<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 15, 1994
REGISTRATION NO. 33-52581
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
HERITAGE MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
IOWA 42-1299303
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
------------------------
13355 NOEL ROAD, SUITE 1500
DALLAS, TEXAS 75240
(214) 702-7380
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
------------------------
JOSEPH D. MAHAFFEY
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
HERITAGE MEDIA CORPORATION
13355 NOEL ROAD, SUITE 1500
DALLAS, TEXAS 75240
(214) 702-7380
(Address, including zip code, and telephone number, including area
code, of registrant's agent for service)
COPIES TO:
<TABLE>
<S> <C>
BRUCE H. HALLETT JOHN P. MEAD
Crouch & Hallett, L.L.P. Sullivan & Cromwell
717 N. Harwood Street, Suite 1400 125 Broad Street
Dallas, Texas 75201 New York, New York 10004
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
The Prospectus relating to the shares of Class A Common Stock being
registered hereby to be used in connection with a United States offering (the
"U.S. Prospectus") is set forth following this page. The prospectus to be used
in a concurrent international offering (the "International Prospectus") will
consist of alternate pages set forth following the U.S. Prospectus and the
balance of the pages included in the U.S. Prospectus for which no alternate is
provided. The U.S. Prospectus and the International Prospectus are identical
except that they contain different front covers, inside front covers and back
cover pages and different descriptions of the plan of distribution (contained
under the caption "Underwriting" in both the U.S. Prospectus and the
International Prospectus).
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 14, 1994
- --------------------------------------------------------------------------------
P R O S P E C T U S
- ---------------------------------------------------------
3,700,000 Shares
[logo] Heritage Media Corporation
Class A Common Stock
($.01 PAR VALUE)
--------------
THE SHARES OFFERED HEREBY ARE BEING SOLD BY THE SELLING STOCKHOLDERS NAMED
HEREIN UNDER "SELLING STOCKHOLDERS." OF THE 3,700,000 SHARES OF CLASS A COMMON
STOCK, PAR VALUE $.01 PER SHARE (THE "CLASS A COMMON STOCK"), OF HERITAGE
MEDIA CORPORATION ("HERITAGE" OR THE "COMPANY") BEING OFFERED HEREBY,
3,145,000 SHARES (THE "U.S. SHARES") ARE BEING OFFERED IN THE UNITED
STATES AND CANADA BY THE U.S. UNDERWRITERS (THE "U.S. OFFERING") AND
555,000 SHARES (THE "INTERNATIONAL SHARES") ARE BEING CONCURRENTLY
OFFERED OUTSIDE THE UNITED STATES AND CANADA BY THE MANAGERS
(THE "INTERNATIONAL OFFERING" AND, TOGETHER WITH THE U.S.
OFFERING, THE "OFFERINGS"). THE PRICE TO THE PUBLIC AND
THE UNDERWRITING DISCOUNT PER SHARE ARE IDENTICAL FOR
THE OFFERINGS.
THE COMPANY IS AUTHORIZED TO ISSUE TWO CLASSES OF COMMON STOCK: CLASS A COMMON
STOCK AND CLASS C COMMON STOCK. CLASS C COMMON STOCK IS ENTITLED TO VOTE ONLY
AS A CLASS ON CERTAIN MATTERS DIRECTLY AFFECTING SUCH CLASS. EACH SHARE OF
CLASS C COMMON STOCK IS CONVERTIBLE AT ANY TIME INTO ONE SHARE OF
CLASS A COMMON STOCK AT THE OPTION OF THE HOLDER.
THE CLASS A COMMON STOCK OF HERITAGE IS LISTED ON THE AMERICAN STOCK EXCHANGE
UNDER THE SYMBOL "HTG." ON MARCH 14, 1994, THE REPORTED LAST SALE PRICE OF
THE CLASS A COMMON STOCK ON THE AMERICAN STOCK EXCHANGE WAS $18 3/4 PER
SHARE.
--------------
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 AD-
EQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION
TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT STOCKHOLDERS (1)
<S> <C> <C> <C>
PER SHARE
TOTAL (2)
</TABLE>
(1) THE EXPENSES OF THE SELLING STOCKHOLDERS, ESTIMATED AT $250,000, ARE PAYABLE
BY THE COMPANY.
(2) THE SELLING STOCKHOLDERS HAVE GRANTED THE U.S. UNDERWRITERS AND THE MANAGERS
AN OPTION, EXERCISABLE BY THE REPRESENTATIVES OF THE U.S. UNDERWRITERS FOR
30 DAYS FROM THE DATE OF THE PUBLIC OFFERING OF THE SHARES OF CLASS A COMMON
STOCK OFFERED HEREBY, TO PURCHASE A MAXIMUM OF 371,922 ADDITIONAL SHARES OF
CLASS A COMMON STOCK, IN THE AGGREGATE, SOLELY TO COVER OVER-ALLOTMENTS, IF
ANY. IF THE OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO PUBLIC WILL BE
$ , UNDERWRITING DISCOUNT WILL BE $ AND PROCEEDS TO SELLING
STOCKHOLDERS WILL BE $ . SEE "UNDERWRITING."
--------------
THE U.S. SHARES ARE OFFERED BY THE SEVERAL U.S. UNDERWRITERS WHEN, AS AND IF
DELIVERED TO AND ACCEPTED BY THE U.S. UNDERWRITERS AND SUBJECT TO THEIR RIGHT TO
REJECT ORDERS IN WHOLE OR IN PART. IT IS EXPECTED THAT THE U.S. SHARES WILL BE
READY FOR DELIVERY ON OR ABOUT , 1994.
CS First Boston
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
- ---------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS , 1994.
<PAGE>
IN CONNECTION WITH THE OFFERINGS, CS FIRST BOSTON CORPORATION ON BEHALF OF
THE U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON STOCK AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K for the fiscal year ended December 31, 1993
(the "Form 10-K"), and the description of the Class A Common Stock contained in
the Company's Registration Statement filed under Section 12(b) of the Securities
Exchange Act of 1934 (the "Exchange Act"), filed by Heritage Media Corporation
(the "Company" or "Heritage") with the Securities and Exchange Commission (the
"Commission") is hereby incorporated in this Prospectus by reference.
All documents hereafter filed by the Company with the Commission, pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in and to be a part of this Prospectus
from the date of filing of such documents. The Company will provide without
charge to each person, including any beneficial owner, to whom this Prospectus
is delivered, upon the written or oral request of any such person, a copy of any
or all of the documents which are incorporated by reference herein, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to the Company at
its principal executive offices, One Galleria Tower, 13355 Noel Road, Suite
1500, Dallas, Texas 75240, Attention: Secretary, telephone: (214) 702-7380.
Any statements contained in a document all or a portion of which is
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 shall not be deemed a
part of this Prospectus, except as so modified, and any statement so superseded
shall not be deemed to constitute a part of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at its offices at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's Regional Offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
such material may also be inspected and copied at the offices of the American
Stock Exchange, 86 Trinity Place, New York, New York 10006-1881.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Class A Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY
REFERENCE. UNLESS OTHERWISE STATED, ALL REFERENCES IN THIS PROSPECTUS ASSUME NO
EXERCISE OF THE U.S. UNDERWRITERS' AND THE MANAGERS' OVER-ALLOTMENT OPTION.
THE COMPANY
Heritage Media Corporation, through its Actmedia, Inc. ("Actmedia")
subsidiary, is the world's largest independent provider of in-store marketing
products and services, primarily to consumer packaged goods manufacturers. The
Company also owns and operates six network affiliated television stations in
small to mid-sized markets and fourteen radio stations in seven major markets.
The Company has acquired three radio stations in its existing markets under the
recently adopted duopoly regulations of the Federal Communications Commission
("FCC") which permit ownership of more than one AM or one FM station in any one
market, if certain requirements are met. The Company's 1993 net revenues were
$291 million, an increase of 16% over $251 million in 1992. EBITDA (as defined
in Note 4 to "Summary Financial Data") was $68 million, a 26% increase over $54
million in 1992.
IN-STORE MARKETING. Actmedia offers advertisers a broad assortment of
in-store advertising and promotional products. Actmedia's products and services,
some or all of which are delivered in 24,000 supermarkets and 12,000 drug
stores, are highly effective in increasing consumer awareness and purchases of
targeted products. Advertising products include print displays on shopping
carts, aisle directories and shelves, and audio advertising played throughout
the store. Promotional products consist of customized in-store demonstrations
and merchandising, as well as coupon and sampling programs. Actmedia can provide
on-line reporting to customers concerning the sales impact of its in-store
programs. Actmedia's full network of in-store marketing products link sight,
sound and one-on-one selling to provide its clients with effective programs to
influence the consumer at the point-of-purchase. Actmedia's 1993 net revenues
were $216 million, an increase of 16% over 1992 net revenues of $186 million.
The most important of the Company's promotional products is the Instant
Coupon Machine (the "ICM"), an electronic dispenser of coupons that is mounted
on shelf channels under or near featured products. Market testing indicates that
the redemption rate for coupons drawn from the ICM is eight times greater than
that of coupons in free-standing inserts and that the cost to the manufacturer
per redeemed coupon is substantially lower. The ICM generated $63 million of
revenues in 1993, tripling the $21 million level of 1992 when it was first
introduced.
Actmedia has contracts, generally extending for three to five years, with
its retail supermarket and drug store customers and is the only in-store
marketing participant with a full-time field management staff supervising its
own national field service organization (up to approximately 15,000 available
part-time employees).
Heritage's principal strategy for its in-store marketing business is to
increase the utilization of the ICM, to develop new in-store products and
product enhancements, to pursue in-store opportunities in additional markets
outside the U.S., to expand in-store marketing to new classes of stores (such as
mass merchandisers and convenience stores) and to increase the utilization of
its audio in-store product.
4
<PAGE>
TELEVISION. The Company's television segment operates three NBC, two ABC
and one FOX affiliated stations. The average ratio of EBITDA to net revenues for
the Heritage television stations for the last five years has been approximately
49%, which is significantly above industry averages for comparable sized
markets. This performance is primarily due to the stations' emphasis on local
advertising revenues and cost controls. Television's 1993 net revenues were $42
million, an increase of 5% over 1992 net revenues of $40 million.
The Company's strategy for its television broadcasting business is to
increase local advertising revenues through market segmentation, to provide
excellent local news programming and to control operating expenses.
RADIO. In the radio segment, Heritage has employed an acquisition and
turnaround strategy to build a group of nine FM and five AM stations, all of
which are located in the top 50 advertising markets. Recently, the Company has
acquired three new stations, creating duopoly ownership in its Rochester,
Milwaukee and St. Louis markets. These acquisitions, which were allowed under
recently adopted FCC regulations, provide opportunities for cost savings in
these markets and create the potential for increased advertising revenues. Due
to acquisitions and internal growth, the 1993 net revenues of the Company's
radio segment were $33 million, an increase of 35% over 1992 net revenues of $25
million.
Heritage's strategy for its radio broadcasting business is to focus on the
acquisition of under performing stations, including possible duopoly
opportunities, and the subsequent improvement in their operations through
overhead reduction, programming redesign and generation of new sources of
advertising revenues.
The Company's executive offices are located at One Galleria Tower, 13355
Noel Road, Suite 1500, Dallas, Texas 75240, and its telephone number is
214-702-7380.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock Offered by the Selling
Stockholders:
U.S. Offering.................................... 3,145,000
International Offering........................... 555,000
Total.......................................... 3,700,000(1)(2)
Number of Shares of Class A Common Stock
outstanding after Offering........................ 16,400,962 shares (3)
American Stock Exchange Symbol..................... HTG
<FN>
- ------------------------
(1) Such shares of Class A Common Stock are issuable upon conversion
immediately prior to the Offerings of 3,700,000 shares of Class C Common
Stock.
(2) Excludes 371,922 shares which the U.S. Underwriters and the Managers have
the option to purchase to cover over-allotments.
(3) Does not include (i) 1,398,078 shares reserved for issuance upon exercise
of stock options granted or available for grant, (ii) 1,185,364 shares
reserved for issuance upon periodic contributions to the Company's
Retirement Savings Plan, (iii) 1,063,362 shares reserved for issuance upon
conversion of Class C Common Stock following the Offerings and (iv) any
shares which may be issued upon exercise of outstanding Settlement Rights.
See "Description of Capital Stock."
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
----------- -------- --------
(DOLLARS AND SHARES IN
THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues......................................... $ 291,205 $250,891 $222,360
Depreciation......................................... 16,268 14,499 10,900
Amortization of goodwill and other assets............ 11,912 11,643 11,413
Operating income..................................... 35,495(1) 28,100 22,300
Income (loss) before extraordinary items............. 77 (14,966) (19,278)
Net income (loss).................................... 512 (18,560) (14,958)
Net loss applicable to common stock(2)............... (4,810) (25,465) (20,435)
Loss per share before extraordinary items(2)......... (0.32) (1.51) (2.39)
Net loss per share(2)................................ (0.29) (1.76) (1.97)
Equivalent shares outstanding(3)..................... 16,314 14,449 10,369
SEGMENT DATA:
Net revenues:
In-store marketing................................. $ 216,319 $186,445 $171,136
Television......................................... 41,517 39,703 35,319
Radio.............................................. 33,369 24,743 15,905
----------- -------- --------
Total............................................ 291,205 250,891 222,360
Operating income (loss):
In-store marketing................................. 22,370 16,427 14,770
Television......................................... 10,707 11,357 8,900
Radio.............................................. 5,981 3,260 1,275
Corporate.......................................... (3,563) (2,944) (2,645)
----------- -------- --------
Total............................................ 35,495 28,100 22,300
EBITDA(4):
In-store marketing................................. 42,220 31,525 27,205
Television......................................... 20,167 19,637 16,801
Radio.............................................. 9,419 5,902 3,644
Corporate.......................................... (3,453) (2,822) (2,547)
----------- -------- --------
Total............................................ 68,353 54,242 45,103
BALANCE SHEET DATA (AT PERIOD END):
Property and equipment, net.......................... $ 57,422 $ 55,832 $ 48,659
Goodwill and other intangibles, net.................. 363,667 373,426 375,378
Total assets......................................... 492,849 496,296 481,147
Long-term debt(5).................................... 312,913 318,425 341,044
Settlement rights(6)................................. 19,514 18,821 14,997
Stockholders' equity................................. 86,642 91,213 62,022
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
<FN>
- ------------------------
(1) Operating income for 1993 was reduced by a nonrecurring charge of $3
million relating to POP Radio (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
(2) Net loss applicable to common stock and related per share data includes the
effect of preferred dividends and accretion of the Settlement Rights. See
Note 1(k) of Notes to Consolidated Financial Statements in the Form 10-K.
(3) Excludes shares reserved for issuance upon exercise of stock options or
upon conversion of outstanding preferred stock, as the effect would be
antidilutive.
(4) EBITDA is defined as operating income before depreciation, amortization,
write-down of program rights and non-cash, nonrecurring charges. EBITDA
should not be considered by an investor as an alternative to net income
(loss) as an indicator of the Company's operating performance or as an
alternative to the information included in the Company's consolidated
statements of cash flows and Management's Discussion and Analysis of
Financial Condition and Results of Operations as a measure of liquidity.
(5) Excludes current installments.
(6) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capitalization and Liquidity."
</TABLE>
7
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the shares
of Class A Common Stock offered hereby.
PRICE RANGE OF CLASS A COMMON STOCK
Shares of the Company's Class A Common Stock have been listed on the
American Stock Exchange under the symbol "HTG" since 1988. The following table
sets forth the high and low closing sale prices of the Class A Common Stock, as
reported by the American Stock Exchange for the periods indicated. All share
prices have been adjusted to give effect to the combination in March 1992 of
every four shares of Class A Common Stock into one share of Class A Common
Stock.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Year Ended December 31, 1992:
First Quarter......................... $ 15 1/2 $ 11 1/2
Second Quarter........................ 12 1/2 7 1/2
Third Quarter......................... 8 1/2 6 1/8
Fourth Quarter........................ 9 1/8 6
Year Ended December 31, 1993:
First Quarter......................... $ 10 5/8 $ 8 3/8
Second Quarter........................ 12 1/2 9 3/4
Third Quarter......................... 15 3/8 10 3/4
Fourth Quarter........................ 19 7/8 14 1/2
Year Ending December 31, 1994:
First Quarter (through March 14)...... 21 5/8 17 1/2
</TABLE>
On March 14, 1994, the last reported sale price of the Company's Class A
Common Stock was $18 3/4 per share. At December 31, 1993, the Company had
approximately 1,000 record owners of its Class A Common Stock.
DIVIDEND POLICY
The Company has never paid cash dividends on shares of any class of its
common stock. It presently intends to retain its funds to support the growth of
its business, to repay indebtedness or for other general corporate purposes and
therefore does not anticipate paying cash dividends on shares of any class of
its common stock in the foreseeable future. Additionally, the various financing
agreements to which either the Company or one or more of its subsidiaries is a
party may effectively prohibit or limit the Company's ability to pay dividends.
8
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of December 31, 1993, adjusted for the
conversion of the Company's outstanding preferred stock on February 1, 1994. The
Offerings will not affect the Company's capitalization, except that the number
of outstanding shares of Class A Common Stock will be increased by 3,766,366
shares, and the outstanding shares of Class C Common Stock will be decreased by
a like amount.
<TABLE>
<CAPTION>
DECEMBER
31, 1993
---------
(DOLLARS
IN
THOUSANDS)
<S> <C>
Current installments of long-term debt.......................................... $ 2,076
---------
Long-term debt (net of current liabilities):
11% Senior Notes due June 15, 2002............................................ 150,000
Bank indebtedness............................................................. 108,900
11% Senior Subordinated Notes due October 1, 2002............................. 50,000
Other......................................................................... 4,013
---------
Total long-term debt...................................................... 312,913
Settlement Rights(1):........................................................... 19,514
Stockholders' equity:
Preferred stock, no par value. 60,000,000 shares authorized; none
outstanding(2)............................................................... --
Common Stock:
Class A, $.01 par value. 40,000,000 shares authorized; 12,633,637 shares
outstanding(3)............................................................. 127
Class C, $.01 par value. 10,000,000 shares authorized; 4,829,728 shares
outstanding................................................................ 48
Additional paid-in capital.................................................... 218,927
Accumulated deficit........................................................... (130,862)
Accumulated foreign currency translation adjustments.......................... (1,144)
Class A Common Stock in treasury at cost (32,828 shares)...................... (454)
---------
Total stockholders' equity................................................ 86,642
---------
Total capitalization............................................................ $421,145
---------
---------
<FN>
- ------------------------
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capitalization and Liquidity."
(2) On February 1, 1994, all of the 161,145 shares of Preferred Stock which
were outstanding were converted into 429,609 shares of Class A Common Stock
and 693,560 shares of Class C Common Stock as the result of the Company's
call for redemption of its outstanding Preferred Stock.
(3) Does not include (i) 1,399,037 shares reserved for issuance upon exercise
of stock options granted or available for grant, (ii) 1,185,364 shares
reserved for issuance upon periodic contributions to the Company's
Retirement Savings Plan, (iii) 1,063,362 shares reserved for issuance upon
conversion of Class C Common Stock following the Offerings and (iv) any
shares which may be issued upon exercise of outstanding Settlement Rights.
See "Description of Capital Stock."
</TABLE>
9
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data below should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
Prospectus. The selected financial data for the periods presented below are
derived from the consolidated financial statements of the Company and its
subsidiaries, which have been audited by KPMG Peat Marwick, independent
certified public accountants. See "Experts."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1993 1992 1991 1990 1989
------------ --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $291,205 $ 250,891 $ 222,360 $203,854 $ 165,000
Depreciation.......................... 16,268 14,499 10,900 9,155 7,863
Amortization of goodwill and other
assets............................... 11,912 11,643 11,413 11,240 10,869
Operating income...................... 35,495(1) 28,100 22,300 13,651(2) 15,101
Income (loss) before extraordinary
items................................ 77 (14,966) (19,278) (26,009) (27,190)
Net income (loss)..................... 512 (18,560) (14,958) (24,950) (30,025)
Net loss applicable to common
stock(3)............................. (4,810) (25,465) (20,435) (27,929) (30,918)
Loss per share before extraordinary
items(3)............................. (.32) (1.51) (2.39) (2.82) (3.64)
Net loss per share(3)................. (.29) (1.76) (1.97) (2.72) (4.13)
Equivalent shares outstanding(4)...... 16,314 14,449 10,369 10,279 7,478
SEGMENT DATA:
Net revenues:
In-store marketing.................. $216,319 $ 186,445 $ 171,136 $152,892 $ 116,100
Television.......................... 41,517 39,703 35,319 35,803 33,324
Radio............................... 33,369 24,743 15,905 15,159 15,576
------------ --------- --------- ------------ ---------
Total............................. 291,205 250,891 222,360 203,854 165,000
Operating income (loss):
In-store marketing.................. 22,370 16,427 14,770 5,854 12,180
Television.......................... 10,707 11,357 8,900 9,854 6,008
Radio............................... 5,981 3,260 1,275 732 (550)
Corporate........................... (3,563) (2,944) (2,645) (2,789) (2,537)
------------ --------- --------- ------------ ---------
Total............................. 35,495 28,100 22,300 13,651 15,101
EBITDA(5):
In-store marketing.................. 42,220 31,525 27,205 23,338 21,454
Television.......................... 20,167 19,637 16,801 18,684 16,247
Radio............................... 9,419 5,902 3,644 3,076 2,182
Corporate........................... (3,453) (2,822) (2,547) (2,503) (2,249)
------------ --------- --------- ------------ ---------
Total............................. 68,353 54,242 45,103 42,595 37,634
BALANCE SHEET DATA (AT PERIOD END):
Property and equipment, net........... $ 57,422 $ 55,832 $ 48,659 $ 52,144 $ 50,134
Goodwill and other intangibles, net... 363,667 373,426 375,378 378,375 344,869
Total assets.......................... 492,849 496,296 481,147 497,358 463,194
Long-term debt(6)..................... 312,913 318,425 341,044 351,686 282,216
Settlement rights(7).................. 19,514 18,821 14,997 11,138 8,445
Stockholders' equity.................. 86,642 91,213 62,022 66,339 92,052
<FN>
- ------------------------------
(1) Operating income for 1993 was reduced by a nonrecurring charge of $3
million relating to POP Radio (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
(2) Operating income for 1990 was reduced by nonrecurring expenses of $6.9
million relating to compensation expense attributable to purchase of
employee stock options in connection with the POP Radio acquisition and a
$1 million write-down of barter accounts.
(3) Net loss applicable to common stock and related per share data includes the
effect of preferred dividends and accretion of the Settlement Rights. See
Note 1(k) of Notes to Consolidated Financial Statements in the Form 10-K.
(4) Excludes shares reserved for issuance upon exercise of stock options or
upon conversion of outstanding preferred stock, as the effect would be
antidilutive.
(5) EBITDA is defined as operating income before depreciation, amortization,
write-down of program rights and non-cash, non-recurring charges. EBITDA
should not be considered by an investor as an alternative to net income
(loss) as an indicator of the Company's operating performance or as an
alternative to the information included in the Company's consolidated
statements of cash flows and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" as a measure of liquidity.
(6) Excludes current installments.
(7) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capitalization and Liquidity."
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's net revenues increased from $222.4 million in 1991 to $291.2
million in 1993, and its operating income increased from $22.3 million to $35.5
million over the same period. This growth is primarily attributable to growth
from existing operations within the Company's in-store and broadcasting
businesses complemented by the acquisition of certain in-store marketing and
broadcast properties. The Company reported net losses of $15.0 million and $18.6
million and net earnings of $.5 million for the years ended December 31, 1991,
1992 and 1993, respectively. Operating results before extraordinary items
improved from a $19.3 million loss in 1991 to earnings of $77,000 in 1993.
In August 1991, the Company purchased KOKH-TV, an independent television
station serving Oklahoma City, and simultaneously sold and donated its KAUT-TV
station assets in this market to a non-commercial educational licensee. The
Company retained its rights to broadcast programming provided by the FOX
Broadcasting Company network over KOKH-TV. Also in August 1991, Actmedia Canada
acquired BLS Retail Resource Group, a Canadian in-store marketing company.
On January 2, 1992, the Company acquired 65% of Media Meervoud, a
Netherlands in-store marketing company ("MMV"). On June 1, 1992 the Company
completed the acquisition of the broadcast assets of radio stations KCFX-FM
(Kansas City) and WOFX-FM (Cincinnati). Also, during 1992, the Company wrote off
its investment in Supermarket Visions, Ltd., a U.K. marketing company ("SVL"),
as SVL ceased operations.
On July 22, 1993, the Company completed the acquisition of the broadcast
assets of radio station WKLX-FM. Heritage programmed and marketed the station
under a local marketing agreement ("LMA") from May 19, 1993 to the completion of
the acquisition. On October 25, 1993 the Company agreed to acquire radio station
WEZW-FM. Heritage programmed and marketed the station under an LMA with the
current owner from such date to the completion of the acquisition on January 1,
1994. The operating results of these stations, effective with the LMAs, are
included in the consolidated financial statements.
Due to the numerous acquisitions and dispositions, the results of operations
from year to year are not comparable. See Note 2 of Notes to Consolidated
Financial Statements included in the Form 10-K for additional information
concerning the Company's acquisitions, dispositions and related transactions.
Reference is made to "Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Form 10-K for additional
information, including a comparison of the 1992 and 1991 results of operations.
RESULTS OF OPERATIONS: 1993 COMPARED TO 1992
Consolidated net revenues of $291.2 million represented a 16% increase over
the 1992 revenues of $250.9 million. Cost of services of $151.1 million
increased 10% in 1993 compared to 1992 due primarily to the increase in net
revenues. Operating income of $35.5 million in 1993 exceeded the comparable 1992
period by 26%. The loss per share was $.29 versus $1.76 in 1992. The improvement
in the Company's operating results for the 1993 period primarily reflects
revenue growth from the Instant Coupon Machine by the In-store Marketing Group,
increased local Television and Radio Group advertising revenues and positive
contributions from the radio station acquisitions. The loss per share in 1993
was lower than 1992 due principally to $7.4 million of additional operating
income, $6 million lower interest expense and increased average shares
outstanding. The 1993 period included a $3 million nonrecurring charge for POP
Radio, a $1.7 million write-down of television broadcast program rights and a
$.4 million extraordinary gain on the early extinguishment of debt. The 1992
period included the $3.3 million write-off of the SVL investment and the
extraordinary losses of $3.6 million, net, recognized as a result of the
Company's 1992 refinancing activities.
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<PAGE>
IN-STORE MARKETING. The In-store Marketing Group contributed $216.3 million
of revenues in 1993, an increase of 16% compared to $186.4 million in 1992. The
success of the ICM was a major contributor to this growth. The ICM generated $63
million of revenues in 1993, its first full year of operation, which tripled the
$21 million level in 1992. Revenues of Retailers' Choice (a cooperative
promotion program) increased by 16%, primarily as a result of management's
decision to increase the number of programs compared to 1992. Revenues generated
per program registered a small decrease from $3.6 million in 1992 to $3.5
million in 1993. The international operations produced an additional $.5 million
of revenues in 1993 to a total of $17.7 million. The international operations
were impacted by the world-wide recession, particularly in Canada. Advertising
revenues in 1993 declined 10% compared to 1992 reflecting the continuing trend
toward promotion and the shift to ICM and away from the shelf-talk product.
Revenues of Impact (a product demonstration program) declined by 16% to $53
million in 1993. The number of Impact programs has continued to decline from 141
in 1991 to 133 in 1992 and 108 in 1993. The demonstration business has also seen
increased competition which has adversely affected pricing.
Net revenues of the POP Radio product increased to $6.6 million in 1993 from
$6.0 million in 1992. In 1993 the Company announced that POP Radio was
terminating its Joint Operating Agreement with Muzak, forming marketing
alliances with three large music network providers to accelerate the conversion
to satellite delivery and expanding its in-store audio network by approximately
9,000 stores. As a result of launching this new program, the Company recorded a
one-time nonrecurring charge of $3 million in the fourth quarter of 1993
reflecting the costs of closing a tape machine servicing center ($1.1 million),
the write-off of obsolete delivery equipment ($1.5 million), and provisions for
other costs ($.4 million). These actions will reduce the ongoing operating costs
and long-term capital requirements for POP Radio and increase the size and
quality of the in-store audio network.
In-store Marketing operating income of $22.4 million increased by 36% from
$16.4 million in the 1992 period due primarily to increased 1993 revenues, store
operations efficiencies and reduced POP Radio losses. The operating margin
increased to 12% in 1993, excluding the $3 million POP Radio charge, compared to
9% in 1992.
The In-store Marketing Group contributed 74% of the Company's revenues and
63% of operating income in 1993, and it is expected that this group will
contribute a higher percentage of the Company's revenues and operating income in
1994.
TELEVISION. The Television Group generated $41.5 million of revenues in
1993, a 5% increase compared to $39.7 million in 1992. The Television Bureau of
Advertising Time Sales Survey reported that industry-wide gross local revenues
increased by 4.4% and national revenues were up 1% compared to 1992. The
Television Group's local revenues increased 13% and national revenues improved
9% compared to the 1992 period. This favorable performance was substantially
offset by the decline of political advertising from $2.3 million in 1992 to $.1
million in 1993. The revenue improvement was produced by the Oklahoma City
(KOKH-TV) and Pensacola (WEAR-TV) stations. Pensacola benefited from local
revenue growth of 9% and national revenue growth of 19%. The Oklahoma City
station generated revenues of $7.3 million in 1993 compared to $6.3 million in
1992 primarily as a result of a 21% increase in local revenues. The continuing
emergence of the FOX network and the success of targeting programming to the age
18-49 audience has favorably impacted KOKH-TV's ratings. The group's 1993
results included a $1.7 million write-down of the carrying value of the rights
to two television broadcast programs at two stations.
Operating income of $12.4 million, excluding the write-down, increased by 9%
compared to 1992 primarily as a result of higher revenues. The operating margin
improved from 29% in 1992 to 30% in 1993 excluding the write-down.
RADIO. Net revenues of the Radio Group increased by 35% from $24.7 million
in 1992 to $33.4 million in 1993 as all of the Company's stations experienced
increased revenues. The radio stations acquired in June 1992 contributed $3
million of the increase and the 1993 acquisitions contributed $1.5 million of
revenues. Revenues for the stations owned for all of both periods increased
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<PAGE>
21% primarily as a result of improved station ratings. The St. Louis stations
improved revenues from $4.9 million to $7 million in 1993 primarily due to the
achievement by the FM station of the number one ranking in the market.
Operating income grew from $3.3 million in 1992 to $6 million in 1993
primarily as a result of the improved revenues by stations owned for all of both
periods and an additional $.2 million contributed by the acquired stations.
CORPORATE EXPENSES. Corporate expenses in 1993 of $3.6 million increased
compared to $2.9 million in 1992 due primarily to increased investor relations
activities and performance related compensation payments.
OTHER OPERATING EXPENSES. As noted above, the 1993 period included a $1.7
million write-down of television program rights as a result of management's
assessment of their realizable value (based upon projected future utilization of
the programs) and the $3 million POP Radio nonrecurring expense. In-store new
product development expenses were approximately $.8 million in 1992 and $1.1
million in 1993.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization of $28.2
million in 1993 increased by 8% compared to $26.1 million in 1992. The majority
of the increase was due to higher depreciation associated with the capital
expenditures to support the growth of Instant Coupon Machine revenues.
INTEREST EXPENSE. Interest expense consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest accrued and paid currently.................................. $ 30,864 $ 32,862 $ 26,234
Deferred interest.................................................... -- 3,990 11,751
Amortization of deferred financing costs............................. 651 621 655
--------- --------- ---------
Total.............................................................. $ 31,515 $ 37,473 $ 38,640
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred interest represents accretion of an 8% subordinated note and
13 1/2% subordinated debentures. The decrease in the deferred interest is
primarily a result of the retirement of these debt instruments in 1992. The
decrease in the current interest from 1992 to 1993 is due to lower debt levels
and interest rates.
OTHER EXPENSES. Included in the 1992 results of operations is a $3.3
million non-cash charge to reflect the net write-off of the carrying value of
SVL.
NET INCOME (LOSS). Primarily as a result of an additional $12 million of
operating income (excluding write-downs and nonrecurring charges) and $6 million
lower interest expense, the Company improved its operating results from an $18.6
million loss in 1992 to $.5 million earnings in 1993. The loss per share in 1993
is due to the preferred dividend payments and settlement rights accretion.
SEASONALITY AND INFLATION
The advertising revenues of the Company vary over the calendar year, with
the fourth quarter reflecting the highest revenues for the year. Stronger fourth
quarter results are due in part to In-store having one extra 4-week cycle in the
fourth quarter, increased retail advertising in the fall in preparation for the
holiday season, and political advertising for broadcasting in election years.
The slowdown in retail sales following the holiday season accounts for the
relatively weaker results generally experienced in the first quarter. The
Company believes inflation generally has had little effect on its results.
CAPITALIZATION AND LIQUIDITY
At December 31, 1993, the Company, through its Heritage Media Services, Inc.
subsidiary ("HMSI"), had a $130 million bank credit facility (the "Credit
Agreement"). HMSI is the Company's
13
<PAGE>
subsidiary which owns Actmedia and the Company's broadcasting properties. The
credit facility was comprised of an $80 million term loan which begins to
amortize on December 31, 1994, and a $50 million reducing revolving credit
facility which begins to decrease on December 31, 1994. At December 31, 1993,
$80 million of the term loan facility and $30.5 million of the revolving credit
facility were outstanding. At December 31, 1993, $19.5 million of additional
borrowings were available under the Credit Agreement. Effective February 9,
1994, the revolving credit facility was increased to $75 million, thereby
providing an additional $25 million availability under the Credit Agreement. The
Credit Agreement includes a number of financial and other covenants, including
the maintenance of certain operating and financial ratios and limitations on or
prohibitions of dividends, indebtedness, liens, capital expenditures, asset
sales and certain other items. Loans under the Credit Agreement are guaranteed
by the Company and HMSI's domestic subsidiaries and are secured by a pledge of
the capital stock of HMSI and its domestic subsidiaries.
On June 22, 1992, HMSI issued $150 million of 11% senior secured notes (the
"Senior Notes") due June 15, 2002. Interest on the Senior Notes is payable
semi-annually. The Senior Notes rank on a parity with the obligations under
HMSI's Credit Agreement, are guaranteed by the Company and HMSI's domestic
subsidiaries and are secured by a pledge of capital stock of HMSI and its
domestic subsidiaries. The Senior Notes include a number of financial and other
covenants.
On October 1, 1992 the Company issued $50 million of 11% senior subordinated
notes (the "Subordinated Notes") due October 1, 2002. Interest on the
Subordinated Notes is payable semi-annually. The Subordinated Notes are
subordinate in right of payment to the prior payment in full of the Credit
Agreement and the Senior Notes.
In mid-1989, the Company issued approximately $7.55 million in equity
settlement rights (the "Settlement Rights") (7.55 million Settlement Rights) in
connection with the financing of the Actmedia acquisition. At the time of
issuance these Settlement Rights entitled the holders to approximately 18% of
the fair market value of the business, properties and assets of Actmedia as a
going concern ("Net Equity") as determined in 1994 or 1996 in accordance with
put/call features of the Settlement Rights purchase agreement. Depending on the
circumstances under which the Settlement Rights are retired, the Company can pay
this value in common stock or cash or subordinated notes convertible into common
stock. To the extent such amount is paid in common stock, the valuation is
required to be increased by 4%. At December 31, 1993, the amount of Actmedia's
indebtedness (substantially all of which is intercompany indebtedness) was
approximately $160 million. During the past four years, the Company has acquired
1.6 million of the Settlement Rights at an average price of approximately $2.72
per Settlement Right in privately negotiated transactions, thereby reducing the
outstanding Settlement Rights to 5.9 million or 14.1% of the Net Equity.
The Settlement Rights mature seven years from the date of issuance (March
19, 1996), but they may be redeemed at the option of the holder ("put options")
or the Company ("call options") at certain specified times during the period
that they are outstanding. The initial put and call options become available in
1994. On or after April 19, 1994 (but prior to May 19, 1994), the Company is
required to select an independent appraiser to determine the Net Equity. Upon
completion of the appraisal process, the holders of the Settlement Rights will
be notified of the appraised valuation of the Net Equity and the resultant
valuation of the Settlement Rights.
For a period of 30 days following such notification, the holders of the
Settlement Rights may exercise a put option at such valuation. Also during that
period, the Company may exercise a call option at such valuation. The put
options may be paid in cash or, at the option of the Company, in Class A or
Class C common stock, a combination of cash and common stock or, in certain
circumstances, in subordinated notes convertible into common stock. The call
options are to be paid in cash unless such payment would create an "adverse
contractual effect" (defined generally as default under, or conflict with,
agreements relating to the Company's indebtedness) for the Company, in which
event, the Company may utilize the same payment process as described for the put
option. To the extent that neither the put nor the call options are exercised
prior to maturity date of the Settlement
14
<PAGE>
Rights, the Company is required to exercise a call option on that date under the
terms set forth above, utilizing a valuation determined by an independent
appraiser. To the extent the options are paid in cash, the Company will utilize
cash provided by operations and/or borrowings against the Credit Agreement.
The Settlement Rights were initially recorded at their estimated fair value
at the date of issuance which approximated $7,550,000. From time to time the
Company estimates the Net Equity and the resultant estimate of the value of the
Settlement Rights. To the extent that such estimate of value exceeds the
carrying value, such excess is being accreted by the interest method to
accumulated deficit over the appropriate accounting period. At December 31,
1993, the carrying value was $19,514,000. The Company intends to increase this
carrying value through additional accretion, to approximately $25,000,000 by
June 30, 1994. The Company will continue to accrete the carrying value of the
Settlement Rights to their estimated value until they are liquidated under one
of the options discussed above.
If, as a result of the independent appraisal process described above, a
valuation is determined that is above or below the accreted carrying value, the
Company will reflect such value through adjustment to the carrying value and to
the accumulated deficit at June 30, 1994. Any such increase in the valuation
would reduce the Company's net income per share or increase the net loss per
share and any such decrease in the valuation would increase the Company's net
income per share or reduce the net loss per share for the six months ending June
30, 1994, and, if the puts or calls are exercised, would similarly affect the
amount of common stock to be issued (if the price were paid in common stock) or
the indebtedness to be incurred (if the price were paid in cash).
Based upon the foregoing debt and Settlement Rights obligations, the Company
is currently highly leveraged, and it is expected to continue to have a high
level of debt for the foreseeable future. As of December 31, 1993, the Company
had indebtedness (long-term debt, including current installments and notes
payable) of approximately $315.0 million and stockholders' equity of
approximately $86.6 million, and accordingly, a consolidated debt-to-equity
ratio of 3.6 to 1. As a result of its leverage and in order to repay existing
indebtedness, the Company will be required to generate substantial operating
cash flow, refinance its indebtedness, make asset sales or effect some
combination of the foregoing. The ability of the Company to meet these
requirements will depend on, among other things, prevailing economic conditions
and financial, business and other factors, some of which are beyond the control
of the Company. Further, being primarily a holding company of operating
companies through HMSI, the Company's ability to repay its indebtedness incurred
at the parent company level will be limited by restrictions on the ability of
HMSI under the Credit Agreement and the Senior Notes to declare and pay
dividends to the Company. Under the credit agreement, at December 31, 1993, the
total amount of dividends that could be paid by HMSI to the Company was $22.6
million. As a result of an amendment to the credit agreement dated February 9,
1994, the total amount of available dividends was increased to $50 million, if
such dividends are required for the purchase or redemption of Settlement Rights.
Under the Senior Note Indenture, at December 31, 1993, the total amount of
dividends that could be paid by HMSI to the Company was $43.3 million. Such
dividends are not permitted if, as a result of such payments, a default would
occur under either the credit agreement or the Senior Note Indenture. As a
result of the foregoing restrictions, consolidated net assets of HMSI totaling
approximately $136.3 million at December 31, 1993 are not available to the
Company to pay dividends or repay debt.
On February 1, 1994, the holders of all of the Company's Series B and Series
C Convertible Preferred Stock converted their 161,945 preferred shares into
429,609 shares of Class A Common Stock and 693,560 shares of Class C Common
Stock at the rate of 6.94 common shares for each preferred share thereby
increasing the Company's common shares outstanding to 17.5 million and
eliminating the Company's annual preferred dividend obligation of $1.8 million.
The Company has focused its growth strategy on acquiring media and other
communications-related properties it believes have the potential for long-term
appreciation and aggressively managing
15
<PAGE>
the operations of these properties to improve their operating results. The
Company has historically used cash flows from financing activities to fund its
acquisitions and investments while the operations are expected to generate cash
flow sufficient to fund their ongoing expenditure requirements.
Cash flows provided by operating activities increased to $40.9 million in
1993 from $17.1 million in 1992. The improvement is primarily attributable to an
additional $14 million of EBITDA, a $4 million decrease in interest payments in
1993 and improved receivables collections. In 1992 cash flows provided by
operating activities decreased by $4.1 million compared to 1991 due to higher
interest payments and receivable levels. In 1993 the significant uses of cash in
investing and financing activities included $9.1 million for the retirement of
debt and other liabilities, $2.8 million for the purchase of Settlement Rights,
$5.1 million for acquisitions and investments, and $18.5 million for capital
expenditures.
In 1992, cash flows from financing activities included $42.1 million of net
proceeds from the issuance of additional Class A Common Stock. These proceeds
were used primarily to fund the $30 million cash component of the Company's 8%
subordinated note retirement and to fund the $7.9 million acquisition of the
Kansas City and Cincinnati radio stations. Cash flows used for capital
expenditures in investing activities during 1992 were generated by cash flows
from operating activities. In 1991, cash flows from financing activities and
cash flows used in investing activities reflect increased bank borrowings and
proceeds from the issuance of the Series B and Series C Preferred Stock. The
preferred stock proceeds were utilized, along with the proceeds from the sale of
radio station KDAY-AM, to purchase a portion of HMI's 13.5% debentures at a gain
and to fund the cash component of the KOKH-TV and BLS Retail Resource Group
acquisitions.
Capital expenditures increased from $15.5 million in 1992 to $18.5 million
in 1993. This increase was due primarily to the purchase of additional Instant
Coupon Machines. Also, the Company completed two nonrecurring projects: the
upgrade of the management information systems of the In-store Marketing Group
and the construction of new broadcast facilities for the Pensacola television
station.
Capital requirements related to acquisitions in 1994 include approximately
$2 million for the In-store Marketing Group's Australia and New Zealand
acquisitions (completed in February 1994), $5 million for the Milwaukee radio
station acquisition (completed in January 1994), and $7.2 million for the St.
Louis radio station acquisition scheduled to close in March 1994. As a part of
the commitment to new in-store radio marketing alliances, the Company made
payments totaling $.8 million in 1993 and is expecting to make payments of $4
million in 1994 representing the Company's share of the cost of the in-store
radio network upgrade. These payments are for exclusive marketing rights which
are amortized over the term of the retail chain agreements (five years). These
requirements will be provided by funds generated from operations.
16
<PAGE>
BUSINESS
GENERAL
The Company, through its Actmedia subsidiary, is the world's largest
independent provider of in-store marketing products and services, primarily to
consumer packaged goods manufacturers. The Company also owns and operates six
network affiliated television stations in small to mid-sized markets and
fourteen radio stations in seven major markets. The Company has acquired three
radio stations in its existing markets under the FCC's recently adopted duopoly
regulations which permit ownership of more than one AM or one FM station in any
one market, if certain requirements are met. The Company's 1993 net revenues
were $291 million, an increase of 16% over $251 million in 1992. EBITDA was $68
million, a 26% increase over $54 million in 1992.
Reference is made to "Item 1 -- Business" in the Form 10-K for additional
information concerning the Company's business, including information regarding
competition and regulation.
IN-STORE MARKETING
In-store marketing includes advertising displays, coupons, promotions and
product demonstrations provided within the store. Economic trends support the
continued growth of in-store marketing because this medium is inexpensive in
comparison to other marketing alternatives such as television, radio and
traditional print advertisements. In-store marketing products and services allow
advertisers to communicate with consumers at or near the point-of-purchase
before, or as, purchasing decisions are made. In addition, changing shopping
patterns have led to shorter supermarket visits, usually without shopping lists,
and declining brand loyalty, thus increasing the potential of in-store marketing
to influence consumer purchasing decisions. Industry sources estimate that a
significant percentage of brand purchase decisions are made in the supermarket.
PRODUCTS AND SERVICES. Actmedia offers advertisers a broad assortment of
in-store advertising and promotional products, which are highly effective in
increasing consumer awareness and purchases of targeted products. Advertising
products include print displays on shopping carts, aisle directories and
shelves, and audio advertising played throughout the store. Promotional products
consist of customized in-store demonstrations and merchandising, as well as
coupon and sampling programs. Actmedia can provide on-line reporting to
customers concerning the sales impact of its in-store programs.
INSTANT COUPON MACHINE. The ICM, which was developed by Actmedia, is an
electronic dispenser of coupons that is mounted on shelf channels under or near
featured products. Through independent market research sponsored by the Company,
the ICM was shown to increase brand switching substantially and to encourage
first-time purchases of featured products. In market testing, coupons featured
in Actmedia's ICM achieved an average redemption rate of 17%, versus reported
redemption rates of approximately 2% for coupons in free-standing inserts,
approximately 4% for coupons sent to consumers in direct mailings and
approximately 1% for run of press coupons. The Company's test results also
indicated that unit sales increased an average of 35% over four weeks for
products using the ICM. The ICM generated $63 million of revenues in 1993,
tripling the $21 million level of 1992 when first introduced.
RETAILERS' CHOICE. Actmedia's Retailers' Choice program provides
cooperative in-store coupon and sampling programs for groups of advertisers,
generally five times per year. Under these programs, Actmedia's representatives
distribute coupons, samples and premiums inside the store entrance. Up to 16.5
million co-op coupon booklets and up to 16.5 million solo coupons and samples
are distributed directly to shopping customers per event. In addition, product
awareness is reinforced through the placement of featured products on a
free-standing Retailers' Choice display.
IMPACT. Impact is the nation's leading in-store supermarket demonstration
program, offering advertisers complete customized events, such as tastings,
premiums, samplings and demonstrations. All demonstrations are monitored every
day by full-time and part-time supervisors at an average ratio
17
<PAGE>
of one supervisor to 15 demonstrators. Impact's regular part-time staff of
demonstrators, who implement the programs, maintain a consistent professional
appearance (with matching aprons and materials). Special display units are
utilized in the programs and programs are sold on a store-day basis. Events are
generally conducted at the front of the store but can be located elsewhere.
CARTS. Actmedia's 8" by 10", four-color advertisements, mounted in plastic
frames on the inside and outside of shopping carts, offer advertisers continuous
storewide category-exclusive advertising delivery of a print advertisement.
AISLEVISION. AisleVision features 28" by 18" four-color advertisement
posters inserted in stores' overhead aisle directory signs. An enhancement,
AisleAction, allows the manufacturer to include motion on the directory sign,
enhancing shopper awareness of the sign.
SHELFTALK/SHELFTAKE-ONE. ShelfTalk features advertisements placed in
plastic frames mounted on supermarket or drug store shelves near its featured
product. ShelfTake-One includes rebate offers or recipe ideas which consumers
may remove from the plastic frame at the site of the featured product.
ACTRADIO. Actradio, formerly POP (Point of Purchase) Radio, is the nation's
largest advertiser-supported, in-store radio network. Actradio delivers its
in-store audio advertising in conjunction with music entertainment services
provided by leading business music providers. Actradio sells advertising time to
manufacturers in units of 15 second, 20 second, and 30 second commercials each
hour.
FREEZERVISION. FreezerVision is a triangle-shaped print advertisement,
mounted in a plastic frame, on the outside of the glass freezercase door.
SELECT. Select is a service which utilizes Actmedia's part-time field force
to perform in-store merchandising tasks for manufacturers. These tasks have
included on-pack couponing and stickering, distribution checks and installation
of point-of-purchase materials.
IN-STORE NETWORK. Actmedia's in-store network delivers some or all of its
products and services in over 24,000 supermarkets and 12,000 drug stores across
the country, a network substantially larger than that of any other in-store
marketing company. By contracting to purchase the Company's in-store advertising
and promotional products, advertisers gain access to up to approximately 200 of
the nation's 214 ADIs covering over 70% of the households in the United States.
Actmedia currently has contracts with approximately 300 store chains, which
contracts generally grant it the exclusive right to provide its customers with
those in-store advertising services which are contractually specified. The
contracts are of various durations, generally extending from three to five years
and provide for a revenue-sharing arrangement with the stores. Actmedia's store
contract renewals are staggered and many of its relationships have been
maintained for almost two decades.
Actmedia's advertising and promotional programs are executed through one of
the nation's largest independent in-store distribution and service
organizations, although certain chains require the Company to utilize their own
employees. Actmedia believes the training, supervision and size of its field
service staff (approximately 300 full-time managers and up to approximately
15,000 available part-time employees) provide it with a significant competitive
advantage as its competitors generally do not have a comparable field service
staff.
CUSTOMER BASE. Actmedia's customer base includes approximately 250
companies and 700 brands. This customer base includes the 25 largest advertisers
of consumer packaged goods. In 1993, the Company's largest customers included
the following:
<TABLE>
<S> <C> <C>
Campbell Soup Kelloggs Pillsbury
Chesebrough-Pond's Kraft/General Foods Proctor & Gamble
General Mills Lever Brothers Quaker Oats
Hunt-Wesson McNeil Ralston Purina
Johnson & Johnson Nestle Foods RJR Nabisco
</TABLE>
18
<PAGE>
INTERNATIONAL OPERATIONS. The Company has set the establishment of a
significant business presence outside of the United States as an important
priority for Actmedia. The majority of the Company's advertisers are large,
multinational companies for whom the use of in-store marketing products in
overseas markets is expected to be a logical extension of their advertising and
promotional budgets. The Company's international operations are conducted
principally in Canada, the Netherlands, Australia and New Zealand. International
sales in 1993 accounted for $17.7 million (approximately 8%) of the In-store
revenues.
TELEVISION
The following table sets forth selected information relating to the
television stations owned by Heritage:
<TABLE>
<CAPTION>
STATION AND NETWORK DMA MARKET STATION MARKET STATION RANK
LOCATION AFFILIATION RANK(1) SHARE(2) IN MARKET(3)
- ----------------------------------------------- ----------- ------------- ------------------- -------------------
<S> <C> <C> <C> <C>
KOKH-TV (UHF).................................. FOX 43 7 4
Oklahoma City, OK
WCHS-TV (VHF).................................. ABC 56 17 2
Charleston/
Huntington, WV
WEAR-TV (VHF).................................. ABC 62 19 2
Mobile, AL/
Pensacola, FL
WPTZ-TV (VHF).................................. NBC 92(4) 17 2
Burlington, VT/
Plattsburgh, NY
WNNE-TV (UHF)(5)............................... NBC 92(4) 4 4
Hartford, VT/
Hanover, NH
KDLT-TV (VHF).................................. NBC 107 11 3
Sioux Falls/Mitchell, SD
KEVN-TV (VHF).................................. NBC 173 22 2
Rapid City, SD
<FN>
- ------------------------
(1) Source: Nielsen Television Designated Market Area ("DMA") Market rankings
1993-1994.
(2) "Sign on-Sign off " market shares as reported in the November 1993 Nielsen
ratings. Ratings are often quoted on a "sign on-sign off" basis,
representing the average percentage of television households viewing the
station during normal program viewing periods (approximately 7:00 a.m. to
1:00 a.m. for Nielsen). As such, ratings are one common measure used by
advertisers and others to compare a station's overall ranking in a market
to its competitors.
(3) Rankings based on relative "sign on-sign off" market shares in the November
1993 ratings of Nielsen.
(4) Does not reflect any homes in southern Quebec (including most of Montreal)
which received the WPTZ-TV signal off the air or by cable. WPTZ-TV's signal
is accessible to approximately 3.4 million people in the province of Quebec
including approximately 2.8 million people in the city of Montreal.
(5) Operated as a satellite of WPTZ-TV, but maintains some local programming
and sells advertising locally.
</TABLE>
Heritage operates its television stations in accordance with a cost-benefit
strategy that stresses primarily revenue and cash flow generation and
secondarily audience share and ratings. The objective
19
<PAGE>
of this strategy is to deliver acceptable profit margins while maintaining a
balance between the large programming investment usually required to maintain a
number one ranking (with its resultant adverse effect on profit margins), and
the unfavorable impact on revenues that results from lower audience ratings.
Components of the Company's operating strategy include management's emphasis
on obtaining local advertising revenues by market segmentation, which provides a
competitive advertising advantage, focusing on local news programming and
tightly controlling operating expenses. By emphasizing advertising sales from
local businesses, the Company's stations produce a higher percentage of local
business (approximately 63% local and 37% national) than the national average.
RADIO
The Company owns and operates five AM and nine FM radio stations in seven of
the top 50 markets. The following table sets forth certain information regarding
Heritage's radio stations:
<TABLE>
<CAPTION>
FM STATION RANK
METRO RANK FM STATION IN TARGET
LOCATION (1) CALL SIGN FORMAT FORMAT RANK (2) AUDIENCE (3)
- -------------------- ------------- -------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Seattle, WA 13 KULL-AM Oldies 2 7
KRPM-FM Country
St. Louis, MO 18 WRTH-AM Standards 1 1
WIL-FM Country
Cincinnati, OH 25 WOFX-FM Classic Rock 1 5
Portland, OR 26 KKSN-AM Standards 1 10
KKSN-FM Oldies
Milwaukee, WI 28 WEMP-AM Oldies 1 6
WMYX-FM Adult 2 10
WEZW-FM Contemporary
Kansas City, MO 30 KCFX-FM Classic Rock 1 1
Rochester, NY 45 WBBF-AM Standards 1 1
WBEE-FM Country 1 7
WKLX-FM Oldies
<FN>
- ------------------------
(1) Metropolitan areas as defined and ranked by Arbitron, Fall 1993.
(2) Heritage's FM station ranking against all radio stations in its market with
the same programming format, based on persons aged 25 to 54 listening
during the 6:00 a.m. to midnight time period. (Source: Fall 1993 Arbitron
ratings).
(3) The target ranking against all radio stations in the market, based on
listenership by adults aged 25 to 54 during the 6:00 a.m. to midnight time
period. (Source: Fall 1993 Arbitron ratings).
</TABLE>
The Company's strategy is to identify and acquire under performing radio
stations or groups and effect management and operational changes to increase
their profitability. Implementation of Heritage's strategy typically involves
the following four-step process: (1) instituting operational improvements,
usually including a change in management personnel and additional capital
investments when appropriate; (2) creating increases in audience ratings through
programming and promotional changes; (3) improving revenues as a result of the
turnaround process; and (4) increasing EBITDA. Heritage radio stations strive to
be top rated in their programming formats, and universally program a mass appeal
music format directed at a target audience of 25-to-54 year olds. Presently,
seven of the Company's nine FM stations are format leaders in their markets.
20
<PAGE>
The FCC limits radio ownership both in the number of stations commonly
owned, operated or controlled in any one market, and in total. In late 1992, the
FCC relaxed its rules to increase the number of AM or FM stations one entity can
own in one market, if certain requirements are met. This new combination is
commonly known as a duopoly.
The Company believes that duopolies can achieve significant cost savings and
also have the potential for increased revenues. The Company acquired two FM
stations in 1993 that created duopolies. In July 1993 it acquired WKLX-FM in
Rochester, New York. Effective January 1, 1994, the Company acquired WEZW-FM in
the Milwaukee market. Heritage announced in January 1994 that it has agreed to
acquire radio station KRJY-FM in St. Louis, Missouri. This acquisition is
expected to close during March 1994.
Each of Heritage's FM facilities is of the highest class of service
permitted by the FCC (B or C) with comprehensive signal coverage of its markets.
The AM stations operate as full-time facilities on regional or clear channels.
21
<PAGE>
SELLING STOCKHOLDERS
The table below sets forth the beneficial ownership of the Company's Class A
Common Stock by the Selling Stockholders at February 28, 1994, and after giving
effect to the sale of the shares of Common Stock offered hereby. Each of the
persons named below has sole voting and investment power with respect to the
shares of Common Stock beneficially owned by it.
<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
BEFORE THE AFTER THE
OFFERINGS(1) SHARES OFFERINGS(3)
------------------ BEING ----------------
NAME NUMBER PERCENT OFFERED(2) NUMBER PERCENT
- ---------------------------------------------- --------- ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
HC Crown Corp.(4)............................. 2,736,201 15.7 % 2,486,270 249,931 1.4 %
Tele-Communications, Inc...................... 1,335,721 7.6 1,213,730 121,991 0.7
<FN>
- ------------------------
(1) Gives effect to the conversion, immediately before the Offerings, of each
share of Class C Common Stock owned by the Selling Stockholders into one
share of Class A Common Stock.
(2) Assumes that the over-allotment option is not exercised. If the
over-allotment option is exercised only in part, all of the shares of HC
Crown Corp. will be purchased before any shares of Tele-Communications,
Inc. are purchased.
(3) Represents the total number of shares subject to the over-allotment option.
In the event that the over-allotment option is not exercised or is
partially exercised, all of the shares to be owned by the Selling
Stockholders after the Offerings will be Class A Common Stock.
(4) HC Crown Corp. is a wholly owned subsidiary of Hallmark Cards,
Incorporated. As of March 7, 1994, HC Crown Corp. beneficially owned
1,818,182 Settlement Rights of the Company.
</TABLE>
The Company is registering the shares of the Selling Stockholders pursuant
to registration rights granted to them pursuant to agreements entered into at
the time of the acquisition of their shares.
DESCRIPTION OF CAPITAL STOCK
The Company's Restated Articles of Incorporation authorize the issuance of
up to 40,000,000 shares of Class A Common Stock, par value $.01 per share,
10,000,000 shares of Class C Common Stock, par value $.01 per share, and
60,000,000 shares of Preferred Stock, no par value per share. A total of
12,634,596 shares of Class A Common Stock and 4,829,728 shares of Class C Common
Stock and no shares of Preferred Stock were issued and outstanding as of
February 28, 1994. A total of 1,398,078 shares of Class A Common Stock have been
reserved for issuance upon the exercise of outstanding stock options. An
additional 1,185,364 shares of Class A Common Stock have been reserved for
issuance upon the Company's periodic contribution to its Retirement Savings
Plan. All of the Company's outstanding shares of Class A Common Stock (including
the shares issuable upon conversion of Class C Common Stock) are fully paid,
nonassessable and listed on the American Stock Exchange.
CLASS A COMMON STOCK; CLASS C COMMON STOCK. The holders of Class A Common
Stock are entitled to one vote per share. The holders of Class C Common Stock
have no voting rights except (1) to the extent such shares are entitled under
Iowa law to vote as a class on specified matters directly affecting such class
and (2) with respect to any amendments to the Company's Restated Articles of
Incorporation which alter or amend dividend or distribution rights, voting
rights, rights upon liquidation and/or merger, transfer rights or preemptive
rights. Such matters include amendments of the Company's Restated Articles of
Incorporation to change the number of authorized shares of a class, to change
the par value of the shares of such class or to alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely.
Subject to the rights of the holders of any then outstanding Preferred
Stock, the holders of common stock are entitled to receive such dividends as may
be declared by the Board of Directors. If
22
<PAGE>
dividends are paid to one class of common stock, whether in cash or in property
(including shares of Preferred Stock but not including shares of common stock of
the Company), then the holders of the other class of common stock are entitled
to receive an Equivalent Proportionate Dividend per share. An "Equivalent
Proportionate Dividend" shall mean a dividend in which the amount payable per
share of Class A Common Stock shall equal the amount payable per share of Class
C Common Stock. If a distribution is to be paid in any class of common stock to
the holders of Class A or Class C Common Stock, the Company shall also pay to
the holders of the other class of common stock a distribution per share of such
number of shares (the "Distributed Shares") as is equal to the number of shares
of common stock per share distributed to such holders of Class A Common Stock or
Class C Common Stock, as the case may be, provided that the Distributed Shares
shall be of the same class as the class of common stock in respect of which such
distribution is made. The Company may not reclassify, subdivide or combine one
class of common stock without reclassifying, subdividing or combining each other
class of common stock on an equal proportionate per share basis.
Upon liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or involuntary, and in the event of any reorganization of the
Company or merger or consolidation of the Company into another entity or the
sale, lease, exchange, transfer or other disposition of all or substantially all
of the Company's assets or the recapitalization or reclassification of the
Company's capital stock, subject to the rights of the holders of any preferred
stock, each holder of either the Class A Common Stock or Class C Common Stock
shall be entitled to receive the same form of consideration per share, in each
case in the Equivalent Proportionate Distribution, whether such consideration is
in the form of cash, property or securities or any combination thereof. An
"Equivalent Proportionate Distribution" shall mean a distribution in which the
amount distributable per share of Class C Common Stock shall equal the amount
distributable per share of Class A Common Stock.
Each share of Class C Common Stock is convertible at the holder's option
into one share of Class A Common Stock at any time.
The Bank of New York serves as the registrar and transfer agent for the
Class A Common Stock.
PREFERRED STOCK. The Board of Directors of the Company is authorized to
issue, by resolution and without any action by stockholders, shares of Preferred
Stock and may establish the designations, dividend rights, dividend rate,
conversion rights, voting rights, terms of redemption, liquidation preference,
sinking fund terms and all other preferences and rights of any series of
Preferred Stock. The issuance of shares of Preferred Stock may adversely affect
the rights (including voting rights) of the holders of the Common Stock.
BUSINESS COMBINATIONS. The Company's Restated Articles of Incorporation
provide that the Board of Directors of the Company, when evaluating a tender or
exchange offer by another party for any equity security of the Company, a merger
or consolidation of the Company with another corporation or the purchase of all
or substantially all of the assets of the Company, may give due consideration to
all relevant factors including (1) the anticipated social and economic effects
of the transaction upon the Company's employees, customers and the communities
in which the Company operates; (2) the consideration proposed in relation to the
then market price of the Company's equity securities, the future value of the
Company as an independent entity and the then current value of the Company in a
freely negotiated transaction, as determined by the Board of Directors; and (3)
relevant aspects of other acquisitions made by such party and their course of
dealing with acquired businesses including the effect thereof on the business
and reputation of the acquired businesses and their products and services and
the effect of such acquisitions on employees, creditors, customers and other
persons affected by the acquired businesses and on the communities involved.
These provisions could have the effect of delaying, deferring or preventing a
change in control of the Company and adversely affecting the market price of the
Company's securities.
LIABILITY OF DIRECTORS. The Company's Restated Articles of Incorporation
provide that a director of the Company shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of
23
<PAGE>
loyalty to the Company or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law, (3) for a transaction from which the director derives an improper personal
benefit or (4) in respect of certain unlawful dividend payments or stock
redemptions or repurchases. These provisions further provide that, if the Iowa
Business Corporation Act is amended to authorize corporate action further
eliminating or limiting personal liability of directors, then the liability of a
director of the Company shall be eliminated or limited to the fullest extent
permitted by the Iowa Business Corporation Act as so amended. The effect of
these provisions will be to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (1)-(4) above. These
provisions are not expected to alter the liability of directors under federal
securities laws or in respect of equitable remedies that may be available under
state law.
COMPLIANCE WITH FCC REGULATIONS. So long as the Company or any of its
subsidiaries holds authority from the FCC (or any successor thereto) to operate
any television or radio broadcasting station, if the Company has reason to
believe that the ownership, or proposed ownership, of shares of capital stock of
the Company by any stockholder or any person presenting any shares of capital
stock of the Company for transfer into his or her name (a "Proposed Transferee")
may be inconsistent with, or in violation of, any provision of the Federal
Communication Laws (as defined in the Restated Articles of Incorporation) such
stockholder or Proposed Transferee, upon request of the Company, is required to
furnish promptly to the Company such information (including, without limitation,
information with respect to citizenship, other ownership interests and
affiliations) as the Company shall reasonably request to determine whether the
ownership of, or the exercise of any rights with respect to, shares of capital
stock of the Company by such stockholder or Proposed Transferee is inconsistent
with, or in violation of, the Federal Communication Laws. The Company may refuse
to permit the transfer of shares of capital stock of the Company to such
Proposed Transferee or may suspend those rights of stock ownership the exercise
of which would result in any inconsistency with, or violation of, the Federal
Communication Laws (including the right to vote and the payment of dividends or
other distributions).
SETTLEMENT RIGHTS. In connection with the acquisition of Actmedia in 1989,
the Company issued certain Settlement Rights which entitle the holders of such
rights to receive cash or Class A Common Stock or Class C Common Stock of the
Company having a value equal to approximately 14.1% of the aggregate market
value of Actmedia's net equity at specified future dates. The Settlement Rights
mature in 1996, but they may be exercised at the option of holders of 20% of the
Settlement Rights or the Company at certain specified times during the period
they are outstanding, with the initial option beginning on April 19, 1994. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capitalization and Liquidity."
REGISTRATION RIGHTS. In addition to the shares offered hereby (including
shares covered by the over-allotment option), the holders of approximately
1,400,000 shares of Class A Common Stock either outstanding or issuable upon the
conversion of other classes of securities of the Company have certain rights to
register those shares under the Securities Act. All costs and expenses of such
registration (other than transfer taxes, any underwriting discounts and
commissions and the expense of any separate counsel to the holders) will be
borne by the Company. No prediction can be made as to the effect, if any, that
sales of shares under the registration statement will have on the market price
of Class A Common Stock prevailing from time to time.
24
<PAGE>
CERTAIN FEDERAL TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain U.S. federal income tax
consequences of the ownership and disposition of Class A Common Stock by a
person that, for U.S. federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust (a "non-U.S. holder"). This discussion does not consider specific facts
and circumstances that may be relevant to a particular holder's tax position
(including the tax position of certain U.S. expatriates) and does not deal with
U.S. state and local or non-U.S. tax consequences. Furthermore, the following
discussion is based on provisions of the U.S. Internal Revenue Code of 1986, as
amended (the "Code") and administrative and judicial interpretations as of the
date hereof, all of which are subject to change. Each prospective holder is
urged to consult a tax advisor with respect to the U.S. federal tax consequences
of acquiring, holding and disposing of Class A Common Stock as well as any tax
consequences that may arise under the laws of any U.S. state, municipality or
other tax jurisdiction.
DIVIDENDS
Dividends paid to a non-U.S. holder of Class A Common Stock will be subject
to withholding of U.S. federal income tax at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty, unless the dividends are
effectively connected with the conduct of a trade or business within the United
States or, if an income tax treaty applies, are attributable to a U.S. permanent
establishment of such holder. Dividends that are effectively connected with such
holder's conduct of a trade or business in the United States or, if an income
tax treaty applies, are attributable to a U.S. citizens, resident aliens and
domestic U.S. corporations, and are not generally subject to withholding. Any
such effectively connected dividends received by a non-U.S. corporation may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of the United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. Under proposed United States Treasury regulations, not
currently in effect, however, a non-U.S. holder of Class A Common Stock who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy applicable certification and other requirements.
A non-U.S. holder of Class A Common Stock that is eligible for a reduced
rate of U.S. withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund with
the U.S. Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of Class A Common Stock unless
(i) the gain is effectively connected with a trade or business of the non-U.S.
holder in the United States, (ii) in the case of a non-U.S. holder who is an
individual and holds the Class A Common Stock as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year of the
sale and either (a) such individual's "tax home" for U.S. federal income tax
purposes is in the United States or (b) the gain is attributable to an office or
other fixed place of business maintained in the United States by such
individual, (iii) the Company is or has been a "U.S. real property holding
corporation" for federal income tax purposes and the non-U.S. holder held,
directly or indirectly at any time during the five-year period ending on the
date of disposition, more than 5% of the Class A Common Stock. The Company has
not been, is not, and does not anticipate becoming a "U.S. real property holding
corporation" for federal income tax purposes.
25
<PAGE>
FEDERAL ESTATE TAXES
Class A Common Stock held by a non-U.S. holder at the time of death will be
included in such holder's gross estate for U.S. federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
U.S. information reporting requirements, other than reporting of dividend
payments for purposes of the withholding tax noted above, and backup withholding
tax generally will not apply to dividends paid to non-U.S. holders that are
either subject to a 30% withholding discussed above or that are not so subject
because an applicable tax treaty reduces such withholding. Otherwise backup
withholding of U.S. federal income tax at a rate of 31% may apply to dividends
paid with respect to the Class A Common Stock to holders that are not "exempt
recipients" and that fail to provide certain information (including the holder's
U.S. taxpayer identification number) in the manner required by U.S. law and
applicable regulations. Generally, the payor of the dividends may rely on the
payees' address outside the United States in determining that the withholding
discussed above applies, and consequently, that the backup withholding
provisions do not apply.
As a general proposition, U.S. information reporting and backup withholding
also will not apply to a payment made outside the United States of the proceeds
of a sale of Class A Common Stock, through an office outside the United States
of a non-U.S. broker. However, U.S. information reporting requirements (but not
backup withholding) will apply to a payment made outside the United States of
the proceeds of a sale of Class A Common Stock through an office outside the
United States of a broker that is a U.S. person, that derives, 50% or more of
its gross income for certain periods from the conduct of a trade or business in
the United States, or that is a "controlled foreign corporation" as to the
United States, unless the broker has documentary evidence in its records that
the holder is a non-U.S. holder and certain conditions are met, or the holder
otherwise establishes an exemption. Payment by a U.S. office of a broker of the
proceeds of a sale of Class A Common Stock is currently subject to both U.S.
backup withholding and information reporting unless the holder certifies
non-U.S. status under penalties of perjury or otherwise establishes an
exemption.
A non-U.S. holder generally may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the U.S. Internal Revenue Service.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Class A Common Stock in Canada is being made only on
a private placement basis exempt from the requirement that the Company prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of the Class A Common Stock are effected. Accordingly, any
resale of the Class A Common Stock in Canada must be made in accordance with
applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of the Class A Common Stock.
REPRESENTATION OF PURCHASERS
Each purchaser of Class A Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Stockholders and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities laws
to purchase such Class A Common Stock without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent, and (iii) such purchaser
has reviewed the text above under "Resale Restrictions."
26
<PAGE>
NOTICE FOR ONTARIO RESIDENTS
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada. As a result, it may not be possible for
Ontario purchasers to effect service of process within Canada upon the issuer or
such persons. All or a substantial portion of the assets of the issuer and such
persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against the issuer or such persons in Canada or
to enforce a judgment obtained in Canadian courts against such issuer or persons
outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Class A Common Stock to whom the SECURITIES ACT (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Class A Common Stock acquired by such purchaser pursuant to the U.S.
Offering. Such report must be in the form attached to British Columbia
Securities Commission Blanket Order BOR #88/5, a copy of which may be obtained
from the Company. Only one such report must be filed in respect of Class A
Common Stock acquired on the same date and under the same prospectus exemption.
27
<PAGE>
UNDERWRITING
The Underwriters named below (the "U.S. Underwriters"), for whom CS First
Boston Corporation, Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are
acting as representatives (the "U.S. Representatives"), have severally agreed to
purchase from the Selling Stockholders the following respective numbers of
shares of Class A Common Stock (the "U.S. Shares") set forth opposite their
names:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS U.S. SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
CS First Boston Corporation......................................................
Goldman, Sachs & Co. ............................................................
J.P. Morgan Securities Inc. .....................................................
-----------
Total.......................................................................... 3,145,000
-----------
-----------
</TABLE>
The Underwriting Agreement between the Company, the Selling Stockholders and
the several U.S. Underwriters provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent, and that the U.S.
Underwriters will be obligated to purchase all of the U.S. Shares being offered
hereby if any are purchased.
The Selling Stockholders have granted to the U.S. Underwriters and the
Managers of the International Offering (the "Managers") an option, exercisable
by the U.S. Representatives, expiring at the close of business on the 30th day
after the date of the initial public offering of the U.S. Shares, to purchase up
to 371,922 additional shares of Class A Common Stock (the "Option Shares"), at
the initial public offering price less the underwriting discount, all as set
forth on the cover page of this Prospectus. The U.S. Representatives may
exercise such option only to cover over-allotments in the sale of the shares of
Class A Common Stock. To the extent that this option to purchase is exercised,
each U.S. Underwriter and each Manager will become obligated, subject to certain
conditions, to purchase approximately the same percentage of Option Shares being
sold to the U.S. Underwriters and the Managers as the number set forth next to
such U.S. Underwriter's name in the preceding table bears to the total number of
shares in such table and as the number set forth next to such Manager's name in
the corresponding table in the prospectus relating to the International Offering
bears to the total number of shares in such table (the "International Shares").
The Company and the Selling Stockholders have been advised by the U.S.
Representatives that the U.S. Underwriters propose to offer the U.S. Shares to
the public in the United States and Canada initially at the offering price set
forth on the cover page of this Prospectus and, through the U.S.
Representatives, to certain dealers at such price less a concession of $ per
share of Class A Common Stock; that the U.S. Underwriters and such dealers may
allow a discount of $ per share of Class A Common Stock on sales to other
dealers; and that, after the initial public offering, the public offering price
and concession and discount to dealers may be changed upon the mutual agreement
of the U.S. Representatives and CS First Boston Limited ("CSFB") on behalf of
the Managers.
The Company and the Selling Stockholders have entered into a Subscription
Agreement (the "Subscription Agreement") with the Managers providing for
concurrent offer and sale of the International Shares outside the United States
and Canada. The offering price, the aggregate underwriting discount per share
and the per share discount to dealers for the U.S. Offering and the concurrent
International Offering are identical. The closing of the U.S. Offering is a
condition to the closing of the International Offering, and vice versa.
28
<PAGE>
Pursuant to an Agreement Between U.S. Underwriters and Managers (the
"Agreement Between") relating to the Offerings, each of the U.S. Underwriters
has agreed or will agree that, as part of the distribution of the U.S. Shares
and subject to certain exceptions, (a) it is not purchasing any shares of Class
A Common Stock for the account of anyone other than a U.S. or Canadian Person
and (b) it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of Class A Common Stock or distribute any prospectus
relating to the Class A Common Stock to any person outside the United States or
Canada or to anyone other than a U.S. or a Canadian Person nor to any dealer who
does not so agree. Each of the Managers has agreed or will agree that, as part
of the distribution of the International Shares and subject to certain
exceptions, (i) it is not purchasing any shares of Class A Common Stock for the
account of any U.S. or Canadian Person and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any shares of Class A Common
Stock, or distribute any prospectus relating to the Class A Common Stock, in the
United States or Canada or to any U.S. or Canadian Person nor to any dealer who
does not so agree. The foregoing limitations do not apply to stabilization
transactions or to transactions between the U.S. Underwriters and the Managers
pursuant to the Agreement Between. As used herein, "United States" means the
United States of America (including the States and the District of Columbia),
its territories, possessions and other areas subject to its jurisdiction,
"Canada" means Canada, its provinces, territories, possessions and other areas
subject to its jurisdiction, and "U.S. or Canadian Person" means a citizen or
resident of the United States or Canada, a corporation, partnership or other
entity created or organized in or under the laws of the United States or Canada
(other than a foreign branch of such an entity) and includes any United States
or Canadian branch of a non-U.S. or non-Canadian Person.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Class A Common Stock
as may be mutually agreed upon. The price of any shares so sold will be the
public offering price, less such amount as may be mutually agreed upon by the
U.S. Representatives and CSFB, on behalf of the Managers, but not exceeding the
selling concession applicable to such shares. To the extent there are sales
between the U.S. Underwriters and the Managers pursuant to the Agreement
Between, the number of shares of Class A Common Stock initially available for
sale by the U.S. Underwriters or by the Managers may be more or less than the
amount appearing on the cover page of this Prospectus. Neither the U.S.
Underwriters nor the Managers are obligated to purchase from the other any
unsold shares of Class A Common Stock.
The Company has agreed that, for a period of 60 days after the date of this
Prospectus, it will not, without the prior written consent of CS First Boston
Corporation, on behalf of the U.S. Representatives and the Managers, directly or
indirectly, offer, sell, agree to sell, contract to sell or otherwise dispose of
any Class A Common Stock or any security convertible into or exchangeable for
Class A Common Stock other than to the U.S. Underwriters or the Managers
pursuant to the Underwriting and Subscription Agreements and other than (a)
pursuant to any employee stock option plan, stock ownership plan, stock bonus
plan, stock compensation plan, dividend reinvestment plan of the Company in
effect on the date of this Prospectus, (b) issuances of Class A Common Stock
issuable upon the conversion of securities or the exercise of warrants
outstanding at the date of this Prospectus and (c) issuances of Class A or Class
C Common Stock issuable pursuant to the exercise of Settlement Rights. See
"Description of Capital Stock -- Settlement Rights." In addition, the Selling
Stockholders, the executive officers and directors of the Company and certain of
its principal stockholders (such group owning approximately 14% of the Class A
Common Stock and 100% of the outstanding Class C Common Stock) have agreed to
such restriction for 90 days after the date of this Prospectus.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act of 1933, as amended, or to contribute to
payments that the U.S. Underwriters and the Managers may be required to make in
respect thereof.
Affiliates of Goldman, Sachs & Co. beneficially owned at February 7, 1994 an
aggregate of 456,168 shares of Class A Common Stock, 550,375 shares of Class C
Common Stock and 909,091 Settlement Rights of the Company. Affiliates of J.P.
Morgan Securities Inc. beneficially owned at March 7, 1994 an
29
<PAGE>
aggregate of 55,556 shares of Class A Common Stock, 512,987 shares of Class C
Common Stock and 909,091 Settlement Rights of the Company. Also, Goldman, Sachs
& Co. has from time to time performed, and continues to perform, various
investment banking services for the Company, for which customary compensation
has been received.
VALIDITY OF CLASS A COMMON STOCK
The validity of the Class A Common Stock offered hereby will be passed upon
for the Company by Crouch & Hallett, L.L.P., Dallas, Texas, and will be passed
upon for the U.S. Underwriters and the Managers by Sullivan & Cromwell, New
York, New York. Crouch & Hallett, L.L.P. and Sullivan & Cromwell may rely as to
all matters of Iowa law upon the opinion of Wayne Kern, Esq., Senior Vice
President and Secretary of the Company.
EXPERTS
The consolidated financial statements and schedules of Heritage Media
Corporation and subsidiaries as of December 31, 1993 and 1992, and for each of
the years in the three-year period ended December 31, 1993, incorporated by
reference herein have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
30
<PAGE>
[United States map showing location of
Heritage Media broadcast properties]
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
No dealer, salesman or other person has been authorized 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, the Selling Stockholders or the
Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---
<S> <C>
Incorporation of Certain Documents by
Reference...................................... 3
Available Information........................... 3
Prospectus Summary.............................. 4
Use of Proceeds................................. 8
Price Range of Class A Common Stock............. 8
Dividend Policy................................. 8
Capitalization.................................. 9
Selected Financial Data......................... 10
Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 11
Business........................................ 17
Selling Stockholders............................ 22
Description of Capital Stock.................... 22
Certain Federal Tax Considerations for Non-
United States Holders.......................... 25
Notice to Canadian Residents.................... 26
Underwriting.................................... 28
Validity of Class A Common Stock................ 30
Experts......................................... 30
</TABLE>
Heritage Media
Corporation
3,700,000 Shares
Class A Common Stock
($.01 PAR VALUE)
----------------------------
P R O S P E C T U S
------------------
CS First Boston
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
[Alternate Page for International Prospectus]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 14, 1994
PROSPECTUS
3,700,000 Shares
Heritage Media Corporation
[Logo]
Class A Common Stock
($.01 PAR VALUE)
The shares offered hereby are being sold by the Selling Stockholders named
herein under "Selling Stockholders." Of the 3,700,000 shares of Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), of Heritage Media
Corporation ("Heritage" or the "Company") being offered hereby, 3,145,000 shares
(the "U.S. Shares") are being offered in the United States and Canada by the
U.S. Underwriters (the "U.S. Offering") and 555,000 shares (the "International
Shares") are being concurrently offered outside the United States and Canada by
the Managers (the "International Offering" and, together with the U.S. Offering,
the "Offerings"). The price to the public and the underwriting discount and
commissions per share are identical for the Offerings.
The Company is authorized to issue two classes of common stock: Class A Common
Stock and Class C Common Stock. Class C Common Stock is entitled to vote only as
a class on certain matters directly affecting such class. Each share of Class C
Common Stock is convertible at any time into one share of Class A Common Stock
at the option of the holder.
The Class A Common Stock of Heritage is listed on the American Stock Exchange
under the symbol "HTG." On March 14, 1994, the reported last sale price of the
Class A Common Stock on the American Stock Exchange was $18 3/4 per share.
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 AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS STOCKHOLDERS (1)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share................................. $ $ $
Total (2)................................. $ $ $
</TABLE>
- ------------------------
(1) The expenses of the Selling Stockholders, estimated at $250,000, are payable
by the Company.
(2) The Selling Stockholders have granted the U.S. Underwriters and the Managers
an option, exercisable by the representatives of the U.S. Underwriters for
30 days from the date of the public offering of the shares of Class A Common
Stock offered hereby, to purchase a maximum of 371,922 additional shares of
Class A Common Stock, in the aggregate, solely to cover over-allotments, if
any. If the option is exercised in full, the total price to public will be
$ , underwriting discount and commissions will be $ and
proceeds to selling stockholders will be $ . See "Subscription and
Sale."
The International Shares are offered by the several Managers when, as and if
delivered to and accepted by the Managers and subject to their right to reject
orders in whole or in part. It is expected that the International Shares will be
ready for delivery on or about , 1994.
CS First Boston
Goldman Sachs International J.P. Morgan Securities Ltd.
The date of this Prospectus is , 1994.
<PAGE>
[Alternate Page for International Prospectus]
THE INTERNATIONAL SHARES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY,
IN THE UNITED STATES OR CANADA OR TO ANY U.S. OR CANADIAN PERSON AS PART OF THE
DISTRIBUTION OF THE INTERNATIONAL SHARES. FOR A FURTHER DISCUSSION OF CERTAIN
RESTRICTIONS ON THE OFFERING AND SALE OF THE INTERNATIONAL SHARES, SEE
"SUBSCRIPTION AND SALE."
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED 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, ANY SELLING STOCKHOLDER OR ANY MANAGER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Incorporation of Certain Documents by Reference......... 3
Available Information................................... 3
Prospectus Summary...................................... 4
Use of Proceeds......................................... 8
Price Range of Class A Common Stock..................... 8
Dividend Policy......................................... 8
Capitalization.......................................... 9
Selected Financial Data................................. 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 11
<CAPTION>
PAGE
-----
<S> <C>
Business................................................ 17
Selling Stockholders.................................... 22
Description of Capital Stock............................ 22
Certain Federal Tax Considerations for Non-United States
Holders................................................ 25
Notice to Canadian Residents............................ 26
Subscription and Sale................................... 28
Validity of Class A Common Stock........................ 30
Experts................................................. 30
</TABLE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K for the fiscal year ended December 31, 1993
(the "Form 10-K"), and the description of the Class A Common Stock contained in
the Company's Registration Statement filed under Section 12(b) of the Securities
Exchange Act of 1934 (the "Exchange Act"), filed by Heritage Media Corporation
(the "Company" or "Heritage") with the Securities and Exchange Commission (the
"Commission") is hereby incorporated in this Prospectus by reference.
All documents hereafter filed by the Company with the Commission, pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in and to be a part of this Prospectus
from the date of filing of such documents. The Company will provide without
charge to each person, including any beneficial owner, to whom this Prospectus
is delivered, upon the written or oral request of any such person, a copy of any
or all of the documents which are incorporated by reference herein, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to the Company at
its principal executive offices, One Galleria Tower, 13355 Noel Road, Suite
1500, Dallas, Texas 75240, Attention: Secretary, telephone: (214) 702-7380.
Any statements contained in a document all or a portion of which is
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 shall not be deemed a
part of this Prospectus, except as so modified, and any statement so superseded
shall not be deemed to constitute a part of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at its offices at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's Regional Offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
such material may also be inspected and copied at the offices of the American
Stock Exchange, 86 Trinity Place, New York, New York 10006-1881.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Class A Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement.
3
<PAGE>
[Alternate Page for International Prospectus]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1994 (the "Subscription Agreement"),
severally and not jointly agreed with the Selling Stockholders to subscribe and
pay for the following respective numbers of shares of Class A Common Stock (the
"International Shares") set forth opposite their names:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL
MANAGERS SHARES
- ----------------------------------------------------------------------------------- -------------------
<S> <C>
CS First Boston Limited............................................................
Goldman Sachs International........................................................
J.P. Morgan Securities Ltd. .......................................................
--------
Total............................................................................ 555,000
--------
--------
</TABLE>
The Subscription Agreement provides that the obligations of the Managers are
such that, subject to certain conditions precedent, the Managers are severally
committee to take and pay for all of the International Shares if any are taken.
The Managers are entitled to terminate the Subscription Agreement in certain
circumstances prior to the purchase of the International Shares.
The Selling Stockholders have granted to the U.S. Underwriters (as defined
below) and the Managers an option, exercisable by CS First Boston Corporation,
Goldman, Sachs & Co. and J.P. Morgan Securities Inc., as representatives (the
"U.S. Representatives") of the U.S. Underwriters, for 30 days after the date of
the initial public offering of the shares of Class A Common Stock pursuant to
the U.S. Offering, to purchase up to 371,922 additional shares of Class A Common
Stock (the "Option Shares") at the initial public offering price less the
underwriting discount and commissions, all as set forth on the cover page of
this Prospectus. The U.S. Representatives may exercise such option only to cover
over-allotments in the sale of the shares of Class A Common Stock. To the extent
that this option to purchase is exercised, each Manager and U.S. Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of Option Shares being sold to the Managers and the U.S.
Underwriters as the number set forth next to such Manager's name in the
preceding table bears to the total number of shares in such table and as the
number set forth next to such U.S. Underwriter's name in the corresponding table
in the prospectus relating to the U.S. Offering bears to the total number of
shares in such table.
The Company and the Selling Stockholders have been advised by CS First
Boston Limited ("CSFB"), on behalf of the Managers, (i) that the Managers
propose to offer the International Shares outside the United States and Canada
initially at the offering price set forth on the cover page of this Prospectus
and through the Managers to certain dealers at such price less a concession of
$ per share of Class A Common Stock and (ii) that such dealers may reallow a
concession of $ per share on sales to certain other dealers.
The Company and the Selling Stockholders have entered into an Underwriting
Agreement dated , 1994 (the "Underwriting Agreement") with the U.S.
Underwriters for the concurrent offer and sale of the U.S. Shares in the United
States and Canada. The closing of the U.S. Offering is a condition to the
closing of the International Offering, and vice versa.
The public offering price and the aggregate underwriting discount and
commissions per share for the International Offering and the concurrent U.S.
Offering are identical. Pursuant to an Agreement Between the U.S. Underwriters
and Managers (the "Agreement Between") relating to the Offerings,
28
<PAGE>
[Alternate Page for International Prospectus]
changes in the public offering price, the aggregate underwriting discount and
commissions per share and reallowance per share will be made only upon the
mutual agreement of the U.S. Representatives, on behalf of the U.S.
Underwriters, and CSFB, on behalf of the Managers.
Pursuant to the Agreement Between, each of the Managers has agreed or will
agree that, as part of the distribution of the International Shares and subject
to certain exceptions, (a) it is not purchasing any shares of Class A Common
Stock for the account of any U.S. or Canadian Person (as defined below) and (b)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any shares of Class A Common Stock or distribute any prospectus relating to the
Class A Common Stock, in the United States or Canada or to any U.S. or Canadian
Person nor to any dealer who does not so agree. Each of the U.S. Underwriters
has agreed or will agree that, as part of the distribution of the U.S. Shares
and subject to certain exceptions, (i) it is not purchasing any shares of Class
A Common Stock for the account of anyone other than a U.S. or Canadian Person
and (ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of Class A Common Stock, or distribute any prospectus
relating to the Class A Common Stock, to any Person outside the United States or
Canada or to anyone other than a U.S. or Canadian Person nor to any dealer who
does not so agree. The foregoing limitations do not apply to stabilization
transactions or to transactions between the U.S. Underwriters and the Managers
pursuant to the Agreement Between. As used herein, "United States" means the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction,
"Canada" means Canada, its provinces, territories, possessions and other areas
subject to its jurisdiction, and "U.S. or Canadian Person" means a citizen or
resident of the United States or Canada, a corporation, partnership or other
entity created or organized in or under the laws of the United States or Canada
(other than a foreign branch of such an entity), and includes any United States
or Canadian branch of a non-U.S. or non-Canadian Person.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Class A Common Stock
as may be mutually agreed upon. The price of any shares so sold will be the
public offering price, less such amount as may be mutually agreed upon by the
U.S. Representatives and CSFB, on behalf of the Managers, but not exceeding the
selling concession applicable to such shares. To the extent there are sales
between the U.S. Underwriters and the Managers pursuant to the Agreement
Between, the number of shares of Class A Common Stock initially available for
sale by the U.S. Underwriters or by the Managers may be more or less than the
amount appearing on the cover page of this Prospectus. Neither the U.S.
Underwriters nor the Managers are obligated to purchase from the other any
unsold shares of Class A Common Stock.
Each Manager has represented and agreed or will represent and agree that (i)
it has not offered or sold and will not offer or sell in the United Kingdom, by
means of any document, any International Shares other than to persons whose
ordinary business is to buy or sell shares or debentures (whether as principal
or agent) or in circumstances which do not constitute an offer to the public
within the meaning of the Companies Act of 1985; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to the International Shares in, from
or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the International Shares to a
person who is of a kind described in Article 9(3) of the Financial Services Act
of 1986 (Investment Advertisements) (Exemptions) Order 1988 (as amended by
Article 6(c) of the Financial Services Act of 1986 (Investment Advertisements)
Order 1992) or is a person to whom the document may otherwise lawfully be issued
or passed on.
The Company has agreed that, for a period of 60 days after the date of this
Prospectus, it will not, without the prior written consent of CS First Boston
Corporation, on behalf of the U.S. Representatives and the Managers, directly or
indirectly, offer, sell, agree to sell, contract to sell or otherwise dispose of
any Class A Common Stock or any security convertible into or exchangeable for
Class A Common Stock other than to the U.S. Underwriters or the Managers
pursuant to the Underwriting and Subscription Agreements and other than (a)
pursuant to any employee stock option plan, stock
29
<PAGE>
[Alternate Page for International Prospectus]
ownership plan, stock bonus plan, stock compensation plan, dividend reinvestment
plan of the Company in effect on the date of this Prospectus, (b) issuances of
Class A Common Stock issuable upon the conversion of securities or the exercise
of warrants outstanding at the date of this Prospectus and (c) issuances of
Class A or Class C Common Stock issuable pursuant to the exercise of Settlement
Rights. See "Description of Capital Stock -- Settlement Rights." In addition,
the Selling Stockholders, the executive officers and directors of the Company
and certain of its principal stockholders (such group owning approximately 14%
of the Class A Common Stock and 100% of the outstanding Class C Common Stock)
have agreed to such restriction for 90 days after the date of this Prospectus.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act of 1933, as amended, or to contribute to
payments that the U.S. Underwriters and the Managers may be required to make in
respect thereof.
Affiliates of Goldman, Sachs & Co. beneficially owned at February 7, 1994 an
aggregate of 456,168 shares of Class A Common Stock, 550,375 shares of Class C
Common Stock and 909,091 Settlement Rights of the Company. Affiliates of J.P.
Morgan Securities Inc. beneficially owned at March 7, 1994 an aggregate of
55,556 shares of Class A Common Stock, 512,987 shares of Class C Common Stock
and 909,091 Settlement Rights of the Company. Also, Goldman, Sachs & Co. has
from time to time performed, and continues to perform, various investment
banking services for the Company, for which customary compensation has been
received.
VALIDITY OF CLASS A COMMON STOCK
The validity of the Class A Common Stock offered hereby will be passed upon
for the Company by Crouch & Hallett, L.L.P., Dallas, Texas, and will be passed
upon for the U.S. Underwriters and the Managers by Sullivan & Cromwell, New
York, New York. Crouch & Hallett, L.L.P. and Sullivan & Cromwell may rely as to
all matters of Iowa law upon the opinion of Wayne Kern, Esq., Senior Vice
President and Secretary of the Company.
EXPERTS
The consolidated financial statements and schedules of Heritage Media
Corporation and subsidiaries as of December 31, 1993 and 1992, and for each of
the years in the three-year period ended December 31, 1993, incorporated by
reference herein have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
30
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses will be paid by the Company in connection with this
offering:
<TABLE>
<CAPTION>
ITEM AMOUNT
- --------------------------------------------------------------------------------- -----------
<S> <C>
SEC registration fee............................................................. $ 25,099
NASD filing fee.................................................................. 7,779
State securities filing fees and expenses........................................ 12,500
Printing and engraving expenses.................................................. 60,000
Legal fees and expenses.......................................................... 30,000
Accounting fees and expenses..................................................... 25,000
Transfer agent fees and expenses................................................. 7,500
Miscellaneous.................................................................... 82,122
-----------
Total.......................................................................... $ 250,000
-----------
-----------
</TABLE>
All amounts estimated except for SEC registration and NASD filing fees.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 851 and 856 of the Iowa Business Corporation Act provide that a
corporation has the power to indemnify its directors and officers against
liabilities and expenses incurred by reason of such person serving in the
capacity of director or officer, if such person has acted in good faith and in a
manner reasonably believed by the individual to be in or not opposed to the best
interests of the corporation, and in any criminal proceeding if such person had
no reasonable cause to believe the individual's conduct was unlawful. The
foregoing indemnity provisions notwithstanding, in the case of actions brought
by or in the right of the corporation, no indemnification shall be made to such
director or officer with respect to any matter as to which such individual has
been adjudged to be liable to the corporation unless, and only to the extent
that, the adjudicating court determines that indemnification is proper under the
circumstances.
Article XIII, Section 2 of the registrant's Amended and Restated Articles of
Incorporation and Article III, Section 13, Subsection 2 of the registrant's
By-laws provide, in general, that the registrant shall indemnify its directors
and officers under the circumstances defined in Sections 851 and 856 of the Iowa
Business Corporation Act.
Article XIII, Section 1 of the registrant's Amended and Restated Articles of
Incorporation and Article III, Section 13, Subsection 1 of the registrant's
By-laws provide that no director shall be liable to the registrant or its
shareholders for monetary damages for breach of fiduciary duty as a director,
provided that the liability of a director is not eliminated or limited (i) for
any breach of the director's duty of loyalty to the registrant or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) any transaction from
which such director derived an improper personal benefit, and (iv) under Section
496A.44 of the Iowa Business Corporation Act.
ITEM 16. EXHIBITS.
<TABLE>
<C> <C> <S>
1(a) -- Form of Underwriting Agreement(1)
1(b) -- Form of Subscription Agreement(1)
4(a) -- Indenture dated as of June 15, 1992 of Heritage Media Services, Inc. ("HMSI")
to Bankers Trust Company(2)
4(b) -- Indenture dated as of October 1, 1992 of the registrant to Bank of Montreal
Trust Company(3)
</TABLE>
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<PAGE>
<TABLE>
<C> <C> <S>
4(c) -- Settlement Rights Agreement dated July 19, 1989 among the registrant,
Actmedia, Inc., Citibank, N.A. and the purchasers listed on Schedule I
thereto(4)
4(d) -- Master Equity Registration Rights Agreement, dated as of July 19, 1989
between the registrant and various subscribers(4)
4(e) -- Form of Equity Subscription Agreement dated July 19, 1989 between the
registrant and various subscribers(4)
5 -- Opinion of Crouch & Hallett, L.L.P.(1)
23(a) -- Consent of KPMG Peat Marwick(1)
23(b) -- Consent of Crouch & Hallett. L.L.P. (included in opinion filed as Exhibit 5)
24 -- Power of Attorney (included on page II-4)
<FN>
- ------------------------
(1) Previously filed.
(2) Filed as an Exhibit to the registrant's Registration Statement No. 33-47953
on Form S-2 and incorporated herein by reference.
(3) Filed as an Exhibit to the registrant's Registration Statement No. 33-52062
on Form S-2 and incorporated herein by reference.
(4) Filed as an Exhibit to the registrant's Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth or described in Item 15 of
the Registration Statement, or otherwise, the registrant has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE>
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Dallas and State of Texas on the 14th day of
March, 1994.
HERITAGE MEDIA CORPORATION
By: ______/s/__JOSEPH D. MAHAFFEY_____
Joseph D. Mahaffey
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this amendment
to this Registration Statement has been signed below by the following persons
and in the capacities indicated on March 14, 1994.
<TABLE>
<C> <S>
James M.*Hoak, Jr. Chairman of the Board and Director
* President and Director
David N. Walthall (Principal Executive Officer)
/s/JOSEPH D. MAHAFFEY Executive Vice President and Director
Joseph D. Mahaffey (Principal Financial Officer)
* Vice President and Controller
James P. Lehr (Principal Accounting Officer)
Director
James S. Cownie
Director
Clark A. Johnson
* Director
Alan R. Kahn
* Director
Joseph M. Grant
*By: /s/JOSEPH D. MAHAFFEY
Joseph D. Mahaffey,
POWER-OF-ATTORNEY
</TABLE>
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