<PAGE> 1
Filed pursuant to Rule 424(b)4
Registration No. 333-25497
11,000,000 SHARES
<TABLE>
<S> <C>
[CLR CH LOGO] [CLEAR CHANNEL COMMUNICATIONS, INC.]
</TABLE>
COMMON STOCK
---------------------
Of the 11,000,000 shares of Common Stock offered hereby (the "Offering"),
5,093,790 shares are being sold by Clear Channel Communications, Inc. (the
"Company") and 5,906,210 shares are being sold by certain selling shareholders
named herein (the "Selling Shareholders"). See "Selling Shareholders." The
Company will not receive any of the proceeds from the sale of Common Stock by
the Selling Shareholders. The Common Stock of the Company is traded on the New
York Stock Exchange under the symbol "CCU". On May 13, 1997, the last reported
sale price of the Common Stock was $49.00 per share. See "Price Range of Common
Stock."
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
==================================================================================================================
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
- ------------------------------------------------------------------------------------------------------------------
Per Share.............. $49.00 $1.666 $47.334 $47.334
- ------------------------------------------------------------------------------------------------------------------
Total(3)............... $539,000,000 $18,326,000 $241,109,456 $279,564,544
==================================================================================================================
</TABLE>
(1) See "Underwriting" for information relating to the indemnification of the
Underwriters.
(2) Before deducting expenses payable by the Company and the Selling
Shareholders estimated at $500,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 1,000,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, and Proceeds to
Company will be $588,000,000, $19,992,000 and $288,443,456, respectively.
See "Underwriting."
---------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the Common Stock will be made at the offices of Alex.
Brown & Sons Incorporated, Baltimore, Maryland, on or about May 19, 1997.
ALEX. BROWN & SONS
INCORPORATED
CREDIT SUISSE FIRST BOSTON
FURMAN SELZ
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
THE DATE OF THIS PROSPECTUS IS MAY 14, 1997
<PAGE> 2
[ARTWORK]
IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS PARTICIPATING IN THIS
OFFERING MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NEW YORK STOCK EXCHANGE IN ACCORDANCE WITH RULE 103 UNDER REGULATION M. SEE
"UNDERWRITING."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including notes thereto, appearing in the
documents incorporated by reference into this Prospectus. All information set
forth herein has been adjusted to reflect five-for-four stock splits effected in
February 1992, February 1993, and February 1994, and two-for-one stock splits
effected in November 1995 and December 1996. Unless the context otherwise
requires, references herein to the "Company" are to Clear Channel
Communications, Inc. and its consolidated subsidiaries, and references herein to
"Eller Media" are to Eller Media Corporation and its consolidated subsidiaries
prior to the consummation of the Eller Media Acquisition (as hereinafter
defined). Unless otherwise indicated, the information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option. See "Underwriting."
THE COMPANY
The Company, which began operations in 1972, is a diversified media company
that currently owns or programs 112 radio stations and 18 television stations in
28 domestic markets and is one of the largest domestic outdoor advertising
companies based on its total advertising display inventory of approximately
50,000 display faces in 15 major metropolitan markets. In addition, the Company
owns a 50% equity interest in the Australian Radio Network Pty. Ltd. ("ARN"),
which operates ten radio stations in Australia, a one-third equity interest in
the New Zealand Radio Network, which operates 52 radio stations throughout New
Zealand, and a 32.3% equity interest in Heftel Broadcasting Corporation
(Nasdaq:HBCCA) ("Heftel"), a leading domestic Spanish-language broadcaster which
operates 38 radio stations in 11 domestic markets. The Company currently has
acquisitions pending for 19 radio stations, including 8 stations which the
Company currently programs and/or sells air time under Local Marketing
Agreements ("LMA") or Joint Sales Agreements ("JSA"), in 6 domestic markets.
After completion of the pending acquisitions, the Company will own or program
123 radio stations.
The 38 AM and 74 FM radio stations currently owned or programmed by the
Company are principally located in the South, Southeast, Southwest, Northeast
and Midwest. These radio stations employ a wide variety of programming formats,
such as News/Talk/Sports, Country, Adult Contemporary, Urban and Album Rock. The
18 television stations currently owned or programmed by the Company are located
in the South, Southeast, Northeast and Midwest. Seven of these television
stations are affiliated with the FOX television network; seven are affiliated
with the UPN television network; one is affiliated with the ABC television
network; one is affiliated with the NBC television network; and two are
affiliated with the CBS television network. Additionally, the Company operates
five radio networks serving Oklahoma, Texas, Iowa, Kentucky and Virginia. In
1996, the Company derived approximately 62% of its net broadcasting revenue from
radio operations and approximately 38% from television operations.
The Company, through its recent acquisition of Eller Media, is one of the
largest domestic outdoor advertising companies with a total advertising display
inventory of approximately 50,000 display faces. The Company provides outdoor
advertising services in 15 major metropolitan markets. The Company currently has
both outdoor advertising and broadcasting assets in seven domestic markets, as
well as in five additional domestic markets currently served by Heftel. The
markets in which the Company now provides outdoor advertising services represent
approximately 22% of the total U.S. population and approximately 50% of the
rapidly growing U.S. Hispanic population. The Company now has a significant
presence in eight of the ten largest U.S. Hispanic markets, including Los
Angeles, Miami, Chicago and San Antonio. See "Business -- Outdoor Advertising."
The Company's successful operating strategies and acquisition track record,
combined with its diversity of radio and television stations in terms of markets
and formats, have enabled the Company to achieve consistent growth in revenue
and cash flow. Since 1992, the Company has achieved compounded annual growth
rates of approximately 43% in net revenue, approximately 52% in
3
<PAGE> 4
broadcast cash flow (defined as station operating income before depreciation,
amortization and corporate expenses) and approximately 58% in after-tax cash
flow (defined as net income before unusual items plus depreciation, amortization
of intangibles -- including non-consolidated affiliates -- and deferred taxes).
COMPANY STRATEGY
The Company's overall strategy is to assist its customers in marketing
their products and services in the most effective and cost-efficient manner
possible. As such, the Company has worked to assemble assets that it believes
are most suited for this purpose. While the Company has traditionally focused on
radio and television broadcasting, it has recently added outdoor advertising
assets to its holdings through its acquisition of Eller Media. The Company plans
to use its further diversified collection of assets, along with the operating
expertise of its management, to continue to generate healthy internal growth.
The Company believes it can augment this internal growth with the opportunistic
acquisition of additional media assets. Such potential acquisitions will be
evaluated based on their strategic value to the Company. The Company believes
that additional acquisitions that meet the Company's criteria will add revenue
and cash flow to its results and improve the performance of the Company's
existing assets. Historically, the Company has been able to generate significant
returns for its investors while maintaining financial flexibility through the
prudent use of leverage. The Company believes that this prudent use of leverage
has also contributed to the Company's relatively low cost of capital. The
Company believes that focusing on its clients' goals, creating a sales-intensive
operating organization, and maintaining a conservative financial position are
aspects of its operating strategy which are more effective in combination than
they would be independently.
The Company believes that the potential exists for cooperation between its
various business segments and that it can help its customers market their
products and services more effectively and efficiently by offering greater
flexibility in the choice of media outlets for marketing messages. The Company
is now able to offer additional advertising solutions for its customers in those
markets where it operates radio and television stations and outdoor advertising
displays. Additionally, the Company intends to use its various business segments
to cross-promote one another when possible. In this way, the Company believes
that its combination of assets will allow it to offer greater value to its
customers.
Broadcast Strategy. The Company's broadcast strategy is to identify and
acquire under-performing stations on favorable terms and to utilize management's
extensive operating experience to improve the performance of such stations as
well as its existing stations through effective programming, reduction of costs
and aggressive promotion, marketing and sales. In addition, the Company employs
a marketing strategy that emphasizes direct sales to local customers rather than
through advertising agencies and other intermediaries. The Company believes that
this focus has enabled its stations to achieve market revenue shares exceeding
their audience shares.
The Company's radio strategy is to assemble and operate a cluster of radio
stations in each of its principal markets. The Company believes that by
controlling a larger share of the total advertising inventory in a particular
market, it can offer advertisers attractive packages of advertising options. The
Company also believes that its cluster approach will allow it to operate its
stations with more highly skilled local management teams and eliminate
duplicative operating and overhead expenses. The Company's television strategy
is to own and program one station in each of its markets and to program an
additional station under an LMA in each such market. In seven of its television
markets, the Company already programs an additional television station under an
LMA.
Outdoor Advertising Strategy. The Company's outdoor advertising strategy is
to expand its market presence in the outdoor advertising business and improve
its operating results by (i) managing the advertising rates and occupancy levels
of its displays to maximize market revenues; (ii) attracting new categories of
advertisers to the outdoor medium through significant
4
<PAGE> 5
investments in sales and marketing resources; (iii) increasing focus on local
advertising sales; (iv) constructing new displays and upgrading its existing
displays; (v) taking advantage of technological advances which increase both
sales force productivity and production department efficiency; and (vi)
acquiring additional displays in its existing markets and expanding into
additional markets where the Company already has a broadcasting presence as well
as the country's largest media markets and their surrounding regional areas. The
Company believes this strategy enhances its ability to effectively respond to
advertisers' needs.
To support this outdoor advertising operating strategy, the Company has
decentralized its operating structure related to outdoor advertising in order to
place authority, autonomy and accountability at the market level and provide
local management with the tools necessary to oversee sales, display development,
administration and production and to identify suitable acquisition candidates.
The Company also maintains a fully-staffed sales and marketing office in New
York which services national outdoor advertising accounts and supports the
Company's local sales force in each market. The Company believes that one of its
strongest competitive advantages is its unique blend of highly experienced
corporate and local market management.
RECENT DEVELOPMENTS
ELLER MEDIA CORPORATION
On April 10, 1997, the Company acquired approximately 93% of the then
outstanding stock of Eller Media for a total consideration of approximately $623
million, consisting of approximately $325 million in cash and 6,643,637 shares
of Common Stock (approximately $298 million in Common Stock based on a price per
share of approximately $44.8625 per share) (the "Eller Media Acquisition").
Immediately following the consummation of the Eller Media Acquisition, the
Company retired approximately $417 million of Eller Media's outstanding bank
debt through borrowings under the Company's credit facility (the "Credit
Facility"). In addition, the Company issued options (with an estimated fair
value of approximately $51 million) to purchase 1,468,182 shares of the
Company's Common Stock in connection with the assumption of Eller Media's
outstanding stock options. The Company also agreed to issue 147,858 shares of
Common Stock pursuant to certain phantom stock plan obligations assumed by the
Company as part of the Eller Media Acquisition. The holders of the approximately
7% of the then outstanding capital stock of Eller Media not purchased by the
Company have the right to require the Company to acquire such stock for
1,081,469 shares of the Company's Common Stock until April 10, 2002. From and
after April 10, 2004 (or before such date upon the occurrence of certain
events), the Company will have the right to acquire this minority interest stake
in Eller Media for 1,081,469 shares of its Common Stock. For the twelve month
period ended December 31, 1996, Eller Media had net revenues, operating cash
flow and an operating cash flow margin of $237 million, $91 million and 38.5%,
respectively. On April 29, 1997, Karl Eller, the Chief Executive Officer of
Eller Media, was appointed to the Board of Directors of the Company. Karl Eller
will remain with the Company to run Eller Media as a subsidiary of the Company.
Mr. Eller's existing employment contract, which has approximately two and
one-half years until expiration, will remain in place. In addition, Mr. Eller
and other members of the Eller Media management team have a significant stake in
the Company's stock options through the conversion of existing Eller Media stock
options into options to purchase the Company's Common Stock.
Following the consummation of the Eller Media Acquisition, the Company
became one of the largest domestic outdoor advertising companies with total
advertising display inventory of approximately 50,000 display faces. It now
provides outdoor advertising services in 15 major metropolitan markets. The
Company currently has both outdoor advertising and broadcasting assets in seven
domestic markets, as well as in five additional domestic markets currently
served by Heftel. The markets in which the Company now provides outdoor
advertising services represent approximately 22% of the total U.S. population
and approximately 50% of the rapidly growing U.S. Hispanic
5
<PAGE> 6
population. The Company now has a significant presence in eight of the ten
largest U.S. Hispanic markets, including Los Angeles, Miami, Chicago and San
Antonio. See "Business -- Outdoor Advertising."
HEFTEL BROADCASTING CORPORATION
On February 14, 1997, the Company's nonconsolidated affiliate, Heftel, the
largest domestic Spanish language radio broadcasting company, completed a merger
with Tichenor Media System, Inc. ("Tichenor"), then the third largest Spanish
language radio broadcasting company. Following the merger, Heftel owned or
programed 38 radio stations in 11 markets, including stations in each of the top
ten Hispanic markets. The Company's total ownership interest in Heftel was
reduced to approximately 32.3% of the total outstanding common stock of Heftel
(voting and non-voting) following the issuance of 4.8 million shares of voting
common stock by Heftel in a public offering, the sale by the Company of 350,000
shares of Heftel's common stock in such public offering and the issuance of
approximately 5.6 million shares of Heftel's voting common stock to former
Tichenor shareholders and warrant holders. In the merger, all of the Company's
voting common stock of Heftel and shares of Tichenor's common stock owned by the
Company were converted into shares of convertible nonvoting common stock of
Heftel in order to comply with the cross-interest policy of the Federal
Communications Commission (the "FCC").
OTHER COMPLETED ACQUISITIONS
Since December 31, 1996, the Company completed the acquisition of 13
additional radio stations for approximately $91.5 million and acquired a 50%
equity interest in a company which owns a radio station in the Czech Republic
for approximately $1.0 million. The Company has also acquired a broadcasting
license for approximately $1.0 million. Eller Media or the Company have
completed the acquisition of 394 display faces for approximately $28.0 million.
These acquisitions include:
- -In January 1997, the Company acquired WZZU-FM in Raleigh, North Carolina from
Ceder Raleigh Limited Partnership for approximately $7.5 million.
- -In January 1997, the Company acquired WQMF-FM in Louisville, Kentucky from
Otting Broadcasting, Inc. and PAO Communications, Inc. for approximately $13.5
million.
- -In February 1997, the Company acquired WVTI-FM (formerly WAKX-FM) in Grand
Rapids, Michigan from Pathfinder Communications Corporation for approximately
$4.1 million.
- -In February 1997, the Company acquired KHOM-FM in Houma, Louisiana from KHOM
Associates, LLP for approximately $6.9 million.
- -In February 1997, the Company acquired the FCC license of KJOJ-AM in Conroe,
Texas from Family Group Enterprises, Inc. for approximately $1.0 million. The
broadcasting assets other than the FCC license were acquired in May 1996 as
part of the acquisition of USRadio, Inc.
- -In March 1997, the Company's 80% owned subsidiary, Radio Enterprises, Inc.,
completed the purchase of WQBK-FM, WQBJ-FM, WXCR-FM and WQBK-AM in Albany, New
York from Maximum Media Inc. and DJAMedia Inc. for approximately $7.5 million.
- -In March 1997, the Company acquired WOKY-AM and WMIL-FM in Milwaukee, Wisconsin
from Chancellor Radio Broadcasting Company for approximately $41 million.
- -In April 1997, the Company acquired WOLZ-FM, WKII-AM and WXRM-FM (formerly
WFSN-FM) in Ft. Myers, Florida from Corkscrew Broadcasting Corporation for
approximately $11 million.
- -In May 1997, the Company acquired a 50% equity interest in Radio Bonton, a.s.,
which owns an FM radio station in the Czech Republic from Bonton, a.s. for
approximately $1.0 million.
- -Since January 1, 1997, Eller Media or the Company have purchased 394 display
faces in 22 transactions for an aggregate of approximately $28.0 million,
including the issuance of a promissory note
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in the principal amount of $9.5 million convertible into approximately 1% of the
outstanding stock of Eller Media. These display faces are located in eight
existing markets.
PENDING ACQUISITIONS
Since December 31, 1996, the Company has entered into definitive agreements
to purchase 14 additional radio stations for approximately $69.5 million. Each
of these acquisitions is subject to the approval of certain governmental
authorities, including the FCC, the Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division"), and other closing conditions. There can be no assurance that such
acquisitions will be consummated or, if consummated, the terms thereof. Pending
acquisitions include:
- -In February 1997, the Company entered into a definitive agreement to acquire
WDUR-AM, WFXC-FM and WFXK-FM in Raleigh, North Carolina from WFXC-FM and
WDUR-AM, Inc. and Pinnacle Corp. for approximately $20 million.
- -In March 1997, the Company entered into a definitive agreement to acquire
WKSJ-FM, WKSJ-AM, WMXC-FM, WDWG-FM, WRKH-FM and WNTM-AM in Mobile, Alabama from
Capitol Broadcasting Company, L.L.C. for approximately $24 million.
- -In April 1997, the Company entered into a definitive agreement to acquire
KMVK-FM, KSSN-FM and KOLL-FM in Little Rock, Arkansas from Triathlon
Broadcasting of Little Rock, Inc., for approximately $20 million.
- -In April 1997, the Company entered into a definitive agreement to acquire
WMFX-FM and WOIC-AM in Columbia, South Carolina from Emerald City Radio
Partners, L.P. for approximately $5.5 million.
The Company has its principal executive offices at 200 Concord Plaza, Suite
600, San Antonio, Texas 78216 (telephone: 210-822-2828).
FIRST QUARTER RESULTS
On April 28, 1997, the Company announced the results of its operations
during the first quarter of 1997. The Company reported that after tax cash flow
increased 83% to $29,440,000 or $.38 per share compared to $16,079,000 or $.23
per share for the same quarter in 1996. Net broadcasting revenue increased 58%
to $98,289,000 as a result of improvement in existing station operations and the
operations of additional stations acquired in 1996 and the first quarter of
1997. Station operating income before depreciation and amortization increased
47% to $35,234,000 compared to $23,978,000 for the same quarter in 1996. Net
income increased 22% to $7,599,000 or $.10 per share compared to $6,238,000 or
$.09 per share for the first quarter of 1996.
THE OFFERING
Common Stock to be offered by the Company....... 5,093,790 shares
Common Stock to be offered by the Selling
Shareholders.................................... 5,906,210 shares
Common Stock to be outstanding after the
Offering........................................ 89,017,920 shares(1)
Use of proceeds................................. To repay indebtedness under
the Credit Facility
New York Stock Exchange symbol.................. CCU
- ---------------
(1) Excludes 2,986,449 shares of Common Stock currently issuable upon exercise
of options to purchase shares of the Company's Common Stock at prices
ranging from $3.26 to $45.125 per share and 147,858 shares of Common Stock
issuable pursuant to phantom stock plan obligations assumed by the Company
as part of the Eller Media Acquisition.
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SUMMARY FINANCIAL INFORMATION
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED DECEMBER 31, ELLER MEDIA
----------------------- ACQUISITION
1992 1993 1994 1995 1996 1996(2)
------- -------- -------- -------- -------- -----------
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STATEMENT OF OPERATIONS DATA(1):
Net revenue........................... $84,485 $121,118 $178,053 $250,059 $351,739 $588,771
Operating expenses.................... 55,812 78,925 105,380 137,504 198,332 340,171
Depreciation and amortization......... 12,253 17,447 24,669 33,769 45,790 109,954
------- -------- -------- -------- -------- --------
Operating income before corporate
expenses............................ 16,420 24,746 48,004 78,786 107,617 138,646
Corporate expenses.................... 2,890 3,464 5,100 7,414 8,527 18,731
------- -------- -------- -------- -------- --------
Operating income...................... 13,530 21,282 42,904 71,372 99,090 119,915
Interest expense...................... (4,739) (5,390) (7,669) (20,752) (30,080) (75,777)
Other income (expense)................ (1,217) (196) 1,161 (803) 2,230 (4,491)
------- -------- -------- -------- -------- --------
Income before income taxes............ 7,574 15,696 36,396 49,817 71,240 39,647
Income taxes.......................... 3,281 6,573 14,387 20,292 28,386 24,104
------- -------- -------- -------- -------- --------
Income before equity in net income
(loss) of, and other income from
nonconsolidated affiliates.......... 4,293 9,123 22,009 29,525 42,854 15,543
Equity in net income (loss) of, and
other income from, nonconsolidated
affiliates.......................... -- -- -- 2,489 (5,158) (5,158)
------- -------- -------- -------- -------- --------
Net income............................ $ 4,293 $ 9,123 $ 22,009 $ 32,014 $ 37,696 $ 10,385
======= ======== ======== ======== ======== ========
Net income per common share........... $ .07 $ .15 $ .32 $ .46 $ .50 $ .13
======= ======== ======== ======== ======== ========
Weighted average common shares and
common share equivalents
outstanding......................... 59,320 62,202 69,326 70,201 74,649 82,484
======= ======== ======== ======== ======== ========
After-tax cash flow(3)................ $17,147 $ 26,638 $ 46,866 $ 71,140 $107,318 $144,171
======= ======== ======== ======== ======== ========
After-tax cash flow per
share(4)............................ $ .29 $ .43 $ .68 $ 1.01 $ 1.44 $ 1.75
======= ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------ AS ADJUSTED
1992 1993 1994 1995 1996 1996(5)
------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....... $ 2,790 $ 5,517 $ 6,818 $ 5,391 $ 16,701 $ 17,574
Total assets.................... 146,993 227,577 411,594 563,011 1,324,711 2,494,888
Long-term debt, net of current
maturities.................... 97,000 87,815 238,204 334,164 725,132 1,221,575
Shareholders' equity............ 31,055 98,343 130,533 163,713 513,431 1,102,728
</TABLE>
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- ---------------
(1) The comparability of results of operations is affected by acquisitions
consummated in each of the periods presented.
(2) Gives effect to the Eller Media Acquisition as if such acquisition had been
consummated on January 1, 1996 and excludes Eller Media's extraordinary loss
on debt extinguishment (net of tax benefit) of $4,537,000. The pro forma
financial information is based on a preliminary purchase price allocation
and does not give effect to any other completed or pending acquisition.
(3) Defined as net income before unusual items plus depreciation, amortization
of intangibles (including non-consolidated affiliates) and deferred taxes.
After-tax cash flow is presented here not as a measure of operating results
and does not purport to represent cash provided by operating activities.
After-tax cash flow should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.
(4) Defined as after-tax cash flow divided by weighted average common shares and
common share equivalents outstanding.
(5) As adjusted to give effect to the Eller Media Acquisition as if such
acquisition had been consummated on December 31, 1996 and to give effect to
the Offering and the application of the estimated net proceeds therefrom of
$240,609,000. The pro forma financial information is based on a preliminary
purchase price allocation and does not give effect to any other completed or
pending acquisition.
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RISK FACTORS
Prospective purchasers of the Common Stock should consider carefully the
factors set forth below, as well as the other information contained in this
Prospectus.
SIGNIFICANT SHAREHOLDERS
Upon completion of the Offering, the two principal shareholders of the
Company, L. Lowry Mays, Chairman, Chief Executive Officer and a Director of the
Company, and B.J. McCombs, a Director of the Company, collectively will own
beneficially approximately 29.0% of the outstanding shares of Common Stock (or
approximately 28.7% if the Underwriters' over-allotment option is exercised in
full). As a result, Messrs. Mays and McCombs will be able to exert significant
influence over the outcome of elections of the Company's directors and other
matters requiring the vote or consent of the shareholders of the Company. The
Company, L. Lowry Mays and B.J. McCombs are parties to a Buy-Sell Agreement (the
"Repurchase Agreement") restricting the disposition of shares of Common Stock
owned by Messrs. Mays and McCombs. See "Description of Capital Stock --
Repurchase Agreement."
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success will continue to be dependent upon
its ability to attract and retain skilled managers and other personnel,
including its Chairman and Chief Executive Officer, L. Lowry Mays. The Company
has entered into an employment agreement expiring in 2001 with Mr. Mays and
other employment agreements expiring at various times with key personnel. The
Company does not maintain a key man life insurance policy on Mr. Mays.
FINANCIAL LEVERAGE
After giving effect to the sale of the Common Stock offered hereby and the
application of the estimated net proceeds therefrom and the Eller Media
Acquisition, the Company would have had, at December 31, 1996, borrowings under
its then existing credit facility of approximately $1,210,395,000 and
shareholders' equity of $1,102,728,000. The Company has borrowed and expects to
continue borrowing to finance acquisitions of broadcasting and other
media-related and outdoor advertising properties and for other corporate
purposes. On April 10, 1997, in connection with the Eller Media Acquisition, the
Company amended its Credit Facility increasing the amount it may borrow to
$1,750,000,000 at floating rates (currently LIBOR plus 0.50%). In connection
with pending acquisitions, the Company may incur $84.8 million of additional
indebtedness prior to the application of the proceeds of the Offering if all
such acquisitions are consummated. The Company will use the proceeds from the
Offering to repay debt previously drawn under its Credit Facility. The Company
will have sufficient funds under the Credit Facility to consummate all of the
pending acquisitions contemplated herein. Future acquisitions of radio and
television stations and other media-related and outdoor advertising properties
effected in connection with the implementation of the Company's acquisition
strategy are expected to be financed from increased borrowings under the Credit
Facility, other debt or equity financings and cash flow from operations. See
"-- Risk of Acquisition Strategy; Capital Requirements." Because of the amount
of the Company's indebtedness, a significant portion of the Company's operating
income is required for debt service. The Company's leverage could make it
vulnerable to an increase in interest rates or a downturn in the operating
performance of its radio and television stations or in general economic
conditions. The Credit Facility contains certain financial and operational
covenants and other restrictions with which the Company must comply, including
limitations on capital expenditures, the incurrence of additional indebtedness,
payment of cash dividends, and requirements to maintain certain financial
ratios. See "Dividend Policy."
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GOVERNMENT REGULATION
Broadcasting. The domestic broadcasting industry is subject to extensive
federal regulation which, among other things, requires approval by the FCC for
the issuance, renewal, transfer and assignment of broadcasting station operating
licenses and limits the number of broadcasting properties the Company may
acquire. The Telecommunications Act of 1996 (the "1996 Act"), which became law
on February 8, 1996, creates significant new opportunities for broadcasting
companies but also creates uncertainties as to how the FCC and the courts will
enforce and interpret the 1996 Act.
The Company's business will continue to be dependent upon acquiring and
maintaining broadcasting licenses issued by the FCC, which are issued for a
maximum term of eight years. Although it is rare for the FCC to deny a renewal
application, there can be no assurance that future renewal applications will be
approved, or that renewals will not include conditions or qualifications that
could adversely affect the Company's operations. Moreover, governmental
regulations and policies may change over time and there can be no assurance that
such changes would not have a material adverse impact upon the Company's
business, financial condition and results of operations. For example, the FCC
currently is considering whether to revise its policy with regard to television
LMAs and there can be no guarantee that the Company will be able to program
stations under existing LMAs for the remainder of their current terms, extend
existing LMAs beyond their current terms, or to enter into LMAs in other markets
in which the Company owns and operates television stations.
Outdoor Advertising. Outdoor advertising displays are subject to
governmental regulation at the federal, state and local levels. These
regulations, in some cases, limit the height, size, location and operation of
billboards and, in limited circumstances, regulate the content of the
advertising copy displayed on the billboards. Some governmental regulations
prohibit the construction of new billboards or the replacement, relocation,
enlargement or upgrading of existing structures. Some local jurisdictions,
including jurisdictions within the Company's existing markets (Tampa, Houston
and San Francisco), have adopted amortization ordinances under which, after the
expiration of a specified period of time, billboards must be removed at the
owner's expense and without payment of compensation. Ordinances requiring the
removal of billboards without compensation, whether through amortization or
otherwise, are being challenged in various state and federal courts with
conflicting results. The Houston ordinance has been the subject of litigation
for over five years and is currently not being enforced. An ordinance in the
Tampa market is also currently the subject of litigation. The Company believes
that its operations will not be materially affected by either of these
ordinances even if they are enforced. The Company's operations have not been
materially affected by the San Francisco amortization ordinances since its signs
conform to effective ordinances and state law currently prevents effectiveness
of other ordinances which require removal of signs without compensation. There
can be no assurance that the Company will be successful in negotiating
acceptable arrangements in circumstances in which its displays are subject to
removal or amortization, and what effect, if any, such regulations may have on
the Company's operations. In addition, the Company is unable to predict what
additional regulations may be imposed on outdoor advertising in the future.
Legislation regulating the content of billboard advertisements has been
introduced in Congress from time to time in the past. Changes in laws and
regulations affecting outdoor advertising at any level of government could have
a material adverse effect on the Company.
Tobacco Advertising. On a pro forma basis, approximately 5% of the
Company's 1996 net revenues were derived from tobacco advertising. In August
1996, the U.S. Food and Drug Administration ("FDA") issued final regulations
governing certain marketing practices in the tobacco industry, including a
prohibition of tobacco product billboard advertisements within 1,000 feet of
schools and playgrounds and a requirement that all tobacco product
advertisements on billboards be in black and white and contain only text. These
regulations, which were due to become effective in August 1997, were challenged
recently by members of the tobacco and advertising industry in a law suit
brought in North Carolina federal district court. In that case, the court upheld
the authority of the FDA to regulate tobacco products by limiting access of such
products to persons under 18 years
11
<PAGE> 12
of age and by requiring tobacco manufacturers to label such products in
accordance with FDA regulations. Nevertheless, the court struck down the FDA
restrictions on the promotion and advertising of tobacco products. Both industry
and the FDA are planning to appeal this decision, and it is unclear what action
an appellate court will take in this matter.
Regardless of whether the FDA is found to have jurisdiction over tobacco
promotion and advertising, and thus have the ability to place limits on
billboard advertising, it is possible that the FTC may take regulatory action in
this area. The FTC has wide-ranging authority over advertising practices, and it
is within their regulatory authority to investigate unfair and deceptive trade
practices, including advertising, pertaining to FDA-regulated products. Although
it has not done so in the past, because of increasing regulatory and political
pressure it is possible that the FTC may take action to limit the content and
placement of outdoor advertising, including, without limitation, the content and
placement of outdoor advertising relating to the sale of tobacco products to
children.
Outdoor advertising of tobacco products also may be affected by city or
state regulations. For example, in 1995, the Court of Appeals for the Fourth
Circuit upheld the validity of a Baltimore city ordinance prohibiting the
placement of outdoor advertisements of cigarettes in publicly visible locations,
such as billboards, signboards and sides of buildings. Subsequently, the United
States Supreme Court declined to review an appeal of this case. Following the
Baltimore ordinance, the City Council of New York City has introduced
legislation to ban outdoor tobacco advertising near schools and other locations
where children are likely to assemble. Also, a local council in Anne Arundel
County, Maryland recently has voted to ban most tobacco billboard advertising.
It is likely that other city or state governments will pass similar ordinances
or statutes to limit outdoor advertising of tobacco products in the future.
In addition to the decisions mentioned above, it recently has been reported
that certain cigarette manufacturers who are defendants in numerous class action
suits throughout the U.S. have proposed an out of court settlement with respect
to such suits that is likely to include restrictions on billboard advertising by
these and other cigarette manufacturers. It has been reported that, as a result
of settlement negotiations, the tobacco industry will agree to a complete ban on
all outdoor advertising, such as on billboards, in stadiums, and in store window
displays.
There can be no assurance as to the effect of these regulations, potential
legislation or settlement discussions on the Company's business and on its net
revenues and financial position. A reduction in billboard advertising by the
tobacco industry would cause an immediate reduction in the Company's direct
revenue from such advertisers and would simultaneously increase the available
space on the existing inventory of billboards in the outdoor advertising
industry. This could in turn result in a lowering of outdoor advertising rates
in each of the Company's outdoor advertising markets or limit the ability of
industry participants to increase rates for some period of time.
Any regulatory change or settlement agreement restricting the Company's or
the tobacco industry's ability to utilize outdoor advertising for tobacco
products could have a material adverse effect on the Company.
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.
12
<PAGE> 13
ANTITRUST MATTERS
An important element of the Company's growth strategy involves the
acquisition of additional radio stations and other media-related and outdoor
advertising properties, many of which are likely to require preacquisition
antitrust review by the FTC and the Antitrust Division. Following passage of the
1996 Act, the Antitrust Division has become more aggressive in reviewing
proposed acquisitions of radio stations and radio station networks, particularly
in instances where the proposed acquiror already owns one or more radio stations
in a particular market and the acquisition involves another radio station in the
same market. Recently, the Antitrust Division has obtained consent decrees
requiring radio station divestitures in a particular market based on allegations
that acquisitions would lead to unacceptable concentration levels. There can be
no assurance that the Antitrust Division or the FTC will not seek to bar the
Company from acquiring additional radio or television stations or other
media-related and outdoor advertising properties in any market where the Company
already has a significant position.
RISK OF ACQUISITION STRATEGY; CAPITAL REQUIREMENTS
The Company intends to pursue growth through the opportunistic acquisition
of broadcasting companies, radio and television station groups, individual radio
and television stations, outdoor advertising companies and outdoor advertising
display faces. The Company routinely reviews potential acquisitions. Although no
definitive agreements have been reached regarding any such potential material
acquisitions, except as described in this Prospectus, it is likely that the
Company will continue to experience significant expansion in the future. As a
result, the Company's management will be required to effectively manage a
rapidly expanding and significantly larger portfolio of broadcasting and outdoor
advertising properties. The Company's acquisition strategy involves numerous
other risks, including difficulties in the integration of operations and
systems, the diversion of management's attention from other business concerns
and the potential loss of key employees of acquired companies or stations. There
can be no assurance such acquisitions will benefit the Company.
The consummation of domestic broadcasting acquisitions, including all
pending acquisitions, requires FCC approval with respect to the transfer of the
broadcast license of the acquired station. There can be no assurance that the
FCC will approve pending or future acquisitions, or that the Company will be
able to consummate such acquisitions.
The Company will face competition from other broadcasting and outdoor
advertising companies for available acquisition opportunities. In addition, if
the prices sought by sellers of broadcasting and outdoor advertising properties
continue to rise, the Company may find fewer acceptable acquisition
opportunities. In addition, the purchase price of possible acquisitions could
require additional debt or equity financing on the part of the Company. See
"-- Financial Leverage." Additional indebtedness could increase the Company's
leverage and make the Company more vulnerable to economic downturns and may
limit its ability to withstand competitive pressures. Additional equity
financing could result in dilution to the purchasers of the Common Stock offered
hereby. There can be no assurance that the Company will have sufficient capital
resources to complete acquisitions, that acquisitions can be completed on terms
acceptable to the Company or that any acquisitions that are completed can be
integrated successfully into the Company.
INTEGRATION OF THE BUSINESS OF THE COMPANY AND ELLER MEDIA
The Eller Media Acquisition involves the integration of two companies that
have previously operated independently. There can be no assurance that the
Company will successfully integrate the operations of Eller Media with those of
the Company or that all of the benefits expected from such integration will be
realized. Any delays or unexpected costs incurred in connection with such
integration could have an adverse effect on the Company's business, operating
results or financial position. Additionally, there can be no assurance that the
operations, management and personnel of
13
<PAGE> 14
the two companies will be compatible or that the Company will not experience the
loss of key personnel. There can be no assurance that such integration will not
adversely affect the operations of the Company.
COMPETITION; BUSINESS RISKS
The Company's three business segments are in highly competitive businesses.
The Company's radio and television stations and outdoor advertising properties
compete for audiences and advertising revenues with other radio and television
stations and outdoor advertising companies, as well as with other media, such as
newspapers, magazines, cable television, and direct mail, within their
respective markets. 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 revenue in that market. Future operations are further subject
to many variables which could have an adverse effect upon the Company's
financial performance. These variables include economic conditions, both general
and relative to the broadcasting industry; shifts in population and other
demographics; the level of competition for advertising dollars; fluctuations in
operating costs; technological changes and innovations; changes in labor
conditions; and changes in governmental regulations and policies and actions of
federal regulatory bodies. Although the Company believes that each of its
business segments is able to compete effectively in its respective markets,
there can be no assurance that the Company will be able to maintain or increase
its current audience ratings and advertising revenues.
NEW TECHNOLOGIES
The FCC is considering ways to introduce new technologies to the radio
broadcast industry, including satellite and terrestrial delivery of digital
audio broadcasting and the standardization of available technologies which
significantly enhance the sound quality of AM broadcasts. The Company is unable
to predict the effect any such new technology will have on the Company's
financial condition or results of operations. On April 3, 1997, the FCC
announced that it had adopted rules that will allow television broadcasters to
provide digital television ("DTV") to consumers. The FCC also adopted a table of
allotments for DTV, which will provide eligible existing broadcasters with a
second channel on which to provide DTV service. The allotment plan is based on
the use of channels 2-51, although the "core" DTV spectrum will be between
channels 2-46 or 7-51. Ultimately, the FCC plans to recover the channels
currently used for analog broadcasting and will decide at a later date the use
of the spectrum ultimately recovered. Television broadcasters will be allowed to
use their channels according to their best business judgment. Such uses can
include multiple standard definition program channels, data transfer,
subscription video, interactive materials, and audio signals, although
broadcasters will be required to provide a free digital video programming
service that is at least comparable to today's analog service. Broadcasters will
not be required to air "high definition" programming or, initially, to simulcast
their analog programming on the digital channel. Affiliates of ABC, CBS, NBC and
FOX in the top 10 television markets will be required to be on the air with a
digital signal by May 1, 1999. Affiliates of those networks in markets 11-30
will be required to be on the air with a digital signal by November 1, 1999, and
remaining commercial broadcasters within five years. The FCC stated that
broadcasters will remain public trustees and that it will issue a notice to
determine the extent of broadcasters' future public interest obligations. The
Company will incur considerable expense in the conversion to DTV and the Company
is unable to predict the extent or timing of consumer demand for any such DTV
services.
SHARES ELIGIBLE FOR FUTURE SALE
The 11,000,000 shares of Common Stock sold in the Offering will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "1933 Act"), unless acquired by "affiliates" (as
defined in Rule 144 promulgated by the Securities and Exchange Commission under
the 1933 Act ("Rule 144)). Beginning 90 days after the date of this Prospectus,
approximately 14,539,919 shares of Common Stock owned by L. Lowry Mays and
approximately
14
<PAGE> 15
11,262,936 shares of Common Stock owned by B. J. McCombs will be eligible for
sale in the public market, although they will remain subject to certain
limitations imposed on affiliates under Rule 144. See "Shares Eligible For
Future Sale."
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act. Discussions containing such forward-looking
statements may be found in the material set forth under "Summary" and "The
Company," as well as within the Prospectus generally. In addition, when used in
this Prospectus, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to a number of risks and uncertainties. Actual results in the future
could differ materially from those described in the forward-looking statements
as a result of the risk factors set forth herein and the matters set forth in
the Prospectus generally. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements that
may be made to reflect any future events or circumstances. The Company cautions
the reader, however, that this list of risk factors may not be exhaustive.
15
<PAGE> 16
CAPITALIZATION
The following table sets forth the current portion of long-term debt and
capitalization of the Company as of December 31, 1996, pro forma to give effect
to the Eller Media Acquisition and as adjusted to give effect to the Eller Media
Acquisition and the consummation of the Offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2)
---------- ------------ -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt....... $ 1,479 $ 1,479 $ 1,479
========== ========== ==========
Credit Facility(3)...................... $ 717,175 $1,451,004 $1,210,395
Other long-term debt.................... 7,957 11,180 11,180
Shareholders' equity:
Preferred Stock, $1.00 par value,
2,000,000 shares authorized, no
shares issued and outstanding...... -- -- --
Common Stock, $.10 par value,
100,000,000 shares authorized,
76,992,078 shares issued and
outstanding, (88,729,505 shares as
adjusted)(4)....................... 7,699 8,363 8,873
Additional paid-in capital.............. 398,622 746,646 986,745
Retained earnings....................... 106,055 106,055 106,055
Other equity............................ 1,226 1,226 1,226
Cost of shares (26,878) held in
treasury.............................. (171) (171) (171)
---------- ---------- ----------
Total shareholders' equity............ 513,431 862,119 1,102,728
---------- ---------- ----------
Total capitalization.......... $1,238,563 $2,324,303 $2,324,303
========== ========== ==========
</TABLE>
- ---------------
(1) Pro forma to give effect to the Eller Media Acquisition as if such
acquisition had been consummated on December 31, 1996.
(2) As adjusted to give effect to the Eller Media Acquisition as if such
acquisition had been consummated on December 31, 1996 and to the Offering
and the application of the estimated net proceeds therefrom of $240,609,000.
(3) The Company incurred $91,500,000 in additional indebtedness subsequent to
December 31, 1996 that was related to acquisitions other than the Eller
Media Acquisition and may incur additional indebtedness of up to $84,800,000
in connection with various pending acquisitions.
(4) On May 2, 1997, the Company filed an amendment to the Company's articles of
incorporation increasing the number of authorized shares of Common Stock
from 100,000,000 shares to 150,000,000 shares.
DIVIDEND POLICY
The Company currently expects to retain its earnings for the development
and expansion of its business. Any future decision by the Board of Directors to
pay cash dividends will depend upon, among other factors, the Company's
earnings, financial position and capital requirements. The Company's Credit
Facility limits the Company's ability to pay dividends, other than dividends
payable wholly in capital stock of the Company.
16
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 5,093,790 shares of
Common Stock offered by the Company hereby, after deducting underwriting
discounts and commissions and the estimated expenses of the Offering, are
estimated to be $240,609,000. All of such net proceeds received by the Company
will be used to repay borrowings outstanding under its $1.75 billion Credit
Facility. As of , a total of approximately $1,496,650,000 in
borrowings was outstanding under the Credit Facility and the effective interest
rate thereon was approximately 6.2%. Borrowings under the Credit Facility have
been used to finance, in part, the Eller Media Acquisition and the other
acquisitions discussed in this Prospectus. Borrowings under the Credit Facility,
which must be paid in full by September 2003, currently bear interest at a
floating rate based on the LIBOR plus 0.50%. Upon repayment of such borrowings,
the amount repaid will become immediately available to the Company for
re-borrowing under the Credit Facility, subject to the satisfaction of certain
conditions. The Company expects that amounts available for re-borrowing under
the Credit Facility as a result of the application of the net proceeds of the
Offering, together with additional amounts that become available for borrowing
under the Credit Facility, will be used to finance the pending acquisitions
discussed in this Prospectus. Future acquisitions of radio and television
stations and other media-related properties effected in connection with the
implementation of the Company's acquisition strategy are expected to be financed
from increased borrowings under the Credit Facility, other debt or equity
financings and cash flow from operations. The Company will not receive any of
the proceeds from the sale of shares by the Selling Shareholders.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol "CCU." The following table sets forth, for the periods
indicated, the high and low closing sale prices per share (as adjusted for all
stock splits to date) as reported on the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
First Quarter............................................. $15.13 $12.53
Second Quarter............................................ 17.38 13.44
Third Quarter............................................. 20.44 15.41
Fourth Quarter............................................ 22.06 18.13
YEAR ENDED DECEMBER 31, 1996:
First Quarter............................................. $29.13 $20.50
Second Quarter............................................ 43.00 27.00
Third Quarter............................................. 44.56 36.56
Fourth Quarter............................................ 44.38 31.00
YEAR ENDED DECEMBER 31, 1997:
First Quarter............................................. $49.63 $34.25
Second Quarter (through May 13, 1997)..................... 49.50 42.75
</TABLE>
On March 1, 1997, there were approximately 6,400 shareholders of record of
the Company's Common Stock.
17
<PAGE> 18
SELECTED FINANCIAL INFORMATION
The selected financial information presented below for the five years ended
December 31, 1996 has been derived from the consolidated financial statements of
the Company, which have been audited by Ernst & Young LLP, independent auditors.
The pro forma financial information presents results of operations of the
Company as if the Eller Media Acquisition had been consummated on January 1,
1996. The pro forma information is unaudited and is not necessarily indicative
of the results of operations of the Company had such acquisition occurred at the
beginning of such period or of the Company's results of operations for any
future periods. The following selected financial information should be read in
conjunction with the consolidated financial statements and notes thereto of the
Company, the pro forma financial statements of the Company and Eller Media and
the consolidated financial statements and notes thereto of Eller Media, all of
which are incorporated herein by reference.
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED DECEMBER 31, ELLER MEDIA
----------------------- ACQUISITION
1992 1993 1994 1995 1996 1996 (2)
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Net revenue............ $ 84,485 $121,118 $178,053 $250,059 $351,739 $588,771
Operating expenses..... 55,812 78,925 105,380 137,504 198,332 340,171
Depreciation and
amortization........ 12,253 17,447 24,669 33,769 45,790 109,954
-------- -------- -------- -------- -------- --------
Operating income before
corporate
expenses............ 16,420 24,746 48,004 78,786 107,617 138,646
Corporate expenses..... 2,890 3,464 5,100 7,414 8,527 18,731
-------- -------- -------- -------- -------- --------
Operating income....... 13,530 21,282 42,904 71,372 99,090 119,915
Interest expense....... (4,739) (5,390) (7,669) (20,752) (30,080) (75,777)
Other income
(expense)........... (1,217) (196) 1,161 (803) 2,230 (4,491)
-------- -------- -------- -------- -------- --------
Income before income
taxes............... 7,574 15,696 36,396 49,817 71,240 39,647
Income taxes........... 3,281 6,573 14,387 20,292 28,386 24,104
-------- -------- -------- -------- -------- --------
Income before equity in
net income (loss)
of, and other income
from nonconsolidated
affiliates.......... 4,293 9,123 22,009 29,525 42,854 15,543
Equity in net income
(loss) of, and other
income from,
nonconsolidated
affiliates.......... -- -- -- 2,489 (5,158) (5,158)
-------- -------- -------- -------- -------- --------
Net income............. $ 4,293 $ 9,123 $ 22,009 $ 32,014 $ 37,696 $ 10,385
======== ======== ======== ======== ======== ========
Net income per common
share............... $ .07 $ .15 $ .32 $ .46 $ .50 $ .13
======== ======== ======== ======== ======== ========
Weighted average common
shares and common
share equivalents
outstanding......... 59,320 62,202 69,326 70,201 74,649 82,484
======== ======== ======== ======== ======== ========
After-tax cash
flow(3)............. $ 17,147 $ 26,638 $ 46,866 $ 71,140 $107,318 $144,171
======== ======== ======== ======== ======== ========
After-tax cash flow per
share(4)............ $ .29 $ .43 $ .68 $ 1.01 $ 1.44 $ 1.75
======== ======== ======== ======== ======== ========
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
DECEMBER 31, AS
------------ ADJUSTED
1992 1993 1994 1995 1996 1996 (5)
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents...... $ 2,790 $ 5,517 $ 6,818 $ 5,391 $ 16,701 $ 17,574
Current assets...... 24,844 38,191 53,945 70,485 113,164 160,438
Property, plant and
equipment --
net.............. 48,017 67,750 85,318 99,885 147,838 654,060
Total assets........ 146,993 227,577 411,594 563,011 1,324,711 2,494,888
Current
liabilities...... 10,073 26,125 27,679 36,005 43,462 91,838
Long-term debt, net
of current
maturities....... 97,000 87,815 238,204 334,164 725,132 1,221,575
Shareholders'
equity........... 31,055 98,343 130,533 163,713 513,431 1,102,728
</TABLE>
- ---------------
(1) The comparability of results of operations is affected by acquisitions
consummated in each of the periods presented.
(2) Gives effect to the Eller Media Acquisition as if such acquisition had been
consummated on January 1, 1996 and excludes Eller Media's extraordinary loss
on debt extinguishment (net of tax benefit) of $4,537,000. The pro forma
financial information is based on a preliminary purchase price allocation
and does not give effect to any other completed or pending acquisition.
(3) Defined as net income before unusual items plus depreciation, amortization
of intangibles (including non-consolidated affiliates) and deferred taxes.
After-tax cash flow is presented here not as a measure of operating results
and does not purport to represent cash provided by operating activities.
After-tax cash flow should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.
(4) Defined as after-tax cash flow divided by weighted average common shares and
common share equivalents outstanding.
(5) As adjusted to give effect to the Eller Media Acquisition as if such
acquisition had been consummated on December 31, 1996 and to give effect to
the Offering and the application of the estimated net proceeds therefrom of
$240,609,000. The pro forma financial information is based on a preliminary
purchase price allocation and does not give effect to any other completed or
pending acquisition.
19
<PAGE> 20
BUSINESS
The Company consists of three principal business segments -- radio
broadcasting, television broadcasting and outdoor advertising. Currently, the
radio segment includes 101 stations for which the Company is the licensee and 11
stations for which the Company programs and/or sells air time under LMAs or
JSAs. These 112 stations operate in 27 different markets. The radio segment also
operates five networks. Assuming all pending acquisitions are consummated (which
include 8 stations for which the Company programs and/or sells air time under
LMAs or JSAs), the Company will own or program 123 radio stations in 28 markets.
The television segment includes 11 television stations for which the Company is
the licensee and 7 stations programmed under LMAs. These 18 stations operate in
11 different markets. The outdoor advertising segment has an advertising display
inventory of approximately 50,000 display faces and provides outdoor advertising
in 15 major metropolitan markets.
INDUSTRY SEGMENTS
Selected historical financial information relating to radio and television
broadcasting for 1994, 1995 and 1996 is presented in the following table:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
RADIO
Net broadcasting revenue................... $ 95,862,834 $144,244,066 $217,189,250
Station operating expenses................. 64,148,412 87,530,942 126,627,982
Depreciation............................... 5,664,700 6,973,801 8,916,495
Amortization of intangibles................ 6,659,726 13,007,026 18,839,820
------------ ------------ ------------
Station operating income................... $ 19,389,996 $ 36,732,297 $ 62,804,953
============ ============ ============
TELEVISION
Net broadcasting revenue................... $ 82,189,748 $105,815,314 $134,549,604
Station operating expenses................. 41,231,654 49,973,531 71,703,668
Depreciation............................... 6,974,404 8,406,025 10,419,895
Amortization of intangibles................ 5,369,710 5,382,030 7,613,554
------------ ------------ ------------
Station operating income................... $ 28,613,980 $ 42,053,728 $ 44,812,487
============ ============ ============
CONSOLIDATED
Net broadcasting revenue................... $178,052,582 $250,059,380 $351,738,854
Station operating expenses................. 105,380,066 137,504,473 198,331,650
Depreciation............................... 12,639,104 15,379,826 19,336,390
Amortization of intangibles................ 12,029,436 18,389,056 26,453,374
------------ ------------ ------------
Station operating income................... $ 48,003,976 $ 78,786,025 $107,617,440
============ ============ ============
</TABLE>
Selected historical financial information related to the outdoor
advertising segment for Eller Media for 1996 is presented in the following
table:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996*
-----------------
<S> <C>
Net revenue............................. $237,032,000
Operating expenses...................... 145,743,000
Depreciation and amortization and other
noncash expenses...................... 46,569,000
------------
Operating Income........................ $ 44,720,000
============
</TABLE>
- ---------------
* Eller Media was formed on August 17, 1995, through the combination of Patrick
Media Group, Inc. and Eller Investment Company.
20
<PAGE> 21
RADIO BROADCASTING
The following table sets forth selected information with regard to each of
the Company's 38 AM and 74 FM radio stations and five radio networks which it
owned or programmed as of , and those stations for which an
acquisition is pending.
<TABLE>
<CAPTION>
TARGET DATE OF
MARKET(RANK)/STATION(1) AUDIENCE(2) STATION FORMAT ACQUISITION FREQUENCY
----------------------- ----------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
HOUSTON, TX(9)
KPRC-AM(3)(5)............................ Adults 25-54 News/Talk/Sports Jan. 1995 950 AM
KSEV-AM(3)(5)............................ Adults 25-54 News/Talk/Sports Jan. 1995 700 AM
KMJQ-FM(5)............................... Adults 24-54 Adult Urban Contemporary Jan. 1995 102.1 FM
KBXX-FM(5)............................... Adults 18-49 Urban Contemporary Aug. 1994 97.9 FM
KHYS-FM(4)(5)............................ Adults 25-54 Rhythmic CHR LMA 98.5 FM
KJOJ-AM(5)............................... Adults 25-54 Christian Jan. 1997 880 AM
KJOJ-FM(5)............................... Adults 25-54 Rhythmic CHR May 1996 103.3 FM
MIAMI/FT. LAUDERDALE, FL(11)
WHYI-FM.................................. Adults 18-49 Contemporary Hits Oct. 1994 100.7 FM
WBGG-FM.................................. Adults 18-49 Classic Rock Mar. 1994 105.9 FM
TAMPA/ST. PETERSBURG, FL(21)
WMTX-AM.................................. Adults 25-54 Sports/Talk Oct. 1994 1040 AM
WMTX-FM.................................. Adults 25-54 Hot Adult Contemporary Oct. 1994 95.7 FM
WRBQ-AM.................................. Adults 18-49 Adult Urban Contemporary July 1992 1380 AM
WRBQ-FM.................................. Adults 25-54 Country July 1992 104.7 FM
CLEVELAND, OH(22)
WNCX-FM.................................. Adults 25-54 Classic Rock Oct. 1994 98.5 FM
WERE-AM.................................. Adults 25-54 News/Talk Oct. 1994 1300 AM
WENZ-FM.................................. Adults 18-49 Alternative Rock May 1996 107.9 FM
MILWAUKEE, WI(29)
WKKV-FM.................................. Adults 18-49 Urban Contemporary May 1996 100.7 FM
WMIL-FM.................................. Adults 25-54 Country Apr. 1997 106.1 FM
WOKY-AM.................................. Adults 35-64 Adult Standards Apr. 1997 920 AM
PROVIDENCE, RI(31)
WWBB-FM.................................. Adults 25-54 Oldies Dec. 1996 101.5 FM
WWRX-FM.................................. Adults 25-54 Classic Rock Dec. 1996 103.7 FM
NORFOLK, VA(33)
WOWI-FM.................................. Adults 18-49 Urban Contemporary May 1996 102.9 FM
WJCD-FM.................................. Adults 25-54 Smooth Jazz May 1996 105.3 FM
WMYK-FM.................................. Adults 25-54 Rhythmic CHR Nov. 1996 92.1 FM
WSVY-FM.................................. Adults 25-54 Adult Urban Contemporary Oct. 1996 107.7 FM
SAN ANTONIO, TX(34)
WOAI-AM(5)............................... Adults 25-54 News/Talk/Sports June 1975 1200 AM
KQXT-FM(5)............................... Adults 25-54 Adult Contemporary Feb. 1993 101.9 FM
KTKR-AM(5)............................... Adults 25-54 News/Talk/Sports July 1993 760 AM
KAJA-FM(5)............................... Adults 25-54 Country Mar. 1972 97.3 FM
KSJL-FM(5)(6)............................ Adults 25-54 Urban Adult Contemporary JSA 96.1 FM
NEW ORLEANS, LA(39)
WODT-AM.................................. Adults 25-54 Blues Oct. 1984 1280 AM
WQUE-FM(7)............................... Adults 18-49 Urban Contemporary Oct. 1984 93.3 FM
WYLD-AM.................................. Adults 25-54 Gospel Aug. 1995 940 AM
WYLD-FM.................................. Adults 25-54 Urban Adult Contemporary Jan. 1995 98.5 FM
WNOE-FM.................................. Adults 25-54 Country Aug. 1996 101.1 FM
KKND-FM.................................. Adults 25-54 Alternative Rock Aug. 1996 106.7 FM
KHOM-FM.................................. Adults 18-34 Contemporary Hits Feb. 1997 104.1 FM
GREENSBORO, NC(41)
WXRA-FM.................................. Adults 18-49 Alternative Rock Aug. 1996 94.5 FM
WTQR-FM.................................. Adults 25-54 Country Aug. 1996 104.1 FM
WSJS-AM.................................. Adults 25-54 News/Talk Aug. 1996 600 AM
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C>
MEMPHIS, TN(43)
WHRK-FM.................................. Adults 18-49 Urban Contemporary May 1996 97.1 FM
WDIA-AM.................................. Adults 25-54 Adult Urban May 1996 1070 AM
WEGR-FM.................................. Adults 25-54 Classic Rock Dec. 1996 102.7 FM
WREC-AM.................................. Adults 35-64 News/Talk Dec. 1996 600 AM
WRXQ-FM.................................. Adults 18-49 Alternative Rock Dec. 1996 95.7 FM
KJMS-FM.................................. Adults 18-49 Urban Adult Contemporary Dec. 1996 101.1 FM
KWAM-AM.................................. Adults 25-54 Religious Dec. 1996 990 AM
RALEIGH, NC(48)
WQOK-FM.................................. Adults 18-49 Urban Contemporary May 1996 97.5 FM
WZZU-FM.................................. Adults 25-54 Classic Hits Jan. 1997 103.9 FM
WDUR-AM(4)............................... Adults 25-54 Urban Oldies LMA/Pending 1490 AM
WFXC-FM(4)............................... Adults 25-54 Urban Adult LMA/Pending 107.1 FM
WFXK-FM(4)............................... Adults 18-49 Urban Adult LMA/Pending 104.3 FM
LOUISVILLE, KY(50)
WHAS-AM.................................. Adults 25-54 News/Talk/Sports Sept. 1986 840 AM
WAMZ-FM.................................. Adults 25-54 Country Sept. 1986 97.5 FM
WHKW-FM.................................. Adults 25-54 Country Jan. 1997 98.9 FM
WTFX-FM.................................. Adults 25-54 Modern Rock Oct. 1996 100.5 FM
WWKY-AM.................................. Adults 25-54 News/Talk/Sports Oct. 1996 790 AM
WKJK-AM.................................. Adults 35-54 Country Oct. 1996 1080 AM
WQMF-FM.................................. Adults 25-54 Classic Rock Jan. 1997 95.7 FM
AUSTIN, TX(51)
KPEZ-FM(5)............................... Adults 25-54 Classic Rock July 1982 102.3 FM
KHFI-FM(5)............................... Adults 18-49 Contemporary Hits Mar. 1993 96.7 FM
KEYI-FM(5)............................... Adults 25-54 Oldies Aug. 1996 103.5 FM
KFON-AM(5)............................... Adults 25-54 Sports Aug. 1996 1490 AM
OKLAHOMA CITY, OK(52)
KTOK-AM(7)............................... Adults 25-54 News/Talk/Sports Oct. 1984 1000 AM
KEBC-AM(7)............................... Adults 18-49 News/Talk/Spanish Jan. 1994 1340 AM
KJYO-FM(7)............................... Adults 18-34 Contemporary Hits Oct. 1984 102.7 FM
WKY-AM(4)(7)............................. Adults 25-54 News/Talk LMA 930 AM
KTST-FM(7)............................... Adults 18-34 Country Aug. 1996 101.9 FM
KXXY-FM(7)............................... Adults 25-54 Country Aug. 1996 96.1 FM
KNRX-FM(7)............................... Adults 18-49 New Alternative Rock Jan. 1994 94.7 FM
RICHMOND, VA(56)
WRVA-AM.................................. Adults 25-54 News/Talk/Sports July 1992 1140 AM
WRNL-AM.................................. Adults 25-54 Sports Sept. 1993 910 AM
WRVQ-FM.................................. Adults 18-49 Contemporary Hits July 1992 94.5 FM
WRXL-FM.................................. Adults 18-49 Album Oriented Rock Sept. 1993 102.1 FM
WTVR-FM.................................. Adults 25-54 Soft AC May 1996 98.1 FM
WTVR-AM.................................. Adults 35-64 Nostalgia May 1996 1380 AM
ALBANY, NY(57)
WQBK-FM(3)............................... Adults 18-49 Alternative Rock Mar. 1997 103.9 FM
WQBJ-FM(3)............................... Adults 18-49 Alternative Rock Mar. 1997 103.5 FM
WQBK-AM(3)............................... Adults 35-64 News/Talk Mar. 1997 1300 AM
WXCR-FM(3)............................... Adults 25-54 Classic Rock Mar. 1997 102.3 FM
TULSA, OK(61)
KAKC-AM(7)............................... Adults 25-54 News/Sports/Oldies Oct. 1973 1300 AM
KMOD-FM(7)............................... Adults 25-54 Album Oriented Rock Oct. 1973 97.5 FM
KQLL-AM(4)(7)............................ Adults 25-54 Sports/Talk LMA/Pending 1430 AM
KQLL-FM(4)(7)............................ Adults 25-54 Oldies LMA/Pending 106.1 FM
KOAS-FM(6)(7)............................ Adults 25-54 Smooth Jazz JSA/Pending 92.1 FM
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C>
GRAND RAPIDS, MI(66)
WOOD-AM.................................. Adults 25-54 Talk May 1996 1300 AM
WOOD-FM.................................. Adults 25-54 Adult Contemporary May 1996 105.7 FM
WBCT-FM.................................. Adults 18-49 Country May 1996 93.7 FM
WTKG-AM.................................. Adults 25-54 News/Talk/Sports Oct. 1996 1230 AM
WCUZ-FM.................................. Adults 25-54 Country Oct. 1996 101.3 FM
WVTI-FM.................................. Adults 25-54 Hot Adult Contemporary Feb. 1997 96.1 FM
EL PASO, TX(69)
KPRR-FM(5)............................... Adults 18-49 Contemporary Hits May 1996 102.1 FM
KHEY-FM(5)............................... Adults 25-54 Country May 1996 96.3 FM
KHEY-AM(5)............................... Adults 25-54 Oldies May 1996 690 AM
FT. MYERS/NAPLES, FL(76)
WCKT-FM.................................. Adults 25-54 Country Aug. 1996 107.1 FM
WQNV-FM.................................. Adults 25-54 Soft Adult Contemporary Aug. 1996 105.5 FM
WKII-AM.................................. Adults 35-64 Nostalgia March 1997 1090 AM
WXRM-FM.................................. Adults 25-64 Country March 1997 100.1 FM
WOLZ-FM.................................. Adults 25-64 Oldies March 1997 95.3 FM
SPRINGFIELD, MA(77)
WHYN-AM.................................. Adults 25-54 News/Talk/Sports Aug. 1996 560 AM
WHYN-FM.................................. Adults 25-54 Adult Contemporary Aug. 1996 93.1 FM
LITTLE ROCK, AR(82)
KDDK-FM.................................. Adults 25-54 Country May 1996 100.3 FM
KMJX-FM.................................. Adults 25-54 Classic Rock May 1996 105.1 FM
KMVK-FM.................................. Adults 25-54 Country Pending 106.7 FM
KSSN-FM.................................. Adults 25-54 Country Pending 95.7 FM
KOLL-FM.................................. Adults 25-54 Oldies Pending 94.9 FM
MOBILE, AL(84)
WKSJ-FM.................................. Adults 35-64 Country Pending 94.9 FM
WKSJ-AM.................................. Adults 35-64 Country Pending 1270 AM
WMXC-FM.................................. Adults 25-54 Adult Contemporary Pending 99.9 FM
WRKH-FM.................................. Adults 25-54 Classic Rock Pending 96.1 FM
WDWG-FM.................................. Adults 25-54 Country Pending 104.1 FM
WNTM-AM.................................. Adults 18-49 News/Talk Pending 710 AM
COLUMBIA, SC(88)
WWDM-FM.................................. Adults 25-54 Urban Contemporary Aug. 1996 101.3 FM
WARQ-FM.................................. Adults 18-49 Alternative Rock Aug. 1996 93.5 FM
WMFX-FM.................................. Adults 25-54 Classic Rock Pending 102.3 FM
WOIC-AM.................................. Adults 35-64 Urban Gold Pending 1230 AM
NEW HAVEN, CT(97)
WKCI-FM.................................. Adults 18-49 Contemporary Hits May 1992 101.3 FM
WAVZ-AM.................................. Adults 25-54 Nostalgia May 1992 1300 AM
WELI-AM.................................. Adults 25-54 News/Talk Oct. 1984 960 AM
LANCASTER, PA(107)
WLAN-FM(4)............................... Adults 18-49 Hot Adult Contemporary LMA/Pending 96.9 FM
WLAN-AM(4)............................... Adults 25-54 Big Band LMA/Pending 1390 AM
READING, PA(130)
WRAW-AM.................................. Adults 35-64 Middle of the Road May 1996 1340 AM
WRFY-FM.................................. Adults 18-49 Contemporary Hits May 1996 102.5 FM
</TABLE>
23
<PAGE> 24
RADIO NETWORKS
<TABLE>
<CAPTION>
TARGET DATE OF
MARKET/NETWORK AUDIENCE NETWORK FORMAT ACQUISITION
-------------- ------------ -------------- -----------
<S> <C> <C> <C>
LOUISVILLE, KY
Kentucky News Network................. Adults 25-54 News/Agriculture Jan. 1992
RICHMOND, VA
Virginia News Networks................ Adults 25-54 News/Agriculture Sept. 1993
OKLAHOMA CITY, OK
Oklahoma News Network................. Adults 25-54 News/Agriculture Oct. 1984
SAN ANGELO, TX
Voice of Southwest Agriculture........ Adults 25-54 News/Agriculture Oct. 1995
COLLEGE STATION, TX/DES MOINES, IA
Clear Channel Sports.................. Adults 18-49 College Sports Networks Various
</TABLE>
- ---------------
(1) Number in parenthesis next to each market indicates that market's national
rank according to BIA Publications, Inc.'s "Investing in Radio 1997 Market
Report, 1st Edition."
(2) Due to variations that may exist within the same station programming
format(such as variations in the tempo of the music or the age of the songs
broadcast), the primary demographic may be different even though the station
programming format is the same.
(3) 80% owned by the Company.
(4) LMA(FCC license not owned by the Company).
(5) Application for renewal of license filed with the FCC on April 1, 1997.
(6) JSA(FCC license not owned and station not programmed by the Company).
(7) Application for renewal of license pending with the FCC.
In addition, the Company owns a 50% equity interest in the Australian Radio
Network Pty, Ltd., which operates ten radio stations in Australia, a one-third
equity interest in the New Zealand Radio Network, which operates 52 radio
stations throughout New Zealand, a 50% equity interest in Radio Bonton, a.s.,
which operates a radio station in the Czech Republic, and a 32.3% equity
interest in Heftel Broadcasting Corporation, a leading domestic Spanish-language
broadcaster which operates 38 radio stations in the 11 domestic markets.
The Company's radio stations employ various formats for their programming.
A station's format is important in determining the size and characteristics of
its listening audience. Advertising rates charged by a radio station are based
primarily on the station's ability to attract audiences having certain
demographic characteristics in the market area which advertisers want to reach,
as well as the number of stations competing in the market. Advertisers often
tailor their advertisements to appeal to selected population or demographic
segments. The Company pays the cost of producing the programming for each
station. Generally, the Company designs formats for its own stations, but has
also used outside consultants and program syndicators for program material. Most
of the Company's radio revenue is generated from the sale of local advertising.
Additional revenue is generated from the sale of national advertising, network
compensation payments and barter and other miscellaneous transactions.
The Company has focused its sales effort on selling directly to local
advertisers, while seeking to minimize sales through outside representatives,
including advertising agencies. Direct contact with its customers has aided the
Company's sales personnel in developing long-standing customer relationships,
which the Company believes are a competitive advantage. The Company's sales
personnel are paid on a commission basis, which emphasizes this direct local
focus. The Company believes that this focus has enabled some of its stations to
achieve market revenue shares exceeding their audience shares in a given year.
Each of the Company's radio stations also engages
24
<PAGE> 25
independent sales representatives to assist it in obtaining national
advertising. The representatives obtain advertising through national advertising
agencies and receive a commission from the Company based on the Company's net
revenue from the advertising obtained. In February 1996, the Company formed an
alliance with one of the nation's largest national advertising representation
firms, whereby the firm will dedicate certain personnel to work exclusively for
the Company's radio stations. The Company believes this arrangement will help
its stations to achieve higher shares of national advertising revenue.
TELEVISION BROADCASTING
The following table sets forth selected information with regard to each of
the 18 television stations which the Company owned or programmed as of .
<TABLE>
<CAPTION>
NETWORK DATE OF
MARKET (RANK)/STATION(1) AFFILIATION CHANNEL ACQUISITION
------------------------ ----------- ------- -----------
<S> <C> <C> <C>
MINNEAPOLIS, MN(14)
WFTC-TV FOX TV-29 Oct. 1993
MEMPHIS, TN(42)
WPTY-TV(2) ABC TV-24 Apr. 1992
WLMT-TV(3) UPN TV-30 LMA
HARRISBURG/LEBANON/LANCASTER, PA(45)
WHP-TV CBS TV-21 Oct. 1995
WLYH-TV(3) UPN TV-15 LMA
PROVIDENCE/NEW BEDFORD, RI(47)
WPRI-TV CBS TV-12 Jul 1996
WNAC-TV(3) FOX TV-64 LMA
ALBANY/SCHENECTADY/TROY, NY(52)
WXXA-TV FOX TV-23 Dec. 1994
JACKSONVILLE, FL(54)
WAWS-TV FOX TV-30 Sept. 1989
WTEV-TV(3) UPN TV-47 LMA
LITTLE ROCK, AR(58)
KLRT-TV(4) FOX TV-16 Feb. 1994
KASN-TV(3) UPN TV-38 LMA
TULSA, OK(58)
KOKI-TV FOX TV-23 Dec. 1989
KTFO-TV(3) UPN TV-41 LMA
MOBILE, AL/PENSACOLA, FL(61)
WPMI-TV NBC TV-15 Dec. 1988
WJTC-TV(3) UPN TV-44 LMA
WICHITA, KS(65)
KSAS-TV(5) FOX TV-24 Aug. 1990
TUCSON, AZ(78)
KTTU-TV(4) UPN TV-18 Feb. 1989
</TABLE>
- ---------------
(1) Number in parentheses next to each market indicates that market's national
rank according to BIA Publications, Inc.'s "Investing in Television 1997
Market Report, 1st Edition."
(2) Application for renewal of license filed with the FCC on April 1, 1997.
(3) LMA (FCC license not owned by the Company).
(4) Application for renewal of license pending with the FCC.
(5) The Company also owns KAAS-TV in Salina, Kansas, which operates as a
satellite station of KSAS-TV.
The Company purchases the broadcast rights for the majority of its
television programming for its Fox and UPN affiliates from various syndicators.
The Company competes with other television
25
<PAGE> 26
stations within each market for these broadcast rights. These programming costs
have declined in the past five years and are expected to continue to decline in
the foreseeable future due to the decrease in the number of stations in the
Company's markets competing for the same programming. Moreover, the affiliation
changes to NBC in Mobile, Alabama and to ABC in Memphis, Tennessee have reduced
the Company's need to obtain outside programming.
The primary sources of programming for the Company's affiliated television
stations are their respective networks, which produce and distribute programming
in exchange for each station's commitment to air the programming at specified
times and for commercial announcement time during the programming. For 1996, the
Fox, NBC and ABC networks' primary programming was intended to appeal primarily
to a target audience of 18-49 year old adults, while the CBS network's primary
programming was intended to appeal primarily to a target audience of 25-54 year
old adults.
The second source of programming is the production of local news
programming on the Fox, CBS, ABC and NBC affiliate stations in Jacksonville,
Florida; Harrisburg, Pennsylvania; Memphis, Tennessee; Mobile, Alabama;
Providence, Rhode Island; and Albany, New York, respectively. Local news
programming traditionally has appealed to a target audience of adults 25 to 54
years of age. Because these viewers generally have increased buying power
relative to viewers in other demographic groups, they are one of the most
sought-after target audiences for advertisers. With such programming, these
stations are able to attract advertisers to which they otherwise would not have
access.
Each Fox contract currently runs for a five year term expiring in 1998,
except for the Fox contract for WXXA-TV Albany, New York, which expires in 1999,
and may be renewed by Fox or the Company. Based on the performance of its
Fox-affiliated stations to date, the Company expects it will continue to be able
to renew its Fox contracts, although no assurances in this regard can be given.
The network affiliation agreements with ABC (for WPTY-TV in Memphis, Tennessee,
effective December 1, 1995), CBS (for WHP-TV in Harrisburg, Pennsylvania,
renewed and effective December 18, 1995), NBC (for WPMI-TV in Mobile, Alabama,
effective January 1, 1996) and UPN (for KTTU-TV in Tucson, Arizona, entered into
in 1995) run for ten-year terms.
Revenue is generated primarily from the sale of local and national
advertising, as well as from fees received from the affiliate television
networks. Advertising rates depend primarily on the quantitative and qualitative
characteristics of the audience the Company can deliver to the advertiser. Local
advertising is sold by the Company's sales personnel, while national advertising
is sold by independent national sales representatives. The Company's
broadcasting revenue is seasonal, with the fourth quarter typically generating
the highest level of revenue and the first quarter typically generating the
lowest. The fourth quarter generally reflects higher advertising in preparation
for the holiday season and the effect of political advertising in election
years.
The Company's broadcasting results are dependent on a number of factors,
including the general strength of the economy, population growth, ability to
provide popular programming, relative efficiency of radio and television
broadcasting compared to other advertising media, signal strength, technological
capabilities and developments and governmental regulations and policies.
OUTDOOR ADVERTISING
Following the consummation of the Eller Media Acquisition, the Company,
through its wholly owned subsidiary, Eller Media, became one of the largest
domestic outdoor advertising companies based on its total advertising display
inventory of approximately 50,000 display faces. The Company now provides
outdoor advertising services in 15 major metropolitan markets located in five
operating regions: California, Texas, the Midwest, the Southeast and the
Southwest. The Company currently has both outdoor advertising and broadcasting
assets in seven domestic markets, as well as in five additional domestic markets
currently served by Heftel. The markets in which the Company now provides
outdoor advertising services represent approximately 22% of the total U.S.
population and approximately 50% of the rapidly growing U.S. Hispanic
population. The Company has a
26
<PAGE> 27
significant outdoor advertising presence in eight of the ten largest U.S.
Hispanic markets, including Los Angeles, Miami, Chicago and San Antonio.
The outdoor advertising industry has experienced increased advertiser
interest and revenue growth in recent years. Outdoor advertising generated total
revenues of approximately $1.8 billion in 1995, or approximately 1.1% of the
total advertising expenditures in the United States, and the out-of-home
advertising industry generated revenues in excess of $3.0 billion in 1995,
according to estimates by the Outdoor Advertising Association of America (the
"OAAA"). Outdoor advertising's 1995 revenues represent growth of approximately
8.2% over estimated total 1994 revenues, which compares favorably to the growth
of total U.S. advertising expenditures of approximately 7.7% during the same
period.
Outdoor advertising offers repetitive impact and lower cost-per-thousand
impressions, a commonly used media measurement, as compared to competitive
media, including television, radio, newspapers, magazines and direct mail
marketing. The outdoor advertising industry has benefited from the growth in
automobile travel time for business and leisure due to increased highway
congestion and continued demographic shifts of residences and businesses from
the cities to outlying suburbs. In all cases, outdoor advertising can be
combined with other media such as radio and television to reinforce messages
being provided to consumers.
The outdoor advertising industry is comprised of several large outdoor
advertising and media companies with operations in multiple markets, as well as
many smaller and local companies operating a limited number of structures in a
single or few local markets. While the industry has experienced some
consolidation within the past few years, the OAAA estimates that there are still
approximately 1,000 companies in the outdoor advertising industry operating
approximately 396,000 billboard displays. The Company expects the trend of
consolidation in the outdoor advertising industry to continue.
The Company's outdoor advertising strategy is to expand its market presence
and improve its operating results by (i) managing the advertising rates and
occupancy levels of its displays to maximize market revenues; (ii) attracting
new categories of advertisers to the outdoor medium through significant
investments in sales and marketing resources; (iii) increasing focus on local
advertising sales; (iv) constructing new displays and upgrading its existing
displays; (v) taking advantage of technological advances which increase both
sales force productivity and production department efficiency; and (vi)
acquiring additional displays in its existing markets and expanding into
additional markets where the Company already has a broadcasting presence as well
as into the country's largest media markets and their surrounding regional
areas. The Company believes this operating strategy enhances its ability to
effectively respond to advertisers' needs.
To support this operating strategy, the Company has decentralized its
operating structure in order to place authority, autonomy and accountability for
its outdoor advertising segment at the market level and provide local management
with the tools necessary to oversee sales, display development, administration
and production and to identify suitable acquisition candidates. The Company also
maintains a fully-staffed sales and marketing office in New York which services
national outdoor advertising accounts and supports the Company's local sales
force in each market. The Company believes that one of its strongest competitive
advantages is its unique blend of highly experienced corporate and local market
management.
The Company focuses its efforts on local sales. Local advertisers tend to
have smaller advertising budgets and require greater assistance from the
Company's production and creative personnel to design and produce advertising
copy. In local sales, the Company often expends more sales efforts on educating
customers regarding the benefits of outdoor media and helping potential
customers develop an advertising strategy using outdoor advertising. While price
and availability are important competitive factors, service and customer
relationships are also critical components of local sales.
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<PAGE> 28
The Company operates the following types of outdoor advertising billboards
and displays:
- Bulletins generally are 14 feet high by 48 feet wide (672 square feet
wide) or 20 feet high by 60 feet wide (1,200 square feet) and consist of
panels on which advertising copy is displayed. Bulletin advertising copy
is either printed with computer-generated graphics on a single sheet of
vinyl that is "wrapped" around the structure, or is hand painted and
attached to the outdoor advertising structure. Bulletins also include
"wallscapes" that are painted on vinyl surfaces or directly on the sides
of buildings, typically four stories or less. Because of their greater
impact and higher cost, bulletins are usually located on major highways
and freeways. In addition, wallscapes are located on major freeways,
commuter and tourist routes and in downtown business districts.
- Premier Panels(TM) generally are 12 feet high by 25 feet wide (300 square
feet) and have vinyl wrapped around the display face. Premier Panels(TM)
are built on superior 30-sheet poster locations that deliver a
"bulletin-like" display. The Company also offers unique Premier
Plus(TM)panels, 25 feet high by 25 feet wide (625 square feet), that
consist of two stacked 30-sheet posters which are converted into one
larger individual display face.
- 30-sheet posters generally are 12 feet high by 25 feet wide (300 square
feet) and are the most common type of billboard. Advertising copy for
30-sheet posters consists of lithographed or silk-screened paper sheets
supplied by the advertiser that are pasted and applied like wallpaper to
the face of the display. Thirty-sheet posters are typically concentrated
on major surface arteries.
- 8-sheet posters usually are 6 feet high by 12 feet wide (72 square feet).
Displays are prepared and mounted in the same manner as 30-sheet posters.
Most 8-sheet posters, because of their smaller size, are concentrated on
city streets targeting pedestrian traffic.
- Transit displays are lithographed or silk-screened paper sheets located
on bus and commuter train exteriors, commuter rail terminals, interior
train cars, bus shelters and subway platforms. The Company's transit
customers include the San Francisco Bay Area Rapid Transit (BART) and the
Metropolitan Rail (METRA) in Chicago.
Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement. Bus shelters are usually
constructed, owned and maintained by the outdoor service provider under
revenue-sharing arrangements with a municipality or transit authority. During
1996, the Company invested approximately $14.2 million for new display
construction and for ongoing enhancement of its existing display inventory. Over
90% of the Company's bulletin inventory has been retrofitted for vinyl.
The following table sets forth certain information with respect to the
Company's outdoor advertising display faces as of :
<TABLE>
<CAPTION>
PREMIER
PANEL(TM)
AND
PREMIER TOTAL
MARKET PLUS(TM) 30-SHEET 8-SHEET TRANSIT DISPLAY
MARKET RANK(1) BULLETINS PANELS POSTERS POSTERS DISPLAYS FACES
------ ------- --------- --------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA:
Los Angeles(2)............... 2 734 116 4,925 -- 1,361 7,136
San Diego.................... 15 112 125 575 -- -- 812
San Francisco/Oakland(3)..... 4 425 320 1,585 627 6,812 9,769
Sacramento................... 29 91 44 426 -- 142 703
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
TEXAS:
Dallas/Fort Worth................... 7 687 84 2,085 135 -- 2,991
El Paso............................. 70 284 11 545 544 -- 1,384
Houston............................. 9 569 701 2,215 1,860 -- 5,345
San Antonio......................... 34 754 -- 1,374 1,332 -- 3,460
MIDWEST:
Chicago............................. 3 455 17 2,858 -- 3,078 6,408
Cleveland(4)........................ 22 261 6 2,007 -- -- 2,274
Milwaukee........................... 28 144 30 822 -- -- 996
SOUTHEAST:
Atlanta............................. 12 378 26 1,132 -- -- 1,536
Miami............................... 11 -- -- -- -- 2,088 2,088
Tampa(5)............................ 21 522 45 1,471 -- -- 2,038
SOUTHWEST:
Phoenix............................. 20 365 -- -- -- -- 365
========= ========= ========= ========= ========= =========
TOTAL............................... 5,781(6) 1,525 22,020 4,498 13,481 47,305(7)
========= ========= ========= ========= ========= =========
</TABLE>
- ---------------
(1) Market rank of the largest city in each market.
(2) Includes Los Angeles, Orange, Riverside, San Bernardino and Ventura
counties.
(3) Includes San Francisco, Oakland, San Jose, Santa Cruz and Solano counties.
(4) Includes Akron and Canton.
(5) Includes Sarasota and Bradenton.
(6) Includes 21 wallscapes.
(7) Excludes 4,086 convenience store displays.
Advertising rates are based on a particular display's exposure (or number of
"impressions" delivered) in relation to the demographics of the particular
market and its location within that market. The number of "impressions"
delivered by a display is measured by the number of vehicles passing the site
during a defined period and is weighted to give effect to such factors as its
proximity to other displays, the speed and viewing angle of approaching traffic,
the national average of adults riding in vehicles and whether the display is
illuminated. The number of impressions delivered by a display is verified by
independent auditing companies.
The Company has a diversified customer base in its outdoor advertising
segment of over 3,000 advertisers and advertising agency clients. The size and
geographic diversity of the Company's markets allow it to attract national
advertisers, often by packaging displays in several of its markets in a single
contract to allow a national advertiser to simplify its purchasing process and
present its message in several markets. National advertisers generally seek wide
exposure in major markets and therefore tend to make larger purchases. The
Company competes for national advertisers primarily on the basis of price,
location of displays, availability and service. In addition, the Company
believes that its outdoor advertising inventory reaches approximately 50% of the
rapidly growing U.S. Hispanic population. The Company has a significant presence
in eight of the ten largest U.S. Hispanic markets, including Los Angeles, Miami,
Chicago and San Antonio.
Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. In 1991 and 1992, the leading tobacco companies
substantially reduced their expendi-
29
<PAGE> 30
tures for outdoor advertising due to a declining population of smokers, societal
pressures, consolidation in the tobacco industry and price competition from
generic brands. Since tobacco advertisers often utilized some of the industry's
prime inventory, the decline in tobacco-related advertising expenditures has
made space available for other advertisers, including those that had not
traditionally utilized outdoor advertising. As a result of this decline in
tobacco-related advertising revenues and the increased use of outdoor
advertising by other advertisers, such as entertainment companies, retailers,
financial institutions and other businesses, the range of the Company's
advertisers has become quite diverse. For other developments related to the
regulation of outdoor advertising, including tobacco products, see "Risk
Factors -- Government Regulation."
The Company owns or has permanent easements on relatively few parcels of
real property that serve as the sites for its outdoor displays. The Company's
remaining approximately 18,343 billboard sites are leased. The Company's leases
are for varying terms ranging from month-to-month or year-to-year to terms of
ten years or longer, and many provide for renewal options. There is no
significant concentration of displays under any one lease or subject to
negotiation with any one landlord. The Company believes that an important part
of its management activity is to negotiate suitable lease renewals and
extensions.
As of December 31, 1996, Eller Media employed approximately 973 people in
its outdoor advertising segment, of whom, approximately 192 were primarily
engaged in sales and marketing, 588 were engaged in painting, bill posting and
construction and maintenance of displays and the balance were employed in
financial, public affairs, real estate, administrative and other capacities.
MANAGEMENT
The Company believes that one of its most important assets is its
experienced management team. With respect to its broadcasting operations,
general managers are responsible for the day-to-day operation of their
respective stations. The Company believes that the autonomy of its general
managers enables it to attract top quality managers capable of implementing the
Company's aggressive marketing strategy and reacting to competition in the local
markets. Most general managers have stock options in the Company. As an
additional incentive, a portion of each manager's compensation is related to the
performance of the profit centers for which he or she is responsible. In an
effort to monitor expenses, corporate management routinely reviews staffing
levels and operating costs. Combined with the centralized accounting functions,
this monitoring enables the Company to control expenses effectively. Corporate
management also advises local general managers on broad policy matters and is
responsible for long-range planning, allocating resources, and financial
reporting and controls.
With respect to the Company's outdoor advertising operations, Karl Eller
will remain with the Company to run Eller Media as a wholly-owned subsidiary.
Mr. Eller's existing employment contract, which has approximately two and
one-half years until expiration, will remain in place. On April 29, 1997, Karl
Eller was appointed to the Board of Directors of the Company. In addition, Mr.
Eller and other members of the Eller Media management team have stock options in
the Company. Members of the Eller Media management team led by Karl Eller have
proven themselves to be leaders in the outdoor advertising industry, and their
experience will be an important asset to the Company.
30
<PAGE> 31
SELLING SHAREHOLDERS
The table below sets forth the beneficial ownership of the Company's Common
Stock by the Selling Shareholders as of , and after giving effect to
the sale of shares offered by the Company and the Selling Shareholders hereby.
<TABLE>
<CAPTION>
SHARES SHARES BENEFICIALLY OWNED
BENEFICIALLY AFTER THE OFFERING (1)
OWNED SHARES --------------------------
PRIOR TO BEING PERCENT OF
SELLING SHAREHOLDER OFFERING(1) OFFERED NUMBER(1) OUTSTANDING
------------------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C>
Hellman & Friedman Capital Partners III,
L.P.(2)................................ 5,566,114 4,951,884 614,230 *
H&F Orchard Partners III, L.P.(2)........ 409,708 364,495 45,213 *
H&F International Partners III,
L.P.(2)................................ 123,458 109,834 13,624 *
H. Irving Grousbeck(3)................... 197,495 175,701 21,794 *
American Media Management, Inc.(4)....... 41,713 37,110 4,603 *
Richard Reiss, Jr.(3).................... 101,920 92,440 9,480 *
K. Tucker Anderson....................... 5,842 5,197 645 *
Glen Krevlin, as Trustee f/b/o Nina
Krevlin, Glenn Krevlin, Michael Krevlin
and Jill Krevlin....................... 1,947 1,732 215 *
Patricia Salas Pineda(3)................. 820 730 90 *
Steven G. Mihaylo........................ 84,138 74,712 9,426 *
El Dorado Investment Company............. 99,925 92,375 7,550 *
--------- --------- -------
Total.......................... 6,633,080 5,906,210 726,870
========= ========= =======
</TABLE>
- ---------------
* Less than 1%.
(1) Reflects an aggregate of 726,870 shares of Common Stock held in escrow
pursuant to the Escrow Agreement by and among the Company, Paul Meyer
("Stockholder Representative"), EM Holdings LLC, and Chase Trust Company of
California, dated April 10, 1997 entered into in connection with the Eller
Acquisition.
(2) Hellman & Friedman Capital Partners III, L.P., H&F Orchard Partners III,
L.P. and H&F International Partners III, L.P. (the "Partnerships") are each
investment partnerships that collectively held the controlling interest in
Eller Media prior to the Eller Media Acquisition. Certain affiliates of the
general partner of the Partnerships served as directors and officers of
Eller Media prior to the Eller Media Acquisition; all such affiliates ceased
to hold such positions effective as of the consummation of the Eller Media
Acquisition.
(3) Prior to the Eller Media Acquisition, individual served as a director of
Eller Media.
(4) Prior to the Eller Media Acquisition, Mr. Arthur Kern, a director of
American Media Management, Inc., served as a director of Eller Media.
31
<PAGE> 32
SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon completion of the Offering, the Company will have 89,017,920 shares of
Common Stock outstanding (assuming no exercise of the Underwriter's
overallotment option). All of the 11,000,000 shares offered hereby (plus up to
1,000,000 additional shares in the event the Underwriters exercise their
overallotment option) will be freely transferable without restriction or further
registration under the Securities Act, unless purchased by an "affiliate" of the
Company (as that term is defined under the Securities Act). Substantially all of
the 14,539,919 shares owned by L. Lowry Mays and the 11,262,936 shares owned by
B.J. McCombs are subject to certain of the resale limitations of Rule 144
because Messrs. Mays and McCombs are affiliates of the Company.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned restricted shares of
Common Stock for at least one year is entitled to sell, within any three-month
period, a number of such shares which does not exceed the greater of 1% of the
then outstanding shares of Common Stock (89,017,920 shares immediately after the
Offering) or the average weekly public trading volume of the Common Stock during
the four calendar weeks preceding the date on which notice of the sale is filed
with the Securities and Exchange Commission. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. Any person (or
persons whose shares are aggregated) who has not been an affiliate of the
Company at any time during the past three months preceding a sale and who has
owned shares of Common Stock for at least two years is entitled to sell such
shares under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information or notice requirements of Rule 144.
The Company cannot make any predictions as to the effect, if any, sales of
shares of Common Stock, or the availability of shares for future sale, will have
on the market price of the Common Stock prevailing from time to time.
REGISTRATION RIGHTS; STOCKHOLDERS AGREEMENT
In connection with the consummation of the Eller Media Acquisition, the
Company granted certain former stockholders of Eller Media (the "Eller Media
Stockholders") certain demand and piggyback registration rights pursuant to a
Registration Rights Agreement. The Eller Media Stockholders were granted three
demand registrations (including the demand registration right used in
conjunction with this Offering) which shall expire on the later of April 10,
1999, or the date when certain of the Eller Media Stockholders own less than
2,285,000 shares of the Company's Common Stock. After the successful completion
of this Offering, the Eller Media Stockholders will own 734,427 shares of Common
Stock, excluding options. The piggyback registration rights expire on the later
of the date when the shares of the Company's Common Stock held by the Eller
Media Stockholders have a value of less than $20 million or April 10, 2002. In
addition, the Eller Media Stockholders agreed to certain "holdback" restrictions
in the event of a public offering by the Company. The Company is also obligated
to file a registration statement on Form S-8 registering the 1,468,182 shares of
the Company's Common Stock issuable upon the exercise of stock options issued by
the Company to former option holders of Eller Media.
In connection with the consummation of the Eller Media Acquisition, the
Company and Eller Media also entered into a Stockholders Agreement with the
holders of approximately 7% of Eller Media's outstanding common stock (the
"Minority Stockholders"). Pursuant to the Stockholders Agreement, until April
10, 2002, the Minority Stockholders shall have the right to require the Company
to purchase their outstanding shares of Eller Media common stock for an
aggregate of 1,081,469 shares of the Company's Common Stock. Such right may be
exercised in whole or in part on no more than three occasions. From and after
April 10, 2004, and prior to such date upon the occurrence of certain events,
until April 10, 2007, the Company shall have the right to purchase all
32
<PAGE> 33
of Minority Stockholders' shares of Eller Media common stock for an aggregate of
1,081,469 shares of the Company's Common Stock. Such shares, unless issued
pursuant to an effective registration statement, shall be considered
"restricted" securities and will be subject to certain transfer restriction. See
"-- General."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 2,000,000 shares of
preferred stock, $1.00 par value per share ("Preferred Stock"), and 150,000,000
shares of Common Stock, $.10 par value per share, of which no shares of
Preferred Stock and 83,924,130 shares of Common Stock were issued and
outstanding at , excluding 36,940 held in treasury.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 2,000,000 shares of
Preferred Stock, in one or more series, and to fix the rights, preferences,
privileges and qualifications thereof without any further vote or action by the
shareholders. The issuance of Preferred Stock could decrease the amount of
earnings and assets available for distribution to holders of Common Stock, and
adversely affect the rights and powers, including voting rights, of such holders
and may have the effect of delaying, deferring or preventing a change in control
of the Company. No shares of Preferred Stock have ever been issued, and the
Company does not presently contemplate the issuance of Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of shareholders of the Company and to ratably receive
dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor, subject to the payment of any
preferential dividends declared with respect to any Preferred Stock that from
time to time may be outstanding. Upon liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in any assets
available for distribution to shareholders after payment of all obligations of
the Company, subject to the rights to receive preferential distributions of the
holders of any Preferred Stock then outstanding.
Shareholders do not have cumulative voting rights or preemptive or other
rights to acquire or subscribe to additional, unissued or treasury shares. The
shares of Common Stock currently outstanding are, and the shares of Common Stock
offered hereby will be, upon issuance thereof, validly issued, fully paid and
nonassessable.
REPURCHASE AGREEMENT
In May 1977, the Company and its then shareholders, including L. Lowry Mays
and B.J. McCombs, entered into a Buy-Sell Agreement (the "Repurchase Agreement")
restricting the disposition of the outstanding shares of Common Stock owned by
L. Lowry Mays and B.J. McCombs and their heirs, legal representatives,
successors and assigns (collectively, the "Restricted Parties"). The Repurchase
Agreement provides that in the event that a Restricted Party desires to dispose
of his shares, other than by disposition by will or intestacy or through gifts
to such Restricted Party's spouse or children, such shares must be offered for a
period of 30 days to the Company. Any shares not purchased by the Company must
then be offered for a period of 30 days to the other Restricted Parties. If all
of the offered shares are not purchased by the Company or the other Restricted
Parties, the Restricted Party offering his shares may sell them to a third party
during a period of 90 days thereafter at a price and on terms not more favorable
than those offered to the Company and the other Restricted Parties. In addition,
a Restricted Party may not individually or in concert with others sell any
shares so as to deliver voting control to a third party without providing in any
such sale that all Restricted Parties will be offered the same price and terms
for their shares. The Repurchase
33
<PAGE> 34
Agreement will continue in effect following the Offering and may preserve the
control of the present principal shareholders.
FOREIGN OWNERSHIP
As a consequence of the restrictions imposed by the Communications Act on
ownership of Common Stock by aliens, the Company's bylaws were amended effective
December 31, 1983 to provide that (i) not more than one-fifth of the shares
outstanding shall at any time be owned of record, or voted, by or for the
account of aliens, their representatives, a foreign government or a corporation
organized under the laws of a foreign country, (ii) the Company shall not be
owned or controlled directly or indirectly by any other corporation of which any
officer or more than one-fourth of the directors are aliens or of which more
than one-fourth of the shares are owned of record or voted by aliens, (iii) no
person who is an alien may be elected or serve as an officer or director of the
Company, and (iv) if the stock records of the Company shall at any time reflect
one-fifth ownership, no transfers of additional shares to aliens shall be made
and, if it shall thereafter be found that any such additional shares are in fact
held by or for the account of an alien, such shares shall not be entitled to
vote, to receive dividends or to have any other rights. The holder of such
shares will be required to transfer them to a United States citizen or to the
Company. This restriction will be applicable to the shares of Common Stock
offered hereby and to the issuance or transfer of such shares after the date of
this Prospectus. The Company's stock certificates will bear a legend setting
forth this restriction. Since the bylaws were amended, the Communications Act
has been revised to remove the limitations on alien officers and directors.
34
<PAGE> 35
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") have severally agreed to purchase
from the Company and the Selling Shareholders the following respective number of
shares of Common Stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ----------
<S> <C>
Alex. Brown & Sons Incorporated............................. 1,571,432
Credit Suisse First Boston Corporation...................... 1,571,428
Furman Selz LLC............................................. 1,571,428
Goldman, Sachs & Co. ....................................... 1,571,428
Lehman Brothers Inc. ....................................... 1,571,428
Montgomery Securities....................................... 1,571,428
Salomon Brothers Inc........................................ 1,571,428
----------
Total............................................. 11,000,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of Common Stock offered hereby if any of
such shares are purchased.
The Company and the Selling Shareholders have been advised by the
Underwriters that the Underwriters propose to offer the shares of Common Stock
to the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $0.96 per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers. After the
Offering, the offering price and other selling terms may be changed by the
Underwriters.
The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to
1,000,000 additional shares of Common Stock at the public offering price less
the underwriting discounts and commission set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 11,000,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those in
which the 11,000,000 shares are being offered.
The Underwriting Agreement contains covenants of indemnity and contribution
among the Company, the Selling Shareholders and the Underwriters with respect to
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
To facilitate the offering of the Common Stock, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Specifically, the Underwriters may over-allot shares of the
Common Stock in connection with the offering, thereby creating a short position
in the Underwriters' account. Additionally, to cover such over-allotments or to
stabilize the market price of the Common Stock, the Underwriters may bid for,
and purchase, shares of the Common Stock at a level above that which might
otherwise prevail in the open market. The Underwriters are not required to
engage in these activities, and, if commenced, any such activities may be
discontinued at any time. The Underwriters also may reclaim selling concessions
allowed to an Underwriter or dealer, if the Underwriters repurchase shares
distributed by that Underwriter or dealer.
35
<PAGE> 36
The Company, Messrs. L. Lowry Mays and B.J. McCombs and the Selling
Shareholders have agreed that they will not, directly or indirectly, offer, sell
or otherwise dispose of any equity securities of the Company or any securities
convertible into, or exchangeable for, or any rights to purchase or acquire,
equity securities of the Company (other than employee stock options granted by
the Company in the ordinary course of business) for a period of 90 days after
the date of this Prospectus, without the prior written consent of Alex. Brown &
Sons Incorporated.
LEGAL OPINIONS
Certain legal matters in connection with the shares of Common Stock offered
hereby will be passed upon for the Company by its special counsel, Akin, Gump,
Strauss, Hauer & Feld, L.L.P. (a partnership including professional
corporations), San Antonio, Texas, and for the Underwriters by their special
counsel, Piper & Marbury L.L.P., Baltimore, Maryland. Alan D. Feld, the sole
shareholder of a professional corporation which is a partner of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., is a director of the Company and owns 48,000
shares of Common Stock (including presently exercisable nonqualified options to
acquire 40,000 shares).
EXPERTS
The consolidated financial statements (and schedules) of the Company
included or incorporated by reference in the Company's Annual Report (Form 10-K)
for the year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included or
incorporated by reference therein and incorporated herein by reference which, as
to the years 1995 and 1996, are based in part on the report of KPMG, independent
auditors. The financial statements and schedules referred to above are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The consolidated financial statements of Australian Radio Network Pty Ltd
not separately presented in the Company's Annual Report (Form 10-K) for the year
ended December 31, 1996, have been audited by KPMG, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such report referred to above is incorporated herein by reference in
reliance upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Eller Media Corporation as of
December 31, 1996 and 1995 and for the year ended December 31, 1996 and for the
period from August 18, 1995 through December 31, 1995, together with the
consolidated financial statements of PMG Holdings, Inc. and subsidiaries and the
combined financial statements of Eller Investment Company, Inc. for the period
from January 1, 1995 to August 17, 1995, incorporated by reference in this
prospectus and elsewhere in the registration statement are included in the
Company's current report on Form 8-K, filed on April 17, 1997, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The combined financial statements of Eller Investment Company, Inc. as of
and for the period ended December 31, 1994, incorporated by reference in this
prospectus and elsewhere in the registration statement are included in the
Company's current report on form 8-K, filed April 17, 1997, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing in giving
said reports.
The consolidated financial statements of PMG Holdings, Inc. and
Subsidiaries as of December 31, 1994 and for the year then ended included in the
Company's Current Report (Form 8-K) dated April 17, 1997, incorporated by
reference herein have been so included in reliance on the
36
<PAGE> 37
report of KPMG Peat Marwick LLP, independent accountants, and upon the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of US Radio, Inc. for the years ended
December 31, 1995 and 1994, included in the Company's Current Report (Form 8-K)
dated May 24, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The combined financial statements of Ragan Henry Communications Group,
L.P., US Radio, L.P. and US Radio Stations, L.P. for the year ended December 31,
1994, included in the Company's Current Report (Form 8-K) dated May 24, 1996
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon incorporated herein by reference. Such combined financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Radio Equity Partners, L.P. and
its subsidiary as of December 31, 1995 and 1994, and for the years then ended
have been incorporated herein by reference in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing in the
Form 8-K of Clear Channel Communications, Inc. dated June 5, 1996, and upon the
authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements filed by the Company with the Commission pursuant to the
information requirements of the Exchange Act may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, 13th Floor, New
York, New York 10048; Los Angeles Regional Office, Suite 1100, 5670 Wilshire
Boulevard, Los Angeles, California 90036; and Chicago Regional Office, 500 W.
Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such material may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxies and information statements and other information regarding
registrants (including the Company) that file electronically. In addition,
reports, proxy statements and other information concerning the Company can be
inspected and copied at the offices of the New York Stock Exchange ("NYSE"), 20
Broad Street, New York, New York 10005, on which the Common Stock of the Company
(symbol: "CCU") is listed.
This Prospectus, which constitutes a part of a Registration Statement filed
by the Company with the Commission under the Securities Act, omits certain
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits thereto for further
information with respect to the Company and the Common Stock offered hereby.
Statements contained herein concerning provisions of any document are not
necessarily complete, and each statement is qualified in its entirety by
reference to the copy of such document filed with the Commission.
37
<PAGE> 38
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference
into this Prospectus and made a part hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, dated March 31, 1997.
2. The Company's Current Report on Form 8-K dated April 17, 1997.
3. The Company's Current Report on Form 8-K dated May 24, 1996.
4. The Company's Current Report on Form 8-K dated June 5, 1996.
Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. To the extent that any
proxy statement is incorporated by reference herein, such incorporation shall
not include any information contained in such proxy statement which is not,
pursuant to the Commission's rules, deemed to be "filed" with the Commission or
subject to the liabilities of Section 18 of the Exchange Act.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document described
above (other than exhibits, unless such exhibits are specifically incorporated
by reference). Requests for such copies should be directed to Houston Lane,
Clear Channel Communications, Inc., 200 Concord Plaza, Suite 600, San Antonio,
Texas 78216 (telephone: (210) 822-2828).
38
<PAGE> 39
============================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.......................... 3
Risk Factors................................ 10
Capitalization.............................. 16
Dividend Policy............................. 16
Use of Proceeds............................. 17
Price Range of Common Stock................. 17
Selected Financial Information.............. 18
Business.................................... 20
Selling Shareholders........................ 31
Shares Eligible for Future Sale............. 32
Description of Capital Stock................ 33
Underwriting................................ 35
Legal Opinions.............................. 36
Experts..................................... 36
Available Information....................... 37
Incorporation of Certain Documents by
Reference................................. 38
</TABLE>
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11,000,000 SHARES
[CLEAR CHANNEL LOGO]
[CLEAR CHANNEL COMMUNICATIONS, INC.]
COMMON STOCK
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PROSPECTUS
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ALEX. BROWN & SONS
INCORPORATED
CREDIT SUISSE FIRST BOSTON
FURMAN SELZ
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
May 14, 1997
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