING ACTIVITIES
The Company's operating activities provided $442 million of cash in 1998
compared to $310 million in 1997. The increase relates primarily to the cash
provided by the operations of American Radio and the improved operating results
during 1998 compared to 1997. The operating activities provided $310 million of
cash in 1997 compared to $104 million in 1996. The increase in 1997 was
primarily related to the cash provided by the operations of Old Infinity, which
was acquired on December 31, 1996.
INVESTING ACTIVITIES
The Company's investing activities used $1.4 billion of cash in June 1998,
primarily for the acquisition of American Radio, compared to $22 million of cash
provided in 1997. During 1996, investing activities used $1.0 billion, primarily
for the cash portion of the consideration for Old Infinity.
The Company's capital expenditures totaled $32 million in 1998 compared to $15
million in 1997 and
INFINITY BROADCASTING CORPORATION 17
<PAGE> 18
$7 million in 1996. The Company's business does not require substantial
investment of capital. The increase in capital expenditures during 1998 and 1997
was due to the Company's acquisition activity during each of these periods.
FINANCING ACTIVITIES
Cash provided by financing activities totaled $1.4 billion in 1998 compared to
cash used of $329 million in 1997. The Company's December 1998 issuance of Class
A common stock generated proceeds of $3.0 billion, net of offering costs.
Offsetting this amount was $2.5 billion of cash used to prepay a $2.5 billion
intercompany note to CBS. During the year, CBS contributed $1.7 billion of cash
to Infinity, of which $1.4 billion was in connection with the American Radio
acquisition. Also during 1998, the Company repaid $784 million of debt,
including $567 million to close American Radio's revolving credit agreement.
Cash used by financing activities during 1997 of $329 million reflects the
repayment of Old Infinity debt as well as $180 million of net payments to CBS as
the Company generated cash earnings. In 1996, financing activities generated
$917 million of cash primarily reflecting the cash received from CBS for the
cash portion of the consideration for the Old Infinity acquisition.
The Company has the ability to borrow up to $1.0 billion under CBS's revolving
credit agreement, which expires on August 29, 2001. Borrowing rates under the
CBS credit agreement are determined at the time of each borrowing and are based
generally on a floating rate index, the London Interbank Offer Rate (LIBOR),
plus a margin. No borrowings were outstanding under this facility at December
31, 1998. The terms of the CBS credit agreement provide for restrictions,
subject to certain exceptions, on the ability of CBS subsidiaries (including the
Company) to incur debt outside the credit agreement. The Company believes that
participating in the CBS credit facility is most advantageous at this time.
However, the Company may obtain an independent credit facility in the future.
Generally, the Company's excess cash can be distributed to shareholders,
including CBS, through dividend declarations. However, the Company does not
anticipate paying any dividends on its common stock in the near term.
As of December 31, 1998, the Company had $524 million of long-term debt,
substantially all of which was assumed in the acquisition of American Radio.
Under the terms of indentures relating to American Radio's long-term debt,
American Radio is limited in its ability to pay dividends to the Company. The
limitation is not expected to have a material impact on the Company's ability to
manage its liquidity or in its pursuit of growth through future acquisitions.
Subsequent to December 31, 1998 the Company repurchased approximately $100
million of its outstanding debt.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates. To manage
this exposure, the Company periodically enters into interest rate exchange
agreements. The Company does not use financial instruments for trading purposes
and is not a party to any leveraged derivatives.
At December 31, 1998, the Company's debt was $525 million, essentially all of
which consisted of fixed rate obligations. With regard to these obligations, a 1
percent decrease in interest rates would increase the value of the instruments
by approximately $10 million. At year-end 1998, the Company had no interest rate
exchange agreements outstanding.
For further information regarding the Corporation's debt, see note 9 to the
consolidated financial statements.
YEAR 2000
The Year 2000 issue is the result of the development of computer programs and
computer chips using two digits rather than four digits to define the applicable
year. Computer programs and/or equipment with time-sensitive software or
computer chips may recognize the date using "00" as the year 1900 rather than
the Year 2000. This could result in a system failure or miscalculations causing
disruptions to business operations.
To address the Year 2000 issue, the Company has undertaken efforts to identify,
modify or replace, and test systems that may not be Year 2000 compliant. The
Company estimates its cost to achieve Year 2000 compliance to be approximately
$5 million, of which $2 million has been incurred to date. CBS is expected to
incur additional costs of approximately $2 million on behalf of the Company to
ensure compliance of the management information systems infrastructure.
Approximately 60% of the total expenditures relate to replacement of existing
systems. The Company expects
18 INFINITY BROADCASTING CORPORATION
<PAGE> 19
to fund these costs through its cash flows from operations. All modification
costs are expensed as incurred.
The Company's centrally managed critical systems are currently Year 2000
compliant or will be replaced by Year 2000 compliant applications by mid-1999. A
significant portion of the Year 2000 work on the Company's systems has been
performed or is underway. The Company is currently in the process of developing
Year 2000 procedures and guidelines for individual radio stations. The Company
plans to have all systems tested and compliant by mid-1999.
The Year 2000 effort also includes communication with all significant third
party suppliers and customers to determine the extent to which the Company's
systems are vulnerable to those parties' failures to reach Year 2000 compliance.
There can be no guarantee that the Company's third party suppliers or customers
will be Year 2000 compliant on a timely basis and that failure to achieve
compliance would not have a material adverse impact on the Company's business
operations.
The Company expects to develop a formal contingency plan to ensure continued
business operations in case of non-compliance with the Year 2000 on a timely
basis. Overall, the Company believes that it will complete its Year 2000 effort
and will be compliant on time. Although there can be no assurances that this
will occur, the Company will continuously monitor its progress and evaluate the
need for a contingency plan. Based on its current plan, the Company believes
that it will have adequate time to prepare for contingency measures if the need
arises.
The Company believes that it is difficult to fully assess the risks of the Year
2000 problem due to numerous uncertainties surrounding the issue. Management
believes that primary risks are external to the Company and relate to the Year
2000 readiness of its third party suppliers or customers. The inability of the
Company or its third party suppliers or customers to adequately address the Year
2000 issues on a timely basis could result in a material financial risk,
including loss of revenue, substantial unanticipated costs and service
interruptions. Accordingly, the Company plans to devote the resources it
concludes are appropriate to address all significant Year 2000 issues in a
timely manner.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including Item 7 -- "Management's Discussion
and Analysis of Financial Condition and Results of Operations," contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, that are not historical facts but rather reflect the Company's
current expectations concerning future results and events. The words "believes,"
"expects," "intends," "plans," "anticipates," "likely," "will," and similar
expressions identify such forward-looking statements. These forward-looking
statements are subject to risks, uncertainties, and other factors, some of which
are beyond the Company's control, that could cause actual results to differ
materially from those forecast or anticipated in such forward-looking
statements.
Such risks, uncertainties, and factors include, but are not limited to the
impact of changes in national, regional and local economies; successful
integration of any acquired properties; the Company's ability to develop and/or
acquire radio on-air talent and programming and to attract and retain
advertisers; the impact of significant competition from other radio stations and
programming alternatives such as broadcast television, newspapers, magazines,
cable television, the Internet, direct mail, and the impact of new technologies;
changes in Federal Communications Commission regulations; and such other
competitive and business risks as from time to time may be detailed in the
Company's Securities and Exchange Commission reports.
Readers are cautioned not to place undue reliance on these forward-looking
statements which reflect management's view only as of the date of this Annual
Report. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events.
INFINITY BROADCASTING CORPORATION 19
<PAGE> 20
REPORT OF MANAGEMENT
The Company has prepared the consolidated financial statements and related
financial information included in this report. Management has the primary
responsibility for the consolidated financial statements and other financial
information and for ascertaining that the data fairly reflect the financial
position, results of operations, and cash flows of the Company. The consolidated
financial statements were prepared in accordance with generally accepted
accounting principles appropriate in the circumstances, and necessarily include
amounts that are based on best estimates and judgments with appropriate
consideration given to materiality. Financial information included elsewhere in
this report is presented on a basis consistent with the consolidated financial
statements.
The Company maintains a system of internal accounting controls, supported by
adequate documentation, to provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Company. Limitations exist in any system of internal accounting controls
based on the recognition that the cost of the system should not exceed the
benefits derived. The Company believes its system of internal accounting
controls appropriately balances the cost/benefit relationship.
The independent auditors provide an objective assessment of the degree to which
management meets its responsibility for fair financial reporting. They regularly
evaluate elements of the internal control structure and perform such tests and
procedures as they deem necessary to express an opinion on the fairness of the
financial statements.
The Board of Directors meets regularly with the independent auditors and
management. The independent auditors have direct access to the Board of
Directors, with and without the presence of management representatives, to
discuss the scope and results of their audit work and their comments on the
adequacy of internal accounting controls and the quality of financial reporting.
We believe that the Company's policies and procedures, including its system of
internal accounting controls, provide reasonable assurance that the financial
statements are prepared in accordance with the applicable securities laws and
with a corresponding standard of business conduct.
20 INFINITY BROADCASTING CORPORATION
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INFINITY BROADCASTING CORPORATION:
We have audited the accompanying consolidated balance sheet of Infinity
Broadcasting Corporation and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of earnings, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Infinity
Broadcasting Corporation and subsidiaries as of December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
New York, New York
January 27, 1999
INFINITY BROADCASTING CORPORATION 21
<PAGE> 22
CONSOLIDATED STATEMENT OF EARNINGS
(dollars and shares in thousands except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenues $2,162,063 $1,691,517 $637,883
Less agency commissions (268,959) (211,426) (83,795)
- ---------------------------------------------------------------------------------------------------
Net revenues 1,893,104 1,480,091 554,088
- ---------------------------------------------------------------------------------------------------
Operating expenses excluding depreciation and
amortization 1,084,122 888,405 343,920
Depreciation and amortization 249,652 197,135 57,528
Corporate expenses 17,440 22,277 13,434
- ---------------------------------------------------------------------------------------------------
Total operating expenses 1,351,214 1,107,817 414,882
- ---------------------------------------------------------------------------------------------------
Operating earnings 541,890 372,274 139,206
Interest expense, net (63,773) (3,645) --
Other income, net 6,324 5,610 309
- ---------------------------------------------------------------------------------------------------
Earnings before income taxes and minority interest 484,441 374,239 139,515
Income taxes (248,776) (196,978) (67,949)
Minority interest in (income) loss of consolidated
subsidiaries (859) 368 --
- ---------------------------------------------------------------------------------------------------
Net earnings $ 234,806 $ 177,629 $ 71,566
- ---------------------------------------------------------------------------------------------------
Basic and diluted earnings per common share $ 0.33 $ 0.25 $ 0.10
- ---------------------------------------------------------------------------------------------------
Weighted average common shares outstanding -- (basic and
diluted) 706,379 700,000 700,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
22 INFINITY BROADCASTING CORPORATION
<PAGE> 23
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 497,701 $ 22,522
Receivables (net of allowance for doubtful accounts of
$27,463
and $15,086, respectively) 460,966 334,914
Prepaid and other current assets 39,206 27,255
Deferred tax assets 19,641 14,334
- ---------------------------------------------------------------------------------------
Total current assets 1,017,514 399,025
Property and equipment, net 236,584 118,471
Intangible assets, net 9,359,170 6,433,283
Other assets 184,975 123,324
- ---------------------------------------------------------------------------------------
Total assets $10,798,243 $7,074,103
- ---------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 176,430 $ 120,356
Accrued compensation 39,750 30,904
Accrued interest 12,113 27
Other current liabilities 3,647 532
- ---------------------------------------------------------------------------------------
Total current liabilities 231,940 151,819
Long-term debt 523,960 1,560
Deferred taxes 1,156,244 484,364
Other noncurrent liabilities 28,072 38,972
- ---------------------------------------------------------------------------------------
Total liabilities 1,940,216 676,715
- ---------------------------------------------------------------------------------------
Contingent liabilities and other commitments
- ---------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, par value $0.01 (50,000,000 shares
authorized, no shares issued) -- --
Class A common stock, par value $0.01 (2,000,000,000
shares
authorized, 155,250,000 shares issued at December 31,
1998) 1,553 --
Class B common stock, par value $0.01 (2,000,000,000
shares
authorized, 700,000,000 shares issued at December 31,
1998) 7,000 --
Capital in excess of par value 8,805,448 6,017,233
Accumulated earnings 44,026 380,155
- ---------------------------------------------------------------------------------------
Total stockholders' equity 8,858,027 6,397,388
- ---------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $10,798,243 $7,074,103
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
INFINITY BROADCASTING CORPORATION 23
<PAGE> 24
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 234,806 $ 177,629 $ 71,566
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 249,652 197,135 57,528
Deferred taxes 12,156 13,883 3,012
Gain on sales of assets, net (3,703) (3,584) --
Other noncash items (6,970) -- --
Changes in assets and liabilities, net of acquisitions
and dispositions:
(Increase) decrease in accounts receivable (37,695) (35,382) (10,248)
(Increase) decrease in other assets 14,120 (14,924) (3,100)
Increase (decrease) in accounts payable and accrued
expenses (7,633) (11,459) 4,611
Increase (decrease) in accrued interest 5,210 (3,858) --
Increase (decrease) in other liabilities (17,940) (9,176) (19,426)
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 442,003 310,264 103,943
- -----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from dispositions 138,731 87,475 --
Business acquisitions and investments (1,474,999) (50,341) (994,165)
Deposit in acquisition trust (34,635) -- --
Capital expenditures (31,717) (15,264) (6,682)
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (1,402,620) 21,870 (1,000,847)
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Receipts from (payments to) CBS, net 1,698,429 (179,563) 916,771
Repayment of CBS note (2,500,000) -- --
Dividends paid to CBS (25,200) -- --
Net proceeds from issuance of common stock 3,046,652 -- --
Repayment of debt (784,085) (149,931) --
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 1,435,796 (329,494) 916,771
- -----------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 475,179 2,640 19,867
Cash and cash equivalents at beginning of year 22,522 19,882 15
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 497,701 $ 22,522 $ 19,882
- -----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 67,974 $ 9,058 $ --
Income taxes paid to CBS 233,905 163,720 64,937
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
24 INFINITY BROADCASTING CORPORATION
<PAGE> 25
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars and shares in thousands)
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON
PREFERRED STOCK STOCK STOCK CAPITAL IN TOTAL
--------------- ---------------- ---------------- EXCESS OF ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 -- $-- -- $ -- -- $ -- $ 1,528,642 $130,960 $ 1,659,602
Net earnings 71,566 71,566
Contribution for
Old Infinity acquisition 4,706,794 4,706,794
Contribution for
other acquisitions 58,165 58,165
Cash from operations
returned to CBS (77,426) (77,426)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 -- $-- -- $ -- -- $ -- $ 6,216,175 $202,526 $ 6,418,701
Net earnings 177,629 177,629
Contribution to prepay
long-term debt 149,931 149,931
Cash from operations
returned to CBS (329,493) (329,493)
Other intercompany activity,
net (19,380) (19,380)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 -- $-- -- $ -- -- $ -- $ 6,017,233 $380,155 $ 6,397,388
Net earnings 234,806 234,806
Contribution for American
Radio acquisition 1,400,000 1,400,000
Contribution to repay
American Radio credit
facility 566,576 566,576
Contribution to repay
American Radio long-term
debt 71,096 71,096
Dividends paid to CBS (1,954,265) (570,935) (2,525,200)
Issuance of Class A
common stock 155,250 1,553 3,045,099 3,046,652
Issuance of Class B
common stock 700,000 7,000 (7,000) --
Cash from operations
returned to CBS (335,680) (335,680)
Other intercompany activity,
net 2,389 2,389
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 -- $-- 155,250 $1,553 700,000 $7,000 $ 8,805,448 $ 44,026 $ 8,858,027
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
INFINITY BROADCASTING CORPORATION 25
<PAGE> 26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
Infinity Broadcasting Corporation (the Company) was incorporated in September
1998. The Company was formed to own and operate CBS Corporation's (CBS)
out-of-home media business consisting of radio and outdoor advertising. In
December 1998, CBS contributed to the Company, at book value, its radio and
outdoor advertising properties.
The consolidated financial statements have been prepared assuming that the
Company existed as a stand-alone entity during all periods presented. Any
acquisitions of radio or outdoor advertising properties by CBS during this
period have been presented as the Company's transactions, and any consideration
to effect these acquisitions has been treated as a capital contribution by CBS
to the Company. These acquisitions include (a) the radio operations of CBS Inc.
in November 1995, (b) Infinity Media Corporation (formerly Infinity Broadcasting
Corporation) and subsidiaries, which include TDI Worldwide Inc. (TDI),
(collectively, Old Infinity) on December 31, 1996, and (c) the radio operations
of American Radio Systems Corporation (American Radio) on June 4, 1998. The
operating results of the acquired entities have been included in the Company's
Consolidated Statement of Earnings from their respective dates of acquisition.
See note 3 to the consolidated financial statements.
The financial information included herein may not necessarily reflect the
consolidated results of operations, financial position, changes in stockholders'
equity, and cash flows of the Company in the future or what they would have been
had the Company been a separate, stand-alone entity during the periods
presented.
Certain previously reported amounts have been reclassified to conform to the
1998 presentation.
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the net assets and entities
described in note 1 to the consolidated financial statements. All material
intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION
Revenues are primarily derived from the sale of radio advertising spots and are
recognized when the spots are broadcast. The Company also receives advertising
revenues on the sale of outdoor advertising space. Revenues from outdoor
advertising space are recognized proportionately over the contract term.
STOCK-BASED COMPENSATION
The Company measures compensation cost for stock-based awards, including awards
issued by CBS, using the intrinsic value based method of accounting prescribed
by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees." The pro forma net earnings and pro forma earnings per
share disclosures using the fair value based method defined in Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," and other related information are provided in note 13 to the
consolidated financial statements.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their estimated
useful lives. Depreciation is generally computed on the straight-line method
based on useful lives of 27.5 to 40 years for buildings, 20 years for land
improvements, and 3 to 12 years for equipment. Leasehold improvements are
amortized over the shorter of the useful life or the term of the lease.
Expenditures for additions and improvements are capitalized, and costs for
repairs and maintenance are charged to operations as incurred.
CASH AND CASH EQUIVALENTS
The Company considers all investment securities with a maturity of three months
or less when acquired to be cash equivalents. All cash and temporary investments
are placed with high credit quality financial institutions, and the amount of
credit exposure to any one financial institution is limited.
INTANGIBLE ASSETS
Intangible assets primarily include goodwill, Federal Communications Commission
(FCC) licenses, which are limited as to availability and have historically
appreciated in value with the passage of time, and transit franchise agreements.
Goodwill represents the excess of the purchase price of acquired businesses over
the estimated fair value of tangible and identifiable intangible net assets
acquired. FCC licenses and goodwill are amortized using the straight-line method
over 40 years. Transit franchise agreements are
26 INFINITY BROADCASTING CORPORATION
<PAGE> 27
amortized over the anticipated life of the contract. Subsequent to the
acquisition of an intangible or other long-lived asset, the Company evaluates
whether later events and circumstances indicate the remaining estimated useful
life of that asset may warrant revision or that the remaining carrying value of
such asset may not be recoverable. When factors indicate that an intangible or
other long-lived asset should be evaluated for possible impairment, the Company
uses an estimate of the related asset's undiscounted future cash flows over the
remaining life of that asset in measuring recoverability. If such an analysis
indicates that impairment has in fact occurred, the Company writes down the book
value of the intangible or other long-lived asset to its fair value.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments is determined by the Company
using the available market information and appropriate valuation methodologies.
Accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange or the value that
ultimately will be realized by the Company upon maturity or disposition. The use
of different market assumptions or estimation methodologies may have a material
effect on the estimated fair value amounts.
INCOME TAXES
Income taxes are provided using the asset and liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and
liabilities are recognized based on differences between book and tax bases of
assets and liabilities using presently enacted tax rates. The provision for
income taxes is the sum of the amount of income taxes paid or payable for the
year as determined by applying the provisions of enacted tax laws to taxable
income for that year and the net changes during the year in the Company's
deferred tax assets and liabilities other than changes arising from acquisitions
and dispositions.
During the periods presented, the Company is part of CBS's consolidated federal
income tax return. The Company has provided for income taxes as if it were a
stand-alone taxpayer in accordance with SFAS 109.
The Company has entered into a Tax Sharing Agreement with CBS (see note 14 to
the consolidated financial statements). Prior to the Company's December 1998
initial public offering, current taxes payable were paid immediately through
contributed capital. Subsequent to the initial public offering, the Company
reimburses CBS as if it were a stand-alone taxpayer, based upon the terms of the
Tax Sharing Agreement.
EARNINGS PER SHARE
The earnings per share have been presented assuming that 700 million shares of
Class B common stock were outstanding for all periods presented prior to the
Company's initial public offering of 155,250,000 shares of Class A common stock.
For the year ended December 31, 1998, basic and fully diluted weighted average
shares outstanding totaled 706 million.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. On an
ongoing basis, management reviews its estimates, including those related to
intangible assets, program rights, contracts, allowances for doubtful accounts,
income taxes and litigation based on currently available information. Changes in
facts and circumstances may result in revised estimates.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments, from time to time, have been utilized by the
Company to manage its interest rate risk. Under interest rate contracts, the
differentials to be received or paid are recognized in income over the life of
the contract as adjustments to interest expense. Gains and losses on
terminations of hedge contracts are recognized as interest expense when
terminated in conjunction with the termination of the anticipated hedged
transaction, or to the extent that the anticipated hedged transaction remains
outstanding, deferred and amortized to interest expense over the remaining life
of that transaction. As of December 31, 1998, the Company had no interest rate
exchange contracts.
NEW PRONOUNCEMENTS
The Company adopted SFAS No. 128, "Earnings per Share," which establishes
standards for computing and disclosing basic and diluted earnings per common
share. Earnings per common share for all periods presented reflect the
provisions of SFAS 128.
INFINITY BROADCASTING CORPORATION 27
<PAGE> 28
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information," were
issued. SFAS 130 requires that an enterprise report by major component and as a
single total the change in its net assets from non-owner sources during the
period. SFAS 131 establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about its products,
services, geographic areas, and major customers. Both statements are effective
for fiscal years beginning after December 15, 1997 and were adopted during 1998.
Adoption of these statements did not impact the Company's consolidated financial
position, results of operations, or cash flows.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133 standardizes the accounting for derivative
instruments by requiring that an entity recognize those items as assets or
liabilities in the statement of financial position and measure them at fair
value. The statement is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. The Company has entered into an insignificant
number of derivative and hedging transactions and does not anticipate that the
adoption of this standard will have a material impact on the Company's
consolidated financial position, results of operations or disclosure.
NOTE 3: ACQUISITIONS
On December 31, 1996, the Company acquired Old Infinity for $4.7 billion
consisting of $3.8 billion of CBS common stock and $.9 billion of debt, which
was repaid immediately prior to the acquisition. The CBS common stock and cash
used to repay the debt were contributed to the Company for purposes of this
acquisition and recorded as contributed capital. In connection with the
acquisition of Old Infinity, the Company divested certain radio stations to
comply with regulatory requirements.
On June 4, 1998, the Company completed the acquisition of the radio broadcasting
operations of American Radio for approximately $1.4 billion in cash plus the
assumption of debt with a fair value of approximately $1.3 billion. The Company
received a $1.4 billion capital contribution from CBS to effect this acquisition
and received an additional capital contribution of $567 million to repay a
portion of the debt assumed in the American Radio acquisition.
The estimated fair values of the American Radio assets acquired and liabilities
assumed (which are based upon preliminary estimates that may be modified at a
later date) are summarized in the following table:
FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
(in millions)
<TABLE>
<CAPTION>
AMERICAN
RADIO
AT JUNE 4,
1998
- ----------------------------------------------------------
<S> <C>
Cash $ 18
Receivables 88
Property and equipment 129
Identifiable intangible assets:
FCC licenses 2,346
Goodwill 825
Other assets 53
Debt (1,316)
Deferred income taxes (654)
Other liabilities (89)
- ----------------------------------------------------------
Total purchase price $ 1,400
- ----------------------------------------------------------
</TABLE>
The following unaudited pro forma information combines the consolidated results
of operations of the Company with those of American Radio as if the American
Radio acquisition occurred on January 1, 1997. The pro forma results give effect
to certain purchase accounting adjustments, including additional depreciation
expense resulting from a step-up in the basis of fixed assets, additional
amortization expense from goodwill and other identifiable intangible assets,
increased interest expense from acquisition debt and related income tax effects.
PRO FORMA RESULTS
(unaudited, in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
- ------------------------------------------------------
<S> <C> <C>
Net revenues $2,060 $1,873
Net earnings 252 162
Net earnings per common share --
basic and diluted 0.36 0.23
- ------------------------------------------------------
</TABLE>
This pro forma financial information is presented for comparative purposes only
and is not necessarily indicative of the operating results that actually would
have occurred had the American Radio acquisition been consummated on January 1,
1997. In addition, these results are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
NOTE 4: EMPLOYEE BENEFIT PLANS
Certain of the Company's employees are covered by various pension plans
sponsored by CBS. Most pension plan benefits are based on either years of
service and
28 INFINITY BROADCASTING CORPORATION
<PAGE> 29
compensation levels at the time of retirement, a formula based on career
earnings, or a final average compensation amount. Pension benefits generally are
paid from trusts funded by contributions from employees and/or CBS. The pension
funding policy is consistent with funding requirements of U.S. federal and other
governmental laws and regulations. Certain employees are also covered by
postretirement benefit arrangements sponsored by CBS consisting of various
retiree medical, dental, and life insurance arrangements.
The Company has accounted for these plans as multi-employer plans. The Company's
allocated expense under benefit plans sponsored by CBS was as follows:
BENEFIT PLAN COSTS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ----------------------------------------------------------
<S> <C> <C> <C>
Pension plan cost $4,199 $5,451 $5,393
Postretirement benefit plan cost 1,647 1,524 1,581
- ----------------------------------------------------------
</TABLE>
SFAS No. 112, "Employers Accounting for Postemployment Benefits," does not have
a significant effect on the Company's consolidated financial position or results
of operations.
Substantially all of the Company's employees can participate in various defined
contribution savings plans sponsored by the Company or CBS. Such plans generally
allow employees to contribute up to 15% of their income on a pretax basis.
Depending on the particular plan, the Company will match from 30% to 50% of the
first 5% of the employee's base earnings, match 50% of the first 6% of the
employee's base earnings, match up to $1,000, or match on a discretionary basis.
NOTE 5: INCOME TAXES
INCOME TAX EXPENSE
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $185,598 $143,900 $53,444
State 41,880 32,406 11,493
Foreign 9,142 6,789 --
- -----------------------------------------------------------
Total current income tax
expense 236,620 183,095 64,937
- -----------------------------------------------------------
Deferred:
Federal 10,004 11,426 2,479
State 2,152 2,457 533
- -----------------------------------------------------------
Total deferred income tax
expense 12,156 13,883 3,012
- -----------------------------------------------------------
Income tax expense $248,776 $196,978 $67,949
- -----------------------------------------------------------
</TABLE>
During 1997, the Company utilized net operating loss carryforwards of $49
million, or $19 million of income tax benefit, arising from previous acquisition
transactions.
Deferred income taxes result from temporary differences in the financial bases
and tax bases of assets and liabilities. The types of differences that give rise
to deferred income tax assets and liabilities are presented in the table below:
DEFERRED INCOME TAXES BY SOURCE
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- ---------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Provision for expenses and
losses $ 19,641 $ 5,717
Operating losses and credit
carryforwards -- 7,367
Other -- 1,250
- ---------------------------------------------------------
Total deferred tax asset 19,641 14,334
- ---------------------------------------------------------
Deferred tax liabilities:
Property, equipment, and
intangible assets 1,156,244 484,364
- ---------------------------------------------------------
Total deferred tax liabilities 1,156,244 484,364
- ---------------------------------------------------------
Deferred income tax liabilities,
net $1,136,603 $470,030
- ---------------------------------------------------------
</TABLE>
A reconciliation of the U.S. Federal statutory tax rate on earnings to the
Company's effective tax rate on earnings before income taxes is summarized as
follows:
EFFECTIVE TAX RATE RECONCILIATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------
<S> <C> <C> <C>
Federal income tax statutory rate 35% 35% 35%
Increase in rate resulting from:
Amortization of non-deductible
goodwill 10 11 7
State income tax expense, net of
federal effect 6 6 6
Other -- 1 1
- -------------------------------------------------------
Income tax effective rate 51% 53% 49%
- -------------------------------------------------------
</TABLE>
The Company has entered into a Tax Sharing Agreement with CBS (see notes 2 and
14 to the consolidated financial statements).
NOTE 6: PROPERTY AND EQUIPMENT
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- -------------------------------------------------------
<S> <C> <C>
Land and buildings $116,218 $ 70,030
Equipment 182,489 99,142
Construction in progress 11,714 4,922
- -------------------------------------------------------
Property and equipment, at cost 310,421 174,094
Accumulated depreciation and
amortization (73,837) (55,623)
- -------------------------------------------------------
Property and equipment, net $236,584 $118,471
- -------------------------------------------------------
</TABLE>
For the years ended December 31, 1998, 1997 and 1996 depreciation expense
totaled $26 million, $20 million, and $12 million, respectively.
INFINITY BROADCASTING CORPORATION 29
<PAGE> 30
NOTE 7: INTANGIBLE ASSETS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- --------------------------------------------------------
<S> <C> <C>
Goodwill $5,789,580 $4,958,090
FCC licenses 3,804,541 1,486,797
Transit franchise agreements 276,750 276,801
- --------------------------------------------------------
Intangible assets, at cost 9,870,871 6,721,688
Accumulated amortization (511,701) (288,405)
- --------------------------------------------------------
Intangible assets, net $9,359,170 $6,433,283
- --------------------------------------------------------
</TABLE>
For the years ended December 31, 1998, 1997 and 1996, amortization expense
totaled $223 million, $177 million, and $46 million, respectively.
Goodwill, FCC licenses and transit franchise agreements are presented in the
Consolidated Balance Sheet net of accumulated amortization. As of December 31,
1998 and 1997, accumulated amortization for goodwill was $363 million and $225
million, respectively, accumulated amortization for FCC licenses was $120
million and $50 million, respectively, and accumulated amortization for transit
franchise agreements was $28 million and $14 million, respectively.
NOTE 8: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- ------------------------------------------------------
<S> <C> <C>
Accounts payable $ 41,685 $ 30,931
Accrued transit franchise
payments 25,562 20,630
Accrued programming losses 8,984 12,028
Other 100,199 56,767
- ------------------------------------------------------
Total accounts payable and
accrued expenses $176,430 $120,356
- ------------------------------------------------------
</TABLE>
NOTE 9: LONG-TERM DEBT
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- ------------------------------------------------------
<S> <C> <C>
9% Senior Subordinated Notes $152,485 $ --
9 3/4% Senior Notes 148,960 --
11 3/8% Subordinated Exchange
Debentures 98,832 --
7% Convertible Subordinated
Debentures 78,812 --
Other 3,191 2,092
Unamortized premium, net 42,328 --
- ------------------------------------------------------
Total 524,608 2,092
Less current portion (648) (532)
- ------------------------------------------------------
Long-term debt, net of current
portion $523,960 $1,560
- ------------------------------------------------------
</TABLE>
In conjunction with the acquisition of American Radio on June 4, 1998, the
Company assumed $1.3 billion of American Radio debt, of which $567 million
borrowed under their revolving credit agreement was repaid immediately upon
acquisition. The 9% Senior Subordinated Notes, the 9 3/4% Senior Notes, and the
11 3/8% Cumulative Exchangeable Preferred Stock (subsequently exchanged into
11 3/8% Subordinated Exchange Debentures) were recorded at their fair market
value as of the acquisition date, which resulted in a net premium of
approximately $73 million. At the time of the acquisition, American Radio's 7%
Convertible Exchangeable Preferred Stock remained outstanding. This preferred
stock was converted into 7% Convertible Subordinated Debentures on September 30,
1998 as discussed below.
The indentures for each of these obligations contain covenants applicable to
American Radio including, among others, limitations on sales of assets, dividend
payments, future indebtedness and the issuance of preferred stock. As a result
of the change in control related to the acquisition of American Radio by CBS, an
offer to purchase the outstanding securities was made in June 1998, and $8
million of the senior notes were redeemed. Another offer was made in December
1998 as a result of CBS's transfer of American Radio to Infinity. Under the most
restrictive of the indentures relating to the American Radio long-term debt,
approximately $2 billion of American Radio's net assets at December 31, 1998 are
restricted. This, in turn, limits the ability of American Radio to pay
dividends.
Prior to the American Radio acquisition, the 7% Convertible Subordinate
Debentures were convertible at the option of the holder at any time into
American Radio common stock. Subsequent to the American Radio acquisition, these
securities are convertible at the option of the holder into merger consideration
consisting of cash and shares of American Tower Corporation common stock, which
are held by the Company for purposes of the conversion. During 1998, 61,373
shares (equivalent to $61 million principal amount of debentures) were redeemed
at a cost of $64 million.
In addition to the redemptions noted above, during 1998, the Company purchased
at market prices, certain outstanding 11 3/8% Subordinated Exchange Debentures
and 9% Senior Subordinated Notes with a face value of $112 million and $16
million, respectively.
30 INFINITY BROADCASTING CORPORATION
<PAGE> 31
The 11 3/8% Subordinated Exchange Debentures due 2009, the 9 3/4% and 9% senior
notes due 2005 and 2006, respectively, and the 7% Convertible Subordinated
Debentures due 2011 may be redeemed at specified redemption prices plus accrued
and unpaid interest after January 15, 2002, December 1, 2000, February 1, 2001,
and July 15, 1999, respectively.
On September 18, 1998, Old Infinity declared a dividend to CBS in the amount of
$2.5 billion evidenced by a note due September 18, 2003, bearing interest at a
rate of LIBOR plus 0.5% per annum. The Company prepaid this note plus accrued
interest in December with the net proceeds received from its initial public
offering of Class A common stock.
OTHER
There are no significant scheduled long-term debt repayments from January 1,
1999 to December 31, 2003.
NOTE 10: LEGAL MATTERS
The Company is party to various legal proceedings arising in the ordinary course
of business. In the opinion of management of the Company, however, there are no
legal proceedings pending against the Company likely to have a material adverse
effect on the Company.
NOTE 11: CONTINGENT LIABILITIES AND OTHER COMMITMENTS
LEASES
The Company has commitments under operating leases for certain facilities and
equipment. Rental expense for the years ended December 31, 1998, 1997, and 1996
was $20 million, $18 million, and $8 million, respectively. These totals include
immaterial amounts for contingent rentals and sublease income.
Additionally, the Company has franchise rights entitling it to display
advertising on such outdoor media as buses, taxis, trains, bus shelters,
terminals, billboards, and phone kiosks. Under most of these franchise
agreements, the franchiser is entitled to receive the greater of a percentage of
the relevant advertising revenues, net of advertising agency fees, or a
specified guaranteed minimum annual payment. Franchise payments totaled $222
million in 1998 and $192 million in 1997.
At December 31, 1998, aggregate minimum rental payments due during the next five
years and thereafter are as follows:
MINIMUM RENTAL PAYMENTS
(in thousands)
<TABLE>
<CAPTION>
GUARANTEED
MINIMUM
OPERATING FRANCHISE
DECEMBER 31, 1998 LEASES PAYMENTS
- ---------------------------------------------------------
<S> <C> <C>
1999 $ 32,529 $161,046
2000 27,555 147,189
2001 23,139 119,785
2002 20,271 53,189
2003 16,484 13,406
Thereafter 64,460 19,953
- ---------------------------------------------------------
Minimum rental payments $184,438 $514,568
- ---------------------------------------------------------
</TABLE>
OTHER COMMITMENTS
The Company routinely enters into commitments to purchase broadcast rights.
Expenses for broadcast rights totaled $48 million, $34 million and $8 million
for the years ended December 31, 1998, 1997 and 1996, respectively. These
contracts permit the broadcast of such properties for various periods. At
December 31, 1998, the Company was committed to make payments under such
broadcasting contracts, along with commitments for talent contracts, of $195
million. At December 31, 1998, aggregate payments for these commitments during
the next five years and thereafter are as follows:
OTHER COMMITMENTS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
- -------------------------------------------------------
<S> <C>
1999 $ 86,547
2000 73,436
2001 23,609
2002 10,260
2003 1,611
Thereafter --
- -------------------------------------------------------
Total other commitments $195,463
- -------------------------------------------------------
</TABLE>
INFINITY BROADCASTING CORPORATION 31
<PAGE> 32
NOTE 12: STOCKHOLDERS' EQUITY
In December 1998, the Company completed its initial public offering of
155,250,000 shares of Class A common stock, resulting in proceeds to the Company
of approximately $3.2 billion ($3.0 billion, net of offering costs). Prior to
December 1998, the Company was a wholly-owned subsidiary of CBS. Immediately
prior to the initial public offering, the Company amended its Certificate of
Incorporation to change its authorized capital stock to 50,000,000 shares of
Preferred Stock, 2,000,000,000 shares of Class A common stock, and 2,000,000,000
shares of Class B common stock. As of December 31, 1998, the Company had
155,250,000 shares of Class A common stock outstanding and 700,000,000 shares of
Class B common stock outstanding. No preferred shares were issued. CBS
beneficially owns 100% of the Class B common stock representing 81.8% of the
Company's equity ownership and 95.8% of the combined voting power of the
Company's Class A and Class B common stock. All of the Company's shares issued
as of December 31, 1998 were outstanding; none were held in treasury.
Holders of Class A common stock and Class B common stock generally have
identical voting rights and vote together as a single class (and not as separate
classes), except that holders of Class A common stock are entitled to one vote
per share while holders of Class B common stock are entitled to five votes per
share, and the shares of Class B common stock maintain certain conversion rights
and transfer restrictions. Holders of Class A common stock and Class B common
stock will share equally on a per-share basis in any dividends declared by the
Board of Directors. The number of record holders of Class A and Class B common
stock at December 31, 1998 totaled 34 and 2, respectively.
NOTE 13: STOCK - BASED COMPENSATION PLANS
The Company accounts for stock-based compensation plans under Opinion 25. For
stock options granted, the option price is not less than the market value of
shares on the grant date; therefore, no compensation cost has been recognized
for stock options granted.
In December 1998, prior to the initial public offering, the Company's Board of
Directors and stockholders approved the 1998 Long-Term Incentive Plan ("1998
Plan"). The 1998 Plan provides for the granting of incentive and non-statutory
stock options, stock appreciation rights, restricted stock, restricted units,
and other performance awards to officers or employees of the Company, its
parents, or its subsidiaries. At December 31, 1998, 15 million shares of Class A
common stock of the Company were authorized but no awards had been granted under
this plan.
Certain employees of the Company participate in CBS's stock based compensation
plans. The stock option information in the following tables reflects options to
acquire CBS common stock held by employees of the Company and by certain
officers of the Company who are employees of CBS. These stock options will not
be converted into the Company's common stock or into options to acquire the
Company's common stock.
STOCK OPTION INFORMATION
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ----------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 25,456,440 $ 7.30 23,723,498 $ 6.04 770,114 $15.10
Options granted 3,459,745 30.01 2,623,653 18.56 898,450 19.36
Options exercised (8,491,073) 1.40 (846,829) 6.32 (46,350) 12.70
Options forfeited (218,892) 19.01 (43,882) 18.57 (21,250) 18.80
Awards assumed -- -- -- -- 22,122,534 5.21
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31 20,206,220 $13.54 25,456,440 $ 7.30 23,723,498 $ 6.04
- -------------------------------------------------------------------------------------------------------------------
Exercisable at December 31 16,369,506 $10.02 19,426,144 $ 4.96 17,327,276 $ 3.98
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
32 INFINITY BROADCASTING CORPORATION
<PAGE> 33
STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED-
OPTIONS WEIGHTED- REMAINING AVERAGE
RANGE OF OUTSTANDING AT AVERAGE CONTRACTUAL EXERCISABLE AT EXERCISE PRICE
EXERCISE PRICES DECEMBER 31, 1998 EXERCISE PRICE LIFE IN YEARS DECEMBER 31, 1998 OF EXERCISABLE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$.0002 -- 4.99 4,072,316 $1.81 3.2 4,072,316 $ 1.81
5 -- 9.99 5,056,307 7.03 5.6 5,056,307 7.03
10 -- 14.99 2,164,659 13.74 6.9 2,164,659 13.74
15 -- 19.99 5,519,893 17.95 7.7 5,037,979 17.90
20 -- 29.99 2,997,050 29.81 9.0 31,250 29.44
30 -- 36.53 395,995 31.60 9.3 6,995 33.73
- ---------------------------------------------------------------------------------------------------------
Total 20,206,220 16,369,506
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Had compensation cost for these options been determined under the provisions of
SFAS 123, the Company's net earnings and earnings per common share would have
been as follows:
RESULTS OF OPERATIONS
(in thousands except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings as reported $ 234,806 $177,629 $71,566
Pro forma net earnings 226,212 165,274 67,205
Net earnings per common share as reported 0.33 0.25 0.10
Pro forma net earnings per common share 0.32 0.24 0.10
- ----------------------------------------------------------------------------------------------
</TABLE>
Options granted during 1998, 1997, and 1996 had a weighted average fair value
per-share of $14.08, $7.79, and $8.03, respectively.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1998, 1997, and 1996, respectively: risk-free
interest rates of 5.5%, 6.4%, and 6.1%, expected dividend yields of 0.0%, 1.0%,
and 1.1%; expected volatility of 31%, 30%, and 30%; and expected lives of 7.5
years, 7.3 years, and 7.4 years, respectively.
Pursuant to the Tax Sharing Agreement, the tax deductions resulting from the
exercise of CBS stock options by employees of the Company will not reduce the
Company's federal taxable income.
NOTE 14: RELATED PARTY TRANSACTIONS
In connection with the formation and capitalization of the Company discussed in
note 1 and the Company's initial public offering discussed in note 12, the
Company entered into an intercompany agreement with CBS. The Company utilizes
certain executive and other services provided by CBS. Certain officers of CBS
serve as officers of the Company. Additional services provided by CBS include,
among others, investor relations, human resources, legal, investment, finance,
real estate, information management, internal audit, tax, and treasury. The
costs of these services are allocated according to established methodologies and
are determined on an annual basis by CBS. Such methodologies depend on the
specific service provided and include allocating costs that directly relate to
the Company or allocating costs that represent a pro rata portion of the total
costs for the services provided. Management of the Company believes these
allocations to be a fair and reasonable share of such costs. For 1998, 1997, and
1996, allocated expenses of $7 million, $13 million, and $13 million,
respectively, were included in the consolidated statement of earnings of the
Company.
It is anticipated that these various arrangements will continue and that
additional transactions may be entered into in the ordinary course of business.
It is further anticipated that the method of allocating costs will be consistent
with past practices. Substantially all costs relating to direct intercompany
services have been reflected in the accompanying consolidated financial
statements. In addition, the Company and CBS entered into a Tax Sharing
Agreement that requires the Company to pay to CBS the current federal, state and
local income tax effect of its transactions as if the Company had been a
stand-alone taxpayer (see note 5 to the consolidated financial statements).
The Company and CBS provide broadcast time to each other. The Company expects to
continue this practice. The revenues or costs associated with these
INFINITY BROADCASTING CORPORATION 33
<PAGE> 34
intercompany transactions were not significant in the periods presented.
The Company and CBS have entered into and expect to continue to enter into joint
advertising arrangements. Revenues are distributed to the parties providing the
services based upon the contract terms. The revenues associated with such sales
were not significant in the periods presented.
The Company owns a minority equity interest in Westwood One, Inc. (Westwood
One). Most of Infinity's stations are affiliated with Westwood One, and Westwood
One distributes nationally certain of the Company's network programming. In
connection with these arrangements, the Company receives affiliation fees as
well as programming cost reimbursements and in certain instances shares in
revenue from the sale of Infinity's programming. In addition, certain officers
of the Company serve as officers of Westwood One for which the Company receives
a management fee. Revenue and expense reimbursements from these arrangements
recorded by the Company totaled approximately $64 million and $62 million in
1998 and 1997, respectively.
NOTE 15: FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1998 and 1997, most of the Company's financial instruments
including cash and cash equivalents, receivables, payables and accruals are
short term in nature. Accordingly, the carrying amount of these financial
instruments approximates their fair value. Substantially all of the Company's
debt was acquired in June 1998 in connection with the American Radio
acquisition. As a result, the fair value of long-term debt approximates its
carrying amount.
The following methods and assumptions were used to estimate the fair value of
financial instruments for which it was practicable to estimate that value:
- - The fair value of noncurrent customer and other receivables is estimated by
discounting the expected future cash flows at interest rates commensurate with
the creditworthiness of the customer or other third party.
- - The fair value of long-term debt is estimated using quoted market prices or
discounted cash flow methods based on the Company's current borrowing rates
for similar types of borrowing arrangements with comparable terms and
maturities.
NOTE 16: SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates and manages its radio and outdoor advertising business as
the out-of-home media segment. The Company characterizes its business as
out-of-home because the majority of radio listening, and virtually all viewing
of outdoor advertising, takes place in automobiles, transit systems, on the
street and other locations outside the consumer's home.
The Company's operations are primarily based in the United States. However, for
1998 and 1997, foreign sales represent approximately 10 percent of the Company's
revenues. The 1998 and 1997 foreign revenues were primarily attributable to TDI
sales in the United Kingdom and Ireland. The Company had no foreign sales during
1996. More than 95 percent of the Company's assets are located within the United
States.
34 INFINITY BROADCASTING CORPORATION
<PAGE> 35
QUARTERLY FINANCIAL DATA
(unaudited, dollars in thousands except per-share amounts)
<TABLE>
<CAPTION>
1998 1997
----------------------------------------- -----------------------------------------
4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net revenues $573,414 $534,318 $455,764 $329,608 $411,802 $376,898 $378,357 $313,034
Operating expenses 393,313 377,316 314,856 265,729 287,386 278,215 271,006 271,210
Operating earnings 180,101 157,002 140,908 63,879 124,416 98,683 107,351 41,824
Net earnings 69,226 67,261 66,877 31,442 61,662 46,654 50,655 18,658
Net earnings per share 0.10 0.10 0.10 0.04 0.09 0.06 0.07 0.03
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
INFINITY BROADCASTING CORPORATION 35
<PAGE> 36
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL AND
STATISTICAL DATA
(unaudited, dollars and shares in thousands except per-share amounts)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1998(A) 1997(A) 1996 1995(A) 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net revenues.................... $ 1,893,104 $1,480,091 $ 554,088 $ 216,288 $174,722
Operating expenses excluding
depreciation and
amortization.................. 1,084,122 888,405 343,920 136,419 103,456
Depreciation and amortization... 249,652 197,135 57,528 17,914 15,591
Corporate expenses.............. 17,440 22,277 13,434 8,736 8,492
- -----------------------------------------------------------------------------------------------------
Operating earnings.............. 541,890 372,274 139,206 53,219 47,183
Interest expense, net........... 63,773 3,645 -- -- --
Net earnings.................... 234,806 177,629 71,566 27,673 42,649
Net earnings per common share -
basic and diluted............. $ 0.33 $ 0.25 $ 0.10 $ 0.04 $ 0.06
Weighted average shares
outstanding - basic and
diluted....................... 706,379 700,000 700,000 700,000 700,000
OTHER OPERATING DATA:
EBITDA (b)...................... $ 797,866 $ 575,019 $ 197,043 $ 71,324 $ 93,095
Capital expenditures............ 31,717 15,264 6,682 9,368 7,843
After-tax cash flow (b)......... 484,458 374,764 129,094 45,587 58,240
Cash flow from operating
activities.................... 442,003 310,264 103,943 49,401 25,287
Cash flow from investing
activities.................... (1,402,620) 21,870 (1,000,847) (1,213,810) 3,976
Cash flow from financing
activities.................... 1,435,796 (329,494) 916,771 1,164,221 (29,131)
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998(A) 1997 1996(A) 1995(A) 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.................... $10,798,243 $7,074,103 $ 7,261,952 $ 1,878,208 $485,747
Long-term debt (including
current portion).............. 524,608 2,092 150,494 -- --
Stockholders' equity............ 8,858,027 6,397,388 6,418,701 1,659,602 511,453
Working capital................. 785,574 247,206 273,403 79,500 32,238
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes financial information for the following acquired entities from
their respective dates of acquisition: the radio operations of American
Radio from June 4, 1998; Old Infinity from December 31, 1996; and the radio
operations of CBS Inc. from November 24, 1995.
(b) EBITDA represents earnings before interest, taxes, minority interest,
depreciation and amortization. After-tax cash flow represents net earnings
plus depreciation and amortization. Although EBITDA and after-tax cash flow
are not measures of performance calculated in accordance with generally
accepted accounting principles, management believes that they are useful to
an investor in evaluating the Company because they are measures widely used
in the broadcast industry to evaluate a company's operating performance.
Nevertheless, EBITDA and after-tax cash flow should not be considered in
isolation or as a substitute for operating income, cash flows from operating
activities or any other measure for determining the Company's operating
performance or liquidity that is calculated in accordance with generally
accepted accounting principles. As EBITDA and after-tax cash flow are not
measures of performance calculated in accordance with generally accepted
accounting principles, these measures may not be comparable to similarly
titled measures employed by other companies.
36 INFINITY BROADCASTING CORPORATION
<PAGE> 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Part of the information concerning executive officers required by this item is
set forth in Part I pursuant to General Instruction G to Form 10-K and part is
incorporated herein by reference to "Security Ownership" and "Principal
Shareholders" in the Proxy Statement.
The information as to directors is incorporated herein by reference to "Election
of Directors" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by reference to
"Director Compensation" and "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated herein by reference to
"Security Ownership" and "Principal Shareholders" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by reference to
"Related Party Transactions" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A)(1) FINANCIAL STATEMENTS
The financial statements required by this item are listed under Part II, Item 8,
which list is incorporated herein by reference.
(A)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for Infinity Broadcasting Corporation
and the Independent Auditors' Report thereon are included in Part IV of this
report:
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Independent Auditors' Report on Financial Statement Schedule 40
For the three years ended December 31, 1998: Schedule
II--Valuation and Qualifying Accounts 41
</TABLE>
Other schedules are omitted because they are not applicable or because the
required information is included in the financial statements or notes thereto.
(A) (3) EXHIBITS
<TABLE>
<S> <C>
3. Certificate of Incorporation and By-Laws.
3.1 Restated Certificate of Incorporation of the Company as of
December 14, 1998 is incorporated herein by reference to
Exhibit 3.3 to the Company's Registration Statement No.
333-63727 on Form S-1, Amendment No. 4, filed with the
Securities and Exchange Commission on December 4, 1998;
provided that the blank in paragraph second regarding the
reclassification of shares is replaced with the number
"642,201.8348624."
3.2 Restated By-Laws of the Company as of December 14, 1998 are
incorporated by reference to Exhibit 3.4 to the Company's
Registration Statement No. 333-63727 on Form S-1, Amendment
No. 4, filed with the Securities and Exchange Commission on
December 4, 1998.
10. Material Contracts.
</TABLE>
INFINITY BROADCASTING CORPORATION 37
<PAGE> 38
<TABLE>
<S> <C>
10.1 Stock and Asset Transfer Agreement, dated December 2, 1998,
between CBS Broadcasting, Inc. and the Company is
incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement No. 333-63727 on Form S-1, Amendment
No. 4, filed with the Securities and Exchange Commission on
December 4, 1998.
10.2 Stock and Transfer Agreement, dated December 3, 1998,
between CBS Corporation and the Company is incorporated by
reference to Exhibit 10.2 to the Company's Registration
Statement No. 333-63727 on Form S-1, Amendment No. 4, filed
with the Securities and Exchange Commission on December 4,
1998.
10.3 Intercompany Agreement between CBS Corporation and the
Company is incorporated by reference to Exhibit 10(x) to the
report on Form 10-K of CBS Corporation for the year ended
December 31, 1998.
10.4 Tax Sharing Agreement between CBS Corporation and the
Company is incorporated by reference to Exhibit 10(y) to the
report on Form 10-K of CBS Corporation for the year ended
December 31, 1998.
10.5 $4.0 billion Credit Agreement among CBS Corporation, the
Lenders parties thereto, Nationsbank, N.A. and the
Toronto-Dominion Bank, as Syndication Agents, The Chase
Manhattan Bank as Documentation Agent, and Morgan Guaranty
Trust Company of New York, as Administrative Agent, dated
August 29, 1996, is incorporated herein by reference to
Exhibit 10(1) to the report on Form 10-Q of CBS Corporation
for the quarter ended September 30, 1996.
10.6 First Amendment, dated January 29, 1997, to the CBS
Corporation Credit Agreement, dated August 29, 1996, among
CBS Corporation, the Lenders parties thereto, Nationsbank,
N.A. and the Toronto-Dominion Bank as Syndication Agents,
The Chase Manhattan bank as Documentation Agent, and Morgan
Guaranty Trust Company of New York as Administrative Agent,
is incorporated herein by reference to Exhibit 10(p) to the
report on Form 10-Q of CBS Corporation for the quarter ended
March 31, 1997.
10.7 Second Amendment, dated March 21, 1997 to the CBS
Corporation Credit Agreement, dated August 29, 1996, as
amended by the First Amendment thereto dated January 29,
1997, among CBS Corporation, the Subsidiary Borrowers
parties thereto, the Lenders parties thereto, Nationsbank,
N.A. and The Toronto-Dominion Bank as Syndication Agents,
The Chase Manhattan Bank As Documentation Agent, and Morgan
Guaranty Trust Company of New York as Administrative Agent,
is incorporated herein by reference to Exhibit 10(q) to the
report on Form 10-Q of CBS Corporation for the quarter ended
March 31, 1997.
10.8 Third Amendment, dated March 3, 1998, to the CBS Corporation
Credit Agreement, dated August 29, 1996, as amended by the
First Amendment thereto dated January 29, 1997, as amended
by the Second Amendment thereto dated March 21, 1997 among
CBS Corporation, the Subsidiary Borrowers parties thereto,
the Lenders parties thereto, Nationsbank, N.A. and The
Toronto-Dominion Bank as Syndication Agents, The Chase
Manhattan Bank as Documentation Agent, and Morgan Guaranty
Trust Company of New York as Administrative Agent, is
incorporated herein by reference to Exhibit 10(x) to the
report on Form 10-Q of CBS Corporation for the quarter ended
March 31, 1998.
10.9 Management Agreement, dated February 4, 1994, between
Westwood One, Inc. and Infinity Broadcasting Corporation is
incorporated herein by reference to Exhibit A to Appendix A
to the Proxy Statement of Westwood One, Inc. dated January
7, 1994.
10.10 Extension Agreement, dated March 31, 1997, extending term of
Management Agreement, dated February 4, 1994, between
Westwood One, Inc. and Infinity Broadcasting Corporation is
incorporated herein by reference to Exhibit 10.9 to the
report Form 10-K of Westwood One, Inc. for the year ended
December 31, 1997.
10.11 Representation Agreement, dated March 31, 1997, between
Westwood One, Inc. and the Company is incorporated herein by
reference to Exhibit 10.11 to the report Form 10-K of
Westwood One, Inc. for the year ended December 31, 1997.
10.12* Employment Agreement, entered into on June 20, 1996 and
effective December 1996, between CBS Corporation and Mel
Karmazin is incorporated herein by reference Exhibit 10(s)
to the report on Form 10-Q of CBS Corporation for the
quarter ended March 31, 1997.
</TABLE>
38 INFINITY BROADCASTING CORPORATION
<PAGE> 39
<TABLE>
<S> <C>
10.13* Employment Agreement entered into on May 1996, effective
November 28, 1995 and amended January 29, 1997, between CBS
Broadcasting Inc. and Daniel Mason is incorporated by
reference to Exhibit 10.13 to the Company's Registration
Statement No. 333-63727 on Form S-1, Amendment No. 4, filed
with the Securities and Exchange Commission on December 4,
1998.
10.14* Restated Employment Agreement, dated as of December 1, 1998,
between TDI Worldwide, Inc. and William Apfelbaum is
incorporated by reference to Exhibit 10.14 to the Company's
Registration Statement No. 333-63727 on Form S-1, Amendment
No. 4, filed with the Securities and Exchange Commission on
December 4, 1998.
10.15* The CBS Corporation 1991 Long-Term Incentive Plan, as
amended to January 28, 1998, is incorporated herein by
reference to Exhibit 10(g) to the report on Form 10-K of CBS
Corporation for the year ended December 31, 1997.
10.16* The CBS Corporation 1993 Long-Term Incentive Plan, as
amended to January 28, 1998 is incorporated herein by
reference to Exhibit 10(b) to the report on Form 10-K of CBS
Corporation for the year ended December 31, 1997.
10.17* 1998 Long-Term Incentive Plan of the Company is incorporated
by reference to Exhibit 10.17 to the Company's Registration
Statement No. 333-63727 on Form S-1, Amendment No. 4, filed
with the Securities and Exchange Commission on December 4,
1998.
10.18* 1998 Executive Annual Incentive Plan of the Company is
incorporated by reference to Exhibit 10.15 to the Company's
Registration Statement No. 333-63727 on Form S-1, Amendment
No. 4, filed with the Securities and Exchange Commission on
December 4, 1998.
10.19* The CBS Corporation Annual Performance Plan, as amended to
November 1, 1996, is incorporated herein by reference to
Exhibit 10(a) to the report Form 10-Q of CBS Corporation for
the quarter ended September 30, 1996.
10.20* The Westinghouse Executive Pension Plan, as amended to
December 1, 1997, is incorporated herein by reference to
Exhibit 10(d) to the report on Form 10-K of CBS Corporation
for the year ended December 31, 1997.
10.21* The CBS Corporation 1998 Executive Annual Incentive Plan is
incorporated herein by reference to Exhibit A to the Proxy
Statement of CBS Corporation dated May 6, 1998.
10.22 Form of Trademark License Agreement between CBS Worldwide
Inc. and the Company is incorporated by reference to Exhibit
10.24 to the Company's Registration Statement No. 333-63727
on Form S-1, Amendment No. 4, filed with the Securities and
Exchange Commission on December 4, 1998.
10.23 Form of Trademark License Agreement between CBS Broadcasting
Inc. and the Company is incorporated by reference to Exhibit
10.25 to the Company's Registration Statement No. 333-63727
on Form S-1, Amendment No. 4, filed with the Securities and
Exchange Commission on December 4, 1998.
10.24 Form of Trademark License Agreement between CBS Corporation
and the Company is incorporated by reference to Exhibit
10.26 to the Company's Registration Statement No. 333-63727
on Form S-1, Amendment No. 4, filed with the Securities and
Exchange Commission on December 4, 1998.
10.25* The Infinity Broadcasting Corporation Stock Plan for
Directors.
21. Subsidiaries
21.1 Subsidiaries of the Registrant
23. Consent of Independent Auditors
24. Powers of Attorney
24.1 Powers of Attorney of directors
27. Financial Data Schedule
27.1 Financial Data Schedule
</TABLE>
- ---------------
* Identifies management contract or compensatory plan or arrangement.
INFINITY BROADCASTING CORPORATION 39
<PAGE> 40
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INFINITY BROADCASTING CORPORATION:
Under date of January 27, 1999, we reported on the consolidated balance sheet of
Infinity Broadcasting Corporation and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of earnings, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998, which are included in the 1998 Annual Report on
Form 10-K. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule included in the 1998 Annual Report on Form 10-K. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion in this consolidated
financial statement schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
KPMG LLP
New York, New York
January 27, 1999
40 INFINITY BROADCASTING CORPORATION
<PAGE> 41
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(in thousands)
<TABLE>
<CAPTION>
ADDITIONS
----------------------------
BALANCE CHARGED INCREASE
AT TO RESULTING AMOUNTS BALANCE
BEGINNING COSTS AND FROM WRITTEN AT END OF
DESCRIPTION OF YEAR EXPENSES ACQUISITIONS OFF YEAR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 allowance for doubtful accounts $15,086 $14,365 $8,349(1) $(10,337) $27,463
1997 allowance for doubtful accounts 11,417 10,382 -- (6,713) 15,086
1996 allowance for doubtful accounts 4,332 2,398 7,722(2) (3,035) 11,417
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Relates to the acquisition of American Radio on June 4, 1998.
(2) Relates to the acquisition of Old Infinity on December 31, 1996.
INFINITY BROADCASTING CORPORATION 41
<PAGE> 42
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 29th day of March,
1999.
INFINITY BROADCASTING CORPORATION
By: /s/ FARID SULEMAN
--------------------------------------
Farid Suleman
Executive Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
SIGNATURE AND TITLE
Mel Karmazin, Chairman, President, and Chief Executive Officer
(Principal Executive Officer) and Director
Farid Suleman, Executive Vice President, Chief Financial Officer, Treasurer
(Principal Financial and Accounting Officer) and Director
George H. Conrades, Director
Richard R. Pivirotto, Director
Jeffrey Sherman, Director
Paula Stern, Director
Robert D. Walter, Director
INFINITY BROADCASTING CORPORATION
By: /s/ FARID SULEMAN
--------------------------------------
Farid Suleman
Executive Vice President, Chief
Financial Officer and Treasurer
Original powers of attorney authorizing Farid Suleman and certain others,
individually, to sign this report on behalf of the listed directors and officers
of the Company and a certified copy of resolutions of the Board of Directors of
the Company authorizing Farid Suleman and certain others to sign on behalf of
the Company have been filed with the Securities and Exchange Commission and are
included as Exhibit 24 to this report.
42 INFINITY BROADCASTING CORPORATION
<PAGE> 1
EXHIBIT 10.25
INFINITY BROADCASTING CORPORATION
STOCK PLAN FOR DIRECTORS
(EFFECTIVE AS OF DECEMBER 14, 1998)
SECTION 1. INTRODUCTION
1.1 Establishment. Infinity Broadcasting Corporation, a Delaware
corporation (the "Company"), has established the Infinity Broadcasting
Corporation Stock Plan for Directors, as such plan may be amended from time to
time (the "Plan"), for those directors of the Company who are neither officers
(other than non-executive officers) nor employees of the Company. The Plan
provides, among other things, for the payment of Director compensation,
including Board Chairman compensation and compensation for other special
services as a Director, if any, in the form of Stock Options and Restricted
Stock and the opportunity for the Directors to defer receipt of all or a part of
their cash compensation. Unless otherwise provided for herein, the term Company
includes Infinity Broadcasting Corporation and its subsidiaries.
1.2 Purposes. The purposes of the Plan are to encourage the Directors
to own shares of the Company's stock and thereby to align their interests more
closely with the interests of the other shareholders of the Company, to
encourage the highest level of Director performance, and to provide a financial
incentive that will help attract and retain the most qualified Directors.
1.3 1998 and 1999 Director Compensation. Directors will not be
compensated for their services as directors for 1998. Thereafter, Directors will
receive such compensation in such form, which may include cash, equity or any
combination thereof, as the Board or the Committee may from time to time
determine. For 1999, unless and until the Board or the Committee determines
otherwise, Directors will receive an annual director's fee of $30,000 in cash
(which will not be eligible for deferral under the Plan) and a grant of stock
options for 4,500 shares of Stock pursuant to Section 6. Such fee may be
prorated for Directors serving for less than the full year, but only to the
extent, if any, so determined by the Company. Directors will also be reimbursed
for their out-of-pocket expenses incurred in attending Board and committee
meetings.
SECTION 2. DEFINITIONS
2.1 Definitions. The following terms will have the meanings set forth
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Board Chairman" means the director who is the
non-employee, non-executive chairman of the Board, if any.
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<PAGE> 2
(c) "Cause" means any act of (i) fraud or intentional
misrepresentation or (ii) embezzlement, misappropriation or conversion of assets
or opportunities of the Company or any of its direct or indirect majority-owned
subsidiaries.
(d) "CBS" means CBS Corporation.
(e) "Change in Control" will have the meaning assigned to it
in Section 8.2.
(f) "Committee" means the Compensation Committee of the Board
(or any subcommittee thereof) or any successor committee established by the
Board, or any subcommittee thereof, in each case consisting of two or more
members each of whom is a "non-employee director" as that term is defined by
Rule 16b-3 under the Exchange Act, as such rule may be amended, or any successor
rule.
(g) "Continuing Directors" will have the meaning assigned to
it in Section 8.2.
(h) "Deferral Account" means the account established by the
Company in respect of each Director pursuant to Section 5.3(a) and to which
deferred cash compensation has been or will be credited pursuant to the Plan.
(i) "Director" means a member of the Board who is neither an
officer nor an employee of the Company. For purposes of the Plan, an employee is
an individual whose wages are subject to the withholding of federal income tax
under Section 3401 of the Internal Revenue Code, and an officer is an individual
elected or appointed by the Board or chosen in such other manner as may be
prescribed in the By-laws of the Company to serve as such, other than a
non-executive officer (such as the Board Chairman).
(j) "Eligible Director" means an individual who is director of
either the Company or CBS Corporation, or both.
(k) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(l) "Fair Market Value" means the mean of the high and low
prices of the Stock as reported by the composite tape of the New York Stock
Exchange (or such successor reporting system as the Committee may select) on the
relevant date or, if no sale of the Stock has been reported for that day, the
average of such prices on the next preceding day and the next following day for
which there were reported sales.
(m) "Grant Date" means, as to a Stock Option Award, the date
of grant pursuant to Section 6.1 and as to a Restricted Stock Award, the date of
grant pursuant to Section 7.1.
(n) "Grant Year" means, as to a particular award, the calendar
year in which the award was granted.
-2-
<PAGE> 3
(o) "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
(p) "Restricted Stock" means shares of Stock, or a contract
right to receive shares of Stock at a later time, awarded to a Director pursuant
to Section 7 which would become vested and nonforfeitable, in whole or in part,
upon the satisfaction of certain restrictions in accordance with the Plan.
(q) "Restricted Stock Award" means an award of shares of
Restricted Stock or of a contract right to receive shares of Stock at a later
time granted to a Director pursuant to Section 7 of the Plan.
(r) "Stock" means the Class A Common Stock, $0.01 par value,
of the Company.
(s) "Stock Option" means a non-statutory stock option to
purchase shares of Stock for a purchase price per share equal to the Exercise
Price (as defined in Section 6.2(a)) in accordance with the provisions of the
Plan.
(t) "Stock Option Award" means an award of Stock Options
granted to a Director pursuant to Section 6 of the Plan.
(u) "Stock Option Value" means the value of a Stock Option for
one share of Stock on the relevant date as determined by the Company using the
Black Scholes pricing model or any other reasonable method.
(v) "Stock Option Vesting Date" will have the meaning assigned
to it in Section 6.2(c).
2.2 Gender and Number. Except when otherwise indicated by the context,
the masculine gender will also include the feminine gender, and the definition
of any term herein in the singular will also include the plural.
SECTION 3. PLAN ADMINISTRATION
(a) The Plan will be administered by the Committee. The
members of the Committee will be members of the Board appointed by the Board,
and any vacancy on the Committee will be filled by the Board or in a manner
authorized by the Board.
(b) Subject to the limitations of the Plan, the Committee
and/or the Board, will have the sole and complete authority: (i) to impose such
limitations, restrictions and conditions upon such awards as it deems
appropriate; (ii) to interpret the Plan and to adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the Plan;
and (iii) to make all other determinations and to take all other actions
necessary or advisable for the implementation and administration of the Plan.
The Committee's or the Board's
-3-
<PAGE> 4
determinations on matters within its authority will be conclusive and binding
upon the Company and all other persons.
(c) The Company will be the sponsor of the Plan. All expenses
associated with the Plan will be borne by the Company.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. 250,000 shares of Stock are authorized for
issuance under the Plan in accordance with the provisions of the Plan, subject
to adjustment and substitution as set forth in this Section 4. This
authorization may be increased from time to time by approval of the Board and,
if such approval is required, by the shareholders of the Company. The Company
will at all times during the term of the Plan retain as authorized and unissued
Stock at least the number of shares from time to time required under the
provisions of the Plan, or otherwise assure itself of its ability to perform its
obligations hereunder.
4.2 Other Shares of Stock. Any shares of Stock that are subject to a
Stock Option Award or a Restricted Stock Award and which are forfeited for any
reason, any shares of Stock that for any other reason are not issued to a
Director, and any shares of Stock tendered by a Director to pay the Exercise
Price of a Stock Option will automatically become available again for use under
the Plan if Rule 16b-3 under the Exchange Act, as such rule may be amended, or
any successor rule, and interpretations thereof by the Securities and Exchange
Commission or its staff permit such share replenishment.
4.3 Adjustments Upon Changes in Stock. If there is any change in the
Stock of the Company, through merger, consolidation, division, share exchange,
combination, reorganization, recapitalization, stock dividend, stock split,
spin-off, split up, dividend in kind or other change in the corporate structure
or distribution to the shareholders, appropriate adjustments may be made by the
Board or the Committee (or, if the Company is not the surviving corporation in
any such transaction, the board of directors of the surviving corporation) in
the aggregate number and kind of shares subject to the Plan, and the number and
kind of shares which may be issued under the Plan. Appropriate adjustments may
also be made by the Board or the Committee in the terms of any awards under the
Plan to reflect such changes and to modify any other terms of outstanding awards
on an equitable basis as the Board or the Committee in its discretion
determines.
SECTION 5. DEFERRAL OF COMPENSATION
5.1 Amount of Deferral. Unless the Board or the Committee determines
that a particular type or award of Director compensation will not be deferrable
under the Plan, either for a given year or years or in general, a Director may
elect to defer receipt of all or a specified portion of the cash compensation
otherwise payable to the Director for services rendered to the Company in any
capacity as a director.
5.2 Manner of Electing Deferral. A Director will make elections
permitted hereunder by giving written notice to the Company in a form approved
by the Board or the Committee and in compliance with Section 5.4. The notice
will include: (i) the percentage of
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<PAGE> 5
cash compensation to be deferred, which amount must be stated in whole
increments of five percent; and (ii) the time as of which deferral is to
commence.
5.3 Deferral Accounts.
(a) Deferral Accounts. A Deferral Account has been or will be
established for each Director electing to defer hereunder. Each Deferral Account
will be credited with the amounts deferred on the date such compensation would
otherwise be payable and will be debited with the amount of any such
compensation forfeited in accordance with applicable Board policy, if any.
(b) Interest. Unless otherwise determined by the Board or the
Committee prior to the deferral date, amounts in a Deferral Account will accrue
interest from time to time at the Interest Credit Rate then in effect,
compounded annually. The "Interest Credit Rate" will be reset by the Company on
an annual basis in January of the year, and will equal the then current one-year
U.S. Treasury Bill rate or such other fixed rate as the Board or the Committee
may from time to time determine.
5.4 Time for Electing Deferral. Any election to (i) defer cash
compensation, (ii) alter the portion of such amounts deferred, or (iii) revoke
an election to defer such amounts, must be made prior to the time such
compensation is earned by the Director and otherwise in compliance with any
deadline which the Company may from time to time impose and in the manner set
forth in Section 5.2.
5.5 Payment of Deferred Amounts. Payments from a Deferral Account will
consist of the deferred cash compensation and accumulated interest in said
account and, unless otherwise determined by the Board or the Committee prior to
the time payments commence, will be made in five consecutive annual installments
beginning in the January following the date the Director ceases to be an
Eligible Director.
5.6 Payments to a Deceased Director's Estate. In the event of a
Director's death before the balance of his or her Deferral Account is fully paid
to the Director, payment of the balance of the Deferral Account will then be
made to the beneficiary properly designated by the Director pursuant to Section
5.7, if any, or to his or her estate in the absence of such a beneficiary
designation, in the time and manner selected by the Board or the Committee. The
Board or the Committee may take into account the application of any duly
appointed administrator or executor of a Director's estate and direct that the
balance of the Director's Deferral Account be paid to his or her estate in the
manner requested by such application.
5.7 Designation of Beneficiary. A Director may designate a beneficiary
in the event of the Director's death in a form approved by the Company.
-5-
<PAGE> 6
SECTION 6. STOCK OPTION AWARDS
6.1 Grants of Stock Option Awards.
(a) General Stock Option Grants. The Board or the Committee
may, from time to time, grant Stock Option Awards to one or more Directors or to
the Board Chairman, if any, for such number of shares as the Board or the
Committee may determine as all or a portion of the annual director's fee or the
Board Chairman's fee, if any, for a given year or years, or as compensation for
special services outside of the scope of normal Board, committee or Board
Chairman activities, or as additional compensation to such Director or Directors
or to such Board Chairman, if any, for their services as such.
(b) Certain Annual Director's Fee Grants. In the event that
the Board or the Committee determines that a percentage of the value of the
annual director's fee for a given year or years (which may be prorated for
Directors serving less than a full year) will be in the form of a Stock Option
Award, then, unless the Board or the Committee determines otherwise: (i) such
Stock Options will be granted automatically on the last Wednesday in January of
such year to each Director in office on such Grant Date, or, if a person joins
the Board or otherwise first becomes a Director at any time after the last
Wednesday in January of a given calendar year, on the last Wednesday of the
calendar month in which such person first becomes a Director (or in the next
following calendar month if such person first becomes a Director after the last
Wednesday of the month); and (ii) the total number of shares of Stock subject to
any such Stock Option Award will be the number of shares determined by dividing
the amount of the annual director's fee to be paid in the form of a Stock Option
Award by the Stock Option Value on the Grant Date, rounded up to the nearest
whole share.
(c) Adjustments. All Stock Options granted pursuant to Section
6.1 are subject to adjustment as provided in Section 4.3.
6.2 Terms and Conditions of Stock Options. Unless otherwise determined
by the Board or the Committee, Stock Options granted under the Plan will be
subject to the following terms and conditions:
(a) Exercise Price. The purchase price per share at which a
Stock Option may be exercised ("Exercise Price") will be equal to the Fair
Market Value of a share of Stock on the Grant Date. Notwithstanding anything
herein to the contrary, in no event may the Board or the Committee establish an
Exercise Price that is less than the Fair Market Value of a share of Stock on
the Grant Date.
(b) Exercisability. Subject to the terms and conditions of the
Plan and of the agreement referred to in Section 6.2(j), a Stock Option may be
exercised in whole or in part as to any shares as to which it has become
exercisable ("vested") upon notice of exercise to the Company commencing on the
Option Vesting Date, as set forth in Section 6.2(c), for such Stock Option
shares and thereafter until the Stock Option terminates. During a Director's
lifetime, a Stock Option may be exercised only by the Director or the Director's
guardian or legal representative.
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<PAGE> 7
(c) Vesting of Stock Option Awards.
(1) To the extent otherwise outstanding, Stock Options will
become exercisable ("vest") as to shares as follows ("Stock Option Vesting Date
or Dates"):
(i) except as otherwise provided pursuant to Section
6.2(c)(1)(ii) or (iii), and provided that the Director is an Eligible Director
on each respective Stock Option Vesting Date:
(a) one-third of the Stock Option shares (rounded
down to the nearest whole share) will become exercisable commencing on January 1
of the calendar year next following the Grant Year;
(b) one-half of the remaining Stock Option shares
(rounded down to the nearest whole share) will become exercisable commencing on
January 1 of the second calendar year following the Grant Year; and
(c) the remaining Stock Option shares will become
exercisable commencing on January 1 of the third calendar year following the
Grant Year;
(ii) in the event that a Director ceases to be an Eligible
Director prior to the time his or her Stock Options vest for any reason other
than removal from office as a director of the Company and/or as a director of
CBS, if applicable, for Cause, then a prorata portion of the Stock Option shares
that would otherwise have vested on the January 1 following the date the
Director so ceased to be an Eligible Director (based on the number of full and
partial months served in the calendar year in which he or she ceased to be an
Eligible Director divided by 12) will vest on such January 1 and all other
unvested Stock Option shares will remain unvested; and
(iii) all outstanding Stock Option shares which have not
otherwise become exercisable pursuant to Section 6.2(c)(1)(i) will become
immediately exercisable upon the occurrence of a Change in Control as set forth
in Section 8.
(2) Notwithstanding anything to the contrary herein, (i) in
the event that a director is removed for Cause from office as a director of the
Company and/or of CBS, if applicable (and/or, in the case of Stock Options
granted to a director in his or her capacity as Board Chairman, from office as
Board Chairman, if applicable), all outstanding Stock Options will be forfeited
immediately as of the time the grantee is so removed from office, and (ii) upon
the occurrence of a Change in Control, all outstanding Stock Options will vest
and become immediately exercisable.
(d) Mandatory Holding of Stock. Except as otherwise provided
in Section 9 and except as otherwise determined by the Board or the Committee,
any Stock acquired on exercise of a Stock Option must be held by the grantee
until the later of: (1) three years from the Grant Date; (2) two years from the
date the grantee ceases to be an Eligible Director; or (3) until the occurrence
of a Change in Control, whichever first occurs (the "Option Shares Holding
-7-
<PAGE> 8
Period"); provided, however, as long as at least six months have elapsed since
the Grant Date, such Option Shares Holding Period, if any, will not apply in the
case of a beneficiary properly designated by the Director pursuant to Section
6.3, if any, or a person holding a Stock Option under a deceased grantee's will
or under the applicable laws of descent or distribution, exercising a Stock
Option in accordance with Section 6.2(h)(3).
(e) Option Term. The term of a Stock Option (the "Option
Term") will be the shorter of: (1) the period of ten years from its Grant Date;
(2) the period from the Grant Date until the time the Stock Option is forfeited
as provided in Section 6.2(c)(2)(i) in the event of removal from office for
Cause; (3) as to any portion of a Stock Option, the period from the Grant Date
until the date such Stock Option can no longer become vested as provided in
Section 6.2(c)(1) because the grantee has ceased to be an Eligible Director; or
(4) the period from the Grant Date until the date the Stock Option (or portion
thereof) ceases to be exercisable as provided in Section 6.2(h).
(f) Payment of Exercise Price. Stock purchased on exercise of
a Stock Option must be paid for as follows: (1) in cash or by check (acceptable
to the Company), bank draft or money order payable to the order of the Company;
(2) through the delivery of shares of Stock which are then outstanding and which
have a Fair Market Value on the date of exercise equal to the Exercise Price per
share multiplied by the number of shares as to which the Stock Option is being
exercised (the "Aggregate Exercise Price"); (3) by delivery of an unconditional
and irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the Aggregate Exercise Price; or (4) by a combination of
the permissible forms of payment; provided, however, that any portion of the
Exercise Price representing a fraction of a share must be paid in cash and no
share of Stock held for less than six months may be delivered in payment of the
Aggregate Exercise Price.
(g) Rights as a Shareholder. The holder of a Stock Option will
not have any of the rights of a shareholder with respect to any shares of Stock
subject to the Stock Option until such shares are issued by the Company
following the exercise of the Stock Option.
(h) Termination of Eligibility. If a grantee ceases to be an
Eligible Director for any reason prior to the end of the ten year period from
the Grant Date, any outstanding Stock Options will be exercisable according to
the following provisions:
(1) If a grantee ceases to be an Eligible Director for any
reason other than removal for Cause or death, any outstanding Stock Options held
by such grantee which are vested or which thereafter vest in accordance with
Section 6.2(c)(1)(ii) or (iii) will be exercisable by the grantee in accordance
with their terms at any time prior to the expiration of the Option Term;
(2) If a grantee is removed for Cause from office as a
director of the Company and/or of CBS, if applicable (and/or, in the case of
Stock Options granted to a director in his or her capacity as Board Chairman,
from office as Board Chairman, if applicable), for Cause, any outstanding
unvested Stock Options held by such grantee will be forfeited and any
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<PAGE> 9
outstanding vested Stock Options will cease to be exercisable by the grantee at
the earlier of (a) the time the grantee is so removed from office and (b) the
expiration of the Option Term; and
(3) Following the death of a grantee, any Stock Options that
are outstanding and exercisable by such grantee at the time of death or which
thereafter vest in accordance with Section 6.2(c)(1)(ii) or (iii) will be
exercisable in accordance with their terms by the person or persons entitled to
do so under the grantee's will, by a beneficiary properly designated by the
director in the event of death pursuant to Section 6.3, if any, or by the person
or persons entitled to do so under the applicable laws of descent and
distribution at any time prior to the earlier of (a) the expiration of the
Option Term and (b) two years after the date of death.
(i) Termination of Stock Option. A Stock Option will terminate
on the earlier of (1) exercise of the Stock Option in accordance with the terms
of the Plan, and (2) expiration of the Option Term as specified in Sections
6.2(e) and 6.2(h).
(j) Stock Option Agreement. All Stock Options will be
evidenced by an agreement, or an amendment thereto, which will be executed on
behalf of the Company by the Chief Executive Officer, the President, or any Vice
President and by the grantee.
(k) General Restrictions.
(1) The obligation of the Company to issue Stock pursuant to
Stock Options under the Plan will be subject to the condition that, if at any
time the Company determines that (a) the listing, registration or qualification
of shares of Stock upon any securities exchange or under any state or federal
law, or (b) the consent or approval of any government or regulatory body is
necessary or desirable, then such Stock will not be issued unless such listing,
registration, qualification, consent or approval has been effected or obtained
free from any conditions not acceptable to the Company.
(2) Shares of Stock for use under the provisions of this
Section 6 will not be issued until they have been duly listed, upon official
notice of issuance, upon the New York Stock Exchange and such other exchanges,
if any, as the Board may determine, and a registration statement under the
Securities Act of 1933 with respect to such shares has become, and is,
effective.
Subject to the provisions of the Plan, any Stock Option granted under
the Plan will be subject to such restrictions and other terms and conditions, if
any, as the Board and/or the Committee may determine, in its or their
discretion, and as are set forth in the agreement referred to in Section 6.2(j),
or an amendment thereto; provided, however, that in no event will the Committee
or the Board have any power or authority which would cause transactions pursuant
to the Plan to cease to be exempt from the provisions of Section 16(b) of the
Exchange Act pursuant to Rule 16b-3, as such rule may be amended, or any
successor rule.
6.3 Designation of a Beneficiary. A Director may designate a
beneficiary to hold and exercise outstanding vested Stock Options in accordance
with the Plan in the event of the Director's death in a form approved by the
Company.
-9-
<PAGE> 10
SECTION 7. RESTRICTED STOCK AWARDS.
7.1 Grants of Restricted Stock Awards.
(a) Restricted Stock Grants. The Board or the Committee may,
from time to time, grant Restricted Stock Awards to one or more Directors or to
the Board Chairman, if any, for such number of shares of Restricted Stock as the
Board or the Committee may determine as all or a portion of the annual
director's fee or the Board Chairman's fee, if any, for a given year or years,
or as compensation for special services outside of the scope of normal Board,
committee or Board Chairman activities, or as additional compensation to such
Director or Directors or to such Board Chairman, if any, for their services as
such, all subject to this Section 7 and to such other terms and conditions as
the Board or the Committee may provide.
(b) Adjustments. Restricted Stock granted pursuant to Section
7.1 is subject to adjustment as provided in Section 4.3.
7.2 Restricted Stock Agreement; Issuance of Shares. All Restricted
Stock Awards will be evidenced by an agreement, or an amendment thereto, which
will be executed on behalf of the Company by the Chief Executive Officer, the
President or any Vice President and by the grantee.
If the Restricted Stock Award is made in shares (rather than as a
contract right to receive shares), a certificate representing the shares of
Restricted Stock will be registered in the name of the Director and deposited by
him or her, together with a stock power endorsed in blank, with the Company.
7.3 Restriction Period; Dividends or Dividend Equivalents
(a) Restriction Period. At the time of award of Restricted
Stock, there will be established for each grantee a "Restriction Period" of such
length as the Board or the Committee determines. The Restriction Period may be
waived by the Board or the Committee. Shares of Restricted Stock and contract
rights to receive shares of Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as otherwise provided in Section 9.
Upon the expiration or waiver by the Board or the Committee of the
Restriction Period and the satisfaction (as determined by the Board or the
Committee) of any other conditions determined by the Board or the Committee,
restrictions applicable to the Restricted Stock will lapse and the Company will,
in the case of shares of Restricted Stock, redeliver to the grantee (or to his
or her legal representative or designated beneficiary) the shares deposited
pursuant to Section 7.2 free and clear of all restrictions except as may be
imposed by law and, in the case of contract rights to receive shares of Stock,
will pay out such shares as provided in the Restricted Stock Agreement.
(b) Dividends or Dividend Equivalents. Subject to the
restrictions on transfer set forth in Section 7.3(a), the grantee as owner of
shares of Restricted Stock will have the rights
-10-
<PAGE> 11
of the holder of such Restricted Stock, except that the Board or the Committee
may provide at the time of the award that any dividends or other distributions
paid with respect to such Stock during the Restriction Period will be
accumulated and held by the Company and will be subject to the same forfeiture
provisions and the same restrictions on transfer as apply to the shares of
Restricted Stock with respect to which they were paid.
The Board or the Committee will determine whether and to what extent,
if any, to credit to the account of, or to pay currently to, each recipient of a
contract right to receive shares of Stock, an amount equal to any dividends or
other distributions paid during the Restriction Period with respect to the
corresponding number of shares of Stock covered thereby ("Dividend Equivalent").
To the extent provided by the Board or the Committee at or after the date of
grant, any Dividend Equivalents with respect to cash dividends on the Stock
credited to a grantee's account will be deemed to have been invested in shares
of Stock on the record date established for the related dividend and,
accordingly, a contract right to receive a number of additional shares of Stock
will be credited to such grantee's account equal to the greatest whole number
which may be obtained by dividing (x) the value of such Dividend Equivalent on
the record date by (y) the Fair Market Value of a share of Stock on such date.
7.4 Termination of Eligibility.
Unless otherwise determined by the Board or the Committee, in the event
the grantee is no longer an Eligible Director, all shares of Restricted Stock
and contract rights to receive shares of Stock previously awarded to him or her
which are still subject to restrictions, along with any dividends or other
distributions thereon or any dividend equivalents that have been accumulated and
held by the Company, will be forfeited, and in the case of Restricted Stock, the
Company will have the right to complete the blank stock power.
7.5 Transfer and Other Restrictions.
(a) Except as otherwise provided in Section 9, shares of
Restricted Stock and contract rights to receive shares of Stock are not
transferable during the Restriction Period.
(b) The obligation of the Company to issue shares of
Restricted Stock or to issue Stock pursuant to a contract right to receive
shares of Stock under the Plan will be subject to the condition that if, at any
time, the Company determines that (i) the listing, registration or qualification
of shares of Restricted Stock upon any securities exchange or under any state or
federal law or (ii) the consent or approval of any government or regulatory body
is necessary or desirable, then such Restricted Stock will not be issued unless
such listing, registration, qualification, consent or approval has been effected
or obtained free from any conditions not acceptable to the Company.
(c) Shares of Stock for use under the provisions of this
Section 7 will not be issued until they have been duly listed, upon official
notice of issuance, upon the New York Stock Exchange and such other exchanges,
if any, as the Board may determine, and a registration statement under the
Securities Act of 1933 with respect to such shares has become, and is,
effective.
-11-
<PAGE> 12
(d) Subject to the foregoing provisions of this Section 7 and
the other provisions of the Plan, any shares of Restricted Stock or contract
rights to receive shares of Stock granted under the Plan will be subject to such
restrictions and other terms and conditions, if any, as the Board or the
Committee may be determine, in its discretion, and as are set forth in the
agreement referred to in Section 7.2, or an amendment thereto; provided,
however, that in no event will either the Committee or the Board have any power
or authority which would cause transactions pursuant to the Plan (other than
pursuant to Section 8) to cease to be exempt from the provisions of Section
16(b) of the Exchange Act under Rule 16b-3, as such rule may be amended, or any
successor rule.
SECTION 8. CHANGE IN CONTROL
8.1 Settlement of Compensation. In the event of a Change in Control of
the Company as defined herein, (a) to the extent not already vested, all Stock
Option Awards, Restricted Stock Awards and other benefits hereunder will be
vested immediately; and (b) the value of all unpaid benefits and deferred
amounts will be paid in cash to a trustee or otherwise on such terms as a
majority of the Continuing Directors (or a majority of the members of a
subcommittee of the Committee consisting solely of members who are Continuing
Directors ("Continuing Directors Subcommittee")) may prescribe or permit.
8.2 Definition of Change in Control. A Change in Control will mean the
occurrence of one or both of the following:
(a) at any time during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire Board, or
individuals whose election or nomination for election to the Board was approved
by a vote of at least two-thirds of the directors then still in office who were
either directors at the beginning of such two-year period or whose nomination or
election was so approved by such directors (together, the "Continuing
Directors"), shall cease for any reason to constitute at least a majority of the
entire Board; or
(b) a majority of the Continuing Directors or of the members
of the Continuing Directors Subcommittee shall determine that a Change in
Control has occurred for purposes of the Plan.
SECTION 9. ASSIGNABILITY
9.1 The right to receive shares, payments or distributions hereunder
(including any "derivative security" issued pursuant to the Plan, as such term
is defined by the rules promulgated under Section 16 of the Exchange Act), any
shares of Restricted Stock granted hereunder during the Restriction Period, and
any Stock Options granted hereunder will not be transferable or assignable by a
Director other than by will, by the laws of descent and distribution, to a
beneficiary properly designated by the Director pursuant to the appropriate
section of the Plan in the event of death, if any, or pursuant to a domestic
relations order as defined by Section 414(p)(1)(B) of the Internal Revenue Code
or the rules thereunder that satisfies Section 414(p)(1)(A) of the Internal
Revenue Code or the rules thereunder.
-12-
<PAGE> 13
9.2 In addition, Stock acquired on exercise of a Stock Option will not
be transferable prior to the end of the applicable Option Shares Holding Period,
if any, other than by will, by transfer to a beneficiary properly designated by
the Director pursuant to the appropriate section of the Plan in the event of
death, if any, by the applicable laws of descent and distribution, or pursuant
to a domestic relations order as defined by Section 414(p)(1)(B) of the Internal
Revenue Code or the rules thereunder that satisfies Section 414(p)(1)(A) of the
Internal Revenue Code or the rules thereunder.
SECTION 10. RETENTION; WITHHOLDING OF TAX
10.1 Retention. Nothing contained in the Plan or in any Stock Option
Award or Restricted Stock Award granted under the Plan (other than Section 8)
will interfere with or limit in any way the right of the Company to remove any
director from the Board or to remove the Board Chairman, if any, from office as
such pursuant to the Restated Certificate of Incorporation and the Bylaws of the
Company, nor confer upon any Director any right to continue in the service of
the Company.
10.2 Withholding of Tax. To the extent required by applicable law and
regulation, each Director must arrange with the Company for the payment of any
federal, state or local income or other tax applicable to any payment or any
delivery of Stock hereunder before the Company will be required to make such
payment or issue (or, in the case of Restricted Stock, deliver) such shares
under the Plan.
SECTION 11. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the Plan.
SECTION 12. REQUIREMENTS OF LAW
12.1 Federal Securities Law Requirements. Implementation and
interpretations of, and transactions pursuant to, the Plan will be subject to
all conditions required under Rule 16b-3, as such rule may be amended, or any
successor rule, to qualify such transactions for any exemption from the
provisions of Section 16(b) of the Exchange Act available under that rule, or
any successor rule.
12.2 Governing Law. The Plan and all agreements hereunder will be
construed in accordance with and governed by the laws of the State of Delaware.
SECTION 13. OTHER COMPENSATION
Nothing contained in the Plan will be deemed to limit or restrict the
right of the Company to compensate directors for their services in any capacity
in whole or in part under separate compensation or deferral plans or programs
for directors or under other compensation arrangements.
-13-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Subsidiary companies of the Registrant are listed below. With respect to the
companies named, all voting securities are owned directly or indirectly by the
Registrant, except where otherwise indicated.
<TABLE>
<CAPTION>
INCORPORATED OWNED BY
UNDER IMMEDIATE
NAME LAWS OF PARENT
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Infinity Broadcasting Corporation Delaware 82.00
Infinity Media Corporation(1) Delaware 100.00
TDI Worldwide, Inc.(2) Delaware 100.00
TDI Metro Limited Ireland 51.00
Metro Poster Advertising Ltd. Ireland 100.00
Roadshow Advertising Ltd. Ireland 100.00
TDI Holdings Limited(3) UK 100.00
LDI Limited UK 100.00
TDI Advertising Limited(4) UK 100.00
TDI Mail Holdings Limited(5) Northern Ireland 100.00
UCGI, Inc. Delaware 100.00
TMRG, Inc. Delaware 100.00
CBS Radio, Inc.(6) Delaware 100.00
Radio Data Group, Inc. Virginia 50.00
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Infinity Media Corporation is also the parent company of 50 wholly-owned
subsidiaries which consist primarily of radio stations operations, all of
which are incorporated in the United States.
(2) TDI Worldwide, Inc. is also the parent company of 6 wholly-owned outdoor and
transit advertising companies and franchises, all of which are incorporated
in the United States.
(3) TDI Holdings Limited is also the parent company of 5 wholly-owned
subsidiaries which consist primarily of outdoor and transit advertising
operations, all of which are incorporated in the Netherlands.
(4) TDI Advertising Limited is also the parent company of 6 wholly-owned outdoor
and transit advertising companies and franchises, all of which are
incorporated in the United Kingdom.
(5) TDI Mail Holdings Limited is the parent company of 3 wholly-owned outdoor
and transit advertising companies, all of which are incorporated in foreign
countries.
(6) CBS Radio, Inc. is also the parent company of 14 wholly-owned subsidiaries
which consist primarily of radio station operations, all of which are
incorporated in the United States.
INFINITY BROADCASTING CORPORATION 43
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in each prospectus constituting
part of the Registration Statements on Form S-8 (No. 333-74387) of Infinity
Broadcasting Corporation of our report dated January 27, 1999 appearing on page
21 of this Form 10-K. We also consent to the incorporation by reference of our
report on the financial statement schedule, which appears on page 40 of this
Form 10-K.
/s/ KPMG LLP
KPMG LLP
New York, New York
March 29, 1999
44 INFINITY BROADCASTING CORPORATION
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<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
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